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July 3, 2023

How can cloud transformation help your ESG goals?

3 Min. Read
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As commitments to Environmental, Social, and Governance (ESG) issues continue to gain momentum, investors, regulators, governments, customers, employees, and activists are increasingly evaluating companies according to ESG criteria. Your cloud strategy can help you reduce your environmental impact, stay compliant, and achieve the agility and scale your business requires.

Why is it so important to review and reinvent your ESG data strategy now?

The push for transparent and consistent reporting is becoming a global phenomenon. By the end of 2023, the US Securities and Exchange Commission (SEC) is expected to issue climate-related reporting rules for publicly traded companies, ESG-focused funds, and firms. The Corporate Sustainability Reporting Directive in the European Union strengthens sustainability reporting by affecting a wider business group.

In addition, according to Gartner, 85% of investors consider ESG factors. While profitable financial performance and innovation are top priorities, investors are increasingly viewing their portfolios through the lens of ESG. In addition, according to PwC's Consumer Intelligence Series survey, 76% of consumers said they would cut ties with companies that mistreat the environment, employees, and communities.  

Cloud technologies can help meet ESG commitments

Businesses are migrating from legacy/on-premises data centers (DCs) to the cloud to help with growing compute and storage needs. According to the World Economic Forum, the transition to cloud computing is expected to prevent the release of at least 629 million metric tons of CO2 into the atmosphere between 2021 and 2024. Increasing efficiency along the value chain, such as IT hardware and refrigeration, is projected to reduce emissions.  

When collaborating with cloud operators, data centers can be used in geographies with low water stress and favorable climates, with a history of energy efficiency practices such as the use of renewable energy, energy-efficient networking, and cooling equipment.

For example, hyperscale data center operators are leaders in the supply of renewable energy, a testament to their commitment to cleaner cloud services. According to Gartner, carbon emissions are expected to be among the top three criteria for cloud purchasing decisions of hyperscale cloud services by 2025.  

How can cloud services help achieve transparency and speed in ESG reporting?

Data availability and quality (accuracy or completeness) are among the most daunting challenges when it comes to reporting. These challenges stem from the lack of a universally defined ESG reporting standard. According to PwC's Annual Global CEO Survey, more than 50% of companies that do not commit to net zero lack the necessary capabilities to accurately measure their carbon emissions.

Combining and reporting data from different sources

ESG reporting requires analyzing data from various systems and external suppliers. Cloud data stores can help businesses connect to multiple data sources simultaneously and standardize data for analysis. By leveraging cloud services, organizations can effectively collect and analyze data from IoT sensors, thereby increasing the energy efficiency of their physical spaces. In addition, many cloud providers have further streamlined the ESG reporting process by offering applications designed to monitor, track and report on key performance indicators (KPIs).

Generating actionable insights and performing predictive analytics

Obtaining structured data to analyze and standardize ESG practices across sectors presents significant challenges. However, harnessing the power of artificial intelligence enables the development of more accurate prediction models. These models help gain valuable insights into progress and provide recommendations for meeting ESG targets. Leveraging cloud-based data science and analytics allows for examining risk exposure, variation, and patterns in ESG performance.

To summarize the findings from a Gartner survey, 87% of leaders anticipate increasing their organization's investments in sustainability over the next two years. Integrating sustainability into business and cloud strategies can provide a competitive advantage for your organization. By leveraging cloud technology, you can facilitate the implementation of a comprehensive strategy that combines industry expertise and technological capability to drive your ESG initiatives forward.