can how technology help combat climate change

It is no surprise that climate change is happening. While individuals like us need to do our best to minimize our carbon footprint, it is even more critical for businesses to take more aggressive actions to reduce its impact on the environment. Companies are increasingly incorporating ESG factors in their business strategies and investment decision making – but what is ESG and (in the spirit of our class) how can technology be used to measure and hold companies accountable to their sustainability goals.

ESG stands for Environmental, Social, and Governance and is used to measure the sustainability of an investment. The term was first introduced in the 1900s with the intention to encourage businesses to focus on all three P’s of the bottom line: People, Planet, and Profits, and not just Profit. For this blog, I’ll focus on the “Environmental” aspect of ESG and deep dive into how it can benefit the digital transformation of businesses. 

Environmental criteria measure a business’s environmental impact on the earth, such as waste, pollution, greenhouse gas emissions, deforestation, etc. It is also used to evaluate any environmental risks a company might face and how the company is managing those risks. For example, is the company compliance with government environmental regulations, or are there risks related to its ownership of contaminated lands? Unlike values of assets owned or liabilities, environmental impact is much harder to measure and regulate. Fortunately, with technology – we might have some hope. 

Technology will allow better measurement of environmental impact

We have talked a lot about cameras and sensor technology in our everyday lives but haven’t touched on environmental sensors. It is a market that is predicted to be worth more than $3 billion annually by 2027. Environmental sensors allow companies to detect, visualize and manage various environmental impacts. For example, Methane is a potent greenhouse gas responsible for 25% of climate change. And the largest source of emission is from oil and gas industries such as ExxonMobil and Schlukberger. These companies work with Stanford and Environmental Defense Fund to uncover the best mobile methane monitoring technology to help the industry manage emotions more effectively. Additionally, a coalition in London uses data collected by environmental sensors to provide locals and businesses with visual tools showing their exposure to air pollution around the city. This study showed that air pollution is the cause of 650,000 sick days each year. It also costs the global economy $225 billion each year in lost labor income. 

Additionally, air pollution directly affects our brain, decreasing our cognitive performance and impairing judgment. For example, stock traders in Germany were 10 percent less likely to trade when air pollution levels were increased. Another study of daily data from the S&P 500 index and daily air quality sensor near Wall Street showed that on days with poor air quality, stock returns were lowered by close to 12 percent. Of course, air pollution doesn’t solely impact the productivity of white-collar workers. A National Bureau of Economic Research study showed that workers at a pear packing factory had a 6 percent decrease in packing speed when there was an increase of pollutants inside the factor. 

Technology will increase efficiency 

New technology will be pivotal to help companies consume less energy, cut down energy bills, and reduce emissions. For example, Google is currently adding a new feature to Google Map to highlight the most environmentally friendly routing. Using data such as traffic, incline, and road type, Google Map can generate the least polluting route and recommend it to the user. Additionally, Google has also been using AI to reduce the amount of energy to cool their data center by up to 40 percent by building more efficient servers and investing more in green energy sources. They are also using machine learning algorithms to predict wind output 36 hours in advance to deliver optimal wind energy to the power grid. Another research by PwC estimated that adaptation of AI for agriculture, water, energy, and transportation contributed up to $5.2 trillion to the global economy, created 38.2 million new jobs, and reduced gas emissions by 4% by 2030. 

Put simply, AI can enable our future systems to be more productive for the economy and for nature,”

– Celine Herweijer, Global Innovation and Sustainability Leader, PwC UK

4 comments

  1. abigailholler1 · ·

    Great post, Jie! There has clearly been a focus on environmental stability within both the public and private sectors in recent years. This is evident by the headlines we are tweeting each week – I too found the google maps release of environmentally friendly routes to be a huge step forward! On ESG specifically, I think one key accelerator to environmental change are the various ESG funds that are claiming a larger portion of investor’s capital. In 2020 alone, ESG funds claimed over $50B in investment dollars, more than double that of 2019. I read an article (linked below) which attributes a lot of this investment to the rise of younger cohorts and their enthusiasm about combating climate change. I think that investment in these areas will be a key enabler to accelerated us of the technological advancements that you’ve noted above.
    https://www.cnbc.com/2021/02/11/sustainable-investment-funds-more-than-doubled-in-2020-.html

  2. ritellryan · ·

    Awareness and identifying the magnitude of the problem is obviously the first step and I think technology can help us identify the magnitude for sure. Then the next step is obviously to figure out solutions and Google’s environmentally friendly route and understanding optimal wind patterns is the first step. I know we had a big thing at work for Earth week last week so ESG is certainly something we focus on, but obviously we can always find ways to do things better with technology and it is good to see that it is already being used to help solve a problem.

  3. therealerindee · ·

    I agree with Ryan that tech can help identify the magnitude of the problem and then track it over time. One big thing I was thinking while reading your post is that now that we have access to so much data being pulled from all kinds of places (sensors being one of them), ESG can be more accurately tracked. I’m specifically thinking about all of the financial firms that Abigail touched on that may have been claiming they purely focused on ESG but in reality were not even close. Now that we have tons of data around this topic, the firms are being held accountable by investors. A crazy fact you touched on that I think companies investing in ESG tech will be able to help is the air pollution sick days. It will be very interesting to see what kind of “clean up” tech invested in by big natural resources companies will become the norm over the next decades.

  4. lourdessanfeliu · ·

    Great post, Jie! It is mind blowing to see how air pollution contributes to sick days – 650,000 sick days with a $225 billion impact is a lot higher than what I originally thought. Thank you for bringing awareness to this topic.

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