ESG and Sustainability : Is 2023 the Turning Point for Sustainability and Climate Action?
In my years of experience, the HVACR and Plumbing Industries are resilient and adapt to many challenges and changes. This is due to the hard work of people ensuring the continuation of business and fulfilling the opportunities that changes bring. The recent focus on ESG and Sustainability issues and the resulting challenges and changes are -evolving. With many new regulations and disclosure standards coming soon HRAI members will want to take a strategic approach to embedding ESG considerations in your decision making.
The first step is for one to understand the terms.
ESG or Environmental, Social and Governance is a traditional term often used to value or evaluate businesses above and beyond only their financial results. It provides a framework or structure to look at any businesses or organizations’ strengths, weaknesses, and value in these 3 categories. Typically, improvements are measured from a base case point in time and recording the KPI’s. Goals and objectives can be set with progress and timing measured.
Investors, Customers, Suppliers and Employees can now make their own choices or decisions on whether to engage with or work for Companies/Organizations based on ESG evaluations.
For example, measures on how Companies/Organizations perform on:
Environmental – actions to safeguard the environment – pollution, waste management, energy use including renewables, natural resource conservation including policies, etc.
Social - managing relationships and treatment of people -- with employees, suppliers, customers and the community where it operates. Workplace health and safety, record of adoption and implementation of DEI - diversity, equity and inclusion initiatives plus eliminating discrimination, holding suppliers accountable to the Company’s/Organization’s standards and values and no unethical actions against suppliers, customers or employees.
Governance – focuses on the ethics and operating philosophies of the top Management/Decision makers/Owners including transparency, traditionally in financial accounting and now extending to other issues, plus no illegal or conflict of interest conduct favoring the business.
People look at and value these Company/Organization ESG actions in several ways -- to mitigate risk, others look to engage with the incremental benefits or support a progressive Company/Organization, others recognize, appreciate and reward the “long term view” or “the comprehensive view” of a fulfilled ESG framework.
Separate but related, the entire Sustainability issue has become a leading topic, challenging each of us and our businesses to “meet the needs of the present without compromising the ability of future generations to meet their needs”.
The expectation is that the Sustainability focus will continue to rapidly expand bringing mandatory reporting (i.e., Greenhouse Gas Emissions, GHG), guided by the existing framework set up by the TCFD (Task Force on Climate Related Financial Disclosures) and use of their Scope 1, 2 and 3 definitions. This Task Force was set by the Financial Stability Board, from recommendations received from the World’s G20 Finance Ministers and Central Bank Governors to allow for standardized reporting. For more information click here….TCFD – Task Force on Climate-related Financial Disclosures – United Nations Environment – Finance Initiative (unepfi.org)
As each one of us in the Industry works together wrestling with our own basic business challenges to meet the objective of serving our customer today (by navigating supply chain issues, labour shortages, -profit margins, and Code/approval issues) one may feel “bloated” (overwhelmed) or “at capacity” for some new ESG and Sustainability issues to squeeze their way into our business’ agenda. However, these issues need to be welcomed in, these are now relevant business issues and will find their way into mandates, Codes/Approvals and correspondences. Opportunities are being created now.
The ESG landscape is changing rapidly both in, in North America and globally. It will be key for HRAI members to keep in the know on future developments such as eventual mandatory GHG reporting requirements as they unfold.
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