Sustainability is a hot topic in 2022. Everyone, from corporations to individuals, is looking for ways to reduce their carbon footprint and environmental impact. This push toward creating a more sustainable future became the foundation for ESG goals.
Here’s what utility companies should know about ESG in building and why it’s becoming increasingly vital for them to embrace this philosophy.
What Is ESG?
ESG stands for environmental, social and governance. The acronym describes a set of standards that socially or environmentally conscious companies can use to screen potential investments.
In this context, environmental generally refers to how these companies adjust policies and practices to address climate change. It could also refer to power usage, plans for energy-efficient projects, natural resource management and conservation. The social aspect of ESG looks at how companies work internally and externally with stakeholders and the public. Governance refers to the business’s internal administration rather than a reference to external bodies.
Each company sets its ESG standards, with the ultimate goal of focusing on more socially conscious investments. Countries working toward preventing the looming climate crisis should establish a universal ESG standard.
Assessing ESG Risk for Utility Companies
ESG might be the ideal choice for many industries, but it presents a growing risk for utility companies — many of which still rely heavily on fossil fuels. While the rest of the world is trying to cut carbon emissions, one study found that energy-related CO2 emissions climbed by more than 6% in 2021. The energy industry released 36.3 billion gigatons of CO2, the highest level in history.
Despite the growing risk, more than half of energy leaders have reported inadequate infrastructure to grow or even create ESG-related businesses. Regardless of their readiness, ESG will continue to expand exponentially in the coming years. Globally, it’s vital to reduce CO2 emissions by 40% before 2030 and reach net zero by 2050 to avert the looming climate crisis. Utility companies need to start assessing ESG-related risks now to better understand how they will respond when climate-related suggestions become mandatory.
Pushing for Sustainable Construction Methods
The energy sector isn't the only one facing ESG-related challenges in the 2020s. Traditional construction methods are slowly phasing out in favor of environmentally conscious design options. Every part of the process can be made greener and more eco-friendly, from sourcing materials to installing the finishing touches. Companies that opt for sustainable building materials or new techniques like prefabricated or modular construction can reduce their carbon footprint and overall CO2 emissions.
Creating energy-efficient buildings will eventually help reduce the demand on utility companies. Focusing on efficiency from the foundation up means the finished structure won't need as much power to operate HVAC systems or lighting. Even if the energy sector still relies on fossil fuels for power generation, less will be burned.
Modular construction also helps reduce CO2 emissions on-site by shortening the timeline. Instead of spending months running diesel-powered equipment daily to get the job done, modular methods take a fraction of the time to complete. The primary components of the project are constructed in a factory setting, then trucked to the job site and assembled. This can be up to 50% faster than traditional techniques.
Creating a Greener Future
There is no universally accepted ESG standard as of 2022, but that will likely change as the climate crisis deadlines approach. The world is swiftly running out of time to make the necessary changes to prevent severe environmental damage. Utility companies must assess the risks ESG could present to their business before they don't have time to make the changes required to create a greener future.