In the ever-evolving landscape of corporate responsibility, organizations find themselves at a crossroads, balancing the ambitious pursuit of net-zero emissions with being compliant with emerging sustainability regulations, such as the Corporate Sustainability Reporting Directive (CSRD).

A Gartner study found that by 2026, 80% of organizations with net zero goals will need to restate interim milestones due to underinvestment and stakeholder scrutiny of progress. More than 50% of organizations that restate those interim milestones will be lacking the analytics capabilities necessary to identify and prioritize reduction measures.

For manufacturing organizations, the issue becomes compounded with the introduction of CSRD, a set of requirements adopted by the European Commission that includes more comprehensive reporting requirements. CSRD places a high premium on understanding an organization’s value chain to measure total carbon emissions and overall environmental footprint. Like the struggles of meeting net zero requirements, CSRD requires accurate data to paint a comprehensive picture of a company's environmental impact.

As part of this push towards transparency and accountability, organizations will be required to disclose detailed information about their supply chains, including environmental and social risks and impacts. Moreover, CSRD introduces Scope 3 emission reporting, expanding the scope beyond direct operations to encompass all environmental matters influenced by or influencing the business, such as greenhouse gas emissions and energy efficiency.

Crafting a sustainable value chain: Compliant with regulations, aligned with net zero goals

Some recent research insights by MIT’s Center for Information Systems Research (MIT CISR) looks at how organizations are setting carbon emission reduction goals across the range of Scope emissions, including Scope 3. MIT CISR indicates that “to track and optimize these emissions requires that technology leaders consolidate data about their company’s carbon emissions, combine it with data from their suppliers, partners, and customers, and make the data available to and actionable by the company. Ideally, the ability to track and optimize will also be used to show value.”

Sustainability is ultimately about data – it is the fuel to provide insights on carbon impacts and opportunities to improve. Recognizing the importance of having a data set is a foundational step. Microsoft has been investing in technology that helps centralize and transform disparate data into a standardized format making it easier for ESG reporting towards net zero ambitions or meeting regulatory requirements. Microsoft have also taken steps to advance the sustainability of AI including, optimizing datacenter efficiency, improving the energy efficiency of AI and cloud services and reducing carbon emissions through the adoption of green software engineering practices.

How 1+1 = 5

Every step of an organization’s value chain presents an opportunity to drive sustainability impact and get bottom line results. For instance, how might you extend the life of materials and inventory from your operations while circumventing costly landfill fees? We collaborated with our client; Spanish retailer El Corte Ingles to develop a Zero Waste app that gave the organization the capacity to commercialize its excess, unmarketable inventory, maximize prevention actions, recover waste, and contribute to the promotion of the circular economy.

Last mile logistics is a big topic for organizations. How can they decarbonize during this important step of the value chain? Avanade has worked with organizations to develop warehouse/logistics solutions to optimize the fill rate of trucks and thus reduce the number of shipments, and the amount of carbon emissions and fuel consumption associated with their use. Optimized logistics means fewer trucks on the road, enabling cost savings and fleet decarbonization.

There is a synergistic relationship between building a resilient value chain and fostering a sustainable value chain within an organization. A resilient value chain allows an organization’s operations to withstand and adapt to disruptions, such as supply chain interruptions or changes in market conditions. A sustainable value chain focuses on minimizing environmental impact, promoting social responsibility, and ensuring long-term viability. By integrating both resilience and sustainability into the organization's operations, an organization can achieve enhanced outcomes, such as increased competitiveness, reduced risk exposure, improved reputation, and cost savings, by strategically aligning resilience and sustainability initiatives.

Practical actions leaders can take

It’s time to debunk the myth of sustainability as a costly endeavor, businesses are urged to leverage their current investments as springboards for incremental progress, culminating in significant advancements. Embracing sustainability transcends the confines of a single executive role, as leaders from diverse business units within operations are called upon to actively participate in this collective endeavor.

Much has been written about the transformative potential of AI and its applicability to sustainability is no different. The adoption of Generative AI can help with the ability to measure, predict, and optimize complex systems, accelerate the development of sustainability solutions, and empower the sustainability workforce. By taking the rote work out of reporting, organizations such as SSE Renewables, Anglian Water, CSIRO have redirected the human effort to focus more on sustainability innovation. Generative AI also creates the potential to synthesize diverse inputs and data sets to accelerate sustainability reporting and insights. Through piloting and testing, organizations can make AI an ally to navigate the complexities of sustainability with confidence and innovation.

With more executive compensation tied to an organization’s ESG impact it’s become easier to find champions with an organization to support sustainability initiatives. Now is the time to illuminate hidden opportunities within existing operational frameworks where sustainability wins can be easily attained, particularly through ongoing technological transformations, organizations can seamlessly integrate these victories into their overarching business strategies. This approach not only fosters immediate benefits but also illuminates how technological investments serve as potent catalysts in driving sustainable impact, thus bridging the gap between corporate objectives and environmental stewardship.

Avanade helps organizations achieve their sustainability goals and meet regulatory reporting requirements. Our actionable strategies and data & AI expertise are tailored to any industry ensuring feasibility and effectiveness in implementation.

Learn more about how we augment Microsoft’s sustainability solutions through our proprietary IP and sustainability services including Avanade Sustainability Quick-Start, Avanade Sustainability Tech Accelerator, and Avanade Green IT Enabler.

Greening the assembly line: Strategies for carbon and cost reduction