What You Need to Know about the SEC’s New Climate Disclosure Proposal: How Logical Buildings Stays Ahead of the Curve
By: Jeff Hendler, Co-Founder and CEO and Sylvie Binder, Smart Grid Analytics, Logical Buildings
Recently, the SEC put out a proposal to require companies to report on their climate impact and GHG emissions. If you missed it, here’s an article and helpful explainer about the rules. These new rules would require disclosure about how climate change could affect a business’s operations. For the first time, the private sector will likely have to track its climate impact alongside traditional financial results.
As the tracking of GHG emissions and private sector climate impact becomes ever more important, Logical Buildings wants to clarify the content of this historic proposal and what it could mean for businesses moving forward.
A Policy Priority Shift
This proposal starts a preliminary conversation about required climate action for private companies operating in the U.S. At a minimum, this is a great catalyst to start conversations around how companies view the built environment. Now, companies can ask themselves what they are doing to be environmentally conscious of the built environment and how they can actively change their spaces to comply with internal or external ESG goals and SEC guidance on a company level. That question alone is a cultural advancement, embedded with corporate community responsibility to improve the environment, that is worth noting as a policy priority shift.
Secondly, this proposal highlights the question of uniform standards and accountability. A lot of companies can begin to make claims about what ESG activities in which they purport to be engaged. The question becomes, how can the market measure these activities in a uniform way and quantify their impact? This proposal by the SEC alludes to future conversations around reporting standards to create increased accountability. By measuring and verifying data versus a uniform baseline, companies can translate data into tangible environmental impact.
This proposal not only discusses the creation of tracking a company’s energy usage, but also the entirety of a company’s environmental impact, including water and air quality — increasingly precious commodities. At Logical Buildings, we educate our users to achieve data competency, enabling them to meet their ESG goals. We provide our clients a prescriptive path toward decarbonization utilizing a socially engaging mobile platform that reduces energy use while improving water efficiency and air quality. Importantly, we deliver the required data measurement and verification reporting required to validate ESG benchmark achievements.
Staying Ahead of the Curve
The SEC proposal has the potential to change the regulatory landscape for all US companies, and at Logical Buildings, we believe that this is a most opportune time for property management and building ownership to provide leadership in decarbonizing the built environment. Individual businesses, small or large, would be best prepared for future climate disclosure regulation by getting ahead of the curve.
It is of the utmost importance for companies to understand the source of their own GHG emissions and develop a thoughtful action plan to strategically decarbonize the built environment. In the face of the increased frequency of extreme weather events, companies must ask themselves what they are doing to increase their resiliency to environmental stress.
Scope 1, 2, and 3 Emissions
An important part of this initiative by the SEC is their recommendation of the commonly accepted principles of Scope 1, 2, and 3 emissions which benchmark climate progress. The EPA created three scopes of emissions tracking categories, defined as follows:
Scope 1 emissions are direct greenhouse (GHG) emissions that occur from sources that are controlled or owned by an organization (e.g., emissions associated with fuel combustion in boilers, furnaces, vehicles). Oftentimes, scope 1 emissions refer to those things that are directly within the grasp of a building owner’s capability to reduce building-level emissions.
For example, at Logical Buildings, we help our clients use the data collected by smart thermostats to have dynamic control over their space and mitigate waste, enabling their buildings to become providers of grid resources to mitigate strain on the grid. The ability to measure, verify and control the technology used in a building owner’s space by tapping into smart technologies helps to achieve lower GHG emissions and accomplish ESG goals.
Scope 2 emissions are indirect GHG emissions associated with the purchase of electricity, steam, heat, or cooling.
With the services provided by Logical Buildings, scope 2 emissions are addressed in buildings such as a garage space, which does not create fossil fuel emissions itself but contributes to a culture of fossil fuel combustion. Logical Buildings can suggest solutions to this energy-intense space that incentivize less fossil consumption, including EV charging port installation.
Scope 3 emissions are the result of activities from assets not owned or controlled by a business, but those which indirectly affect its value chain. Scope 3 emissions include all sources not within an organization’s scope 1 and 2 boundaries.
At Logical Buildings, Scope 3 areas could include spaces over which building owners do not have control — say, they lease space to a resident or a retail tenant. Historically, leased spaces have electricity meters which create a direct relationship between the tenant and the utility. This relationship has led building owners, acting rationally under this construct, to let energy inefficiencies persist. Owners were not incentivized to make changes in scope 3 emissions, such as providing tenants with HVAC-controlled devices to better manage the space, because building owners do not front the energy bill. But through the purview of an ESG mindset or the frame of mind considered in a new potential SEC ruling requiring climate disclosures, this area of scope 3 emissions could now be more important. An ESG mindset provides a long-awaited incentive for the building owner and tenant to work together to provide and use smart technologies to their fullest to reduce everyone’s overall carbon emissions. Whole building accountability is now achievable because there are certain technologies and tools in place, such as smart metering technologies and smart thermostats.
Corporate Accountability for the Entire Building with SmartKit AI and GridRewards
Logical Buildings has a suite of climate technology tools that provide corporate accountability to achieve ESG requirements. The company’s SmartKit AI mobile platform provides guidance and protocols for building owners to reduce scope 1 and scope 2 emissions. Multifamily and commercial building owners can reduce scope 3 emissions by empowering their residents and tenants with the company’s GridRewards app platform.
Both platforms provide users with the tools to see and manage their own energy use and lower usage and emissions with prescriptive guidance. Logical Buildings’ products engage users with clear, real-time data coming from their building or home, teaching them how to dynamically manage their energy use, and emissions, as well as optimize water use, indoor air quality, and other associated resiliency sensor information throughout the year. What’s more, Logical Buildings’ trailblazing mobile app, GridRewards, provides a cash payment incentive for residents and tenants to use less energy and decarbonize their individual environments.
Taking on Carbon Intensity with Time of Use Data Management
The integration of smart metering technology with smart devices can now empower big and small buildings, single-family homes, and apartments to be dispatchable and flexible grid service providers. Both SmartKit AI and GridRewards enable people to understand for the first time their time of use (TOU) energy usage and calibrate it with the carbon emissions intensity of energy at that moment. TOU carbon intensity is a new metric derived from data extraction from the grid and smart meters. This metric provides highly valuable guidance and the capability to tailor energy usage based on emissions intensity. Logical Buildings tracks carbon intensity metrics for SmartKit AI and GridRewards users, allowing users to make their desired energy adjustments and even be compensated for providing a grid service during demand response events via the direct cues and mobile alerts on the SmartKit AI portal and GridRewards app.
The Bottom Line
The energy transition towards electrification of heat and mobility, supported by the integration of renewable resources is underway. Every day, the grid becomes more decentralized, digitized, and decarbonized. This SEC proposal and the services that Logical Buildings provide to users are aimed at the nexus of these trends, driving the change in private sector ESG policies and practices.
Logical Buildings CEO, Jeff Hendler, commented that Logical Buildings is “empowering commercial and residential users with their ESG tech tools to ‘socialize with their space’ in the most environmentally efficient way.” Any final guidance from the SEC regarding climate disclosures in the coming months will require building owners and tenants alike to use the smart services and technologies available to them. We believe it is critical to empower all stakeholders to take action with the common goal of energy efficiency and environmental resiliency — taking their energy destiny into their own hands.