The protection, maintenance, and sustenance of earth’s resources are often associated with the climate crisis and environmental protection groups. However, the rapid deployment of new electronic products into the market has led to a tremendous amount of electronic waste (e-waste) pollution, leading to the depletion of the earth’s resources.
Sustainability is not a new concept. Since 2000, organizations have been working towards more sustainable options, focusing on reduced risk and cost approaches. With time, enterprises started to focus on increasing value creation including brand and culture. In 2006, Esty and Winston wrote a book called Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage. This book focuses on how business managers should manage the environmental challenges facing society and the business world. Their viewpoints were expanded in 2009 by Ram Nidulmolu et al who wrote a lengthy article in the Harvard Business Review1 about the five stages that companies go through when incorporating sustainability as part of their business strategy.
In today’s business world, many organizations are working towards a more holistic approach and progressively integrating the concept of sustainability into their processes – beginning from their products and services, to managing both hardware and software digital transformation.
According to the IBM Institute for Business Value Report Sustainability as a transformation catalyst states that 53% of surveyed organizations view environmental sustainability as one of their top priorities within the next 3 years.
Commitment to sustainability goals, Execution and Implementation of these goals, and Integration of sustainability with digital transformation are 3 important factors that need to be considered when employing sustainability in business strategies.
Nearly 90% of global institutional investors revise investments if organizations do not consider the Economic, Social, and Governance (ESG) criteria in their business model! The world’s largest investor, BlackRock, recently announced it would place sustainability at the center of its investment approach and actively exit investments that indicate a high sustainability risk, such as coal-sourced energy
Organizations along with their stakeholders are collaborating to develop complementary capabilities that would benefit both and enable significant economic as well as social value towards their business strategies.
Implementing sustainability helps to create a balance with the needs of the present to provide for a better future incorporating strategic decisions that will support the future generations to meet their needs without depleting the earth’s resources and reducing the pollution.
Why is Sustainability Imperative for Product Engineering?
Sustainability in Product engineering involves ascertaining the environmental impact of the product on the environment. This is determined by its value retention options. Product engineering aims to create products better than the competition/prototypes based on consumer feedback. They also consider consumer preferences. Today, to reduce the carbon footprints, there is a critical need to provide consumer awareness to embrace the integration of sustainability into product engineering.
Certain factors, listed below, make for a good argument as to why organizations need to embrace sustainability in their product engineering
Brand value: An organization’s commitment to environmental consciousness and mindfulness of its sustainability approach brings in happy customers and clients. This goes a long way in demonstrating ethical values and standards when practicing sustainability in their product and operations.
Innovation: When organizations decide to integrate sustainability into their products, a rethink is involved. In order to work towards optimizing natural resource efficiencies and manage risks, redesign of products, processes, and the entire systems are to be taken into the study. This often leads to new innovations within the organization and re-structuring of goals with a more demanding vision.
Adaptability: Organizations that integrate sustainability find it easier to adapt to changes and thereby mitigate risks. Environmental, Social, and Governance (ESG) factors are now key components in risk assessment. Moreover, a product that is designed to be re-used and recycled whenever market changes are effected, the greater the adaptability of the product keeping to regulations, streamlines the processes for faster output, and reduces waste.
Increased Cost efficiency: With sustainability, we see better energy efficient operations, decreased waste pollutants, and better allocation and management of resources – tangible, intangible as well as human resources. When mapping how efficiently a product progresses through its developmental lifecycle, both designers and engineers are thus dictating how a product will impact the environment.
Profitability and Positivity: Integrating sustainability into the infrastructure and processes brings invigorating growth, innovations, and definitely higher profits. Together all this leads to better employee engagement which needs no better motivation towards achieving the organization’s goals and development.
Compliance: When organizations comply with world standards and protocols and align with the ESG framework, stakeholders and investors recognize the ethical commitments and values that govern every step in an organization’s operations leading to consistent investment helping all parties to grow and compete with excellence.
Before we go forward to what could be the Sustainable Development Goals and Principles (SDGP) that an organization should incorporate, an understanding of the ESG framework is essential and pivotal to the organization’s vision and success towards integrating sustainability wholeheartedly.
In each process and system a company engages with, companies must transition from standard, unplanned, and “work-in-siloed” approaches to strategic, efficient, and integrated ones.
The ESG Framework
This may sound sensational, but when you train a single natural language processing model it is known to produce as much CO2 as 315 return flights from New York to San Francisco!
Criticism and false claims were rife during the last decade that the IT sector consumed massive amounts of energy and was responsible for driving up greenhouse gas emissions. However, simultaneously, studies showed that energy systems were increasingly going digital, improving efficiencies, and making devices smarter and more connected.
Environmental, Social, and Governance, (ESG) is a framework within which organizations learn to navigate the risks and opportunities of their products and services around sustainability issues. The ESG framework has evolved more in the 2020s4, helping organizations to measure certain decisions such as the implementations, and the outcome in terms of their product or service, that could affect the environment, the impact the product or brand has on society, and the accountability and degrees of transparency that exists within the organization affecting employees and stakeholders, especially during changes in market!
Measuring the ESG performance of an Organization
Measuring the ESG performance of an organization is not just a challenge but also tricky. Since corporates work with quantifying most actions, it is difficult to quantify say how an organization can reduce pollution. In an IT enterprise, the broad factors listed below would be some of the measures that product engineers need to take into account to comply with the ESG framework
- Carbon efficiency: Build applications that are carbon-efficient
- Energy efficiency: Build applications that are energy-efficient
- Carbon awareness: Build applications that are carbon-aware
- Hardware efficiency: Build applications that are hardware-efficient
- Measurement: Learn how to measure carbon emissions
- Climate commitments: Defining the exact mechanism of carbon reduction
When you embed ESG into your strategy, operations, and reporting in a transparent manner you build trust across all stakeholder groups.
Although it is known that ESG can be tracked and measured, evaluating ESG performance is tricky. But broadly ESG performance can still be quantified and qualified if one ascertains the right blend of factors that are in sync with the goals of your stakeholders.
- Decarbonization
- Diversity in the workforce
- Ethical sourcing of material both for infrastructure as well as assets employed
- Tools, technology, and transparency, to access and use data
- Ease of implementation
- Allocation of human and financial resources and compensation frameworks
Stakeholders and investors refer to company-reported ESG data to help assess investment opportunities, select suppliers, and make other important decisions. Reporting has become standardized using ESG disclosures, making it a seamless way to reach out to investors and stakeholders.
Rating agencies like Bloomberg, MSCI, and S&P Global are known to give companies ESG scores using different sets of performance criteria. These scores provide for Validation, Peer comparison, Benchmarking, investor attraction, and risk management, thereby helping to keep the overall governance of an organization functioning within its sustainability goals.
It is thus through ESG that an organization can evolve its sustainable business practices to realize a positive impact.
Sustainable Development Goals & Principles (SDG&P)
This is an even greater challenge for IT corporates to put into practice. They would need to draw a fine line between idealism and realism when setting down the goals and principles to incorporate sustainability within the ESG framework. It’s not easygoing!
But once a company decides to set up its SDG&Ps, it is then that it will realize the potential impact on the supply chain and its revenue growth.
There is no specific formula or recipe that needs to be followed when setting up the SDG&Ps. However the main goal is to work towards a sustainable future for the company and its economic and social impact via its product towards its customers, clients, and other stakeholders, including vendors.
The Sustainable Development Goals (SDGs) were launched in 2015. There are 17 SDG goals that companies across the globe have picked from and are working on in collaboration with local governments, and local NGOs, either to validate existing approaches to grappling with sustainability issues or to support the development of new business models, products, and services
Under the Environmental, Social, and Governance pillars, the organizations can evolve their own Sustainable Development Goals which can be both, short-term as well as long-term goals.
Keeping in mind the original 3 Ps of people, planet, and profit, introduced into the corporate world to look beyond the bottom line by John Elkington in the 1990s, the 4th P, “purpose” was introduced later. These 4 are what should encompass the SDG&Ps of any organization that wants to change its business practices that could have a positive impact on society and the environment.
Partnerships & Collaborations
Engaging with the same wavelength partners and collaborators is what can bring to fruition the SDGs and uphold the ethical principles laid down by the organization.
According to the Business and Sustainable Development Commission report, collaborations between companies would create market opportunities of up to $12 trillion annually and add 380 million new jobs by 2030
For example, if a company is into making products more affordable to lower-income groups, partnerships could be established with local organizations whereby lower prices could be offered to specific groups. Instead of competing, cooperation with local organizations can be beneficial for both parties. Alternatively, two companies can work together each supplementing their own expertise to build products and deliver services that benefit the people that live around them and also the local governments. This can lead to the emergence of a new business model with a new business case too. This would thus help push the ESG performance scores bringing in higher investments too and raising the motivational bar for employees, vendors, and other stakeholders.
Conclusion
Incorporating any of the Sustainable Development Goals into the business practices is the first step towards bringing a positive impact in the environs of the organization. Sustainability in product engineering requires awareness, thoughtfulness, and implementation towards making a positive impact on the environment and society.
Keep tuned in for Part II on the Significance of Sustainability in Software Development.
Calsoft, being a Technology-First company and a pioneer in software product engineering services, has been a driver for ESG and Sustainability and achieved the Silver in ESG and Bronze in Sustainability at the iNFHRA Workplace Excellence Awards, highlighting our dedication to green practices, safety, and community engagement.
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