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Wednesday, April 17, 2024

It’s time to decarbonize the technology industry

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TECH companies tend to have complex, decentralized footprints that make measuring emissions difficult. A decarbonization strategy must address a variety of elements, including office space, warehouses, supply chain, distribution, and data centers. Since service companies do not own many of the assets they operate, they may face their own challenges in measuring decarbonization efforts. Even larger companies that have been vocal about their corporate-level green strategies have been challenged, leading to tactical implementation at the business-unit level.

Many tech companies simply do not view climate change as a top consideration when it comes to funding projects. Only 24 percent of tech companies said climate change considerations significantly factor into their funding decisions, while 42 percent said it does not factor in. For small technology companies where it is harder to scale, this number rises to almost half (47 percent).

KPMG conducted the Survey of Sustainability Reporting at Technology Companies and found only half of global tech companies even acknowledge the risk of climate change in their financial reporting, much less assign a quantitative impact to it. The vast majority of tech companies overall have not implemented remuneration incentives for directors to achieve decarbonization targets. Only 13 percent have incentives in place. However, by company size, large companies lead the way with 32 percent indicating they have incentives in place. And public companies outperform private companies on this topic (26 percent versus 6 percent).

The survey asked respondents to identify the barriers to decarbonization that their company is experiencing. Most of the choices received similar weighting. However, “board and management are insufficiently engaged” and “investors are more focused on short-term goals; not asking us to decarbonize” were cited slightly more frequently than other responses and combined represented 35 percent of the total. Conversely, “Carbon prices too low to be effective” and “Covid-19” were the barriers least frequently cited by respondents. While the survey results suggest that tech companies are lagging in their decarbonization efforts, new regulations and market demand may begin to force them to be more aggressive in their overall green strategies.

The survey found that tech companies are struggling to define and navigate a strategy that effectively meets decarbonization objectives. Most are trying to decide what their next steps will be; others have started but are unsure of what to do next.

But tech companies cannot afford any further delays in their decarbonization journeys. Regulators, investors, and consumers are ramping up the pressure for environmentally friendly policies, creating financial and reputational risk for those that fall behind.

The good news is that green strategies, while helping the planet, can also offer positive business outcomes. There are mounting recognitions that effective net-zero transformations can unlock new markets, products, revenue, and value propositions.

The excerpt was taken from the KPMG Thought Leadership publication entitled, “It’s time to decarbonize the technology industry.”

© 2021 R.G. Manabat & Co., a Philippine partnership and a member-firm of the KPMG global organization of independent member- firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

For more information on KPMG in the Philippines, you may visit www.home.kpmg/ph

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