Can digital transformation help us transition to a more sustainable world? That’s one of the vital questions addressed in a recent white paper from the World Economic Forum’s Digital Transformation of Industries initiative, which examines some of the central implications of widespread digitization for our society as a whole. Besides building a digital workforce and fostering trust in the digital economy, the white paper identified the creation of a sustainable world as one of three key challenges facing society, which could be significantly impacted by digitization. Following is an overview of the white paper’s exploration of how digital transformation could impact sustainability efforts; what obstacles need to be overcome if digital transformation’s contribution is to be positive; and what concrete, near-term steps businesses can take to start off down the right path.
It is becoming increasingly clear that economic growth must be decoupled from resource use and emissions growth if our planet and society are to have a sustainable future. However, this objective has proved difficult to achieve so far. Historically, a 1% increase in GDP has corresponded to a 0.5% rise in carbon dioxide emissions and a 0.4% increase in resource intensity. Consequently, if our current business practices continue, we could see the global gap between natural resource supply and demand rise to 8 billion metric tons by 2030, which is equivalent to $4.5 trillion in lost economic growth.
However, the potential that digital initiatives have to help decarbonize the global economy is significant. WEF research estimates that from 2016 to 2025, over 25 billion metric tons of net carbon dioxide emissions could be avoided in two major industries (electricity and logistics) using a variety of digital efforts. Strategies such as universal energy storage integration and smart asset planning and management alone could save nearly 9 billion metric tons of carbon dioxide in the electricity sector by 2025, which is equivalent to $418 billion of new economic value.
Despite its potential to boost sustainability efforts in a variety of other industries, digital transformation nevertheless has a significant environmental footprint of its own. The two most pressing challenges that digitization must address if it is to have a positive environmental impact overall are increasing quantities of e-waste and the high energy-intensity of data centers.
- E-waste: A United Nations study estimated that 40 million metric tons of e-waste were disposed of in 2014 (7 million tons was generated by the US alone and an additional 6 million by China). Unfortunately, “disposed of” doesn’t seem to mean properly recycled. According to EPA estimates, less than one-third of e-waste tonnage generated in the US in 2012 was recycled domestically. For the most part, American e-waste is shipped to developing countries, where workers who are underserved in the informal economy conduct recycling efforts that are not only improper and often ineffective, but also hazardous to human health.
- Data center energy consumption: While data centers facilitate energy efficiency in other industries, they are highly energy intensive themselves. Due to a high power consumption rate (which is necessitated by constant data processing activities and the cooling systems required to keep the centers functioning properly), data centers are already consuming 1.5% to 2% of global electricity, and that rate is expected to grow by 12% each year. By 2020, data center energy consumption is projected to reach 140 billion kilowatt-hours—the annual output amount of 50 power plants—and result in annual carbon emissions of nearly 150 million metric tons.
Where can businesses seeking to enhance the role of digitization as a positive force for sustainability begin? The WEF white paper suggests four ways to get started:
- Embrace circular economy principles: Organizations can help decouple economic growth from resource consumption on an individual basis by embracing and integrating circular economy principles into their own operations. Offering services to help users optimize their existing assets, launching new products that are easy to recycle or reassemble, and linking buyers and sellers through collaborative platforms in order to reduce wasted product are all examples of initiatives that today’s sustainability-focused digital companies are implementing.
- Use digital technology for greater transparency: Digitization has great potential to help companies better understand the environmental impact of their supply chains and target particular strategies for reducing that impact. Digital tools can serve to benchmark potential sustainable suppliers, track corporate social responsibility scores, and identify critical areas for improvement.
- Reduce waste through collaboration: Digital platforms can help businesses, or even entire industries, to optimize the use of assets or routes through shared or collaborative initiatives. For example, crowdsourcing in the logistics industry can help businesses make far better use of available capacity and consequently reduce the total number of trucks on the road and miles driven.
- Agree on IT environmental standards: At both the industry level and across industries, companies can bring pressure to bear on the technology industry to improve reporting standards. Data center efficiency, clean energy sourcing, and e-waste disposal are all areas that would strongly benefit from clear, industry-supported guidelines.