Exploring Sustainable Practices in Air Conditioning Systems Manufacturing

Industry leaders are embracing ESG and investing in diversity, governance and social contribution to foster air conditioning systems. Stakeholders are designing air conditions to make air clean, build a healthy workplace, boost environmental protection, implement measures for climate change and contribute to local communities. Burgeoning urbanization, thriving living standards and scorching heat have fuelled the demand for AC units, spurring the need for ESG rankings and goals.

The onslaught of the COVID-19 outbreak expedited the need for air purification and ventilation, encouraging companies to step up their efforts toward decarbonization. Companies are banking on social missions to curb global warming and offer a reliable and safe air environment. Moreover, the global push for net-zero energy buildings has encouraged stakeholders to invest in ESG metrics.

It is worth mentioning that air conditioners consume more electricity than other home appliances. Demand for air conditioners will continue to gain uptick with soaring temperatures and prevalent heatwaves. According to the IEA, the global demand for space cooling will witness a three-fold rise by 2050. ESG will witness profound traction to negate the effects of scorching heat and propel the penetration of environmentally friendly ACs.

Key Companies in this theme

    • Daikin Industries, Ltd.

    • Mitsubishi Electric Trane HVAC US LLC

    • Hitachi Ltd

    • Carrier

    • Whirlpool Corporation

    • Haier Group

Environmental Perspective

Amidst a surge in demand for AC, stockholders, shareholders and other stakeholders are gearing up to minimize the amount of energy consumption and GHG emissions. Blue Frontier, a sustainable air conditioning technology provider, suggests that AC contributes 5% of global greenhouse gas emissions. Leading players have furthered their inclination toward carbon neutrality to achieve business growth that complements environmental performance. To illustrate, Daikin has formed a “Challenge to achieve carbon neutrality” theme; and has upped efforts to attain net zero greenhouse gas emissions by 2050 (in line with the Environmental Vision 2050). The company claims to have cut net emissions by 10% through the sale of energy efficient products. The Japanese company is contemplating exploring AI and IoT to provide healthy, safe air environments. Developing a roadmap to reducing GHG emissions and similar bullish targets will bolster the brand position in the global landscape.

Social Perspective

Brands have emphasized employee well-being, health & safety and diversity, equity and inclusion (DEI) to unlock sustainable growth potentials. Notably, Hitachi aims for a 30% ratio for female and non-Japanese Executive and corporate officers by 2030. It has formed DEI promotion leaders in each region to expedite diversity. Companies are expected to undergird training programs to enhance individual skills, capabilities and specialties. Moreover, the spotlight on work-life management has become pronounced following the gray areas uncovered by the COVID-19 pandemic across business verticals. Hitachi is doing away with overwork and long working hours, fostering nursing- and child care. It has also strengthened health & safety measures by conducting occupational health & safety risk assessments. Besides, around 40.3% of employees have received special health guidance, alluding to a buoyant initiative to boost employee health.

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Governance Perspective

The trend for sustainable business growth with fairness, honor, corporate behavior, sound corporate governance, ethics & compliance and transparency has become indispensable. Well-established players have furthered their emphasis on board diversity as it reflects differences in professional experiences, viewpoints, skills, educational backgrounds, national origin, race, gender and age. In essence, 12 out of 13 directors at Whirlpool are independent and each of the board’s four committees comprises independent directors. Prominently, 33% of the independent directors are women, while 25% belong to ethnic/racial minorities. In 2021, the Board, with external advisors, partook in an education session on ESG trends. It is worth noting that the committees of the Board oversee the facets of ESG risk monitoring and implementation.

The competitive landscape indicates an increased emphasis on organic and inorganic strategies to gain a stronghold in the competitive environment. Industry leaders are expected to fulfill their responsibilities toward society, planet and foster corporate value with an investment in a sustainable supply chain. To illustrate, in July 2022, Blue Frontier announced an infusion of USD 20 million in Series A funding to underpin the goal of eradicating billions of tons of GHG emissions. With cooling poised to overtake heating demand, companies are likely to introduce AC that is sustainable, efficient and affordable, along with reduced energy storage cost. The global air conditioning systems market could observe around 6.2% CAGR between 2021 and 2028.

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