Net-Zero is a foundation for Data Driven-Transformation
There is no Net-Zero without data, internally and externally it is impossible to drive to a true Net-Zero position without understanding the full end-to-end lifecycle costs of your business. This actually represents a huge opportunity, not simply in driving to Net-Zero, but also in completely redefining the efficiency and effectiveness of your business.
Net-Zero is a data problem
What does it require to do true Net-Zero? To create a robust carbon accounting approach, and to manage your overall impact, means understanding 3 major streams, known as the emission scope.
- Scope 1 — Your direct internal impact
- Scope 2 — the semi-indirect elements that are related to those direct impacts, normally energy related
- Scope 3 — things that happen upstream or downstream of your company that enable you to produce, and people to use, your product or service
These things are a complex data challenge, if you look at the accounting guidance for Scope 3 it is a 152 page monster and I’m going to use some things from it here, but if you’ve got a long flight and need to sleep it is actually a pretty good read.
In simple terms, this is all about data, and the ability to link data about climate impact to what you do.
In other words to really do scope 3, you need a fully traceable bill of materials that goes right back to its point of origination, and then you need to track that product all the way to its decommissioning. This means having a Digital Thread that isn’t simply internally but covers the whole lifecycle.
My Scope is your Scope 3
Part of that traceability means that as you look at your own challenge you quickly realize that you are also someone else’s problem. Your customers need to understand your full impact, as do any suppliers.
This gives significant opportunities, it is an extremely obvious use case for Collaborative Data Ecosystems because you absolutely will need that sort of external collaboration to be able to drive Net-Zero reporting.
There is no way to achieve Scope 3 reporting without data collaboration, the only question is whether that collaboration is to achieve Net-Zero or just report. Capgemini Research have found that 11% of organizations are already engaging in advanced collaborative approaches and those that choose to engage in data collaboration are already showing 9% revenue improvement and 2x market capitalization as a result of engaging in collaborative data ecosystems.
This is matched against 60% of organizations that want to do this, in other words 49% of organizations know they need to do this, but haven’t yet made the switch. The question with Net-Zero isn’t about its cost, its about its business advantage.
Don’t just report, manage to Net-Zero
Solving this data challenge shouldn’t be done for reporting reasons, it should be done because you want to manage your way to Net-Zero, not simply internally but across the entire lifecycle of what you do. This management can have massive direct business benefits, not simply reducing your impact on the planet but potentially reconfiguring your business to deliver the next level of competitive advantage.
Adaptive Supply Chain is a Net-Zero problem
The COVID and the global supply chain challenge has shown that existing linear approaches to supply chain planning are incredibly fragile. A shortage of drivers, a blockage in a shipping channel and everything collapses into a heap of spreadsheets and panic.
The way out of this will be to have adaptive supply chains, ones that are built on collaborative data ecosystems that enable the participants to plan together to drive better mutual outcomes, and enable businesses to implement multiple recovery and adaptation strategies to handle these challenges. To do this you are going to need a lot of information between participants, enabling things like collaborative route planning so less truck drivers are able to do more deliveries while covering less miles.
This is also exactly the collaboration you need to get to Net Zero on your supply chain. Net-Zero is really “just” a KPI for an adaptive supply chain, or Net-Zero Scope 3 upstream is part of the cover story for building the collaborative data ecosystem you need to transform.
Product performance is a Net-Zero problem
Understanding how a product performs in the field is also a Net Zero problem, if you are selling direct to end customers you need to understand how efficiently they move it to where they use it, how it is used, and what happens at the end of its life. If you are selling to someone who then sells to someone else then you need a continuing ecosystem of data that expands from your customers to theirs.
This is also the information you need to understand how your customers (and theirs) use your product, whether they use your product, how long it sits on a shelf and what impacts that time, etc, etc
Scope 3 Downstream is your cover story for transformation on the commercial and sales side of your organization. If today you are designing and producing products only based on direct, internal, and probably inaccurate, data then you won’t know the amount of the product that can be, or is recycled, and what impacts product durability and lifespan. Competitors who can make those decisions are able to produce cheaper products, that last longer, and have lower carbon impact. To not how the lifecycle view in design is to choose to be outcompeted.
Net-Zero procurement isn’t just a procurement question
Another good example of how Net-Zero makes you better and more data driven is procurement. The traditional question for procurement is cost, and yes with Net-Zero we need to consider their full Scope Net-Zero impact, but we also need to be able to consider the impact on our scope impact.
If for instance there is a choice between two products, both have the same price, and same Net-Zero upstream impact. But their supply chain impacts are different for acquisition meaning their overall upstream is different. If you just look upstream however you might not be optimizing correctly. What if the product that has the lower upstream has a lower reliability that requires more often replacement, leading to increased downstream impacts?
In other words managing procurement for Net-Zero will require the full Scope impacts to be able to be tracked and simulated.
Net-Zero requires your meta-mirror
Digital Twin, meta-mirror or headless metaverse the name you give it doesn’t matter. What you need to do for Net-Zero is what you need to do to create a well managed business that handles collaborative data ecosystems and the data inversion, you need the external view, you need to be able to collaborate with your upstream and downstream partners, and you need to be able to design, produce and manage products or services from a lifecycle perspective.
Like the famous cartoon by Joel Pett “what if we create a better world for nothing” a huge benefit of a Net-Zero program is that it requires you to take better control of your business.
Managing your Net-Zero meta-mirror is a Net-Zero challenge
Whether just reporting on Net-Zero or managing Net-Zero for business advantage one of the things you have to consider is the cost of those efforts. Even if just static reporting on stationary data you are going to be increasing your impacts. Hopefully not to the level of over-using water by four-times as recently happened in the Netherlands to a data center, but the point is that any ESG efforts need to factor in their own consumption.
If using Cloud platforms this will include Scope 3 costs associated, as Scope 2 power-consumption will not be direct. If engaging in a complex ecosystem where a share platform is being used, the individual usage and engagement of that needs to be tracked.
For a company focused purely on monitoring this can become a significant challenge in itself, for one focused on managing to net-zero it will be just a minor part of a much bigger picture.
Net-Zero managers will beat Net-Zero reporters
Organizations who grasp the biggest opportunity of modern business — the ability to manage your organization based on the external as well as internal reality — are also going to be those who can best address the largest existential threat to the planet: climate change.
This post was written in conjunction with Vincent De Montalivet
