McKinsey: How Does Tech Pave the Way to Decarbonisation?

A Key Theme at CES 2024 in Las Vegas, Sustainability Initiatives Underpin & Optimise the Development of Emerging Technologies to Tackle the Climate Crisis

According to research by global management consulting firm McKinsey, cloud-power is key to necessary decarbonisation initiatives for a 1.5°C pathway by 2050.

The study found that there are three technologies which are, for the most part, cloud-powered — artificial intelligence (AI), machine learning (ML) and Internet of Things (IoT) — that, when used correctly, can play an integral part in the success of decarbonisation initiatives, providing unique insights when it comes to the likes of climate-smart agriculture, climate investing and scaling critical climate technologies — all critical elements when it comes to lowering and eventually eliminating carbon in pursuit of climate neutrality.

“As companies gear up to comply with increasingly complex sustainability regulations, strategic use of cloud-powered technologies can be a crucial differentiator,” McKinsey’s Cindy Levy, Fan Gao, Eric Hannon, and their fellow report co-authors report.

Cloud-powered tech that accelerates sustainability

The foundation of McKinsey’s research is based off 217 initiatives the consultancy has identified that, together, offer substantial decarbonisation opportunities across a variety of industries. McKinsey says that these initiatives create a ‘meaningful pathway’ toward curbing the path of g;obal warming to 1.5°C.

“In everything from assessment and reporting to major transformations and business enablement, these technologies serve as a crucial tool for achieving decarbonisation goals swiftly and efficiently,” the report’s authors state.

With AI, ML and IoT poised to play a crucial part in the decarbonisation process, here’s how McKinsey predicts cloud technologies are acting as a major catalyst.

Technology expedites decarbonisation by 47%

Despite cloud technologies taking a hold over the last 15 years or so, McKinsey’s research finds that these assets have not, until recently, been utilised to their full potential. But the time for embracing these technologies, which McKinsey says unlock substantial value, is now under way, with barriers such as cost and it being time-consuming mitigated as time has gone by. 

Looking at its 217 initiatives, McKinsey’s research suggests 101 of them, 47%, can accelerate decarbonisation with the help of cloud-powered technologies. It adds that previous estimates, which said decarbonisation would cost US$9.2 trillion annually, the impression now is that the contribution of the cloud to this cause could be worth hundreds of billions of dollars each year. Its worth can also be calculated by its power to reduce the amount of CO2 equivalent released, which McKinsey sets out as up to 32 metric gigatons (GtCO2e), almost half of the total 65 GtCO2e estimated to be required for net-zero emissions by 2050. 

It’s been found that cloud-powered technologies, including AI, IoT, and ML, can significantly contribute to decarbonisation efforts, as cloud-based data exchanges enhance transparency in Scope 3 emissions and, as a result, reduce the time for actionable strategy. Potentially, cost of decarbonisation can be reduced by 5-15% when cloud technologies are actioned, resulting in more than a quarter when it comes to Scope 3 emissions.

Planning and implementing assets for decarbonisation 

But what good is having technology that can make meaningful change with no means of making it work?

McKinsey calls for companies to identify their own critical initiatives which will speed up decarbonisation, before adhering to the following steps:

  • Develop a technology-enabled decarbonisation plan: This provides the basis for a model that can be frequently updated as new solutions become available and a company moves through the decarbonisation process. 
  • Understand the potential of cloud-powered technologies for each initiative: Where can cloud-powered technology have the biggest impact?
  • Develop an investment and implementation plan: This way, companies can maximise decarbonisation through investment in critical technologies.

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