What’s Stopping Tech Companies from Becoming More Sustainable?

Although sustainability features high on the agenda, hurdles remain.

What are the main obstacles preventing tech companies from becoming more sustainable? And how can they overcome them?

These two important questions sit at the heart of our new ‘How Sustainable is the Technology Sector?’ report based on a study of 550 technology industry executives across 11 countries. Overwhelmingly, our findings show that business leaders consider sustainability to be vital – and yet, there is widespread frustration at barriers to progress.

Plugging the “Perception Gap”

There is an uncomfortable gap between the importance CEOs attach to sustainability (80%) and how satisfied they are with the overall level of progress at their companies (65%). Company directors similarly point to a mismatch between aspirations and reality, rating sustainability at 88% while putting their company’s current situation at 71%. A difference of 17%.

So what is holding tech companies back?

One factor may be that middle management has a different perspective from company leaders. Many managers consider their companies to be more sustainable than the importance they personally assign to sustainability. In other words, they feel their company is already doing enough. This sentiment is most marked among managers employed in operations roles.

Without question, those working in an operations capacity have multiple, fast-paced challenges to juggle. There are countless software, hardware, networking, cloud and cybersecurity issues to address, data and personnel challenges to tackle. Yet the fact that sustainability occupies a lower place on their agenda may lead to complications at a later stage.

Cost is the biggest barrier

When we look at our research across all responsibility levels, it is no surprise to see that cost is considered the biggest challenge. While that’s true globally, it’s interesting to note some regional disparities. In EMEA, slightly less than half of our respondents cite prohibitive cost as the reason for businesses not becoming more sustainable, while in APAC, it’s 55% and, in the US, 60%. These figures are telling and underline the scale of the problem.

Although cost is the biggest barrier, it is by no means the only one. Regulatory requirements, time constraints and speed to market fill the next three spots on the list.

Given the day-to-day pressures to hold their own in an intensely competitive sector while complying with the demands of regulators in areas such as data privacy, it’s easy to see why sustainability may sometimes be overlooked or downgraded in importance.

Harmonization of data gathering and reporting is another potential stumbling block. The widely held assumption is that sustainability calls for new work and consequently creates additional costs. While it is straightforward to figure out how much certain measures cost in Pounds Sterling or US Dollars, it is far harder to pinpoint their true worth.

It can be challenging to measure the immediate return on investment because it is not just a linear calculation. For example, switching to more expensive (per tonne) sustainable packaging may seem like an additional spend, but if that means a reduction in material used, there may be dramatic cost savings.

And what if the use of greener materials helps win business? Such an impact is far from easy to isolate.

The pandemic puts brakes on progress

Inevitably, COVID-19 has also proven to be a hindrance to the development of sustainability. 31% of the respondents on average among the different regions surveyed believe the pandemic is a significant factor in slowing the progress of sustainability initiatives.

What’s more shocking is that for some, albeit less than a fifth, not seeing any value in sustainability is a stumbling block. On average among our regions, 17% cited that as a challenge. Let that sink in for a moment. Yes, it was one of the lowest reasons identified, but even so, it must be seen as concerning that 17% of these international tech organizations do not consider the value of sustainability and therefore are not progressing sustainability efforts.

On the other hand, commitment to net zero is a convincing indicator of a company’s determination to execute sustainability practices. Half our respondents in Australian organizations have a formal commitment, followed by 44% in China, the UK, and Italy. The average for businesses across the globe is 38%.

Clearly, there is still a long way to go for many. But some large tech organizations are attempting to show the way.

“It seems like the goal of a net zero carbon footprint is now shared by those at the top table of tech businesses,” says Russ Shaw CBE, Founder of Global Tech Advocates and Tech London Advocates. “Google has been carbon neutral since 2007, while Microsoft plans to be carbon negative by 2030 and has committed to running 70% of data centres from renewable energy by 2023.

“Where change is happening more slowly perhaps – and the industry must hold itself up to the mirror – is in the use of technology itself. Think about the energy required for the multitude of cloud servers which host terabytes of data – demand for which is increasing exponentially, meaning focusing on reducing carbon footprints is more important than ever.”

In an era in which environmental, social and governance (ESG) metrics are increasingly linked to performance, many tech businesses will need to overcome cost concerns and the other challenging factors outlined in order to step up their sustainability efforts. That’s important for the health of our planet, of course, but also in ensuring their business is on the right footing to thrive.