Fractal aisight

April 2022

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FEATURE

Eco.logical

Harnessing the power of AI
to accelerate sustainable solutions

FEATURE

Eco.logical

Harnessing the power of AI to accelerate sustainable solutions

Environment, social and governance (ESG) issues were once seen by business leaders as a secondary concern. Now, though, they are a strong magnet for investment, especially among generations who will shortly be making those key decisions. Millennials and Generation Z are twice as likely to invest in funds that endorse companies with strong ESG principles, and 70% of them prefer to work for a company with a strong ESG footprint. As workforce issues like talent retention continue to climb up executives’ list of priorities, satisfying those sustainability expectations has become essential for business growth.

Committing to sustainability goals is one thing but delivering on them – and proving the results add value to the business – is a complex challenge. Companies must choose between an abundance of voluntary codes like the Global Reporting Initiative and the Task Force on ClimateRelated Financial Disclosures, as well as preparing to comply with emerging governmental regulations around the world. It’s even more complex for suppliers, who may need to comply with diff erent sustainability standards depending on what each of their clients expectations. 

Success is built on three pillars: identifying the best strategy to tackle sustainability issues; devising meaningful ways to monitor, measure and report on the results; and empowering people across the organization to put those plans into practice. By addressing all three of these pillars, Fractal helps its clients frame the right problems to address and design the solutions.

Question one is the same for every organization, but the answers are very different: what, exactly, is the ESG problem you want to tackle? We all have ideas about reducing emissions and conserving natural resources, but what does that really look like in the context of your business and the industry in which it operates? Only 03 by putting the issues in this frame can companies identify opportunities to make the impact they want and explore ways to make it happen. A design-led approach is the best way to pinpoint the pertinent issues, envisage eff ective solutions, create prototypes and manage change so the whole organization can rethink the way it does things and achieve its sustainability goals.

Every industry, and every company within each industry, has different needs, whether it’s identifying targets they can work towards incrementally or realizing dramatic change to make their business future-proof.

This design-thinking, solution-seeking approach is at the heart of what Fractal does, and it can be used to develop powerful ESG strategies. In the Asia-Pacific region, for example, a major telecom company wanted to harness innovation and technology to help reduce carbon emissions, address environmental issues and reduce consumption.

“Telstra’s sustainability vision goes beyond carbon neutral operations, which we achieved in July 2020 through one of Australia’s largest ever carbon off set purchasing programs,” said Fei Tan, Advanced Analytics Chapter Lead at Telstra. “By 2025, we aim to be generating renewable energy equivalent to the amount we use, and by 2030 we’ll have reduced our absolute emissions by at least 50%. We are also committed to creating a more sustainable future by optimizing the resources we use, reducing consumption and waste across our business and investing in circular solutions. Alongside an 85% increase in our network waste recycling rate, our goal is to reuse or recycle 500,000 mobile phones, modems and over devices each year to 2025.”

– Fei Tan, Advanced Analytics Chapter Lead, Telstra

Telstra’s vision is far-reaching, extending beyond internal goals to support sustainability efforts across its ecosystem.

“As Australia’s leading telecommunications and technology company, and a large user of energy, Telstra has an important role to play in addressing climate change and the many environmental challenges we face. We are committed to leading by example and using our scale and voice to help drive better environmental outcomes in our own operations and among our customers, suppliers, and communities. We use technology to address environmental challenges and help others to do the same.”

– Tim Osborne, Data Solutions Manager at Telstra

Using a multi-disciplinary, design-led approach, Fractal’s artificial intelligence, engineering, design and domain experts worked with employees and stakeholders from across the company in a hackathon-type process.

“We started with an immersive view of the business including the client ecosystem, data centers and network sites and the data available on their systems,” said Tanay Kumar, Senior Consultant at Fractal Analytics. “This was complemented by primary and secondary research, including collaboration with industry experts, corporates and educational institutions to deepen our understanding of the trends and best practices in the telecom industry.”

By combining those best-in-class examples through its design-driven process, Fractal worked with the company to synthesize and narrow down the problems it wanted to address, build a solid business case and experiment with solutions. It then moved towards three prototypes that can be scaled to reduce emissions across its data centers and network sites.

While framing the problem is an essential starting point for a strong ESG strategy, progress can only come from a deep understanding of the organization’s current position in its sustainability journey, what it aims to achieve and the actions needed to move forward. For instance, what benchmarks, baselines, and data controls should be in place to deliver a full and accurate picture of progress, not least in compliance with various governmental and non-governmental standards and regulations?

And how can you make sure everyone has the information they need to keep things on track? It’s a challenge that demands all the right data to be in one place, where it can be aligned and modeled against a spectrum of well-defined key performance indicators (KPIs) and automatically audited and validated. That’s where Fractal’s process consulting expertise comes in.

Take the example of two major consumer packaged goods companies that needed to build end-to-end ESG reporting and visualization platforms. Both organizations faced a similar problem: structured and unstructured data coming from a wide range of sources including third-party suppliers as well as the companies’ own sourcing and procurement teams. By creating a data model for ESG, Fractal harmonized and democratized each organization’s data onto a single platform so it could be used across business functions, from manufacturing to procurement, logistics, human resources and governance teams.

“Each of these business functions had different processes for collecting and gathering data, as well as diff erent KPIs relating to sustainability,” said Siddhartha Sabale, Senior Consultant at Fractal Analytics. “Developing a single platform helped them to visualize the entire range of KPIs, but it also reduced overall turnaround time. Visualization reports that previously took weeks or months to create can now be generated at the click of a button, and the companies are using these reports in their annual sustainability reporting to external audit partners. Additional simulation tools are now being developed with one of these companies, which will enable it to see how sustainability initiatives in logistics or manufacturing will have a wider impact on areas like net growth or net revenue.”

When all stakeholders are clued up on ESG performance against KPIs, it’s easier for them to make the right decisions – and that is another area where Fractal excels. How, for example, can a global confectionary manufacturer make sure it is sourcing raw materials in way that is both cost efficient and environmentally responsible?
  • Plot the path –
    Fractal works with enterprises to understand their current ESG maturity and create a road map for meaningful sustainability impact.
  • Make it measurable –
    standardized data models and industry-specific templates enable powerful data analytics and ESG reporting so firms can understand where they are, where they’re going and how to get there.
  • See the solutions –
    captured data is used to identify key sustainability drivers, with scenario planning to optimize decision making and reporting against KPIs.
    against KPIs.

That was the big problem for one Fractal client, which needed to identify the most sustainable areas to source its cocoa supplies from. Cocoa trees are susceptible to water stress, and some of the plantations that supply the organization include areas with limited groundwater availability. The company needed accurate, up-to-date information to identify areas of baseline water stress (BWS – the ratio of annual water withdrawals to total available annual renewable supply) so it could create sustainable sourcing strategies across a given farm or geography. Its manual calculations were proving prone to error, so Fractal recommended an optimization solution that uses site-level simulation with inputs including BWS, emissions, the volume raw material required and latitudinal and longitudinal location parameters to provide recommendations about which areas sourcing teams should select for different scenarios. The result? Low-cost sourcing of raw materials with lower average BWS across the chosen farm or location.

With these three pillars of sustainability in place, companies can devise, test and demonstrate the value of their ESG measures. But to paraphrase an old saying, time waits for no man, organization, environment or planet. The pressure is on to act now, and to match accuracy with speed and scale.

“Every industry, and every company within each industry, has different needs, whether it’s identifying targets they can work towards incrementally or realizing dramatic change to make their business future-proof,” said Bhaskar Roy, Client Partner, Asia-pacific at Fractal Analytics. “As we’ve worked with different clients’ frameworks, we have created accelerators to help speed up the journey of discovering and achieving the sustainability impacts they’re looking for. That might involve framing the solution, consulting on assessment process or creating data models to help clients create the solutions they need. Our design-thinking approach helps companies to quickly identify the problems they want to address, and to tackle them through targeted strategies and scalable solutions.”

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