By combining sustainability initiatives with digital transformation, businesses can realize bottom-line benefits while meeting ESG goals.

Digital transformation and environmental sustainability are top agenda items for businesses today. Consider that in a recent Gartner study, executives named environmental sustainability (for the first time) as a top 10 priority. And research from Forum (formerly IDG Communications) says 91% of organizations have adopted or plan to adopt a digital-first business strategy.

Thankfully, the two go hand-in-hand. Using digital technologies such as Internet of Things (IoT), artificial intelligence (AI) and others, businesses are not only creating sustainability solutions that meet the expectations of a growing number of stakeholders, but they also can reap financial benefits from creating more efficient operations and innovative models.

With better sustainability solutions—made possible using digital tools—businesses can reduce their resource use, energy costs and waste, and meet the growing demand for sustainable products and services. Using these technologies, businesses can increase operational and supply chain transparency, simplify emissions reporting and create circular business models.

As detailed in a new e-book, Cognizant and Microsoft are supporting clients in their sustainability efforts by providing expertise and technology to meet their sustainability goals. At the same time, both companies—like a quickly growing number of organizations—are intensely focused on their own sustainability efforts.

More stakeholders demanding sustainability

Investors are just one of the groups looking for businesses to take meaningful action on tracking and improving their environmental, social and governance (ESG) metrics. The stakeholders that companies need to pay attention to on this issue include:

• Investors: According to a recent study by Morgan Stanley, at least 78% of investors believe sustainable investing is a risk mitigation strategy. Investors want companies to exhibit long-term plans for success, and reducing waste and emissions is part of that, for both resilience and regulatory compliance reasons.
   
• Regulators: Eighty percent of the global economy is now subject to a net-zero emissions target. As the effects of climate change become more acute, governing agencies are asking companies to have a strategy and plan in place to address these risks. In the EU, the European Commission’s Circular Economy Action Plan aims to move companies toward making sustainable products, and regulators there are demanding greater supply chain visibility.
  
  
• Employees: Employees are choosing companies that incorporate sustainability principles into their strategy, operations and corporate culture. In one study, 83% of respondents said their employers weren’t doing enough to tackle sustainability, and 63% said they want to work for companies with strong environmental policies. Amid the global talent shortage, companies that prioritize sustainability are more likely to attract top talent.
  
  
• Customers: While a company’s progress toward sustainability may not influence every sale, 81% of consumers in a Nielsen study said they strongly believe companies should work to improve the environment. Additionally, as organizations start to track and reduce Scope 3 emissions—emissions produced by suppliers and other vendors they do business with—customers will be more likely to choose those progressing on sustainability.

Sustainability focus areas to transform businesses

From our work with companies on supporting their sustainability efforts, Cognizant and Microsoft have identified six areas where companies can utilize sustainability and digital transformation to stay ahead of the competition, meet regulatory requirements and grow their top and bottom lines:

1. Net-zero pathways: Enterprises need to achieve a balance between greenhouse gases emitted and absorbed from their operations, supply chain and investments. They also need to meet sustainable development goals in other areas, including water, biodiversity, soil, etc. Digital technology—including IoT sensors, edge computing and cloud or software solutions—can help businesses automatically collect, record and analyze all of these areas to establish a baseline and monitor progress.
   
   Using digital solutions, businesses can design interventions to achieve long-term reduction targets. These same tools can reveal data and insights that lead to a plethora of additional business and cost-saving solutions.
   
   
2. Sustainability and ESG reporting: To accurately report on progress toward sustainability goals and key ESG indicators, businesses need to collect data from multiple, often siloed, systems across business units. When businesses digitally transform this data collection process, they can largely automate data ingestion and metrics analysis, which results in more accurate, timely monitoring and reporting.
   
   Such an advanced approach to data management can also improve how businesses study and improve a wide variety of other operations throughout the company.
   
   
3. Green products and the circular economy: Companies need to shift from linear to circular business models, such as providing products as-a-service. By combining solutions such as product lifecycle management and emissions management systems, businesses can generate accurate and granular data on the environmental footprint of each product they sell. They can also glean the insights needed to evolve and improve these products and how they are sold.
   
   
4. Sustainable supply chains: Regulators and consumers are demanding greater supply chain traceability and transparency related to supplier sourcing and management. As a result, companies need digital solutions to give them visibility and better control of their end-to-end supply chain practices to effectively track and manage impacts. This data can also be used to drive innovation and greater efficiencies.
   
   
5. Sustainable IT: The demand on digital infrastructures is growing year by year, even as IT departments face pressure to decarbonize and reduce e-waste. Through better utilization of the cloud, virtual networking, smarter software architectures and even low-power edge computing, IT operations can become more sustainable and fit for a net-zero future.
   
   
6. Sustainable manufacturing and operations: Sustainability is pushing companies to rethink the materials, components and products they use and produce, and shift toward new circular material and digital flows. With a new set of business cases and performance indicators in mind, the key is to find organizations’ "sustainability sweet spot": the place where profit, product and digital solutions seamlessly blend with the pursuit of a sustainable common good.

In addition to reducing negative environmental impacts, all six of these focus areas can generate countless top- and bottom-line benefits, including improved efficiency, reduced costs, streamlined processes, and an enhanced brand reputation to all stakeholders.

Learn how Cognizant and Microsoft can help

Amid the growing urgency to address climate change and sustainability, connected digital solutions can equip companies to make real change to achieve success. Cognizant is helping companies design and implement these solutions, and our partner Microsoft has a growing ecosystem of solution partners that can quickly deploy market-ready solutions.

Read our new e-book to learn more about real-world examples, and find out how we can support your company’s drive toward net-zero impacts.

This article was written by Manoj Mathew, VP and Global Head, and Dr. Rouzbeh Amini, Head of Sustainability Services, Global Growth Markets, in the Sustainability Services practice at Cognizant.