October 11, 2022

Supporting ESG Considerations For Our Customers

ESG is a topic you’re hearing more about, and with good reason. It refers to an organization’s efforts toward environmental, social and governance issues. Though it’s somewhat self-explanatory, here are some main points on ESG related to organizations:

  • Environmental covers metrics associated with a company’s impact on the natural world, including greenhouse gas emissions, natural resource use, pollution, deforestation and biodiversity. It can also include exposure to environmental and climate change risks such as flooding, drought and wildfire.
  • Social looks at a company’s people-related impacts such as how responsibly it manages worker rights, health and safety in its operations and supply chain, its practices on diversity and inclusion and its values around corporate giving, taking into account the interests of external stakeholders
  • Governance examines a company’s decision and policy making procedures and the effectiveness of its ethics obligations for the board of directors, managers and shareholders. It concentrates on how a company creates transparency in accounting and how it polices itself on tax strategy, philanthropy, executive remuneration, political lobbying and potential conflicts of interest.

Reporting ESG

In March 2021, the U.S. Securities and Exchange Commission (SEC) announced the creation of a Climate and ESG taskforce. Driven from the increasing investor focus and reliance on climate and ESG-related disclosure and investment, the taskforce identifies ESG misconduct for publicly traded companies, requiring them to outline climate risks to their operations when they file registration statements, annual reports and other documents.

Companies are being urged to make ESG core to their business strategy, to set zero emission goals and provide this information in disclosure statements. Many companies are already publicly advertising their sustainability and environmental goals, and ESG reporting is key to validate their statements. Creating a common framework with a single set of reporting standards will create uniform requirements for reporting organizations and improve clarity for users of the data, ensuring that stakeholders can base decisions on consistent and comparable information.

Why is ESG important?

Sustainability is a widely used term for many things environmentally related and can be a leverage for companies to drive innovation and create competitive advantage. Making positive sustainability changes can support an organization’s image and brand, as well as improve talent acquisition and retention. Companies will continue to see investor and customer demand for improving their environmental impacts, so it’s important to be prepared for ESG reporting.

Some key considerations for building ESG reporting practices include determining which topics to address and frequency of disclosure. It’s important to also select the right ranking agencies and align with appropriate frameworks and certifications.

Organizations must also determine the level of reporting they seek to do:

  • Compliant – Compliance requirements focus only; broad policies, no disclosure.
  • Basic – Understood as a risk management issue; reactive, with limited disclosure; no third-party assurance, limited materiality.
  • Better – Understood as a risk management issue and value opportunity with proactive and measurable commitments; comprehensive disclosure, third-party assurance of select data, enterprise-wide materiality and integrated with strategy/risk reviews.
  • Best – Considered essential for enterprise-wide excellence, with measurable commitments across all focus areas and integrated into long-term strategy; integrated reporting and impact reporting, comprehensive third-party assurance of all key data, enterprise-wide materiality and annual risk review, externally validated.

At FTI, we have solutions to support our customers’ ESG actions. Many of these systems can be digitally connected, making them powerful tools for ESG reporting.

  • Building Automation Controls Typically the largest ESG-related data collection and connectivity capabilities available.
  • EV charging Through our EnTech Solutions division, we provide EV charging infrastructure to support electric company/employee vehicles.
  • Solar Create clean energy, reduction in electric grid consumption, demand reduction.
  • Battery Storage Ability to store and use energy from solar, demand reduction.
  • Biodigestion Reducing levels of methane and other gas exposure to environment created by agricultural waste while creating clean renewable natural gas (RNG).
  • Power Monitoring Power usage, power quality, energy reduction systems.
  • Lighting (new and retrofit solutions) Reduced electrical energy, more controllability.
  • Connected Building, Electrical, Fire, Camera, and Security Best means of leveraging data to reduce energy and meet ESG goals.

Do you have sustainability, energy or ESG goals? Do you have the necessary tools to visualize them, create reports and validate your data? In all cases, data will be required from various sources: electrical, mechanical, environmental and even materials. What connected systems do you have or need to accurately record the right information and automate these systems so that it is easier to maintain and even enhance ESG reporting?

ESG mandates and reporting requirements are in the early stages, and now is the time to prepare. FTI has the tools and services across our organization to help; reach out to me today to learn more.