Digital transformation could be good for the planet, as well as your business. However, there are challenges, with today’s technology itself contributing to climate change
With all eyes firmly fixed on the COP26 climate change conference in Glasgow in recent weeks, sustainability has never been such a crucial issue, nor captured public attention more.
Aiming to secure global net zero emissions by the middle of this century and limiting global warming to 1.5 degrees, world leaders have called on industry to limit emissions and act in a more sustainable way. However, according to the Royal Society, digital technology accounts for between 1.4% and 5.9% of global emissions. That’s much the same as the airline industry – and the figure has been steadily rising.
John Frey is chief technologist, sustainable transformation at Hewlett Packard Enterprise and a lead contributor to the World Economic Forum’s (WEF’s) Bridging Digital and Environmental Goals playbook. He estimates that by 2025, 61% of the world’s population and 41.6 billion internet of things devices will be online.
“The expansion is improving livelihoods and driving productivity, but we can’t ignore a fundamental issue: the rapid growth of the digital universe and its energy consumption is contributing to climate change,” he says.
So how can organisations carry out a digital transformation while keeping sustainability in mind?
Sustainable business benefits
Frey believes digital transformation and sustainability can often be complementary. “Sustainable innovation often results in solutions that save money, have a lower environmental and social impact, improve employee attraction and retention, and generate little to no waste,” he says.
That’s what Paolo Taticchi found when consulting on a digital transformation project for pharmaceutical company Consilient Health. The company hoped to secure important partnerships with major manufacturers and customers in the pharma industry, while also wishing to retain its relationship with the NHS, itself implementing new sustainable supply chain and procurement strategies.
According to Taticchi, a professor who teaches strategy and sustainability at UCL’s School of Management, it became very clear that digital transformation projects would enable the sustainability strategy by providing real-time information and measurement of processes, along with greater transparency for internal and external stakeholders. These projects included distributed ledger technology in the management of supply chains and the implementation of a new ERP system.
“The sustainability objectives have become a true source of innovation in the context of the digital transformation agenda,” Taticchi says.
Similarly, the European Farm to Fork strategy aims to improve traceability in food supply chains, but also intrinsically works to reduce waste. For example, the SecQuAL (Secure Quality Assured Logistics for Digital Food Ecosystems) project, funded by the Industrial Strategy Challenge Fund, introduces smart labels to monitor cold chain conditions, predict shelf-life more accurately and identify bottlenecks and inefficiencies in supply chains.
The programme will help reduce waste throughout the supply chain says Clive Stephens, head of research and development at food producer Cranswick. “Our vision is to be the world’s most sustainable meat business,” he says.
The EU has found that participants in farm-to-fork smart farming initiatives have shown reductions in water use, pesticide use and NO2 emissions. Meanwhile, the WEF suggests that using artificial intelligence to design out waste for food, keep products and materials in use for longer and regenerate natural systems could represent savings of up to $127bn (about £93bn) a year in 2030.
Overcoming the hurdles
However, a sustainable digital transformation creates challenges because digital technology itself is a significant contributor to global climate change. While improvements in energy efficiency have helped to limit the growth of energy demand from data centres and data transmission networks, each accounted for around 1% of global electricity use in 2019, according to the International Energy Agency.
Oliver Iltisberger, president of ABB Smart Buildings, thinks the answer is to install renewable energy generation – such as photovoltaic technology, wind turbines, battery energy storage systems or thermal energy storage – or to buy renewable energy from the grid.
As part of the company’s own digital transformation, it created its first carbon-neutral production site at Lüdenscheid in Germany. Solar technology now generates up to 100% of the factory’s energy requirements, enough to supply 340 private households, Iltisberger says.
“When used with the site’s co-generation plant, Lüdenscheid can generate 14% more energy than needed. This surplus is sold back into the public grid, meaning the site is energy positive,” he adds.
For a solar farm, any increase in efficiency is a positive move in terms of sustainability. But when R-evolution, a subsidiary of sensor and software firm Hexagon, recently created a digital twin for its solar farm in Archidona, Spain, physical electronic waste was reduced too.
“We are working to establish a ‘smart digital reality’ that mirrors our Archidona solar farm to improve efficiency, remotely and autonomously detect solar panel anomalies, improve maintenance, aid inspections and more,” says CEO Erik Josefsson. “We discovered, for example, that an easterly wind is the most damaging and which panels are most at risk; this means operators can more efficiently take preventative countermeasures.”
Physical waste is also a growing issue, with the not-for-profit WEEE Forum estimating that the amount of waste from electrical and electronic equipment will total as much as 57.4 million tonnes in 2021 – heavier than the Great Wall of China.
Frey, though, thinks such waste can be minimised through the product-as-a-service concept. This aims to optimise device refresh cycles by using automation and data, such as information on workloads and power consumption, to provide lifecycle analysis and work out when a product might need to be replaced.
“This enables companies to fully leverage their IT and to optimise resource planning, thereby minimising waste and positively impacting the environmental footprint,” he says.
Other potential negative side effects of digital transformation include high levels of water usage. The Water Resources Group, part of the World Bank, says that water demand is expected to exceed current supply by 40% by the end of this decade.
Digitalisation means more online activity. The data centres needed to handle this require vast amounts of water for cooling: a 15MW data centre can use as much water as three average-sized hospitals, or more than two 18-hole golf courses. However, the industry is starting to tackle the issue, with Microsoft, Google and several other tech companies recently committing to becoming water-positive by 2030.
Getting staff on board
On the upside, one of the most common pitfalls with a digital transformation project – staff buy-in – is far less likely to be a problem when the project has a sustainability focus. Research has repeatedly shown that people prefer to work for companies with solid environmental credentials.
In a recent survey in the US, UK, India, Canada, Germany, Mexico, Spain, Brazil and China, the Institute of Environmental Management & Assessment (IEMA) found that almost three-quarters of employees and jobseekers were more attracted to companies that were environmentally sustainable.
Meanwhile, according to recruitment firm Robert Walters, a third of white-collar professionals in the UK say they’d turn down a job offer if a company’s environmental, sustainability or climate control values didn’t align with their own, along with more than half of jobseekers in France, Chile and Switzerland.
“It’s therefore all the more important for leaders to embed sustainability in their strategies and support and empower team members to use their passion and expertise within communities and initiatives to become a driving force themselves within and beyond the organisation,” says Frey.
According to the WEF, digital transformation offers an “immense opportunity” to help decarbonise the global economy. There’s the potential, it says, to avoid an estimated 26 billion metric tons of net CO2 emissions from just three industries – electricity, logistics and automotive – from 2016 to 2025.
Meanwhile, according to the Global e-Sustainability Initiative, each metric ton of CO2 emitted by the ICT sector can help users save 10 tons, thanks to developments such as teleconferencing, improved logistics and smart buildings.
This trend must continue, says Frey. “The world needs to urgently accelerate sustainable innovation cycles,” he says. “Experts estimate that roughly half of the carbon reductions that the world needs to achieve net-zero emissions in the coming decades must come from technologies that have not yet reached the market.”
Sustainable transformation: what to consider
1. Conduct an impact assessment and define the scope
The first step in a sustainable digital transformation, advises the World Economic Forum, is to carry out an assessment to work out which environmental risks and opportunities are of strategic significance to the company. How can improved sustainability lead to other operational benefits? How can greater efficiency improve sustainability?
As with any digital transformation, it’s important to look at the whole picture; it’s not just a case of transforming in-house operations. What is the environmental impact of supply chain operations, such as the manufacturing and transportation of goods used? What is the downstream impact from the disposal of end-of-life assets?
“It’s important to engage with suppliers and do regular audits to ensure maintenance of high ethical standards throughout the supply chain,” says Frey. “It is key to engage with peers, industry bodies and cross-sectoral organisations to share best practices and new challenges, and to advance supply chain programmes and standards beyond one’s own business.”
2. Set measurable goals
A sustainable digital transformation will not only mean setting business goals, but environmental ones, too: goals that are measurable and timebound. Each should be linked to an explicit profit and loss result and backed by clear key performance indicators, incentives and reporting mechanisms, so that progress can be tracked against business and environmental targets.
“No matter what your goals are, the way to get there is better data. You can’t optimise or predict anything without it,” says Josefsson. “If you can find ways to measure every aspect that matters and produce data you can trust, you can make operations increasingly autonomous – and that’s ultimately the future for efficient, sustainable processes.”
3. Establish governance
The World Economic Forum advises organisations to define a governance structure that helps embed environmental sustainability throughout the transformation strategy. This could mean establishing a steering committee involving the chief sustainability officer and other corporate leaders to map out priorities across the organisation. Areas of responsibility and decision-making powers should be defined.
It’s important to make clear the potential business benefits to get buy-in from partners both outside and within the business.
“The process wasn’t easy, as the digital transformation and sustainability agenda pushed the organisation to a major change in the way of working,” says Taticchi, referring to his work with Consilient Health. “A clear business case for all initiatives was defined in order to engage the board and senior management team. The CEO acted as champion of both initiatives.”