Environmental, Social, and Corporate Governance (ESG) is an evaluation of a firm’s collective conscientiousness for social and environmental factors. It is typically a score that is compiled from data collected surrounding specific metrics related to intangible assets within the enterprise. It could be considered a form of corporate social credit score. Research shows that such intangible assets comprise an increasing percentage of future enterprise value. While ESG aims to understand exactly what companies’ business is, how they impact the world and meet society’s needs, Digital Transformation, in turn, seeks to optimize the execution of processes and improve them. In this way, there is a mutual interest in meeting the expectations of the public, either through new experiences or through the attention given to topics that customers deem important. So, let’s learn how digital transformation impacts ESG.
Process digitization has undergone major changes in recent years. From the emergence of technological solutions for automation and data analysis, for example, companies were able to improve the entire production chain, maintaining quality and gaining more agility in the execution of processes. With that, decision-making was maximized, since it started to be based on the analysis of data available in the organizations’ internal systems, fed in real-time.
However, in addition to decision-making, digital technologies allowed managers to customize processes to offer the public exclusive and innovative items, without having to make their sustainable practices more flexible. In other words, the digitization of processes allows companies to increase their production without disrespecting ESG standards. Thus, these companies are able to develop customized services and products without generating additional costs for the consumer or burden on the environment, for example.
The greater autonomy in the production chain provided by digitization is directly connected with the main objectives of ESG, which are:
- to take care of the environment;
- expand social responsibility;
- and adopt better governance practices.
And technology is the best ally of companies in this process of Digital Transformation and adaptation to the norms and demands of the public. ESG is the next corporate transformation and emerged in response to the needs of society, which requires companies to take a more active role in adopting sustainable practices against social problems that impact everyone’s lives. In this sense, the charge will be even more incisive in the coming years and companies that do not pay attention to these issues could have serious problems.
As well as the digital journey, ESG is a necessary transformation that goes hand in hand with digitization. Therefore, the connection of both allows for increasingly strategic and beneficial action for organizations and for society as a whole.