Environmental, Social and Governance (ESG) issues are a hot topic in boardrooms these days.
It’s no surprise. World-altering reports on the state of climate change are delivered with alarming regularity. Diversity and social inclusion misalignment, alongside lax environmental values, are accelerating ‘the great resignation’. And getting the company’s response wrong to these issues can have detrimental effects on a brand’s image and reputation.
In many respects, addressing ESG issues is a no-brainer for organisations. There is a collective social need for a more eco-friendly and socially sustainable approach to economic development. Adding to that already important goal, there is a growing body of evidence recognising the role played by ESG values in driving employee value propositions, financial performance, prosperity, sustainability and in attracting investment.1,2,3
Transforming an organisation to deliver on ESG goals, rather than set-and-forget or ‘greenwashing’ them,* however, requires an effective and efficient approach, not to mention strategic nous and the ability to execute. A tried and tested methodology that can help execute ESG goals and bring their execution straight to the CIO’s door is enterprise architecture.
Enterprise architecture for ESG
The term ‘enterprise architecture’ or ‘EA’ refers to a set of frameworks, methodologies and tools that can help an organisation map their business strategy to their processes, data assets, ICT systems and technology.4 Its value lies in its ability to provide key organisational insights, ensuring coherence between business goals and the supporting business functions and technology services needed to achieve them.
By understanding the underlying components of a business – their inter-relationships, value-chains, alignment and capabilities – enterprise architecture discovers and identifies misalignment between goals, tactics and strategy, and is a great starting point for implementing business strategy through digital transformation.5
This means that enterprise architecture frameworks are well placed to assist organisations in assessing their current ESG position, informing the prioritisation of digitally-enabled or evaluated ESG initiatives, and developing the tactical roadmap to reach an ESG vision.
Additionally, tested and proven EA methodologies and practices will help mitigate associated risks that result from approaches that lack the maturity needed to ensure alignment to organisational imperatives.
How to get started
Whether you want to meet Greenhouse Gas (GHG) emissions targets or ensure fair trade sourcing in supply chains, there will likely be required changes to multiple elements of your business processes, supporting information systems, people and/or technology.
To succeed on this transformation journey, an enterprise architecture approach offers an array of tools. For example, heatmaps (charts that visualise which business functions, application systems, or technology components are associated with a particular performance measure) can assist in selecting priority areas to tackle; while value chain mapping can provide insight into the ESG impact of decisions regarding supply chains.
To start, get to really know your current state by viewing your ESG goals through the various EA layers, or lenses, and then use this insight to map out what you need to do to reach your desired future state.
Business – Whether it’s organisational HR policies, a marketing strategy or your procurement network, many organisational processes and functions need to be assessed for their ability to meet ESG goals. Take procurement for example, how do your suppliers’ ESG profiles fit with your ESG goals? Do you need to redesign your supply chain? Should you assess your community and social impact when adopting a new business model?
Information systems – Will your information systems support the above business process changes? A key element of attaining any ESG goal will be the data that your business is collecting and creating. Your strategies and goals will dictate the data you need to measure and manage, but at the same time, the data you already have (or don’t have) can inform the goals set in the first place. For example, do you have data on your recycling practices, the emissions being produced by your supply partners or the percentage of fair-trade sourcing in your supply chains? Can you evaluate the environmental footprint of your transport fleet? And do you have the systems to capture and/or produce this data?
Technology – Your organisation’s computing power, storage and telecommunications need to be able to support the above information systems and business capabilities. Are the technologies currently in place adequate to run the new systems you will need? Mapping your technology infrastructure will also help directly identify specific ESG ICT goals such as transitioning to low carbon footprint data centres, optimising the use of your infrastructure, or reimagining the possible data and computer processing tradeoffs that get you to your lower-emissions goal.
EA frameworks allow organisations to go from vision to implementation across all organisational levels and areas, and then to circle back for continuous refinements and improvements. A business with mature enterprise architecture practices will also be better placed to respond to the evolving ESG landscape.
From alignment to transformation
Often, and especially when looked at through a holistic enterprise architecture approach, achieving or reporting on certain ESG goals (or seizing on innovative new opportunities that ESG brings about) will not be possible through isolated tech changes, but in fact, require a more holistic digital transformation. (You may have already gone through this in your COVID-19 pandemic response, but did you factor ESG in when you did?)
An EA-supported ESG assessment will give an accurate view of the costs and benefits of an organisation’s overall IT portfolio. Architecture lenses will then help to make the decisions necessary for ESG-related digital investment and/or transformation.
For example, the high energy footprint of business IT systems is becoming an increasing focus of ESG concern.6,7 As a consequence, organisations are feeling significant pressure to move to ‘clean-IT,’ optimising the trade-off between energy consumption and computational performance, and incorporating algorithmic and computational efficiencies in IT solutions and designs.
Meeting ESG future states will likely require digitalisation and emerging technologies such as IoT, digital twins, big data, and AI. Numerous applications are already available in the market to support sustainability management and ESG reporting, including PwC’s ESG Pulse. There’s also increasing recognition within the business world of the importance of integrating ESG into enterprise resource planning (ERP) systems as compliance and reporting requirements develop.8
Avoiding code red
Organisations need to embrace ESG for their long-term prosperity. But to take advantage of ESG opportunities and truly make a difference (not to mention complying with future reporting and regulation requirements)9 organisations need to embed ESG goals into their business, data and technology.
EA offers well-established and proven practices/frameworks to enable strategic and aligned ESG transformations. The approach can be instrumental to cascading an ESG vision throughout the organisation, ensuring it is strategically embedded.
With an evolving ESG landscape, organisations must be able to respond and adapt to changing requirements with agility and confidence. A mature enterprise architecture approach can be the differentiating enabler to competitive advantage – and to ensuring your organisation helps achieve a more sustainable society.