Wednesday, April 16, 2025
By Alper Cezmi Ozdemir
Digital transformation is fundamentally changing the way companies across industries and sectors operate. This transformation is fueled by a wide array of technological advancements, from data analytics to artificial intelligence (AI). While the growing use of digital technologies holds great promise, it also creates uncertainties around sustainability issues. It is now becoming increasingly important for organizations to grasp the implications that this shift has for how they approach sustainability reporting.
Companies trying to navigate this digital terrain need to ensure their reporting processes are not only efficient but also transparent and accountable, meeting the rigorous demands set by international reporting frameworks. By doing so, they can effectively communicate their environmental, social, and economic impacts, thereby reinforcing their commitment to sustainable practices and enhancing their credibility with stakeholders.
Environmental impacts cannot be overlooked
Despite the overwhelming potential benefits of digital change, the rapid rise of new technologies also brings environmental challenges. The development, maintenance and eventual disposal of digital infrastructure, such as data centers and personal devices, contribute to greenhouse gas emissions, energy consumption, and the generation of electronic waste. For instance, data centers, which are the backbone of digital operations, are notoriously energy-intensive. According to the International Energy Agency, data centers accounted for approximately two per cent of global electricity demand in 2022.
Moreover, the rapid pace of technological advancement leads to frequent hardware upgrades and replacements, resulting in a growing volume of electronic waste. This e-waste poses a serious environmental threat. The disposal of outdated devices and components not only contributes to landfill overflow but also represents a loss of valuable resources that could be recovered through recycling.
Understanding and disclosing these environmental impacts is crucial for companies that are genuinely committed to sustainability. It requires a comprehensive approach that includes investing in energy-efficient technologies, implementing robust e-waste management practices, and exploring solutions such as renewable energy sources for powering data centers. By proactively tackling these challenges, organizations can ensure that their digitalization efforts align with their sustainability objectives.
The need for global reporting standards on digitalization
The GRI Standards provide a robust framework for organizations to report on a wide array of sustainability impacts, including those that arise from the increasing digitalization of business operations. These standards are designed to cover a broad spectrum of environmental, social, and economic topics, ensuring organizations can effectively report on critical areas.
However, as digital technologies continue to evolve and integrate into various aspects of business operations, there are emerging gaps in the current disclosure landscape. These are particularly evident in areas related to the unique impacts of digital technologies, such as data privacy, the use of AI, and cybersecurity. For example, while the GRI 418: Customer Privacy Standard provides some level of coverage, it falls short of addressing the complex and rapidly changing landscape of data privacy and governance. This is a critical area where organizations face increasing scrutiny and regulatory requirements, necessitating more detailed and specific guidance.
To effectively bridge these gaps, updated GRI Standards or new disclosures that address the challenges and opportunities presented by AI and data governance will be needed. This includes standards that provide clear guidelines on how organizations should manage and report on data privacy issues, the ethical use of AI, and the implementation of robust cybersecurity measures. By responding to these emerging disclosure needs, the GRI Standards can continue to serve as a leading global framework for sustainability reporting, enabling organizations to navigate the complexities of digitalization while maintaining their commitment to sustainable and responsible business practices.
Alper Cezmi Ozdemir is a research associate in the GRI Research Team, where he led the Research Project on Digitalization, and author of the research paper The Impacts of Digitalization: Identifying emerging challenges and opportunities for sustainability reporting. The Global Reporting Initiative (GRI) is the independent nonprofit organization that is the architect of the common global language to assess and report on environmental, social and economic impacts.
[Note: This is an abbreviated version of the original article.]
