In January 2023, the European Union (EU) implemented the Corporate Sustainability Reporting Directive (CSRD). This framework strengthens reporting regulations for social and environmental information. These standards are intended to measure the environmental, social and governance (ESG) impact of businesses.
However, North America lacks a similar regulatory framework. Instead, ESG investing regulations are primarily governed by state-level legislation. This has led to considerable inconsistencies within North America, sparking widespread debates concerning ethical investing.
According to data from Pitchbook, in 2022, 61% of North American investors applied ESG principles into parts of their portfolios. Ethical investing is clearly a growing priority, as this figure illustrates an increase from 58% in 2021.
Nevertheless, there has been some backlash due to the “unnecessary constraints” ESG criteria imposes on organizations. Many Republicans have been advocating for anti-ESG bills. According to Ed Mills, the managing director at Raymond James investment services, “there certainly is, for now, an anti-ESG policy push within the Republican Party.”
Despite the apparent US controversy on ESG principles, only 13% of global investors see ESG as a “passing fad that will eventually go out of fashion”. It is important shared service leaders in the US consider implementing ESG, as to not fall behind in the global market.
In a 2023 SSON report, Tom Bangemann notes that the Global Business Services (GBS) model “is the ideal choice” for holding businesses accountable for ESG due to its proficiency in managing multiple distinct functions. Considering the environmental pillar of ESG alone, striving for technological sustainability can benefit the climate whilst minimizing business costs. Shared service leaders can optimize IT financial management (ITFM) strategies to invest in sustainable technologies. These investments support the value drivers in IT, Finance and GBS by encouraging digital transformation, reducing costs, and driving business growth.
Hardware Longevity
One way to progress towards technology sustainability is to support hardware longevity. Using ITFM strategies to invest in more durable resources for the organization and implementing policies to encourage longer lifecycles can reduce resource consumption.
Traditional hardware lifespans are usually 3-5 years, and maintaining working hardware for employees is crucial for an organization’s productivity. However, increasing the lifespan of hardware can reduce business costs, reduce carbon emissions, and promote more sustainable business practices.
One way of reducing the cost of replacing hardware is by implementing IT asset management processes. This allows all assets, from hardware to software systems, to be maintained and replaced when necessary. Managing the IT asset lifecycle can include various stages such as planning, deployment, maintenance, and disposal. Implementing processes allows for the organization to understand the costs of resources and utilize them effectively throughout all stages. This encourages informed, cost-effective decisions, such as deciding between a staggered approach to replacing hardware or a complete replacement of all assets.
This can be an effective way of utilizing your ITFM to reduce costs as, according to Gartner, companies that use IT asset management reach up to 30% savings in the first year. In the next 5 years businesses saved at least 5%.
These processes should be tailored to the business, aligned with its goals and objectives. Rather than using a general ‘one-size fits all’ approach, the policies should work efficiently within the organization’s infrastructure.
In addition, consistent maintenance will ensure hardware continues to perform efficiently. This supports hardware longevity without risking neglecting important upgrades. This includes checking any security measures on the hardware to protect from data breaches and other risks.
Green Coding Practices
Another ITFM strategy to support sustainable technology is green coding. This environmentally sustainable computing practice minimizes the energy required for processing code. It not only reduces energy costs for businesses but can also boost earnings. CEOs that implement sustainability and digital transformation initiatives, such as green coding, report a higher average operating margin than their peers, according to the IBM 2022 CEO Study.
Utilizing more sustainable software can be implemented in several ways. Reducing file sizes, avoiding unnecessary open-source code, and eliminating 'code bloat' (excessive and inefficient code) can reduce the energy consumption of an organization's IT assets. This can also reduce business costs as energy costs will not be used on redundant, inefficient IT practices.
Establishing a green coding system within a business can include many structural changes. One innovative tactic are sleep statements, which are ‘pauses in the code’ that make processors sleep for periods of time.
In addition, multicore processor applications can increase efficiency. Multicore processors can simultaneously process multiple tasks, reducing power consumption and increasing time efficiency. Another method for executing multiple tasks concurrently is by implementing asynchronous code, allowing the processor to operate without waiting for the completion of individual tasks. Eliminating this waiting time further reduces the processor’s energy consumption.
Another tactic is utilizing microservices. Microservices break down complex software into smaller, modular elements or services that are only used when necessary. This is an alternative to running a large monolithic program. The benefits of harnessing microservices include applications running more efficiently, reduced energy costs, reduced carbon footprint and increased control as ‘with the right construction, they can be individually altered to your requirements.’
Enterprise Operations
It remains likely that automation will continue to be a trend in 2024, however increasingly shared service leaders are looking to the power of AI (Artificial Intelligence) for decision-making processes. These innovative forms of technology are usually linked to increasing visibility and optimizing processes; however, these enterprise operations can encourage sustainability within an organization.
Automation, for example, can support ESG objectives in numerous ways. It can supply organizations with metrics to track their environmental strategy, optimize processes and digitize resources to decrease energy consumption. Robotic process automation (RPA) can assist with the integration of sustainable objectives into workflow processes.
Although AI is a new component of shared services, many organizations are looking to the future through innovative applications of AI. The potential uses of AI are endless, and sustainability is no exception. There are increasing concerns over the carbon footprint of AI, which is why it is more important to develop environmentally friendly AI investments.
According to Forbes, “AI positively drives environmental outcomes through its ability to analyse large-scale interconnected databases to develop coordinated actions aimed at environmental preservation.” This includes the potential for AI to effectively manage processes within shared services and generate solutions to increase their sustainability.
In addition, AI can be used to support IT asset management, through predictive maintenance. This will allow organizations to maintain IT resources effectively throughout its lifecycle. The possibilities continue, from supply chain tracking to optimizing storage systems. The technology has a lot of untapped potential, so organizations looking to invest in sustainable technology should keep an eye on AI.
As shared services continuously look for innovative technologies, whilst trying to remain environmentally conscious, tactically implementing ITFM processes is crucial. Progressing towards sustainable technology not only allows businesses to align with ESG principles, but can improve efficiency, reduce IT costs, and encourage innovation and growth. Many of these skills and ITFM strategies will be discussed at SSON’s ITFM bootcamp. This will be a part of the Shared Services & Outsourcing Week Conference in Orlando in March 2024.