In this blog post, NTT DATA evaluates the urgency of environmental pressures on business, and how cloud can be used to combine competitive advantage, operational excellence and transformational improvements in Sustainability.
January 16, 2023
In this series of three connected blog posts, NTT DATA sets out its vision for using the move to cloud as a mechanism for combining competitive advantage, operational excellence and transformational improvements in Sustainability. In this first part, where do we stand today?
A world in crisis
The COP 26 conference seems like ancient history now, but it happened less than a year ago. Virtually every government in the world was represented and they agreed sweeping restrictions to the use of fossil fuels, including a strong aspiration to eliminate coal altogether in the next two decades. Everyone agreed on the need for action, based on the latest IPCC reports (International Panel on Climate Change), which make it clear that climate change is real, is happening now and some aspects are irreversible. Nothing we do will prevent the mean global temperature from rising: the only questions are how high and fast?
Since then, political instability has spread around the world leading to an energy crisis. Coal fired power stations are being brought back into action and a desperate scramble for gas supplies has become a key preoccupation. Where does that leave the climate crisis, and how does that impact on business leaders and their strategic plans?
The need for change
The truth is, no matter what happens with social unrest, nothing has changed in the calculations achieved at the last COP meeting. For every business sector, sustainability at a time of growing climate impact is still the key to future prosperity, and there are many reasons why.
Investment. Long-term investors need to know that the enterprises they support have a future. That means they have to be sustainable. They need to prove that they can operate profitably as the environment changes around them, which means reducing carbon emissions, cutting waste, reducing pollution and having a clear vision for the future. Major investors are unwilling to put money into businesses that may not have a long-term future. This also makes business sense. A recent Rain Forest Alliance survey into Corporate Social Responsibility (CSR) shows that 98% of business in all sectors with clear CSR policies reported business benefits, including lower fixed costs and higher profits.
Consumer sentiment. Every piece of research into this topic proves that people prioritize brands and businesses that are serious about the environment. Brands that take the environment seriously grow in value: the other kind decline. The same survey quoted above shows that 98% of consumers have a more favourable view of products from companies with clear environmental policies, and 73% expect serious action by those companies to improve their sustainability performance.
Talent. There's a new generation out there, the creative but sceptical younger people every enterprise wants to employ. They increasingly place environmental performance as a top factor in deciding which business they will consider joining. This sentiment is becoming more pronounced all the time. From manufacturing to services to advanced technologies: potential employees will rate you environmentally before joining.
Regulations. As concerns about sustainability increase, so every major regulatory regime across the world is becoming progressively more restrictive when it comes to activities that could have environmentally damaging impact. Enterprises need to report in depth and show a clear audit trail for their entire value chains, not just covering Scope 1 emissions (from your own operations), and Scope 2 (from direct suppliers), but now also Scope 3 (emissions from production of raw materials, components, transport).
No matter how dramatic short-term events might be, these underlying realities are not going to change. Sustainability is the key to future viability for every kind of business. So how can they respond more effectively to this challenge?
Technology as an enabler for change
Most enterprises are finding out something campaigners have known for years: better environmental performance is good for business. It's not just because of public opinion or investor sentiment. If you use less energy then your fixed costs go down. If you reduce pollution, it means you are operationally more efficient. Money that used to be wasted can now be reinvested in better processes, better equipment, new product and service development. These are activities that make money for the business. It is not surprising that enterprises with a better environmental record, therefore, are also gaining competitive advantage and becoming more profitable.
NTT DATA is a leading technology company and our focus is, of necessity, on the role of technology in improving our clients' performance. Naturally enough, at a time of climate crisis, this means asking how new technology, I particular the Cloud, can help deliver better commercial and sustainability performance.
We know that enterprises need to move fast to the cloud, although we also make it clear that the process can be complex and there are costs involved. Perhaps the most important health warning we can give is to say that cloud is not necessarily green. Traditional cloud, based on large groups of server farms networked together, use a lot of energy and, as the world moves towards more bandwidth hungry applications, with exponential growth in storage of visual files, so the demand for energy grows. Use of blockchain, not just in its original task of crypto mining but for managing value chains, is also contributing to the need for more transactions, which means more energy use.
We can manage cloud to deliver massive economies of scale through shared resources, virtualization and changes to working practices (more virtual working, less travel). This is not enough in itself, however, to deliver the much-needed step-change in energy use and carbon emissions. Every individual enterprise needs to rethink how it structures its IT, manages its processes and embeds sustainability in its normal working activities. That's an organizational and cultural requirement, as well as a test of technology capability.
The second blog in this 3-part series will take a closer look at technology as a driver of sustainability and what it means for management priorities and strategies. For now, let's remember that good environmental practice is good for business, and only sustainable enterprises have a viable long-term future.