By: Charles Cao, head of EMEA operations and strategy at Conga
Environmental, social and governance (ESG) has been on the business agenda for quite some time; however, it has largely been driven by corporations feeling the pressure to meet wider sustainability targets and appeal to customers. Now, there is a newfound sense of urgency as the pandemic has brought to light the inefficiency of many pre-pandemic business practices. According to KPMG’s Technology Industry CEO Outlook study (2020), 57 percent of global tech leaders believe managing climate-related risks will be a key factor in keeping their jobs moving forward. With this in mind, it’s clear that sustainability needs to be taken more seriously, by governments and businesses alike, and technology may hold the answer.
In response to the pandemic, digital transformation has offered leaders an opportunity to reset their operational model and make fundamental shifts in their day-to-day practices. As part of this, organisations have had to reconsider the basic interactions between people, processes and technology as they transitioned to remote working. Whilst the initial move may have proven challenging, as McKinsey research suggests, 95 percent of leaders will be continuing with their transformation efforts well into 2022. This next stage in organisations’ digital transformation journeys is a critical time where leaders can take the opportunity to consider the environmental and social impact of their commercial operations, and integrate more sustainable IT solutions and practices within their organisation.
Digital transformation and ESG are fundamentally linked
At a basic level, digital transformation is an enabler of more efficient and indeed, sustainable business practices. For example, if an organisation moves its entire supply chain to a cloud-based enterprise resource planning (ERP) system, leaders benefit from greater insight, allowing them to fully optimise supply chain performance and improve overall efficiency. In doing so, teams can better coordinate demand and supply, minimising waste, or unnecessary recalls, which in turn, reduces overall energy output, and can help suppliers track, report and reduce their overall carbon impact.
Now that the pandemic has forced a great tide of digital transformation, businesses are using digital documents and e-signatures, reducing their paper consumption, and migrating nearly all their operations to the cloud, which is generally more energy efficient than on-site IT and data storage. This has forced leaders to reconsider their business operations, and in doing so, opt for more sustainable solutions. That being said, in their haste to set up the fundamentals of home working for their workforce, many organisations have rushed their transformation programmes, with the focus purely being on keeping the business running. They have not necessarily considered other ways that their business could operate more effectively or, more importantly, perform in a more environmentally friendly manner long term.
Indeed, whilst the benefits of ESG transformation are well known, sadly, the uptake is still rather slow across most areas, and businesses are reluctant to make serious changes or commitments. Too many companies still rely on legacy systems with largely paper-based processes that lead to higher energy outputs and waste. According to IDC TechBrief 2020, only one in three companies use electronic signatures, with many still opting to print paper copies of documents or contracts. It is vital that companies continue with their transformation efforts and pursue more sustainable solutions. However, digital transformation much like ESG, cannot be rushed and it can be hard for businesses to know where to begin.
Sustainability is a journey
COVID-19 has been the most unplanned reason for accelerating digital transformation for the majority of businesses. Out of sheer necessity, leaders have opted for short-term solutions, with the hope of transforming their business as quickly as possible and, as Conga’s research suggests, only 36 percent of these transformation projects are considered somewhat successful. Initiatives were often driven by the desire to keep up with competitors or to adopt the latest technology as a means of solving the business’ problems, rather than establishing clear objectives. The first step in formulating an effective strategy is to measure where the business currently stands in its digital transformation journey, that is, what works, and what does not.
Ideally, leaders should try to simplify or streamline one critical business process at a time – that is, stage by stage, rather than adopting fully transformational technology without identifying how it benefits the operational cycle. This is also how leaders should approach their ESG programmes. Sustainability, much like digital transformation, is a journey. Leaders need to review areas of the business stage by stage, identifying room for improvement as they progress along their ESG evolution. Likewise, as businesses adopt more digital channels and look to reduce their carbon or paper footprint, they may find another process that needs to be addressed or that requires further tweaking. In order for ESG or any other transformation programme to work, leaders need to take a step back and review how they operate on a daily basis. They need to consider how they can integrate environmental considerations within their core business logic and identify which digital technologies will help them to achieve these goals.
Digital transformation: people, processes and technology
One area that is often overlooked within any company’s transformation programme, is employee wellbeing. The pandemic has drastically altered workers’ everyday lives and many have experienced high levels of stress and even burnout as a result of remote working. As revealed in a recent report by the National Centre for Social Research (NatCen), whilst the pandemic may have accelerated flexible working patterns, it has also caused increased levels of loneliness and mental distress.
On top of this, Conga research has found that 92 percent of organisations with a digital transformation strategy in place have experienced barriers to the process, whether resistance to change from the workforce or from management. What this shows is that employees need to be on board with transformation programmes from the start and accept the need for change in order for it to work. Too many organisations pick a technology and implement it at speed without considering the business outcomes nor the impact on staff. With the added complications of remote working, the toll that this can have on employees becomes even greater. As businesses prepare for their return to the office – whenever that may be – and begin to adopt hybrid working patterns and more sustainable IT solutions, it is vital that employees are involved in the process – leaders need to put people before technology.
Sustainable and ethical IT is an imperative, and the insight gained from over the last year should shape businesses’ contingency plans for years to come and lead to more sustainable ESG business practices. As indicated in The World Economic Forum’s Global Risk Report 2021, environmental issues continue to dominate the top five global risks in terms of likelihood and impact. As recent events have shown, the key to establishing a purpose-led digital business is to engage all employees, at every level, in the company’s transformation and ESG journey. The pandemic has led to a shift in priorities and encouraged leaders to explore alternative ways of working and doing business. Digital transformation is here to stay and provides us an opportunity to drive our ESG and sustainability efforts.