At the upcoming International Conference on Information Systems, Daniel Rush will be presenting new research empirically examining the association between enterprise information systems capabilities and greenhouse gas emissions in large organizations. The research, co-authored with myself, Ron Ramirez, and Kevin Kobelsky, suggests that IS capabilities may be a critical enabler of achieving corporate sustainability goals. The program session is Tuesday from 3:00 – 3:30 pm. in the Convention Center. Drop by to hear more from Dan!
Accenture’s use of a digital platform for speed, scale, and efficiency.
The Interpretive Guidelines were hailed as an important step forward in providing material information to investors regarding climate change risks.
Did the Guidelines impact corporate disclosures in financial statements (10-Ks)?
Ceres analyzed all S&P 500 10-k filings from 2009 to 2013, finding that:
Most S&P 500 climate disclosures in 10-Ks are very brief, provide little discussion of material issues, and do not quantify impacts or risks. Based on this report’s 0-100 scoring scale, electric power companies received an average score of 16.7 for the quality of their SEC reporting—by far the highest industry average. Even within this group there was high variability in the quality of reporting. (Ceres, p. 5 [my emphasis in bold]).
What to make of these results?
Ceres recommends that the SEC: “devote increased attention to climate risk disclosure by issuing additional comment letters in response to inadequate disclosures, and educate registrants about how to comply with the Guidance.” (p. 28).
Regarding firms, Ceres essentially says: do a better job identifying climate risks and opportunities and disclosing these to the SEC. Ceres refers to the need for “systems, processes and controls to gather reliable information” but misses an important opportunity to address an underlying necessary condition to fulfilling SEC guidance: implementing and managing specialized information systems for capturing, processing, and analyzing information related to energy, carbon emissions and other important environmental sustainability information.
It would be impossible for firms to comply with financial regulations without such systems, and it’s no different with environmental regulations. Imagine global corporations trying to comply with complex accounting and finance regulations using homegrown spreadsheet models developed and managed by one person: it wouldn’t work. The same applies to environmental regulations.
Here’s the bottom line.
Guidance, regulations, board-level oversight, internal controls, emission reduction targets, management incentives, and reporting requirements are all well and good. But without addressing the IT elephant in the room – grossly inadequate information systems focused on environmental management information – I don’t foresee any significant changes in actions and impacts.
Information systems for managing energy and carbon emissions data are critical to corporate environmental sustainability efforts.
Yet there is a lack of research on how these systems are adopted, used, implemented, etc.
To shed some light on this topic, I decided to explore how organizations are implementing and applying ECMS. Together with my colleague Ryan Whisnant, we looked at two different systems in two different organizations to identify patterns of use and make recommendations for practice.
Here’s the abstract and a link to the SSRN paper (a revised version of which is forthcoming at the Journal of Industrial Ecology):
This article examines an important class of information system (IS) that serves as the foundation for corporate energy and greenhouse gas accounting: energy and carbon management systems (ECMS). Investors, regulators, customers, and employees increasingly demand that organizations provide information about their organizational energy use and greenhouse gas emissions. However, there is little transparency about how organizations use ECMS to meet such demands. To shed light on ECMS implementation and application, we collected extensive qualitative interview data from two service-sector organizations: one that uses a spreadsheet-based ECMS and another that implemented an ECMS provided by a third-party vendor. Our analysis of collected data revealed numerous challenges in the areas of business processes, managerial capabilities, data capture and integration, and data quality. Though our results derive from only two organizations and require confirmation in large-sample surveys, we provide several general recommendations for organizations regarding ECMS. We also provide suggestions for future studies to build on our tentative results. Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2411879
While this paper represents an important early step in this research stream, much more needs to be done. In particular, one of the most important next steps would be to examine the business value implications of these systems.
Four things I’ve done this year in line with Earth Day.
1. Published a conference paper with Dan Rush suggesting that investors positively value investments in IT for managing energy and carbon emissions (rather than not valuing them because they think it’s greenwashing). Dan is leading the effort to broaden the sample and confirm the findings under more robust conditions.
2. Finished drafting a case study examining how two organizations manage energy and carbon emissions. The study revealed numerous environmental data management challenges, including
- integrating energy and carbon management systems (ECMS) with other corporate systems to enable valid and efficient data transfer;
- importing global indirect emission data from utility companies;
- workflow processes involving multiple and iteratively emailed spreadsheets; and
- keeping spreadsheet-based systems current with the latest calculation methods and parameters.
The study recommends that firms conduct total cost of ownership analyses of ECMS adoption and that standards bodies add specific guidelines regarding information systems and their role in calculating estimation uncertainties and conducting validation checks.
4. Designed, developed, and taught an MBA elective that included an online section (is virtual learning more green due to lack of commuting?) for students to learn a design thinking framework and have the opportunity to apply it to projects with a sustainability theme (transport, energy use, local food, etc.). This gets students thinking about the meaning of environmental sustainability (framing), current practices (exploring the design space and synthesizing insights), and how to concept and develop new IT-enabled solutions that satisfy human, economic, and technical constraints. Fantastic experience and student engagement!
Not enough, but it’s a start.
Craig Engelbrecht, Director of Remote Services and Technology, Siemens Infrastructure and Cities, Building Technologies Division, 2012
John Downie and Wendy Stubbs ask an important question: how consistent are the data used to convert activity data (e.g., number of plane flights) into greenhouse gas emissions (CO2e) information for purposes of Scope 3 environmental reporting?
The answer? Not so valid in the sense that a variety of different emission factors are used by different firms. For example, in their sample 3 firms used .15 for the short haul flight conversion while 5 firms used .405 (a factor of 2.7 greater). This is problematic from a consistency and an accuracy perspective.
The solution? The authors suggest that:
In Australia [more uniform emission factors (EFs)] would be ideally achieved through the expansion of the EFs included in the annual NGA Factors workbook publication.
Perhaps the NGA could publish XML or XBRL code that is automatically populated into software used by firms, so that all firms receive the same numbers at the same time. Kind of like Apple’s App Update system (I know, I know, 15 updates, what am I thinking…):
That would be a digital age solution to this environmental data problem.