Leveraging Digital Towards Improving Sustainability

The threat of climate change has pushed companies to embrace a more sustainable future, with an increasing number of companies announcing their commitment to ESG and sustainability. But such commitments need to be supported by concrete action, and there are growing calls to leverage digital technologies towards a better and greener future, highlighting the potential of data for sustainable development.

Bringing digital technologies and sustainability together makes logical sense. The green transition and the digital transition have been two of the most significant global business trends over the past several years, and are twin challenges: neither can succeed without the other. In practice, digitalization is being increasingly understood by companies as a way to improve environmental performance with firms such as Mercedes Benz and Analog Devices announcing their commitment to sustainability using digital.

And now, a recent study provides empirical evidence to support the relationship between the two trends. A recent article by Prof. David Bendig and colleagues highlights a strong positive relationship between companies that strategically prioritize digital technologies and their environmental performance

Digital Orientation and Environmental Performance

According to Bendig and colleagues, companies that have a strong strategic focus on digital technologies tend to have a greater ability to adapt to changing market conditions, as well as to identify and exploit opportunities for innovation. Such companies also tend to be more efficient in their resource use, leading to lower costs and reduced environmental impact.

Take the software company Teradata Corporation, one of the firms selected for their sample. In their 2021 ESG report, Teradata committed to developing technology products and services for a sustainable future. It also committed to leveraging digital tools for video conferencing and virtual workplaces for its employees to achieve environmental goals such as resource efficiency. Likewise, computer software manufacturing company Seagate and offshore oil drilling company Schlumberger, are committed to using novel data-driven technologies and digital solutions to reduce greenhouse gas emissions and resource waste in their operations. These initiatives point to a digital orientation on the part of these companies which was also associated with an improvement in their environmental performance across the period of study.

“We suggest that managers can improve their company’s environmental performance and competitive position by increasing the level of strategic digital orientation within their organizations” explains Bendig. Developing a strategic digital orientation consists of developing technologies, features, and functionalities that meet the needs of the customer; developing digital capabilities within the firm; coordinating a digital ecosystem, and having a digital architecture configuration.

In this regard, the study also carves out important implications for policymakers who want to drive sustainable growth. Bendig recommends, “If we want companies to embrace digitalization and reduce their environmental impact, we need to give them a powerful incentive, that’s why policymakers should consider offering subsidies or tax relief to companies that invest in proven green technologies.” With the right policies in place, a thriving ecosystem of environmentally conscious companies that are leading the way toward a sustainable future may be created.

Positive Knock-On Effects for Society

In addition to the direct benefits for businesses, this shift towards digital sustainability can also have positive knock-on effects for society as a whole. As companies become more sustainable and efficient, they may also develop new business models and products that encourage consumers to reduce their environmental impact, leading to a more sustainable future for all. Furthermore, prioritizing digital sustainability allows companies to catalyze positive change in their wider ecosystems, mitigating the environmental impact of their entire value chain and ultimately contributing to a sustainable future for all.

Digital technologies and data have the potential to be powerful tools in the fight against climate change and the move toward a more sustainable future. By prioritizing digital orientation and sustainability, companies can not only improve their own bottom line but also contribute to a brighter future for society at large.