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How cloud can help or hurt your ESG efforts

Summary

  • Businesses are prioritizing ESG activities at the same time they’re accelerating their digital transformations through cloud technologies.
  • The two efforts should be considered together, so that you can use cloud solutions to advance your ESG efforts, such as through better transparency and reporting.
  • You must also pay attention to what an increased use of cloud services and your providers’ commitments mean for your sustainability goals.

Whether it’s creating more eco-friendly operations, committing to diversity and inclusion, taking part in climate change initiatives or other efforts, businesses are making environmental, social and governance (ESG) programs a priority.

At the same time, companies are increasing their use of cloud services, with many creating multi-cloud and hybrid cloud environments as part of their ongoing digital transformations. The timing is serendipitous, because cloud can help enterprises achieve their ESG goals.

Many of the world’s largest organizations already are leveraging cloud services to support their ESG programs and measure their impact. PwC’s US Cloud Business Survey of more than 500 executives from Fortune 1000 companies shows that 60% of business leaders are using or plan to use cloud to enhance ESG reporting and 59% use or plan to use cloud to improve their ESG strategies.

Business leaders look to cloud to accelerate ESG progress
Business Leaders Look to Cloud to Accelerate ESG Progress. To what extent is your company considering the intersection of your cloud transformation and the environmental, social and governance (ESG) goals of your company?

Q: For each of the following areas, to what extent is your company considering the intersection of your cloud transformation and the environmental, social and governance (ESG) goals of your company? Source: PwC US Cloud Business Survey. June 15, 2021: base of 524

But executives also need to be aware of the potential challenges related to cloud service deployments. Moreover, as businesses embrace the cloud to deliver new services and enhanced customer experiences, they also increase energy demands across the value chain. As a result, they should also pay attention to cloud and data center efficiency.

Here’s a look at what major cloud vendors provide and where you should focus as you think about cloud’s impact on ESG at your organization.

Enhance ESG reporting

Cloud-based data management and reporting can help support ESG by automating processes and standardizing the data, providing increased transparency within the organization as leaders seek to better understand diverse social and environmental risks. All of this is important, given the growing interest in developing metrics and controls over ESG reporting. ESG reporting is inherently complex. Needed data might be sourced from a combination of financial and non-financial systems and in some cases from external vendors.

Microsoft recently announced Microsoft Cloud for Sustainability, a software as a service offering that enables organizations to more easily and effectively help record, report and reduce their emissions toward net zero. The offering, currently in preview, will connect to real-time data sources, accelerate data integration and reporting, and provide accurate carbon accounting to show performance against goals, according to Microsoft.

Amazon Web Services (AWS) offers a program called Data Exchange that makes it easy to use third-party sustainability data. Once subscribed to a data product, companies can use the AWS Data Exchange API to load data directly into Amazon S3 and then analyze it with a variety of AWS analytics and machine-learning services. The company says it’s working with organizations to make ESG data available to customers to help them accelerate sustainability research, innovation and solution development by removing the friction of finding, licensing and using sustainability-related data.

Advance emissions reductions

Migrating from on-premise data centers to an energy-efficient cloud can help companies reach emissions reductions targets. This will be increasingly important as compute, storage and AI/ML workloads increase across businesses as they transform operations.

For example, Microsoft has an application that enables companies to gain insights into their carbon emissions related to Microsoft’s Azure cloud services. It provides a sustainability dashboard so managers can understand greenhouse gas emissions associated with Dynamics 365 and Azure cloud usage, learn the root causes of emissions changes by tracking actual and avoided emissions over time, and calculate how to further reduce emissions by moving additional applications and services to the cloud.

Google Cloud Platform (GCP) provides carbon-free energy scores for Google Cloud regions so that companies can choose GCP locations that are optimized for lower carbon emissions. The tool examines a number of areas to determine emissions, including the average percentage of carbon free energy consumed in a particular location on an hourly basis and grid carbon intensity, which indicates the average lifecycle gross emissions per unit of energy from the grid.

Salesforce offers its Sustainability Cloud, which enables organizations to quickly track, analyze, and report reliable environmental data to help them reduce their carbon emissions. It offers an automated, streamlined and integrated approach for the current manual and complex environmental reporting process. Companies can use the solution to visualize carbon footprint data in dynamic reports and dashboards—both for audit purposes and to help drive climate action programs at scale.

SAP is also addressing the challenge of sustainability. At its SAP Sustainability Summit, the company announced SAP Product Footprint Management, which will be available in the third quarter of 2021. The solution is designed to assess product footprints across the product life cycle, to help companies make a detailed assessment of the environmental impact of their products.

Where to pay extra attention

In general, cloud offers benefits such as increased agility, reduced operating costs and easier access to data and applications—all of which can help businesses meet their ESG goals. But cloud also comes with a number of challenges that, left unaddressed, could hinder organizations’ ESG efforts.

Our recent survey indicates multiple barriers are keeping a significant number of organizations from achieving optimum value of cloud. These include a lack of integration with existing systems and data, a lack of technology talent within the company, cybersecurity and privacy issues, governance challenges, and a lack of alignment/clarity on roles and responsibilities relating to cloud ownership. Any of these could potentially draw attention away from ESG initiatives.

Operating multi-cloud or hybrid cloud environments can be particularly challenging for organizations as they look to build their ESG strategies.

Many organizations are using cloud-based offerings from a variety of providers. This not only can create more management complexity, but also make it challenging in terms of monitoring the sustainability efforts at the various cloud service providers. The providers might have significantly different commitments toward sustainability, and this affects how they create and operate their cloud infrastructures.

To help overcome these and other challenges, organizations should create a governance program to make sure they get maximum value from the cloud from an ESG standpoint, in addition to the benefits outlined above. Cloud customers might also consider cloud management platforms that feature artificial intelligence and machine learning capabilities to better manage workload costs and sustainability initiatives.

Companies will also need to acquire new talent, such as cloud engineers, architects, cybersecurity specialists and other professionals with cloud experience and knowledge of sustainability principles.

The benefits of cloud from an ESG standpoint are clear. But companies should confront the challenges to fully reap the benefits.

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Casey Herman

US ESG Leader, Chicago, PwC US

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Ron Kinghorn

ESG Consulting Solutions Leader, Boston, PwC US

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