IT companies sharpen focus on green goals as ESG holds key to win deals

Global tech majors have even taken the acquisition route to build their ESG agenda.

IT companies sharpen focus on green goals as ESG holds key to win deals
Accenture made three new sustainability-focused acquisitions in Q3 FY22. (Image source: Reuters)

By Ayushman Baruah

Indian IT companies, much like their global counterparts, are increasing attention to their environmental, social, and governance (ESG) framework as clients have started considering it a critical factor before signing technology deals.

Wipro, for instance, is committed to reducing its emissions to zero by 2040. “ESG is not just important in winning deals but also in acquiring the right talent … I have been hiring quite a lot of senior talent over the last few years. The uniqueness of the Azim Premji Foundation and culture of Wipro is one significant reason why they join us, because it matters,” said Thierry Delaporte, CEO and MD, Wipro.

HCL Technologies has achieved a 55.9% reduction in per capita carbon footprint between 2010 and 2020. It has increased the renewable energy portion of its overall energy consumption to 10.4% in FY20 and decreased per capita water consumption by 23.5% since 2013.

“I believe ESG is becoming more and more important for our clients. We are doing well in a lot of the ESG metrics … if you have a vision and thought leadership around ESG, you get better access to customers, better mindshare, and wins,” C Vijayakumar, CEO and MD, HCL, said in a recent media interaction.

Tata Consultancy Services (TCS) has set a new carbon reduction goal to reduce its absolute greenhouse gas emissions by 70% by 2025 (with 2016 as the base year) and to achieve net zero emissions by 2030. This follows the company meeting its previous target of reducing its specific carbon footprint by half ahead of schedule by FY20 (with FY08 as the base year).

“Our net zero goal underlines our renewed commitment to environmental stewardship. To curb emissions and limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels, all organisations will have to reimagine existing business models and aim for sustainable growth,” NG Subramaniam, chief operating officer and executive director, TCS, said in its annual report.

Infosys began its climate action journey in 2008 and became carbon neutral in FY20, 30 years ahead of the timeline set by the Paris Agreement. In FY22, Infosys met 53.8% of its electricity consumption needs in India through renewable sources. By 2030, it aims to reduce absolute Scope 1 and 2 greenhouse gas emissions by 75% and scope 3 emissions by 30%.

Even at Mindtree, ESG initiatives are a business priority. “Sustainability, and therefore ESG, has become a board-level priority for nearly all our clients. They are increasingly looking to partner with organisations for whom ESG is a central part of their own strategies,” said Debashis Chatterjee, CEO and MD, Mindtree.

Analysts believe there is an increased demand among clients to align their organisations’ ESG objectives by choosing tech providers who can complement their own sustainability ambitions.

“IT companies see a large opportunity to play a key role in enabling these sustainability outcomes of enterprises, in a type of shared responsibility model. They want to capitalise on the increasing interest and investments by exposing ESG benefits and features in product/ service offerings, looking through the lens of value propositions and service capabilities. For IT firms who operate in a hypercompetitive environment, rising focus on ESG can be the difference between winning or losing a deal. They will be prioritised for possessing differentiating capabilities that not only support current ESG goals, but can also support future needs,” said Apoorva Chhabra, principal analyst, Gartner.

Global tech majors have even taken the acquisition route to build their ESG agenda. Accenture made three new sustainability-focused acquisitions in Q3 FY22. In April, it acquired two sustainability advisory companies: Belgium-based Greenfish and UK-based Avieco. In May, it acquired Germany-based akzente, a sustainability consultancy that helps companies build sustainability into the core of their businesses.

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