Embracing the net zero transition
13 MINS READ
Pioneering sustainability transition with net zero commitment
Organizations from the energy sector endeavor to meet the net zero targets.
However, most are hesitant to identify and implement the right technology or strategy. Based on our customer interactions from the energy sector, we have observed the following:
Most organizations do not have a system or mechanism that provides enterprise-wide real-time insights and analysis on various emissions across the value chain, which would enable agility in decision-making and validate KPI-based corrective measures for the desired results.
There is a wide gap in data for sustainability decision systems, and reducing the supply chain emissions is one of the critical factors which accounts for most of the Scope 3 emissions.
There needs to be a unified view of ESG (environmental, social, and governance) goals that impact the net zero performance. Other factors, such as high costs and lack of funding for net zero initiatives, bring more uncertainty toward implementation.
Effectively tackle internal, external, structured, and unstructured data to facilitate agile business decisions with intelligence.
Conceptualize and develop a unified enterprise sustainability system (ESS) that is interpretable, flexible, scalable, and explainable.
Build a data knowledge hub per sustainable standards to accelerate insight generation using machine learning and big data.
Defining key aspects of decarbonization
Organizations are exploring ways to enable transition toward a decarbonized energy future.
The essential drivers with a significant value chain and ecosystem dependencies are as follows:
Policies and regulations
Technology, products, and trends
Shareholders' and investors' needs
Policies and regulations
Carbon pricing: In their broader climate strategy, governments are introducing carbon pricing mechanisms (a price on carbon pollution to bring down emissions and drive investment toward cleaner options). Around 40 countries already use carbon pricing mechanisms as per The World Bank, and more are planning to implement them in the future.
Net zero emission laws: Environmental regulations were already existing across countries. However, with the introduction of net zero emissions, many countries are gradually enacting or proposing net zero laws in their legislation. For example, in June 2019, the UK became the first major economy to pass a net zero emissions law.
Technology, products, and trends
Energy transformations: Clean energy technologies are gaining momentum. Technologies such as electrification, carbon capture and storage (CCS), carbon capture utilization and storage (CCUS), bioenergy with carbon capture and storage (BECCS); direct air capture (DAC); hydrogen-related fuels, and bioenergy contribute to the reduction of emissions.
Shareholders’ and investors’ needs
Increasing demand: Shareholders demand consistent disclosure and reporting from organizations and must have full rights to vote on net zero strategies with complete transparency, accountability, and KPIs.
Transparency in ESG reporting: Organizations are expected to have laser-focused visibility and transparency in reporting scope 1 (direct – owned facilities, vehicles, and processes) and scope 2 emissions (indirect – organization’s purchased electricity, steam, heating, and cooling). Reporting scope 3 (indirect – includes all other upstream and downstream activities) is optional per GHG protocol standard but strongly recommended. Scope 4 includes avoided emissions that are unofficial and occur outside of a product's lifecycle.
Uniformity of standards: During the COP26 conference, it was agreed by International Financial Reporting Standards (IFRS) to have a common baseline on the sustainability disclosure standards. Also, a communication plan with short, medium, and long-term targets covering the complete scope of emissions was recommended.
Pillars of an intelligent Enterprise sustainability system (ESS):
The pathway toward net zero looks challenging.
However, it is also a potential opportunity to select the right business models with a purpose-led approach and accelerate energy transition through the right technology choices. Organizations that thrive on such opportunities with credibility and differentiated positioning are most likely to inspire and lead. An intelligent ESS is built on three elements (as shown in Figure 1 below). The synergy among them generates insightful data, which is stored in the data knowledge hub and consumed by the process digital twin.
1. Net zero management center: Equipped with AI and quantum cloud computing capabilities, the net zero management center is the brain of a sustainable enterprise. It intends to analyze the interactions among the various internal and external processes and operations to derive actionable insights based on historical learning.
2. Enterprise sustainability data sources: These are the various big data sources across the value chain, encompassing the total scope of emissions of an enterprise, driving actionable results with a KPI-led focus and corrective measures.
3. Technological construct: This is the base for achieving the desired net zero results. Built on a 5G network, it intends to provide seamless connectivity across the enterprise and its external ecosystems. AI and ML platforms enable continuous learning and smart decision-making. Intelligent industrial internet of things (IIoT) devices and cyber-physical systems execute action items sent by AI and ML. The blockchain platform ensures security and transparency in the chain of operations.
Figure 1: Elements of an ESS
4. Sustainable governance: In an organization, this is central to building and sustaining trust and requires clear purpose and mass collaboration with transparent communication and advocacy to partners, stakeholders, investors, and employees. Cultivating diversity and inclusion at the board level, implementing data protection measures, improving operations accountability, and actively updating, communicating, and training employees on important ESG policies are key examples of solid governance. Also, it’s equally important to measure, monitor, and report the emissions adhering to sustainability standards and have active employee participation in sustainability programs.
Reimagining an enterprise for sustainability transformation
Enterprises today struggle to lay out meaningful strategies to reach net zero.
Figure 2 depicts a 5C architecture framework for an ESS that acts like a catalyst and navigator for net zero accomplishment. It is designed with KPIs for intelligent decision-making and suggests the course of action on a real-time basis with continuous feedback.
The 5Cs indicate the capabilities of the system to collect data from suppliers and other global databases at regular intervals (hourly, daily, or monthly). It helps inspect sustainability data, calculate operational performance, and derive insights for stakeholders.
Three dynamic engines power ESS: a process digital twin, real-time data knowledge hub, and an enterprise-wide decision intelligence management (EDIM) system. These engines interconnect with the net zero management center for data transmission, accumulation, and analytics. Together, it is a curated guidance for the executives to monitor business KPIs, report current ESG and Carbon Disclosure Project (CDP) ratings, and evaluate them against the sustainability trends in real-time.
The executives can have a unified view of how their ecosystems and networks are performing, with the ability to foresee and identify improvement areas and implement the actions to enable the net zero transition. The proposed model helps build resilience in the value chain, curate new customer and employee experiences, and enable the boundaryless ecosystems that will accelerate the path to net zero and beyond.
Figure 2: ESS – The 5C framework for a sustainable enterprise
The sustainable enterprise advantage
The following use cases illustrate the architecture and flow of ESS.
Use case 1 – Net zero acceleration by an enterprise
Figure 3: We leverage the process digital twin and net zero management center of ESS toward deep insights and analysis for faster net zero accomplishment
Use case 2 – Visibility and traceability of suppliers’ carbon footprint
Figure 4: The ESS provides better visibility and traceability on the energy consumption and emissions in the supplier value chain to drive a continuous reduction in carbon footprint.
Envisioning business impact and benefits
On the long road to net zero, this is how organizations can envision and realize benefits.
Adopting the proposed framework can help organizations realize tangible and non-tangible benefits, as listed below.
Fast forwarding net zero targets up to 2X that can help maintain market leadership while contributing to economic growth.
Reducing carbon footprint by 5% YoY and improving the health and well-being of individuals.
Driving mid to long-term profitable growth, with an increase in market share, and clean revenue by 3-4% YoY.
Enhancing service quality and increasing net promoter score by up to nine points.
The way forward
Most organizations rely on manual processes and data touchpoints, which impact their competitiveness and sustenance.
The envisioned ESS has the potential to build a resilient value chain and embrace ecosystems, which will better enable the transition to net zero for a smarter, safer, and more sustainable world.
Embedding sustainability into the operations of internal and external ecosystems is now crucial. By leveraging this framework, executives can have a unified view of the progress in scope 1, 2, and 3 emissions, plan investments, position themselves firmly, and lead with a progressive approach. Taking calculated risks and accelerating the execution of net zero plans could help businesses discover new revenue models and business opportunities, create market demand, and attain the first-mover advantage.
However, shifting to a performance-based model that supports sustainability requires change beyond implementing new technologies. It requires a shift in attitude, discipline, organizational culture, and the development of the necessary skills. In addition, organizations must assess their digital and cybersecurity maturity levels and make crucial investment decisions to fully leverage the framework and reap the desired benefits.