Businesses’ environmental, social and governance (ESG) strategies have increasingly come under the microscope in the last 12 months. Companies have been exposed to even greater scrutiny than before with investors, partners and customers pushing them to prove their credentials and comply with the latest standards.
ESG has gone to the top of the agenda and nowhere is this truer than in the Channel. Organisations are accelerating their move towards a greener and more sustainable future by changing their working practices, policies, and products and services, as well as examining their wider supply chain.
Organisations have also been busy implementing diversity, equity and inclusion (DEI) programmes to ensure greater equality and opportunity in their workforce. At the same time, they have been pumping money into green investments that meet not only their own principles, but those of their shareholders.
Yet, there’s still a long way to go. According to Agilitas’ Channel Trends 2024 report, only 20 per cent of businesses are hiring a dedicated ESG lead and 25 per cent have a dedicated ESG team, while a further 27 per cent are outsourcing their ESG initiatives to consultants and 10 per cent still don’t report on sustainability targets.
Essentially, ESG is a set of standards that measure a business’ impact on society and the environment, and how transparent and accountable it is. Ensuring you comply with ESG may be difficult to start with given the big changes that you may have to make, but, if implemented effectively, an ESG strategy can yield long-term rewards both for your company and employees, and the environment and wider community.
“Channel companies are increasingly recognising the importance of integrating environmental, social and corporate governance strategies into their operations,” said David Hiscock, SVP global channels at Ribbon Communications. “They are looking at it through multiple lenses, including initiatives to reduce their carbon footprint, improving supplier diversity and working with greener partners, focusing on the wellbeing of their teams and incorporating ethical guidelines into their business practices.”
To build an ESG strategy, first you need to look at your business as a whole and how it interacts with employees, customers and partners, as well as the wider industry. Then you need to draw up a set of targets and milestones that you want to achieve, and create a roadmap to get there.
Environmental impact
The environmental part of ESG focuses on how a business minimises its impact on the environment. It covers everything from the company’s products and services to its supply chain and operations. There are a host of different environmental business practices that you can adopt. These include reducing energy and using renewable energy sources to reach net zero carbon emissions; developing greener products and services; adopting zero-waste products or sustainable packaging made from biodegradable materials; using LED lighting; and encouraging recycling and reducing waste.
“It’s encouraging to see a shift from carbon offsetting and credit purchasing, with many feeling this was a simple way to avoid the ongoing and upcoming issues faced by the industry,” said Deborah Johnson, head of ESG at Agilitas. “Instead, we are seeing a strong shift toward more concrete carbon zero targets. By doing so, companies are actively reducing their carbon footprint rather than redirecting their impact.”
To achieve net zero, you can work with independent organisations such as the Carbon Disclosure Project to benchmark your progress and identify improvement areas. You should also carry out a materiality assessment to determine priority areas, mapping out data, policies and procedures to identify gaps and risks.
Channel businesses have been minimising their environmental impact by improving their energy efficiency, reducing waste through the circular economy and moving to renewable energy sources. They’re also looking to work with responsible and green partners throughout the supply chain, holding them to set environmental, social and ethical standards.
A key area of focus is ensuring sustainability throughout the entire lifecycle of a product or service, wherever possible. Accountability and transparency within carbon auditing are also expected to grow significantly as regulatory frameworks begin to catch up and consumers increasingly demand more sustainable solutions.
“Circularity will be a key trend this year, with organisations starting to select suppliers based on their contribution to the reduced consumption of newly-manufactured tech, smart use of assets and sustainable designs,” said Lyndsey Charlton, COO at Daisy Corporate Services. “The less we consume, the less new products will be made. With that comes a reduction in forever chemicals, conflict minerals, poor labour conditions and nature-negative operations.”
Jamie Hughes, UK sales director at Evolve IP, added, “Sustainability is a big area of focus within the industry at present, with everything from product packaging to device usage consuming less power. Data centres are obtaining lots of attention at present, as this is an area where huge sums of power are being consumed. I have seen that many data centres are trying to secure contracts with power providers that offer renewable energy to improve their sustainability credentials. There’s a big drive to be more sustainable, not only in terms of the energy they need to deliver services, but also for cooling, and they are becoming more expensive to run.”
After carrying out an in-depth review of its operations, supply chain and carbon footprint, and getting an expert ESG consultancy to complete a full audit of its activities, Charterhouse Group has adopted a net zero carbon target for 2030. As well as implementing new ways of working, sourcing and delivering products and services, the company also publishes a carbon reduction plan outlining its progress.
Going a step further, the company works with its customers to help them understand how using its products and services can enable them to meet their carbon reduction goals. It has also launched a supplier code of conduct which includes key environmental expectations, with ESG a prerequisite for new suppliers wanting to work with the company.
Positive social contributions
The social aspect of ESG concerns how a business impacts wider society and workplace culture. By providing fair and equal opportunities and conditions for employees, third parties in the supply chain and local communities, companies can make a positive contribution to society.
This could include ensuring products are safe and customer data is secure and preventing abuses within the supply chain, such as labour rights. It may also extend to providing training and supporting health and safety, and wellbeing; promoting equality in the workforce through DEI policies; and investing in local community projects, such as educational initiatives.
It’s an area that has gone to the top of many channel companies’ to-do lists, particularly given that 48 per cent of consumers believe businesses need to do more to advance societal issues such as DEI and fair pay, according to a recent PwC study. This can be even harder to achieve in an industry that has historically been male-dominated.
“An area often overlooked is the ‘S’ in ESG,” said Agilitas’ Johnson. “Social responsibility should be considered as sensitive an issue as the others, focusing on how employees, customers and partners can all come together to develop a community-based brand that incorporates all levels of the total experience.”
Channel companies have increasingly focused on DEI initiatives by fostering more diverse and inclusive workplaces. By establishing a more diverse team, companies can enable a more conducive working environment that’s, therefore, more productive, and generates better results and more satisfied and loyal employees.
“Diversity, equity and inclusion remains top of the agenda, particularly as it’s slow progress making in-roads to address disparity and inequity,” said Caroline Griffin Pain, chief legal officer at Colt Technology Services. “Fifty six per cent of women leave the tech industry between 10 and 20 years into their careers. That is double the rate of men.
“Businesses have an obligation to create an open, inclusive culture in which everyone feels welcomed, comfortable and safe so they can thrive. Collaborating as an industry and tackling this together is key.”
Holli Hulett, co-founder of Boom Collaboration, added, “Equality and diversity are gaining lots of traction just now. In meeting spaces and video calls, accessibility and ensuring everyone’s voice is able to be heard both physically and metaphorically matters. Diversity, equity and inclusion are now widely recognised as key to developing business success and a happier workforce.”
BT is just one company that publishes regular reports on its diversity efforts. This helps to ensure that the company is held accountable but also encourages other companies to embrace a more diverse workforce. BT also requires all its suppliers to outline their sustainability targets before it starts working with them.
Processes and accountability
The governance aspect of ESG refers to the processes of decision-making, reporting and the logistics of running a business. It looks at a company’s ethical behaviour and transparency with stakeholders about its activities.
Examples of this include accurate reporting to stakeholders on financial performance, business strategy and operations, and ensuring leaders and managers are accountable for risk and performance management. It also ensures that companies undertake business ethically, such as preventing bribery, and achieve diversity in the leadership team and are open about executive pay.
Jola explained how it takes a holistic approach to ESG, with a primary environmental focus on reducing the company’s carbon footprint by using greener suppliers wherever possible. In addition, the company promotes recycling, offers cycle-to-work schemes and uses Microsoft Teams to reduce travel for meetings.
The company’s social priority is to support employees and charitable community initiatives. From a governance perspective, diversity is key.
“Channel companies regularly support local and national causes, running for charity, playing in football and boxing matches, hosting coffee mornings and supporting local food banks,” said Cherie Howlett, co-founder and chief marketing officer at Jola. “It is a great way to engage employees, give back to the local community and encourage physical and mental wellbeing.”
Emerging challenges
There are emerging challenges for channel companies to contend with. New European Parliament rules to crack down on greenwashing (where a business makes false or misleading statements about the environmental benefits of a product or practice) and the Corporate Sustainability Reporting Directive are driving a sea change in sustainability commitments, requiring companies to back up their ESG claims and be held accountable for their actions.
The government’s Climate-Related Financial Disclosure Regulations 2022 will also require channel partners and their end users to outline their carbon emissions and what they are doing to reduce them by 2025.
Added to that, the Science Based Targets Initiative, a collaboration between the Carbon Disclosure Project, the United Nations Global Compact, Worldwide Resources Institute and the World Wide Fund for Nature, will publish a discussion paper and draft proposal evaluating the use of environmental attribute certificates for offsetting scope 3 emissions.
Scope 3 emissions are the result of activities from assets not owned or controlled by the reporting organisation, but that the organisation indirectly affects in its value chain.
To comply, the tech industry must address the issue at the buying stage, focusing on the repairability, recyclability and embedded component emissions of the equipment they are buying. Having a dedicated head of ESG or sustainability team can also help to ensure compliance with regulations such as the UK Sustainability Disclosure Standards.
Another issue is accessibility for employees and customers. In this vein, Colt Technology Services has introduced an accessibility roadmap which sets out how it will build accessibility into everything it does. Digital poverty continues to be a problem too. But channel companies are well placed to provide services which can promote digital inclusion.
ESG policies also have a growing influence on purchasing decisions, as end users become increasingly more aware of the issue. According to a recent YouGov poll, 71 per cent of consumers consider social factors, 68 per cent environmental factors and 51 per cent take into account governance factors before deciding whether to buy, making it paramount that companies commit to ESG for the long-term.
“Research shows rapid consumer shifts towards the desire for durability and repairability for the products they use, and employers are quickly making this shift by taking advantage of inventory-as-a-service led solutions,” said Agilitas’ Johnson. “Additionally, customers are growing more concerned with a company’s carbon footprint and are therefore more willing to pay higher premiums for sustainable products or services.”
Sarwar Khan, sustainability director at BT Business, added, “Across the Channel we’re already seeing requests from customers for ESG initiatives and companies who aren’t seen to be improving their ESG efforts will inevitably miss out on business to competitors who are. In fact, one in 10 channel partners are already losing out in bids and RFPs due to not having the right sustainability credentials in place. So, adopting robust and clear policies should be an imperative.”
Partner collaboration
To ensure a successful ESG strategy, it’s critical that everyone is on the same page. That requires vendors, partners and customers to share the same vision and best practices, and to work together to benefit each other. For example, companies can collaborate to decarbonise operations to enable customers to reduce their scope 3 emissions.
Colt Technology Services’ Griffin Pain said, “Vendors play an active and important role in supporting partners’ ESG initiatives and helping them achieve their goals. Prompt, accurate responses to requests for data and transparency around their own ESG goals are crucial factors in helping channel partners reach their targets.”
Ribbon Communications’ Hiscock added, “Vendors can focus their efforts on developing innovative services and products which promote sustainability and address environmental and social challenges. This may involve using sustainably-sourced materials, designing energy-efficient solutions or offering products that support social causes and community development. Similarly, vendors can support partners in transparency and responsible sourcing throughout a supply chain, including sharing any information around suppliers’ ESG credentials and collaborating to address supply chain risks and vulnerabilities.”
Vendors can also run training programmes and events to help partners and end-users understand and develop ESG strategies. Additionally, the provision of connectivity, IoT, edge, cloud and AI solutions can enable them to reduce their carbon emissions and meet their sustainability goals.
Vendors can further support partners and customers by calculating and providing data on the carbon footprint and lifecycle assessment of their products and services. Given that little data is available outside of end-user devices, recommendations on the best approach for customers is currently extremely difficult, making it vital vendors collaborate together.
“If vendors could work together to provide this data in the same format, and using the same methodology to allow comparisons and build trust it would allow meaningful decisions to be made by customers,” said Daisy Corporate Services’ Charlton. “Eventually, the data would need to include all available sustainability factors via the same process and methodology constructed.”
ESG will continue to be a key focus for all companies moving forward. Channel partners can play a pivotal role in helping them to achieve their goals. Ribbon Communications’ Hiscock said, “Fundamentally, channel companies are embracing the fact that ESG is not only a crucial part of their business strategies, but a moral imperative that is necessary for long-term success and sustainability.”
Agilitas’ Johnson added, “To drive real change, organisations in the Channel should be focused on the future, rather than only adhering to today’s regulatory requirements. By focusing on tomorrow, they ensure they stay current, engaged and in focus with wider ESG strategies. A channel organisation can therefore safeguard its longevity and exploit this mileage in the future.”
This feature appeared in our June 2024 print issue. You can read the magazine in full here.