Tag: sustainability

Making It Count: Why the Latest IPCC Report Should Compel Enterprises to Rethink the ‘E’ in Their ESG Strategies | Blog

The repercussions of climate change and global warming have been exposed in more ways than one over the past 12 months. The heart-breaking pictures of forest fires and increased natural disasters would cause even the fiercest of climate-change skeptics to look up and take notice. The latest reckoning has come from one of the top authorities on climate change – the Intergovernmental Panel on Climate Change (IPCC).

Its recent warning of a ‘code red for humanity’ signals the urgent need for enterprises to strengthen their commitment to the “E” in Environmental, Social, and Governance (ESG) strategies. Read on for more on our continued analysis of this important issue and what steps your organization can take toward achieving a more sustainable future.

IPCC and its latest findings

As the United Nations body responsible for conducting scientific assessments on one of the gravest issues facing our world — climate change, IPCC conducts studies to determine its repercussions, the future risks that it presents, and avenues to mitigate the ravages of this phenomenon.

In its latest Climate Change 2021 report, the IPCC presents a realistic picture of the impact of climate change and details measures the world can take while there is still time to act.

Among the report findings are the following:

  • Human influence is unequivocally responsible for the warming of the atmosphere, ocean, and land, which has resulted in widespread and rapid changes in the atmosphere, ocean, cryosphere, and biosphere
  • The scale of recent changes across the climate system as a whole and the present state of many aspects of the climate system are unprecedented. Case in point – in 2019, the levels of carbon dioxide (CO2) in the atmosphere were higher than at any time in at least the last 2 million years; also, global mean sea levels have risen faster since 1900 than over any preceding century in at least the last 3000 years
  • Global surface temperature will continue to increase until at least the mid-century under all emissions scenarios considered. Global warming of 1.5 degrees Celsius and 2 degrees Celsius will be exceeded during the 21st century unless deep reductions in CO2 and other greenhouse gas emissions occur in the coming decades

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What important role do corporations play?

Corporations globally bear a huge onus to prevent global warming and reverse its effects. Their activities also directly contribute to the likelihood of the world achieving the COP 21 commitment to limiting global increase in temperatures to well below 2 degrees Celsius and preferably to 1.5 degrees Celsius, compared to the pre-industrial period. But the IPCC report warns that, unless impactful measures are taken, these figures are most likely to be breached during the 21st century itself.

And while corporations worldwide have started putting more emphasis on their commitment to do their part to mitigate their environmental impact through ESG initiatives, there is an essential need for them to pivot their ‘E’ in ESG plans towards concrete steps to more meaningfully contribute towards a sustainable future.

An analysis of the recent wildfires around the world demonstrates the urgency of ‘E.’ While wildfires are a phenomenon that take place during the hot and dry season, the recently exacerbated instances of these fires are immensely worrying. Here’s how the world has been increasingly grappling with forest fires:

Image 2 The Siberian wildfires

The eastern regions of Russia (constituting some of the coldest parts of the world, including parts of Siberia) have been experiencing unprecedented forest fires in 2021. From July to mid-August, this region had more than 300 active forest fires, and at one point, Siberian wildfires were bigger than all wildfires raging in the rest of the world. NASA reported that the smoke from the Siberian wildfires reached the North Pole for the first time in recorded history. Long story short – the Arctic is burning at scales never seen before, and global warming is a major culprit behind it.

  • The Greece wildfires

The devastating fires raging during mid-August in Greece have been described by the Greek Prime Minister as “a natural disaster of unprecedented proportions.”

The rising global temperatures could lead to increased heatwaves which would spell drier weather conditions, leading to more extreme wildfires and, in turn, contribute to global warming – a vicious circle indeed.

  • The U.S. wildfires

Wildfires in the U.S. are causing huge devastation. Recently, the fires in Tahoe Basin, California, have forced thousands to evacuate. As these fires continue raging in the backyards of some of the most prominent organizations of the world, scientists have said that climate change has made this region much warmer and drier thus rendering it susceptible to more frequent and destructive wildfires.

Where does the ‘E’ of ESG come into the picture here?

Corporations often engage in what is known as carbon offsetting to meet emissions targets. Carbon offsets are essentially meant to account for a company’s carbon production and balancing the scales on it. An example of carbon offsetting could be a steel company engaging in afforestation or reforestation to ‘offset’ a certain percentage of the carbon produced by their operations.

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But the recent wildfires raise pressing questions for corporations such as: What if the forest under their afforestation project itself becomes a victim of wildfires? Does such a corporation account for the carbon produced due to this fire rather than offset and report the same in its ESG filings? What lies beyond afforestation as a means of carbon offsetting?

The way forward for corporations

Here are some ways enterprises can take action:

  • Realize that carbon offsets, while helpful, do not present the comprehensive solution: Essentially, the risk of relying heavily on carbon offsets would convert efforts into a ‘balancing game’ rather than a ‘mitigating game.’ So, while any future emissions are being balanced by a reforestation project, what happens to the existing carbon already contributing to rising temperatures? Hence, enterprises must also take active measures to seek carbon footprint mitigation
  • Diversify carbon offsets: Instead of having high exposure to a certain carbon offset activity, corporations should diversify their offset activities – following the golden rule of diversification and risk optimization. Considering the marginal cost of abatement as a metric to calculate their carbon footprint reduction against costs could be a viable way forward
  • Report with transparency: Corporations run the risk of ‘greenwashing’ if they fail to communicate the actual impact of their ESG initiatives. Now more than ever, with increasing interests and scrutiny, corporations who are truthful with their ESG filings could reap more benefits than their counterparts who are not as transparent. Sharing information and experiences with other companies on the initiatives that create the most impact and the ones that do not will help achieve results at scale because when it comes to the environment, it’s always a ‘team-game’
  • Adopt ESG technology: With their massive and expanding footprints, enterprises must think about the different layers within the sustainability technology stack – from advisory and applications to data, cloud, and infrastructure. Learn more about the scope of services provided by the technology market around sustainability here: ESG tech stack- Everest Group

While voices on the other side may question the real impact and efficacy of ESG efforts by enterprises, we believe it is a little too soon to declare ESG as passe. As ESG gains more maturity, reliable data and studies will help corporations, governments, civil society bodies, NGOs, and other stakeholders course correct.

At this juncture, one is reminded of one of the classic dialogues from the movie Shawshank Redemption: “Remember, hope is a good thing, maybe the best of things, and no good thing ever dies.” But only with collective and impactful actions can we have the luxury of bearing the much-needed hope for a future without code-reds.

To discuss your ESG efforts, please feel free to contact Aakash Jaiswal, Senior Analyst, at [email protected], or Rita Soni, Principal Analyst, Impact Sourcing and Sustainability Research at [email protected].

Where Business Meets Purpose: Launching Our Inaugural Impact Sourcing Specialist State of the Market | Blog

We are very excited to share the launch of Everest Group’s inaugural Impact Sourcing Specialist State of the Market Report. The report will compare global services companies where the primary talent strategy is impact sourcing. I had the honor of conducting a similar study in 2013 with a focus on India for NASSCOM Foundation, funded by the Rockefeller Foundation. But what a difference nearly a decade can make in the growth of impact sourcing.

Learn how to participate and receive the RFI

The increased adoption of this business practice has been driven by social movements across the globe that have prompted greater attention to equity and inclusion within society, impacting the business community. The United Nations’ launch of the Sustainable Development Goals in 2015 brought major public attention and an increased focus on global partnerships. The momentum was furthered in 2019 by the US association of CEOs Business Roundtable redefining the purpose of a corporation to promote an “economy that serves all Americans” and recognizing all stakeholders as being essential.

In recent years, many grassroots social movements are calling for social justice globally. Near continuous climate change disasters and the ongoing global pandemic have made the world feel a lot smaller and further highlighted the plight of marginalized communities. Finally, as a Gen Xer, I must give credit where credit is due – members of Gen Z are actively looking for purpose and are launching and joining impact sourcing companies to address needs in their communities.

With the combination of these factors, we have seen a growing movement for mission-driven companies within the global services industry. Today, impact sourcing specialists span the globe from developing communities in South Africa to middle-income parts of the U.S. and Europe. The companies are creating livelihoods for a wider range of marginalized communities with different operating models to accommodate these groups.

“Rural” has expanded from the Himalayas to Appalachian mining towns. Persons with disabilities now include neurodiversity alongside physical disabilities. Women are at long last being included in distinctive and meaningful ways in an industry that has struggled with diversity. And the list goes on to include veterans, refugees, native populations, and the incarcerated.

Impact sourcing operating models are also more diverse. Our initial analysis of the market shows many creative sales strategies, multi-country delivery approaches, innovative training programs, and unique employment models, to name a few. We have also learned about partnerships, M&A, and investor interest beyond the usual impact investors. This is an exciting turning point for the impact sourcing movement and space to be in!

Another big change since 2013 is the list of ecosystem builders has grown and strengthened the movement. We are proud to partner with leading global associations, networks, and platforms that are advancing impact sourcing including BSR/Global Impact Sourcing Coalition, the International Association of Outsourcing Professionals (IAOP), Business Process Enabling South Africa (BPESA), Intelligent Sourcing, and many more.

Your help is needed to continue to build collective insights into this vital market. Our State of the Market study will provide impact sourcing specialists with a unique opportunity to compare themselves to peers. It also will provide buyers with valuable insight into the latest services the market has to offer, locations, and companies using impact sourcing as a talent strategy.

Connect with us to learn how to get involved with this confidential study and assessment. If you self-identify as an impact sourcing specialist, please click the participate link below to receive the Request for Information (RFI) packet. Thank you in advance for participating.

Participate and Receive the RFI

Resources:

Case for Impact Sourcing

What’s in a Name – Defining Our Journey toward Sustainability 4.0 | Blog

More and more companies today are undertaking sustainability-related initiatives in response to pressing global, social, and environmental issues. Leading organizations are finding ways to instill betterment into their businesses, from educating and involving employees in grassroots community efforts to embedding greater purpose into their core business models.

Companies have learned that good does not come from charities and non-profits alone. Businesses already play a vital role in the economy by creating jobs, fostering innovation, and providing essential goods. Adding sustainability initiatives helps considerably in creating shared impact. In the last few years, we’ve seen large organizations significantly increase their sustainability reporting. And companies are discovering that, in doing good, not only are they giving back, but they are achieving business value and competitive advantage.

With the pandemic and social unrest creating greater pressure for change, forward-looking companies are now taking their sustainability efforts to the next level and realizing the business advantages this brings. To learn how, read on.

What does this mean at Everest Group? 

Within ESG or Environmental, Social, and Governance, the “social” component is particularly relevant to Everest Group. Our industry is about people and driven by people, making it practical to interweave economic and social betterment into the business model from the base – while also adding the “good” into business practices. With the global services industry naturally being people-driven at its core, Everest Group can advocate for human capital development, or ensuring people are offered equal opportunities and chances to succeed.

Everest Group is prioritizing Impact Sourcing under the sustainability umbrella. This growing business practice involves intentionally hiring and nurturing careers for people from marginalized communities who have fewer chances of employment and prioritizing suppliers that do so.

With the UN declaring a ‘code red for humanity’ for climate change, the environment is also a critical need to address. With the breadth and reach of our industry knowledge, we can help to bolster the opportunity to leverage sustainability principles to make an impact. Through partnerships, Everest Group helps businesses embrace social and environmental initiatives that will also deliver business impact within the services industry.

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Finding competitive advantage in the growing sustainability market

Years ago, it was simple to say that a business existed only for shareholder profit maximization. Adding responsibility to business models brings it into the 21st Century purpose-driven economy. Now is the ideal time to acknowledge sustainability efforts with the issues we face today affecting all locations and industries, whether environmental or social.

Today, over 90 percent of large global enterprises are reporting on sustainability in some form, representing a great increase from around 70 percent about eight years ago. And ESG investments have increased among the top 30 IT service providers tracked by Everest Group by 51 percent alone since early 2020, all of which illustrate the growth of the sustainability market.

Enterprises and service providers are starting to see the benefits of embedding sustainability into their practices. Sales are rising because consumers want to know they are spending their money on products that lend to a larger purpose. Further, prospective employees are now beginning to navigate toward companies where they know ethical and sustainable practices are part of the business.

Moreover, large corporations are making bold commitments towards more diverse suppliers, lower carbon emissions, and incorporating environmentally-safe production processes.

 What does this mean for your company?

One of the initial challenges of becoming purpose-driven is putting a description and goal behind what the company wants to achieve. The evolution of sustainability has allowed companies to apply it at different levels and define their journey. As companies move through the levels, they discover just how much can be achieved. The conversation has evolved with a multitude of terms now used to define sustainability as illustrated below:

Screenshot 2021 09 14 093240

1.0 Checkbook Philanthropy: In the earliest stages, sustainability involves encouraging employees to give back, either through volunteering or choosing a non-profit to contribute to. Getting employees involved also inspires goodwill within the community and provides knowledge of the community’s needs.

2.0 Triple Bottom Line (people, planet, profits): Then, sustainability progressed to the next level, where the idea of the triple-bottom-line lens of people, planet, and profits arrives. Here businesses look to see if they can mitigate any effects they might have on people and the planet such as companies checking to see if they may be putting their employees at financial, health or any other risk.

3.0 Responsible Business: At this point, companies begin to think about how they can mitigate their environmental and social impacts by considering steps such as reducing travel or moving to a hybrid work from home model to lower emissions. This is when businesses also recognize the business opportunity in doing good, as previously described.

4.0 Purpose Driven: In this stage, sustainability becomes more purpose-driven within the company. Impact initiatives are not just about shareholder maximization; it is now about stakeholder engagement and becoming a purpose-driven business. Stakeholders help broaden the company’s network, whether it’s the community it operates in, the employees, or the planet. Level four broadens the “good movement” and says, “we’re here to serve.”

What do we call it and what’s to come?

We are using the term sustainability in the broadest context of ESG. But as we engage our stakeholders the words will evolve for context and include such terms as supplier diversity/DEIB (diversity, equity, inclusion and belonging), Corporate Social Responsibility (CSR), and purpose.

Whether a company is starting at level one or moving quickly into the more advanced levels of sustainability, it should begin to plan a governance model that will allow it to successfully achieve objectives and measure them. We’re also beginning to hear new roles emerge for those leading the strategy charge and aligning initiatives across departments, business units, and stakeholders such as Chief Sustainability Officer, Chief Responsibility Officer, and more.

With ambitious global goals being set across the ESG spectrum, our objective at Everest Group is to celebrate the progress towards reaching them.

If you would like to discuss sustainability further or have any questions, please reach out to [email protected].

Can “Code Red for Humanity” Be the Signal for Using Digital for Good? | Blog

A landmark United Nations report issued an alarming warning on climate change, calling it a “code red for humanity.” While the situation seems dire, recent positive developments in the sustainability arena keep the hopes for a greener future alive. Read on to learn what immediate steps enterprises can take now to move the needle on sustainability goals through digital transformation.

The UN Intergovernmental Panel on Climate Change (IPCC) assessment report released last week continues to make waves across countries, governments, corporations, and non-governmental organizations (NGOs). It touched a nerve even with those segments of the population who are rarely engaged with climate issues, a sign of rising sustainability consciousness in the zeitgeist.

While awareness toward building a sustainable future has been in the spotlight for over a decade now, it is important to understand the following reasons why the IPCC report has managed to create significant noise:

  1. Timing of the report: Coming just a couple of months before the critical UN Climate Change Conference (COP26) this fall in Glasgow, Scotland, the new report will play a key role in the negotiations. IPCC’s previous assessment in 2013 and 2014 paved the way for the Paris climate agreement
  2. The warnings are clearer and direr: The confidence of the assertions made by the authors is the real strength of this new publication. The clearest of these points is humanity’s responsibility for climate change
  3. Visible effects: As countries continue to grapple with the pandemic, the climate impact over the past few months has significantly worsened. The dangers of climate change are no longer something far away in the future, impacting people in distant lands. It’s here and now and affecting every region and population segment across the world
  4. Rapid changes are needed now: Even after 197 countries signed up to the Paris climate agreement in 2015, the IPCC report claims that we won’t be able to keep the rise in global temperatures below 1.5 degrees Celsius or even 2 degrees Celsius this century unless immediate and sustained deep cuts in carbon take place

 

“Hope is a good thing, maybe the best of things, and no good thing ever dies…” 

The situation is a reality check. However, we see positive signs that possibilities still abound for a greener, cleaner future such as:

  1. Concerted, profound, and immediate efforts can avert the catastrophe: Immediate deep cuts in emissions of greenhouse gases could stabilize rising temperatures. Scientists believe if we can cut global emissions in half by 2030 and reach net zero by the middle of this century, we can halt and possibly reverse the rise in temperatures
  2. The rise of the environmentally-conscious Generation Green: Gen Z and millennials are rewriting the rules of conscious investments and consumption, and taking charge of the sustainability agenda by sustainable investing and their willingness to pay more for eco-friendly products and hold institutions accountable for their actions
  3. The report paves the way for directing accountability: By strengthening the scientific evidence between human emissions and extreme weather, the UN report provides a new, powerful means for stakeholders everywhere to hold corporations and governments legally accountable for the climate emergency
  4. Evolution from checkbook philanthropy to building purposedriven enterprises: While at the beginning of the sustainability journey, the focus largely remained on ad hoc initiatives, where now conversations have transformed into a purpose-driven movement. Businesses are not just focused on maximizing return for shareholders, but on overall stakeholder engagement to build purpose-driven enterprises

Four Steps Enterprises Can Take Now   

Now that we have managed to grab the attention of all audiences, the need of the hour is to get the ball rolling. Here are some steps enterprises can take as they embark upon their sustainability journeys:

  1. Turn intentions into actions: Enterprises globally are pro-actively reporting sustainability. Over 90% of all S&P 500 firms do some sort of sustainability reporting, which is significantly higher than a decade ago. Supplier announcements of sustainability-specific investments have risen significantly over the last 12-15 months, highlighting the strong intent by both sides to drive environmental, social, and governance (ESG) messaging in the market (exhibit below).

However, despite having the right intentions, enterprises globally still struggle to envision a comprehensive and actionable ESG strategy that they can adopt. This is where the expanding sustainability vendor ecosystem can play an important role in bringing together the external expertise, tools, and offerings that can help enterprises succeed in their sustainability agendas

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  1. Set more attainable targets based on accurate predictions: As the impact of greenhouse emissions becomes clearer, it paves the way for enterprises to define quantifiable targets and measure, monitor, and report these goals to guide all decisions and truly become purpose driven. Enterprises can get decision-making guidance from the rising number of specialized data providers who are going deep into ESG areas, focusing on specific industries, lines of business, and action items
  2. Leverage the technology ecosystem to build, implement, and scale sustainability agendas: With their massive and expanding footprints, it’s important for enterprises to think about the different layers within the sustainability technology stack from advisory to applications, data, cloud, and infrastructure. How enterprises scale sustainability across their technology landscape can have significant downstream implications. We believe that strategic partners who can assist clients in end-to-end ideation, implementation, and scaling their sustainability programs will play central roles going forward Picture2
  3. Institute an operating model for sustainability: Business operations and workflows need to embed purpose elements within core business strategies and processes as organizations move up the sustainability maturity curve. This requires thinking about the critical components of sustainability through an operating model shift. Our view of this operating model encompasses key elements such as data, technology, and operations, underpinned by a robust foundation of governance and talent as presented below: Picture3

We covered some of our thinking in a recent webinar on Digital for Good: Shape Your Sustainability Journey and will continue to share our insights as we monitor the latest developments in this space. How are you planning your sustainability journey? We’d love to hear from you by emailing us at [email protected] and [email protected].

How Cost Competitive are Global In-house Centers (GICs)? | Sherpas in Blue Shirts

Although GICs are an integral component of the global services market with increasing adoption by buyers, there continue to be questions about their cost competitiveness. To obtain the facts, Everest Group conducted GIC cost competitiveness assessments with both source markets (North America and Europe) and service providers. Following are the key findings from our recently released report on the topic.

GICs offer sustainable arbitrage with source markets across locations/functions, and organizations have the potential to increase savings by fully leveraging efficiency levers

Despite sustainability concerns, our analysis indicates that GICs provide source markets with significant cost savings. Savings typically vary between 30 to 70 percent, across most locations and functions. More interesting is the finding related to change in cost arbitrage across successive years. In India’s case, favorable exchange rates, coupled with a less-than-anticipated impact of wage inflation, has strengthened cost arbitrage over the last two to three years. While the focus in recent years has naturally been on India, it’s important to acknowledge and remember that other leading locations, (i.e., Philippines, China, Mexico, and Poland), also continue to offer similar cost arbitrage compared to the last two to three years.

The report examines the sustainability of cost savings (measured by number of years) in detail by evaluating cost inflation (separate for wages and other cost elements) and forex movements in leading locations. Exhibit 1 provides a synthesized view of our analysis, indicating the sustainability of cost arbitrage for most locations/functions even under aggressive inflation and currency movement scenarios.

GIC Cost Competitiness I1
Exhibit 1

The sustainability analysis is based on labor arbitrage alone, and excludes the impact of efficiency-based levers such as reducing general and administrative expenses, moving to tier-2 locations, increasing capacity utilization, and increasing span of control and deskilling. While not all GICs have been able to fully leverage and exploit these levers, best-in-class GICs have been able to achieve an additional 10-12 percent savings beyond labor arbitrage. 

Comparing GIC costs with service provider pricing is too simplistic; organizations need to evaluate the TCO to assess the relative cost difference

In our experience, most buyers compare GIC costs with service provider pricing to assess the relative cost difference between sourcing models. But this comparison often fails to capture the true financial impact of a sourcing decision. Mature buyers evaluate the Total Cost of Ownership (TCO) metric. In addition to hard costs (e.g., salaries, facilities, technology, and telecom), TCO incorporates the soft costs associated with transition, governance, and relationship/account management, along with net impact of productivity measures (see Exhibit 2).

Annualized TCO for parent/buyer
Exhibit 2

Conducting a TCO analysis yields interesting results. Indeed, there are instances in which GICs have significantly lower TCO costs than service providers for certain kinds of work, even though the GICs’ operating costs would be higher than provider rates.

The relative cost competitiveness between sourcing models is dependent on multiple factors. There are those related specifically to the work and where/how it is delivered (e.g., relative scale, process maturity, nature of work, and domain expertise.) There are also company-specific factors driving differences, such as preferences for a more experienced pool, better pedigree talent, market positioning as an employer of choice, promotion of similar organizational culture, and approaches to gain share.

To truly gauge cost competitiveness of GICs with service providers, organizations need to conduct a TCO analysis that takes into account all hard and soft costs and unique requirements.

We are hosting a webinar on Thursday, November 20, that will discuss how GICs add strategic value to the parent organization and how they can quantify that value. Register here.


Photo credit: Tup Wanders

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