Artificial intelligence can help drive an organisation’s climate change strategy.
In fact, a recent report from Capgemini found that AI powered use cases for climate action have the potential to help organisations fulfil up to 45% of their Economic Emission Intensity (EEI) targets of the Paris Agreement.
Why should enterprises focus on sustainability and climate action?
There are many drivers for sustainability, from attracting investment and new employees to reputational enhancement.
In my research conducted at Henley Business School a few years ago, I explored the drivers behind corporate motivation to invest in becoming more sustainable. Based on inputs from 170 of the world’s largest companies, the ability to attract and retain the best employees topped the list of drivers, alongside the expectations of customers.
Our Capgemini Research Institute also carried out research this year around how sustainability is fundamentally changing consumer preferences. It found that 75% of millennials expect employers to take a stand on social and climate issues and that 79% of consumers are changing their purchase preferences based on sustainability
Another key driver for any business is the increased pressure on global resources. Organisations must deliver products and services sustainably, and the realisation of planetary limits is becoming more widely understood. A growing population, technological advancement, urbanisation and increased rates of consumption of everything from energy to consumer products is putting increased pressure on our natural resources. Whatever size the business, resource efficiency is going to be key. According to the Global Footprint Network, we are already using 1.7 Earths’ worth of resources annually — that’s more than nature can regenerate each year and will have a huge impact on a business’ ability to sustain itself.
The risk of climate change to organisations — and the planet — is increasingly ‘real’. Over the past decade, these concerns have climbed up the global agenda, with climate change and its related impacts featuring in the World Economic Forum’s top five Global Risks every year since 2011. According to the World Bank, $158 trillion of physical assets — double the total annual output of the global economy – are at risk without preventative action to mitigate climate change. Many businesses are already facing the hard implications of climate change today — for instance insurance costs are rising as claims for extreme weather events escalate.
The world is waking up to this, and we’re seeing policy change at unprecedented scale. In September the EU increased their carbon reduction ambition to ensure they reach their net zero target by 2050, China has committed to Carbon Neutrality, and under the President Elect, US will re-enter the Paris Agreement.
Another indicator is the investment community. For example, Blackrock have made sustainability a core part of its investment strategy and assets in sustainable funds hit a record $1 trillion as reported by MorningStar.
Increasingly business understands that addressing these issues is critical for their long-term success. The case for sustainability has never been more pressing.
Is it now an imperative regarding attracting and retaining customers?
We see from our retail team, that sustainable shopping and consumption patterns are attracting growing interest around the world. At the Consumer Goods Forum last year, Capgemini spoke on the role of technology to address sustainability issues in this sector. And many businesses then, were citing consumers as a key driver.
Impacts from global food waste, fast fashion and rare earth metal extraction are well documented. More and more, we are seeing retailers, driven by consumers, taking a stand on these issues and tackling problems like unsustainable palm oil cultivation or plastic packaging.
In research conducted by our Capgemini Research Institute in June 2020, we found that 78% of more than 7,000 consumers across seven countries believe “companies have a larger role to play in society.”
A significant majority of consumers (79%) are changing their purchase preferences based on sustainability. The research also found consumers practice sustainability-led behavior in their daily life (eg, minimising food waste or using energy-efficient appliances), and in their shopping behaviour (eg, preferring products with minimal packaging), which would impact their brand loyalty.
From a business perspective, there is a strong connection between sustainability and business benefits, with nearly 80% of executives pointing to an increase in customer loyalty as a key benefit from sustainability initiatives. Over two thirds (69%) pointed to an increase in brand value. The impact of sustainability credentials on brand value and sales is supported by our consumer research: if consumers perceive that the brands they are buying from are not environmentally sustainable or socially responsible, 70% tell their friends and family about the experience and urge them not to interact with the organisation.
The research found that 68% of the organisations also cited improvement in environmental, social and governance (ESG) ratings of their organisation driven by sustainability initiatives, with nearly 63% of organisations saying that sustainability initiatives have helped boost revenues.
Another high-impact industry which we are seeing adapt to the new world order is the automotive sector.
Automotive and mobility companies worldwide are facing increasing pressure from both consumers and government regulators to prioritise their sustainability efforts. We’re seeing a fundamental potential for a shift in approach as consumers adopt new, greener and more flexible approaches to getting from A to B. This will be more of a mobility ‘experience’, rather than just being about vehicles. Over the coming decade, original equipment manufacturers (OEMs) will be forced to shift from being product-centric companies to being product and service oriented, offering incentives and new ways in which consumers can get from A to B sustainably.
How can organisations meet their customers’ sustainability demands?
How can technology innovations like AI help with an organisation’s sustainability drive?
Technology is changing our world, and with it bringing new challenges and opportunities for sustainability. While recognising that technology can have unintended negative impacts, the possibility for ‘good’ far outweighs the bad. According to the Global e-Sustainability Initiative, GeSI, for example, technology has the potential to cut 9.7 times as many carbon emissions as it emits.
The most significant development for sustainability is the increasing ability to generate, capture, transmit as well as learn from data. The implications for what we can do with this data are huge and will be a critical feature for the sustainability agenda.
Advanced analytics, enabled by the increase in quality and quantity of data from connected devices in an operation, provide organisations with much greater insights into their efficiency. This can help identify opportunities to reduce environmental impacts across the operation, for example from energy consumption patterns, which can be adapted accordingly. In the same way, the intelligence from customer experience can be used to improve the manufacturing process, producing only what we need.
The adoption of AI to address climate change is also growing, with successful use cases around tracking GHG emissions and tracing GHG leakages at industrial sites, as well as using AI to improve the energy efficiency of facilities and industrial processes. AI is also being successfully utilised to design new products that reduce waste and emission during prototyping, production and usage. AI is playing a role in reducing the wastage of food products and raw materials by improving demand planning, it is also being successfully deployed for route optimisation and fleet management for retail, automotive and consumer products firms.
Our most recent report Climate AI: How artificial intelligence can power your climate action strategy, considers the potential that AI offers for accelerating climate action and the benefits that have been achieved so far, revealing that 48% of organisations across the automotive, industrial/process manufacturing, energy and utilities, consumer products, and retail industries are currently using AI to tackle climate change, and already helping reduce GHG emissions by 12.9% – with expectations that AI could help reduce greenhouse gas (GHG) emissions by 16% over the next 3-5 years. In fact, our modelling exercise — conducted in partnership with a climate start-up ‘right. based on science’ — estimates that, by 2030, AI-enabled use cases can potentially help some organisations fulfil up to 45% of their Economic Emission Intensity (EEI) targets of the Paris Agreement.
4. Who should lead this drive within an organisation and how?
The research found that only a few organisations are successfully combining and scaling their climate vision with AI capabilities. We call these high-performing organisations ‘Climate AI Champions’. They represent only 13% of the entire survey sample. We can learn from them about what is working for organisations and how best to integrate AI to better impact their sustainability initiatives.
One of the things they seem to be doing differently is being able to drive their climate action and AI action by building dedicated leadership and technical teams to drive implementation. We found that 47% of champions have a dedicated leader for each climate goal and action compare to 36% of others, and 53% have a dedicated team for implementing tech solutions compared to 42% of others.
One of the main recommendations from the report is the need to educate sustainability teams on the potential for AI and educate AI teams in the criticality of climate action. Given that we know from the report, that investment and skills is a ‘gap, it seems to me that it is only by coming together that the impact and needed change/approaches will be made.