By Kai Goerlich and Will Ritzrau
As leaders gather in Paris for the UN Conference on Climate Change, game-changing initiatives are on the table. The stakes are high: the aim is to reach, for the first time, a universal, legally-binding agreement that will enable us to combat climate change effectively and boost the transition toward resilient, low-carbon societies and economies. The hope is that COP21 will be a turning point.
To create a true shift, there’s a need for concrete actions which can drive results. Digital business and technologies can make a big impact. We estimate that IT could help cut greenhouse gases by 7.6 Gt and save a value of around $30 trillion in resources, including water, energy and metals by 2030.
Resources – We won’t get more, so let’s be more efficient
According to the World Trade Organization, worldwide trade volume tripled between 2000 and 2015 and will continue to grow as high as $70 trillion by 2030. To take full advantage of this market opportunity, logistics service providers need to increase their capacity for transporting by ship, railway, roadway, and air by 50 percent. Meanwhile, financial transactions will have to double and reach a volume of nine trillion transactions.
Further fueled by a global middle class that is expected to grow three-fold by 2030, this demand will likely outgrow natural and economic capacity. Estimates from a variety of nongovernmental organizations and analysts predict the need for 50 percent more water, 50 percent more energy, 50 percent more food, and 100 percent more metals by 2030. Not only will this demand lead to over-exploitation of the world’s natural resources, but it will also result in high and volatile commodity pricing.
We estimate that the resources needed over the next 15 years will sum up to around $33 trillion. By applying digital technologies globally, and reducing operating costs, we could essentially save the resources that we need to cope with the growing demand. The benefits of digitization extend beyond cost savings… they can also lower carbon emissions enough to avoid most catastrophic warming scenarios.
Carbon Emissions – We can’t afford the impact, so let’s reduce
According to #SMARTer2030, a study by the Global e-Sustainability Initiative (GeSI) and Accenture Strategy, it is possible, during the next 15 years, to hold worldwide carbon emissions to 2015 levels by digitizing business processes and applying data to decisions about resource use. In new research published in Digitalist Magazine, Executive Quarterly, SAP estimates that in six major industries like utilities, agriculture and food production and transportation and logistics, digital technologies can help save 7.6 Gt carbon emissions by 2030. That’s a full 63 percent of the 12.1 Gt total identified in the #SMARTer2030 study that could be cut.
This leads us to ask: Where would technology create the highest impact? Would certain industries generate greater efficiency gains and lower emissions? How realistic is it for a business to become more sustainable and more profitable at the same time?
Let’s consider an example from agriculture and food production. Farmers are now using digital technologies and analytics which enable them to reduce the amount of chemicals they use to fertilize and protect crops, and to optimize their use of heavy machinery. By tapping into big data for crop impacts – such as weather or soil composition – farmers can make better decisions about how much water they need for irrigation; reduce the amount of herbicides and pesticides used; and limit the gas-guzzling equipment needed. As a result, they can optimize their yields (harvests), while also cutting carbon emissions. This use of technology to make better decisions also has a positive impact on the farmer’s profit, through optimized investment in fertilizer, herbicides or pesticides.
To become more sustainable, organizations have used IT – specifically analytics and automation – to drive cost and resource efficiencies. These efficiency gains are often used as a way to reinvent products and business models. As we’ve noted, natural resources are now a global competitive factor – they cannot be ignored. However, the natural resource inefficiencies will remain largely hidden if digital technologies are only used to identify financial outcomes without a link to the natural resource footprint.
By rolling out digital business technologies across the economy, six major industries alone could help cut harmful greenhouse gases significantly, and save a value of around $30 trillion in natural resources, by 2030. And, as the digital farming example shows, it is possible to be(come) more sustainable and profitable. Just imagine how much greater an impact there could be to addressing the climate crisis if every industry could realize these gains.
Kai Goerlich is Director of IoT, Supplier Networks and Digital Futures at SAP SE. Will Ritzrau is Director for Sustainability at SAP SE. This post is based on their joint research, Charted: Is Digital Business the Answer to the Climate Crisis? in the Q4 2015 issue of Digitalist Magazine, Executive Quarterly, available for free download on the Apple App Store and Google Play.