Illustration 1 – ERP and PLM combined can unlock the true potential
Even if the Europen Union Green Deal is about making the EU more sustainable – it could impact the day-to-day life of the CIO – in a good way. Sure, it would be obvious to start measuring and reducing greenhouse gas emissions and IT-related environmental impacts. Let’s go beyond simply CIO reporting on sustainability.
The article will include examples of how a CIO can provide value to Sustainability Strategies. Real value.
The EU Green Deal, what does it mean to the CIO?
The EU Green Deal aims to achieve climate neutrality by 2050 through reduced greenhouse gas emissions, renewable energy, and biodiversity conservation. As companies strive to meet these goals, the role of the CIO is expanding from IT management to becoming a sustainability information provider. This requires ensuring products and services comply with the upcoming Green Deal’s traceability and identification requirements. This Opticos viewpoint examines CIOs’ crucial yet unclear role in driving their companies toward sustainability. But first, let’s look at the background of the EU Green Deal.
What is the European Green deal?
The European Green Deal is a flagship project of the European Commission and a holistic approach to addressing the challenges of climate change. Some of the ambitious goals can be seen in the figure below.
Illustration 1 – EU Green Deal key figures – ( * compared to 1990)
The Green Deal covers all sectors
The Green Deal includes a variety of measures, such as promoting electric vehicles, enhancing energy efficiency in buildings, and investing in sustainable infrastructure and research and development. The Green Deal covers all sectors of the economy, including transport, energy, agriculture, buildings, and industries such as steel, cement, ICT, textiles, and chemicals. In this context, the Green Deal must deliver legislation and regulations, such as the potential use of Digital Product Passports and different Supply Chain Acts. These legislations will require how the sustainability data of products and services sold on the European market should be measured and made available to consumers, customers, partners, and suppliers.
It is important to note that the EU Green Deal differs from the UN Sustainable Development Goals (SDGs). However, the SDGs and the EU Green Deal are closely related as they promote sustainable development and address global challenges such as climate change. The SDGs provide a global framework for the EU Green Deal, and the EU Green Deal is seen as a tool to achieve the SDGs.
What does this mean to the CIO?
Traditionally, the CIO role has been viewed as a technology expert responsible for managing and implementing IT infrastructure and systems within organizations. They are now becoming key players in helping companies reach their sustainability targets. With increasing pressure on the world to reduce greenhouse gas emissions and address environmental challenges, companies are turning to their CIOs to lead in implementing sustainable technology solutions, often under the digitalization taxonomy. However, this is only part of the story. Going back a couple of years, the introduction of the GDPR law and other privacy legislation had a tremendous impact on the organizational use of privacy data. The EU Green Deal and upcoming legislation could have a similar data challenge impact on companies. This time it’s about how they communicate the sustainability data on their products and services to the public. In the not-so-distant future, a consumer of a product in the EU shall easily understand the full sustainability impact of a product or service they are about to purchase. It could be scanning a QR code in a store when buying a new TV to get the sustainability score, or it could be when buying a vacation journey online. The EU will start with complex products with a high environmental impact, but eventually, it will come to mass-produced products and services.
Using legislation to promote competition
These legislations aim to make producers compete with sustainability like they already do with price. Sites that compare sustainability scores between similar products will appear in the same way that price comparison sites already exist today. For companies that would like to compete on sustainability, it will probably be a must to be able to provide open data on sustainability scores for their products and services. WatchGuard organizations will scrutinize this data, and cheating on the data will be a business risk, with a magnitude similar to Diesel Gate’s on car emissions a few years back. Additionally, companies that today provide products and services to the public sector will face the challenge of supplying this type of information to at all being able to participate in public procurement.
Data as a carrier for environmental impact
One thing that makes the demands on data architecture even higher is that it will likely not be sufficient to provide this data on the model or article level. It could be required to provide data on an individual product level, batch, or serial number. Otherwise, it will not be possible to understand the environmental impact of transportation or evaluate the potential use of a product from a second-hand and recycling perspective. It means that new and higher demands on supply-chain-traceability and the possibility of identifying a product in a globally unique way. Many companies using legacy ERPs will realize this the hard way when discovering that meeting these demands is impossible with their current IT systems. Many companies could face costly repercussions if they delay addressing these issues. Similar to the GDPR events a decade ago, it will be more expensive the longer you wait to acknowledge this. Resources to rectify the situation will dwindle and become increasingly scarce and costly.
In the figure below, we provide examples of how CIOs can help provide value to their company’s sustainability strategies.
Illustration 2 – How can CIOs add value to sustainability strategies? Here are some ways for inspiration.
Opticos offerings
The scope of the CIO agenda is expanding, and the requirements and opportunities related to sustainability are one primary driver. There is a wide range of aspects to consider that may impact and shape the IT landscape in the future.
At Opticos, we are open to engaging in discussions around this topic and providing assistance to help clarify requirements, identify opportunities, and assist in forming the change agenda going forward for your business and specific needs.
Hans Bergström & Nils Andersson
Director Enterprise Architecture
Consultant Specializing in Sustainability
Environmental Sustainability is becoming an integral part of corporate strategy with changing perspectives worldwide as most organizations are making future commitments towards sustainable operations.
However, along the way, they encounter several challenges ranging from performance reporting and governance to data and technology limitations. IT and Data Strategy now sit at the heart of environmental Sustainability as they enable organizations to collect and analyze information, monitor performance, and gain actionable insights.
This article will help you navigate the critical areas and some of the pitfalls.
Why are Environmental Sustainability objectives relevant to your organization?
Decarbonization was the focus of all attention during the Climate Change Conference (COP 27) in November 2022. A factor acknowledged as a critical step in offsetting human impact on the global climate.
From a business perspective, organizations face increasing pressure from their customers, investors, governments, and regulators and are held accountable for their Environmental, Social and Governance (ESG) initiatives and actions.
Most leading organizations are now incorporating ESG and environmental Sustainability in their corporate strategy and reporting progress in their annual performance reports.
Measurements for Environmental Sustainability
Environmental Sustainability requires an organization-wide transformation program and framework for computing, assessing, and allocating greenhouse gas (GHG), climate, and environmental impacts and outcomes to the organization’s direct and indirect actions and business operations.
Illustration 1 – Opticos approach to assess and measure environmental sustainability
Therefore, organizations must establish a clear link between their operations (Scope 1, 2, or 3)*(1) with measurement parameters (CO2 equivalent, water consumption, waste, biodiversity impact) and positive or negative climate and environmental externalities.
Illustration 2 – This is how the Swedish Government announces its position and commitment
Challenges in the current ecosystem
While there has been a rapid increase and adoption of reporting standards and accountability mechanisms, many organizations are yet to align their net zero commitments to any robust process or criteria. As the Net Zero Tracker reports – More than one-third of the world’s largest publicly traded companies now have net zero targets, up from one-fifth in December 2020. However, 65% of corporate net zero targets do not yet meet minimum procedural standards of robustness.
Well, where do the organizations fall short? And why do some organizations find it challenging to set a path to achieve their environmental sustainability objectives?
Organizations face many challenges, from data shortfalls, technology limitations, and time-consuming manual processes to defining robust KPIs for reporting and obtaining ESG metrics across the value chain. A fragmented approach with a weak governance structure can even aggravate the problem further in the absence of universally accepted industry regulations and standards.
A Growing Need for Change
Organizations have realized the need to decarbonize and improve Environmental Sustainability across their value chain but often struggle to translate this ambition into action and results. Sustainability may be a relatively recent concept, but the core principles of business transformation still apply.
Leadership to accelerate a shift in the corporate strategy
Environmental Sustainability directives should trickle down from the top, i.e., the leadership and organizations need to embed environmental sustainability targets/KPIs throughout their business operations. Organizations require more than better measurement and reporting practices to achieve real progress—fundamental changes in the industry ecosystems and business models are also vital areas.
Analysis of the 26 largest publicly traded Swedish Companies shows that net-zero targets are entering the mainstream, and so are the efforts to report and govern them. However, the primary challenges include drafting and deploying a detailed plan that addresses the entire scope of the value chain.
Illustration 3 – Net Zero Tracker’s analysis of Swedish large companies
Collaboration can help you along the journey
Sustainability is a systemic concept that requires the entire value chain to collaborate. Competition, though essential, is one of many drivers for success. Organizations realize the power of collaboration as shared interests and goals incentivize them, and the growing need to invest in the health of e shared ecosystem.
It is now imperative for business leaders to take a broader ecosystem view based on an understanding of all stakeholders and go beyond engagement to enablement.
Technology as a critical enabler
Much of the critical data necessary to support environmental Sustainability resides in enterprise software systems, and if this data can be standardized, combined, and analyzed, the improvements can be substantial. Whether in individual companies or large and complex organizations, the data-driven approach is already delivering sustainability-linked dividends – from reducing waste and water consumption to calculating and subsequently lowering the carbon footprint across the entire value chain.
As the world struggles to reduce or isolate the emissions causing climate change, it’s exciting to see new digital tools and technologies coming into play to help industries meet this urgent challenge. A broader digital transformation is becoming a significant enabler for monitoring sustainability performance and driving a reduction in carbon footprint. Businesses implementing transformation programs and the right technological toolkit will find that net zero targets can be compatible with organizational growth.
How can organizations engage?
Organizations need to determine the current maturity of their environmental sustainability initiatives, understand their material environmental impact, and work towards building objectives, targets, and action plans.
Illustration 4 – Organizational Maturity Levels for Environmental Sustainability
For organizations in their initial phases of the environmental sustainability journey, existing measurement frameworks, such as GHG Protocol *(2) or IFRS Sustainability Disclosure Standards *(3), can offer a way forward to establish program guidelines and a measurement strategy and help focus on data management.
A formal, structured transformation program can be a clear solution to multiple challenges organizations face on their way to the environmental sustainability journey. Opticos has worked with clients across different industries and varied transformation objectives during the past decade.
We provide expert knowledge and help organizations develop key transformation strategies and analyze current and key success factors.
Do not hesitate to contact us to discuss this further.
Learn more:
Authors
Abhishek Kale
Johan Saks
*(1) – In short, Scope 1 direct emissions come from owned or operated assets. Scope 2 consists of indirect emissions from purchased energy, such as district heating or electricity. Scope 3 encompasses all other indirect emissions, including those that result from the company’s activities executed by e.g. suppliers and distributors.
*(2) – GHG Protocol establishes comprehensive global standardized frameworks to measure and manage greenhouse gas (GHG) emissions from private and public sector operations, value chains, and mitigation actions.
*(3) – IFRS Sustainability Disclosure Standards are intended to provide a global baseline and to be compatible with jurisdiction-specific requirements, including those intended to meet broader stakeholder information needs.
Cost seems to be top-of-mind for most CXOs and retains a high position on the agenda.
The objective of a cost optimization programme could be to fund growth or market expansion, enable innovation in both short- and long-term perspectives, or attain or maintain market position or leadership.
Cost savings initiatives can originate from different perspectives and be quite diverse in nature. A top strategic agenda which impacts the fundamental way of doing business to address structural costs within the current operating model is one example. A selective focus on tactical and targeted improvements within certain parts of the business could be simple in its rationale but effective in optimising cost and trying out an approach.
A structured approach towards the cost savings agenda is essential.
- Ensure (swift) progress to meet determined targets.
- Choose and implement a cost-out model to meet desired scope and objective – neither too complicated nor too narrow, but “fit for purpose.”
- Facilitate necessary shift from a budget perspective to cost cutting, cost optimization or value-driven cost improvements – depending on ambition
- Ensure long-term savings and cost focus become integral to the business agenda.
- Avoid typical pitfalls and limit potential risks.
OPTICOS APPROACH TO COST OPTIMISATION
Leveraging a hypothesis-driven way of working in close cooperation and clear sign-offs from relevant stakeholders help bolster analysis and execution. Given the scope and an emphasis on cost savings, the overall approach may be tailored to meet the desired business objectives.
Opticos structured and pragmatic approach encompassing five phases to executing a typical cost-out programme.
TYPICAL SUCCESS FACTORS
There are identified factors that significantly impact cost out program success rate where effective program management helps boost progress, manage risks, and increase output.
Methods and areas to work with to help articulate, define and achieve financial goals:
- Cost optimization
- Cost transformation or Cost-out
- Cost mapping
- Cost allocation
- Cost assessments and Benchmarking
- Cost transparency
- Financial management
Areas of knowledge and expertise critical to fully establish a cost-savings agenda:
- The Sourcing and Procurement domain, e.g. address overall spending – since this often constitutes a large portion of the total cost.
- The IT Strategy and Digital Business Transformation area provide valuable insights and capabilities to address improvements within the IT and Technology space, often crucial drivers for improvements and cost savings.
- To drive real business change, broad industry experience is needed to understand the market and the industry dynamics within the industry in scope.
Learn more:
Any questions about our insights? do not hesitate to reach out to:
Choosing the right automation partner for your organization
Making a good choice among hundreds of automation partners operating across the globe can be a challenge. It’s not about finding the best partner – it’s about finding the best fit for your organization.
The path to successfully implementing automation capabilities and solutions depends on the partnership between your organization and the automation partner.
The automation partner of your choice will engage with your company long-term – as the capability area requires a long-term business commitment. Technical skills are not enough.
A compatible work culture, communication style, and the right chemistry go a long way in building a strong partnership.
Nowadays, “automation” is attracting a lot of attention because of several possible and desirable benefits. Here are some of them:
- Time savings for employees
- Reduction in errors and human mistakes
- Decrease time spent performing repetitive tasks
- Increased business capacity
However, there are also consequences and limitations when entering the area of “automation” to consider. Let us list a few of the most common:
- Cost and effort (time) to set up
- Continuous maintenance and support
- Not suited to deal with low-volume unique scenarios
Considering the above, choosing the right partner will help you to achieve your automation goals and subsequently help you to harvest the fruits of your investment.
At Opticos, we help you to evaluate future automation partners, not only from a technical capabilities standpoint but also from a cultural perspective. Our framework and methodology were developed through extensive industry experience helping customers pick the right partners.
Innovation is what drives us forward. Today it is something that is invested in and commonly interwoven in business plans and formulated in business and IT strategies. Going forward, however, innovation will more likely be driven across all levels and departments rather than solely from IT and by a selected few e.g. the management, consultants or project groups. Innovation cannot be organized and governed, it is part of the culture and it must grow organically in the company’s entirety. To innovate is to re-imagine, re-defining our existence [1], it is not just another change management project.
According to Forrester “20% of CEOs will fail to act on digital transformation and put their firms at risk”. Innovation will require breaking the boundaries of any hierarchical structure. CEOs will need to be open to new ideas and letting innovators be part of defining the strategy for embracing the digital future. Creating an innovative climate will be crucial. As a result, governance models based on KPIs will become obsolete and irrelevant and ultimately a new governance landscape will emerge.
On a corporate level innovation might come to be driven by all who are interested rather than those with designated roles, allowing a freedom to be innovative. On a societal level, which we must not forget in the context of digitalization, innovation will likely be driven by and in communities of digital activists and freelancers.
Learn more about innovation in the future digital society:
Together We Innovate – Innovation in Networks rather than lone geniuses:
https://www.wsj.com/articles/SB118841662730312486
5 Innovation Keys for the Future of Work – five innovation practices:
https://www.inc.com/jacob-morgan/5-innovation-keys-for-the-future-of-work.html
[1] Götz Werner – Founder of DM (Drogerie Markt) and advocate of basic income.
Financial management – An essential part of a healthy company
Financial management is essential for companies to survive. By planning, organizing and controlling financial undertakings you create room for growth.
A prerequisite for optimizing your costs is to understand the current situation as well as how the cost structure of where you are heading will look like. Four key points to remember when assessing costs:
- Establish the cost baseline.
- Identify and assess opportunities and risks. Analyse and break down spend.
- Develop a strategy and a roadmap. Identify where to start and your end goal.
- Track the benefits to understand if you are heading in the right direction.
To understand your cost structure and identify addressable spend it is common to look at what costs are fixed, semi-variable and variable in the short, medium and long perspective.
An example of fixed costs, only addressable in a long perspective, is a contract written in a 5-year period. A variable cost in short term is for example to stop buying consultant hours. In order to get fast results and create momentum it can be important to find which costs can be eliminated today.
By setting up a roadmap of short- and long-term cost initiatives you can visualize a timeline stating actions that are most important to start with as well as in what order cost optimizing activities should be performed. More often than not this is a timely and complex task but, quick improvements could be achieved by finding out the following:
A roadmap of activities of cost optimization
Drive the change within line organization
Permanent cost savings are best initiated and driven by the operational business with strong support by top management. It is in operations you can optimize and/or standardize your processes. Some costs are, as mentioned previously, easier to cut while other costs are the opposite – essential. Costs linked to essential processes could, instead of being cut, be optimized.
Today, there are many administrative processes that, by definition, provide low or no value to the end customer or generate no revenue, but are still essential for the company. Usually these processes have been consolidated into shared service centres which in turn could be outsourced to near- or off-shore locations. This has been a formula for cost cutting and lowering the administrative burden on employees. Instead of taking these measures it could be more cost effective to turn to technologies such as Robotic Process Automation.
Robotic process automation is the fastest growing enterprise technology today. By using RPA, companies have the possibility to automate business processes that are many times both costly and time consuming.
There are different levels of how advanced RPA can be. The less advanced levels are nowadays mature technologies with many competing vendors. Here we can find business cases to be made where case studies have shown return of investments of RPA implementation to be between 30-200% already in the first year. The business case is not only built upon increased efficiency where the processes are executed faster. By implementing RPA in existing business systems, it also helps save costs incurred due to human errors. According to estimates from IBM erroneous data input by humans costs $3 trillion per year in the US alone. By implementing RPA, errors for those certain processes are coming down towards 0%, which of course has a positive impact in a business case.
Having a cost-optimization focus is possible regardless of organization maturity, requirements for innovation and change and improving current operations. There are many different ways of achieving this; stop doing, standardizing or re-negotiating contracts. But now we also have the possibility of applying RPA, something which has emerged rapidly in the last couple of years. If you are interested in getting more information, please don’t hesitate to contact us at Opticos.
Read more about financial management and RPA by clicking on following links:
https://isg-one.com/pt/artigos/calculating-a-robot-s-tca-(total-cost-of-automation)
https://assets.kpmg/content/dam/kpmg/pdf/2016/05/rise-of-the-robots.pdf
[1] https://www.mckinsey.com/industries/financial-services/our-insights/the-value-of-robotic-process-automation
[2] https://hbr.org/2016/09/bad-data-costs-the-u-s-3-trillion-per-year
It is easy to fall for the latest trends and buzzwords, it’s what keeps us up to date and relevant. But rarely is it completely applicable and implementable on your organisation as-is. Take the new trend of RPAs for example. Robot Process Automation is seen as a quick road to automation and most importantly cost reduction but what is often overlooked is the fact that RPAs are actions that would have been done by a human (manually) now being done by a robot (automated). Which ultimately means that an inefficient process done manually will be just as inefficient, although somewhat faster, when automated. In other words, RPAs do not improve your processes they simply make them go faster.
According to Forrester, “75% of AI projects will underwhelm because they fail to model operational considerations, causing business leaders to reset the scope of AI investments”[1]. With automation comes vast opportunities for decreased lead times and higher quality – if what is being automated is a fully functioning and effective process/activity. When investing in automating processes it is therefore important to set up a clear business case and plan for the new intelligent layer that is being added as it will require new competence for driving the improvement processes, configurations and much more.
Learn more about what RPAs are, how they can be used and what to consider when implementing them:
How to Capitalize on Robotics – Savings Drivers with Digital Labor:
How Artificial Intelligence Will Change Everything:
AI in the Workplace and the future of Robotic Process Automation:
[1] Forrester, Predictions 2018 – A year of reckoning
If you have any questions about the insights we share or are keen to turn ideas into action, please contact Mattias Gustrin, Head of Insight, +46 734 30 14 92, mattias.gustrin@opticos.se
47 % of jobs in the United States are at risk of being automated, according to an Oxford study. OECD has found that “close to one in two jobs are likely to be significantly affected by automation” in 32 OECD countries. These statistics can be alarming at first but only if one is not prepared. Denying the inevitable will lead to a deer-in-headlights situation for all companies that have not adapted their modus operandi in time for the coming change that will affect the corporate landscape and the global society.
This is not another Orwellian prophecy – vast transformations toward an increasingly more digital society are inevitable in the next decade. Bain, amongst others, predicts that by 2030 “the global economy will likely be in the midst of a major transformation”.
Learn more about the future of employment:
AI & The Future of Work – TED Talk by Volker Hirsch
The Future of Employment: How Susceptible are Jobs to Computerisation?
OECD Social, Employment and Migration Working Papers
Labor 2030: The Collision of Demographics, Automation and Inequality
If you have any questions about the insights we share or are keen to turn ideas into action, please contact Mattias Gustrin, Head of Insight, +46 734 30 14 92, mattias.gustrin@opticos.se
There is no denying it anymore, there is an elephant in the room and we need to address it. It is the rapid decrease in jobs during the peak of automation in the coming decade. Many studies have tried to pinpoint the vastness of the change, but we simply cannot know, all we know is we need to be prepared. Jobs as we know and define them today will change.
It is in our genes, when something seems unpleasant, we avoid talking about it. However, this topic will affect so many of us the coming year, an avoidant strategy is not an option. Either we drive the train, or we get run over by it – we must through proactivity lead the change. How well we adapt to the change is dependent on how prepared we are for it. As leaders we must consider the organizational changes that will be faced and how we can support our employees during the transition.
As individuals we will need to consider if and how we can educate ourselves in order to broaden our competence and adapt to the changing needs of the organisation where employed and by the market at large.
With the increased automation that we face, jobs that are more focused on distinctively human capabilities such as empathy and creativity will be sought after. Scary, yes, but this can also open up for many inspiring, exciting possibilities. With the inevitable need to re-define jobs that we have today, humans will be able to have the freedom to innovate, create and inspire.
Learn more about innovation in the future of work:
AI & The Future of Work – TED Talk by Volker Hirsch:
ps://youtu.be/dRw4d2Si8LA
Harvard Business School Podcast, Future of Work – Ep. 9 How firms are building strategy around AI:
https://www.hbs.edu/managing-the-future-of-work/podcast/Pages/podcast-details.aspx?episode=6820866
If you have any questions about the insights we share or are keen to turn ideas into action, please contact Mattias Gustrin, Head of Insight, +46 734 30 14 92, mattias.gustrin@opticos.se
