Top 3 Reasons Why Digital Transformation Is Key To The ‘E’ In ESG

Mark Valdez Written by Mark Valdez

Top 3 Reasons Why Digital Transformation Is Key To The ‘E’ In ESG

As we close out 2021 and set our sights on 2022, let’s look at two trends that have been at the center of conversation throughout the energy industry: digital transformation and environmental, social, and governance (ESG), specifically the “E” component. Because of increasing pressure from stakeholders and investors, more and more companies are creating sustainability strategies and are trying to incorporate them into their ESG business plans using modern technology.

In today’s world, investors and consumers are more frequently looking for cleaner energy sources to power their homes or businesses. This is driving industry leaders like Pioneer Natural Resources, ExxonMobil, and ConocoPhillips to develop products and services that are in line with the needs of the market to remain relevant and competitive. Therefore, you’re now seeing major players develop more comprehensive ESG strategies that include sub-components involving sustainable development, responsible “energy transition” policies, and environmental planning, to name a few, with other companies following suit.

Companies in all sectors, including energy, are incorporating advanced technologies to maximize their ESG strategies, drive long-term growth, performance, maximize shareholder value while managing and mitigating risk. The following are three technologies businesses are using to their advantage and why they may be keys to driving value in the “E” within ESG.

  1. Internet of Things (IoT): Companies utilizing IoT solutions to track, analyze and deliver data in real-time can make sound decisions more quickly and efficiently. A report from the World Economic Forum states that 84% of IoT deployments are currently addressing or have the potential to address the UN’s Sustainable Development Goals (SDGs), which can assist businesses in their ESG plans. With advanced IoT tools and sensors, companies not only can have the capability to monitor data, but they’ll also be able to respond to demand and make necessary changes to their respective environment. For example, some midstream companies are using sensor technology to monitor pressure, gas flow, and other variables to predict pipeline leaks. This real-time leak detection and alert system could lead to a reduction in costs and prevent environmental damage. Therefore, this type of technology could help companies accelerate their respective ESG policies.
  2. Artificial Intelligence (AI): Modern technology has also given companies the capability to use AI to their advantage in ESG investing. For example, using AI enables a company to better detect and reduce the amount of methane emissions at a wellhead or pipeline using machine learning combined with optical sensors. Royal Dutch Shell is one of the leading companies in AI having implemented descriptive analytics and predictive maintenance for half a million valves in its operations across the world. Much of AI’s potential comes from its capability to carry out data analysis and algorithms that allow computers to analyze data and identify key information that can be referenced when making business decisions. A report from MDPI discloses how ESG frameworks and the impacts of AI are related to the UN’s SDGs. Incorporating AI into ESG plans can be beneficial by having the potential to track CO2 removal, energy emission reduction, and further accelerate the “energy transition”
  3. Digital Twins: The concept of digital twin technology is to create a virtual environment that replicates real-world processes or services to collect data and predict how they will perform. Digital twins coincide with features and characteristics found in IoT and AI, which use sensors and algorithms to enhance data analytics to aid in business strategy and risk prevention. Shell has also started incorporating digital twin technology into its Nyhamna gas plant to explore the performance of operations, minimize energy consumption, and ultimately increase gas and condensate production. This advanced technology benefits the “E” in ESG by detecting cost-saving solutions in certain areas of a process or service that would otherwise be seen as wasteful.

What Does This Mean For The Energy Industry In 2022?

A new year breeds new and exciting opportunities and changes on the horizon. One important prediction that can be made with certainty is the importance of environmentalism, especially within the context of ESG, which will only increase in popularity with investors and consumers. Simultaneously, the push for digital transformation will continue throughout the industry adding value to operations and business analysis. More and more companies are moving towards a new age of energy, specifically a more sustainable energy, that will be developed by advanced technology and ultimately bring a “green” return on investment.

READ MORE: Why Digital Transformation Can Take Sustainability To New Heights

About The Expert

Mark Valdez is a Consultant in Opportune LLP’s Process & Technology group based in Houston. Before joining Opportune, Mark worked for the United States Marine Corps as a Data Systems Administrator and was a Scheduling and Operations Intern for The Personal Office of Barack and Michelle Obama. Mark graduated from Texas A&M University with a B.S. in Business Management Information Systems and a minor in Cybersecurity.

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