This article was originally published in Forbes Council.
By Dr. Francois Laborie, President of Cognite, North America
We are currently in the “big pledge era,” a time when world governments and corporations are boldly committing to major reductions in their carbon footprint and overall environmental impact. Throughout 2020, we saw pledge after pledge from companies of all types. Nestle promised to reach net-zero by 2050. Facebook upped the ante by pledging to reach net-zero by 2030. And Royal Dutch Shell pledged to strive for net-zero carbon emissions not only from its operations but also from the end use of all its energy products by 2050.
There is no doubt that climate change is real and action must be taken now to mitigate it. Companies committing to their part in this work are commendable. However, in a recent survey of U.S. energy industry leaders, conducted by my company in partnership with The Harris Poll and Axios Studio, 75% of respondents said that “the public messaging about what companies in the industry are doing to address environmental sustainability is different than the conversations held behind closed doors.”
Despite the apparent false front, I found the overall report to be extremely encouraging. “Sixty-eight percent of energy leaders believe the industry can reach net-zero emissions by 2050,” and the data also identified the critical component that will get us there: technology.
Based on what I’ve learned from our company’s findings, as well as larger industry trends on the matter, here are my perspectives on technology’s role in the energy industry’s sustainability journey.
Many leaders see the initial expense as a roadblock.
According to our report, 3 out of 4 U.S. Energy leaders agree that “many companies in this industry say they want to be more environmentally sustainable but aren’t willing to actually shoulder the cost of doing so.” The prevailing myth in the energy industry is that environmental sustainability initiatives will hurt the bottom line.
It simply isn’t true, however. It’s quite the opposite: Sustainability can drive profits by enabling cost cuts, improving efficiency and reducing the environmental footprint — all at the same time. In just one example, when GE reduced its greenhouse gas emissions by 32% and water use by 45%, it reportedly achieved $300 million in savings.
It’s also worth noting that investing in sustainability is a risk management tool. In a 2015 study (download required), 72% of respondents noted climate change-related risks could significantly impact their operations, revenue or expenditures. The way I see it, in the long run, only those who become sustainable will remain competitive and continue to drive growth.
Prioritizing environmental sustainability improves operational efficiency.
A recent Accenture study claims 2021 is “the year of the Twin Transformation” — i.e., the most successful companies will focus on the intersection of digital technologies and sustainability. This is echoed in my company’s report, which found that 84% agree they can’t achieve their environmental sustainability goals without technology. However, we also found that 38% believe decarbonization would ultimately increase their operating costs. For all industry leaders, getting to net-zero is a balancing act of initial investment versus long-term profits.
Fortunately, technology is a catalyst for environmental sustainability specifically because it allows us to reimagine existing operations. Technology enables the development of new products and services that use less energy, chemicals and water, and reduce waste from operations — all of which can improve both environmental sustainability and operational efficiency at the same time.
Take Pirelli, an Italian tire company. It measures operational performance and product quality in real time and uses algorithms to suggest corrections throughout the production cycle. This allows for continual improvement to both the process and product, eliminating waste by reducing the number of defective tires that would otherwise end up in landfills. This type of big data management system enables more efficient operations and a more effective product, increasing value for both the company and its customers.
When developing plans to meet sustainability targets, it is helpful to take an indirect approach. Instead of asking yourself, “What technologies can we implement to reduce emissions?” change the question to, “What technologies can we implement to enable process and machine optimization?” Much of the positive sustainability impact to date has resulted indirectly from digital transformations aimed at operational goals.
The first step toward a more sustainable future is understanding our present.
Companies representing more than 70% of the global economy are predicted to set targets this year to reach net-zero emissions. Like most sustainability projects I’ve been a part of, these plans often begin with two questions: What is our carbon footprint today? What are the biggest factors impacting it? These are data questions. Data is how we identify where there is waste and where there is opportunity.
Previous evidence has suggested (subscription required) that data-driven companies are 5% more productive and 6% more profitable than their competitors. However, our report found that the biggest challenges to leveraging data include manual data collection, frequency of reporting and poor data quality. This is often due to the complexity of underlying information technology (IT) and operational technology (OT) source systems. Industrial data is siloed, making it hard to access and harder to understand. Implementing a central, contextualized data management system is a crucial first step.
It is clear that environmental sustainability and operational improvements go hand in hand, and data is the connecting thread. To rise to the challenge of the “big pledge era” and truly achieve net-zero goals, we must be transparent with our data, which requires the right technology to uncover it, understand it and act on it.
As the industry becomes more effective in using innovative technological solutions to improve operational efficiencies while reducing environmental impact, we can increase profitability. We can then shift resources to larger investments in environmental sustainability — energy diversification, electrification, natural resource sustainability, etc. — to drive the energy transition forward.