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Better data is the key to meeting ESG standards

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24 Apr, 2024

This post was originally published on Sustainability Matters

This week marked Earth Day 2024, and as we navigate an increasingly data-driven landscape and harness the burgeoning power of artificial intelligence, there are few justifications for organisations to not manage and report their environmental, social and governance (ESG) data with enhanced efficiency and transparency. Global ESG standards are on the rise, and Australia is at the forefront of this movement. In June last year, the Australian Government took decisive steps by initiating mandatory ESG reporting for large companies and financial institutions, set to commence this June. Yet, the question remains: are our large corporations adequately prepared?

As we strive for a future marked by accountability, the selection of data partners will critically define an organisation’s capability not only to meet but to surpass ESG standards. Transitioning to advanced data systems transcends mere compliance; it is a strategic imperative that accelerates our progress towards sustainable development goals.

Despite many Australian organisations committing resolutely to new ESG standards, they face hurdles in achieving their objectives due to data challenges within the supply chain, which can inadvertently lead to unintended greenwashing. The Australian Competition and Consumer Commission recently found that 57% of 247 businesses surveyed might have engaged in greenwashing through their claims.

Frequently, the data required is already present within organisations; however, the challenge lies in unlocking this data and integrating it with other vital datasets for comprehensive analytics. This enables management to obtain a holistic view. A 2023 survey disclosed that over 80% of Australian organisations still depend on spreadsheets to collect, analyse and report ESG-related data, instead of leveraging modern AI and analytics platforms. This reliance on outdated methods means that most of our reporting has been backward-looking, whereas the need of the hour is for real-time, actionable insights for immediate impact.

The principal obstacle is not merely the availability of data but the capability to seamlessly integrate and analyse it to ensure accurate and reliable reporting of ESG data, thus avoiding the risks of greenwashing. With ESG data predominantly unstructured and scattered across various formats and locations, this presents a significant challenge.

According to the same study, more than 70% of Australian senior business leaders surveyed last year cited data collection as the most challenging aspect of the ESG reporting process. 47% of respondents indicated that incomplete and missing ESG data was a significant obstacle, with another 33% reporting inconsistent and irregular data collection procedures, and 47% citing poor data quality as a key hurdle.

Consider the example of Woolworths, Australia’s largest supermarket chain, which once struggled with common data challenges such as fragmented databases and complex integration. The adoption of Qlik technology transformed Woolworths’ operations, enabling more effective inventory management and reducing food waste by allowing comprehensive analysis of customer segmentation, trading hours, expiration dates and sales patterns, thus optimising markdown policies and stock rotation of perishable goods.

Similarly, organisations with extensive property portfolios, such as the Australian National University (ANU), stand to benefit from improved data collection for enhanced energy efficiency insights. ANU’s initiative to replace outdated dial-based electricity meters with more contemporary digital meters feeding Qlik’s energy dashboard — processing data from over 1000 electricity meters every five minutes — illustrates the transformative power of integrating advanced data systems.

Ultimately, to adeptly manage and report ESG data, businesses must select the right data partner and build a robust data foundation by effectively collecting, integrating and delivering trusted data into your preferred environment, be it on-premise, in the cloud or a hybrid. Once established, AI-powered analytics can be used to transform that data into actionable insights and strategies — creating visualisations, generating predictions and providing interactive, rapid responses that benefit not just reporting efforts but the user’s overall business operations.

As the climate crisis intensifies and the targets set in the Paris Agreement become increasingly daunting, trustworthy and timely data will play a crucial role. During this Earth Day week, it’s imperative for all of us to commit to advancing our data practices to achieve our ESG goals and foster a more sustainable world.

Mark Fazackerley.

Top image credit: iStock.com/Boy Wirat

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Energy Efficiency as an Imperative Climate Strategy

Energy Efficiency as an Imperative Climate Strategy

With mandatory climate statement disclosure rolling out in Australia, businesses need to start reporting on their emissions and sustainability plans for the future. As companies begin assessing the relevant risks and opportunities related to various climate scenarios, energy efficiency presents itself as an immediate climate-strategy with long-term benefits.

Commencing 1 January 2025, businesses that meet two of the three conditions — more than 500 employees, gross assets above $1 billion or $500 million or more in consolidated gross revenue — are required to lodge a climate statement, which discloses their climate-related plans, financial risks and obligations. As part of the gradual roll-out, by 1 July 2027, businesses that meet two of these conditions — more than 100 employees, gross assets above $25 million or exceeding $50 million in consolidated gross revenue — will also be required to report.

This climate statement will need to include the company’s sustainability governance, climate risks and opportunities, including those physical and transition related. They will also need to disclose their Scope 1 and 2 emissions, strategy to decarbonise, and conduct scenario analysis on the short, medium and long term impacts on the business. By the second year of reporting, businesses will also be expected to report on Scope 3 emissions.

Scenario analysis will be based on various assumptions of the state of the climate, one of which includes a possible future where global temperature has increased 2.5°C or more. They will be required to share their climate strategy and steps they are taking long-term in preparation for this scenario.

Common themes within climate strategies will include switching to renewable energy sources, electrifying fleet vehicles, purchasing carbon credits, and carbon capture and storage. Many of these methods look at reducing emissions through the energy source, or targeting the carbon aspect directly; however, climate strategies can also include reducing the amount of energy used. By investing in more energy efficient equipment, sites can maintain production whilst using less energy and producing less emissions.

When increasing energy efficiency and reducing energy consumption first, businesses will see short-term impacts; however, in the long term, they are also improving their foundation for an energy transition. Assuming no other changes, higher energy efficiency can lead to decreased energy demand, allowing for reduced system requirements when specifying and planning for self-generation or energy costs.

To understand what opportunities are available for upgrading to more energy efficient equipment, businesses can start with an energy audit to understand how energy is being consumed across site. Energy audits, like the ABB Energy Appraisal, can provide a roadmap for where and how equipment can be upgraded for the best energy saving potential. An energy audit identifies areas that can be immediately improved with existing equipment on the market, so there is no need to wait for the commercialization or development of more sustainable technology. Going beyond just changing all lights to LEDs, efficiency recommendations may include areas where variable speed drives can be added to control motor speed or upgrading from an IE3 motor to an IE5 ultra-premium efficiency or IE6 hyper-premium efficiency motor to reduce energy losses by 40% or more. This area can often be overlooked on sites as the Minimum Energy Performance Standard (MEPS) in Australia for motors is just IE2.

Mostly used in pumps, compressors, conveyors and fans, motors may seem like a minor part of a site; however, with 45% of the world’s electricity converted into motion by industrial electric motors, there are many opportunities for energy savings. In fact, a recent survey commissioned by ABB IEC Low voltage motors, showed that 92% of surveyed businesses in Australia recognize the important role of electric motors in achieving sustainability targets. In this same survey, participants ranked a reduction in operating cost as a more important driver for investing in energy efficiency than lowering their organization’s emissions. This is because upgrading to newer, more efficient equipment provides benefits beyond just emission reduction. For example, ABB’s Synchronous Reluctance (SynRM) Motors, available in IE5 ultra-premium efficiency or IE6 hyper-premium efficiency, use no rare earth metals or magnets. Running quieter and with bearing temperatures reduced by up to 15°C and winding temperatures by up to 30°, SynRM motors have longer maintenance periods, superior reliability, and contribute to a better operational environment.

Looking ahead, upgrading to an IE5 SynRM motor also provides more visibility into Scope 3 emissions, as SynRM motors meet ABB’s circularity criteria and transparency on environmental impact is provided through Environmental Product Declarations (EPDs).

By requiring companies to disclose their climate information, these new legal requirements are opening the door and facilitating more internal discussions on environmental impact and emission reduction. Whilst mandatory climate reporting is only required of large business entities this year, the progressive roll-out and Scope 3 emission reporting requirements mean that businesses of all sizes in Australia will be impacted by these new requirements. As businesses become more conscious of how sustainability should be integrated into their operations and finances, there is no better time to start investing in energy efficient solutions.

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Image credit: iStock.com/denizunlusu

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