In Short : To control their carbon footprint and enhance ESG performance, firms can conduct carbon audits, transition to renewables, optimize energy usage, manage supply chains sustainably, promote waste reduction, engage employees, publish transparent ESG reports, invest in green innovation, and advocate for climate policies, ensuring compliance with regulations.
In Detail : With 2030 net zero deadlines creeping closer by the day, many companies are still struggling to get a handle on their carbon footprint and ESG performance – and they risk pushing away conscientious customers if they cannot change direction. Martha Karl, a senior solution manager at SAP, explains how firms can use digital technologies to turn their sustainability efforts into a competitive edge.
Early in 2023, msg global solutions, a consulting firm with offices in 23 countries, released its first sustainability report.
“We really needed to understand, what are our emissions [and] in terms of social equality, where do we stand?” said Louise Cooke, a member of the Swiss company’s executive board, explaining msg’s motivations for producing the report.
Looming compliance responsibilities are another big reason firms like msg are seeking to better understand their emissions profile. Under rules adopted by the European Commission this summer as part of the European Green Deal, companies active in Europe will be required by the EU Corporate Sustainability Reporting Directive (CSRD) to report “both on their impacts on people and the environment, and on how social and environmental issues create financial risks and opportunities for the company.”
Set to be phased in beginning in 2024, the CSRD applies not only to EU-based companies, but also to organizations headquartered elsewhere that operate and/or have a subsidiary in the EU and meet certain qualifications (such as those with more than 250 employees in the EU, or whose annual revenue there exceeds €40 million). Smaller subsidiaries of US-based companies with securities listed on a regulated EU market also will be subject to the requirements, according to Deloitte.
Similar policies soon will impact companies in the United States. The state of California recently adopted rules requiring large public and private companies that do business in the state to track and report their greenhouse gas (GHG) emissions, and submit climate-related financial risk reports. Meanwhile, the US Securities and Exchange Commission is expected to finalize similar rules for public corporations by year’s end.
The upshot to all this is that organizations in a wide range of industries, including professional services, soon will be required to track and report on their emissions and other aspects of their sustainability profile, whether they do business in Europe, the US or both.
Beyond compliance, there are other compelling business reasons for consultancies to behave more sustainably. Nowadays, given the choice between a consulting firm with a strong, proven ESG (environmental/social/governance) track record and another with a weaker or fuzzier ESG profile, some clients likely will choose to do business with the former, all other factors being equal. Investors are similarly inclined.
It’s also worth noting that companies can access funding, subsidies and low-interest loans from various public sources (state, federal and abroad in places like the EU) to support their sustainability and ESG programs. Besides accessing those sources themselves, they also can help clients access them, as KPMG is doing.
Firms also can leverage a superior sustainability performance in a variety of ways, from branding to business development to raising capital. For example, msg’s own internal commitment to sustainability tracking and reporting puts it in a strong position to market sustainability-management services to its clients. Better stewardship of resources also can provide considerable financial benefits to a firm by driving costs and inefficiencies out of the business. For consulting firms to capture these kinds of benefits and meet compliance responsibilities, they’ll need to put a few important building blocks in place, including:
GHG accounting
With the link between sustainability and profitability continuing to strengthen, it’s critical for consulting firms to give carbon footprint and sustainability performance equal footing with financial priorities in their organization-wide decision-making. To do so, they need an accounting system for their emissions data, one capable of producing reports that are as auditable, transparent and reliable as their financial data — a kind of green ledger.
Measurable metrics
Facilities (buildings, data centres, etc) are the biggest GHG producers for many consulting firms. So they must be able to track and report on energy consumption and emissions across all their built environments, using data-gathering Internet of Things sensors and the like. Also, advanced analytics can help them identify optimal pathways for reducing emissions and resource consumption. Those pathways could include relying more on locally sourced renewable energy, scaling the availability of energy-consuming IT systems based on usage patterns, and shifting systems from on-premises to the cloud.
Tools to manage travel
Corporate travel and employee commuting also can be major contributors to a consulting firm’s carbon footprint. Policies that encourage less commuting and more work-from-home is one way to reduce emissions. Another is to turn to travel management software that gives a firm full visibility into the carbon footprint associated with business travel, and the ability to balance emissions with cost, timing and other factors in booking travel.
People and teams can see the emissions trade-offs they’ll be making in choosing different modes of transportation to get to a destination, such as air vs. rail. In addition, firm leadership can develop lower-emission travel policies (such as to require teleconferencing instead of in-person visits in certain situations), which then can be incorporated into and enforced by the travel management software.
Holistic approach to reporting and acting
A lack of visibility into ESG- and carbon footprint-related data across the business is a major impediment to a firm’s ability to track, report on, and make substantial strides on the sustainability front. How is a firm going to accurately measure and disclose this kind of information if it can’t readily gather that data, or if the data it gathers isn’t current or trustworthy?
To address this lack of visibility, firms like msg are shifting to a 360°, “control tower” type of approach, where within a single digital environment they can collect, analyse and report on a range of finance, operational, workforce and emission data, view progress on their sustainability-related KPIs, and based on their analysis of the data, make adjustments or different choices to improve KPI performance. Transparency in all this is critical, especially for regulatory reporting, where firms will need to provide actual carbon footprint data instead of estimates or averages.
In msg’s case, by taking a holistic, single-view approach, “We can trace [the ESG] values we see in the [firm’s sustainability] report back down to the source data,” says Cooke. “We understand what our emissions are now, [and] the social equality KPIs.”
Recently, msg set goals of cutting fuel consumption 25% by 2025 and increasing the number of females in management positions by 1% each year until 2030. Now firm leaders can see exactly how much progress is being made toward fulfilling those targets.