CIOs Joining Front Lines of Corporate Greenhouse Gas Management

Corporations have recently enlisted new participants to support their greenhouse gas management programs: Chief Information Officers (CIO). That point was reinforced in a recently-published article in CIO Magazine.

CIOs are now on the front lines of corporate climate change programs. That’s because manual spreadsheet accounting and disparate legacy systems are not able to support organizations’ need for accurate, verifiable carbon data for compliance under market based compliance schemes that are being considered in the U.S. and several other jurisdictions, as well as growing disclosure demands from investors, community stakeholders and activists. In order to meet those new standards, organizations will need to implement information management tools that support efficient and accurate reporting and analysis in order to address changes in greenhouse gas (GHG) management that are just around the corner. CIOs will play a central role in that process.

ESS has just published a white paper entitled, “A CIO’s Guide to Global Climate Change,” which provides a detailed discussion of this issue. It’s now available for download from our web site.

The process of building a program for evaluating, monitoring and measuring GHG emissions should begin with the development of a carbon management strategy. Managing climate risk in the context of corporate objectives starts with understanding the company’s operations. Executives need to identify which practitioners or business units need to use the data and for what purpose. Answers to these questions will provide critical direction for best practices for collection, processing and reporting of GHG information.

It’s a very complicated process, and will likely affect most businesses — including many that previously have not been required to provide GHG emissions reporting.

So GHG management is coming out of the bailiwick of environmental managers, facility managers and even the risk managers. CIOs will soon inherit responsibility for a challenge that has real bottom-line implications. That will eventually require organizations to develop a comprehensive plan for GHG management, supported by an integrated software platform.

2 comments May 7th, 2008

Executive Ethics Book Incorporates Environmental Ethics Discussion

Last year, I was asked to write a manuscript for a new book on corporate ethics. My topic was how environmental issues had become part of corporate ethics and sustainability, an ethical imperative. The book, entitled Executive Ethics: Ethical Dilemmas and Challenges for the C-Suite, was published on April 10th and is now available on Amazon.com and in bookstores.

As recently as 2000, environmental stewardship was not a major priority among business and political thought leaders. In many cases standards for environmental practice were not much different from government-mandated emissions laws. Business leaders believed the primary environmental responsibility of the enterprise was to maintain compliance with standards adopted by federal and state governments, and to ensure that factory emissions did not threaten the health of workers and nearby residents, as an extension of their commitment to local corporate citizenship.

But since the dawn of the 21st century, there has been a rapid evolution among key business leaders who are moving critical benchmarks from regulatory compliance to real leadership, as they adjust to their customers’ increased consciousness of environmental sustainability, growing concern about greenhouse gas emissions and resultant effects on global warming and climate change.

These concerns are now being reflected both on the production floor and in the boardroom. Corporations are proving that they can successfully balance concerns for the environment with the traditional priorities of operating profitable enterprises.

Industry analysts are predicting that the next few years will be critical for manufacturers, retailers, financial services firms and others as they establish sustainability goals for their long term business roadmaps. This movement is driven by a commitment to corporate ethics as much as it is by pragmatism.

Companies that embrace sustainability are taking a long-term view of their effects on society. They are departing from traditional views of private property rights and ownership. Such firms don’t respond simply for regulatory purposes (such as mitigating the effects of air or water emissions on the surrounding community), but because of a desire to avoid the potential costs if the global environment is seriously threatened.

I was delighted and honored to be asked to write about this topic. I hope it sparks even more discussion about the importance of environmental ethics within the larger discussion of corporate ethics.

Add comment May 1st, 2008

Leveraging Software for Sustainability is EXPO.08 Keynote Theme

Management in this century requires global orchestration–managing from the outside in. Enterprises are starting to use Web 2.0 to do this — putting application data in a very common user interface, like a browser.

That was the message from Simon Jacobson from AMR, the keynote speaker at ESS EXPO.08. Jacobson was one of several speakers that provided insightful perspectives on key business and IT challenges to a record-setting audience of corporate and government executives and thought leaders who joined us this week in Phoenix for our annual business conference.

This was one of several thought-provoking sessions where industry leaders and thought leaders came together to discuss issues that will have a huge impact on the enterprise in the near future. I’m pleased that this and many other presentations have firmly established ESS EXPO as a forum where industry leaders can meet some of the people who are providing solutions for tomorrow’s issues today.

Emerging issues such as managing greenhouse gases through the supply chain, caps on carbon production and energy consumption are emerging on the list of corporate priorities, Jacobson said.

He talked about how Web 2.0 is being used in the enterprise and architected in a framework called Manufacturing 2.0 that pulls data out of legacy applications into a more modern framework. In the configuration, organizations can maintain legacy data storage, and still have applications talk to one another.

What is the visibility of environmental performance across extended supply networks? How do organizations get a consistent view of performance across the enterprise? Fragmented and manual systems make it difficult for corporate managers to get answers. These systems have to be consolidated into a single instance that will give you a way to automate work flow and build assumptions.

Environmental software, Jacobson said, should be web-based, and all EHS data should be consolidated in a common database that takes collective intelligence, ties it together, and shows it back to the user. Adoption of Web services is on the rise in the enterprise. Applications such as wikis, blogs and podcasts are also on the rise to help companies get around the latency of data in a crisis situation.

How do companies integrate EHS with typical GRC systems? They must be integrated with the rest of the business applications, such as he ERP, the supply chain and product focused applications into a controls management system that enables development of processes and procedures for risk remediation — and all of those show as intelligence on a management dashboard.

Jacobson predicts that REACH will impact all manufacturing processes, and thus financial compliance, IT compliance, and environmental compliance will have to be integrated.

Of course, the technology that Jacobson described is available today. ESS is deploying integrated EHS platforms for major organizations around the world including global leaders like PetroChina.

Add comment April 17th, 2008

Respected EHS Analyst Predicts GRC Solutions Market to Reach $52 Billion

If you’re still deciding whether to attend EXPO.08, let me refer you to Michael Rasmussen’s new research, in which he says GRC is gathering momentum among organizations as a philosophy of business. In fact, he predicts a $52 billion market for GRC solutions in 2008.

As a business philosophy, GRC is collaborative, requiring contributions from throughout the enterprise. The philosophy is composed of sustainability, consistency, transparency, and especially efficiency — which happen when organizations leverage information and processes across the enterprise.

ESS EXPO.08, which starts Sunday, will feature several industry experts who will share perspectives on their corporate governance issues or initiatives, and how their organizations are using information technology to address those concerns.

Rasmussen points out, “good governance is built upon diligent risk and compliance management processes. In today’s business environment, ignoring a federated view of GRC results in business processes, partners, employees and systems that behave like leaves blowing in the wind.”
In the past few years, ESS, like Rasmussen, has found that there are several common drivers of GRC in the enterprise:

• Growth of Corporate Social Responsibility.
• Increasing governance demands.
• Rating agencies focused on enterprise risk management.
• Increasing risk profile in a distributed world.
• Connecting performance management to risk management.
• Increasing regulatory compliance profile.
• Impact of the extended enterprise.
• Inefficient, manual and siloed risk and compliance initiatives are ineffective.

Quite a while ago, we realized that silos of information increase, rather than mitigate risk, and we moved to architect our solution as an integrated platform. For that, I have to thank our product development teams and their depth of industry experience. You can almost say they “felt” the wave coming, and like good surfers, they were in position to ride it properly.

Other analysts are noticing how ESS has positioned itself to address market trends. At the recent Gartner GRC conference in Chicago, lead analyst Dan Miklovic provided an EHS industry overview, where he reported, “ESS is one of the few providers to offer a suite of EH&S solutions that closely align with Gartner’s market definition and to offer both hosted and licensed delivery models.” I highly recommend it if you are a Gartner subscriber.

With their leadership, our development teams have brought to market a solution that allows managers to see the big picture, use their resources effectively, reduce unnecessary complexity, and stay nimble and flexible. We operate in such a dynamic business environment (witness how quickly Bear Stearns ceased to exist – in just one weekend!) that simplicity and transparency of information are needed to ensure that businesses meet their corporate governance objectives.

Add comment April 10th, 2008

Prominent CEOs Discuss Corporate Green Programs at
WSJ ECO:nomics Event

Last week I had the pleasure to attend the Wall Street Journal’s ECO:nomics Conference on Creating Environmental Capital. It was a sellout and featured prominent CEOs such as Lee Scott of Wal-Mart, Jeff Immelt of GE and Patricia Woertz of ADM, who addressed important issues like how does a multinational giant hedge its bets on the green business frontier; how are they adapting to soaring energy prices while simultaneously implementing environmental mandates; and who they believe will win or lose in the global trade of greenhouse gas emission credits.

The biggest question, of course, is how much shareholders are going to allow companies to sacrifice profits to undertake environmental initiatives?

I had an opportunity to meet with another conference speaker, James Rogers, CEO of Duke Energy, and commend him on his leadership in driving sustainability in the utility sector. They are implementing our software across the entire enterprise as the backbone for its environmental, health and safety information management system.

I also attended a round table lunch led by Shai Agassi, who has just raised $200 million to start a new company. He is the founder and chief executive officer of Project Better Place, which he formed to install, scale and operate regional and global infrastructures that are necessary for electric vehicles. With a personal passion for solving large-scale social and environmental issues, Agassi will manage the operation of international electric vehicle fleets and partners with electric car manufacturers.

Agassi, creator of SAP’s NetWeaver platform, previously served as president of SAP’s products and technology group, and was a member of the company’s executive board.

Other opinions heard at the conference:

• Immelt says he smells the chance to make a lot of money, and that GE’s green business will grow overseas, and also perhaps in the U.S.;
• Scott has committed Wal-Mart to a zero waste and 100% renewable energy strategy. He said he has no idea when the company will meet that objective;
• Several speakers said shareholders and social activists are clearly at the corporate gates, driving much of the “greening.” But, they contended, corporate boards do have a fiduciary duty to analyze risks that can come from climate change, and many boards are doing just that.

Add comment March 17th, 2008

Leading Analysts Advise Organizations to Implement Integrated Solutions

I’ve been beating the drum for integrated sustainability solutions since 2000. Since then we have been building out our solution to encompass all critical environmental health and safety matters, which enables organizations to take a holistic and strategic approach to sustainability. The integrated design reduces complexity, risks and costs by leveraging critical data, information and best practices from a common database for a facility, business unit or across the enterprise.
In the past two weeks, two different industry analysts have been discussing sustainability platforms in the same terms, which tells me that the direction we are taking is the right one.

Michael Rasmussen, a well-respected industry expert and the principal of a consulting service called Corporate Integrity, has long been a proponent of platforms rather than silos. In his most recent blog post, he says that information technology risk management isn’t the be-all and end-all of risk management; it’s only one aspect. He warns that vendors who say they are in the GRC space without an integrated platform may be thrown out of meetings. There can’t be a much stronger warning than that against point solutions rather than integrated solutions.

In addition, at its GRC summit this week, the lead Gartner GRC analyst, Dan Miklovic, presented an overview of the EHS space called “Environmental, Health and Safety: “Your Applications Must be Part of an Overall GRC Process.” Gartner says that EHS information systems must become fully integrated and, when they do, they help organizations by reducing:

• number of applications
• interfaces
• support staff
• IT hardware and
• number of vendors to be managed

That advice aligns with ESS’ approach of reducing complexity to reduce risks and costs.

We are always working with our customers to make sure they get the innovative solutions they need to reach their sustainability, performance and compliance goals. One of the ways we do that is by inviting IT experts and users from some of the world’s leading companies to our user conference, ESS EXPO.08, which is a highly successful event for sharing best practices among our partners and customers. EXPO.08 is coming up April 13-17, and I hope to see you there. This year’s keynote will be AMR analyst Simon Jacobson, who will talk about laying the foundation for sustainability through environmental compliance.

1 comment March 13th, 2008

Report Shows How Manufacturers Are Changing Rules for Use of Chemicals

I’ve been reading the new State of Green Business 2008 report on critical initiatives in business, published by GreenBiz.com. This report shows how organizations are changing the way they do business by changing their operational processes to reduce the amount of toxic chemicals that are used in manufacturing processes.

It’s noteworthy that several ESS clients, like DuPont, were applauded for being at the forefront of significant win-win environmental initiatives.

There is growing interest among industry leaders and other global stakeholders regarding international chemical reporting standards. The European Union already has taken an important first step with its REACH regulations. We at ESS have noted that more organizations are carefully reviewing their processes; and we’re working with our customers and partners, and regulatory bodies to ensure our clients are positioned to effectively address current or future chemical regulations with our software platform.

The report’s authors say there is insufficient data to show how companies are doing, in aggregate, to move the needle in the U.S. on issues like climate change, toxics reduction, water conservation, and resource efficiency. However, there is quite a bit of information about companies that either executed on or committed to address corporate sustainability initiatives. Change is taking place across the board, not just with high-profile global enterprises in the oil and gas, utility and mining industries.

The report examines practices from a wide range of industries. There were a few surprises: for example it notes that some personal care products have been found to contain a surprisingly high number of toxic ingredients.

Another amusing example of coming change is the iconic new car smell that we all admire. It was found to be a byproduct of bromines, lead, chlorine and heavy metals used to manufacture automobiles. Several foreign car companies make cars containing the highest numbers of these substances.

Use of toxic ingredients may pose risks to the consumer, of course; but they have an even greater impact on the companies that use them, prompted by risk-averse investors and corporate stakeholders who are demanding changes even faster than some regulators.

Add comment February 27th, 2008

Intel Makes a Major Investment in Renewable Energy

About 5 percent of global corporations consider climate change a major priority. One of the notable companies moving in that direction is Intel (Nasdaq:INTC), which is now the largest corporate purchaser of renewable energy in the U.S.

Intel has agreed to buy renewable energy certificates (REC) for more than 1.3 billion kilowatt hours per year, which is equivalent to 46 percent of its total U.S. energy use.

Though company officials did not list the length of its agreement, it is likely a significant commitment. Intel’s investment is expected to drive construction of new renewable energy generation facilities, spur similar investments by other companies and eventually drive sufficient demand to lower costs. It also ensures that Intel will be using energy from renewable sources such as wind, the sun and biomass.

Intel has been buying wind power in Oregon for its plant there for years, and this year will purchase 25 million kilowatt hours of wind power.

Intel has always been a leader in environmental monitoring and management at its semiconductor manufacturing facilities and has received numerous awards from environmental groups.

Second among firms buying renewable energy credits is a company that might surprise you: PepsiCo is buying 1.1 billion kilowatt hours of REC per year.

Add comment January 31st, 2008

More Companies Responding to Demands for Transparency of Risk Reporting

Unless you are involved in corporate governance, you probably aren’t aware that there is an organization called The Corporate Library, that provides reports that assess corporate governance reporting on behalf of investors and insurance companies. The Corporate Library is a repository of reports and information such as corporate policies, SEC filings, and executive compensation. This information, available for purchase, provides corporate reporting and evaluates whether a company’s documentation offers sufficient detail to prevent shareholder lawsuits and satisfy investors’ and insurers’ requirements for transparency. In addition to selling information to the financial community, the Library also provides reports to the enterprises themselves to help them benchmark their performance against other companies.

In a recent report, The Corporate Library found that some well-known companies are not reporting enough detail about their CO2 emissions and the costs involved in cleaning up those operations. Toy company Hasbro (HAS); fiber-optic maker Corning (GLW, Fortune 500); railroad company Burlington Northern Santa Fe (BNI, Fortune 500), Royal Caribbean (RCL) cruise line; and lawn and garden company Scotts (SMG) all scored below average in the report. Meanwhile most utilities and other companies that are known for emitting significant amounts of carbon dioxide have long detailed their emissions and potential costs in financial filings. Those organizations scored much better.

Companies that expect to maintain industry leadership in a market environment that demands more transparency need to invest in monitoring and reporting platforms that will help them satisfy these new investor requirements for reporting risk management data. The Corporate Library sells a product called the “Board Analyst,” that analyzes whether a company’s governing board is proactive and effective in demanding transparency from executives. If I were a corporate board member in these times, I’d be asking my company’s executives to invest in integrated monitoring platforms that can efficiently collect and report this data to improve their transparency rating.

Add comment January 14th, 2008

Duke Energy, Alcoa Among Companies Recognized for Sustainability Reporting

Duke Energy and Alcoa, both industry leaders, as well as ESS clients, have been chosen as finalists for the Ceres 2007 North American Sustainability Rewards. According to a news release, “the awards are not intended to endorse or reward corporate sustainability performance, but rather to acknowledge exemplary disclosure that places performance in the broader context of sustainability challenges, risks and opportunities.”

Ceres is a leading network of investors, environmental groups and other public interest organizations that work with companies to address sustainability challenges such as global climate change. Ceres also directs the Investor Network on Climate Risk (INCR), comprised of over 60 institutional investors who collectively manage more than $4 trillion in assets.

Award nominees were evaluated based on criteria that address completeness, credibility and quality of communication. The panel of 13 judges includes North American leaders and experts representing a broad spectrum of backgrounds.

The Association of Chartered Certified Accountants (ACCA) has been giving these awards for fifteen years to promote transparency in reporting sustainable business practices. This year, 87 companies entered reports, and 21 finalists were chosen. Since 1999, ACCA has teamed up with Ceres to present the awards for sustainability. This year’s entrants included a wide variety of industries from mining to automotive manufacturing to apparel.

Duke Energy, Alcoa and the other award nominees are leading a powerful new trend in which companies are leveraging EHS information management systems to communicate their sustainability performance to external stakeholders. As a result, their efforts are being recognized by organizations like Ceres.

Add comment January 10th, 2008