Building a Bridge between Digital Transformation and Sustainability
The phrase digital transformation has been used with increasing frequency in recent years. As with many phrases that become part of the general lexicon, it is important to pull back and think about what it means.
In general, digital transformation refers to the use of technology and digitization to reduce costs and increase revenue. However, technology has been applied in this way for decades. In other words, this drive does not represent a push for transformation, but a continuation of the typical way we use digitization. The adoption of technology does not need to must necessarily (must necessarily???) occur incrementally; this happens naturally as companies grow.
The real problem with digital transformation is that it lacks a clear goal. While the presumptive goal is to drive digitalization (digitalization or digitization???) and improve profitability, this is the goal of nearly every decision made at a tech company. Companies are expected to customize the goal to their specific situation. However, this boils down to telling companies to do what they have always done. If we want a truly transformational process, then we need to create a truly transformational goals. Moreover, there is a transformational process underlying many of the initiatives that fall under this call, and it is not the move toward digitization, but sustainability.
The Perceived Friction between Digitization and Sustainability
Many people think of digitization and sustainability as mutually incompatible processes, but mounting evidence shows that sustainability is in the best interest of a company in terms of continued solvency. However, this evidence has not convinced most board members, who continue to see sustainability in terms of politics rather than profits. In truth, the value of sustainability is extremely difficult to calculate, so many investors will not sacrifice profits in its name. A survey by PwC showed that over 80 percent of investors would not sacrifice more than a single percentage point of return for social or environmental goals.
This means that companies that want to embrace sustainability need to do so in a way that drives profits. Luckily, digitization makes this possible. Digital technology is virtually the only business input that decreases in terms of expenses over time, but increases the potential profitability. Most other elements associated with business have linear costs and linear returns even when scaled. Only technology comes with the potential for exponential returns, at least when implemented in the right way. Think about startups that have only a handful of employees yet have staggering profits. These are the startups driven by digital technology.
The Marriage of Digital Transformation and Sustainability
If companies can make digital transformation work in terms of promoting sustainability, then adopting green practices moves beyond a political act and becomes a way of driving profits. This is the transformation that many companies aim for when they seek out new digital strategies. The goal is not embracing new technology for the sake of digitization, but working toward a lasting and necessary change for the future. The former is about incremental change while the latter is truly transformative and identifies new aims and strategies for the company. These strategies will help companies stand out as stewards for the safeguarding of the planet. With customers increasingly paying attention to how companies do business, these are aims that can drive profitability.
The problem then becomes one of feasibility. Sustainable change that drives profitability is a true transformation affecting nearly every department at a company, and it sometimes fundamentally shifts what the company does. The hurdles are real, but they are also the transformation that the world needs. This is the type of transformation that will make businesses viable for the next 100 years. The return on investment is practically infinite as it is about maintaining the delicate balance of the Earth while we are at a tipping point. The future will be decided by how companies react and the steps they take now.
How Companies Should Proceed with Digital Transformation
Moving forward, it is less about digital transformation and more about what digital transformation can help us achieve. Introducing new technology is not in itself enough. Instead, it is a matter of introducing these technologies to achieve a particular goal, such as making logistics more efficient to eliminate excess carbon emissions while saving on unnecessary shipping costs. The potential for leveraging digital advances to drive green practices and save money is incredible, but companies need to be proactive in identifying them and justifying them to their board of directors. Even if board members are driven by profits, it is becoming easier than ever before to demonstrate how digitization can promote sustainability — and boost the bottom line.