Organizations are working to seize the initiative on environmental, social and governance (ESG) issues, and this focus is propelling the technology innovation agenda. ESG is changing from being an important reporting responsibility to a driver of value creation.

In our annual technology report, almost half of respondents (48 percent) say that advancing their ESG priorities over the next two years will be a primary innovation goal for their technology functions – which includes 53 percent of companies in the ASPAC region, 46 percent in the Americas and 47 percent in EMA.

The opportunity here is considerable, and many organizations are focusing on how digital transformation can help to tackle their environmental ambitions, such as reducing carbon emissions through more efficient working practices, or measuring and reporting carbon emissions more accurately.  Technology should also help address new regulations like CSRD, which require companies to identify and monitor progress against broader sustainability objectives such as social and governance standards. 

Businesses are also looking at how to use technology to drive up ethical standards in the workforce, and to support diversity, equality, and inclusion initiatives, including during recruitment processes. There is also the possibility of using technology to develop more sustainable products and services.

Existing technology or new investment?

Almost three-quarters of respondents (72 percent) are confident they can make progress on their ESG ambitions using their existing technology stacks. An example of this would be using existing data and analytics tools to track performance, manage reporting and identify improvements.

Our survey suggests there is nervousness around investing in new technologies, with 65 percent of organizations saying that economic uncertainty has left them feeling less confident about investing; and 67 percent stating that they are expected to do more with a smaller budget than last year.

However, some organizations are now moving away from ESG “point solutions” to starting to consider sustainability requirements within the overall organizational infrastructure and data modernization journey – recognizing that the data for sustainability needs to be tracked and sourced throughout the organization (and beyond).   And this data needs to be enterprise grade, meaningful and assurance-ready to enable value accretive transformation and maximize the business case for investment. 

While there may be strength in existing tech stacks, organizations should be cautious about shying away from any investment in innovation; an approach which could give competitors the opportunity to seize the initiative, overtake as a rival, or even become the industry leader.

There is also an opportunity for the IT function to identify its own sustainability levers, from making energy efficient architectural decisions and circularity of the IT supply chain, to increasing the diversity of IT talent and clarity of governance around AI.  The IT function must tell its sustainability story effectively to elevate confidence in future performance.  

Elevating confidence

Like any investment in technology, budget frustrations are not new, and organizations must demonstrate real value in their investment in ESG initiatives. Highlighting the business outcomes and returns up for grabs can help transformation leaders win access to the support and resources they need to achieve their ambitions.

Amongst industrial manufacturing companies, for example, where confidence is high it’s no coincidence that 81 percent of organizations say they are fully aware of the productivity impact and financial costs of their existing technology debts[1]. Technology leaders should follow that example, to help ensure that ESG remains a top technology innovation priority.

For more information, read the full KPMG global tech report 2023, or speak to one of the team below.

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