As the world emerges from the pandemic, we are seeing an uptick in confidence in various economies and enterprises, with one clear trend emerging—businesses want to grow responsibly and sustainably.
Here in the Philippines, the Securities and Exchange Commission (SEC) started releasing sustainability reporting guidelines as early as February 2019, which were piloted in publicly listed companies (PLCs) on a comply or explain approach for the first three years upon implementation but will become mandatory in the April 2022 reporting cycle to be submitted in 2023.
But as shown in the KPMG 2021 CEO Outlook, it revealed that CEOs are pressured to deliver increasingly ambitious environmental, social and governance (ESG) goals in a range of domains, from helping protect the planet to tackling social injustices and diversity to sustainable business practices. The same survey shows that nearly six out of 10 CEOs see increased demands from stakeholders for more ESG reporting and transparency. Yet, more than four out of 10 CEOs say they are struggling to tell a compelling ESG story to their stakeholders.
A reason for this may be that the understanding and mastery of ESG is still in its early stages, with most organizations unsure of where to start and what to prioritize. Furthermore, with the pressure to protect the bottomline in the short-term, organizations may find ESG investments, including research and development funding for green solutions, too costly with minimal financial returns. Thus, their investments and initiatives may be short-term solutions or for mere compliance.
However, if organizations do not start embedding ESG in their business strategies, they will fall behind the competition and miss out on the long-term benefits of running a sustainable business.
Innovation as key driver
Innovations in the ESG dimension are creating new opportunities for businesses by paving the way to develop cutting-edge technologies and solutions that help drive growth and sustainability, empower workers, and improve tracking and reporting of metrics.
Here are some activities that enable innovation to be a driver for a sustainable world:
1. Adopt purposeful experimentation and research. If you want to see novel and breakthrough value propositions, you need to have a culture of curiosity and experimentation. It must be purposeful experimentation and research that will explore different strategies, configurations or solutions using “scientific techniques or methods” thus generating innovation. For example, in the financial services industry, this could mean adopting a holistic benchmarking tool, analytics or machine learning to capture data, provide metrics, and measure the compliance and risk exposures of corporate clients in areas such as carbon emissions.
2. Use the cloud as an innovation vehicle. Moving IT servers and related facilities from on-premise to the cloud can help organizations minimize their IT operations’ carbon footprint by as much as 88 percent, according to Amazon. For instance, tracking and reporting ESG data becomes more transparent when using the cloud. In addition, it facilitates the development and use of innovative technologies and solutions that accelerate ESG implementation.
3. Integrate ESG and transform risk and change management practices. The role of ESG is rapidly changing the landscape of risk management. Governments and private enterprises should be able to respond to the growing appetite for ethical and sustainable investments in order to respond to this new era of financial decision-making.
4. Reduce energy use through edge-based solutions. Edge-based solutions are types of technologies that use distributed computing frameworks to integrate or bring applications close to their data sources, such as local servers or IoT devices, and are usually time-sensitive in processing data. Given this model, organizations can optimize and leverage the benefits of these solutions to reduce energy consumption by as much as 98 percent compared to using cloud-based solutions, according to Analog Devices, Inc. Examples of applications are in manufacturing industries, where factory automation using precision sensing and drive technologies can help reduce motor energy consumption during factory production of products.
5. Empower employees through digital tools. By investing in digital tools that promote productivity and work efficiency through remote setup or work from home arrangements, we eliminate the need to travel physically to work and reduce our carbon footprint to a considerable degree. Also, the manufacturing industry can look into ways to make the workplace safer by giving workers secure devices and systems to wear.
6. Data-driven decision making. By using a standard data model (for example, for energy consumption) for certain industries such as mining, healthcare, retail, real estate, automotive, or manufacturing, we can derive context for energy usage intensity and other performance indicators to measure them more accurately and make better decisions.
7. Embrace 3D bioprinting for healthcare. For the pharmaceutical and healthcare industries, the utilization of 3D bioprinting can minimize waste and environmental burden. It also provides new ways to conduct medical research, such as testing on animals, because 3D tissues are an accurate representation of reality and can be used to predict what will happen in clinical trials.
For governments and the private sector to accelerate ESG adoption, these and other far-reaching innovations are necessary. KPMG’s Innovation Summit in the Philippines on July 20, 21, 26, and 27 will feature innovation stories from stakeholders with an emphasis on sustainability and will take place alongside the firm’s internal Ideation Challenge focusing on promoting ESG initiatives.
Register to the summit for free: https://forms.microsoft.com/r/mSatTEu66c