As natural disasters like hurricanes, floods, and wildfires worsen and increase in frequency, it’s become clear that the climate crisis is a business risk. Therefore, some companies are now engaging with predictive data and analytics to figure out how to best protect their physical assets—and where to build new ones.
John Mennel, a managing director at Deloitte and its purpose strategy leader, helps companies access that sort of data and advises them on how to interpret it. Tech Brew talked with Mennel about that process and the other analytical tools Deloitte uses to guide companies in becoming more sustainable.
Tell me about you and the work that you do at Deloitte.
The work I do is with large corporations and some public sector organizations, helping them both figure out their decarbonization strategy and figure out the economics around it and then implementing it—whether that’s putting in the technology, managing the data, doing renewable energy, improving manufacturing processes…all the things you can imagine that are part of decarbonizing.
Then I also do a lot of work on just the economics around that. One of the great things about sustainability now is the economics are quite good. Renewables are the cheapest source of energy, and so companies generally save or make money when they’re more sustainable. A lot of what I do is helping clients figure out the economics and the financing. We have an integrated sustainability practice that cuts across everything we do: That’s our consulting business, our technology business, our transaction business, our audit and accounting business, and our tax business. I’m on the leadership team for that global practice, and I look after all of our digital assets and data, like the software products and models that we build.
More broadly, our sustainability practice focuses on a couple of different things with clients. One is decarbonization. We also do a lot of work on physical and transition risk. What are the risks to companies, assets, and businesses from climate change? Then the third thing we work on a lot is reporting and disclosure in data—so, reporting to the public market. The fourth thing that we do is we’re starting to work more and more with companies on creating new business through carbon assets, so basically being able to monetize carbon reductions through the capital markets.
I’d love to hear more about Deloitte’s GreenLight Solution, GreenSpace Tech, and ClearCarbon.
Not surprisingly, they’re related to a lot of the areas I talked about. GreenLight is a solution to put together a decarbonization strategy, so it helps companies build the plan, visualize the plan, and visualize all the economics around the plan. A lot of our clients already have a plan, so a lot of times what we’re doing now is helping them with GreenLight do economic optimization. If they have a decarbonization plan, how do you reduce the capital expense to accomplish it? How do you increase the return on investment? Just as an example, we were working with an energy company that had a plan to reach net zero that was going to cost them about $12 billion to implement, and we took $5 billion out of that by doing optimization with GreenLight.
GreenSpace is a climate tech navigator. So it helps companies understand the emerging climate technologies that they’ll need to decarbonize, and in particular helps companies find those startups and figure out who they want to work with to do pilots, who they want to invest in, and potentially who they want to acquire. We’re working with both corporations and financial institutions.
ClearCarbon is an asset that helps companies create insets. [Carbon] offsets are carbon assets that can be traded [and] be sold to anybody. Insets are carbon reduction assets that can be sold within a value chain, within a specific company. And because of that, they’re viewed as being more high quality, and they’re at a higher price, usually.
We also have an asset called Climate Risk Navigator that basically helps a company plot where all of their physical assets are, and then determine what the risks would be from a higher incidence of severe weather events. And then feed that into their valuation: Determine if they believe they are assets that they need to invest in to harden them, or they need to move them, or they need to sell them, or whether they’re valued correctly. And that’s because of higher fire hazards, flood hazards, storm hazards causing a lot of our clients to replan how they think about their physical assets.
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What do you feel are currently the biggest obstacles companies are facing when they’re trying to hit their sustainability targets?
Having good data is a big issue, and really being able to identify where the carbon is in their operations. And supply chain is a particularly thorny problem. What we’re working with companies more and more on is to be able to say, from this specific supplier, from this lot that’s been shipped from the supplier for this specific product, what is the carbon embedded in that product or that shipment? And not based on estimates, but based on actuals. Because you need that actual data to reduce it. That’s a big overall issue.
A lot of the other issues are economic optimization. Companies will only move as quickly as they can, frankly, make the investments profitably and finance them. And so figuring out how to take a really big plan, break it up into pieces, figure out where you can finance each one of those pieces and how you sequence things that have higher returns—that kind of economic analysis is the second part that we’re working on a lot with clients.
The third thing [is] in the physical risk area. A lot of our clients, we’re doing the work with them to figure out where they have physical risk. Then, how do you make decisions around that? If you have a warehouse that is flood-prone, how do you model out the various decisions you should make? Do I invest in that and make it more resistant to floods? Do I sell it and build somewhere more secure? Do I get rid of my warehouses and have a supplier do it? The financial analysis around that is something that we have a lot of clients working on.
Are you seeing an increase of that data coming from space? That’s something I’m seeing a lot.
We’re working with a number of the satellite firms and we have an announced partnership with Google with their tech staff that we’re using to pull in a lot of satellite data, especially into our physical risk tool. We’re also working with a major utility on wildfire generation to predict where wildfires will exist along the lines and then to sense when a wildfire is started or may have been started. And a lot of that data is coming from satellites.
A lot of the magic in that now is being able to take multiple data sets from different satellites and use artificial intelligence to fuse them and to get conclusions from those models that are not in the data itself. As an example, the various satellite systems in existence are able to detect methane plumes of about 100 kilograms per hour currently—and sometimes even higher. It depends on the weather.
That data really gets useful if you can get down to about 10 kilograms per hour. Even though that’s not in any single data set, we can feed multiple satellite data sets into an AI model and then be able to get down to that 10 kilogram threshold to be able to do things like help some of our government clients understand where there may be abandoned oil wells that have not been properly capped, for example. And so that’s where a lot of the action is right now. I’m personally really excited about the MethaneSAT that was launched by the Environmental Defense Fund. When that comes online, that will have much more granular carbon dioxide and methane data. Maybe I’m just geeky, but I’m very excited about it.