As sustainability moves further up the hierarchy of corporate priorities, targeting “hard to abate” industrial emissions is becoming more urgent. To keep pace with global policy shifts and mandatory ESG reporting obligations, industrial and commercial players are adopting future-oriented solutions that enable the transition to cleaner energy.
In this article, we’re taking a deep dive into what those requirements are, how they impact businesses, and viable solutions for companies seeking to bring their operations into full compliance.
Navigating the “E” in ESG: the current state of reporting obligations
ESG reporting refers to the public disclosure of a company’s environmental, social, and governance (ESG) performance and initiatives. It’s a way for companies to communicate their sustainability efforts and impact to stakeholders, and perhaps most importantly, regulators. These disclosures are mandatory, to varying degrees, in 29 countries at present. The rules typically apply to larger, publicly listed companies above a certain threshold of employees. Here, we’re focusing on the “E”: the environmental impact of business activities, including emissions due to heat generation and electrification. It’s important to note that these environmental requirements aren’t necessarily up to individual countries. Rules in one region can affect foreign companies, too. For example, the EU’s new reporting rules will affect US companies that form part of the value chain for European firms. The reason for this is that ESG rules have a much broader application than just assessing the direct emissions that individual companies produce.
The 3 scopes of ESG reporting
The Greenhouse Gas (GHG) protocol classifies emissions into three scopes. The first two are mandatory in several countries. Scope 3 is voluntary, but companies who go this extra mile are likely to transform faster and more effectively, gaining an advantage in the process.
Scope 1: Direct
This category includes all direct GHG emissions that an organization produces, using sources that it owns or controls. Examples include emissions from combustion of fuels in boilers, furnaces, and vehicles, as well as emissions from chemical production processes. Scope 1 also covers so-called “fugitive” emissions: leakages of gasses such as refrigerants.
Scope 2: Indirect
These are emissions that an organization produces from the generation of electricity, heat, or steam that it purchases from another organization. Scope 2 emissions are associated with the consumption of energy, but they are not directly produced by the organization itself.
Scope 3: Indirect, and not owned
These are all other indirect GHG emissions that are not included in scope 2 emissions. These emissions result from activities that are not owned or controlled by the organization but are related to its activities, such as emissions from the production of purchased goods and services, employee commuting, and business travel. This scope also considers the impact of downstream (usually financial) activities, like investments and franchises.
Incentives targeting emissions: more carrot, less stick
So far, the adoption of ESG standards in the US particularly has proceeded more through incentivized buy-in, rather than enforcement per se.
At a federal level, the Inflation Reduction Act offers tax credits for consumers and commercial enterprises for sustainable energy sourcing and efficiency. It also creates new tax credits to stimulate investment in low-carbon power generation, industrial production, and real estate. By providing more ways to monetize credits, the Act enables more businesses to enter the ESG marketplace to participate in (and benefit from) transformation.
By creating these incentives, regulators have turned sustainability goals into an opportunity – rather than a burden. This has opened the door for forward thinking companies to take the initiative and forge ahead with decarbonization.
Meeting environmental targets through heat renewable heat and heat electrification: an imperative for industry
Incentives alone can only move the dial so far. Technological limitations have always been one of the biggest obstacles to shifting industry away from fossil fuel reliance. And industrial heat production in particular has long been considered as “hard to abate”. But it’s precisely because industrial heating is so carbon-intensive that reform is needed so urgently.
The good news is that technology now exists that can power this much-needed industrial energy transition without compromising on productivity or escalating costs.
TIGI’s renewable heat generation and storage solutions empower businesses to transition to greener, lower cost energy by leveraging the state of the art in industrial heating tech. As leaders in renewable heat and heat electrification, we deliver full turnkey energy solutions for industrial applications, including solar collectors, heat pumps and smart storage – along with optimized control and cloud services.
Contact our team to discover how TIGI’s innovative Heat-as-a-Service model is transforming industry and turning ESG compliance into a competitive advantage.
