ESG a priority for digital transformation
- More than 80% of companies plan to increase their investments in sustainability
- But putting ESG at the top of the priority list does not guarantee success
- A new BCG article details the digital building blocks for successful corporate sustainability agendas
Sustainability is at the top of corporate agendas worldwide, and environmental, social, and governance (ESG) goals have become major considerations in companies’ digital transformation programs. New research from Boston Consulting Group (BCG) shows that more than 60% of companies consider ESG factors a primary focus or a key criterion for selecting and prioritizing digital initiatives, and more than 80% plan to increase their investments in sustainability.
These are among the findings in a new BCG article, titled “The Five Digital Building Blocks of a Corporate Sustainability Agenda,” being published today. The article, which is based on a survey of more than 850 companies worldwide, shows a clear link between digital capabilities and sustainability, and it outlines the digital prerequisites for achieving sustainability goals.
“Companies that are successful in their digital transformations are nearly twice as likely as other organizations to see ESG goals as a key focus of digital initiatives,” said Hamid Maher, a managing director and partner at BCG and a coauthor of the article. “One reason is that successful transformers shift from digital reengineering to innovation as they move past the nuts-and-bolts challenges of delivering a transformation and focus on how their new capabilities can help tackle broader opportunities in their company’s sustainability agenda.”
The article looks at how companies are setting their E, S, and G digital priorities, and it notes significant differences among industries regarding the importance that companies put on ESG and how much each industry emphasizes the E, S, and G. While one in four companies overall makes ESG the primary focus area of its digital transformation, the percentage in individual industries ranges from almost twice that (in medtech, biopharma, and automotive) to about one in ten (for telecommunications, software, fashion, and luxury). But even in the lagging industries, digital leaders put a high priority on ESG: 38% for telecommunications and 64% for software, for example.
“Because climate change is so pervasive as an issue, one might intuitively assume that E dominates over S and G. But company investments cover all three aspects of sustainability fairly equally, and our findings actually show that S and G are becoming higher priorities,” said Rich Hutchinson, global leader of BCG’s Social Impact practice and a coauthor of the report. “Overall, 80%, 70%, and 69% of companies have digital initiatives that focus on social goals, governance considerations, and environmental programs, respectively.”
Again, there are significant differences by industry as well as by region that the article covers. Regionally, for instance, social initiatives are the most-pursued priority in North America and Europe, where diversity, equity, and inclusion concerns run high, while governance initiatives rank first in Asia.
Finally, the article details the five prerequisites critical to using digital technologies to move ESG initiatives forward:
- Sustainability and growth need to be thought about together.
- You cannot systematically reduce what you can’t measure.
- Dynamic environments mandate digital decision-making support.
- Risk tracking, monitoring, and mitigation is more important than ever.
- Access to platforms and ecosystems is key.