Closing the loop on sustainability information

 
Key technologies for instrumenting, monitoring, analyzing, and reporting enable enterprises to advance sustainability efforts internally and across their extended value chains.
 
By David Kelly, Heather Ashton, and Vinod Baya
 

Features


Introduction

As the old adage goes, businesses cannot manage what they do not measure. Becoming a sustainable enterprise starts with information rarely or never collected in the past. Sustainability requires internal and external information sharing and collaborative efforts to track the impact of energy, water, waste, and other resources and processes (manufacturing, storage, distribution, and so forth) across the product life cycle and business operations.

Tracking and analyzing information across the life cycle—from design to shipping to disposal to reuse—is the only way to fully understand and begin to achieve sustainability goals. Taking more modest steps focused on efficiency will also deliver measurable results. According to The Climate Group, information technology has the potential to deliver emissions savings of 15 percent (the equivalent of 7.8 billion metric tons of CO2e) from global emissions by 2020, largely by improving efficiency across economies.1

As discussed in the article, “Sustainability: Moving from compliance to leadership,” the role of IT is to create visibility and feedback across the enterprise and extended value chains so that sustainable practices become embedded in ongoing operations. Doing so will support the staff engagement with sustainability and will support the creation of closed-loop feedback systems that drive changes in design, sourced material, and business processes to improve sustainability. Visibility is about consumption, waste, labor practices, and so on, and feedback is about the impact of decisions or changes. Over time, this coordinated use of information will embed sustainability practices in enterprise operations, rather than positioning sustainability as a separate compliance or reporting activity as it is in most enterprises today.

PwC identifies four key emerging information technology areas to address enterprise sustainability. These four areas span the life cycle of information from where it is created to where it is reported, as shown in Figure 1.

  • Instrumentation technologies help surface and collect information germane to sustainability.
  • Enterprise sustainability planning (ESP) systems provide a broader context for aggregating, managing, and analyzing captured information.
  • Value-chain–oriented processes, practices, and technologies
    help organizations extend strategic sustainability efforts beyond internal corporate boundaries.
  • Sustainability reporting technologies can take the aggregated information and provide performance metrics to stakeholders.

Figure 1
Emerging technologies that collectively can advance sustainability efforts and objectives

Figure 1: Emerging technologies that collectively can advance sustainability efforts and objectives

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Instrumentation

Most enterprises have little experience— and no mechanisms—for collecting data about the environmental and social impacts of their products and operations. Current efforts to collect sustainability-related information are manual and nonstandard. Emerging instrumentation methods bring the promise of allowing organizations to move away from ad hoc, manually oriented accounting to more automated solutions. “As much as you can, you want to remove that manual portion of the process and just have the energy data feed directly into the system,” says Ryan Whisnant, director of sustainability at SunGard. “I would anticipate that we’re going to see more and more moves in that direction.”

For example, by using devices that have complex sensing software to track and communicate resource consumption and movement, companies can gain a much better understanding of their energy usage habits and may be able to respond to market volatility with intelligence that can lead to strategic decisions.

Through enhancements to areas such as heating, ventilation, cooling, and control systems, companies can improve their visibility of information about energy consumption in buildings and facilities. According to one estimate, heating, ventilation, air conditioning, and lighting are responsible for more than 70 percent of a building’s energy consumption.2 Building automation and control companies such as Honeywell, Johnson Controls, Schneider Electric, and Siemens offer instrumentation products and systems aimed at greater control over new or existing buildings. Emerging end-user products such as smart thermostats from Nest and Ecobee allow control via the Internet and learn over time to save energy.

The more advanced version of energy instrumentation is part of the smart grid vision. The smart grid is a concept to promote more responsible, reliable, and strategic use of energy resources. Smart grids are intelligently integrated electrical networks that not only distribute electricity but also provide much richer monitoring and measurement capabilities that will encourage more sustainable practices. This is accomplished by placing sensing, control, and reporting devices at all points along the energy chain, creating a closed feedback loop that helps suppliers understand customer usage patterns, respond to events that occur anywhere in the energy chain, and provide incentives for changing consumption patterns to reap savings on energy prices.

With an enterprise sustainability planning solution implemented throughout a global enterprise, companies can consider information in the context of business operations, linking resources such as water and energy to products and services across their life cycle.

Many initial efforts in instrumentation are limited. For example, often a latency of data flow—sometimes as long as 24 hours—prevents some early smart meter architectures from enabling quick response. In an ideal situation, the data would trigger an immediate adjustment to energy flows, driving higher efficiencies, leveling consumption patterns to avoid extremely high peaks, or preventing blackouts.

To facilitate the collection and realtime reporting of information related to resource consumption, many businesses have begun to use the smartphone. With its GPS capabilities, the ubiquitous smartphone is evolving into a platform for the instrumentation of corporate resource management.

For example, CarbonTrack is an iPhone application offered by SAP that allows users to track carbon footprints from daily commuting or business trips.

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Enterprise sustainability planning applications

The next component in the strategic approach to sustainability is to manage all the information that can quantify, track, analyze, and provide feedback and visibility into sustainability performance and lead to appropriate business decisions. Applications for managing environmental resources are known in the market by many names—carbon management, energy management, and energy and resource management, among others. With origins in measuring greenhouse gas, energy usage, or carbon footprint, these applications aspire to manage all environmental resources such as water, precious metals, waste, and so on, as well as social impact. For the purpose of the discussion in this article, PwC calls this application category enterprise sustainability planning (ESP) software.

Table 1
Emerging features and functions of enterprise sustainability planning (ESP) solutions

Table 1: Emerging features and functions of enterprise sustainability planning (ESP) solutions

In their short lifetime, ESP applications have quickly evolved as a key system of record for corporate sustainability. The features and functions these products offer are evolving rapidly. Table 1 provides a list of features that can be expected now and in the future from this class of solutions. For most enterprises, the journey of using these solutions starts with implementation in local facilities or departments. However, the tools create the most value when metrics, visibility, and impact occur at the enterprise level.

With an ESP solution implemented throughout a global enterprise, companies can consider information in the context of business operations, linking resources such as water and energy to products and services across their life cycle. In addition to tracking resource consumption, the objective of ESP solutions is to help CIOs and business leaders place a value on these resources and then find ways to enable innovations in sustainable products, reduce consumption, mitigate exposure, and change business practices to optimize resource use. “Enterprises have so many choices in how they can act on sustainability. They need an optimization function that looks across all options. They can’t do that without software,” says Peter Graf, chief sustainability officer at SAP. Modeling and analysis capabilities in ESP solutions allow businesses to target the most optimal returns.

Because sustainability is a relatively new category for enterprise applications, the nascent market is approached from various entry points, each with its own frame of reference, but there are already more than 100 vendors. Table 2 provides a sampling of vendors and their areas of focus.

The opportunity for the vendors is to make energy and other environmental resources something that enterprises manage in a more automated manner. “The energy sector has really never leveraged information technology in a meaningful way,” says Amit Chatterjee, founder and board member of Hara Software. “At Hara, as we engage with our customers, we find that after all these years of Internet communications, there’s still a lot of use of paper, phone, and fax,” Chatterjee continues, suggesting the potential for automation.

Table 2
A sampling of enterprise sustainability planning (ESP) solution vendors

Table 2: A sampling of enterprise sustainability planning (ESP) solution vendors

The opportunity for enterprises is to embed sustainability in operations, much like financial processes are. “With modest extension to existing processes, one can incorporate sustainability impact into the standard process,” explains Jon Chorley, chief sustainability officer of Oracle Corporation. This has many advantages. “With this discipline, we will have traceability to the data source, ability to reconcile information, all without a parallel business process or training of people,” Chorley continues.

“Enterprises have so many choices in how they can act on sustainability. They need an optimization function that looks across all options. They can’t do that without software.”
—Peter Graf, SAP

Facilities play a large role in energy consumption and sustainability practices. Therefore, facilities and building energy management vendors are moving into the ESP market. Because these vendors—Honeywell, Johnson Controls, and Siemens, among others—also provide instrumentation solutions, their ESP solutions can be set up to automate data collection by pulling it directly from facilities or utility providers.

Enterprise resource planning (ERP) vendors, such as SAP and Oracle, also provide ESP solutions. Because the ability to collect data from a vast array of sources across the enterprise is critical to this application category, an ERP vendor has extensive experience to contribute.

Vendors focused on governance, risk, and compliance (GRC), as well as environment, health, and safety (EHS), have been making inroads into sustainability as well. In this category, Enablon, Enviance, MetricStream, and IHS are active. By tracking a variety of environmental performance data, they enable users to assess the financial risks a company faces based on environmental resource usage profiles.

Juxtaposed with these vendors are various pure-play startups in sustainability: CarbonView, ENXSUITE, Hara Software, Locus Technologies, Verisae, and others offer ESP solutions to tap into the market for energy tracking and corporate sustainability. Being pureplay companies, their opportunity is to seed new processes for sustainability.

“The net effect [of ESP systems] is providing an enterprise-wide view of their current spend, which I call a transparency-to-results process,” Chatterjee says. The results are often visualized on dashboards that bring together sustainability information and put it in the context of business operations, as shown in Figure 2 from Hara Software. Users can establish monthly “maximum emission” goals and can monitor their progress against personal goals for reducing their carbon footprint.

In the market for monitoring structures, ECODE from EcodeOnline.com and Path to Net Zero from Kingspan Insulated Panels are two examples of smartphone applications aimed at sustainability. ECODE provides access to green building resources, including information about products and a carbon footprint calculator that tracks energy usage, such as electricity, oil, automobile gasoline, airline travel, and recycling behavior. Path to Net Zero is a free tool for architects to simulate the process of improving the energy efficiency of buildings.

As sustainability vendors continue to explore ways to use new platforms, such as mobile, the instrumentation will continue to evolve. The proliferation of smart devices at all points along the energy chain will enable businesses to optimize everything from new building plans to employee travel choices that contribute to reducing their carbon footprints.

Figure 2
Example of a dashboard providing sustainability information in the context of business operations.

Figure 2: Example of a dashboard providing sustainability information in the context of business operations.

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Value chain mechanisms to drive sustainability

For many enterprises, an estimated 70 percent of the carbon footprint is in the value chain. Thus, the value chain holds the key to transformational business practices that will impact a company’s total footprint. “Real value is created for the full energy value chain by having two-way visibility and collaboration between the supplier and user,” explains Pat House, senior vice president of strategy at C3, suggesting that sharing and collaboration within the value chain are essential to improving sustainability performance. Various mechanisms and approaches have emerged to create visibility and feedback in value chains for sustainability.

They include the following:

  • ESP vendors focusing their solutions on the value chain
  • Industry groups leading the creation of standards, frameworks, and information systems for sustainability in specific verticals
  • Life cycle analysis applications, which model and account for resource use during the life cycle of any product from cradle to grave or cradle to cradle
  • Approaches that affect sustainability during the design of the products

ESP solutions focusing on value chains

“With modest extension to existing processes, one can incorporate sustainability impact into the standard process.”
—Jon Chorley, Oracle

Although they offer solutions for the enterprise, some ESP vendors concentrate primarily on managing sustainability-related information from the value chain. C3, with its initial focus on the electric energy industry, expects sustainability to be an information-driven transformation of the value chain. “The solution [to sustainability challenges] is … providing an information-driven transformation so that resources can be managed as strategic assets across the entire energy continuum from generation through transmission and distribution to end-user consumption,” explains Pat House of C3.

Other vendors, such as Climate Earth and Trucost, bring more of a financial focus to understanding impact from the value chain. In addition to quantifying the environmental impact, they put a price on the impact so that the sustainability performance can be understood in financial terms. Both use environmental databases with profiles or flows of industry sectors or value chain activity to determine their valuation.

Industry groups get involved

Recognizing that the achievement of many sustainability goals requires the cooperation of the supply chain, industry groups are forming to emphasize the information sharing aspect. “Retailers want to know about their suppliers’ energy and greenhouse gas emissions, waste generation, the materials they’re using, and where those materials are sourced from. Also, each supplier wants similar information of their suppliers, and so on. One of our objectives is to make sure that they have rapid access to accurate information,” says Adam Siegel, vice president of sustainability at the Retail Industry Leadership Association, which represents retailers in the United States.

The role of industry groups is to ensure a systematic, collaborative approach to sustainability, preventing duplicated efforts, confusion, and disparate goals. They accomplish such objectives by creating standards, methods, and systems to facilitate the sharing of information. Table 3 shows a sampling of industry organizations that facilitate information sharing and their focus.

The life cycle approach

Life cycle assessment (LCA) applications constitute another technology sector that has become a primary information source for sustainability efforts. Productbased companies have used LCA tools for nearly two decades, and the tools require expert practitioners trained in the software. LCA tools focus on a particular product and its footprint across the value chain. A key strength of LCA is that it studies whole product systems, which enables businesses to avoid mitigating one environmental impact while exacerbating another. LCA vendors include GaBi Software, EcoScan, SimaPro, and Umberto.

Table 3
Industry groups facilitating information sharing and collaboration in value chains

Table 3: Industry groups facilitating information sharing and collaboration in value chains

Table 4
Design tools supporting product design and value chain interactions

Table 4: Design tools supporting product design and value chain interactions

Taking a design approach

As much as 60 percent of a product’s environmental footprint is established in the design phase.3 Therefore, some enterprises have chosen to use a design tool to facilitate information sharing and feedback in the value chain. Table 4 shows examples of solutions that create visibility into environmental impact during design.

Nike has created a web-based program it calls the Environmental Apparel Design Tool. (See Figure 3.) The tool helps apparel designers evaluate waste and toxins generation, as well as energy and water consumption in sourced materials and in manufacturing. It makes these issues visible at design time, allowing companies throughout the supply chain to benchmark and measure the environmental footprint of their products, so they can identify areas for improvement and make informed sourcing and product life cycle decisions.

Figure 3
Nike’s Environmental Apparel Design Tool

Figure 3: Nike’s Environmental Apparel Design Tool

Industry groups, too, can approach sustainability from a design perspective. The Outdoor Industry Association has developed Eco Index, a tool4 that helps companies reduce their environmental impact.

Vendors of CAD/CAM and other design software, such as Autodesk, Dassault Systèmes, and PTC, are working to extend their capabilities into sustainability modeling. These tools will help product design engineers determine carbon footprint, energy consumption, and the impact of raw material selection from sourcing through manufacturing, use, and disposal.

Although internal resource management and energy-conscious business decisions will continue to be areas where companies use technology to contribute to sustainability efforts, the real impact will need to be at the value chain level. PwC expects the technology offerings to mature during the next several years as companies search for the best way to involve their trading partners upstream and downstream in sustainability efforts.

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Sustainability reporting

To successfully implement a sustainability strategy, IT organizations also need to focus on the technologies and tools that enable different stakeholders (employees, consultants, business partners, government agencies, and more) to obtain and analyze sustainability data. Sustainability reporting should make a clear link between corporate financial reporting and corporate environmental, social, and governance (ESG) objectives.

Reporting provides feedback in a closedloop system. “Sustainability is not a separate thing; it is integrated into the strategy,” says Tom Sedory, IT director of strategy and sustainability at Nike. “Reporting is critical in that it gives an opportunity to pause, gain insights, and learn to drive our strategy.”

Sustainability reporting comes in different forms. For example, most ESP solutions have modules for generating sustainability and regulatory reports. However, organizations may also want to consider a range of diverse sustainability reporting standards, or take advantage of solutions from software vendors that focus primarily on the generation of Extensible Business Reporting Language (XBRL)-based, standards-oriented reports.

Standards

“Real value is created for the full energy value chain by having two-way visibility and collaboration between the supplier and user.”
—Pat House, C3

What constitutes a sustainability report depends on the audience and on the standards or expectations the report must address. Currently, there is no mandatory single standard for sustainability reporting. Instead, a range of standards from industry organizations or governmental agencies define different types of reports. In many cases, sustainability reports will be used in conjunction with traditional financial or investor reports. Table 5 provides perspective on some of the major standards.

Sustainability reporting standards will continue to evolve. However, organizations will want to monitor the progress of standards from organizations such as Global Reporting Initiative (GRI) and Ceres, which may have the largest overall impact. GRI is widely regarded as a defacto standard. While an increasing number of enterprises are releasing sustainability reports, over the long term the trend is toward integrated reports, also called triple bottom line. Integrated reports bring together economic, environmental, and social impact information in a single financial report. In May 2011, PUMA released the first environmental profit and loss (P&L) statement that provides environmental impact in financial terms. The company plans to release a social P&L later in 2011.

XBRL reporting software vendors

In addition to various sustainability standards, organizations may also consider turning to XBRL and XBRLbased reporting applications. XBRL is a flexible business reporting language and open standard for communicating business information. Based on the Extensible Markup Language (XML), XBRL is developed by XBRL International, which includes organizations and government agencies.

While XBRL is a collection of open standards and specifications, several software vendors now provide XBRL-based reporting applications for a range of uses, from financial and US Securities and Exchange Commission (SEC) filings to economic policymaking. To date, XBRL has frequently been applied to financial information, yet global initiatives are extending it to nonfinancial areas such as sustainability reporting.

With the need for collecting, sharing, and analyzing information across value chains and different potential user populations, XBRL is a strong fit for sustainability-oriented reporting, including requirements such as triple bottom line reporting. From an industry perspective, this market is still maturing, with no clear leader.

One way XBRL supports sustainability is through specific taxonomies that define how data is reported. For example, the GRI has created a GRI taxonomy for XBRL that incorporates the GRI Sustainability Reporting Guidelines, while the Spanish Association of Accounting and Business Administration has released an XBRL taxonomy for social responsibility scorecards.

Table 5
A sampling of sustainability management and reporting standards

Table 5: A sampling of sustainability management and reporting standards

Rivet Software is one example of a vendor providing XBRL reporting solutions that can support sustainability requirements. Sustainability data collected throughout an organization or by other applications can be mapped into an XBRL taxonomy and exported into an XBRL reporting solution, such as Rivet’s Crossfire. Putting sustainability data into XBRL can make it possible to integrate different sets of data, such as GRI Indicator data with SEC GAAP data. This integration enables users to drill down and across different data sets to analyze and understand correlations.

While many organizations consider XBRL reporting solutions a baseline for financial reporting, such solutions can also pay off in other types of reporting. Future development of XBRL solutions and increased refinement and use of sustainability-oriented XBRL taxonomies such as GRI’s will simplify the use of sustainability metrics, processes, and practices.

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Conclusion

The role of technology is to create visibility into the consumption of environmental and social resources so enterprises can engage with the information to transform products, processes, and related practices to optimize resource consumption and embed sustainability sensitivities in ongoing operations.

Emerging technologies span the information life cycle from instrumentation to the management of the enterprise footprint and through the management of the value chain impact and reporting. As enterprises continue to strive toward integrated reports that include the triple bottom line, they will need to rely on these developing technologies to achieve sustainability goals.

The proliferation of smart devices will drive instrumentation that supports the capture and surfacing of data about resources such as energy, water, and wood. ESP systems will continue to provide the enterprise-level systems for this information, helping to turn it into actionable, strategic data that can lead to dynamic business decisions. These ESP solutions will also link to and eventually support the management of value chain sustainability efforts, in which companies move away from information silos and toward a flow that supports the cradle-to-cradle nature of the product life cycle.

PwC expects forward-thinking organizations to continue to drive sustainability initiatives across the value chain, whether through industry groups, trade associations, or within a specific value chain. Technologies such as life cycle analysis, design tools, and XBRL reporting will continue to support these efforts. Eventually, these technologies will coalesce into a streamlined methodology for surfacing, capturing, measuring, tracking, and optimizing resource consumption patterns across industries. At that point, the promised benefits of sustainability can finally be realized.

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1 The Climate Group, Smart 2020: Enabling the low carbon economy in the information age, 2008.

2 Joe McKendrick, “Smart buildings: the first ‘killer app’ for smart grid?” SmartPlanet, April 26, 2011, http://www.smartplanet.com/blog/business-brains/smartbuildings-the-first-8216killer-app-8217-for-smartgrid/15295

3 Summer Rayne Oakes, “How the Eco Index is Leading Apparel to a Green Future,” GreenBiz.com, July 7, 2011, http://www.reuters.com/article/2011/07/07/idUS377990781520110707.

4 http://www.outdoorindustry.org/gov.csr.ecoindex.html

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