Software and technology companies are embracing ESG

ESG

Yes, you read that right. And it is happening in big ways across Canada, the United States and world-wide. 

Let’s back up. Time out. (Yes, that was a Saved By The Bell sitcom reference) 

Software and tech companies are embracing ESG. Time out: What is ESG?

What is ESG?  

Environmental, social governance (ESG) is a trend that is here to stay. Boiled down, ESG is a framework that can be rolled out at any company. It helps businesses make certain that they consider the impacts of their business as it operates on this planet and around all people. The ESG key: The goal is for a business to cause no harm while in operation. 

Being better to the environment feels good, no doubt. It can also make good business sense. Why? It encourages business to do more with less, reducing costs. It can also reduce risk along the supply chain and value chain. Sustainable businesses not only attract and retain customers, partners, and employees because they are considerate and deliberate, but they also stand to gain on the bottom line too. 

Which technology companies are embracing ESG?

Get inspired by real initiatives from real technology, software, and SaaS (software-as-a-service) vendors. A growing number of them – in both the B2B (business-to-business) and B2C (business-to-customer) space – have ESG and sustainability policies and plans. Here are a few to get you thinking:

  • Google has a public-facing carbon policy. 
  • IBM employs a framework, Impact, that tackles ethics, environment, and communities. 
  • Microsoft has been very vocal in their fight again climate change. 
  • AWS has a big focus on sustainability in the cloud. 
  • Salesforce has also pushed out a plan for sustainability. 
  • SAP is also an enabler and an exemplar. 

Drop by your favourite teach company’s Sustainability, ESG, or Corporate Social Responsibility (CSR) webpage for a more details plan and their own tracking. It can give you ideas for your own business.  

Software SaaS vendors are deploying sustainability policies

Why should tech companies have an ESG plan? 

“For starters, companies that have embraced environmental, social and governance (ESG) models are simply providing what many of their customers, investors, shareholders and employees now want.” This is an excerpt from an article by Forbes from 2021. 

In the article, it is evidenced that Millennials and Gen Z are driving solid demand for companies with efforts that match their own values. Some say that “they aren’t picking you as a vendor if you don’t you care about a cause.” I can only guess that in 6 months from now, an even larger share of buyers of B2B SaaS will be invested or exclusively associated with vendors who have an ESG and sustainable projects plan. 

Said clearly, there are 6 main benefits for software and technology companies to create an ESG framework:
  1. To do some good. I often hear that owners, board members, or executives are sick or saddened thinking about the state of the planet they are leaving for future generations. They want to do some good. They want to leave their stakeholders and themselves feeling better about the future of the planet and society. 
  2. To do more with less. If I didn’t capture your attention with bullet #1, I will certainly get you with this point. Software companies that deploy ESG models and frameworks often save money through efficiencies in process, energy consumption savings, or materials savings. Basically, being sustainable as a company often enables you to consume less, therefore spend less.  
  3. To attract and retain great employees. Either you have too many employees, or not enough. It is rare that you feel you are at capacity, and have a full bench of employees from whom you can draw from. So, how do you draw staff that care about your business? Millennials and Gen Z are attracted to companies that share in their own values. They are often inspired by social-equity, and environmental-consciousness. Having a cause that your company works towards inspires and attracts people that work for you. 
  4. To attract and retain great customers and partners. Increasingly businesses are deploying a sustainable procurement policy. What is this? It is a written policy that outlined who they will work with, and under what conditions they will engage. An example is that a firm will not do business with vendors that cause harm to the planet. I foresee companies being left behind who do not have an ESG policy – for this reason. If your company doesn’t benchmark itself against key sustainability metrics, your ecosystem could stop engaging.
  5. To limit risk to supply and value chain, and upcoming regulations. Making sure your suppliers are conscious, and are anticipating climate change impacts can help make sure that your firm is at less risk during another pandemic, or another local or world-wide extreme weather event. 
  6. To differentiate. If your software company cares about society and the planet, but your competitors doesn’t, it is easy to see who will survive in the market long-term. Who do you think will win long term? The good guys. 

How do software and technology companies measure ESG?

As it stands today, there are 15+ sustainability frameworks that you can use to track your own ESG. A single standard hasn’t “won the race” so to speak. Corporate Social Responsibility (CSR) and GRI (Global Reporting Initiative) are popular reporting types. So are the UN SDG’s. Recently the IFRS acquired SASB (Sustainable Accounting Board Standards), and we’ve seen a surge in its popularity in several key industries. 

Once your business has picked the ESG framework it is going to benchmark off of, the next part is an assessment. This benchmark assessment is conducted, usually by a third-party, to get a starting point metric and collect documentation to support this. You’ll be looking at several factors across your entire business, including:

  • energy consumption
  • greenhouse gas emissions
  • employee pay, treatment, and opportunity
  • waste
  • community involvement
  • and more

What sustainable projects are technology companies rolling out?

This is the fun and inspiring part. ThisRock is starting to post “Example Sustainable Initiatives” every Thursday on our social feeds. Follow along and get inspired.