When I talk to enterprise tech companies at the moment, the key messaging is eerily similar – businesses need to focus on digital transformation, cloud migration and using artificial intelligence and analytics to glean insights from their data.
But they’ve also jumped on the sustainability bandwagon. The big public cloud providers, AWS, Google and Microsoft, have made much of their efforts to power their data centres and corporate campuses from renewable energy, even if they still have to rely on buying carbon credits to offset their energy consumption overall.
Shifting applications and data to the big cloud platforms can help their customers cut carbon emissions generated by hosting their own data centres and infrastructure.
Now that many organisations have their company and customer data in the cloud, we are also seeing the rise of the sustainability cloud – an add-on platform to help businesses monitor their greenhouse gas emissions and other ESG (environment, social, governance) measures.
Rise of the sustainability cloud
There’s the Microsoft Cloud for Sustainability, which, for a licence fee starting at US$4,000 ($7,146) a month, will help you “gain the visibility you need to improve sustainability reporting and help transform your business”.
IBM last year bought sustainability reporting start-up Envizi and integrated it to offer “a single system of record that delivers auditable, finance-grade ESG and sustainability data”.
Enterprise resource planning software maker SAP has its Cloud for Sustainable Enterprises and Oracle Cloud EPM, which is an ESG monitoring and reporting platform for Oracle customers.
Salesforce, which is the world’s largest provider of customer relationship management (CRM) is pushing its Net Zero Cloud, which costs US$48,000 per year for the starter version and up to $210,000 for the advanced package.
That’s a hefty investment for a company, especially when you consider the technical work and expertise required to gather the data to feed into the platform and make sense of the reports it generates.
But this sort of monitoring and reporting is no longer an abstract concept for New Zealand businesses.
Last year, we became the first country to introduce a law that will require our large financial institutions to report on climate risk and account for their greenhouse gas emissions, starting from April 2024.
Mandatory climate reporting
The Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act 2021 will likely be just the start.
The US Securities and Exchange Commission (SEC) has a similar proposal in the works that would require public companies to provide detailed reporting of their climate-related risks, emissions and net-zero transition plans. It’s just a matter of time before our own listed companies face a climate reporting mandate.
To stand up to external scrutiny, most of those financial organisations will have to invest in some sort of sustainability software and tools, tracking everything from the energy use of their buildings to, potentially, the carbon footprint of every investment they fund.
So-called Scope 3 emissions are the hardest to deal with as they encompass the emissions generated by third parties in the supply chain. An external reporting board is currently developing the climate reporting standards that around 200 financial institutions will need to adhere to.
Currently, there are no universally recognised standards for sustainability reporting, although US Fortune 500 companies seem to have settled on the Greenhouse Gas Protocol, an emissions reporting classification system backed by non-profit organisations the World Resources Institute and the Climate Disclosure Project.
Many companies have also voluntarily chosen to reflect the UN’s sustainable development goals in their own ESG monitoring and reporting efforts.
Salesforce initially built its Net Zero Cloud to automate the manual processes its internal sustainability team were grappling with to calculate the company’s own carbon footprint.
“We are this world-class CRM, and we’re doing this in spreadsheets, calling up building managers around the world, begging them to send us energy consumption data and things like that,” Sunya Norman, vice president of ESG strategy and engagement at Salesforce, told me last week.
Now, automated feeds from sensors attached to Salesforce buildings feed in energy consumption data so that their carbon footprint can be calculated in real-time.
Norman said she was already seeing the rise of the “carbon accountant” as third-party verification of sustainability efforts becomes a requirement, just like annual financial auditing is a fact of life for most businesses.
“Once we get the upstream standardisation, the SEC saying thou shalt report in a certain way, suddenly that takes care of a huge portion of your supply chain as well,” she said.
Sustainability expertise lacking
My sense is that NZ businesses have a long way to go on the ESG data gathering, monitoring and reporting front.
We lack capability in this area, but the likes of Toitū, which runs carbon certification programmes and advises on emissions reduction efforts, are doing good work to assist the business community.
A PWC survey undertaken last year in the US found that around a third of executives are beginning to use cloud platforms to inform their ESG strategies and reporting.
It’s probably a similar picture here.
How the cloud can help or hurt your ESG efforts. (Source: PWC)
Technology has the potential to play a valuable role in streamlining the process of gathering and reporting ESG data and monitoring progress towards goals.
AI (artificial intelligence) could also be drawn on to suggest ways to improve performance.
But whatever sustainability cloud or software package a business uses, it is only as good as the quality of the data that is fed into it.
We risk exacerbating the risk of greenwashing unless ESG reporting efforts are built on robust evidence-based standards and widely adopted as part of our national net zero 2050 target.
Originally published on BusinessDesk.co.nz
Photo credit: Tobias Weinhold, Unsplash
PETER GRIFFIN 