In the second part of this five-part ESG series, we'll delve into what is covered by the environmental aspect of ESG and how tech companies can be more environmentally conscious. Missed the first part? You can read it here.
What is the tech industry’s impact on the environment?
There are industries with a larger carbon footprint than the tech industry, but it would be naive to believe that the tech industry doesn’t also have a big impact. There are subsectors of tech that have a particularly high environmental impact, such as anything involved in electronic manufacturing or that result in e-waste, and of course, the crypto industry which we discussed the challenges of here. However, even tech businesses with low overheads may have at least a small carbon footprint through their digital presence and online activities.
Whilst the UN estimates that the tech industry accounts for 2 – 3% of global emissions, many experts estimate this to be higher and as the world and our activities migrate further online, this trend could grow. It isn’t just the trend of consumers spending more time, it’s also the sector trends of using technology that requires higher computational power too. This was recently evidenced by the growing consumer demand for AI which saw ChatGPT break growth records in January 2023 by reaching over 100 million users.
Whilst the industry should continue to innovate, it should also be considerate of the environmental impact of its activities and do what it can to reduce or offset its carbon footprint. Whilst it’s great for a brand’s reputation to share its environmental efforts, tech companies should be wary of talking without action, which can lead to accusations of 'greenwashing'.
What can tech companies do?
As a tech company, even if you believe you have a low carbon footprint, you’ll have a footprint nonetheless. Having policies in place to reduce your impact can help your business become more attractive to potential employees, lenders, investors, and customers, and build a better reputation in your industry and community.
The first step should be an audit of your current practices and policies to review their environmental impact, but here are some simple actions that can be considered as a starting point:
Reduce unnecessary travel and face-to-face meetings by encouraging remote working arrangements.
- Encourage green commuting by promoting carpooling schemes or cycling to work
- Invest in newer equipment that is more energy-efficient
- Limit electricity usage to working hours and implement a power-down policy
- Reduce printer usage and promote recycling
- Audit your supply chain to ensure that you work with suppliers who are committed to being environmentally friendly and sustainable
What next?
A recent Business Insights and Conditions Survey (BICS) from late 2022 found that 39% of UK businesses surveyed reported being very, or somewhat, concerned about the impact climate change. Whilst we can see there’s a growing trend of businesses that are alarmed by the impact of ESG, collective action will be needed to make a significant impact. Often, the first steps on this journey are small ones and whilst each company is unique, I would encourage you to start by reviewing your policies and processes to see if there are more environmentally-friendly alternatives.
Whilst environmental factors are often the first to come to mind when thinking of ESG reporting, there is much more to consider. In our next article, we'll explore the social aspect of ESG reporting. If you would like to receive this blog and our other tech blogs directly to your inbox, subscribe to our tech mailing list here.
Need advice?
If you need support with ESG reporting within your tech business, please reach out to your usual UHY advisor or contact James Foster on j.foster@uhy-uk.com.
Sources:
https://www.ons.gov.uk/economy/environmentalaccounts/articles/climatechangeinsightsuk/february2023
https://www.unep.org/news-and-stories/story/new-pact-tech-companies-take-climate-change
