Energy Efficiency, Electrification and Decarbonization: A Call to Action for Corporations
In the evolving landscape of climate-related initiatives, terms such as corporate social responsibility, sustainability, ESG (Environmental, Social, Governance), and energy transition have surfaced. Despite the terminology dance, the essence remains unchanged: tackling climate issues is imperative for the environment, society, and businesses alike. This urgency was underscored during mHUB’s accelerator demo day, where it was evident that startups and corporations alike recognize the necessity of addressing climate challenges.
The Evolution and Critique of ESG
ESG, once a popular term, has faced criticism due to widespread greenwashing and unclear objectives. However, the ensuing political discourse has pushed companies to break down ESG into actionable components and build robust business cases. Now, a shift towards “greenhushing” is observable, where companies work on environmental components more discreetly.
Progress Among Major Corporations
Significant advancements are being made within Fortune 100 companies, with a growing focus on identifying material issues relevant to the company and its stakeholders. These corporations are building substantial sustainability expertise within their organizations and boards.
Key Learnings and Recommendations
1. Rethink Existing Business Frameworks:
· Sustainable business approaches must differ from traditional frameworks of business management, investment and regulation.
· Effective sustainability drives efficiency, agility, innovation, profitability, and enhances employer attractiveness.
2. Establish Metrics and Management:
· Establish dedicated metrics to manage and estimate the financial impact (materiality) of operations on climate and vice versa.
· Recognize the true costs of climate-driven disruptions and shift these costs to the emission generators.
· Initial data collection is crucial for impactful decision-making.
3. Revisit Operations for Efficiency:
· Beyond renewables like solar or wind, consider using biomass waste or extracting heat from solar panels to improve energy efficiency.
· Identify untapped energy sources within industrial and residential campuses for both climate benefits and profitability.
4. Transition from Fossil Fuels:
· Renewable energy is growing, but electricity demand (due to electrification, EVs, data centers, AI) is outpacing it.
· Develop energy storage solutions to ensure reliable energy supply amidst the intermittent nature of solar and wind power.
· Embrace advancements in battery technologies for better and safer energy storage.
5. Carbon Capture and Utilization:
· Shift focus from carbon capture and sequestration to capture and utilization.
· Convert captured carbon into useful feedstocks (e.g., methanol, ethanol) for own manufacturing or selling to others, thereby transforming a cost into a revenue source.
· Support the development of this field through startups like Metasorbex and Rushnu.
6. Leverage Tax Credits:
· Utilize the Inflation Reduction Act (IRA) for tax credits to accelerate clean energy deployment and reduce emissions.
· The IRA’s impact could far exceed initial expectations, potentially reaching $780 billion through 2031 (Brookings Institution).
7. Explore Carbon Offsets:
· In the absence of internal measures, buy carbon offsets to mitigate emissions. Carbon credits can originate planting and restoring forests, or companies that are capturing carbon directly from the air.
· Ensure rigorous verification of carbon offsets to maintain integrity.
· Incorporate carbon credits to support Scope 3 emission reductions and drive climate project funding on the voluntary carbon market.
8. Global Reporting Standards:
· Adapt to rigorous reporting requirements, particularly regarding Scope 3 emissions, which are critical despite current SEC rulings.
· Address challenges in data governance, technology, and supply chain engagement for accurate emission tracking.
Diverging Global Mindsets
European companies are forging ahead with sustainability initiatives despite some setbacks in the USA. This divergence highlights the competitive edge sustainability can offer and the regulatory pressures in Europe, which contrast with the disincentives in the USA.
Conclusion
The momentum towards comprehensive sustainability is clear. Global companies are preparing for stringent reporting and material impact assessments. For those yet to start, the message is unequivocal: begin your sustainability journey now to ensure long-term viability and competitive advantage.
