Edtech industry or Education Technology Industry players are gearing up to plan, report and monitor their ESG performance amidst an exponential rise in digitization. Notably, the prevalence of online learning against the backdrop of the COVID-19 pandemic prompted industry leaders to achieve ESG goals. AI-based learning tools forayed into the mainstream education landscape, encouraging investors, venture capitalists and other stakeholders to prioritize ESG goals. Lately, education technology has witnessed skyrocketing demand across advanced and emerging economies. A host of global organizations expects their vendors to adopt ESG goals, while stakeholders are demanding that startups define and focus on ESG strategy.
Investors are bullish on the prospect of edtech providing an immersive learning experience to K-12 students (kindergarten to 12th grade). High-profile and emerging players continue investing in tech and tools that boost online and digital learning. A slew of private equity funds has ESG-themed funds, alluding to stakeholders growing interest in society and the environment. For instance, in March 2022, Cakap, an Indonesian online language learning platform, secured fresh funding from IIF (Indonesia Impact Fund). The infusion of funds is reported to be the first ESG-compliant private impact fund under the aegis of Mandiri Capital Indonesia. Buoyant investments will propel access to high-quality education, especially in lower-tier cities, and play a pivotal role in bridging the language proficiency gap.
Environmental Perspective
Edtech companies are responding to climate change to invest in an environmentally sustainable future. Digital learning companies have furthered their efforts to propel UN Sustainable Development Goals and take a giant stride toward decarbonization. Stakeholders are expected to be on the same page on global net zero emissions and use technology and operations to foster the change the world needs. Microsoft aims to reduce its Scope 1 and 2 emissions to near zero by 2025 and is contemplating removing more carbon than it emits by 2030. Moreover, in July 2021, it also rolled out the Microsoft Cloud for Sustainability to render automated, integrated and comprehensive sustainability management.
Stakeholders are likely to take a robust approach to reporting and recording emissions with automation and data collation. Industry players could use a secure cloud to tackle e-waste across schools with startups investing in the advanced technology. In December 2020, Karo Sambhav used Microsoft Azure, engaged with over 22,700 schools, and collated around 12,000 metric tons of e-waste for responsible recycling in India. Furthermore, Microsoft also emphasized bridging the skill gap in data center communities through investment in technical training programs at vocational schools, community colleges and other educational institutions.
Social Perspective
Edtech companies are promoting the values of gender equality, inclusion and a safe work environment. Companies are likely to complement UN Sustainable Development Goals with an emphasis on quality education and boosting workers’ health and safety. Several edtech companies have sought state-of-the-art technology to bolster inclusion, diversity and access. For instance, in September 2021, SP2 Mentor Collective suggested that it connects students, targeting first-generation learners, including those of color, students from low-income backgrounds and other underrepresented students.
Stakeholders have added fillip to their ESG goals by investing in new-age skills and focusing on talent mobility. Companies are gearing up to upskill talent pools to keep up with global digital transformation. Cisco is expediting the way it develops, attracts and promotes diverse talent. It has joined forces with OneTen Initiative, that is gearing to hire, upskill, and promote one million African American/Black (AA/B) Americans over the next ten years. It witnessed a 60% surge in the representation of all employees who identified themselves as AA/B from entry level through the manager.
State-of-the-art technologies, including ML and AI, have witnessed an uptake. To illustrate, as of June 2022, Coursera reported around a 50% surge in the number of business learners in India. The trends have prompted technology-oriented startups to inject funds into advanced solutions and services to help bolster the digital skills of their employees. In August 2021, Caisse de dépôt et placement du Québec (CDPQ) announced an infusion of funds into ApplyBoard through Equity 253 fund—a diversity-dedicated fund—aimed at companies leveraging diversity and inclusion initiatives and promoting them as business priorities.
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Governance Perspective
As sustainability becomes mainstream, governance and accountability have become instrumental for prioritization and alignment across the industry. Microsoft has formed a Climate Council with business leaders from every business group to foster alignment, offer sustainability advice, review progress on commitment, prioritize resources and funding and collaborate. Its Board of Directors offers feedback, insights, and oversight across environmental and social aspects.
With companies targeting pre-K to 12, post-secondary and workforce education portfolios, stakeholders have prioritized governance structure to foster their ESG profile. For instance, Cisco asserted in its Purpose Report that audits covered 390,000 supply chain workers during fiscal 2022. Cisco’s compliance and ethics organization reports all allegations and cases of ethical violations to the Audit Committee of the BoD and the Compliance Steering Committee.
Poor ESG practices may be detrimental to environmental, reputational and legal risks that can dent an organization’s prospect on the bottom line. Companies with strong ESG performance could stay ahead of the curve with a lower cost of capital, a loyal investor base and better access to financing. According to the U.S. financial services company Morningstar, ESG investment strategies surpassed USD 1 trillion in 2020, largely fueled by sustainable investment funds amidst the COVID-19 pandemic.
In December 2022, Skillsoft’s corporate social responsibility report found that diversity, equity, and inclusion (DEI), participation in fair trade, and enhancing labor policies were top priorities in the CSR program. The research noted that 46% said ESG efforts were replacing CSR efforts. Prevailing trends suggest the global edtech market could register a 16.5% CAGR from 2022 through 2030. The growth trajectory is expected to gain ground as companies focus on creating long-term value by creating ESG strategies.
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