How is ESG Impacting the Industry?

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, and legislation is increasingly making this type of reporting mandatory.

We spoke with Paul Reid from Onnec (formerly Excel Redstone) on the podcast about how ESG is impacting the industry.

Onnec has been in business for 34 years, and they're known for infrastructure, integration, cabling and managed services. They work with large corporates all over the world, helping ensure connectivity throughout their buildings and providing them with actionable insights from the data collected.

Below are some of the highlights from our conversation; Paul explains the importance of ESG reporting and the impact it is having on their clients.

“The part of the business that I specifically work for is the MSI team (master system integration), and we've developed a solution over the last four years with a very large technology customer that effectively maps data from any device anywhere in the world.

This is relevant because of increasing legislation; you can't credibly assign a pathway to net zero if you don't really understand where you are today and therefore build a plan to go forward to make changes that are needed”. - Paul Reid, Business Development Manager at Onnec.

Currently, only one in five commercial buildings operate with a basic Building Management System, despite Europe being the third-largest energy consumer in the world.

“We provide granular data that allows our clients to better understand how their buildings are operating. The TCFD is increasingly making these ESG principles mandatory, and it is already enforced for our financial customers. There is now a major change in how they have to report on environmental, social and governance, and if they don’t comply, fines will be issued.

We're seeing lots of different sets of legislation being introduced that ensure there isn't greenwashing potential in this space. It’s a really encouraging move because it means that even if people doubt the urgency that's required to address these issues, the legislation is forcing positive environmental change.

Data from assets in buildings has never been more important. We've developed and continue to develop a particular solution that has some very unique features. That means that for very large portfolios, it's a lot easier to start building those datasets that allow you to populate the reporting tools so you comply with the legislative requirements.

The legislation is going to get tougher and tougher, and that's likely to be the case because all the early indications show that, as a country, we're probably going to miss a lot of the net zero targets and commitments. This then starts to become a financial and a business model problem because the less credible your net zero pathway and strategy are, the less favourable you will look to investors or tenants wanting to rent a space.

So, it’s a massive financial and business risk for these companies, and decisions have to be made around priorities in their investment portfolio because it's likely that they may not be enough available capital to upgrade the entire portfolio in one go.

The problem with some of the new legislation is that it is focused on new developments, and they are such a small percentage of the built environment. I think I saw a statistic that said something like 2% of the built environment is new developments. So, you could almost argue that there’s going to make no material impact on the 2050 or even 2030 delivery targets by focusing too much on new developments. Of course, there needs to be legislation in place for new builds, and we want new developments to be right the first time, future-proofing them, so they are suitable now and in the future, but it is the existing buildings that really have to be addressed.

Existing buildings are not built in a standardized way, so the engineering control systems that they're running and the way the systems are procured, configured and maintained are different every time. You've got new challenges in every building.

Our business, as a master system integration business, understands exactly how to go in and engage those challenges. We have a very defined process that allows us to quickly get to a baseline with a building, and then we can start to give the customer some data and the ability to make informed decisions. It may be that regardless of the best intentions, the data collected shows that the outcome we would like to see in that building is not that feasible, or it could reveal some quick wins that can be adjusted to optimize the energy efficiency of the building and save the client money whilst allowing them to meet reporting standards”. - Paul Reid.

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.

It is, however, the large corporates that emit the most carbon, hence they are the first to be hit by this legislation, and the threat of financial penalties is creating urgency. The aim, of course, is to improve the environmental impact of the built environment whilst creating healthy, safe spaces for occupants that are governed fairly considering structure and oversight, code and values, transparency and reporting, and cyber risk and systems (SP Global).