ESG: Enhancing Your Company's Strategy with LED

What is ESG?

ESG stands for “Environmental, Social, and Governance”. It is a tool used for sustainable investing. It’s a non-financial factor that is part of an investor’s analysis process.

ESG Investing is the method of integrating a company’s ESG initiatives into investment decisions. Investors and consumers are increasingly more aware of corporate responsibility programs. A company’s ESG strategy is currently an important screening tool. It is more often a big factor when stakeholders evaluate investment opportunities.

ESG assesses a company’s environmental, social, and governance methods. This is done along with more conventional financial measures. An example of an ESG investment could be purchasing stock in a tech company that transforms one of its data centers to use renewable energy. This results in cost benefits along with a positive effect on the environment. The Data Center may decide to convert all its interior lighting over to LED high bays. It may also decide to convert all the parking lot fixtures over to LED Shoebox fixtures. Both would be part of an ESG investment.

An ESG (risk) score is a calculation of an enterprise’s performance factoring in ESG criteria. It rates the company’s exposure to ESG-related risks. And it takes into account the company’s experience with handling these risks. For the environmental part of ESG, these criteria are used to evaluate environmental risks that a company might face. It also takes into account how the company has managed and plans to manage those risks. The growth of ESGs has created a needed incentive to develop sustainable production methods and responsible resource management.

What is an ESG Strategy?

An ESG Strategy characterizes how a company operates concerning environmental issues and social responsibility. Investors often think about a company’s ESG strategy to evaluate investment risk. ESG factors and scores are used as investment screening tools. To help investors with their evaluations, Yahoo Finance added a sustainability tab in 2020. This tab shows the ESG performance of a company and how it compares to competitors.

Developing an ESG strategy helps the company brand, by demonstrating a socially conscious business approach and values to consumers. It’s increasingly more common for consumers to be concerned about a company’s carbon footprint. Delivering a solid ESG strategy will help investors and consumers understand that your company is committed to a more sustainable future.

ESG strategies will include comprehensive optimization strategies on energy. These often include:

• Building and system retrofits.
• Onsite retrofits permit businesses to reduce operational costs and energy consumption.

A lot of investment and real estate groups are now normalizing LED lighting and retrofits for their properties and future investments.

To the right is an example of a facility that has incorporated energy optimization strategies into its construction:

How Can LED Lighting Help with a Company’s ESG Strategy?

The use of LED lighting helps with the “environmental” part of ESG. The environmental criteria used for ESG standards include the following factors:

• The amount of energy that companies use
• The amount of waste emitted
• The total impact the organization’s activities have on the environment and the climate

One of the primary ways organizations can decrease costs through ESG is by reducing energy usage and associated utility costs.

Organizations can choose to take on projects designed to increase the efficiency of their existing facilities, such as LED lighting.

Upgrading facilities to modern LED lighting is one of the fastest and easiest ways to cut energy consumption. Lighting contributes to around 5% of worldwide carbon dioxide emissions. A global switch to energy-efficient LED technology could save over 1,400 million tons of CO2 and avoid the construction of 1,250 power stations.

LED lighting can help to realize savings of up to 50-70%. It has been recognized as one of the most practical and readily available technologies for cities to shift to a low-carbon economy in the next ten years. Public lighting accounts for 20-40% of a city’s electricity bill. Switching to LEDs can bring huge benefits to a city’s tight budget. For example, Los Angeles is saving around $10 million per year in electricity costs after changing to LEDs. The city also realized a further $3 million in maintenance savings.

By 2035, the majority of lighting installations are expected to use LED technology. Energy savings from LED lighting could eclipse 569 Terawatt Hours (TWh) annually by 2035. That is equal to the yearly energy output of more than 92 1,000 Megawatt (MW) power plants.

LED retrofits are a common step (usually one of the first steps) companies take to achieve a more sustainable future and brand. Changing a company’s indoor and outdoor lighting to LED lights is an environmentally friendly choice for a number of reasons:

• It reduces operational and energy costs. LEDs use less energy than traditional sources of light.
• LED products and materials contain no hazardous waste, such as mercury. Thus, they can be safely recycled.
• It reduces their carbon footprint. By switching to LEDs, companies can decrease their overall kWh use. This directly reduces overall CO2 emissions.

Additionally, an LED-integrated smart lighting platform, equipped with sensors and timers, can have a large impact on a company’s sustainability profile. These platforms transmit data to analytical engines which determine how lighting is best utilized in individual areas.
Smart controls can maximize savings in many ways. Lighting that automatically dims in reaction to the occurrence of strong sunlight will reduce operational costs substantially. With a smart lighting platform, you can dim lights in response to bright midday light. It can also turn off lights in areas of a facility that are unoccupied.

Conclusion

The switch to LED lighting systems not only boosts a company’s ESG score but also saves the company money in the long run. This affects their bottom lines dramatically. Energy-efficient operations often prove to be cash-flow positive. A company’s yearly savings may outstrip the upfront costs of implementing these more efficient solutions.

Furthermore, customers in the developed world progressively take into account the extent of a corporation’s carbon footprint as an influence in their buying decisions. As a bonus, a higher ESG rating will make it easier for companies to borrow money or issue debt on a green basis in the future.