As the world continues to grapple with the effects of climate change, there is increasing interest in how digital technologies can help with environmental sustainability goals.
Digital sustainability encompasses a range of practices, from data-driven decision-making reducing waste and energy-efficient cloud computing to ethical supply chain management and responsible hardware sourcing. By embracing digital sustainability, companies can not only have a positive impact on the environment but also reap substantial economic benefits. It can help to reduce costs, strengthen supply chains, and create a more resilient business model.
Emerging drivers for digital sustainability
When working on emissions reduction and removal, the approach most favoured by most initiatives is one of collective responsibility, such as the Race to Zero and Exponential Climate Action. The following trends are some signals from around the world which are encouraging individuals and organisations to take action themselves.
Consumer Choice
While the desire to be green conflicts with new economic realities, consumer trends continue point toward continued enthusiasm for shopping and living in sustainable ways. Even with the perception of sustainable products costing more, consumers are still opting to shop more consciously if the choices are easy to make.
There is also continued faster growth of products marketed as sustainable versus those not marketed as sustainable. Sustainable products have a price premium of 28% and an annualised growth rate of 7.2% compared to just 2.8% for non-sustainable products.
Consumers are more likely to prefer brands that highlight their green credentials, but they must be meaningful demonstrations of credible action in their supply chains and production processes. Brands are unable to “greenwash” by donating to charities or simply purchasing carbon offsets.
The use of digital product passports, soon to be mandated in the EU, provide technological means to gather data on a product throughout its supply chain so stakeholders, especially consumers, can make more informed choices about the environmental impact of the product.
Ecological impacts of cloud computing
Digital devices, networks, and datacentres account for approximately 3% of worldwide emissions – greater than the airline industry. Most of the hyperscale providers (Google, Microsoft, Amazon) are investing in innovative cooling solutions as cooling accounts for 60% of energy, and pursuing net-zero energy generation as well. The economies of scale provided by the hyperscale providers will likely make it difficult for smaller datacentre players to compete, especially if greenhouse gas emissions become more visible and costly. Microsoft even offers an emissions dashboard to help calculate your carbon footprint.
Voluntary Carbon Markets
There is continued growth in voluntary carbon markets worldwide, spurred by increasing influence by external organisations to join the race to net zero and to hold accountable to international agreements. Companies can purchase offsets for greenhouse gas emissions in a voluntary market, for both avoiding emissions through things such as building wind farms and for removal of emissions such as afforestation or technology solutions. This value of this marketplace is greater than $2B USD (2021) and set to grow to somewhere between $10B and $40B by 2030.
Buyers in these markets are also pricing removal credits at a premium compared to avoidance credits, with an expected increase in technology-based removal credits as technology improves. They also want more robust assurance of what they are buying through strong monitoring, reporting and verification, delivered through digital technologies.
There is a lack of clarity for global compliance markets and how companies can trade across national boundaries, so trustless blockchain based solutions may find a foothold in this sector.
Higher social cost of CO2
The social cost of CO2 is much higher than previously calculated. Many pieces of policy are based on an outdated price of $51/tonne, while a new study calculates a much higher price of $181/tonne based on new analyses.
Interestingly the common perception of sea level rise only factors a small percentage of the social cost calculation. Energy use and transition also factor in a small amount where gains in efficiency and emissions reduction are offset with growth in demand. The largest factors in calculating the social cost of carbon are mortality and the impact to agriculture, with a significant variance to the agricultural impact due to the complexity of crop yields, temperature and CO2 levels not being well understood.
However, what this all means is that the benefits for greenhouse gas emission mitigation can be increased and the drive for action is more compelling.
New climate taxes may be closer than you think
Renewed interest in so called “windfall” taxes that are finding resonance with the public that seem to be OK with punishing certain sectors such as the oil industry who are seen as taking excessive profits. 87% of Americans support a “crackdown” on them, and the UK recently passed legislation to raise up to $80B USD from new windfall taxes on the energy sector. These policies are easy to explain and popular.
The International Energy Agency suggests that it will require $4 trillion in annual investment in clean energy by 2030. While most of the money is to come from the private sector, governments will be looking for ways to lay the groundwork to help accelerate development. The ongoing conversations about minimum corporate taxes and multinational tax rates shine a light on where things may be headed.
Counter indicators for digital sustainability
Not all approaches require collective action and there are some doubts that ESG even benefits the bottom line. The need to drive digital sustainability for individual companies may be less important after all.
We are aware of the problem known as the tragedy of the commons when it comes to controlling carbon emissions. To address this issue, people are giving serious consideration to planning large-scale carbon removal or geo-engineering efforts. These projects rely on technology to either remove greenhouse gases from the atmosphere or reduce the amount of heat and sunlight received from the sun to decrease the greenhouse effect.
State of carbon dioxide removal
Currently, virtually all carbon dioxide emissions removal is done through forests – either through reforestation (replacing forests) or afforestation (new forests). Only 0.1% is novel removal technologies like bioenergy, biochar or direct air capture and storage. Even if we can reduce emissions by 50%, the target we are currently failing to meet, the pathways that limit global warming to 1.5 or 2C require substantial amounts of CO2 removal in 2050 from both conventional and novel removal technologies. The scale up factor is something like 2x for conventional and 1300x for novel CO2 removal technologies by the year 2050.
These novel technologies are things like BECCS (bioenergy carbon capture and storage) and DACCS (direct air carbon capture and storage), enhanced rock weathering and coastal wetland management.
Substantial investment in technologies will be required, with potential payoffs in development of intellectual property and new businesses. However, it should not be underestimated the challenge faced with these novel technologies. Some estimates put the land area required for BECCS at 5x the area of India, and the energy requirements for DACCS at 25% of global energy in 2100. These requirements are incredible and further slippage against the reduction targets may fuel increased investment in “Manhattan-project” style initiatives that eclipse all other efforts.
Geoengineering
George Soros delivered remarks at the Munich Security Conference in mid Feb 2023 where he spoke about an initiative to refreeze the arctic. A fleet of 500-1000 vessels would vaporise water droplets during the summer months in the arctic, generating a cloud layer that would reflect the sun’s heat. This would then prevent the arctic ice from thawing in the summer and increase the size of the permanent ice sheet over time. The technology to do this exists now and it is just a matter of policy and initiative.
Similarly, a start-up gained attention in April last year releasing sulphur-dioxide particles into the high atmosphere to reflect the sun’s rays and help cool the earth. They were recently blocked from launching more balloons, but they have the backing of investors who will undoubtedly keep pushing. This is also a significant plotline of the latest Neal Stephenson book, Termination Shock. Furthermore, the US government has been directed to develop a cross-agency research group on climate interventions based on solar geoengineering research.
Speaking of Termination Shock, there is unsurprisingly significant concerns raised by some experts on initiatives such as these, where there could be profound consequences when these technologies are “terminated” and whatever effects they were abating are suddenly released catastrophically.
Scenarios
Now that we have covered a few of the emerging trends for digital sustainability, let’s consider a few future scenarios. These scenarios, the Shared Socioeconomic Pathways, helped produce the IPCC Sixth Assessment report on climate change published in August 2021 and are the basis for policy work worldwide. The are based on a classic 2x2 scenario matrix which has put Adaptability and Mitigation as the critical uncertainties and included a ‘middle of the road’ option. The scenarios are:
- SSP1: Sustainability (Taking the Green Road)
- SSP2: Middle of the Road
- SSP3: Regional Rivalry (A Rocky Road)
- SSP4: Inequality (A Road divided)
- SSP5: Fossil-fuelled Development (Taking the Highway)
SSP1: Sustainability (Taking the Green Road)
The world shifts gradually, but pervasively, toward a more sustainable path, emphasizing more inclusive development that respects perceived environmental boundaries. Management of the global commons slowly improves, educational and health investments accelerate the demographic transition, and the emphasis on economic growth shifts toward a broader emphasis on human well-being. Driven by an increasing commitment to achieving development goals, inequality is reduced both across and within countries. Consumption is oriented toward low material growth and lower resource and energy intensity.
SSP2: Middle of the road
The world follows a path in which social, economic, and technological trends do not shift markedly from historical patterns. Development and income growth proceeds unevenly, with some countries making relatively good progress while others fall short of expectations. Global and national institutions work toward but make slow progress in achieving sustainable development goals. Environmental systems experience degradation, although there are some improvements and overall the intensity of resource and energy use declines. Global population growth is moderate and levels off in the second half of the century. Income inequality persists or improves only slowly and challenges to reducing vulnerability to societal and environmental changes remain.
SSP3: Regional rivalry (A Rocky Road)
A resurgent nationalism, concerns about competitiveness and security, and regional conflicts push countries to increasingly focus on domestic or, at most, regional issues. Policies shift over time to become increasingly oriented toward national and regional security issues. Countries focus on achieving energy and food security goals within their own regions at the expense of broader-based development. Investments in education and technological development decline. Economic development is slow, consumption is material-intensive, and inequalities persist or worsen over time. Population growth is low in industrialized and high in developing countries. A low international priority for addressing environmental concerns leads to strong environmental degradation in some regions.
SSP4: Inequality (A Road Divided)
Highly unequal investments in human capital, combined with increasing disparities in economic opportunity and political power, lead to increasing inequalities and stratification both across and within countries. Over time, a gap widens between an internationally connected society that contributes to knowledge- and capital-intensive sectors of the global economy, and a fragmented collection of lower-income, poorly educated societies that work in a labour intensive, low-tech economy. Social cohesion degrades and conflict and unrest become increasingly common. Technology development is high in the high-tech economy and sectors. The globally connected energy sector diversifies, with investments in both carbon-intensive fuels like coal and unconventional oil, but also low-carbon energy sources. Environmental policies focus on local issues around middle- and high-income areas.
SSP5: Fossil-Fuelled Development (Taking the Highway)
This world places increasing faith in competitive markets, innovation, and participatory societies to produce rapid technological progress and development of human capital as the path to sustainable development. Global markets are increasingly integrated. There are also strong investments in health, education, and institutions to enhance human and social capital. At the same time, the push for economic and social development is coupled with the exploitation of abundant fossil fuel resources and the adoption of resource and energy intensive lifestyles around the world. All these factors lead to rapid growth of the global economy, while global population peaks and declines in the 21st century. Local environmental problems like air pollution are successfully managed. There is faith in the ability to effectively manage social and ecological systems, including by geo-engineering if necessary.
Strategic Implications
Scenarios create a powerful set of perspectives from which to develop and test strategic planning for organisations. Considering the above scenarios:
- What are some strategic options for your organisation in each scenario? If the future were to turn out like any one of these, how would you want your organisation to react?
- What new aspirational goals become possibilities under the scenarios? How would your current goals need to be refined?
- What new opportunities for innovation or new products/services might these scenarios present? How will new customer groups, technologies, and the competitive landscape change?
- What are some signposts or indicators that could help signal which scenario is emerging?
Practical Actions
It is not usual in scenario planning activities to assign probabilities or a likelihood to scenario options, but given the stakes involved, experts are being asked to provide some insight into where we are headed. While the worst case scenario (SSP5: Taking the Fossil Highway) is increasingly being ruled out as implausible, the most likely outcome is something between SSP2 Middle of the Road and SSP3 Regional Rivalry with an outcome of 3C for 2100.
Looking at the scenarios SSP2 and SSP3 and the trends and signals noted earlier, there are some clear actions business leaders can take now to enhance digital sustainability:
- Establish a sustainability technology group to gather, analyse and deploy sustainable technologies and changes to operating models
- Develop KPIs to baseline and measure improvements in sustainability of your organisation and suppliers
- Establish a data platform for reporting on ESG
- Prioritise projects and suppliers thatpositively impact sustainability KPIs
- Prepare for increased carbon footprint of AI technologies
- Commit to increasing e-waste recycling from 17.4% to 100%
