Podcast – Our Industrial Life: Why should businesses care about COP26?

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.

I'm your host, Rebecca Ahrens, and today we're kicking off a new series on the podcast. We're going to be having ongoing conversations with two very special guests.

LISA WEE

So my name is Lisa Wee. I am VP of Sustainability at AVEVA.

RUCHI SHAH

Hi everyone. My name is Ruchi Shah and I am the Sustainability Manager at AVEVA.

REBECCA

Over the next few months, Lisa, Ruchi and I will discuss topics like science-based targets, the role of industry in shaping the future health of our planet, the importance of setting sustainability goals and how industrial technology is helping businesses meet and surpass those goals.

So without further ado, here's our show.

Thank you both for joining me today to talk about COP26, which I know that you attended, Lisa.¹ So I just want to start by taking this back to the basics. What's at stake here? Why should we care about what happens at COP26—especially since we hear sometimes suggestions from activists, for example, that these conferences are really just full of empty promises?

What is COP26 and why is it important?

LISA

Yeah, I think it's a great and important question. Just to take it a step back a minute, you know, what is COP? What is that part of the name stand for? It stands for conferences of the parties. And it relates to parties that have signed the U.N. or United Nations Framework Convention on Climate Change. So this is the most global conference that the world has to discuss climate change and how to make progress on it.

And I think it matters because, you know, why does the United Nations matter? It matters because we're trying to have global cooperation on really big problems that transcend national boundaries, that no one country, no one group of actors can solve alone. And I would say that that applies to no issue more than climate.

The emissions that we emit in the U.S., which is where I'm sitting today, you know, they don't stay in the U.S. They go up into the atmosphere and they affect everybody. But they actually don't even affect everybody evenly, right? They affect some countries in places that are more vulnerable to climate change than others. Africa, for example, is a continent which is responsible for the least emissions but is actually the most vulnerable to some of the consequences, like drought.² And so bringing parties together at COP26 is an opportunity to try and give everybody a voice in saying how to move forward on solving this problem, both through mitigating the impact, but also adapting to the reality.

It's challenging because you're getting so many global perspectives, but it's also really important because of the nature of this issue. So I think COP is an important forum from an international perspective, but it's also—you know, at its core, there's only so far of what can be achieved through international diplomacy.

So I think maybe there's COP26, there is the official negotiations about what all these countries can agree upon and what policy framework should be set in place. But beyond that, COP26 brings together all sorts of activist companies, investors to really discuss what can happen outside of policy as well.³ So it's become a really important incubator almost for bottom-up action as much as it has from top-down action from policymakers. And that's what makes it quite unique and quite important.

So I understand that there's skepticism on what can be achieved at an international cooperation level. I think that's well deserved, but still, we need that aspect to it. But it also goes much beyond the formal discussions that are happening in what's called at COP26, “the blue zone,” which is where all the international diplomats are meeting.

There are other zones where—in fact, all over the city in this case—there were groups coming together, sometimes led by civil society, sometimes led by the private sector, to discuss how they can cooperate and work together on climate as well.

REBECCA

So yeah, I just I'd like to follow up on that and dig in a little bit more on why. Specifically, it's important that the business community have a representation there.

I know you mentioned in the past this innovation zone. So since you were there, it would be great to just get a sense from you what the atmosphere was like, specifically among the people representing the business community. Because you kind of get the sense that in the last few years companies are starting—and the private sector generally—are starting to take sustainability goals on in a more sort of ambitious and meaningful way than they had before.⁴

The importance of the private sector in sustainability efforts

LISA

Absolutely. I mean, I think that that was a general comment for many COP veterans. So again, the conference normally takes place on an annual basis. COP26 was perhaps supposed to be an inflection-point COP because we hadn't met the year before due to COVID, and it was also an opportunity to check in at where governments were on their various commitments.

But what was really noticeable this time was just how much private sector presence there was, and how much investor presence there was. And again, that's really important and really significant because we need all parties to be present to make progress. And I think that what was most encouraging in the sustainable innovation zone where I was, was seeing the role of technology highlighted.

Because, again, climate issues are global, but they also require solutions at scale. And that is something that technology can provide. Seeing that presence there and seeing also the presence of investors there to support, again, the deployment of technology was really promising.

REBECCA

Do you have the sense that for the businesses that are there and participating in these conversations and the innovation zone, that there's sort of more accountability that arises out of that because they've made their presence known, and there's sort of a growing energy around measuring commitments to change—not just making the commitments, but following up with data?

LISA

Yeah, absolutely. I think that—it's almost interesting—it felt this time, in its own way, like, the business community is playing an activist role in and of itself. That's not to say that we are replacing the very important global youth movement that was in Glasgow and that was there to, again, to remind everybody of the importance of the impact of the decisions that were being made on their future. But I would definitely say that companies are not sitting around. Business is not sitting around waiting or relying entirely on what gets decided from an international perspective.

Now, there are areas where, again, we really need alignment on policy and one of the areas that has been left undecided for a very long time from the Paris Agreement was a rulebook aspect relating to how carbon gets traded globally across borders and a greater alignment on carbon pricing.⁵ Yes, we do need a framework that allows for a more even approach across countries.

But businesses themselves, even, you know, major, heavy industry knows that carbon pricing is coming or is already active and they are already adapting their entire business model to operate, you know, preparing for a lower carbon world. They're not waiting around. And in fact, we, as companies, again, can be progressive in the measures that we take and implement across our own operations.

For example, what renewable energy and the energy that we're using for our offices to fund our data centers where we're developing products: where does that come from? If we do have a car fleet, is it an electric car fleet? There are all sorts of ways that businesses can use our own buying power to influence things, and we are.

Across industries, across geographies, the private sector is trying to add renewable energy to the grid. They're creating that demand for greater renewable energy because most of us are setting renewable energy targets and another noticeable change is just the amount of—you talked about standards—there definitely are standards out there for the private sector. And I would say that even though there is skepticism about the commitments that are coming at the national level—so when a government commits to reduce their emissions by a certain amount, there still isn't a universal yardstick for measuring that—but there is for companies.

So, you know, when we as AVEVA came out and made a commitment to set, you know, a science-based target—so a target that aligns to the Paris Agreement in line with being able to maintain a 1.5 degree future—there's actually methods and organizations that are out there.⁶ There are standards and ways of measuring that.

Science-based targets

REBECCA

And can you dig in a little bit on these science-based targets? Just explain a little bit more what they mean, why they're significant, and then just go into a few of the—you mentioned already a few examples of ways that businesses, strategies they can adopt for, you know, lowering their emissions, for example, making sure that their energy is coming from renewable sources, maybe electrifying their own fleet if they have, like, a corporate fleet of vehicles.

Just talk about a few more examples of things that you see businesses taking on.

LISA

Sure. Well, why don't I hand this over to Ruchi, who has just been leading our submission for setting science-based targets. So I can't think of anybody better to explain that.

RUCHI

Absolutely. And thank you, Lisa. Well said about COP26 and the significance. And I completely agree when it comes to corporates, we are adopting science-based targets, which is—you can think about it as like the gold standard out there, which is most aggressive, and pushing companies to limit their emissions in alignment with 1.5 degrees Celsius, which means that we don't want to hit that threshold. Otherwise there will be devastating effects impacting economies and countries to sort of that's the gold standard that AVEVA has adopted.

And when we are submitting, they're being very specific about what strategies we are going to take to reduce our scope one, two and three, direct and indirect emissions. We are not saying we'll only do things at our offices, but we are saying we are going to look at our value chain: how we do business with suppliers, how we think about business travel, which in the pre-COVID world, as you know, is sort of one of the biggest sources of emissions.

We are also going above and beyond, where we are looking at the impacts of our software and our customers are using our software, how energy intensive they are and what steps can be taken to sort of measure and reduce them. So they're—from a business perspective, I think it's really critical to think about the full value chain scope, and not just think about what I can do at an operational level.

REBECCA

So you're kind of saying that having conversations with these people in your value chain—your partners, your customers—getting them all sort-of on board, working towards a single goal, can have—maybe you would call it, like, a force-multiplier effect.

RUCHI

Yeah, absolutely. And when we look at the ways as to how we are going to reduce emission, let's say, from our procurement of goods and services—where we have thousands of suppliers that we work with—that's where we are really engaging with external groups, even our peers and competitors, both at local and national levels. Because, in a way, most corporates they share some of the suppliers and customers, right?

So the ask is pretty much the same. Like, we want everyone to reduce emissions. We are trying to sort of figure out how unified we can be in that messaging.

Working together to create meaningful change

REBECCA

And another thing I wanted to ask about is different sorts of organizations or pledges that companies can join. Maybe AVEVA has joined some of these already. I'm thinking about things like the Renewable Energy Buyers Alliance, things like this.⁷

Can you just talk about what those organizations are and why a company might want to be involved?

RUCHI

Absolutely. And especially when it comes to, sort of, AVEVA reducing operation emissions, one of our big focus areas is procuring renewable energy for all of our offices, as well as implementing energy efficiency measures. And when we did our targets submission and our inventory of greenhouse gas emissions, we realized that our footprint is not like one of the sort-of bigger tech companies where the loads are concentrated. Our loads are scattered across the world, and the market is not just there where we can go out to each market and buy renewable energy. So we are working with groups like REBA, or Renewable Energy Buyers Alliance, to aggregate our loads and to send a strong market signal out there in terms of clean energy procurement.

REBECCA

And a few other things you had mentioned previously: TCFD, CDP—can you just explain what these things are and what role they play?

LISA

Sure. I guess I'll jump in here. So, you know, I think that CDP and TCFD relate essentially to reporting standards. And I guess that's something that's also interesting. When I was talking about accountability, and the fact that already in the private sector, there's a very high bar here. So CDP—although now it goes definitely beyond just companies to also cities as well—you know, essentially, it is a common framework for companies to report out on what they're doing and to provide some pretty detailed information on how companies are mitigating.⁸ So, reducing emissions, but also managing climate-related risks and preparing their own businesses to transition to a low-carbon world.

They're aligned to another standard, which is the Task Force for Climate-related Financial Disclosures.⁹ And again, you know, driving these disclosures are investors, who are really trying to understand the businesses that they are invested in, but also to use their influence, right, to increasingly to use their influence to advance and accelerate the transition to a net-zero economy. So I would say that those are important reporting standards that are out there.

In some cases, they—and so some countries are also choosing to require them. There's been a big push to align across standards, which is helpful because, if not, we also, as companies, can end up getting a lot of reporting fatigue. But the intent there is, again, to provide investors with the information they need to make better decisions about whether or not their portfolios are aligned to their values around promoting green economies and advancing net zero.

You know, you'll generally hear, you know, “what were the outcomes of COP26?” You know, “was it all a wash? Was it positive? Did it achieve what it set out to do?” You know, most people will say it was a fragile win.¹⁰ Before COP26, we were projected at—based on the pledges—about hitting a 2.7-degree world. Now, coming out of it, we're closer to 2.4 degrees.

So, you know, we still need to do more, and we need to move faster. But, you know, just to kind of give some highlights of some positive things that came out of COP26, well, one was that we now need to come back, and countries need to come back and actually update their pledges every year—versus the next update was going to be in 2025. So what you're seeing is people are trying to incrementally move. Okay, we were at 2.7. Now we're at 2.4. By COP27, will we get down to two degrees? Will we get below two degrees?

Looking at the private sector side, you know, some of the big progress and wins related, again, to investment, was the GFANZ, as it sometimes gets called, but it's the Glasgow Financial Alliance for Net Zero.¹¹ And essentially this was about banks and asset managers coming together to mobilize $130 trillion to advance net zero. That's a very, very significant amount of money.

REBECCA

Is that mainly through technology investment?

Investing in technology

LISA

So that's the next point. How do they deploy it? So, they've raised these funds. Now they need to, you know, invest it in technologies that will advance net zero. And they need to do it into geographies, right? They're going to want to do it in geographies where there is need. And there are some gaps there. And again, I think that'll be the big focus of the next COP, which will be COP27, which interestingly is in—will be in—Egypt.¹²

So there will probably be a greater focus on Africa—on the African perspective in particular. But it's a good example. If you want to talk about renewable energy, it's a country that has abundant renewable energy resources. They've been pretty slow to be able to build and deploy wind and solar, but technology has definitely helped.

You know, at AVEVA, our software is actually used to manage the—it's the world's largest thermosolar plant.¹³ It's in Morocco. It's about the size of San Francisco to give you a sense of how big this solar field is. It's got 2 million mirrors that need to be coordinated, and they change direction according to the sun.

And when you're doing renewables at that kind of scale, you know, that's where you really need technology, right, to help you to—through our software, at least, they have a single control pane that allows them—it’s hooked up to all the field, to all those 2 million mirrors—that allows them to optimize, it allows them to run analytics, predictive analytics, so they can understand where things are likely to fail. It helps to support them in that maintenance aspect as well.

You know, so that's an example where, you know, technology is desperately needed. But the flipside: we also need policy. You know, Morocco was very progressive because they had set an ambitious target, and that field alone provides about 6% of their renewable energy right now. But we need larger policies as well to help electrify, green the grid, not just in Morocco, but across the whole continent.

So that's where, again, you need policymakers to come together. And then the private sector can obviously bring the technology that we have. And investors can help to fund it. So you kind of need all of the players there to advance real progress.

The importance of quality data

REBECCA

Yeah, and this is actually a good transition to the last thing I wanted to talk to you about, which is more specifically on the technology side.

So we were talking about, you know, the importance of reporting and reporting standards. It seems like one of the key things that's needed for accurate reporting is good-quality data, which gets back to a question of building up the right technology. So—we'll dig into this a little bit more in future episodes—but I was wondering if you could just kind of touch briefly on the ways that AVEVA's technology in particular can be used—the different applications that it has for advancing our customers’ sustainability goals.

You mentioned one which is, you know, a sustainable energy company in particular. But even companies that aren't in the sustainable energy field, they also can use the technology to support their own sustainability goals.

LISA

Yeah, absolutely. You know, again, we have a very wide-ranging portfolio, starting from helping on the engineering side to how we help our customers operate as well.¹⁴ So, the technology has sustainability benefits across all of those areas.

I think that to give an example, just on the engineering side, we've now seen our customers come to us to help, like, from the beginning when we are designing—especially in the process industries on the simulation side. You know, they want to understand how the decisions that they make, what emissions impacts they will have.

And so we are building in—and have successfully built in—carbon-accounting capabilities into our suites of tools because we want to give them underlying data from the beginning that's accurate. A company like Kellogg's, for example, that has manufacturing plants: they've used our tools to help them to understand how to optimize HVAC systems, how to understand, first of all, what energy they are using, but then also to identify reduction opportunities over time.¹⁵

So it really isn't limited to, you know—we work very closely with the energy producers themselves, but also in the manufacturing sector, there's huge advantages if you're able to get real-time data, to visualize that data, to connect data points across global operations or regional operations. Or even within one area, across different plants, you're going to have a much more quick and accurate view of what you're really able to achieve. And so that allows you to report up on your sustainability goals quite accurately, but also to achieve them.

RUCHI

And just to add one more point to that: what really excites me about AVEVA technology is how it's helping to drive, sort-of, emerging technologies and scaling up. So especially some of our tools are being used in designs for production of green hydrogen, which is very exciting because in the market we often hear the skepticism about we need more technologies at scale to actually see net-zero goals being met. So that was just one thought that came to my mind.

REBECCA

Yeah, and I think it would be great in a future episode to kind of—I know we have a lot of really interesting sustainability-focused stories—it would be great to kind of dig into those and in more detail and hear some of those stories.

But for now, I just want to say thank you to both Lisa and Ruchi for joining us today. And I very much look forward to future conversations.