Tech Companies Still Lagging on Sustainability Leadership

The technology industry has been under much scrutiny in recent months. Facebook’s treatment of political advertisements has been put under the microscope, another pitfall for the company as it still struggles in the wake of criticism it has received for its role in the meddling of the 2016 U.S. presidential election. WeWork – which is more of a real estate company but one that catered to tech companies and startups - saw its attempted IPO fail quite spectacularly. Other tech companies have seen their feet held to the fire over various issues: Google has found itself mired in controversy over immigration, Amazon employees felt their company could do better on climate action, and Uber and Lyft have raised eyebrows over data suggesting that they’re responsible for more cars on the road instead of less.

According to the American Center for Sustainability and Excellence (CSE) the lack of strong sustainability leadership is endemic across many of the world’s leading technology companies. The CSE’s study found that only 37 percent of companies report on their climate change performance, while only 23 percent explicitly mention the Sustainable Development Goals (SDGs) in their reporting. Despite a vocal outcry that the tech sector’s responsibility should grow with the power that they accumulate, there is still a long way to go for that scenario to become a reality.

Understanding the benefits of sustainability

Tech companies largely understand that millennials are their most important demographic, but there is a clear disconnect in terms of priorities.

The study notes that many Silicon Valley companies did not include sustainability as part of their core strategy as recently as 2016; meanwhile, millennials have increasingly expected companies to lead on social issues. This gap in priorities is certainly closing, but not up to the standards of innovation set by the industry itself.

The overall sustainability score for the industry comes in at 50 on a scale of 100 on CSRHub, which is considered an average mark. The average active sustainability scores lie at 17, which is also considered average. For an industry that prides itself on pushing the envelope, the middling results should be troubling.

Following the money doesn’t always pay off

While there has been a very real shift in the actions of executives on the topic of sustainability, there has long been a perception in the C-suite that being more socially conscious isn’t a priority for shareholders. The study notes that angel investors’ and venture capital’s inherent focus on quick returns and exit strategies doesn’t help incentivize a strong long-term sustainability strategy.

That perception, however, is becoming outdated.

Investors have begun to see that reporting on sustainability is actually beneficial to an organization. That knowledge has put topics of environmental, social, and governance issues at the top of the list of priorities for executives at some of the largest investment firms in the world. That fundamental shift allows for rapid progress to be made, as executives of tech companies now have even more incentive to understand how they can have an impact, for better or worse, on society.

Progress is being made - somewhat

While concerns still exist, this report notes that of the 100 companies surveyed, 60 percent have a sustainability report, up drastically from 29 percent in 2016. Of those 60 percent that do have a report, 50 percent used Global Reporting Initiative (GRI) reporting standards.

Focus on environment and community may have been lacking in the report from 2016, but they have significantly improved in the three years since, rising from a 63 percent to 98 percent focus on the environment, and a jump from 51 percent to 66 percent on community engagement. Emphasis on philanthropy and supply chain has increased as well, while any drives to improve ethics and employee engagement have remained largely steady.

This upward progression, along with the recent shift in investor attitudes, shows a clear reorientation toward more sustainable practices not only in management, but in applications of leading-edge technology as well. Overall, the technology industry is making strides on social impact with advancements such as artificial intelligence and blockchain. Companies are weighing the broader social implications as well as financial potential in new technologies and innovations, a clear positive trend.

Ultimately, sentiment is changing around sustainability as a core part of an organization’s strategy. The question is, can the technology sector keep improving – and eventually, even lead?

Image credit: Riccardo Annandale/Unsplash