With increased levels of corporate transparency, organizations are exercising a high degree of moral and ethical leadership. Companies are looking more closely at their health and safety, environmental, and social practices to ensure compliance not only with legislation but also with ethical expectations.
But they are not alone. Technology is now more affordable and accessible than ever and can help companies to comply with ESG.
In this article, we break down:
Environmental, Social, and Corporate Governance (ESG) is an evaluation of an organization’s collective conscientiousness for social and environmental factors.
Investors are increasingly evaluating ESG factors as part of their analysis process for identifying opportunities. For example, 67% of investors plan to buy more shares of ESG-focused companies.
And that’s with good reason. Companies that adopted environmental, social, and governance policies in the 1990s have since outperformed those that didn't.
The table below breaks down what ESG compliance is all about. These performance indicators change from company to company based on their activities, but the below should provide a rough outline. ESG is typically calculated as a score based on these categories.
Air and water pollution
Data protection and privacy
Gender and diversity
Audit committee structure
Bribery and corruption
ESG metrics are not usually part of mandatory financial reporting. However, companies are increasingly making disclosures in their annual report or standalone sustainability report. This data can also be made available to rating agencies and shareholders.
Numerous organizations, such as the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI), and the Task Force on Climate-related Financial Disclosures (TCFD) are working to form standards and define materiality to facilitate incorporation of these factors into the investment process.
As the requirement for ESG compliance and company transparency increases, companies are working to improve their ESG ratings. And this is where technology can assist.
Internet of Things (IoT) sensors are a quick, reliable, and cost-effective way for any organization to collect data. With this information, companies can shape their ESG compliance strategy and decision-making processes.
Sensor-based data is especially useful within the domain of Environmental compliance, but can also help with other ESG metrics.
As a result of the 2015 Paris agreement, 193 countries have agreed to global net-zero emissions by 2050. To meet this challenging target, everyone needs to put the reduction of carbon emissions at the top of their agenda. Hence its inclusion as an ESG metric.
Global warming is primarily caused by rising CO2 levels in the atmosphere. CO2 is mainly produced through energy production. Saving energy reduces CO2 emissions. And everyone is talking about how technology can help.
Temperature sensors can be used to help corporations identify energy wastage, such as through unnecessary heating, over ventilation, or poor insulation. Changing heating schedules, automating ventilation based on temperature, and improving insulation will all contribute to reducing energy, reducing carbon emissions, and improving ESG compliance.
Sensor type: Temperature
Case study: Warehouse
Detecting abnormal CO2 concentrations within a building can lead to the early identification of faulty equipment e.g. refrigeration units.
Addressing the problem ensures that air pollution is reduced and that employee well-being is maintained through the elimination of potentially unhealthy air from the office environment.
Early detection of a problem, followed by corrective maintenance, can also extend the life expectancy of the equipment, reducing waste.
Sensor type: CO2
Sensors can be used to collect data that, once analyzed, will assist an organization with its strategy and decision-making for energy efficiency.
Temperature and humidity sensors installed on equipment, such as Heating Systems, Air Condition Units, and Ventilation Systems provide data points around energy performance, changes in operation, and trends. Once analyzed, the data can uncover energy inefficiencies such as overheating or over ventilation, which can be addressed.
This can lead to energy savings and extend the life expectancy of expensive equipment.
Proximity sensors on doors and windows are used to inform how often they are opened and closed. This is useful for tracking occupancy as well as for identifying locations where energy is wasted through, for example, leaving a window open.
Temperature sensors under desks and motion sensors in meeting rooms uncover how people use space and rooms. Monitored data can be analyzed to identify overused and underused areas, allowing space layout decisions to be made that are really data-driven. This can also lead to downsizing.
Sensor type: All wireless sensors
Case study: Factory no. 7
Any facility or organization that uses refrigerators or freezer units can suffer considerable loss and wastage if a fault occurs to a unit or an incorrect temperature is set.
Using temperature sensors is a low-cost and convenient way to monitor, in real-time, the temperature of all cooling systems. Any abnormal temperature fluctuation can be quickly identified and addressed, eliminating potential wastage and financial loss.
Sensor type: Temperature
Case Study: Global restaurant chain
Many organizations regularly flush their water pipes to eliminate the potential growth of Legionella, a water-borne bacterium that causes Legionnaire's disease, a lethal respiratory illness. It grows if water remains stagnant between 18 and 48 degrees Celsius (64.4 and 118.4 Fahrenheit) for a prolonged period.
Monitoring the temperature of the water in a pipe over a period of time will indicate if that pipe has been used or not. If the pipe has been used, there will be no need for flushing, saving water.
Sensor type: Temperature
Case study: JLL
Employee retention has really been brought into focus by the recent pandemic. An important part of this is hybrid working, which has now become the norm. Organizations are having to make their workspaces more “attractive” as a place to work to attract employees back.
One area where sensor technology can assist is through accurate and up-to-date occupancy data. Using a combination of desk occupancy, proximity, and motion sensors information can be collected, in near real-time, and used to identify, for example, unused desks in a hot seating area, available offices, and free meeting rooms.
Making this data available to employees, through the web or a phone-based app, improves efficiency and productivity by eliminating wasted time when looking for free space. It also lowers stress and anxiety levels for employees by removing their frustration when searching for an available work location.
Employee engagement can be further improved with the use of touch sensors. These can be deployed as a feedback panel, service button, or survey. They allow employees to request services right away, provide feedback on a service, and document cleaning or maintenance activities for legal compliance.
Sensors can also be used to help reduce repetitive, tedious, and time-consuming activities for employees, allowing them to concentrate on more important and interesting tasks.
For example, temperature sensors remove the need for physical and manual temperature-taking of freezers. Using proximity sensors can help identify areas that have or have not been used by employees and whether they need to be cleaned.
Case study: Spaces Red Elephant
Employee welfare and wellbeing are critical factors when considering ESG compliance. Everyone should expect a safe, healthy, and pleasant work environment.
IoT sensors can assist companies in delivering numerous improvements and benefits to their employees in the workspace. These include:
Temperature sensors can be used to detect overheating equipment or the outbreak of fire.
Proximity sensors can indicate if doors, windows, or cabinets are open which should not be. These could be a security risk for the employee.
Touch sensors can be deployed on refrigerator or freezer doors, often within kitchen areas, to indicate abnormal opening periods. Any extended opening time will lead to unhealthy storage conditions with food, medicines, and other perishable items going bad.
Water sensors provide an alert if water is detected. This information allows a company to repair leaking pipes, cooling systems, or ventilation units and maintain a good working environment for employees.
Temperature sensors, when deployed on water pipes, can assist companies in detecting stagnant and potentially “unsafe” water before it becomes critical and life-threatening.
Proximity sensors can track how frequently restrooms, desks, and meeting rooms are used. This data can be analyzed to determine if an area or room requires cleaning. Over time cleaning schedules can be tailored, as required, to ensure an optimal working environment for the employee.
Wireless CO2 sensors record CO2 concentrations in the work environment. High levels are dangerous for employees and can affect their cognitive and physical wellbeing. If an abnormally high level is identified the building ventilation can automatically be increased to disperse this gas
Environmental, social, and governance criteria are becoming increasingly important for all corporations. They are being used by investors as a way to evaluate potential investment and by the general public as a measure of moral and ethical compliance.
Conversely, ESG criteria can also help investors avoid companies that might pose a greater financial risk due to their environmental or other practices and by the public as an indicator of a potentially poor employer.
Adopting measures based on data provided by intelligent sensors, organizations can improve their ESG compliance and enhance their contributions to people, planet and profit.
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