Sustainability issues and ESG trends shaping the technology sector include technology’s climate impact, supply chain sustainability, the circularity gap, nature-related impacts, and digital ethics.
Sustainability risks and opportunities facing the tech sector are striking. While for many sectors COVID-19 has posed significant challenges, for technology it has also opened numerous new opportunities, according to SustainAbility Institute by ERM’s annual Sustainability Trends Report.
During the pandemic, the tech sector has experienced significant growth as people and businesses were forced to go online and rapidly embrace digital solutions to continue economic, social, educational and welfare activities during lockdowns. Pandemic-initiated growth is likely to continue, as remote working and other uses of technology to connect people in more innovative ways are likely to stick long term.
The pervasiveness and ubiquitous nature of technology also means it faces regulatory and civil society scrutiny in areas like sustainability and data ethics. Edelman’s 2021 Trust Barometer shows that public trust in the sector is waning; in fact, while trust in business overall is growing, trust in the technology sector has consistently declined over the past decade. The sector has high-profile environmental challenges as well, including e-waste management, the sustainable sourcing of critical minerals, and data centre sustainability.
The technology sector has great potential to help society and other industries manage the transition to a sustainable economy. To do so, it must manage its own sustainability and ESG related risks, especially considering the sector’s exponential growth.
Tech companies already provide technological solutions to other sectors to support their transitions to sustainable operations. If the sector can build and maintain public trust regarding data privacy and digital innovation – so that more digitally enabled solutions can be embraced in everyday lives – then the low-carbon transition to sustainability can be a digitally enabled one.
The growing prominence of ESG in investor strategies, coupled with new policies such as CSRD and the European Union’s Sustainable Finance Disclosure Regulation, is helping cement ESG as a mainstream business concept influencing investment returns and corporate strategy.
Despite regulatory momentum and the strengthening business case for making sustainability and ESG part of core business strategy, ESG integration in practice remains complex and challenging. One of the main barriers has been a lack of consistent and comprehensive data. For example, in a recent global survey of institutional and wholesale investors, half of respondents said that the absence of quality ESG data was holding back their organization’s adoption of ESG.
ESG functions will be further integrated deeper into business departments and operations Private equity firms will accelerate focus on ESG, also increasing pressure on portfolio companies recognizing that integrating sustainability and ESG into a business can drive value for the organization through brand reputation, ESG ratings outcomes, financial performance, and employee engagement and retention, more than 80 percent of the world’s largest companies now report on ESG or sustainability metrics and performance, with that number expected to grow further in 2022.