EY UK Sustainability

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Digital technologies are one of <a href="https://www.weforum.org/agenda/2019/01/why-digitalization-is-the-key-to-exponential-climate-action/" target="_blank">the best hopes</a> in the effort to achieve net zero by 2050 and offer businesses the opportunity to bridge the gap between net-zero ambitions and actions.The use of Internet of Things (IoT) devices, the cloud and Big Data analytics can target improving efficiency and lowering the emissions of factories, buildings and other energy-intensive assets. Digital twins, artificial intelligence (AI) and machine learning (ML) can also support minimizing carbon footprints across industries.Organizations continue to be inundated with new technologies and the infinite possibilities they present, but experts warn that businesses risk being lured into the hype cycle. Businesses must make critical decisions about where and how best to deploy these technologies, and avoid getting distracted by “bright and shiny” things, says David Rae, Partner, Climate Change and Sustainability Services at EY.Rae urges business decision makers to buy solutions—not just technology. “The focus should be on what challenge you’re trying to solve and why. Emerging technology is part of the answer; it’s not the answer. It’s about thinking bigger,” he says.Sean Jones, Microsoft’s Chief Sustainability Officer in Germany, explains that the biggest challenge to decarbonization lies in an organization’s impact beyond its factory and office walls, known as scope 3 emissions.“Addressing this requires decarbonization at a systemic level, including renewable power replacing fossil fuels; advances in hydrogen and battery technology; the electrification of every business, encompassing e-mobility, steel, cement and chemical manufacturing; and integration of digital technology to securely manage the energy grid, balancing supply, storage and demand,” says Jones.

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The use of technology is critical to ensure that what matters is measured and that the right data is shared, emphasizes Gunther Rothermel, SAP’s Co-GM and Chief Product Officer for Sustainability.“Businesses that aim to decarbonize must measure and report scopes 1, 2 and 3 emissions with accuracy,” says Rothermel. “Managing diverse emissions across a supply chain with different data quality is a challenge for any one company. Industry coalitions empowered by a sustainability data exchange enable the transactional carbon accounting needed to reach substantial decarbonization across supply chains.”Digitalization and sustainability initiatives promote deeper, broader transformation when they are successfully combined. By processing data more efficiently, identifying challenges faster and testing solutions immediately, even hard-to-abate sectors can become agile and responsive.“So many sustainability initiatives are good for both the planet and profit. The data used by businesses today is only the tip of the iceberg,” says Christina Shim, VP and Global Head of Product Management and Strategy, IBM Sustainability Software.Digital tools are now <a href="https://www.microsoft.com/en-us/sustainability/cloud" target="_blank">available</a> to help companies connect to data at the source and standardize it on a common data model aligned with globally accepted standards, such as the Greenhouse Gas Protocol for emissions, ESRS and GRI standards for water and waste and the WBCSD Pathfinder for Product Carbon Footprint.“Centralizing and standardizing data according to these standards is accelerating progress and bringing greater accuracy to reporting and, ultimately, to the progress companies can make toward their sustainability goals,” says Brandon Potter, Microsoft Principal Group Product Manager, Microsoft Cloud for Sustainability.What was once emerging tech is now everyday table stakes to inform and drive business and sustainability goals. IoT sensors have multiple use cases across industries, including agriculture, farming, manufacturing and transport. AI, in particular, has the potential to integrate with all other technologies and help organizations make better, faster decisions that hasten progress toward low-carbon and net-zero goals.AI can translate collected data into actionable insights and feedback loops to make insights more useful over time. Collecting and analyzing data from sensors and GPS trackers helps manage resource-intensive tools essential to many industries, increasing productivity and identifying efficiencies that can reduce operational impacts.For example, <a href="https://research.ibm.com/blog/geospatial-models-nasa-ai" target="_blank">a new foundation model being developed by IBM and trained on public</a>, NASA-collected geospatial data could convert satellite data into high-resolution maps of floods, fires and other landscape changes. Such a model could potentially help businesses with planning, operations and risk mitigation, or be further fine-tuned to a specific need.“Every day, my team works with customers around the globe and across industries. Ultimately, the common issue facing all of them is a data issue.” says Potter. “True and accurate emissions reporting requires data from all aspects of the business. Today, this data is siloed and not in a common structure.”

While experimentation is encouraged, one of the biggest risks to progress is blindly committing to immature technology. This is why EY’s value-led approach reframes how businesses consider how they create and derive value from sustainability.Many investments related to wind and solar power, battery technology and e-mobility have reached a level of maturity where experimentation is no longer required.“The goal here is to think through what a long-term commitment to specific innovation paths looks like, and allow that to grow organically,” says Ben Taylor, Global Strategy and Markets Leader, Climate Change and Sustainability Services at EY.Early adopters risk failing fast—but not usually in a way that favors agile startups. After securing board-level buy-in, failing to deliver can lead to writing off technologies that may have potential later in the business journey. Taylor cites an example of a consumer products company that was looking at technology to reduce the density of plastics in bottles. “The technology had several benefits, from cost-effectively reducing virgin plastic to carbon incentives. But the technology just wasn’t mature enough at the time,” says Taylor. “They rolled out the technology for about three years before giving up on it. Now, the technology is more mature, but it has a bad reputation within that specific business.”The bottom line, according to David Lindop, EY Global Consulting’s Chief Data Officer, is that many emerging technologies that were considered science fiction just five years ago have matured at an unprecedented rate and are now ready for application.“Sustainability may be the first use case as a driver for change, but these technologies will have an impact way beyond decarbonization, such as on cost, efficiency, waste reduction and, ultimately, business resilience,” says Lindop.

Steve Varley

Global Vice Chair for Sustainability, EY

Christina Shim

VP and Global Head of Product Management and Strategy, IBM Sustainability Software

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How Can Emerging Technologies Catalyze the Decarbonization Journey?

The global supply chain has faced increased scrutiny in recent years amid growing concern around climate change, human rights and corporate responsibility. Supply chain sustainability is motivated by factors including consumer demand, investor pressure, resource security, human rights and legislative agendas.According to a 2022 global EY <a href="https://www.ey.com/en_us/supply-chain/supply-chain-sustainability-2022" target="_blank">study</a>, eight in 10 supply chain executives are increasing their efforts toward sustainable operations, but the complexity and lack of visibility of global supply chains and the need for resilience pose challenges.Gunther Rothermel, SAP’s Co-GM and Chief Product Officer for Sustainability, explains that businesses are facing tightened legislation on sustainability in many markets around the globe.“In the past, procurement might have looked at a technical specification and negotiated a price. In the future, sustainability in a supply chain becomes possible for businesses that are equipped to record, report and act on scopes 1–3 emissions data,” says Rothermel. “Companies can rise beyond the compliance challenge with a reliable data foundation enabled by the exchange of data along supply chains.”

Companies can increase their climate impact and enable emission reductions in hard-to-abate sectors with minimal cost to the consumer by working with suppliers toward establishing a net-zero supply chain.By incorporating ESG analytics across product design and development, sourcing, manufacturing processes and life cycle planning and reporting, technology is supporting sustainability-led transformation by helping stakeholders make more responsible decisions underpinned by data.According to the <a href="https://www.weforum.org/reports/net-zero-challenge-the-supply-chain-opportunity" target="_blank">World Economic Forum</a>, circularity through the reuse and recycling of products, improved efficiency and the use of renewable energy could reduce almost 40% of emissions in supply chains, with just a minor impact on product pricing.Cloud technology products are now unifying data intelligence and providing organizations with the overall visibility needed to both improve sustainability reporting and track the insights needed to make decisions for long-term business transformation, explains Musidora Jorgensen, Microsoft Chief Sustainability Officer, U.K.“The ability to unify data to provide the insights needed to reduce the overall impact across carbon emissions, water and waste is where organizations are struggling at the moment, primarily because it’s so complex to do,” says Jorgensen.Sheri Hinish, EY’s Principal, Americas and Global Sustainability Innovation and Ecosystem Leader, says that AI plays a crucial role in enabling this effort.“AI is a partner that can help you identify trends and patterns using large amounts of data, and that gives you insights that you otherwise wouldn’t have readily available,” she says. This includes how organizations can make operations more efficient or use machine learning algorithms to model carbon-responsible logistics networks and circular thinking, she explains.“Using AI in demand forecasting based on responsible inventory management uses many decision points to model more sustainable decision orchestration end-to-end,” says Hinish. ”When coupled with technologies like digital twinning, these simulations can help organizations use existing data and run scenario models with a net-zero lens that can uncover opportunities around eco-efficiency, resource use and other ESG-related metrics.”It can also promote operational efficiency throughout the supply chain by cutting down on energy use, which is critical to lowering carbon emissions.“With AI technology, companies can quickly evaluate what-if scenarios, such as alternative supplier sourcing, alternative route planning or prioritizing different KPIs—for example, prioritizing carbon footprint over cost or time,” says Rishi Vaish, CTO and VP, IBM Sustainability Software. “In this way, AI can help businesses respond to disruptions with agility, making them more resilient and more carbon-efficient.”Bringing operational data like this into how companies plan and operate their key processes is the next big step in corporate sustainability, says Sean Jones, Microsoft Chief Sustainability Officer, Germany.“When thinking about planning for production, supply chains and transportation, staff need operational sustainability data to determine the optimal production plan based on CO2 output vs. an alternative production plan that may result in faster delivery,” says Jones. “Managers require sustainability data to make informed decisions on the trade-offs on a daily basis.”There are other trade-offs to be assessed when making decisions about which technology supports an organization’s goals. For example, blockchain technology has attracted headlines as an immutable record ledger, meaning that organizations can trace each step in the supply chain to understand provenance, carbon footprint changes resulting from transformation and other attributes. This allows organizations to demonstrate, for example, proof of ethical and sustainable sourcing in their supply chains.But blockchain has faced considerable criticism, primarily due to its implementation of a consensus mechanism that is energy-intensive. There are other variants of these consensus algorithms to pick from, some of which are superior to others in energy efficiency.Blockchain technology is still in its early stages, which is why businesses need to run feasibility studies to understand its impact and how to strike a balance between increasing security and environmental sustainability. Lessons can be learned from industries adopting technology to help inform value-led sustainability decisions on product development, regulation, customer engagement and supplier management.“When you think about what it means to realize a net-zero and equitable world, it really comes down to trust and the feeling of transparency, and how to document proof of performance in the supply chain,” says Hinish.One example of how this technology is being implemented is in the fisheries industry. Kvarøy Arctic, a pioneer in sustainable fish farming based in Norway, is <a href="https://www.youtube.com/watch?v=RGegQI9keyI" target="_blank">enabling corporate buyers and restaurants to scan a QR code</a> that provides a provenance history for Arctic salmon and the feed they are raised on.“Buyers are able to download images and videos of the farms and see for themselves the conditions and animal welfare standards that Kvarøy Arctic upholds. The company also plans to introduce a consumer app to provide insight into the quality and sustainability of their seafood in the future,” says Rishi Vaish, CTO and VP, IBM Sustainability Software.Without technology, managing multiple stakeholders in the supply chain is hard to track, and sustainability impact is nearly impossible to measure.

There are three ways businesses can accelerate the value and sustainable impact of their supply chains, explains Hinish.“Start by defining the impact you want to achieve and how to make it operational using technology. Then place human beings, or copilots, at the center of transformational sustainability, where you rethink how work gets done and how to make more responsible decisions. The third element is to assess how to use and finance emerging technology that is creating access to transition to a net-zero and equitable world.”“Ultimately, supply chain emissions are a combination of what we choose to build and how we choose to build it,” says Donna Warton, Microsoft Corporate Vice President, Supply Chain and Sustainability. “It’s critical to leverage the right standards, such as life cycle assessment, that can harmonize product, material, supplier and geographic emissions into a joint impact roadmap. Using our digital carbon platform, we are able to map process changes at individual suppliers to specific products, which we publish as part of all-up product carbon footprints in our Device EcoProfiles.”Hinish warns that one major pitfall is that supply chains frequently equate sustainability only with the goal of lowering emissions, at the expense of other important sustainability considerations.“This is referred to as ‘carbon tunnel vision,’ an emerging term that calls for organizations to adopt a more comprehensive approach to sustainability and defining impact,” she says. This could include environmental factors such as water use, land use, biodiversity, air and water pollution and waste production, and social considerations like labor rights, access to a fair living wage and the community impact of the business.Jorgensen emphasizes that the goal is to achieve sustainable outcomes faster by leveraging emerging technologies, contributing to wider business transformation. “The ability to unify data across the complete value chain of an organization can provide the overall visibility an organization needs to both improve sustainability reporting and track insights needed to make decisions for long-term business transformation.”

Sheri Hinish

Principal, EY Americas and EY Global Sustainability Innovation and Ecosystem Leader

EY Global Vice Chair for Sustainability

How Can Technology Drive Sustainability in the Supply Chain?

Changing consumer behavior at scale is crucial for climate action. According to the <a href="https://www.ey.com/en_gl/consumer-products-retail/make-sustainability-accessible-to-the-consumer" target="_blank">2021 EY Future Consumer Index</a>, 84% of consumers worldwide say sustainability is important when making purchase decisions, and 43% want to spend more money on goods and services from companies that help the community, even if those companies charge a higher price.But many consumers fail to follow through in their purchases; the same study reveals that 47% say it costs too much to purchase sustainable products. <a href="https://www.ibm.com/thought-leadership/institute-business-value/en-us/report/esg-data-conundrum" target="_blank">IBM Institute for Business Value research</a> also shows that consumers are increasingly skeptical of ESG claims. Only 20% say they trust the statements companies make about environmental sustainability, down from half just two years ago.For businesses, it is time to consider how technology can give customers the information they need to make more sustainable and informed purchasing decisions. The same <a href="https://www.ibm.com/thought-leadership/institute-business-value/en-us/report/esg-data-conundrum" target="_blank">IBM Institute for Business Value</a> study shows that inadequate data is the biggest challenge organizations face in advancing their ESG goals.

Consumers play a critical role in influencing the scale and speed of the net-zero transition. Whether as individuals buying online or in stores, or as business buyers buying at scale, their choices at the point of payment increasingly test and reward the sustainability credentials of companies and their products, while also signaling what they may buy in the future, says Steve Varley, EY’s Global Vice Chair for Sustainability.“This is important because many of the investments that have to be made by businesses are multiple years out, and in many areas, sustainable products don’t yet exist at the scale we need them,” Varley says.Access to sustainability information helps consumers make more sustainable choices, allowing them, for example, to prioritize local growers or harm-reducing growing practices, or circular economy approaches for fashion and technology.Multiple opportunities exist to engage consumers, explains Adrian Slobin, EY’s Partner, Americas and Global Consulting Leader for Sustainability.“Labeling carbon emissions and eco-ratings on devices, creating marketplaces for pre-owned devices and providing options for consumers along the purchase journey to make sustainable choices are all features that educate, inform and influence choice,” says Slobin.Technology and information systems can promote more sustainable consumer behavior, and can also be good business, says Christina Shim, VP and Global Head of Product Management and Strategy for IBM Sustainability Software.“Without data, sustainability is not visible, it’s not actionable and it’s not operational. By leaning into sustainability practices today, organizations can get better positioned to be more efficient, more sustainable and more profitable in the years to come,” says Shim.In fact, more than 80% of CEOs surveyed say their sustainability investments will drive better business results in the next five years, according to <a href="https://www.ibm.com/thought-leadership/institute-business-value/c-suite-study/ceo" target="_blank">IBM Institute for Business Value research</a>.Businesses can bridge the consumer intention gap by increasing awareness and incentivizing sustainable behavior. Carbon labeling enabled by innovative technology could be key to helping consumers make informed purchasing decisions.Developments to create trusted labeling for consumers include the EU’s move to expand its Ecodesign Directive for sustainable products <a href="https://commission.europa.eu/energy-climate-change-environment/standards-tools-and-labels/products-labelling-rules-and-requirements/sustainable-products/ecodesign-sustainable-products_en" target="_blank">beyond energy</a>.“Recognizing that this is a time-intensive process, and that most companies cannot afford to label or certify their entire portfolio, an alternative method is investing in enabling consumer education through transparency and trust. Data and AI technology can be a helpful resource in establishing transparency and trust with consumers,” says Jones.

Gabriele Goertz

Global Head of Sustainability Ecosystem, SAP

Changing consumer behavior toward sustainability is a crucial component of climate action. Businesses can bridge the consumer intention gap and promote sustainable consumer behavior by increasing awareness, incentivizing sustainable behavior and utilizing data. Organizations should focus on giving customers access to information that helps them make informed decisions. Data and AI technology can be valuable resources in achieving these goals.“Customers are a part of every company’s Scope 3 emissions and must be part of the solution to become net zero,” says Donna Warton, Microsoft Corporate Vice President, Supply Chain and Sustainability.By making sustainability messages clear, concise and relevant, businesses can effectively engage consumers, boosting sustainability and the bottom line.