Navigant Research Blog

“Basing” Corporate Emissions Targets

— February 6, 2018

Global Emissions Goalposts Are Captivating C-Suites and Gaining Velocity in Corporations Around the World

In boardrooms worldwide, an interesting discussion is occurring as iconic brands and corporate titans reform their journeys to cut greenhouse gas (GHG) emissions, as well as their strategies for protecting the climate. Mindsets were rebooted by the 3% Solution and the Science Based Targets Initiative, and were energized by the global Paris Agreement, leading to waves of bold pledges from corporations. What are factors that make these concepts concrete for executives deciding on goals?

Putting the “Based” in Science-Based

Dating back to the mid-1990s, businesses developed emissions goals with arbitrary reduction numbers, intending to one-up a competitor or tag to a year with marketable slogans like “15% by 2015.” So why are science-based targets (SBTs) suddenly resonating as executives deliberate long-term objectives? Well, it looks like it’s more about the “based” than it is about the “science.” It’s not that science is uninteresting to corporations, it just isn’t the only impetus for speed and adoption of the SBT approach to target setting. On topics of environmental protection, businesses often make a public case for certainty or a level playing field. Internal specialists tasked with emissions now have a tool that provides both of these even without a domestic compliance and regulatory framework in place to address GHGs. Many corporate anecdotes suggest that revising the terminology is also key to promoting the SBT concept, and although different terms are used (context-based, evidence-based, responsibility-based, even value-based targets), they appear to achieve the same outcome.

“Based” targets are winning out in a marketplace of climate goal concepts that is sometimes confusing; it’s about time there is one dominant framework. There’s carbon neutral, climate neutrality, net-zero, net-positive, and even drawdown. Some have fallen out of favor because they require too much explanation while others signal new frontiers. “Based” targets are here to stay, and their current traction is similar to previous standards and certifications, such as the Forest Stewardship Council and the Marine Stewardship Council. The way it plays out, industry leaders or first movers set a target based on the sector’s emissions budget and others follow suit, either exceeding the leader, or chasing that level of ambition. There are now 339 multinational companies committed to setting a target that follows the pathway to 2°. More of those companies are from the US than from any other nation in the world.

So What?

More than anything else, this concept helps internal discussions with the C-suite when a specialist can tell leadership that, by setting an SBT, the company is identifying its share of reductions in relation to the global emissions challenge and that cuts its footprint within the emissions budget for the sector and industry. Putting an emissions goal into a global context makes sense to internal stakeholders in a way that definitively makes a case for “how do we do our share?” It also makes sense to external investors and advocacy stakeholders that are starting to ask companies when they will have a science-based target—or why they haven’t set one yet.

Basing targets on global data is here to stay. Executives like the linearity of setting targets; 89 companies had them approved by the SBT Initiative in 2017. How can you take the next steps? 2018 is the year!

If you are looking at what paths to take, contact Matthew Banks for information on the projects and services Navigant’s Sustainability Team can offer as a strategy partner.

 

Sustainability as a Business Model

— December 12, 2017

Energy efficiency and emissions goals form an important piece of sustainability initiatives for many corporations and other professional entities. Sustainability is often solely associated with energy and climate-related metrics, but it is not the only factor contributing to a sustainable organization. Investors are starting to recognize what a sustainability-focused business approach can mean for long-term organizational success. Increasingly, sustainability performance (or environmental and social governance) is being defined more broadly to include social issues such as education, injustice, and poverty.

UN Sustainable Development Goals

In 2015, the UN launched the 2030 Agenda for Sustainable Development with the support of 193 nations. This agenda includes a set of 17 sustainable development goals (SDGs) and 169 targets that came into effect in January 2016. The purpose of the SDGs is to create standards that can measure progress on key issues like combating poverty, climate change, and injustice—among others. The UN agenda is designed to create an economic environment where the deployment of capital resources is considered in terms of economic, social, and environmental criteria. SDGs foster a discussion on investment quality beyond just the expected financials.

Socially Responsible Investment: A Growing Track Record of Outperformance       

Socially responsible investing may have begun in the 1700s with the Quakers, who refused to support “sinful” businesses such as tobacco, firearms, and the slave trade. More recently, sustainable investing has taken on the guise of promoting environmentally sustainable businesses, although financial performance is at the fore. The Morgan Stanley Institute for Sustainable Investing performed a study on over 10,000 sustainable equity funds that found that these investments have met or exceeded the performance of comparable traditional investments. UBS, a leading global investment bank, claims to have $970 billion, or 35% of its investable portfolio, placed in socially conscious investments. Al Gore’s sustainability-focused private investment fund, Generation Investment Management (GIM), has returned about 16.3% after fees since September 2014, while the MSCI World Index has returned 7.7% over the same period. Assessing the sustainability of companies can be done using the Dow Jones Sustainability Indices, which are a group of benchmarks that track the stock performance of companies in terms of economic, environmental, and social criteria.

The Foundation of High Performing Companies

Why do sustainable companies often outperform their peers? For Gore and GIM, not only is sustainability good for humanity, it is also a significant indicator of investment risk, management integrity and quality, robustness of business models, and products and services that are aligned with real-world problems and needs. Put together, these characteristics can identify high performing companies that provide consistent returns. An interesting note about GIM and its investment thesis is that it has broadened the scope of the definition of sustainability to include company diversity, human resources practices, community interaction, employee benefits, healthcare, and the values and ethics of the C-suite—along with the usual energy- and climate-related strategies. Each sustainable investment decision is aimed at choosing the factors that are most important to the sector where the company competes.

Many companies that use Navigant’s Energy research and services deliver energy-related products and services that can help their own customers meet sustainability goals. However, energy and emissions are only a small component of sustainable participation in the global economy. Similar to the dramatic efficiency results that can be achieved with a holistic approach to commercial building energy management, corporate sustainability efforts—and often business performance—can be dramatically improved with a more holistic view of what sustainable business performance means and how it can be achieved. There do not have to be any tradeoffs, and the real-world results are starting to speak for themselves.

 

Can Technology Solve the Dysfunction of Sustainability?

— November 30, 2017

Sustainability is a term that, by itself, can be meaningless. The downfall of “green” into “greenwashing” is a cautionary tale for sustainability champions. In a recent Triple Pundit article, “The 8 Dysfunctions of Sustainability,” a Penn State University professor articulated the problem: “[My critique] is meant to both reclaim the original fullness of ‘sustainable development’ but even more to point to the baggage we must leave behind. In a word, sustainability has to grow up.” Professor Erik Foley’s criticism is sound and defensible. The question then becomes: How can we course correct and make sustainability a relevant and impactful metric?

It is important to define a scope of action to make the concept of sustainability concrete. Let’s look at the commercial buildings sector as an ecosystem of business, economics, and people that can provide structure to the analysis of sustainability. Technology can be deployed to alter how we operate and assess the value of buildings against the environmental, social, and governance lenses of sustainability. To be specific, data, analytics, and automation can represent three pillars of a mature solution for the buildings sector that ensure continuous and ongoing improvements in the buildings sector from a sustainability perspective. Let’s examine two dysfunctions from Professor Foley’s article to highlight how technology can be the pathway forward.

#2: We measure what we can manage even if it doesn’t matter.

The bottom line here is action. We have tracked the evolution of the intelligent buildings market for years at Navigant, and it is evident the technology can make significant impacts on sustainability metrics. We have tracked the transformation from traditional building automation solutions that improved scheduling and reduced hot and cold calls in the biggest buildings to software as a service (SaaS) applications that provide enterprisewide insight on building operations—the key shift is action. Effective intelligent building solutions provide an end-to-end solution for gathering, communicating, and analyzing data that is translated into meaningful information with integrated automation and controls that enable continuous improvement in operations. What that means that customers can utilize technology to reduce costs, improve experience, and lower environmental impact through a systems-based strategy.

#4: Efficiency ≠ sustainability.

Foley’s fourth dysfunction sets up a further explanation of the sustainability improvement opportunities tied to the systems-based approach to building operations made possible by intelligent building solutions as described above. The smarts of the data-driven approach to intelligent buildings are rooted in the idea of holistic insight and operational improvement. This approach is a perfect counter to dysfunction #4. Take, for example, our historic approach to energy efficiency and demand management—these two objectives were seen as isolated strategies for energy management that delivered different and possibly competing benefits. The real-time insight and continuous operational changes made possible by integrated automation and controls with analytics enable reduced costs, lower environmental impacts, and increased comfort. One side does not have to take precedent over another but can be prioritized at different times to meet a larger goal. From a sustainability perspective, an intelligent building solution can support overall energy use reduction, but also optimize equipment operations so energy is used at peak time if there is onsite solar, for example, or reduce energy during peak if reliant only on grid power.

Today, there is a real opportunity to re-envision sustainability to deliver operational changes that provide sustained social, environmental, and governance improvements. Interested in more of Navigant Research’s point of view on sustainability? Check out our recent report, Intelligent Building Technologies for Sustainability.

 

Google Aims to Create a Blueprint for Smart City Development in Toronto

— October 19, 2017

The proliferation of fast growing, high density cities has created major challenges around energy and water infrastructure, traffic congestion, air quality, and the efficient management of resources for large numbers of people. Google’s Sidewalk Labs, a subsidiary of parent company Alphabet Inc., is attempting to solve these complex urban problems through a public-private partnership with Waterfront Toronto. Sidewalk Labs will invest an initial $50 million to deploy automated vehicles (AVs), smart buildings, intelligent traffic signals, and a myriad of other digital technology solutions for Quayside, a neighborhood on Toronto’s waterfront. This is the first project of its kind for Alphabet, and it aims to create a smart city blueprint for 21st century urban neighborhoods. While the first phase of the project will be deployed in Quayside, Sidewalk Labs intends to expand the pilot across Toronto’s entire Eastern Waterfront district—transforming the city into a global hub for urban innovation.

Connectivity and Mobility Key Focus Areas

Sidewalk Labs has released a 200-page document on its vision for smart city development in Toronto. Although the plans are yet to be finalized, the company is aiming to build the neighborhood “from the internet up”—making ubiquitous connectivity a significant hallmark of the project. As seen in other smart cities under development, such as in San Diego, a number of communication networks will be needed to execute on ambitious smart city visions. In Toronto, Sidewalk Labs will be deploying high speed wired communications over fiber and copper, high bandwidth wireless over Wi-Fi and cellular, and long-range low bandwidth connectivity using low power wide-area networks (LPWANs). The wide range of communication networks will enable an array of applications to be deployed, ranging from low power technologies such as air quality sensors all the way to high capacity networks for AVs.

The creation of a high tech and flexible mobility system is expected to be another major area of focus for the project. Sidewalk Labs plans on restricting all non-emergency conventional vehicles from a large portion of the neighborhood while providing robust walking and bicycling infrastructure, an expansion of streetcar lines, and self-driving transit shuttles. Additionally, smart parking systems, an adaptive traffic light pilot (which prioritizes pedestrians and cyclists), and a mobility as a service platform (which will help residents assess all mobility options) are expected to be deployed. Commercial freight will also be transformed into a tech-driven urban system by using robots to make deliveries. Together, these initiatives should make Quayside one of the most technologically advanced mobility (and least car-dependent) neighborhoods in North America.

Local Project, Global Implications?

The vision for the ambitious smart city project in Toronto goes far beyond the city itself. Sidewalk Labs is hoping the results and lessons learned in Toronto will be replicable for the thousands of other global cities struggling with similar urbanization and sustainability challenges. Finding the right business models, stimulating interdepartmental coordination within government, and quelling citizen concerns about privacy and security are all barriers that Sidewalk Labs must overcome if this project is to be successfully scaled and exported to other cities. Both leading and aspiring smart cities should keep a close eye on the developments on Toronto’s waterfront. It is one of the most ambitious projects to date in terms of testing integrated systems and innovations and could serve as a blueprint for optimal efficiency, sustainability, and improved quality of life for 21st century cities.

 

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