How Does ESG Impact Smart Buildings?
The concept of Environmental Social Governance (ESG) reporting is not something that only larger organisations need to concern themselves with; it is also vital for small and medium-sized companies. The buildings these businesses operate out of have a profound impact on their environmental footprint and the health and wellbeing of their employees, which directly links to the environmental and social aspects of ESG.
It has been reported that smaller commercial buildings make up the bulk of building stock, and many of these small commercial buildings don't have a building automation system. According to the Department of Energy's Commercial Buildings Energy Consumption Survey (CBECS), 94% of all commercial buildings are less than 50,000 sq. ft., and of these small commercial buildings, only 11% have a building automation system. Therefore many are operating inefficiently and are not collecting the relevant energy and carbon data to be able to set out an improvement strategy.
We discussed this with Chris Irwin from J2 Innovations on our podcast. He believes "the only way we're going to get to net-zero, or even close, is if we address the bulk of the buildings that have, up to now, not had effective controls."
He went on to explain that he thinks "the climate change crisis is increasing people's awareness; the problem is we're creating too many emissions, and our climate is about to fall apart. The climate crisis is causing huge disruption to people's lives through catastrophic, extreme events, not to mention rising sea levels and the impact on migration. We've got to get to grips with this collectively; it's really a very serious deal for us."
When a small, mid-sized or large issuer understands the value of ESG data and reporting, investors' ability to see the full picture of their asset's performance and prospects is enhanced (LSEG 2020).
Wiredscore certifies buildings, rating them based on their digital connectivity. Buildings can receive a platinum, gold or silver accreditation, showing how robust and resilient the connectivity is. Much of a building's infrastructure relies on connectivity; there are many wireless devices and sensors that collect data. The insight gained from this data allows a company to make informed decisions.
"It has been reported that in London, Wiredscore certified buildings were able to charge a 5% digital premium on their space." - Richard Morris, Technology Within (Listen to our podcast with Richard here)
Ultimately, investors and shareholders want to understand how businesses are responding to long-term and macroeconomic trends such as climate, demographic and technological change, as well as political developments. Green-certified buildings are viewed as a lower risk to investors; they want to protect their portfolios against non-financial reporting in order to deliver environments tenants want to rent. This then results in stronger financial performance as they can charge more per month, be more resilient and retain tenants, securing future capital.
Andy Saull from CBRE discussed social sustainability on our podcast; he noted that "there's now more of a social sustainability angle for buildings in order to attract people to offices through better wellbeing, health, fitness and productivity."
He also talked about the barriers surrounding thorough, consistent reporting when it comes to environmental sustainability:
"Research shows that currently, things like EPC ratings and minimum energy efficiency standards do not actually correlate with operational energy performance. You can own a building with an EPC rating of A, but it can perform in operation in the same way as a building that has been given an EPC rating of E. It's just a badge or a trophy.
The Better Buildings partnership has been pioneering a rating that came out of Australia called NABERS; it's effectively a new way of measuring operational carbon to prove your buildings sustainable. It requires submission of data throughout the lifecycle of the building, and you always have to be sustainable. I think that will hit the UK market soon as a benchmark of environmental sustainability."
A number of economists now suggest that we are rapidly moving into the next cycle of economic change. The rise of industrialisation has led to climate change, environmental erosion and resource depletion. The Paris Agreement set out in 2016 aims to 'keep a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius. Achieving its goals by meeting the signatories' nationally determined contributions ('NDCs') requires the growth of new products and new 'green' industrial sectors in areas including renewable energy, energy efficiency, waste processing and recycling (LSEG 2020).
At amBX, our Director of Product, Jon Couch, shared his thoughts on the topic:
"Legislation drives change; the requirement for certain types of businesses to present these scores is forcing the industry to take action and become more environmentally friendly.
We have found that digital twins are very beneficial. In our case, having a lighting digital twin can offer the ability to map how a building is running now (and in a far more accurate way than just doing a lighting survey), but it also allows a forecast to be created which shows an owner where they could get to from lighting energy and carbon perspective." - Listen to Jon's podcast here.
Ultimately, urban areas emit a lot more carbon than any other. The world's cities emit 70% of the world's carbon dioxide (National Geographic 2018), and buildings account for a large chunk of this. Therefore, it is important to understand how buildings are currently performing now and how they can be improved to become more environmentally friendly. amBX can assist with this, acting as a system integrator to aggregate data, presenting lighting energy and carbon data and simulating changes in the virtual environment before applying it to the physical asset.
We will only achieve net zero goals if we work together, sharing data to create a holistic ESG score.
In addition, buildings need to be appropriate for occupants; they should be healthy environments that are suitable for their needs. Again, amBX can assist in terms of circadian lighting and air quality monitoring as well as data visualisation to improve health and wellbeing and build trust with occupants.