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April 28, 2022

TCS takes a proactive approach to ESG as pressure builds globally

IT services vendor TCS is taking a proactive approach to environmental, social, and governance (ESG) issues. The company is using its technology to address environmental and social concerns, but it must also focus on social and governance issues, including diversity, to match sector leaders like Accenture.

More than 80% of respondents in the Digital Sustainability Index, prepared by TCS and the University of Auckland, said that embracing digital technologies for sustainability could give them a competitive edge. Most companies also revealed that digital sustainability initiatives positively impacted their reputation.

With a digital sustainability initiative in place, TCS is strengthening its competitive edge in ESG. In the fiscal year ended March 31, 2021, supported by its Secure Borderless Workspaces operating model, TCS reduced its absolute carbon footprint by 49% over the previous year. Girish Ramachandran, president of TCS Asia Pacific, said during the company’s Q2 2022 earnings announcement that the pressure to improve ESG performance was driven by investors and employees, especially the younger generation, who want to work for sustainable companies.

TCS has pledged to reduce carbon emissions by 70% by 2025 and achieve net-zero emissions by 2030. It aims to achieve this by embracing a new working model (only one-quarter of TCS’s total workforce will work from the office by 2025), alongside digital technologies and renewable energy.

TCS is using its technological prowess to address ESG concerns

Technologies such as the Internet of Things (IoT) and artificial intelligence (AI) are playing a growing role in addressing ESG concerns. For instance, they can help firms monitor their activities in real-time and maximize operating efficiencies, which, in turn, can reduce their use of energy and water.

TCS is using IoT, cloud services, cybersecurity, and AI as part of its Clever Energy project, aimed at reducing energy consumption across its campuses. TCS has also undertaken initiatives like a Sustainathon, which encouraged students to use technology to lessen food wastage. It has also initiated the Social Enterprise Education Lab, a program to support entrepreneurship and job creation.

Rapid growth in data volumes and connected devices could override ESG efforts

The growth in IoT and data volumes could pressurize existing efforts to drive efficiencies in data centers and networks. According to the International Energy Agency, data centers generate between 1% and 2% of global greenhouse gas (GHG) emissions.

Therefore, the increasing shift to the cloud raises questions about the ability to increase energy efficiencies, even as companies focus on renewable energy generation. Failure to address these trade-offs will hamper TCS’ aim to reduce emissions. Furthermore, with scrutiny set to increase, detailed disclosures on energy use and related emissions will be a prerequisite for companies in the IT services sector.

Alongside technology, TCS must focus on gender parity and diversity

TCS’s strong focus on ESG is reflected in GlobalData’s thematic scorecard for the IT services sector. The company’s score of four out of five in the ESG theme suggests that its activity in this theme will improve its future performance. Accenture, Atos, and Capgemini are dominant players in ESG, scoring five out of five, and TCS must continue to invest in the theme to match the sector leaders.

Accenture is differentiating with a commitment to net-zero emissions by 2025, carbon neutrality by 2040, and 100% renewable electricity by 2023. It is also hiring senior and mid-senior level talent in the ESG space to broaden its reach. TCS must also focus on increasing gender diversity at the board level from 36%. At Accenture, women account for 46% of the board.

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