Study Shows Successful Sustainability Initiatives Are Led by Top Execs

With so many organizations adopting sustainability programs these days, I’ve wondered if there are reliable benchmarks that can help determine what constitutes a highly successful sustainability initiative. “Where Sustainability Lives,” a study¹ published by consulting firm Framework: CR, recently provided some interesting insights regarding that matter.

The study suggests that there is a strong correlation between organizational structure and successful sustainability programs. Kathee Rebernak, Framework: CR President and CEO, said that correlation exists, in part, because stewardship of those programs now rests in close proximity to executive suites or boardrooms.

According to the study, programs that are either managed and executed by senior executives or report to the board of directors tend to be more successful at garnering high-profile awards for sustainability performance, including the Carbon Disclosure Project’s Leadership Index and Fortune magazine’s list of 100 Best Companies to Work For. Rebernak suggests that recognition from respected sources can be regarded as a reliable benchmark of an organization’s commitment to sustainability.

Indicators that are closely aligned with successful sustainability programs are:

• The title of the position that is responsible for sustainability,
• The department charged with managing sustainability efforts,
• Organizational proximity to the CEO; and
• If, and how frequently, the department reports to the board of directors.

“The general trend indicates that companies receive more external recognition if the person in charge of sustainability sits higher within the organization structure,” according to the report. “For example, companies in which sustainability is managed by a senior vice president perform better than those that delegate that function to vice presidents, directors or managers.

“It’s not enough to have ‘CEO support.’ For the sustainability effort to drive business value, the CEO must be in the driver’s seat.”

As leading organizations continue to earn public acclaim and business advantages from outstanding sustainability performance, it won’t take long before top decision makers see the connection and become more closely engaged in their programs.

¹ Visitors must register to obtain the Framework: CR study.

Add comment August 24th, 2009

Chinese Companies Turn to U.S. Technology to Support GHG Reduction Goals

Earlier this week, members of the Obama administration and representatives from China held meetings to discuss a variety of trade and commerce issues. Discussion topics included the administration’s interest in encouraging the Chinese to reduce their greenhouse gas (GHG) emissions. Of course, the official position of the Chinese has been to decline implementation of broad legislation mandating GHG reductions.

However, behind the scenes, some Chinese companies are quietly taking significant steps to manage GHG emissions.

For instance, companies like PetroChina, and its parent CNPC, launched major emission management programs several years ago, including implementation of enterprise-wide technology platforms that serve as the foundation for those initiatives. Although there has been little fanfare surrounding the company’s actions, it’s important to note that PetroChina’s program was a significant step that was taken without external prompting from government regulators. As a major player in oil and gas acquisition and distribution markets, company officials recognized the need to exercise responsible environmental stewardship in order to maintain its standing with its Western competitors.

In Hong Kong, officials earlier this year adopted a regulatory system that provides financial incentives for electric utilities to reduce emissions to regulatory limits. The long-term agreement between Hong Kong and electric generating companies CLP and Hong Kong Electric would allow the companies to adjust rates to generate a rate significant increase, plus a bonus if they reduce emissions below permitted levels.

Of course, ESS is providing technology solutions that support several of these groundbreaking initiatives. That’s why we’ve found it interesting to note that while government negotiators are debating climate change amid broad trade policies, Chinese companies are doing business with U.S. technology companies like ESS to support responsible corporate emissions management. We’re looking forward to many more opportunities to promote effective sustainability programs in China and elsewhere along the Asia-Pacific rim.

Add comment July 31st, 2009

Sustainability Initiatives Continue to Drive Growth of Carbon Allowance Market

The market for voluntary carbon credits continues to grow, fueled by an ever-increasing number of corporate responsibility initiatives. According to data compiled in State of the Voluntary Carbon Market 2009, a report published by Ecosystem Marketplace, trading volume on the world’s voluntary carbon markets nearly doubled, surging from 65 million tons in 2007 to 123 million tons in 2008. Increased volume is a clear indication that the number of organizations aligning sustainability with their core operating functions continues to trend upward.

“The fact that the volume of the market has grown even in the most stressed times indicates that people are looking at the sustainability of their business,” said Caroline Angoorly, head of Environmental Markets for North America at JP Morgan, a report contributor.

The U.S. remains the largest provider of voluntary offsets (28 percent) and, collectively, U.S.-based companies are the largest buyers (39 percent) according to the report. Asia contributed 45 percent of all carbon credits bought on the over-the-counter (OTC) market in 2008, and the Middle East emerged as a key source of credits, supplying 15 percent of OTC transaction volume in 2008.

Experts suggest that compliance with existing (European Union, Australia) or proposed (U.S.) climate change regulations will drive increased carbon market activity this year. As more EHS professionals discover the benefits of sustainable operations, it is likely that efficiency and cost savings will be the primary driver for sustainability initiatives, which will be good for the enterprise, good for the environment and good for the long term viability of carbon markets.

1 comment May 29th, 2009

Bottom Line Benefits Continue Momentum for Corporate Sustainability

I’ve noticed that organizations are continuing to invest in corporate sustainability programs, including robust environmental, health and safety (EHS) information management systems, despite the challenging market environment. Momentum for sustainability continues because corporate decision makers understand those initiatives deliver both immediate and long-term benefits to the enterprise.

Authors Bruno Berthon and Eric Lowitt, provide ample evidence of sustainability benefits in “Don’t Give up Sustainability Now or You’ll Pay Later,” an article recently published in Forbes Magazine.

Berthon and Lowitt flatly assert, that “sustainability is closely aligned with critical moves companies need to make in a downturn–moves like doing more with less, returning to basics and investing prudently.”

Sustainability supports solid goals that are good for businesses in any economic environment. For instance, corporate managers are always looking for ways to reduce waste and inefficiency to enhance their profit margins. A growing number of companies have discovered that sustainability can generate associated cost reductions and operating efficiencies.

Building Sustainability in Hard Times, a recently published ESS white paper, provides solid evidence about the correlation between sustainability and profitability.

Berthon and Lowitt also suggest that sustainability offers other business benefits, including opportunities for:

• Business growth in the expanding market for consumer products and services that improve energy efficiency; and
• Partnerships that influence future government regulations. Numerous ESS clients have joined the U.S. Climate Action Partnership, a nonprofit that has worked closely with federal regulators to craft climate change legislation under consideration in Washington.

In times like these when companies are looking for strategies that deliver reliable benefits, experts like Berthon and Lowitt show that investments in sustainability – including EHS information management – clearly deliver bottom-line results that can help companies survive the current market instability and provide a foundation to help your business thrive for many years to come.

2 comments May 18th, 2009

Hong Kong Regulation Ties Future Utility Rate Hikes to Emission Reductions

A new regulatory scheme adopted by the government of Hong Kong has attracted the attention of experts who follow the electric utility industry in Asia. This approach, called “scheme of control,” ties future electric rate levels to emission reductions by the territory’s electricity providers, CLP and Hong Kong Electric.

Scheme of control is an intriguing approach because of its carrot-and-stick approach to environmental oversight. It’s an especially interesting development because we’ve recently applied our solution to address the rapidly changing regulatory scheme in Hong Kong.

This may be a precursor of things to come for other utility companies.

According to an article from The New York Times, the agreement “authorizes the companies to charge electricity rates that will give them a 9.99 percent return on assets. If either company exceeds regulatory limits for any pollutant, however, it would be required to charge customers less, reducing its allowed rate of return by 0.2 to 0.4 percentage points.

“If the companies manage to cut their pollution rates more than required, then they are allowed to raise prices to the point where they effectively earn bonuses of 0.05 to 0.1 percentage point on their rate of return.”

With a strong incentive to reduce emissions, it won’t be surprising if Hong Kong Electric and CLP take steps to strengthen their pollution control programs so they meet their emissions reduction targets.

This is yet another example of rapidly changing worldwide regulatory requirements that are driving organizations to implement enterprise-wide platforms for EHS management and voluntary sustainability reporting. Under the Hong Kong scenario, EHS technology not only helps organizations save time and reduce operational costs; it also becomes a powerful driver for business opportunities that can provide significant long-term payoffs. With regulatory activity accelerating across the globe, a growing number of organizations are leveraging the power of EHS technology to generate those benefits and more.

We’ll continue to follow developments with Hong Kong’s implementation of this regulatory scheme to determine how it impacts the territories’ utility companies.

1 comment May 8th, 2009

Earth Day and Your Business: Can Cutting GHGs Improve Your Bottom Line?

Is your enterprise ready to meet the challenges of a carbon-constrained business environment?

Earth Day 2009 arrives at a watershed moment for business and industry. If proposed U.S. regulatory changes are adopted, an organization’s ability to limit greenhouse gas emissions and other pollutants will be a factor in determining winners and losers in the new economy. Fortunately, a growing corporate sustainability movement – supported by many leading corporate CEOs — shows clearly that Earth Day’s goals aren’t just for treehuggers any more.

This year’s event offers an important opportunity to demonstrate how companies across industry sectors have taken a leading role in slowing the growth of greenhouse gas emissions. A growing number of organizations are participating in voluntary reporting programs sponsored by environmental advocates like the Global Reporting Initiative and the World Business Council for Sustainable Development. Investor-driven initiatives have resulted in companies publishing performance data from their sustainability initiatives.

It’s a sea change from the days when Earth Day symbolized inefficient, labor intensive regulatory compliance that increased operational costs without gaining any significant business benefit. Corporate sustainability is now recognized as an integral component of sound operational planning and execution. Soon it will be a key factor that will impact your company’s risk profile, brand viability, and its ability to attract capital.

ESS has supported the goals of Earth Day for nearly two decades. During that time, we have enabled thousands of organizations to improve emissions management performance, reduce compliance risk and achieve cost savings through improved information management. ESS’ integrated software platform provides up-to-date EHS data that supports better daily management decisions and empowers users to develop innovative practices to assure environmental best practices – including management of greenhouse gas emissions – and improve energy efficiency. We have even provided free downloads of our Waste Reporter software to help organizations fulfill requirements for the EPA Biennial Hazardous Waste Reporting.

Information management is the key to ensuring that your business can gain a competitive advantage in this rapidly-changing regulatory climate. We hope that this time next year, you will join us in celebrating your company’s success at transforming your environmental challenges into drivers for bottom-line success.

Do you agree that this Earth Day represents a historic opportunity for companies like yours?

2 comments April 21st, 2009

Is Your Business Prepared? EPA Proposes Rules to Limit GHG Emissions by 2011

Is your business ready for mandatory greenhouse gas (GHG) reporting?

The U.S. EPA has done what most experts have been predicting for months: announced that it will propose guidelines for limits on GHGs (carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, sulfur hexafluoride and perfluorocarbons) linked to global warming.

EPA requirements would apply to businesses based on a capacity-based threshold or an annual 25,000 metric ton limit. Affected vertical industries include oil and gas, manufacturing, chemicals and some forms of agribusiness that have confined animal feeding operations.

From our vantage point, the most interesting detail from this weeks’ announcement was that initial reporting would start in 2011 which will require businesses to collect data starting in 2010.

To meet that deadline, businesses will need to quickly mobilize to develop protocols for collecting and communicating emissions data. The Climate Registry and World Resources Institute have developed best practices that support effective reporting and verification.

Also, our CIO Guide to Global Climate Change provides detailed information to help your company establish a carbon management program, including guidelines for implementing robust IT tools for GHG reporting.

It’s worth noting that businesses like Caterpillar, Duke Energy and Alcoa that have well-established programs are lobbying for implementation of federal GHG limits. Because those industry leaders have mature programs for carbon measurement and management, the new federal rules would put them at a strategic advantage over competitors that have not implemented GHG emission management programs.

It’s clear that regulatory change is just around the corner. Is your business prepared to operate in a carbon-constrained environment?

Add comment March 13th, 2009

Analysts Predict Carbon Market Growth to Hit $150BN Despite Downturn

The global downturn may have a dampening effect on most economic activity, but a pair of leading analysts predict the carbon emissions market will shrug off the effects of the recession to extend a steady pace of expansion into a sixth consecutive year.

The global market value of carbon allowances will increase to $150 billion by the end of 2009, a 27 percent increase, according to a report by market analyst New Carbon Finance. Businesses reported 4 billion metric tons of carbon emissions under national and international protocols and programs, a 42 percent increase compared to 2007.

Guy Turner, director of New Carbon Finance, said growth in the market for certified emission reductions (CER), the carbon credit currency used by the United Nations’ Clean Development Mechanism (CDM), will drive increased carbon credit market trades this year.

(CDM is an arrangement under the Kyoto Protocol that allows industrialized nations to reduce their overall greenhouse gas footprint by investing in projects that reduce emissions in developing countries.)

Neil Eckert, chief executive of Climate Exchange PLC, which owns and operates Chicago and European-based commodity exchanges where carbon emissions futures are traded, agreed with Turner’s assessment. “It is a pretty bullish market. The growth is not in a straight line and there are ups and downs, but overall there is a really healthy growth pattern.”

The chart above indicates that the total value of the global carbon market has grown from $1 billion in 2004 to $118 billion last year. The purple bar shows that European Union transactions accounted for $94 billion of last year’s total. This year, EU transactions are expected to post moderate growth. However, demand for allowances from U.S. and Australian buyers is expected to increase as those nations’ regulators prepare to implement national carbon emission cap-and-trade schemes.

Calculating the impact of carbon emissions on your business can be a substantial investment of time and staffing resources. If your jurisdiction adopted a cap-and-trade scheme this year, would your business be prepared to efficiently address the complex requirements for reporting carbon emissions? The price of inaction could be greater than you think, as reflected by the continued growth in the worldwide value of carbon allowances.

Add comment February 3rd, 2009

EPA Ups Ante to Catch Violators of U.S. Environmental Laws

The U.S. Environmental Protection Agency (EPA) has raised the stakes to apprehend individuals or organizations that commit serious violations of federal emissions management laws.

The agency’s website now features an online “most wanted” list of fugitives who are being sought by law enforcement officials for committing environmental crimes. The EPA website also has an online tool to report sightings of persons on the “most wanted list.”

An EPA official said, “Putting this information on the EPA’s Web site will increase the number of ‘eyes’ looking for environmental violators. Two EPA fugitives were captured this year, and this Web site could help us find more fugitives in the future.”

While I don’t endorse making most environmental concerns into criminal matters, I wanted to make sure U.S. environmental, health and safety managers and executives become familiar with this program.

EHS managers and executives already have plenty of motivation to comply with environmental mandates. In today’s business environment, organizations risk loss of reputation, as well as costly fines for failure to comply with applicable environmental standards. Furthermore, investors and customers regard environmental management as an indicator of an organization’s ability to control operating risks.

With this new enforcement program, EPA has upped the ante.

Information management tools like ESS’ robust solutions for environmental compliance, GHG/carbon management and corporate responsibility reporting enable organizations to proactively measure and manage emissions to streamline compliance with EPA and other national and international laws, protocols and directives. Investments in these powerful platforms can help organizations avoid administrative or criminal sanctions like those EPA law enforcement officials are pursuing.

Add comment January 5th, 2009

WBCSD Report Advocates Sustainable Business Purchasing Practices

Recently, I’ve posted several blogs about establishing environmental leadership through implementation of sustainable operational practices. In a recently released report, the World Business Council for Sustainable Development (WBCSD) provides a timely reminder that operational strategies represent only part of the roadmap to overall sustainability.

Sustainable Consumption: Facts and trends from a business perspective, suggests that businesses and consumers need to incorporate sustainability into their purchasing decisions, too.

“More and more, companies realize that consumption issues are a central concern for their businesses. Companies have made a significant shift in their thinking and willingness to use their expertise with consumers to help solve today’s problems,” said Samuel A. DiPiazza Jr., CEO of PricewaterhouseCoopers International and chairman of the WBCSD.

The report identifies three steps that are needed to optimize sustainable purchasing practices:

• Innovation - Developing products that strike the right balance between maximizing societal value and minimizing costs (both environmental and operational);
• Choice influencing - Providing consumer information that shows why a particular product is or isn’t sustainable; and
• Choice editing - Removal of products and services that are not sustainable.

Consumers, while expressing a preference for green-friendly products, list sustainability as one of many factors, including availability, affordability, convenience, product performance, skepticism and force of habit, that influence their buying decisions, according to the report. Smart executives understand that focusing solely on environmental concerns isn’t a sound strategy for meeting your company’s business objectives.

It bears repeating that WBCSD represents the perspectives of influential corporate managers who keep a close watch on the ‘profit’ portion of the triple bottom line. That’s important, especially in today’s business environment, in which many companies are fighting just to remain viable. Sustainable practices will be adopted only if they are realistic enough to provide opportunities for business growth and if they support efficient operations, in order to address the concerns of investors and C-level executives. In its report, WBCSD seems to offer suggestions that meet those criteria.

2 comments December 22nd, 2008