Digital
Technology and Sustainability: Positive Mutual Reinforcement PART II
According to the authors of the PwC report,
“The challenge for innovators, investors, and governments is to identify and
scale these pioneering innovations, and also to make sustainability
considerations central to wider AI development and use.”
It’s important, therefore, for businesses to
approach these developments carefully, balancing the twin imperatives of
driving efficiencies and ensuring social survival and resilience.
Recent developments in Iceland highlight how
getting the balance right between the digitization of industry, finance, and
other sectors and ensuring sustainable development is tricky.
Data Challenges
Bitcoin mining — the process by which
bitcoins are produced — is a highly energy intensive process. In fact,
Icelandic energy company HS Orka recently warned that an “exponential” rise in
bitcoin mining meant the use of electricity by bitcoin mining data centers
could soon exceed the electricity needed to supply all of Iceland’s residential
homes. This development raises serious questions about the growth of data
processing and how it affects the ability of countries to reduce their
carbon footprint.
Company-specific challenges with respect to
data and carbon footprints are emerging, exposing companies to risks they might
not initially have anticipated. Banks that are pushing into digital services,
for example, are finding that the energy usage associated with processing
ever-larger amounts of data is increasing their carbon footprint — in some
cases pretty quickly.
Indeed, digitization is juicing up the links
that private companies use to interconnect their networks to such an extent
that Equinix, the world’s largest operator of data centers, predicted in 2017
that such bandwidth capacity at banks and insurers alone would grow by 61
percent annually until 2020. The growth rate of the bandwidth that enables
private data exchange will by 2021 be double that of the rate at which the bandwidth
of the Internet will be growing at that point. The implications for energy
usage are dire.
In industry, digital processes such as 3D
printing have clear attractions and are being pursued aggressively by some
players. Yet even as the applications of 3D printing are obviously useful, the
process can also result in significant waste as users experiment at the design
phase, resulting in a lot of “misprints.” When sustainability goals are taken
into consideration, 3D printing does not necessarily seem to be the
manufacturing boon it may first appear. “With such a vast range of potential
uses and applications for the technology, it is not easy to say whether 3D
printing helps to protect resources or, conversely, it is just another source
of waste; the environmental performance will vary depending on the product,”
point out Stefan Schaltegger and Holger Petersen, both professors of
sustainability management at Leuphana University of Lüneburg and Nordakademie
of Elmshorn in Germany.
They suggest that sustainability managers
should develop in-depth knowledge of 3D printing and assess its ecological
impacts at an early stage, getting involved at the start of operational process
planning.
This should lead to the creation of a
symbiotic relationship between sustainability managers and IT managers. The
former should engage immediately in the design stage of new digital processes,
“so as to ensure no opportunity to map energy and resource use…is missed,” the
professors say. For their part, IT managers “must recognize the relevance of
their decisions to sustainability.”
Finally, societal impacts must be considered.
Large-scale automation threatens to reduce employment in transportation,
manufacturing, agriculture, and the service sector, among other industries.
Probably most visibly, we already see the consequences of consumers’
enthusiastic embrace of ride-hailing services in certain cities: Traditional
cab drivers have found themselves disintermediated by the economics of taxi
apps. Some municipal authorities are starting to question the terms on which
ride-hailing services are exploiting their drivers. The so-called gig economy
looks less utopian in practice than it sounded in theory.
And societal impacts have an ethical
dimension. The ethical and responsible use of AI involves three main elements:
the use of big data; the growing reliance on algorithms to perform tasks, shape
choices, and make decisions; and the gradual reduction of human involvement in
many processes. Together, these elements raise issues related to fairness,
responsibility, and respect for human rights.
What Should Be Done?
We think the application of digital
technology requires a far more balanced sustainability strategy, one that
understands and addresses its economic and social impacts. Indeed, the
consensus view on digital technology’s contributions to the circular economy
may be missing an understanding of its impact on society. This cannot be
ignored as companies play their part in moving toward the United Nations’ 17
sustainable development goals (SDG 17) defined in 2015.
And although AI presents transformative
opportunities to address the Earth’s environmental challenges, left unguided,
it also has the capability to accelerate the environment’s degradation. If
people are to develop “safe” digital technology, they must ensure that it
aligns with humanity’s values, promising applications of the technology that do
not harm humans or other species.
That’s why we think there is a third element
to consider: social impact value, which focuses on minimizing environmental
damage and maximizing value from extracted resources, building biodiversity,
neuro-diversity, and community inclusion.
How should companies approach social impact
value? As a first step, we recommend that companies establish board-level
digital and sustainability advisory units to ensure that boards understand AI
and other digital technologies, including considerations of safety, ethics,
values, and governance. Companies should also ensure that their technology
strategies optimize the effect digital will have on sustainability outcomes, both
to capture new business opportunities and to manage risks.
We have developed six principles for a
sustainability strategy in the digital age:
• Understand how the activities of your
company create or reduce societal value by analyzing the types of activity;
outcomes; and social, environmental, and economic impacts of the business.
• Rethink your products and services (e.g.,
their usage and design) and understand conflicting objectives.
• Engage strategically with an expanded list
of your value chain stakeholders.
• Share economic wealth and develop markets
in which circular economy principles apply.
• Create the management information needed to
drive these issues in the operational activities of your business.
• Build capabilities and train employees to
develop what could be called implicit sustainability managers.
All six principles require a strategy
designed to pursue a sustainable balance of value creation with customers,
suppliers, and society. We want to emphasize that this strategy is not intended
to turn businesses into selfless organizations that disregard revenue,
profitability, and performance improvements. Businesses with a sustainability
strategy regard balanced value creation as the key imperative for the long-term
viability of their business model and social license.
One of
the leading approaches to deliver on this is PwC’s Total Impact Measurement and
Management (TIMM) framework. We have worked with our clients, academics, and other
experts to refine the framework, which is now recognized as a leading approach
to identifying, measuring, and valuing impact.
Whatever method you deploy in your business,
the solution needs to give you the breadth and depth of analysis to effectively
integrate these considerations into strategy development and decision making in
your business.
by Nils Naujok, Henry Le Fleming,
and Naveen Srivatsav
FOR FULL ARTICLE AND
EXHIBITS https://www.strategy-business.com/article/Digital-Technology-and-Sustainability-Positive-Mutual-Reinforcement?gko=37b5b&utm_source=itw&utm_medium=20180807&utm_campaign=resp
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