As environmental risks grow, business leaders can no longer view digital transformation and sustainability as separate agendas – that’s the message of a new report from the World Economic Forum (WEF).
Published last month, Bridging Digital and Environmental Goals: A Framework for Business Action highlights a host of risks that companies are facing as climate challenges mount up. And with those hurdles taking on ever-greater urgency at a time of rapid technological change, the report urges senior figures to ensure that sustainability goals are hardwired intrinsically into their firms’ digital transformation efforts.
COVID-19, the report points out, has accelerated digitalisation across every sector, giving leaders an opportunity to overhaul outdated business practices with a strategic reset. That surge of momentum, it argues, should not be wasted – because the crisis has also delivered “a wake-up call to a myriad of impending global risks – which are increasingly linked to environmental impacts… highlighting the need to prepare for future disruption through resilient business operations backed by reliable data and digital technology”.
It notes: “This imperative has been signalled by the financial markets themselves, which have validated the fact that robust environmentally sustainable practices can preserve investments in times of volatility and, in some cases, boost returns.”
As such, the report warns, business leaders have a clear choice: “pave the way towards an environmentally sustainable economy or risk losing your licence to operate.”
The report emerged from the WEF’s special CEO Champions group on Accelerating Digital Transformation in a Post-COVID-19 World, led by Hewlett Packard Enterprise (HPE) boss Antonio Neri. In an accompanying blog, HPE’s chief technologist, sustainable transformation, Dr John Frey, notes that climate action failure “is among a subset of environmental risks that pose the second-most imminent threat to our society”, surpassed only by infectious diseases.
Effective use of data, Frey points out, will be key to surmounting those risks. He writes: “Immense opportunity exists for enterprises that can capture the value of data to drive more sustainable solutions. For example, it’s estimated that the value unlocked by artificial intelligence [AI] in helping design out waste for food, keeping products and materials in use and regenerating natural systems could be up to $127bn a year in 2030.”
Frey highlights seven domains in which corporates should attempt to make a difference with their digital transformation and innovation plans:
With those areas in mind, he argues, purpose-based digitalisation efforts should be driven by three, underlying principles:
1. Embracing product-as-a-service as part of a business model refresh HPE is strategically pivoting into an edge-to-cloud, platform-as-a-service company. As Frey explains: “The move is in response to customers desiring to shift away from buying and operating IT equipment, and instead consuming it as a service. In doing so, they are eliminating the overprovisioning of IT, thus reducing both capital expenditures and environmental footprint.”
2. Reducing environmental impact throughout the supply chain “Optimising environmental impacts within operations is important,” Frey writes, “but its positive impact will be hindered if similar measures aren’t taken throughout the entire supply chain… The use of data-sharing and tracking platforms provides both visibility and accountability – often in real time – thereby reducing environmental impacts before they are magnified.”
3. Responding to pressure from inside and out “Increasingly,” Frey notes, “consumers want the companies they use to be focused on sustainable issues. So, too, do employees – and prospective employees. Indeed, the ability to attract and retain talent – especially among younger generations – is tied to a company’s performance with respect to sustainability and other purpose-centric initiatives.”
He warns: “Laggards in these areas will suffer from talent shortages, setting themselves up for lacklustre digital transformation results.”
The implication being that lacklustre results will only serve to compound risks.
So, which corporates are setting strong examples on this front? Let’s take a look at some beacons of light that have surfaced from the recent news agenda and are making bold strides for others to follow…
1. THE WEF GLOBAL LIGHTHOUSE NETWORK
Just a few days after publishing its Bridging Digital and Environmental Goals report, the WEF announced the latest pack of organisations to be admitted to its Global Lighthouse Network – a selection of factories deemed exceptionally smart in their use of Fourth Industrial Revolution methods to achieve digital transformations.
Unveiling its 15 new inductees, the WEF noted: “By fully embracing agile ways of working, these manufacturers have been able to respond to disruption and ongoing shifts in supply and demand along their production network and value chains.”
Three factories in particular stood out for their environmental advancements:
2. THE MICROSOFT AND TOTAL TEAM-UP
As announced on 12 March, computing giant Microsoft and oil firm Total have sealed a strategic partnership to collaborate on digital transformation and sustainability goals.
The arrangement marks a step change in Total’s efforts to become a responsible energy provider and Microsoft’s plan – outlined in a public commitment – to become carbon negative by 2030.
Under the partnership, Total will use Microsoft technologies to complete its digitalisation programme, automate business processes and deploy a series of low-carbon and carbon-removal technologies. Meanwhile, Total will supply Microsoft’s global portfolio of data centres with green electricity to help reduce its carbon footprint.
Total Chairman and CEO Patrick Pouyanné said: “The rapid development of Total and Microsoft in their areas of expertise brings many opportunities of cooperation for both companies.
“We are committed to bringing our expertise by selling green electricity to support Microsoft in achieving its sustainability goals, and we’re pleased to rely on Microsoft’s cloud and AI solutions to accelerate our digital transformation. This is fundamental to drive progress towards a world with net-zero emissions.”
3. AB INBEV’S SUPPLY CHAIN TRANSPARENCY
Last autumn, the beverages major announced a pioneering pilot scheme enabling beer fans to trace the ingredients of their favourite brews right back to the farms of origin.
Even better, the initiative will also enable AB InBev’s farming partners to improve their yields, and for the firm as a whole to rein in its carbon footprint.
Under a system created in partnership with Leuven-based blockchain-as-a-service firm SettleMint, the firm will record data on environmental impacts and water efficiency from every stage of beer production – from farmers and grain cooperatives to maltsters and brewing plants – onto a distributed ledger.
At scale, the data will be used to spur resource management and supply chain efficiencies, while providing AB InBev’s consumers with full transparency: by simply scanning a QR code on the firm’s beer packaging, they will be able to view the entire record of how the batch they are drinking from was produced – including environmental data.
Set to go live this year, the project will initially focus on the Leffe brand.
According to SettleMint co-founder and CEO Matthew Van Niekerk, the project demonstrates that blockchain technology “is more than a buzzword”.
He noted: “Providing transparency to consumers is not only a guaranty of quality, it also delivers enhanced trust in the brand. COVID-19 has demonstrated a clear need for more resilient supply chain management systems, and blockchain delivers on this.
“We are thrilled to work hand in hand with AB InBev to not only improve supply chain resilience, but to also support its supply chain management ambitions and [drive for] sustainability.”
As the WEF report pointed out, the pandemic has served corporates with a wake-up call about the broader risks they are facing. The most innovative companies are showing that tangible forms of mitigation are not merely conceivable, but achievable.
View the full Bridging Digital and Environmental Goals report here
Matt Packer is a freelance business, finance and leadership journalist