Today, 5th of June, is the World Environment Day and we reflect on how much we have achieved in the industry, but also how much work remains to achieve a sustainable future. The last two decades have been marked by major changes in both the financial and technology sectors, driven by digitalisation and climate awareness. Here we explore the advances and challenges that have shaped these sectors and their impact on our world.
The IT Industry: A Revolution in 20 years
The IT industry has experienced an incredible revolution in the last 20 years. Internet use has grown exponentially, with global internet penetration rising from around 5% in 2000 to over 67% today, with Northern Europe at a whopping 97.4%. This growth has not only changed how we communicate, but also how we work, shop, and live our lives.
Statistics show that the amount of data produced every day now reaches an incredible 5 quintillion bytes. Cloud computing has become a cornerstone of modern business models. The use of cloud services instead of in-house servers can reduce energy consumption by up to 90%. This is a significant improvement for the environment as it greatly reduces carbon emissions.
Artificial intelligence (AI) and machine learning have become critical components of business strategies, from customer service automation to complex data analysis.
Finance and Technology
The financial sector is at a crossroads, with digitization and sustainability being the primary catalysts for the transformations in the market. At the same time, financial institutions are gradually remodeling into technology-driven companies, and most operations are now digitalized.
The fintech sector has redefined traditional banking and finance models. By implementing digital solutions, fintech companies have improved accessibility, transparency and efficiency. Digital payment systems, mobile banking and blockchain technology are just a few examples of innovations that have reduced reliance on physical branches and paper transactions. New opportunities with sustainable fintech:
Efficiency: Sustainable fintech software helps companies improve their operational efficiency by reducing energy consumption, waste and other costs associated with unsustainable practices. One example is the move to digital invoices and documentation which has resulted in a reduction in paper use.
Transparency: With sustainable fintech businesses increase transparency in their financial operations, for example using blockchain technology to create records of financial transactions that are secure and auditable. This not only enhances the trust and confidence of customers and stakeholders, but also provides companies with insights into their financial operations that can inform decision-making and improve overall performance.
Resilience: By adopting sustainable fintech software, businesses can improve their resilience to environmental risks and adapt to changing regulations. The fintech software used should be able to handle customisations as the financial industry is constantly changing and new regulations are being introduced.
Security: As financial services become increasingly digital, maintaining robust data security is paramount. Ensuring that environmental data is protected and used responsibly is essential for maintaining trust and integrity in green initiatives.
Challenges with the revolution
Despite efficiency improvements, the ICT sector still accounts for between 2-4% of global carbon emissions. This is due to the massive energy consumption of data centers and networks. Increased use of the internet and digital services also has a greater climate impact. Streaming videos and other data-intensive services contribute to energy consumption. Also, we have an over-consumption of new electronics today, and we usually replace them several years before they have reached their measured lifetime.
In the realm of fintech, this advancement translates into seamless digital payments that streamline online shopping experiences, potentially driving up consumption rates worldwide. This surge often leads to a greater proportion of unsustainable purchases, necessitating lengthy deliveries that contribute to environmental emissions.
Digitalisation clearly has a dual role in terms of sustainability. On the one hand, it contributes to increased energy efficiency and reduced emissions through optimised processes and reduced resource use. On the other hand, the increased use of digital technologies requires large amounts of energy, leading to additional emissions. Initiatives such as resource-efficient coding and sustainability standards in the ICT sector are crucial to balance these impacts. Businesses also need to embrace flexible energy solutions to cope with increased weather-dependent electricity generation and integrate renewable energy sources into their operations. Additional initiatives such as green bonds, ESG funds, and international agreements for stricter sustainability reporting have helped to promote sustainable investment strategies.
The way forward
Despite the impressive progress for both the finance and technology sectors in terms of digitalisation and sustainability, there is still much to do. The challenges we face require collaboration between businesses, governments and individuals to develop and implement sustainable solutions. Reducing energy consumption, manufacturing products from recycled materials, switching to renewable energy and continuing to reduce our dependence on fossil fuels are crucial steps towards a sustainable future.
The financial services landscape is fundamentally changing, and organizations must adapt to the opportunities and challenges presented by new technologies and environmental concerns. Companies should consider how to integrate sustainable financial practices into their business model, and companies that embrace it could have a considerable competitive advantage in the future.
On this World Environment Day, it is worth noting the significant progress we have made in the industry, but also the need to continue working towards a more sustainable and digitalised world. Our common future depends on the decisions and actions we take today.