With all the talk about corporate net zero targets, it is important to remember that zero is a number – it needs to be calculated, not approximated. Which is why accounting and auditing are crucial for making corporate sustainability pledges real.
But while an entire industry of financial accountancy has been developed to make financial reporting easier, when it comes to carbon accounting and emissions auditing, the task is arguably even more complex and laborious – and there is no firmly established industry of professionals to help.
Enter technology. From carbon accounting software to supply chain sensors, digital innovations in areas such as artificial intelligence (AI), blockchain technology and the internet of things (IoT) can help businesses to measure and monitor their progress towards sustainability goals.
For many businesses, the immediate focus is on tackling their carbon footprints. But determining how much carbon a company is responsible for needs to take account not just of its direct operations and energy consumption (so-called scope 1 and scope 2 emissions), but also the emissions produced along its supply chains and by the end consumers’ use of its products and services (known as scope 3 emissions). That means not just obtaining robust data, but also ensuring that it’s comparable and that it can be combined, consolidated, and mapped.
“The very first thing companies need to do on their path to becoming sustainable enterprises is to understand their environmental footprint based on facts and figures,” says Jan Gilg, an executive and head of product development at SAP, the business software firm. He was speaking at the launch of one of SAP’s suite of solutions and tools designed to help companies track their full environmental and social impact.
At the heart of all technology for measuring, monitoring, and managing carbon emissions and other sustainability indicators is the truism that what gets measured gets managed. So here are some examples of how cutting-edge tech can help businesses see the whole picture of their impact on the environment and society – as well as the impact of the wider world on their business:
ID and traceability tech
Auto ID and traceability technologies can be used to track raw materials, components and manufactured products to assure the efficacy of supply and to authenticate products as ethically sourced – for instance when it comes to materials such as organic cotton and sustainable palm oil. “Technologies such as QR codes, micro-printing, holograms and chemical fingerprinting can identify genuine products and materials at source,” says Stuart Higgins, partner at BearingPoint, a management and technology consultancy that recently partnered with SAP on carbon and environmental solutions. “Manufactured goods can then be given unique serial numbers and an associated digital certificate of origin, often within a blockchain for added security, to assure authenticity.”
Blockchain
Blockchain technology might be better known as the digital architecture behind cryptocurrencies, but blockchains are essentially distributed digital ledgers that can verify and authenticate anything from transactions to personal identities. As such, blockchain technology is emerging as a key factor in improving the veracity of supply chain traceability and provenance – ensuring that each player along the value chain generates and securely shares data points with labels that clarify ownership and cannot be altered. As Jonas Lundqvist, CEO at the blockchain platform Haidrun, explains: “In a food supply chain, for example, the record of a journey from farm to fork is available to monitor in real time, while the disclosure of data provides accountability for trading transactions and farming practices to support claims such as organic, freshness and superior quality. Data entered on a blockchain ledger can eliminate the possibility of a non-organic ingredient later being reported in an organic product.”
In a recent Financing climate future report, the Organisation for Economic Co-Operation and Development (OECD) outlined specific areas in which continued blockchain integration with sustainable infrastructure can be beneficial, including emissions certification, decentralising the financing of infrastructure, and making better use of existing infrastructure assets. “Blockchain will play an important role in the intelligent value chain, and while technology and sustainability do not always go together, the rise of blockchain and demand for improving ESG [environmental, social and corporate governance] reporting can change that,” says Lundqvist.
Artificial intelligence and digital twins
AI technologies have become crucial to sustainable business performance. Their self-learning algorithms can improve the accuracy of forecasts and thereby aid business decision-making. Used in conjunction with smart sensors, AI can improve supply chain sustainability, for example, by monitoring manufacturing equipment. AI-enabled systems can receive data from smart sensors placed within the equipment, identify issues and flag them to the plant operator and also to the end business customer at the top of the supply chain.
AI can also help improve the sophistication of so-called digital twins – virtual models designed to accurately reflect a physical object. In supply chains, digital twins can help businesses capture dynamic emissions data to automate emissions measurement and reporting. AI can improve their ability to simulate future states, allowing emissions reduction initiatives to be properly modelled and their current and future impacts evaluated
The internet of things
The IoT refers to the billions of physical devices around the world that are now connected to the internet, all collecting and sharing data via smart sensors – thereby allowing businesses to potentially harness that data to improve sustainability. For instance, factories, warehouses and retail outlets might be wasting or overconsuming energy if equipment is left on when not in use. Like AI, machinery equipped with IoT sensors can identify supply chain issues in advance and improve product transportation fuel efficiency by detecting the most fuel-efficient route for goods and reducing last-mile emissions. More crucially for the purposes of carbon accounting and auditing, it can generate data that can be measured.
Satellite monitoring
Satellite measurements of the Earth’s temperature, sea levels, atmospheric gases, shrinking ice caps and forest cover have long played a vital role in understanding the climate crisis. Now, innovations in satellite monitoring are delivering insights to businesses about hidden emissions along their supply chains – particularly of the greenhouse gas methane.
Climate Trace is a coalition of global organisations that can track methane, carbon dioxide, and other human-caused greenhouse gases to specific sources in real time. Launched in 2020 by former US vice-president Al Gore, it uses AI algorithms to spot indicators of greenhouse gas emissions in satellite imagery collected by various space agencies and organisations to create a new set of emissions intelligence. The capability to track methane hotspots worldwide with such a high degree of precision enables fossil fuel producers to cut emissions faster, at a lower cost.
Collating, aggregating and reporting
SAP has developed a range of sustainability solutions and tools to help businesses monitor, interpret and use sustainability data. For instance, its cloud-based SAP Product Footprint Management allows companies to gain visibility into carbon footprint data throughout a product’s supply chain. The carbon footprint data is collected during production, material sourcing and transport – and can be used by other SAP solutions, such as SAP Integrated Business Planning for Supply Chain. Moreover, it enables data to be shared with customers, suppliers and business partners – helping to drive transparency across a business’s scope 1, 2 and 3 emissions. As Thomas Saueressig, a SAP executive responsible for product engineering, put it in a blog post: “Supply chain emissions are on average 11.4 times higher than operational emissions. So merely focusing on individual operational emissions is no longer enough.”
Likewise, SAP Sustainability Control Tower helps businesses to automate their ESG reporting processes by integrating financial and non-financial data on an ongoing basis – enabling companies to use that combined data to manage and steer their performance with minimal processes. “When we embed emissions data into underlying business processes, leaders can drive real change by making conscious decisions across the entire value chain,” explains Saueressig. “These activities are interconnected and must be done together to achieve maximum impact. Our business software applications bring together materials, energy and financial flows to steer businesses in a holistic way.”
In addition, the company has introduced SAP Responsible Design and Production, a solution for sustainably designing products that can help businesses transition from linear production lines and product use to a “circular” economy based on the continual recovery and reuse of materials. As Saueressig notes, “measuring, monitoring, and reducing carbon emissions across the entire value chain means inventing entirely new value chains. And these will no longer be linear.”
Find out more at sap.com/sustainability