Sustainability is at the top of the global agenda. From countries and companies to small businesses and individuals, incorporating acts that protect the environment and prevent climate change is of the utmost importance. Companies are increasingly working to outcompete each other, and ESG has emerged as one of the areas where businesses can truly differentiate themselves.
Being conscious of how a company delivers its product or service and its impact on the environment and people is now a key metric for investors and customers. According to Investor’s Business Daily’s ESG rankings, no other company is doing this better than Microsoft.
With a $3.37 trillion market cap, Microsoft shows big businesses that sustainability isn’t just a tick-box exercise but a cornerstone for future success. Here’s a look at how the tech giant’s gentle touch is earning major points for the business:
The early bird
Microsoft understands the importance of being first. Their mission to cut carbon emissions and reduce waste has been a long time in the making, and they’re generally considered a “first mover” in the industry. As the biggest company in the world, Microsoft has an ethical responsibility to account for its Environmental, Social, and Governance (ESG) practices. What is unexpected is just how well they’ve risen to the occasion.
No stranger to the concept of BHAGs (Big, Hairy, Audacious Goals), they set out on a sustainability journey with the following goals:
- Carbon neutral by 2030
- Carbon negative by 2050
- Water positive by 2030
- Zero-waste by 2030
Under the leadership of CEO Satya Nadella, Microsoft has committed to delivering returns to shareholders and helping the company and the entire globe forge a path to a more sustainable future.
Sustainability, the Microsoft way
What sets the IT company apart is that sustainability is interwoven with business goals rather than an afterthought. Speaking to IBD, the Chief Sustainability Officer Melanie Nakagawa explains, “Our company can only do well if the world is doing well. So, we see our work on sustainability for the planet and people as inextricably linked to the success of our business. (We) have embedded sustainability into everything our company does.”
Microsoft understands that, at its core, sustainability is a global undertaking and uses a three-pronged approach. They focus on:
- Reducing its ecological footprint.
- Helping its customers build sustainable solutions and reliably measure and report on progress.
- Advocating for global policies that it believes will benefit the environment and combat climate change.
This way, they’re changing their business and setting the bar for the industry. From a shareholder perspective, there’s immense value in knowing the company is proactive in ESG engagements with regulators across the
Microsoft In The Cloud
In its efforts to partner with global communities on the sustainability journey, Microsoft launched Microsoft Cloud for Sustainability, a platform of digital tools that helps its customers and other organizations measure and manage their environmental impact. It also assists in better preparing organizations to meet new reporting requirements.
ESG is fast emerging as a competitive investment arena, and Microsoft is of significant interest. According to Forbes, ESG investing prioritizes ethical investments and helps businesses and individuals align their investments with their personal values.
Microsoft’s commitment to sustainability has caught the investment community’s attention, and it has incorporated ESG and sustainability into its investing framework. “Not every company can be like Microsoft when it comes to ESG; they set the bar for other companies,” said Marian Macindoe, head of ESG stewardship at Parnassus Investments, which specializes in sustainable investing.
“They are first movers on climate change. When people saw they were going carbon negative, people were like, ‘I didn’t even know that was a possibility.” What sets Microsoft apart from other companies is it identifies the issues that are material to the long-term success of its business, or which pose risk. It then spends the time and energy to address how it will manage those risks. “They’re just not playing Whack-a-Mole,” said Macindoe.
Carbon Negative, Water Positive, Zero Waste
Microsoft is striving to achieve the ambitious sustainability goals it laid out for itself in 2020. It’s working to be a carbon-negative, water-positive, zero-waste company by 2030. (A carbon-negative company removes more carbon dioxide from the atmosphere than it emits.)
Microsoft has also pledged to remove from the environment by 2050 all the carbon the company has emitted since its inception in 1975. Microsoft’s pledge has earned it a UN Global Action Award in 2021 for being the first company “to commit to recovering historic emissions.”
The company says it’s working hard to turn pledges into progress. “We are firmly focused on achieving what we’ve laid out and making the right long-term investments that support the sustainability of our business for decades to come,” said Nakagawa.
As part of that push, Microsoft, one of the largest corporate buyers of renewable energy, is advocating for clean energy policies, supporting the development of carbon accounting standards, and helping realize the potential of next-gen AI to accelerate sustainability solutions, says Nakagawa.
A look at their Social and Governance interventions
But Microsoft is more than a leading voice in addressing climate change or so-called green issues. It’s also a leader on the ‘S’ and ‘G’ pillars of ESG, says Jason Qi, a research analyst at responsible investing firm Calvert Research and Investment. The tech company, he says, earns high marks when it comes to human capital management, data security, and privacy. “We’ve seen a very consistent and solid track record from Microsoft on ESG,” said Qi.
Macindoe cites a situation in which Microsoft exhibited its commitment to social issues within its walls. When Microsoft shareholders voted in late 2021 to make the company more transparent about harassment and gender discrimination, less than a year later, the company released a report that included an action plan to prevent future harassment cases.
“I mean, that is just above and beyond,” said Macindoe. “When you do the report, you make public the things you’ve done wrong and then strive to improve. I mean, that’s authenticity and humility that makes a good ESG investment or any investment.”
Room For Improvement With Regulators
Of course, Microsoft isn’t perfect. One area the tech giant can improve on from an ESG perspective, says Qi, is bettering its relationships with regulators worldwide. Microsoft’s biggest risks, for example, could come from increasing scrutiny from international regulators on antitrust issues and emerging technologies.
Challenges aside, when it comes to ESG, Microsoft is all-in and takes its leadership position seriously, says Macindoe. “I’ve been doing this for 19 years, and Microsoft is always at the table,” said Macindoe. “They always show up. If there’s an ESG leaders’ meeting with ten people, Microsoft is going to be there. Because they want to learn, they want to share, and they want to be responsive.”
Conclusion
While many companies are still grappling with the various intricacies of sustainability, Microsoft has risen to the challenge and set the bar. With a circular approach to ESG, the tech giant is getting its house in order and taking the world along for the ride.
Tackling three major challenges—carbon, water, and waste—they’ve managed to reduce their carbon footprint and are further committed to reducing all the carbon they’ve ever created. By working with and supporting governments, NGOs, and other bodies working on climate change, they’re helping to create a collaborative ecosystem for learning and implementing new techniques.
But it’s not all goodwill. Microsoft understands that a healthy world is one in which it can continue to thrive and dominate markets. Regardless of the motivation, the result remains the same: a better planet for all.
