Global business leaders to boost IT spending on sustainability, yet struggle to turn goals into reality, finds IBM report

An impressive 88% of global business leaders intend to escalate IT investments to bolster sustainability initiatives over the forthcoming year, as revealed by IBM’s latest report. Despite this enthusiasm, a considerable gap persists between ambitious sustainability objectives and the realization of these aspirations, presenting substantial challenges for many organizations.

IBM’s Sustainability Report: High Ambitions, Lagging Execution

IBM’s State of Sustainability Readiness 2024 report, developed in collaboration with Morning Consult, surveyed 2,790 executives from 15 industries across nine countries between April and May 2024. Nearly nine out of ten leaders expressed a commitment to increasing IT expenditure for sustainability initiatives, with more than half recognizing these technological investments as pivotal drivers of business growth. Such investments are increasingly seen not just as a cost but as a strategic asset capable of delivering operational efficiencies, stakeholder engagement, and long-term profitability.

Nevertheless, the transition from intent to practical implementation remains fraught with difficulty. Many organizations are struggling to establish robust metrics for key sustainability indicators, such as renewable energy consumption, total energy usage, and recycling rates. The report highlighted that 50% of leaders acknowledge gaps in data maturity, which impedes precise sustainability reporting and, ultimately, meaningful progress. Without reliable data, organizations cannot accurately measure their carbon footprints or assess the efficacy of sustainability initiatives, leading to inconsistencies and underperformance.

The sustainability landscape is further complicated by the constantly evolving regulatory environment. Governments and international bodies are increasingly setting stringent standards for corporate environmental performance, adding pressure on companies to not only invest in IT solutions but also to ensure that they have the capabilities to demonstrate compliance effectively. Companies that fail to meet these standards risk facing reputational damage, regulatory penalties, and a loss of competitive advantage.

Data-Driven Decision-Making: The Cornerstone of Sustainability

Kendra DeKeyrel, IBM’s Vice President for ESG and Asset Management Products, underscored the indispensable role of comprehensive data in driving sustainability efforts. She illuminated the ongoing struggle businesses face in collecting accurate data, which is foundational for meaningful sustainability outcomes. Accurate and timely data serve as the backbone for all sustainability-related decision-making processes, allowing businesses to evaluate their progress, identify areas for improvement, and communicate their efforts transparently to stakeholders.

Despite the growing regulatory demands for precise and transparent reporting, 54% of companies reported compliance and reporting challenges, while only 29% identified improved reporting accuracy as a core benefit of adopting new sustainability technologies. This gap between expectations and capabilities underscores the necessity of developing more sophisticated tools and methodologies to support data collection and analysis.

Data-driven decision-making not only aids in regulatory compliance but also enables companies to optimize their resource use, reduce waste, and innovate in the development of sustainable products and services. Companies that excel in leveraging data are better positioned to create value through improved operational efficiency, enhanced brand reputation, and stronger customer loyalty, which ultimately contributes to their competitive advantage in an increasingly eco-conscious marketplace.

The deficiency in data accuracy and comprehensiveness presents a formidable barrier that hinders the actualization of sustainability ambitions, complicating the move from aspirational rhetoric to actionable outcomes in an increasingly demanding regulatory environment. The importance of adopting advanced analytics and machine learning tools cannot be overstated, as these technologies can transform raw data into actionable insights, providing a clearer picture of sustainability progress and challenges.

AI’s Underutilized Role in Advancing Sustainability Initiatives

Despite the widespread acknowledgment of AI as a crucial tool for attaining sustainability goals, a recent Accenture study revealed a disconcerting reality: only 16% of major global corporations are currently on track to meet their 2050 net-zero targets. Alarmingly, nearly half of the surveyed companies have witnessed an increase in their carbon footprints rather than a reduction. This counterintuitive trend highlights the complexity of the sustainability challenge, where traditional methods fall short, and transformative technologies like AI remain underutilized.

AI holds transformative potential in this domain, with 90% of surveyed executives recognizing its significant role in advancing sustainability. AI technologies can be leveraged to optimize energy consumption, predict maintenance needs for equipment to extend their life cycle, and enhance supply chain efficiency—all of which contribute to reducing the environmental impact. However, 56% of companies have not yet integrated AI into their sustainability frameworks, primarily due to budgetary constraints. The deployment of AI and other advanced technologies requires a significant initial investment, and many companies lack the financial resilience to allocate consistent funding.

Indeed, nearly half (48%) of all sustainability initiatives lack consistent funding, which continues to impede the deployment of critical technological solutions. This lack of funding is often symptomatic of a broader issue: the perception of sustainability as a cost center rather than a value-generating endeavor. Until businesses and their stakeholders recognize the long-term financial and societal returns of sustainability investments, initiatives will continue to struggle with underfunding.

Christina Shim, IBM’s Chief Sustainability Officer, pointed out that AI offers a dual advantage: it has the potential to minimize environmental impact while simultaneously enhancing financial performance. AI algorithms can analyze large volumes of data in real-time, enabling companies to make smarter decisions about resource allocation and emissions reduction. However, she also cautioned about the environmental footprint of AI technologies themselves, emphasizing the need for energy-efficient processors and strategic optimization of data processing locations to mitigate these effects.

The energy demands of AI models, particularly those involving machine learning and deep learning, can be substantial. As companies turn to AI to solve environmental problems, they must be mindful of the irony that these solutions can also contribute to increased energy consumption. To address this, companies are increasingly investing in green data centers, which utilize renewable energy sources and are designed for maximum energy efficiency. The adoption of such practices will be critical for ensuring that the tools used to drive sustainability do not inadvertently contribute to the problem they are meant to solve.

Executive Disconnect: A Barrier to Sustainability Advancement

A significant dissonance exists within corporate hierarchies regarding sustainability readiness. The State of Sustainability Readiness 2024 report found that while 67% of C-suite executives believe their companies are effectively managing climate resiliency, only 56% of directors and vice presidents concurred with this assessment. This discrepancy underscores divergent perspectives on risks related to infrastructure, supply chains, and financial exposure, indicating the need for more cohesive and aligned sustainability strategies within organizations.

This disconnect often stems from a lack of clear communication and shared understanding of sustainability priorities across different levels of management. While top executives may see sustainability as a strategic imperative, operational leaders are more likely to encounter the practical challenges of implementing sustainability initiatives. Bridging this gap requires not only robust internal communication but also the integration of sustainability metrics into the broader business performance framework, ensuring that sustainability goals are viewed as integral to the company’s success.

Furthermore, differing incentives and performance metrics may contribute to this disconnect. C-suite executives are often evaluated based on long-term strategic outcomes, whereas mid-level managers might be more focused on short-term operational efficiencies and cost controls. Aligning these incentives to foster a unified approach to sustainability is crucial. Companies must ensure that sustainability goals are cascaded throughout the organization and that all employees, from top executives to frontline workers, understand their role in achieving these objectives.

Expert Insights: Leveraging AI and Fostering Alignment to Bridge the Sustainability Gap

The IBM report concluded by offering actionable recommendations for companies committed to transforming sustainability aspirations into reality. Leveraging AI tools tailored to specific operational needs—such as employing generative AI for carbon reduction strategies—emerged as a critical step. Generative AI, in particular, can help companies simulate various scenarios to predict the impact of different sustainability interventions, allowing them to optimize their strategies for maximum effectiveness.

Experts stressed the necessity of rigorous data collection and utilization to align sustainability targets across various organizational levels. Robust data not only helps in tracking progress but also plays a key role in enhancing stakeholder confidence, attracting investments, and ensuring compliance with regulatory standards. Companies that succeed in harnessing the full potential of their data are better equipped to respond to the growing demands for sustainability from investors, customers, and regulatory bodies.

Addressing perception gaps among different tiers of decision-makers is equally crucial. By embracing data-driven insights, enhancing transparency, and fostering alignment in sustainability goals across executive and operational ranks, organizations can achieve significant progress towards their sustainability objectives. Cross-functional teams that bring together expertise from IT, operations, finance, and sustainability are instrumental in breaking down silos and fostering a culture of collaboration.

To ensure that sustainability initiatives translate into actionable outcomes, companies should consider establishing dedicated sustainability offices or roles with a clear mandate to oversee and coordinate efforts across departments. These roles can help maintain momentum, ensure accountability, and provide the necessary expertise to navigate the complex landscape of sustainability requirements and opportunities.

Summing it Up

Despite the undeniable momentum for sustainability among global business leaders, the pathway from strategic goals to tangible outcomes remains fraught with complexities. The integration of advanced data analytics, AI, and executive alignment represents the key to transforming ambitious sustainability initiatives into concrete actions, thereby fostering both business growth and environmental stewardship. As the world increasingly prioritizes climate action, companies must rise to the challenge by investing in technology, aligning internal incentives, and fostering a culture of transparency and collaboration to ensure their sustainability ambitions become a reality.