How electric vehicles and the Internet of Things are accelerating corporate ESG action

Last October, a major electric vehicle maker began offering customers in its new state of Texas its own brand of car insurance, with a catch. Rather than paying regular premiums based on standard formulas of age, credit and gender, policyholders will be assigned a “safety score” based on their actual driving. The car itself will act as an ombudsman, recording and reporting cases of hard braking and near misses, with premiums fluctuating accordingly. It is one of the first examples of how real-time data from the networked Internet of Things (IoT) will not only be repackaged as new features and services, but will also shape the way consumers use these services.

In addition to driving safely, for example, electric vehicle companies may one day wish to incentivize owners to charge their vehicles on the grid during peak demand, using cash rewards and other incentives to jump-start their renewable energy strategies. He has every reason to, given the recent investor rush into environmental, social and corporate governance (ESG) – which included investing a record $120 billion in equities related to the ESG last year and awarding the leading electric vehicle company a trillion-dollar market capitalization, eclipsing its five biggest rivals combined.

This insatiable thirst for sustainable investing, coupled with impending regulation by the SEC, has created a convergence in which the IoT is being harnessed to accelerate ESG-friendly initiatives, whether they be electric vehicle competitors that are rushing to electrify or rewire more energy-efficient homes or decarbonize the grid. . And that, in turn, has heightened the importance of a corporate figure that is rarely associated with sustainability: the CIO or CTO. Networking cars and large-scale heating and cooling systems requires their leadership and expertise. “Do you want to wait for regulation to catch up to you, or do you really want to differentiate your business based on how innovative your products and services are?” asks Sachin Lulla, who leads global digital strategy and transformation for the advanced manufacturing and mobility practice at Ernst & Young, LLP. That’s the trillion dollar question.

IOT MEETS ESG

The IoT can, at times, be as amorphous as the cloud, referring to just about anything with a chip in it. But the IoT-meets-ESG stack could be described as having five distinct layers, starting with the thing itself – whether it’s an EV or an HVAC – and then the bandwidth needed to connect those objects. This is followed by edge computing to reduce latency and power consumption, before increasing to include cloud-based services where AI and analytics are brought to impact data. Finally, there’s the interface, where users or the device in question are nudged in a more sustainable direction.

This vision has been slow in coming, made longer by one-off projects and proof-of-concepts that have wasted nearly a trillion dollars in a phenomenon known as “pilot purgatory.” “Most businesses start at the bottom-

whereas they should start from the top down, with a focus on business value,” says Lulla.

For traditional automakers embarking on 10-digit electrification programs, it’s simple: how can the IoT help steer consumers away from SUVs to their new EVs? A key part of selling this switch is allaying drivers’ anxiety about range, or how far they can go on a single charge. Although advertised ranges are fiercely contested for marketing purposes, they are generally derived from the basic car battery chemistry (with a good margin of error). But combining real-time charge levels with driving speeds, traffic conditions and weather could yield range estimates with much greater accuracy and thus wean customers off internal combustion engines.

EDUCATING SMART HOMES

Another great idea that has been on the horizon for a decade or more is “smart homes” that will finally come to fruition thanks to ESG. Electric heat pumps and water heaters, for example, are much more efficient than the coal and gas furnaces and boilers they replace. Regulations already require them to be grid-connected to allow utilities to turn them on and off remotely, but this also creates an opportunity to use domestic water heaters as a kind of battery, parking the excess heat during off-peak hours to offset demand at other times.

In both of these cases, as in the case of a nascent auto insurance business, the new value comes from providing data-driven products and services rather than “dumb” physical assets. This transition is essential to decouple growth and profits from mere consumption.

Hence the importance of CIOs and CTOs, who have not only seen a decade of digital transformation efforts compressed into months or even weeks, but also play a pivotal role in enabling these new business models. and ensuring regulatory compliance. “Because technology now underpins all industries, the CIO should be in the driver’s seat to partner with business units to enable their growth strategy,” says Lulla.

For years, the IoT has searched for a path from pilot purgatory to essential solution. With the ESG, he finally found one.

The views expressed by the author are not necessarily those of Ernst & Young LLP or other members of the global EY organization.

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