It is also plagued by disparate reporting standards and data management concerns. How can technology be used to bridge the gaps?
In the face of increasing regulatory pressure, many businesses are scrambling to align environmental responsibility with business strategy.
The win-win way to integrate sustainability into the difficult business equation is use data to drive efficiency, innovation, and cost savings throughout the organization while reducing environmental impact.
Embracing this “data-driven sustainability” can guide businesses towards a sustainable future while optimizing operations and fostering a culture of environmental stewardship, according to Gwyneth Tan, Head, Strategic Programmes (Sustainability), SGTech.
DigiconAsia: How do data-driven sustainability strategies improve environmental compliance?
Gwyneth Tan (GT): Today, the topic of sustainability cannot be addressed alone without also concurrently addressing data issues. Dealing with either aspect in isolation leads to tunnel vision and siloed decision-making — an outcome particularly detrimental to complex manufacturing supply chains, where every point of production is codependent.
Poor consolidation of group ESG data puts businesses at risk of missing critical indicators that can skew interpretation by decision-makers. With carbon taxes rising by the year, businesses are being supported by more monetary incentives to decarbonize.
However, beyond short-term monetary costs, the more insidious implication of non-data-driven sustainability strategies lies in erroneous or misaligned abatement plans.
DigiconAsia: What challenges do businesses face in effectively collecting, managing, and analyzing the vast amounts of data generated from their operations?
GT: Regardless of sector, digitalization and ESG practices today are becoming increasingly intertwined and interdependent across all business activities. As ecosystem players span not only across different industries but also across countries and cultures, the greening of supply chains is particularly challenging. What is mostly not visible to observers is the extent of what it takes for a business to reduce group emissions by the equivalent of even one ton of carbon dioxide. Some considerations:
- Abatement begins with baselining, and to derive a baseline, there must be adequate internal coordination, process setting, and information verification. The reality is that most value chains, suppliers and partners do not always possess uniform digital and data capabilities, have similar methodologies of data categorization and quantification; or are even working in similar cultures. Assumptions have to be made out of operational necessity, but this is far from adequate as real data often varies by substantial amounts.
- Beyond the immense undertaking of cross-border aggregation and verification, Scope 3 data misinterpretations and inaccuracies abound in reported outcomes, which can paint erroneous, or even misleading pictures to corporate decision makers.
- Beyond the tracking and reporting of environmental footprints, qualitative metrics are varied, as there are reporting standards in existence today. While Sustainability Accounting Standards Board stresses reporting of ESG topics material to the firm, and Global Reporting Initiative takes a more holistic approach looking at environmental, social and governance practices of the organization, the Task Force on Climate-Related Financial Disclosures (TCFD) and the International Sustainability Standards Board (ISSB) are heavily focused on linkages to the company’s financial accounts.
- Ultimately, benchmarking of ESG practices such as gender diversity, employment of the underprivileged, charitable donations and corporate social responsibility; women’s leadership roles, and reporting frameworks — differ between countries and even between businesses in the same industry. Thus, there is too much room for subjective interpretation of data and information.
Take Singapore as an example. As globally established as the country is for its corporate governance, her lawmakers and regulators are still grappling with the fast-impending sustainability-driven global economy. While moving towards her our own TCFDs, and ultimately ISSB frameworks, her government is careful to make changes at a measured and inclusive pace so that affected business can quantify and account for the social and governance pillars of their ESG efforts with as little overlap and confusion as possible.
Concurrently, Singapore is also making progress in strengthening cybersecurity, and pushing for businesses to safeguard and tamper-proof their internal data so that data-driven sustainability efforts are not weakened.
In the meantime, real operational gaps remain between data gathering, accounting, reporting, and interpretation.
DigiconAsia: With so many challenges now and in the future, how can technology be used to ease the transitions and unify disparate standards and approaches?
GT: Today, digital data technologies are increasingly being deployed to narrow gaps between data gathering, accounting, reporting, and interpretation. For the manufacturing industries in particular, the extent of speed and accuracy in production planning for reducing carbon footprints can mean the difference between achieving or missing output and cost projections.
So, businesses can now use AI-driven production simulation (via digital twinning technologies) to shorten outcomes of production simulations to two or three weeks, compared to traditional input methods where the manufacturer would only receive results after completing entire multiple production cycles.
According to one of our member firms specializing in this field, Zuno:
- AI is used to help business to gain meaningful insights into their emissions data, and plan for data-driven abatement.
- Internet of Things devices have been deployed in brownfield buildings and plants to monitor room temperatures, smart intelligent power supply, even in automated cleaning.
- Dedicated ESG accounting platforms can be leveraged to help boards of directors and their management in the massive undertaking of consolidating and interpreting group data, not only in terms of speed by also in accurately pivoting datasets for ease of understanding by stakeholders.
DigiconAsia: What steps are Chief Information Officers and their peers in industry taking to integrate sustainability goals into their organization’s digital strategy and technology infrastructure?
GT: All value chain owners should be acutely conscious of data gaps — particularly so for manufacturers. Failure to produce timely and accurate sustainability data can result in regulatory, financial, and reputational risks.
Chief Information Officers and their peers in technology have distinct but equally important planning and implementation roles in their organization’s greening of their Scope 3 ecosystem.
While Chief Sustainability Officers provide domain knowledge and expertise, as well as guidance and advisory, CIOs are more successful when boards and senior executive management act in concert. For comparison, Chinese state-owned enterprises (SOEs) operate on a centralized model where decisions on sustainability are taken at the chairperson level; thereafter implemented as policies throughout the conglomerate by the various entity or country heads.
Whatever the model used, raising corporate ESG practice and decarbonizing supply chains can be effective only when there is complete leadership buy-in, and strong corporate willpower to collaborate and innovate.
Also, the greening of supply chains is not a one-sided effort. Value chain owners and contributors have equal parts to play. Contributors are often small- and medium- sized enterprises, so there must be sufficient motivation for them to take group accountability for the planet.
DigiconAsia thanks Gwyneth Tan for sharing SG Tech’s insights.
