How Tech giants are helping companies to meet ESG goals

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2521

Engine No. 1, a hedge fund, targets to invest in Exxon and Netflix. It is becoming more responsive to the ESG (Environmental Social and Governance) concerns.

The ESG trend is gaining impetus and attracting billions of dollars.

ESG, triple bottom line (people, profit and planet) and net-zero pledges are gaining popularity, which has changed the way businesses used to operate.

IT firms are locking more deals due to the sustainability initiatives of their clients. On the other hand, clients are questioning their operations and new services to ensure that ESG principles are maintained, which might push up the costs.

Many investors are connecting financial risks with environmental risks and are assessing the company’s exposure to climate change. Companies are transforming the business models that suits well with the net-zero economy.

IT Companies are trying to meet ESG standards. 52% of S&P 500 companies are tying ESG metrics to compensation plans. SEBI has issued new disclosure norms related to ESG funds to bring sustainability reporting at par with financial reporting.

Several technologies have emerged to meet sustainability goals.

  1. Cloud optimizes carbon footprint, reduces wastage and operational costs.
  2. AI provides energy management solutions.
  3. Cybersecurity & GRC is management to improve corporate governance.
  4. AR facilitates virtual consumer engagement and provides training sessions.

Globally, companies are making use of technology to make their operations sustainable. Recently, Infosys tied up with BP, an energy company, to develop an energy-as-a-service solution and help the company achieve its decarbonization objective.

TCS has signed a deal with Clever Energy and uses Internet-of-Things to help the company scan their electricity consumption and cut wastage. The sustainability initiatives of clients have helped the IT firm to sign block deals.

It is still in the nascent stage, but there are signs of acceleration.

When clients decide to shift from data centres to cloud platforms-it reduces costs, emissions and increases their sustainability ratings.

Everest Group, one of the largest IT providers, has announced 51% of its sustainability investments after April 2020. It is the initial stage, making it difficult to quantify the revenue of IT firms. But, it is a multi-million market and influential.

The value chain is an essential aspect of ESG investment. Companies are working with customers, suppliers, etc., to reduce ESG concerns and boost growth. SEBI’s disclosures norms include value chain partners.

Companies are scrutinizing the sustainability plans and the commitments of their IT suppliers. Tech companies need to commit to carbon-neutral dates and sustainability targets.

IT companies are coming out with net-zero pledges. TCS plans to achieve net-zero by 2030, Tech Mahindra by 2050. Infosys achieved the target in 2020 and is ensuring that its activities do not add emissions.

Companies are taking a step further and adding sustainability in their service level agreements. The cost of service is increasing with the increase in sustainability initiatives.

A lot of costs is incurred on local training programs to improve diversity. But, Indian IT firms like TCS, Infosys or Wipro are known for the societal good.

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