Published on the 26/04/2023 | Written by Heather Wright

Corporate ESG initiatives are taking a battering from the current economic headwinds, with difficulties in accurately measuring the initiatives and ineffective governance hampering progress.  

The second annual Google Cloud commissioned Harris Poll survey of nearly 1,500 business leaders across 16 countries found that while most companies are talking about ESG – 96 percent have at least one sustainability program in place – their ESG efforts have dropped from top priority last year to number three this year, with declining numbers of programs moving into implementation phases.

While Gartner has forecast 5.5 percent growth in IT spending for the year ahead – an increase from its earlier forecast for the year which was a more meagre 2.4 percent – companies understandably remain cautious, focusing efforts around projects that can show immediate returns.

“While everyone says they want to advance sustainability efforts, no one knows how to actually do it.”

For sustainability, that’s proving to be a hard ask.

For ESG, data is the lifeblood, enabling companies to pinpoint where and how to impact operations sustainably to get the biggest bang for their buck, and letting leaders see where their business is meeting the bar and where it’s falling behind.

But both the Google report, and one from IBM, show data is severely lacking for many organisations, stifling their sustainability ambitions, and ramping up the potential for greenwashing.

Executives surveyed in the Google Cloud Sustainability Survey admit they lack the systems to deliver those insights and measure progress of sustainability initiatives, making it harder to move the programs forward.

“Companies are struggling to move sustainability initiatives forward, with 72 percent of the respondents… agreeing that while everyone says they want to advance sustainability efforts, no one knows how to actually do it.”

That confused sentiment is a seven percent jump on last year’s results.

The IBM report, The ESG Conundrum, also points to inadequate data as the top challenge undermining the initiatives. That report, The ESG Conundrum, surveyed 2,500 executives and more than 20,000 consumers across 34 countries.

Most of those executives reported their organisations are struggling to manage, manipulate and map data.

There’s a host of data difficulties holding them back, including lots of manual data (73 percent), difficulty consolidating or manipulating data (70 percent), poor transparency in data calculations (70 percent) and difficulty mapping data across brands and geographies (69 percent).

The lack of data isn’t just hampering programs. It’s leading to the very real prospect of greenwashing.

IBM’s report found that while nine in 10 organisations are talking publicly about sustainability commitments, only 58 percent are actually implementing programs and just 22 percent are measuring against targets. In fact, 72 percent of executives believe that most organisations would be caught greenwashing if investigated thoroughly and when it comes to their own organisations 59 percent admit to overstating or inaccurately representing their own sustainability activities.

And consumers are taking note with ‘skyrocketing’ consumer scepticism: Just one in five say they trust statements companies make about environmental sustainability, down from 50 percent two years ago.

For those that do nail it, there are big benefits, IBM’s report suggests. It says ESG leaders are 43 percent more likely to outperform their peers on profitability.

“Our research reveals that ESG can operate as an accelerator that drives profitability and growth,” it says.

“Top-performing companies don’t make trade-offs between sustainability, social responsibility, good governance and shareholder value; they achieve all these outcomes at once.”

In fact, the report notes, when ESG is viewed as a vehicle for driving business value, rather than simply a reporting exercise, it can create insights the deliver new opportunities and boost performance for businesses.

Seventy-two percent of those surveyed said they approach ESG as a revenue enabler rather than a cost centre, with improved profitability (45 percent) and improved innovation (35 percent) now expected alongside the focus on compliance and risk management.

And it’s there, in the elevation of ESG, that IBM says companies can find success, using ESG to drive engagement, inspire innovation, improve operations and unify ecosystem partners around shared strategic goals.

To do that, it says organisations must funnel data in two directions. Looking internally, embedding ESG data into operations to drive performance improvements, such as integrating emissions data into core operational or enterprise asset management systems to help reduce the company’s carbon footprint.

At the same time, sharing transparent insights with others can build trust with customers, employees and partners, creating new market opportunities and supporting innovation and engagement.

Those surveyed for the Google report, meanwhile, say they need their organisations to be more agile, rather than relying on a dedicated reporting structure,, with dedicated leadership for sustainability initiatives.

Technology, unsurprisingly, is touted by both reports as a key investment for businesses.

Cloud has long been touted as a key lever for reducing carbon emissions. Accenture’s Green Behind the Cloud says migration to public cloud could reduce CO2 emissions by 59 million tons per year – the equivalent of taking 22 million cars off the road.

Data centre operators are falling over themselves to push their green credentials, with data centres forecast to consume 1.86 percent of all global electricity by 2030. Google famously was the first major company to go carbon neutral, back in 2007, before transitioning to 100 percent renewable energy a decade later.

In New Zealand, AWS and Microsoft are both currently building data centre facilities in-country with NZTE pushing the country as a centre for ‘green’ data centres.

Microsoft, which has said its three Kiwi centres will use ‘cleaner’ air cooling, rather than water, has ambitiously stated that businesses using sustainable cloud data centres instead of their own ‘less efficient’ infrastructure, can help the whole country. AWS too, has been pushing its green credentials, talking up a green power deal with Mercury earlier this year.

Datagrid is also marketing its new build outside of Invercargill as ‘Australasia’s first carbon-neutral hyperscale data centre’.