Over the next four years, the EU will roll out carbon tax policies and already investors are flocking to companies with well-documented and data-backed ESG policies and commitments. Companies are investing heavily in people and expertise, with the number of sustainability roles increasing by 91% in the last five years in the UK alone. The future of how we do business must be environmentally friendly, and integrated technology solutions will help us make this adjustment.
These signs give me hope, but when it comes to how business and industry approach sustainability, we are still at the beginning. To meet market and consumer demands, every company will need to evolve its sustainability programs to be as precise and rigorous as those of financial accounting. Like the Sarbanes-Oxley Act of 2002 that mandates record keeping and financial reporting practices for businesses in the United States, we can expect laws and consumer expectations regarding sustainability impacts are following suit.
Just as SaaS platforms, cloud computing and digital transformation have changed the way companies sell, hire and invest, we are on the cusp of similar changes in sustainability. For example, as recently as the mid-2000s, interviewing for a new corporate job meant printing resumes, handing out benefits brochures, and signing forms that had been photocopied half a dozen times. Today, many HR software companies offer streamlined digital solutions for tracking applicants, onboarding new colleagues, and managing benefits. When large organizations are faced with a high volume of data in any area of their business, digitization is the inevitable solution. Companies have reached a similar tipping point in their need for sustainability software today. With the growing demand to track and prove ESG commitments, digital solutions are now being integrated into the fabric of corporate sustainability reporting. Importantly, these solutions will help accelerate progress on climate change.
Over the past decade, I’ve seen first-hand how data-driven sustainability efforts have helped major consumer brands take stock of their environmental impact and then make key decisions to transform their footprint.
- In 2017, Nike set a goal of “zero release of hazardous chemicals”. This required a coordinated global effort across their entire supply chain – their network of manufacturers now needed to align on wastewater testing and reporting. Nike used a data platform to track progress at hundreds of facilities, and today they continue to track the manufacturing use of restricted substances.
- In 2018, VF Corp. tracked baseline environmental impact at its factories in China, Bangladesh and Vietnam. Since implementing sustainability programs focused on energy, water and greenhouse gas savings, VF has been able to leverage sustainability data to reduce over 50,000 metric tons of GHGs.
Going forward, we can expect sustainability technology to be the next large-scale business investment. Leaders that have paved the way like Nike and VF can provide useful lessons for companies that are just beginning to take a serious look at their environmental impact.
The first lesson is that it is essential to consider one’s all
impact – holistically. For example, in apparel, the vast majority of a brand’s emissions are in its supply chain. While efforts to rid retail stores of single-use plastic bags or to swap out light bulbs in corporate offices are laudable, such initiatives ultimately have marginal impact when the entire realization of the sale of a clothing is taken into consideration. Accurate data must be collected at every stage of the supply chain – from raw material extraction to finished products – to get the full picture. While complex in the modern world of disaggregated global manufacturing, companies that invest in the foundational work today will be able to make the most impactful improvements tomorrow. Only by establishing an accurate baseline of water or energy use can they track progress and prove the ROI of sustainable investments.
This brings us to a second lesson: the power of a bottom-up collaborative approach with your supply chain partners. While top-down approaches—for example, using advanced algorithms to estimate carbon emissions based on generalized datasets—are attractive for their ease, this approach will ultimately lack the resolution needed to help leaders whether they move the needle. Instead, companies need to take a more granular approach, reaching across the entire value chain to collect data from material suppliers to subcontractors and suppliers. Although different from the status quo, this is the future of sustainability management. We need to start moving in that direction and leverage enterprise-level digitized solutions to help us get there.
Tomorrow’s sustainability leaders will start by implementing the right technology solutions. With huge pools of impact data available, they will need SaaS solutions designed to collect, manage and contextualize information from many different parts of their business. While there are dozens of robust solutions on the market, it will be important to select platforms and partners that offer scalability, flexibility, reliable data sources, and interoperability with their business systems and their existing technology stack.
Sustainability is the next pillar of enterprise software. Until now, few companies felt that rigorously measuring and managing their environmental impact was a major imperative, but with rapidly changing expectations and demands, we will see digital sustainability solutions become the new normal. , especially for consumer goods manufacturers.