The first Earth Day on April 22, 1970, mobilized 20 million Americans to focus attention on an increasingly polluted planet. Earth Day transformed public attitudes about environmental issues, and inspired transformative legislation. The Environmental Protection Agency was created in December, 1970, and the 70s also saw the passing of the Clean Air Act, the Water Quality Improvement Act, the Endangered Species Act, the Toxic Substances Control Act, and the Surface Mining Control and Reclamation Act.
Over the past half century, people have come to understand how intertwined humans are with the environment. They’ve adopted habits like recycling and water conservation, buying smarter appliances and vehicles, and finding ways to reduce their carbon footprint. Companies are also getting pressure to do more, and not just from environmental groups. Customers, employees, and investors are asking for tangible environmental and social-benefit results backed by performance metrics. The waste management industry is in a good position to respond.
Environmental, social, and governance reporting goes mainstream
Earth Day has gone from a movement to an imperative. And companies have evolved from reluctant participants to environmental problem-solvers. A relatively new concept in the investment field, ESG reporting, has helped elevate discussions about environmental, social, and governance (ESG) issues and put them on par with financial balance sheets.
A company’s ESG report provides a quantifiable way to communicate to investors about the impacts of broader global and societal issues. It includes both the risks and opportunities the company faces, and discloses actions they’re taking to respond. ESG reporting includes qualitative and quantitative metrics tracked over time. Investment firms are increasingly asking for this kind of reporting so they can be responsive to their investors and assess the long-term viability of companies prior to investing.
One investment firm leading the way in asking for ESG reporting is BlackRock. In January 2020, BlackRock’s CEO, Larry Fink, stated, “A company’s ability to manage environmental, social, and governance matters demonstrates the leadership and good governance that is so essential to sustainable growth.”
Investors care about environmental impact
PwC surveyed 325 investors globally in 2021. Nearly 80% said ESG was an important factor in their investment decision-making. Almost 70% of those surveyed thought ESG factors should figure into executive compensation targets, and about 50% expressed a willingness to divest from companies that didn’t take sufficient action on ESG issues.
While the same survey found that the majority of investors are only willing to accept slightly lower investment returns for better ESG results, companies are nonetheless facing pressure to assess and track these metrics. With more companies calling attention to ESG goals and reporting, more investors will begin asking which companies are leading and which are lagging in their attention to sustainability issues.
As the waste management industry consolidates through mergers and acquisitions, companies with broader reach and visibility will be expected to demonstrate plans to address climate-caused disasters, pollution, greenhouse gas emissions, and the social and reputational impacts of operations. In short, investors won’t be satisfied with environmental protection that only responds to regulatory guidelines.
Investors – and the broader community – now understand climate change as an existential global and financial risk. And they want proof that companies are being good stewards of their money and of the world in which they operate.
ESG reporting: Where to begin?
The waste and recycling news site, Waste Dive, has created a tracker of waste management companies that are issuing annual sustainability reports. It outlines ESG focus areas that companies are looking at, and will be updated as new information becomes available. As of April 22, 2022, the Waste Dive tracker included seven companies, details their environmental goals, and shows how they plan to meet, measure, and report on their targets.
A key part of ESG reporting is to identify and disclose potential risks and opportunities related to environmental issues, including climate change. Risks can be financial, operational, and regulatory, with impacts that can lead to reduced stakeholder confidence. But there are also opportunities to cut costs, expand services, and enhance company image. Here’s an overview of what waste management companies have come up with so far.
Environmental, social, and governance risks include:
- Costs of complying with often inconsistent climate and emissions regulations for landfills
- Possible future carbon pricing systems that don’t recognize solid waste combustion as a form of greenhouse gas mitigation
- Carbon taxes on fleet vehicles
- Weather events that impact landfill operations and construction projects
- Storms that damage facilities, disrupt supply chains, or down energy grids
Potential opportunities from ESG initiatives include:
- Revenue from enhanced landfill gas-to-energy systems
- Revenue from higher recycling volumes
- Cost reductions for compressed natural gas fleet expansion
- Favorable community response to a cleaner-burning fleet
- Potential extreme weather event clean-up contracts for resilient waste management companies
- Increased shareholder value for implementing ESG
As waste management companies continue to work with investors and the community to report on sustainability efforts, additional opportunities will arise. Just as Earth Day 1970 was just the beginning of the global environmental movement, these early ESG reports will help define new ways the industry can respond to climate change and the community.
How companies are defining targets, measurements, and plans
Because it’s a relatively new concept in corporate governance, ESG has many different reporting frameworks. Currently, companies can choose which standards to use, and some rely on several. This makes it difficult to compare information across companies, but there appears to be a trend toward consolidation of standards organizations.
Measurement frameworks currently being used in waste management include:
- Carbon Disclosure Project (CDP) – A global environmental disclosure system that supports companies, cities, states, and regions to measure and manage their risks and opportunities on climate change, water security, and deforestation.
- Task Force on Climate-Related Financial Disclosures (TCFD) – Created by the Financial Stability Board (FSB) to develop recommendations on the types of information companies should disclose to support investors, lenders, and insurance underwriters to appropriately assess risks related to climate change.
- Global Reporting Initiative (GRI) – An independent, international organization headquartered in Amsterdam that helps businesses and other organizations take responsibility for their impacts by providing them with a global common language.
- Sustainability Accounting Standards Board (SASD) – Standards maintained under the auspices of the Value Reporting Foundation that guide the disclosure of financially material sustainability information by companies to their investors. Available for 77 industries, including waste management.
- Science Based Targets initiative (SBTi) – A partnership between CDP, the United Nations Global Compact, World Resources Institute (WRI), and the World Wide Fund for Nature (WWF) created to show companies and financial institutions how much and how quickly they need to reduce their greenhouse gas (GHG) emissions to prevent the worst effects of climate change.
In November 2021 at the COP26 climate conference, the International Financial Reporting Standards (IFRS) Foundation Trustees announced the creation of a new ESG standard-setting board, the International Sustainability Standards Board (ISSB). This March, ISSB issued their first draft proposal for baseline sustainability disclosure standards. This means measurement standards and methodologies are still under discussion, allowing industry leaders to weigh in on the best metrics for their purposes.
Taking action on ESG
Waste management companies that are reporting ESG are measuring the greenhouse gas benefits of recycling, renewable energy production, landfill carbon sequestration, and reduced fleet emissions. Some of the announced plans to reach ESG targets include:
- Expanding landfill gas-to-energy projects that produce renewable natural gas (RNG)
- Operating facilities with renewable energy including RNG, solar, and geothermal
- Increased processing of recyclables, recovered material, and organics
- Following LEED building standards for new facilities
- Reducing fleet emissions by using renewable or alternative fuels
- Fleet efficiency through better routing and maintenance
While it might seem that sustainable practices are more likely to increase costs or decrease profitability, the opposite can be true once a program is up and running. For example, changes at the fleet level can have a number of tangible financial benefits. Renewable or alternative fuels, along with attention to regular vehicle maintenance, will not only decrease emissions, but also costs. Efficient routing can then become a savings multiplier. Haulers using technology to optimize routes are saving on the cost of fuel, vehicle wear-and-tear, and personnel.
Here are some ways waste haulers are implementing Routeware tools to help them improve operations and gather data to meet ESG reporting requirements:
- Route optimization with EasyRoute – Huge benefits for better serving the community while balancing workloads, reducing overtime, and maximizing vehicle allocation are just the beginning. EasyRoute helps achieve ESG goals by helping companies identify and implement efficiencies that tangibly reduce emissions and fuel costs.
- Fleet automation with Routeware – Reduce time on the road with faster, safer pickups. Routeware also increases accuracy which equals fewer go-backs. When they are billed for extra pick-ups and trash, customers are incentivized to pay more attention to recycling.
- Recycling engagement with ReCollect – It’s well understood that the least earth-friendly route to the landfill is through the recycling center. When communities use ReCollect, more people recycle and they’re more knowledgeable about the right things to sort. ESG goals can be met by diverting more from the landfill, increasing tons of recycled materials, and decreasing contamination.
Since it was first celebrated back in 1970, Earth Day expanded to Earth Month. But global attention to the risks of climate change makes it imperative that companies work to reduce their environmental impact all year long. ESG reporting provides a framework for responding to investors that also helps companies identify solutions and target opportunities that tie directly to operational and financial sustainability.
Learn more. We can help you identify tools and technologies to help you meet your goals for ESG. Let’s talk.