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Tech sector can lead the fight against climate change

The technology and telecoms sector has a dual role to play in sustainability – to transform its own organisation and ecosystems, and to use its role as a digital enabler to drive sustainability for its customers

Mobile phones, microchips and datacentres don’t have exhaust pipes, but their environmental footprint is significant. This puts technology, media and telecoms (TMT) businesses front and centre in the fight against climate change and in the shift to sustainable societies.

Not only are they highly exposed to the sustainability challenge – contributing significantly to global energy usage, emissions and waste – but they play a dual role by delivering solutions across all other industries. By applying technology solutions such as artificial intelligence (AI), they are delivering everything from smart efficiencies in logistics and manufacturing to mapping forests to combat deforestation.

EY’s new report, TMT’s dual role in building a sustainable future, sets out how the TMT sector can lead the transition. It can minimise its own environmental impact and that of other sectors. And putting environmental, social and governance (ESG) considerations at the centre of organisations will also improve financial performance and the creation of long-term value.

Is TMT sustainable?

TMT businesses are energy-hungry. While estimates vary, the information and communications technology (ICT) sector accounts for between 2% and 4% of global carbon emissions, and up to 7% of global electricity use – a share likely to grow significantly, with data traffic forecast to grow more than 60% year on year. Meanwhile, global e-waste across sectors is forecast to reach 75 million tonnes a year – as heavy as 13 Great Pyramids of Giza – with only 17% of e-waste currently recycled.

Emerging technology is adding to the red side of the climate ledger, too. Bitcoin alone accounts for 0.55% of global electricity production, which is equivalent to the electricity demand from an entire nation the size of Sweden.

These pressures mean that stakeholders – from regulators and investors through to employees and customers – are becoming more demanding than ever in their ESG expectations. Some 56% of consumers surveyed by EY said they were willing to pay slightly more for a product that is environmentally sustainable, while 70% of enterprises surveyed are interested in 5G and internet-of-things use cases that can help meet their sustainability goals.

Crucially, given the multitude of touch points with consumers and other businesses, the TMT sector is uniquely placed to play a leadership role on delivering sustainability through engagement, education and action.

How the sector can respond

Positively, TMT businesses are already responding to the sustainability challenge – for example, the industry is committing to science-based targets alongside timeframes to reach carbon-neutrality and net-zero – but there is further to go. There are a number of actions that businesses can take to achieve success.

The first step is for TMT businesses to look internally, measuring their own ESG performance. The adage may be well worn, but you can’t manage what you don’t measure. TMT businesses need clarity and understanding of their Scope 1, Scope 2 and Scope 3 emissions and the impact these have on the world around them. From here, a culture of sustainability can be built in and around the sector. Industry-wide reporting and disclosure is key.

With measurement in place, the TMT sector needs to have a relentless focus on execution and transformation, including a rapid transition to renewables, operationalising sustainable procurement, transforming supply chains and maximising circularity. Robust and agile performance management and digital sustainability analytics can support this shift.

By putting sustainability at the heart of their organisation’s purpose and building energy-efficiency into their operations and technologies at the earliest stage of their development, businesses will find that carbon efficiency often translates into operational efficiency.

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As businesses address their own priorities, they should also drive change in their ecosystem, working with – or picking between – suppliers and partners based on their emissions commitments. For business-to-business (B2B) companies, sustainability needs to be a core feature of value propositions, whether through new technologies, supporting the cyclical asset lifecycle or providing insight into the end-to-end supply chain.

Consumer-facing businesses are in a strong position to steer consumers towards more sustainable habits and choices, whether by improving the environmental impact of consumer devices or encouraging re-use and repair where possible.

At present, only 3% of TMT chief executives spoken to by EY for the most recent CEO imperative study cited climate change and sustainability as the trend with the greatest impact on their business. With stakeholder focus rightly on the importance of building long-term value, that percentage needs to increase – and quickly.

TMT is far from immune to the sustainability challenge, and there is an opportunity for the sector to show leadership. By playing a dual role on sustainability, TMT will lead by example and also lead the transformation of other sectors, businesses and customers.

Praveen Shankar is technology, media and telecommunications sector leader at EY UK & Ireland

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