ESG is having its day in the sun. Is your solar company as sustainable as it should be?
Environmental, social and governance (ESG) investing is having a watershed year, and for the solar industry, this momentum is great news. But solar companies may need to up the ante on their own sustainability efforts.
As more organizations face the daily realities of climate impacts on their operations, supply chains, and ultimately, their bottom lines, ESG investing is at an all-time high. Covid-19 seems to be contributing to this trend. According to a recent survey by CoreData, 60% of fund selectors globally have become more focused on ESG since the start of the pandemic.
At the same time, cities, states and companies are making net zero pledges as never before. More than 700 cities in 53 countries worldwide have committed to halve emissions by 2030 and reach net zero carbon emissions by 2050.
Meeting climate commitments will involve a quantum energy shift unlike any we’ve seen in our lifetimes.
But achieving net zero targets is much harder than setting them, and doing so in a way that considers every social and environmental implication is even more difficult, as recent allegations of forced labor in the Chinese solar supply chain attest.
The Solar Sustainability Challenge
Solar and sustainability would seem to go hand in hand, but that’s not necessarily the case. For years, solar companies – from global manufacturers to local installation companies — have put ESG on the back burner, in part because the very product they’re offering is seen as inherently sustainable. But the new emphasis on sustainable supply chains means that’s simply not enough.
“It is a really big deal when, for an energy technology that is supposed to be clean, there are headlines about dirty processes, waste or poor labor relationships,” says Dustin Mulvaney, a professor at San José State University and author of several books on solar and sustainability, in a recent PV Magazine article. “Headlines like this could actually dissuade people to adopt and support solar – and solar depends to some extent on public support.”
First Movers in Solar ESG
Many solar companies, however, are taking leading roles in sustainability and ESG. SunPower was one of the first panel manufacturers to prioritize ESG. SunPower Maxeon DC panels were the industry’s first to become Cradle-to-Cradle Certified, an independent certification that scores a product’s environmental and social performance across five critical sustainability categories: material health, material reuse, renewable energy and carbon management, water stewardship, and social fairness.
Maxeon Solar, the SunPower spinoff now responsible for its manufacturing sites outside the U.S., is carrying the torch forward with renewed emphasis on all areas of ESG. Both companies are signatories to the United Nations Sustainable Development Goals, and both recently published their 2020 sustainability reports (see SunPower’s here and Maxeon’s here).
Aligning Your Solar Business With Your Customers’ ESG Strategies
Organizations with robust ESG strategies make ideal customers for solar companies. There’s no need to convince them of the benefits of solar from an economic, environmental and social perspective. They’re already focused on the right goals.
But many solar companies struggle to put the same emphasis on sustainability that brings commercial customers to them in the first place.
Over the past three years alone, the U.S. solar industry has doubled, in spite of the pandemic. Solar had a record-setting Q1 2021, according to the U.S. Solar Market Insight Report, with every sector — residential, commercial and utility-scale – growing significantly year over year.
With that kind of growth, solar companies should expect to set aside a portion of their budgets to build, measure and evaluate sustainability programs. Making sure your solar company has an ESG strategy in place will avert any sustainability concerns as your customers implement supply chain requirements.
Enter the Solar Supply Chain Traceability Protocol
The Solar Energy Industries Alliance (SEIA) recently introduced the Solar Supply Chain Protocol to help solar companies ensure the sustainability of its products. While not exhaustive, the protocol gives solar companies something that was sorely lacking until now: a roadmap for both identifying the source of a product’s material inputs and tracing its movements throughout the supply chain.
“The solar energy industry has a responsibility to mitigate and manage its full range of social and environmental impacts, which include respecting the human rights of workers, ensuring that the rights of communities and other stakeholders are respected, and making business operations safe and environmentally responsible.”
SEIA Solar Supply Chain Protocol
ESG for Solar Companies: Where to Start
A sound ESG strategy involves more than just ensuring a sustainable supply chain — although this is a substantial effort. It involves every aspect of a business – from environmental practices to community involvement to hiring practices and social equity initiatives.
Developing an ESG strategy starts with engaging stakeholders, including employees, customers, investors, suppliers and partners. Doing so enables the material sustainability issues a company needs to focus on to emerge from those who have a real stake in the company.
In our next post, we’ll walk through the process of developing an ESG plan. Stay tuned!