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Corporate sustainability management - the step from regulation to business value

Assessing carbon emissions of business operations is not only important to preserve the living conditions on our planet and a regulatory requirement in Europe but also creates tangible business benefits to mitigate business risks. ICT solutions, including cellular connectivity, can be key enablers to reduce carbon footprint, but the assessment of this enablement effect needs to include the direct and indirect impact of ICT technology, which is where the recently published ITU-T L.1480 standard comes into play.

Senior Researcher, Ericsson Industry Lab

IoT Client Principal at Ericsson

Assessing carbon emissions and ICT solutions for sustainable corporate operations

Senior Researcher, Ericsson Industry Lab

IoT Client Principal at Ericsson

Senior Researcher, Ericsson Industry Lab

Contributor (+1)

IoT Client Principal at Ericsson

The business drivers for sustainability

NFRD, CSRD, Green Claims Directive, GHG Protocol, ESRS, ISO 1400, ITU-T L.1400 – there is a jungle of sustainability regulations and reporting requirements out there, creating a massive administrative burden and additional operational costs for enterprises across all industries in Europe. So, let’s talk about business!

One can approach this topic from the perspective of achievable business benefits if enterprises implement a corporate Environmental Management System (EMS) in response to regulation. A corporate EMS is pivotal to fulfill the requested reporting needs, but at the same time it can also help to:

  • grow top-line and reduce OPEX
  • mitigate risks related to greenwashing and regulatory interventions
  • increase competitive advantage and brand value
  • increase employee productivity and attract and retain talent

Mitigating the risk of unintentional greenwashing is an increasingly important business driver. If greenwashing is uncovered, it can have severe negative impact on revenues and brand value, and in case of regulatory interventions, up to 1/3 of corporate revenues can be at stake. This risk must not be underestimated.

Greenwashing has many different aspects and variants. Green Planet Tracker, a non-profit financial think tank has published a very helpful definition of 6 different greenwashing methods.1 Among them are “greenshifting”, (pushing the responsibility for negative environmental impact to users of products or services) and “greenlabelling” (a practice where marketers call something green or sustainable, but a closer examination reveals this to be misleading).

With the above in mind, let’s shed some light on the structure of sustainability-related regulation and reporting directives and recommendations in Europe, as they are the tools to mitigate sustainability-related business risks.

How to manage corporate sustainability

Managing sustainability-related business risks and opportunities requires a corporate sustainability management system. Such a system requires proven methodologies, frameworks, and auditable standards, which is what the ISO 14001 series is all about.2 No company is legally obliged to apply ISO 14001 methodologies or to get certified against the standards, but doing so often helps to establish efficient operational processes and provides a competitive edge. The standards and recommendations discussed below are compliant with ISO 14001.

Fair market conditions require a certain level of transparency. The European Corporate Sustainability Reporting Directive (CSRD) requires larger companies and listed enterprises to publish regular reports on the social and environmental risks they face, and on how their activities impact people and the environment.3

All companies headquartered in Europe and exceeding two of the following criteria are liable to reporting, starting in 2025 for the financial year 2024

  • >20 MEUR total assets
  • >40 MEUR turnover
  • >250 employees

Approximately 50.000 European companies are eligible to this regulation. The CSRD is replacing the older NFRD (Non-Financial Reporting Directive).

Non-European companies will also be affected. If they have a branch or subsidiary in Europe and >150 MEUR turnover, reporting duties start in 2029.

A key question for practitioners is then how the reporting needs to be done, and this is where the European Sustainability Reporting Standards (ESRS) are coming into play.

Helpful tools to implement corporate sustainability

The ESRS is a whole set of standards with the purpose to help companies disclose sustainability information and data according to the CSRD requirements.4, 5 A whole market has evolved now for providers of platforms, tools and services for enterprises to perform reporting according to the ESRS.

It is important to understand the broad scope of the ESRS when it comes to carbon emissions (ESRS E1, paragraph 41), including:

  • Direct emissions from company-owned and controlled assets (“scope 1” emissions)
  • Indirect emissions, e.g. from purchased electricity for own operational use (“scope 2” emissions)
  • Material acquisition & pre-processing as well as distribution & storage, use, end-of-life of products and services (“scope 3” emissions)

Scope 3 means, that enterprises can’t only look at their own operational emissions but must also assess and report the emissions of their products in use, even if used by customers. Un-intentional greenshifting will become visible.

The Greenhouse Gas (GHG) protocol is the most widely used set of greenhouse gas accounting standards and includes a corporate value chain accounting standard.6 It can also be used to calculate the scope 3 emissions.

Digital transformation is key to achieve sustainability targets across all industries. An important practical question is then how to assess the positive and negative impacts of ICT tools and services used in this context, which is the purpose of the ITU-T L.1420 and ITU-T L.1480 standards.7, 8 While the first one is focusing on the assessment of the impact of ICT in organizations, the later offers guidelines for assessing how ICT impacts greenhouse gas emissions across industry sectors.

Similar to the ESRS, the ITU-T L.1480 also has a broad scope covering the whole value chain of ICT deployed in any industry, including:

  • the GHG emissions of an ICT solution along its full lifecycle (“first order effects”)
  • the direct positive and negative enablement effect of an ICT solution on its use case (“secondary order effects”)
  • indirect positive and negative structural and societal effects (“higher order effects”)

In combination, the ESRS and ITU-T L.1420/L.1480 ensure that greenlabelling as a mistake can be avoided in the interest of consumers and society wherever ICT solutions are used in a sustainability context.

sustainability regulations and reporting standards (extract) Implication
ISO 14000 Set of norms, standards and guidelines for corporate environmental management
NFRD (Non-Financial Reporting Directive) European directive for non-financial ESG reporting covering environmental, social and compliance matters
CSRD (Corporate Sustainability Reporting Directive) Substituting the previous NFRD Requires companies to report on social and environmental. Extends scope, reporting requirements and number of eligible companies in Europe.
ESRS (European Sustainability Reporting Standards) Set of standards for ESG reporting standards compliant with CSRD
GHG protocol set of greenhouse gas accounting standards and including corporate value chain accounting
ITU-T L.1420 Recommendation for the assessment of positive and negative impacts of ICT tools and on GHG emissions in organizations
ITU-T L.1480 Recommendation for the assessment of positive and negative impacts of ICT tools and on GHG emissions across industry sectors
EU Green Claims Directive Planned European Directive to prevent greenwashing, expected to come into force in 2026

Sustainability enablement: A practical example

Ericsson has not only been a key contributor to the ITU-T L.1480 project but also trialed the recommended methodology in the building management sector in partnership with Kiona, a leading provider of building energy management systems, and The Carbon Trust. The ITU-T L.1480 methodology has been applied to assess the enablement effect of Kiona’s AI-based building energy management system on the greenhouse gas emissions reduction of a larger fleet of apartment buildings in Sweden and Finland. Detailed information about the AI-based building energy management case and how the ITU-T L.1480 standard has been applied can be found in the related case study9 and project report.10

What is on the horizon: EU Green Claims Directive

Implementing a corporate sustainability management system leveraging the CSRD, ESRS and the ITU-T L.1400 series can realize very tangible business benefits including top-line growth, OPEX reductions and particularly the mitigation of greenwashing-related business risks, but this not yet the end of the development.

In March 2023, the European Commission has adopted a proposal for a Green Claims Directive with the objective make green claims reliable, comparable, and verifiable across the EU.11 It shall be possible to substantiate sustainability claims by scientific evidence, which will require the methodologies provided by the ESRS, ITU-T L.1480 and the GHG Protocol. The directive is expected to come into force across all member states by 2026.

Call to action

With the ITU-T L.1400 series, and specifically the ITU-T L.1480, the telco industry has provided a vital contribution to the landscape of sustainability assessment guidelines & recommendations, enabling transparent cross-sectoral net zero commitments and help to reduce the risk of false claims of net-zero (greenwashing).

Sustainability regulation and reporting undoubtedly create an extra workload, but they can also be leveraged to build a competitive edge and to manage business risks. Recommendations such as ITU-T L.1420 / L.1480 provide practical frameworks and methodologies and represent very useful tools for practitioners across all industries to assess all positive and negative impacts of the usage of ICT targeting the reduction of carbon emissions.

Remember: 2024 is the first year subject to CSRD reporting, therefore it’s time to get going and to make yourself familiar with the ITU-T L.1480 standard if you want to claim that your ICT solutions are enabling your customers to reduce your carbon footprint in any way. In the end, it’s all about building a competitive edge and securing a sustainable business.

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