Driving growth while prioritising sustainability: key themes in the tech sector
As the technology sector continues to evolve, businesses must navigate a rapidly changing landscape shaped by AI and ESG considerations. Cloud technologies, while offering scalability and efficiency, have come under scrutiny for their environmental footprint, particularly in terms of energy consumption. At the same time, the rise of generative AI presents both opportunities and risks, influencing workforce productivity, security and overall business operations.
Here, we explore the growing emphasis on sustainable cloud solutions, the adoption of AI in the workplace, and the strategic role of ESG in driving investment and long-term success. By understanding these trends, tech companies can position themselves for a future that balances innovation with responsible business practices.
At Moore Kingston Smith, our sustainability services team works with clients throughout their sustainability journey. We guide clients in developing their sustainability strategies, support them in meeting their climate-reporting requirements, and work closely with them to embed ESG reporting into their business, promoting long-term sustainability and growth.
Minimising the environmental impact of cloud technologies
Historically, SaaS and cloud-based technologies have faced criticism for their ecological impact, primarily due to the environmental toll of data centres and their cooling infrastructures. The media narrative has largely focused on the energy consumption of these centres, with reports like the one from the International Energy Agency predicting that the combined energy footprint of global data centres could reach around 1,000 TWh by 2026, a dramatic increase from 460 TWh in 2022. To put this into perspective, this is roughly equivalent to the electricity consumption of an entire country such as Japan.
However, as the industry begins to place a greater emphasis on sustainability, tech companies are turning their attention to lean software development and improving the efficiency of coding to reduce their energy demand. Data centres in the UK are increasingly focusing on optimising their power usage effectiveness and adopting renewable energy sources.
There is increasing pressure on UK companies from the government, investors and other key stakeholders to report both their direct and indirect greenhouse gas emissions. This can be a complex task for technology companies, as emissions from data centres and other tertiary sources need to be considered. However, assessing their carbon footprint and implementing energy reduction initiatives can be a crucial tool for technology companies to align with growing regulatory and consumer demands for greener operations.
We help companies measure their scope 1, 2 and 3 emissions, providing them with the key baseline data required to develop carbon reduction plans and report to key stakeholders. Our team has expertise in navigating the complex scope 3 emissions categories that require estimation and engagement with the value chain.
Embracing generative AI: balancing productivity and security
The number of shadow AI users in the UK is on the rise. These employees are using AI tools to enhance their productivity and efficiency at work, indicating the readiness of employees to leverage new technologies to improve their work performance. In contrast, research by McKinsey found that only 11% of companies worldwide were using generative AI at scale in their business. This disparity poses potential risks in terms of data security and compliance where these tools are used without formal approval.
Despite the limited formal adoption, this research highlights the considerable economic potential of generative AI, particularly in tasks like coding, which could be significantly streamlined by AI. Their study on software engineering teams further revealed that those trained to use generative AI tools were not only more efficient but also more fulfilled and satisfied in their roles. This suggests that integrating AI into the workplace can offer substantial benefits beyond just productivity improvements.
Companies that embrace AI strategically will be better positioned to create a more productive, satisfied and secure work environment for their employees. It is, however, important for companies to appropriately assess the risks that AI and other new technologies can pose to their business.
We support clients through ESG risk assessments by identifying the opportunities and risks associated with using AI. By mapping the impact of AI on a business, we can help design appropriate solutions that allow it to mitigate potential risks and leverage AI’s potential.
ESG as a strategic advantage for investment and growth
For companies aiming for private equity funding or planning an exit strategy, integrating ESG and sustainability practices can be a key driver of value creation. By adopting a robust ESG framework, technology companies can differentiate themselves in a crowded market, signalling to investors that they are forward-thinking, resilient and proactive in managing both risks and opportunities.
Implementing sustainable practices and supporting social equity can directly improve a company’s operational efficiencies. Furthermore, these efforts help mitigate risks related to environmental or social issues, which can otherwise pose significant threats to business continuity and reputation.
Adopting ESG principles also opens the door to a broader investor base, particularly those in the growing field of impact investing. Investors focused on sustainability and social responsibility are increasingly looking for companies that align with their values. By demonstrating a commitment to ESG, companies can attract these investors, while also improving their brand reputation, building customer loyalty and enhancing employee satisfaction. These elements work together to drive long-term sustainable growth.
Private equity firms and investors are increasingly recognising the strategic value of ESG factors when assessing companies for investment or acquisition. Companies with strong ESG performance often enjoy greater market appeal and command premium valuations due to their perceived lower risks and sustainable growth potential. As ESG considerations become an essential factor in investment decisions, companies that prioritise these practices will be better equipped to navigate an increasingly competitive market.
Our sustainability services team has worked with businesses across their investment lifecycle, providing them with key services such as ESG risk screening and due diligence, gap analysis and strategic advisory. We help companies to reduce their sustainability risk profiles and enhance their practices to provide a risk-adjusted return on investment.
Final thoughts
Tech companies must proactively embrace sustainability, AI-driven efficiency and ESG principles to remain competitive. Reducing environmental impact, optimising AI adoption and aligning with investor expectations through ESG integration will not only strengthen business performance but also open new growth opportunities. In an evolving market, companies that prioritise these strategies will be best positioned for sustainable success.
Our team is equipped to support you wherever you are at on your sustainability journey. From risk assessment to strategy development and due diligence, we leverage our expertise in sustainability and the technology sector to provide you with bespoke solutions for sustainable success.
