Sustainability as a strategy for a better future...

Congratulations Dag Boye and Andrew Wolff for leading MoU between Willams Energy and Microsoft. It’s my privilege to collaborate, contribute and learn. Sustainability and clean energy are now in the forefront of new frontiers, innovative business strategy and market differentiation. Our Digital Transformation practice, as part of MSUS CDO, drives outcome-driven strategic partnerships with top enterprise accounts based on shared values and vision. I focus on Transport, Logistics and Supply Chain industries as part of office of CDO. 

The non-renewable and fossil energy based initiatives are getting quite expensive, in fact accumulate penalties in various industry sectors. The new projects are not granted by governments and local authorities including pressure from environmental activists. The whole supply value chain is susceptible to carbon footprint, waste, energy and water impact. The world is facing critical energy and water shortages, a situation that is likely to get worse with a booming global population and climate change. Hence, there are incentives for emission reduction, decarbonization, clean water, embracing green and be compliant to required criteria for new business opportunities. The goal of providing safe, clean energy and water for people and agriculture is critical to the planet and one that many companies are working on. Smart infrastructure, and efficient supply chain are key areas where companies are working to provide solutions aligned with core ESG goals.

A new order is emerging with green fuel (like hydrogen), solid state batteries, solar power, component systems with s/w and h/w integration including electric vehicles, electric vertical take-off and landing (eVTOL), Electric Vertical Aircraft (EVA), integrated transportation in highly dense urbanization, multimodal logistics, urban mobility etc. Green fuels of the future require new capabilities and business processes to generate, compress, store, transport and consume fuel safely and economically with minimal footprint on our environment! All parts need to be there for a sustainable business model as part of supply chain management and intelligent logistics network! The ESG performance and scorecard is now a “requirement” to grow business and demands a carefully thoughtful business strategy.

The water on the planet now is the same water that dinosaurs were drinking. Oceans account for 97% of Earth's water. Most, 2.5%, of the planet's fresh water, is locked in the polar ice caps, in the soil, or irreversibly polluted. That means, as of now, 0.5% of all the water on the planet is potentially usable by people, animals, and plants. We are at a tipping point when it comes to global water scarcity. The main problems exacerbating the crisis of water scarcity include the lack of sufficient infrastructure, growing population, and climate change. These factors are putting an enormous strain on an already fragile water system. The world's population is expected to increase by 2 billion over the next 30 years to almost 10 billion. The situation is expected to get worse when it comes to clean water, sanitation and health.

Every person, organization, and nation generate waste including municipal waste, agricultural and animal waste, medical waste, radioactive waste, hazardous waste, industrial waste, construction and demolition debris, mining waste, oil and gas production waste, fossil fuel combustion waste etc. The amount of waste produced is influenced by economic activity, consumption, and population growth. Waste generation directly represents inefficient use of materials and inefficient supply chain including manufacturing. While numerous waste-related data collection efforts exist at the local, state, and national levels, the availability of indicators on how materials are generated, used, and managed is critical for each organization. Imagine the amount of food, human waste and ship waste is disposed in oceans during tourism and cruises. When such commercial waste isn’t managed and disposed of properly, it can damage natural ecosystems including wildlife and pollution. Proper waste disposal is the significant responsibility of every business!

What we, as Microsoft, are doing on sustainability as a strategy?

1. Operating as carbon neutral worldwide since 2012 and we are committed to being carbon negative by 2030
2. Investing in green Data Centers to power our cloud including hydrogen as a fuel; innovating in Salt Lake City, UT where the fuel cells combine hydrogen and oxygen in a process that creates water vapor and electricity. The estimated costs to produce hydrogen fuel cells has fallen 75% since 2018.
3. Largest purchaser of renewable energy in USA and using an internal carbon tax to fund innovation and drive carbon reduction.
4. Investing in smart technologies to reduce Microsoft building energy consumption by up to 20% by internet of things (IoT), machine learning (ML), analytics, and artificial intelligence (AI)
5. Building next-generation devices to reduce environmental impact, infrastructure supply chain as a more sustainable platform.
6. Addressing biodiversity and improving ecosystems. We have adopted smart water approaches to reduce water usage.

We can do more together as our joint strategy hinges on the following areas with our customers:

1. Monitor water consumption and conservation
2. Objective reduction in carbon emissions and waste.
3. Understand the math behind ESG accounting and environmental impact.
4. Make eco-friendly choices based on well-defined thresholds.
5. Be inspired and innovate by combining atoms and bits together.

Here is a quick transportation use case at a higher level. Imagine if each courier or parcel drives awareness for shipping related environmental footprint proactively in your cart during the checkout process. Let’s assume that based on shipping address, we know the post fulfillment details from warehouse in a city to the delivery destination. For transportation companies like FedEx, UPS and DHL, we know the transportation services from ground, air to last mile. We can calculate fuel, energy and water costs for all flights, hauling trucks and vans including delays. We have to have the measurements for volume of shipments between source and destination i.e. total pellets and boxes. These calculations are not easy and depend heavily on hundreds of underlying baseline KPIs and rules-based calculator model that becomes intelligent over time including scope 3 emissions. The day is not far when we can get granular details combining the entire supply chain from manufacturing to last mile delivery at an item level. Imagine each “can of soda” informs buyers and consumers about the environmental impact. That’s the state of nirvana or holy grail very similar to nutrition and ingredients panel on each container. We conduct intellectually stimulating envisioning workshops based on design thinking for clear goals and outcomes. We bring business accelerators, IP, industry specific resources and expertise to make such scenarios real using powerful technologies and live data streams.

What does this mean in terms of business growth and profitability?

We estimate that industry revenue could grow 6%–7% per year for long term and, I think, companies that are able to innovate and provide new science, technology, and intelligence-enabled ESG solutions will grow by multiples of that rate. It encompasses a global and diverse set of businesses. I think quality companies with strong management teams working on the high end of the ESG curve are set to dominate with stronger growth, margins, and valuations over time.