How digitization is decarbonizing industry

REBECCA AHRENS

From AVEVA studios, this is Our Industrial Life, the podcast that brings you stories from the essential industries and investigates how data and technology are shaping the future of the connected industrial economy.

In the last couple of years, AVEVA has made a big push to put sustainability at the center of its business practices. It's one of the business's core values. Today I'm going to be talking with AVEVA’s Vice President of Sustainability, Lisa Wee, to understand what the company is doing to support our own as well as our customers’ sustainability goals. Thanks for joining me, Lisa.

LISA WEE

Thank you for having me back, Rebecca.

REBECCA AHRENS

So, I'd love to hear you talk a little bit about why AVEVA has decided to make sustainability such a huge focus.

LISA

It's interesting. We have always had a focus on sustainability at AVEVA—in part because our products help our customers to advance their sustainability goals. We help them become more efficient. We help them reduce waste through digitalization. But we've noticed that, for our customers, it's also become an increasingly important topic. We ran some research just recently, and it showed that 95% of them, especially at the executive level, rated sustainability as a top priority.

REBECCA

Yeah, and why do you think sustainability is becoming more and more of a top priority for our customers?

LISA

They see it as important for their employees, for their bottom line, for the longevity of their business. So, they understand that sustainability, you know, it helps make sure that their company is going to be returning long-term value and able to grow and compete for many years to come.

It's also really important because I think we all want to contribute to leaving a better world behind for the next generation. One of the common ways that we have to understand how we're doing on that topic is the UN Sustainable Development Goals.¹ Sometimes I refer to them as the world's global to-do list. And we know we still have a lot to do to deliver a better future. In fact, you know, achieving those goals, though, again, could be a business opportunity, because it can open up about $12 trillion per year in market opportunities by 2030. But, it's also a way of making sure that we are leaving the planet in a better condition than we found it and making sure that the next generation have a prosperous future ahead of them.

REBECCA

So, sustainability can mean a lot of different things. I think recently, when people talk about sustainability, what they are really often referring to is limiting global warming to 1.5 degrees Celsius or below. Obviously, this is going to require massive collaboration effort between governments, individual citizens and private industry. So, what are the businesses that make up the industrial economy going to need to do to help limit global warming to 1.5 degrees Celsius?

LISA

You know, climate is a cross-cutting issue for society. It's a global issue. And it's also an issue where we're running out of time. We need to take meaningful action this decade to really make sure that we are scaling technologies quickly now that we can deploy at scale to get to a net zero economy by 2050.

REBECCA

So what does meaningful action mean in this context? What do we need to do to get to net zero?

LISA

We're going to need massive investment in clean energy projects and infrastructure to get us there. The International Energy Agency has studied different pathways to show that this is possible to get to net zero by 2050.² But they do anticipate we're going to need about 4 trillion a year by 2030. And that actually represents a 15-fold increase in efficiency investments alone by 2026. So, we have a lot to do in the next couple of years. And, the reason why the industrial sector matters is that if you look at our global carbon footprint—if you take the power industry, and then the industrial sector—that accounts for almost 65% of the world's greenhouse gas emissions. Or it did in 2020.²

Decarbonizing the industrial sector through digitalization

REBECCA

Sixty-five percent. That's a tremendous amount. I mean, and it's not like we can just shut the industrial sector down. I mean, we can't ask pharma companies to stop making life saving drugs or vaccines or ask manufacturers to stop making cars or energy companies to stop generating electricity. I mean, these things need to keep running.

LISA

It's a great point. You know, what that means is that we can't make meaningful progress on climate change unless we tackle those sectors. How do you decarbonize those sectors? First of all, we do need to start with the decarbonization of the power grid—and we are making a lot of progress there.³ We've seen a lot of alignment with policymakers in helping to accelerate that change. But, we still have hard-to-abate industrial sectors: the oil and gas sector, cement, steel. These are all industries that contribute to how we all live our daily lives. They're foundational industries, and they're very complicated to decarbonize. And, through new digital technologies, we can really help to transform those sectors. We can help the energy sector to actually push the frontiers of what is possible. And we are, through helping them to explore the deployment of new energies, such as blue and green hydrogen.

REBECCA

Blue and green hydrogen, by the way—just for those who don't know—refers to some of the different ways hydrogen can be created for use in clean energy sources.

LISA

When we digitalize those industries, they're able to find huge efficiencies and cut waste as well. So, important contributions and not easy work.

REBECCA

So, AVEVA’s technology, as you were saying, obviously, plays a role in helping our customers, you know, achieve this sustainability transformation that is obviously so essential for the world as a whole to, you know, stay within this limit of 1.5 degrees Celsius. But AVEVA’s also committed to leading by example, when it comes to sustainability, so I'm wondering what this means for AVEVA as a business. What are we doing within our own corporate environment to meet our own sustainability goals?

Understanding our emissions

LISA

Yeah, I remind people all the time: even though we're a software company, and of course, our own footprint is relatively small, we still have to go through the exercise of understanding where our own emissions come from. So, we've really taken the time to do that over the past 18 months. We've been reporting our emissions for many years now, but we went through a detailed carbon-footprint assessment, where we looked at our scope 1 and scope 2 emissions, as well as a detailed value-chain scope 3 analysis.

So, maybe it's helpful here if I just remind everybody of the of the definitions of scope 1/scope 2, because I know there's a lot of jargon.⁴ So, what does that actually mean? So, scope 1 and scope 2 is essentially the emissions that come from running our daily operations, as well as the emissions from the generation of energy that we purchase from our utility provider. So, that's really important that we understand that. As a company, it's generally the easier part to get your arms around—because you will have utility bills, you know? You will know if you have a corporate car fleet, for example—that also falls under scope 1 and scope 2. It will tend to be easier to track and then to plan to reduce. But, the issue is that it's generally a pretty small part of your footprint. And for AVEVA, for example, if we had about 80 wind turbines running for a year, that would take care of our scope 1 and scope 2. But, about 97% of our total footprint is what's called scope 3, and that is the emissions that are coming from upstream of us and downstream of us.⁵

REBECCA

Can you just say how upstream and downstream are defined in this context for listeners who might not be familiar with those terms?

LISA

So, upstream of us, that means the emissions that come from the suppliers that we purchase goods from. It also refers to business travel emissions, and even employee commuting emissions. I know that's a tricky one. People often think that falls under scope 1/scope 2, but that's under our scope 3. And then downstream of us, we have the energy that gets used when our customers run our software.

Now, increasingly our customers are choosing to run that software on the cloud. And because we work with cloud providers that run off renewable energy and have made very significant renewable energy commitments, that lessens that impact. But, we also have to map that, study that and look to decrease that, which is a big challenge for a company that's looking to grow—anytime you have significant use of sold-product emissions. You know, businesses are in the business of growing, but how do you do that and cut your carbon footprint at the same time? It's an interesting and important challenge. And it essentially forces you to rethink your entire business model.

So that's why, you know, for many companies, scope 3 is incredibly challenging—because it's not just about looking at the energy that you're consuming to run your operations. It's understanding, you know, the inputs for your business: how do you make those, you know, low carbon? And even the outputs from your business—how do you redesign your business to be able to say that your goods themselves are low carbon? At AVEVA, we've made a commitment to cut those scope 3 emissions by 50% by 2030.⁶

Making sure we’re on track

REBECCA

And so, how does AVEVA, kind of, track that? Or how do we make sure that our goals are in line, say, with the most recent Paris Accords? And what do we do to make sure that we're on track with those targets?

LISA

Yeah, so we're fortunate that there are standards out there for companies. And at AVEVA, we've chosen to align our target-setting with the highest standards, which include the Science Based Targets initiative. So, we submitted, first of all, our targets for validation to the Science Based Targets initiative. And they validated both our 2030 targets, which are our near-term targets, but they also validated our commitment to be net zero across our value chain by 2050. You know, we submitted to them both detailed data about our current footprint, but also high-level models of how we would be able to reach those ambitious goals. And, we are required to report annually on our progress towards those.

REBECCA

Why is it important to submit these data and models? Why not just submit the targets themselves?

LISA

You know, I think it's important to have that third-party validation and verification. We are also looking at having actual verification of our data. We've obviously worked with decarbonization experts, and we have knowledge in-house. But having, again, third-party validation of the actual numbers that we're reporting every year, it's important to us to know our progress—but we also have seen a big uptick in our customers asking us as part of their responsible sourcing and procurement, you know, have we verified our data? And this year was a really big year for us. We've just put out our Sustainability Progress Report. And, you know, we were able to procure 100% renewable energy for all of our offices—so essentially bring down our scope 1 and scope 2 emissions below 90%, which is really, really huge compared to our FY 20 baseline. So that's big progress.

But at the same time, we actually also noticed that our scope 3 emissions crept up a little bit. And that just speaks to some of the challenges that I was talking to earlier. In part, some of the drivers there were that we've seen a return to business travel as the pandemic moves into more of an endemic stage. But, we have also seen more commuting of folks going back to the office. And then we've also grown our business—and for us, that was the biggest contributor. So, I think that that's why we need, sort of, annual reporting to sort of know where we stand and be very transparent about that. And, look, we don't pretend to have everything figured out for being able to immediately cut scope 3. But we do have plans in place. We're working very closely with our suppliers this year to engage them and understand what programs they have in place to reduce their emissions so that we can lower our footprint there.

REBECCA

And what other steps is AVEVA taking to lower its scope 3 upstream and downstream emissions?

LISA

We have also made an important commitment—by joining the First Movers Coalition—about how we want to use our own procurement and buying power to create demand for new clean, green products.⁷ So, as part of that First Movers commitment related to aviation, we have committed to purchase 5% of our travel emissions will be covered by sustainable aviation fuel by 2030. We're also looking into different ways of having either a travel carbon-budget that we're going to roll out across the company, or even looking at a more advanced internal price on carbon that would help us look at how to price-in carbon into our everyday business activities as well. And then, of course, on the use of sold products, which is the downstream side, we've really been working with our technology teams, first of all, to start bench-testing our own products when they're in the product-design phase to understand the energy intensity, and to look at best practices there that we could roll out going forward. We've joined the Green Software Foundation, which essentially is all about developing best-practice principles for the software sector—that just doesn't exist right now.⁸ So, we're really keen to not only change our own practices, but to influence the sector more broadly and help champion that. And then, you know, the nice thing for us is—as a company that's really focused on being cloud-first—we know that because of the cloud providers that we've selected, and our ambitions to help our customers move to cloud, when they are able to do so, it already reduces their impact on the planet. So, those are a couple of the activities that we have underway, and we’ll continue to report on our progress.

REBECCA

And we'll link to that Sustainability Progress Report on the episode page. I wanted to ask just a little bit more to clarify about the First Movers Coalition. So, this is an organization that many businesses can join. Can you just talk a little bit more about what they do, what that organization represents?

LISA

Absolutely. So, the First Movers Coalition is a joint initiative by the World Economic Forum and the US State Department. And the idea here is that it's for businesses who want to use their buying power across a number of different areas—so to advance sustainable aviation, to advance green steel—essentially, to signal to the market that there is demand for low-carbon products related to these hard-to-abate sectors. Part of climate leadership is saying: we understand that there is a price premium associated with these products right now, and we are still committed to using them. And so, the idea behind the initiative is if enough larger corporations come together to provide that certainty to the sector, that they are willing to pay that price premium, that that will really spur development, and that that will help these newer industries to scale rapidly—which, as I mentioned in the beginning, that's really key. Because we need these industries to scale in this decade so that we can actually deploy very, very rapidly during the next 20 years after that. So, you know, that's why it, sort of, is called “First Movers” because, again, it's showing that we're willing to help pioneer the demand for these new products that we think are really critical to getting everybody to net zero by 2050.

REBECCA

Yeah, I mean, that seems like it really speaks to this notion of AVEVA wanting to lead by example, right? We're not just about making lofty declarations about goals—we're actually putting our money where our mouth is, literally, and investing in these initiatives that might cost the company a little bit more, but are worth it in the long run.

And the last thing I wanted to ask you about is just to put kind of a finer point on the difference between the handprint and the footprint. I know this is a framework that AVEVA has been using for discussing these different, sort of, realms of focus in terms of sustainability.

Carbon footprint and handprint

LISA

Absolutely. So, when we talk about our footprint, we're really talking about our operations. And in the context of carbon, we're talking about scopes 1, scopes 2 and scopes 3, sort of, you know, because those are the categories that we are expected to report on. But there's a really interesting movement at the moment around “scope four,” as it's sometimes called. And that's what at AVEVA, we refer to as our “handprint,” which is, you know, through our products, what are the saved and avoided emissions that we're able to enable for our customers? So, yes, when a energy producer is, maybe, using our software, they will incur some emissions from turning on their browsers and actually logging in and you using the software on the cloud, or on premise. But what they're doing with the software is likely going to save them a significant amount of emissions. For example—I mentioned this earlier—but we've now built into our software new capabilities that allow folks, when they're in the engineering phase of plants, to understand the carbon footprint of that plant, or to look at different sustainability criteria.

And so, through our handprint, we're actually able to help our customers significantly reduce emissions. And so, that's something else that we are looking to measure. We have some work underway right now to again, really in a credible way, working closely with our customers—because they hold the data—to say: okay, you know, through digital transformation, and specifically through use of our products, you know, what are the savings that you have been able to achieve on your carbon footprint? And we're already seeing a lot of our customers using this, using our software to do this. So, it's just it's an exciting project to have underway with them to help more systematically measure those gains and those sustainability benefits.

REBECCA

So, this is probably a great place to stop because, next time, we'll be digging into a little bit more about how our customers are using our software. We just had a big conference and some of our customers actually presented stories about how they've been using the software to do the kinds of things that you're talking about, you know: reduce their own emissions, increase efficiency, maybe even transition to alternative forms of energy.

So, for now, I will just say thank you again for joining me, Lisa. It's always great to talk to you and I am definitely looking forward to our next conversation.

LISA

Thank you, Rebecca. Pleasure talking to you and excited to continue the discussion.