Environmental, Social, Governance (ESG): time was when a metric of this sort was way outside a company’s remit, but if attempted, fell mainly within the remit of marketing departments in most businesses. But there is change in the air in more ways than one.
The measurement of ESG is now rapidly becoming a key performance indicator for SMEs, a critical success factor in many Boards’ view of their business, and a specific criterion for investors.
Consider the following:
92% of consumers are now more likely to trust a company that supports social or environmental issues.
58% of employees now consider a company’s social and environmental commitments when deciding where to work.
68% of investors have now integrated ESG into their decision making.
Why is this? Partly, it’s because the Government has set such strict targets for carbon reduction by 2030 and 2050, and businesses that don’t look like they’re credibly measuring their efforts towards sustainability will be viewed poorly by the market.
But also, it’s because, in so many instances, ESG benefits also map clearly to the bottom line. What makes sense for ESG often makes sense for the business, too.
Energy and fuel: hot topics for ESG
Nowhere is this clearer than with regard to energy and fuel use.
Broadly speaking, business activity (defined as non-residential) generated 85% of the UK’s greenhouse gas emissions according to the latest Government figures, and fuel and energy use ultimately contributed heavily to this.
It is clear, then, that by – say – moving to non-fossil fuel and more efficient energy sources, better ESG outcomes can be achieved – and, since fuel and energy prices are now rising and are likely to continue to do so, costs can be lowered at the same time.
So, how can businesses, and perhaps specifically FDs, make the biggest difference to the balance sheet – and hit their ESG targets – quickest?
It’s not all about vehicles
Whilst for many a key focus is, for example, on the positive ESG impacts of switching to electric vehicles, they could be missing more critical sustainability metrics under their own roof (or indeed that of the premises they intend to purchase or invest in).
To put this into perspective, Government estimates state that business premises such as offices, retail space, hospitality venues and industrial units account for up to 80% of private sector energy demand.
Probably, then, the greatest opportunity to combine ESG benefits with cost benefits starts within the building itself.
But how to go about it?
Sustainable buildings: careful wins, longer-term gains
Energy and fuel efficiency is a complex science, and every building performs differently, so it’s critical to understand that simply applying “green bling” – installing a few heat pumps here and there, or some photovoltaic panels – really isn’t the way to go about it, whether it’s a new build or an existing asset.
Worst case scenario: the energy dynamics of the building can cause these features to either fight with each other – increasing rather than decreasing energy usage – or deliver excessive and unneeded heat and cooling, which also translates, ultimately, into unnecessary energy use. Needless to say, this is an ESG and balance sheet fail!
On the other hand, a rigorous design process, supported by techniques including thermal analysis for heat efficiency, Computational Fluid Dynamics (CFD) modelling for airflow, façade analysis for solar energy potential, and other approaches, can combine mechanical, HVAC, electrical, power distribution and lighting elements in the most low-carbon, energy-efficient way possible.
This delivers consistent gains over time, supporting a much stronger ESG performance, but also satisfying the critical need to balance risk and return.
Liveable, workable, healthy: how your building will be judged
At the same time, it’s important to remember that ESG is not just about climate and carbon, but also about community – and here, too, companies are being measured.
Once again, though, what makes sense for ESG makes sense for the business. A building’s closest community is its occupants, so by ensuring buildings are comfortable in terms of health factors like humidity, and wellbeing factors like acoustics, light, and aesthetics, you can maximise occupants’ productivity.
Naturally, this tends to deliver a tangible positive effect on the bottom line, but it also improves other metrics like employee satisfaction, staff retention, morale, and recruitment.
Approaching these challenges piecemeal, however, will likely result in significant expense for little or no gain for either the ESG score or the balance sheet. A considered and holistic design is the key.
Who can make your buildings ESG-friendly?
At Green Building Design Consultants, we have worked with businesses, their Facilities Managers and indeed their Finance Directors in every kind of building from offices to data centres, and care homes to universities, to model, design, and install sustainable technologies.
These technologies deliver a lower carbon footprint, healthier and more productive environment, and a return that makes for on-message reading on the balance sheet and the ESG reporting alike.
From conversation, to consultation, to carbon-neutral – it starts whenever you’re ready.
To find out more about our services and how we can help you, please call us on 01992 552111.