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Sustainability - the rising strategic priority

Jared Johnson
Sunset with solar panels

Not many years ago, many companies were beginning to understand the “why” of having a purpose that’s larger than the business. Today, with climate change at our door and renewed attention on sustainability, these companies are considering the “how”—how to align purpose and commit to practices that reflect their impact on larger issues like these.

Kin + Carta is one of those companies, and we have taken concrete steps to make our commitment to strong business ethics and meaningful sustainability practices. We are one of 16 global, fully-certified publicly traded B Corps and the first publicly-traded B Corp on the London Stock Exchange.

B Corp certification is not a trivial undertaking. The process is rigorous and executed through independent verification as the company demonstrates that it meets the highest standards of social and environmental performance, transparency, and accountability.

At Kin + Carta, we view our B Corp status as the foundation on which we build the company into the future. We are scaling our techniques, methodologies, and skills to incorporate clients’ non-financial KPIs, Sustainable Development Goals commitments, and carbon-conscientious practices into our solutions.

For a company whose culture and values align with sustainable business practices, B Corp certification can result in significant business value. In addition to being a public statement of the company’s purpose and commitment, it demonstrates to stakeholders that those commitments are legally locked into business operations. It serves as a key differentiator in attracting top talent. Further, a client, supplier, or business ally who forms a partnership with a B Corp can realize a rich alignment of values, which in turn leads to new opportunities.

Sustainability is top of mind for CEOs

Sustainability is a rising priority for CEOs. In Gartner’s most recent survey of CEOs, it is the fastest-growing strategic business priority for 2022-23. Further, consumer manufacturing and retail CEOs report that ESG and CSR are their #2 priority.

CEOs consider four forces that are driving environmental sustainability as a priority:

1. Technology maturity
2. Changing preferences of consumers and employees
3. Government action
4. Financial alignment

Let’s consider each of these in turn.


Technology maturity

From the code we write to the platforms we build on and the energy we use, it has never been more important to understand the physical impact of our digital solutions.
The COVID pandemic brought about technology-based changes in the workplace that contribute to sustainability. With more remote work and virtual collaboration, there has been a ripple effect in carbon savings arising from factors like decreased commuting activity and lower physical facility requirements.

Batteries are a key maturing technology seeing investment and innovation. Battery costs have dropped by a factor of 9 over the past decade, spurring exciting developments in sustainable transportation alternatives. This innovation is not limited to consumer vehicles.

Electric truck fleets and public transport vehicles are more viable as the cost of batteries decreases. More dramatically, the uptake of battery-powered airplanes reveals a move toward more sustainable aviation practices.

Heart Aerospace already has billions of dollars in orders from United Airlines for an 19-passenger electric plane to be delivered in 2026. While this first model is meant for regional flights of 250 miles or less, this portion of air travel uses a disproportionate amount of fuel per mile flown because most fuel is consumed during takeoff and landing. As continued improvements are made in battery technology, electric planes with longer ranges will become more and more viable.

85% of people indicate that they have shifted their purchase behavior towards being more sustainable in the past five years
Businesswire

Another maturing technology is the Cloud. All of the major cloud hyperscalers (Google Cloud Platform, Amazon Web Services, and Azure) now offer tools to measure the carbon footprints that their customers create by running the workloads in the Cloud. They also have all set goals to run their data centers on renewable or carbon-free energy by 2030 or earlier.

  • AWS claims they are 3.6 times more energy efficient than the median of surveyed enterprise data centers in the U.S. and up to 5 times more energy efficient than typical EU enterprise infrastructure. And Amazon is on path to powering its operations with 100% renewable energy by 2025.
  • GCP claims they are 2x more energy efficient than an average US data center. Google is carbon neutral for their operations today (meaning they are using carbon credits to cancel out their carbon emissions), with a goal to run on carbon-free energy, 24/7, at all GCP data centers by 2030.
  • Azure has a goal of powering its data centers exclusively with renewable energy by 2025.

There is a sustainability nuance to the Cloud: the less energy an application consumes in the Cloud, the lower your Cloud bill. An app built to run cloud-natively, for example, intentionally optimizing the app to run from a cloud-provider, not an in-house data center, will require less energy than that same app built to run in a traditional data center.

However, there are different techniques and approaches to minimize the energy consumption of existing apps (also known as brownfield apps) that were built to run on-premises but now are candidates to migrate to the Cloud.

These brownfield apps can be totally rebuilt from scratch to run in the Cloud, or just slightly revised. The nuance is that the more “cloud-native” each app becomes, the less energy it typically will use in the Cloud, and the lower your Cloud bill will be.

Cloud technology advancements mean it is now possible for enterprises to build software that is highly performant and highly sustainable. Your businesses sustainability strategy should encompass how you are using the Cloud to its advantages to lower your business’s emissions.

Changing preferences of consumers and employees

The COVID pandemic did not simply impact technology. Workers changed their views of work because of the lockdown. Remote work has become mainstream rather than a fringe option. In addition, the two youngest generations in the workforce—GenZ and Millennials—generally prioritize purpose on par with role and salary.

They want to be part of a company committed to positive contributions to the world. Enterprises that have made such commitments are seeing high numbers of job applicants, even in today’s tight talent market.

Focus on sustainability is not limited to the workplace. There is a steadily increasing shift in consumer behavior toward brands and products that include sustainability in their business. In fact, 85% of people indicate that they have shifted their purchase behavior towards being more sustainable in the past five years.

One-third of people are willing to pay a premium for a more sustainable product. This changing consumer behavior means that being sustainable is not just a way to differentiate, and it is imperative to remain competitive.

Government action

In addition to the attention being paid to sustainability by employees and consumers, investors are starting to scrutinize how much risk businesses are under from climate. Like the early days of digital, we are seeing massive shifts in value pools that will create new sector winners and losers.

This is the next wave of new customer expectations and in this context, the SEC has proposed disclosure guidelines that are both an inflection point and a catalyst for businesses in North America to change.

The SEC would require three categories of disclosure:

  1. Material climate impacts, requiring disclosure of risks from climate-related hazards such as fires or floods by location and by share of assets exposed, and disclosure of transition risks (which could be regulatory, technological, market, or reputational risks) over the short term, medium term, and long term.
  2. Greenhouse-gas emissions, requiring reporting of audited Scope 1, Scope 2, and Scope 3 emissions.
  3. Targets or transition plans that comply with companies’ advertised environmental claims (e.g., net-zero commitments).

 

Discover the 5 steps of sustainable business transformation.

Learn more

Financial alignment

Sustainability is no longer a “nice to have” goal in business. McKinsey forecasts that up to $5 trillion annually will be invested in sustainability by 2025, making it the largest capital reallocation in history. Global ESG equity flows are growing exponentially. CEOs must incorporate these trends into company strategies and align financial plans.

There is also pressure from asset managers and shareholders for companies to be more sustainable. For example, BlackRock, the world’s largest asset manager, announced that by 2030, at least 75% of BlackRock corporate and sovereign assets managed on behalf of clients will be invested in companies with science-based targets around carbon.

Achieving sustainability is a long-term goal, and technology has a significant role in success. Sustainability is intrinsically coupled with your digital strategy. It plays a key role in shaping the future of technology and business operations, and those who lead the way can make a difference that transcends short-term financials.

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