The tech and services industry is not prepared for sustainability

The Bottom Line: Sustainability literacy needs to develop at all levels in organizations and on both sides of the tech and services contract

Regulation will hit hard—maybe not immediately after COP26, the UN climate summit this November, but it will come. Executives and boards are expecting it, but their organizations aren’t prepared. It’s all good talking about turning organizational-level strategies into roadmaps, targets, and execution. It’s also easy to talk about ecosystem and supply chain collaboration as if it’s never occurred to anyone before. But making this happen in reality is another matter and needs the right people to have the right knowledge and skills at all levels of organizations and ecosystems to make change happen—and drive a culture that wants to make it happen.

The world is not on track to meet its most visible sustainability goal of reaching net-zero emissions by 2050. In the absence of rapid, tangible change, the chance of limiting post-industrial global warming to 1.5 (or even 2) degrees is gone. We’ll see more intense and irreversible climate and ecosystem meltdown­—what the 2015 Paris Agreement sought to avoid. Significant progress is also lacking across the 17 UN Sustainable Development Goals covering the environmental, social, and governance (ESG) aspects of sustainability, such as eliminating modern slavery, securing biodiversity, or achieving true diversity and representation in all forms of organizations. This lack of progress applies to businesses and governments worldwide—in both their goals and investments. The technology and services industries are no exception; providers of both are developing new capabilities and embedding sustainability in their existing portfolios, but relative to the scale of change required, it’s not enough.

Business leaders and policymakers need help. They need to change fast. They won’t be able to change without a range of consulting, technology, implementation, and ongoing managed services. Many tech and service providers talk a good game and have identified the size of the problem, but the very fact that they’re only developing the capability that every organization needs right now sums up an industry that is not prepared. Services and technologies do not align across the sustainability services value chain we identified in our soon-to-be-published ecosystem mapping study. Organizations must achieve the same level of alignment to become sustainable across ESG. Top-level strategies are not being embedded and executed. A lack of sustainability literacy is as big of a barrier as digital literacy has been to transformation over the past decade—on both the provider and client sides—as is poor and disparate data, a lack of CEO-level championing, and change-averse culture. But more on this later.

80% of businesses don’t have a plan for sustainability

Our conversations with tech and service providers and their clients about their sustainability plans helped us categorize organizations into five buckets based on current status and approach:

• The reinventors: At most, 10% of organizations are aiming to reinvent their business models to fundamentally change their industries.
• The roadmappers: The second 10%, at most, have defined goals (such as a net-zero emissions target) and a reasonable grasp of their current footprints and are moving along roadmaps.
• The well-meaning middle: The middle 40%, the largest group, means well but lacks a plan. They largely don’t have a handle on their current emissions footprint­—whether it’s Scope 1, 2, or 3 (direct, indirect, and supply chain emissions, respectively).
• The waiters: Roughly 20% are waiting either positively or begrudgingly for regulations, and they plan to follow the established best practices.
• The greenwashers: The final 20% are looking to “creatively account” themselves out of whatever they’re required to disclose (you could also call this deliberate greenwashing).

Accounting for differences in the definitions you could apply to organizations and the qualitative nature of this list, we’re confident in saying 80% or more of organizations fall outside of the first two categories and still don’t have the sustainability plan they need.

Sustainability needs a culture change and collaboration on a level we haven’t seen before

There must be a monumental shift in culture around sustainability, data transparency, and integrating data and business processes throughout ecosystems. The technology exists, but organizational appetites and alignment are less advanced. There is a desperately needed role for service and technology providers. We need to move from a competitive view of supply chain ESG visibility toward collaboration on a new level.

Organizations aren’t aligned in their sustainability efforts

Organizational-level strategies are too often disconnected from departments, domain-level roadmaps, and targets. Throw in disparate processes and data, and making sustainability “native” through an organization becomes daunting. Concrete roadmaps are required, and they must be broken down to day-to-day operations and decision making with targets in place for functions that incentivize and track progress. For example, to reach net-zero emissions, procurement teams must shift away from buying fossil fuel-based energy; but those decisions won’t be made unless sustainability (e.g., the carbon footprint of energy) is weighted in procurement decision-making processes. The same goes across categories, whether sourcing travel, packaging, or IT devices and software.

There are examples in the tech and services industry that make us optimistic… But there needs to be rapid acceleration

Technology firms are using their scale and resources to invest in renewable energy to underpin their operations. They are also positioning as ecosystem coordinators promoting sustainability by the open sharing of data and positioning technologies toward ESG applications. Platform companies aim to integrate data and business processes, and they are hinting at facilitating ecosystem collaboration. But they risk over-complicating their technologies as the market hypes up and brands all things new and existing as ESG.

Providers of consulting, technology, engineering, and managed services are aiming to embed sustainability across their portfolios; some are developing methods of tracking their impacts internally and with their clients. Some are aligning their services in narratives that cover the whole organizational sustainability journey and can show example case studies with joint sustainability and business outcomes. Many speak of their approach in bridging the gap between organizational-level strategy and execution—with some positioning frameworks previously applied at digital transformation toward sustainability.

Despite the high activity levels and increasing frequency of press releases, most of the capabilities described here are developing. They need to develop far faster if organizations are going to have any chance of reaching net-zero and adequately addressing all 17 Sustainability Development Goals. The barriers enterprises face in sustainability are just as applicable to technology and services providers. We’ve covered some above. However, just as digital fluency has been a challenge for service providers and their clients over the past decade, sustainability fluency is now proving to be just as big of a challenge.

Takeaways

Organizations (and their service providers) need to educate their employees and ecosystems and strive to achieve a new level of buy-in to the inherent business benefits of sustainability. Organizations also need to play their role in outlining very clearly what’s about to happen in terms of regulation and climate change if we don’t move now. Organizations and service providers are hiring, but that’s not enough. Sustainability talent alone will not embed it natively throughout an organization unless there’s a firm mandate and accountability from above. Sustainability literacy needs to develop rapidly, as does the approach of organizations turning their plans into reality.

If you think things are changing now… that’s nothing compared with what’s coming. Get your organization ahead of regulation. Customers and regulators are going to start panicking. Take it from someone who has fought to drive a coherent plan and action on sustainability from a political opposition in local government: Organizations can and must get ahead of regulation, and they can also lead in creating that regulation.