Calling out empty corporate environmental, social, and governance (ESG) promises is relatively easy these days. Enhanced awareness, instant news (a.k.a. social media), and multiple reporting frameworks reveal all—or very close to it. Stakeholders and consumers are demanding more transparency in how organizations track, measure, and communicate ESG mandates. And the Securities and Exchange Commission (SEC) is responding.
As the SEC moves closer to mandating ESG reporting, executives, managers, and staff are discussing how they’ll meet these new requirements. These conversations include identifying the resources necessary to accurately report the material impacts of their operations, Scope 1, 2, and 3 emissions, and other ESG activities.
Interestingly, the pending SEC rulings aren’t the only potential change driving these strategy sessions. Business leaders are examining their sustainability programs for another reason, too. Customers, employees, and investors are demonstrating the fiscal risks of corporations ignoring climatologists’ decades-old warnings. If your company isn’t interested in saving the planet, people are increasingly less interested in your company.
Urgent, inevitable, and permanent
The growing universal willingness to address climate change couldn’t come at a better time, according to the 2022 Intergovernmental Panel on Climate Change (IPCC) report. The report, issued by the United Nations body responsible for assessing climate-change science, stresses urgency. I have two primary takeaways after reading their findings. First, there’s no path back to normal. We’ve permanently changed our climate to what it is today. Second, and genuinely encouraging, we still have time to make meaningful changes that limit future adverse impacts.
Reporting on ESG activities ranging from waste disposal to greenhouse gas emissions (GHG) for vendors is a practical start. Especially if the SEC requires companies to disclose complete supply chain environmental impact, not just company-owned manufacturing facilities and corporate headquarters’ carbon footprints. But without marketplace solutions to facilitate crucial data collection and analysis, any report, mandatory or optional, is less meaningful.
“We’re all-in. What now?”
Building a sustainability strategy starts at the top and diffuses throughout the company. Once there’s buy-in at every level, the next questions are, “Do you know where to begin? Do you have the infrastructure to measure success during the implementation?”
Where to begin
The proposed SEC guidelines, if approved, will require climate risk reporting, including data on Scope 1, 2, and 3 emissions. My simple descriptions below are a useful starting point but my colleague Chelsea Davis explains these terms in a clear, practical, and detailed manner to help your teams understand these different emission sources:
- Scope 1 refers to direct emissions from sources your business owns or controls
- Scope 2 describes indirect emissions from the utilities the company purchases
- Scope 3 is all other indirect emissions that happen in your value chain
I encourage business leaders to start with their climate risk assessment and then focus on measuring their Scope 1 and 2 emissions. Quantifying Scope 3 impacts is easy for the SEC to require but difficult for you to deliver, especially without the right resources to collect and interpret data. How can you report on the carbon emissions of your value chain when many of those companies probably don’t even know their embodied carbon emissions? Introduce your suppliers to technology that automates the process of tracking your emissions across all three levels!
Generally speaking, the highest sustainability ROI comes from improving existing operations. As So, after assessing your Scope 1 emissions, consider implementing energy conservation measures like new lights, building automation systems, lighting controls, and system optimization processes. These steps alone typically save 30%-50% on current building emissions.
Automating labor-intensive manual tasks is another quick start to increase sustainability ROI. Start with spreadsheets. From building the workbooks to the subsequent calculations and projections, you can free hours of staff time to address higher-value initiatives—including ESG reporting! Advanced, centralized platforms like Atrius® Sustainability simplify reporting frameworks worldwide.
A critical task to facilitate measuring your sustainability strategy during implementation and beyond is finding the right technology solutions. Get to know the marketplace now, before 1000s of companies are scrambling for solutions to meet SEC compliance guidelines.
Marketplace gaps and trends
Whether you’re looking out for your own company or helping your suppliers, finding the right technology solution to facilitate ESG reporting starts with knowing what is and isn’t available.
One concerning gap between existing and emerging technology is the absence of data integration in the newer solutions. Energy managers need a big picture approach to achieve sustainability goals. Learning to drive is an excellent analogy to illustrate my point. In the beginning, you’re focused on the vehicle immediately ahead of you and staying in your lane. Input from your driving instructor about what’s happening to the left or behind you is overwhelming and unwelcome. Fortunately, processing multiple data points simultaneously gets easier as you gain confidence. When your attention shifts from 10 feet ahead to all around, you get the critical macro-level visibility necessary to drive safely.
Similarly, the sustainability space has marketplace solutions for those initial steps to grab the low-hanging fruit mentioned above. There are fewer sophisticated, robust platforms that collect granular data, normalize utility bills, work with Enterprise Resource Planning (ERP) systems, and then format all the information to comply with multiple reporting frameworks.
Corporate responses & trends
I expect energy and sustainability managers to focus on assurance measures in the near term and optimize supply chains over the next 10 years. Analyzing vendor value will shift from assessing product costs to balancing expenses against carbon offsets prices. Relatedly, I also think we’ll see less regulation in the carbon offset market. We’ll have more accessible, direct options to buy and sell using software platforms versus working with procurement partners as we do now.
While I expect numerous software solutions, particularly to facilitate potential SEC reporting compliance, we’ll also see large numbers of sustainability and ESG assurance consultants enter the marketplace. Their expertise could help close some of the immediate software gaps. These professionals will likely advise us as we focus on optimizing our supply chain ESG performance, too. I anticipate a holistic approach to climate risk management, far beyond simply reducing greenhouse gasses.
Acuity Brands, through our Atrius division, is hyper-focused on closing the software and staffing gaps in the ESG marketplace. We’re continually innovating our software and elevating team training to make a difference for every client.
Sustainability is hands-on; Atrius® is, too.
Whether you’re working on your first climate risk assessment or are years into managing the company’s ESG strategy, a hands-on approach accelerates success. And the sooner we reach our sustainability goals, the better. The extreme weather events across the globe prove we’re running out of time to prepare businesses for unavoidable disruptions.
We can’t undo the climate changes to date. We can, however, innovate, automate, and collaborate to create a sustainable future. Atrius will help you earn customer, employee, and stakeholder trust. Together we can clarify your ESG goals, build the infrastructure to collect vital data, and position you for pending ESG reporting mandate
And we’ll cheer when you reach your sustainability goals!
If you’re ready to chat about software that can support your sustainability journey through every stage, get in touch with an expert from Atrius today.