By Ross Sleight, Chief Strategy Officer at Somo, a global digital product agency
Digital transformation is accelerating. When businesses take on the challenge of becoming digital first to respond to consumer expectations they need to reinvent themselves. The finance sector in particular has seen a significant push towards becoming digital, leaving legacy processes behind to create new Products and Services that are more impactful and meaningful to customers. While there’s no one way to do this, the Harvard Business Review recently published an article on navigating the ambiguity of digital transformation through three principles; acting ahead of the phase transition, amplifying learning and adaptation, and investing in capabilities, not competencies.
However, with the role some businesses play in our lives as customers and employees, their effect on the world, society and the environment, and the communities we live in, there is a fourth principle that demands to be a central tenet of any digital transformation strategy: Sustainability.
As a whole, the finance sector has been slower than others to embrace sustainability in their digital transformation. This is mostly due to businesses themselves being slower to shift towards sustainability and meeting this wider stakeholder demand than simply focusing all efforts on financial returns for shareholders.
A ubiquitous feature for businesses
When it comes to ESG (Environmental, Social and Corporate Governance and often underpinned by UN Sustainability Goal) commitments, made by a business there is a need for them to cascade, as a whole, down into their digital transformation strategies. With ESG and digital transformation, as PwC detailed in a report earlier this year, these areas need to touch every single action a business does, in order for their true potential to be realised. If a business is not pursuing a positive ESG agenda as a core part of its proposition, its reason for being, then we cannot expect digital transformation to have optimum sustainability. Of course, a digital transformation strategy can implement and measure ESG goals, and in itself, can be accountable and sustainable in its practices and implementation, but it can only run as fast as a business’s total commitment to sustainability. For example, specialist investment companies, like Clim8, have strong digital propositions underpinned by company-wide sustainability.
In practice this can take many different forms. This can be helping to measure, improve, and develop customers’ digital literacy, like Lloyds Bank has done with their Essential Digital Skills Report, to ensure no one is left behind because of digital transformation. Digital transformation has also led to bank branch closures that in theory make economic sense by creating cost efficiencies, increasing returns to financial shareholders, but this strategy ignored the needs of a key stakeholder within a sustainability agenda: the communities these branches operated in. Internally, it can mean ensuring that product development is meeting sustainable best practices, with the technology being used not just because it was the best price, but because it’s the most environmentally sound as well.
Digital transformation should also act as a way of measuring the impact of business. It should facilitate and measure supply chain audits, work to develop carbon footprinting measurements and wrap around the core business to provide insight on this and other data. The goal is then to action all of this to further a business’s sustainability goals. Transparency can be built in these cases for the supply chain around core digital platforms such as blockchain or distributed ledgers.
The challenges: behaviour and investment
One of, if not the, biggest barriers for digital transformation comes with customers and behaviour change. Digital transformation based around improved and sustainable customer experience has created a shift from traditional channels of service t such as phone to digital channels for self-service. For customers that are used to undertaking certain tasks in a particular way, we cannot expect them to change these tasks immediately and embrace digital. This behaviour change needs to be motivated and incentivised from trial through to the development of a digital first habit.
Another obstacle in sustainable digital transformation is the additional investment that is required. Features such as greater accessibility in a front-end user experience, or providing services in a different form will all require investment. Investment opportunities in companies with sustainable digital transformation may be overlooked for ones that the market provides a better return on.
Making the juice worth the squeeze
Despite the challenges of implementing a sustainable digital transformation, the fruits of that labour will yield a positive differentiation as a brand for customers, and provide them with a more inclusive experience that will promote greater loyalty. The general public is more aware of how businesses conduct themselves around sustainability and want to be with a company that in their eyes is doing the right thing for all stakeholders.
Implementing a digital transformation that is rooted in sustainability means wider engagement across all stakeholders, from the customers and employees, to the financial shareholders as well. Those that seek this more inclusive, sustainable approach will develop new engagement strategies to fund and advance their digital transformation, thus creating an experience that is continuously improving for its customers.
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