Why Digital Transformation Will Drive ESG

With increased regulatory pressures, CIOs are becoming critical to organizations’ environmental, social and governance strategies.

If any organization is striving to meet their environmental, social and governance goals, then digital transformation is essential. So says Vincent Hébert-Garneau, product manager at DIREXYON Technologies, a Montreal, Canada-based company that provides advanced financial modeling tools for asset-intensive industries including electric, gas and water utilities, municipalities and transportation.

Hébert-Garneau spoke with StrategicCIO360 about why digital transformation is key to ESG success, what that means for IT leaders and how CIOs can best play this new role.

How does tech play a role in ESG?

Integrating innovative technologies can help us face ESG challenges head-on. Software with artificial intelligence and machine learning capabilities will soon be the norm in helping organizations predict the impacts of our decisions amid climate-related risks and uncertainties. Companies will be relying on technology to create digital twins and simulate their asset evolution to select the best strategy, while considering uncertainties and unforeseen events.

Companies depend upon technology to evaluate climate-related risks and rapidly assess the consequences of failure through data-driven insights. Technology allows them to use information coming from multiple systems to quantify the impacts of their strategies on asset reliability and environmental health and safety.

With increased regulatory pressures, we predict more companies will be turning to technological innovations to reach ESG objectives more rapidly. Technologies such as asset investment planning software are a prime example, since it quantifies environmental risks, and helps you understand the environmental and social implications of interventions performed on your assets.

Why does data matter in ESG?

At the most basic level, data matters because it is needed to understand and to quantify ESG targets and sustainability metrics. Without data, organizations cannot accurately track their progress toward ESG goals. Data empowers organizations to measure and tangibly align with their ESG targets.

In most cases, there will be no direct correlation between an action and its impact on an ESG metric. Multiple sources of data or information will be used by analytics solutions to extract insights from high volumes of data.

Data will also be used to demonstrate with transparency the compliance to regulatory requirements. Whether we think of ISO 55000 compliance, or SEC requirements for reporting on climate-related risks, transparent demonstration of compliance will require an organization to provide supporting data down to the source. IT leaders must remember that data can only provide the answers. It is crucial that they are well aligned with the ESG objectives of their organization, so that they can build a data management strategy that will serve optimally.

How does a company’s digital transformation play a role in achieving ESG goals?

Digitalizing asset inventory and human expertise is a milestone toward digital transformation. Digitalizing your organization’s assets leverages IoT and machine learning. By creating digital twins for simulating asset evolution and scenario analysis, you can determine the best strategies and outcomes aligned with your ESG goals.

In parallel, digitalizing human expertise through process or decision modeling will allow evaluation of long-term impacts of your current actions, or test alternate scenarios that could unlock more value. Digitalizing human expertise is also a good way for companies to safeguard subject matter expertise and decision policies in a time where resources are hard to find or replace.

The ultimate goal of digital transformation is to create value for customers. An organization that engages in an accurate digital representation of its asset portfolio and of its decision-making process will be in a great position to leverage the newest technological innovations to generate insights.

IT leaders should be able to make the right decisions more rapidly and achieve their ESG goals.

What do IT leaders need to consider when creating their ESG plan?

Creating an ESG plan is a great opportunity for IT leaders to centralize and improve collaboration in their organization. An effective plan will unite people, technologies and processes.

Internal communication is critical. An ESG plan will execute successfully only if the whole organization is engaged. IT leaders must ensure the reasons behind the plan are communicated and repeated, so the organization is well-aligned with its mission. The objectives and benefits of the plan should be articulated in a way that is relatable to each employee.

The plan must ensure a transition that brings value to those affected within the framework of their daily activities, while achieving the targeted outcomes.

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