Companies currently have to carry out two major transformation tasks simultaneously in order to remain competitive. While the necessity of digitalization is hardly questioned, the situation is different when it comes to sustainable transformation. In the Sustainable Economy Barometer, less than half of respondents believe that a sustainability strategy is essential for competitiveness (Civey 2023). Experience shows that sustainability is seen more as a means of fulfilling requirements and less as a means of strategic development.
However, the effects of climate change, the scarcity of natural resources and rising consumer expectations mean that companies need to rethink their business practices and implement sustainable solutions. This includes reducing greenhouse gas emissions, using renewable energy, promoting a circular economy and improving social standards in supply chains. International efforts to achieve greater sustainability in the economy are leading to stricter regulation. At EU level, there are stricter requirements for products and services (European Green Deal, Ecodesign Regulation, Right-to-Repair, etc.) or reporting obligations for companies (NFRD or CSRD, LkSG / CSDDD, etc.1). However, the younger generations and business partners are also driving the sustainable transformation (Bertelsmann 2024). More than two out of three German employees think it is important that their employer acts sustainably (Stepstone 2023).
On the one hand, companies need to invest in technologies such as cloud computing, artificial intelligence, big data analysis and the Internet of Things in order to remain competitive. However, digital transformation is not just about further developing IT and increasing efficiency. Rather, the value proposition needs to be reviewed or completely redeveloped (Wessel et al. 2020).
The variety of digitalization options and the scope of all three pillars of sustainability (economic, ecological and social) are particularly challenging. This becomes clear in the technical term “twin transformation”. This combines digital and sustainable efforts to ensure long-term success and have a positive impact on society and the environment. Although digital and sustainable transformation appear to be independent of each other, there are numerous synergies between them. Connections can be found in green IT initiatives, data-driven energy management to reduce energy consumption and support for sustainability reporting, among others. However, twin transformation is not so much the implementation of individual measures, but rather a holistic task that can lead to the realization of synergies in companies and supply chains (cf. Hinsen et al. 2023).
The majority of companies consider the impact of digital technologies on environmental sustainability to be positive or very positive (Bundesnetzagentur 2023). According to a recent study by Bitkom, increased digitalization efforts can reduce CO2 emissions in Germany by 73 million tonnes by 2030 (Bitkom 2024). A fundamental connection between the two transformations is therefore recognized here. Companies such as Patagonia are using the latest technologies to track the origin of their products and ensure that they are manufactured ethically and sustainably (Patagonia 2024).
However, digital solutions can also lead to increased energy consumption, which has a negative impact on the ecological footprint. For example, the use of generative models of artificial intelligence is currently leading to an increase in energy consumption; the investment in training GPT4 is estimated at $78 million (Stanford 2024). This makes it all the more important to operate the transformations simultaneously. Companies must ensure that digital initiatives are not only efficient, but also environmentally friendly.
Another obstacle is the lack of expertise and resources. Many companies have difficulty finding qualified employees to implement the twin transformation. HSBA therefore offers the Digital Transformation & Sustainability Master's degree course, in which students have been working in project groups since 2018 to learn how to explore interdisciplinary areas of the twin transformation, systematically analyze them and generate practice-relevant results (HSBA 2024).
Conclusion
By integrating digital and sustainable practices, companies can improve their efficiency, reduce costs, strengthen their market position and make a positive contribution to society and the environment. Last but not least, it is important to present yourself as an attractive employer for current and future employees. However, there is still the impression that transformation tends to be pursued selectively, is sometimes seen as an annoying additional expense and the differentiation in the market as well as the potential for corporate development are underestimated. It is therefore time to view the twin transformation as a strategic imperative and to take the necessary steps as quickly as possible to shape a sustainable and digital future.
1 NFRD: Non-Financial Reporting Directive, CSRD: Corporate Sustainability Reporting Directive, LkSG: Lieferkettensorgfaltspflichtengesetz, CSDDD: Corporate Sustainability Due Diligence Directive, GHG: Green House Gas