Leaders understand that sustainability is now part of enterprise growth strategy. Sustainability isn't just about compliance; leadership generates real value through new products, customer loyalty, stakeholder buy-in, and better margins. Companies are expected to monitor and report not just carbon emissions but also other aspects of sustainability such as water use, waste management, and supply chain ethics. Meeting these obligations requires companies to invest in new technology systems, often complementing and accelerating existing initiatives to modernize IT.

Having the right data and deploying the appropriate technology to collect, analyze, and report on it is the starting point for most sustainability efforts. More than 88% of executives surveyed by Bain agree that improvements in digital technology are critical for advancing their sustainability goals, but most say that they are not taking the actions needed to make that happen. Only 24% of companies say that they are ready for future reporting needs—a potentially worrying statistic since it can take years to build up these capabilities.

Technology will be essential to meet the broad public commitments that some companies are making. At the company level, decisions about how to improve sustainability—for example, which vendors to work with, which technologies to invest in—will need to rely on actual data on the company’s performance.

Beyond compliance, the potential to create new value has many companies deploying technology focused on new initiatives. They have integrated sustainability into their strategy, metrics, and operating model, and technology teams are partnering with business leaders to shape the roadmap and build new sustainability-oriented digital products and services.

For example, a European dairy producer saw an opportunity to reduce emissions quickly and to commercialize the improvements by developing a comprehensive platform to track its Scope 3 emissions and help its farmer partners also reduce their emissions. Most emission reduction goals focus on Scope 1 (direct emissions from a company’s activity) and Scope 2 (emissions from purchased electricity, heat, and steam), which companies have more control over, but in dairy, most emissions are on-farm, Scope 3. This dairy producer leveraged existing systems combined with tailored solutions, including automated data collection via sensors and third-party partners to collect, process, and aggregate data from farmers and other providers. This platform allows the company and the farmers to identify the areas that need work and to get recommendations on the actions that would improve them.

The reporting challenge: Beyond compliance

The dairy producer’s opportunity sprang from its desire to become an industry leader while meeting the regulatory requirements for reporting on emissions. Since the regulatory landscape is shifting and expanding rapidly, companies need to anticipate additional reporting requirements. The EU’s Corporate Sustainability Reporting Directive mandates that EU companies start reporting on their greenhouse gas emissions and other environmental factors by 2025. In California, large companies will need to report on Scope 1 and Scope 2 emissions by 2026, and Scope 3 emissions by 2027—not far off, considering the time it takes to put these systems in place. And carbon emissions are just the beginning: Increasingly, regulations will enforce other aspects of sustainability, such as Germany’s Supply Chain Due Diligence Act (and the upcoming EU directive), which requires companies to set up risk management systems to ensure that human rights and other social standards are being met in the production of goods.

Measuring sustainability requires a cross-functional perspective: Companies need to understand the material flows (supply chain), manufacturing footprint (operations), impacts on people (human resources), customers’ product use (sales), and the fiscal instruments that support it all (finance). In many cases, the necessary data isn’t sitting in company systems and needs to be manually gathered until a process or tool can be built or acquired to automate it. Most companies will need to invest in new technology and talent to enable auditability as they move from industry averages to actual measurements of their own company and value chain (see Figure 1).

Figure 1

As companies make sustainability commitments that go beyond carbon emissions—for example, pertaining to water usage or labor practices—tech and business leaders will need to be closely aligned on priorities. Each company will have to decide which objectives are most important to their business so that they can invest in the technology tools, data capabilities, and talent necessary to fulfill those objectives.

Deploying technology to meet sustainability objectives

Sustainability within IT’s operations is table stakes for enterprise technology leaders. Across industries, enterprise technology typically represents, on average, about 25% of a company’s Scope 1 and Scope 2 emissions. Large data centers can consume 3 million to 5 million gallons of water daily, and end user devices (laptops, tablets, mobile phones) often consume more electricity than needed and contribute to a company’s electronic waste load. Developing systems to minimize these impacts helps to build the capabilities that will serve the entire organization.

Beyond IT, enterprise technology is critical for monitoring and analyzing the data that executives depend on to understand baselines and set ambitions based on priorities. Companies will need to set sustainability goals that align with the existing technology roadmap. Sustainability objectives can help turbocharge the business case for modernizing legacy technology and migrating to cloud workloads, so it makes sense to align the efforts.

Some sustainability investments deliver results fairly quickly, such as reducing data center utility costs by increasing the temperature. In other cases, companies will invest in areas with less immediate payback, such as skills-based hiring, which is a recruitment strategy that emphasizes competencies over formal education or previous job titles. One bank started by understanding its baseline for carbon emissions and then prioritized initiatives based on impact and feasibility. Since there is no universal standard on how vendors report Scope 3 emissions, the bank also defined guidelines about which information it would consider when ranking vendors by emissions. These and other measures support the bank’s goal of reducing its carbon emissions by 15% between 2022 and 2025 (see Figure 2).

Reinventing to create new value

In some cases, the focus on sustainability encourages the development of new products and services that can increase revenue and build value. And that trend appears to be growing: A recent survey found that nearly 90% of Generation X consumers say that they would spend at least 10% more for sustainable products, up from 34% in 2019. A software company that provides tools for managing construction projects tapped into this trend by making sustainability a cornerstone of is value creation plan. It started by developing a better understanding of its customers’ sustainability priorities and then quantified how its software helped customers meet their goals, such as avoiding carbon emissions during construction. Through improved marketing of its software’s contributions to sustainability, the company is experiencing an increase in revenue worth at least €5 million between 2021 and 2024.

In another case, a large fintech company wanted to improve its sustainability ratings after its initial baseline assessment fell below expectations. The company engaged the board and top management in cocreation workshops to define new sustainability goals and initiatives to improve its ratings. It rolled out several quick-win initiatives and began to disclose sustainability metrics on its website. Through these early moves, the company outlined a high-level sustainability transformation plan that included an analytical and scalable approach to map and report successes. At a more granular level, it defined specific actions to take to improve the metrics that agencies consider in assigning their ratings.

The path forward

For companies that have made aggressive public commitments and aspire to make sustainability an important part of their brand, technology could become the bottleneck preventing them from delivering on those commitments. There’s no single, correct approach, and the systems necessary to monitor, analyze, and report on sustainability objectives—not to mention platforms that could deliver real value to partners and customers—take time and talent to build.

The leaders in this space have been investing in custom solutions to support their sustinability efforts for more than a decade. While some large software vendors are beginning to include sustainability measurement in their products, the application landscape is still immature. Companies that are just getting started have some catching up to do, and most know it: Only about one-third of the executives we surveyed with high sustainability ambitions believed that they have the technology necessary to deliver on them. Leaders and disrupters alike will need to move quickly to catch up and tap sustainability as a competitive advantage.

About the research

Gerson Lehrman Group (GLG) facilitated this survey for Bain on its platform utilizing its Network Members, independent industry professionals, consultants and other individuals within GLG’s network. For more information about GLG’s business, go to glginsights.com. The survey and presentation of the survey results in these materials were created by Bain, and GLG shall have no liability with respect to or in connection with the results provided in these materials or the survey.