A new digital transformation? From click & mortar to brick & software
09 May 2022
At the time of software companies, or rather "Brick & Software", the decisions to make or buy must be completely…
In 2020, Eurazeo launched O+, its new sustainable development strategy aimed at achieving carbon neutrality by 2040 at the latest, promoting a more inclusive economy, and encouraging low-carbon investments. This dynamic of commitment to CSR – Corporate Social Responsibility – does not only concern investment funds but also the entire economic spectrum, like groups such as Veolia or Engie which have placed ecological transformation at the heart of their strategy. This trend is driven by ever-increasing social pressure, particularly from the younger generation, and by increasingly demanding legislation for companies.
Social pressure seems to be the main motivation for companies to take action on CSR initiatives. Consumers are more than ever demanding transparency on the origin and quality of products, leading to the proliferation of labels, such as Origine France Garantie, and the success of start-ups such as Yuka or C’est qui le patron? This trend is not limited to B2C markets, as B2B players are also fully concerned. As for employees, they are increasingly demanding that their company demonstrate ecological and social exemplarity. Some platforms stand out in this respect, such as Shift Your Job, which proposes to list organisations that contribute in one way or another to the decarbonisation of the economy. A similar logic is proposed by the Collectif pour un réveil écologique (Collective for an ecological awakening), which seeks to help young graduates “choose an employer sufficiently committed to the transition”.
The legislative framework also lays the foundation for a change in the dimension of the interest that companies have in CSR issues. In the space of a few years, the legal framework set up to encourage companies to adopt sustainable principles has been greatly strengthened. In 2015, the Law on Energy Transition for Green Growth advocated sustainable economic growth and the creation of sustainable jobs. Four years later, the Pacte Law encouraged companies to take better account of social and environmental issues in their activities, and introduced the principle of the Mission Company, giving companies the opportunity to “declare their raison d’être through social and environmental objectives”. At EU level, two pieces of legislation have recently come into force. Since 2019, the Disclosure Regulation (or Sustainable Finance Disclosure Regulation) imposes new obligations on financial actors to integrate ESG (Environmental, Social and Governance) criteria into their reporting, requiring fund managers to assess the sustainability of their portfolio and end investors to define sustainability objectives. The comparability of financial products with regard to ESG risks, and therefore the incentive for funds to take these criteria into account in their investment policies, was particularly strengthened. Finally, the CSRD proposed by the European Commission in 2021 aims to improve and harmonise the publication of information on the sustainability of companies.
In order not to turn away a growing number of consumers, to remain attractive on the labour market in a concern for employer branding, and to satisfy increasingly pressing legislation, companies must therefore integrate CSR aspects into their strategy. Large groups are taking this need more and more seriously, often as a constraint, and sometimes as an opportunity. Total recently became TotalEnergies, a name change that is not only symbolic, but representative of the group’s desire to be seen as a player in the transition, by supplying energies such as wind, biomass, solar, electricity and hydrogen. This trend is also embodied by companies that make CSR a strategy for their business model. The French company BackMarket, founded in 2014, is already a major player in the circular economy and since May 2021 one of the French unicorns, after raising €276 million in funding. Others, stemming from the social entrepreneurship trend – which combines social and environmental dimensions around a viable project – are meeting with great success: La Ruche qui dit oui, which offers to buy directly from local producers, or Phénix, the French competitor of Too Good to Go, which gives a second life to unsold food, are examples of successful young companies whose model structurally responds to the sustainable development issues of our time.
Faced with this increasingly pressing demand for virtuous operational models, the “tick-the-box” approach in which many companies have invested in recent years seems outdated. Indeed, the monitoring of “standard” indicators, such as parity, turnover rate or energy consumption, does not allow to accurately reflect the efforts undertaken to make economic activities more sustainable. In this context, the deployment of digital solutions, combined with an advanced analytical approach enabled by a mastery of the most advanced data science techniques, are key to developing a CSR approach that is as close as possible to the company’s operations, with a directly measurable impact. For example, predictive maintenance projects allow for a better understanding of the rate of degradation of an asset, and thus extend its lifespan while optimising its maintenance plan. The “new generation” of CSR is therefore profitable and sustainable, and can contribute positively to the financial performance of companies.
Thus, for many companies, CSR is no longer an administrative constraint of compliance with the numerous rules in force, but rather a strategy challenge to be addressed by integrating it fully into their business model. It is true that extra-financial reports are still sometimes academic and not very operational, but companies are gradually becoming aware that they can no longer be satisfied with this. Social and environmental reporting can no longer serve only to reassure potential investors or the supervisory authorities, but must now reflect the company’s overall strategy. To do this, adapting its business model is now a necessity. Moreover, economic actors are now at a turning point where legal and social pressure, and its possible amplification in the future, leads us to believe that the logic of adaptation and optimisation that has prevailed until now must now give way to a logic of innovation and construction of new business models that are equal to the challenges of the ecological transition.
Maxime Caro, Léo Poitou, Alexis Maupoint
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