Sustainability: From compliance to competitive advantage | HCLTech

Sustainability: From compliance to competitive advantage

How can organizations embrace technology to achieve a compliant and sustainable competitive advantage?
12 minutes read
Sukant Acharya
Sukant Acharya
EVP, Global Business Head, Sustainability, IoT and Industry NeXT
12 minutes read
Sustainability: From compliance to competitive advantage

In today's rapidly evolving global landscape, sustainability stands as the cornerstone of a responsible business ecosystem. Recently, we have witnessed a substantial reinforcement of regulatory frameworks and compliance directives, underscoring the growing significance of this paradigm shift. Notably, the introduction of the Corporate Sustainability Reporting Directive (CSRD) in Europe, which mandates over 49,000 entities to report on sustainability, vividly lays out the importance of adhering to European Sustainability Reporting Standards (ESRS) and embracing the principle of double materiality — a term that considers the impact of a company’s activities on the environment and society as well as its financial performance. This evolution highlights the imperative for businesses to lead the way in sustainable practices. 

California's New Climate Law (SB253) has broadened its reporting requirements to include 'Scope 3' emissions, emphasizing the need for a comprehensive strategy for environmental accountability. Similarly, the UK's adoption of the Strategic Disclosure Standards (SDS), rooted in International Financial Reporting Standards (IFRS) principles, sets a higher benchmark for transparency, fostering a resilient and accountable ecosystem. 

Amidst these shifting landscapes and pressure to comply with regulatory mandates, organizations are grappling with the dual challenge of staying competitive and meeting regulatory mandates on sustainability. These demands often entail substantial costs and organizational shifts. Technology innovations offer a remarkable opportunity to align sustainability with shareholder values, creating a foundation for competitive advantage. A technology-driven strategic approach not only offers capabilities to achieve net-zero goals but also provides seamless visibility into operations, dynamic control of systems, prevention of wastage and a reduction in per-unit energy costs. Moreover, rapid differentiation through the development of sustainable products and services can positively impact the market. 

Despite well-developed regulatory frameworks, compliance directives and technology-driven sustainability initiatives, organizations still face specific challenges that persist in their pursuit of sustainability. Let's explore how these challenges hinder their efforts to attain their sustainability goals. 

Complexity in integrating the ecosystem: Achieving sustainability goals requires seamlessly integrating sustainability practices across the entire value chain. This integration poses a unique set of challenges, demanding a deep understanding of the organization's internal operations and those of its suppliers, partners and customers. Consider a B2C company serving millions of customers through diverse systems and interaction models across the globe. Without a holistic ecosystem perspective, managing end-of-life for circularity can be daunting. Similarly, a B2B manufacturer faces increasing complexities with unique sustainability demands from each customer and a globally dispersed supplier base. Ecosystem integration involves aligning sustainability objectives, sharing information and fostering collaboration among ecosystem stakeholders. Implementing sustainability practices at this level, supported by the right technological solutions, is paramount to driving substantial change. 

Challenges with data management: Data complexity is a significant challenge for businesses with extensive operations spanning diverse products and service lines across multiple locations. Managing this data efficiently entails cleaning, structuring, integrating and aligning it with various regulatory requirements while extracting valuable insights. This requires considerable effort and technology plays a pivotal role in automating tasks like collection, storage, integration, mapping, and reporting processes, ensuring compliance with region-specific frameworks and standards. Leveraging digital twin technology for data intelligence yields precision, traceability, and verification, providing assurance for audit processes. Furthermore, technology facilitates data analysis, enabling the identification of existing inefficiencies and the provision of recommendations for operational enhancements. 

Broken chain in circularity: Embracing sustainability demands a focus on sustainable products and a circular economy. Annually, according to the Ellen MacArthur Foundation, over 120 billion metric tons of goods circulate within the economy, but consumers discard an estimated 99% of these products within just six months of use. Also, report from the US Environmental Protection Agency found that less than 5% of plastic waste in America is recycled, with limited innovations to support the avoid-reduce-reuse-recycle model.  The biggest hurdle in circularity is the blind spots in the production-consumption-end-of-life chain. Introducing technology to establish a digital thread in the product value chain coupled with design stage interventions to enhance product lifecycle and enhanced recyclability helps fast-track circularity initiatives.  

Technology innovation: Driving sustainability initiatives as a source of competitive advantage 

Leveraging cutting-edge tech solutions is the key to achieving net-zero emissions and sustainable practices while making operations more efficient. From AI-driven supply chain transparency to digital twin-driven sustainable operations, these innovations empower businesses to reduce their carbon footprints and embrace a greener, more sustainable future.  

Net-zero transformation and sustainable operations:  Achieving sustainability through net-zero transformation is paramount. Across all industries, the reduction of greenhouse gas (GHG) emissions requires leveraging technologies, such as digital twin, AI, IoT and predictive maintenance. Adhering to the principle that "what gets measured, gets managed," the strategic implementation of emission measurement technologies, trend analysis, and benchmarking enables optimization and emissions reduction. Digital twin-based tools offer real-time insights, allowing organizations to measure, monitor, normalize, compare, contrast, predict, and alert on the source of issues and opportunities in near real-time. AI and machine learning-driven dynamic threshold control, KPP builders and a comprehensive organizational view streamline the path to net-zero transformation and cost reduction. Monitoring energy consumption can proactively prevent failures and downtime, minimizing poor-quality product production and waste in rework and scrap.   

Sustainable products: Sustainable products are a vital element of the circular economy. They significantly reduce emissions, carbon footprints, energy consumption, and material usage, driving circularity. These products undergo rigorous simulations and testing to minimize their environmental footprint, demonstrating a commitment to sustainability and innovation in product development. Utilizing mapping and what-if tools for Product Carbon Footprint and Lifecycle Assessment aids in enabling Design for Sustainability by measuring and mitigating the environmental impact of a product or future product throughout its entire lifecycle. Data-driven insights and an ecosystem-driven knowledge base for material substitution change of design principles aid faster decisions toward a more sustainable product. Cloud-enabled ecosystem collaboration and extensive usage of simulated data and environment help reduce R&D costs and accelerate time to market. Moreover, sustainable products extend the product lifecycle, increasing organizational value and simplifying end-of-life management. This comprehensive approach fosters sustainability from inception to disposal.  

Sustainable IT: Sustainable IT commands urgent attention. While fast-proliferating volumes of data have become the source of energy to feed the expansive business ecosystem, it has necessitated energy-guzzling algorithms and infrastructure to process the same. In addition, the convergence of IT-OT and ET is creating a complex digital workplace that needs to be available 24/7, consuming energy and leaving a significant carbon footprint.  

Server virtualization is a prime example of an effective approach, consolidating applications to reduce power consumption and optimize space and cooling. Nevertheless, certain power-intensive applications still exist, emphasizing the need to identify and optimize these specific processes. By embracing energy-efficient coding (green coding) practices, we can effectively reduce power consumption associated with such applications. Similarly, employing desktop virtualization techniques helps reduce the number of power-consuming devices, ensuring a more sustainable IT infrastructure. Leveraging advanced analytics for network analysis and dynamic load balancing can help reduce energy consumption in network assets. Moreover, implementing technology-enabled interventions, such as green IT procurement and automated power-saving measures, saves cost and helps achieve net-zero goals.  

Sustainable finance: Sustainable finance ensures downstream project compliance, supporting a greener ecosystem. Technology serves as a cornerstone in driving sustainable finance by empowering businesses to navigate the complexities of environmental impact assessment and mitigation effectively. Through the implementation of Partnership for Carbon Accounting Financials-aligned emission quantification methodologies for financing, investing and insurance-related activities, technology facilitates precise target setting in accordance with standards like the Science Based Targets Initiative, Net-Zero Banking Alliance and Net-Zero Insurance Alliance. It further enhances client and investor engagement solutions, fostering a marketplace-driven approach to promote sustainable finance and living. Through the establishment of robust platforms for taxonomy management and standardized reporting, technology streamlines the classification of green financing frameworks and EU taxonomy, ensuring comprehensive and transparent disclosures. Additionally, technology supports the seamless implementation and management of corporate ESG strategies, which facilitates the integration of tailored dashboards for efficient ESG data management and reporting. This will ultimately drive sustainable finance practices to new heights and reduce risks for organizations. 

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In a nutshell, technology will play a crucial role in helping businesses attain sustainability. It empowers organizations to reduce environmental impact and meet the ever-growing demands of responsible business practices. Simultaneously, technology is instrumental in guiding organizations toward harnessing sustainability as a source of competitive advantage. Technology offers a wide range of solutions to drive sustainability as a value enabler moving forward, from energy transition to supply chain transparency, remote work capabilities and near real-time operations optimization. 

At HCLTech, we are committed to advancing sustainability through our comprehensive suite of sustainability-focused solutions, including Design for Sustainability SF 360, among others. Our flagship, award-winning Net-Zero Intelligent Operations (NIO) solution designed for Scope 1, 2, 3 tracking and reporting leverages digital twin, IoT and AI technologies to streamline energy consumption and mitigate GHG emissions with real-time insights. It provides actionable insights to reduce costs, prevent failures, and enhance operational efficiency. Our efforts are complemented by our commitment to driving rapid and meaningful long-term sustainable growth while adopting a responsible and mindful approach for our customers.  

This fusion of technology and sustainability pushes the boundaries, offering exciting possibilities for CXOs to succeed and establish a sustainable competitive advantage. 

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