The Next Frontier - at the intersection of Digital and Green Transition

Albert Einstein had once said - "The mind that opens to a new idea, Never comes back to its original size". That is the feeling after reading a very simple yet well-articulated book by Bill Gates - 'How to Avoid a Climate Change Disaster'. The book is well summarized in one-sentence here as Bill Gates’ plea to the individuals, governments, and business leaders of the world to reduce greenhouse emissions by changing the way we make things, plug in, grow things, get around, and keep warm and cool. It has been often said 'A problem well stated is a problem half solved'. The book does exactly that at the beginning - which is providing a simple decomposition of overall problem. It urges the reader to only remember two numbers - 51 billion and the other is zero. Fifty-one billion is how many tons of greenhouse gases the world typically adds to the atmosphere every year. Zero is what we need to aim for. The book succinctly explains a quick math to break down the 51 billion number for us to understand what areas contribute to the emission, and they are:

• Getting around (planes, trucks, cargo ships) - 16%
• Growing things (plants, animals) - 19%
• Plugging in (electricity) - 27%
• Making things (cement, steel, plastic) - 31%
• Keeping warm and cool (heating, cooling, refrigeration) - 7%

If you are an individual tuned into global emerging trends or a corporate leader straddling multiple business priorities - there are two interesting topics that are inescapable - ESG (Environment, Social and Governance) and Digital Transformation. The Davos Agenda is a pioneering mobilization of global leaders to shape the principles, policies and partnerships needed in this challenging new context. Earlier this year, a growing coalition of top business leaders across industries announced their commitment to the Stakeholder Capitalism Metrics, a set of environmental, social and governance (ESG) metrics and disclosures released by the World Economic Forum and its International Business Council (IBC) in September 2020, that measure the long-term enterprise value creation for all stakeholders.

On the other side, an interesting course in Coursera titled 'Sustainable Digital Innovation' talks about how - even if the emissions that correspond to the ICT sector stand for approximately 1.4% of the overall global emissions, the digital solutions available today can decrease other sectors' emission by up to 15-20%. The course highlights multiple opportunities and important digital trends - but two of them that really makes you think are:

• The possibility (with digital) of matching supply and demand in real-time through digital coordination platforms that will drive step change in asset utilization, improved quality of service and hence lower emissions.
• Deploying smarter systems and optimization solutions - for example route planning and optimization can lower and optimize transportation distance and also allow use of cleaner transportation modes.

It is clear the next frontier for competitive differentiation for businesses will be at the intersection of Digital and Green transition. For industrial organizations at the cusp of change, a well-designed and executed digital transition will also enable the Green transition, enhance ESG scores, create competitive differentiation, enhance investor confidence and above all help create a net zero future. While many of the opportunities and solutions in the ESG roadmap may be structural in nature (such as switching to onsite renewables, moving to EV fleets etc.), a variety of digital solutions and technologies can play a key role. In my mind, digital solutions that can help drive this change can be broken down into four levels:

• Connecting the unconnected: data in digital form is today critical for any process or activity to be understood better and improved. With digital technologies such as IoT and sensors, a fleet vehicle or a personal car that was previously unconnected can now be connected to create cyber-physical systems that will help understand and improve performance of the asset. For the 'S' in ESG which is Social - this is a big opportunity given connecting the unconnected will bring a much wider access to communication, healthcare and finance to all parts of the society.
• Creating visibility and awareness: with digital data, once an asset is connected and digital data is available for consumption, it creates visibility and awareness about any process or activity. This gives individuals an opportunity to assess performance using digital key performance indicators (KPIs). The book I refer above talks about a company that has developed a 'smart bin' that uses image recognition to track how much food is wasted in a house or business and gives a report on how much was thrown away, along with its cost and carbon footprint.
• Optimization and Recommendation Systems: today 'digital twins' of manufacturing process and a connected supply chain can help augment human judgement on decisions to optimize the commercial and material flow through the value-chain. Digital twins and optimization solutions are being applied to optimize energy consumption and to ensure optimal asset utilization for producing goods and services. Recommendation systems enabled by Artificial Intelligence and Machine Learning are being applied to predict the quality of finished goods - that will help reduce waste and customer returns and in turn bring in efficiencies across value chain.
• Autonomous and Intelligent Closed-loop control: the next level of optimization and autonomy is ability to use real-time and historical information and patterns to not only recommend optimal thresholds for operating a process but for machines having the Autonomy to perform final control on the process to run it optimally. Today several large industrial organizations are embracing self-optimizing digital technologies that will create the ability to produce the same goods and services more efficiently.

Now that my mind has opened to this new idea of exciting intersection of digital and green transition, it is refusing to go back to its original size :). I keep pondering on other possibilities …..

What are your thoughts about the intersection of these two big opportunities and how do you plan to stay tuned here? Thank you for reading and do share your thoughts.

 Views expressed are personal.