Greening the bottom line: Houston expert on the ups and downs of sustainability transformation, reporting

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Although sustainability has invariably moved to the top of the corporate agenda across various sectors, businesses still face challenges in effectively implementing these transformative changes. Photo via Getty Images

Amid remarkable fund allocation towards tackling environmental, social, and corporate governance issues, investors deeply concerned about climate change exert substantial leverage on firms and regulators to make reforms.

Furthermore, the Securities and Exchange Commission has proposed new rules requiring all publicly listed corporations to disclose climate change risks in their regular filings with clear reporting obligations, such as information on direct greenhouse gas emissions (Scope 1), indirect emissions from purchased electricity or other forms of energy (Scope 2), as well as GHG emissions from upstream and downstream activities in the value chain (Scope 3).

What problems and possibilities should they prioritize?
Where should they devote time, effort, and money to have the most long term effect via business processes?
What principles, policies, and internal standards should be implemented to initiate the process and get good ESG ratings?
When do corporate sustainability challenges necessitate collaborations with other businesses to meet commitments and achieve goals?
What organizational behavior and change management measures should be incorporated to induce sustainability into the corporate culture?

One-fifth of businesses still need a sustainability plan in place, and fewer than 30 percent feel the effect of that strategy is evident to all employees.

Introducing climate-related practices across businesses and corporations takes time and effort. Since sustainability transformation initiatives span multiple business functions and units, whether they are helping or hurting the bottom line is often a fuzzy picture. It is not easy to quantify near-term profitable impacts directly emanating from sustainable strategies, disincentivizing many businesses from setting ambitious carbon reduction targets.

Businesses often struggle with what they intend to assess and what "good enough" performance looks like for the firm. Furthermore, sustainability performance reporting is infested with the inherent stakes of the legitimacy of data collection, defining the metrics and materiality, accountability to the stakeholders, the dynamism of the business environment, the complexity of reporting standards, and the risk of obsolescence of the tool.

For context, there are approximately 600 sustainability reporting standards, industry efforts, frameworks, and recommendations worldwide. Additionally, the one-directional data collection method used by the carbon market trading systems for scoring analyses often leads to intentional or unintentional greenwashing.

So then, what is the path forward?

An effective strategy would involve adopting a synergistic approach, just like the yin and the yang elements that embody balance and harmony on two distinct yet interconnected levels. The yin aspect, prevailing at the government level, would require a robust standardization of reporting frameworks via policymaking and regulations that can effectively implement suitable transformation engines for businesses. It will entail developing adaptable market mechanisms to successfully guide businesses and consumers to identify, plan, navigate, strategize, and execute greenhouse gas reduction initiatives. It will require answers to foundational questions like:

What tools and resources can help businesses improve their financial performance by reducing energy waste and energy costs?
How do manufacturers engage their suppliers in low-cost technical reviews to improve process lines, use materials more efficiently, and reduce waste?
How can waste management and recycling help a business by saving money, energy, and natural resources?

There is a dire need to standardize and consolidate the industry benchmarks and reporting frameworks against which businesses can assess their performance for climate action and potentially improve their bottom line by investing in appropriate carbon mitigation activities. This will create a fundamental shift in the mindset of corporates and raise the level of conversation from "Should we implement sustainable business frameworks?" to "How we could best implement sustainable frameworks for better ROI and an impactful bottom line?"

On the other hand, the yang element operates at the business or corporation level. Successful execution of sustainability strategies entails interweaving the sustainability thread into the business core across strategies and processes, operations and personnel, and products and services.

What is the business case for sustainability efforts? From operational cost savings to expansion in new markets, from enhanced brand equity to investor interest and share expansion, companies that incorporate robust and scalable sustainable practices have opportunities to unlock new sources of value capture and new markets that can deliver immediate financial rewards. Such measures will demonstrate the overall sustainability transformation's power and potentially provide money or cost savings to fund other components.

One way to do it is by introducing circular business models to reshape the whole product usage cycle: re-engineering product designs with more sustainable materials, redesigning the manufacturing lifecycle, recycling products, packaging, and waste, and reducing emissions in transportation, water, and energy consumption activities. By leveraging technology and AI in the extended system of interactions within and outside the business, companies can monitor, predict, and reduce the carbon emissions in their supply chains and yield immediate financial results.

Designing, implementing, and managing the foundational governance of sustainable business practices, strategies, structure, and tactics will require robust governance of sustainability efforts in all key business areas, including marketing, sales, product development, and finance. Additionally, organizational values, leadership initiative from the CEO and board level to the employees, and stakeholder interest are necessary to drive value for business policy. Involving employees in decision-making will help induce better commitment and accountability to implementing economic, social, environmental, and technologically sustainable interventions and initiatives.

Finally, businesses need to understand that they could truly develop long-term business success and shareholder value when they stop viewing sustainability from a compliance or ESG reporting lens. Long-term business success cannot be achieved solely by maximizing short-term profits but through market-oriented yet responsible behavior that automatically drives enhanced business bottom lines. This demands a collaborative partnership between policymakers, the private sector, nonprofit organizations, academia, and civic society to usher in economic growth, competitiveness, and consumer interest. This partnership is essential for environmental protection and social responsibility to ensure a sustainable future.

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Ruchi Gupta is a certified mentor and vice chair at SCORE Houston.

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Houston American Energy shares details on Baytown recycling facility, new innovation center

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Houston American Energy Corp. (NYSE: HUSA) plans to break ground on its new advanced recycling facility in the Cedar Port Industrial Park in Q4, the company shared in an announcement this week.

The company acquired a 25-acre, $8.5 million site for development in July from TGS Cedar Port Partners, which handles approximately 5 billion pounds of plastic resin annually. HUSA also plans to build the Abundia Innovation Center on the site.

HUSA named Houston-based Corvus Construction Company the design and construction partner on both projects.

“The site at Cedar Port is in the largest master-planned rail and barge served industrial park in the United States with direct access to the Houston Ship Channel and the Port of Houston,” Ed Gillespie, CEO of HUSA, said in a news release. “It provides robust logistical advantages for the transportation of both feedstock and our low-carbon drop-in fuels and chemical products. Critically, the region has a deep pool of engineering and operations talent. HUSA looks forward to working with local communities and adding economic growth in the Gulf Coast region.”

The new advanced recycling facility will convert plastic waste into pyrolysis oil and will serve as a hub for a five-year development plan designed to scale production capacity.

The facility will be built around New York-based Abundia Global Impact Group LLC’s technologies and proprietary pyrolysis process, which converts plastic and certified biomass waste into high-quality renewable fuels.

HUSA acquired AGIG this summer. At the time, the combined company shared that it planned to serve a multi-billion-dollar global demand for renewable fuels, Sustainable Aviation Fuel (SAF) and recycled chemical feedstocks.

The Abundia Innovation Center is planned to serve as a state-of-the-art research and development facility for the renewable energy sector, aiding in the commercial and technical validation of new technologies. HUSA previously announced that Nexus PMG, also based in Houston, will provide strategic support and guidance in the development of the innovation hub.

According to HUSA, the recycling facility and innovation center will “create the foundation for HUSA’s long-term vision to be a leader in the low-carbon fuels sector by driving collaborative innovation.”

UH researchers make breakthrough in cutting carbon capture costs

Carbon breakthrough

A team of researchers at the University of Houston has made two breakthroughs in addressing climate change and potentially reducing the cost of capturing harmful emissions from power plants.

Led by Professor Mim Rahimi at UH’s Cullen College of Engineering, the team released two significant publications that made significant strides relating to carbon capture processes. The first, published in Nature Communications, introduced a membraneless electrochemical process that cuts energy requirements and costs for amine-based carbon dioxide capture during the acid gas sweetening process. Another, featured on the cover of ES&T Engineering, demonstrated a vanadium redox flow system capable of both capturing carbon and storing renewable energy.

“These publications reflect our group’s commitment to fundamental electrochemical innovation and real-world applicability,” Rahimi said in a news release. “From membraneless systems to scalable flow systems, we’re charting pathways to decarbonize hard-to-abate sectors and support the transition to a low-carbon economy.”

According to the researchers, the “A Membraneless Electrochemically Mediated Amine Regeneration for Carbon Capture” research paper marked the beginning of the team’s first focus. The research examined the replacement of costly ion-exchange membranes with gas diffusion electrodes. They found that the membranes were the most expensive part of the system, and they were also a major cause of performance issues and high maintenance costs.

The researchers achieved more than 90 percent CO2 removal (nearly 50 percent more than traditional approaches) by engineering the gas diffusion electrodes. According to PhD student and co-author of the paper Ahmad Hassan, the capture costs approximately $70 per metric ton of CO2, which is competitive with other innovative scrubbing techniques.

“By removing the membrane and the associated hardware, we’ve streamlined the EMAR workflow and dramatically cut energy use,” Hassan said in the news release. “This opens the door to retrofitting existing industrial exhaust systems with a compact, low-cost carbon capture module.”

The second breakthrough, published by PhD student Mohsen Afshari, displayed a reversible flow battery architecture that absorbs CO2 during charging and releases it upon discharge. The results suggested that the technology could potentially provide carbon removal and grid balancing when used with intermittent renewables, such as solar or wind power.

“Integrating carbon capture directly into a redox flow battery lets us tackle two challenges in one device,” Afshari said in the release. “Our front-cover feature highlights its potential to smooth out renewable generation while sequestering CO2.”

As electric bills rise, evidence mounts that data centers share blame

Data Talk

Amid rising electric bills, states are under pressure to insulate regular household and business ratepayers from the costs of feeding Big Tech's energy-hungry data centers.

It's not clear that any state has a solution and the actual effect of data centers on electricity bills is difficult to pin down. Some critics question whether states have the spine to take a hard line against tech behemoths like Microsoft, Google, Amazon and Meta.

But more than a dozen states have begun taking steps as data centers drive a rapid build-out of power plants and transmission lines.

That has meant pressuring the nation's biggest power grid operator to clamp down on price increases, studying the effect of data centers on electricity bills or pushing data center owners to pay a larger share of local transmission costs.

Rising power bills are “something legislators have been hearing a lot about. It’s something we’ve been hearing a lot about. More people are speaking out at the public utility commission in the past year than I’ve ever seen before,” said Charlotte Shuff of the Oregon Citizens’ Utility Board, a consumer advocacy group. “There’s a massive outcry.”

Not the typical electric customer

Some data centers could require more electricity than cities the size of Pittsburgh, Cleveland or New Orleans, and make huge factories look tiny by comparison. That's pushing policymakers to rethink a system that, historically, has spread transmission costs among classes of consumers that are proportional to electricity use.

“A lot of this infrastructure, billions of dollars of it, is being built just for a few customers and a few facilities and these happen to be the wealthiest companies in the world,” said Ari Peskoe, who directs the Electricity Law Initiative at Harvard University. “I think some of the fundamental assumptions behind all this just kind of breaks down.”

A fix, Peskoe said, is a “can of worms" that pits ratepayer classes against one another.

Some officials downplay the role of data centers in pushing up electric bills.

Tricia Pridemore, who sits on Georgia’s Public Service Commission and is president of the National Association of Regulatory Utility Commissioners, pointed to an already tightened electricity supply and increasing costs for power lines, utility poles, transformers and generators as utilities replace aging equipment or harden it against extreme weather.

The data centers needed to accommodate the artificial intelligence boom are still in the regulatory planning stages, Pridemore said, and the Data Center Coalition, which represents Big Tech firms and data center developers, has said its members are committed to paying their fair share.

But growing evidence suggests that the electricity bills of some Americans are rising to subsidize the massive energy needs of Big Tech as the U.S. competes in a race against China for artificial intelligence superiority.

Data and analytics firm Wood Mackenzie published a report in recent weeks that suggested 20 proposed or effective specialized rates for data centers in 16 states it studied aren’t nearly enough to cover the cost of a new natural gas power plant.

In other words, unless utilities negotiate higher specialized rates, other ratepayer classes — residential, commercial and industrial — are likely paying for data center power needs.

Meanwhile, Monitoring Analytics, the independent market watchdog for the mid-Atlantic grid, produced research in June showing that 70% — or $9.3 billion — of last year's increased electricity cost was the result of data center demand.

States are responding

Last year, five governors led by Pennsylvania's Josh Shapiro began pushing back against power prices set by the mid-Atlantic grid operator, PJM Interconnection, after that amount spiked nearly sevenfold. They warned of customers “paying billions more than is necessary.”

PJM has yet to propose ways to guarantee that data centers pay their freight, but Monitoring Analytics is floating the idea that data centers should be required to procure their own power.

In a filing last month, it said that would avoid a "massive wealth transfer” from average people to tech companies.

At least a dozen states are eyeing ways to make data centers pay higher local transmission costs.

In Oregon, a data center hot spot, lawmakers passed legislation in June ordering state utility regulators to develop new — presumably higher — power rates for data centers.

The Oregon Citizens’ Utility Board says there is clear evidence that costs to serve data centers are being spread across all customers — at a time when some electric bills there are up 50% over the past four years and utilities are disconnecting more people than ever.

New Jersey’s governor signed legislation last month commissioning state utility regulators to study whether ratepayers are being hit with “unreasonable rate increases” to connect data centers and to develop a specialized rate to charge data centers.

In some other states, like Texas and Utah, governors and lawmakers are trying to avoid a supply-and-demand crisis that leaves ratepayers on the hook — or in the dark.

Doubts about states protecting ratepayers

In Indiana, state utility regulators approved a settlement between Indiana Michigan Power Co., Amazon, Google, Microsoft and consumer advocates that set parameters for data center payments for service.

Kerwin Olsen, of the Citizens Action Council of Indiana, a consumer advocacy group, signed the settlement and called it a “pretty good deal” that contained more consumer protections than what state lawmakers passed.

But, he said, state law doesn't force large power users like data centers to publicly reveal their electric usage, so pinning down whether they're paying their fair share of transmission costs "will be a challenge.”

In a March report, the Environmental and Energy Law Program at Harvard University questioned the motivation of utilities and regulators to shield ratepayers from footing the cost of electricity for data centers.

Both utilities and states have incentives to attract big customers like data centers, it said.

To do it, utilities — which must get their rates approved by regulators — can offer “special deals to favored customers” like a data center and effectively shift the costs of those discounts to regular ratepayers, the authors wrote. Many state laws can shield disclosure of those rates, they said.

In Pennsylvania, an emerging data center hot spot, the state utility commission is drafting a model rate structure for utilities to consider adopting. An overarching goal is to get data center developers to put their money where their mouth is.

“We’re talking about real transmission upgrades, potentially hundreds of millions of dollars,” commission chairman Stephen DeFrank said. “And that’s what you don’t want the ratepayer to get stuck paying for."

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