This article was published on the ABB Conversations blog on 11 October 2022.
When discussing sustainability in buildings, the conversation is usually dominated by how much a business can save in operational expenditures. While that is a compelling reason to decarbonize one’s building, there is a larger business opportunity beyond energy efficiency.
Customers are shopping with sustainability as their compass [1]. Shareholders are applying Environmental Social Governance factors to their investment decisions [2]. New talent is selecting employers based on climate impact [3] [4], and on top of that, these stakeholders are becoming increasingly savvy to greenwashing, when a business spends more money on marketing sustainability than on their actual solutions [5]. The climate crisis is ushering in a new cultural wave of transparency that determines a business’s market share, social license to operate, and future ability to innovate.
Sustainability can no longer be a side project. The planet can’t afford it, and we as business owners and managers can’t afford it. Sustainability must be woven into every aspect of a business – from supply chain to real estate management to merchandising – to the point where it becomes a core tenet of the brand. The natural evolution of our economy is such that only those who can provide what customers are demanding – goods & services delivered sustainably – will survive. Sustainability will no longer be a differentiation, but a baseline that all companies must maintain.
Transparency is the best policy
When everyone is marketing themselves as sustainable, the way to gain customer favor is to prove it. There is value in transparency, and when it comes to Scope 1 and 2 emissions (emissions that occur from sources that are controlled/owned by an organization or emissions associated with the purchase of electricity, steam, heat, or cooling, respectively [6]), energy management systems afford us that transparency.
Simply stated, energy management is the ability to monitor and control energy consumption in a building. Annette Clayton, Chair of NEMA Board of Governors, noted how digital solutions, like a building energy management system, can improve energy efficiency by “making the invisible, visible” [7]. When we can see how much energy is spent every second of the day in every part of a building across an entire fleet of buildings, then we can create a roadmap for how to improve our business operations that prioritizes the most impactful efforts.
Take Microsoft – the largest software company in the world [8] – for example. In their 2021 Environmental Sustainability Report, Microsoft outlines in extreme detail their efforts to reduce scope 1 and 2 emissions, such as “deploying AI to improve energy efficiency,” which resulted in “a 12 percent increase in median efficiency” of their Redmond campus chiller plant [9]. They also describe a cutting-edge approach to reducing data center emissions that uses artificial intelligence “to schedule workloads in times and regions with the lowest carbon footprint… to take advantage of grid-level fluctuations in carbon intensity to minimize carbon” [9]. Instead of only publishing their sustainability targets, the Microsoft report demonstrates real-world solutions and results.
To some, transparency may seem risky. If you allow others to see into your operations, then you open yourself up to criticism; you make your actions – and inactions – known. But customers are looking to align themselves with brands that are courageous and authentic. Proof of progress and commitment to the values you broadcast is more powerful than creating a veneer of success. We have evidence that transparency is the best policy.
The outdoor clothing company Patagonia is known as a corporate sustainability trailblazer; they are an accredited and founding member of the Fair Labor Association [10] and have recently made headlines when the founder announced he was giving away the company to use profits to fight climate change [11]. However, even Patagonia is not perfect. The Atlantic reported on a 2011 audit that revealed human rights exploitations in Patagonia’s supply chain [10]. Their response? Transparency. Patagonia’s Chief Operating Officer said, “We think people will be disappointed, we think people will likely ask why we didn’t do something sooner. We’re going to be really honest about those things… We’re going to dive very deeply into this issue and we’re going to break trails for the rest of the industry” [10].
For Patagonia, the risk of transparency paid off. TIME reported that sales quadrupled over the decade following the audit and, as of 2019, surpassed $1 billion [12]. TIME also reported, “Young people are clamoring to work at the company’s main campus. More than 9,000 people applied for 16 internship positions last summer” [12].
Patagonia provides an example for how transparency can be woven into the essence of a brand. The company’s ethos is outlined in their 2016 Annual Benefit Corporation Report which states, “The conventional corporate approach to communications is to promote the good and keep quiet about the bad… we’ve taken the alternative approach that it’s better to put everything out there and then work to fix it—the idea being that transparency will keep us honest and keep our team focused on constant improvement. We hope that sharing good and bad information makes it easier for other brands to do the same, which should help to drive collective action to raise the bar” [13].
Also, important to note is that “customer” or “stakeholder” in this context is extremely broad. While retail provides some of the most accessible examples of how customers are demanding sustainability, organizations across all segments are receiving pressure from their customers to decarbonize transparently. For example, universities are receiving increasing pressure from students, professors, and alumni to divest from fossil fuels [14]. According to The Princeton Review, 74% of respondents to their annual College Hopes & Worries Survey indicated, “having information about a college’s commitment to the environment would contribute to their decision to apply to or attend the school” [15].
Another demonstration of the value of transparency is the increasing popularity of B Corp Certification. In 2006, B Lab was established as a nonprofit network with the idea that “a different kind of economy was not only possible, but necessary” [16]. This led them to the development of the B Corp Certification, which is “a designation that a business is meeting high standards of verified performance, accountability, and transparency on factors from employee benefits and charitable giving to supply chain practices and input materials” [16]. Originally only utilized by small business, the B Corp Certification has grown significantly, even hosting large multi-national B2B corporations such as Danone.
Sustainability planning is corporate strategic planning
Some may say that sustainable, ethical operations are too expensive. It costs money to add energy efficiency upgrades to buildings. It costs money to exchange a fleet of internal combustion engine delivery trucks for electric vehicles. It costs money to source materials from ethical companies that pay workers living wages. But the real question is, can you afford not to do these things? When customers don’t want to buy from you, investors don’t want to invest in your business, and the best minds don’t want to join your organization, there will be no future for that brand.
In an article for Euronews, Frankie Leach wrote a resounding statement about the fashion industry, which applies across all segments: “Any attempts to better this industry must embrace the idea that there is value in conserving precious resources and restoring the environment, and where the culture of transparency and accountability is at the core” [17].
The climate crisis is here, and it is driven by untenable business practices and consumption habits. As a result, sustainability holds a new and ever-growing weight in our culture that will dictate market behavior. Will your business evolve with the times or be left behind?
References
[1] G. Petro, “Consumers Demand Sustainable Products And Shopping Formats,” Forbes, 11 March 2022. [Online]. Accessed 19 July 2022.
[2] T. L. Taylor and S. Collins, “Ingraining sustainability in the next era of ESG investing,” Deloitte, 05 April 2022. [Online]. Accessed 19 July 2022.
[3] C. Ro, “Younger workers have higher eco-anxiety than those who’ve come before them. It’s affecting where they can – and will – work,” BBC, 01 March 2022. [Online]. Accessed 19 July 2022.
[4] A. Christian, “Are workers really quitting over company values?,” BBC, 28 February 2022. [Online]. Accessed 19 July 2022.
[5] C. Edwards, “What is Greenwashing?,” Business News Daily, 29 June 2022. [Online]. Accessed 19 July 2022.
[6] United States Environmental Protection Agency, “Scope 1 and Scope 2 Inventory Guidance,” United States Environmental Protection Agency, 29 September 2021. [Online]. Accessed 19 July 2022.
[7] A. Clayton, Interviewee, CEO of Schneider Electric North America & Chair of NEMA Board of Governors. [Interview]. 14 July 2022.
[8] The Software Report, “The Top 100 Software Companies of 2021,” The Software Report, 12 July 2021. [Online]. Accessed 20 July 2022.
[9] Microsoft, “2021 Environmental Sustainability Report,” Microsoft, 2022. [Online]. Accessed 20 July 2022.
[10] G. B. White, “ALL YOUR CLOTHES ARE MADE WITH EXPLOITED LABOR,” The Atlantic, 03 June 2015. [Online]. Accessed 19 July 2022.
[11] D. Gelles, “Billionaire No More: Patagonia Founder Gives Away the Company,” The New York Times, 14 September 2022. [Online]. Accessed 23 September 2022.
[12] A. Semuels, “‘Rampant Consumerism Is Not Attractive.’ Patagonia Is Climbing to the Top — and Reimagining Capitalism Along the Way,” Time, 23 September 2019. [Online]. Accessed 19 July 2022.
[13] Patagonia, “Annual Benefit Corporation Report,” 2016. [Online]. Accessed 19 July 2022.
[14] C. McGreal, “Yale, Stanford and MIT’s fossil fuel investments are illegal, students say,” The Guardian, 16 February 2022. [Online]. Accessed 19 July 2022.
[15] The Princeton Review, “The Princeton Review 2022 College Hopes & Worries Survey Report,” 2022. [Online]. Accessed 20 July 2022.
[16] B Lab, “Make Business a Force For Good,” B Lab, 2022. [Online]. Accessed 20 July 2022.
[17] F. Leach, “The trillion dollar question: How to fix the fashion industry,” Euronews, 29 November 2021. [Online]. Accessed 19 July 2022.
