Environmental, Social and Governance: Is IT Ready for It?
Corporate investors are increasingly applying non-financial criteria like environmental, social, and governance to their evaluation of companies. It’s not far-fetched to see that these elements will start turning up in future IT audits, either.
Although companies are not required by law to disclose ESG initiatives and results in their financial reports, more companies are disclosing their ESG activities in their annual reports because their investors are asking for it. In part, this new ESG focus has been driven by concerns about climate change, but there is also new-found investor interest in corporate workforce diversity initiatives and in how companies treat their human workforces, their customers, and their customer data.
Depending upon the investor, what could be important is whether the company’s workforce (and board) is diversified, the employment conditions for foreign labor forces, what the company does to reduce its carbon emissions and carbon footprint, or how well the company protects the confidential information of its customers.
IT plays a pivotal role in company attainment of ESG, because data centers, information handling, customer-facing processes, and employee hiring practices are all integral to IT.
When sustainability grew in relevance, the first thing that large enterprise purchasers did with their smaller company suppliers was to ask suppliers for annual sustainability reports.
To show the biggest gains in sustainability, suppliers immediately took aim at their IT data centers, figuring that by rapidly virtualizing servers and storage they could show tangible reductions in data center floor space and power usage. By doing so, they would satisfy their large enterprise buyers and ensure that their contracts and revenues would stay in place.
Since then, corporate IT’s role in sustainability and ESG has widened.
More automated systems are in place for e-commerce and for the follow-up phases of sales purchasing cycles, like the need to return or exchange an item, or to speak to someone at the company about a billing or a product problem. Corporate functions like sales, the warehouse, billing, etc., might technically be “in charge” of these processes, but the actual processing (and glitches) often involve systems, and that’s IT. Because so many problems that can be linked to ESG inevitably end up in IT, CIOs and IT leaders need to be actively involved.
If the CEO, the board, a major investor, an investment company, or an IT auditor hasn’t knocked on IT’s door yet, that day is coming.
