Today, Business leaders must navigate a multitude of headwinds. From pandemic-related supply chain disruptions, the war in Ukraine and an emergent banking crisis to escalating cybersecurity threats, high interest rates, growing energy costs and persistent talent shortages — the economic threats just keep coming. In addition to those, many leaders are fighting climate change and social inequity as business imperatives.
Being a sustainable business takes guts, resilience, vision, adaptability and responsibility. It requires much more than embracing and surviving many challenges. They have to make the changes they want to see in the world.
Increasingly businesses are coupling environmental, social and governance (ESG) efforts with business continuity planning. Because both are exercises in risk management, it makes sense to approach them with the same discipline and with the same set of tools, suggest Judith Rodin and Saadia Madsbjerg, co-authors of Making Money Moral: How a New Wave of Visionaries Is Linking Purpose and Profit.
“ESG measurement doesn’t just need more uniformity, rigor and breadth. It also needs an additional variable in order to assess businesses’ capacity to effectively recover, adapt and grow in the face of shocks and stress: resilience,” Rodin and Madsbjerg argued in a 2021 article for the World Economic Forum.
“Simply put, it is increasingly clear that investors can no longer outrun or ignore social and environmental problems. All evidence points to continued business and financial disruption in the years ahead.”
Consider the “E” in “ESG.”
“While the ‘E’ assesses factors such as carbon footprint and water and waste management, it fails to measure a company’s exposure to climate-change disasters,” Rodin and Madsbjerg continued.
“When location makes the power supply lines and transit options vulnerable to climate risks, or if supply chains could break down in the face of disasters, many extant business continuity plans are insufficient. Most current environmental assessments in the ‘E’ metric do not account for tomorrow’s challenges.”
To ensure that they are, in fact, prepared for tomorrow’s challenges, business leaders must view ESG through the lens of business continuity planning. Furthermore, they must use technology and data to bolster their efforts, simultaneously mitigating change to the climate while adapting to change in the business.
Sustainability Equals Stability
When “ESG” entered the corporate vernacular in the mid-2000s, the goal was responsibility; businesses that embraced ESG did so because it was the right thing to do. Now, in a post-COVID world, the goal is resilience; businesses embrace ESG because it’s existential.
“It is becoming increasingly clear that climate change is a global issue … As such, chances are that your business will be affected and that climate change will disrupt your day-to-day activities,” Deloitte wrote in its 2020 report Saving the World Might Save Your Company.
“A high proportion of organizations do not have plans in place to deal with these newly arising issues. Yet, early adoption of climate risk integration can contribute strongly to safeguarding your organization’s business continuity.”
Climate risk integration kills two birds with one stone: traditional ESG on the one hand and business continuity on the other.
They’re not as dissimilar as they seem. After all, sustainability is stability.
While it’s true that people want to do business with companies that are environmentally friendly, it’s absolutely vital that they do business with reliable companies. Automakers learned this firsthand when COVID-19 impacted the supply of computer chips. Without the components they needed, they could neither make nor sell their products.
Because the supply chain might just as easily have been upended by climate disaster as it was by disease, it’s plain to see: ESG dovetails with business continuity by ensuring the availability of consistent and dependable suppliers.
That’s especially true when it comes to IT products and services, according to Jon Brown, a senior analyst at research firm Enterprise Strategy Group, whose research shows that 85% of organizations have eliminated a potential technology supplier due to ESG concerns. During an April 2023 webinar about the impact of sustainability on IT buying decisions, he said ESG business issues influence what organizations buy, how they buy and from whom they buy.
“This is something … that impacts how they look at products and how they look at vendors,” Brown said.
“Organizations are willing to pay a little bit more for products that have better ESG footprints and for vendors that have better ESG reputations.”
Although it looks good to consumers, companies aren’t drawn to ESG-focused vendors only for marketing reasons. Equally, they’re drawn to them because ESG-focused vendors have given more thought to climate risks — and are therefore better prepared to maintain or quickly resume critical operations in case of business disruption.
Driving Resilience with Data
Executing ESG initiatives from the perspective of business continuity requires a concrete understanding of enterprise risk.
“Understanding the full spectrum of an organization’s ESG risk exposure is a vital component of developing an integrated business strategy,” Prathmesh Raichura, partner in risk consulting and ESG at KPMG in Canada, said in a sponsored article for Toronto newspaper The Globe and Mail.
“Addressing your exposure can not only help mitigate vulnerabilities, it can also highlight opportunities for corporate innovation, enhance stakeholder relations and enable a competitive edge.”
In the digital enterprises of today, the secret to understanding anything — including risk — is data.
Fortunately, data sources abound thanks to cloud-based technologies, many of which can generate intelligence that’s useful for ESG initiatives and business continuity planning alike.
One of the most obvious examples is the Internet of Things (IoT). In manufacturing, for example, organizations can use ubiquitous, low-power IoT systems to proactively monitor manufacturing equipment for the purpose of performing predictive maintenance. Knowing that an ounce of prevention is worth a pound of cure, manufacturers can use data to prevent equipment failures instead of reacting to them. Because high-performing equipment uses less energy and lasts longer, thereby reducing waste, doing so shrinks their carbon footprint while also ensuring business continuity by way of minimizing equipment downtime.
IoT is one example. Machine learning and satellite imagery are two others, according to Rodin and Madsbjerg.
“Machine learning and satellite imagery enable the rapid (even real-time) collection of data that helps better measure resilience,” they said in their piece for the World Economic Forum.
“For example, S&P Global Ratings recently used information collected by NASA satellites to assess how the location of public water utilities would affect their financial strength.”
S&P found a correlation between better metrics on debt and the location of utilities in certain ecosystems — for example, in evergreen forests where water quality is better.
“Water utilities’ credit quality is also influenced by factors such as the potential for droughts or location in high-growth, high-demand areas,” Rodin and Madsbjerg noted.
Bringing data to bear for business continuity planning and ESG business issues creates a holistic view of both, which makes it easier to see where they overlap. And if they can see where business continuity and ESG overlap, organizations can deploy resources more effectively in order to address them.
Local governments already are doing exactly that, according to Rodin and Madsbjerg, who helped develop the City Resilience Index, which encompasses 52 metrics that contribute to more resilient cities.
“Now it’s used to help governments worldwide measure and manage programs, operations and investments, it could be readily adapted for companies and investors,” they said.
IT Sustainability Strategies Still Nascent
About 50% of companies earning over a billion dollars a year had a companywide sustainability strategy , according to Andrea Osika, who manages ESG reporting efforts for Nutanix, citing information from a fairly recent study by Capgemini.
“But only 18% had a fully developed sustainability strategy specifically within IT,” Osika said.
She said it’s still early days for IT sustainability strategies to lower the environmental impact of an organization, but anticipates increased interest since IT is integral to core operations for most modern companies.
“Regulations and frameworks for reporting emissions are changing and evolving,” she said.
She learned that between 2021 and 2022 there was an 80% increase in proposed or mandatory global ESG regulations. She expects more will come in 2023. Reporting frameworks used to disclose ESG data continue to develop as regulators and stakeholders seek more uniform sets of metrics to evaluate an organization's practices and policies in this space.
“They're morphing into a more standardized, centralized means of reporting emissions. We're all in the same boat waiting for those regulations and tools we will use to report on emissions.”
Technology industry companies that already report ESG strategies and results each year will make it easier for others to start their own ESG efforts. Osika said IT leaders will learn from one another and adapt as regulations evolve.
Continuity and Collaboration
Although less than one-fifth of all organizations cite the ESG function as having an active role in resilience today, many business leaders believe that ESG could own resilience in their organization within the next five years, Deloitte reported in its 2022 Global Resilience Report.
In preparation, forward-looking organizations are already exploiting synergies between ESG and business continuity. Along with data, the key is collaboration.
“Is there expertise on sustainability or climate change within your company, and is this knowledge shared with your resilience professionals?” Deloitte asked in its report, Saving the World Might Save Your Company.
“Aligning your sustainability and resilience strategy is a great way to protect your business against climate change disruption.”
A good starting point, it said, is connecting sustainability officers to key stakeholders in the field of general risk management and business continuity planning.
“In other words: Make sure your supply chain planners are in contact with your sustainability department,” Deloitte advised. “Given the complexity and uncertainty, it makes sense to foster collaboration between disciplines to help anticipate and mitigate the threats that climate change brings.”
Using data and collaboration as their modus operandi, organizations can integrate ESG and business continuity in ways that help them weather any storm — be it figurative or literal.
“Until businesses and investors embrace an approach where resilience is a consistent thread running through ESG, they will remain ill-equipped to rebound most effectively from the crises that inevitably lie in our future,” Concluded Rodin and Madsbjerg.
Editor’s note: Explore the latest Nutanix ESG Report.
Gary Hilson has more than 20 years of experience writing about B2B enterprise technology and the issues affecting IT decisions makers. His work has appeared in many industry publications, including EE Times, Embedded.com, Network Computing, EBN Online, Computing Canada, Channel Daily News, and Course Compare. Find him on Twitter.
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