ESG, which translates into Environmental, Social, and Governance, is currently a top priority for businesses and will be a particularly important topic on Earth Day 2023 (22nd March). According to a recent PwC survey, the capability of a business to reduce greenhouse gas emissions ranks among the highest priorities for investors. ESG is a system to assess these outcomes, i.e. the longevity and social effects of a business or organization.
The three components of an ESG evaluation can be defined as follows:
- Environmental: The ecological impact of the company consists of its carbon emissions, levels of pollution, and resource consumption.
- Social: The company’s societal impact, including its treatment of employees, consumers, and communities, as well as its allegiance to individual rights and diversity.
- Governance: The leadership and management of the corporation, such as its track record of disclosures, accountability, and ethical conduct.
Given its criticality, organizations need new ways to pursue, achieve, measure, and report on ESG goals – the adoption of the Internet of Things (IoT) can help get there faster.
What is IoT, and How is it Related to ESG?
The Internet of Things (IoT) is a worldwide network of internet-connected tangible assets – ‘things’ such as sensors and devices. These ‘objects’ are used for monitoring the environment and exchanging the data collected.
Some ‘objects’ collect and transmit information, others receive and act on information, and others may perform both. They are intelligent because they can communicate via the Internet. There are two primary reasons why ESG and IoT are complementary.
First, IoT can make the accumulation and filing of ESG metrics considerably more precise and efficient. Secondly, there are myriad ways in which IoT can help improve ESG performance.
Both are expected to experience tremendous growth in the future, and it is evident that there will be several fascinating prospects for the partnership between IoT and ESG.
IoT Positively Influences Environmental, Social, and Governance
The Internet of Things (IoT) enables quicker and more transparent understanding of enterprise performance, thereby expediting Environmental, Social, and Governance (ESG) value realization.
IoT captures data in real time, as it occurs. With new surveillance insights, you can then start analyzing, visualizing, and identifying areas that could be improved. IoT solutions provide a full cycle for refining or streamlining emerging water, energy, waste, or emissions solutions — whenever evidence demonstrates a shift is necessary.
If your sustainability goals, such as environmental solutions or ESG objectives, are not being met or if you are just getting started, IoT may be the right technology to integrate into your plans.
- Sensors of the Internet of Things (IoT) can be utilized in environmental monitoring to capture a large quantity of extremely useful data on elements like the state of the air and water, soil quality, and pollution emissions. This information enables organizations to take action on the basis of solid evidence.
- Utilizing IoT, businesses can monitor and then optimize energy consumption across their entire organizational structure. This optimization can extend from the reduction of energy consumption in buildings and factories to both external and internal transportation.
- From monitoring to analysis, IoT may offer more sustainable supply chain models. Improved monitoring of products in transit can unleash a state of unlimited transparency, with more energy-efficient routes.
- IoT can also be utilized to enhance a vital aspect of any organization: its collective responsibility to its employees. A business can observe working conditions to ensure that it is not only complying with labor laws but also going the extra mile.
6 Ways to Leverage IoT to Reach ESG Goals
Companies can explore the following routes when adopting the Internet of Things as a key lever for ESG:
1. Shift from an “annual report” mindset to real-time measurement and correction
IoT is an asset in your transition from a yearly chronicler of ESG to a real-time guardian of ESG as both an everyday goal or credo and as an essential business objective. Daily monitoring, accumulation, measurement, and detection of anomalies enable timely action by decision-makers. Additionally, auditors can report in near-real-time as compared to retroactively.
2. Create a digital twin of your organization to find hidden ESG enablers
A digital twin is a digital representation of your organization in real-time. It functions as a virtual reproduction and provides an easy-to-understand, information-led summary of the current state of ESG. Dynamic analytics and geospatial models empower the C-suite to grasp their effect on the planet in real-time. This allows you to evaluate the environmental impacts and efficacy of new product configurations.
3. Improve working conditions for employees and general emission levels
IoT systems can monitor indoor and exterior air quality with greater precision — at a pace and precision that’s way ahead of older industrial systems. They can also spot and promptly report the presence of contaminants, particulates, or hazardous gasses such as carbon monoxide with greater accuracy. By detecting anomalies, these systems prevent the discharge of hazardous chemicals into the atmosphere, thereby protecting the safety and health of everyone.
4. Reduce energy consumption in knowledge work or office settings
Monitoring occupancy in real-time via IoT can also enhance ESG performance. Managers of office buildings could even minimize energy consumption by limiting use to occupied spaces. Even hotdesking, as well as flexible work practices, can be implemented to improve energy usage.
5. Measure ESG impacts across your entire procurement network
You can utilize IoT to provide real-time carbon emissions monitoring and visibility in-transit for not only your own organization but also every other stakeholder in the supply chain. This sort of data can help importers, shippers, dealers, and manufacturers appreciate the impact of their supply chain operations at any given point in time. IoT tools provide previously unattainable insights into the environmental impact of their supply chain logistics.
6. Use artificial intelligence and IoT in retail units to build a more efficient business
IoT solutions supported by artificial intelligence (AI) are empowering next-generation sustainability programs in retail. These have the ability to revolutionize the entirety of the value chain, spanning production to reverse logistics. From reducing energy consumption to ethical sourcing as well as waste reduction, IoT technologies are boosting ESG outcomes in the retail sector.
Examples of How IoT is Helping Build an ESG-First Future
Multiple businesses have identified the overlap between IoT and ESG and are bringing in new ways to encourage efforts in this direction.
For instance, Veea Inc., a maker of integrated smart peripheral connectivity devices, has already announced the availability of its new ESGaaS (Environmental, Social, and Governance as a Service) offering. Automated building platforms, such as Metrikus, consolidate ESG data so that efficiencies can be accurately tracked.
Another IoT solution that offers low-code apps for ESG use cases is the Losant Enterprise IoT Platform. This includes fuel, oxygen, wastewater, energy, and emission monitoring. Universal Electronics Inc.’s sustainability-centered wireless connectivity offerings also exemplify how IoT helps achieve ESG goals. They offer up to 2.5 times the computing capacity of conventional Bluetooth technologies while consuming up to 80% lesser battery power. The company announced at CES 2023 that it had dispatched 15 million of these items.
Conclusion: Why IoT is an ESG Must-Have in 2023 and Beyond
There are a number of advantages to investing in IoT as a component of your ESG strategy. Adopting ESG practices can assist businesses in identifying and mitigating potential risks, including regulatory penalties and reputation damage. It can help businesses reduce costs by decreasing energy consumption and waste, for instance. Focusing on ESG can result in the creation of new services and products which resolve social and environmental challenges – aided by a strong bedrock of IoT infrastructure.
Ultimately, companies that prioritize ESG through IoT (and can demonstrate ESG compliance through IoT data) have a winning advantage. They can place themselves for growth over the long term — by being custodians of the environment and protectors of societal rights and duties. In the end, sustainability prepares companies for a better, more inclusive, and ultimately profitable future for all.