The need to become sustainable is posing “an existential crisis” for the energy industry, according to a new survey into the sustainability of this sector by French software firm Dassault Systèmes.
The report suggests that, as the industry prepares for a post-COVID world, the tools and skills adopted during the pandemic can act as a blueprint for a more digitally-savvy and sustainable sector.
As the report ‘A sustainable future for business post-COVID’ relates, many energy businesses have struggled to make significant progress on their sustainability and resiliency journeys. 75% of energy companies have had difficulty predicting and planning for government decisions, and 70% have struggled to attract and retain environmentally focused talent. These problems have led to 76% of businesses having to postpone implementation of their sustainability goals and 64% struggling to innovate.
This is seemingly creating an existential threat for energy companies that are failing to meet regulatory and consumers’ expectations, increasing their long-term risk. 69% of those surveyed admit that they will need to change their business model to comply with the government’s sustainability goals. Carbon is one specific area that the sector is struggling with, with 71% stating that the industry is unable to comply with the government regulations. On top of government regulation, energy companies are also dealing with more eco-conscious clients. 70% say customers are demanding sustainable alternatives to traditional energy products and 38% are concerned that failure to become sustainable will turn customers to their competitors.
The post-COVID energy mix
The COVID pandemic was a challenge for the energy sector, but it acted as a catalyst for organisations to become more sustainable moving forward. According to the survey, 69% of companies see COVID as a chance to reshape their business in a more sustainable way, whilst 67% agree that it offers a chance to reset the world more sustainably. On top of this, almost eight in 10 energy leaders (79%) now see sustainable product innovation as a strategic priority; six in ten also acknowledge that becoming net zero is a priority for their organisation (64%).
Despite this, many energy companies are taking a lukewarm approach to their energy mix: by 2030, British energy companies expect to reduce their reliance on fossil fuels and clean fuel (4% and 1.5% respectively), and increase their investment into new energy sources (15%). This is despite a strong government mandate and heavy investment towards renewable energy sources to enable the country to reach its net zero objectives by 2050.
By contrast, Dutch companies are accelerating their shift towards renewables to meet drastic emission cuts required by the government by 2030: renewables are slated to represent 29% of the energy mix (+2% compared to current levels), replacing both fossil (20%, -8% compared to current levels) and clean fuel (24%, -7% compared to current levels) as the primary energy source for the country.
Energy companies are conscious that they need to shift their business and operating models quickly if they are to meet these new, ambitious mandates. As a result, energy leaders admit that investing in decarbonising their supply chain is a strategic priority.
The role of data and technology
In the quest to become more sustainable, says the report, businesses understand they need new technology and tools to calculate their footprint accurately. 71% believe that a centralised data management solution is needed across their entire supply chain, yet 69% currently lack the necessary data to evaluate their carbon footprint. On top of this, 67% admit to lacking the tools needed to implement a carbon reduction policy.
Virtual technology is seen by many energy businesses as key to helping the sector transition to a sustainable future. 67% are currently using virtual prototyping and simulation, such as virtual twins, to reduce waste and carbon emissions; while three in four (73%) are using them to collaborate more effectively in a digital world. Virtual twins are digital tools enabling users to collaborate, access swathes of data and create virtual models and simulations of products to test out hypotheses. By removing the need for physical prototypes, virtual twins enable companies to reduce their waste and carbon emissions. This provides companies with more effective methods to improve the lifecycle of their products and provides an advantage to avoid losing customers to more environmentally-savvy competitors.
Virtual twins are already used in the conception of solutions to harness the power of renewables, such as wind turbines, solutions to turn water into energy, mobile electrical chargers and solar panels. Highly versatile, the virtual twin approach is also used to improve the safety of operations in extraction sites, from drilling into caves to extracting fossil fuel, routing nuclear power and managing waste; and even mapping out models of physical sites before construction.
Beyond the immediate benefits when it comes to improved collaboration to upskill staff and speed up innovation, the sector sees virtual twins as a fundamental technology to support their business in its transition to a greener economy. Close to three in four (70%) energy leaders even consider that virtual twins will play a critical role in achieving a carbon neutral world by 2050.
John Kitchingman, Managing Director EuroNorth at Dassault Systèmes, said: “The energy sector faces many challenges, with environmental concerns, increasing public scrutiny and new government mandates disrupting traditional business models. When we look at the world post-pandemic, now is the perfect time for the industry to start implementing the right strategy to reduce its carbon footprint while delivering the type of products its customers need and upskill current staff to be ready to take on new roles, all the while meeting governments’ stringent mandates for lower emissions. To do so, the industry not only needs the right strategy, business and operating models, but also technology to underpin these initiatives – starting with virtual twins.”