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Companies must align digitalisation, sustainability plans
Instead of keeping the digital transformation and sustainability teams separate, organisations should marry them to maximise the best payoffs in both missions
recent years.
Many organisations, however, are pushing digitalisation and sustainability strategies in isolation from each other. Often, a chief digital officer (CDO) would drive digital transformation and a chief sustainability officer (CSO) would drive new net-zero targets. There are huge opportunities to address this disconnect.
Digital transformations - such as telecommuting, remote diagnostic, telemedicine, virtual conferencing, e-documents, and e-signatures that are quickly replacing pen-and-paperwork - are small steps from being an expected outcome of sustainability goals. Many of the Industry 4.0 digitalisation for IoT, Big Data and AI application will result in greater operational efficiency (for instance, through preventive maintenance), which should translate into reduction in energy usage.
Digitalisation as a strategic enabler
Organisations should approach sustainability with digitalisation as a strategic enabler. If a company has already outlined zero-carbon goals (that is, Scope 1, 2, or 3) but does not mention some form of enabling digital technology, the initiative will not be a serious sustainability proposal as there is no systematic way of tracking the sustainability targets. Many emerging technologies - such as Big Data and AI, drones, and low-cost satellites, IoT and geolocation and blockchain - can be applied to enhance the implementation of such sustainability initiatives.
Digitalisation is an essential enabler for sustainability, as it provides the necessary instrumentation to track, monitor, and report sustainability data. The latter includes data about energy, water, materials, and emissions). Most companies, however, do not systematically collect such data. Even if the data is available, it exists in fragmented pockets all over an organisation. Digitalisation makes possible a new system to collect data at source, integrated across geographical silos, with smart analysis through AI and machine learning, and even with autonomous preventive or corrective operation.
Organisations should therefore be more intentional in leveraging digital technologies in their sustainability efforts. One example is in smart building management with intelligent lighting, airconditioning, heating, ventilation, safety, and security control. Various studies have shown that buildings constitute 40 per cent of energy consumption and a third of greenhouse gas emission. There is huge potential to mitigate such environmental impacts through digitalisation.
Another example is in the highly fossil-fuel-dependent logistics and supply chain. Digital technologies are, again, key enablers in building a smarter and greener supply chain. Even in fostering the circular economy, apps can be developed to track individual carbon footprint (for example, digital wallet such as Ant Forest), to gamify and nudge recycling behaviours and discourage wastage.
Digital sustainability collaboration with strategic partners
A good strategy to align digitalisation and sustainability is to strive for win-win digital sustainability collaboration with strategic partners, for example with utility, industrial, technology, and consulting companies or startups). To achieve net-zero targets, it is necessary to bring together partners with complementary capabilities to co-create new solutions. Traditionally, digitalisation expertise, sustainability expertise and domain expertise often reside with different parties.
This is particularly pertinent to customers in industries that are facing technological disruptions and huge challenges in their sustainability transitions, in sectors such as energy, resource/commodity, transportation, agriculture, manufacturing, building and construction. In the case of Faurecia, an automotive supplier, it leveraged on Schneider Electric's digital analytics solutions to optimise its factory operations across its 300 locations globally for energy efficiency.
Similarly, BP and Shell tapped Microsoft's cloud computing platforms and AI tools for carbon emission tracking and management, and in return, they agreed to supply Microsoft with clean alternative energy. Inditex, a global fashion retailer with brands such as Zara, also partnered DBS Bank, which has incorporated strong digital capability into supply chain financing with provenance certification through blockchain to ensure ethical sourcing of its cotton procurement in India.
Key challenges and the need for a transformational mindset change
Despite the clear synergies, aligning digitalisation and sustainability is a complex undertaking. There will be challenges in ensuring measurable sustainability accountability from digitalisation, such as the need to integrate disparate systems, to source for data from non-traditional sources, and to churn the sheer volume of new sustainability-related data for new insights.
There will be challenges in approaching sustainability with digitalisation as a strategic enabler. A key issue is to inject a transformational mindset in embracing digitalisation. Deeper organisational changes are required. In the case of preventive medicine, it is not enough to just install IoT vibration sensors onto machines; equally important is the need to redesign the jobs of traditional technicians to drive effective AI augmentation.
There will also be challenges in striving for win-win digital sustainability collaboration with strategic partners. Negotiating a win-win strategic partnership will require careful calibration of the potential benefits in tapping others' unique expertise and the risks of compromising your own organisational expertise and deep customer knowledge. In this regard, Siemens, dropped its partnership with IBM to develop digital sustainability solutions, choosing instead to work with French IT company Atos, for fear of IBM becoming a direct competitor.
Seize new market opportunities in digital sustainability
Companies should act quickly to build and align their digitalisation and sustainability capabilities. The focus should not be just about internal operational efficiency and emission reduction but also about product innovation and market exploration to seek new growth opportunities. Johnson Controls, a leader in building management technologies and solutions, is actively developing a digital platform called OpenBlue to bring together a suite of building solutions for smart building management as a new net-zero-as-a-service offering to its customers.
In a similar vein, DBS Bank leveraged its strong risk management expertise and digital capabilities to launch a new carbon exchange to enhance transparency, liquidity, and integrity of voluntary carbon market. As the pressure for net-zero commitment escalates for many organisations, the market opportunities will expand. Progressive organisations that pursue a combined strategy of digitalisation and sustainability can certainly expect to have a strong competitive edge over others.
By Assoc Prof Sia Siew Kien, NBS's associate dean (graduate studies) and an associate professor of information systems, and Alvin Ng, Johnson Control's vice-president for digital solutions in Asia Pacific, for The Business Times.
