ESG & digital transformation – challenges and opportunities (Part II) | 3046

An ethical investment portfolio must take a joint perspective on ESG and Digital Transformation integration for business decisions. Successful companies greatly benefit from carrying out ESG and DT change processes together. Those who carefully choose the right path and the best suited IT partner stay ahead and win.

  1. The reality of most DT projects’ ROI
  2. factors causing DT failure
  3. Digital Transformation and ESG ratings
  4. ESG investments risks are incomplete without adding DT risks
  5. Investment risk planning: ESG & Digital Transformation included
  6. Choosing a qualified IT partner to succeed

This concludes the two-part blog post on ESG that Future Processing and AFKI collaborated on. Part I and Part III are included below:

The market for digital transformation is rapidly growing as a result of instruments for sustainable ESG, new business models, and social changes brought about by digitalization technology. Major changes have only been accelerated by the COVID-19 epidemic, necessitating a quick adjustment on the part of many company owners. Digital transformation investment is expected to reach $1.97 trillion in 2022 and a mind-boggling $6.8 trillion globally by 2023, according to International Data Corporation (IDC). Additionally, according to IDC, 30% of the top 2000 worldwide (G2000) corporations will set aside a capital budget of at least 10% of their annual sales to support their digital strategy.
Digital Transformation 2 01 of the ESG scaled

The ROI of most DT initiatives in practise

The unfortunate reality is that 70% of digital transformation projects don’t provide a return on investment, despite the fact that many IT professionals advise organisations to dive headfirst into DT efforts. It may occur for a number of reasons, including a lack of alignment, a dearth of internal talent or a lack of certain KPIs, but it may also be caused by insufficient technology infrastructure, a dearth of suitably competent IT partners, or a cultural gap.

A survey by BCG of 825 executives who executed digital transformation in their organizations—across all industrial sectors and digital transformation types—has been completed.

The success score is established by taking into account the percentage of specified goals achieved and value produced, the percentage of goals accomplished and value produced on schedule, the success in comparison to previous transformations, and the success in comparison to management’s goals for long-term change.

8 causes of DT failure

A more thorough failure study of DT programmes revealed important internal issues and their role in producing subpar transformation outcomes. These are the key causes of why digital transformation fails. Before figuring up the DT strategy, every business owner should be aware of these.
Scaled ESG Digital Transformation 2 03

To begin with, it’s critical to analyse internal aspects, learn from other businesses’ experience, and include IT partners and consultants.

Getting the appropriate information to the person in charge of carrying out a certain project phase (75%)

Using paper scanning as the primary method of information capture (72%)

Data migration from old systems to newer technologies (59%)

Enterprise-wide information governance policies aren’t strong enough (75%)

Employees receive insufficient training (32%)

bottlenecks in IT (33%)

Executive buy-in is lacking (38%)

Lack of internal talent (38%)

As a result, it is crucial to examine internal tech infrastructure, the board’s and employees’ attitudes towards changes, and internal IT professionals who may either accelerate or inhibit growth in addition to employing IT specialists.

ESG ratings and digital transformation

Being mindful of hazards is one thing, but we must also keep in mind the significance of rankings and ratings while assessing and planning investments. Both digital transformation and ESG have criteria and procedures for evaluating their levels of maturity.

There are 6 areas in which we may evaluate a DT project’s maturity:

Project management, customer insights, and direct marketing are just a few of the marketing and eBusiness functions that the Differentiators, the study’s smallest group of businesses, consistently perform better than average at. They also tend to be pure-play or highly focused online retailers. The digital and physical worlds are being smoothly merged by these digital transformation professionals.

The most significant feature of Collaborators is that they connect inside and outside to allow practice and innovation with digital. 95 percent of Collaborators value the whole customer experience of their brand over the performance of any one channel. More Collaborators report excellent coordination and ongoing engagement between marketing and information technology than any other sector. In comparison, just a few Collaborators said that their IT department handles marketing activities as transactional, one-time requests.”

Without DT hazards, ESG investment risks are insufficient.

ESG ratings have a greater influence on corporation financials than many people believe. How is this even possible? In 2025, ESG ratings and scores will account for up to one-third of all investments. However,ESG reporting and rates will overlook $3.7 trillion in global digital transformation investments in 2026.

Most big corporations currently report on ESG indicators; however, few include digital transformation KPIs into corporate financial or ESG reports.

While finance managers are fixated on business sustainability as measured by ESG ratings, they frequently overlook the DT as a significant indicator of organizational resilience and longevity.

Investment risk management includes ESG and digital transformation.

Every firm in the world has learned that not everything can be planned for, and even less can be foreseen. Even though many people anticipated the limits and obstacles associated with the COVID-19 epidemic would soon be ended, we will be confronted with an unknown “new normal” in the near future.

Which DT will most likely play a significant role?

We have little control on unanticipated global upheaval, sociological trends, or changing needs of the moment. The McKinsey study has this information. The report includes further information on current behavioral trends that will influence business decisions.

It is commonly acknowledged that executives and boards of directors must guide organizations down a fine line between providing economic value and reducing risk. To complete these demanding tasks and make smarter investment decisions, businesses must carefully examine both existing and future DT and ESG reforms. To plan for hazards, the entire analysis should be completed a few years in advance. We must also keep in mind the need of practical ESG and digital transformation strategies for key risks and long-term sustainability.Investors, stakeholders, business leaders, and boards of directors all want them.

Selecting a certified IT partner to ensure success

Before we begin planning DT and ESG modifications, we must first select an experienced and well-qualified IT partner for both processes. Furthermore, participation in forward-thinking industry consortiums adds value to risk mitigation strategies. The experienced team working with the organization will assess risks and devise a plan for both changes. Best-fit IT partners will help you make long-term improvements, from advising and gathering needs to modifying current systems or constructing whole new ones.

As a consequence, not only will the implemented solutions be more likely to succeed, but they will also contribute to the general development of company and associated investment success.

Regarding AKFI

The Actionable Knowledge Foundational Institute, a non-profit international industrial collaboration, is directed by Manuel Vexler as executive director. It is a forum for forward-thinking businesses launching Digital Transformation and ESG projects. Members’ working groups combine Digital Transformation and ESG skills to create concrete initiatives. When executed, the techniques protect stakeholders against catastrophic risks, resulting in significant economic rewards.

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