Sustainability in a Fast-Changing Business Environment
Henrik Hvid Jensen, Chief Technology Strategist at DXC Technology, writes that the world after a pandemic is shaking up a lot of long-held rules. To transition to net zero, we need to revisit the meaning of sustainability.
This realignment, which keeps making us question things we thought were true about how we live and work, gives us all a great chance to think about how we impact the world and make positive changes.
This reevaluation has already started: after COVID-19, hundreds of companies and 130 countries have already pledged to reach net zero carbon emissions.
The CEOs of companies that make more than $1 billion a year agree that sustainability is important to their company's future success. However, there is a risk that everyone underestimates the speed of change, and their current endeavours will not lead to net zero.
Expediting transition to net zero
Disruptive technologies and policy decisions are happening in a non-linear way. So far, estimates of how much lower-carbon technologies will cut emissions have been way too low. Even the most conservative of the International Energy Agency’s scenarios have seen emissions drop by 24% in the last four years.
As the move to net zero speeds up, cautious companies run the risk of losing money and keeping old business models, which opens the door for early movers.
To deal with this huge change, we need to switch from a linear economy based on build, sell, use, and throw away to a circular economy based on repair, reuse, refurbishment, and recycling, where values are more important than value.
Digitising the circular economy is the only reliable path to achieving net zero while maintaining the century-long increase in global wealth. The good news is that adaptation has already begun; we are now living and working in the new reality.
Importance of circular economy
Environmental, Social, and Governance (ESG) objectives are driving organisations to achieve "sustainable sustainability" by demanding them to oversee a data-driven and platform approach to addressing near-term compliance and reporting carbon emissions across supplier chains. More difficult is the task of assisting an organisation's leadership in reimagining and steering their business within the framework of the circular paradigm to achieve ESG goals and remain competitive.
In a circular economy, industrial processes use inputs that are either renewable, recycled or highly recyclable. This helps reduce or get rid of waste and pollution. In effect, waste is transformed into a valuable asset rather than an expensive liability.
In the next 10 years, consumers and governments won't let supply chains make waste, and the circular economy will likely be the only economy in 20 years.
Products, value chains, and business strategies must be redesigned for the circular economy. To be competitive in a circular economy, businesses must begin learning and adapting today. Their IT systems, for example, will need to be modernised to allow for effective interactions with upstream and downstream partners, which will be crucial in circular ecosystems.
Societal benefits of a circular economy
Born-circular products don't have an end-of-life. Instead, their design is based on making it easy and effective to recover value. In the same way, born-circular businesses have a direct financial reason to get all the value that can be recovered from their products. Contracts, deposits or the "product as a service" model make it easy for users to return products.
However, the arguments in favour of circularity go beyond environmental and economic benefits to include societal benefits. Maintaining social inequality is increasingly considered a waste of resources, much like squandering material resources. Virtual labour, for example, is credited with increasing workplace inclusiveness and diversity. The World Economic Forum has termed these benefits "overwhelming."
Data driven business practices for sustainability
During the shift to a circular economy, it will be important to have access to good data, so it is important to improve leadership skills in and around IT. This is especially helpful because ESG is a strategic and data-driven topic on the boardroom agenda in the world after a pandemic. Good data will also help ensure compliance with environmental regulations and the visibility of partners up and downstream.
For example, addressing Scope 3 carbon emissions (indirect emissions from consumers and suppliers in a company's value chain) requires giving up opaque carbon accounting and tracking practices and working proactively with customers, supply networks, and industry associations.
The good news is that new digital tools, such as distributed ledger technology (DLT), geospatial technology, and internet of things (IoT) implementations, promise to overcome the limitations of current ESG models by giving direct data that can be used to provide actionable insights. However, legacy modernisation skills are also required. The objective of long-term sustainability is getting closer by the day. However, action must be taken immediately.