From Greenwashing to Transparency
We are in a race to reduce and/or eliminate carbon footprints in everything we do. The energy transition is moving us toward that path with very aggressive expectations by 2050. As a result, the pace of innovation has started to increase on many fronts to tackle the sources of GHG emissions across industries such as Iron Ore, Steel, Chemicals, Oil & Gas, and Transportation. They require massive capital projects as it relates to complex changes on the design of process equipment and overall industrial processes and manufacturing. While all of that gets resolved, the question is, what can we do now?
A 2021 Carbon Measurement Survey Report by Boston Consulting Group revealed that 85% of organizations are concerned about reducing their emissions, but only 9% are able to measure their emissions comprehensively. What is more revealing is that more important from this report is that the respondents estimate that 30% to 40% average error rate in their emissions measurements. In 2022, NewClimate Institute and Carbon Market Watch released a report highlighting the fact that major global companies are avoiding meaningful climate action and are instead using false, misleading, or ambiguous green claims.
“As pressure on companies to act on climate change rises, their ambitious-sounding headline claims all too often lack real substance, which can mislead both consumers and the regulators that are core to guiding their strategic direction. Even companies that are doing relatively well exaggerate their ambitions,” said NewClimate’s Thomas Day, the lead author of the report.
Recommended Approach
So how do we begin addressing these challenges? There are five parallel steps:
Identify & measure.
You cannot control what you cannot measure. Each organization needs to Identify & Measure Scope 1 and 2 emissions. But is Scope 3 the most important one? Yes, see item 4, and collaborate with your customers and suppliers, but if they are not measuring Scopes 1 and 2, it will be hard for them to help you with Scope 3.
Develop realistic emissions-reduction plans.
This typically requires an accurate understanding of the patterns and performance over time.
Comply, report, and disclose emissions.
There are more than 10 reporting frameworks that vary by industry, regional locations, and jurisdictions, among others.
Collaborate with customers and suppliers.
Scope 3 is the largest and the hardest to manage as it requires a collaborative and transparent approach across multiple businesses in your supply and value chain.
Provide audit trails.
Regulators and auditors will want to trace the data to the source.
Current Approach
Based on our voice of customers across four industries - Mining, Oil & Gas, Power Generation, and Textile the challenges can be summarized as follows:
Early establishment of a governance process. Many organizations have a sustainability and/or environmental group, but there is no formalized process on how the data gets collected, managed, approved, and reported from sites to enterprises.
Excel-driven reporting by one single person. We are still seeing state-of-the-art macro Excel applications that have been developed and maintained by one single person.
Manual data collection can lead to errors. For the most part, the people running these spreadsheets are juggling data, text files, and images to be able to collect the required data to fill these reports. The process requires a very intensive quality control process to ensure that measurements are entered appropriately and make sense.
Estimates to handle exceptions due to late data collection. In order to understand the chemical composition to be able to report the major emissions influencers, organizations leverage 3 or more labs. A typical process can take more than 3 days and often a couple of weeks, depending on the complexity of the component, e.g., Gas vs. Coal in a generation facility. As a result of these long waiting times, organizations utilize estimations from past performance or other similar facilities.
Errors lead to a multi-step approval process. Since the process is very manual, the errors of the estimation process can deviate, adding up over time. Organizations will have to go through multiple levels of approvals, which involves a third-party reporting organization that completed public reports.
Multiple reporting frameworks. SASB and GRI, for the most part, seem to be very mature complementary reporting frameworks. However, organizations operating in many jurisdictions need to juggle compliance exceptions by jurisdictions and by industries. Each of these frameworks reports on very specific items and runs slightly different calculations on the data collected.
Auditable and Traceable. The data needs to be traceable and auditable, so the provenance of the data needs to be managed. Any files, images, and documents where the data came from need to be stored to provide supporting evidence for auditors and regulators. Most organizations store this on file drives and/or, at best, SharePoint-like applications.
Data is not accessible to other business functions. The reporting process is often managed by the environmental and sustainability teams. Other business functions are looking to get access to the data as a single source of truth for production, quality, and other parallel and internal reporting mechanisms. For the most part, a PowerBI-like report is provided where people need to extract the data manually or send it via email to others.
The Fusion Approach
There is not a one-size-fits-all approach. There is not one company that can provide all the components required for this. It is important to understand what each party delivers and brings to the table. This is a high-level architecture diagram on which Fusion will play a critical role in acquiring and consolidating the data on behalf of our clients to then report the data to the various corporate packages and external sources, including blockchain-based applications.
Fusion is able to ingest data from various sources and sites and in various formats from time series, events, IoT-sensor-based messages, activity-based, remote sensing satellites to even image-based data as required. It keeps track of the data source provenance and is able to track versions of data as changes happen on the underlying source system.
In Fusion, organizations can implement their calculations and/or interact with third-party specialized tools for more complex energy and water balances. Due to the openness of Fusion, organizations can share/exchange data with third-party providers such as labs and/or approved carbon footprint estimators. The results can be tracked as versions of the data for comparison purposes. The same share/exchange methods can be used with your customers and suppliers.
You already have a supplier for ESG reporting; not a problem. You need to keep in mind that the data collected for ESG reporting is required by other applications and business functions in the organization. Fusion provides a single source of truth foundation for the industrial data so it can serve your ESG reporting needs and the needs of other functions. This helps break the silos in decision-making.
The ESG reporting data is highly sensitive. This is not an issue with Fusion. Fusion can segregate the data into multiple repositories so sensitive data can be protected yet accessible by any authorized party.
Users can inquire Fusion for performance trends using our aggregation capabilities that can expand various reporting cycles - weekly, monthly, quarterly, or annually.
Conclusion
The pressure is on organizations to move away from Greenwashing to Transparency:
Makes ESG reporting part of your digital transformation and strategy toward a data-driven and analytics-driven organization.
Do not create siloes by lock-in on a vendor to collect the data from source systems directly.
Leverage Fusion for accelerating the industrial data consolidation process, and have ESG part of the ecosystem of analytics that supports your operations across all functions - production, quality, maintenance, process optimization and among others.
