There is a growing call from investors and consumers for companies to not only implement environmental, social, and governance measures (ESG), but also disclose and accurately report on the effectiveness of such measures in the spirit of corporate accountability. With no agreed-upon standard, it can be difficult for companies to outline an ESG reporting strategy. Let’s break down the basics of ESG reporting, some best practices, and how adopting solar energy can help your company make good on its goals.
ESG reporting is a way for companies to disclose how they’re addressing sustainability issues from greenhouse gas emissions to workplace diversity to customer data security. The Securities and Exchange Commission already requires a certain degree of ESG reporting, but the Biden administration will likely look to make ESG reporting mandatory — with an emphasis on climate risk factors — for all public companies as part of their regular SEC filings. According to a report published by the Governance and Accountability Institute, 90% of S&P 500 companies participated in some type of ESG reporting in 2020. While embracing ESG reporting is a good thing — with tech giants like Sony and Cisco Systems leading the way — a lack of a single reporting standard has created confusion among companies, and frustration among investors who want reporting that’s easily comparable and third-party verified.
In lieu of an agreed-upon standard for ESG reporting, different groups, including consultants, journalists, and the U.S. Chamber of Commerce, have suggested best practices. They include:
Common among ESG reporting standards such as GRI and SASB is the disclosure of greenhouse gas (GHG) emissions, which are broken down into three categories, or scopes. Defined by Greenhouse Gas Protocol, these scopes aim to paint a fuller picture of a company’s climate impact by assessing both its direct and indirect emissions. Scope 1 includes GHG emissions from company-owned and operated sources, from boilers and furnaces to cars and trucks. Scope 2 emissions result from the power a company purchases, such as utility-grid electricity. Lastly, scope 3 includes incidental emissions like those tied to the manufacture of products a company uses. While Greenhouse Gas Protocol recommends that companies report all scope 1 and 2 emissions, reporting scope 3 emissions is considered optional.
One thing companies can do to help reduce their climate impact is invest in solar energy. Greenhouse Gas Protocol has issued guidance that explains how a common corporate solar photovoltaic (PV) setup, where solar energy is produced on-site and is supplemented by electricity purchased from the utility, factors into scope 1 and scope 2 emissions. Solar can help in this arena because it allows for the generation of emissions-free renewable energy right on the owner’s property. The electricity generated by a PV system can be used to satisfy a significant portion of a facility’s onsite power load, thus limiting the amount of energy pulled from the grid, which most often is generated via pollution-causing fossil fuels. What’s more, innovations like solar grazing — where farm animals like sheep are allowed to feed on the grass surrounding ground arrays — and pollinator-friendly installations, which provide environments for essential bee populations, can further enrich local ecosystems.
While there’s definitely more work to be done in improving ESG reporting, it is clear that solar energy helps companies achieve their environmental and sustainability goals. At PowerFlex, we make the entire solar adoption process, from project development to financing to installation, incredibly easy for our clients, which include Amazon, PepsiCo, and a host of other big names. Contact us today so we can get started with your free consultation.