How electric vehicles and the Internet of Things are accelerating companies’ ESG actions

Last October, a major EV manufacturer began offering customers in its new home state of Texas its own brand of auto insurance:with a catch† Instead of paying regular premiums based on standard formulas of age, credit, and gender, policyholders are assigned a “safety score” based on their actual driving behavior. The car itself will play ombudsman and will record and report instances of hard braking and near collisions, with premiums fluctuating accordingly. It is one of the first examples of how real-time data coming in over the networked Internet of Things (IoT) is not only being repackaged as new features and services, but also shaping how consumers use those services.

In addition to forcing safe driving, EV companies may one day want to direct owners to: reload their vehicles on the grid during peak demand, using cash rewards and other incentives to reboot its renewable energy strategies. It has every reason to, given the recent rush of investors in… environmental, social and corporate governance (ESG) – including deposit a record $120 billion Last year in ESG-related equities and award the leading EV company a market cap of one trillion dollars, dwarfing its five second-biggest rivals combined

This insatiable appetite for sustainable investment, coupled with imminent regulation by the SEC, has created a convergence in which IoT is being used to accelerate ESG-friendly initiatives – whether that be EV competitors racing to electrify or rewire more energy-efficient homes or decarbonize the electric grid. And this, in turn, has increased the importance of a corporate figure rarely associated with sustainability: the CIO or CTO. Connecting automobiles and heating and cooling systems at scale requires their leadership and expertise. “Do you want to wait for regulations to catch up, or do you really want to differentiate your business based on how innovative your products and services are?” asks Sachin Lulla, who leads America’s Consulting Advanced Manufacturing & Mobility for Ernst & Young, LLP. That’s the trillion dollar question.

IOT MEETS ESG

The IoT can sometimes be as amorphous as the cloud, referring to just about anything with a chip in it. But the IoT meets ESG stack can be described as five different layers, starting with the thing itself — be it an EV or an HVAC — and then the bandwidth needed to connect these objects. That will be followed by edge computing to reduce latency and power consumption, before expanding to the cloud-based services where AI and analytics are applied to the data. Finally, there is the interface, where users or the device in question are pushed in a more sustainable direction.

This vision has been a long time coming, made longer by one-off projects and proof-of-concepts that squander almost a trillion dollars in a phenomenon known as “pilot purgatory.” “Most companies start at the bottom

when they should start top-down, with a strong focus on business value,” says Lulla.

For older automakers starting with 10-digit electrification programs, the matter is simple: How can the IoT help steer consumers away from SUVs to their new EVs? An important part of selling that switch is allaying drivers’ fears of range, or how far they can travel on a single charge. While advertised ranges are hotly contested for marketing purposes, they tend to be derived from the car’s basic battery chemistry (along with a healthy margin of error). But by combining real-time charge levels with driving speeds, traffic conditions and weather conditions, range could be estimated much more accurately – thus distracting customers from combustion engines.

EDUCATION IN SMART HOMES

“Smart homes” are another great idea that has been on the horizon for a decade or more and will finally be realized thanks to ESG. For example, electric heat pumps and boilers are much more efficient than the coal- and gas-fired furnaces and boilers they replace. Regulations already require them to be connected to the grid so that utilities can turn them on and off remotely, but this also opens up the possibility of using home water heaters as a kind of battery, parking excess heat during off-peak hours to meet demand at other times. .

In either case, as with a car company’s fledgling insurance business, new value is derived from providing data-based products and services rather than “dumb” physical assets. This transition is critical to decouple growth and profit from pure consumption.

Hence the importance of CIOs and CTOs, who have not only seen a decade of digital transformation efforts condensed into a matter of months, if not weeks, but also play a pivotal role in enabling these new business models and ensuring compliance. of the regulations. “As technology is now the foundation for all industries, the CIO must be in the driver’s seat to work with the business units to enable their growth strategy,” said Lulla.

For years, IoT has sought a path from trial purgatory to essential solution. With ESG, it has finally found one.

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

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