How digital technology can drive energy efficiency and sustainability

In this episode, Craig Coulter and Sai Yadati from the EY Advanced Manufacturing and Mobility team, examine what industrial companies can do to accelerate their sustainability initiatives.

Key takeaways:

Challenges such as energy infrastructure limitations, conflict minerals and the need for accurate ESG data are obstacles to reaching climate goals, despite progress and investments spurred by recent legislation.
Digital tools are critical for energy transition, with examples showing significant reductions in emissions through smart energy management and the potential of virtual power purchase agreements for renewable energy sourcing.
Leadership plays a key role in decarbonization by fostering a culture of innovation and collaboration, essential for maximizing digital technology benefits and achieving sustainability targets.

For your convenience, full text transcript of this podcast is also available.

Welcome to the EY Advanced Manufacturing and Mobility Business Minute podcast series, where EY professionals explore the critical business issues impacting our industry today.

Moderator

For today’s session, we’re going to discuss a topic that continues to make headlines: decarbonization. We’ll look at how industrial companies are using digital technology to build a better decarbonization strategy. As the need for carbon net zero grows stronger, industrial companies are under increasing pressure to innovate and transform. Automation, artificial intelligence (AI) and other cutting-edge tools can help with production processes and improve efficiency, which in turn helps to reduce carbon emissions.
But there is still a lot of work to be done for these companies to get where they want and need to be. Here with us today to discuss this really important topic is Craig Coulter, EY Global Advanced Manufacturing and Mobility Strategy and Operations and Sustainability Leader, and Sai Yadati, EY Americas Advanced Manufacturing and Mobility Sustainability Leader. Thanks for joining us today.

Craig Coulter

Thanks for having us.

Sai Yadati

Thank you. Thanks for having us.

Moderator

According to the EY 2023 Sustainable Value Study, more than two-thirds of advanced manufacturing and mobility companies surveyed have committed to reducing emissions by a certain amount. More than half are also committed to being carbon neutral, and a third plan to get to net zero. Nine out of 10 companies surveyed have committed to achieving these climate ambitions within the next 30 years.
It seems like progress is being made in leaps and bounds, yet there are still concerns. Craig, let’s start with you. What sort of obstacles are industrial companies encountering as they strive to reach their climate change objectives?

Coulter

Industrial companies are committing considerable resources to achieve their net-zero goals by decade’s end. But they’re still facing a number of challenges to make that happen. Despite [the] COVID-19 pandemic’s substantial setbacks, significant investments related to IRA and other legislation in US and EMEIA are enabling better progress. But we should try and shift that narrative to frame COVID-19 more as a market hurdle, underscoring that now is the pivotal moment for our clients to seize the initiative as they transform.
Another issue is our current energy infrastructure, as it’s currently not capable of meeting our future energy demands. According to International Energy Agency (IEA), we are set to boost our global renewable capacity to 2.5 times its current level by 2030. And while that’s impressive, it’s still short of the capacity we need by the end of the decade.
Related to that, we’re also in a bit of a crunch with conflict minerals needed for low-carbon tech. With much of the renewable supply chain such as copper, lithium, nickel and zinc concentrated in China and other developing countries, there’s understandable concern about accessibility when it comes to obtaining these materials, especially given today’s tenuous geopolitical landscape — let alone the working conditions many miners in these locations face.
Lastly, accurate and real-time ESG data is another issue. It’s very hard to come by. While advances in AI are showing great potential to streamline this, poor data quality is really allowing us to not utilize AI’s full potential to tackle the issues.

Moderator

Clearly, there are still challenges ahead. So, let’s bring Sai into the conversation and talk more about how digital technologies can play a vital role in addressing some of these concerns and building some positive momentum. Research findings in a recent Make UK report indicates that 62% of UK manufacturers that have adopted digital technologies reported achieving energy cost savings in the past 12 months.
Furthermore, 44% said that digitalization was the top driver of productivity improvements. Sai — talk to us about how digital technologies are being utilized to expedite the net-zero transition for industrial companies.

Yadati

Sure, I’d be happy to. There are some exciting developments that give us reason to be optimistic about the path to net zero. When you look at the Internet of Things (IoT), generative AI, and advanced analytics, these are tools that can help industrial companies fast-track their energy transition. Think about smart devices that can help track energy consumption by producing data around the “who,” “what,” “where,” and “when” of energy usage, all in real time. IoT sensors and AI can catch inefficiencies and predict maintenance needs.
Supply chain analytics can sharpen conservation strategies and help to minimize waste. The good news is, these technologies can be implemented right now to help companies to reduce energy consumption. For example:

An American automaker’s push for continuous improvement in energy management has led to an impressive 38% emissions reduction.¹
A large Danish shipping company has used the power of AI and cloud computing to slash fuel consumption by 10%.²
A French electric equipment specialist is setting a new benchmark by reducing energy consumption by almost a third through automated supply chain management.³
Two American conglomerates have smart meters set up and running to optimize energy use across their facilities.⁴
And lastly, a German chemical company is harnessing digital twinning to optimize energy use at their plants.⁵

So in a nutshell, digital tech isn't just an asset. In many cases, it can be the way to fast-tracking a company’s transition to net zero. It is, in a way, how companies can truly entrust their own duality challenge of being sustainable while also being profitable, addressing the needs of both the stakeholders and the shareholders.

Moderator

That’s very exciting. While we’re on the topic of technology, I’d like to talk about renewable energy and virtual power purchase agreements. The way I understand it, industrial companies can use these agreements to buy renewable energy at a fixed price over a long period of time to improve energy security. Can you talk about this strategy, Craig, and how data analytics can help make it work?

Coulter

Absolutely. Maybe just some examples out there that we can share. So a number of industrial companies are optimizing their energy mix by including renewable energy. For example:

An American heavy equipment manufacturer is investing $24 million in a German company that creates environmentally friendly energy storage systems.⁶
A US airplane manufacturer relies on renewable energy such as solar, wind and hydropower for powering its American factories and a data center.⁷
Another American chemicals company is entered into a virtual power purchase agreement, or VPPA, to contribute 135MW of wind power to their North American grid, equating to about 528,000 megawatt-hours of renewable electricity annually.⁸

This is an excellent opportunity for all of our clients, and they should take a hard look at it. With virtual power purchase agreements, data analytics can help with demand forecasting, coordinating supply, energy storage and discharging in a decentralized, renewable-based power system. This can help identify energy mix optimization levels between new renewables and existing fossil-fuel-based energy.
So the key takeaway here is that this is a huge opportunity for multinational companies to invest in, whether through partnerships, altering their energy sources for renewables or through virtual power purchase agreements. And it’s a great example of how clients can achieve their net-zero goals.

Moderator

Thanks for getting us up to speed on renewables, Craig. I’d like to talk about energy circularity. Sai, how are digital technologies helping companies exploit all of their energy resources, materials and waste to be more efficient?

Yadati

When it comes to decarbonization, energy circularity presents a significant opportunity for industrial companies. Selectively using and recycling energy resources, materials, and even waste within a closed loop system is crucial. Digital technologies can be the conduit that helps companies efficiently utilize energy circularity, functioning as an essential catalyst.
Consider how transformative waste, heat recovery and carbon capture are harnessing greenhouse gases, which are conventionally seen as the problem, and instant recycling them can transform a company’s carbon emissions profile.
Any enterprise committed to decarbonization should be weighing the potential of energy circularity.

Moderator

That’s very interesting. I’d like to shift gears a bit and talk about the role leaders can play in energizing their people around digitalization to decarbonize. Clearly, leaders need to rethink culture, talent and partnerships in ways that support digital transformation in the context of the sustainability agenda. What are your thoughts on how leaders can effectively engage their people in this effort and earn their support for next steps?

Yadati

If you are aiming for net zero, you’ve got to shake off the traditional ways of doing things. This starts at the top. Leadership has to nurture a culture of innovation, encouraging the team to try new things, take risks and even fail sometimes. It’s all about breaking status quo, staying agile and embracing change.
That’s how you get the most of your digital solutions. Find the courage to step out of your comfort zone. Think differently. Adapt and pivot. Equally important is bridging the gap between your digital transformation and sustainability teams. Your CIOs, CTOs, CSOs — they all need to be on the same page. Collaboration is crucial for maximizing the returns on your digital investments and for meeting your sustainability targets.
You also need to invest in your people. Make sure they are skilled and ready to navigate the digital landscape. Provide the necessary training. Upskill them. Foster cross-functional collaboration and remember: a well-equipped workforce can significantly contribute to your decarbonization goals.
And take note: no one achieves net zero alone. You’ll need an ecosystem of partners — in tech, in academia, and across the industry. These strategic alliances can lead to shared best practices and accelerate the pace of decarbonization. The fight against climate change is, after all, a team sport. It will take collaboration to achieve ultimate and enduring success.

Moderator

I think that’s a great point. As much as digital technology continues to change our lives, there’s still so much power in people and the ability to drive change. So as we wrap up, I’d like to focus on action items that really can help companies increase the impact of digital on their sustainability outcomes. Craig, what recommendations do you have for industrial company executives to help leverage technology to support their decarbonization initiatives?

Coulter

As we all know, all of our clients have net zero goals. So the urgency to decarbonize is very real, and the next steps are getting clearer and clearer every day. So here are some recommendations that industrial companies can take to optimize digital tools for their sustainable outcomes.

First, integrating a digital strategy into your energy transition program. Define the digital benefits, set clear goals and timeframes, ramp up those investments, and ensure that you have robust cybersecurity measures.
Secondly, you can't run before you can walk. So initiate a pilot program and set short-, medium-, and long-term investment objectives. Focus immediate investments on digital tools like smart metering and automation. Then start to think bigger. For example, digital twins that Sai mentioned in Smart energy storage. Keep the long-term goal on circular technologies, despite those complex challenges we know you all face.
Also, always consider and leverage government incentives when available. Investment use cases can look significantly more favorable when incentives can boost the bottom line.
I also think it’s critical to lead by example. So try to break down those data silos, encourage widespread industry adoption of digital solutions, and try to be a champion of digitization and standardization. It’s all about transforming together.
Finally, last but not least, please go beyond mere compliance. Treat compliance investments as that first stepping stone. Then utilize detailed data about your energy use and emissions to drive better efficiencies, and you can improve your business decision-making.

So in summary, adopting a digital-first approach to decarbonize can give industrial companies a much-needed edge in market transformation. With strategic leadership, empowered workforce and collaborative innovation, industrial manufacturers can make their net-zero ambitions a reality.

Moderator

That’s perfect. Craig. It’s been a pleasure getting insights and perspectives from both you and Sai. How can listeners find out more about this important topic?

Coulter

I would invite listeners to go to ey.com to read and learn more about digital and decarbonization. There’s more information and insights on the points that we discussed. And also, please feel free to reach out and ask for further discussions and information. We’d be delighted to engage more meaningful conversations on these topics.

Moderator

Thanks for joining us today and for the great discussion on this important topic.

Coulter

I really appreciate you having us today. Thanks so much.

Yadati

Absolutely. Thanks for having us today.
Thanks for listening to today's EY Advanced Manufacturing and Mobility Business podcast. We hope you found it engaging and informative. To listen to other business minute podcasts, you can find them at ey.com/ammpodcasts.

"General Motors Accelerates Emissions Reduction Goals," Smart Energy Decisions website, www.smartenergydecisions.com/energy-management/2021/05/03/general-motors-accelerates-emissions-reduction-goals
"A.P. Moller - Maersk expands relationship with Microsoft to further digitize and decarbonize logistics," Maersk website, www.maersk.com/news/articles/2023/06/08/maersk-expands-relationship-with-microsoft-to-further-digitize-and-decarbonize-logistics
"Schneider Electric outperforms 2023 sustainability targets and maintains its leadership in ESG ratings," Schneider Electric website, www.se.com/ww/en/about-us/newsroom/news/press-releases/schneider-electric-outperforms-2023-sustainability-targets-and-maintains-its-leadership-in-esg-ratings-65cc89b3ade55370f80f3013
"Smart meters," GE website, https://www.ge.com/news/reports/tag/smart%20meters
“Honeywell forge energy optimization," Honeywell website, www.honeywellforge.ai/content/dam/honeywellbt/en/documents/gated/sustainabilityinfographic.pdf
"Staying competitive with the Digital Twin," Siemens website, https://www.siemens.com/global/en/company/stories/industry/2024/basf-chemical-industry-digital-twin-energy-efficiency-decarbonization-germany.html
"Cummins Collaborates With Company Pioneering Energy Storage Technology To Advance Destination Zero Strategy," Cummins website, www.cummins.com/news/releases/2022/08/01/cummins-collaborates-company-pioneering-energy-storage-technology-advance
"Boeing reaches net-zero carbon emissions from manufacturing and worksites," Boeing website, www.boeing.com/company/about-bca/washington/boeing-reaches-net-zero-carbon-emissions-from-manufacturing-and-
"DuPont Virtual PPA helps fund commissioning of 135-MW Texas Wind Farm," EnergyTech website, www.energytech.com/renewables/article/21264460/dupont-virtual-ppa-helps-fund-commissioning-of-135-mw-texas-wind-farm

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Presenters

Craig Coulter

EY Global Advanced Manufacturing & Mobility, Strategy & Operations and Sustainability Leader

Sai Yadati

EY Americas Advanced Manufacturing & Mobility Sustainability Leader

Podcast

Episode 33

Duration

15m 39s

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How digital technology can drive energy efficiency and sustainability

Key takeaways:

Moderator

Craig Coulter

Sai Yadati

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Coulter

Moderator

Yadati

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Coulter

Moderator

Yadati

Moderator

Yadati

Moderator

Coulter

Moderator

Coulter

Moderator

Coulter

Yadati

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Craig Coulter

Sai Yadati

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