By Jeremy Green
With the Paris Agreement on climate change on track for full ratification, there is at last a chance that the ‘biggest risk to the global economy’ might finally get some of the attention it deserves.
That almost certainly means that there will be renewed pressures on enterprises to cut their own carbon emissions; the exact proportion varies, but in developed countries businesses account for about a fifth of all emissions.
Of course, there are many reasons why businesses might want to reduce their CO2 output: apart from the obvious regulatory requirements, and the associated impact of either carbon tax or cap-and-trade regimes, there are implications for finance and capital markets (where a “cleaner” profile can make it easier to raise capital), and customer and brand perception.
Moreover, some companies – such as insurers – are directly exposed to the negative impact of climate change; others can expect that the consequences of climate change will have negative impact on the demand for their products or on the conditions in which they conduct their business. So action to reduce carbon emissions makes basic business sense. From a more cynical perspective, the ability to comply with complex regulations is a strategic advantage and a potential barrier to entry, which gives some enterprises additional incentive to support a demanding regulatory environment.
As our new report points out, the IoT has strong potential to help enterprises to reduce their emissions. Although ICT accounts for an appreciable proportion of the world’s emissions (around 2.3% in 2020) this is in long term decline, and the contribution of technology in reducing emissions has the potential to outweigh the emissions it generates. Our work with The Carbon Trust has established that 70% of this benefit comes from the IoT.
The sector which benefits most in terms of emissions reduction is ‘connected buildings’, which accounts for 29% of the carbon abatement. This is closely followed by ‘connected transportation’, which accounts for 28%. These two are then followed by ‘connected living’ (consumer carbon reductions through lifestyle changes, of which the most important are travel reduction and shift towards lower-carbon travel modes) at 14% and ‘connected energy’ (primarily the use of IoT in the electricity generation and distribution industries) at 13%. No other area of economic activity comes close to these first four.
Across different verticals the benefits in terms of carbon reduction are highly concentrated within specific IoT applications. Two applications, field force automation and fleet vehicle driver behaviour improvement, account for more than 80% of the carbon reductions enabled by the IoT, with the first of these alone providing 61% of the savings. The third and fourth most important applications, ‘smart logistics efficient routing and fleet management’, and ‘supply main management’, are closely related, and account for 6% and 4% respectively, and ‘smart logistics loading optimisation’ accounts for a further 3% (see below Figure 1 ).
IoT-enabled carbon emission reductions by application. Source Machina Research:
There may be further upside to the impact of IoT on emissions, in that we have assumed a deployment of the IoT based on a relatively gradual transformation from a fragmented set of ‘subnets of things’ towards a more integrated full Internet of Things. A more orderly and rapid transformation towards integration would provide greater benefits to enterprises, and to public sector use cases such as smart cities.
Elsewhere we have argued that adopting a more standards-based approach to IoT deployment would lead to a 27% increase in the number of connected devices within smart cities, and could improve the speed and extent of adoption of smart city applications. The same scenario would also increase the impact of IoT in reducing carbon emissions, both directly through wider and faster deployment, and indirectly through reduced costs.
Configuring the organisation to manage and reduce its carbon emissions poses challenges for company culture and organisation structure. The process whereby emissions are generated do not respect organisational siloes. Enterprises that are serious about using the IoT to reduce their carbon emissions must either assign this responsibility to a senior manager with line of business management authority or create a new role and ensure that its occupant does have the authority needed to get the job done.
Establish baselines is critical to understanding and reducing the enterprise’s carbon emissions. Any organisation seeking to manage its emissions needs to be ready to capture, manage and store, and analyse data from operations. Data needs to be collected across a wide range of metrics. The need to collect and analyse data is particularly important if the organisation wants to establish the efficacy of specific carbon-reducing measures such as miles driven, fuel used, etc.
We have created a simple model to help enterprise begin their conversation, and thus their journey, towards reducing carbon emissions through IoT-based solutions. This takes a number of simple business-friendly inputs that should be relatively easy to obtain, such as the number of the company’s vehicles, the area of office space, factory space and/or warehouse space, or the number of employees in different environments. The model uses calculations based on savings factors for the impact of IoT solutions on specific sources of carbon emissions.
The model output is in terms of carbon emissions saved, in KgCO2, for each carbon-reducing IoT application that is deployed. Users can further vary the inputs by flexing a ‘potential’ factor that represents the extent to which carbon-reducing solutions have already been deployed, and an ‘intensity’ factor that allows for special circumstances for a particular enterprise – the size of its trucks, perhaps, or the geographical location of its warehouses. We have provided several reference cases to illustrate the functioning of the model for different types of companies.
What our model shows is that enterprises need to focus their efforts on those IoT applications that make a real difference, and that this varies both by vertical and by country. At the same time, policy makers should emphasise and encourage measures that make the most difference. Regulation should reward the right steps and penalise non-adoption. The most obvious areas for encouragement are in workforce mobility (field force management), transportation and logistics.
But business cases and references are clearly not enough. The adoption of workforce mobility solutions has been pushed by the mobile industry and its systems integrator distribution partners for years. We need to understand why businesses – especially SMEs – have largely been impervious to these messages. The future of the planet might just depend on it.