Information Systems for Environmental Sustainability

IT, Resource Productivity, Environmental Preservation, and the Fourth Industrial Revolution


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Climate Risk Regulations Vs Enforced Regulations: The IT Elephant in the Room

In 2010 the SEC published “interpretive guidelines” for corporate disclosure of risks related to climate change, summarized in this table by Ceres (p. 8):

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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.

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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.

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Sustainability + Big Data = Transformation

From my perspective,” Starks said, “the Internet of Things is a technology looking for purpose, and to me sustainability is a purpose.” Toward that end, he said, AMEE hopes to be a “catalyzer for change…” (Gavin Starks of AMEE).


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Corporate Value Chain GHG Accounting Standard: Where’s IT?

The 149-page corporate value chain accounting and reporting standard was released a few months ago by the Greenhouse Gas Protocol:

Over a three year period:

  • 2,300 participants were involved from 55 countries;
  • 96 members participated in technical working groups to draft the standard, and;
  • 34 companies from various industries road tested the standard in 2010.

The new standards provide a methodology that can be used to account for and report emissions from companies of all sectors, globally. They are accompanied by user-friendly guidance and tools developed by the GHG Protocol.

The standard is all about information: what’s required, what’s suggested, how often, how accurate, boundaries, computations, etc. It is detailed, precise, and (fairly) comprehensive.

But it says almost nothing about the information systems that are at the foundation of its implementation. For example, discussion of a “Data Management Plan” is relegated to an appendix that uses vague language such as:

Information on criteria used to determine when an inventory is to be re-evaluated, including the relevant information needed to be tracked, and how this should be tracked over time. This allows data and information sources to be tracked and compared overtime. It may also involve identifying a system (e.g., document tracking and identification system) to ensure data  and information is easily located and under what conditions this information/data was used or collected.

Why is this a problem? As Orlikowski and Iacono (2001) emphasize:

  • IT artifacts, by definition, are not natural, neutral, universal, or given….they are shaped by the interests, values, and assumptions of a wide variety of communities of developers, investors, users, etc.
  • IT artifacts are always embedded in some time, place, discourse, and community….[historical and cultural conditions] cannot be ignored, abstracted, or assumed away.
  • IT artifacts are usually made up of a multiplicity of often fragile and fragmentary components… [over simplifications] make it easy to talk about technologies, [but] they also make it difficult to see that such technologies are rarely fully integrated, flawless, and unfailing, and that they can and often do break down, wear down, and shut down.
  • IT artifacts are neither fixed nor independent, but they emerge from ongoing social and economic practices.
  • IT artifacts are not static or unchanging, but dynamic…understanding how and why IT artifacts come to be “stabilized” in certain ways at certain times and places are critical aspects of understanding the range of social and economic consequences associated with particular technologies in various socio-historical contexts.

Ignoring these critical characteristics of information systems in organizations may inhibit effective implementation of environmental standards, and ultimately, hamper efforts to manage and reduce corporate greenhouse gas emissions.

What’s needed? IMHO, expansion of the scope of GHG standards to include specifications for the information systems that form the foundation of applying the standards in practice.

Reference

Orlikowski, W.J., and Iacono, C.S. 2001. “Desperately Seeking the ‘IT’ in IT Research – A Call to Theorizing the IT Artifact,” Information Systems Research (12:2), pp. 121-134.


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VERGE DC: Focus More on Business Energy Efficiency & Carbon Reductions?

The recent VERGE DC Conference brought together:

corporate leaders focusing on a new wave of technological change revolutionizing sustainability. A convergence of technologies for energy, buildings, information, and vehicles, which GreenBiz calls VERGE, is enabling companies to break down organizational silos, and accelerate innovation. This has profound implications for your company’s sustainability and business goals.

The program included experts on residential energy use, built environment, innovation, electric vehicles, cloud, Internet of things, government, sensors, and supply chain management. I attended virtually, free, so thanks to VERGE for making most of the sessions available online.

One suggestion I have is to increase the focus on what business is doing now in the areas of using IT to enable energy efficiencies and carbon emission reductions (only a few sessions dealt with this topic). What types of efficiency initiatives are working? What is most effective? What are the hurdles?

Why more focus on business? According to computed U.S. energy flows, the non-residential sector uses much more electricity (about 1.5 times as much):

  • Residential electricity: 4.95 quads (39%)
  • Commercial + Industrial + Transportation: 7.85 (61%)

From an aggregate “move the needle” standpoint, is it easier to get tens of thousands of large companies to be efficient rather than 100 million + households?

Suggestions for future VERGE programs?

  1. Environmental ERP vendors and use cases
  2. Carbon emission management in supply chains
  3. Data standards for sharing energy value chain data between utilities and business
  4. Social media for employee engagement efforts around energy efficiency/carbon management

I have three studies in progress on information systems for managing energy and carbon emissions (#1 above), and there’s a growing community of researchers and consultants working in these spaces. One insight that’s emerged from my research is that energy data sharing between utilities and companies is not well developed, and this is a key inhibitor of organizational sustainability efforts (the first study on this will be posted on SSRN soon).


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Update: XBRL Taxonomy for Sustainability Data Now Released

I’ve written before about how the Global Reporting Initiative (GRI) and Deloitte were collaborating to develop an XBRL (extensible business reporting language) standard for sustainability data. Well, it’s now launched:

Data on the sustainability performance of companies – including carbon emissions, water use and human rights infringements – can now be easily revealed thanks to a new format for tagging data in sustainability reports, being launched today (Thursday 8 March 2012) by the Global Reporting Initiative (GRI). Sustainability experts say the new format will help people find information hidden in sustainability reports much more quickly and easily.

GRI is encouraging firms to tag their data with the new standard. This is a step in the right direction, but I have a few questions.  How long will it take for firms to adopt? What is the incentive? How long will it take leading energy and carbon management systems to incorporate the new standard to make it automatic and costless for companies to use the standard? Will the data be shared or monetized by third parties?