Sustainability goals should focus on business practices first

While more companies are thinking about their impact on the environment, evidence still suggests that far more businesses are formulating plans than putting sustainability initiatives into action.

Schneider Electric, a global supplier of electronic equipment and services for businesses and consumers, is bucking that trend. The company, based near Paris, provides products and services designed to help companies reduce energy consumption and has initiated projects internally to meet its own sustainability goals.

In this Q&A, Michael Lotfy, senior vice president of power products and systems for Schneider Electric North America, discusses the first steps companies can take to become more sustainable in their operations and the challenges they'll face as they pursue these goals.

Climate change will likely become more severe if organizations don't take steps to reduce carbon emissions, Lotfy said. Climate scientists warn that the environment will suffer irreversible consequences unless global temperature rise is held to 1.5 degrees Celsius by 2100. But companies will need to triple the speed and resources if the world is going to meet global temperature reduction targets.

One of the most critical areas companies can take is to reduce greenhouse gas emissions, according to Lotfy. They are broadly categorized as scope 1 for directly generated emissions, scope 2 for indirect emissions from a company's operations, and scope 3 for emissions generated by a company's suppliers and partners.

What should companies think about when they want to start to reduce carbon emissions to meet sustainability goals?

Michael Lotfy

Michael Lotfy: For scope 1 and 2 emissions, there are actions that you can take first in your own organizations. For example, you can make your offices more energy efficient and use sustainable materials to reduce the CO2 emissions within your own organization. In your factories, use more renewable energy with solar panels or wind power.

Then look at the materials and designs that you use in your own operations. All the innovations at Schneider align with the company's sustainability targets. For example, in one of our latest releases of FlexSet Switchboard, we're using less copper, we're using less aluminum and we're also using reusable packaging. That's a big part of sustainability because you immediately eliminate cardboard and waste. And it's part of the circular economy because we reuse the materials.

No. 2 is to think about how you can reduce your scope 3 downstream CO2 emissions. At Schneider, we're working with most of our top tier suppliers in North America to help them decarbonize their operations. We have an independent company that helps suppliers understand what their baseline CO2 emissions are and what actions they need to take.

These are big and complex projects with high initial costs and a slow ROI. So how do companies build a business case to launch sustainability goals?

Lotfy: We live in a time where paradoxes are becoming a way of life, and managing these paradoxes becomes a part of daily life. That being said, it depends on how you look at the equation. I look at the equation very simply in that the next generation may not even have a decent life. But there are also laws and regulations coming into effect right now that penalize companies that do not take action in multiple ways.

There's no doubt that most of the sustainability targets or actions that you can take to reduce CO2 emissions require capex investments. That said, the ROI is significant and fast -- in most cases it's under two years. Let's say you use less copper. You paid an upfront cost to redesign the product, but you're reducing the copper by 25%, so you get the money back in X number of months. If you use reusable packaging, there's an initial cost for the reusable packaging, but you'll get the packaging back for perhaps 1,000 deliveries. When you put this in the bigger equation and you include the fact that we need to protect the planet and maintain the future of the company, it's a no-brainer discussion.

The idea that sustainability is costly is mostly an idea from the past because right now, we have the technology to make it much less costly. All the digital tools that we have to design -- with something like 3D printing, you no longer have the need to build a mold and break it.

How do companies avoid charges that they are greenwashing -- using misleading data to show that they are doing better on sustainability than they really are?

Lotfy: There is a massive wave coming now dedicated to mitigating greenwashing. One of the takeaways of COP27 [Conference of the Parties to the UN Framework Convention on Climate Change] is that governments are now going to regulate and define the concept of decarbonization and put on hard targets. This is a massive first step that might not eliminate greenwashing but will reduce it drastically. This is because you must show the proof that you have decarbonized. You have to show proof that you have solar panels and battery systems and you are using more energy from batteries than from a utility. This is where we need governments to drive accountability and make it illegal to do greenwashing.

What are some of the factors that will drive more companies to put sustainability plans into action in the next year?

Lotfy: Governments and companies are planning that there will be regulations across the world, where you will have X amount of CO2 emissions a year and after that's reached there will be a carbon tax. They are already discussing this in Europe, so you will have governments driving accountability for companies -- you do this or you pay a substantial amount.

Second, a lot of companies are looking to add sustainability goals to the compensation of executives in the organization. We have it at Schneider. But it's new for many companies because you usually measure top- and bottom-line performance. But it's something new when you add in sustainability.

In the next 12 months, you will find a lot of regulations and laws coming into force that will require companies to have goals in [their] operation. This will not just be the top Fortune 500 or 1000. It will be for every company and every operation, including small businesses, because this is how you drive change.

Jim O'Donnell is a TechTarget senior news writer who covers ERP and other enterprise applications for TechTarget Editorial.