Three Events That Will Impact Facilities and Sustainability in 2023

I believe these three events and the details surrounding them will have a significant impact on manufacturing facilities and their approach to sustainability initiatives in 2023. All of these events will require companies to collect, analyze and manage data at a whole new level in order to take advantage of opportunities, comply with regulations, and make agile business decisions.?

$10 Billion to Reduce Greenhouse Gas Emissions

As a major component of the 2021 Infrastructure Law, the Inflation Reduction Act injects billions into the economy to support clean and alternative energy initiatives and programs. The government has set aggressive goals of reducing “U.S. greenhouse gas emissions by 50-52 percent below 2005 levels by 2030” and the Department of Energy (DOE) estimates that “the clean energy provisions of the Inflation Reduction Act and the Bipartisan Infrastructure Law together could reduce emissions by more than 1,000 million metric tons of CO2e in 2030, equivalent to the combined annual emissions released from every home in the United States.”?

One component of the Inflation Reduction Act that may be of particular interest to manufacturing facilities is the Extension and Expansion of the Advanced Energy Project Credit. According to the Inflation Reduction Act Guidebook , $10 billion is now available for projects that include “re-equipping an industrial or manufacturing facility with equipment designed to reduce greenhouse gas emissions by at least 20 percent.”

Understanding the condition and performance of critical assets will be foundational in determining where a company may be able to introduce emission-reducing projects to take advantage of these funds or other related tax credits now available.

Evolving Sustainability Disclosures and Reporting Rules

According to Worldfavor, provider of a sustainability platform, three proposals for standardized sustainability disclosure were announced in 2022. The U.S. Securities and Exchange Commission (SEC) proposed disclosure rule changes , the European Sustainability Reporting Standards were introduced, and the International Sustainability Standard Board (ISSB) created a global baseline of sustainability disclosures. In fact, the ISSB?unanimously decided on February 16, 2023, that global climate and sustainability disclosure rules will go into effect next year .?

The article reported that these “three disclosure proposals are all preceded to set the foundation for future ESG reporting and improve the completeness, comparability, reliability, and accountability of corporate sustainability reporting.”

iRIScarbon , a solution provider of regulatory reporting, explained that “the first step in the process will be efficient data collection from multiple sources and sensitivity to the fact that ESG disclosure will include both qualitative and quantitative data and a focus on transparent outputs. Using the right methodology and referring to the right sources will be instrumental in meeting challenges like quantifying sustainable investment data.”

An SAP executive emphasized the importance of accurate and efficient data capture and visibility in a recent Forbes article , “When reducing energy usage, industrial manufacturers often need more real-time visibility … across all their factory locations, distribution centers, and logistics services. Challenges include the inability to automatically capture and process emissions data, limited understanding of process effectiveness and carbon footprint, and slow and suboptimal decision-making on production-related consumption strategies and actions.”

It’s easy to see why data will play an increasingly important role as manufacturers and other companies are required to report more sustainability results under these evolving regulations.

Unstable Economic and Geopolitical Climate

In addition to the massive government incentives and evolving disclosure standards, the United States is struggling with record levels of inflation, and the world continues to suffer from the repercussions of the Russia-Ukraine war.

The latter is resulting in an energy crisis , most acutely affecting the European region at the moment. Desperate countries are easing restrictions for coal and nuclear energy producers to cope, which generates higher emissions in the short-term. The high inflation rate in the United States, reaching 6.4 percent in February 2023 , is coupled with concerns about long-term energy supply and security issues.?

Both of these issues will require ongoing monitoring; the unpredictable nature of such geopolitical events will make it even more important to generate as close to real-time data as possible to fuel appropriate business decisions.

Final Thoughts

Sustainability issues are not going away. As we approach the heart of 2023, manufacturing companies and other facilities will need to continue to refine their data collection, analytics, and reporting capabilities to ensure that they can take advantage of generous financial incentives, avoid rising fines and penalties, satisfy evolving reporting requirements, and respond quickly to changing economic and geopolitical landscapes. Having a centralized, integrated data ecosystem not only supports world-class asset operations , but provides facilities information to successfully navigate the changing sustainability ecosystem.

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