Skip to main content

Digital Transformation and ESG Strategy Belong Together

We’ve apparently reached an inflection point with the development and execution of Environmental, Social, and Governance (ESG) corporate policies. The role of business leadership in sustainability issues around climate change has received increasing attention from companies and their key stakeholders.

But over the past year, something changed for CEOs worldwide, and sustainability talk turned into action. Continued disruption -- including upheaval and disruptions from the global COVID-19 pandemic -- has society at large calling for a new approach to economic advancement and business priorities.

According to a recent survey by Oxford Economics, when it comes to optimizing opportunities and delivering business value, some CEOs have discovered an additional step. These savvy CEOs report deliberately integrating their Sustainability and Digital Transformation efforts.

Digital Transformation and ESG Drive Growth

For organizations with a clearly defined sustainability strategy and the right capabilities in place, this alignment is unlocking commercial performance benefits -- up to 41 percent higher revenue growth.

The most forward-thinking CEOs see government ESG mandates as an opportunity, whereas others merely see the operational cost. From the strategies they embrace, the stakeholders they engage, and the digital capabilities they can leverage, leading CEOs imagine growth that will positively impact their enterprise.

Almost half of the CEOs surveyed said increasing sustainability is one of the highest priorities for their organization in the next 2 to 3 years -- that's up from roughly a third in 2021, or an increase of 37 percent in just a year.

Exploring ESG Global Market Trends

According to a recent Bloomberg Intelligence market study, global ESG assets surpassed $35 trillion in 2020 and are on track to exceed $41 trillion by 2022 and $50 trillion by 2025 -- one-third of the projected $140 trillion in total assets under management globally.

The European market had more than half of global ESG assets until 2018 but was surpassed by the U.S. market, which now dominates with over 4 percent growth in the past two years. Its holdings should exceed $20 trillion in 2022, even if its growth rate halved.

Moreover, the Bloomberg study findings show that climate change is eclipsing corporate governance and social issues at the top of the ESG agenda, reflecting both the existential threat of global temperature rise and the race against time to rein it in.

Besides, with regulators and standard setters proposing tougher rules for carbon reporting, many companies are now taking their first steps to understand their value-chain emissions. As an example, Amazon, Microsoft, Google, and Alibaba have all set net-zero commitments for their services.

Why Corporate Net-Zero Bold Goals Matter

Some are more comprehensive in how they define net-zero, according to a study by MSCI. But none of them can make a dent in their upstream supply-chain emissions without getting their server and chip vendors to follow suit. As they discover how much their technology suppliers emit, B2B engagement could become the next frontier of climate influence.

According to the findings of a recent PwC survey and market study, there are a few actions business leaders could take immediately that will advance their ESG agendas and bring their stakeholders with them along on the journey.

The PwC survey found that 82 percent of C-suite respondents said companies should embed ESG directly into their corporate strategy. However, so far, just 40 percent of CEOs have factored climate change into their strategic risk management, without which it is more difficult to drive a corporate sustainability agenda.