From Regulations to ROI: Unpacking Sustainability at RISKWORLD 2024

Companies are increasingly committed to sustainability, driven by government mandates and consumer demands. But a serious challenge remains: how can businesses embrace sustainability without incurring prohibitive costs? Can you go green without going broke?

At RISKWORLD 2024 in San Diego, Hannes Endriß, TÜV SÜD’s Business Line Manager for Smart Sustainable Buildings, and Chris Mandel, President of Excellence in Risk Management and Assistant Professor at Embry-Riddle Aeronautical University, addressed this complex. They examined the intricate regulations of sustainability and the financial benefits of sustainable practices.

Here are 7 key takeaways from the session.

1. Sustainability rules are complex. The landscape of sustainability rules is vast and varied, with at least 19 entities providing frameworks for corporate sustainability reporting and disclosures. It includes the 17 Sustainable Development Goals (SDGs) from the United Nations to the Paris Agreement, SASB accounting measurements, and much more. The challenge of navigating these standards is exacerbated by significant regional variations, such as the 11 U.S. states participating in the Regional Greenhouse Gas Initiative and the 30 states with mandatory renewable energy quotas in their electricity portfolios.

“There is a growing need for consistency and simplification of these frameworks and standards, which has been the biggest challenge from the start,” said Mandel.

2. Real estate regulations loom large too. New frameworks are emerging, particularly in real estate, to promote sustainability. The EU’s Green New Deal requires that buildings minimize resource and energy use. In New York, Local Law 97 under the Climate Mobilization Act sets stringent greenhouse gas limitations and energy efficiency goals for buildings over 25,000 square feet to reduce the city’s emissions significantly by 2030. Similarly, Singapore's Green Plan and Green Building Masterplan aim to achieve ambitious sustainability targets by 2030, focusing on green buildings and Super Low Energy (SLE) developments.

3. The stakes are high. If global temperatures rise above 3 degrees Celsius by 2050, global GDP could drop 18%, according to a KPMG report. Other risks include more frequent and severe weather events, shifts in consumer behavior, increased regulatory demands, and technological disruptions.

“If global temperatures rise by 1 degree we will face an unstable food supply. At 1.5 degrees, expect heat waves, floods and droughts,” Endriß warned. “A rise of 5 degrees could make a large part of Earth uninhabitable.”

4. Prioritizing the “E” in ESG. The “Environmental” component of Environmental Social Governance (ESG) is critically important for risk managers. Adhering to standards like ISO 14001 can enhance a company’s public image and ensure the success of Environmental Management Systems employed by the company, providing a framework for identifying, modifying, and complying with relevant environmental regulations.

“Companies must ask themselves: ‘how are we managing our impact on the environment?’ ” said Mandel. That’s the heart of sustainability, though other issues are also relevant.”

5. Buildings are a big source of emissions. Buildings are a major source of carbon emissions, accounting for 37% of the global total—more than the transportation or industrial sectors, according to the 2021 Global Status Report for Buildings and Construction. Sustainable building practices can significantly reduce these emissions and are an essential part of a comprehensive risk strategy.

6. ROI of green building. Green building investments, though initially more costly (increasing costs by 1% to 6%), can result in substantial long-term savings and benefits. These include lower operational costs, up to 7% increased building values, 12% higher rental rates, and improved user convenience by 40%, according to multiple studies.

“When considering the complete lifecycle of a building, there is clear value and ROI in green building certification,” Endriß said.

7. Assess your buildings for carbon emissions and sustainability frameworks. Green building and infrastructure assessments help companies understand carbon emissions and compliance with sustainability frameworks. Tools like digital twins are invaluable for simulating and implementing sustainable solutions, thereby improving energy efficiency and enhancing a building's ESG score.

Learn more from Hannes Endriß and Chris Mandel in a June 20 webinar Sustainability Without the Sticker Shock: Save Green While Going Green.