Effective uses of digital technologies to support corporate sustainability strategies

The variety of options for sustainable strategies, coupled with the fast-moving nature of products, create a daunting task when subjecting these areas to permanent adaptation. Managing these challenges can be very complex and requires the use of digital technologies to keep pace with this issue. A new generation of environmental, social, and governance (ESG) software solutions for a number of areas, such as sustainability management in the supply chain or ESG reporting, is developing rapidly. Companies are mostly aware of the need to search for innovative methods in this area. In contrast, advanced analytics for holistic control and management of supply chains, artificial intelligence for optimising energy consumption, or the use of blockchains for tracking materials throughout the value chain are all still in their infancy.

Companies often still collect the necessary ESG data in simple Excel files – an approach that does not make sense. Instead, holistic ESG data management software should be developed and the company-wide IT architecture should be successively expanded with the necessary ESG services and corresponding solutions. The pressure to act will increase rapidly in the coming years, as legislators demand high-quality data and reports from companies with new disclosure regulations such as the Corporate Sustainability Reporting Directive or the EU Taxonomy. For this, appropriate data management must first be established.

Companies have an increased need for insight into their CO2 emissions, but they must also work towards reducing and continuously monitoring these emissions in order to reduce them. Production and service processes must be redefined, and savings potential must be sustainably sought along the product chain. In addition, data-based decision-making processes should be introduced with sustainable performance management, and the associated benefits, risks, costs and opportunities weighed up in order to closely monitor the effectiveness of the sustainability transformation. This requires the aggregation of high-quality ESG data that is accurate, reliable and meaningful.

For this purpose, the company's existing IT landscape should be used and integrated in the best possible way. The goal is to track measures along the value chain transparently and in real time. Joint use of data in the partner network of customers or suppliers is also necessary. In the future, the ESG activities of companies will also play a role in the determination of company value by investors. Here, too, we are dealing with completely new requirements.

The efficient use of digital technologies to support sustainability strategies requires measures to be implemented on two levels:

1. Development and deployment of the right IT solutions for practical application areas.
2. Integration of each individual ESG measure into a harmonised company- wide IT architecture.

Strategically important technical options include, among others:

• Carbon footprint calculations and simulation of reduction pathways for company-wide decarbonisation activities
• Physical climate risk analysis and assessment of appropriate adaptation measures;
• Management of ESG risks along the entire value chain; and
• Use of ESG data as a basis for innovative reporting systems (e.g. for real-time reporting).

In order to be able to implement these technical options, it makes sense to bundle individual ESG topics into IT modules. First, companies need to develop comprehensive data sourcing and determine the need for data exchange with business partners, investors, and regulators. Second, companies need to develop ESG measurement capabilities and third, ESG management capabilities along all applicable ESG dimensions. Fourth, companies need to identify integration opportunities across core IT functions and processes. Finally, the management of the company’s entire IT landscape with a focus on the environmental and social dimensions must become a significant aspect.

Companies need to use state- of-the-art digital technologies to achieve their ESG goals, but at the same time ensure that the IT itself is green and sustainable. The effort required for this should not be underestimated. At the same time, however, the associated transformation of the company's value chain will improve its own competitive position. The necessary IT building blocks must be well coordinated and will in many cases require a concept lasting several years with constant readjustment. The efficient use of digital technologies can promote sustainability in companies by reducing resource use and improving efficiency.

Examples include:

• Digital tools for monitoring and optimising the energy efficiency of buildings and facilities.
• Software to support paperless office workplaces.
• Use of cloud computing services to reduce the need for servers and IT equipment in the company and using energy-efficient data centres that are fully powered by electricity from renewable energy sources.
• Automation of processes that can contribute to increased productivity and reduced error rates.
• Supply chain management tools to monitor and improve supplier sustainability.
• Data analysis tools to understand and minimise the environmental impact of processes.
• Conversion of the company's vehicle fleet to increasingly CO2-neutral vehicles.
• Conservation of resources with the aim of reducing the demand for resources while increasing production output (e.g. through increased use of renewable raw materials, closed material cycles and more efficient processes).
• Responsible and secure handling of data, especially from customers, with a data compliance management system.
• Responsible procurement of raw materials and respect for human rights along the value chain.
• Transparent reporting of sustainability progress to employees – develop key performance indicators (KPIs) to make progress and data transparent (e.g. energy consumption, water consumption, waste volume, wastewater volume, material consumption). A good KPI should capture a measurable value so that staff can act on relatively quickly.
• Develop highly automated and holistic control and reporting software with high granularity, and with a concept that encompasses a wide range of functions.