Broader view: From technology to transformation

SAFER, SMARTER, GREENER

A BROADER VIEW

FROM TECHNOLOGY TO TRANSFORMATION

Programme director Rune Torhaug, DNV GL

Lead authors Thomas Mestl, DNV GL Saya Kitasei, Xyntéo

Contributors The authors would like to acknowledge the following contributing authors and reviewers:

Theo Bosma, Pippa Brown, Sigrid Brynestad, Alexander Flesjø Christiansen, Tonje Folkestad, Christine Fløysand, Corey Glick (Xyntéo), Bart in 't Groen, Åsgeir Helland (Xyntéo), Andrew Isaacs (UC Berkeley Haas Business School), Anne Louise Koefoed, Stephen Leyshon, Mark Line, Cecilie Mauritzen, Frank Børre Pedersen, George Psarros, Morten Pytte, Jillis Raadschelders, Eva Turk, Bjørn-Johan Vartdal, Nynke Verhaegh

This initiative is a collaboration between DNV GL and Xyntéo, an advisory firm that works with global companies on projects that enable businesses to grow in a new way, fit for the climate, resource and demographic realities of the 21st century. www.xynteo.com

Suggested reference: DNV GL: From technology to tranformation, Høvik, 2014.

Photography: Istockphoto.com, DNV GL

ACKNOWLEDGEMENTS

Foreword by Henrik O. Madsen ................................................................. 4A broader view . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10SHIPPING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Case study: Aligning split incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

ELECTRICITY AND RENEWABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Case study: Empowering stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

OIL AND GAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26Case study: Managing systems risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

FOOD AND WATER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32Case study: Accounting for value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

HEALTHCARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38Case study: Transforming mindsets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

THE WAY FORWARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44

4 FROM TECHNOLOGY TO TRANSFORMATION

One hundred and fifty years ago, the world was in the midst of a profound transition.

New technologies such as steam power, electricity and the telegraph led to an explosion

in productivity and connectivity, reshaping the global economy in just a few short

decades. Yet these shifts also introduced new risks to life, property and the environment

and transformed the relationship between technology, business and society.

MANAGING RISK, BUILDING TRUST

It was this context into which Det Norske Veritas and Germanischer Lloyd were born. These companies, which have now merged into DNV GL, took on the role of verifying that vessels were seaworthy during a time when the convergence of new technology and business models caused an unacceptable number of ship accidents. By managing the increasingly complex risks associated with the rapidly evolving maritime sector, classification societies built trust among shipping stakeholders, contributing to the birth of a new era in international trade.

Today, as DNV GL celebrates our 150th anniversary and our first year as a united company, the world is at another inflection point. The technologies, systems and institutions that have driven the most prolonged period of growth in our civilisation’s history are being tested by the new demands of the 21st century. And once again, our ability to manage risk and build trust will help us enable the changes the world needs.

In order to rise to this challenge, we have been exploring six themes of strategic relevance to our new organisation. Some of the themes, such as climate change adaptation, have taken us into newer territory; others, such as the future of shipping, have seen us re-evaluate more familiar ground. I believe that all of them, however, are absolutely central to our efforts to empower our customers and society to become safer, smarter and greener.

I hope that we can use the themes’ findings, as well as the momentum of 2014, to engage a wide range of stakeholders in a forward-leaning discussion about how to achieve our vision – global impact for a safe and sustainable future.

I look forward to the journey ahead.

Henrik O. Madsen President and CEO, DNV GL Group

DNV GL’S PAST, PRESENT AND FUTURE

5

One hundred and fifty years ago, the world was in the midst of a profound transition.

New technologies such as steam power, electricity and the telegraph led to an explosion

in productivity and connectivity, reshaping the global economy in just a few short

decades. Yet these shifts also introduced new risks to life, property and the environment

and transformed the relationship between technology, business and society.

MANAGING RISK, BUILDING TRUST

It was this context into which Det Norske Veritas and Germanischer Lloyd were born. These companies, which have now merged into DNV GL, took on the role of verifying that vessels were seaworthy during a time when the convergence of new technology and business models caused an unacceptable number of ship accidents. By managing the increasingly complex risks associated with the rapidly evolving maritime sector, classification societies built trust among shipping stakeholders, contributing to the birth of a new era in international trade.

Today, as DNV GL celebrates our 150th anniversary and our first year as a united company, the world is at another inflection point. The technologies, systems and institutions that have driven the most prolonged period of growth in our civilisation’s history are being tested by the new demands of the 21st century. And once again, our ability to manage risk and build trust will help us enable the changes the world needs.

In order to rise to this challenge, we have been exploring six themes of strategic relevance to our new organisation. Some of the themes, such as climate change adaptation, have taken us into newer territory; others, such as the future of shipping, have seen us re-evaluate more familiar ground. I believe that all of them, however, are absolutely central to our efforts to empower our customers and society to become safer, smarter and greener.

I hope that we can use the themes’ findings, as well as the momentum of 2014, to engage a wide range of stakeholders in a forward-leaning discussion about how to achieve our vision – global impact for a safe and sustainable future.

I look forward to the journey ahead.

Henrik O. Madsen President and CEO, DNV GL Group

DNV GL’S PAST, PRESENT AND FUTURE


The Arctic offers a preview of a new paradigm for business: harsher environments, higher public scrutiny and a greater need to engage with stakeholders. As industries enter the Arctic, understanding, communicating and managing risks will be essential both to earning social licence to operate and minimising the impacts of their activities. With such high stakes, the Arctic will be a defining frontier – not just of operations, but of safer, smarter, greener technologies and standards. The Arctic is rich with resources and dilemmas. And while there are no easy answers to these dilemmas, we must tackle questions about its development step by step, based on a common understanding of the risks. In this theme, we examine the complex Arctic risk picture and explore its implications for shipping, oil and gas, and oil spill response.

ARCTIC: THE NEXT RISK FRONTIER

ADAPTATION TO A CHANGING CLIMATEClimate change mitigation remains essential for our work to build a safe and sustainable future. But the greenhouse gases that have accumulated in the atmosphere over the past century and a half have already set changes in motion. Infrastructure and communities around the world urgently need to adapt to a climate characterised by more frequent and more severe storms, droughts and floods. And given the interdependence between business and society, business has a strong interest and critical role to play in these efforts. In this theme we have been developing tools to help both businesses and communities adapt to this new risk reality: a web-based platform for sharing information and best practices; a risk-based framework to help decision-makers prioritise their adaptation investments; and a new protocol to equip leaders to measure and manage community resilience to climate change.

As DNV GL turns 150, we are exploring six ‘themes for the future’ – areas where we can leverage our history and expertise to translate our vision into impact. We selected these themes as part of our efforts to take a broader view of the relationship between technology, business and society. On these pages you will find short introductions to each theme. To find out more, join us at: dnvgl.com/vision-to-impact

A BROADER VIEW Shipping is the lifeblood of our economy and the lowest-carbon mode of transport available to a world with ever-rising consumption. It therefore has a crucial part to play in a safe and sustainable future. But the industry faces a challenging climate: more intense public scrutiny of safety and security, tightening restrictions on environmental impacts and a revolution in digital technology. To meet these challenges, we have analysed six technology pathways that can help us achieve three ambitions for 2050: reduce the sector’s fatality rates 90 per cent and reduce fleet-wide CO2 emissions 60 per cent, all without increasing the costs of shipping.

THE FUTURE OF SHIPPING

Electricity is already revolutionising the way we power our operations, fuel our vehicles, and light and heat our buildings – and it will have an even bigger role to play in the decades to come. Many emerging technologies can provide cleaner, smarter, affordable and reliable energy. Floating offshore wind can provide emissions-free power at scale by 2050. And a suite of smart grid technologies will enable households and communities to participate in leaner, more local power systems. In this theme, we take a closer look at these technologies, and examine the contributions they can make to providing low-carbon power to future generations.

ELECTRIFYING THE FUTURE

The future is not what it used to be. Rising global temperatures, diminishing natural resources and deepening inequality threaten everyone’s prospects, including those yet to be born. Yet alongside these new global challenges are new innovations, solutions and opportunities that make a safe and sustainable future possible: a world where nine billion people can thrive while living within the environmental limits of the planet. In this theme, we set a vision towards this future. We analyse the barriers to change and detail the concrete actions that governments, business and civil society must take together if the obstacles are to be overcome and the opportunities for safer, smarter and greener growth are to be seized.

Technology has always been an enabler of societal change and we can expect that it will play a pivotal role in our transition to a safe and sustainable future. Indeed, existing technology is already unlocking safer, smarter, greener solutions for powering our economy, transporting our goods, caring for our sick and feeding our growing population. But history shows that trans-formative technologies – from the automobile to the internet – can take decades to reach scale. And time is one resource we do not have. How can we accelerate the deployment and commercialisation of sustainable technologies while ensuring that they are introduced safely into society? In this theme, we investigate this question, analysing the barriers to technological uptake and providing insights from past and present technologies.

A SAFE AND SUSTAINABLE FUTURE


THEMES FOR THE FUTURE

7

The Arctic offers a preview of a new paradigm for business: harsher environments, higher public scrutiny and a greater need to engage with stakeholders. As industries enter the Arctic, understanding, communicating and managing risks will be essential both to earning social licence to operate and minimising the impacts of their activities. With such high stakes, the Arctic will be a defining frontier – not just of operations, but of safer, smarter, greener technologies and standards. The Arctic is rich with resources and dilemmas. And while there are no easy answers to these dilemmas, we must tackle questions about its development step by step, based on a common understanding of the risks. In this theme, we examine the complex Arctic risk picture and explore its implications for shipping, oil and gas, and oil spill response.

ARCTIC: THE NEXT RISK FRONTIER

ADAPTATION TO A CHANGING CLIMATEClimate change mitigation remains essential for our work to build a safe and sustainable future. But the greenhouse gases that have accumulated in the atmosphere over the past century and a half have already set changes in motion. Infrastructure and communities around the world urgently need to adapt to a climate characterised by more frequent and more severe storms, droughts and floods. And given the interdependence between business and society, business has a strong interest and critical role to play in these efforts. In this theme we have been developing tools to help both businesses and communities adapt to this new risk reality: a web-based platform for sharing information and best practices; a risk-based framework to help decision-makers prioritise their adaptation investments; and a new protocol to equip leaders to measure and manage community resilience to climate change.

As DNV GL turns 150, we are exploring six ‘themes for the future’ – areas where we can leverage our history and expertise to translate our vision into impact. We selected these themes as part of our efforts to take a broader view of the relationship between technology, business and society. On these pages you will find short introductions to each theme. To find out more, join us at: dnvgl.com/vision-to-impact

A BROADER VIEW Shipping is the lifeblood of our economy and the lowest-carbon mode of transport available to a world with ever-rising consumption. It therefore has a crucial part to play in a safe and sustainable future. But the industry faces a challenging climate: more intense public scrutiny of safety and security, tightening restrictions on environmental impacts and a revolution in digital technology. To meet these challenges, we have analysed six technology pathways that can help us achieve three ambitions for 2050: reduce the sector’s fatality rates 90 per cent and reduce fleet-wide CO2 emissions 60 per cent, all without increasing the costs of shipping.

THE FUTURE OF SHIPPING

Electricity is already revolutionising the way we power our operations, fuel our vehicles, and light and heat our buildings – and it will have an even bigger role to play in the decades to come. Many emerging technologies can provide cleaner, smarter, affordable and reliable energy. Floating offshore wind can provide emissions-free power at scale by 2050. And a suite of smart grid technologies will enable households and communities to participate in leaner, more local power systems. In this theme, we take a closer look at these technologies, and examine the contributions they can make to providing low-carbon power to future generations.

ELECTRIFYING THE FUTURE

The future is not what it used to be. Rising global temperatures, diminishing natural resources and deepening inequality threaten everyone’s prospects, including those yet to be born. Yet alongside these new global challenges are new innovations, solutions and opportunities that make a safe and sustainable future possible: a world where nine billion people can thrive while living within the environmental limits of the planet. In this theme, we set a vision towards this future. We analyse the barriers to change and detail the concrete actions that governments, business and civil society must take together if the obstacles are to be overcome and the opportunities for safer, smarter and greener growth are to be seized.

Technology has always been an enabler of societal change and we can expect that it will play a pivotal role in our transition to a safe and sustainable future. Indeed, existing technology is already unlocking safer, smarter, greener solutions for powering our economy, transporting our goods, caring for our sick and feeding our growing population. But history shows that trans-formative technologies – from the automobile to the internet – can take decades to reach scale. And time is one resource we do not have. How can we accelerate the deployment and commercialisation of sustainable technologies while ensuring that they are introduced safely into society? In this theme, we investigate this question, analysing the barriers to technological uptake and providing insights from past and present technologies.

A SAFE AND SUSTAINABLE FUTURE


THEMES FOR THE FUTURE


EXECUTIVE SUMMARYWhy does proven technology that can offer economic, environmental and social benefits take so long to scale?

That question has emerged as one of the most fundamental facing business and society today. The world is on an unsustainable course, with the needs of a growing global population and economy on a collision course with the constraints of the planet’s ecosystems and resources. Many existing technologies can help us address these challenges – but not until they are adopted at scale. And numerous barriers – from technical and financial to regulatory and societal – impede the uptake of technology.

In this report, we draw lessons on transformation from five sectors: shipping, oil and gas, electricity and renewables, food and water, and healthcare. For each sector, we consider the drivers of technological uptake to date and assess the industry-specific barriers that must be overcome for further progress. We take a closer look at five case studies, assessing cross-cutting barriers with special importance to sustainable technology and examining measures that can help us address them:

� Aligning split incentives � Managing systems risks � Empowering stakeholders � Accounting for value � Transforming mindsets

This document is not a comprehensive survey of technological developments across economic sectors, nor is it an outlook of technologies that hold promise for the future. Rather it is intended to inspire further discussion about the changing relationship of technology, business and society, and the new approaches we will need to harness technology’s potential.

To tell this story, we draw upon our own research and experience as well as insights from a roundtable on Transformative Technology that we convened in June 2013 in Berkeley, California. Throughout the report we have included links to more detailed information about the examples we describe as well as other project connections to explore. We conclude with a set of questions that we believe are essential to unlocking transformation we need to achieve our vision of “global impact for safe and sustainable future”.

"THE FUTURE IS HERE – IT’S JUST NOT EVENLY DISTRIBUTED" - WILLIAM GIBSON

9

For more on DNV GL’s vision for a safe and sustainable future, go to:


From the Stone Age to the digital age, technology has defined and redefined civilisation. It has extended human life expectancy and expanded human expectations of life. It has taken us to the extremes of our planet, nourished billions, eradicated diseases, increased our productivity and transformed the world into a global, connected economy and society.

Yet the same technologies that made possible the achievements of the past century have also had a host of unintended consequences . The fossil fuels that generate two-thirds of our electricity and power almost all of our transportation have polluted our soil, water and air, causing respiratory diseases, damaging ecosystems and changing the climate. Large-scale agriculture has made it possible to feed ever more people, but this gain has come at the expense of biodiversity, and given rise to crops that are more vulnerable to disease. And though more digitisation has increased efficiency in everything from healthcare to traffic control, it has also exposed our information to violations of privacy and security.

As we strive towards a new and better paradigm – one in which the needs of today are balanced against the needs of tomorrow – we look once again to technology to drive our transformation. Technology has a major role to play in helping achieve our vision of global impact for a safe and sustainable future. But whether we reach that future or not depends less on new technologies than on how effectively we are able to scale technologies we have, all while managing risk and building trust.

A broader view on technologySince the Industrial Revolution and the explosion of technologies that it introduced, DNV GL has qualified technology and created standards whose purpose is to ensure that the progression from technological development to deployment happens with minimal loss to life, property and the environment. But there are many factors that can prevent a technology from being used – even if its benefits are clear and risks manageable. If we are to reach a safe and sustainable future, we must take a broader view of technology and the barriers it faces.

INTRODUCTION

"FROM THE STONE AGE TO THE DIGITAL AGE, TECHNOLOGY HAS DEFINED AND

REDEFINED CIVILISATION"

11


Assuming that technological change will drive technological deployment relies upon a link between research and application that may be broken. Before it can move from development to deployment, technology must overcome technical barriers related to the context in which it operates, including compatibility with existing infrastructure, performance under extreme conditions and scalability.

Policy can be an important mechanism to correct the types of market failures that slow the uptake of technology that provide economic, social and environmental benefits. But the absence of policy supports, policies that perpetuate perverse incentives and a lack of regulatory certainty are all frequently cited as some of the biggest barriers to the deployment of transformative technology.

Risk management has taken on new weight in a modern society whose tolerance for failure is lower than ever before. The 21st century has seen a rise in public awareness and concern about the risks posed by industry to workers, public health, the environment and climate. In today’s globally connected world, consumers demand greater transparency from businesses and leaders, and news of local incidents can spark global reputational crises in real time. Public scepticism and opposition can delay or halt the introduction of new technology.

Investors generally favour technologies that provide the highest return on investment, and consumers generally favour technologies that provide a service at the lowest cost. New technology faces several financial disadvantages, including the cost of new infrastructure and dependence on uncertain government subsidies. In the case of sustainable technology, the market’s failure to capture environmental and societal costs and benefits hampers its competitiveness. Even when technologies do provide cost savings, for example by lowering fuel consumption, their payback periods are often too long for capital-constrained consumers and investors, who optimise spending on relatively short timescales.

TECHNICAL REGULATORY

SOCIETALFINANCIAL

THE BARRIERS WE HAVE IDENTIFIED FALL INTO FOUR CATEGORIES:

13

Technology and trust At the same time, the requirements for earning social acceptance of technology are changing – just as the need for technological transformation is most urgent. Public trust in institutions that enjoyed a reputation for reliability and credibility during the 20th century – from governments and financial institutions to the news media and the scientific community – has declined. Perceptions and trust are becoming crowd-sourced, with consumers turning to new, decentralised sources of information to determine whether a new technology fits with their vision for the future.

Ultimately, technology itself can provide its own momentum. The popularity of iPhones and Teslas cannot be attributed only to their measurable benefits or to regulations. They spark the imagination of consumers, tapping into society’s values and aesthetics. If technology can tap into that positive force, transformation can happen very quickly indeed.

Moving from technology to transformationWe must expand our focus from technology itself to its transformative potential for three reasons:

First, technology itself is not the goal, but rather a means to an end. The past century has shown that our understanding of technology evolves over time. It is hard to say which of today’s solutions may prove

to be the next chlorofluorocarbon (CFC) or asbestos, compounds that seemed miraculous when first introduced but over time revealed such harmful side effects that they have been pulled from the market. There are no silver bullets. Rather than building systems, regulations and mind-sets that tie our fates to particular technologies, we must increase our ability to be alert to the full spectrum of technology’s effects and change course quickly when old thinking becomes obsolete.

Second, our old definitions of technology are too narrow. Technology’s functionality relies upon the context in which it is used. Sometimes the measures that have the biggest potential to increase safety, energy efficiency or profitability are not tools or machines, but systems and behaviours. For example, we identify the importance of a new safety culture in the shipping sector, a way to measure community resilience and a patient-centred approach to healthcare. These measures can be approached with the same kind of rigor that we use for physical assets – while still taking the local and human context into account.

And finally, transformation is urgent. It is clear that a ‘business as usual’ approach to technology will not get us to a safe and sustainable future fast enough. Existing technology already offers many of the solutions we need – but only given the right enabling conditions. Given the pace of global warming, resource degradation and demographic change, time is rapidly becoming the most finite resource of all.

DEFINITION:

Technology - the use of science in industry, engineering, etc., to invent useful things or to solve problems

"LANGUAGE IS A TECHNOLOGY, WRITING IS A TECHNOLOGY, CULTURE IS A TECHNOLOGY, AND JUSTICE IS A TECHNOLOGY…WE HAVE THE TECHNOLOGIES. WE NEED TO

THINK OF TECHNOLOGY IN ITS LARGEST DEFINITION, INCLUDING SOFTWARE AND SYSTEMS, AND WE NEED TO ENACT THE ONES

THAT HAVE PROVED THEY CAN HELP." - KIM STANLEY ROBINSON


SHIPPING

Propeller patented

Screw propeller commonly used

Steel hull patented

Steel hull and rivets

1827 1910's 1840 1900

SHIPPING 15

One of the oldest means of travel and transport, ships have played an enduring role as the backbone of the world economy. Today, shipping handles over 80 per cent of global trade, mobilising complex supply chains to meet global demand. The maritime industry has also made significant contributions to human exploration, bringing us to new environments and new frontiers of understanding.

Radar patented Radar navigation

1904 1960


Today, shipping transports some 80 per cent of the world’s trade while emitting the least greenhouse gases per unit of cargo transported. But further transformation will be required due to the demands of more cost-effective, low-emission and complex operations as well as new challenges such as changing weather patterns and Arctic routes. The sector’s emissions of nitrous oxides (NOx) and sulphur (SOx), causing air pollution, estimated to be responsible for tens of thousands of deaths each year, could be virtually eliminated by technologies such as scrubbers and catalytic converters that have been mandatory in land-based industries for years, but are only now beginning to be advocated for shipping. Alternative fuels, including natural gas and biofuels, could provide further emissions savings, but these have also been slow to gain traction.

What drives transformation?Over the past century, competition has been a primary driver of technological change in the shipping industry. The need to reduce costs and increase performance has driven the sector’s

major fuel and engine shifts to date. Regulation has also driven important technological change. Major accidents, such as the Exxon Valdez tanker spill in 1989, as well as persistent public health and environmental problems, such as air pollution in ports, have created pressure for the shift to technologies such as double hulls, scrubbers and all-electric (cold-ironing) ports.

Nevertheless, even in the presence of these drivers, transformation is a slow process in the shipping industry. Technological shifts such as containerisation or the introduction of double hulls on tankers took around 30 years from introduction to achieving a 90 to 100 per cent market share.

Why does transformation take so long?The shipping industry has a reputation for being conservative when it comes to adopting new technology. Much of the innovation underlying transformative technology occurs outside the sector. For example, steam engines, hybrid propulsion and fuel cells all originated in the automotive and electric power industries and only later spread to ships.

SHIPPINGTechnological advances in shipping have shaped conflict and commerce among nations for millennia. The shift from wood to steel as the main construction material, the introduction of steam power and improvements in navigation have been instrumental in overcoming the high risks associated with seafaring and establishing the modern global trade system. Over the past century, continued innovation in hull construction materials and methods, propulsion and navigation has dramatically improved safety, efficiency and performance of ships.

SHIPPING 17

Especially in today’s highly competitive shipping market, most owners must maximise profits over the short term. Retrofits and newbuildings, both of which require significant up-front capital expenditure, are difficult to justify if they cannot deliver quick returns on investment.

Relative to global truck, airplane and automobile fleets, the shipping industry has few and long-lived assets. Ships are expected to be in service for two or three decades, and are typically built in batches of several at a time. As a result, the baseline rate of turnover in the global fleet is slow, limiting the speed at which new technologies can be introduced cost-efficiently.

Despite the ubiquity of shipping in global trade, the International Maritime Organisation has described the maritime transport industry as “invisible” in people’s daily lives. In contrast to the aviation and automotive industries, for example, ship owners have less global brand exposure, and the reputational consequences of poor performance or accidents are lower than in industries such as oil and gas.

Unlike many other sectors, new technologies in the shipping industry are guilty until proven innocent. Ships that do not comply with the International Maritime Organisation’s (IMO) technology-specific regulations are ineligible for insurance, a significant financial deterrent for would-be front-runners who might otherwise consider trying out innovative ship designs . Moreover, maritime legislation, including rules, regulations and standards, has traditionally focused on technologies rather than the services they provide, further inhibiting the introduction of new technology.

The shipping sector is a complex sector made up of many actors with different priorities, time horizons and approaches to decision making: ships’ owners, the yards where they are built, the manufacturers who supply components, the suppliers of fuel and cargo owners who charter the ships each have different incentives, investment horizons and approaches to decision-making (see Aligning split incentives).

SHORT INVESTMENT HORIZON

SLOW TURNOVER

LOW VISIBILITY TO GLOBAL CONSUMERS

BURDEN OF PROOF ON NEW TECHNOLOGY

SPLIT INCENTIVES02.

01.

04. 05.

03.

WHAT DELAYS THE INTRODUCTION OF NEW TECHNOLOGIES IN THE SHIPPING SECTOR?


A range of technologies and practices have been identified that can increase energy efficiency and reduce emissions associated with shipping. Even with no carbon price to incentivise CO2 reductions, some of these measures – enough to reduce the sector’s greenhouse gas emissions 30 per cent by 2030 – offer sufficient fuel savings to pay for themselves.1

This finding is consistent with analyses of marginal abatement costs that have been done for other sectors. For example, in a 2007 analysis of abatement potential throughout the global economy, McKinsey found that energy efficiency measures in buildings and transportation offered the lowest-cost means to reduce greenhouse gases – and many were net cost-saving. 2

If so many energy efficiency measures that can provide cost savings already exist, why haven’t they already been implemented? One answer lies in the problem of split incentives. The residential sector, which is responsible for about a quarter of global energy demand, illustrates this barrier. In cases where landlords are responsible for a property’s upkeep but tenants pay its energy bills, landlords have little financial incentive to invest in efficiency

ALIGNING SPLIT INCENTIVES

BARRIER CASE STUDY SHIPPING

improvements that only benefit their tenants. Conversely, in situations where the landlord covers energy costs, tenants have little financial incentive to adopt energy-saving behaviours.

Ship owners and charterers are analogous to the landlords and tenants in the example above. In cases where ship owners pay for fuel, such as voyage charters, liner operations and contracts of affreightment, owners have a strong incentive to invest in fuel efficiency measures for their vessels. Much more often, the benefit of the fuel savings accrues to the charterer. In the absence of a regulation, responsibility for a significant share of fuel costs or an expectation of higher charter rates and contracts or greater second-hand resale value, ship owners’ incentive to invest in energy efficiency technology is low.

Moreover, this split incentive problem deepens when it comes to new technology. Even though every actor might benefit from a technology’s introduction, each faces start-up costs that they have no incentive to take on before other actors move first. Owners have no incentive to invest in unproven technologies, particularly in today’s extremely competitive market

COLLABORATION AMONG SHIP OWNERS, CHARTERERS AND OTHER ACTORS CAN BE INSTRUMENTAL IN OVERCOMING SPLIT INCENTIVES AND THE FIRST MOVER PROBLEM.

SHIPPING 19

where investment horizons must be very short, unless they are confident those technologies can still meet the terms of their charters and comply with regulations. Component manufacturers have no incentive to develop a technology if they aren’t guaranteed a market for their products. Fuel suppliers will not build new bunkering infrastructure without guaranteed demand.

Collaboration among ship owners, charterers and other actors can be instrumental in overcoming split incentives and the first mover problem. Joint industry projects (JIPs) bring partners together to solve problems that are difficult to solve in isolation, either due to their complexity or their cost.

As one example of collaboration, DNV GL is part of a joint industry project FellowSHIP, which has designed, commissioned and introduced fuel cells

2 Enkvist, et al., “A cost curve for greenhouse gas reduction,” McKinsey Quarterly, February 2007.

1 DNV, “Pathways to low carbon shipping: Abatement potential towards 2030,” 2010.

and energy storage for the offshore supply ship Viking Lady. The close collaboration among the ship owner, the power systems manufacturer, the classification society and the charterer – as well as the support of Norwegian authorities – has been critical to the success of this demonstration project. Each party has contributed different pieces of the solution, from the fuel cells themselves to the new classification rules that enable them to be used. So far the hybrid power system’s fuel savings have proven sufficient to recover the initial capital investment in only a few years while also reducing emissions substantially, all without disruption to the vessel’s service.

0 100 200 300 400 500 600 700 800

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Solar panel (not shown)

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Steam plant operational improvements

Engine monitoringReduce auxilitary power

Trim/draftFrequency converters

Gas fuelledElectronic engine control

Light systemFuel cells as aux engine

Fixed sails/wingsWaste heat recovery

Exhaust gas boilers on auxCold ironing

Propeller conditionContra-rotating propellers

Weather routingAir cavity/lubrication

Hull conditionKite

For more on DNV GL’s vision for shipping, go to:


ELECTRICITY AND RENEWABLES

Battery invented Edison patents light bulb

Rechargeable Lead-acid battery

LED (light emitting diode)1799 18801859 1962

ELECTRICITY AND RENEWAbLES 21

Countless aspects of modern life – from the way we light, heat and cool our buildings to our ability to communicate instantaneously around the world – are based on the wide availability of affordable, reliable electricity. The birth of electrical engineering in the second half of the 19th century ushered in a new era of productivity and connectivity. Over a few short decades, a series of inventions revolutionised the way electricity was produced, transported and used, transforming global industries and societies.

Reliable AC network Gotland 1, first commercial

HVDC system

Large scale interconnections of local grids

Gotland Light, first commercial HVDC with IGBT

1893 19541932 1999


The past century has seen great technological transformation in the electricity sector. The steam turbine, invented in 1884, enabled the generation of electricity from any feedstock that could be combusted to produce heat. Today, four-fifths of the world’s electricity is generated using steam turbines, including systems that draw heat from nuclear reactors, concentrated solar rays and geothermal energy. The use of electricity had been constrained by our ability to transport it efficiently. In 1882, Thomas Edison launched the world’s first large-scale electrical grid, a direct current (DC) grid that served 59 customers in Manhattan. Shortly thereafter, new alternating current (AC) systems extended the range of power transmission. Today, 5.8 billion worldwide enjoy access to electricity.

The electrification of global society did not unfold without challenge. In the early 1900s, a belief that the new incandescent light bulbs emitted dangerous vapours caused many households to cling to gas lamps. The fledgling electrical engineering industry was plagued by problems arising from faulty components, leading the industry to form organisations, such as the Netherlands-based KEMA, devoted to testing and certification of the equipment it relied upon. The development of safe, reliable and efficient electricity systems became important national priorities, and most electricity infrastructure was built and operated by publically owned utilities. The investments these utilities made and the rates they charged their customers were closely regulated by public commissions.

More recently, a new set of challenges has driven transformation in the electricity industry. Universal access to electricity – an achievement that will require providing power to 2.7 billion additional people by 2030 – is now a key development goal. Demand for clean air and concern over climate change have pushed many governments to mandate emission control technologies for fossil fuel-burning power plants and incentivise a shift from coal to cleaner gas, nuclear and renewable sources. Meanwhile the

variability added by large-scale wind and solar power and the pressure added by increasingly frequent and severe weather demand power systems with greater flexibility and resilience. And all of these new demands must be met while maintaining or exceeding the high standards of safety and reliability we have come to expect from our power supply.

What drives transformation?The price and supply security of fuel have significantly influenced technology uptake. Price and supply volatility of fuels such as coal, natural gas and oil have encouraged utilities and governments to diversify their generation portfolios and invest in technologies that use more abundant, domestic sources of fuel when possible.

As with other sectors, environmental regulations have driven the introduction of emission control technologies to curb pollution from conventional power plants. In recent years, increasingly tight limits on emissions of SOx, NOx and particulate matter are making some fossil fuel power plants unprofitable or even illegal.

ELECTRICITY AND RENEWABLES


Most of the world’s electricity infrastructure relies upon ageing, inefficient and inflexible incumbent grids. These grids were designed to support a power system with relatively large power plants that can be controlled and dispatched centrally to meet demand. Neither they nor the power markets that govern their use were designed to absorb variable and distributed energy, posing a limitation on how much renewable generation can scale.

Supply is just one half of the electricity equation – technology adoption and behaviour on the demand side also have a large influence on the efficiency and use of power. But public awareness of the electricity system is limited, and consumers may be sceptical of changes to the elements they do see, whether different light bulbs or new, digital meters (see Empowering stakeholders).

Emerging renewable technologies are highly vulnerable to regulatory uncertainty. As an example, recent research shows that in the US, where periodic policy shifts occur, the wind energy market suffers a 76 to 94 per cent drop whenever production tax credits expire. This regulatory risk combined with their relatively long-term returns and high up-front capital costs makes it hard for new technologies to compete for investor dollars with quick-return sectors such as information and communications technology.

LIMITED COMPATIBILITY WITH INCUMBENT INFRASTRUCTURE

CONSUMER BEHAVIOUR

VULNERABILITY TO REGULATORY UNCERTAINTY

WHAT DELAYS THE INTRODUCTION OF NEW TECHNOLOGIES IN THE ELECTRICITY AND RENEWABLES SECTORS?

01.

03.

02.


For most of the past century, the electricity system has been invisible to the average household user. When people turn on switches or plug in appliances, they expect their power to work – but the complex system of centralised power plants, high-voltage transmission lines and distribution networks that supply that power tends to operate behind the scenes. Regulation of electricity rates has generally insulated consumers from changes to the supply side such as the introduction of new types of power plants and the expansion of the grid, and these changes did not fundamentally alter the consumer’s experience with their electricity.

Nevertheless, power demand plays a large role in shaping the power system. Thousands of megawatts of spare capacity has been built globally just to meet peak demand in hours when customers tend to use power most. These generators produce expensive power and sit idle the rest of the year. Consumers typically have not had detailed enough information about the cost of their power to avoid the kind of usage patterns that ultimately lead to a more expensive system.

A new suite of digital ‘smart grid’ technologies are revolutionising this model. Advanced digital meters that can transmit and receive price and usage data instantaneously make it possible for customers to react to real-time electricity prices. Sensors can remotely detect and address faults such as downed powerlines when they happen, rather than waiting until they are reported, providing the grid with greater reliability and resilience. And improvements in handling bi-directional power flows can enable more distributed generation, where households

to generate their own power on-site and sell any excess back to the grid. Both power suppliers and consumers gain flexibility in their strategic use of energy to minimise costs.

But although several governments have set ambitious smart grid targets and utilities have begun to roll new smart infrastructure out, smart grid’s progress has been slower than anticipated. One of the resons for this delay has been resistance from consumers who are sceptical about smart grid’s benefits.

The smart generationPG&E, based in California, was one of the first utilities to launch a smart meter rollout programme. Confident in the environmental and financial benefits of the new metering infrastructure they were installing to both individual consumers and the system as a whole, PG&E was surprised to encounter vocal opposition to smart meters from consumers who did not see major cost or other benefits after new meters were installed. They believed that the new meters were collecting data on them for the government, or even that the digital meters were emitting radiation that had negative health effects. Despite the fact that only 30 thousand customers have opted out of PG&E’s smart meter program of the almost 10 million meters installed to date, those customers’ concerns have been amplified in big headlines, protests, and court cases.

California’s experience with smart meters illustrates a key barrier to the introduction of new technology. Public perception of the risks and benefits

EMPOWERING STAKEHOLDERS

BARRIER CASE STUDY ELECTRICITY AND RENEWABLES


associated with new technology can delay or prevent its deployment. Opposition may be particularly high in cases when a technology directly affects a consumer’s quality of life and does not deliver immediate benefits. Utilities and other technology providers must anticipate and address consumer concerns to overcome this barrier. “Most utilities take a technolophilic approach,” as Dr Julie Albright, a sociologist who has studied California’s smart meter programme, notes, but “focusing on technology alone can be like a set of blinders.” According to Dr Albright, although most of the consumers making decisions are “digital immigrants,” decisions will soon be made by “digital natives,” members of a generation that defines itself by its close relationship with technology. Different types of communication are effective with these different demographics about new technologies.

In the town of Groningen, The Netherlands, DNV GL has been working together with a community to put the principles of stakeholder engagement into practice. The forty households of PowerMatching City, as the project is called, have become a living laboratory for smart grid technologies, including digital meters, smart appliances and distributed generation technologies such as rooftop photovoltaic panels. Working through channels from old-fashioned community engagement to more techie iPad apps, the project’s developers are striving to build residents’ awareness and engagement with the new technologies in their homes and communities.

For more on DNV GL’s work on visualising the smart grid, go to


OIL AND GAS

Single fold seismic data

3-D Seismic survey1924 1960's

First oil pipeline Pipelines in common use

1865 1900

OIL AND GAS 27

Although humans have been using petroleum since the 6th century bC, it was not until the 20th century that the modern industry emerged. Low-cost hydrocarbons have influenced the development of transportation systems, materials science and many more aspects of economy and society. but the fuels as well as the emissions they produce have also had consequences for the environment, climate and public health.

First subsea completion

Subsea completion common

1943 1980Directional drilling

patentedHorizontal drilling in common use

1940 1980's


The 20th century saw rapid technological development in the oil and gas industry. One important area of innovation was in exploration. The introduction of 2-D seismic imaging in 1924 marked the beginning of the shift from ‘wildcat’ drilling to science-based exploration; today 3-D seismic imaging is common and some operators have even begun to use 4-D imaging to analyse reservoirs. Advances in drilling and completion technologies have also transformed the industry. Together with directional drilling, hydraulic fracturing, which was first demonstrated in 1947 but only gained momentum in the 1990s, has made large unconventional gas resources economic to produce.

Meanwhile, new developments helped the industry pursue resources in ever more remote and harsh environments. In the 1940s, operators began drilling wells further and further from the coast, and offshore production kicked off in earnest in the 1950s with the first well drilled out of sight of land in the Gulf of Mexico. Production of oil and gas in deep water (depths of more than 1000 feet) began in the 1970s. Today, about one-third of global oil production takes place offshore, and a growing proportion of larger oil companies’ offshore production and future development projects are in deep water.

Today, many experts believe that the oil and gas industry stands at a turning point. Population growth and a growing global middle class are leading to a rapid rise in energy demand just as access to cheap oil and gas is beginning to decline. Even as new technology unlocks new sources of hydrocarbons, the oil and gas sector is coming under increasing pressure to reduce spills, leaks and intentional releases and emissions associated with combustion. Moreover, the contribution of oil and gas to rising greenhouse gas emissions is building support for a fossil-free economy.

What drives transformation?In the oil and gas industry, characterised by large investments, large risks and large potential returns as well as strong government interest, there are many drivers of research and innovation.

Profit and the finite nature of oil and gas resources have been key drivers of technological innovation in the oil and gas industry since its inception. As known reservoirs are depleted, the industry has developed technology to find and exploit increasingly challenging sources. The extreme conditions facing operations in the Arctic and in ultra-deep water, two of today’s most important frontiers for the offshore industry, require increasingly complex technological solutions – and with them, management systems to ensure that this technology is operated with minimum risk.

The early oil and gas industry suffered from intense, ungoverned competition, leading to frenzied rushes on promising sites, inefficient recovery of the total field and numerous risks to workers and the environment. A series of regulations, including on reservoir management, construction standards and environmental, health and safety measures helped drive the adoption of technologies that helped the industry minimise risk to life, property and the environment.

The need to maximise returns on fields, driven by the high capex and regulatory burden of each new development, has also spurred innovations such as enhanced oil recovery and advanced completion techniques.

Reliable access to energy is a matter of national security for most countries, and many governments have invested in technological development that bolsters indigenous oil and gas production.

OIL AND GAS

OIL AND GAS 29

Oil and gas fields depend on extensive infrastructure, including road, rail or sea transport options for equipment and materials; tankers or pipelines to transport fuels to processing facilities and then the market; reinjection wells or processing facilities for waste water and facilities for personnel and their families. Although oil and gas are often produced together, their infrastructural requirements are slightly different, and many fields around the world vent or flare associated gas because the infrastructure required to bring it to demand centres is too high.

The oil and gas industry faces a high degree of public scrutiny. Concerns about the effects of oil and gas activity on local communities and ecosystems, as well as the contribution of oil and gas to climate-altering emissions, have put the brakes on development from western Canada to the Paris Basin to the Arctic. Shareholder activism has become more common. Earning social license to operate has become a critical ingredient for industry success.

The oil and gas industry relies upon very large capital investments. The cost of failure, to both a company’s balance sheet and to its reputation, is very high. Consequently, the industry is highly risk-conscious, typically requiring new technology to be qualified before it is put into use in order to manage the technology risk. Such technology qualification may take up to five to ten years qualifying new technologies.

HIGH COST OF SUPPORTING INFRASTRUCTURE

NEED FOR SOCIAL LICENCE TO OPERATE

EXTREMELY LOW TOLERANCE FOR FAILURE

WHAT DELAYS THE INTRODUCTION OF NEW TECHNOLOGIES IN THE OIL AND GAS SECTOR?

01.

03.

02.

BARRIER CASE STUDY OIL AND GAS

As the industry moves into increasingly challenging areas, it is adopting new technologies and systems that must deliver high performance under harsh conditions with minimal human oversight. At the same time, it must carefully manage the risks associated with these new technologies, ensuring high standards of human and environmental safety, if it is to avoid losing social license to operate.

Modern oil and gas production is a complex operation. While the operator maintains ultimate responsibility for all activities on their sites, representatives of many different service companies may be onsite at any given time, managing highly specialised processes, such as drilling activities, well operations, oil and gas processing, as well as their associated risks.

In the aftermath of Macondo, the need for a more holistic and transparent approach to risk management has become more urgent than ever. As that incident showed, complex systems fail in complex ways. The multi-actor environment and complicated human-technology interface that arises from interconnected but highly specialised technologies and procedures add dimensions to the risk picture. As a consequence, a systematic approach to managing these risks will be increasingly essential. It should be performance-based, assign clear roles and responsibilities to the involved actors and cover people, technology and organisations in a holistic manner.

MANAGING SYSTEMS RISKS

One emerging solution for deep water production is to establish integrated subsea systems that take care of production and processing on the seabed. Such systems improve efficiency and recovery factors by avoiding the processes of pumping hydrocarbons up to the water’s surface against large hydrostatic pressure and produced water back down to the reservoir again. Subsea systems also mitigate the need for manned platforms, reducing associated operating expenses and risks to human life and opening up locations where seasonal ice cover limits access to the surface.

Integrated subsea production and processing also come with new risks that must be managed. A large number of components, including pumps, compressors, separators, pipelines and power cables, must operate effectively not only individually but as an integrated system. Their integration faces barriers related to lack of technical qualification as well as common standards. And above all, because it is so challenging to inspect, maintain and repair equipment once it has been installed on the seabed, the level of quality assurance that must be performed on the technology before it is deployed is very high.

To address these barriers, DNV GL is developing risk management and technology qualification tools for subsea process system. By taking a broader view, operators and regulators should gain a more robust understanding of and approach to managing the risk complexity likely to become more common in the future.

For more on DNV GL’s work on subsea value chains, go to


FOOD AND WATER

Cast-iron plow patented

Steel plow1797 1840's

Glass and tin canning

Aluminium drink cans

1812 1960's

FOOD AND WATER 33

The technological advances of the past century, including in crop genetics, fertilisers and irrigation techniques, enabled an explosion in agricultural productivity without which the population growth of the past half-century would almost certainly not have been possible.

Gasoline tractor Early mechanisation in farms

1892 1950'sMendel's theory

of geneticsFirst genetically modified plant

1856 1982


During the 20th century, most technological development in the agricultural sector focused on producing more from the same land. Inorganic fertilisers have been in use since the mid-19th century and irrigation has been practiced for thousands of years, but mechanisation dramatically increased the scale at which they could be used.

The combination of these technologies with new, high-yielding cultivars and pesticides enabled cereal production to more than double in the developing world between 1960 and 1985 – the so-called Green Revolution – and still forms the basis of industrialised agriculture today. But agricultural technology is unevenly distributed around the world, with 65 per cent of the world’s food production still performed with little or no mechanisation.

While these technologies have increased productivity, they have also increased the energy and water-intensity of the agricultural sector, depleting local water supplies, causing erosion and contaminating soil and water with fertiliser and pesticides. Agriculture is a major source of greenhouse gases, particularly methane from cattle and wetland rice cultivation. Covering almost 40 per cent of the Earth’s ice-free land, agricultural activities have significant impact on natural habitats and ecosystems.

The global agricultural system is enormously wasteful, with as much as one-quarter of all calories produced spoiling or being thrown out. Still, some studies estimate that global food production will need to increase a further 50 per cent by 2030 and 70 per cent by 2050 to meet the demands of a world with 9 billion people. Meanwhile, agriculture is among the sectors most vulnerable to the effects of climate change, particularly growing water stress. And farmers already comprise most of the world’s poorest billion, giving them limited capacity to adapt.

A combination of both high-tech and low-tech innovations are helping transform the sector. Some farms are now using sensors to target irrigation and nutrients more precisely, improving rainwater catchment systems and reusing wastewater. New crop strains, including geneticaly modified cultivars,

that are resistant to stresses such as drought and pests, are being introduced. And tillage methods that use natural processes and high-volume overturning to restore nutrients to soil, reduce erosion and minimise energy usage are becoming more common.

At the same time, there is a growing movement to revitalise local, small-scale farming, using heritage crops and traditional farming methods. Aid organisations are increasingly supporting sustainable agriculture initiatives – projects that consider production in the context of food security, nutrition and local employment.

What drives transformation?Governmental and non-profit organisations have played a unique role in driving agricultural innovation. Initiatives led by national research organisations and international groups such as the Rockefeller Foundation and the World Bank have been instrumental in the development and transfer of agricultural technology. Local acceptance and implementation has also been instrumental in effecting the rapid transformation of food systems from Mexico and India to Pakistan and the Philippines.

Consumers – and in some cases, regulations – are increasingly holding retailers accountable for their products’ supply chains. Standards ensuring food safety have long encouraged retailers to manage risks associated with the production, packaging and transport of the goods they sell. In recent years, some consumers in higher-income markets are also paying premiums for more environmentally and societally sustainable products, as measured by factors from the use of sustainable farming practices to the treatment of workers.

FOOD AND WATER

FOOD AND WATER 35

In most markets for agricultural products, cost is the primary driver of consumer decisions. Economies of scale in inputs and equipment, processing infrastructure and distribution networks give large, industrialised farms a significant advantage over their smaller-scale counterparts. Consequently, new technologies and practices that are adopted first by smaller-scale farmers – as has been the case for many organic farming methods – can face difficulty competing in highly price-sensitive markets.

Agriculture is one of the oldest human activities in the world, and many of the inputs it relies upon – such as freshwater – are priced far below their true value, encouraging inefficient use (see Accounting for value).

The regulation of agricultural technologies differs substantially across geographies. Genetically modified (GM) crops, for example, are much more contentious in Europe, where a number of regulations restrict the sale of GM products, than in the United States, where even legislative efforts to require consumer labeling of GM goods have struggled to gain traction. The disparity between these two regulatory cultures has been ascribed to differing public perceptions of risk, particularly in the case of the environmental and health effects of new technology.

COMPETITIVE ADVANTAGES FOR SCALE

UNACCOUNTED FOR VALUE

REGULATORY CULTURES

WHAT DELAYS THE INTRODUCTION OF NEW TECHNOLOGIES IN THE FOOD AND WATER SECTORS?

01.

03.

02.


Water is an essential resource for all human activity. Its uses range from providing sanitation for communities and cooling for industrial processes to supporting ecosystems and agriculture. But water policy is often driven by social and public health concerns, and like many ecosystem services is frequently treated as a free natural resource rather than an economic good.

Because water’s full benefits are generally not reflected in its price, technologies and practices that maximise water efficiency – the amount of output per water input – have been slow to reach scale. As one example, in the global agricultural sector, which is responsible for some 70 per cent of all water withdrawn, mechanised irrigation technologies have been fundamental to the past century’s increase in productivity. Entire agricultural systems, from infrastructure to crops themselves, have been engineered around plentiful irrigation. But these systems also waste water, and the over-application of water and other inputs such as potassium, phosphate, nitrogen and pesticides contributes large volumes of run-off which can contaminate soil and other water resources.

Businesses and communities rely upon water to be available at the right time and at the right price. But over the past century, population and economic growth, aided by technology, have quintupled the amount of water used by global agriculture. And with climate change now increasing the frequency and

severity of droughts and floods, altering the global hydrologic cycle and exacerbating water scarcity, water availability is even less certain. In 2014, the World Economic Forum’s annual Global Risks Report reported that water crises are now in the top three concerns for the global community . Water scarcity is a growing reality – but a reality to which technology has not yet caught up.

Still, innovative water efficiency technologies have been developed and are in use, particularly in geographies such as Australia, Singapore and California where business, political and public awareness of water scarcity is high. And a growing number of companies and communities worldwide are seeking ways to understand and limit the water they use both directly and indirectly.

Tools and protocols to help measure water footprints are an important step towards overcoming the barrier posed by the failure of markets to account for water’s costs and benefits. Water footprinting can inform decisions about the water intensity of our consumption and investments. Measuring this resource is a prerequisite to managing it, leveraging market forces to incentivise water-saving technologies. UNIDO and DNV GL are jointly developing a water footprint self-assessment tool to assist small and medium size enterprises in developing countries to evaluate their footprint in restricted stages of the product life cycle.

BARRIER CASE STUDY FOOD AND WATER

ACCOUNTING FOR VALUE

FOOD AND WATER 37

For more on DNV GL’s work on a safe and sustainable future for food, go to:


HEALTHCARE

Röntgen discovers x-rays

X-Rays commonly used1895 1920's

Fewster: Cow pox and its ability to prevent small pox

Small pox eradicated

1796 1979

HEALTHCARE 39

Advances in the technologies and methods used to maintain and restore human health have extended human life expectancy. Many infectious diseases that were common one hundred years ago, such as smallpox and polio, have been virtually eradicated. Today, millions of people around the world receive treatment from health services every day.

Laser developed Lasers commonly used in eye surgery (LASIK)

1957 1995Flemming

invents penicillinPenicillin commonly used

1928 1940's


The coming decades will hold new challenges for the healthcare sector: improving healthcare safety, serving an ageing population, reining in cost increases and providing patients with more holistic care. Meanwhile, it is imperative that we close the gap between care in high- and low-income countries, all the more because poor communities are disproportionately facing increased risk from heatwaves, drought, floods and disease associated with climate change.

Despite improvements, healthcare safety still has a way to go. Around one in ten patients hospitalised are harmed while receiving care, and unsafe care is the world’s 14th leading cause of morbidity and mortality .

The global population is ageing, exacerbating the mismatch between healthcare demand and supply. The number of people older than 60 tripled worldwide between 1950 and 2000, and are projected to reach 9 per cent of the population by 2020. Long-term physical and mental conditions associated with old age, such as dementia, will become more prevalent, calling for integrated systems that provide physical, social and psychological care over longer durations to more people. With a greater share of global patients worldwide living longer in poor health, the upward pressure on the cost of healthcare will also increase.

Integrating information and communications technology (ICT) could raise the efficiency of services dramatically. Telemedicine and mobile health or mHealth harnesses mobile phones, which are proliferating even in areas with little other

infrastructure, as well as sensors, to facilitate the remote exchange of information between doctors and patients. Increasingly powerful analytics can enable hospitals and research institutions to identify trends, share best practices and manage risks. But the adoption of ICT is proceeding much more slowly in medicine than many other industrial sectors, delayed by conservatism on the parts of both practitioners and patients.

But a more fundamental transformation is needed in the healthcare sector. As Information Era-patients become more well-informed and empowered, their expectations of their health services are expanding. Patients are no longer passive recipients of care, they expect to be consulted, informed and involved in any decisions that can affect their health. Today’s system, which developed over the past century to meet the needs of providers and professionals, treats patients more often as the sum of their parts, each requiring a different specialist and different cures, rather than a unified whole. Achieving this transformation without disruption to these essential services will require a coordinated effort across all parts of the sector.

What drives transformation?Every individual has a stake in driving constant improvement to healthcare, both for themselves and others. Public pressure has galvanised initiatives, both governmental and non-governmental, to eradicate diseases and improve the quality of and access to health services. The willingness of practitioners and patients to take part in medical trials has also helped drive development of new treatments.

HEALTHCAREThe past century’s achievements in healthcare have been the result of improved sanitation

and nutrition, healthcare system reforms and increased scientific understanding, as well

as innovations in technologies used to diagnose and treat disease. For example, since the

discovery of the X-ray in 1895 and the beginning of Magnetic Resonance Imaging (MRI)

in 1952, around five billion medical images have been made worldwide, enabling the

diagnosis of many internal pathologies without surgery. The introduction of penicillin in the

late 1920s and insulin in the 1930s was followed by mass manufacturing in an increasingly

sophisticated pharmaceutical industry.

HEALTHCARE 41

Health is a highly politicised issue rooted in deep sociocultural attitudes. Ideological divides and conservatism in the healthcare establishment have delayed healthcare system reform. For example, Hungarian physician Ignác Semmelweis was ostractised by the medical community after he suggested that doctors could reduce the rate of puerperal fever, a common disease among new mothers in the mid-19th century, by washing their hands. The link between poor hygiene and puerperal fever was not accepted until decades after Semmelweis’s early death.

CONSERVATIVE CULTURE

WHAT DELAYS THE INTRODUCTION OF NEW TECHNOLOGIES IN THE HEALTHCARE SECTOR?

01.

The healthcare experience is personal, and many patients rely upon people they trust, whether medical practitioners or friends and family, to make decisions about their health. New technologies and practices that alter the patient experience are frequently met with suspicion – even if their benefits are well-documented – if they not are introduced by a trusted agent.

PATIENT HABITS AND PREFERENCES

02.

The healthcare system is fragmented, with different disciplines educated and funded in silos, impeding coordinated, systemic transformation. This fragmentation exacerbates split incentives, with different specialists rewarded for performing treatments rather than for contributing to positive health outcomes.

SECTOR FRAGMENTATION

03.

A quiet revolution is taking place – a revolution aimed at putting people back at the centre of healthcare. The philosophy of person-centred healthcare has been advocated for more than two decades, including by the World Health Organisation and the Harvard School of Medicine. But today, a crescendo of research, policy and other initiatives suggests that person-centred care is on the verge of a breakthrough.

In a departure from the prevalent disease-based system, person-centred care aims to meet people’s physical, psychological and social needs together, engaging them in decision-making and incorporating their abilities, preferences and lifestyle into their own treatment.

The hallmarks of person-centred healthcare include greater coordination among the different professionals and providers serving a patient, involvement of the patient’s social network in their treatment and greater dialogue between professionals and patients. And users report wide-ranging benefits, from increased satisfaction and a better quality of life for patients to improved job satisfaction for professionals – not to mention better health outcomes and a stronger healthcare economy.

New technology, practices and standards can all contribute to reducing risks in health services. But piecemeal solutions to the industry’s challenges will not be sufficient. To affect the kind of change needed to make person-centred healthcare a reality, we need transform the very culture of the health sector,

re-evaluating the system as a whole and building partnerships among patients, practitioners, providers and policymakers to envision a safe, affordable and just future for healthcare.

A person-centric worldview Transforming industry cultures, especially in systems as complex and tradition-based as healthcare, is no small undertaking. It requires that we overcome all of the other barriers we have examined. In the health sector, we must align split incentives among providers, professionals and patients, ensuring that we reward outcomes rather than treatments. We must take a systems approach to the patient rather than managing the risks associated with their separate organs. We must overcome public scepticism by engaging users as we introduce mHealth and other new technologies. And we must take into account value the current system ignores, such as a patient’s health outside the confines of medical care and treatment.

In order to change mindsets, we need to work across stakeholders to establish trust, shared value, and a common vision. Together with Monday Morning’s Sustainia, DNV GL has outlined such a vision and guide for achieving person-centred healthcare by 2050. Drawing upon the latest findings of global health literature, successful case stories, interviews with experts and patient testimonials, this guide assesses the state of person-centred healthcare and recommends actions to increase its adoption.

BARRIER CASE STUDY HEALTHCARE

TRANSFORMING MINDSETS

To learn more about DNV GL’s vision for achieving person-centred healthcare by 2050, go to


Change is inevitable in our increasingly volatile, complex and uncertain world. But the manner in which we change is not. Will we leave our current trajectory willingly or will we wait until the pressures of overpopulation, income inequality, resource scarcity and climate change alter our trajectory for us?

THE WAY FORWARD

Speaking about the challenge of climate change, Nobel Prize winner Al Gore often quotes an African proverb: “If you want to go fast, go alone. If you want to go far, go together.” The transformation we need to reach a truly safe and sustainable future must achieve both. We must go fast. We must go far. And we must go together.

THE WAY FORWARD 45

HOW CAN WE MANAGE RISKS TO BALANCE SAFETY AND SUSTAINABILITY? When it comes to the systems upon which our global economy and society depend, transformation is not easy. Any disruption to energy, transport, food and health services would cause major economic loss and human suffering. Yet the status quo poses even more certain threats. The purpose of risk management is to avoid such disruptions and protect life, property and the environment. At the same time, as we saw in all of the sectors we examined, many rules and regulations manage risk by prescribing technologies rather than outcomes. Policies and standards that are based on performance encourage innovation and continuous adoption of improved technologies.

HOW CAN WE HARNESS INSPIRATION TO DRIVE TRANSFORMATION? By definition, risk management focuses on minimising negative consequences. But positive outcomes can also be a powerful motivation for change. Aligning financial incentives, revealing and quantifying hidden benefits and enabling long-term thinking all encourage investment in line with true value. As we saw in the electricity and health sectors, approaches that engage, empower and inspire stakeholders can motivate them to adopt new technologies and behaviours in spite of the cost and inconvenience of leaving old ways behind.

TRANSFORMING FASTER

TRANSFORMING FARTHER

TRANSFORMING TOGETHER HOW CAN WE COLLABORATE TO BREAK DOWN BARRIERS TO CHANGE? The quality of transformation depends on how many people it brings along. With stakeholders that are more connected, engaged and empowered than ever before, every sector must be conscious of the new standards for trust. Securing regulatory approval to use a technology is no longer sufficient. Industries must earn – and keep – social licence to operate. Transparency, early stakeholder engagement and a demonstrable commitment to continuous improvement are essential to be a trusted business in the 21st century. Moreover, collaborating unlocks new solutions. The challenges businesses and society face today are steep, complex and systemic – and they cannot be solved in isolation. Sharing knowledge and resources, collaborating on new initiatives and working towards common visions can all help drive the transformation faster and farther.

ADDRESSING THESE THREE PRINCIPLES CAN HELP US UNDERSTAND WHY TECHNOLOGY TAKES SO LONG TO SCALE – AND WHAT CAN HELP IT BECOME TRANSFORMATIVE:

JOIN THE CONVERSATION ABOUT HOW TO MOVE FROM TECHNOLOGY TO TRANSFORMATION: WWW.DNVGL.COM/TECHNOLOGY-TO-TRANSFORMATION

We believe that technology must play a key role if we are to reach a safe and sustainable future. But technology alone is not enough. We must understand and unlock the potential of the technology we have and enable the innovation we need. We are seeking new ways to manage risk that support continuous improvement and innovation, showcase opportunities and build partnerships. By taking a broader view of technology, we can transform faster and farther – and transform together.

SAFER, SMARTER, GREENER

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DNV GLDriven by its purpose of safeguarding life, property and the environment, DNV GL enables organisations to advance the safety and sustainability of their business. DNV GL provides classification and technical assurance along with software and independent expert advisory services to the maritime, oil & gas and energy industries.

It also provides certification services to customers across a wide range of industries. Combining leading technical and operational expertise, risk methodology and in-depth industry knowledge, DNV GL empowers its customers’ decisions and actions with trust and confidence. The company continuously invests in research and collaborative innovation to provide customers and society with operational and technological foresight. DNV GL, whose origins go back to 1864, operates globally in more than 100 countries with its 16,000 professionals dedicated to helping their customers make the world safer, smarter and greener.

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Broader view: From technology to transformation