Digital transformation lessons can aid climate action in technology, science and industry

Out-Law Analysis | 22 Dec 2021 | 2:29 pm | 11 min. read

Businesses at the forefront of innovation in technology, science and industry can lean on their experiences with digital transformation projects and engaging with sophisticated supply chains when responding to the climate crisis.

For some companies, the shift from fossil fuels to electro mobility is a matter of survival. However, delivering on decarbonisation is a daunting challenge for businesses. Many technology companies, manufacturers, life sciences businesses and healthcare providers, though, are past specialists in change projects and in dealing with disruption and pressures to innovate.

As advanced users or developers of technology and data, these businesses also have a head-start on those in other sectors when embarking on their own ‘net zero’ transformation, and they can build on their already-integrated supply chains to drive reductions in emissions from others too.

With businesses still processing what the outcomes from COP26 in Glasgow mean for them, we explore the way that climate-related issues will influence the actions of companies active in technology and digital markets, and the diversified industrial, life sciences and healthcare sectors.

Technology and digital markets

There has been a tendency for the technology sector to be considered as part of the solution to the problems of climate change. There are legitimate reasons for this, but it must also be recognised that there are climate-related issues within the sector itself to be addressed.

This is particularly visible in the cloud computing and data centres market where energy consumption is coming under increasing scrutiny, both from policy makers and regulators and from investors, in the drive to achieve net zero.

In Ireland, for instance, concerns have been raised about the growing number of data centres in the country, and the associated increase in energy consumption, and how it could threaten security of supply in the electricity market if the pace of growth witnessed currently goes unchecked. That is why the Commission for Regulation of Utilities in Ireland recently imposed directions on operators of Ireland’s electricity grid that are anticipated to improve the geographic spread of data centres across the country and prompt data centre developers to put in place their own on-site power supply.

We know, though, from our own work that many data centre operators are ahead of the curve on lowering their energy consumption and finding better ways of using waste heat – the Energy Reuse Effectiveness metric is increasing transparency in this regard.

As the world of finance adapts to the climate crisis and the outcomes from COP26, there is an increasing focus on ‘green’ investments as lenders and asset managers look at channelling more of the funds they are responsible for to environmentally-friendly businesses and projects. This will be a further driver of climate action and sustainability in the technology sector in 2022 and beyond.

McMillan Andrew

Andrew McMillan

Partner, Head of Technology & Digital Markets

Technology companies have a huge opportunity to lend their technologies, skills and expertise to climate-related initiatives  

There has already been significant progress made. Thousands of businesses – many from the technology sector – have joined a global movement by committing to achieve ‘net zero’ carbon emissions by 2050 at the very latest. Over a third of mobile operators by revenue have met the UN’s Race to Zero criteria, which is a great achievement, although there is clearly more to be done.

Technology itself can play an important role in enabling the energy transition. The net zero agenda is acting as a driver for businesses to investigate ways in which they can access or share data to improve efficiency. Data trust models are emerging as a way in which to effectively enable safe and secure data sharing with appropriate controls on access and use. Once data sets have sufficient scale, artificial intelligence tools can be used to look for patterns and correlations so as to provide insights – the larger the data set, the better the output.

If 2021 was a year of commitments, 2022 must be the year where this translates into action. Technology companies have a huge opportunity to lend their technologies, skills and expertise to climate-related initiatives, such as the Green Grids Initiative announced at COP26 that looks to interconnect countries, continents and communities to renewable power sources, Mission Innovation that aims to supercharge investment in clean energy, or the joint US and UAE-led AIM4C initiative that seeks to deliver more sustainable agriculture and innovative food systems.

Diversified industrial

The outcomes from COP26 have received a mixed response, but the conference did at least maintain momentum on climate action and even explicitly spelled out the challenge ahead: “recognising” that for the target scientists have outlined of restricting the average rise in global temperatures to 1.5°C by the end of the century will require worldwide emissions to be cut by 45% by 2030, on 2010 levels.

Livesey Nicole

Nicole Livesey

Partner, Head of Diversified Industrial

 There will inevitably be increasing incentives and, perhaps more likely, disincentives introduced across the globe to persuade industrial companies and manufacturers away from products, processes and businesses that create and emit carbon, as well as other greenhouse gases

Two outcomes from COP26 have particular significance for businesses in the diversified industrial sector.

The first is the pledge contained within the Glasgow Climate Pact to switch away from coal and other fossil fuels as the source of energy and replace them with low carbon technologies.

Efforts to obtain consensus to end fossil fuel subsidies and phase out coal in its entirety failed, but parties agreed that the drive to bolster clean power generation and energy efficiency measures should involve “the phasedown of unabated coal power and phase-out of inefficient fossil fuel subsidies”. The Glasgow Climate Pact is the first formal COP agreement to reference coal and fossil fuel directly in 26 years of UN climate summits. That sends a really strong market signal to companies, financiers and investors and will have caught the attention of all businesses reliant on coal and fossil fuels, which includes manufacturers.

The second initiative of note is the new declaration on zero emissions cars and vans.

More than 100 national governments, cities, states and major car companies signed the new declaration and in doing so committed to ending the sale of internal combustion engines by 2035 in leading markets, and by 2040 worldwide. A number of countries also committed to end the sale of fossil fuel-powered heavy-duty vehicles by 2040. However, some major car manufacturing economics have not signed the pledge, including Germany China, Japan and the US.

Major global original equipment manufacturers (OEMs) headquartered in India, China and the US have committed to “working towards reaching 100% zero emission new car and van sales in leading markets b 2035”. Though this does not represent a binding commitment, it was further than their respective governments were prepared to go.

What those active in the diversified industrial sector will want to know now is how governments around the world will translate their pledges into policies and action.

There were a lot of commitments during, and in the lead into, COP26 that impact on the sector – such as those set out in the UK’s net zero strategy. However, those commitments will not be enough to ‘keep 1.5°C alive’ – more is needed.

There will inevitably be increasing incentives and, perhaps more likely, disincentives introduced across the globe to persuade industrial companies and manufacturers away from products, processes and businesses that create and emit carbon, as well as other greenhouse gases. Those that are already starting to make changes are going to have to make more changes, and more quickly, and those that are slow off the mark are going to be put under a lot of financial, regulatory and public pressure to catch-up.

Life sciences

Like it has been during the pandemic, the life sciences sector will be integral in the battle against climate change.

The development and manufacture of the many lifesaving drugs and medical therapies we use today is an energy and resource intensive process. Doing so more sustainably is now one of the sector’s greatest challenges.

Emissions monitoring, and environmental stewardship more broadly, is at the core of business strategies following COP26, pharmaceuticals and the wider life sciences sector included. It is increasingly present in standards, regulations, stock exchange listing requirements, tender offer structures, investors’ due diligence and bank loan requests.

Portrait of Clare Tunstall

Clare Tunstall

Partner, Head of IP & Life sciences

Although there is no vaccine for climate change, the sector can offer innovative solutions to help society achieve net zero targets, mitigate the other impacts of climate change and achieve resource efficiency

One of the most significant areas of discussion at COP26 was the extent to which and how quickly the world could commit to switching from fossil fuels as a source of energy and replace them with low carbon technologies. The life sciences sector has ramped up its commitments and its messaging on targeting net zero including renewable energy commitments.

Collaboration within the sector is vital to unlocking climate action. Outsourced manufacturing is a feature of most life science companies’ supply chains and there is a need for more transparency and accountability on how businesses across the supply chain are tackling their emissions.

With increasing market pressure from investors, public bodies and the public, companies are seeking to set standards for their suppliers. The Pharmaceutical Supply Chain Initiative was set up in 2006 to set standards for responsible supply chain management in terms of safety, social and environmental objectives. Building on this, the Energize program announced at COP26 is a collaboration between 10 global pharmaceutical companies to engage hundreds of suppliers in climate action and decarbonisation of the pharmaceutical value chain. The collaboration aims to accelerate the adoption of renewable energy and reduce greenhouse gas emissions within the pharmaceutical value chain, including through power purchase agreements.

COP26 also highlighted the need for consistency and clarity on regulatory requirements related to climate change and the environment, to avoid the patchwork of requirements that currently exists. Many companies in the life sciences sector have made specific commitments on emissions reduction, often in line with the standards set by the Science-Based Targets initiative’s science-based targets (SBTs), and report emissions and environmental impacts to the Carbon Disclosure Project. The more companies in the sector are setting SBTs, enabling informative comparisons, the bigger the impact will be on climate action and transparency. Environmental commitments may in the future be a condition of membership of industry organisations who may even consider including obligations in voluntary codes of conduct.

Regulation, however, often stands in the way of change. The practice of including paper leaflets with every medicine, for example, is currently mandated although not very ecologically friendly. There are moves to review the regulatory framework to allow the use of electronic patient information leaflets for some medical products but not all. Many medical products, including vaccines, need cold storage and manufacturing requirements often dictate air quality and temperature. These requirements all contribute negatively to emissions.

Moving towards a more sustainable society won’t just reduce carbon emissions and help to mitigate the impact of climate change, it will also improve the health of the entire population. The environmental and societal aspects of the world we live in have a direct impact on our health and affect long-term conditions. The use of plastics and air quality are all inextricably linked to cancer and respiratory and other long-term illnesses. The life sciences sector is central to dealing with serious disease.

Technological innovation has already driven major improvements in the detection and treatment of illnesses, and now is a great opportunity for the sector to champion sustainable, lower-carbon, and zero-waste innovation that will contribute to preventing them.

The sector has much to offer beyond carbon neutrality. Although there is no vaccine for climate change, the sector can offer innovative solutions to help society achieve net zero targets, mitigate the other impacts of climate change and achieve resource efficiency. Research from across the life sciences will be important to developing bio-products with as small a water, carbon and land footprint as possible. Ending society’s reliance on fossil fuels will be no small feat, but science offers real opportunities to address these issues through the adoption of innovative processes and technologies. There are already promising signs of this happening and other opportunities to explore. These include:

  • The development of greener ways to fuel the planet’s energy requirements, replacing petrochemicals and emission-heavy materials like concrete with next generation bio-fuels and bio-based materials and greenhouse gas up-cycling – to use greenhouse gases emitted by industry, and ultimately to use greenhouse gases captured from the atmosphere, in gas fermentation processes, exploiting bacteria to make the building blocks we need for sustainable plastics, fine chemicals and fuels.
  • The application of gene-editing technology such as CRISPR is allowing scientists to grow organisms that are adapted to a changing climate, or with characteristics that could help us fight climate change.
  • Synthetic biology is allowing the creation of new systems that could help fight climate change in many ways, from microbes that can remove pollution from the environment to redesigned plants with artificial components to help them suck up carbon.
  • Global food production reportedly accounts for one quarter of all global greenhouse gas emissions, and scientists are working with farmers to grow more productive, climate-friendly crops and livestock.
  • As climate change threatens the global supply of food, scientists are also working to improve food security, improve diet, and reduce food spoilage and waste.

Healthcare

Health was one of three science priority areas for COP26, with the health programme focused on a range of initiatives, including building climate resilient health systems, developing low carbon sustainable health systems, and including health priorities within national climate action plans.

Healthcare providers globally will be eager to see what the pledges announced at the conference mean for them in practice.

Ellis Joanne July_2019

Joanne Ellis

Partner, Head of Healthcare

For developing countries, support with funding from richer nations to account for the health impacts of climate change is vital  

One of the core health-related pledges obtained were the commitments from 50 countries to develop climate-resilient and low-carbon health systems. Within that, 14 countries set a target date to reach net zero carbon emissions in their health systems on or before 2050.

In the UK, health policy is largely devolved and delivered by separate NHS bodies, but the health services in England, Scotland, Wales and Northern Ireland have all united to commit to net zero carbon emissions.

In announcing the joint commitment, the UK government highlighted the fact that health systems account for 4.6% of global emissions currently and outlined in stark terms how that would make health systems the world’ fifth biggest emitter if they were one country. According to a Reuters report, the manufacture and transport of medical products, as well as the construction and operation of hospitals and clinics account for the majority of health system emissions.

One area that the UK government has said it will focus on is the decarbonisation of NHS property in England. It has announced an initial £280 million in funding towards that project, and said further funding will come from a £1.425 billion funding pot that is to cover the whole public sector up until 2024/25.

For developing countries, support with funding from richer nations to account for the health impacts of climate change is vital. In this regard, the Glasgow Climate Pact acknowledged that it was a matter of “deep regret” that the commitment global leaders of developed economies made in 2009 to provide $100 billion a year to help fund climate change mitigation and adaptation initiatives in developing countries by 2020 had not been met. Former UK prime minister Gordon Brown, who is the World Health Organization’s ambassador on global health finance, has called for this money to come and be used in the provision of better healthcare.

A new delivery plan (12-page / 1.14MB PDF) projects that the $100bn a year target will be met in 2023, while the Glasgow Climate Pact itself has urged delivery of the annual goal “through to 2025” – this is in line with what was negotiated in the Paris Agreement in 2015.

The need for this funding has been starkly illustrated by Fiji's UN ambassador Satyendra Prasad, who highlighted the impact of climate change on the provision of healthcare during COP26.

“It’s quite tragic when your doctors and nurses are themselves being evacuated, when they should be providing front- line services,” Prasad said, highlighting the increase the country is also seeing in waterborne diseases in the aftermath of storms as well as the need to relocate medical facilities to higher ground and train health professionals on dealing with climate-related health problems.