Sustainability reporting: How to do it properly

A sustainable global economy isn’t out of reach — but it will take better data and better sustainability reporting
 

 
At most COP conferences recently (26, 27, etc.), the news about our current global warming trajectory and greenhouse gas emissions is fairly dire.
 
By most estimates, we’ve already warmed the planet +1.2°C over pre-industrial averages (as of the summit in 2021). The Paris Climate Accord had set a goal for total warming of no more than +1.5°C by the year 2100. That would now mean limiting the next 79 years to only another +0.3°C.

This is challenging. And while we are inherently a software company at heart, we’re also a company deeply focused on sustainability reporting. We have been for 28 years. This is a societal problem and it needs a deeper solution that does involve people, governments, and tech.

One glaring issue right now is the general lack of sustainability reporting and high-quality sustainability reports. Data is confusing, people are doing it wrong, the goalposts move too often, culture wars are getting involved, and corporate sustainability reporting has become somewhat of a performative punchline for many. We’ve unfortunately been having the same discussions about sustainability reporting and sustainability reporting standards for 20 years now.

It seems like, even under a best case scenario — if pledges are kept, targets are met, and everything goes according to plan — warming is projected to reach +1.8°C. If the policies in place today were to remain the status quo and no progress is made, we’d instead be looking at warming of +2.7°C.

The big takeaway here is that the public and private sectors must vastly accelerate our progress towards net zero emissions — or otherwise exceed warming targets by leaps and bounds. It will take a collective and coordinated effort. That seems like a big ask in a time of political rancor, but we’re talking about something much bigger than ourselves: a global reporting initiative and a future where environmental performance means as much as financial performance.

How exactly do we start to do this?
 

Sustainability reporting and refrigerants

Corporate sustainability efforts, and general non financial reporting efforts, often center around reducing or neutralizing carbon impact, and harmful emissions make up a huge portion of the equation.

The NEEP 2021 Summit found that 30% of all carbon emissions in the Northeast, for example, come from buildings.

For this and other reasons, it’s critical that we collaborate on ESG (environmental, social, and governance) solutions to reduce emissions from the built environment and curb ozone depletion.

While a lesser-known facet of carbon emissions management and even sustainability reporting, refrigerants have an out-sized impact. In the U.S., the average refrigerant annual leak rate for equipment older than 6 years is 25%.

This is problematic because many of the most common refrigerants in use today are super pollutants with high ozone-depleting potential (ODP) or global warming potential (GWP). There are many classes of refrigerants to consider, including but not limited to the following:

• Chlorofluorocarbons, or “CFCs”, are the most destructive class and also the original refrigerants. Just a single pound of CFC gas has the GWP of 10,900 pounds of CO2 — the same amount emitted by a typical passenger car in a year. Findings from a recent MIT study suggest that the continued emissions from stored CFCs have a GWP of 9 billion metric tons of CO2. That alone is more than the total GHGs the EU pledged to eliminate by 2030 under the Paris Climate Accord.
• Hydrochlorofluorocarbons, or “HCFCs,” were a class of refrigerants used to replace CFCs after 1995. These too are highly destructive to the environment, however, and are no longer produced.
• Hydrofluorocarbons, or “HFCs” came next. Some newer equipment uses these formulations, which do not contain chlorine and are less atmospherically impactful. However, they still have a high GWP and are being phased out.

While CFCs haven’t been manufactured in equipment since 1995, and HCFCs have not been used since 2010, obsolete equipment is still in service or in storage in many locations, leaking these chemicals into the atmosphere. Remaining stockpiles of cylinders and canisters containing CFCs also remain a major threat. Short-lived pollutants (including hydrofluorocarbons) account for up to 45% of current global warming.
 

Sustainability reporting 101: Refrigerant management, Project Drawdown, and destruction

For years, refrigerants like CFCs and HCFCs have given us many modern conveniences. The time has come, however, to retire them from use and ensure they can do no more harm to the ozone. Leaked refrigerants are proven to release more harmful materials into the atmosphere than all commercial airliners combined. 

One problem: a common sustainability report doesn’t talk as much about refrigerants. It might, yes (it would be grouped under Scope 1 emissions) but most established sustainability reporting frameworks focus on bigger-picture, media-friendly items like “pledges-by-specific-year” and carbon offsets, etc.

But, and this is good news: the most negative impacts can be avoided, and sustainability performance can be improved, with proper refrigerant management. Project Drawdown identifies refrigerant management as one of the top solutions for curbing climate change. Success requires a multi-pronged approach, including:

• Effective ESG reporting and incorporating ESG deeper into financial reporting
• An internal culture of urgency around regulatory compliance
• No BS on a company’s sustainability report
• An earnest effort to reduce leaks
• Best-practice sustainability reporting standards
• Reduced reliance on older refrigerants, which are undergoing mandated drawdowns
• Successful recycling and destruction of older refrigerants

 

Why would we argue for destruction over recycling?

 

 
Trakref has always championed the destruction of used refrigerant gases over recycling. Why? The evidence shows that, by and large, recycling has led to further venting (and further global warming). Over the past 27 years in the U.S., despite increased ESG reporting and guidance from the EPA, over 10 billion pounds of refrigerants have been vented into the atmosphere — the equivalent of more than 20 billion tons of CO2.

That’s bad. And again, looking at sustainability reporting and sustainability reports over time, you don’t always see this discussion of destruction vs. recycling.

The simple fact is that reclamation and recycling cannot keep pace with growth in global refrigerant usage. Destruction is clearly the best option, with benefits including reduced need for storage, less uncertainty around where refrigerants end up, and no more surprise mixed-gas fees from batches of recovery cylinders.

One of the first steps of better sustainability reporting and non financial reporting in general is to adhere to best practices around refrigerant usage, which in this case means destruction. Even if some of the old refrigerant or canisters are obsolete, they can still be impacting the current climate in more ways than you realize. Over time, as ESG initiatives become an even bigger deal, not prioritizing destruction will become some form of violation of the Global Reporting Initiative. We’re headed towards days like that.
 

The importance of accurate ESG data and reporting in general sustainability reporting

Your corporation’s social credit score (an aspect of sustainability reporting) depends upon positive performance on sustainability audits, climate-related financial disclosures, and your sustainability report.

This ultimately matters to your investors, who increasingly seek insights into how your company performs on ESG strategy and sustainability metrics. It might not always seem like it matters to your investors, but it does — and it increasingly will.

By 2030, we’d guess (and have already seen) that the sustainability report of a company, or a corporate social responsibility report, will be as valuable as financial performance.

Don’t buy it? If we keep warming, it will be. Sustainability reporting and sustainability reporting standards could be the new fiscal gold.

Back to refrigerants for a second here, as that’s our area of expertise around sustainability reporting.

Refrigerants including CFCs, HCFCs, HFCs, PFCs, and others play a substantial role in ESG strategy and reports due to their high impact on climate change. Remember, a single pound of refrigerant is the equivalent of a ton or more of carbon.
 

What are the proper frameworks for sustainability reporting?

There are several environmental, social, and governance reporting frameworks to choose from for your company’s sustainability report.

An ESG and sustainability reporting framework like the Sustainability Accounting Standards Board (SASB) will require broad reporting, while others, like the Global Reporting Initiative (GRI), will have a specific section for refrigerants (in this case, GRI-305). The SBTi (Science Based Target Initiative) uses another possible ESG reporting framework, although with a weaker overall requirement for “General” emissions tracking.

There is also the International Sustainability Standards Board, which calls for high quality, transparent, reliable and comparable reporting.

Most attention tends to be paid to the Sustainability Accounting Standards Board, although this can vary with political headwinds.

In any case, refrigerant usage will need to be reported as a part of Scope 1 emissions financial statements, and all companies are expected to record and report all refrigerant usage for sustainable development.

Common gaps in these sustainability reporting standards include refrigerated containers, vehicles, smaller equipment, recently replaced equipment, new installations, and fire suppression systems.

Remember this above all on sustainability reporting: your company is solely responsible for corporate ESG data reporting and omissions — so be careful and complete when reporting refrigerant use, and use proper ESG factors and sustainability reporting standards.
 

Besides feeling good about the world, what are the benefits of sustainability reporting?

The goal should always be to amass “Investor Grade Data” on sustainability reports to tell your ESG story, demonstrate your own ESG journey, and show your energy efficiency. Proof of sustainability (i.e. effective sustainability reporting) improves your image and opportunities in the market.

The importance of ESG reports to the success of your company in today’s market is hard to understate.

According to Harvard Business Review, external stakeholders like investors and banks are more willing to open the coffers and offer capital investments or loans to companies with strong corporate governance performance in detailed ESG reports with data analytics.

Stockholders will use this information to invest — or not invest, since they are interested in responsible investment. Robust, accurate sustainability reports and financial statements can differentiate your company and create meaningful opportunities. ESG information in annual reports is, in a sense, a competitive advantage and just as important as financial performance.

Now, you could argue that this stuff (i.e. sustainability reporting) doesn’t matter as much in times of:

• Recession
• Inflation
• Political rancor (“woke” vs. the right)
• High interest rates
• Etc.

You’d be partially right in that maybe sustainability reporting falls down the list a little bit for some investors, but it doesn’t fall far down the list. Sustainability reports are important, and investors, founders, executives right now realize that future generations of consumers are worried about these topics. They want to see a clean, good, data-rich sustainability report. Remember: the next major crop of consumers (which is what investors tend to care about) are already putting off having children until later in life, and one of the big stated reasons is, in fact, the climate.

As we see more demographic shifts and climate concern, then gradually more climate related financial disclosures, we’re going to hit a world (we’re already almost there) where sustainability reporting, the corporate sustainability report, and the Sustainability Accounting Standards Board are all hugely important corporate growth components.
 

Understanding “double materiality” in sustainability reporting

The methods companies use to handle sustainability reporting — and the output of those methods in the form of sustainability reports — have changed drastically in the past decade. There has been a gradual convergence between ESG objectives and the broader push for net zero emissions, decreasing environmental impacts, and mitigating climate risks.

That’s all good.

For example, the EU Commission introduced the now-critical concept of Double Materiality as part of the 2019 Non-Binding Guidelines on Non-Financial Reporting Update (NFRD).

This concept acknowledges that ESG topics can be “material” in terms of either financial or climate impacts — or both. It also acknowledges that ESG issues represent a combination of risks and opportunities for the company and for the environment.

Detailed sustainability reporting of Scope 1 emissions will eventually be a requirement under this concept.

Read more about Double Materiality and its implications for reporting here.
 

OK, so all this said, how do we improve sustainability reporting?

A standardized approach to sustainability reports and ESG efforts — across all of your equipment and types of emissions — will go a long way towards a more consistent, accurate, and persuasive sustainability report, with qualitative disclosures and quantitative disclosures.

One of the best ways to keep your sustainability reporting and sustainability performance in line is by migrating manual recording processes into more reliable technology solutions. Modern refrigerant management platforms can make ESG data sources and reporting functions easily accessible to all stakeholders, on-site and on-the-go.

Refrigerant tracking and reporting software like Trakref helps to improve your ESG reports in at least 4 ways:

• Eliminate the delays, guesswork, and potential to lose paper forms
• Real-time monitoring of key metrics and KPIs for strategic purposes
• More engagement with streamlined, simplified ways to record and present data
• Keeps investors well-informed and satisfies the growing demand for ESG info

One of the simplest ways that Trakref improves your sustainability reports, honestly, is that we push out clean data in a fast, easy way — and we update our software with real-time policy changes so that you don’t have to worry about that type of shift. We’re an expert, so you need one less highly-compensated expert on your team. And your Environmental, Social, and Governance still come in properly.
 

Back to investors and sustainability reporting for a second now

It wasn’t until the 2010s that investors really began to pay attention to ESG reporting and sustainability data. Today’s investors are deeply interested in you presenting ESG information and carbon footprint and may even have a task force on climate.

Due to new EPA refrigerant regulations, 2022 is also set to be a turning point year. Energy management and corporate sustainability talks are already heating up in the C-suites of many organizations. Sustainable investing has finally gone mainstream, and companies disclose more often.

Even companies with strong performance too often focus on non-financial information and non-financial reporting directive when writing reports. This is not enough to satisfy financial stakeholders, who use ESG & energy management data to decide whether or not to invest in your company.

So where does this valuable data come from?

The voluntary nature of ESG reports and the lack of universal ESG standards for disclosures on energy management can make it hard to figure out where to begin. Recent regulatory changes will push sustainability leaders to elevate and formalize their processes and tracking with emerging energy management software solutions that structure the tracking and reporting process from end to end.
 

A bit of the recent regulatory requirements and compliance, supply chain, etc.

 

 
Regulations meant to curb gas emissions that harm the ozone, including super-polluting HFC and CFC refrigerants, have been evolving for decades. The Clean Air Act in 1970 and the Montreal Protocol in 1987 laid a lot of groundwork, but the most recent evolutions in the regulatory landscape are sweeping in scope.

Here are a few of the developments in the last few years that you should be aware of, as they’ll have heavy implications for strategic planning and reporting on ESG initiatives:
 

The Kigali Agreement (2019)

This update to the Montreal Protocol has made it an even more powerful instrument against climate change. The goal is to reduce HFC consumption by over 80% by 2047, which could help the planet avoid up to a 0.5 °C increase in global temperature by 2100.

 

The AIM Act

A part of the pandemic relief package in December 2020 was a bipartisan set of energy provisions that included the AIM Act. It provides the EPA with new regulatory authority to address HFC refrigerants for environmental stability. The AIM Act introduced an official phase-down in the production and consumption of HFCs and programs and policies around managing the use of HFCs and transitioning to next-gen technologies.

 

Phase 2 & 3 of the AIM Act

Phases 2 & 3 of the AIM Act began in late 2021 and involved several updates and changes to the regulatory process. SNAP 20 & 21 restrictions, as well as Section 608 requirements for all HFCs, have been reinstated. This will mean your company is expected to track leak inspections, fix leaks, document repairs, calculate annual leak rates, and include them on every transaction or invoice. CARB’s New R4 Program could also play a large role in this phase.
 
State level Regulations
California, Washington, New York, and New Jersey are a few of the 20 states that have developed their refrigerant management programs, and they are a patchwork of recordkeeping, reporting, registration, and recycling responsibilities. We refer to the responsibilities the 4Rs, and they are also represented in Trakref V4, launched March 1, 2023

 

On the horizon – Three specific California Bills replacing SB 260

SB 253 will “require all large corporations that do business in California to publicly disclose their greenhouse gas (emissions) in line with the Greenhouse Gas Protocol . . . [and] [t]hese disclosures will include corporate supply chains (scope 3), which can include more than 90% of a corporation[‘]s carbon emission.” The second, SB 261, “is modeled on the climate disclosure rules used by CalSTRS and hundreds of major financial institutions, as well as Federal securities risk disclosures that focus on financial risk related to the climate crisis.” Third, SB 252, “harnesses the power of California’s public investment funds, the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS), to push businesses to act on climate change while protecting these vital public funds from fossil fuels’ inherent volatility.”Overall, the push is for a greater focus on drawdowns, and phase-outs of harmful GHGs coupled with more detailed and formalized tracking and reporting of all emissions. This will impact the supply chain, which is typically of greatest concern to those in Operations and the executive tier.

 

So what are sustainability reporting software options?

At Trakref, we believe technology is the solution to many environmental and regulatory challenges sustainability leaders face. We’ve worked hard to create ESG reporting solutions that support the needs of corporate sustainability goals and sustainability audit questions.

These tools are easy-to-use for executives, HVACR technicians, and sustainability personnel. By making them accessible and intuitive, Trakref’s ESG software helps you to limit emissions and meet your sustainability goals while also satisfying investors who want to see detailed ESG reports.

Among other solutions, Trakref can help you to:

• Meet ISO 14001 and other requirements (ISO 14064, GRI, LEED, and more)
• Achieve impactful corporate social responsibility goals
• Streamline environmental reporting and tracking
• Reduce your regulatory tasks
• Provide immediate access to audits and validations
• Set and manage goals across all your operations

Your team will have access to standardized reports and push-button audit convenience that change the game for reporting on ESG and sustainability metrics.

Our comprehensive refrigerant management system includes three individual solutions that work together to help you protect the environment from harmful refrigerants.

• Trakref has recently released V4 in response to the escalating need for information on the expanded use of refrigerants (F-gas). V4 was specifically engineered to accommodate a higher capacity as compliance requirements continue to escalate and extend to products previously beyond the reach of federal regulations. V4 results from the growing interest in companies’ adjusting goals to understand their carbon footprint better. It provides resources that support sustainability disclosure in line with financial reports and enables companies to build a. accurate reporting foundation with integrated reporting to support stakeholder engagement. Most companies see a positive impact.
• Trakref V3: Owners, operators, and associated service teams can use Trakref Classic to quickly and easily enter and track all service tickets, supporting compliance and ESG success. Clear, step-by-step guidance improves engagement, accuracy, and ESG outcomes. The Classic Version of Trakref is being sunsetted to support
• Trakref Pro: This digital refrigerant journal helps the team maintain clear and complete records. Detailed tracking of all gas & cylinder-related data, streamlined with bar code readers, maximizes your proof of ESG performance for your investors.
• SF6 Compliance With Trakref: Our compliance management software helps your organization to track usage acutely, calculate leak rates, and meet numerous regulatory requirements (such as EPA 608 and CARM RMP). Use it to track ESG performance and unlock valuable insights into how to improve your company’s sustainability initiatives.

The environmental management of refrigerants has never been so simple. Trakref has leveraged more than 25 years of refrigerant management experience to bring the best possible solutions for ESG reporting and refrigerant management.

Cost Savings are the result of a well-developed plan to reduce refrigerant emissions and associated risk management. Let us know if there are any additional questions we can answer for you about sustainability reporting, sustainability reporting standards, reporting companies, sustainability reports in general, or anything else. We love to help!