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Navigating Cost Pressure and Climate Change With Technology

Industry Insights

By Amy Sparks , Associate Director - Corporate Finance | Matt Dalton , Deloitte Partner - Consulting

26 April 2023

Blog image climate 850x500

2023 is looking like it will be the year of margin pressure for many organisations. Normalising from the pandemic years, optimising costs will be a focus for enterprise as market conditions continue to prove challenging across the globe. Fortunately, the year is 2023, and there are many technology solutions that can assist with these challenges.

Given current market conditions, now more than ever, organisations will be seriously considering technology solutions, including Artificial Intelligence (AI) and automation solutions, that can help to increase productivity and relieve margin pressure.

In a recent Bloomberg webinar, “Intelligent Automation: Transformation in a time of uncertainty,” FedEx Executive Vice-President of IT and Global Opco Technologies, Ken Spangler, spoke on the topic of cost and automation, detailing the challenges of costs and productivity facing many businesses at present and the potential of technology – in particular, AI and automation.

A key takeaway from this webinar, and the key message of this article, is that embracing any technology solution is not about the technology – it is about the organisation’s ability and readiness to adopt and make organisational changes enabled by the technology. The changes that the technology can bring and how that change is implemented and operationalised within the organisation to deliver the desired outcome of that change is what matters. This framing is very important.

A relatively new factor that many businesses need to address are the costs associated with climate change, including regulatory compliance costs. In New Zealand, large companies must comply with the requirements under the Climate-related Disclosures regime, which includes emissions reporting, and many organisations will seek technology solutions that assist with these requirements.

There are also the costs associated with understanding and addressing climate change risks. These may not affect operational costs but could be one-off costs such as weather events impacting physical assets. For an organisation highly exposed to climate risk, the costs of remediating this risk could result in additional operational expenditure if continuous monitoring and assessment is required.

There is a proliferation of technology firms that have developed climate technologies and solutions designed to assist organisations with their climate change needs, whether it’s in relation to reporting, assessing climate risk, or driving better climate practices.

But how does an organisation choose which solution is best for their needs? It can be difficult to assess the evolving climate technology landscape and cut through what at times feels like marketing spin. Not only are the technologies new but the understanding of climate change and climate action in a business context is new too.

In our view, current adoption of climate technology is siloed in nature, meaning that the problem it addresses is bespoke to the climate need and does not consider the organisation in its entirety.

Organisations should assess climate technology solutions with care. If not selected correctly, these technologies could further drive silos and stifle an organisation’s ability to leverage the data and insights generated. It is likely that many climate technologies will assist in bringing costs down – but this is not a guarantee. They may solve for the climate need but present numerous other organisational challenges. A technology solution that solves one problem but creates three new ones is not the right solution. This is where the framing of the technology adoption is critical – it is not about the technology; it is about how organisations adopt it and change the way they work as a result.  

Deloitte has recognised the growing appetite for climate technology globally, and with this, the problems with assessing and adopting the technology. GreenSpace Tech was launched in January 2023 to assist clients looking to scale or adopt climate technologies. The solution recognises the challenges of both climate and of business – navigating the rapidly changing climate technology landscape and identifies opportunities for organisations to both decarbonise and create a sustainable competitive advantage. 

2023 may be the year of cutting costs, but this will come paired with innovation and technology adoption. Technology will provide answers to many organisations looking to optimise their costs and take pressure off margins and address climate change. Many of the climate technologies are new, and the interactions with the business as whole are often unexplored. Organisations that adopt technology that assists in driving the correct organisational outcomes will be the ones who thrive. These are the organisations that will make the most of innovative technology to move their company through the tough market conditions and into a new phase of growth.

This article was originally published on the deloitte.co.nz blog.

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