What's at the intersection of digital technologies and sustainability?

With all the changes we’re navigating during the pandemic, you can’t help having questions about what the future will look like. As a researcher, one feels something is happening, that things are going to transform, but how? I was curious—what exactly is happening and what is going to happen?

It's from this perspective that I was involved in doing research for our most recent European thought leadership. Our analysis included a global, multi-dimensional study of more than 4,050 companies (and incorporated random forest machine learning).

The pandemic has amplified the need to accelerate the ongoing digital transformation happening in the 2010s. And it became clear that in the 2020s, sustainability will be the new digital.

But what happens when you put those two together? In our research, we discovered that new value exists at the intersection of digital technologies and sustainability. We found companies that pursue sustainability as a digital growth path are more than 2.5 times likely to be among tomorrow’s leading organizations.

We called this a “twin transformation.” Regardless of industry, these businesses are likely to be among those showing profitable growth by the end of 2021. We saw that European companies are well-positioned to join this group if they are willing to move through the challenges and act on the opportunities.

3 keys to overcoming obstacles

Regain confidence

While you might think European companies are a natural to be Twin Transformers because of their early investments in sustainability, we discovered that isn’t the case. Many companies expressed concerns about the pace of their recovery from pandemic effects. Our research found that in Europe, just 22% of the leading companies in either digital technologies or sustainability were also Twin Transformers (versus 34% in APAC). While European companies put Digital Transformation and Sustainability at the top of their short-term and mid-term priorities to rebound, they are less likely to exploit the synergies between the two.

It might be a tempting time to “wait and see,” but especially among European companies, now is the time to invest in technology, despite the pace of economic recovery. The performance premium of a Twin Transformation matters at this time of crisis that harshly tests the resilience of businesses. As company fortunes diverge, with only 35% of companies setting themselves up for future success and 15% of past leaders struggling to get back on their feet, companies already embarked in the Twin Transformation have significantly more chances to join the winners.

Recognize technology as a lever for sustainable transformation

We came into the research thinking European companies would be ahead of other companies with sustainability but lagging on digital reinvention. What we found was that Europe was indeed strong in sustainable transformation, more aware and ambitious.

But ambitions alone are not enough to lead in the Twin Transformation. Europe needs to address two caveats to achieve real scale and impact: the business drive behind the sustainable transformation and the synergies between the two transformations.

European companies are less likely than their US or APAC peers to be motivated by the business opportunities presented by sustainability—such as growing revenues by launching new, sustainable products and services. This reluctance could slow down the transformation of their business models.

They also lack the conviction that sustainability and digital transformation can go hand in hand, not only as Green for IT but more fundamentally as IT for Green. On average, APAC companies we surveyed were more convinced that digital technologies will help them to a very large extent to achieve their sustainable initiatives (24% of APAC respondents versus 16% of Europeans).

Siemens is a good example of the successful alliance of tech and sustainability to drive sales: the company is investing in simulation and digital twin technology to optimize the environmental performance of its products and services throughout the lifecycle.

<<< Start >>>

<<< End >>> 

Think in a systematic way

To make this twin transformation a reality, you can’t do it alone. True change needs to include an entire ecosystem from employees to suppliers. From our research, we noticed companies that explore ecosystems could scale their business models faster and further while offering a more profound sustainability impact. In this way, “they conceive of ways to gain traction with new strategies as they shift gears and pull away from the old.” Then, they test and learn from incubator programs that bring together many partners.

For example, Schneider Electric, a global company based in France, convened with the New Energy Opportunities (NEO) Network to explore growth models. The NEO network is a worldwide community and online market platform of more than 300 corporate renewable energy purchasers and providers supported by leading market analytics that serve to match supply with demand. Schneider teamed up with Walmart to use this network to help Walmart’s “Project Gigaton,” which aims to avoid a gigaton of CO2 emissions that would otherwise have been created through Walmart’s global value chain by 2030.

Many twin transformers in our study (61%) already generate more than 10% of their revenues through ecosystem plays, and nearly 80% expect to do so within three years.

A perfect position for recovery and growth

What began as a curiosity yielded a road map for European businesses to make the most out of this moment. To truly transform, companies need to understand that sustainability is a business opportunity as well as a societal mandate. Our research found that European companies are frequently motivated by personal convictions and societal pressures but are less likely than their peers in North America and APAC to cite the business opportunities presented by sustainability, such as launching new products and services. That mindset needs to change.

It's also time for European companies to focus on the power of digital technologies to drive a sustainability agenda. Though recent research found that sustainability and technology topics are discussed in the earnings calls of around 50% of Europe’s largest companies, only 5% of companies address the two in tandem. There’s tremendous value at this intersection of tech and sustainability for companies that are bold enough to push through the obstacles.

²Accenture Research analysis of earning calls of largest 2000 companies in terms of revenues