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When it comes to climate change and greenhouse gas emissions (GHGs), the United States is moving backwards, according to a report released earlier this year by the Rhodium Group, an independent research organization.
The report says, “… progress in reducing U.S. GHG emissions was reversed in 2021, moving from 22.2% below 2005 levels in 2020 to only 17.4% in 2021, putting the U.S. even further off track from achieving its 2025 and 2030 climate targets.”
The U.S. Securities and Exchange Commission (SEC) took on the trend and recently detailed newly proposed rules that would require companies — both foreign and domestic that are registered with the SEC — to report climate impact and emissions information. The proposal aims to bring standardization via policy to what has, until now, been largely optional — unlike the EU, which established similar reporting requirements in 2014.
The proposed rule has sparked political and legal debates, including whether the agency even has the authority to implement the new rules.
For those impacted — any group required to make regular SEC filings — the proposed requirements may demand additional resources and time spent measuring scope 1, 2 and 3 emissions — which are defined by the EPA as follows:
- Scope 1: GHG emissions directly owned and controlled by a company (i.e., vehicle fleets, boilers, machinery)
- Scope 2: GHG emissions that are indirectly associated with a company’s purchase or use of utilities including heat, steam, electricity, etc.
- Scope 3: GHG emissions comprise the majority of a company’s GHG output and stem from a company’s association with third-party suppliers of products or services the company works with. This includes the GHG output of both scope 1 and scope 2 emissions as defined above and is referred to as “value chain emissions.”
According to the SEC’s press release, periodic reporting must include, “… information about climate-related risks that are reasonably likely to have a material impact on their business, results of operations or financial condition and certain climate-related financial statement metrics in a note to their audited financial statements,” in addition to “information about greenhouse gas emissions.”
Which leaves companies of various sizes not only wondering where to begin, but how. Green tech — a sector of the tech industry that specializes in the innovation and application of tools that can be used to effectively model and conserve energy and resources to curb the negative impacts of climate change — may be a large part of the answer.
Go green or go bankrupt?
Energy surpasses several categories when it comes to the main contributors of greenhouse gas emissions because it covers a wide spectrum, including transportation, electricity, heat, buildings, manufacturing and construction and fugitive emissions like vapors from appliances, storage tanks, pipelines etc. All of these are regularly and overly relied on in the enterprise to conduct business.
Measuring and accurately reporting the information outlined by the SEC can be daunting , but that’s where technology, as usual, comes in to innovate.
“Given the SEC’s proposed rules for emissions reporting, it’s a hot time for our sector in green tech. The way this information has been measured for years in spreadsheets is not consistent and we’re seeing that recognized in this proposal,” Alyssa Zucker Rade, chief sustainability officer at SustainLife, said. “Now, it’s all about translating to emissions outputs in a verified and validated way. It is amazing to see that now being supported by regulation on a large-scale. Once the SEC rolls out a final ruling on the proposal, I’ll be interested to see what the data verification and assurance side of that formal reporting requirement entails.”
SustainLife — a company that hopes to offer a solution for enterprises looking to begin measurements — launched its free public beta software-as-a-service (SaaS) platform in November 2021, working with organizations that are seeking ways to become more sustainable, environmentally driven corporate citizens.
“Even with the SEC’s proposals aside, there are a range of pressures that every company in the U.S. faces — including pressures related to their scope 3 emissions, which are harder to track, from their supply chain etc. There’s pressure from the public, from employees and from boards that trickles down demanding the organization to do better,” said Mike Hanrahan, cofounder of SustainLife.
“Everyone sees the writing on the wall and if you don’t, you probably won’t be in business in 10 years. At some point, if you don’t, you likely won’t be able to sell to Fortune 500s or sell internationally, for example. Making sure you’re getting ahead of this is important. It will impact your brand value,” he added.
The scope of green tech offerings for the enterprise
Executives at large corporations like Microsoft and Equinix have echoed the sentiments about brand competitiveness and say they are working to refine and democratize sustainability offerings for their customers.
Microsoft is currently testing Sustainability for the Cloud, a SaaS offering currently in preview that will be publicly available later this year. The company has designed the tool with a focus on four pillars:
- Unifying data intelligence
- Reducing the operational and environmental footprint of a company’s processes, buildings and so on.
- Creating a more sustainable value chain, specifically with insights into scope 3 emissions data
- Building a more sustainable IT infrastructure to address a company’s scope 1 and scope 2 emissions
“Of course, there is an expectation from regulators to get more precision around this type of reporting. However, regardless of the reporting requirements, at Microsoft, we do think this offers opportunities for our customers to differentiate themselves and see that sustainability focuses are good for business,” says Kees Hertogh, general manager of global industry product marketing at Microsoft. “If you differentiate your products by creating more sustainable products — it’s a business opportunity as much as anything else.”
Equinix, a global colocation data center market that serves major global corporations like Zoom, Netflix, Salesforce, AT&T and Verizon, has been focused on sustainability efforts for more than a decade.
As a business-to-business service provider, Equinix’s sustainability efforts qualify as scope 3 emissions for many of the aforementioned global giants and the company has been tracking and providing its emissions data and progress to customers for some time — which means that companies using Equinix’s data centers and services, are a bit more sustainable and can more easily report on the breadth of their scope 1, 2 and 3 emissions.
Through tracking this data, Equinix can work with its customers to pursue efficiency opportunities like scaling renewables and helping them meet their company’s own decarbonization targets, etc.
“Any IT organization, including ours, has a major role to play in delivering on ESG (environmental, social and governance) priorities,” said Milind Wagle, CIO of Equinix. “First and foremost, I view data as core to driving accountability for any sustainability strategy, so an IT organization like Equinix, has a critical role in making data available to the enterprise and the executives who drive that strategy in any organization — and how we do that through dashboards and reports and intelligence can drive actions around those strategies. “
Equinix has seen, firsthand, an increasing demand for sustainability from its stakeholders, customers and employees alike — and it has met them, particularly with its global green data centers.
“We’ve been seeing these trends of investors wanting more access to environmental impact data, including climate risk and scope 1, 2 and 3 emissions. We’ve been preparing for this for a long time, not just because of regulatory pressure, but because we think it’s the right thing to do and it drives value and efficiency of the business,” said Jennifer Ruch, Equinix’s director of sustainability and ESG.
Ruch said that SEC requirements like this can drive efficiency but also help highlight how data centers are ahead of this trend. “Sustainability is a part of our strategy now and going forward, regardless of what the U.S. does on the regulatory side.”
The company claims it was the first data center company to set a renewable energy goal back in 2015. According to Ruch, for 2021, Equinix will be reporting 95% renewable energy coverage across the world.
Capitalism may be the key to sustainably
Outside of SaaS and data center offerings for the enterprise — which may not be a fit for all companies to adopt — others, like Sandeep Ahuja, cofounder and CEO of CoveTool and Ron Soreanu, VP of operations at Ravin, are tackling aspects of GHG contributors head-on in two of the largest GHG sectors: buildings and transportation.
Buildings, both residential and commercial, account for close to 40% of U.S. carbon dioxide emissions. When Ahuja heard this statistic, she was shocked and moved to make an impact, which led to the creation of CoveTool.
The company’s data-driven platform is designed to optimize building design, cost and sustainability using machine learning. CoveTool’s green business insights allows project stakeholders like architects, engineers and contractors to collaborate in one platform and measure metrics like energy and embodied carbon to see where reducing those metrics can save money. Last year, the company claims it helped its customer base of 2,000 across 22 countries save more than 28 million tons of CO2.
“I think that capitalism is a solution to sustainability. I think that if we help people make more money, save money and get to profitability faster, they are going to do it more,” Ahuja said. “Instead of just relying on the goodness of people’s hearts, this tool incentivizes green business intelligence with the promise of cost savings.”
Separately, transportation accounts for roughly 29% of GHG emissions in the U.S. and Ravin, an AI-powered vehicle inspection company, has set out to make a dent in reducing that.
Vehicle fleets and trucking account for a large swath of that, but the company claims a significant portion of the movements of these vehicles is’n’t even business-related, but maintenance-related — driving them to and from inspections. Ravin’s solution brings automation to fleet managers at their fingertips and uses AI and computer vision to show vehicle diagnostics instantly — avoiding those extra trips to “figure it out” and only for maintenance that is actually necessary, thereby reducing emissions.
“For more companies to transition to green technologies, the incentive has to be monetary and the policies created for companies must have some kind of environmental and sustainability component across the board,” said Soreanu. “More companies we work with require us to work within their sustainability goals. By doing that, we create these shared responsibilities and hold one another accountable, as we should, to design the best future for our families.”
Why sustainability demands ‘business not-as-usual’
Several recent reports from authorities, such as the Intergovernmental Panel on Climate Change and the United Nations, warn that not enough progress has been made and that it is “too late” to make the needed dents to reverse detrimental impacts. However, the enterprise and the green tech innovations that are at the ready to support their sustainability efforts, show promise in at least mitigating some negative effects.
“It’s hard and challenging to make operational changes, but the sooner you start measuring and adopting the tools that are available, the easier it will be in the long run. Start now if you want your business to remain credible in the next five years,” Hanrahan says.
The SEC’s proposed rules promise to benefit companies and investors alike and hold the enterprise accountable for its share of impact, according to a statement from SEC Chair, Gary Gensler’s in the SEC’s March press release.
If implemented, the proposed requirements would include a gradual integration period for SEC registrants. According to the SEC, the compliance date would be dependent on the registrant’s filer status. There would also be a gradual integration period for registrants to begin reporting of scope 3 emissions.
“Even without the SEC regulators, the push for sustainability reporting will have an effect on companies of all sizes,” Hertogh added. “I think that is important to realize … in order for us to, as a society, make progress, we have to realize this is not a problem of the happy few and it’s not the end. It’s not just about reporting to the SEC. This is about making fundamental progress and how we’re thinking about building products, engineering products, etc. for the future to come.”