As organizations work towards net zero, one business function has significant power to accelerate progress.
While technology may not be the magic bullet that will solve climate change, it can make a powerful difference to the way organizations plan, set targets, execute, optimize, measure and report on sustainability initiatives.
Yet technology strategies and sustainability strategies are less integrated than they should be. Recent research suggests less than one in two CIOs are part of the leadership team setting sustainability goals.
Technology can be harnessed to solve complex challenges – to simultaneously manage risk, build resilience, maintain profitability, and protect brand equity and reputation. But it is also a large source of emissions. Since 2007, the tech industry has contributed to around 6% of greenhouse gas emissions – and the world’s collective carbon footprint will only continue to rise as our dependence on technology for simple daily tasks increases.
That’s why tech leaders will need to hold themselves accountable for meeting their organization’s sustainability targets by investing in ‘green’ tech solutions. And at the same time, play a proactive role in finding new solutions to ESG challenges. To use that tech for the greater good.
The sustainability imperative
Market forces are demanding change, making sustainability table stakes for any competitive organization. After two years of pandemic-led disruption to supply chains and operations, external risks are all too real. In a recent survey of over 100 Australian C-suite leaders, 54% agreed the operational impact of climate-related disasters was the top climate change issue already impacting their business.
Sustainability is also already impacting access to capital, with ESG mandates on the rise – including within Australia’s $3.3 trillion superannuation pool. In late 2021, a coalition of major investors, banks and insurers committed their collective $130 trillion in assets to target net zero emission investments by 2050.
Yet almost a third of Australian companies believe they’re falling short on their ESG commitments. Meanwhile, just 36% of ASX 200 companies have set a net zero target, and the majority (62%) don’t even publish their ESG plans.
As I discussed in my presentation at the Sustainability Leaders Summit in Melbourne, there are several possible reasons why this commitment to change is failing to translate into effective action.
Organizational structures, along with decision-making and governance processes, are rarely designed to treat sustainability as a material business issue. For example, if tech leaders aren’t involved in sustainable goal setting, that’s a red flag.
Business leaders recognize they bear significant responsibility and that there’s a lot at stake, however, they’re not in control of external factors. For example, consumer product companies can’t control what happens to their products post-purchase. They may also need to educate partners and customers to help drive behavioral change.
And then there’s an ongoing misconception that sustainability and profitability cannot coexist. This couldn’t be further from the truth, but many organizations struggle to quantify the potential return on their sustainability investments.
Here’s the crux of the problem: unless the business case for sustainable practice can be proven, and the impact measured and reported on, nothing will change. Critical elements of your ESG strategy will be little more than good intentions.
And that’s where technology – including AI-based tools, decision science modelling, and green cloud computing – can make a difference.
Transforming sustainability
Big, inspiring sustainability goals are all well and good. But to achieve impactful results for business and society, sustainability must be addressed as a holistic challenge within and beyond company walls.
This isn’t easy: organizational processes and vast supply chains are inherently complex, making it almost impossible for human intuition to accurately predict the impact of different initiatives.
This is why tech leaders need a seat at the sustainability table. They bring reliable data and technology that sparks innovation – helping to identify new opportunities and create tomorrow's measures of success. Guiding decisions on how to prioritize certain sustainability initiatives and investments over others – and (most importantly) showing how profitability and sustainability can coexist.
Accelerating net zero progress for a textile manufacturer
Here’s one example. Using machine learning and decision science, we can simulate and explore future scenarios, better understand complex problems, and leverage data to optimize solutions. Artificial Intelligence tools can also uncover alternative options that might otherwise have been missed or underestimated. In turn, these data-based insights can inform the business case for investment.
When Thoughtworks worked with a textiles manufacturer to map out the cost, timeframe and impact of over 200 different sustainability-related scenarios – from switching to electric vehicles (EVs) to changing raw materials – the outcome was surprising.
They found that switching to EVs could potentially reduce carbon emissions by 16.9% year on year, but this was costly and would take time to fully transition. Switching to organic cotton and incentivizing customers to choose more sustainable products would have a similar emissions reduction impact of 12.3% each year.
The difference? Switching materials could also be implemented in weeks, rather than years, and would have a negligible impact on business costs. In fact, when we ranked the initiatives by the amount of emissions reduced, duration and cost, switching to EVs failed to make the top 10 for impact.
Considerations
Are you using data to guide your decisions, or gut instinct?
How can your CIOs help you use decision science to prioritize the right initiatives?
Reduced waste, increased profitability for a fast-growing supermarket service
Technology can also help us find smarter, cleaner ways of working. For example, Thoughtworks helped UK-based supermarket chain Waitrose manage the challenges of its rapidly growing home meal delivery service.
As demand for the service grew, Waitrose continued to expand the range of recipes. However, this presented new challenges. It became increasingly difficult to accurately forecast customer demand and preferences for specific recipes, leading to over or under-ordering of the raw ingredients. And that was creating a poor customer experience, while also contributing to food wastage and impacting the service’s profitability.
Within three weeks, we developed and deployed a new AI-based demand forecasting system that could learn customer preferences and adjust for seasonality. This immediately reduced food waste by 25%, improved the customer experience and made the service more cost-effective.
Considerations
How mature is your organization’s ability to measure and report on the progress of sustainability initiatives and associated benefits?
Does your tech team already have access to simple tech tools that would reduce costs and improve sustainable outcomes?
Why sustainability needs to be a goal of digital transformation
For the first time ever, CEOs placed environmental sustainability in their top 10 business priorities in Gartner’s 2022 Survey. As well as feeling pressure from stakeholders to act, they see opportunities to drive business efficiency and revenue growth.
That’s why it’s so important to integrate digital transformation and sustainability strategies. Tech can enable the redevelopment of products, services, supply chains and business operations to lower carbon footprints and enable circular economy models – while also consciously lowering the environmental impact of accelerating digital adoption.
Solving the sustainable tech paradox for a green energy supplier
As a technology consultancy, Thoughtworks is aware our work can create a carbon footprint. That’s why we also work on ways to improve this – not just for our clients, but for the whole industry. Through a collaboration with major public cloud providers, we developed an open-source Cloud Carbon Footprint tool.
Green energy provider Holaluz recently used this tool to understand the environmental impact of its current cloud infrastructure. Holaluz wanted to minimize the emissions generated from its cloud compute to ensure its operations aligned with its core values and purpose. The tool identified ways to reduce annual costs by 3% – while also cutting CO2 emissions and energy consumption.
By using this tool to benchmark the impact of cloud and compute services, organizations can also find opportunities to relocate workloads to regions with a higher mix of renewable energies, or switch to more energy efficient compute options.
Considerations
Are your CIOs and CTOs set targets for reducing server and software emissions as part of your ESG goals?
How can you measure and reduce emissions from your cloud infrastructure?
Working together towards net zero
An effectively executed sustainability strategy can help you mitigate the risks of operating in an uncertain future. This is fundamental to building supply chain and operational resilience – and in turn, can create strategic business value and competitive advantage.
It will take a collaborative effort to achieve this strategy. Technology leaders will increasingly be asked to ensure their platforms, functions and software have a sustainable focus – that they are providing solutions without adding to emissions. Their expertise will become invaluable – by implementing AI-based tools, decision science modelling, and green cloud solutions to prioritize, measure and manage your sustainability targets. Ultimately, they can show how improved sustainability will complement, rather than conflict with, business profitability and growth goals – and help you reach your sustainability targets sooner.
