Tech Leaders & ESG Goals: A Powerful Combination

The Growing Importance of ESG for Tech Leaders

Environmental, social, and governance (ESG) factors are becoming increasingly vital for Chief Technology Officers (CTOs) and technology leaders as they guide the expansion of new companies. A focus on ESG is now a primary concern for investors, coinciding with substantial growth in sustainable investment practices.

This change in perspective across all sectors is driven by a straightforward reason. Consumers are demonstrating a reduced willingness to support businesses that do not demonstrate a commitment to sustainability.

Consumer Demand and Regulatory Changes

Data from an IBM survey reveals that the COVID-19 pandemic has heightened consumer awareness regarding sustainability. This has also increased their readiness to financially support initiatives aimed at a more sustainable future.

Simultaneously, governmental efforts to address climate change are gaining momentum. The United States has rejoined the Paris Climate Agreement, and recent executive orders emphasize climate commitments.

From Aspiration to Implementation

In recent years, many organizations have begun establishing long-term sustainability objectives. However, these goals are frequently projected by CEOs and chief sustainability officers.

These objectives are often long-range and ambitious, meaning the practical, short-to-medium term execution of ESG programs frequently falls to operations and technology departments.

The CTO's Role in ESG Success

CTOs are integral to the planning stages and can be a key asset in accelerating an organization’s progress toward its ESG goals. Here are some initial actions technology leaders can undertake to promote sustainability and ethical practices:

• Prioritize energy efficiency in technology infrastructure.
• Implement responsible data management practices.
• Focus on building inclusive and diverse technology teams.

Minimizing Environmental Footprint

The increasing digitization of businesses and the growing reliance on devices and cloud-based services are driving up the energy demands of data centers. Currently, these facilities are responsible for approximately 1% of global electricity consumption. However, projections from IDC suggest that the widespread adoption of cloud computing could prevent the release of over 1 billion metric tons of carbon dioxide between 2021 and 2024.

Enhancing Compute Workload Efficiency: A fundamental understanding of the relationship between computation, power usage, and greenhouse gas emissions originating from fossil fuels is crucial. Optimizing the efficiency of your applications and compute workloads will lead to reduced expenses and energy consumption, thereby lessening the carbon footprint associated with those workloads.

Within cloud environments, tools such as automated compute instance scaling and recommended instance sizing ensure that you are not operating an excessive number of, or unnecessarily large, cloud virtual machines based on actual demand. Consider transitioning to serverless computing, which automates much of this scaling process.

Strategic Deployment of Compute Workloads: Historically, the selection of cloud regions has been guided by factors like cost and latency to users. However, carbon intensity is now an equally important consideration. While regions offer comparable computing capabilities, their carbon intensities often differ significantly.

Certain regions benefit from greater access to carbon-free energy sources, resulting in varying carbon intensities. Therefore, selecting a cloud region characterized by lower carbon intensity represents a straightforward and highly effective measure. Alistair Scott, co-founder and CTO of Infracost, emphasizes this point, stating, “Developers are motivated to minimize waste and act responsibly, and cloud providers can facilitate this.

Providing information within the development workflow empowers those responsible for infrastructure provisioning to balance CO2 impact against other critical factors like cost and data locality before deployment.”

Furthermore, estimating the carbon footprint of your specific workloads is possible through the use of open-source tools. Cloud Carbon Footprint, a project supported by ThoughtWorks, is one such example. Etsy has also released an open-source tool, Cloud Jewels, which assesses energy consumption based on cloud usage data.

These tools are instrumental in tracking progress towards goals like Etsy’s commitment to reduce energy intensity by 25% by the year 2025.

• Key Takeaway: Prioritizing energy efficiency and strategic region selection are vital for sustainable cloud computing.

Driving Positive Social Change Through Technology

CTOs and technology leaders are uniquely positioned to generate substantial and positive social impact, extending beyond simply minimizing environmental consequences.

Integrating societal advantages into product development is a key responsibility for technology executives and founders. Prioritizing these benefits within your product roadmaps can yield significant results. Consider, for instance, a fintech CTO who could implement features designed to broaden credit access for underserved communities.

Companies like LoanWell exemplify this approach, actively working to increase capital accessibility for those often excluded from traditional financial systems while simultaneously streamlining and improving the fairness of loan origination.

Effective product design necessitates a balance between utility, efficacy, and sustainability. Viewing sustainability and social impact as fundamental components of product innovation presents a valuable opportunity for differentiation and positive contribution.

Lush serves as a prime example, pioneering package-free alternatives and introducing Lush Lens – an application utilizing mobile phone cameras and artificial intelligence to provide product information virtually. This initiative has already surpassed 2 million scans, addressing the beauty industry’s reliance on plastic packaging.

Embedding responsible AI methodologies within the organizational culture is crucial to prevent potential social detriments. Machine learning and artificial intelligence are now integral to the personalized digital experiences users expect.

These technologies power everything from product and content suggestions to spam detection and predictive analytics. Therefore, incorporating responsible AI practices is paramount to ensuring that the advantages of AI and ML are broadly accessible and that unintended negative consequences are avoided.

Begin by defining clear principles for responsible AI implementation, then translate these principles into concrete processes and procedures. Treat AI responsibility reviews with the same importance as code reviews, automated testing, and UX design. As a leader, you define these processes.

Governance and the Role of the CTO

Effective governance extends beyond the executive level and board of directors; the Chief Technology Officer (CTO) is a crucial figure in this process.

A key aspect of impactful governance is building a strong, varied technology department. Studies indicate that teams comprised of individuals from diverse backgrounds achieve superior outcomes 87% of the time when compared to groups with singular perspectives.

Furthermore, research from Gartner demonstrates a clear correlation between workforce diversity and positive business results, showing a 12% increase in performance and a 20% rise in employee retention within diverse organizations.

Reinforcing the significance of diversity, equity, and inclusion within the technology team is paramount. Utilizing data-driven insights is an effective method for guiding these initiatives.

Implementing a confidential, voluntary internal program to gather demographic information – encompassing gender, race, and ethnicity – can establish a benchmark for identifying areas needing improvement and tracking progress over time.

Integrating these diversity and inclusion enhancements into the employee performance evaluation system, such as through the use of Objectives and Key Results (OKRs), is also recommended.

Accountability should be distributed across the entire organization from the outset, rather than being solely the responsibility of Human Resources.

These strategies represent just a selection of the contributions CTOs and technology leaders can make towards advancing Environmental, Social, and Governance (ESG) goals within their respective companies.

The initial step, however, involves acknowledging the substantial influence a technology leader can exert from the very beginning.