September 20th, 2020 by
Reducing Exposure and Improving Performance in the Real Economy
Business Intelligence and Decision Support Services — a $30 billion-plus combination of software and service industries — has enabled dramatic advances in corporate performance. It empowers insight and intelligence-driven strategies and institutional decision-making and offers some of the most powerful tools at our disposal to turn down the global climate change thermostat.
To many casual observers, it may appear as if the reality of climate change and the pace it is altering our daily lives is undetermined. While the politicization of climate change clouds public perspective, some leaders in the “real economy” — where the production, purchase, and flow of goods and services and all the associated greenhouse gas emissions actually happens — are aligning with policymakers and civil society on the urgency of quickly slowing humanity’s contribution to accelerating climate change.
The role of the private sector in addressing climate change in the real economy is rapidly coming to the forefront as awareness and commitment is increasing among corporate leadership and boards of directors in some of the biggest companies in the world. The risks of inaction on emissions associated with human activities are increasingly visible to the leadership, investors, and regulators of the industrial sectors with the greatest responsibility for these emissions. Rocky Mountain Institute’s (RMI’s) work is focused on collaborating with these sectors, evidenced by the institute’s role in the recently launched Center for Climate-Aligned Finance and Climate TRACE initiatives, and in recent blogs on tackling industrial emissions and the need to realize there is no “business as usual” to decarbonize industry.
However, increasing awareness and commitment alone are still insufficient to halve greenhouse gas (GHG) emissions within the next decade, which we must do to avoid the worst-case scenarios for climate change. To progress at that pace, we must develop new ways to quantify and expose the risks of inaction to reduce emissions and identify emerging opportunities created by addressing emissions reduction. Thankfully, we can look to the technologies and data science behind the Business Intelligence industry for help.
Fortunately, while, as the pandemic, impact on the economy due to the warming climate will be catastrophic, unlike the pandemic, the science around climate change is known. Thus, we already have much of the basic knowledge required to develop insight, intelligence, and decision support tools to help companies navigate their businesses toward a lower-carbon future.
Making the Right Decisions for Both the Climate and Corporations
To address the challenge of connecting known science with real economy realities, RMI and a broad network of collaborators are launching a new initiative called “Climate Intelligence.” The initiative draws upon existing technology, tools, and practices in Business Intelligence to bring “asset grade” data, insight, and intelligence to bear on decision-making in the highest emissions sectors, and aligns it with these sectors’ market realities.
Climate Intelligence is built upon application of tools and techniques from Business Intelligence that have revolutionized corporate performance on a number of mission-critical areas. However, these tools and techniques have not yet been applied effectively to improve performance against metrics related to environmental, social, and governance (ESG) corporate behaviors, which companies, investors, and shareholders increasingly recognize as equally impactful to corporate success.
In the past two decades, the largest companies (and correspondingly the largest GHG emitters) from financial services, energy, consumer products, media, and almost every other global industry have invested billions of dollars in data management, business intelligence, big-data-driven machine learning, and artificial intelligence-aided analytics to optimize their performance in the real economy. Yet, these technologies have not been used to expose the increasingly material risks and opportunities associated with GHG emissions, climate change, and other sustainability issues and how corporate action on these risks and opportunities relate to mainstream assessments of corporate performance.
Without the ability to quantify and contextualize ESG factors against more tangible commercial priorities, ESG is often pushed into the realm of “sustainability” and government and stakeholder relations. It should, however, be thought of as a significant factor in mainstream organizational decision-making that often falls under the chief financial officer. Plainly stated: factoring in GHG emissions reduction makes business sense, from a Business Intelligence perspective, as well as a Climate Intelligence one.
We Have the Technologies…
Today we already have the technologies and skills needed to deploy real climate intelligence to change this dynamic. We have access to increasingly more accurate satellite-based GHG emissions monitoring along with a variety of new air- and land-based sensors. All these sensors generate immense volumes of high-grade quantitative emissions data for analysis. We also have access to vast stores of publicly available data that can be integrated with emissions data to provide ever increasing accuracy and traceability in attributing emissions by asset, corporations, geography, and even by role in global value chains. This will lead to quantifying lifecycle and Scope 3 emissions in the supply chain.
Further, we have the opportunity to utilize proprietary data that typically remains hidden behind corporate firewalls. In some circumstances, this private data can be brought into a secure sandbox for comparison with information from other companies and public data. With this, we can produce increasingly accurate and valuable data and insight that drive a reduction in global emissions.
Thanks to emerging blockchain technologies and analysis capabilities, we are also now able to securely integrate these strands of data under one platform, and to generate timely and valuable insights with the integrity and provenance required to influence real-time business and investment decisions to limit exposure to climate-related risks, whatever form they may take.
And Now We Have the Tool
RMI has developed a real-world demonstration of such a Climate Intelligence solution: the Climate Action Engine (CAE), a methane emissions business intelligence and decision-support tool for the oil and gas industry. RMI and our team working on the CAE will provide business intelligence to serve the highest value use-cases developed in collaboration with major industry partners, including Chevron, Exxon, Origin Energy, and Shell, to test and refine use-case development, and deliver irrefutable data to decision-makers seeking to reduce wasteful and polluting methane emissions.
By synthesizing data from a broad set of emissions detection technologies, other industry assets, and operational data, the CAE can deliver actionable Climate Intelligence to operators and investors in the oil and gas industry to help companies meet emissions reductions targets. For more information on the Climate Action Engine, visit www.rmi.org/cae
Climate Intelligence is Business Intelligence as we strive to align company performance with the need to reduce GHG emissions by 50 percent in the next decade.
Register for the webinar “Climate Intelligence for the Oil and Gas Industries.“
Originally published on the Rocky Mountain Institute website.
Featured image by Cynthia Shahan, CleanTechnica.
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