Why is ESG Important?
For corporate decision-makers and sustainability professionals, integrating ESG principles is not just about meeting regulatory requirements; it’s about positioning the company as a leader in responsible business practices. A 2023 Forbes survey showed that 61% of consumers say that a company’s poor environmental practices make them less loyal to the brand, and 55% of consumers are prepared to pay more for environmentally responsible products. Blackrock notes that sustainable portfolio assets more than doubled between 2019 to 2022, from $87 to $255 billion, and returns on such companies historically outperform the conventional market (Link). In this sense, companies who don’t follow sustainable business practices may suffer in their performance.
Financial Benefits
Meaningful progress on ESG goals require company commitment and investment. High commercial use and return on investment (ROI) makes on-site solar the ESG tool with the most potential impact on a company’s bottom line. As of 2024, the combined annual green power use of EPA’s Top Fortune 500 Partners is over 65.5 billion kilowatt-hours. This is equivalent to the annual electricity use of more than 6 million average American homes. Microsoft, Google and Wal-Mart occupy the top 3 spots on this list, respectively (Link)
– Overall Operation Costs Reduced: All companies are experiencing rising electric costs due to inflation, aging electric grids, and infrastructure improvements to combat catastrophic weather events. This has also driven historically high rate hikes many states are experiencing, such as California (Link). Solar on rooftops and parking canopies will normally offset 50%-100% of electricity supply costs for most businesses.
– Federal ITC Savings: Currently the Investment Tax Credit (ITC) is the highest it’s been in years, starting at 30% of the total cost of the solar project and increasing up to 40%-60% when special conditions are met such as the geographical location of the site in an “energy community”. There is leeway in how companies can apply this credit over time, as well as provisions to transfer the credits or have the amounts directly paid to entities without a taxable basis. The ITC criteria are subject to updates on an annual basis as well as by Congress and presidential administrations, so now is the time to capitalize on them.
– Flexibility in Purchasing Options – Some companies prefer to invest their own capital in solar projects, to take advantage of the attractive tax credits and 20%-35% ROI (3-5 year simple payback) in states that are best suited for solar. Others prefer to leverage a Power Purchase Agreement (PPA) that delivers immediate Year 1 savings, by agreeing to buy power at a predetermined rate from the solar system, which is owned and operated by a solar financing company. This is the most popular finance option that commercial & industrial companies choose, since it requires no capital budget, nor maintenance from the customer. Depending on the state, PPAs can save 30% or more compared to your current utility rates with term lengths ranging from 10 – 25 years.
– Control Energy Costs for Future / Avoid Volatility: By locking in your PPA rates or purchasing your solar system, you are not only saving on current energy use, you are also protecting your company from the inevitable rate hikes in the future.
– Additional Incentives: OnSwitch can help identify if your company is eligible for additional incentive programs like LADWP and WAIRE which can save additional project costs or help avoid industry-related costs.
– Get solar quotes for your company in less than 24 Hours: OnSwitch can provide an accurate, custom SkyQuote for your company’s rooftops or carports in just 24 hours! Go to our webpage, submit your address and get your SkyQuote with system design, Purchase + PPA pricing options, and a detailed savings report for your team to review.
Environmental Benefits
Once you’ve understood the value of on-site solar for your locations, it’s important to understand how solar helps achieve your ESG goals. Solar has become a staple of the shift to renewable energy, likely due to its accessibility and the incentives offered by State and Federal programs.
– Reduced Carbon Emissions: According to a UN Report, replacing fossil fuel use with renewable energy is the single most effective effort we can make to reduce the consequences of climate change (Link). Fossil fuel consumption from the Commercial and Industrial sector produces most of the world’s carbon dioxide (CO2).
– Commercial Portfolios have Largest Impact: The overwhelming majority of fossil fuel use comes from the Commercial and Industrial (C+I) sectors. This means that every commercial location that goes solar (usually 150 kW system or larger), reduces the same amount of fossil fuels as hundreds of homes and automobiles. Companies who have multiple locations can particularly benefit from both sustainability and cost-reducing efforts.
– Energy Independence: Generating energy on-site reduces reliance on external energy suppliers and mitigates the risk associated with fluctuating energy prices. This not only supports environmental goals but also enhances operational resilience. Battery and EV charging will further improve the resilience of buildings and their surrounding communities.
– Increase EV Charging Infrastructure: When deploying solar carports, it’s an excellent opportunity to also add electric vehicle supply equipment (EVSE) in commercial and industrial parking lots. EV Charging can help both reduce air pollution and generate revenue for EVSE owners.
Social Benefits
On-site solar energy also delivers substantial social benefits, which are critical components of ESG performance.
– Job Creation: The installation and maintenance of solar panels require skilled labor, contributing to job creation within local communities. It can also help strengthen community ties.
– Attracting Talent: A commitment to sustainability can also make your company more appealing to potential employees. Many job seekers prioritize working for companies that align with their values, and a strong ESG record can help attract top talent.
– Enhanced Corporate Reputation: Companies that invest in sustainable technologies like solar energy are often viewed more favorably by consumers, employees, and investors. This positive perception can translate into increased customer loyalty and improved employee morale.
Governance Benefits
Effective governance is about ensuring transparency, compliance, and long-term financial stability. On-site solar energy aligns with these principles in several ways.
– Regulatory Compliance: As governments impose stricter environmental regulations, on-site solar helps companies stay ahead of compliance requirements. Demonstrating proactive environmental stewardship can reduce regulatory risks and avoid potential fines.
– Transparency and Reporting: Solar installations provide clear metrics for reporting sustainability achievements. Businesses can showcase their energy savings, emissions reductions, and overall ESG performance, enhancing transparency and building trust with stakeholders.
Addressing Perceived Challenges and Negative Perceptions
Despite its numerous benefits, on-site solar energy is sometimes met with skepticism. Let’s address some common concerns and misconceptions:
– High or Prohibitive Costs to Install Solar: With PPA options allowing companies to bypass a large capital investment to begin, solar is now both practical and accessible for any company with the space for panels. Also, with payback period from 3 – 5 years, many companies will approve that solar as a capital investment.
– Reliability / Intermittent Energy Supply: since the majority of commercial solar projects are tied into the local grid, having solar will be just as reliable as your local utility. As battery and storage options become more available, solar will eventually be more reliable than the utility and allow for energy even when the local grid may be down.
– Maintenance and Durability: Most solar panels have a manufacturer’s warranty of 25 years and will perform even longer than that. Most solar on-site projects will also include third-party monitoring and system maintenance built into the system costs. There are very few places in the US that require cleaning of your solar panels more than a few times in a 25-year span, so cleaning shouldn’t be a concern either.
Conclusion
On-site solar energy is the optimum ESG tool due to its unmatched financial and environmental benefits. A single project can produce millions in cost-savings and maximize environmental metrics regardless of ESG platform. In fact, solar is the ideal first step in a sustainability plan – the notable savings produced from solar can drive the investment budget for additional ESG efforts.
As financing options like Power Purchase Agreements (PPAs) remove barriers to access, and energy costs continue to rise, solar will become common and no longer be associated with industry leading companies. Currently, the competitive edge produced by companies with solar includes improved brand recognition, investor priority, cost-savings and job creation.
For corporate decision-makers and sustainability professionals, embracing on-site solar is not just a step towards fulfilling ESG criteria; it’s an investment with unmatched returns, and a long list of positive benefits.
If you would like to learn more, or receive a custom SkyQuote for your company location, or SkyPlanner for your company portfolio of sites, please reach out to info@onswitchenergy.com.
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