By Amit Tandon and Vedant Agarwal,
Amidst the war for revenue, profit and talent, business heads and CEOs are seeking ways to build sustainable solutions that add value to the larger community by solving pressing problems and making a difference that matters. ‘Profit with Purpose’ which at one time was driven by social enterprises, is all set to change. Management teams now want their companies to be recognised as forces for good.
With social responsibility gaining precedence, ‘sustainability’, is no longer the right thing to do, but an integral component of growth. The degree and way technology is leveraged for sustainability transformations may determine which organisations outperform financially, thereby creating more value than their peers and emerge or cement their position as companies of tomorrow.
Technology enabled ESG transformations may fall in three broad categories, i.e., technologies that make core operations sustainable, technologies that enable organisations to further environment actions in the communities where they operate and lastly, technologies that deliver robust monitoring and reporting capabilities.
Disproportionate focus of an organisation’s ESG transformation is expected to be sustainability of core operations. In this context, Fourth Industrial Revolution (4IR) technologies play a dual role of harnessing existing capabilities to bring in operational efficiency and achieve ESG goals. An interesting example of this is the adoption of geo-spatial technology to ensure sustainable supply chain practices. For example, satellite imagery helps to build sustainability in agriculture in peat lands, forest reserves, etc. to detect if there is deforestation taking place. On similar lines, IoT is playing an increasingly crucial role in predictive maintenance. By collecting and processing hard to gather data, IoT devices help run algorithms that predict downtime scenarios, thereby bringing in energy efficiency and reducing waste. Technologies also help create sustainable innovations. Generative design and 3-D printing are being used by heavy equipment manufacturers, wherein, lighter and more efficient substitutes are being designed which helps realise savings across transportation, material consumption and energy usage. Further, AI powered talent management algorithms support workplace inclusivity and prevent patterns of inadequate representation by eliminating biases around age, LBGTQIA+ communities, etc.
Industries such as steel, cement, and petrochemicals are harder to abate since carbon is an integral part of their business process. Technology plays a critical role for such organisations to take climate actions to limit impact on local communities and the planet. Carbon Capture, Utilisation and Storage (CCUS) technologies play a key role in their decarbonisation journey when deployed at large point sources such as power plants, refineries, and other industrial facilities. Direct Air Capture (DAC) technology uses chemical reactions to selectively capture carbon from air. Carbon Utilisation technology aids by re-using the captured carbon and converting it into plastic, concrete or other materials. Additionally, AI Driven algae sequestration is being used for carbon storage. Here, AI is used to develop an advanced learning model to predict algae light penetration, pH balance, growth and optimal density. This model then allows for continuous harvesting of algae and helps realise outsized sequestration gains.
Managing ESG mandates requires continuous action, and an organisation cannot manage what it doesn’t track. Two prominent challenges in this endeavor are data quality and manual collection. IoT enables collection and sharing of real time data across business processes. IOT’s use case across supply chain, operations and corporate functions has outsized potential in helping companies track and achieve ESG goals. Carbon accounting solutions allow businesses to collect and ingest activity and spend data that can quickly calculate baseline emission. Further, machine learning can help estimate future emissions through scenario analysis. This helps businesses set their decarbonisation goals and understand the associated abatement effort required. AI can be a key ingredient in stress testing climate and physical risk models by reconstructing past climate conditions and predicting weather events. This helps businesses quantify potential impact of climate risk/ change on their value chain.
Eventually, technology enablement can allow for real-time, insight driven and audit friendly ESG data management.
Being witness to the sheer breadth and depth of sustainability technology leaves no doubt that it will be the cornerstone of a successful organisation’s future. The ability to adopt, utilise and scale new technologies will decide top line growth, profitability, and customer experience. This is further validated in Deloitte’s 2023 CxO Sustainability Report*, wherein, instead of retrenching amid inflation, geopolitical crises and an energy crunch, CxOs indicate they have accelerated their sustainability efforts. Investment on sustainability technology is also increasing making it evident that technology is the strongest weapon in a CxO’s arsenal to undertake harder to implement, needle moving action on ESG. With an empowered workforce leading the way, technology will be the fulcrum that will help organisations stay ahead in their ESG transformation curve.
Amit Tandon is Partner, Deloitte India and Vedant Agarwal is Director, Deloitte India