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Dubbed the "twin transformers", these two pillars of change drive performance at savvy companies that use each to take part in the Industrial Revolution 4.0. The focus on the twin powers of digitisation and sustainability to drive business performance and growth, as well as developing solutions for problems facing wider society — such as climate change — was noted by EU President Ursula von der Leyen last year as she revealed Europe's industrial strategy.
“Europe's industry is the motor of growth and prosperity in Europe," she said at the time. "And it is at its best when it draws on what makes it strong: its people and their ideas, talents, diversity and entrepreneurial spirit. This is more important than ever as Europe embarks on its ambitious green and digital transitions in a more unsettled and unpredictable world. Europe's industry has everything it takes to lead the way and we will do everything we can to support it."
And von der Leyen's plans are correct, says Carlo Bozzoli, chief information officer at Enel – digital and green transformations must go hand-in-hand. "It requires, as set out in the European Green Deal, an immediate paradigm shift towards more sustainable, resource-efficient, circular and climate-neutral solutions enabled by an increasingly digitised society," says Bozzoli. "In fact, technological and digital innovations are revolutionising the way we produce, distribute and consume energy, paving the way for a new business model."
For Bozzoli, the energy transition is driven by five key forces. Sustainability is the first, and the motivating factor, as we have such a short window of opportunity to limit temperature increases below 1.5 degrees Celsius. Success is crucial, as climate change comes with human, natural and financial costs – research suggests pollution is responsible for nine million premature deaths annually and leaves one million species facing extinction, while the climate crisis will cost $23 trillion globally by 2050.
Because of that, electrification is the second force driving the energy transition, predicting that the increase in electric cars and expansion of electric grids in Africa and Asia will mean half of consumed energy will be electricity by 2050. "Thanks to decarbonisation, electricity will emerge as the best source of end-use energy use," he says.
The third factor is urbanisation, a trend that's seeing rural residents continually moving to cities – indeed, half of the world's population lives in an urban area already, and that proportion is expected to grow, especially in Africa. From a sustainability standpoint, cities consume three-quarters of the world's energy and emit 70 per cent of emissions, though they only occupy less than one per cent of the world's land. "Therefore, making cities sustainable will be key for energy transition," he says.
Bozzoli's fourth factor of change facing businesses is responding to new customer needs, driven not only by new technologies but accelerated by the pandemic. That's changed how we work and live, as well as expectations – now, customers want personalisation and are less loyal to brands. "For this reason, businesses should put the customers first by listening to their needs and creating a connection with them," Bozzoli says.
The last factor brings it all together: digital transformation has impacted every aspect of our society and economy, says Bozzoli. By next year, two-thirds of global GDP will be digital, with investments in digitisation climbing 16 per cent from 2020 to 2023 to total $7 trillion, while from 2025 the annual income of the platform economy will top $60 trillion. This is growth all companies can benefit from, he says, in particular energy utilities.
"The high-speed energy transition process requires utility companies to evolve and become the co-ordinators of an increasingly complex system with multiple interactions between different and decentralised actors," he says. "Digitalisation can break down boundaries between energy sectors, increasing flexibility and enabling integration across entire systems. In this context, digital technologies will play a key role in fully decarbonising the power sector, which is the starting point for a net-zero energy system."
Keeping ahead of such forces will not only help businesses, including utilities, to contribute to solving the climate crisis, but pairing digital solutions with sustainability drivers helps businesses grow, too. Recent studies reveal that this "European double-up" makes business sense, with "twin transformers" 2.5 times as likely to have strong performance than others that fail to heed such changes.
However, that research also warns that European companies aren't doing enough on both fronts. "European companies' early lead in sustainability should make them a natural to be Twin Transformers, yet few are pursuing this path," the report notes.
Bozzoli agrees, noting that energy utilities – key players in this transformation – are in the "middle of the back in terms of digital maturity, lagging technology and finance sectors." What can they do to catch up? Enel Group's own activities reveal a path forward to building a sustainable business model using technology.
Enel has turned to the cloud to manage big data, in order to power artificial intelligence, the Internet of Things and automation across its business. That lets the utility use predictive maintenance and data-driven operations to improve availability and production of renewable energy sources, while advanced sensors support an autonomous power grid that can better use renewables for electricity, be it pulling in power from home-based solar panels or recharging electric cars. Meanwhile, personalised data lets customers manage their energy use and access tailored services.
Next, the utility is investing in augmented reality, wearables, edge computing and quantum computing – all big ideas in their pilot phases that show real promise, says Bozzoli. "We're committed to the path of new value creation found at the intersection of digital technologies and sustainability evolving towards a sustainable business model," he says – in other words, the twin transformers are working for Enel as the group uses digital to transition to sustainability.
This article was originally published by WIRED UK
