Built For The Future: A Blueprint For Sustainability & Business Growth

Sustainability and Greenhouse Gas Reporting are terms being used more and more regularly in the business world. While they started on the fringe with environmentally mission-driven businesses, they moved on to the most visible public companies and are now becoming expected of all businesses — no matter the size.

This is likely not news to you. These ideas are being tossed around all sectors. However, many business owners don't realize sustainability can actually be a benefit. It's not just a time and money sink to meet consumer, investor, and government pressure. Sustainability programs, like greenhouse gas reporting, provide tangible value.

Simply put, placing sustainability as a core business strategy offers a strategic advantage that pays significant dividends down the line. Sure, it may come at the cost of immediate returns, but mounting evidence shows it is a smart long-term decision. 

Let's take a look at these 7 key benefits to understand why sustainability is a smart business choice. 

1) Showing Environmental Consciousness to Consumers

Consumers today aren't just passive buyers; they are active participants in the market with a strong voice and a clear demand for sustainable practices. A 2021 study found that 85% of consumers have become more environmentally conscious in recent years, with 60% stating that sustainability is an important consideration in their purchasing. Taking it one step further, over one-third of U.S. consumers are willing to pay more for sustainable products. In a nutshell, consumers are willing to change their consumption habits to reduce environmental impact.

This shift in consumer habits means companies must follow suit to keep their business. Failing to pursue ESG programs, and report on them, may lead to lower profits and a declining market share. On the flip side, capitalizing on sustainability can draw away market share from competitors.

2) Saving Money on Operations

Sustainability is not just about saving the planet; it's also about saving pennies, which can turn into increased profits. In simple terms, sustainability can make operations more efficient. Whether greening supplier shipping operations or reducing office energy use, operational costs often decline. 

This is particularly relevant for the development sector, where energy costs typically account for one-third of a commercial building's operational expenses. Cutting energy costs with sustainable building designs can significantly reduce these costs. For example, green buildings consume 25% to 35% less energy, and LEED-certified buildings have 20% lower maintenance costs than their conventional counterparts. 

3) Attracting and Retaining Talent

Being a sustainable business is important for attracting top talent. A study by IBM found that 70% of workers prefer sustainable companies. This is even more relevant for younger generations, which typically place a higher value on sustainability. 

This is highlighted in a study by Deloitte, which found that 44% of millennials and 49% of Gen Z workers have made career choices based on their personal ethics. With Gen Z and Millennials set to make up over 30% of the workforce by 2030, companies need to align with their values.

4) Attracting Investors

More investors are steering their funds towards companies with strong ESG programs, viewing sustainability as a marker of prudent management and long-term viability. On the institutional investor side, global ESG-focused investments are projected to increase 84% by 2026 to a total of $33.9 trillion. This will account for 21.5% of total assets under management by institutional investment companies. A similar trend is expected on the individual investor side, where 89% of investors say they consider ESG issues as part of their investment strategy. In light of this trend, businesses can't afford to ignore the call for sustainable practices if they want to keep their investor base engaged and growing. 

5) Improving Risk Management

One of the primary reasons positive ESG performance is desirable for investors is because it improves risk management, reduces instability, and improves long-term success. ESG practices minimize risk by limiting direct ESG-related threats and by facilitating the development of resilient systems.

Direct ESG-related risks can be accusations of greenwashing, which creates a negative public image, or spending excess capital on inefficient systems. Developing resilient systems includes forward planning for transparent reporting and developing supply chains that are resilient to unforeseen disruptions.

For example, studies show that companies with higher ESG ratings were less volatile during the COVID-19 pandemic and performed better than low-scoring ESG companies.

6) Getting Ahead of Regulatory Changes

In the same vein, governments around the world are tightening environmental regulations. Developing robust sustainability strategies in the near term is a way to stay ahead of these changes. By proactively engaging in ESG reporting and sustainability initiatives, companies can ensure they are not caught off-guard by new regulations, avoiding potential fines and disruptions to their operations. 

7) Increasing the Value of Property and Attracting Tenants

For companies that own or develop property, green buildings are not just good for the environment but also a good financial choice. Studies show that sustainable buildings have higher property values and rental rates due to better living environments and because consumers value sustainability.

Additionally, on average, they have a 23% higher occupancy rate and better tenant retention rate than non-sustainable alternatives. This drives up rental income and offsets the initial investment needed to design a sustainable building. In the case of LEED, the average payback time is 5 years, after which point LEED-certified buildings demonstrate lower operational costs than conventional buildings. 

Leaders at small and large businesses are coming to the same conclusion — ESG and sustainability are essential. There is solid economic and social backing that it has significant value, and not including ESG in your business is now a major risk. 

This is particularly true in the development sector. Each of the three components of ESG has an important role to play. However, the "E" often takes center stage when buildings are at play. This is primarily due to the building sector's significant impact on the environment and the associated costs for building owners and developers. For example, energy for building operations accounts for 27% of the U.S.'s total greenhouse gas emissions and is one of the largest operating expenses. The commercial building fleet in the U.S. costs over $190 billion annually to power.

Business owners and developers incorporating ESG into their long-term strategy can reduce their environmental impact, create a positive public image, and drive down operational expenses — a win-win. 

An Overview of ESG

Environmental, Social, and Governance (ESG) criteria are a broad set of standards for companies and investors to disclose and assess performance against non-financial measures like a company's impact on climate change and wider society. 

While ESG emerged in the last few years as a topic in the United States, the concepts are not new. The roots of ESG can be traced back to several periods in U.S. history — most notably the environmental and social movements in the 1960s and 1970s.

From this point, the ideology gained momentum, and the current term "ESG" was coined in the United Nations Principles for Responsible Investing (PRI) report Who Cares Wins in the mid-2000s. Following the publication of Who Care Wins, only 63 companies signed the associated agreement, and it was largely targeted towards investment firms.

Throughout the 2000s, ESG adoption slowly picked up pace, pushed forward by international agreements, like the Paris Agreement, Business Roundtable's (BRT) statement on the purpose of a corporation, and regular discussions at the annual Conference of the Parties.

These international meetings have significantly increased awareness around the idea, increasing research and reporting on ESG's role in long-term business success. As a result, investors are placing a higher priority on the issue, pushing companies in all sectors to make ESG part of their strategy. As of 2021, 99% of S&P 500 companies publicly disclosed some form of ESG information.

This focus on ESG has also permeated the U.S. regulatory landscape. On March 6, 2024, the Securities and Exchange Commission (SEC) issued a ruling requiring thousands of U.S. companies to report greenhouse gas emissions, sparking a renewed focus on emissions reporting. This ruling, along with a trend of global government regulations, aims to increase environmental impact disclosures and promote long-term sustainable practices. It is expected to have a significant impact on the business community. Additionally, California's recent legislation, including SB 253 and SB 261, sets a new standard for GHG reporting and corporate responsibility. These laws, which require emissions reporting and climate-related financial risk disclosure for large companies, are expected to influence national-level policy and drive sustainability efforts across the United States.

“E” in the Building Sector

The growing focus on ESG is also prevalent in the world of development. Investors, tenants, communities, and local governments are asking building owners and developers to consider how their projects will impact the local environment and community. While this can seem like a headache for developers, it's an opportunity for companies to strengthen their businesses for the long term.

First, buildings have a significant impact on the environment through waste generation, resource use, and emissions. Second, historical building design and operations are often inefficient, and there is substantial room for improvements that will increase performance and drive down costs.

Gathering baseline data on your existing building's environmental impacts is critical to improving performance and capitalizing on the associated benefits. Processes like energy audits, generating a greenhouse gas inventory, and improving supplier communication are great starting points. With this data in hand, it is easier to create long-term goals and develop a sustainability roadmap to guide the performance improvement process. 

The first step is understanding how your building impacts the environment and where operational efficiency can improve. 

Energy Use 

Energy use is the leading operational expense for non-manufacturing buildings in the U.S.

On average, energy for commercial buildings in the United States is comprised of 60% electricity and 34% natural gas. When this is broken down further, the largest energy use is space heating (32%), followed by ventilation (11%), lighting (10%), and cooling (9%). This averages an overall energy requirement of 22.5 kWh per square foot.

The U.S. government has found that 30% of this energy is "wasted." Increasing energy efficiency can significantly improve the bottom line. Installing "Prop Tech" solutions, improving natural ventilation, and adding onsite renewable energy systems are all viable solutions. Another consideration is that the U.S. government offers incentives to help building owners make these changes, so it's a great time to start.

And that savings equates to real dollars. With an average cost of 12.52 cents per kWh and the average size of a commercial building, annual energy costs are between $46,000 and $53,500 based on when the building was built. A 30% savings can exceed $15,000 in annual savings. 

Water Consumption 

Water use is similar — commercial buildings consume 17% of publicly supplied water in the U.S.

Already, 40 U.S. states are expected to face water scarcity issues in the next several years. Not only will this drive water costs up for building owners, but it may also mean that water use is restricted. Water efficiency and recycling systems will help buildings be resilient during these drought periods.

This makes properties more desirable to tenants and attractive for city planning departments that are concerned about future water issues.

Waste Generation 

While waste disposal costs are not nearly as significant as energy costs, they are steadily climbing as landfills near capacity. Some estimates show that landfills in the U.S. will be full in the next 22 years.

Additionally, waste is a hot topic for city planners considering how their communities will handle an influx of businesses or residents. Reducing waste and improving recycling can cut down on these costs, be favorable for planning departments, and be a major part of other materiality ESG metrics for your business. 

Greenhouse Gas Emissions 

GHG emissions have become one of the leading metrics in the ESG space. This is due to increasing global awareness of GHGs' impact on global warming and the quantity of emissions the built environment is responsible for — 40% of annual emissions.

Another core component of corporate sustainability and reporting is greenhouse gas emissions. Greenhouse gases are produced (directly or indirectly) by almost every process in our fossil fuel-dependent world. And the sheer scale of these emissions, and surprisingly manageable ways to reduce them, are why they are taking a central focus in the growing decarbonization movement.

This movement has been growing for decades and is now widely accepted. With a growing number of targets like The Paris Agreement (2050 net-zero emissions), governments, investors, and the public sector are calling for change — which begins with understanding exactly how many emissions are being produced, why they're being produced, and where they're coming from. This information helps develop a carbon emissions inventory, which shows the net release or intake of emissions. Ultimately, an inventory helps identify areas for emissions reductions and a manageable way to quantify these efforts.

Developing an emissions inventory starts with quantifying all of the emissions an organization creates or removes from the environment. These emissions are separated into Scopes 1, 2, 3, and 4.

SCOPE 1: Direct Carbon Emissions

In simple terms, Scope 1 emissions are emissions that a company directly makes. Officially, the Environmental Protection Agency (EPA) defines them as "direct [carbon] emissions that occur from sources that are controlled or owned by an organization."

These are arguably the easiest types of emissions to quantify when considering the four main Scope 1 areas:

1. Stationary Combustion = Emissions released by fuels used in onsite operations
2. Mobile Combustion = Emissions released by vehicles owned or controlled by a business
3. Fugitive Emissions = Emissions released by leaks
4. Process Emissions = Emissions released as part of an onsite industrial process/manufacturing

Any fossil-fuel-powered equipment or service that an organization controls will produce carbon emissions.

SCOPE 2: Indirect Carbon Emissions

Scope 2 emissions are indirect carbon emissions generated by the consumption of energy purchased from a utility company. They typically take the form of electricity, steam, heating, and cooling. While these emissions aren't generated directly by the organization using them, they result from their demand. As such, these emissions are tied to an organization's operations and are accounted for by the organization that uses them.

The amount of Scope 2 emissions that a business generates is directly dependent on how much energy they use. For example, a manufacturing company typically has larger Scope 2 emissions than an accounting business. 

Emissions are Interconnected

It is widely held that Scope 1 and 2 emissions are primarily within an organization's control. This makes them a great starting place for developing a sustainability and emissions reduction strategy. With an effective plan, it is possible to reach net-zero Scope 1 and 2 emissions. 

These first two scopes help identify direct and indirect emissions linked to an organization's day-to-day functioning. Whether it is the emissions created by work vehicles or the electricity needed to power its offices, these emissions sources fall squarely within Scope 1 and Scope 2. The following two scopes are more abstract but paint a picture of the interconnectivity businesses have with each other and society. 

SCOPE 3: Value Chain Emissions

Scope 3 emissions are also known as "value chain emissions" because they include all of the indirect emissions that result from an organization's value chain. In simple terms, Scope 3 emissions include all sources not within Scope 1 and 2 emissions, which means they come from upstream and downstream activities, like sourcing raw materials or third-party transportation of finished products or customer use of the product. One company's Scope 3 emissions are another's Scope 1 and 2.

For many businesses and industries, Scope 3 is where a majority of emissions are generated, and therefore where emissions can be reduced. This means that companies who track Scope 3 have leverage over their suppliers and are more likely to address the life-cycle impact of their products. 

SCOPE 4: Avoided Carbon Emissions

The previously mentioned scopes relate to carbon emissions generated from an organization's activities. Scope 4 balances this out by calculating saved emissions or how much carbon was not emitted due to a business's actions. This includes any carbon-reducing measures a group has embraced, like carbon offsetting or installing solar panels. Another relevant example of Scope 4 emissions are the emissions saved by working from home. Not only do employees avoid emissions by not commuting, but transportation emissions from telecommuting are significantly reduced.

Now that we’ve explored the various scopes of GHG emissions, let’s delve into the building sector to illustrate its significance within the industry. Greenhouse gas emissions represent one of the most substantial environmental impacts of the building sector, accounting for 34% of the U.S.'s total emissions.

When considering Scope 1 and 2 emissions, most people think of the impact of energy use for heating, lighting, and transportation. But for those who serve businesses focused on emissions reductions, it is not enough to focus on a building design that models a lower Scope 1 and 2 emissions profile. Ignoring embodied carbon — the emissions embedded in building materials — shortchanges the client's efforts. This Scope 3 emissions category presents mystery and challenges, not unlike human DNA. As scientists are discovering ways to hack human health through DNA discovery, developers and the Architecture, Engineer, and Construction (AEC) community are helping businesses hack their emissions profile by understanding embodied carbon.

So what is it? Embodied carbon is the carbon dioxide (CO₂) emissions from manufacturing, transportation, installation, maintenance, and disposal of building materials. Understanding all of the sources of emissions — operational and embodied — is critical for developers.

How Embodied Carbon is Like DNA

Analogies can make complex concepts easier to comprehend. Think of embodied carbon as the DNA of building materials. To understand a material's embodied carbon profile, we must first consider what defines embodied carbon.

Embodied carbon is broken into two categories: upstream and downstream. Upstream consists of emissions associated with the initial construction, whereas downstream refers to maintenance during the building's lifecycle and end of life. Upstream emissions are separated into the production and construction stages.

The vast majority of embodied carbon generates during the production stage from the extraction of raw materials. Building materials like concrete, aluminum, and steel require a constant feed of raw materials and today account for 23% of global emissions. Even though there is traditionally recycled content in each, the production relies heavily on fossil fuels. Simply stated, these materials are examples of those that lack an easy decarbonization pathway.

Embodied carbon in the construction stage primarily comes from transporting materials to the job site and construction activities (workers and equipment). Downstream embodied carbon emissions include building repairs, dismantling buildings, and end-of-life material disposal.

One of the first moves of the sustainable building industry and sustainable building rating systems was to reward projects for using materials with recycled content, that were manufactured close by, and that come from manufacturers with take-back programs. In the current version of LEED BD+C, there are optional credit points specifically that reward these material characteristics. While the term "embodied carbon" was not front and center in the initial version of LEED, the outcome of focusing on materials with regional and recycled content gave a nod to materials with lower embodied carbon profiles. The material "DNA" matters.

How Embodied Carbon is Tracked & Reported

The complexity of embodied carbon can make it difficult to calculate and track consistently. This is primarily due to the nature of self-assessment and transparency needed between partners across the value chain. However, utilizing a carbon accounting standard can help streamline the reporting process. Many materials now come with an Environmental Product Declaration (EPD), which provides a profile of the product's embodied carbon.

Led by customer and client demand, or pushed by regulators, many companies are beginning to report their greenhouse gas emissions. Initial reports likely will focus on Scopes 1 and 2, the reporting entity's direct and indirect carbon emissions. As emissions reporting grows across industries, entities are broadening their tracking and reporting to include Scope 3. The design, construction, renovations, and maintenance of buildings are a primary source of upstream and downstream Scope 3 emissions.

For this reason, developers and the AEC industry are compelled to understand the impact building materials have on Scope 3 emissions.

Identifying Embodied Carbon with Life Cycle Analysis (LCA)

One of the most effective and common strategies to understand embodied carbon is implementing a whole building Life Cycle Assessment (LCA) before construction.

LCAs review all aspects of a project, upfront and downstream emissions, to calculate a cradle-to-grave embodied carbon estimate. This assigns a carbon value to each portion of the project to allow for easy comparison and the identification of carbon "hot spots." Because it is conducted before construction, the insights are used to develop and implement alternative low-carbon strategies in the final project design.

Emerald recently conducted a Building Life Cycle Assessment (BLCA) for Intro Cleveland, LEED Gold Certified and the nation's largest mass timber building. The BLCA modeled the mass timber design as 21% fewer tons compared to a baseline steel and concrete building.

How the AEC Community Can Lower Embodied Carbon

By using an LCA as the tool to evaluate material options, designers are then able to focus on implementing low-carbon alternatives in high emissions areas. While this is a project-by-project case, there are typically three main focus areas.

1) Building Materials:

Materials are inherently a carbon "hot spot." To address the embodied carbon from the manufacturing process, designers can specify products with lower profiles such as those made locally, that contain recycled content, that contain bio-based ingredients, or that are manufactured with renewable energy (among others).

2) Transportation:

Products shipped long distances will have a higher profile for the transportation category. Reduction strategies include sourcing closer to the job site or requiring low-carbon transportation options.

3) Construction Process:

Overall building and construction processes can utilize strategies to reduce embodied emissions. Options include job sites fueled by renewable energy vs. fossil fuels or advanced framing, and other material and waste reduction strategies. 

It is nearly impossible to reach net zero embodied emissions. For emissions that can't be limited by direct operational or construction change, carbon offsets can provide the final push for carbon-neutral buildings.

In the race towards globally mandated net-zero goals, the right carbon accounting system will be vital in making informed decisions for effective corporate sustainability strategies. However, the carbon accounting process remains relatively opaque, with no single internationally accepted methodology.

To help you navigate this process, we've broken down the leading carbon accounting protocols and their key differences.

Greenhouse Gas Protocol (GHG Protocol)

Developed in 1997, the Greenhouse Gas Protocol is a joint initiative between the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD). It was developed following the Paris Climate Agreement to help countries and businesses pursue emissions goals to keep the global temperature rise below 1.5 degrees Celsius. 

Since then, the GHG protocol Corporate Accounting and Reporting Standard has become the world's most widely used greenhouse gas accounting standard. It provides various resources, including calculation tools, guidance, and verification services. 

The hallmark of the GHG Protocol is a three-scope method of tracking emissions, with the sum being the total carbon footprint. 

• Scope 1: Direct emissions, including those created from production and transportation equipment.
• Scope 2: Indirect emissions from energy purchased or generated.
• Scope 3: All other indirect emissions (value chain emissions), usually from the supply chain, including a company's customers and end-use consumers.

The same three scopes that define the GHG Protocol are also considered one of its weaknesses. While most companies using this protocol include Scopes 1 and 2, some do not include Scope 3. 

This is likely because Scope 3 requires information from suppliers and customers throughout the value chain, which is challenging to calculate. However, for many companies, Scope 3 emissions will represent the most significant part of a company's carbon footprint.

Who Uses the GHG Protocol: Companies, cities, and governments use this carbon accounting protocol. Over 90% of Fortune 500 companies use the GHG Protocol directly or indirectly.

The Task Force on Climate-Related Financial Disclosures (TCFD) 

The TCFD was created by the Financial Stability Board (FSB) to improve market transparency by recommending what carbon emissions financial companies should measure and how to report them. Founded in 2017, the TCFD is structured around four themes: governance, strategy, risk management, and metrics and targets.

Unlike the GHG Protocol, which solely focuses on carbon accounting, the TCFD includes 11 disclosures to provide transparency to carbon reporting.

The goal of TCFD is to harmonize greenhouse gas accounting methods within the financial industry to allow financial organizations to consistently measure their emissions and support investors in weighing risks related to climate change. 

However, there are some complaints regarding this framework. One of the most prevalent is company directors citing increased liability arising from the uncertainty associated with forecasted carbon emissions — one of the key criteria of the TCFD.

Who Uses the TCFD Protocol: Financial markets (investors, lenders, and insurance underwriters) use the TCFD Protocol as part of ESG reporting and carbon accounting. The main regions that use TCFD include the European Union, Singapore, Canada, Japan, Hong Kong, New Zealand, and the United Kingdom. 

The Partnership For Carbon Accounting Financials (PCAF) 

Created by Dutch banks in 2015, PCAF measures financed emissions, helping to align financial institutions with net zero goals. Building on the GHG accounting methodologies developed by GHG Protocol, they aim to create a consistent global GHG accounting standard for financial institutions covering various assets.

These asset classes include: 

1. Listed Equity and Corporate Bonds 
2. Business Loans and Unlisted Equity 
3. Project Finance
4. Commercial Real Estate 
5. Mortgages
6. Motor Vehicle Loans 

The PCAF is complementary to the TCFD and provides a framework for financial institutions to disclose their greenhouse gas emissions. It does not provide its own carbon accounting tools and conforms with the GHG Protocol. 

Who Uses PCAF: The PCAF Standard is being implemented in five regions: Africa, Asia-Pacific, Europe, Latin America, and North America. It covers financial institutions and financial products of all sizes. 

Choosing one of these commonly accepted greenhouse gas reporting frameworks is a starting point, but they don't cover all the bases for effective sustainability reporting. Other metrics, like water use, waste generation, and energy consumption, need tracking. However, which metrics you track and how you track them depends on the business and industry.

One solution that is gaining popularity is the idea of using materiality in ESG reporting. Materiality defines ESG criteria as most important to a company and places more value on these aspects. It helps remove the barrier between comparing companies by assessing each business individually and rating them using the most relevant issues. 

What is the Role of Materiality in ESG Reporting?

A recent whitepaper released by the NYU Stern Center for Sustainable Business defines materiality as "issues that can have significant repercussions on the company (both positive and negative)." In this context, materiality can apply to economic, environmental, or social material issues. However, defining what is materially important to a business is still somewhat oblique, as there is no agreed-upon threshold or criteria. 

Regardless, most businesses have some key components that can generally be agreed upon as materially important ESG issues. For example, the NYU Stern whitepaper references water scarcity as a key example of economic and sustainable materiality for a beverage company. The beverage company needs large quantities of water to produce its product, so local water insecurity would significantly affect the business. Additionally, the company's water use may create issues for local communities in water-stressed regions.

By placing more value on materiality concerns, we can better understand how sustainable a business is. In addition, determining key materiality issues can provide significant benefits by helping a company identify vulnerabilities, limit future risk, and assist in long-term strategic planning. 

How to Determine Materiality Issues 

Understanding what issues are materially important for a business is challenging. One of the most widely accepted methods is through a materiality assessment. Materiality assessments engage business and community stakeholders to identify how important specific ESG issues are to them. There are five key steps for conducting a materiality assessment: 

Phase 1: Identify Issues, Stakeholders, And Business Components 

The initial step is to decide who the business's stakeholders are, what issues to present them, and what core values are essential to the company. 

First, create a list of issues relevant to stakeholder groups and the company. It should include metric-based outputs like energy use to less tangible topics like employee happiness.

Second, decide who the relevant stakeholders are. This should be a holistic group that encompasses all relevant parties. You want to include a range of groups, from those directly impacted by the company, like community members, to industry experts. 

Third, determine what other issues the business internally finds important and wants to consider as part of its ESG programs. Topics like risk management and employee promotion rates fall into this category. 

Phase 2: Stakeholder Outreach  

Use the list of ESG issues you created, along with business drivers, and collect data from the internal and external stakeholders identified in Phase I. Typically, this includes a combination of formal and informal surveys and interviews. 

Phase 3: Map And Prioritize Materiality Issues 

The collected data should now be synthesized, typically with a model or framework, to create quantitative scores that allow issues to be ranked. Ranking issues lets the business identify and prioritize key material ESG components. These rankings are used to create an initial ESG materiality matrix. 

Phase 4: Align Issues with the Company Vision 

Then, the initial matrix is reviewed and edited by the business's leaders to ensure it aligns with the management's vision and company goals. Ultimately, a final matrix identifying the company's ESG materiality issues is created. This final matrix is sent back to key stakeholders for final review and comments. From here, the company develops a plan to address and track materiality issues over time. 

Phase 5: Execution And Reporting 

Finally, the company should regularly publish updates on how there are progressing on their overall ESG strategy and materiality issues. This can be done through an annual ESG/sustainability report or a designated portion of their website.

Regular reporting lets the public know that the business takes ESG seriously and provides a place for the company to discuss how they are addressing lacking ESG areas.

Once materially relevant environmental resources are identified, you need to develop programs to record them over time. How you do this is variable based on what you are tracking. However, the program should be able to cover all of the relevant inputs and outputs of the resource and be long-term oriented.

Take, for example, energy use. Gathering energy use data from your utility supplier or through energy bills is straightforward.

On the other hand, tracking emissions is less straightforward than other resources like water use or waste generation. They can't be directly tracked from a single source, or easily measured by meters or waste removal logs. Instead, they are generated by varying actions that a company takes across the value chain from the extraction of raw materials used to make products, through the sales process and also include end-of-product-life impacts. As a result, some emissions are directly under the control of the business, while others are not — such as emissions related to a supply chain. This can make tracking and reporting emissions a challenging yet necessary process.

Let's take a look at how to track greenhouse gas emissions.

Tracking Your Greenhouse Gas Emissions

Recording GHG emissions focuses on tracking actions that produce emissions and quantifying the emissions associated with those actions. These actions are split into three categories: Scope 1, Scope 2, and Scope 3 emissions. Each scope relies on various metrics to quantify the associated emissions, which translates to varying efforts to track and reduce the associated emissions.

Scope 1: Direct Emissions

Scope 1 emissions are direct emissions from sources owned or controlled by the company. The primary Scope 1 emissions include: 

• Onsite Energy Consumption: These emissions are generated by fuels directly used in onsite operations. One of the most common examples is natural gas used for heating buildings. Tracking this is primarily done by reviewing utility bills outlining the quantity of gas purchased and used. 
• Company Vehicles: Emissions generated by vehicles directly owned by a company fall into Scope 1. Companies need to monitor the distance traveled and fuel efficiency of their vehicles. This data, often recorded through fleet management systems, helps quantify direct emissions from transportation. 

Scope 2: Indirect Emissions

Scope 2 accounts for indirect GHG emissions from the consumption of purchased energy — typically from a utility company. A company does not directly generate these emissions, but they are the result of their demand. 

Tracking Scope 2 GHG emissions is almost entirely reliant upon utility bills. This helps calculate the emissions attributable to their energy use, even though the actual generation of these utilities occurs off-site. 

Scope 3: Value Chain Emissions

Scope 3 is the most extensive and challenging, encompassing all other indirect emissions from a company's value chain. This includes upstream and downstream activities — typically all emissions that don't fall into Scope 1 or 2.

Important aspects to consider are: 

• Supply Chain: Identifying emissions related to goods and services a company purchases. This may be from a supplier that produces a part you use or emissions from a third-party transportation company that moves your product. Tracking these emissions is challenging and relies on third-party suppliers self-reporting them to you.
• Employee Commuting and Travel: Companies should track the emissions related to employee commuting and business travel. Again, this relies on self-reporting of mode of transportation and mileage.
• Waste Management: Waste is different from supply chain and travel because it results from direct operations, like manufacturing. However, the waste does not release emissions until it goes through combustion or breakdown, which happens at a landfill or waste facility — making it Scope 3. To calculate these emissions, the waste needs to be quantified and its handling understood. Whether it's recycled, landfilled, or incinerated, it provides insights into the associated emissions. This information is typically available from local waste management companies. 

How Reporting and Certifications Support Each Other

While knowing your company's emissions profile is important, doing something about it is important too. There are tools and resources to manage and track emissions and also support other aspects of a sustainability strategy, including stakeholder engagement. Take, for example, ArcSkoru, the free software behind LEED for Existing Buildings: Operations and Maintenance (LEED O+M). 

A key component of LEED O+M is tracking resource use of a building's operations — such as energy consumption, water use, and waste generation. Arc, as it is known for short, allows ongoing data tracking of several performance categories in LEED EBOM. By entering utility and waste data into Arc, it is easy to extract emissions impact and track performance over time. This data can be used as the baseline for Scope 1, Scope 2, and some Scope 3 emissions for a building. 

GHG reporting also helps companies report with other frameworks including GRESB, TCFD, CDP, and GRI.

Software Can Help Make Tracking Data Easier

In most cases, there will be a lot of data to keep track of. At a minimum, you will have water and energy use, waste generation, and greenhouse gas emissions. Plus, these programs will be ongoing throughout the life of a business, so the amount of data will compound annually.

Having a central hub that maintains this data will not only make it more accessible but also easier to review over time. Just like when determining what you will track, emissions data will likely be the most complicated and a prime target for software solutions to facilitate the data management and collection. 

Here are a few considerations to help you decide if software is valuable in tracking your greenhouse gas emissions and how to find the right software for your business.

Cracking the Code: Simplifying GHG Reporting Through Software Solutions

The first step is to decide if you will use a consultant to spearhead the baseline emissions inventory development or do the work in-house. Either way, you may decide to leverage the assistance of GHG Reporting software to facilitate the process. 

GHG Reporting software provides a system to help organize and quantify emissions data. It often has built-in functionality for common emissions categories, highlights key points to consider when collecting emissions data, and outputs final emissions totals. With the right reporting software, companies can accurately collect and track emissions data over time to make strategic decisions on reducing their emissions.

Not all Greenhouse Gas Reporting software is the same. There are many types of GHG Reporting software available, and understanding how they differ will help your company choose the right option for your business.

What Scopes Will You Track?

There are several different protocols used for reporting carbon emissions. A few of the most common are the Greenhouse Gas Protocol (GHG Protocol), The Task Force On Climate-Related Financial Disclosures (TCFD), and The Partnership For Carbon Accounting Financials (PCAF). Software options are built around a specific framework. Decide which protocol you are using and choose software that meets those requirements.

Another consideration is which scope of emissions you want to track. While tracking all three is the goal, maybe you want to start with Scope 1 and 2. Perhaps you know Scope 3 is a high-emitting part of the business, and so you want to be sure to have help reporting Scope 3. Reporting software can specialize in different scopes — particularly for Scope 3, which is the broadest. 

A robust Scope 3 reporting software can help you look at different segments individually. For example, breaking transportation-related segments into the grey fleet or customer travel categories is a straightforward concept many companies understand. Some software specializes in complex vendor reporting protocols whereas others are limited to simple Scope 3 tracking.

How Big Is Your Portfolio? 

Considerations around the number and uses of your properties are important. Along this same line, you need to consider the size of your business. For example, if you are a private equity firm with several subsidiaries, it can be useful to separate the data for each portfolio and then be able to "roll up" the results into a final report. 

In this case, enterprise-scale software is probably the right option for you, but it might not be necessary if you are a small business. The price difference and functionality of different types of software can vary greatly. 

Will You Purchase Carbon Offsets? 

Carbon offsets are a viable way to reduce your emissions, particularly for challenging segments to decarbonize. However, not all offsets are equal and major companies like Disney, JP Morgan, and BlackRock have been accused of purchasing "worthless" offsets. 

Not only does this reduce the value of the offsets, but it opens up companies to claims of greenwashing and poor public image. If you plan to purchase offsets as part of your sustainability strategy, choose software that will verify that offsets are valid and have the appropriate third-party certifications. 

What Else Do You Want to Track? 

Robust sustainability reporting doesn't stop with GHG emissions. It also includes criteria like waste generation and water use, which are requirements for green building certifications. LEED is the most widely recognized green building standard and one of the best ways for companies to show that they consider sustainability in their operations. 

Software that tracks several sustainability criteria is an excellent way to centralize data collection and reporting for a business's entire sustainability program. 

Do You Need Integrations? 

Your company may have been tracking energy use for years in efforts to reduce costs and plan for capital improvement projects. Your building automation software or instance of Energy Start Portfolio Manager may have already-stored data about your utility use that would be helpful to your first report. If so, you may want to choose GHG Reporting software that integrates with this type of standalone platform to track Scope 1 and 2 emissions.

Other considerations for integration are whether reporting software connects with your chosen finance software and allows for uploading individual spreadsheets for detailed Scope 3 tracking.

What About the Costs? 

As with all business considerations, cost will play a factor. Less robust, cheaper software can be a good starting point for the first few years. Then, as your business or sustainability reporting grows, you can upgrade to more encompassing options. On the other side, if your company footprint is rapidly growing or you have targets for emissions reductions, it can be helpful to buy "up" from the start to ensure all data and reporting are integrated from the beginning. 

Does the Software Include Consulting? 

If you need help in the reporting process, some software includes "support" through the platform. This can help fill in knowledge gaps while you complete the process. 

 Some software includes built-in consulting. When considering this option, there may be some limitations including: 

• It will often require you to take training for the platform before it is available. 
• Typically, it only includes GHG Reporting, not additional sustainability areas you track. 
• It will increase the price of the software. 

A better alternative is to work with an outside consultant to facilitate your entire sustainability program and rely on their expertise to fill in gaps with the GHG Reporting sections. 

With your goals in mind, you will develop and implement sustainability-oriented programs. Focusing on the most easily achievable yet high-impact programs is the best place to start. These programs are often the most cost-effective and are a great way to get the ball rolling. They will show the public that you are making progress and are serious about your goals.

Let's look at two potentially high-impact parts of a business and their solutions.

Water Usage in the U.S.

A recent U.S. Geological Survey (USGS) report estimated water use across the U.S. to be about 322 billion gallons per day (Bgal/d). According to the EPA, "the average American family uses more than 300 gallons of water per day at home," and "roughly 70% of this use occurs indoors." This is an enormous amount of water, and while the Earth may seem to have plenty of this resource, less than 1% of that is available for human use.

Waste of the resource itself is not the only environmental impact of using water. Many buildings rely on centralized municipal water supplies, so on the other side of this water usage is the time, money, and energy spent on transporting and retreating this water before it gets recycled back into the system. 

Prioritizing efficient water usage is a must, and there are countless other benefits that come along with it. Aside from the money saved from less water being used, water efficiency can also help us maintain our aquatic ecosystems, improve water quality, and mitigate the impacts of drought.

Water-Saving Strategies

Water efficiency features help reduce the overall amount of water used in a building or facility. Where to begin?

At home, it's easy to use less water for teeth brushing or a shower. But when we consider commercial buildings, we need to apply different tactics. There are some general, small changes that can be impactful such as the installation of a water-efficient faucet or the use of a low-flow toilet. When building new, it's always advisable to install water-efficient fixtures from the beginning. Also, larger water-using systems such as irrigation and process water can also be designed efficiently. 

Project teams can follow an integrated process to begin assessing existing water resources, opportunities for reducing water demand, and alternative water supplies. Effective strategies include: 

• Install submeters to measure baseline flow and reduce usage 
• Use gray water or non-potable water whenever possible 
• Use green landscaping features such as native plants and/or xeriscaping 
• Use water-efficient irrigation strategies and technologies 
• Harvest rainwater by installing a rainwater collection system 
• Install efficient plumbing fixtures 

From an individual feature to a single room to the entire building, every little bit counts. Take a bathroom, for instance. According to the U.S. Department of Energy, "federal law requires tank and flushometer toilets to use no more than 1.6 gallons per flush (gpf) and urinals to use no more than 1.0 gpf." Urinals almost always use less water than toilets given their design, but it's important to recognize that older urinals can use up to 5 gpf, far more than most toilets manufactured nowadays. According to the EPA, if "all older, inefficient urinals were replaced, we could save nearly 36 billion gallons annually." 

If your company is considering upgrading your bathrooms with water-efficient appliances, consider also updating signage as well to reflect the inclusivity of all genders. Sustainability and social equity go hand-in-hand, and offering gender-neutral bathrooms is a step towards equality for all employees, regardless of gender expression. 

Reducing Energy Use for Heating and Cooling

In a building's quest for reduced energy consumption and lower emissions profile, design teams are often tasked with evaluating system options for building owners. One such option is district energy. District energy systems utilize a central plant to produce steam and chilled water distributed to buildings through a network of underground pipes. The steam is used for heating and the chilled water for air conditioning.

This process delivers energy efficiency with a high level of reliability. Not only can district energy lower heating and cooling costs, it greatly benefits the overall operating performance of a building. 

One Source. Countless Advantages.

Unlike traditional HVAC systems, district energy is a sustainable heating and cooling source. It eliminates the need for capital investment in expensive equipment and/or replacement costs and does not require specialized staff to maintain. Instead, the equipment and labor costs are shared by all the customers on the system. 

District energy systems aggregate energy loads and distribute steam or chilled water only when needed so that you only buy what you need. It also creates the opportunity to integrate services so that waste is limited, and resources are optimized. This approach delivers both economic and environmental benefits.  

District energy eliminates the need to install, repair, or replace an internal HVAC system. Instead, energy is created at the central plant and delivered to a building's internal air handlers. As a result, steam and chilled water produced by district energy are always available when the building needs it, regardless of how little or how much it demands. Also, since space for expensive boiler or chiller equipment is no longer needed, customers can benefit from the extra space. 

District Energy can integrate renewable energy technologies into their systems much easier than individual property owners can with their in-building systems. Clients connected to district energy systems will be able to avoid carbon taxes and other mandates designed to drive carbon emissions reduction goals consistent with the incentives outlined in the Inflation Reduction Act. 

For a real-world example of a high-impact sustainability program, let’s examine how Emerald Built Environments helped Big River Steel (BRS) become the first-ever LEED-certified steel production facility. LEED-certified facilities use significantly less resources (water and energy) and produce less waste than noncertified facilities. For BRS, these were critical considerations for their sustainability program.

About Big River Steel

Big River Steel is a new steel manufacturing company in the U.S. that focuses on leveraging technology to improve efficiency, win market share, and drive performance. In fact, BRS calls itself a technology company that also makes steel. Its facility is unique when compared to other steel mills because of its innovative Flex Mill™ technology — a process that combines the wide product mix and superior capabilities of a more traditional steel mill, with the nimbleness of technologically-advanced mini mills. This steel company soon found out that technology and efficiency are valuable not just for succeeding as a business, but for environmental sustainability as well.

The Challenge

Before breaking ground, the Emerald Built Environments team engaged with Big River Steel (BRS) executives in conversations about technology and efficiency. They demonstrated how BRS's values had already put them on a path toward sustainable business practices and that pursuing further commitment to sustainability standards would make them stand out from other businesses of the same kind and enhance their marketing strategies.

After these discussions with Emerald, Big River Steel CEO Dave Sticker decided this steel production facility would become the first of its kind to receive LEED certification. All four buildings on the 1,300-acre campus were to get certified: the mill, an admin building, an employee services building (ESB), and a warehouse. By including the mill in this process, BRS became the first heavy-industrial facility to even attempt LEED certification.

This was, of course, no easy task. There's a reason BRS's competitors have limited their LEED efforts to executive buildings and R&D offices. A steel mill consumes so much energy and water as part of the manufacturing process that LEED certification seems impossible. BRS's Flex Mill™ consumes less of these raw resources, but the newness of this technology meant that there was no easy way to quantify these savings for certification. But Emerald proved that it can be done.

The Solution

Because the Flex Mill^TM concept was a new technology, there were no comparisons to calculate process energy and water savings. Instead, Emerald used the Credit Interpretation Ruling (CIR) process with Green Business Certification, Inc. (GBCI). By engaging the review team in a discussion about the mill and what makes it unique, Emerald was able to help them evaluate the new technology. This review process, which ultimately included two CIRs, compared patent filings and process designs to existing energy documentation guidelines to create a model of the mill's energy and water baselines and projected savings.

This CIR process will pave the way for future industrial facilities to document their process energy and water savings.

For the mill, as well as the other three buildings on campus, Emerald implemented an integrated design process, in which all players were involved in the project from the beginning to focus on the owner's project requirements and to ensure the best outcome. In this manner, at least 14 different standards and design parameters were met in the production of the facility and its modular spaces.

The Outcome

Once the work was completed, Big River Steel held its grand opening and hosted a global audience of steel industry leaders, at which time it publicly announced its LEED certification. Of the four main buildings on campus, two earned Silver (Mill Building and Warehouse A), and the other two earned Gold (ESB and Admin Building). BRS committed to a number of sustainability practices on their 1,300-acre site, which included the following outcomes:

• Protection of an ancient Quapaw Burial Mound
• 5+ acres of new trees planted
• 100% of process waste and stormwater captured, treated and returned to the Mississippi
• 50%+ of natural areas preserved and protected
• Minimum of 30% of recycled materials on builds constructed
• Over 80% of construction waste diverted from landfills
• 30% of wetland acres mitigated and protected
• Over 40% of building materials were locally sourced

For BRS, LEED certification was the primary goal, but a byproduct was reducing the environmental impact related to the construction of their production facility and reducing resource use. For example, the buildings on the site were projected to use 729 gallons per day for building use (toilets, sinks, showers). Juxtaposed to its steel production, that number pales in comparison: 3.8 million gallons per day. While BRS used high-efficiency toilets, sinks, and showers to limit its potable water use for the buildings, it also employed a high-efficient process design that saved 31% of process water. In addition to the efficient design, it also returns 634 gallons of water per day to the Mississippi River — in a state that is cleaner than the groundwater (per EPA guidelines). 

Throughout the process of developing your goals and creating sustainability programs is the time to begin securing the necessary funding for them. It's no secret that sustainability programs and effective GHG reporting typically require a financial investment. Understanding the nuances of costs is key to ensuring the success and longevity of these environmental initiatives. 

What About Sustainability Costs Money?

Understanding where money will be spent throughout the lifecycle of a company's sustainability program is the first step in developing a cost estimate and securing budget allocations to fund the work. While the following list is not exhaustive, it highlights the major budget items. 

Hiring Consultants and Staff 

Developing a robust sustainability and GHG reduction strategy often starts with human resource investments, including consultants and internal staff. The team is critical to ensuring programs are implemented effectively and adapted as necessary. 

In many cases, the early stages may involve assigning tasks to existing roles and hiring external sustainability consultants to help develop an overarching framework and get programs running. As programs move into their third year and beyond, companies may create specialized internal positions to oversee the ongoing efforts. 

Consultants are still a valuable tool throughout, yet their role and involvement are typically refined over time. For example, consultants may only be involved in developing public-facing annual progress reports. 

Projects Delivering Improved Performance 

Often, one of the most capital-intensive portions of corporate sustainability is implementing projects to improve environmental performance. These are the core of all sustainability programs. 

For example, a manufacturing facility may implement new equipment that uses less energy or produces less waste. A business may install onsite solar panels to cut down on Scope 1 or 2 emissions and reduce ongoing energy costs. A building owner may implement improvements like low-flow faucets to reduce water waste, balance the existing HVAC system to improve air quality and reduce energy costs, or install EV chargers to facilitate low emissions commuting.

The list goes on — projects and associated costs are specific to each company's goals. 

Reporting And Supplier Engagement 

Tracking sustainability data, like energy use, greenhouse gas emissions, and waste generation, can be time-consuming with thousands of data points. Investing in software to help record and report this information is a great option. 

For example, GHG reporting software typically provides a framework to organize and quantify emissions data based on common emissions categories that highlight key areas to consider when collecting emissions data. Plus, they will provide reports on overall emissions that are useful in deciding where to implement emission reduction programs.

The same goes for engaging with suppliers, which can be challenging depending on the size of the supply chain. Having a central point to pull data from all suppliers simplifies the process.

Carbon Offsets and Renewable Energy Credits (RECs) 

RECs and carbon offsets are an effective way for companies to reduce their overall emissions. Offsets are purchased from a broker or on the open market to offset any company emissions. Alternatively, RECs are typically purchased from a utility provider and certify a portion of energy purchased is from renewable sources.

RECs and offsets are useful in targeting challenging or cost-prohibitive emissions or as a near-term solution before operational changes can be implemented. In 2021, 36% of S&P 500 companies purchased carbon offsets, and the global carbon offset market is expected to reach nearly $3 trillion by 2030. Clearly, offsets are a core component of many GHG emission reduction strategies, and they are a core component of our net zero strategy here at Emerald Built Environments.

Philanthropy 

Adjusting corporate giving strategies to focus on environmental causes is becoming popular. While it doesn't reduce a company's direct environmental impact, it shows a company is engaged in sustainability. This can be a great way to highlight a company's pro-sustainability outlook in annual reports. 

For instance, the environmental non-profit 1% for the Planet connects companies with approved environmental organizations. Companies pledge to donate 1% of their annual income to these organizations and know the money is spent in an impactful way. There are over 5,400 companies that have joined 1% for the Planet, including Emerald Built Environments.

Paying for Sustainability

After there is a general idea of the program costs, the next step is identifying and allocating resources to fund them. Several options are available depending on your industry, what you are using the capital for, and your current balance sheet. 

Internal Funds 

Using internal funds is straightforward, whether that's by shifting around budgets or allocating available capital. However, using internal funds is not always possible, and relying solely on this option year after year can be challenging. Market conditions shift, and internal priorities change — you don't want to scramble to secure external funding on short notice. 

Government Incentives 

The U.S. government has set a priority of reducing nationwide emissions and boosting sustainability. This includes reducing U.S. GHG emissions by 50% by 2030 and achieving a net-zero emissions economy by 2050. In this pursuit, there are many government programs and incentives that help businesses facilitate this process. 

The Inflation Reduction Act (IRA) is a great place to look for sustainability-focused tax credits to reduce energy use and emissions. Some core components of the IRA are: 

• Tax credits up to $5 per square foot for buildings that meet energy efficiency criteria. 
• Tax credits that cover 30% of the cost of implementing onsite solar power systems. 
• Tax credits of up to $7,500 for new light-duty electric vehicles and up to 30% for commercial electric vehicles. 

While tax credits won't cover all sustainability initiatives, they can play an integral role in reducing overall costs. 

Grants 

In this same vein, state and federal governments sponsor several grant programs designed for green businesses and initiatives. Grants provide upfront funding for a specific project or initiative that doesn't need to be paid back.

For example, the EPA recently awarded over $2 million in grants to small businesses developing technologies to help protect the environment. While these types of grants may not apply to all companies, they can be invaluable in some cases. 

Borrowing — Public & Private 

Another solution is looking for green loans. Public sector loans often come with favorable terms, encouraging sustainable projects. For instance, the Department of Energy has over $412 billion in lending capacity for projects that reduce GHG emissions. 

In the private sector, green loans are gaining traction. These loans are linked to environmental sustainability performance and provide favorable rates if ESG-related targets are met. In 2021, sustainability-linked loans totaled over $52 billion in the U.S., a significant increase from previous years. A notable example includes carmaker Hyundai securing a $1 billion green loan to expand its electric vehicle business in the U.S. 

Your company may also opt to use innovative financing such as PACE or Energy As a Service. PACE is bond-financed, low-interest, off-balance sheet financing by entities authorized by legislation to lend. Energy As a Service is similar to on-bill financing, with the equipment and service provider paying for up-front costs.

In short, you might make more money. As HSBC notes in the CDP's 2021 Global Supply Chain report, Walmart gives favorable pricing, financing and payment terms to companies that report. Walmart is not alone. Just a few other notable brands include Microsoft, Goldman Sachs, Bayer, Dow, Deloitte, Lego, Nike, PayPal, Target, and Wells Fargo. If you are in supply chains that lead to these or other reporting companies, you are on notice.

"…delivering on Scope 3 emissions won't happen until a lot is done to help the SMEs supplying their products."

– Mr. Surath Sengupta, Global Head, Trade Portfolio Management, HSBC

Building upon the concept that data shows 11 times more emissions come from the supply chain, we know fundamentally that what is not measured cannot be managed. That is why these increasing numbers of companies reporting and engaging supply chains are so important. The report data shows that 50% of the world's employment and 90% of all businesses fall into the small-to-medium enterprise (SME) category.

Without SME engagement and reporting, global emission reductions will not reduce. Responding to pressure from customers and stakeholders, 41% more SMEs reported emissions than in 2020. Not only are you being asked to report, but you are also being asked to achieve target reductions.

It Takes Supplier Engagement

Don't panic — your customers will help you get there, and so can we. The report also shows us that getting to a solid Scope 3 emissions reporting process takes time and effort. Of the companies reporting in 2021, only 49% felt comfortable sharing Scope 3 data publicly. The details show that once a company starts to engage its suppliers towards Scope 3 reporting, some need two to three years before they achieve 70% or more engagement. Whether you are just starting to report your Scope 1 and 2, or ready to move on to your Scope 3, the important idea is simply to start. If you are ready to look at your Scope 3, knowing how to engage your suppliers and supporting them in complying with your reporting requirements takes work.

Emerald Built Environment’s work with First Financial Bank is a real-world example of how sustainability plans adapt and change over time.

The bank had already implemented sustainability practices and developed a Climate Action Awareness Plan but felt they were inadequate. Emerald helped the bank build on those existing practices and create a unified corporate sustainability strategy.

The Solution

Emerald developed an employee survey to understand values and the importance of sustainability for First Financial Bank staff. The high level of respondents indicated that sustainability is very important to employees. The answers provided in the survey helped Emerald tailor a customized Sustainability Roadmap to fit the company’s existing culture and values.

Analyzing the utility and energy use data from all facilities, Emerald provided a clear view of energy use at all facilities, from large corporate offices to the smallest square-foot bank branches. This data helped identify underperforming locations that would benefit from an energy audit to plan future utility improvements.

A database like this, which tracks energy and utility consumption and cost, is a powerful tool for continued facility improvement.

Similarly, Emerald analyzed the bank’s operations and maintenance (O+M) protocols. By integrating sustainable practices into O+M across all facilities strategically and purposefully, they will be able to increase their level of stewardship.

Finally, Emerald developed a Sustainability Roadmap document with recommendations for short- and long-term sustainability goals, business practices, and even product opportunities. This will help the leadership identify immediate opportunities for increased stewardship, develop strategies to improve energy efficiency, and reduce utility costs. All these strategies are designed to engage employees in fulfilling core values and building community involvement around sustainability initiatives.

The Outcome

After gathering one year of utility use and cost data from their facilities, the bank plans to continue tracking all locations in this manner. By streamlining the process of data aggregation, they will be able to maintain facility data moving forward, enabling more informed decisions.

First Financial Bank can now identify which facilities are high-energy consumers. Selected properties will undergo energy audits and recommendations for system improvements. Repeating this data-informed process will continue to lower the company’s baseline utility usage and improve environmental impact for years.

By continuing to engage with employees across its facilities, First Financial Bank will be able to cultivate shared values and a unified vision for the future.

Beyond making improvements and reducing operational costs, publicizing environmental data goes a long way. Whether by releasing annual reports or making the data available on a company website, it should be publicly accessible. This transparency shows potential tenants and investors that you are taking an active stance on ESG, builds consumer trust, and elevates your brand. As an example, reporting by portfolio managers to GRESB is increasing by 20% annually. Investors increasingly rely on GRESB data to make investment decisions — those who do not report or have poor scores stand to lose out. 

What Reporting Can Look Like

Greenhouse gas emissions reporting is not only a common requirement for ESG frameworks but an essential part of building consumer trust, meeting ESG obligations, and showing progress in reducing emissions. 

To get started with reporting, you should first clarify what emissions categories will be included in a report — and what will not. It is ok to start with limited categories, and if you do it is important to be equally transparent as to what data you do have and what data could be collected later. For example, Emerald started its reporting journey in 2022 with Scope 1, 2, and "company-controlled Scope 3 transportation emissions." In 2023, we expanded to include additional Scope 3 categories and will continue to expand and refine our reporting year over year. 

When it comes to reducing emissions, it is important to understand what matters most — i.e. what are your biggest impact categories. Emerald's biggest emission categories are from electricity and heating fuel, over which we have limited control in our leased office space. Thus, we focus on other impact categories. As a professional service firm that is predominantly digital, while we may be able to save emissions by switching postal carriers for urgent deliveries since those happen 1-2 times a year, the impact would be negligible. Whereas with a decision to dedicate resources to offset travel emissions and allow higher car rental fees for EV rentals, we would have a greater impact since travel emissions is a larger impact category for us.

For an example of what we do, check out our 2022 GHG Emissions Report!

LEED-certified buildings create tangible value. These properties typically see increased occupancy, higher rental rates, and reduced operating costs. In turn, they provide benefits for occupants, such as employee productivity gains, recruitment advantages, improved environments, and preventative wellness.

What is LEED Certification?

While there are several certification agencies, LEED is the most widely used and accepted. As of 2021, there were over 36,000 LEED-certified projects covering 4.63 billion square feet of space. These projects are found across the globe, with 74% in North America, 9% in East Asia, 6% in Europe, and 4% in South Asia and Latin America. However, we expect this focus to slowly shift away from North America as sustainability continues to become a global priority. During 2021 and 2022, China was the leader for new LEED projects, with nearly 5x more than the second country.

The acceptance of LEED is not limited to the private sector; governments are showing their support by developing LEED-certified projects. As of 2021, 120 cities and communities had achieved LEED certification for their buildings and operations.

According to Alex Liftman, Global Environmental executive at Bank of America, "USGBC’s work and its LEED for Cities program are helping to catalyze the critical change needed to ensure every city has a sustainable foundation and is part of the solution to reach the aims of the Paris Climate Accord.” 

LEED By Project Type

One of the key reasons why LEED has such a far reach is because its overarching framework is adapted for specific types of projects. These include:

• Data Centers
• Healthcare
• Hospitality
• Retail
• Schools
• Warehouses
• Single Family Homes
• Multifamily Residential

While the core tenants remain the same across each type of LEED certification project, categories are weighted differently based on how relevant they are to the kind of development. For example, data centers are known for their considerable energy and water requirements, so LEED for Data Centers considers this a higher priority for these projects. This ensures that LEED applies materiality in its rating system, providing the most impactful sustainability initiatives for each type of development.

LEED on a Community Scale

This idea is even further applied in LEED for Neighborhood Development (LEED-ND) and LEED for Cities and Communities. These programs are scaled up from single development projects to consider entire communities and cities.

While the same core tenants of LEED are still applicable, many other variables must be considered. Concepts like walkability, social cohesion, and natural resource protection are all scaled-up considerations that become more relevant in larger projects. Creating a sustainable future requires the development of resilient communities, purposefully designed cities, and regular reporting for community stakeholders.

Understanding the Rating System: An Example

The most known version of LEED is its BD+C (Building Design & Construction) rating system, which is a holistic framework that aims to not only limit the environmental impact of structures but also prioritize the quality of life and support local communities. This is done through a rating system where projects gain points for effectively meeting criteria for “credits”, which are separated into nine different categories. For example, the “Indoor Water Use Reduction” credit can provide up to 6 points in the “Water Efficiency” category in the BD+C rating system.

In total, 35% of credits relate to climate change, 20% to human health, 15% to water resources, 10% to biodiversity, 10% to promoting the green economy, and 5% to the surrounding community.

A project is granted a LEED Certification level based on the number of points it gains. The level criteria are:

• Certified = 40 to 49 points
• Silver = 50 to 59 points
• Gold = 60 to 79 points
• Platinum = 80+ points

The Multiple Stages of LEED

Platinum is an excellent goal for all projects to aim for, yet even if platinum certification is initially achieved after construction, LEED doesn’t end there. LEED provides a framework of multi-tiered certifications that build on each other.

LEED certifications begin at new construction and continue through ongoing operations to ultimately achieve net-zero status. This allows a single project to achieve several LEED certifications, highlighting ongoing sustainability efforts.

LEED For Building Design and Construction (BD+C)

LEED BD+C is the most common type of LEED certification and is what most people think of when they hear “LEED.” It is a certification for new construction or major renovations that focuses on the entire structure’s design and construction activities.

LEED For Interior Design and Construction (ID+C)

LEED ID+C applies to projects that develop the interior of a building but do not have control over an entire building’s operations. This can be for a new interior build-out or major renovation.

For example, a company that rents a floor in an office building and decides to design and build out that floor can apply for LEED ID+C. They did not develop the entire building and have no control over its operations. However, they can develop the floor they have access to in a sustainable, LEED-certified way.

LEED For Operations and Maintenance (O+M)

LEED O+M is a certification option for existing buildings that have been operating and occupied for at least one year. It focuses on ongoing building operations and maintenance and requires no construction or renovations.

Additionally, it requires ongoing data collection for performance-based metrics, like energy use, for certification. This makes it an excellent tool for tracking resource consumption for lowering operating costs and developing data for sustainability reports.

LEED Zero

LEED Zero is the culmination of a company’s sustainability initiatives and is available for projects previously certified under LEED BD+C or O+M. It is a certification that verifies a company’s net-zero status in carbon emissions, energy, waste, or water over a 12-month period. Each category has specific reporting and certification requirements. While there are currently only 100 LEED Zero-certified projects, this number will grow as governments and communities continue to ramp up net-zero initiatives in pursuit of climate goals.

While LEED is excellent for reducing resource use and improving building performance, WELL Certification empowers companies to create more intentional, healthier, and productive workplaces that benefit employees and business owners. In short, WELL uses a set of standards, design concepts, and operational policies that transform how businesses implement human capital risk management. People are one of a business's most important assets; protecting them is paramount to long-term success.

Of the 168 hours in a week, we spend nearly 90% of that indoors. To combat this challenge, WELL certification provides companies with an evidence-based roadmap focusing on three important facets: employee health and well-being, productivity in office environments, and corporate governance principles. 

Since 2014, over 45,000 projects have adopted WELL's rating systems, including 20% of Fortune 500 companies. The explosive demand for building a stronger corporate culture, creating healthier workspaces, and meeting ESG targets means that WELL initiatives have impacted over 13 million people. 

Human Risks

The built environment's role in human health has never been more important than it is today. A myriad of factors in working spaces, including air, water, light, fitness, comfort, and mental health, can either hinder or improve our well-being.

Among the top human health risks in working environments directly related to buildings are poor air quality, inadequate lighting, noise pollution, and vibration. These hazards may not always be visible but can significantly impact workers' health over time. Even chronic discomfort or fatigue can impair focus and lead to long-term illness and other health problems.

Reducing these risks is critical from both an ethical and financial standpoint. Employee well-being translates directly to physical and mental health, which drives business productivity and sustainability. Prioritizing worker health by designing better work environments, providing social services, and developing a positive company culture are all aspects to consider in managing your business's human capital.

Mitigating Risk with WELL

WELL is backed by scientific research that shows human health can be improved through design interventions, operational protocols, and policies.

WELL focuses on 10 main categories, which cover a holistic view of a workspace — from water and air to material use and community. Meeting specific criteria in each category awards points, which provide a WELL certification level, similar to the process of LEED certification.

Each category has specific base criteria that are mandatory to receive certification, like utilizing ergonomic workstations and developing emergency preparedness plans. Additionally, there are other options that the building owner can choose to implement based on how applicable they are to a specific project. The performance-based metrics of WELL monitor, measure, and certify that a work area supports employees' well-being. 

These 10 categories and WELL's solutions define what constitutes a healthy building and mitigate human capital risk.

This is shown through countless studies and ongoing research. Investing in WELL certification and improvements in building infrastructure that favor a "people first" environment leads to:

• A 28% increase in workplace satisfaction.
• A 26% increase in reported well-being scores.
• A 10-point jump in median productivity scores.
• A 10% increase in overall perceived mental health.
• A 7.7% increase in the rental price. 

The WELL Advantage

Building projects that pursue WELL certification have clear competitive advantages over projects without. As of 2022, there were WELL-certified projects in 120 countries encompassing 4 billion square feet. The world sees the value of human capital and the value that WELL certification provides — it's a prestigious global certification.

Deeper Insights into Human Health

With its focus on human wellness and striving for healthier environments, companies receive deeper insight into factors they can control within their buildings for maximum user benefit. 

Thus, by integrating WELL certification into the planning process of a building project, companies can ensure greater engagement with future occupants. This creates a positive experience for all stakeholders and benefits everyone who interacts with the building. 

Cost Saving Efficiency 

In addition to bettering occupant experience, WELL-certified buildings show cost savings from improved operational efficiencies. WELL requires ongoing monitoring of several metrics, which is valuable data to help track ongoing improvements and implement better processes.

In addition, 62% of WELL-certified buildings saw higher valuations, and 73% saw faster leasing rates after making healthy building improvements. 

Third-Party Certified 

Certified by the Green Business Certification Incorporation (GBCI), which also administers the LEED certification program, The WELL Building Standard is third-party backed and a respected credential that can be leveraged to attain tax credits, sustainability targets, and a more rapid ROI.

The Value of Certifications

Research shows that companies that invest in the well-being of their stakeholders benefit from enhanced performance and increased financial returns. Additionally, these strategies play an important role in overall business sustainability. Both LEED and WELL certifications can be pillars of a corporate ESG plan that provides tangible benefits and reputational value. 

Overall, sustainability certifications, ESG programs, and greenhouse gas emissions reporting are all important parts of business.

Placing ESG and sustainability as a core business strategy offers a wide range of benefits that pay significant dividends down the line. These benefits extend beyond just reducing costs and come in several forms that can be impactful in both short- and long-term time horizons. They contribute significantly to a company’s growth, resilience, and reputation.

In the globalized world, businesses need to align with long-term trends while being adaptable to unforeseen changes — both core benefits of sustainability. These added benefits include:

Regulatory Compliance Issues

Governments around the world are increasing regulation on how businesses impact the environment. This is being driven by a growing global awareness of how human actions are changing the world, which is precipitating government commitments to reduce impacts — such as limiting greenhouse gas emissions. The United States has committed to having net-zero GHG emissions by 2050 and 24 states have put forward their own net-zero commitments. A substantial portion of this reduction will fall directly on the private sector.

By adopting sustainable practices, companies can stay ahead of the regulatory curve, avoiding costly fines and legal penalties. A study by McKinsey study found that on average one-third of a business’s profits are at risk of ESG-related changes in regulation. Proactive companies will not only save money but help ensure their uninterrupted business operations.

Reputation and Brand Image

In the current market, a company’s commitment to sustainability significantly enhances its brand image. Consumers favor sustainable companies.

According to PDI Technologies’ third Business of Sustainability Index report, 68% of U.S. consumers are willing to pay more for products from sustainable brands, and that jumps to 72% among millennials and 78% for Gen Z. This shift in consumer preference underscores the pivotal role of sustainability in shaping a positive and appealing brand reputation.

Innovation and Competitive Advantage

Sustainability is a powerful driver for innovation. Not only does sustainability force companies to reassess their operations to improve efficiency, but it also promotes the development of alternative solutions.

Stakeholder Expectations

Stakeholders, including investors, customers, and employees, increasingly demand sustainable practices from companies. Firms that align with these expectations benefit from increased investor interest, enhanced customer loyalty, and improved employee satisfaction.

For example, investors favor companies with good environmental performance due to their correlation with above-average returns. A recent study of 13,000 companies over nine years found companies with a high ESG rating had a 4.3% higher average annual return than poorly rated companies.

Insurance and Risk Assessment

Incorporating sustainable practices is a great way to minimize risk — whether from regulatory changes or unforeseen events. Improving company efficiency, assessing supply chain resilience, and long-term planning are all core components of corporate ESG programs. For example, businesses with strong sustainability performance performed better and were more resilient during the COVID-19 Pandemic.

This higher resilience can lead to more favorable insurance premiums due to reduced operational risks. Companies with strong sustainability practices often experience fewer accidents, disruptions, and claims, making them more appealing to insurers.

Government Incentives

Governments across the globe are increasingly offering incentives to encourage sustainability in business. These incentives include tax breaks, grants, and subsidies aimed at promoting environmentally friendly practices. For example, the U.S. government’s Inflation Reduction Act provides substantial tax credits for businesses making many energy efficiency and sustainability improvements.

Employee Morale & Retention

Sustainability is continually playing a larger role in employee choices. In fact, 69% of people looking for a job consider a company’s sustainability record in their job search. Furthermore, companies that incorporate sustainability into their business can align with existing employees who value the environment. This leads to happier employees that are more productive and drives employee retention.

A study by UCLA found that employees in companies with robust sustainability programs were 16% more productive than those in companies without such initiatives. This heightened productivity is attributed to increased employee engagement and a sense of purpose.

On the other hand, failing to implement sustainability programs is a major risk. There is a cost to inaction that becomes clearer every year.

The Negative Consequences of Inaction

Environmental Impact 

Business actions directly impact the environment through resource use and waste generation. Business-related carbon dioxide emissions are one of the main drivers of climate change, which primarily result from fossil fuel use. Climate disasters are a major risk for the economy and caused over $300 billion in business losses in 2022 alone.

Emissions are categorized into four groups, Scope 1, 2, 3, and 4. Scope 1 emissions are generated from a business's activities that they directly control. This includes company vehicles, onsite manufacturing, and leaks. Scope 2 emissions are indirect energy emissions. In simple terms, they are emissions generated by a utility company to produce the energy consumed by the business.

Scope 3 are known as "value chain emissions." They are all emissions that the company indirectly generates from up and downstream activities. In many cases, Scope 3 emissions make up most of a company's total emissions. Yet, they are among the most challenging to track and reduce because they depend heavily on suppliers and end product users. Scope 4 is avoided emissions, which represent emissions reductions as a result of the company's actions. This can be by purchasing carbon credits or installing low-carbon energy alternatives. A good business strategy includes goals to reduce Scope 1-3 emissions.

Waste generation is another major environmental impact of business operations. The world generates over 2 billion pounds of solid waste annually. This waste largely enters landfills. With more waste comes more need for landfills, exacerbating waste management challenges, and degrading natural landscapes. Companies that develop net-zero waste initiatives can capitalize on lower waste disposal and input material costs.

Water availability is rapidly declining, and the private sector is responsible for 17% of annual freshwater consumption. Higher consumption is exacerbating more extreme droughts and desertification, impacting regional water supplies. Estimates show that by 2030 1.1 billion people will lack access to fresh water. This is driving up water prices and raises concerns about availability for the agricultural and industrial sectors. Water-efficient infrastructure can dramatically reduce consumption in the private sector and is an important part of green building design. 

Social Impact 

Failing to adopt sustainable practices perpetuates a range of social issues. Income inequality worsens as marginalized communities bear the brunt of environmental degradation and resource depletion. Racial and gender inequalities persist, with vulnerable populations disproportionately affected by pollution and deteriorating living conditions.

Additionally, socially conscious companies see direct financial benefits. A study by Glassdoor found that 76% of job seekers consider a diverse workplace an important factor when considering companies. This leads to further innovation with a workplace that includes different perspectives and social awareness, allowing for better consumer engagement. 

Health Impact 

The disregard for sustainability has a detrimental impact on public health. Air and water pollution caused by unsustainable practices contribute to respiratory diseases, allergies, and other health issues leading to 1 in 6 deaths worldwide and 100,000 deaths in the U.S. annually. This alone costs the U.S. $866 billion in annual healthcare costs.

Furthermore, climate change-driven decline in soil quality will affect food production, reducing agriculture yields by 30% and increasing malnutrition rates by 20%. Without sustainable approaches, cities experience fewer green spaces, which are vital for mental well-being and community interaction.

The cumulative effect of these health-related challenges poses a significant burden on society and strains healthcare systems. 

Business Impact 

Studies report that sustainability-conscious companies have better long-term financial success. These companies are more resilient to changing environments, government regulations, and consumer values. Furthermore, they have lower operating costs, higher employee retention, and a positive public image. 

Additionally, companies that implement sustainability programs yet fail to get relevant certifications or use accepted frameworks are at significant risk. The development space is an excellent example of this concern. 

When implementing sustainable building design without 3^rd party verification, like LEED or WELL, there is no check that the plans meet accepted standards, opening the company up to claims of cheating or greenwashing. The same concern is present for carbon accounting, which can be an opaque process for the public. A lack of an accepted framework in the process will raise questions, even if the methods used were accurate. Green building certifications and accounting frameworks provide an accepted, universal standard that benchmarks what a "sustainable building" is. 

Not investing in a well-defined, certified, and accepted sustainability strategy has risks.

The data shows that sustainability provides tangible value. Consumers, regulators, tenants, and employees all value companies that are aware of their environmental impacts and try to limit them. Gone are the days of near-term, publicly visible profits above all else.

Furthermore, while regulations to support these practices have lagged in the U.S., they are now catching up. Implementing these types of programs may soon be a requirement. Getting ahead of the regulatory curve is a smart choice.

However, sustainability programs take time to implement and require ongoing oversight to ensure they are effective. Working with a knowledgeable sustainability consultant can help streamline the process and ensure cost-effective and valuable systems are used. Emerald Built Environments has the skills and track record to help you develop, implement, and maintain your sustainability programs. Learn how Emerald can elevate the ESG of your business.