Digital government driven by ESG: sustainable and inclusive public services

Digital transformation is unstoppable and governments around the world are keeping up with this trend. They are adopting innovative technologies to improve public services, foster citizen participation and ensure greater transparency in decision-making. In order to maximize benefits and avoid negative impacts, these digitization processes must be accompanied by measures to address the associated environmental, social and governance (ESG) risks.

What is digital government?

The Government Digital Transformation Guide developed by the Inter-American Development Bank (IDB) defines government digital transformation as the “change in corporate culture, organizational models, methods, and processes that takes advantage of information and communication technologies to enable public institutions to meet the needs of citizens and businesses in an efficient, transparent, and secure manner.”

In addition, the OECD has stated that digital government is not simply the adoption of digital technologies in public administration, but also the definition of State modernization strategies that use digital technologies as an integral part and are aimed at creating public value. Therefore, one of the dimensions of digital government is “user-driven approaches”, which gives an active role to citizens in shaping processes, services and policies and requires the adoption of inclusion mechanisms to ensure that this happens.

Did you know that Latin America and the Caribbean is moving toward greater digital transformation of governments?

The need to streamline processes, close gaps or find new competitive advantages has created an opportunity not only for businesses, but also for governments in the region to expand digital ecosystems and the information they contain. This growth has been facilitated by improvements in digital infrastructure, including the expansion of broadband networks and the adoption of new technologies, such as cloud computing.

However, the region faces major challenges in this regard. The transformation toward digital government in Latin American countries has not been uniform. In 2022, Uruguay (35th), Chile (36th), Argentina (41st) and Brazil (49th) were in the first quartile of the ranking of 197 countries evaluated under the United Nations E-Government Development Index (EGDI), which measures the scope and quality of online services, the level of development of communications infrastructure and the human capital required. In contrast, other countries in the region ranked in the bottom quartile. In addition, although there are more and more digital natives, there is also a low level of digital literacy. This is compounded by complex regulatory environments, which can hinder digitalization processes.

To address these challenges, the IDB has developed several tools, such as the Government Digital Transformation Guide, which details how to understand and drive digital transformation according to five pillars: governance and institutional framework, legal and regulatory framework, digital talent and change management, infrastructure and technological tools, and new digital processes and services.

What are the potential risks and impacts associated with digitalization processes?

While the numerous benefits of digitalization in governments are well known, there are also associated risks that should be considered.

Environmental risks

• Increased energy consumption and carbon footprint due to the use of digital technologies. 
• Increased generation of hazardous waste related to the production and disposal of electronic devices that can release toxic substances into the environment if not handled properly. 
• Increased demand for natural resources in the manufacture of electronic devices and technology. Increased demand can lead to increased exploitation of these resources, which can have negative environmental impacts. 
• Excessive dependence on technologies that may be vulnerable to extreme weather events, such as floods, earthquakes or storms. 

Social and human rights risks

• Digital exclusion of people and communities that do not have access or skills to use digital technologies. Lack of access to or knowledge of the use of information technologies becomes a determining factor in creating (or deepening) gaps between rich and poor and in creating (or worsening) conditions of social discrimination.  
• Increased government surveillance and control of citizens through the use of surveillance and data analysis technologies.  
• Job losses due to the automation of government processes and elimination of the need for manual labor.
• Challenges in protecting the privacy and security of citizens’ personal data, especially if handled improperly. 
• Increased digital inequalities by creating barriers that accentuate existing socioeconomic and digital divides, as it may be more difficult for some citizens to access and use digital government services.  

Governance risks

• Lack of transparency in citizen participation mechanisms, poor communication and hindered accountability.  
• Implementation challenges, as it can be a complex and costly process, including interoperability and adoption issues for government employees. 
• Lack of citizen participation, as it can exacerbate digital exclusion and hinder the effective participation of those without access or skills to use digital technologies.  
• Security and privacy risks, especially if personal data is handled improperly. Cyber terrorism, espionage, data breaches and other security threats can lead to loss of confidential information, disruption of services and/or financial losses.

It is worth noting that these risks may vary depending on the context and implementation of digital transformation by governments. Therefore, digital government strategies require the design and implementation of measures to prevent and correct undesirable ESG impacts, including human rights impacts.

What tools exist to manage these ESG risks?

The IDB’s Environmental and Social Policy Framework (ESPF) includes Environmental and Social Performance Standards (ESPS) with guidelines and requirements for borrowers to manage environmental and social risks. Our framework is geared toward the systematic management of the project’s environmental and social performance throughout its life cycle. In ESPS 1, the borrower is required to do this through a project-specific Environmental and Social Management System (ESMS) based on the “plan, do, check, act” cycle. This management system is a useful tool to identify and manage the potential risks and impacts associated with data misuse and its implications for the right to privacy and other human rights; the exclusion of vulnerable groups who have limited connectivity or digital skills; and the challenges to citizen participation, particularly in terms of understanding and being able to dispute decisions made through digital government services.

In this sense, the implementation of an ESMS, with its seven pillars, to digitalization projects enables:

• The creation of a project-specific environmental and social framework, which establishes the principles and objectives to manage environmental, social and governance risks.
• The identification of risks and impacts related to the intended digital infrastructure or digitalization of public services. 
• The design and implementation of plans and programs to mitigate impacts related to energy consumption, waste management and other environmental impacts of the new digital infrastructure, as well as plans to ensure digital connectivity and equal access to digital services and the protection of the right to privacy in data processing.  
• Strengthened organizational capacity and competence, including the development of trainings and awareness campaigns for public officials on how to respond to the risks and impacts of digital government.
• Preparedness and response plans to emergency situations, including weather events that affect digital infrastructure and situations of data loss or theft that affect privacy.
• Stakeholder engagement to ensure a digital government that is responsive to the needs of citizens. 
• The implementation of monitoring and evaluation mechanisms.

Digital transformation

Digital transformation is no longer an option, but an imperative. Therefore, ESG risks in government digitalization processes must be adequately addressed to achieve environmental sustainability, social responsibility and effective governance, so as to facilitate the insertion of our countries in an increasingly globalized environment.

At the IDB, we strongly believe in the importance of applying an ESG approach to the digitalization of government services. Our Environmental and Social Policy Framework is an essential tool to ensure that the digital transformation is managed effectively and responsibly, minimizing its impact and guaranteeing accessibility and equity for all citizens through transparent and secure governance.

A robust ESG approach is critical to making digital transformation sustainable and equitable for all citizens

Karen Quintos, EVP and Chief Customer Officer, Dell Technologies