Sustainability is driving the IoT way beyond ROI

A few months back, at an event in Dallas, I spoke with Matt Barber, CEO of Vutility. The company makes a sensor that either hangs off a wire or can be installed in a breaker box to measure utility consumption. It then sells the data generated by that sensor back to its customers. As part of our conversation, Barber mentioned that demand for the product had gone through the roof as a result of ESG reporting requirements.

ESG, for those not in the know, stands for Environmental, Social, and Governance. Many companies either voluntarily adopt ESG goals or are forced to by their investors, partners, or the SEC. Many of these goals focus on sustainability and any requirements related to companies tracking and reducing their carbon footprints.

In late May, for example, the SEC proposed a set of rules that would require publicly traded companies in the U.S. to report their carbon footprints. In the meantime, cities such as New York and Chicago have laws on their books requiring the owners and/or operators of buildings in their cities to reduce those buildings’ carbon footprints by measurable amounts. Many businesses are voluntarily adopting plans of a similar nature.

And the IoT is ready to help. Vutility, which assists companies with easily retrofitting their electricity infrastructure to measure where every watt goes, has seen demand for its services soar. More established companies such as Honeywell have been adapting their product lines to serve the needs of their carbon-counting customers.

Honeywell, which has its own goal to become carbon neutral by 2035, is seeing customers of its Honeywell Process Solutions products focus more on methane emissions because they have up to 84 times as much of an impact on global warming compared with carbon dioxide, said Adrian Fielding, GM of emissions monitoring and reduction for Honeywell Process Solutions via email.

Honeywell is focusing on wireless detection sensors that can be placed near potential leak sources, he told me, which gives plant managers more accurate information at the source of the leak. The resulting data can be used to generate better predictive maintenance algorithms and lead to faster response times for fixes — all of which can help meet sustainability goals and also reduce fines.

Building automation and green building are also large potential markets for big industrial providers such as Johnson Controls, Schneider Electric, and Siemens. This week, Siemens both acquired a company to help make buildings smarter and launched Building X, a software-as-a-service offering that will help companies track how buildings use energy and make clear how to improve on those efforts. And last week, Johnson Controls acquired a network security company for smarter buildings. It also worked with Accenture to showcase two new deployments of its OpenBlue smart building software.

Building automation today serves three purposes, for tenants and owners alike. The first is to help them conserve or better use energy, whether they’re doing so with the goal of cutting costs or meeting ESG goals or both. The second is to help tenants understand occupancy trends as companies try to figure out how to adjust their real estate holdings for hybrid work. And third is to ensure workers can stay safe if they return to the office in a world where COVID is still running rampant.

In June, Ron Rock, CEO and co-founder of Microshare.io, came on the IoT Podcast to highlight those trends. He also discussed how companies are trying to put in IoT infrastructure first, which would allow them to collect data they could use to set a baseline before adopting ESG commitments and goals. That means companies will likely spend money on the IoT and sensor infrastructure, and will only tweak their implementations once they figure out how they want to meet their goals. As he said at the time, “Everybody now is being asked to report on ESG data, and that’s driving a lot of IoT spending.”

Research firms agree. IDC recently issued a report noting that spending on ESG performance will grow to $158 billion in 2025, at a compound annual growth rate (CAGR) of 32.3 percent. Unfortunately, two-thirds of that spending will go to consulting services, according to IDC. That means less money for sensors and more money for figuring out how to get data, then how to adapt to and meet climate and governance goals.

Another challenge is inflation. Research firm Omdia recently posted an article noting the demand for ESG spending is rising, but cautioned that concerns over inflation and demand for more energy might lead businesses to reduce their efforts in this sphere so as to ensure sustainable profits over sustainability.

Clearly the demand for data around energy consumption is going to remain high, either because of sustainability goals or because the cost of energy is rising and companies are trying to use it more efficiently. Either way, IoT companies are eager to serve this new market.