Conquering the climate crisis requires tackling CO2 footprints across the entire value chain
In this exclusive guest article, Norbert Faure, Managing Director at BCG Platinion, discusses some essential steps for tackling the climate crisis.
With record-breaking heatwaves and unseasonal cold snaps becoming yearly occurrences, the early impacts of climate change are being felt all over the world. Although it can feel like the ambitions of global governments to reach net-zero carbon emissions by 2050 are a long way away – the burning question is how businesses can make a real commitment, and thus real change.
Concrete sustainability and climate action has never been more pressing than it is now. Businesses of all sizes are committed to improving environmental sustainability and making carbon net-zero pledges. In fact, half of the UK’s largest businesses have pledged to reach net-zero by 2050.
However, the challenge is translating commitment to action. It can no longer be about how an organisation offsets just its own emissions. The real goal is how leaders begin creating solutions which help other businesses achieve this too.
Three types of emissions
There are three types of emissions outputs for leaders to consider when developing a plan of action when addressing emissions. Firstly, there are those generated by sources directly within a company’s control. Then, there’s emissions created indirectly through the purchase of electricity, steam, heating, and cooling. The final type, and most difficult to document and resolve, are emissions generated indirectly through the business’s value chain.
Reducing all three types of emissions comes with their individual challenges. During the World Economic Forum, BCG highlighted initiatives in five different areas that companies should focus on to decarbonise their supply chains: transparency, optimising operations to reduce emissions, engaging suppliers, leveraging ecosystems of partners, and enabling their organisations with low-carbon governance programs.
Yet, the effectiveness of this relies on sufficient talent and the technological capabilities to execute a substantial shift. Most businesses have long begun a digital transformation journey, but sustainability transformation must be part of this too. Otherwise, neither digital nor sustainability transformations will reach their full potential.
Gather, track, report
First and foremost, companies need real-time emissions data to make their own, smarter energy decisions. Yet to gather, track, report – and importantly act on emissions data – often extends beyond the ability of technology that companies use today. In fact, current approaches tend to be fragmented and are often tracked on spreadsheets.
Spreadsheets allow a single user to enter, input numerical data with great flexibility, even leading to potential manipulation. What’s more, without a content management system to coordinate and track changes from the varies sources that input, spreadsheets become cumbersome and error-prone.
And as governments and investors add more emission reporting pressure, asking for the same rigor and processes of reported financial data, new systems are becoming a necessity.
Digital platforms and solutions that can design and execute sustainability programs, however, are becoming available. If applied right, these can unlock value at all checkpoints, including across the supply chain when platforms are integrated, and processes and human behavioural change are addressed in parallel.
In reality, emissions can simply be passed down in the chain, which is why emissions output from suppliers and clients alike need to be re-evaluated to make ever-lasting change. And as significant progress goes beyond addressing a company’s own greenhouse gas emissions, it will be the use of technology that enables them to make meaningful changes across the value chain.
Areas where technology can help
Companies need to design a technology roadmap, considering several key areas to hone in on, thus accelerating the journey to net-zero value chains. Capturing and reporting emissions data is the obvious – albeit challenging – first step that can be accomplished by building and refining data platforms.
Business leaders should look to gather data from emissions inside their own company’s control through data capture and data migration tools. Then, non-financial data reporting platforms and business intelligence capabilities can reduce effort by allowing organisation-wide access and visibility. Here, technologies such as the internet of things (IoT) and blockchain can help take this a step forward as it enables real-time, automated, and accurate carbon reporting that fully integrates into financial systems.
Another area that provides a major challenge for businesses when measuring the emission created within an organisation’s value chain is data sharing. For it to be effective, the immediate focus should be on finding an agreement with suppliers on emission-measurement methodologies. Following that, existing data should be made accessible through electronic data interchange (EDI) systems that capture both operational and financial.
The real benefit comes from optimising data sharing and reducing the cost of validating supplier data. Doing so means pivoting from on-site audit to AI and blockchain-enabled verification. Then, over time, businesses can move from ad-hoc, unreliable spreadsheet-based data sharing to accurate, trustworthy data on open platforms in the public domain.
The use of AI coupled with IoT devices will also play a key role. It will help automate decision-making across a company’s operations as well as across industry value chains. As CO2 emissions become a decision metric, existing supply-chain planning systems will include such data to ensure efficiency. And over the next two to five years, new technologies, such as digital twins, will help innovation processes as it reduces the effort needed in product life-cycle management and R&D.
A wealth of benefits
Looking further into the future, companies and whole industries will leverage digital technologies to accelerate their transition to new business models and introduce sustainability-centric designs and lines of business. Once business leaders understand that technology can support them in driving sustainability, it’s important they think about the ways this can benefit other businesses and the planet.
Of course, no transformation comes free but thankfully, when companies prevent physical waste, increase energy efficiency and improve resource productivity, they don’t just reduce emissions, they also save money, improve profitability and enhance competitiveness. So while achieving net-zero carbon goals will require effort and change, it is an essential transition, beneficial for a businesses’ bottom line, but most importantly, for our planet.