The CIO Imperative: How emerging tech can accelerate a path to sustainability

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9 minute read 15 Feb 2023
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TMT
Sustainability

Enterprises are increasingly looking to leverage new technologies like 5G and IoT to deliver their ESG goals.

In brief
  • Seventy-six percent of enterprises believe that emerging technologies can play a critical role in reducing their organization’s carbon emissions.
  • ESG is most likely to feature as a leading consideration in 5G and IoT investment, and companies investing in these areas already see a range of benefits.
  • Sustainability capabilities and credentials are the top attributes that organizations will seek in their technology vendors in the future.

Companies increasingly see 5G, the Internet of Things (IoT) and emerging technologies as driving their sustainability efforts, with greater efficiency, improved measurement, and virtual products and processes ranking high on the list of benefits.

That’s a key theme emerging from the latest EY Reimagining Industry Futures Study, which explores attitudes and intentions around 5G, IoT and other emerging technologies expressed by executives from 1,325 enterprises worldwide across an array of industries.

How EY can help

The EY CIO Imperative Series is designed to provide critical answers and actions to reframe the future of your organization. In this article, we discuss how the results of this study show an important convergence between enterprises’ technology and sustainability strategies across six dimensions.

 

1.  Enterprises view emerging technologies as positive drivers of sustainability
 

Fifty-four percent of the enterprises we surveyed believe emerging technologies can play a vital role in accelerating their business’s progress on sustainability. A further 41% believe these technologies can play a largely positive role but also present some risks. This awareness of potential downsides reflects current research that estimates information and communication technology (ICT) in its entirety accounts for 1.8% to 2.8% of greenhouse gas emissions and an even higher proportion of electricity consumption.1

 

Interestingly, Asia-based enterprises are the most likely to highlight the vital role of emerging technologies (62%), while European businesses are the most likely to say their positive impact is accompanied by some risks (49%). This regional variation may reflect European policymakers’ historical focus on the energy consumption risks posed by data centers and cloud technologies.2

2. The sustainability upside of new technologies covers a range of dimensions

Respondents see emerging technologies as providing a range of positive contributions to long-term sustainability strategies. Reduced energy consumption tops the list, followed by improved measurement and planning, and reduced production of waste. The shift to virtual services and workforce tools also features prominently.

Other benefits are less prominent, with only about a quarter of respondents highlighting the positive impacts on circular business models and the adoption of renewable energy sources — suggesting these could be areas that will need greater focus in the future from the CIO community. The range of positive outcomes, however, underlines the multi-sided potential of emerging technologies from a sustainability perspective.

3. ESG is a major investment consideration in emerging technology investments – especially 5G

Looking across all emerging technologies, 35% of our survey respondents view ESG as a leading consideration when making investment decisions, with another 41% viewing it as important. 5G investments are the most likely to involve ESG as an important principle, followed closely by IoT.

Conversely, augmented reality, blockchain, and quantum computing investment decisions are less likely to involve ESG. A quarter of respondents, for example, cite ESG as a minor consideration when investing in blockchain. Given bitcoin and other cryptocurrencies — which rely on blockchain — are attracting high levels of ESG-related scrutiny from regulators and policymakers, such as the European Commission, some realignment of priorities in the future seems likely.

4. 5G and IoT are already benefiting enterprise sustainability strategies

The ESG implications of 5G and IoT tend to have greater weight in enterprises’ investment decisions than those of other emerging technologies. When businesses investing in these two technologies are asked about their sustainability benefits, their responses are instructive: they are more likely to already see current benefits compared with the broader sample of enterprises asked about the potential benefits of emerging technologies at large.

As a result, many of the ESG benefits associated with emerging technologies as a whole are even more clearly linked to 5G and IoT. Over half (55%) of businesses currently investing in 5G and IoT say they’re helping to improve sustainability planning and forecasting, compared with 39% who believe the same could be true of emerging technologies at large. And 48% cite the productivity benefits of 5G and IoT, against just 22% for emerging technologies more broadly.

5. Sustainability imperatives are reshaping attitudes to technology suppliers and industry ecosystems

As sustainability becomes ever more central to CIOs’ technology strategies, the attributes that enterprises are seeking in their technology suppliers are changing. Over three-quarters of enterprises say they’ll prioritize vendors that can articulate the environmental impact of emerging technologies. Businesses also believe that vendors need to do more to reflect sustainability in their service portfolios: many don’t think the 5G and IoT use cases on offer sufficiently address their sustainability needs.

These views are mirrored in the attributes that enterprises are seeking in their technology suppliers. Today, speed of deployment and execution tops the list, followed by end-to-end solution capabilities, with sustainability capabilities and credentials coming in third. But in the future, sustainability capabilities and credentials are the number one attribute enterprises say they will seek. 

How EY can help

Ecosystem strategies designed to help access new skills and competencies through collaboration with suppliers and other organizations will also be able to deliver sustainability advantages. Eighty percent of enterprises agree that collaborating with other organizations and industries on circular business models will become much more important in the next five years.

 

6. Not all industries think alike about sustainability and emerging technologies
 
When respondents are asked for their perceptions of emerging technologies’ sustainability benefits, marked differences in energy efficiency and circularity expectations emerge at the sector level. While reduced energy consumption tops the list across all industries, the proportion citing this benefit ranges from 54% in automotive to only 38% in health care. Similarly, reduced waste production is highlighted by 50% of executives in manufacturing but only 35% in government organizations.

 

Government and healthcare (both 44%) are the most likely to cite emerging technologies’ positive impact on measuring their organizations’ environmental impact. However, assessing their suppliers’ environmental impact — ever more important given the need to report Scope 3 emissions — is regarded as relatively less important in government and healthcare but as a major benefit among manufacturing and energy respondents. While industries are alive to the potential for emerging technologies to help measure performance and progress, the breadth of their ambition — whether their focus is on their own organization or extends to accommodate their supply chain — differs.

Conclusion and next steps

ESG considerations are already feeding into businesses’ technology investment decisions, and sustainability needs are set to become a dominant factor in their technology vendor choices. So far, so good. Yet CIOs can do more to help ensure that high levels of expectation translate into long-term value creation:

1. Prioritize emerging technologies and the sustainable benefits they can deliver

While organizations are alive to a range of sustainability benefits unlocked by new technologies, it is critical that technology leaders focus their ambitions. Technology leaders should prioritize and phase the key ESG outcomes they are seeking and decide upon the optimal technologies that can deliver them, taking care to explore the combined impact of different technologies.

2. Build a robust framework to evaluate the environmental implications of your emerging technology strategy

Evaluate the carbon intensity and energy efficiency of your portfolio of emerging technologies and ensure your framework clearly links to overarching targets relating to reduced IT energy consumption across your organization. Take care to assess how migration to newer technologies and standards can enhance sustainability across your organization’s technology estate.

3. Work with your leadership team to ensure that technology considerations inform all aspects of your organization’s sustainability agenda

Close collaboration with other leadership roles and functions will help ensure that the role of new technologies in accelerating ESG goals is understood by all parts of your organization. This will help ensure that existing digital transformation roadmaps remain fit-for-purpose as sustainable principles become an increasingly important driver of them.

4. Ensure that sustainability is a guiding principle of your technology supplier and ecosystem relationships

CIOs are already prioritizing sustainability capabilities as attributes they seek in technology vendors. Building on this, it is vital that organizations put sustainability at the heart of their dialogue with their broader partner ecosystems. While technology investment decisions and vendor choices are already made with sustainability in mind, there is scope for greater collaboration on circular business models and shared ESG commitments going forward.

5. Target emerging technology use cases that are sustainable by design

Many businesses already have long-standing IoT initiatives, and these are increasingly complemented by the fast-growing adoption of 5G and edge computing. Use cases and deployment models should have sustainable outcomes built in. To achieve this, CIOs should consider how emerging technology use cases can deliver benefits to employees, partners and customers alike and create the right feedback loops with technology vendors to turn vision into reality.


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    Summary

    As sustainability goals continue to come under increasingly intense scrutiny, CIOs must evaluate the upside and downside role of emerging technologies in driving sustainable outcomes, generating long-term value and building a better working world.

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    EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.