How can digital enable the transition to a more sustainable world?
Digital transformation has the potential to decouple emissions and resource use from economic growth; yet significant barriers must first be addressed.
Transitioning to a sustainable world is one of three areas we focus on as part of the societal implications cross-industry theme. The other themes we examine are skills and employment, and trust and shared values.
We have so far failed to decouple economic growth from emissions growth and resource use. The historic trend holds that for every 1% increase in global GDP, CO2e emissions have risen by approximately 0.5% and resource intensity by 0.4%.¹ Current business practices will contribute to a global gap of 8 billion metric tons between the supply and demand of natural resources by 2030; translating to $4.5 trillion of lost economic growth by 2030.²
But for the first time, the 21st UN Conference of the Parties (COP21) in December 2015 reached a legally binding and universal agreement on climate. The agreement aims to keep global warming ‘well below’ 2°C, with countries striving for 1.5°C above preindustrial levels.³
With increasing pressure on the world’s resources and an urgent need to cut emissions, digital transformation can help set the world’s economy on a sustainable footing.
Boosting sustainability through digitization
What role can the digital transformation of industries play in meeting this challenge? Our analysis suggests that digital initiatives offer immense opportunity to help decarbonize the global economy (see Figure 1):
- There is the potential to avoid an estimated 26 billion metric tons of net CO2 emissions from just three industries: electricity (15.8 billion metric tons avoided); logistics (9.9 billion) and automotive (540 million), from 2016 to 2025.
- This is almost equivalent to the CO2 emitted by all of Europe across that time period, or the United States more than five times over (based on 2013 data). ⁴ By 2025, this would amount to 8.5% of global emissions. ⁵
- In the electricity sector, if smart asset planning and management, and energy storage integration were universal, we estimate that up to 8.8 billion metric tons of CO2 emissions could be saved by 2025, creating $418 billion of new value for the economy.
In addition to our analysis, the Global e-Sustainability Initiative “GeSI” finds that digital technologies have the potential to reverse this ‘high growth-high carbon’ trend. With their framework also including the social and economic benefits of ICT, the GeSI 2015 report found that for each metric ton of CO2 emitted by the ICT sector, it helps users save 10 tons.
The environmental impact of digital
However, a number of challenges will need to be addressed if the full potential of digital transformation is to be realized; some relating to the environmental impact of digital technology itself. For example, e-waste is growing, resulting in lost potential value from reusing or recycling devices, ever-growing mountains of landfill and increasing volumes of toxic chemicals being released into the environment. According to a United Nations study, 40 million metric tons of e-waste was discarded in 2014,⁶ of which 7 million metric tons alone were from the United States and 6 million from China.⁷
Data centers also contribute significantly to emissions due to their high power consumption and often inefficient cooling systems. Data centers currently consume 1.5 to 2% of global electricity, a rate that is growing at 12% a year.⁸ Consumption is projected to increase to 140 billion kilowatt-hours annually by 2020. That would be equivalent to the annual output of 50 power plants and create carbon emissions of nearly 150 million metric tons of carbon annually.⁹
Despite the significant challenges in managing the environmental footprint of our data, some leading companies are making great strides. In fact, 27 technology companies now use 100% renewable energy in their operations, including Intel, SAP, Datapipe and Motorola.¹⁰ Apple sources 100% clean energy for its data centers and in 2015, announced a €1.7-billion plan to build and operate two data centers in Europe, each powered by 100% renewable energy. In addition, Apple has decreased the average total power consumed by Apple products by 57% since 2008, reducing their customers’ electricity bills and carbon emissions by 350,000 metric tons of CO2 in three years.
Barriers to scaling the circular economy
Progression toward a more sustainable, ‘circular’ economy has so far been limited to pioneers and first-moving global companies to date. There are a number of barriers to widespread adoption; from the geographic dispersion of supply chains to the complexity of materials and deconstructing products. Digital and technology innovations are providing companies with the opportunity to overcome such barriers. Machine-to-machine and data analytics enable companies to match the supply and demand for underused assets and products. ‘The cloud’, in combination with mobile and social media, can dematerialize products or even entire industries. Moreover, 3D printing creates opportunities for manufacturing inputs that are biodegradable¹¹
- Circular supply chain introduces fully renewable, recyclable or biodegradable materials that can be used in consecutive life cycles to reduce costs and increase predictability and control. Leading examples include Natureworks biopolymers, derived from 100% renewable sources, and AkzoNobel’s paints and coatings made from bio-based materials.
- Recovery and recycling revives materials previously designated as ‘waste’ for other uses. Companies either recover end-of-life products to recapture and reuse valuable material, energy and components or reclaim waste and byproducts from a production process. Proctor & Gamble now operates 45 facilities on a zero-waste basis, which has created more than $1 billion in value for the company over the past five years.
- Product life extension: recaptures value that would have been lost by disposal. By maintaining and improving products through repairs, upgrades, remanufacturing or remarketing, companies can keep them economically useful for as long as possible. For instance, Panasonic operates a high-tech disassembly, reuse and recycling plant, now recycling around 700,000 products a year.¹²
- Sharing platform creates new business opportunities for consumers, companies and micro-entrepreneurs, who rent, share, swap or lend their idle goods. Fewer resources go into making products that are infrequently used, and consumers have a new way to both make and save money. Examples include Uber, Airbnb and Lyft among a growing field.
- Product as a service, where manufacturers and retailers start to bear the total cost of ownership, adjusting focus to longevity and reliability of products and building new relationships with customers. As an example, Philips has launched ‘pay by lux’ to charge for lighting by output instead of unit sales, Michelin now charges per kilometer for tires, moving away from tires as the end product.¹³
Consumer trust and adoption
Consumers must have confidence in digital technologies if the potential of digital to decouple economic growth from emissions growth can be realized. The 2015 Accenture Digital Consumer Survey found that by 2020, nearly half of consumers will own a connected Internet of Things (IoT) device, with strongest demand for home cameras and security, smartwatches and fitness devices.¹⁴ There is great potential for such devices to enable consumers to proactively manage their energy and water consumption, improve efficiencies and reduce utility bills. For such devices to scale, consumers must believe that their devices and data are secure and that their personal information will be protected.
Four ways to get started
1. Embed circular economy principles. To reduce their environmental impact and decouple future growth from resource constraints, organizations should embed circular economy principles in their business. For instance, by launching products that can be reassembled or recycled, offering services that optimize the use of existing assets, or creating collaborative platforms that link buyers and sellers (see Brightstar case study).
Brightstar device recycling program
Brightstar has resold close to 15 million used digital devices since 2009. Brightstar’s program is one of the biggest in the world by volume and the largest in the world by geographic reach. Brightstar recovers more than 22 metric tons (Mt) of printed circuit boards, 42Mt of screens and 35Mt of batteries every year. Their ‘Buy Back and Trade In’ (BBTI) program takes used devices from developed economies and markets them in developing economies, targeted at retailers and wireless operators.
2. Commit to transparency across operations, tracking assets and suppliers. Digital technology can be used to better understand and therefore reduce the environmental impact of supply chains. By benchmarking potential suppliers, compiling corporate social responsibility scorecards and identifying improvement areas, companies can target the areas that will have the most impact (see Nike case study).
Nike environment scenario tool
Nike developed an environment scenario tool that allows it to quantifiably assess the environmental and financial impact of changes to its supply chain, from using different materials to changing its sourcing. Now, Nike can instantly see the potential impact over the next 10 years on the company’s water, energy, CO2 emissions and waste impact across the entire supply chain.¹⁵
3. Collaborate to share excess capacity or waste streams across businesses and industries. Businesses should look to platforms to optimize the use of existing assets or routes, or sell by-products to a nearby waste-to-energy plant. In logistics, for example, businesses have a huge opportunity to reduce their environmental footprint through optimizing the value from existing routes. Our value at stake analysis found that the value to society of crowdsourcing warehousing is worth 500 times its value to the logistics industry.
4. Agree on both industry-level and cross-industry environmental standards for the IT sector: Guidelines should cover appropriate disposal of e-waste, sourcing of clean energy, and improving the efficiency of data centers. While a number of companies have made significant progress in recent years, there is still a great opportunity for the technology industry to improve its reporting standards (see European Commission case study).
European Commission code of conduct for data centers.
In 2008, the European Commission released a code of conduct for data centers, a voluntary initiative with 184 participants from businesses (such as IBM, BT, HP, Vodafone and Unilever) and the public sector (such as the United Nations).¹⁶ The Code of Conduct establishes best practice and a framework of operation for the design, operation, maintenance and retirement of data centers. Participants must share energy meter and other data on an annual basis to ensure compliance and enable the European Commission to continually assess progress, set benchmarks and further develop the best practice guidelines.¹⁷
1. GeSI: ICT Solutions for 21st Century Challenges
2. Accenture Waste to Wealth, Palgrave Macmillan, 2015
3. UN Framework Convention on Climate Change “Adoption of the Paris Agreement”, December 12, 2015
4. Trends in Global CO2 Emissions: 2014 Report
5. CAGR taken from 2010 to 2030 to calculate 2025 global emissions forecast. Centre for Climate Change Economics and Policy and Grantham Institute. Policy Paper, May 2015
6. Baldé, C.P., Wang, F., Kuehr, R., Huisman, J. (2015), The global e-waste monitor – 2014, United Nations University
7. Reuters online article: U.S., China top dumping of electronic waste; little recycled[/fn]
8. Greenpeace report: How dirty is your data? A look at the energy choices that power cloud computing
9. Natural Resources Defense Council – Data Center Efficiency Assessment (2014)
10. National Renewable Energy Laboratory – Renewable Electricity Use by the U.S. Information and Communication Technology (ICT) Industry (2015)
11. Accenture Waste to Wealth, Palgrave Macmillan, 2015
12. Panasonic PETEK by numbers
13. Accenture Waste to Wealth, Palgrave Macmillan, 2015
14. Accenture Digital Trust in the IoT Era, 2015
15. Nike – Our Sustainability Strategy
16. European Commission: IET Organisation List (November 2015)
17. European Commission: Code of Conduct on Data Centres Energy Efficiency (October 2008)
Societal implications is one of four cross-industry themes (along with digital consumption, digital enterprise, and platform governance) that have been the focus of the World Economic Forum’s Digital Transformation of Industries (DTI) 2016 project. An overview of the DTI program can be found here.
Our in-depth analysis of the societal implications cross-industry theme is available in a white paper, which can be downloaded here.
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