Beyond compliance: How your ESG strategy can supercharge your business
Fujitsu / March 24, 2022
While the increased focus on Environmental, Social and Governance (ESG) factors create new compliance requirements for businesses, it is also an opportunity to create new value, drive efficiency, and maximize brand value. Sustainability agendas can be reframed as growth engines. This blog highlights areas where this is already happening.
Reframing sustainability as a powerful engine for growth
In the last five years, Environmental Social and Governance (ESG) controversies destroyed more than $500bn in market capitalization. That is one startling fact contained in a new PAC white paper sponsored by Fujitsu. On this evidence alone, ESG is a phenomenon that companies need to address strategically, tactically, and operationally.
The paper argues that, while ESG creates new requirements, it is also an opportunity to create new value, drive efficiency, and maximize brand value. Companies can reframe their sustainability agendas as growth engines. And the paper highlights four use cases where that is already happening.
What is driving your ESG strategy?
ESG pressures are coming from two main directions at once – consumers and regulators. Consumer attitudes are changing. A recent survey by Unilever showed that a third of consumers choose to buy from brands they believe are doing social or environmental good. New regulations are also having an impact. For example, the new German Supply Chain Act (Lieferkettensorgfaltspflichtengesetz) coming into effect in 2023 will require large companies to identify, assess, prevent, and remedy human rights and environmental risks and impacts both in their organizations and across their extended supply chains. Similar legislation and directives are expected in the EU (Supply Chain Due Diligence), the UK, and other major countries worldwide.
Companies are starting to respond. In a recent survey conducted by PAC, 84% of European business leaders said their customers were important drivers in shaping their decarbonization strategies. However, there are still concerns in some quarters that companies are indulging in “greenwashing” as part of tick-box responses, and not taking any real action at all.
What Fujitsu sees on the ground is real change. There is growing overlap and even convergence between organizations’ sustainability and technology strategies. In the same PAC study, almost 80% of business leaders stated that using IT to increase sustainability was a goal of their digital transformation activities. Customers and employees are gravitating towards brands that deliver on their ESG promises. A growing number of businesses are finding that their sustainability investments can actually open up new possibilities in creating new products and services – or rapidly release cost from inefficient ways of working.
Communicating ESG values
PAC says an important first step in delivering on ESG promises is to establish reporting that can be trusted by all stakeholders. However, building a complete set of trusted data across the supply chain is complicated. Data provided by partners – and their partners – must be verified. And so far, many initiatives attempting to harness data analytics, blockchain and intelligent connectivity have struggled to scale beyond small, tactical plays.
Fujitsu has designed and implemented multiple projects that overcome these barriers, leveraging Distributed Ledger Technology (DLT) as part of an integrated approach to delivering trusted data and ESG breakthroughs.
One of these projects is for AB InBev, the world’s biggest brewing company, with hugely successful brands like Leffe, Beck’s and Corona. The firm wanted to let consumers feel the reality of Leffe’s provenance and demonstrate how working with local farmers has reduced the brand’s carbon footprint.
Fujitsu worked with AB InBev and partners to identify the core data required across the supply and production process, gather it into a secure Distributed Ledger Technology (DLT) network, then enable consumers to access the data through a QR code on the product packaging. Internally, the initiative also brought about a clearer view of the brewing giant’s supply chain, creating opportunities to optimize resources and locate areas to remove blockages and operational friction.
Building top-line growth
Increasingly, business tenders and governments ask for proof of ESG credentials as a screening criterion. A strong ESG proposition can significantly increase a bidder’s contract win ratio. Building on that, Botanical Water Technologies has developed an entirely new business model that supports a more sustainable manufacturing ecosystem and can be incorporated by other companies as part of their ESG narrative.
Botanical Water Technologies has developed a process to reuse some three trillion liters of water discarded annually during juice extraction from fruit, vegetables and sugar cane. Fujitsu works with Botanical Water Technologies to create the Botanical Water Exchange, a blockchain-based platform to aggregate demand and efficiently distribute water to other manufacturers. By capturing the data from agricultural producers and presenting the insights to manufacturers, the exchange offers reliable, dependable sources of water with certainty around supply and cost, as well as a highly positive built-in ESG and philanthropic components.
Delivering cost reduction
ESG strategies also involve making processes more efficient. The Rice Exchange platform provides a secure marketplace for buyers and sellers of rice to interact, handling more than $1bn of annual trades. The platform brings buyer and seller together via a blockchain-enabled platform, giving confidence to the buyer that the product is as stated, including all relevant digital documentation, certificates, bill of lading, etc., and confirming to the seller that payment will be made. Early estimates indicate that using Rice Exchange result in at least 20% savings for stakeholders and reduces the time it takes to trade by as much as 90%.
Maximizing brand value
Provable ESG credentials can also help boost brand acceptance and lower the risk of negative brand impact. Fujitsu helped tex.tracer develop a blockchain-based platform that brings transparency to the fashion supply chain, enabling fashion brands and consumers to make educated decisions.
This end-to-end view of textile production builds a clearer view of tex.tracer’s supply chain to optimize resources and remove operational friction. It also enables partners to communicate in new ways by uploading data and allows brands to report on the data and communicate this to other stakeholders in- and outside the company.
As a consequence, consumers can also scan QR codes in-store to check the garment’s journey and learn about the garment makers, having the assurance there was no slave/child labor and the materials are sustainable.
Leveraging data and technology to drive your ESG Strategy
As these use cases show, blockchain and Distributed Ledger Technology (DLT) solutions will undoubtedly be an important part of many ESG solutions — enabling a single, immutable, and transparent dataset to map out a supply chain. However, finding the right blend of technologies to tackle specific business issues is key to success.
Find out how to drive your ESG strategy and add value to your business by reading this white paper co-written by analyst firm PAC and Fujitsu.