Sustainable Solutions: Is Tech the Answer?
January 17, 2023 | Davos
The world is at an inflection point. With the global economy facing a myriad of headwinds – elevated inflation, snarled supply chains, an unprecedented food and energy crisis – businesses must balance operational resiliency with sustainable responsibility. There is an urgent need to make industry more efficient. Much has been done. But we have only scratched the surface of changes that need to be made. We invited business leaders and CEOs to brainstorm solutions to create more efficiency and mitigate risks across industries. Technology has proven, time and time again, to be the catalyst that helps overcome disruption, spur innovation and drive change. How can we utilize lever-evolving technologies to accelerate bold changes and help businesses thrive?
Ana Paula Assis, General Manager, IBM Europe, Middle East and Africa
Domenico Azzarello, EMEA Regional Managing Partner, Bain & Company
Dan Barclay, CEO, BMO Capital Markets
Andreas Berger, CEO Corporate Solutions, Swiss Re
Richard Bloxam, CEO, Capital Markets, JLL
Raymond Chao, Chairman, Asia Pacific and Chairman and CEO, China, PwC
Alistair Dormer, Executive Vice President Green Energy and Mobility Sector, Hitachi Ltd and Chairman, Hitachi Europe Limited
Ron Hovsepian, President, CEO and Board Member, Indigo AG
Steve Howard, Chief Sustainability Officer, Temasek
Sinead Kaufman, Chief Executive, Rio Tinto Minerals
Deeptha Khanna, Executive Vice president and Chief Business Leader Personal Health, Royal Philips
Sharon Marcil, Regional Chair, North America, Boston Consulting Group
Laura Newinski, Deputy Chair and Chief Operating Officer, KPMG.
Sami Rahal, CEO, Central Europe, Deloitte
Sierra Signorelli, CEO, Commercial insurance, Zurich Insurance Group
Lars Stenqvist, Chief Technology Officer, Volvo Group
Rob Thomas, Senior Vice President, Software and Chief Commercial Officer, IBM.
John Waldron, Senior Vice President and Chief Commercial Officer, Honeywell.
Jason Weller, Global Chief Sustainability Officer, JBS
Manus Cranny, Anchor, Bloomberg Television
Following introductions, Manus Cranny, Anchor, Bloomberg Television raised the question that while the top four risks identified at Davos 2023 were all linked to climate, ESG has slipped down the agenda and ESG funds have been battered by controversy over disclosure and information. He questioned whether ESG was in danger of being seen as a luxury in a turbulent world and introduced the idea of the critical importance of clean, quality data in being able to translate high-level ESG visions into reality.
When asked who had a clear ESG strategy and if they have the technology in place to empower it, the majority of participants agreed they had a strategy for ESG, but many did not have the technology and data to execute on it
The discussion started around how to make data more robust and usable. Andreas Berger, CEO Corporate Solutions, Swiss Re said the company had recently grasped the importance of using data as an asset. “We created an analytical data model and have now addressed all the issues around data including sustainability.” The company realized it was addressing an industry problem and decided to use our data model “forward-integrated” solution to its customers who did not have access to the right data in their organization.
Ana Paula Assis, General Manager, IBM Europe, Middle East and Africa talked about the investments they have made over the years in data lakes and data warehouses as a way to integrate data in a structured way. “The challenge now is that there is a lot of unstructured data generated from multiple sources so companies need to ensure the right person has the right access and to leverage all technologies to create a single view.”
Laura Newinski, Deputy Chair and Chief Operating Officer at KPMG agreed that data is crucial in driving the sustainability journey of companies and there is work to do to ensure the data is understandable and repeatable.
Laura Newinski pointed to the emergence of new technologies like AI-based ChatGPT which can handle data that isn’t structured. She also cautioned that digital transformation is creating a significant climate issue in the amount of energy it is using. Companies need to solve for that too and new technologies like ChatGPT is a way to create the data source “without having to store and manipulate the massive amounts of data that we all need.”
The conversation turned to the question of how companies navigate data overload and use data to their advantage in tackling their sustainability agenda and the challenges that they face. Rob Thomas, Senior Vice President, Software and Chief Commercial Officer, IBM, said that “if you don’t know where you are, you don’t know where you are going,” and that organizations are struggling to hire enough staff to solve “the data problem”.
Domenico Azzarello, EMEA Regional Managing Partner, Bain & Company said that Bain had recently completed a survey of 100 companies that revealed while 95% of them were executing on their plans, only 7% were on track.
Rob Thomas said that technology is only part of the problem for sustainability. “Once progress is made on this front, the next challenge will be cyber security.”
Participants offered real-life examples of how they are using technology to boost sustainability, with insights from a range of industries. Sinead Kaufman, Chief Executive, Rio Tinto Minerals, said that the mining industry is “rich on data and poor on insights”. She said that Rio is using data and technology in three big ways – firstly to improve productivity; secondly to find new ways to operate in a sustainable manner such as trialing new technology to produce lithium, and thirdly, to find a way of decarbonising the business.
Sinead Kaufman said that the business is becoming less commoditised with the emergence of products such as green aluminum. At the same time, suppliers want to know how products are made in order to track their sustainability. “We have the will,” said Sinead Kaufman, “But the challenge is to do it without crippling the business with client requests for data.”
Deeptha Khanna, Executive Vice President and Chief Business Leader Personal Health, Royal Philips, said that her business is on track to meet its target and 25% of its revenues will be circular by 2025, such as by leasing machines. The company can see great potential for data to boost sustainability and outcomes such as working to combine data from multiple hospitals to get a single view of patients.
Lars Stenqvist, Chief Technology Officer, Volvo Group, agreed that clean data is critical as the vehicle industry adapts to requirements for each truck to have its own “CO2 passport”. This means having data at every stage of the supply chain. “If you’re a producer and you don’t fix logistics then you have a problem.”
John Waldron, Senior Vice President and Chief Commercial Officer at Honeywell, outlined how the company is using technology to drive sustainability. The starting point is the use of data to measure the fact that 63% of its total portfolio meets ESG criteria. The company has found solutions through technology in many of its businesses, such as building a carbon sequestration plant in Louisiana, which pumps CO2 into the ground.
With companies on an accelerated path to meet net zero targets, better data is essential for companies to execute more quickly against ambitious targets. John Waldron said: “37% of our businesses aren’t ESG oriented and we know which they are and are addressing it. But you need the data in the first place to know that.”
The discussion moved to smart infrastructure and how companies are upgrading their assets. Rob Thomas observed that some companies are retiring their older assets for more efficient ones.
Alistair Dormer, Executive Vice President Green Energy and Mobility Sector, Hitachi, said that technology already exists to create and store renewable energy but added that new digital technology will be essential as the energy mix continues to shift in favor of renewables. “That will require a huge level of technology investment to match supply and demand.”
Andreas Berger said that the path to success lies in finding the right partner with which to stress test digital twin technology. “It’s not about transferring risk but understanding it up front.”
Steve Howard, Chief Sustainability Officer, Temasek, contrasted his experience at IKEA where ESG was relatively easy to implement with the challenge at Temasek, an investment fund with 600 portfolio companies . “We don’t have all that information. No-one does.”
ESG and sustainability are different sides of the same coin. ESG began as a risk management tool, while sustainability is a business strategy that informs how you develop. ESG as a risk management tool does not provide the full picture because of incomplete data. Steve Howard compared a companies’ overview of its ESG to “a Middle Ages map of the world.”
Technology will provide “new data frontiers” as the drive for sustainability means that every industrial process is being re-invented.
Richard Bloxam, CEO, Capital Markets, JLL, said that the ownership of real estate is fragmented, leading to a lack of transparency. The world’s biggest real estate investor owns assets worth $350bn, against total global real estate assets of $320 trillion. Picking up on Steve Howard’s analogy, Richard Bloxam said that any map attempting to chart the sustainability of the sector would be “prehistoric.”
The real estate sector has a long way to travel on the transition journey, with Richard Bloxam pointing out that 40% of total carbon emissions globally come from the built environment.
The big challenge for the real estate sector is that 80% of the world’s buildings were built in a different era and will still exist in 2050. Technology is important “but the biggest issue is human behavior.” Owners and operators of property have different priorities in terms of how they use space. Homeowners are not prepared to spend as much to upgrade their homes as commercial property owners.
Laura Newinski said that data has a role to play in helping to understand how property is being used.
John Waldron agreed that migrating to a more sustainable world is difficult when it comes to real estate and infrastructure because the knowledge base is shrinking because many buildings that stand today were built thousands of years ago.
Shifting Corporate Priorities
The discussion moved to concerns that sustainability and energy transition have fallen down the priority list for corporate CEOs because of the rise in inflation and geopolitical concerns. Raymond Chao, chairman, Asia Pacific and chairman and CEO, China, PwC pointed to research findings from the firm which suggested climate risk is no longer a top concern for CEOs. The reason, says Raymond Chao, is that the current environment means “organizations are trying to strike the balance between short-term profitability and long-term investment.” He added that climate risk may be back to the top of the agenda in “three to five years” but said that companies are behind in their decarbonisation targets. “There is so much to be done, and we are so far behind.”
The lack of urgency is not helped by the fact that many of the CEOs in place today will have retired by 2050. Sami Rahal, CEO, Central Europe, at Deloitte stressed the importance of digital twin technologies. He agreed that the technology exists to solve problems but not at the scale required, using green hydrogen and electric vehicles are examples. As well as harnessing technology, leadership is required, from governments and CEOs because those technologies are needed particularly to help ‘hard-to-abate’ industries become more viable.
Sami Rahal said while 25% of corporate CEOs believe they have the right data, none have the level of data required to comply with EU reporting directives.
The inflation reduction act in the US includes a lot about subsidizing technologies but it’s also about permitting innovation in the journey to net zero.
Data Ownership and the Need for Neutrality
Ownership is critical when it comes to data and it’s the biggest hurdle, according to Andreas Berger. “There’s this myth that if I don’t own the data I give up everything,” said Andreas Berger, who argued that all industries require a shift in mindset towards the principle of neutrality and sharing of data. Industry participants should put the masses of data they have onto a neutral platform in order to collaborate . “We’re all trying to solve the same problem,’ said Andreas Berger.
The theme of data collaboration moved into a discussion of how the global food industry can use data to improve sustainability and food security.
Jason Weller, Global Chief Sustainability Officer at JBS agreed that data sharing and transparency is crucial in understanding and ensuring sustainability in food supply chains. JBS works with hundreds of thousands of farmers and says that “globally 98% of our footprint is out of our control.”
Jason Weller sees this as a big opportunity “to change the conversation” with regard to the entire supply chain by using data if participants collaborate. Consumers are increasingly demanding to know about the sustainability and provenance of their food and Jason Weller said that JBS is looking at ways to capture data on how a particular cut of meat was produced and the carbon intensity involved in its production, then transferring that information across the supply chain to the consumer. The company is working with partners on data transparency around how foods are farmed, to optimisation of transportation and refrigeration. “By collaborating on data, we ensure we have allies, not competitors on our ESG journey”, says Jason Weller.
It is one thing to answer questions for consumers, but, Jason Weller says, the real value lies in providing the same data to the farmers. “It’s about using data to optimize resiliency of farming operations, not just extracting it for consumers if you want to feed a planet of 10 billion people.”
Ron Hovsepian, President, Chief executive and Board member, Indigo AG, said that the company “ingests terabytes of data” to help farmers with their journey to sustainability. Last year the company completed the first carbon sequestration at scale of agricultural farm land.
Dan Barclay, CEO, BMO Capital Markets talked about the challenge of how to switch the mindset of consumers to understand the value of sustainability and being prepared to pay for it by using data to show the real benefits and to change behavior. Ron Hovsepian pointed to a live example – his company had moved to a more sustainable process for producing rice for AbInbev which resulted in saving 4.4 billion gallons of water while only increasing the price by a fraction.
Ron Hovsepian said boards want to see ESG reports that provide full transparency about every stage of the supply chain and look to a future where data can provide that.
Manus Cranny summed up the discussion by encouraging participants to connect and co-operate on their journeys to sustainability.
This roundtable was proudly sponsored by