Sustainable Digital Transformation: the path to a better future

Sustainable Digital Transformation is the process by which companies, the public sector and private individuals adopt digital technologies in order to improve key areas such as efficiency and innovation.  This is achieved by focousing on a combination of environmental, social and governance (ESG) objectives.

In other words, it is not only a question of digitalising processes and products, but also of implementing these changes responsibly, to support resilient, equitable growth which also respects the planet.  Even though this presents a complex challenge requiring varied approaches for different scenarios, it remains the most promising path towards a better, greener future.

A double track approach: digitalisation and sustainability

The approach outlined above is known as the ‘twin transition’, which involves the strategic intersection between the digital and green transitions.  Rather than representing two separate alternatives, the two areas are in fact mutually enabling.

According to numerous studies, digital technologies can contribute to achieving a reduction of global CO₂ emissions of between 15 and 20% by 2030 if implemented as part of a targeted strategy in high impact sectors such as energy, transport, industry and construction.

In the current scenario characterised by climate change and geopolitical crisis, this claim is even more relevant, especially taking into account Europe’s ambition to become the first zero climate impact continent by 2050.

Sustainable digitalisation is therefore an essential lever in achieving these targets, as highlighted in the Next Generation EU and European Green Deal plans.

It is also important to note how companies who embrace this double transition will be much better equipped to deal with future challenges and build long term market value.

In that regard, Italy will be able to play a major role if it can harness the transformative potential of digital technologies to make its key sectors, like manufacturing, agrifood and energy, more efficient and competitive.  Recent data confirms that:

• over 77% of Italian companies consider sustainability a strategic priority (2024 figures);
• however only 20% have introduced digital technologies designed to measure and improve ESG performance;
• 68% of companies consider a lack of skills the main hurdle to the sustainable transition.

Technologies required to implement sustainable digital transition

Sustainable digital transition requires a solid data culture.  Companies must be able to gather, analyse and interpret numbers to make informed decisions which also take into account the environmental and social impact of their business activities.  Technologies which can make a significant contribution to the gathering of this information are:

• IoT (Internet of Things): enables real time monitoring of energy consumption, environmental parameters and production cycles. In smart cities for example, the IoT enables more efficient management of public illumination systems, traffic flows and waste collection;
• Artificial Intelligence: helps to optimise complex processes, prevent system failures before they happen (predicitive maintenance) and improve resource use. In agriculture, it can analyse data about the climate conditions and soil to reduce consumption of water and fertilisers;
• Blockchain: used to ensure supply chain traceability, promoting transparency and sustainability in the agrifood, fashion and logistics sectors;
• Cloud Computing: reduced reliance on physical IT infrastructures, thereby lowering energy consumption. Cloud enables companies to measure their environmental footprint more accurately with the help of ESG reporting tools.

Nevertheless, many organisations have to deal with various challenges associated with low levels of digital literacy and a lack of the necessary specialised skills in data analysis among the workforce.  Research on a sample of businesses have in fact shown that only one in four companies possess the essential competences they need to enable them to embrace the green tech transition.

Reports also suggest that the limited internet connectivity available in certain geographical areas is one of the principal which render digital infrastructures inadequate.  If we also consider the lack of shared criteria to evaluate the environmental impact of digital businesses (ESG measures), it becomes apparent how much work is still to be done if the European targets are to be reached.

The role of public policy and the advantages of sustainability

In order to provide an adequate response to the challenges outlined above, it is essential to understand the key role of public policy in promoting the sustainable digital transition.

Schemes such as tax breaks to incentivise the adoption of green technologies, digital training programmes and a regulatory framework which fosters transparency and responsability can all facilitate the transition.

However, genuine collaboration between governments, businesses and private individuals is required to create an ecosystem favouring sustainable innovation.  The aspects they must work closely together on are summarised below:

• company leadership: companies must introduce sustainability in governance, connectiing ESG objectives with their digital strategy;
• public policy: needs to include incentives for SMEs, investment in training and regulations that encourage the adoption of low carbon technologies;
• education and culture: it is essential to raise widespread awareness of the benefits digitalisation can bring to sustainability, starting with schools and universities.

The sustainable digital transformation can gain great advantage from a cohesive, reciprocal effort, not only environmentally speaking but also in terms of the economic and social impact.  In Europe for example, the so-called ‘digital green tech’ market is worth over 300 billion euros and continues to expand steadily, thanks to growing demand for innovative solutions combining technological efficiency with a reduced environmental impact.

It is also interesting to note how companies who have already taken steps to combine digitalisation and sustainability are recording tangible results in terms of performance.  Recent studies have shown that such companies are 25% more profitable than average, due to their increased operational efficiency, capacity for innovation and their customers’ and investors’ preference for more responsible business models.

In Italy, this trend is particularly evident among start-ups.  In 2023 for example, over 30% of new, innovative companies reported a specific focus on advanced technologies and the prioritisation of environmental sustainability.

Translated by Joanne Beckwith