The tech sector is a key player in the environmental, social, and governance (ESG) value chain, as a source of emissions as power consumption grows, and also as a key enabler of efficiencies and ESG policies through the various services and solutions they provide.
Listed below are the key technology trends impacting ESG performance, as identified by GlobalData.
Internet of Things (IoT)
IoT will be a $1tn industry by 2024, thanks to the rapid growth in the number of connected devices across enterprise and consumer markets. Tech companies use IoT in their factories and data centres to operate with far greater efficiency and flexibility, allowing them to continuously monitor energy and water consumption.
While IoT can address a range of sustainability goals for tech companies, the manufacture of connected devices creates its own environmental issues, such as generating large amounts of e-waste, particularly in the consumer market. There are growing calls for regulators to bring greater transparency to environmental audits to reduce the levels of greenwashing.
Advanced data analytics allow companies to monitor their operations in real time and thereby drive operational efficiencies, including the impact on environmental factors such as reducing unused stock and excess energy and water use. Analytics combined with new technologies, such as augmented reality (AR), virtual reality (VR), and others can help in reducing the environmental impact of companies across industries.
Several IT service providers are now offering broader sustainability services that can help companies to both measure and report on strategies and roadmaps to track and measure sustainability initiatives. Atos, for example, offers a range of digital solutions that aim to help decarbonise corporate processes, while Capgemini flags artificial intelligence (AI) and analytics to help companies optimise energy consumption and logistics operations.
Growth of hyperscale cloud data centres reflects the ongoing shift away from on-premise corporate data centres as computing resources move into the cloud. Multi-tenant data centres with shared infrastructure and resources help to maximise operating and energy efficiencies.
Exponential growth in data volumes and the shift to the cloud trends, further boosted by Covid-19, raises questions as to the limit of efforts to increase energy efficiencies, even as giants like Amazon, Google, and Microsoft focus on renewable energy generation. With scrutiny set to increase, detailed disclosures on energy use and related emissions will be a prerequisite for companies in this space, as well as for their key clients.
Lithium-ion batteries power most of today’s electronics and are increasingly becoming a vital resource for electric vehicles and electric grids. Although ubiquitous, lithium batteries are a significant concern for the environment. This is because lithium is a scarce natural resource, and the enormous amount of water needed for its extraction, and the damage caused to the areas around the mines is enormous. In addition, there are concerns over unsustainable working conditions of labour.
Tech companies must act responsibly toward environmental and social factors associated with lithium extraction. This would require stronger governance policies. Those that pioneer sustainable lithium extraction, will be better positioned in the eyes of investors, regulators, and customers.
5G adoption is increasing across the world, with operators investing significant sums to deploy the new networks and provide additional capacity to transport the huge amounts of data consumed by 5G devices. Operators have been eager to stress the energy and data efficiency of 5G networks, at least as compared to earlier generations such as 4G.
However, 5G networks represent additional network builds, adding to the environmental footprint of existing networks. Faster networks and more advanced devices will further fuel data hungry applications, such as video streaming and gaming, requiring additional network investments over time. Operators will face ongoing scrutiny over how they manage the ESG impacts, from e-waste to energy consumption.
Software-defined everything (SDE)
Software defined networking (SDN) and the related trend towards SDE have important implications for security and broader ESG issues. Software-defined architecture provides a means to automate virtual security measures for networks and data centres.
In an SDE scenario, security functions such as firewalls and intrusion detection are decoupled from the proprietary hardware. This allows the network operations or data centre administrators to update and manage security from a central point using software tools.
Where compliance with local regulations is a factor, such as the EU’s General Data Protection Regulation (GDPR), appropriate security protocols, such as encryption and read-only access can be applied specifically to the appropriate sensitive data as required.
This is an edited extract from the ESG – Top Trends by Sector – Thematic Research report produced by GlobalData Thematic Research.