Sustainability: Real progress but also thorny challenges ahead

Over the past several years, organizations across the board have made progress in improving environmental sustainability by reducing greenhouse gas emissions, cutting back on toxic substances, using more earth-friendly packaging, and replacing energy-inefficient infrastructure.

There is no denying that environmental sustainability is top of mind for many companies today. IDC’s Sustainability Readiness Index Survey (August 2024) found that 32% of businesses have created strategic road maps, while 26% have begun embedding sustainability into their operations and 20% say that sustainability has become the “new normal.” IDC’s Sustainability Readiness Survey (July/August 2023) also found that organizations worldwide have improved in their environmental sustainability efforts over the past few years. What’s more, sustainability remains high on the C-suite agenda.

While all of this is good news, there are plenty of hurdles still left to clear. Some are simply harder nuts to crack, while others are the result of changing requirements and realities. Here are some of the challenges left to resolve in the area of environmental sustainability:

• Collecting, sharing, and reporting on environmental data: For many organizations, identifying and collecting sustainability data across operations is still a challenge. In the European Union, for example, three-quarters of organizations are in the early stages of doing so (IDC’s Future Enterprise Resiliency and Spending Survey, Wave 3, April 2023). Getting a handle on data is also a critical step in operationalizing sustainability with an emphasis on decarbonization, which is now a top priority for many enterprises across the globe (IDC’s 2023 Global Sustainability Readiness Index). An operationalized carbon-neutral strategy requires end-to-end visibility on climate data. To do it right, IT will need to integrate the insights from often disconnected platforms to provide comprehensive carbon neutrality inputs to procurement. Back to the good news: Organizations are slowly conquering this issue. According to the IDC FutureScape: Worldwide Future of Industry Ecosystems 2023 Predictions (October 2022), by 2025 60% of global 2000 organizations will have formed cross-ecosystem environmental sustainability teams responsible for sharing data, applications, operations, and expertise in ways that facilitate sustainable ecosystem practices.
• Dealing with uncertain economic environments, which can distract from sustainability issues: Energy prices, price inflation, and geopolitical tensions continue to fluctuate, and that uncertainty can impact focus on environmental sustainability. So far, however, companies seem to be staying the course. IDC’s July 2024 CIO Sentiment Survey found that despite these uncertainties, 75% of organizations plan to either keep investing or accelerate their sustainability efforts.
• Pursuing measurable results: Success with environmental sustainability requires making the organizational and cultural changes necessary to succeed and realize the potential financial and non-financial benefits. Overcoming this hurdle requires strong leadership and good data that will lead to effectively investing budgets in ways that yield a measurable ROI.
• Scope 3 shock: Scope 3 emissions make up 60% to 95% of the total carbon impact for most organizations. (Scope 3 emissions are those a company is indirectly responsible for up and down the value chain, like those created by suppliers to create products the company buys and from its products when consumers use them) What’s more, these emissions are often outside of a company’s direct control, making measuring and monitoring them much harder than with Scope 1 (emissions that a company makes directly) and Scope 2 (emissions that a company makes indirectly, like when energy it uses is produced on its behalf). The key is good data quality.
• New and changing regulations: Governments continue to add environmental sustainability regulations, and organizations must adapt in ways that enable them to comply. The Corporate Sustainability Reporting Directive (CSRD) and the Carbon Border Adjustment Mechanism (CBAM) cover the entire European Union, while countries like Germany, France, and the U.K. have their own additional regulations. While the U.S. currently has no comprehensive directive like the CSRD, there are plenty of regulations from the Sustainability Accounting Standards Board (SASB) and the SEC, through its climate-related disclosures. That’s changing, however; in the past two years, both federal and state agencies have introduced new environmental initiatives and proposals. Notable among federal acts are California’s SB 253, the Climate Corporate Data Accountability Act, which requires the disclosure of greenhouse gas emissions, and SB 261, the Climate-Related Financial Risk Act, which mandates that companies doing business in California with annual revenues over $500 million produce biennial climate-related financial risk reports in accordance with the Task Force on Climate-Related Financial Disclosures (TCFD).

Businesses have no choice but to adapt to these new regulations. Adapting requires enhancing supply chain visibility to track emissions and social practices, collaborating with suppliers to reduce environmental impact, and investing in sustainable practices throughout the entire value chain.

Succeeding with environmental sustainability issues across operational, financial, environmental, and cultural lines requires vigilance and focus on all these areas.

And it will pay off. IDC predicts that by 2027, companies most advanced with sustainable business transformation will have sustainability embedded across the organization (IDC FutureScape: Worldwide Sustainability/ESG 2024 Predictions, October 2023).

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Karen D. Schwartz is an adjunct research advisor with IDC’s IT Executive Programs (IEP), focusing on IT business, digital business, disaster recovery, and data management. She has extensive experience both as a researcher and a business and technology journalist, covering a broad range of issues and topics. She often writes about cybersecurity, disaster recovery, storage, unified communications, and wireless technology. Karen holds a Bachelor of Arts degree from UCLA.