In an unstable world, businesses can no longer address supply chain issues without looking at the bigger picture: environmental sustainability. To protect our planet and do their part in meeting urgent global climate mandates and consumer and investor demands, business leaders are seeking bold solutions. But their success hinges on building agile and resilient systems that drive responsible practices, transparency and accountability. In short, they need an advanced environmental sustainability strategy, AI-powered technology and global analytics—and they need it yesterday.
As business leaders focus on leveling up their organizations’ sustainability commitments and assess their plans, processes and supply chain systems along the way, it’s important to understand where the organization falls in terms of maturity. To help accelerate progress, we’ve outlined the five ladder steps businesses can take to turn sustainability plans into measurable outcomes.
The pressure is on global business leaders to shrink their organizations’ carbon footprints and demonstrate accountability for their commitment to sustainable practices.
When world leaders joined this year’s United Nations Climate Change Conference (COP26) in Glasgow, the event was billed as the “the last, best hope” to save the planet. Seeking commitment and action from nearly 200 countries, COP26 culminated in an agreement: Next year, governments would return with more robust, concrete plans to limit carbon emissions. In the meantime, they will pressure wealthy nations to “at least double” funding by 2025 for those most vulnerable to the dangers of global warming. As the clock ticks, business leaders must demonstrate their commitment to sustainability by setting realistic goals and plans to cut down emissions quickly and responsibly.
Not only is the world watching—consumers, investors and regulatory boards are also grading businesses’ sustainability performance with increasing scrutiny. With more than 600 mandatory and optional sustainability reporting provisions globally, failing marks are as costly as they are harmful. According to a recent report by The Nielsen Company, more than 70% of global consumers stated they were willing to change their consumption habits in favor of sustainable products and services to lessen the negative impact on the environment.
Like consumers, investors also prefer to back companies with good sustainability performance. Using environmental, social and governance (ESG) criteria as a benchmark, institutional investors can easily avoid or divest from companies that pose a greater financial risk due to poor ESG ratings and harmful environmental practices. Failing to meet these standards raises a red flag to a growing number of financial backers, damaging the company’s holdings and its future.
As business leaders hurry to formalize and commit to sustainability goals, it’s helpful to acknowledge where the organization falls in terms of maturity. From there, leaders can assess what it will take to level up.
The steps below represent the ladder to greater sustainability. Each step outlines where the organization is at and how it can elevate the impact of its strategy, processes and technology to propel its ascent toward carbon neutrality.
- The awakening. The first step on the sustainability ladder represents the beginning of a reckoning. At this stage, an organization has scant awareness of its environmental impact, leading to escalated risks and costs. Sustainability goals either don’t exist or they’re very distant. Believing there are no major benefits in adopting sustainable practices, organizations make little effort to build eco-friendly structures and processes, collect data related to sustainability, or invest in technology that can measure and reduce carbon emissions. At this stage, the company risks losing partnerships and investments, damaging its reputation, amassing code violations and incurring penalties—and the more it delays taking action, the more it will cost to become carbon neutral.
- The bare minimum. As organizations step up, they begin to focus on reporting their greenhouse gas emissions—both scope one, which accounts for the direct emissions from the sources owned or controlled by the reporting company, and scope two, which measures the indirect emissions from purchased electricity, steam, heating and cooling resources the company consumes. While the organization is primarily motivated by regulatory compliance, it may set some tangible sustainability goals for scope one and two emissions. To collect the emissions data, harmonize it and run basic reporting, the company will invest in processes, people and technology. But because of challenges with data quality, standardization and integration, these processes often produce analytics that are just descriptive, telling organizations what’s happening but not why.
- Carbon reduction. Mid-climb, the organization begins reporting scope three greenhouse gas emissions, which include all indirect emissions that occur in a company’s value chain. Meanwhile, the methods for collecting scope one and two emission data begin to mature. Because the organization can now integrate internal data and track KPIs effectively, it can start collaborating with external partners to collect relevant external data—like the extraction, production and transportation of purchased materials and fuels or the usage of its sold products and services—with varying degrees of accuracy and breadth. Now it’s possible to run diagnostics on scope one and two emissions and calculate the company’s true carbon footprint. With this baseline, the organization can set realistic carbon reduction or carbon credit plans, model changes against its footprint and take proactive actions to reduce it.
- Carbon offsetting. At this important juncture, the focus shifts from compliance to high-impact carbon footprint reduction rooted in insights and analytics. Business leaders are driving emission reduction initiatives and considering how to implement sustainability strategies in the supply chain, business processes, technology and products or services. Carbon offsets take center stage as technologies like AI and machine learning, the Internet of Things (IoT), natural language processing (NLP) and digital twins process data in real time and create end-to-end visibility. The organization begins using predictive analytics with automated insights to guide decisions about carbon emissions, cost savings and next steps.
- Carbon neutrality. At the top of the ladder, organizations emerge as sustainability leaders. These companies have reached carbon neutrality and are driven by a greater purpose: generating long-term social and environmental change. Through collaboration, networking and innovation, the organization’s sustainability initiatives expand beyond business boundaries. The full spectrum of analytics is now possible, allowing leaders to make autonomous decisions and actions.
Becoming a sustainability leader doesn’t happen overnight, but there are many ways to accelerate progress. The journey requires a 360-degree transformation of structures and processes, a shift in the culture and a data-driven strategy fueled by transparent analytics. To get there, organizations must overcome challenges like poor data quality, systems and technology that are ill-equipped to capture data and process insights, and a lack of awareness of the business value sustainability can unlock.
As a result, many of today’s larger organizations are poised on the second rung of the ladder. But leaders are emerging like Google, which became carbon neutral in 2007. Next in line are more than 200 companies that have signed the climate pledge to become carbon neutral by 2040, including giants like Amazon, Microsoft, GSK, P&G, Coca Cola and PepsiCo.
For those beginning the journey toward a holistic sustainability transformation, early investments in a data and analytics platform can jumpstart the ascent. While the focus may begin with early compliance tracking, an organization can quickly scale its platform to measure its overall impact, shrink its carbon footprint and systematically track progress toward long-term goals. To spur progress, consider implementing a process for harmonizing and consolidating data from various sources like energy meters, control systems and utility bills. From there, the organization can build automated systems for sustainability reporting and KPI tracking.
Once an efficient global analytics platform is in place, predictive modeling is possible and companies can begin generating actionable insights and AI-driven recommendations for reducing or offsetting carbon emissions. With neural networks that suggest the next-best sustainability actions, systems can learn how to make automatic decisions throughout the supply chain, choose options that result in a lower environmental impact, solve problems, heal glitches and prevent holdups.
Commitment to carbon emission reduction hinges on a high-performing sustainability insights engine, but true transformation requires more than just a sophisticated analytics platform. What leaders do with the insights they gain is equally important.
Companies need to identify and execute opportunities for carbon footprint reduction. For many, this will entail a series of changes to the supply chain. Identifying process improvements, shifting to alternative energy sources or equipment, redesigning products and creating more sustainable service life cycles are just a few ways leaders can make the shift to carbon neutrality. By making informed decisions about how they adjust their organization’s sourcing strategies and deploy carbon offsets, leaders can drive sustainability swiftly and strategically—and cut costs and earn consumers’ trust along the way.
To successfully define, measure and control carbon emissions, change must happen from the top down. Organizations that build the foundation for analytics transparency also need leaders to drive strategies that will help their organization leapfrog to the top of the sustainability ladder. For business leaders, offsetting costs and offsetting carbon are entwined imperatives that will shape and sustain the future of the business for years to come.