vidya technology blog
vidya technology blog

October 11, 2022

Why ESG concepts are totally related to digital transformation in industry

By Daniel Jorge

ESG

ESG (Environmental – Social – Governance) concepts have been gaining much attention in recent years. In collaboration with major global goals, such as the Paris Agreement and the SDGs, they focus on sustainable growth, social responsibility, and transparent corporate governance.

Tuning this scenario to the industry, we find several challenges that obstruct the commitment to these themes, such as the large emission of greenhouse gases into the atmosphere and even the risks to operators in the workplace.

To reduce dangerous activities and meet ESG decarbonization goals, industrial digitalization options have emerged. This technological strategy has mitigated problems and promoted the growth of companies that invest in digital transformation as a solution to boost their growth in the ESG pillar.

 

What are ESG concepts?

 

ESG concepts first appeared in mid-2005. However, long before that, there were already movements aiming to deal with the problems presented, such as the Kyoto Protocol, which was signed in 1997 and had as its main agenda the recognition by large industries of the existence of global warming and the need for plans to contain greenhouse gases.

ESG

By breaking down each of the axes, we can understand some of the main directions that each one of them brings:

 

  • Environmental: sustainable practices, such as reducing emissions of pollutants, adopting renewable energy and securing biodiversity;
  • Social: socially responsible practices, such as employee safety and health, support for diversity and local communities, and more recently data privacy protection;
  • Governance: efficient management of the company through anti-corruption policies, transparency and compliance with laws and regulations.

 

ESG in industry

 

Once the bases of each of the axes of the ESG concepts are understood, it is possible to think of solutions and process optimizations that boost the positive effects of these practices. As previously mentioned, digital transformation enters as an essential factor in this scenario and, from the adhesion of new technologies in the industrial environment, it becomes possible to be in harmony with the concepts proposed by ESG.

So, to deepen in the theme, we must first understand the industry context in relation to the pillars of the ESG and what are the main problems currently faced related to the theme.

 

Main challenges of the industry in the ESG axis

 

On the environmental axis, one of the major challenges is the excessive emission of pollutant gases into the atmosphere, increasing the effects of global warming. Besides this, there are also impacts related to the operation on the local fauna, flora, and biodiversity, and also the unregulated use of raw materials and natural resources.

In recent years, for example, CO2 emissions from energy combustion and industrial processes have been increasing significantly. According to the International Energy Agency (IEA), about 2.04 gigatons more carbon dioxide were released into the atmosphere in 2021 than in 2020, reaching a total value of 36.3 gigatons, the highest since 1900.

Not only that, but the energy transition to a net-zero scenario is also concerning, as it lags behind expectations in the coming years. Also according to the IEA, even with the advances in renewable energy production by 2026, this increase in production capacity is still expected to be 1459.3 gigawatts less than what is needed to eliminate carbon emissions.

On the social side, within these same industries, there are constant risks that generate accidents involving workers caused by problems with equipment, falls, slips, collisions, explosions, and exposure to harmful substances. Even with several occupational safety regulatory organizations around the world, these accidents are still likely to happen, and having internal policies that reduce risks is fundamental to ESG concepts.

Having made some key points, we can now understand the role of digitalization in this scenario!

 

 

Digitization as an answer to ESG needs in industry

 

Digitization as an answer to environmental, social and governance problems in industries has strengthened mainly since the Fourth Industrial Revolution (or Industry 4.0). Several technologies such as Artificial Intelligence, Machine Learning, Internet of Things, started to be essential in the day-to-day industry especially to optimize the operation.

In this context, the industry’s digital transformation is also directed to mitigate the problems presented above, such as reducing carbon emissions in the atmosphere and work safety.

Cutting-edge technologies started to emerge, and one of the main benefits they brought is the possibility to monitor every process within the industry in a much more automated and efficient way. For example, an operator can know exactly how much CO2 is emitted by a machine in operation, or even the exact efficiency in the production of renewable energy by a solar panel farm.

With much better monitoring, then, it also becomes possible to plan much more assertive actions as well, understanding exactly the points of improvement within the industrial plant and prioritizing each of them. And furthermore, by performing this whole process digitally, it is also possible to reduce the amount of workers in the industrial plant, keeping them safer and less susceptible to possible accidents.

Did you like the subject and want to know more about how digitalization helps in the industry decarbonization and in its sustainable growth? Click here and access our ebook about the topic or or download it using the form below!

 

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