Regulation eclipses innovation as main driver in sustainability

Companies say that regulatory requirements are now a more important factor driving corporate sustainability initiatives while the competitive advantage provided by such initiatives are viewed as less important, according to a new report.

AMR Research surveyed 189 employees that handle decisions on sustainability initiatives for the report, which also looks at business risks, the largest sustainability challenges and what companies are doing to reduce emissions and increase energy efficiency. Respondents came from both energy-intensive and non-energy-intensive industries.

The most important driver behind corporate initiatives is the business value provided by them, cited by 29 per cent of respondents. In the previous survey, in 2008, 28 per cent noted business value as a major driver.

Coming in second was compliance with regulatory requirements (27 per cent). In 2008 it was chosen by only 11 per cent of those surveyed. The change, the report notes, is due partially to the US EPA's mandatory greenhouse gas (GHG) emissions reporting requirement for certain industries along with the expectation that the US will eventually have formal carbon regulations.

The third main driver was competitive advantage, which was chosen by 33 per cent of those surveyed in 2008, but only by 12 per cent this year.

Another big change discovered by the report is that 35 per cent of companies said they are placing more importance on reporting Scope 3 emissions - those that come from supply chains, which are the more difficult ones to track and monitor - than they did last year. Only four per cent said they now put less importance on Scope 3 emissions.

When asked about their systems for managing GHG emissions data, 35 per cent said they have a system that is completely standardised and integrated, while the rest are working with fragmented systems and relying on in-house systems, legacy systems or spreadsheets, leading the report to conclude there is a growing need for sustainability software and services to assist companies.

The major business risks in a low-carbon economy that companies are facing today, expect in three to five years, or expect in 2020, are the cost of energy, government regulations, emissions reduction and energy efficiency, and the direct cost of emissions.

The report notes that risks could be lumped into two areas. The first is a group of immediate, direct risks that a price can be put on, mainly centred on energy and emission performance and regulations. The second group of risks is less immediate and indirect, such as pressure from stakeholders, customers and supply chains.

The issues that present the largest challenges to companies are their carbon footprints and sourcing renewable energy, while the actions that are the biggest challenges are reducing energy use and greenhouse gas emissions.

The most prevalent action being taken by companies is carbon emissions reduction (51 per cent), but more companies than in past years are also purchasing green electricity (24 per cent) and purchasing carbon credit offsets (19 per cent).

The top area where companies are seeking energy efficiency improvements is in building management (53 per cent) followed by manufacturing process re-engineering (39 per cent), which was also named the main area for improvements three to five years from now.

This article first appeared at GreenBiz.com