Category: ESG and Sustainability

Can Joint Innovation and Public-private Partnerships Prove to be the Noah’s Ark for Africa? | Blog

Almost 200 countries came together at the Climate Change Conference (COP 27) in Egypt last month to take action toward achieving the world’s collective climate goals. Among the event highlights was the establishment of a fund to assist the nations most vulnerable and impacted by the effects of climate change. Read on for key takeaways from COP 27 and implications for the Global South.

The much-anticipated conference, dubbed the Africa COP, marked 30 years since the adoption of the United Nations Framework Convention on Climate Change (UNFCCC). While much has transpired and the planet has come a long way in its fight against climate change since then, some nations have been left behind in achieving their carbon goals and are not experiencing the intended benefits.

Developing nations have long sought financial assistance to rebuild their social and physical infrastructure, but the World Bank and other publicly-funded lending institutions have failed to fulfill these growing needs. To address this issue, the UNFCCC, backed by the United Nations Environment Program and several attendee governments, launched a five-year work program to fund and promote smart technology solutions in developing nations, opening ground for tech providers to display their capabilities in the space.

COP 27 proved to be an instrumental platform for service providers and Big Tech players to engage in sustainability conversations and highlight their contributions towards the planet and its people.

The bridge towards a sustainable future must be pillared by collaboration and joint innovation in technology. Partnerships can be seen as the key to climate adaptation and mitigation. Many of these collaborations focus on marrying Artificial Intelligence (AI) and satellite technology. Some examples include:

  • IBM is partnering with UK’s Science and Technology Facilities Council, among others, to leverage innovations in indexing multidimensional climate data to rapidly discover climate-relevant information from aerial imagery, maps, Internet of Things (IoT), drones, light detection and ranging (LiDAR) scanning, satellites, weather predictions, and climate change projections
  • Microsoft collaborated with Planet Labs PBC and The Nature Conservancy to build the Global Renewables Watch – a first-of-its-kind living atlas intended to map and measure all utility-scale solar and wind installations on Earth using AI and satellite imagery
  • Using high-quality geospatial data for disaster predictions and mitigation is very common in the more developed countries, whereas the Global South often lacks the resources and talent to generate and analyze reliable climate data. Partnerships among various stakeholders can bridge the climate data gap. Microsoft has committed to democratizing climate solutions in Africa by combining its AI prowess with Planet Labs PBC’s satellite imagery

The Loss and Damage Fund marked a momentous win for the Global South

As organizations do their part to help the Global South, COP 27 set a milestone by recognizing the disproportionate exposure of the poorer nations in Africa, Asia, and Latin America to climate change consequences. Established after years of appeals by the developing nations to compensate for losses due to climate disasters, the fund is viewed as a major political step to provide the appellants with a sense of justice and rebuild trust among nations.

Let’s take a look at other key implications for the Global South:

  • Africa’s climate needs remain underfunded – While a step in the right direction, the Loss and Damage fund needs to be backed by effective policies and infrastructure to be beneficial. Historically, the funds promised by developed nations toward climate impact haven’t been fully disbursed or equitably distributed. The Climate Policy Initiative (CPI) noted that of the meager 25% of global climate investments that crossed the borders towards developing nations, Sub-Saharan Africa mobilized only 3% despite being the most vulnerable to climate adversities
  • Global efforts and African needs are misaligned – Africa’s situation calls for urgent climate impact adaptation, but global climate funds and collaborations announced by service providers are only directed towards mitigation of climate impact
  • African leaders will rethink their engagement with multilateral initiatives – African nations will further their strategies for adaptation and energy generation considering their primary concerns of poverty alleviation and economic development. Thus, the African region ranks as an attractive climate-related investment opportunity for private players. According to CPI data, private finance comprises half the global climate finance yet stands at just about 14% in Africa
  • ESG regulations in Africa will become more stringent – As African nations advance in their sustainability journeys and try to attract foreign private investment, they will follow the global trend and strengthen their ESG regulations. Among many countries planning to launch such frameworks this year, Uganda referenced a “sustainable financial system” in its recent five-year plan

This opens several opportunities for service providers and consultants as more enterprises will require their expertise to transition to sustainable models. The increased volumes of ESG data generated will create opportunities for data analytics players, helping to bridge the climate data gap.

The world remains bullish on Africa’s future

COP 27 concluded on an optimistic note as technology, transparent funding, and developing nations’ needs became central to the climate resilience discussions. Innovative solutions across sectors are moving stakeholders closer to achieving their climate pledges.

Organizations are collaborating and prioritizing community impact in developing nations. Public-private partnerships toward sustainable models will make technology and welfare more accessible in these regions. With changing geo-political scenarios, Africa will prove to be an attractive opportunity for various investors and service providers.

To discuss further, please reach out to Rita Soni and Ambika Kini.

Rita Soni, Principal Analyst, Impact Sourcing & Sustainability Research

Email ID: [email protected]

LinkedIn: https://www.linkedin.com/in/ritansoni/

Twitter: https://twitter.com/ritaNsoni

Ambika Kini, Senior Analyst

Email ID: [email protected]

LinkedIn: https://www.linkedin.com/in/ambika-kini/

 

The Role of ESG in IT Services Pricing: Is There a Case for a Green Premium? | Blog

Service providers who lead in green engineering and can produce significantly more carbon-efficient software have an opportunity to price their sustainable IT services at higher premiums and pioneer this emerging space. Read on to explore more on IT services pricing in today’s ESG-focused marketplace.  

In the book How to Avoid a Climate Disaster: The Solutions We Have and the Breakthroughs We Need, Bill Gates popularizes the concept of a Green Premium. Simply put, a Green Premium is the incremental charge/cost that buyers must pay to use a clean technology over a “dirty” one.

Now, this isn’t a new notion by any means. Consumers pay more for products that are marked “organic” and happily shell out extra bucks for greener packaging or responsibly-sourced coffee. Green Premiums exist because organizations typically incur more costs to deliver cleaner products and services. But they also generate pricing power due to differentiation.

This concept has mostly restricted itself to mass usage products in a business-to-consumer setting. Can IT service providers replicate this in the enterprise technology marketplace? By introducing sustainability into the technology services, is there a case for a Green Premium?

We believe two distinct paths can lead to a Green Premium in IT services pricing – an external-facing route and an internal one. Let’s explore the external opportunity first.

Green software

While building software, the most important priorities are typically user-centric – user experience, performance, latency, security, etc. Developing carbon-efficient software has never been a core objective. And in the process, the impact of emerging technologies has largely gone unnoticed. Only recently has a host of research been published pointing out the tremendous negative impact the likes of blockchain and artificial intelligence could have on the planet. For example, according to a study performed at the University of Massachusetts, Amherst in 2019, training a single Artificial Intelligence model can cause as much carbon emission as five cars in their lifetimes. No one saw that coming!

But we do see emerging signs of this changing. There is an industry-wide push towards greener software development practices. This includes steps such as considering the carbon impact of architectural decisions, choosing more energy-efficient languages, using data practices that reduce redundancy, and building more hardware-efficient applications. Given that this is an emerging field, there is no single service provider who does it better. And this creates a unique opportunity for service providers to aim for leadership in this blue ocean and materially differentiate their services

Providers who can lead in green software engineering and produce significantly more carbon-efficient software will differentiate themselves from competitors around parameters that genuinely matter to enterprises today. Alongside typical cost savings quoted in most proposals, future slide decks might have a percentage reduction in carbon emissions as one of the key benefits to the enterprise.

Getting the internal act together

Now, let’s explore the internal route that could lead to Green Premiums. Alongside providing green software engineering practices, service providers need to focus on achieving environmental, social, and governance (ESG) goals. A provider who leads in green software engineering but scores low on ESG metrics might not be able to establish credibility with clients.

Sooner than later, enterprises will inevitably start to consider ESG as a key parameter in their sourcing strategy. Traditionally, ESG parameters were mere check-the-box or good-to-have selection criteria. But according to Everest Group research, they are now becoming deal-breakers – or makers – in many instances. We expect to start seeing enterprises look for energy efficiency, impact sourcing, community impact, board-level governance, and transparency/disclosure standards. Service providers who score high on these metrics will be able to materially differentiate themselves against the competition.

The way forward

The primary challenge in this entire process lies in being able to calculate the exact Green Premium of sustainable IT services. No consensus exists yet. Both internal-facing ESG initiatives and cutting-edge green software engineering practices require investments from service providers and are inherently more expensive. A first mover in this space will face this challenge but also have an opportunity to literally set the benchmark.

In an increasingly commoditized industry, ESG offers promise for technology service providers to set themselves apart by creating truly differentiated services. As any ardent observer of the industry will acknowledge, such occasions are few and far between.

Are you a service provider aiming for leadership in this space? As an enterprise, are your providers exploring this opportunity to the fullest? Let me know by reaching out to [email protected] to discuss the emerging topic of ESG and its impact on IT services pricing.

Also, don’t miss our webinar, Key Issues for 2023: Rise Above Economic Uncertainty and Succeed, as we explore major concerns, expectations, and key trends expected to amplify in 2023.

Unlock a New Source of Value Creation – Integrate Sustainability into the GBS Charter to Help BFS Firms Realize Their ESG Goals | Blog

Global Business Services (GBS) organizations have a big opportunity to champion Environment, Social, and Governance (ESG) in banking and financial services (BFS) institutions. To learn about six ways GBS organizations can help enterprises reach their ESG goals and unlock greater value, read on.

ESG is creating new opportunities for BFS Global Business Services organizations. Fast-evolving consumer awareness about social, political, and environmental values, emerging regulations, and increased demand for sustainable financial products are pressuring BFS firms to prioritize ESG goals in operations and employment.

Let’s explore the significant role GBS units can play in enabling ESG for enterprises.

ESG products and services emerge

To meet new customer and investor expectations along with regulatory mandates, BFS organizations are building ESG products and services – such as green loans, sustainability-linked loans, and carbon-neutral banking – to make their operations sustainable.

Capital market firms are embracing green underwriting, while asset and wealth managers are steadily moving toward ESG investing. These organizations are also focusing on workplace diversity, pay equity, and good governance structure to meet their ESG aspirations.

This has created a big opportunity for GBS organizations to move from being measured for their labor arbitrage and cost efficiency to the value they can deliver to enterprises. These units can become vital to the enterprise’s ESG agenda by expanding their sustainable service offerings and conducting ESG-specific due diligence and risk assessment. GBS centers’ strong visibility across the enterprise’s functions, operations, and capabilities to support their ESG initiatives will drive this new focus.

Six ways GBS organizations can support enterprise ESG goals and commitments

As BFS organizations increasingly look for ways to support and grow their businesses with an impact-driven mindset, GBS organizations should be at the forefront of defining and internalizing ESG goals.

The new environment has opened up many avenues for GBS organizations to maximize the value they can deliver and become ESG enablers for their enterprises. For a deep dive into the opportunities summarized below, please read our newly released research.

See how GBS organizations can promote ESG initiatives within the enterprise in the image below.

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GBS organizations can enable the following key opportunities for BFS firms:

  • Enhance sustainable investing practices – Support enterprise banks by running/enhancing sustainable investment initiatives, such as portfolio optimization and expansion, and positive and negative screening of these portfolios
  • Develop new sustainable products – Identify feasible opportunities to expand the green product portfolio for their respective enterprises following the regulatory and competitive landscape
  • Proactive ESG risk monitoring – Build on their roles in supporting enterprises in managing various risk types such as liquidity, credit, and operational so GBS can be leveraged as specialist ESG risk management centers by enterprises
  • ESG performance tracking and reporting – Set up dedicated ESG performance reporting teams at GBS centers, which, in turn, will own the management and execution of ESG performance tracking and reporting tasks
  • ESG compliance reporting – Track ESG-specific regulatory developments across different countries where the enterprise has an operational footprint. Accordingly, it can assess the impact of newly introduced mandates or disclosures requirements on the enterprise’s existing compliance processes
  • Implement ESG commitments of the enterprise – Undertake sustainability initiatives to integrate the ESG goals of the enterprise across its own operations, people, and functions. For example, a leading US investment bank committed to incorporating sustainability-focused features such as energy-efficient lighting and minimized water consumption policies in its new technology base in Poland. Similarly, a major European bank’s GBS center has been working since 2009 on a Train Green Program aimed at creating sustainability awareness among school children

Call to action for BFS GBS leaders

As GBS organizations take on more strategic roles, it becomes imperative for them to step up and become ESG enablers for their enterprises. To do this, GBS leadership must champion the development of ESG-specific capabilities and prioritize initiatives to drive enterprises’ ESG agendas, while embedding ESG and sustainability practices into their service delivery and operations.

To discuss how we can assist your enterprise with achieving your ESG goals, reach out to Sakshi Garg [email protected], Piyush Dubey [email protected], and Mohini Jindal [email protected].

Discover more about how to integrate sustainability and ESG initiatives into your organization in our upcoming webinar, Driving Larger-scale Adoption of Impact Sourcing from the Inside Out.

CIOs Meeting ESG Commitments Must Go Beyond Reducing Carbon Footprint | Blog

Environmental, Social, and Governance (ESG) initiatives and investments are growing in importance and starting to significantly influence the marketplace, particularly for services and products. Almost every large company in the world now has an ESG agenda, comprising CEO and leadership team formal commitments to their boards and other stakeholders. Those commitments now are moving down in the organization to the different functional heads, including the CIO, for IT’s share of the responsibility for meeting the company’s commitments.

Read more in my blog on Forbes

New Sustainability and ESG Investment Regulations will Spur a Second Digitalization Wave in Wealth Management | Blog

The clock is ticking for asset managers to provide arduous and complex Environmental, Social, and Governance (ESG) data on financial funds mandated under the Markets in Financial Instruments Directive (MiFID II) by January 2023. To meet European regulations, the wealth management industry will need to embrace advanced digital tools to account for investors’ ESG preferences – leading to a second digitalization wave. Read on to learn how this will impact technology providers.  

The global wealth management industry is at an inflection point. The strong growth in assets under management for wealth managers has been fueled in part by the digitization wave sweeping this industry.

Generational wealth transfer and the rise of the next breed of investors have redefined advisory services from a physical to a hybrid model. This step change in wealth management firms’ traditional customer base has led to increasing demand for tailored and digital customer experiences.

The first digitization wave resulted in firms increasingly collaborating with FinTechs, building in-house innovation capabilities, and adopting digital technologies such as Artificial Intelligence (AI) and analytics to develop new products, services, robo-advisors, and business models.

With the rise of sustainability and ESG preferences in investing, a second wave is coming  

As investors and advisors settled into the new normal and wealth management services became accessible to all, another demand pattern emerged. Next-generation investors are cautiously choosing the right wealth manager to help manage their wealth.

Today’s new client base is increasingly attracted to companies with strong sustainability and ESG standings and wants evidence from wealth managers of funds’ internal and external sustainability commitments.

However, the rise of greenwashing poses serious reputational risks for wealth managers. The lack of a single source of truth in analyzing ESG data means that no standard terminology exists to accurately classify any company’s ESG standing.

Investors are baffled by the sheer increase in ESG funds entering the market and are concerned about their authenticity. Millions of dollars in penalties have been levied on large financial services enterprises over greenwashing claims this year alone.

New MiFID II guidelines on ESG

To fight greenwashing, the European Union has passed MiFID regulations to promote sustainable finance products and facilitate greater transparency for all participants. Under this amendment, advisors will need to identify client ESG preferences and incorporate sustainable products in portfolios accordingly.

However, classifying ESG data for each fund across 580 mandatory, conditional, and optional fields is a mammoth task. The disparate data sources make it difficult for enterprises to accurately account for ESG scores. Another bigger emerging problem is how all this data will be used to connect to investors’ sustainability preferences.

Because of the data complexity and challenges facing asset managers to comply, the original deadline has been extended from August 2023 to January 2023.

What will this mean for wealth technology providers?

The industry already faces competition from emerging FinTechs who capture market share and provide contextualized experiences. On top of this, a significant gap exists between the new guidelines and the current state of investment platforms to meet these requirements.

Asset and wealth managers will need to assess whether their current platform can ensure compliance with this changing regulation and partner with technology providers to modernize their digital solutions.

This will be challenging as we believe the user interface in many wealth management technology platforms has not evolved at the same pace as the core functionality, which will hamper the industrialized delivery of personalized and contextualized experiences at scale across hyper-segments.

The new regulations will require adding an ESG layer to existing platforms to account for investors’ preferences. As sustainability and ESG preferences become ingrained and drive technological changes in current platforms, expect to see a second wave of digital advancements coming.

Wealth technology providers will have to accelerate their ESG roadmaps in the next 12-18 months and show value from these initiatives. We recommend providers take the following actions:

  • Craft roadmaps to ensure their technology platforms comply with the new regulation
  • Engage proactively with wealth management clients to help them navigate the nuances of the regulatory change
  • Invest in a partnership ecosystem for ESG data providers that can help enterprise clients solve the data gap

The compliance deadline extension has given wealth managers much-needed extra time to assess their technology offerings and develop roadmaps to incorporate ESG preferences. With the compliance date fast approaching, providers will need to move quickly to invest in their platforms to provide the digital solutions the wealth management industry needs to meet the MiFID II ESG amendments.

Has your organization made changes to meet the sustainability and ESG investment regulations? Please reach out to [email protected] to share your experiences and learnings.

Also, don’t miss our LinkedIn Live event, Sustainability and the CIO’s Office: A Powerful Connection, to learn how the diversity of people and power of technology can strengthen your sustainability strategy.

Ready, Set, Go – Scope 1, 2, and 3 “Emissions” Extended: How ESG Standards Must Measure People and the Planet | Blog

While the decades-old greenhouse gas emissions scopes are a ubiquitous tool for reporting carbon footprints, the reporting standard needs to evolve and extend. Organizations must also measure their impact on people to provide a holistic picture of their sustainability performance. Read on for our new model for extending the global standard of scope 1, 2, and 3.

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Scope 1, 2, and 3 emissions explained

More than nine out of ten Fortune 500 companies use the following three scopes to measure, report, and manage their Greenhouse Gas (GHG) emissions:

Scope 1 – your facilities –emissions from fuel sources a company owns and controls

Scope 2 – controlled by you, procured by you –emissions through purchasing electricity

Scope 3 – influenced by you, extending stakeholders –emissions considered indirect to the company due to less control including the supply chain, transportation, and asset portfolios. For many industrial sectors, this is the largest scope

SDGs are comprehensive and all-inclusive, and they do need a comprehensive take on sustainability by enterprises

Sustainable Development Goals, which were adopted in 2015 by the international community, encompass both social and environmental aspects of sustainability. SDGs are witnessing a bigger global collaboration than the Millennial Development Goals (MDGs) and create more space for the private sector’s involvement in realizing the goals. Rooted in human rights, and weaving them with environmental issues, SDGs give a robust opportunity to the private firms to explore their role in slowing down the global warming and making the world a more inclusive space.

With SDGs being a comprehensive take on both social and environmental aspects of sustainability, enterprises need an equally comprehensive outlook on their role in realizing the goals. Enterprises have started zeroing down on their carbon footprint using GHG Protocol. However, they are still falling short on measuring their social footprint and generate the right insight using their social footprint data. While there are several metrices and global standards to measure the social footprint of an organization, these standards are diverse and lack comprehensiveness.

While GHG emissions protocols comprehensively capture an organization’s carbon footprint, a broader focus is required. Expanding these scopes to encompass sustainability’s social aspects will truly serve the aspirational SDGs the world wants to achieve under the United Nations’ 2030 Agenda for Sustainable Development.

Extending the three scopes for success 

With this set up, we can all agree the ubiquitous GHG emissions scopes can be extended to include a social footprint for a holistic approach. Using the same logic, we at Everest Group recommend including the following elements in your social scopes:

Scope 1 – your people – A company’s positive and negative influences on employees count towards the social scope 1 footprint. This includes workplace diversity, gender pay gaps, accessibility, employee physical and mental health, parental leave (including maternity, paternity, and adoption benefits), and job security

Scope 2 – controlled by you, procured by you – A company’s positive and negative influence on contractual and outsourced employees, customers (e.g., fair pricing practices), and supplier diversity programs broaden the social footprint.

Scope 3 – influenced by you, extending stakeholders – A company’s wider impact on its customers, supply chain, community, and other stakeholders. It can include:

  • Expanded production and services to underserved markets
  • Welfare policies for suppliers’ personnel throughout the value chain
  • Considering consumer physical and mental well-being in designs
  • Providing employment opportunities to local communities
  • Ensuring sustainable resource exploitation and value-sharing ecosystem with local communities
  • Implementing impactful and relevant CSR initiatives to serve the community

Measuring the total sustainability picture

Although these elements are covered in different national and international laws, standards, and company policies, developing a common definition for social footprints is necessary. Generating indices or scores is one way to measure and rank companies on their performance in these key areas.

In addition to taking into account the people aspects in consolidated ESG scores, the standards should also examine the impact companies have on the planet that goes beyond simply measuring aspects of environmental degradation like deforestation, waste production, and plastic production in siloes.

An international ESG standard should integrate all these elements. Having an integrated ESG score that consolidates the people and planet aspects of sustainability holistically would shed valuable light on a firm’s true sustainability-led values.

With diligence and global collaboration between businesses, governments, and international organizations to develop these standards, the environmental and people aspects of sustainability can be bridged.

What can’t be measured can’t be managed. Everest Group strongly advocates for a comprehensive indexing of enterprises’ social and environmental footprints. With just eight years until 2030, we need to begin evolving our measuring standards now to achieve SDGs in a true sense.

To have scope 1,2, and 3 model explained in greater detail, contact us at [email protected], [email protected], or [email protected].

Learn about Everest Group’s pledge to help organizations around the world increase the number of jobs provided to workers in marginalized communities through impact sourcing – while providing businesses with access to the best talent with high levels of reliability, productivity, and engagement. Our Commitment to Action is to grow the impact sourcing market from its current level of 350,000 FTEs to half a million in three years.

The Ukraine-Russia War is Impacting Global Sustainability Initiatives and Derailing Progress in Meeting SDG Goals | Blog

The Ukraine-Russia War has hindered the progress of nations and businesses toward achieving global sustainability goals. Along with its humanitarian and economic consequences, the crisis has altered investment in energy, defense, and autocratic states. Can the enthusiasm the world felt just seven years ago about reaching Sustainable Development Goals (SDGs) be recaptured, and what does the future hold for sustainability enablement service providers? Read on to find out.

The optimism around achieving SDGs, also known as the Global Goals, has waned since its adoption by the United Nations in 2015 with the promise of improving people’s lives and preserving natural resources.

Global sustainability initiatives have been impacted by the Ukraine-Russia War, the pandemic, and supply chain issues. According to the UN, income for about 60% of the global workforce declined during the pandemic. Supply chain issues further exacerbated the economic contraction and humanitarian losses by inflating food and fuel prices.

The war is impacting progress in accomplishing SDGs, directly through its humanitarian and economic consequences, and indirectly through its effect on Environmental, Social, and Governance (ESG) investments.

The following three major challenges have emerged due to changing perceptions about ESG investments in light of this crisis:

  • The war has ramifications on global energy transition

The Ukraine-Russia war has slowed down the global energy transition to renewables in two ways:

Increased metal and gas prices slowing renewable technology investment – The region is a leading supplier of “energy transition metals” like nickel, palladium, copper, and lithium. Russia accounts for 7% of the world’s mined nickel and 33% of the world’s mined palladium, which are used in electric vehicle batteries and to reduce automobile emissions, respectively. Ukraine is the largest supplier of noble gases like krypton, which is used in renewable technologies. The war has reduced the already sluggish rate of renewable technology investment by increasing the prices of these metals and gases.

Ramped up coal production and fossil fuel investment – Russia accounts for 17% of the world’s natural gas supply, which is perceived as a transition fuel globally. Before countries develop sustained sources of renewable energy, natural gas is replacing fossil fuels due to its lower carbon emissions. The issue is more pronounced in Europe, as about 80% of Russia’s natural gas is exported to Europe, fulfilling about 40% of Europe’s gas demand. The war has inflated gas prices. Although the US has agreed to supply more gas to the region, this raises the question of sustained gas supply and puts pressure on European governments to accelerate their net-zero strategies. The market is optimistic that Europe will transition to clean energy faster than expected because it needs to become energy self-reliant.

Slow investment in renewable energy has further dipped since 2018. While renewable energy requires patient and risk-tolerant investors, fossil-fuel investment generates considerable returns quickly due to the massive existing hydrocarbon infrastructure. In the war’s wake, fossil fuels are seeing an investment frenzy, with Canada, the US, Norway, Italy, and Japan increasing production. Many countries across Europe again are ramping up coal production to avoid depending on Russian gas. In the short run, it seems that the world has taken steps back on global warming

  • Investment in defense is being reclassified as sustainable

Before the war, steering away from investing in arms and ammunition was considered prudent and ESG conforming. However, the war has brought back fears of traditional warfare. Now, many nations have started taking a U-turn from this narrative by categorizing defense investment as sustainable for national security and global alliances. Many global defense suppliers’ share prices spiked upward the first day Russia invaded Ukraine.

Many European nations, including Germany, Poland, and Sweden, have announced increases in their defense budgets. SEB Investment Management, a leading asset-management firm in the Nordics, has revised its sustainability policy to allow some of its equities and corporate bonds to be invested in the defense sector. With skepticism associated with traditional warfare restored, investors and governments are bound to pump more money into arms and other defense products.

  • Investors are steering away from autocratic states

Investors are facing heightened reputational risks for associating with authoritarian regimes. The boundary between investing in government bonds of an autocratic state and investing in companies conducting business in/with the autocratic states is now blurred for investors. Western investors are striking Russia off their investment list, especially if the investment is ESG-compliant. This can dampen investments in other autocratic states and the businesses associated with them.

How does the war impact sustainability enablement service providers?

The war has temporarily derailed the uptake of renewable energy investments. To start, this will impact enterprises’ Scope 2 emissions reduction goals. Scope 2 emissions are generated from purchased electricity, and reducing these emissions requires enterprises to turn towards renewable electricity sources.

The sustainability enablement technology industry also will experience a short-term supply crunch of semiconductor chips, which is an important input in producing sustainability technologies.

To deal with these choppy waters, organizations will need help from consulting and technology providers to shift their sustainability mix to access net-zero strategies to still achieve their committed targets for global sustainability initiatives.

Moreover, as the sustainability ecosystem matures, forward-looking investments in scaling undertakings such as enhancing trust in data and reporting (avoiding greenwashing claims), scaling operations to accelerate net-zero targets, and creating persistent governance systems will continue to create momentum.

To further discuss global sustainability initiatives, contact [email protected], [email protected], and [email protected]

You can read more about the impacts of Russia’s military action in Ukraine on services jobs and global sourcing in our blog, “Will Ukraine’s Invasion Have a Domino Effect on Other Geopolitical Equations?”

 

Consider Your Competitive Positioning in Your ESG Initiatives | Blog

Regulatory agencies are driving companies in the US and the EU to make commitments to comply with Environmental, Social, and Governance (ESG) criteria for corporate behavior and financial performance. Focusing on ESG initiatives and investments is growing in importance and starting to significantly influence the marketplace, particularly for services and products. Two trends are noticeable now.

Read more in my blog on Forbes

The Impact of Climate Change on International Business Strategies – Why Corporations Should Pay Attention | Blog

Acknowledging the reality of the current climate crisis, forward-looking corporations are adopting business strategies to make their organizations more resilient to its far-reaching consequences. Climate change can directly impact employee well-being, service delivery location decisions, and other critical business operations. Read on to gain a better understanding of its short- and long-term impacts and what to consider.     

“Jakarta is sinking,” screamed headlines as Indonesia announced moving its capital 2,000 kilometers northeast to Nusantara, on the island of Borneo. The move that could cost Indonesia upwards of $30 billion is driven by concerns of Jakarta’s submergence by 2050. Jakarta could be the first of many cities to be adversely impacted by climate change.

The debate on climate change has moved from whether it is real to when will it impact us. Climate change has become inescapable. The discussion on climate change featured primarily in social media, conferences, academia, and educational institutes have moved to boardrooms. Corporates are increasingly concerned about the short- and long-term impact climate change can have on their businesses.

Facing pressure from employees, customers, and investors to act on climate change, corporations are increasingly forced to acknowledge climate change’s economic, physical, and operational impact on their business and human capital.

Weather warnings

Hotter summers, colder winters, and an increasing frequency of extreme weather events like storms, hurricanes, and floods are all signs of the climate crisis. According to multiple studies, the earth’s surface temperature has seen the highest increase in the last 40 years, with 10 of the warmest years occurring post-2005. Scientists worldwide have reported record ice cap melting and glacier retreats.

The exponential increase in extreme weather events and natural disasters should be a more pressing concern. In 2020 and 2021, the world has seen a spike in natural disasters in the last few years, with a five-fold increase over 50 years. Climate change has led to warmer temperatures, leading to more frequent heatwaves and droughts. Sea levels have been rising steadily, coupled with frequent coastal region flooding.

Corporations taking notice

Corporations are now acknowledging that climate change can have a significant impact on business functions. Extreme weather events in recent years have disrupted business operations and resulted in the loss of human life, physical assets, and infrastructure.

Companies are trying to think beyond the short-term consequences already being felt and understand the long-term effects of climate change on international business strategies. In addition to business disruptions, climate change can have implications on employees’ mental and physical well-being and, in extreme cases, loss of life. In most companies, especially the global services industry, human capital is the most critical asset. Climate change can significantly impact business operations due to lower productivity, loss of work hours, and possible higher attrition rates.

As companies acknowledge climate change’s direct and indirect business impacts, the more forward-thinking companies have started adopting plans to make themselves more resilient to climate change and its consequences. Although this is just the beginning, a lot more needs to be done in terms of workforce and location strategies.

Location strategies need to consider climate change

Most companies are still more focused on the short-term, like building climate-resilient buildings and reinforcing existing infrastructure to make it more resilient to the impacts of climate change. Location strategy is a long-term decision with significant investment and sunk costs. Once a company decides to start delivery operations from a particular location, it is an irreversible long-term decision due to the high capital and labor investment.

Companies will have to consider the impact of climate change on future location strategy decision making, which traditionally includes talent, cost arbitrage, and conventional operating and business environment parameters. Climate change impacts different regions, locations, and geographies differently. Although two locations might be neighboring coastal cities, the impact of climate change could differ depending on the landscape.

Hence, it is paramount for companies to understand the effects of climate change on the particular location they are accessing and the degree of its impact. The holistic, long-term assessment should consider historical and predicted climate patterns, government mitigation measures and their effectiveness, and geographic factors.

In our recent viewpoint, Impact of Climate Change on Delivery Location Sustainability, we cover climate change’s impact on significant delivery locations around the world, across multiple parameters including rising temperatures, heatwaves, floods, hurricanes, storms, and rising sea levels with qualitative insights on select sites. The report provides a high-level view on short-term and long-term risk management measures to mitigate the effects of climate change on companies and employees.

To discuss further, please reach out to [email protected] or [email protected].

Also, don’t miss our webinar, 5 Success-driving Actions: How to Unlock Untapped, Affordable Talent, exploring key talent strategies in various geographies.

Real Diversity, Equity, Inclusion, and Belonging (DEIB) in Your Supply Chain: Advancing Gender DEIB with Impact Sourcing for the Workforce of Tomorrow | Blog

Organizations that have a diversified workforce and prioritize providing opportunities to all will ultimately contribute to building a stable global economy. While gender equity and inclusion have improved over the last decades, many challenges remain, including discrimination/bias, underrepresentation in leadership levels, and lack of access to education and employment opportunities. Impact sourcing is a business imperative that will not only help companies reach new talent pools but also offer opportunities to marginalized communities and populations, especially women.

Empowering women through impact sourcing

Impact sourcing is a business practice in which companies intentionally prioritize service providers that hire and provide career development opportunities to people who otherwise have limited prospects for employment.

Companies are implementing impact sourcing models to elevate excluded groups and improve gender equality through opportunities such as training and employment in various regions, especially where educational and career opportunities are not readily available to all. By including impact sourcing initiatives, organizations can begin to embed gender-responsive and ethical procurement practices into their business models, and, ultimately, affect social-economic improvements, such as decreased poverty and increased employment rates.

A response by the approximately US$215 billion1 global services industry to address social exclusion, impact sourcing is not a new concept but can make a significant impact. Considering that third-party services is one of the largest corporate sourcing/procurement spend categories, with companies often spending 5% of revenue on services partners, the practice has the potential to not just open up new talent pools, but also provide equal opportunities.

The gender gap in global services

According to S&P Global data, the percentage of women in the total workforce in developed and emerging markets has averaged around 35% over the past five years and has been exacerbated by the global pandemic. The proportion of women decreases progressively up the corporate ladder. However, in developed markets, the percentage of women in senior management is even lower than the number of women within boards of directors.

By investing in impact sourcing, companies can combat unequal treatment of women in the workforce with specific impact sourcing strategy goals. For instance, they can focus on closing the gender gap at the base of the issue rather than reporting on diversity indicators at the top, such as the number of women on boards or the percentage of women’s ownership. This is part of a growing movement to broaden supplier diversity to gender-responsive procurement, spearheaded by UN Women[1].

How impact sourcing aligns with the United Nations (UN) Sustainable Development Goals (SDGs)

Impact sourcing is one of the most credible and powerful ways to accomplish some of the 17 UN SDGs. As a result, it bolsters gender-responsive procurement, which is defined as the selection of services, goods, and civil works that consider their impact on gender equality and women’s empowerment.

Impact sourcing naturally aligns with UN SDGs in the following ways:

Picture1 1 Goal 1 – No Poverty: Impact sourcing helps provide employment opportunities to marginalized groups, contributing to reduced income distribution gaps and eradicating poverty
Picture2 Goal 4 – Quality Education: The innovation in impact sourcing includes training, accommodation, recognition of unique talents, and career counseling for youth who may not have access to higher education
Picture3 Goal 5 – Gender Equality: Putting women at the center of economies will fundamentally drive more sustainable outcomes since individuals who identify as women are increasingly becoming part of the core workforce. Organizations can become more inclusive towards women by having a rigorous impact sourcing strategy
Picture4 Goal 8 – Decent Work and Economic Growth: Employment is at the core of impact sourcing, helping organizations offer good jobs to marginalized individuals
Picture5 Goal 10 – Reduced Inequalities: Growing inequality is one of the biggest roadblocks in achieving social progress and global stability. Impact sourcing can contribute towards inclusion and equal opportunities within and among countries

With lower attrition rates and higher corresponding levels of employee engagement, which results in lower costs and higher productivity over time, impact sourcing also provides a diversified talent pool to companies.

Impact sourcing encourages companies to help underserved populations, like women, move out of poverty and transform their lives and provide for their families. Corporations can engage in inclusive hiring practices that promote equal opportunity, diversity, skill development, and equal treatment for women. A responsible hiring mechanism by organizations can effectively contribute towards increasing employment opportunities and career development for this socially impacted and vulnerable segment of society, creating meaningful change in the world and taking an impactful step in the fulfillment of the UN SDGs.

Additionally, as the LGBTQ+ community enters the workforce, organizations may expand the definition of “gender” to become more inclusive in their impact sourcing decisions.

Impact sourcing use cases with gender-specific goals

Televerde

Established as a US-based for-profit sales and marketing organization in 1994, Televerde provides on-the-job training to more than 200,000 current and formerly incarcerated women in the US. As a purpose-driven company, Televerde helps these women reintegrate back into their communities.

Televerde has a global workforce of more than 600 employees, 70 percent of whom sit behind prison walls, and about 60 percent of its staff is comprised of incarcerated women. In addition to being paid fair market hourly wages, they receive training for the required skills and can also achieve certifications in sales and marketing, while earning college credits for completing company-sponsored training programs.

Not only does the Televerde business model help these women, but it has enabled the company to generate more than US$8 billion in revenue for its clients.

In 2020, Televerde formed its non-profit unit Televerde Foundation to further empower incarcerated women and serve as a driving force to fulfill Televerde’s mission to change the lives of 10,000 disempowered people by 2030.

iMerit

A global impact sourcing specialist, iMerit was founded in 2012 in rural India to bring a diverse talent pool from underserved backgrounds into the digital workforce. Today, 52 percent of its workforce is female, and, interestingly, the company was founded by Radha Basu, a technology pioneer who rose through the ranks when very few women did. By embedding purpose objectives into its business model, the for-profit impact sourcing firm has raised US$23.5 million in funding since July 2021.

Today, iMerit employs more than 4,000 data enrichment and annotation experts in Bhutan, India, and the US. It launched one of its first all-women centers in Metiabruz, West Bengal, a region where women have traditionally lacked professional career opportunities.

Sama

A for-profit training-data company, Sama focuses on annotating data for artificial intelligence algorithms. As one of the pioneers in the impact sourcing space, it aims to reduce poverty, empower women, and mitigate climate change. The company combines its technology platform and worker training programs to increase economic opportunity for those in underserved communities.

Sama, a certified B Corporation, operates global delivery centers in Kenya and Uganda and was named one of the “Best for the World” for workers in 2021.

By 2019, Sama had helped over 50,000 people move out of poverty. Its impact was particularly strong for women during the COVID-19 pandemic, when Sama was able to create a remote working model, allowing them to continue working despite lockdown orders.

FiveS Digital

An India-based certified woman-owned business and impact sourcing company, FiveS Digital has a workforce of over 1,500 employees at seven delivery centers in India, with a presence in Europe and North America. It started as a pure-play BPO company in 2009 and has entered the digital technology services domain over the years.

FiveS Digital collaborates with several non-profit organizations and supports young professionals’ upskilling needs, especially women from Tier-2 or Tier-3 cities and rural areas. With diversity and inclusivity as one of its key focus areas, it invests in opportunities and leadership roles for women. As a result of its continued commitment and focus, it was recently certified as a Women’s Business Enterprise (WBE) by the Women’s Business Enterprise National Council (WBENC), the largest third-party certifier of women-owned and operated businesses.

Organizations are choosing suppliers that aim to help disadvantaged groups

An increasingly used type of gender-responsive procurement, impact sourcing helps organizations discover initiatives to improve gender inclusion at all levels by partnering with leading impact sourcing specialists like FiveS, Sama, iMerit, and Televerde, as well as mainstream providers.

Enterprises can make a difference by partnering with service providers that employ groups experiencing exclusion, whether as an HR practice or by subcontracting to impact sourcing specialists. As businesses increasingly reach into untapped geographies for hidden talent, they will help build a stable global economy and promote inclusivity – a true win-win scenario.

Discover more about the benefits of inclusivity in the LinkedIn Live event, Why Inclusivity is Essential in Building Your Tech Talent Workforce.

[1] https://www.unwomen.org/en/about-us/procurement/gender-responsive-procurement

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