Modern CIOs are data-oriented, good storytellers, orchestrate outcomes and act as business brokers. As the climate emergency begins to have a significant impact on the bottom line of businesses, those CIO skills are set to become essential for leading businesses towards Net Zero CO2 goals and adapting to the impact of the climate emergency. This means understanding the environmental footprint that technology has whilst also adopting and using leadership and data tools to enable the entire organization to be more sustainable.
Bush fires now regularly ravage the hills of California, home to Silicon Valley; Australia and Pakistan have been devastated by floods, and Europe is experiencing one of the mildest starts to winter on record following a continent-wide heatwave over the summer of 2022. The human and business cost of the climate emergency is worrying business leaders, says Hugh Shannon, Head of Sales and Customer Success with OakNorth, a bank and banking technology provider:
Coming out of COVID, the climate really is the next Black Swan event, although it is not really a Black Swan.
As Shannon identifies, the risks of unsustainable living and business patterns are not news, it is damaging organizations, and in a classic case of better late than never, attention is being paid. Shannon adds:
Banks need to think about the risk from a forward-looking basis. Bank analytics is typically historic.
Historical data is of little use when the events impacting an organization and its customers are unprecedented.
Sustainability is becoming a compliance issue. All large companies trading in the European Union (EU) now have to disclose data on the sustainability risks the organization is exposed to. The European Parliament adopted the Corporate Sustainability Reporting Directive (CSRD) by 525 votes, and only 60 MEPs voted against it on November 10, 2022. There are also specific regulations for sectors, such as the EU Sustainable Finance Disclosure Regulation (SFDR), and like GDPR, nations around the world often copy EU regulations.
IT the solution
Technology proved itself as part of the solution to disruption during the COVID-19 pandemic. It is well documented that digitally advanced organizations coped with the privations of the lockdown. Digital methods can also play a role in reducing an organization's impact on the planet. But it's about more than the technology; Richard Williams, CIO for the European Bank of Reconstruction and Development (EBRD), says technologists have the skills to make organizations more sustainable. He explains:
Technology is about engineering, and it is really pragmatic. We have a whole workforce that is predisposed to have a crack at difficult problems. Every technologist I have spoken to has said: `where do I start?'.
Williams adds that CIOs have a powerful position that can be used to drive sustainability:
I have agency due to my role, and I have information; therefore, I have an obligation to be an advocate for sustainability. There is also the influence we have with our partners, so we can shape the narrative. Also, morally, it is the right thing to do.
IT is also part of the problem
Technology is both a part of the solution and a significant polluter. Business advisory firm McKinsey conducted research that revealed that enterprise technology is responsible for up to 400 megatonnes of CO2 equivalent gases emissions a year.
Technology often forms a Scope 3 emission. There are three emissions scopes that organizations have to monitor and report to regulators and customers. The scopes were defined as part of the Greenhouse Gas Protocol, the world's most widely-used greenhouse gas accounting standard. This protocol was developed by the World Resources Institute and the World Business Council for Sustainable Development.
Scope 1 is direct emissions, in effect, the emissions within the confines of the enterprise building. Scope 2 is indirect emissions from the energy the business acquires from an electricity generator, for example. Scope 3 is indirect emissions from the supply chain, which covers everything from logistics companies to outsourced and cloud technology services.
These scopes are creating new demands by customers on organizations, says Neil Ryland, Chief Commercial Officer with Normative, an emissions analytics service provider. He explains:
The procurement departments are being asked about this in the same way they are expected to prove that the organization doesn't use child labour.
While in other sectors, there is an industry-wide move to clean up their act, Shannon of OakNorth says:
The Network for Greening the Financial System has already seen a number of major global banks sign up to its charter.
Scope 3 is hard
Scope 3 presents CIOs and organizations with a challenge, especially as it is always outside of the confines of your business. In banking, Shannon says:
Banks have to disclose details on the firms that they lend to because their Scope 3 becomes your emissions. Large firms are already making their own disclosure, but the middle market has no mandate to report its emissions.
CIOs could well face a similar problem with technology suppliers, big tech is already providing tools and reports so that business technology leaders can understand their emissions, but the boutique providers may require extra effort. Ryland at Normative says the complexity of Scope 3 is regularly seen. He explains:
Organizations have often done Scopes one and two but can't do Scope 3 without getting buried in Excel. There is a real accuracy challenge with Scope 3.
Despite the challenges of Scope 3, understanding and then making the organization more sustainable is akin to the move to cloud computing and digitization, says Forum for the Future Senior IT Advisor, Kevin Antao. Being sustainable is also just good business sense, he says:
Your customers can inspect sustainability market data, and if you are not in it, then you are in trouble. As CIOs, we championed digital; now we have to champion sustainability.
That championing starts, like digital transformation, with data and change management. Williams at EBRD says:
CIOs have the data and the mindset to put actionable insight into people's hands. That is exciting, and it is the unique CIO territory as we have the ability to bring together the dreamers and the idealists.
Antao agrees and says there is currently an arms race of service providers offering carbon calculations. That is arguably good news. Both Normative and OakNorth have entered the race. Data tools equip organizations to move from the current state of not knowing where to start their sustainability plans to taking action. Shannon explains:
We take the emissions and the revenue of an organization, and that gives us a starting point for a bank to understand their customers and then ask more questions. Data is the way forward.
Ryland adds of the benefit:
Like a financial audit, as a leader, you are being asked to put your name against it.
Just as GDPR made organizations place legal responsibility for data protection with a senior leader, it can only be a matter of time before the same is true of sustainability. Therefore business technology leaders will need to start using analytical tools which have a financial reporting heritage.
As organizations become increasingly digital, that is not without an environmental impact, and Williams says CIOs must ensure digitization is sustainable. He adds:
It is obvious that technology is going to have a bigger environmental footprint as our society digitizes, so we have to promote sustainability by creating digital twins of the organization that you can input sustainability parameters to and measure the impact. There is a need to develop adaptation models, and that is pure digital activity, as you cannot A/B test this in any other way.
With digital, organizations don't have any excuse not to capture and model the unintended consequences.
Where do CIOs start
Working for an organization founded by the world-renowned environmentalist Jonathan Porritt meant that CIO Kevin Antao had to understand the sustainability impact of the technology estate at Forum for the Future. But as Antao reveals, it's not an easy task. He says:
I started with principles and standards, the key was to find a reliable definition, particularly as to how digital intersected with the agenda. I quickly learned that sustainability was much more than climate change and referenced the UN Sustainable Development Goals (UN SDG’s) as a starting point.
Definitions such as ‘digital sustainability’, ‘sustainable digitalization’ or even ‘corporate digital responsibility’ made me realize that the definitions of the intersection of digital and sustainability are immature and still evolving.
On base operations and IT procurement, I looked at devices, networks, and the digital infrastructure, asking myself the question whether I had made the most sustainable product choices. For example, for laptops, I relied upon Leaf Score to help make my selection.
A key area was around cloud and storage, where I was led by the research pointing out that 100 gigabytes of data can equate to an equivalent of an emission of 0.2 tonnes of CO2, hence enabling me to roughly calculate my storage savings footprint.
While for SaaS, we considered the organizational application map, and asked two simple questions: did the provider transparently publish its progress against the UN SDG’s, and had the organization actively signed up to the UN Global Compact.
This revealed positive results for the likes of Microsoft and Salesforce, but some surprises with key collaboration software common to many organizations.
Of the work, he says:
It encouraged us to really lean in on this and look at the business case.
In this article, I spoke not only to CIOs but also to a bank providing technology services and a carbon accounting technology provider. The latter two most often enter the organization via heads of ESG, procurement or the CFO. As with digitization, the sustainability agenda requires a cross-functional approach involving all areas of the business.
As CIOs Antao and Williams describe, the CIO and technology department has skills, data and the right mindset to be a major asset in organizations becoming more sustainable. In addition, CIOs are responsible for a major part of the organization's Scope 3 emissions, so like their peers, they will need to embrace data technologies to understand how they, too, can reduce their emissions.
Without the expertise of the CIO and technology, business and society is taking one of the riskiest bets of all time - our shared future.
UPDATED Jan 4th 2023 to correct the spelling of Normative. The final 'e' was omitted in the original version.