Business PickupIn recent years, companies have begun setting sustainability goals such as net zero with the expectation that all employees will contribute. Yet, if sustainability isn’t your core role, ESG initiatives can be overwhelming. From breaking down the acronyms to defining terms like carbon credits and understanding why they matter, this guide will share everything today’s business professionals should know about sustainability and how to support it.
Business sustainability terms to know
ESG
One of the most commonly used sustainability acronyms is “ESG.” While you may be familiar with it, here’s a quick refresher: E stands for environmental; S refers to social initiatives like training and community; and G is for governing aspects, such as board representation and anti-corruption.
ESG was developed by the investor community to focus on non-financial aspects of business — in other words, what they’re doing beyond being profitable. To participate in ESG implies that you’re taking action in the areas described above and measuring your impact.
Most companies begin with “E” because it’s often easiest to measure the direct impact of sustainability initiatives. There are many tangible components of it, including waste, sustainable procurement, and how your company’s operations impact the environment. To break it down even further, carbon tends to be the core focus of the environmental component because it’s the most pressing issue, but companies should beware of developing “carbon tunnel vision” and overlooking other environmental concerns.
GHG
Greenhouse gasses, or GHG, are also referred to as emissions and carbon footprint. While GHG composition is roughly 80% carbon dioxide, it also includes other gasses, including methane, nitrous oxide, and fluorinated gasses. When we discuss carbon emissions, CO2e, or carbon dioxide equivalency, is used to describe greenhouse gasses and their potency.
Scopes of Emissions
As you pursue sustainability efforts in your company, it’s helpful to know how emissions are categorized. There are three main scopes used to classify how emissions are produced:
- Scope 1 refers to direct fuels or direct use of fossil fuels. This usually includes natural gas or diesel burned through a company’s fleet.
- Scope 2 refers to emissions generated from electricity and how it’s produced.
- Scope 3 encompasses supply chain emissions and indirect sources. It’s more complex than scopes 1 and 2, and can encompass bringing raw materials into the facility (upstream) as well as delivering products to customers (downstream).
For most companies, the majority of emissions fall under scope 3. About 90% of Quantum’s emissions, for instance, are within scope 3. Yet, it’s easier to drive sustainability by starting with scopes 1 and 2, because they’re within your direct control to manage. While scope 3 is certainly worth pursuing, starting with a less complex scope is more approachable for most companies.
Carbon Neutral & Net Zero
If your company hasn’t yet received a request for emissions data from customers, it may be coming — and soon. Companies are setting ambitious targets such as carbon neutral, which means to reduce carbon emissions to the greatest possible degree and then offset whatever can’t be reduced. As long as you achieve net zero for scope 1 and 2 combined, your company may be referred to as “carbon neutral;” reducing scope 3 is optional.
Net zero, on the other hand, means all scopes net out to zero. This is a much more ambitious, longer-term goal. Yet, many sustainability-focused organizations have already begun striving towards net zero, which is why we’re seeing more and more companies approach their partners for data on carbon emissions.
Carbon credits & why they matter to corporate sustainability
Carbon credits are an essential tool for most companies looking to improve sustainability efforts. There are two markets for carbon credits:
- The compliance carbon market was set up by government regulators. Participation is mandatory for some companies like power generation facilities and refineries.
- The voluntary carbon market is for companies looking to purchase offsets to reduce their emissions, possibly as part of their carbon neutral and net zero goals.
Compared to the compliance market, the voluntary market isn’t nearly as regulated. To generate carbon credits, a company must demonstrate additionality, or doing activities to reduce emissions above and beyond current processes. In other words, if the activity would have happened anyway, it’s not eligible for a carbon credit. And additionality may fluctuate — something that meets the criteria now may become business as usual in the future, so it will no longer satisfy requirements. To ensure your efforts are meeting the additionality requirement and are thus truly eligible for carbon credits, you’ll need to go through a registry for verification. Not all registries are created equal; we recommend VERA, Gold Standard, American Carbon Registry, and the Climate Action Reserve.
At Quantum, we don’t offer carbon credits because we don’t believe our space meets additionality; however, we do offer reports and encourage clients to use this reporting in their own sustainability pursuits. We can break down reuse and recycling in terms of estimated carbon emissions saved or avoided through our processes.
The regulatory landscape is changing quickly. A corporate sustainability reporting directive has been released in Europe in which companies of 500 or more employees or a certain revenue threshold will have to report. Many companies report on sustainability even if they aren’t mandated to. If your company is reporting voluntarily, choose your framework based on what works best for your needs and be prepared to show your work. Many companies use the UN Sustainable Development Goals, but the Sustainability Accounting Standards Board is another option. There’s no “one size fits all” solution, so consider the framework and how it fits your goals.
Business Advantages of ESG Reporting
Reporting on ESG and supporting your initiatives with hard data gives your company several business advantages. For one, it’s better for your bottom line. It can help you reduce cost and increase efficiencies around operations/utilities. Quantum recently changed to radiant heating at one of our facilities and saw our bill drop by 25%. Plus, close to half of investors prefer investing in sustainable companies, known as “impact investing.”
Moreover, 64% of people are willing to spend more on sustainable products or services, and many companies are now considering it a business minimum to have ESG mandate for RFQs. Reporting can even support your recruitment strategies, as younger generations want to work for companies with strong ESG mandates, and sustainability has a positive correlation with employee experience and engagement. Finally, from a risk management perspective, ESG reporting can lead to less pressure from activist groups and less scrutiny from regulators.
Ways to implement ESG from your role
Understanding ESG and the why behind it is a great starting point for contributing to sustainability in your role. With this knowledge, you can begin taking actionable steps to support sustainability.
The simplest approach is to get started somewhere, no matter how small it may seem. For many people, the path towards sustainability begins with learning more about your company’s activities. For instance, what can you measure? What are your stakeholders asking or looking for? Look at internal stakeholders, and consider what staff are noticing. From there, choose one focus and start to work towards it, measuring your progress as you go.
Alternatively, one starting point could be reviewing resources such as Green Economy Canada, which offers a beginner-friendly boot camp, or HSBC’s sustainability tracker and free assessment tools. Or, consider starting with the GHG protocol. These standards can be daunting, but you can start with the best available data that your company has, and then fill in gaps as more information becomes available. For example, you might then perform a materiality assessment by assessing your activities, operations, impact, and determining out of those, what is most significant to your business. Then, rank all different aspects of the business to generate a list of priorities, which will act as a roadmap for setting goals and tracking progress.