For the first time in history, technology makes it possible for companies to be more profitable by becoming more sustainable. This is not just a possibility, but an imperative. In the same way that a series of key technologies became powerful and affordable enough to make the iPhone possible in 2007, an even broader and more disruptive set of technology cost curves are converging today to reshape the future of every industry.
If you thought the last decade of digital transformation was a wild ride, buckle up. As Kelly James, GM of Energy and Utilities at Salesforce put it,
"It turns out digital transformation was like a warm-up act for business' race to net-zero."
Sustainable transformation is the successor to digital transformation. It’s about taking the lessons we've learned from dealing with disruption, data, speed, and agility over the last several years and applying them to sustainability. Using tools and processes that we already understand creates a clearer path to net-zero; one that’s based on business fundamentals and is proven to work in other contexts. Just as digital wasn't driven by some moral imperative to use new technologies, sustainable transformation will surge ahead based on economics and market dynamics as much as, or more than, corporate altruism. This is no different than in every previous agricultural and industrial revolution.
What is new about this transformation is that the solutions companies must pursue to reach net-zero are the same as the ones they’d have to implement anyway to adapt to three major challenges shaping the most uncertain decade for business in living memory.
- Challenge: Fossil fuels have high, unpredictable costs that endanger business continuity. They are leading to an ecosystem collapse that endangers every company, and they keep organizations heavily dependent on a fragile global supply chain.
- Solution: A race to decarbonize through clean energy independence, defined by cleaner, cheaper, “ownable” power supplies that are produced closer to the point of use, have predictable prices, and that companies can better control.
- Challenge: We can’t count on just-in-time supply chains and cheap materials. COVID-driven logistics disruptions and geopolitical shocks have revealed the long-term fragility of our global infrastructure. Materials prices are surging and unpredictable. Even common goods like paper cups becoming nearly impossible to find. “Every commodity,” said Ann Tracy, a sustainability leader at a major consumer products firm, “must now be treated like the precious resource it is.”
- Solution: A transition to circularity through resource independence that shields companies from rising materials and supply chain costs and minimizes unnecessary dependence on third parties. This is driven by the electrification and automation of manufacturing and transportation, affordable and sustainable materials that are “grown” in a lab instead of extracted from nature, improved production economics, and producing and reusing materials closer to customers.
- Challenge: The benefits of net-zero are long term, but investments are needed now. Significant resources will be directed to decarbonization through clean energy independence, and circularity through resource independence, but results won’t be immediate.
- Solution: Digital long-term value business models that see products sold as a service or subscription, and services transitioning to outcome-based contracts or consumer experiences. Companies that switch from spikey, transaction-based revenue to long-term, predictable fees will gain greater certainty around future cash flow so they can invest with confidence. Firms also get more control of the full product lifecycle, using that new power to create efficiencies through data and technology. Savings are passed along to customers with competitive, lower prices.
The challenges listed here are very real, but the solutions may sound fantastical or unachievable. Yet, in the words of author William Gibson, “the future is already here, it’s just not very evenly distributed.” Today, there are large-scale, tangible examples of each of these three sustainable transformation goals in some of the world’s largest companies and most innovative start-ups.
What this all means is that sustainability is not just about future generations, it’s about future-proofing businesses today. It’s not just the question of whether there will be any economy at all in a world ravaged by future climate catastrophes, but whether your business will fail or rise above this decade’s volatile markets and the inevitable progress of emerging technologies.