Can AI Help Supply Chains Be More Environmentally Conscious?

By Ariadnna Garcia 

Pixabay. December 20, 2016. Boat in body of water 

I am pleased to introduce this WEC blog post by Ariadnna Garcia. As we explore challenging issues for sustainable development, we want to feature diverse perspectives. Ariadnna is an undergraduate at UC San Diego and one of our first Climate Ambassadors in partnership with the University of California Alianza Mexico. Ariadnna explores the potential of AI as a tool for sustainability in supply chains. We hope you find her ideas thought-provoking!  

– Glenn Prickett, President and CEO of WEC  

Supply chain sustainability, which refers to the management of the environmental, social, and economic impacts of goods and services throughout their lifecycle, is a pressing challenge facing businesses today due to the worsening condition of our planet. As the climate crisis approaches the point of no return, it becomes essential for corporations to ensure their business practices are sustainable and protect the environment from further harm.  

Supply chains are complex and global in nature. Thus, it is no surprise that businesses may struggle with measuring their sustainability performance, managing their carbon footprint, and reducing their waste. Also challenging is ensuring that their ethical and social responsibility mitigate their environmental impact. According to a report conducted by McKinsey in 2016, 80% of a business’s emissions are produced from the supply chain. Businesses understand the cruciality of sustainability within their supply chains and rank this among their most urgent concerns.  

Can AI address sustainability challenges in supply chains? 

A solution that may address these challenges is that of artificial intelligence (AI) which is the future of data organization, analysis, and complex decision-making. By incorporating AI into the process of supply chain sustainability, businesses may contribute to a more equitable and environmentally conscious global economy by further developing tech-smart approaches to corporate sustainability. 

Mikhail Nilov. May 2, 2021. Men looking at the code on the board 

Sustainability with AI- collecting and synthesizing sustainability data 

One of the most significant barriers facing businesses in achieving supply chain sustainability is the complexity of modern supply chains. With hundreds of thousands of suppliers spanning worldwide, it is difficult to track, collect, and measure environmental data, specifically their sustainability performance.  

The increased number of regulations implemented by governments adds additional complexity in the management of supply chain data. All this data must be synthesized into a human-readable format so that businesses make data-driven decisions, implement the most effective sustainability initiatives, and analyze their current progress.  

This is where AI has the potential to transform the way in which businesses interact with data. Such uses include:  

AI works quickly, frequently outperforming humans and accomplishing tasks that might take minutes in a matter of seconds. The complexity and globality of supply chains can benefit from technology like AI that can sort and process through large data sets, producing insights and visualizations with fewer errors than those committed by humans.  

AlphaTradeZone. November 8, 2020. Man in blue dress shirt holding black digital tablet beside a person writing  

Tracking data- advanced technologies can decrease environmental harm 

This transformative technology can monitor a business’s current sustainability performance by providing continuous feedback on highly polluting actions executed by businesses daily, such as: 

  • carbon emissions 
  • waste generation 
  • water consumption 
  • energy usage 

Using AI may improve communication among the supply chain networks as businesses share their real-time data providing fast feedback to decision-makers so that errors can be addressed, and improvements implemented.  

The scope of AI insights and suggestions can extend to assessments of risks and opportunities. AI may be programmed with technology that can advise where a business can improve its sustainability performance and flag areas where a business may be failing. For example, AI can provide businesses with options for the most optimal transport routes based on traffic and other data, suggestions on the most sustainable suppliers and materials, and methods for the most efficient way to package items – all of which improve supply chain sustainability.  

AI may also have the ability, through its analysis of patterns and trends, to predict future risks and ways in which a business can best mitigate or eliminate these sustainability endangerments. The collection and synthesis of this data can then be used to boost a company’s sustainability transparency and communicate to stakeholders their commitment to mitigating their environmental impact.  

Ella Ivanescu. January 9, 2020. Shooting steam at the sky 

Maximizing profit while reducing environmental footprint through AI 

AI can also be a valuable tool for optimizing supply chain sustainability, and one prominent way is through predicting and managing inventory levels. With projective capabilities, AI can analyze inventory levels, sale patterns, and supply chain trends to help predict the supply and demand a business requires and should expect.  

Such insights may help with the overproduction of items, reducing waste, and ensuring that products are delivered to customers safely through its analysis of transport routes. According to the company, Avery Dennison, overproduction and waste can account for approximately $163 billion worth of lost inventory. If businesses wish to maximize their profits while simultaneously losing fewer products and increasing customer satisfaction, AI can potentially help achieve this.  

Navigating the risks of AI integration 

Although AI brings substantial benefits to supply chain sustainability, the risks and challenges of working with large language models should not be ignored. Companies should consider the risk before implementing this sophisticated technology. These risks can arise from how AI is implemented within a business to the technology itself.  

Discrimination expands to AI-powered supply chain sustainability 

The most prominent issue that has gained international attention is that of biases and discrimination within AI technology. AI works by taking in copious amounts of data, sifting through them, and generating an output. Because AIs are training on large, unfiltered data sets from the internet, biased language in the AI output may occur.  

According to McKinsey, even the most perfectly crafted AI systems can generate biases despite efforts to avoid it during development. For example, if using AI for hiring new suppliers, biases present in the language model may favor certain demographics of candidates as opposed to others who may have more sustainability qualifiers. Businesses should be aware of these risks, rigorously assess the data used to train the AI systems, and develop alternate approaches in case of biases or output errors. 

Mitigating security risks and privacy concerns of AI technologies 

Another potential risk of using AI technology is the impact on IT security and data privacy. AI systems may collect a sizable amount of confidential data and IT infrastructure that must be adequately protected. If the data security systems fail or if the AI system is poorly designed, data breaches could occur and negatively impact businesses. Security and privacy measures, like bias and discrimination checks, should be rigorously implemented to ensure that the AI system is appropriately designed to protect the vast amount of information collected and mitigate the occurrence of breaches. 

Understanding the limitations and fallibility of sophisticated technologies 

A third risk is that of over-relying on the AI system and fully entrusting it to produce infallible information. Although AI produces fewer mistakes than humans, a business cannot without review expect the technology to produce no errors. Implementation of an AI system should ensure that human decision-makers work alongside the programs to provide quality assurance checks that data and outputs are accurate.  

Tara Winstead. May 16, 2021. Person reaching out to a robot 

Recognizing the possibility of job displacement  

On this same note, an issue that also prominently is discussed is the rise of unemployment due to the integration of AI systems. While using an AI tool does not directly translate into job losses, new jobs can even be created while old jobs can be improved. AI requires input from humans, especially to inspect its accuracy; therefore, companies should be inspired to create these new jobs and train their employees to handle these machines instead of simply dismissing them. Training programs for employees can equip the evolving workforce with the skills to use AI to increase productivity and decrease time wasting administrative tasks. Job losses are a valid concern for individuals, and optimistically, with the right approach and design of AI, the potential job losses can be partially offset.  

Exploring the future of AI in supply chain sustainability 

Supply chain sustainability is an urgent and complex challenge facing businesses. Those challenges should be met with technology that is equipped with the correct tools to handle the complicated and international nature of supply chains. Fortunately, AI is the current technology available that may be able to live up to the responsibility of ensuring companies are on a sustainable route placing the betterment of the environment at the forefront of their agenda.  

An AI system can 

  • Gather, analyze, and simplify a significant amount of data collected through the supply chain   
  • Generate insights, patterns, and projections along with suggestions for sustainability improvements. 
  • constant reporting of information gathered coupled with the predictive analysis performed provides AI the ability to spot ways in which a business can improve as well as where it is failing 
  • can assess future risks that pose a threat to the business 
  • Optimize supply chain sustainability through data-driven decision making  
  • Enhance production and increase efficiencies that reduce overproduction and the production of waste 

AI does include potential risks, such as the presence of bias and discrimination, security and privacy breaches, fallible technology, and job losses. Companies can mitigate these risks through a series of strategies that focus on human-reviewed safety and security features along with fallback systems.  

Final Thoughts on How Businesses Can Use AI to be More Environmentally Conscious

In this era of widespread technological advancements, the prevalent use of sophisticated technologies, like AI, is bound to affect our lives. Therefore, here I start the conversation about the potential effects of AI in sustainable supply chains. Become a WEC member and join the discussion on AI with industry leaders. Already a member? Log into the forum now to join the conversation.  

References 

“Artificial Intelligence vs. Human Intelligence.” Simplilearn, November 17, 2022. https://www.simplilearn.com/artificial-intelligence-vs-human-intelligence-article#:~:text=The%20processing%20of%20data%20and,operation%20of%20AI%2Dpowered%20devices.&text=When%20it%20comes%20to%20speed,for%20artificial%20intelligence%20or%20robots

Atsmon, Yuval. “Artificial Intelligence in Strategy.” McKinsey & Company. McKinsey & Company, January 11, 2023. https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/artificial-intelligence-in-strategy

“Big Data Analytics.” IBM. Accessed April 25, 2023. https://www.ibm.com/analytics/big-data-analytics

Blšták, Miroslav. “Even Artificial Intelligence Can Make Mistakes.” KInIT, May 9, 2022. https://kinit.sk/even-artificial-intelligence-can-make-mistakes/

Bové, Anne-Titia, and Steven Swartz. “Starting at the Source: Sustainability in Supply Chains.” McKinsey & Company, November 11, 2016. https://www.mckinsey.com/capabilities/sustainability/our-insights/starting-at-the-source-sustainability-in-supply-chains

Ferrer, Xavier, Tom van Nuenen, Jose M. Such, Mark Cote, and Natalia Criado. “Bias and Discrimination in AI: A Cross-Disciplinary Perspective.” IEEE Technology and Society Magazine 40, no. 2 (2021): 72–80. https://doi.org/10.1109/mts.2021.3056293

Gülen, Kerem. “Ai and Ethics: Balancing Progress and Protection.” Dataconomy, January 16, 2023. https://dataconomy.com/2023/01/16/artificial-intelligence-security-issues/

Jackman, Jonathan. “Supply Chain Sustainability: 3 Pillars for the Future of Business.” Logility, January 25, 2022. https://www.logility.com/blog/3-pillars-of-supply-chain-sustainability/

Kasparov, Garry, and David De Cremer. “Ai Should Augment Human Intelligence, Not Replace It.” Harvard Business Review, August 30, 2021. https://hbr.org/2021/03/ai-should-augment-human-intelligence-not-replace-it

“Real-Time AI.” DataStax. Accessed April 26, 2023. https://www.datastax.com/products/real-time-ai

“The Secret Weapon for Sustainable Business? AI.” The Atlantic. Atlantic Media Company, 2022. https://www.theatlantic.com/sponsored/ibm-2022/the-secret-weapon-for-sustainable-business-ai/3741/

Silberg, Jake, and James Manyika. “Tackling Bias in Artificial Intelligence (and in Humans).” McKinsey & Company. McKinsey & Company, June 6, 2019. https://www.mckinsey.com/featured-insights/artificial-intelligence/tackling-bias-in-artificial-intelligence-and-in-humans

Srivastava, Sudeep. “Optimizing Supply Chain with AI and Analytics.” Appinventiv, March 22, 2023. https://appinventiv.com/blog/ai-in-supply-chain-analytics/#:~:text=According%20to%20a%20study%20from,%25%20and%2065%25%2C%20respectively

Stühler, Gregor. “Council Post: How Ai Is Paving the Way for More Sustainable Supply Chains.” Forbes. Forbes Magazine, January 19, 2021. https://www.forbes.com/sites/forbestechcouncil/2021/01/20/how-ai-is-paving-the-way-for-more-sustainable-supply-chains/?sh=401447f65896

“Supply Chain Crisis Made Worse as 8% of Stock Ends up as Waste.” RFID. Accessed April 26, 2023. https://rfid.averydennison.com/en/home/news-insights/press-releases/supply-chain-crisis-made-worse-as-8-percent-of-stock-ends-up-as-waste.html

Weitzman, Tyler. “Understanding The Benefits And Risks Of Using AI In Business.” Forbes. Forbes Magazine, March 2, 2023. https://www.forbes.com/sites/forbesbusinesscouncil/2023/03/01/understanding-the-benefits-and-risks-of-using-ai-in-business/?sh=67ff2e916bba

“What Is Artificial Intelligence (AI)?” IBM. Accessed April 30, 2023. https://www.ibm.com/topics/artificial-intelligence

“What Is Predictive Analytics?” IBM. Accessed April 26, 2023. https://www.ibm.com/topics/predictive-analytics

Zen. “Artificial Intelligence and Its Impact on the Supply Chain Industry.” Demand Planning & Forecasting Software | Supply Chain Management Tool, April 19, 2023. https://www.demandsolutionseurope.com/artificial-intelligence-and-its-impact-on-the-supply-chain-industry/.  

June 28 @ 10:00 am 12:30 pm UTC-4

Eight years after the official birth of the SDGs there still seems to be a lack of collective action in the business community to support them. Or, perhaps, is there a lack of transparency? Governments at least are continuously repeating their calls for business action on the SDGs while they develop and fund projects with NGOs and civil society that do not have the impact needed to reach a single goal or even one of the 169 targets.

The first global meta study, led by Prof. Frank Bierman and Xian Sun, et. al. at the University of Utrecht (2022), clarified that “the scientific evidence suggests only limited transformative political impact of the Global Goals thus far”. Not a single transformative initiative led by business was identified. The Catalyst 2030 Awards for Systemic Change, on the hunt for companies contributing to the SDGs, presented SAP as winner for having committed 10% of its procurement spend to social enterprises and diverse-owned enterprises. A very noteworthy initiative. However, not what’s getting us close to reaching the Goals.

And yet, the business case for companies to contribute to the SDGs is strong as identified in several publications (e.g. BSDC and SSRN). While many of these companies communicate their own businesses’ activities with respect to the SDGs, they seem not to consider pure business-related collaborations a relevant SDG contribution. And those are the ones that can have a transformative impact for the SDGs.

This WEC Roundtable wants to identify collaborations with a large impact, that help to achieve one or more SDGs. It is an opportunity for business executives to get inspired under the Chatham House Rule.

This is a WEC Member only event. To request and invite, please contact fwerner@wec.org

This event has passed. Please check out the full event summary below:

WEC, ERM, Beveridge & Diamond host Exec RT on ESG Disclosure: Navigating the Complexity of New Financial Regulations

Read Event Summary for ESG Disclosure: Navigating the Complexity of New Financial Regulations

On March 15th and 16th we hosted our Executive Roundtable on ESG Disclosure, bringing together executives and WEC members in a deep dive into ESG Disclosure obligations and frameworks in the U.S., Europe, and other markets. Read the summary of this important discussion below.

Join our next WEC Executive Roundtable by becoming a WEC Member today: https://www.wec.org/membership

April 20 @ 8:00 am 5:00 pm UTC-4

WEC, ERM, and Boehringer Ingelheim are thrilled to announce our upcoming in-person event “Decarbonizing Value Chains: Hard-to-Abate” Industries” happening on April 20th-21st in Ingelheim/Frankfurt (Germany).


Our event will delve into the opportunities to decarbonize as new technological solutions such as green hydrogen and carbon capture are evolving, and innovation is underway. However, as the overall strategic roadmap for heavy industry to reach net zero emissions over the entire value chain is still unclear, the event will focus heavily on corporate strategies to decarbonize their production and procurement.


As all WEC Executive Roundtables, the event will take place under the Chatham House Rule and bring together 30-40 senior business experts.

Please note this is a member only event. To request an invitation please contact Smitha Konduri – skonduri@wec.org

This event has past. Read the full summary below:

May 17 @ 6:00 pm 9:00 pm UTC-4

WEC will award the CEO of the Independent Jury selected recipient the 2023 Gold Medal Award on May 17th, 2023 in Washington D.C. Learn more about the Gold Medal Award here.

Details

Date: May 17

Time: 6:00 pm – 9:30 pm

Location: Planet Word, Washington DC

Event Categories: Gold MedalPrograms

Event Tags: Gold Medal Event

This event has passed but please enjoy pictures from the day here: https://www.wec.org/2023-wec-gold-medal-presentation-gallery/

November 17, 2022 4:30 pm 7:00 pm EDT

November 17, 2022 4:30 pm 7:00 pm UTC+0

This event has past.

The event summary can be found by scrolling to the bottom of the page

The World Environment Center (WEC) and AB InBev, the world’s leading brewer, convened the WEC Gold Medal Symposium on Entrepreneurship in Sustainable Value Chains on Thursday, November 17th live in New York City!

Tackling the climate crisis and other sustainable development challenges requires all the collective energies that society can muster. By supporting entrepreneurship in value chains, the private and public sectors can play a key role in promoting sustainable and resilient development.

AB InBev’s Chief Sustainability Officer, Ezgi Barcenas, convened a diverse group of sustainability leaders to explore Entrepreneurship as a key aspect of a forward-looking ESG strategy. WEC, which advances sustainable development through corporate business practices, co-hosted and moderate the event.

Our speaker’s line-up included executives from AB InBev, Colgate Palmolive, Inter-American Development Bank and more!

About WEC Gold Medal Symposium
AB InBev, the world’s leading brewer, was the recipient of the 2022 WEC Gold Medal Award for International Corporate Achievement in Sustainable Development. The Gold Medal Award was presented to AB InBev CEO Michel Doukeris at an in-person ceremony at Washington, DC’s Planet Word on Wednesday, May 18, 2022. This symposium was part of the series recognizing and acknowledging AB InBev’s outstanding work.

The Gold Medal Award is presented annually to a global company that has integrated sustainability into its business practices, created ground-breaking solutions to critical environmental and social challenges, and demonstrated global leadership to accelerate progress toward a sustainable future. An independent Gold Medal Jury comprised of recognized sustainability experts selects the Gold Medalist through a global competition among nominated companies invited to apply for the Award. This event is part of a series of Symposiums hosted by WEC to recognize AB InBev and raise important dialogues on relevant sustainability topics. You can read the press release here.

This is an invitation only event.

2022 WEC Gold Medal Symposium “Leadership for a Sustainable Future: Building a Next Generation Business Today” Summary

Download full summary in English here

On the occasion of awarding the 2022 Gold Medal for International Corporate Achievement in Sustainable Development to AB InBev, the World Environment Center (WEC) convened a Symposium for business executives to discuss with thought leaders and practitioners how to navigate the business risks (and opportunities) from a more unpredictable global economy than any time in recent memory. The war in Europe, the COVID-19 pandemic, and the catastrophic climate crisis are changing the world like nothing else in the past 80 years. Business leaders must assure business continuity in the near term while taking action to build a resilient, next-generation business. Held under the Chatham House Rule, this Symposium was a dialogue designed to share goals, strategies, and practical solutions, and to lead the global transformation towards resilience and sustainability.

To read the full summary, key point details and additional information, click HERE.

Note:  WEC Executive Roundtables are conducted under the Chatham House Rule.

WEC & Arabesque hold Roundtable on The Future of ESG investment

Bild von Gerd Altmann auf Pixabay

The World Environment Center & Arabesque, convened an Executive Roundtable to review the latest developments in ESG investment standards and data analytics. With a 50:50 split between North America and Europe participants, 42 senior executives, joined the conversation, including 23 representatives from 18 global companies, 14 from eight financial organizations, and five from NGO/academia.

There is now global acknowledgement that the climate crisis is posing an immediate threat to business and financial markets. In addition, companies with vulnerable supply chains, questionable labor standards, and a inability to innovate in the face of environmental and social challenges are especially exposed to financial risks. Leading financial institutions have reacted to these risks by integrating Environment, Social and Governance (ESG) considerations into their portfolio management, and they have created international standards through initiatives such as the Task Force on Climate Related Financial Disclosures (TCFD). ESG data analytics are becoming an integral part of investment decisions. Meanwhile, ESG-related opportunities are also gaining in importance, with the framework of the UN SDGs serving as an important reference, while total impact measurement concepts are sitting at the doorstep to finally put an end to externalizing important costs of business action.

Host

·      Todd A Bridges, Partner, Arabesque

 

Moderators and Facilitators

·         Arabesque: Andreas Feiner

·         Orbia: Cristina Gil

·         The Chemours Company: Sheryl Telford

·         Value Balancing Alliance: Christian Heller

·         Yale University: Daniel Esty

·         World Environment Center: Glenn Prickett

Speakers

·         BP: Kelly Goddard

·         Dow: Eunice Heath

·         Duke Energy: Katherine Neebe

·         Impact Management Project: Clara Barby

·         Jacobs: Zoe Haseman

·         JP Morgan Chase & Co.: Marisa J. Buchanan

·         LafargeHolcim: Magali Anderson

·         Novartis: James Wallace

·         PRI: Nathan Fabian

·         SAP: Daniel Schmid

·         SASB: Janine Guillot

·         State Street Global Advisors: Benjamin Colton

·         UNJSPF: Herman Bril

Key Points:

  • Poll questions during the Roundtable revealed that all participants confirmed that ESG related data requests have risen in quantity and became more complex and that they witnessed a growing interest by their company Boards in sustainability. Asked to what extent company representatives have the data available to communicate with their investors on material ESG issues: 60% responded yes, 40% said no.
  • ESG integration into standardized frameworks: 2020 has been the year in which the single most coherent standardization of frameworks and standardization related to ESG disclosure has taken place. Mainstream investors such as BlackRock and others have entered the field as a response to their need for quality information to deliver financial returns at low/moderate risk. In addition to new EU regulation, five major private global organizations, SASB, TCFD, GRI, CDSB, and the Integrating Reporting Framework (IR), have collaborated, culminating in the IFRS foundation trustees issuing a consultation on whether they should play a role in the consolidation process. Financial institutions are now united in a common wish for a generally accepted harmonization of ESG disclosure with minimum mandatory KPI’s be added to traditional financial accounting standards.  Beyond that, they expect a continued proliferation of competing standards, because investment houses need to differentiate themselves and because different stakeholders and sustainability issues merit their standards.

    In parallel to this development, the European Commission’s “Sustainable Finance Disclosure Regulation” (SFDR) is now mandatory, expecting financial service providers to disclose how they consider sustainability issues in their strategies, processes, and products. Knowing that the definition of a commonly agreed-upon set of indicators to assess ecologically sustainable economic activities is still a key challenge, the EU refers to its classification system, the newly developed, almost finalized EU taxonomy. By January 2022, each financial product issued in the EU must carry these disclosures.

    The big question in the room was whether European leadership may force global framework setting to adopt the EU standards? Several experts expressed their doubts, especially since they expect that global and US-dominated standard bodies will insist on strictly business-relevant indicators. Other experts were less skeptical, convinced that the relevant actors will grab the pragmatic opportunity for harmonization, underscoring that EU regulation is too advanced to be changed and that the TCFD recommendations have already been integrated with its approach. There was consensus among the experts, however, that harmonization of standards and rules is taking place at a fast pace – with a good chance that 2023 will see a global standard that defines a limited set of mandatory, highly business-relevant key indicators to be reported and evaluated.

    Another key trend has been expressed: investors with huge portfolios increasingly request and use raw data for their own company evaluations, starting with the commonly accepted business-relevant indicators developed through SASB and TCFD. From here, investors may take up additional industry-specific indicators for their evaluations and thus differentiate themselves further from competitors.
  • Decision-useful insights through data analytics: Standards, Frameworks, and regulations create a common basis for companies to report the data requested by capital markets and other stakeholders. Given that companies report high-quality data, technology can then enable much more accurate and comparable sustainability assessments of thousands of companies than known so far. Vice-versa, technology can enable companies to report the data required at a lower cost and to a greater extent.
    However, current and upcoming technology can not only help generate quality data, but it also enables developing applications that transfer sustainability data into decision-useful insights. A few applications that can be generated (by simply clicking on a button) were introduced during the Roundtable:
    • a “trust score”, enabling to quantify the impact of trust on a company’s financial performance;
    • a “temperature score” used in low carbon indices: it quantifies how companies are contributing to the rise in global temperature through their GHG emissions. Corporations receive a near-term and long-term temperature score reflecting the pathways they are on given their current behavior: it can be used to favor companies that are aligned with 1.5° and 2° pathways;
    • peer group analysis to monitor the ESG performance of competitors;
    • a human rights tool to evaluate a company’s risk exposure concerning existing or new business opportunities;
    • a supply chain tool to understand key suppliers’ ESG performances, something that can be part of a temperature score of a company’s scope 3 emissions.

      Technology can and will enable many more applications, while ultimately finding its raison d’être above all in being the central source for universally accessible, raw sustainability data. In this function, it provides companies and investors the opportunity to access and integrate ESG data into decision-making processes. Transparency and trust in the raw data are especially critical to enable that function.
  • To Manage Risk and Create Sustainable Long-Term Value through ESG data analytics, experts recommend that company executives first understand which business and associated sustainability challenges are (financially) material to the company. Reporting information only because it can be measured, doesn’t mean the data helps in decision-making. Instead, what matters should be measured. It is critical that companies develop the infrastructure throughout the corporation to gather ESG-related information and structure it for management decision-making.

    However, although ESG data analytics is an effective way to measure the impacts of the business, top manage­ment must fully understand and back the strategy derived from the data and tell the narrative behind it. Several options were  recommended to strengthen accountability, such as  combining the achievement of mid-term sustainability goals with compensation programs, performance reviews, etc.

    Roundtable participants observe that investors sense an age of new risks and opportunities, ultimately asking the question: “who is ready for the transformation taking place”? As preferences of investors are beginning to change, they demand creativity and innovation. This goes beyond technology and includes management, collaborations, public engagement, communication, etc. For climate change a good, functioning framework for decision-making has been developed through the CDP, Science-Based Targets Initiative, TCFD, and the Paris Agreement. However, roundtable participants are concerned that this is not yet the case for other very pressing topics such as biodiversity loss, the marine environment, diversity & inclusion, to name a few. In addition, a “maturity measurement” of a company’s ability to take on a challenge, e.g. if a company is rising or falling, is expected to evolve.
  • How to attract long-term investors: Long term, ESG-conscious investors have become a significant group as they are reported to already hold a third of invested shares of some global companies. They increasingly expect that the corporate strategy reflects sustainability goals and that top management takes account of these goals. Different from five years ago, they are now well prepared and understand the connections very well. The adoption of the TCFD has clearly shown that meaningful and well-managed sustainability goals have a strong impact on the company’s ability to communicate its ability to manage risks. Other business-relevant global risks (and opportunities), sometimes specific to the company, are now often expected to be managed with equal seriousness, as investors are gaining a better understanding of the topics, and even better data they can refer to. Leading companies have already demonstrated this ability to initiate a major transition away from unsustainable products in reaction to climate change while keeping a holistic approach to sustainability. Although only executing a bold strategy is convincing over the longer term, financial markets have shown that they honor a clear message concerning the transitioning of the company into a carbon restricted world.

    Other companies, those with less risky products, are not automatically gaining confidence within the financial community. Within their sector, they attract long-term investors by bold target-setting that includes business-relevant sustainability issues well in advance of competitors, and by increasingly attracting the best talents and most ambitious customers, which they increasingly do because they are perceived as a sustainability leader. But this is not the only reason why investors reward sustainability leaders.  Sustainability leaders are perceived as being able to find new customers who need the expertise to solve new challenges associated with global change: since leaders have gone through most of those challenges themselves and found practical solutions, they are the best to design products and services that work. That’s how business opportunities evolve. And last but not least: companies that have integrated sustainability and financial data and understand correlations can easily show how much savings they achieve by setting new goals. Although some companies may fear the risk of reporting data that reveals undesirable trends, roundtable participants recommend disclosing them anyway as it helps to solve inevitable problems. An intermediate step that can help maybe to first share those data internally and learn from the internal discussion before proceeding to public disclosure.
  • The UN Sustainability Goals were not designed for investors and neither with their help. And most companies, although finding value in the SDG framework, in general, have little understanding of how to measure their impact, let alone how to communicate to financial markets any impacts that they have on the SDGs. Roundtable participants stated that they hardly get questions from investors related to their strategy and impact concerning the SDGs.

    However, including the SDGs into investment decisions has already been taken up by some large institutional investors who find extra financial value in them.Stating that the SDGs help identify positive social/environmental impact, these contributions may lead to more business opportunities, meaning that an investment can become interesting. That is why two major initiatives have recently developed:
    • a group of institutional investors led by Dutch investors designed the “SDI Asset Owner Platform,” a sustainable investment tool based on the SDGs that helps investors through standardized taxonomy to identify companies who contribute to the SDGs with their products & services or their operations & conduct.
    • cooperation between academics and investors in the UK designed “The Sustainable Investment Framework”, which provides investors with a way to holistically measure investment outcomes against all 17 SDGs, concentrated into a dashboard of six core themes and associated metrics.

      Both initiatives are starting points that are expected to evolve. They show that investment markets are further developing, with ESG integration being supplemented by opportunities that the SDG framework addresses. As measuring impact is a very difficult undertaking and more data is needed for these analytics, the major driver of these developments is digitization.
  • Total impact valuation emerging, although not yet widely applied: Capital markets increasingly refer to information beyond current financial statements that provide a more holistic understanding of how companies are performing. That is due to new regulations, international norms, investor preferences, and industry disruption. ESG reporting frameworks such as SASB are helping to provide comparable data on sustainability matters that create or erode enterprise value. With total impact valuation, a concept has emerged, that takes account of additional parameters measuring the creation and destruction of value. Among the leading initiatives developing standardized and practical methodologies to impact valuation are the Value Balancing Alliance and the Impact Management Project.

    Total impact valuation methodologies aggregate the economic value with the environmental cost/value and the social cost/value from the company activities. Experts made clear during the Roundtable, that we need to be very careful about how that data is being aggregated. A simple example is that human rights abuses cannot be traded off e.g. by high salaries for employees, and high carbon emissions can’t be compensated by other values either. Evaluating a company from diverse angles is not simply a matter of data availability, but also of  balanced storytelling. While this should be a global conversation, the business community has raised concerns as the European Commission leads the discussion in a rather internally focused way when a dialogue with the IFRS, SASB, the GRI, etc. would be helpful.

    It should be noted that impact valuation is not only in the interest of investors. It is even more important for strategic decision-making within the company. An example is e.g. understanding the total aggregated costs of production in a certain location compared to an alternative location, or e.g. financing carbon credits versus purchasing renewable energy.

Note:  WEC Executive Roundtables are conducted under the Chatham House Rule.

WEC Gold Medal Roundtable Convenes Business Leaders on Future of Sustainable Mobility

Photo by Joey Kyber from Pexels

On the occasion of awarding the Gold Medal 2020 to Ford Motor Company, the World Environment Center convened an Executive Roundtable to learn from leaders in the transportation sectors about their efforts to drive sustainability in transportation and discuss further efforts required in the years ahead for mobility systems change. This Roundtable was designed to share goals and strategies, and to lead the global decarbonization efforts in mobility.

Speakers represented key transportation sectors:

  • Automotive: Bob Holycross, Chief Sustainability, Environment & Safety Officer, Ford Motor Company
  • Energy: Philippe Montantême, Senior Vice President, Strategy Marketing Research, Total
  • Information Technology: Edan Dionne, Vice Pres., Environmental, Energy & Chem. Management Programs, IBM
  • Infrastructure: John Siraut, Global Technology Lead, Transport Economics, Jacobs
  • Policy & Planning: Dana Lowell, Senior Vice President, ERM

moderated by Glenn Prickett, President & CEO, World Environment Center

The Roundtable was held virtually in a webinar format, with approx. 30 senior executives from WEC member companies and other international corporations, as well as senior officials from government, science, and think tanks.

Key Points:

  1. Sustainable Mobility will be achieved by orchestrating several things at the same time, as a survey among the participating experts revealed. At least four important drivers of sustainable mobility have been identified, all of them equally important: (a) a completely new generation of automobiles, trains, airplanes and other means of transport, (b) technology and financial means to provide enough renewable power, (c) political leadership and skills, (d) a passion for change among the people.
  2. The market for zero emissions vehicles is evolving rapidly. Until recently it has been good enough to offer prestigious zero emission vehicles. However, companies are now mainstreaming these techno­logical solutions, making them affordable for the middle classes, and providing products adjusted to their needs. While leading companies are adjusting their product portfolio towards zero emission vehicles, they are also setting zero-emissions goals for their production with deadlines in some cases as early as 2030: zero water withdrawals for manufacturing processes, zero single use plastics, zero waste to landfills, zero air emissions from facilities. Sustainability management is now being integrated in every aspect of the business of leading companies like quality management had been decades ago. It is now about to become the standard of good practice.
  3. It is not yet clear which fuels will catch on for heavier vehicles and airplanes as passenger cars most likely will be electric. A mix of several low carbon/zero carbon fuels, including hydrogen, biofuels, and synthetic fuels is expected to replace fossil fuels during a transition phase that may last one or more decades.
  4. Digitization can help orchestrate a safer, more efficient, and sustainable transportation network by increasing the capacity of existing transportation networks, creating smarter transportation systems, and making low-carbon mobility accessible for everyone. Among the emerging technological solutions are open cloud-based platforms that connect the diverse components of urban mobility systems, including connected vehicles, mass transit, pedestrians, city infrastructure and service providers. Furthermore, digitization can help reduce the demand for physical mobility as customers make better-informed travel decisions or may meet their needs without travel.
  5. Sustainable infrastructure must not always be new, advanced and the latest technology. Rather than focusing on building new infrastructure it was claimed that making use of the existing is more economical and seems to have the greatest impact to reduce carbon emissions anyway: for example, electrifying the railroad network was mentioned to be such a key investment or building sidewalks and bicycle roads next to streets that reduce people’s dependency on automobiles. Technological solutions for smarter transportation systems are important, too, however not as an alternative.
  6. Vehicle fleets could have much impact. They have experienced a market pull to turn towards electric in the past 18 months, especially from the large logistics companies. One problem, however, is that a typical fleet life span in the US, especially for large vehicles such as busses, is approximately 15 years. Best chances to get the momentum going can be expected from large national fleets, whose life span is 5-10 years as they sell used vehicles to smaller fleet providers. Furthermore, electrical drive can be mandated.
  7. Policy action to help decarbonize mobility is essential, according to the participants. Putting a price on carbon is an action item that several participants recommended. Another recommendation is to take what has been established in California and roll it out nationwide as much as possible, thus creating a national frame­work. On the other hand, it is expected that individual states such as California and New York will continue to lead decarbonization efforts, along with several recently formed collaborations of states. To overcome political divides, it was recommended that business gets into the driver’s seat and make clear that an ambitious national policy framework is in its interest. This recommendation is backed by statements from European participants, who state that an ambitious long-term vision such as the EU’s Green Deal is beneficial as it backs progressive companies’ sustainability actions, and also provides security that investments will pay off in a policy framework that is expected to stay for the years to come.

Further resources mentioned: Corporate Electric Vehicle Alliance, America’s Zero Carbon Action Plan

Note:  WEC Executive Roundtables are conducted under the Chatham House Rule.

WEC hosts Exec Roundtable on Decarbonizing the Business – Achieving Carbon Neutrality in Line with Scientific Recommendations

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With a clear business case for decarbonization in mind, hundreds of major global companies have already committed to reach net-zero emissions between 2030 and 2050. WEC brought together 53 senior executives from 10 countries joined the conversation, including 43 representatives from 27 global companies.

The Key Points from the Roundtable were:

  • 2020 should be the year when global CO2-emissions reach their peak, but being realistic, 2025 must be the year.
  • Several times a clear and encouraging message was repeated: Decarbonizing all sectors entirely seems to be possible now.
  • In practice companies find it realistic to fully decarbonize their own operations (Scope 1 and 2 emissions) before 2050. The real challenge is to decarbonize Scope 3 emissions.
  • Controversy if offsetting emissions on large scales is a viable solution as companies have concerns about the economics and sustainability of offsets, including in the land-use sector.  At the same time, “natural climate solutions,” e.g. forest conservation & restoration, regenerative agriculture, etc. can be immediate and cost-effective.  This is an important area for Scope 3 reductions and high-quality offsets.
  • Financial markets are effectively making clear to industries that are heavily dependent on fossil fuels that the financial risk is growing.
  • When it comes to climate change WINNING SLOWLY IS THE SAME AS LOOSING, as Anthony Hobley (World Economic Forum) shared.

You can read the full summary of the event here.

Advancing Corporate Sustainability: Guidance on How to Get to the Next Level

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At an invitation only virtual event, Glenn Prickett, WEC President & CEO moderated a session with executives from DowVolkswagenEcolab, and Orbia spoke on key aspects of sustainability, including setting goals and targets, addressing the circular economy, decarbonizing the business, managing water resources, and setting up a sustainability program.

A new program is currently being launched by the World Environment Center (WEC) to help these companies learn from those that have successfully integrated Sustainability into their business. The event provided insight into how leading companies addressed growing expectations from customers, regulators and investors, reduced their exposure to environmental and social risk and at the same time use business opportunities that arise from sustainability. This event was to provide less exposed brands, often those in B-2-B customer relationships or in less regulated markets, that haven’t felt the same need to take sustainability very serious, insight into how leading companies have set up sustainability programs and secured top management’s commitment.

A summary of the event can be found here.

July 15, 2020 @ 11:00 am 12:30 pm UTC-4

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This is an invitation only event. As part of a World Environment Center initiative to support international companies that feel the need to advance on sustainability in order to meet expectations of customers, investors, and regulators.

Executives from Dow, Volkswagen, Ecolab, and Orbia will speak on key aspects of sustainability, including setting goals and targets, addressing the circular economy, decarbonizing the business, managing water resources, and setting up a sustainability program. Glenn Prickett of the World Environment Center will moderate the session.

In the light of growing expectations from customers, investors, and regulators that companies reduce their exposure to environmental and social risk and at the same time use business opportunities that arise from sustainability we are seeing that many of the most exposed global brands have implemented structures and have made much progress on EHS and sustainability.

Less exposed brands, often those in B-2-B customer relationships or in less regulated markets, haven’t felt the same need to take sustainability very serious. This is changing and has been accelerated by the COVID-19 pandemic. A new program is currently being launched by the World Environment Center (WEC) to help these companies learn from those that have successfully integrated Sustainability into their business.

 

This webinar will focus on the following topics, each of them being kicked-off by a leading company:

  • How are leading companies setting goals and targets (incl. the SDGs)?
  • How are they addressing the circular economy in practice?
  • What is expected from companies that use water and what are leading companies doing in practice?
  • How to address climate change and how are leading companies decarbonizing their business?
  • How has a leading company recently set up a sustainability program from scratch and how had it secured top management’s commitment?