Defining sustainability: Where to start?
It is now generally accepted that human activity is driving major climate change and putting pressure on the natural world at unprecedented levels. This is exacerbated by continued population growth worldwide and a predominantly global, industrial economy based on consumerism and continuous economic growth. Now is the time to act, yet we hear global leaders committing to targets to limit temperature increases and achieve ‘net zero’ carbon emissions on timescales of one or two decades. Many business leaders and citizens, however, are calling for change now.
We all need to make changes to play our part in developing a lifestyle and economy that is sustainable. But what is sustainability in business? Clearly, we need to be ambitious, and the principles of “leave no trace” that originated in a code for walking in natural space is a simple vision of leaving no mark, no rubbish, and taking nothing away. From an industrial point of view, this means companies follow this principle to produce fully recyclable products made and distributed using clean energy, designed for a long efficient service life, and with recyclable and harmless by-products.
As consumers start to analyze the environmental impact of the products, services, and consumables they buy, they will start to make more sustainable choices.
These principles may seem obvious, but one of the key challenges is to drive these changes quickly in a global market that prioritizes profits and consumers who prioritize price.
Empowering businesses and consumers through choice
While we are seeing some legislative success, such as the EU “right to repair” law, the most effective way of driving hard change is through market pressure. Both consumers and businesses must include sustainability as a key factor in buying and planning decisions. In fact, this is something that is within the immediate control of us as individual consumers, and of businesses through their procurement policies. This is also where technology can be a driving force.
As consumers, we all need to make more sustainable choices when buying products and services, but this requires companies to detail the sustainability credentials of their products with a reasonable degree of accuracy and clarity. For example, at HCLTech, as a global technology company, we are developing solutions that will allow consumers to include sustainability options in their purchase decisions. These include templates and accelerators for commerce platforms (used for online ordering) that display a product’s carbon footprint, the proportion of the product that is recyclable, and the product’s service life. In addition, we are including options for recycling a product being replaced, and delivery options that enable a trade-off between more efficient logistics and delivery times.
Our view is that public sentiment is shifting quickly, and as consumers start to analyze the environmental impact of the products, services, and consumables they buy, they will make more sustainable choices. Companies that prioritize sustainability in the way they operate, advertise, and sell products will thus gain an advantage. While the shift to more sustainable products and supply chains will incur additional cost; increasing product prices; early adopters of sustainability will likely gain market share with the shift in consumer sentiment. Therefore, companies should include sustainability information and options in their commerce offerings, which will help accelerate consumer adoption of sustainability factors into their choices.
Driving sustainability beyond enterprise walls
For businesses to move to more sustainable products and services, they will need to drive more sustainable policies in their suppliers.
We are already seeing an increase in companies providing sustainability audits of organizations and making this information available. Again, our experience is illustrative here. Our procurement consulting team is developing a solution with one of the sustainability auditors to include sustainability criteria in their sourcing processes for materials and services. This will also include links to the auditor’s systems to integrate up-to-date audit ratings.
While this is a relatively simple change, it requires companies to balance cost, quality, service delivery, and sustainability in their sourcing evaluations. They must ensure that sustainability is not merely viewed as a procurement checkbox, but rather as a quantitative evaluation with appropriate weighting. Such changes in procurement practices will quickly drive suppliers to review their own credentials and sustainability policies, and invest in improvement initiatives.
To meet the global climate challenge, we need to drive transformational changes and not just incremental changes. By changing procurement policies to prioritize sustainability, we believe companies can accelerate improvement in sustainable business practices and become more competitive. We have already seen this in our own company. Customers and investors want to understand our sustainability policies and initiatives. Increasingly, RFPs are also including questions and scoring on sustainability credentials and policies backed up by independent certification.
Accurate observation and analysis, however, will be key to ensuring that companies identify and prioritize sustainability initiatives. We must do this at a sufficiently detailed level, such as SAP’s carbon accounting solution that enables transaction-level carbon impact recording of individual activities. This facilitates accurate measurement of actual energy and material usage, rather than basing decisions on assumptions. The technology for tracking real-time energy consumption is readily available for IoT-enabled devices, which can even be retrofitted to older equipment, such as IoT-enabled power meters. While energy consumption is just one element, we can quickly monitor it to help prioritize processes for review and transformation.
Putting words into action: Environmental, social, and governance (ESG) at HCLTech
At the heart of our culture is the purpose of shaping and strengthening the economic, social, and financial future of the world, and specifically of the communities where we operate. We have seen our focus on environmental, social, and governance (ESG) goals deliver strong value. Such focus has allowed us to grow as an organization and build lasting and productive relationships with our employees, clients, and stakeholders.
Today, there is a growing expectation from investors, employees, clients, NGOs, and other stakeholders that companies increase the transparency of their sustainability and social responsibility practices through public reporting of ESG policies, initiatives, and metrics. We are committed to transparent reporting of our progress in all areas of ESG, which are available in our Business Responsibility Report and through our adherence to the United Nations Global Compact.
Our “GreenIT” initiative will improve the sustainability of the services we provide to our global customer base. The program addresses four major levers — reducing waste materials from the provision, service, and disposal of IT equipment; maximizing energy efficiency; maximizing recycling from our operations; and sourcing more sustainable suppliers, such as promoting Forest Stewardship Council-certified paper products. These initiatives are applied to all operations. including our data centers, our campus office facilities, and telecommuters working from their home offices. Every small detail adds up to a big difference.
The idea is to accelerate the adoption of more sustainable business practices in businesses and consumers, to rapidly reduce global warming and the negative environmental impacts of industry. Government legislation is arguably the fastest way to drive hard change, as companies must comply with locally relevant laws. Clearly, such laws will need to play a part in driving change, such as the banning of future sales of internal combustion engine-powered cars in many countries.
Our view is that consumer and business-to-business market pressure, through the adoption of sustainability criteria in sourcing, is a very effective driver of change. Companies can undertake relatively simple steps now with readily available technology that will drive a more rapid move to a sustainable economy. It is also probable that earlier adopters will be the long-term market winners.
To learn how sustainability is reshaping corporate ESG agendas – and why modern ERP systems like SAP S/4HANA have a key role to play in achieving step change improvements, click here.