Sustainability Is a 2021 Megatrend in Building Technology Markets

A new megatrend crystallized in building technology markets in 2020. Although the pandemic temporarily shifted people’s focus toward immediate priorities, it also reinforced many companies’ long-term focus on sustainability. The building technologies market—including technology OEMs, energy service companies, and energy services providers—has been no exception. 

Environmental, Social, and Governance Commitments Take Center Stage

In March 2020, Trane Technologies completed a spinoff from Ingersoll Rand that focuses on climate innovation solutions and announced plans to reduce product emissions 50% by 2030. These plans align with its participation in the Gigaton Challenge, which is a commitment to reduce its customers’ carbon footprint by more than 1 billion metric tons. In May 2021, Trane tied executive compensation to environmental, social, and governance (ESG) metrics. 

In December 2020, Carrier announced its commitment to the Gigaton Challenge and carbon neutrality by 2030. Johnson Controls announced a new set of sustainability commitments, including a target of net-zero carbon emissions before 2040, in January 2021. Ameresco published its first ESG report for the year 2020 in 2021 as well.

These are just some of the companies that have taken a more strategic approach to sustainability and ESG this past year. A variety of factors drive this trend, including:

• Pressure from financial institutions to disclose a wider variety of ESG targets and metrics, driven by demand for sustainable impact investing.
• Regulatory signals coming from the Biden administration and other governments focused on decarbonization.
• Social pressure to declare ESG targets from customers, competitors, peers, employees, and other stakeholders.
• Extreme weather events—including the wildfires, hurricanes, and heat waves of 2020-2021—bring the consequences of not limiting global warming to 1.5 degrees into sharp focus.

The most important driver, however, has been the recognition that a sustainability-first approach creates opportunities for companies to create value by attracting and retaining customers and talent, reducing exposure to regulatory risks, and creating opportunities for partnerships through robust ESG agendas. Integrating sustainability into product strategy provides a powerful lens for engaging a new set of sustainability-driven clients, partners, and other stakeholders.

An Increasingly Sustainability-Driven Market Requires Commitment

Customers across commercial, industrial, and public sectors have also been setting sustainability objectives and aligning their operations with greenhouse gas (GHG) reduction targets. According to the Science Based Targets initiative’s 2020 progress report, over 1,000 companies have committed to reducing their GHG emissions to align with Paris Agreement goals; together, these companies represent 20% of the global market cap. Many more have set less ambitious GHG reduction targets.

When engaging these customers, building technology and services providers are increasingly required to demonstrate how their strategy, products, and services are aligned with clients’ decarbonization needs. A company’s own environmental track record gives it solid footing when going to market with sustainability-oriented solutions and assisting clients with reaching their own sustainability objectives.