A majority of executives–62% to be exact–consider a sustainability strategy necessary to differentiate in today’s competitive landscape. And while many think developing a corporate sustainability strategy is a heavy lift, setting clear goals and developing a detailed plan is a strong head start that can yield quick results. With the right resources and processes, any organization can launch environmentally-friendly initiatives to help drive their business towards a smaller carbon footprint.
This article presents key corporate sustainability trends, discusses the importance of responding to rising sustainability concerns, and lists a few steps to start (or accelerate!) your organization’s sustainability journey.
Corporate sustainability trends in 2022
Policy initiatives, climate change, and other activities combined in 2021 to significantly affect this year’s corporate sustainability goals and ESG reporting. Let’s look at two major activities driving 2022 sustainability trends:
- A new Securities and Exchange Commission (SEC) proposed ruling
- A global climate summit – COP26
SEC proposed rules requiring corporations to disclose ESG data
Stakeholders and consumers want to make informed, sustainability-related purchases and investment decisions. Thus, the increasing demand to define best ESG reporting practices and mandate full transparency regarding ESG data and criteria. According to Gary Gensler, SEC Chair, “…Investors should be able to drill down to see what’s under the hood” of asset management funds. In other words, it’s no longer enough for businesses to say we have initiatives to reduce our impact on the environment, it’s time for us to demonstrate our progress with real, hard numbers.
The SEC’s proposed rule amendments require public companies to disclose certain climate-related information in their registration statements and periodic reports. If these amendments pass, organizations will have to be transparent about the material impacts of their operations and Scope 1, 2, and 3 emissions, among other ESG activities.
In addition to complying with these mandates, organizations can also benefit from the increased visibility by demonstrating trustworthiness to their customers. And to the extent investors might consider ESG-based purchases less risky than other stock buys, they’re driving the 2022 trend for full disclosure.
COP26 and Science Based Target Initiatives (SBTi) focus on net zero
In late 2021, 120 world leaders and 40,000 registered participants (including observers and media) met in Glasgow for the 26th annual United Nations Climate Change Conference (COP26). Country leaders and party delegates worked to advance the implementation of the Paris Agreement and establish ways to move the world forward on a more sustainable, low-carbon pathway. The COP26 Glasgow Climate Pact and a global campaign to rapidly scale corporate climate ambition are two sustainability events from 2021, powering corporate ESG activities in 2022.
The Science Based Targets initiative (SBTi) and United Nations announced in November 2021 that 1,045 companies representing more than $23 trillion in market capitalization are decarbonizing at the pace and scale required to limit global warming to 1.5°C. Member organizations represent 53 business sectors across 60 countries and employ more than 32 million people. Additionally, half of these companies use SBTi’s framework to reach net zero by 2050.
Public-private coalitions committed to accomplishing COP26 and SBTi goals are trending in 2022. Stakeholders from various sectors are collaborating to deliver meaningful change. For example, The Leadership Group for Industry Transition (LeadIT) represents countries and companies aiming for net-zero carbon emissions from industry by 2050. With backing from the World Economic Forum, Sweden and India launched LeadIT at the 2019 UN Climate Action Summit.
The core of New York city’s efforts to achieve carbon neutrality by 2050 is public-private partnerships. A 2006 retrofit of the Empire State Building reduced energy costs, improved occupant comfort, and delivered deeper usage insights with individual metering. This project became the business case for large-scale renovations necessary to achieve carbon reduction emissions consistent with the city’s 2019 Climate Mobilization Act.
The White House Executive Order mandating half of all new vehicles sold in 2030 be zero-emissions vehicles
An August 2021 Executive Order calls for long-term fuel efficiency and emissions standards, partially accomplished by mandating half of all new vehicles sold in 2030 be battery-electric hybrid, plug-in hybrid electric, or fuel cell electric vehicles. The target date allows manufacturers time to upgrade existing facilities without stranding assets.
The Executive Order also aims to save people money and enhance public health by reducing pollution levels. These goals reflect how closely society’s beginning to look at the interconnected net effects of separate systems. Realizing how our primary mode of transportation impacts where we live and the air we breathe, questioning regulations and challenging the environmental status quo are trending in 2022.
ESG reporting in 2022
People around the world increasingly want to work for or invest in companies leading by example. Employees and volunteers want to associate with organizations committed to sustainability. And ESG reporting is how they’re evaluating sustainability objectives.
According to a Deloitte report, the Harvard Law School Forum on Corporate Governance says, “Investors are seeking [quantitative ESG] metrics to evaluate a company’s approach to sustainability and its drivers of long-term growth.” Research indicates “more than nine out of ten publicly traded companies adopting ESG, and it’s one of the biggest trends in the business world today.”
The Governance & Accountability Institute, Inc.™ (G&A) reports, “92% of the S&P 500 companies published a sustainability report in 2020, up from 90% in 2019” but the ESG reporting trend isn’t limited to large companies. Hank Boerner, G&A Chairman, Chief Strategist and Co-Founder, states, “G&A’s research has clearly shown that corporate sustainability reporting is now a best practice for the leading U.S. public companies and is increasingly being adopted by mid-cap companies…”
So ESG reporting is up, but in what format? With virtually no standardized guidelines, organizational leadership is choosing between several frameworks—leading to a variety of different formats with little standardization between them. Here are just a few of the common standards out there:
- The Sustainability Accounting Standards Board (SASB) notifies companies on what ESG factors they should measure and report to investors.
- The Global Reporting Initiative (GRI) is an independent, international organization informing organizations on how to measure and report ESG data.
- The Carbon Disclosure Project (CDP) is a nonprofit that surveys companies, verifies results, and issues ratings for businesses that do the best job reporting on greenhouse gas emissions and water usage. Over 6,800 organizations use this accompanying framework specifically for carbon, water, and forest-related reporting.
- The Global Real Estate Sustainability Benchmark (GRES) is a percentage (100 percent maximum) measurement of ESG performance in absolute terms, over time and against business peers.
There’s a clear demand for ESG reporting, which means even while C-suite executives wait for format directives, they’re implementing and measuring sustainability goals. For example, JP Morgan, Wells Fargo, and Blackrock are three major financial institutions with ESG investing criteria for their processes and products. According to the 2022 JUST 100 ranking, Meta is No. 1 among tech companies in the environment, with net-zero emissions operations and heading towards being water positive. McDonald’s is committed to advancing sustainable beef production and sourcing cage-free eggs. NFL Green is the National Football League’s sustainability program, designed and implemented to reduce the environmental impact of their major events.
The importance of having a sustainability initiative
“Companies that aren’t harnessing the power of sustainability reports may be losing favor with investors or losing competitive advantage. They may also be at a disadvantage when attracting and retaining customers and employees.” The broad and deep interest in ESG behavior shared above suggests this Deloitte research is on point. But why? Let’s consider four likely reasons.
First, sustainability initiatives signal to investors, consumers, and employees that company leadership understands their organization’s role in the environmental ecosystem. Organizations integrating sustainability initiatives into their business models are well-positioned for the future.
Second, when decision-makers address sustainability, it assures stakeholders that company leadership recognizes that their operations and goods or services directly affect the environment. Identifying the problem means they can minimize potential harm by applying green initiatives to their sourcing, supply chain, and production activities company-wide.
Third, stakeholders want transparency. Knowing CEOs or board chairs signed The Climate Pledge or joined a coalition like the global corporate renewable energy initiative RE100, they know leadership holding themselves publicly accountable for their ESG actions.
Fourth, a sustainability commitment requires executives, boards of directors, and/or trustees to thoroughly examine what it will take to meet their ESG goals–then allocate the resource to measure and evaluate goal progress continuously. Reaching this point in the implementation process sends a positive message to investors, customers, and employees regarding the company’s environmental values.
These days it’s relatively easy for interested parties to call out empty ESG promises. Increased visibility, instant news (a.k.a. social media), and multiple reporting frameworks make it easier to discover what’s happening operationally or, as SEC Chair Gensler phrased it, “to see what’s under the hood.”
How Atrius is helping organizations on their sustainability journey
Some companies are digging deep into their operational data to satisfy stakeholders and meet with specific reporting frameworks. They’re correcting old generalizations and assumptions to bring more granularity and accuracy into their sustainability initiatives. They’re getting their operational data in line to adapt their ESG commitments to louder calls for transparency and disclosure.
There’s also a concerted effort to revise communications and better showcase sustainability progress for building occupants. For example, energy teams are presenting simplified reports highlighting ESG accomplishments to increase employee and tenant engagement. This past year, Atrius worked with a commercial construction management firm, organizing their utility data in preparation for reporting on their sustainability goals to internal and external stakeholders.
We also help drive student engagement with sustainability initiatives at one of the world’s top 100 public universities. Their building engineers and facilities teams work hard to manage the institution’s most valuable and visible assets—their buildings. They engage students’ support for their efforts by making utility usage data publicly available in a digestible format. Sharing this information lets students and occupants see how their actions affect the environmental impact of the buildings in real-time. For example, when they turn off the air conditioning in their dorm room, they can see the corresponding reduction in the building’s overall emissions footprint.
3-steps to start your organization’s sustainability journey
If you’ve read this far, you understand the urgency and importance of initiating company-wide sustainability goals as soon as possible. Fortunately, you can get an easy head start and three quick wins following three steps.
Step 1: Think big picture
Start by reading your organization’s vision and mission statements. Clearly understanding your value position(s) as a company and to stakeholders informs your big picture thinking.
Next, review company resource usage. Sustainability goals are about reducing consumption and limiting waste discharged into the environment. You might need assistance identifying where and when your organization has the highest demand for specific resources like gas, electricity, water, heating, cooling, etc.
When you know your organization’s resource usage data, you can research which reporting frameworks–SASB, GRI, CDP, or GRES–align best with your data collection capabilities.
Finally, get internal buy-in across departments and organizational levels before establishing ESG goals or publicly announcing a new sustainability initiative. Perhaps form a committee or create a sustainability team to move the initiative forward and provide strategic support.
Step 2: Set baselines, benchmarks, and goals
After standardizing data collection formats and selecting a reporting framework, there are often quick wins to look forward to during this step. For example:
- The information gained during an energy audit
- Insights from detailed cost analysis
- Enhanced operational knowledge provided by facility teams
- Reduced employee commuting time, lowering transportation emissions
Celebrate these quick wins with your Green Team, C-suite executives, and employees. Thanking them for their current efforts earns their ongoing support.
Step 3: Elevate and communicate your initiatives
Sharing your quick wins, as well as the challenges, is authentic and transparent. People often want to engage, especially with a winning team!
And with greater participation, there’s more help gathering data from industry standards or ESG reporting databases and their scores.
A new Securities and Exchange Commission (SEC) proposed ruling, a global climate summit, and a presidential Executive Order from 2021 are driving corporate sustainability activity in 2022. ESG goals are the new corporate “must-haves” to attract customers, investors, and employees. But research also confirms creating smarter, safer, and greener spaces isn’t enough without transparency and reporting validating these efforts.
Businesses and institutions that recognize the importance of establishing a sustainability initiative can start designing their plan by thinking big picture, setting benchmarks and baselines, and communicating wins to stakeholders.
Research shows consumers and investors notice—if not prefer–companies prioritizing ESG. Creating smarter, safer, and greener spaces should be a top priority for any organization, no matter the size or industry. These activities are likely more successful when they begin with clear goals and detailed plans. Choosing the right enterprise technology partner is crucial to achieving the data transparency necessary to capitalize on a consumer market highly focused on the sustainability of goods and services.
Reach out to Atrius. We’ll help you earn stakeholder trust. Together we’ll clarify your ESG goals, create the infrastructure to collect vital data, and help you tell your sustainability story.