Key Takeaways

• Leading ways for individuals to cut their greenhouse gas emissions include decreasing their air travel, decreasing their household energy use, decreasing their vehicle fuel consumption and eating a more plant-based diet. Leading ways for businesses to decrease their greenhouse gas emissions include decreasing their fossil fuel consumption, their waste, and their use of fluorinated gases.
•  Common sustainability metrics used by major technology companies are focused on waste, renewable energy/energy use reduction and water.
• Leading challenges for businesses in implementing sustainability initiatives include cost, a lack of a clear sustainability definition, a lack of organizational capacity, challenges measuring sustainability and its impact, and lastly the fact that near-term challenges often take precedence.
• Three areas of opportunity for tech companies to provide sustainability solutions are in creating programs for emissions data transparency, creating tools — especially AI tools — to foster process optimization for sustainability, and creating platforms for data and solution sharing across industries to form partnerships for sustainability.
• Unique aspects of sustainability for technology companies to consider are the duty/perception of technology companies to bring sustainability solutions to other industries, the large number of startups in the industry that do not consider sustainability immediately, and the unique problem of short product lifecycles leading to large amounts of toxic e-waste.

Introduction

Sustainability Actions

Individual

 

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Air Travel

• For individuals that fly, aviation is a large contributor to their carbon footprint.
• According to the UN, as of 2018, the average citizen in the US emitted 583.54 kilograms of CO2 per year from aviation when counting both domestic and international flights (adjusted for tourism). This is much higher than the global average of 103 kilograms. 
•  Other forms of travel, such as bus, ferry, or train are generally much more environmentally friendly. The easiest way to decrease aviation emissions is simply to stop air travel and look for other forms of transportation.

Housing

• Housing accounts for more than half of US household emissions, accounting for 33.6% of domestic emissions and 34.7% of overseas emissions according to PBS News Hour.
• Of housing emissions, the vast majority are for utilities, accounting for 25% of domestic housing emissions and 9.2% of overseas housing emissions.
• There are many ways to reduce housing utilities emissions, starting with big impact actions such as installing solar panels or upgrading large appliances such as water heaters, furnaces, and air conditions to more energy efficient models, to simpler steps such as improving home insulation, installing a thermostat, replacing light bulbs with LEDs, or signing up to purchase clean electricity (such as wind or solar) from their electricity provider.

 

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Transportation

• Transportation is the second largest category of CO2 emissions for US households, accounting for 29.8% of domestic CO2 emissions and 17.1% of overseas emissions for the average household.
• This is mostly driven by fuel purchases for family vehicles (23.1% of domestic emissions and 8.3% of overseas emissions), as well as a small amount from public transportation (4.8% domestically and 3.5% overseas).
• The most impactful way to decrease these emissions would be to avoid vehicle ownership altogether — using a bike, public transport or walking to get around. However, this is simply impossible for most US households.
• By switching to an electric vehicle, drivers can drastically reduce their CO2 emissions. According to the Union of Concerned Scientists; "driving the average EV is responsible for fewer global warming emissions than the average new gasoline car everywhere in the US. In some parts of the country, driving the average new gasoline car will produce 4 to 7 times the emissions of the average EV."

 

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Food

• Food accounts for 16.7% of domestic CO2 emissions for US households, and 20.7% of overseas emissions. Food emissions have drastically increased in the US from the 1990s due to increases in packaging emissions, transport emissions, retail, consumption, and food waste.

• The most impactful way to decrease food emissions for US households would be to eliminate or reduce the consumption of dairy products, especially those from cows.

 

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• If Americans stopped eating all animal products, it would reduce the country's greenhouse gas emissions by 2.6%.

Business

Fossil Fuel Consumption

• For the commercial sector in the US, fossil fuel combustion accounts for the largest amount of greenhouse gas emissions.
• Therefore, the most impactful way to decrease greenhouse gas emissions would be to decrease fossil fuel use. This can be achieved in a variety of ways, but some of the most impactful are improving the energy efficiency of buildings, switching to greener fuels such as natural gas, or, if the company has a fleet, switching to EV or hybrid vehicles.
• For example, by building energy efficient buildings or renovating a building to make it energy efficient, companies can reduce the building energy consumption from 12% to 100%, depending on the choices made.

Waste

• The second largest amount of greenhouse gas emissions for the US commercial sector comes from landfills and waste services.
•  Waste transportation accounts for a large share of most company's greenhouse gas emissions, so companies can reduce their impact by improving their waste removal practices and/or decreasing the amount of waste they produce.
• For example, by reusing and recycling cardboard boxes, companies can "save almost 4 tons of CO2 for every ton of corrugated cardboard boxes kept from entering the landfill."
• Companies can use recycled paper to decrease emissions: "buying just 6 cases of 100% recycled paper also saves 1 ton of CO2."

Fluorinated Gases

• The third largest amount of greenhouse gas emissions for the US commercial sector comes from their use of fluorinated gases.  
• These gases are primarily used as "refrigerants, foam-blowing agents, aerosol propellants, solvents and fire suppressants." They also come from the "manufacturing processes for aluminum, magnesium, electronics (e.g. semiconductors), and electrical transmission and distribution equipment."
• This could be reduced by switching to other forms of refrigeration, adopting fluorinated gas recycling, and improving their vehicles to reduce the leakage of refrigerants used in vehicle air-conditioning systems.
• For example, replacing old refrigerators with those that have earned the ENERGY STAR rating, there could be a reduction of 9,000 pounds of greenhouse gas emissions over the lifetime of the product.

Research Strategy

Sustainability Definitions & Metrics

 

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Definitions

• According to Harvard Business School, sustainability in business is: "doing business without negatively impacting the environment, community, or society as a whole. Sustainability in business generally addresses two main categories: The effect business has on the environment [or] the effect business has on society. The goal of a sustainable business strategy is to make a positive impact on at least one of those areas."

• Business research and advisory firm Gartner defines a sustainable business as one that "seeks to create long-term steakholder value by factoring social, economical and/or environmental impacts into strategic and operational decisions." IMD Business School provided nearly exactly the same definition.
• Talal Rafi, Founder & CEO of Sesame Associates, World Bank Ambassador on Climate Change, Young Global Leader nominee of the World Economic Forum and member of the Forbes Councils offers this definition of sustainability: "providing for the present needs without compromising the needs of the future generations to meet theirs. It has three pillars: economic, environmental and social."
• Back in 2010, McKinsey surveyed corporate leaders about their perceived definition of sustainability and found that there was no clear definition: "55 percent define sustainability as the management of issues related to the environment (for example, greenhouse gas emissions, energy efficiency, waste management, green-product development, and water conservation). In addition, 48 percent say it includes the management of governance issues (such as complying with regulations, maintaining ethical practices, and meeting accepted industry standards), and 41 percent say it includes the management of social issues (for instance, working conditions and labor standards). Fifty-six percent of all the respondents define sustainability in two or more ways."
• In 2021, McKinsey has refused to define sustainability at all, arguing instead for companies to create their own definition and "design their sustainability organizations to focus on each sustainability topic the company is prioritizing (for example, green hydrogen or its subtopic, operational decarbonization). To do this well, companies should define the list of sustainability topics that matter for the organization, either because they are important to the business or because they are the areas in which the company is uniquely positioned to make a difference."

Metrics

• According to the Harvard Business Review, as of 2021, more than 2,000 companies globally have set targets to cut their greenhouse gas emissions in line with the Science Based Targets initiative (SBTi), and more specifically are taking action to reduce carbon emissions.
• The World Economic Forum created a common set of 21 sustainability metrics, released in 2020, that focus on the following areas: Principles of Governance, Planet, People, and Prosperity. A sample of metrics from this report are governance body composition; greenhouse gas emissions, diversity and inclusion, and total tax paid.
• ESG consulting firm Goby recommended that companies track the following metrics: exposure to climate-related risk, carbon emissions, energy consumption, water usage, and waste and pollution.
• Most of the leading tech companies report their yearly greenhouse gas emissions in metric tons of CO2 equivalent.
• Based on a review of company sustainability reports of large tech companies, the most common target areas are waste, energy and water.  
• Many companies were focused on reducing waste to landfill, for example: "Dell set a target to recover 2 billion pounds of used electronics by 2020. Alphabet Inc. has a goal that by 2022, 100% of Made by Google products will include recycled materials."
• Almost all tech companies were found to have renewable energy and energy efficiency targets, such as using '100% clean energy' or specific purchase goals for renewable energy, for example the 3.4 GW purchase target by 2025 from Alphabet Inc.

 

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Pain Points/Challenges

 

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Cost

• Cost is one of the frequently cited challenges for businesses to implementing sustainability initiatives. According to Lawrence Loh, Director of the Centre for Governance and Sustainability at the NUS Business School, "decarbonisation may lead to higher costs including production or carbon taxes or credits purchases."
• According to HSBC, increased cost was cited as the biggest internal challenge for companies to meet net-zero goals: "concerns about increased cost were cited by 61% of respondents as a barrier to meeting net-zero targets and emissions-reduction goals. Almost half of those (29%) see this as a “very significant” obstacle, rising to 32% in the US."
• According to Ramboll's 2019 Sustainability Survey, which included large global companies, 34% of those interviewed cited the high perceived investment as a key implementation challenge to sustainability initiatives.
• While it is easy for businesses to identify the up-front costs of sustainability initiatives, it is still challenging for them to calculate the long-term value of these initiatives, including long-term cost savings and the impact on consumer opinion.

Focus/Definition

• Lack of a clear definition of sustainability was cited as a key challenge by many companies, who then struggled with what to focus their sustainability efforts on.
• According to Geoffrey Jones, a business history professor at Harvard University, "There is a crippling vagueness about what sustainability means."
• HSBC found that 27% of respondents were looking to policymakers for additional guidance on a sustainability definition, with that percentage increasing to 31% among large enterprises.
• A clear definition is necessary, according to Hans-Christoph Hirt, Head of EOS for Federated Hermes, as "We have seen a discrepancy between the growing numbers of companies setting climate targets, with very few of them being science-based."

Lack of Capacity

• Companies face challenges implementing sustainability goals throughout their daily operations.
• According to the Ramboll 2019 Sustainability Survey, 47% of companies surveyed cited the lack of capacity and resources as the biggest challenge to implementing sustainability initiatives.
• Many companies are struggling to even define a clear strategic direction for sustainability, as cited by 33% of Ramboll 2019 Sustainability Survey respondents. These companies are struggling with the alignment of their objectives and targets and their everyday operations.
• As identified by HSBC, companies struggle with re-aligning their business model to support their sustainability goals.
• According to Nick Hindle, Managing Director, Head of Client Coverage, Asia Pacific, Commercial Banking, "Aligning the business model with a sustainability agenda requires a fundamental corporate culture transformation—and an operational commitment to making it happen. It means rethinking company strategy and even retooling products and services that not only fit decarbonisation but allow a company to retain—and grow—its competitive advantage. It’s about rethinking and putting into practice the goals and ideas about how the business will achieve net-zero."

Poor Measurability

• One of the most common challenges cited for businesses in becoming more environmentally friendly is the challenge of measuring sustainability. It is hard for businesses to know what to measure, especially when it comes to measuring daily activities. There is a need for more guidance on the types of KPIs to focus on, and those that are not worth the time.
• According to Andrea Debbane, Chief Sustainability Officer for Kuehne+Nagel, "Visibility and reduction capability are major challenges to decarbonisation in the logistics industry. Many organizations do not have the data or tools to measure their carbon footprint, and acquiring new technologies and low-carbon and clean fuels is often a costly endeavor."
• HSBC found that "almost half (49%) of respondents highlighted administrative burdens such as data collecting and reporting as an obstacle to meeting their net-zero or other emissions-reduction goals, with 19% of these describing this as a “very significant” barrier." This was especially true for small and mid-sized businesses.
• This is also true as companies attempt to improve the sustainability of their supply chain, including measuring the sustainability of their suppliers, as illustrated by the work Google is doing with companies such as ENI and Unilever.
• Companies also have a hard time measuring the value of sustainability: 41% of executives interview in the Ramboll 2019 Sustainability Survey cited "poor measurability of sustainability value and benefits" as a key challenge for their company in executing sustainability initiatives.

Near-Term Issues

• While companies are interested in pursuing sustainability, near-term issues often take precedence.
• For example, Forbes found that in 2021, "a focus on near-term business issues or demands emerged as the top obstacle for implementing sustainability initiatives this year—up to 37% from 30% in 2020. In fact, the majority of executives (65%) said their organizations needed to cut back on environmental sustainability initiatives in some way due to the pandemic."
• Data from Bloomberg supports the idea that near-term problems can detract from the sustainability focus for businesses. Bloomberg found that climate-change related discussions during 2020 first-quarter earnings calls of companies on the S&P 500 dropped 50% compared to the previous quarter. For technology companies specifically, executives mentioned climate change 53% less.
• While this was a temporary pause, it illustrates the challenge companies face in having a continued focus on sustainability.

Research Strategy

Areas of Opportunity

 

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Emissions Data Transparency

• According to BCG, there is opportunity for tech companies to create programs that provide "system wide visibility to drive sustainable decision-making and behavior across an organization." By measuring and analyzing carbon data, businesses can achieve an average CO2 reduction of 30%-40%.
• These solutions could include IoT and blockchain based technologies.
• While there is a noticeable lack of solutions in this space, companies such as Plan A and Planetly are beginning to fill the gap by creating programs that help businesses monitor, report and reduce their carbon emissions.
• According to Terence Zou, Founder and CEO of Ryde, "While it is good to encourage green investments and promote the use of clean energy, one unique struggle for smaller startups and SMEs, especially in the local context, is the lack of in-house expertise and understanding of carbon emissions — how to calculate and how to curtail it. Sans this technical knowledge, a business cannot efficiently plan its decarbonisation strategy, nor pen its efforts into numbers that are easy for the public, employees, and stakeholders to comprehend. The gap among environmental experts, business owners and everyday consumers is one that needs to be bridged. Of course, where there is a gap, there is an opportunity. This means that businesses — particularly tech startups perhaps — can create the technology to operationalize this in-house and signal the need for more freelance tech and eco consultants. Ultimately, this is to ensure that even smaller players can be part of the decarbonisation movement."

Process Optimization

• According to BCG, there is an opportunity for tech companies to create new cloud-native software and digital platforms to improve business process, including utilizing AI technology to improve cost and emissions optimizations.

• According to AVEVA, businesses that utilize digital tools for process optimization could realize "21% energy savings and 44% less downtime in manufacturing."
• BCG found that companies employing process optimization solutions generally achieve 5%-10% reductions in CO2 emissions.
• For example, Compology is a tech startup that conducts waste metering for dumpsters using AI and Smart cameras to "inform proper disposal to divert more waste from landfills, increase recycling rates, and reduce truck miles traveled —all of which lower a business’s carbon footprint."
• AI decision-making has been used in transportation logistics, yard management and manufacturing to reduce CO2 emissions.
•  NESTLE has implemented a digital Unified Supply Chain solution across their more than 80 process units to optimize decision-making and decrease waste, helping the company work towards their goal of carbon neutrality by 2035.
• As the above examples show, almost any company could utilize process optimization software, however, the manufacturing industry seems to be especially keen to adopt such software, with 44% of manufacturers surveyed by MIT in 2020 reporting that they utilized AI for inventory management and 32% for monitoring/diagnostics.

Data Ecosystems

• Technology companies could accelerate the sustainability revolution by creating opportunities for cross-industry data sharing and partnerships that power innovative solutions to environmental challenges.

• According to BCG, "data sharing generates value in five ways: enabling innovation, creating trust, facilitating coordination, raising awareness, and validating hypotheses."
• BCG found that companies utilizing data ecosystems and data sharing partnerships achieved average emissions reductions of 5%-10%.  
• There is evidence of interest in this area from big corporations, such as IBM, which developed OpenBuilt in collaboration with Red Hat, Cobuilder, Cemex, EDIN Network, Backe, Sol Services and Element. OpenBuilt is a "new platform designed to help securely connect fragmented construction industry supply chains.... OpenBuilt will offer new digital solutions to help innovate and drive more efficient, sustainable and safer construction projects."
• In the ag sector, cross-industry collaborations are also taking place. For example, the FoodBytes! platform by Rabobank is "a holistic platform to drive industry change towards a sustainable food system. The platform brings together innovative startups, investors and industry leaders to help them achieve both their individual business goals and collective aims toward a more sustainable planet."
• These types of collaborations would best serve businesses in industries that contribute most to greenhouse gas emissions or other environmental problems, such as energy, transportation, and agriculture.  

Research Strategy

Sustainability for Technology Companies

Enabler of Progress

• The tech industry can be uniquely seen as having the duty of providing sustainability solutions for other industries.
• According to Ariane Bucaille and Rafi Addlestone, analysts with Deloitte, "For technology companies, however, sustainability involves both looking in and looking out. Of course, tech companies are examining their operations and supply chains in order to minimize their own carbon emissions. But the tech sector has the added responsibility and opportunity to develop the smart technology solutions that enable the digitalization, electrification, and efficiency that can drive decarbonization and help companies across every industry achieve their sustainability goals."
• In order to be true 'solutions providers', however, tech companies must firstly be sustainable themselves. According to Louise Schreiber, SRI analyst at Mirova, "These risks, if not managed properly, could create a sort of ‘flip side effect’ and reverse the capacity of the tech industry to act as an enabler of progress towards a sustainable future and, worst case scenario, turn the tech industry into a sustainability disaster. Only tech companies with sound environmental and social practices across their value chain can be considered as actual solution providers."

Plethora of Startups

 

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• The tech industry is unique in the amount of startups that have been created. These startups have a tendency to wait to focus on sustainability issues until they become larger, putting off worrying about the issue until they become more established.
• These smaller firms generally cite lack of "time, resources and expertise" to address key sustainability issues in their companies.
• Matteo Renoldi, dealroom.co innovation analyst, illustrates the challenge for startups to find the talent to address some more complicated sustainability challenges: "Impact start-ups receive a lot of applications, but there are still senior and specialized roles, such as climate scientist roles, that are hard to fill, he said, because it is difficult to find senior people who are willing to work in start-ups."
• Leon Kamhi, head of responsibility at Federated Hermes, illustrates another challenge in sustainability for tech startups: "The technology sector has grown out of start-ups...When [start-ups] come to market the founders come wanting to retain their power over the company. So it’s not that easy engaging with them because of that governance, there is often a dual-share structure, often without a sunset clause. And there often isn’t a lot of competition." This type of founder-leader governance style can make implementing sustainability goals challenging if the founder themselves is not inherently interested in that, as there are no other senior members or governing body to spearhead the changes.
• According to a study from TechFounders and Akzente, "86% of the startups said they had thought about the role and relevance of sustainability for their business model, just two-thirds had taken action to implement measures. Of those who have not yet done anything, 33% said it was because they are 'too small so it does not make sense yet.'"

Short Product Lifespan

 

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• Tech has a unique problem of short product lifespans — sometimes by design — that then cause a large amount of dangerous and environmentally damaging e-waste.
• An article published in Huck Magazine states: "Frighteningly, most smartphones and tablets have a life of around three years, becoming irrelevant in the consumer cycle when flashier ‘must-have’ products are released into the market. Tech manufacturers purposefully engineer “planned obsolescence” into products to ensure the cycle continues, with little regard for the human or environmental impact. This means that big tech brands are purposefully designing their products to fail, as a ploy to keep consumers ‘needing’ to buy new ones."
• This "planned obsolescence" is promoted by the major consumer tech companies such as Apple and Samsung, which were both fined €10m and €5m in 2018 when it was found that they purposefully broke consumer's phones by releasing updates that caused "serious malfunctions and significantly reduce[d] performance, thus accelerating phones’ substitution."
• Some companies are attempting to combat this issue, such as Fairphone, which produces ethically made, easy to repair and durable phones from fair-trade minerals.
• E-waste, all those last-gen tech products thrown out regularly when a new version comes out, cause unique environmental harm and have the potential to harm human health. These tech devices contain high rates of some very deadly substances such as arsenic, lead, and mercury, as well as include environmentally damaging hard plastics that take a very long time to decompose.
• According to the World Economic Forum, e-waste "has grown from 5.3kg per capita to 7.3kg per capita between 2010-2019, but recycling hasn't kept up."
• Tech companies have a unique burden to create recycling programs for these products because they can be so harmful if disposed of incorrectly, unlike most other consumer products, which do not pose any inherent risks if not recycled.

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