Enterprise hits and misses - the impact of the SEC's ESG policies gets scrutinized, the EU AI Act is official, and TikTok's future sparks debate

Jon Reed Profile picture for user jreed March 18, 2024
Summary:
This week - AI gets the sexy headlines, but enterprises shouldn't sleep on ESG. The EU AI is now official, but how should digital leaders respond? The potential TikTok ban raises bigger questions, and McDonald's tech failure whiffs.

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Lead story - New ESG regulations will have a big impact on tech and service firms - here's why

AI continues to dominate the tech PR festival, but once again ESG, with its direct implications for compliance, is the sneaky big story companies should be tracking. Brian's latest explains the significance of the SEC's ESG climate disclosure rules, adopted on March 6:

These rules will bring a measure of clarity, specificity and comparability to the data that companies report. This data will become part of a firm’s annual reports, SEC filings and other documents. In effect, this non-financial data will get the same degree of assurance, controls and attention/oversight that financial data currently receives.

According to the SEC, the new rules will require companies to report:

  • “Climate-related risks that have had or are reasonably likely to have a material impact on the registrant’s business strategy, results of operations, or financial condition;
  • The actual and potential material impacts of any identified climate-related risks on the registrant’s strategy, business model, and outlook. [For the full bullet point list, check Brian's article]

Some companies will be breathing a sign of relief that so-called "Scope 3" emissions are not a core part of these requirements - though now is not the time for overconfidence about carbon emissions across supply chains. One way or the other, more laws on this are coming - and if not laws, then supplier approval rules, etc. As Brian points out, this is still a substantial new wave of regulation - one with big implications across the enterprise:

For any software vendor that was still on the fence about supporting ESG/Greenhouse gas reporting, the wait is over. You need capabilities now or your customers will “seek true love elsewhere”.  

There are currently over 40 fairly complete ESG technology vendors out there and readers should expect to see some of these get acquired by larger ERP, process automation and/or EPM (enterprise performance management) firms.

A rethink of software design is in order here, especially for ERP vendors:

It’s also time to rethink the data model of ERP software. It’s clear that enterprise data requirements now go well beyond the four walls of a company (the traditional boundaries of an ERP product). Data needs to be captured, analyzed, reported, etc. across the entire value and supply chain no matter how many tiers deep the supply chain or how many customers a firm has. ERP needs new places to store this information and leadership is definitely needed here.

That rethink was overdue. Despite all the strong talk about sustainability we hear from the keynote stage, it seems that software vendors are back on their heels on this more than they should be, settling for symbolic, modestly useful gestures like paying for carbon offset credits for conference attendees. Maybe it's time to divert a few resources from flawed generative AI solutions with questionable ROI, and devote a bit more development resources towards an ESG overhaul?

As Brian says, we'll need to keep tracking this story:

Yep, the ESG landscape fundamentally changed last week…

Diginomica picks - my top stories on diginomica this week

  • Making digital transformation easier - some leadership learnings from GSK's Diane Krisciunas - Stuart dispenses leadership lessons on keeping transformations from going off the rails: "Krisciunas’ third piece of advice is to pick your use cases with care, with an eye to early wins that can demonstrate business value. She cites an example of one such use case that GSK is working on with C3.ai around forecasting accuracy."
  • The British Library looks to the future as it reveals the incalculable damage of its ransomware attack - an important postmortem from Chris, with wake-up calls a-plenty. Changes the library will make after this setback include setting up a "best-practice, role-based-access control setup for domain and storage services, enshrining the principle of least privilege across the organization."
  • Building multi-modal biological LLMs - checking out the ambitions at Bioptimus - I'm more optimistic about AI in medicine than just about any other area, given the enormous data sets involved and the implications for solving vexing conditions. George has a promising startup story, albeit with the usual caveats that too many gloss over: "It's also important to note that foundation models tend to hallucinate, and it will be interesting to see how this turns up in these new kinds of biological foundation models. They may be good at identifying new connections or opportunities to explore, but all the results will require cross-checking against traditional scientific models, direct observation, and clinical trials."

Vendor analysis, diginomica style. Here's my top choices from our vendor coverage:

Oracle CloudWorld London coverage - as Oracle CloudWorld London kicked off, we framed up the show with earnings and customer trend analysis. Expect more stories from the event this week:

A few more vendor picks, without the quotables:

Jon's grab bag - Madeline continued her rewarding series with What I’d say to myself back then – that dream job won’t fall in your lap, so speak up, says Workday’s Emma Chalwin. Meanwhile, Cath filed two of the niftiest AI scenarios I've seen this year:

Finally, as per Stuart, the EU AI is official: EU AI Act passes the European Parliament - a milestone, but only the beginning. Where should tech leaders go from here? Mark Chillingworth takes this up in Digital leaders - what the EU AI Act will mean for you.

Best of the enterprise web

Waiter suggesting a bottle of wine to a customer

My top seven

  • Enterprise SaaS investment makes a comeback — but not where you'd expect - Ron Miller crunches numbers on where SaaS spending is growing, including CRM, supply chain, and, as he posits, data/analytics.
  • How Tech Industry Layoffs Are Impacting Developers - The New Stack busts some hype around why developer layoffs are happening: "The advent of AI is also having an impact, but the extent of that is open to debate. Iverson thinks AI is having a huge psychological impact, but it’s still unclear how much AI is affecting hiring and employment levels, and mentions that the technical recruiters he’s spoken with… all seem to think that it’s minor compared to the issues related to interest rates.”
  • How to avoid the headaches of AI skills development - Joe McKendrick with a thoughtful look at the good/bad of AI skills readiness: "Even as organizations accelerate AI adoption, the majority don't understand what, if any, AI skills their employees possess or have an upskilling strategy to develop them."
  • What a possible SEC change says about corporate America's commitment to ESG - more on the SEC's ESG policies, this time from Axios: "The SEC's reported action, along with moves at the state and local level, are the latest in what feels like a larger pullback in the quest to push companies to disclose and curb their carbon footprint." This is the broader backdrop, where policies have political fallout, and lessening Scope 3 requirements are part of the perceived pullback.
  • The SEC’s climate disclosure rules are the latest to require expanded ESG reporting - PwC's take on how enterprises should respond: "Companies will need to develop an effective controls environment and accelerate their ability to collect, manage and measure ESG data. While the SEC rule may be top of mind, these steps may also help you with other global regulations."
  • The CEO’s secret to successful leadership: CEO Excellence revisited - McKinsey takes a victory lap for a book with a big impact: "If you say to us, 'What is the role of a CEO?,' we’re now crystal clear on what that is. We would say the irreducible core of the role consists of six things you will need to do."
  • A TikTok ban bill was passed by the House. Here's what that means for the app - a supposed "TikTok ban" is far from a done deal - and it opens up a big ol' can of worms. Even if we conclude that TikTok is indeed a security risk, most other social networks have the same algorithmic dumbing down/disinformation problems. However, theses issues are certainly worth debating. Here's one take from NPR.

Overworked businessman

Whiffs

Okay, so I took a gratuitous shot:

The blurring of AI movies and reality isn't particularly helpful for our collective grasp. If you do it, you might wind up in the whiffs:

 Hard to resist a meaty softball right over the plate:

See you next time... If you find an #ensw piece that qualifies for hits and misses - in a good or bad way - let me know in the comments as Clive (almost) always does. Most Enterprise hits and misses articles are selected from my curated @jonerpnewsfeed.

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