{"id":795453,"date":"2022-05-25T09:24:52","date_gmt":"2022-05-25T09:24:52","guid":{"rendered":"http:\/\/test.daliworks.net\/index.php\/2022\/05\/25\/how-to-dt-for-esg-en\/"},"modified":"2026-07-28T01:28:50","modified_gmt":"2026-07-28T01:28:50","slug":"how-to-dt-for-esg-en","status":"publish","type":"post","link":"http:\/\/test.daliworks.net\/index.php\/2022\/05\/25\/how-to-dt-for-esg-en\/","title":{"rendered":"How to Advance ESG Through Digital Transformation (DT) | Relevance, Why to Link Them, and How to Act"},"content":{"rendered":"

<\/h1>\n
\n

Solving DT and ESG in One Stroke: A Closer Look<\/h2>\n<\/blockquote>\n

Since the COVID-19 pandemic, digital transformation (DT) and ESG have emerged as the strategies drawing the most attention for revitalizing the global economy and bringing a sustainable future closer. DT, the new normal ushered in by COVID-19, is the product of the big data era and a booming contactless economy that have made digital more important than ever. Even traditional industries such as food and retail can no longer survive without DT, and an innovation paradigm is taking shape in which DT drives ESG management while building long-term competitiveness and creating new business value.<\/p>\n

Can DT embrace ESG, the hottest topic in the business world? In Europe, the term “twin transformation” has emerged to describe the combination of ESG and DT. Companies now have to solve two challenges at once: digital innovation and sustainability. If ESG is the goal, DT is the means. It is time to pursue both simultaneously, developing sustainable digital business models and creating new business value.<\/p>\n

In this post, we look at ESG and DT, the two pillars of innovation for sustainable management, present practical ways to link them, and search for the most realistic, clear-cut path to success.<\/p>\n

No ESG, No Survival<\/h2>\n

ESG stands for the non-financial elements of a company: Environment, Social, and Governance. ESG management built on these pillars means that a company whose goal is profit also invests in socially and ethically valuable work that advances the environment, society, and governance.<\/p>\n

\"\"<\/p>\n

Source: Insight Korea<\/p>\n

Survey after survey confirms that ESG management is becoming a baseline strategy for sustainable growth at companies of every size. ESG activities at Korean companies are becoming more systematic and concrete, and the reason companies are so committed is that the formula “ESG=survival” is taking hold.<\/p>\n

These days, ESG is essential for attracting capital from financial institutions, because a low ESG score means no investment. In a BNP Paribas survey of 356 investment firms worldwide, 52% said ESG is currently an essential or central consideration in their investment strategy. Asked how central ESG would be to their investment strategy two years from now, 82% of investors gave the same answer, showing that ESG has become an indispensable consideration internationally.<\/p>\n

ESG also directly affects the business, for example by building a positive corporate image. The preferences of the MZ generation (young consumers born after 1980), the key consumer group of the future, are seen as another driver. In a recent Korea Chamber of Commerce and Industry survey of 380 MZ-generation respondents, six in ten (64.5%) said they would buy products from companies that practice ESG even at a higher price.<\/p>\n

Toward ESG Management Through DT!<\/h4>\n

Experts note there is a reason that global ICT companies armed with DT rank near the top of the ESG ratings issued by global assessment agencies, from environment (E) to social contribution (S) to governance (G), and they propose fusing DT with ESG management. Rather than treating ESG as a daunting undertaking, the idea is to graft it on naturally through DT.<\/p>\n

To run the business efficiently, companies should adopt data-driven DT to maximize productivity and practice ESG management. For example, ICT can serve the environment: the cloud, a core DT technology, can manage green energy and reduce carbon emissions, and robots can handle waste processing. Creating social value with public big data can maximize the public good and strengthen the Social pillar, while replacing legacy client-server, on-premises systems with cloud- and big-data-based ERP (enterprise resource planning) systems can raise shareholder value, effectively improving the Governance pillar.<\/p>\n

Linking ESG and DT<\/h2>\n

As we have seen, most companies already recognize the need for ESG and are weighing concrete ways to reach their ESG goals. At the same time, they are pursuing corporate innovation through DT to keep pace with an increasingly digital business environment. DT is a tool that can interlock tightly with ESG: it can contribute to environmental and social factors by optimizing the energy and raw materials used in production or preventing industrial accidents through internal controls, and it can even have a positive impact on governance, for example by digitalizing internal accounting controls.<\/span><\/p>\n

Although linking the two innovation agendas cuts duplicate costs and creates synergy, companies that connect the two across their overall operations are still not common.<\/span><\/p>\n

\"\"<\/p>\n

Why Link Them<\/h4>\n

Greater efficiency through convergence<\/b><\/span><\/p>\n

Many companies still take a two-track strategy that treats ESG management and DT as separate initiatives. Considering that both are about improving how the business is run, a two-track approach means performing BPR (Business Process Restructuring, the company-wide overhaul of business processes) twice for the same work, which creates inefficiency. Not only does the cost of BPR double, but efficiency also drops because the work is carried out as separate projects. Since DT entails BPR, companies should factor the ESG elements that affect each process into BPR to minimize this waste.<\/span><\/p>\n

The inefficiency created when the two are not linked consumes more resources and increases the burden of internal control, making ESG problems more likely. Therefore, when pursuing DT, each company needs to carry out BPR while considering where in its business processes it can fold in environmental and social goals along with governance control objective<\/span>s.<\/span><\/p>\n

DT that boosts ESG performance<\/b><\/span><\/p>\n

Pursuing ESG through DT produces a synergy effect: data on the company’s ESG activities accumulates naturally along the way. That data enables better feedback for future improvement and serves as useful evidence when responding to ESG assessments. Indeed, ESG activities that were once impossible because data was hard to accumulate can now be run on hard numbers thanks to advances in big data technology, fueling calls for evidence-based ESG.<\/span><\/p>\n

How to Do ESG Through DT<\/h2>\n

<\/h4>\n

\u200b<\/span>1. Identify the ESG Goals DT Can Deliver<\/h4>\n

Before assessing how DT initiatives can drive ESG outcomes, identify the company’s key ESG goals. After assessing the current state, determine which goals the technology organization can drive. In other words, think through which technologies to invest in, and how, to transform the current business portfolio. Typical technology-driven ESG goals include:<\/p>\n

\u2013 Environmental \u2013 Combine the Internet of Things (IoT), remote monitoring, and artificial intelligence\/machine learning to cut emissions.<\/p>\n

\u2013 Social \u2013 Support DEI by establishing employee and supplier diversity programs and investing in solutions that promote health and well-being.<\/p>\n

\u2013 Governance \u2013 Strengthen data security across the enterprise, maintain compliance, and standardize ESG reporting.<\/p>\n

The first step, then, is connecting technology to the existing business. Technology is a means, not an end in itself. A tailored strategy is needed for choosing which technologies to invest in and how to graft them onto the existing business.<\/p>\n

\u200b2<\/span>. Integrate ESG Into the Digital Strategy<\/h4>\n

Once you understand the company’s ESG goals and the role technology can play, the next step is aligning those goals with the company’s digital roadmap. This secures the agility you want from the transformation program while advancing ESG initiatives. Three areas are generally worth examining.<\/p>\n

Digitized operations, experiences, and products<\/strong><\/p>\n

Digitizing operations, experiences, and products saves time and money, and it also breaks down silos and makes critical data easy to access, accelerating the path to insight. As part of the digitization process, technology organizations can measure and track ESG indicators such as energy consumption, greenhouse gas emissions, and water usage.<\/p>\n

For example, one oil and gas company fitted its US production facilities with sensors to generate digitized methane-detection data and flag methane leaks. As a result, it improved on-site safety measures and reduced emissions. Across ESG initiatives, IT leaders can selectively deploy digital technologies such as Internet of Things (IoT) devices to find areas where efficient, automated data collection and standardized reporting are possible.<\/p>\n

Smart operations through integrated data and analytics<\/strong><\/p>\n

Insights drawn from rich data can form the foundation for advanced analytics such as AI\/ML, and data-driven predictions and recommendations improve as data volumes grow. Analytics is especially useful when partnering with sustainability-minded suppliers and optimizing the supply chain. The ability to predict potential manufacturing defects or supply issues helps technology leaders proactively meet requirements for environmental impact, safety, and quality.<\/p>\n

Building dedicated data privacy and security teams<\/strong><\/p>\n

Executing a digital strategy successfully requires the right people with the right skills collaborating across business units and IT. Cross-functional, product-oriented teams build the agility needed to respond to changing customer needs while accelerating feedback loops and improvements to deliver value quickly.<\/p>\n

Product teams can reinforce governance initiatives, especially those addressing customers’ high expectations for data privacy and security. Organizing dedicated teams to improve how employee and customer data is accessed, stored, and processed will earn customer trust in preserving privacy and protecting personal data.<\/p>\n

Cloud migration and enterprise architecture<\/strong><\/p>\n

Companies are rethinking their enterprise architecture as part of DT. Moving on-premises workloads to the cloud increases speed and agility while also contributing to ESG goals.<\/p>\n

Public cloud data centers optimize the use of their most heavily used data servers, so they consume less energy than private data centers, making cloud migration a far more environmentally friendly choice. Modeling data from 451 Research shows that moving applications from on-premises infrastructure to cloud services can cut IT energy use by as much as 70~80%.<\/p>\n

3<\/span>. Win Buy-In for Strategic ESG Initiatives & Build the Business Case<\/h4>\n

Once you have determined how digital strategy initiatives can best support the company’s ESG goals, IT leaders need to share them across the enterprise and win buy-in. It is important to make clear that many of these initiatives cannot be realized with digital technology and IT alone. Actively discussing ESG opportunities with other functions is an effective way to identify which initiatives are the best fit to build.<\/p>\n

And once you have analyzed the digital transformation strategy with ESG goals in mind and completed coordination with the necessary partners and stakeholders, prioritize initiatives by weighing the value delivered to the company against the resources required to execute. Build the business case for the highest-priority initiatives and begin laying the digital foundation for the broader ESG strategy.<\/p>\n

Start DT and ESG with IoT<\/h2>\n

DT can be seen as reshaping the business portfolio and upgrading the business with new technology. ESG is a change in the management paradigm itself. The two do not move separately: DT can be a means of advancing ESG management, and IoT technology is a way to start both. If you are curious about the relevant solutions and how to adopt them in practice, <\/span>contact Thingplus!<\/span><\/p>\n

\u200b<\/span><\/p>\n

\u2705 References<\/p>\n

KCGS Report No. 143, “ESG Management Powered by Digital Transformation”<\/p>\n

[ESG With Metaverse Wings] What Is ESG, and Why Are Companies Feeling the Pressure?<\/a><\/p>\n

The Fusion of ESG and DT: Have You Heard of “Twin Transformation”?<\/a><\/p>\n

Three Ways to Catch Two Rabbits at Once: DT and ESG<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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