The ABCs of Energy for your ESG Goals: A Discussion in Two Parts

Even if you’re not your organization’s Chief Sustainability Officer, chances are that you are being exposed every day to a whole lot of information relating to environment, sustainability and governance (ESG) goals. These days, there is more ESG data coming at us every day, but it’s disorganized and often hard to make sense of. So, we thought it might help to step back and help you cut through the thicket of confusion by listing and defining some of the most commonly used terms out there. Rather than go through these alphabetically, as some lists do, we thought it would make more sense to group these by categories, within which various terms are related. 

There are so many terms, we decided to break this into two separate posts. Our first post will examine these terms and issues at the highest level, related to corporate and institutional behavior and high-level environmental goals. Next week, we will focus on the energy-related terms and definitions that affect the activities and strategies that corporations will need to undertake in a quest to become more environmentally sustainable.

Let’s start by taking a look at the terms related to corporate and institutional activities as they relate to the environment.

Corporate Behavior:

Corporate Social Responsibility (CSR) – The United Nations Industrial Development Organization (UNIDO) defines corporate social responsibility as a “management concept whereby companies integrate “social and environmental concerns in their business operations and interactions with their stakeholders. CSR is generally understood as being the way through which a company achieves a balance of economic, environmental and social imperatives.”  UNIDO notes that this balance is often also referred to as “Triple Bottom Line.”

The UNIDO CSR Diagram

https://www.unido.org/our-focus/advancing-economic-competitiveness/compe...

Triple Bottom Line - Let’s investigate that latter concept in somewhat more detail. Harvard Business School piece on the topic entitled “Triple Bottom Line: What It Is and Why It’s Important” calls it a “business concept that posits firms should commit to measuring their social and environmental impact—in addition to their financial performance—rather than solely focusing on generating profit.” It notes that the term can be dissected into three elements: profit, people, and the planet.

Environmental, Social and Governance - Then there is ESG referred to above (and in our post of xxdate – xxlink?), the metrics that responsible companies are increasingly adopting. The CFA Institute (for chartered financial accountants) notes that while ESG metrics are not formally required as part of corporate accounting, “companies are increasingly making disclosures in their annual report or in a standalone sustainability report.” It also comments that a number of institutions are in the process of developing standards to help these factors be incorporated into corporate reporting to aid investors in determining the stance and activities of various companies.

B Corporation – At this high level, there are certified B Corporations which have made specific CSR commitments. The non-profit group B Lab, which certifies B Corporations, defines these entities as businesses that meet “high standards of verified performance, accountability, and transparency on factors from employee benefits and charitable giving to supply chain practices and input materials.” In order to get B Corporation certifications, companies must: show high levels of social and environmental performance, as evaluated by B Lab; make a formal legal commitment to be accountable to all stakeholders (not just owners or shareholders); and behave transparently so that behavior can be assessed.  Some well-known B Corporations include Green Mountain Power (the first utility to attain certification), clothing companies Athleta and Patagonia, and body care company The Body Shop.

Now let’s focus in on the terms related to energy use and associated emissions that affect our planetary well-being.

Emissions:

Greenhouse Gas – United States Environmental Protection Agency (EPA) defines a greenhouse gas as “any gas that absorbs infrared radiation in the atmosphere.” Such gases include carbon dioxide, methane, nitrous oxide, and a number of fluorocarbons.

The growing challenge of carbon dioxide

https://gml.noaa.gov/webdata/ccgg/trends/co2_data_mlo.png

Carbon Footprint – the EPA defines carbon footprint as “the total amount of greenhouse gases that are emitted into the atmosphere each year by a person, family, building, organization, or company.”  They include activities such as driving, heating a home, cooking and flying, as well as emissions associated with the articles that are used or consumed (so if a factory making your shoes or inputs to your business has associated emissions, they tie to your carbon footprint).

Net Zero Energy – sticking with the EPA, its definition of net zero energy (or simply net zero) is “producing, from renewable resources, as much energy on site as is used over the course of a year.” Thus, a building could be net zero if it had sufficient rooftop solar to offset all of its energy consumption. More broadly, net zero is being applied to corporations that may be purchasing offsets (to be defined shortly) that are applied against their associated carbon emissions.

Carbon Neutral – Merriam Webster (yes, this term has clearly made it to the mainstream) defines carbon neutral as “having or resulting in no net addition of carbon dioxide to the atmosphere.” The international Energy Agency and other bodies often suggest that net zero and carbon neutrality are synonymous, and it indicates “carbon neutrality, or ‘net zero,’ means that any CO₂ released into the atmosphere from human activity is balanced by an equivalent amount being removed.

Carbon Negative – A more recent concept of being carbon negative has emerged, especially since Microsoft in 2020 committed to being negative by 2030, removing from the environment “all the carbon the company has emitted either directly or by electrical consumption since it was founded in 1975.” The IEA comments that “Becoming carbon negative requires a company, sector or country to remove more CO₂ from the atmosphere than it emits.”  

At a high level, these are the sustainability terms that matter in setting the stage and defining behaviors.  Next week, we’ll spend some time fleshing out the glossary related to energy-related emissions, metrics, and strategies to attain corporate energy and sustainability goals.

Action Items:

1. Determine your company’s stance with respect to Corporate Social Responsibility and ESG goals

2. Define your carbon footprint

Responsibly yours,

Matt Ward and Joyce Bone – CoFounders, SolMicroGrid