How can connected, IoT-enabled solutions power green transformation while increasing businesses’ bottom line?
Climate-related disasters have cost North America an estimated $415B over the past 3 years. Increased scrutiny and urgency from both governments and consumers are pushing firms to develop solutions that address the climate crisis. For firms endeavoring to reduce waste while remaining competitive, leveraging IoT and connected solutions to service and maintain assets prevails. These connected service solutions capture performance data, use predictive analytics and AI, and leverage cloud-based infrastructure to surface actionable insights. Connected ecosystems drive sustainability and profitability for companies in three ways: enable measurement and reduction of waste, introduce accountability to achieve financial gains, and promote circular lifecycle management.
Enable Measurement and Reduction of Waste
Connected service solutions help companies better understand their energy output and reduce excessive use. The first step to reducing waste is to capture and monitor consumption data. IoT sensors equip companies with the necessary tracking capabilities to pinpoint upstream and downstream emission waste “hotspots”. With this data, firms have the power to understand required energy levels, model alternate solutions, and leverage predictive technologies to optimize during usage peaks and valleys. Corporations can negotiate favorable contracts and manage costs with energy providers. Given waste reduction is congruent with operating cost reduction, these solutions increase profitability. Providers of connected services solutions, such as Schneider Electric, cite substantial cost savings in the form of energy reduction. In one such example, Schneider Electric supported a large water plant facility yielding 220M gallons per day with annual energy expenditures worth $6M. For its flooding control system, the plant installed advanced controllers using pluggable programming libraries. With transparent data empowering smart decisions, the operation reduced energy consumption by 30% and cut more than $1.8M in electric costs annually.
Introduce Accountability to Achieve Financial Gains
Savings yielded from energy monitoring and waste reduction are quantifiably larger as these investments are rewarded with tax deductions and other financial gains. These benefits are achieved in part by the abundance of data collected via IoT solutions. From connected services solutions, firms can produce accountability reports and accurately synthesize sustainability efforts to governments, investors, and consumers to reap financial benefit. Globally, governments are introducing legislation and policy that incentivizes companies to go green. Firms receive tax deductions or credits for positive contributions. For example, in the U.S. green commercial buildings that are certified to have energy and power savings worth 50% qualify for a $1.80/ft² tax deduction.
Companies are also financially penalized for negative externalities in the form of energy or environmental taxes. For example, in 2013 Walmart paid more than $81.M for unlawful conduct and violations of the Clean Water Act. Investors are influencing the importance of sustainability with their dollar. Sustainable investing now represents 25% of all US assets under management or $12T. Managers are looking into how companies address carbon and climate change through innovation and technology when making investment decisions. It is clear that organizations not only need to practice low-energy consumption, but need to reliably demonstrate their reduced footprint in order to increase profitability. Connected, IoT-enabled solutions are key to unlocking this value.
Promote Circular Lifecycle Management
Across industries and markets, connected, IoT-enabled solutions have introduced new business models and challenged old ones. One way in which companies can rethink their business models to drive profitable sustainability is to incorporate the concept of the circular economy. Circular economy is a methodology where companies take more responsibility over the full asset lifecycle. Firms are strongly encouraged to emit waste in their systems through recycling and extend asset longevity via proactive maintenance and monitoring. These concepts are realized using connected services solutions and IoT sensor data.
One such example of the circular economy concept in practice is evidenced by Renault, a French electric car manufacturer, leasing its car batteries to buyers. Over the course of the battery lifetime, usage and data is tracked remotely through embedded sensors. Once the battery has been depleted to optimal usage, it would signal to Renault and the customer that its ready for retrieval for internal use or parts recycling. Since implementation, Renault has recovered and refurbished 43% car parts which has led to 30-50% cheaper prices for customers due to raw material savings. The practice of circular economy is not only effective for cost savings but also moves businesses from product to servitization. As companies service and engage customers more frequently, higher premiums can be charged and the customer relationship is enhanced. Ancillary servitization revenue streams coupled with cost reduction from circular asset lifecycle increase overall profitability.
Connected services enable businesses to lock in benefits of being a sustainable and profitable enterprises. Through IoT, businesses can track their energy consumption, deploy green efforts, and introduce new service-oriented business models. Further, these solutions yield real and measurable changes and position companies to successfully compete for share of wallet from those customers who care most about sustainability.
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Senior Manager, Smart Products & New Business Models, Capgemini Invent