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Sustainability strategy must focus on energy consumption

In this Q&A, Greg Cudahy of EY discusses why more efficient energy consumption helps companies meet sustainability goals and how public-private investment drives energy transitions.

The move to more sustainable technologies will be vital for companies to reach climate goals. However, this is expensive, and the adoption of greener technologies does not always result in the expected sustainability goals.

One reason for this is that companies are focused on the power generation side of sustainability -- for example, by moving to eco-friendly power sources -- rather than the power consumption side, according to Greg Cudahy, global leader for tech, media and telecommunications at EY.

Cudahy and his group consult with companies around the world in developing a strategy as they transition to more sustainable energy sources and technologies. In this Q&A, Cudahy discusses why more efficient energy consumption is a critical aspect of meeting sustainability goals, why public-private partnerships are needed to make the transition more affordable and why sustainability results in profitability.

A lot of discussion has been around retrofitting for sustainability, and that's now changing into designing sustainability in, but people want to know what they can do now and where they can start.
Greg CudahyGlobal leader for tech, media and telecommunications, EY

Is sustainability a key issue today for most businesses?

Greg Cudahy: At the highest level, this has become a strategic issue, and it's now clearly a C-suite agenda item. You don't get past the door without understanding what your position is on sustainability.

What are some trends now as companies set a sustainability strategy for IT?

Cudahy: Often when people talk about green tech, they talk about things like photovoltaics, biomass, wind turbines, but that's on the power generation side. It's the power consumption side that's going to serve as an explosive growth area. A lot of discussion has been around retrofitting for sustainability, and that's now changing into designing sustainability in, but people want to know what they can do now and where they can start.

Does the strategic focus have to be on reducing consumption and getting more efficient energy usage, rather than just moving to alternative energy sources?

Cudahy: That's right. When you get down to it, a lot of green gains are from increased productivity. Everybody talks about how because they're driving an EV [electric vehicle], their carbon footprint is lower, but that depends on where the energy is coming from. People look at the silo instead of the value chain. They'll say the car is not generating any carbon, but is that [power] coming from a coal-based source or is that coming from nuclear, from wind or other more renewable resources? Where are you getting all the minerals to support this? What's the cost of mining? It's much more complex than just how many solar cells or wind turbines you deploy, or how much hydro you use. That's a challenge because companies that operate independently only control a small slice of the total value chain. We think a big trend is going to be having companies across the chain involved, so you're not just making a problem elsewhere. That's how you're going to get a sea change in the efficiency of power usage, not just sourcing more green power.

How will that change come about, and will companies motivate themselves or will it take more government regulations?

Greg Cudahy, global leader for tech, media and telecommunications, EYGreg Cudahy

Cudahy: Five or so years ago, it was a push from government and regulators both in the U.S. and elsewhere. My opinion now -- not that everybody agrees with it -- is that we're at a tipping point now, where sustainability is a given if you talk to anybody in business and remove the politics. Certainly the next generation of employees want to know that they're not just getting a paycheck -- they want to know that they have a purpose and an impact. It's something that's seen as a mission-critical thing for society, not just as employees or even individuals, and that concern has embedded itself into most of the major companies we've worked with now.

This kind of transformation to adopt more sustainable technologies is very expensive. How can companies make that investment?

Cudahy: The public-private part is really important now in energy transition, but also in the adoption of more efficient devices across the value chain. Can consumers fund that over time? Probably, but is that fast enough? That's why there's this notion of public-private partnerships, which you can see in China and in the U.S. with the CHIPS Act, for example. You can't do a large transformation program, in any sector, without some involvement from the government to make sure that there's sustainability consideration in it.

What are some of the specific IT areas that can make a difference in this energy transition?

Cudahy: One of the big trends that we see right now is there's going to be a huge market in edge computing. For this, you need all these IoT devices, but that's a conundrum because the more devices you deploy, the more energy you use. You get a huge benefit in some ways, but you also have an energy increase in usage elsewhere. You measure something aggressively to achieve some of the goals, but [rather than pushing] CO2 elsewhere, you need to look at the whole value chain and make sure that everything you do up and down the system generates less CO2 in total.

Many companies are adopting edge computing in part to increase efficiency and reduce the costs of the cloud, but doesn't this also increase energy usage?

Cudahy: It's not costless to move data back and forth, especially as volumes of data are increasing exponentially. If you're constantly moving that back and forth to the cloud, it's not just the cost or the lag time, it's additional energy usage. So, if companies are making real-time decisions, they must decide what data they want to keep and if they really want to move it to the cloud. It's not just the efficiency of energy directly, but it's also reducing unnecessary usage of storage, and it's reducing the number of computations that don't result in action. Each individual one is minuscule, but when you have billions of transactions across the globe daily, even 10% more efficiency in those has a direct impact on energy usage and sustainability overall.

Because the transition to being a sustainable company can be very costly, can a sustainable company be a profitable company?

Cudahy: In general, that's true in terms of operating costs. It's the upfront investment that's the challenge, but it's also the optimal deployment of that investment that's the challenge. So, the notion of public-private partnerships comes in. A lot of that is about designing in sustainability, and a lot of that is around sequencing. If you're a cash-poor company, you want your initial investment to get a quick return on cash flow so you can invest more. If you're a cash-rich company, you may decide to invest where there's a big environmental impact and then do direct cost reductions later. It's all about doing the initial assessment and determining where you get the biggest bang for the buck first. So, in general, the answer to your question [of whether sustainable companies will be more profitable] is yes, but you have to look, specifically industry by industry, and even individual company by individual company.

The public side of the public-private investment comes from public sources such as the U.S. CHIPS Act. Where are the private sources of investment?

Cudahy: There's VC money in there as well, in that some companies that are perceived as having a chance to get a leap in a particular industry subvertical will get some startup funding. Instead of retrofitting sustainability, as startups they can design sustainability in. But whether it's government, it's the companies themselves or it's venture capitalists, all of them know that over the long haul, there's no question that more sustainable is more profitable.

Editor's note: This Q&A has been edited for clarity and conciseness.

Jim O'Donnell is a senior news writer who covers ERP and other enterprise applications for TechTarget Editorial.

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