Evaluation of the Business Case for Using Analytics for Corporate Sustainability and Overcoming the Challenges in its Execution By Nihar Dalmia Bachelor of Commerce St. Xavier's College, University of Calcutta, 2005 Master of Business Administration SaYd Business School, Trinity College, University of Oxford, 2013 SUBMITTED TO THE MIT SLOAN SCHOOL OF MANAGEMENT IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE IN MANAGEMENT STUDIES AT THE MASSACHUSETTS INSTITUTE OF TECHNOLOGY JUNE 2014 D 2014 Nihar Dalmia. All Rights Reserved. LIBRARIES i The author hereby grants to MIT permission to reproduce and to distribute publicly paper and electronic copies of this thesis document in whole or in part in any medium now known or hereafter created. Signature redacted Signature of Author: MIT Sloan School of Management May 9, 2014 Signature redacted Certified By: Matthew Amengual Assistant Professor Institute of Work and Employment Research MIT Sloan School of Management Thesis Supervisor Accepted By: Signature redacted Michael A. Cusumano (I SMR Distinguished Professor of Management Program Director, M.S. in Management Studies in Program MIT Sloan School of Management 1 Evaluation of the Business Case for Using Analytics for Corporate Sustainability and Overcoming the Challenges in its Execution By Nihar Dalmia Submitted to the MIT Sloan School of Management on May 9, 2014 in partial fulfillment of the requirements for the degree Master of Science in Management Studies Abstract in an age where organizations across industries and sectors are placing increasing importance on sustainability, leaders are looking for more accurate information to guide their decisions on sustainability-related issues. Analytics and big data have been recognized as valuable tools to advance sustainability efforts both at a community as well as an organizational level. In the last decade specially, tools have been adopted by many organizations to gather and analyze data relevant to sustainability, to gain insights through business intelligence tools and to extend visibility through the supply chain. However, with opportunities come challenges and questions remain about the validity of the business case for sustainability analytics. As sustainability analytics gains momentum, understanding, identifying and addressing the challenges that come along with its adoption is going to be critical for companies to be well prepared to take their sustainability efforts forward. This thesis evaluates the emergence of sustainability analytics and the business case for its adoption, identifies the challenges that hinder its success and points towards shifts in current approaches to overcome those obstacles. Further, two of the assumptions about big data are that organizations are 'swimming in a sea' of data and thus the challenges lie in finding valuable insights, and that challenges associated with big data are primarily technical in nature. This work investigates these claims from the perspective of sustainability analytics and aims to identify the opportunities and challenges that organizations must be aware of to maximize its sustainability efforts using analytics. Various cases and interviews are cited to support the analysis and arguments presented in this paper. Chapter 1 opens the paper with a discussion of the link between sustainability and analytics and the emergence of sustainability analytics. Chapter 2 investigates the expected and realized value based on the business case(s) for sustainability analytics. Chapter 3 evaluates the challenges that can lead to the failure in realization of this value and addresses common assumptions that contribute to this failure. Chapter 4 discusses and recommends a shift in the finance function as a key ingredient to the success of sustainability analytics. The paper concludes with a proposed strategic framework in Chapter 5 that organizations must consider in their pursuit of overcoming the challenges of successfully adopting sustainability analytics. Thesis Supervisor: Matthew Amengual Title: Assistant Professor, MIT Sloan School of Management 3 Page intentionallyleft blank 4 Acknowledgements To my wife, Ekta, for her eternal love and patience, my parents for their unending support and inspiration, and my brother for constantly pushing me forward A special thank you to my advisor for guiding me through my research and nudging me forward when it was most required 5 Page intentionallyleft blank 6 Table of Contents Abstract......................................................................................................................................................... 3 Acknow ledgem ents.......................................................................................................................................5 Introduction .................................................................................................................................................. 9 1. W hat is the relationship betw een sustainability and analytics? .................................................... 11 1.1 Em ergence of Big Data and Analytics .................................................................................... 11 1.1.1 W hat is Big Data?................................................................................................................ 11 1.1.2 M ajor m ilestones ................................................................................................................ 15 1.1.3 The big data landscape .................................................................................................... 17 1.1.4 The big data cycle - A system s dynam ic view .................................................................. 18 1.2 Em ergence of sustainability analytics ..................................................................................... 19 1.2.1 W hat is corporate sustainability? ................................................................................... 20 1.2.1.1 People (The social pillar of sustainability)........................................................................ 21 1.2.1.2 Planet (The environm ental pillar of sustainability)......................................................... 22 1.2.1.3 Profit (The econom ic pillar of sustainability)................................................................... 23 1.2.2 W hat is Sustainability Analytics? .................................................................................... 23 1.2.3 Sustainability Analytics Applications............................................................................... 25 2. W hat is the business case for sustainability analytics? ................................................................... 27 2.1 Searching for the goals................................................................................................................ 27 2.1.1 M ethodology....................................................................................................................... 28 2.1.2 Com pany 1: Pharm aceutical .............................................................................................. 28 2.1.3 Com pany II: Autom obile .................................................................................................. 29 2.1.4 Com pany Ill: Services ................................................................................................... 30 2.1.5 Com pany IV: Technology ................................................................................................ 31 2.1.6 Com pany V: Internet...........................................................................................................31 2.1.7 Com pany VI: M anufacturing ............................................................................................ 32 2.1.8 Com pany VII: Courier delivery services.......................................................................... 32 2.1.9 Com pany Vill: M edical Equipm ent................................................................................... 33 2.1.10 Com pany IX: Chem icals.......................................................................................................34 2.1.11 Com pany X: Retail............................................................................................................... 34 7 2.2 Analysis of the business cases................................................................................................ 35 2.2.1 Ranking the business cases............................................................................................. 36 2.2.2 Finding the insights ......................................................................................................... 38 3. W hat are the challenges of adopting sustainability analytics?....................................................... 41 3.1 Tension betw een data collection and data analysis .............................................................. 41 3.2 Phases in big data analysis....................................................................................................... 43 3.2.1 Data acquisition and recording ...................................................................................... 44 3.2.2 Inform ation extraction and cleaning .............................................................................. 45 3.2.3 Data Integration and Aggregation ................................................................................ 46 3.2.4 Analysis ..............................................................................................................................