Listen in on boardroom and C-suite conversations, and you’ll likely hear plenty of animated discussions around environmental, social, and governance (ESG) initiatives. ESG has become a front and center priority for decision-makers across industries, including owners and managers of data center and commercial real estate portfolios.

Data center and commercial real estate stakeholders are recognizing and responding to calls for social responsibility, sound corporate governance, and environmental sustainability. These demands come from a range of sources — from federal and local government mandates to customers, tenants, and employees to shareholders, investors, and the public at large. At the same time, stakeholders are also feeling the pressure to show a measurable financial return for their ESG activities.

Driving energy efficiencies and decarbonization are effective strategies for reducing environmental impact; providing healthier and more comfortable spaces for employees, tenants, and customers; and proving a commitment to ESG.

ESG goals fueled by rising energy costs

The push toward ESG is being driven by multiple factors, including financial pressures stemming from rising energy costs. Between 2021 and 2022, the U.S. saw gas prices jump nearly 50%, resulting in a 34.6% increase in energy prices. ESG initiatives that promote increased energy efficiency and decarbonization can alleviate the financial impact of these rising and unpredictable costs.

Higher costs are especially painful for data centers, with their growing need for energy. According to the International Energy Agency, data centers worldwide consume upwards of 250 terawatt-hours (TWh) of electricity, representing around 1% of global electricity demand and 0.3% of global carbon emissions. As the world’s growing need for data continues to escalate, data center stakeholders are feeling increasing pressure to reduce their energy consumption to protect their bottom line as well as the environment.

And, it’s not just energy they need to worry about. Data centers also use a tremendous amount of water to cool their equipment, generate electricity, and keep their facilities up and running. To provide some perspective, data centers employing traditional cooling methods use as much as 26 million liters of water each year and 3 million to 5 million gallons of water every day — enough to supply the water needs of 30,000 to 50,000 people. Given the prolonged droughts exacerbated by climate change, the urgency to reduce data center water as well as energy usage is gaining traction.

Commercial real estate portfolio stakeholders are also experiencing increasing pressure to adopt ESG practices. In a recent CBRE survey of commercial real estate professionals, including investors, 70% of respondents reported a heightened focus on ESG strategies, largely driven by higher energy prices and government-imposed requirements.

Investors were among those most interested in ESG. Three-fourths of survey respondents said reducing energy consumption and carbon emissions are the top ESG considerations most likely to impact property value. Investors and tenants are more willing to pay a premium for buildings that employ on-site renewable energy generation and/or smart energy technology to monitor and adjust energy usage.

Government requirements

Pressure to embrace ESG is coming from outside sources as well, including federal, state, and local government agencies. Starting on Jan. 1, the U.S. Department of Energy (DOE) enacted stricter nationwide requirements for HVAC equipment that have sent building stakeholders scrambling to meet them. States and municipalities are following suit.

Consider Local Law 97, which was passed in New York City as part of the Climate Mobilization Act. One of the nation’s most ambitious plans for reducing emissions, Local Law 97 requires most buildings over 25,000 square feet to meet new energy efficiency and greenhouse gas limits by 2024. The goal is to reduce emissions produced by the city’s largest buildings by 40% in 2030 and by a whopping 80% in 2050.

These new mandates also come with increased public reporting requirements forcing companies — including building stakeholders — to disclose their energy efficiency records. Strong energy efficiency reports can become a competitive edge, especially in the commercial real estate world where tenants are willing to pay more per square foot for energy-efficient spaces. Conversely, poor reports can be a detriment, particularly considering that this information is made publicly available building by building — and, in some cases, even displayed on a plaque by the front entrance.

With more stringent requirements comes a lot of handwringing around potential penalties that could seriously impact the bottom line. But incentives offer an equally powerful motivator to embrace ESG. For example, the New York State Energy Research and Development (NYSEDA) Commercial Challenge is offering up to $15 million in incentives in its fourth round of funding to applicants who demonstrate a plan to implement electrification, carbon capture, and emissions reduction initiatives.

Emission Reduction Credits (ERCs) or Capped Allowance Systems offer incentives to companies to help with mitigating the costs of meeting mandates set by local municipalities and city governments. The Inflation Reduction Act (IRA) made billions of dollars available to stakeholders willing to incorporate green elements into their building design, and the Energy Efficient Commercial Buildings Property tax credit increased the amount of the 179D deduction for new energy-efficient commercial buildings.

Indeed, there is a wide range of funding opportunities for building stakeholders available in the form of federal and local incentive programs, green loans, decarbonization initiatives, and equipment rebates — all of which make ESG more financially viable.

Data, data everywhere

Given the necessity as well as advantages of achieving ESG goals through improved energy efficiency and carbon management, the question now becomes: how? The solution is in the data. However, many data center and commercial real estate stakeholders struggle to effectively capture, interpret, and leverage their buildings’ data; there’s either not enough of it or too much coming from too many disparate systems and sources.

Data is the key to meeting ESG goals — including reporting requirements, public disclosure, public perception, and shareholder and investor expectations. With access to the right data in the right format, data center and commercial real estate stakeholders have the visibility they need to find opportunities to improve and maximize energy efficiencies.

And yet, data remains a serious obstacle. In the aforementioned CBRE survey, more than half of respondents pointed to a lack of quality data as the most troubling obstacle to reaching ESG goals. Other key data-related concerns include the difficulty in clearly showing financial returns, the inability to meet government disclosure requirements, and uncertainty around cost versus benefits, making it hard to justify taking action.

So what can be done to leverage data as an ESG tool instead of a barrier? It starts with better visibility. With real-time visibility into how their operations are performing, building and data center stakeholders can dramatically improve the way they monitor peak building usage, control systems to ensure maximum comfort and efficiency, and decrease response time when critical alarms sound. In fact, according to the McKinsey Global Institute, tapping into data can translate into $9.5 trillion to $15.4 trillion in additional economic value for the world’s smart buildings. Clearly, the financial upside of quality data is huge.

Unify the data, achieve the ESG goals

The downside, however, is that data visibility is often clouded by independent building management systems compounded by siloed data aggregation, analysis, and actioning. Data centers and commercial real estate portfolios often encompass multiple buildings across disparate geographic locations. Each building has its own independent building management system as well as technologies and processes for aggregating data from lighting, HVAC, electrical, and a host of other systems.

Accessing and collecting operational data usually requires logging into all these different systems with many different touchpoints. This makes it very time-consuming to aggregate data and nearly impossible to translate it into analytics that can be acted on to make a building run more efficiently. Building stakeholders must fix the silos and unify their data into a single platform and dashboard to achieve complete, real-time visibility.

By integrating HVAC, lighting controls, building access controls, security, fire and life safety, network infrastructure, and more, these disparate systems can operate uniformly and in unison. This puts easy-to-understand, actionable information at the user’s fingertips, with normalized data points that have the same meaning regardless of where the data comes from or who’s looking at it. A unified data dashboard additionally makes it faster and simpler to find hidden inefficiencies and identify and address problems before they arise.

Predictive analytics plus benchmarking

Fixing those data silos is also key to leveraging predictive data to support ESG targets. Data center and commercial real estate stakeholders are well-advised to invest in a data analytics solution that offers fault detection and diagnostics in addition to identifying and analyzing anomalies that often indicate a source of building inefficiency. Ideally, the data analytics solution should be smart enough to “learn” a building’s operational and usage patterns to find those anomalies, inefficiencies, and waste with greater reliability and accuracy.

Solutions with an early warning system enable facilities engineers to be predictive and proactive in preventative maintenance — allowing them to stay ahead of equipment malfunctions, eliminate uneven heating and cooling patterns, and prevent energy loss while prolonging equipment life, reducing costs, and minimizing downtime.

Quality data is also critical for benchmarking past and current performance — another effective tool for identifying and rectifying inefficiencies. By analyzing building energy consumption over time and comparing it to past performance and similar buildings in the same geographic area, stakeholders can better evaluate usage, uncover savings opportunities, and assess the cost-effectiveness of any ESG initiatives implemented. Research shows that building owners who monitor benchmarking data have consistently reduced building energy usage by an average of 2.4% per year.

Want good data? Find a good partner

Today’s data centers and commercial real estate portfolios are more expansive and complex than ever. Fixing the data silos to enhance uptime, real-time visibility, predictive analytics, and benchmarking often requires addressing myriad building issues — from outdated software to broken equipment to faulty alarms and much more. It also requires having the resources and expertise to implement a plan for the long-term commissioning and actioning of data. Not every data center or commercial building stakeholder has those resources and expertise on hand.

For that reason, finding the right technology partner is critical successful data collection, analytics efforts, and ESG strategies. When searching for that partner, there are a few key considerations to keep front of mind. An effective technology partner will know how to capture and make sense of all the data from disparate sources and systems. What’s more, they’ll know how to work collaboratively with stakeholders, tenants, suppliers, and vendors to align ESG goals. Look for a partner who will provide agnostic guidance on technology solutions to unify and leverage data, based on specific needs and ESG objectives.

In your quest for a technology partner, you may want to consider teaming up with a master systems integrator (MIS) who has the knowledge and expertise to integrate complex building automation systems (BAS) to make sure they’re communicating properly with each other and serving up actionable data on a single dashboard. A proven MIS can help ensure your building is ready to adopt new technology that meets energy efficiency requirements today as well as those to come.

With an objective approach, an MIS will help secure solutions not simply based on the lowest cost but on their future readiness. An MIS can also assist in negotiating favorable utility contracts, Retail Power Purchase Agreements (PPAs), and other agreements to make your ESG goals more attainable and affordable.

Finally, and perhaps most importantly, look for a technology partner who walks the walk by embracing ESG as an internal priority for their own organization as well as their clients’.

More than a buzzword bandied about the boardroom, or another obligation demanding your time, focus, and resources, ESG is a smart business move for data centers and commercial real estate stakeholders looking to drive efficiencies, lower costs, and protect their reputations while reducing their environmental impact. With the right technology partner to help you collect, unify, and leverage a wealth of building and systems data, your ESG initiatives can generate goodwill, good governance, and good returns. And that’s good for business, the planet, and people who share it.