Over the past decade, environmental, social and governance (ESG) principles have become increasingly tied to corporate reputation and pages and pages of companies’ annual reports have been filled with declarations and promises related to sustainability and ethics. Then regulators came to burst the bubble.
As consumers and shareholders became savvier and more sceptical and demanded more transparency from brands, policymakers started to clamp down on misleading claims.
As a result, “greenwashing” today represents one of the main – if not the most significant – financial and strategic challenges to a business operating model, impacting everything from its financial stability to its strategy and reputation.
And the regulators are just getting started. Two new EU directives – the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive – are due to come into effect between 2024 and 2026, and will compel thousands of companies with an EU presence – including US and UK multinationals – to provide detailed information about how they address environmental and human rights risks across their entire value chain.
As the new directives include ESG disclosure obligations related to the environmental impact of resources, the management of e-waste and the implementation of circular practices, it is clear that tech leaders must act now.
So far, when it comes to responsibly managing technology, much of the focus has centred on making tech procurement more sustainable and improving the green credentials of digital hardware solutions through design and software. And there are admirable examples of where this approach is yielding great results, such as the recent announcement by Amazon Web Services that it plans to extend the life of its servers.
However, these new directives show that responsibility does not end in the use phase – no matter how long that is. And the impending mandatory disclosures related to circularity, biodiversity impact and waste management demonstrate that today, how a device is handled at the end of its life must also be thoughtfully considered as part of any sustainability claim.
Consequences for CIOs
So what does this all mean for CIOs and other technology leaders?
First, it means the rubber is meeting the road. Not having a strategy that looks at the entire lifecycle of a device – from procurement to information technology asset disposal (ITAD) – is simply no longer an option.
It also means that if companies are to transition to the sustainable models of operation envisaged in the forthcoming EU legislation, decision-makers will need to start embedding circular principles in their digital transformation plans today. So, where to start?
Circular technology lifecycle management (TLM) offers an excellent blueprint for aligning tech strategies to some of the critical points of the new regulatory framework, but requires a different way of thinking about devices – as something to use and reuse, not own and discard – and not every business is ready to make that leap.
That is why many companies are turning to ITAD as a quick fix to responsible device handling. However, even though there is no doubt ITAD can be a great first move in the transition to circular tech, leaders must realise that not all providers have the same credentials.
A trick to watch out for is having a greater focus on cost at the expense of picking a partner able to offer true transparency on how end-of-life devices are handled and where they end up. It is estimated that, every year, more than 350,000 metric tonnes of electronic waste are illegally shipped from recycling facilities in the EU to developing countries, where it wreaks environmental havoc. Unregulated handling of waste – including e-waste – also represents a human rights challenge, not just in developing countries, but also much closer to home.
And with unregulated and unregistered asset disposal comes the issue of data security. Big names have suffered damaging incidents related to their failure to properly retire old assets containing sensitive data. These practices also risk organisations being targeted by ransomware or other security breaches that can leave their reputation in tatters and open them up to potential – and significant – regulatory sanctions.
It is evident that without complete transparency and proper supplier assessment when it comes to ITAD, companies risk thinking they are being compliant, responsible and “green”, when the reality is very different. They are simply outsourcing responsibilities without sufficient due diligence and understanding of the considerable risks involved.
To make ITAD a strategic business practice – in the absence of a full technology lifecycle management plan – organisations should only consider providers that guarantee a strict chain of custody, complete audit trail for every device, digital tracking of IT assets, secure data destruction, and environmentally responsible repair and refurbishment.
Organisations should also look for ISO-certified processes to guarantee compliance with international laws, regulations and standards, as well as best-practice handling of data and environmental procedures.
Much greater due diligence
One thing to bear in mind, however, is that if international certifications are a must today, they will soon be the bare minimum. The new EU directives will require much greater due diligence than companies are used to providing today – including from those who go to the effort to secure certification and demand this from their suppliers.
It is clear that with the most demanding set of ESG-related EU regulations for a generation on the horizon, it is imperative for organisations to limit their exposure to ESG liabilities associated with their use of digital assets.
But it’s not all doom and gloom. European policymakers are ultimately turning consumers’ and shareholders’ appeal for green, more transparent practices into law – so aligning business practices to the new regulatory framework is bound to significantly strengthen a company’s reputation.
The circular economy represents a $4.5tn economic opportunity – so there is much to gain there. And responsible and sustainable handling of devices plays a crucial, strategic role in any business risk-management plan.
By looking at the new directives as a blueprint for business success rather than a threat, wise tech leaders have a tremendous opportunity to rethink their technology strategy and bring circularity, sustainability, compliance and social governance to the heart of their digital transformation plans.