Goldman Sachs Takes Big Gamble on Growth of Carbon Offset Market

The carbon offset market took a big jump today with the alliance between E+Co and Goldman Sachs (GS). Goldman has agreed to purchase the majority of E+Co’s carbon offset portfolio and help promote E+Co’s goal of providing investment capital and support services to small, clean energy business ventures in developing countries.

E+Co is a 15-year-old nonprofit investment company started as a result of a Rockefeller Foundation study on opportunities for developing clean energy businesses in developing nations. It provides business support services and capital to clean energy businesses in Africa, Asia, Europe and Latin America and the United States.

E+Co also assists clean energy businesses with the aggregation, validation, verification and creation of high quality GHG offsets, including those that will be sold to Goldman Sachs. The carbon financing provides the enterprises with additional capital that supports, sustains and helps clean energy ventures grow.

Goldman has made a big bet on the growth of the U.S. carbon offset market and on the continuing pressure to do something about climate change issues. Small-scale clean energy projects, while supporting important social and environmental benefits, can struggle to attract sufficient capital to assure success. The financial backing and business development services provided by E+Co assists small businesses in those developing nations to supply clean and affordable energy to those regions, efforts that simultaneously increase employment opportunities and reduce greenhouse gas (GHG) emissions.

Goldman’s move is just another subtle reminder that smart companies are preparing now for the advent of a U.S. carbon trading market. Even though companies must exercise prudence in order to survive this market correction, executives must be mindful that failure to address both current and future market shifts will put your organization at a competitive disadvantage.

We anticipate the mounting wave of clean energy activity will generate greater pressure for companies of all sizes to measure and monitor their GHG emissions and acquire those carbon credits Goldman Sachs will help E+Co create.

1 comment November 12th, 2008

EHS Technology Can Cut Utility Costs, Improve Energy Efficiency

Remember the Chinese curse, ‘may you live in interesting times’? That adage definitely applies to corporate managers who are under mounting pressure to cut operational costs. As corporate revenues spiral downward, cost cutting pressures accelerate.

Increased demand for water and electricity is driving plans for expanded power generation and treatment plants, which are likely to drive higher utility costs. However, what alternatives are available if there’s no money to build new power plants or water desalinization facilities? It’s time for the enterprise to harness its collective ingenuity to develop improved resource management practices.

As a result, a growing number of companies are looking to save money by minimizing use of water and electric utilities. I got this idea from an article in Scientific American that shows how water and energy management are interconnected. Communities need water to produce electricity, which is needed to treat water.

The article says communities need to solve both of these problems at the same time. More businesses are contributing to the solution by developing programs that emphasize better resource stewardship.

Investing in EHS technology can empower your company to improve energy efficiency by cutting waste. EHS software can pay for itself in lower energy costs and lower compliance costs and risks. Companies would reap immediate ROI, improve environmental performance plus help defer the need for new utility plants, pushing potential cost increases further into the future.

Which leads me to another timely adage: You can’t manage what you can’t measure. Companies can’t efficiently manage their resources unless they have accurate and actionable information from an EHS software platform.

Add comment November 4th, 2008

Experts Say IT Trend May Drive CSR into Financial Reporting

This from Environmental Leader today: “The Global Reporting Initiative’s creation of an extensible business reporting language taxonomy for the many indicators itemized in its sustainability framework could automate sustainability reporting in much the same way that the SEC believes XBRL will aid the production of financial reports,” according to CFO.com.

This development could even drive a new trend that combines standard financial data with sustainability data in a single annual report. A handful of companies already do this, according to CFO. Eric Israel, a managing director at KPMG, believes more will follow.

“There is a serious need for IT support to make this happen,” Israel says. “It’s missing now, but as expectations change and sustainability reporting becomes less about PR and more about satisfying investors’ need for data, more automation will become essential.”

Half of the S&P 500 released Corporate Social Responsibility reports last year, according to SIRAN, the Sustainable Investment Research Analyst Network.

Corporate decision makers would be well advised to consider making investments in CSR information management software now. The pressure is on. Companies that delay will find they are unprepared when CFOs will be accountable for CSR reporting in the future.

1 comment October 28th, 2008

US EPA Competition Drives Reduced Emissions

Competition is good for everyone. So it’s not so surprising that many leading corporations, municipalities and small businesses are participating in a different kind of competition: a contest to see which organizations can go beyond regulatory requirements to improve the quality of the environment.

Companies like industry leaders Intel and John Deere are examples of organizations participating in the National Environmental Performance Track program. Sponsored by the U.S. Environmental Protection Agency (EPA), the Performance Track competition encourages organizations to develop programs that reduce emissions is excess of EPA-regulated limits for air, water and land pollution. For example, another noteworthy participant, the City of Dallas, has pledged to reduce water consumption at city-operated sites by 49 million gallons over 3 years, a 5 percent reduction.

Performance Track participants are encouraged to develop measurable emissions reduction goals that drive improvements to air, water and land quality. Since the program launch in 2000, more than 500 Performance Track member organizations have established in excess of 4,000 goals, resulting in a reduction of 310,000 metric tons of GHG emissions, 13,000 tons of nitrogen oxide and 52,000 tons of hazardous waste from being released into the environment.

Your organization still has a few more days to submit a 2008 Performance Track application. If your organization or government entity would like to join the competition, applications will be accepted through October 31. Members can obtain annual performance reports and renewal applications starting February 1, 2009. Submission deadline is April 1.

Needless to say, ESS can help Performance Track participants monitor progress against EPA and corporate benchmarks. ESS’ integrated EHS platform and powerful software tools, including our Environmental Compliance and GHG/Carbon Management solutions, help organizations streamline collection, processing and communicating emissions information to reduce complexities and risks and costs associated with generating both mandatory and voluntary reports.

Add comment October 28th, 2008

Experts Cite Growing Popularity of Integrated Platforms

For quite a while now, I’ve been advocating that companies move to a unified software platform to simplify EHS risk and compliance, centralize data into a unified repository and manage data enterprise wide.

Last week, I received a briefing about the capital markets from a firm in our space that specializes in M&As and got a clearer picture of how they view compliance software. The presentation traced the history of compliance initiatives back to pre-SOX days (when we started ESS). It showed the hockey stick growth of compliance as a tactical matter, characterized by information silos, duplicate entities and limited compliance visibility. It shows that compliance has now emerged as a strategic imperative in the enterprise. Industry analysts like AMR have long ago embraced the concept. Now it’s gaining acceptance among other compliance software companies.

The presentation goes on to say that the compliance space is growing 2-4 times faster than any other in software and “no other software application category is growing as quickly. The next generation of compliance software will transform ‘converging’ point solutions to fully integrated compliance platforms, which will sustain and accelerate the rate of growth and demand in the coming years.”

AMR Senior Research Analyst Simon Jacobson, the keynote speaker at ESS EXPO.08, recommended that EHS data should be consolidated in a common database that efficiently collects information, ties it together and communicates it throughout the enterprise. Dow Chemical successfully leveraged that strategy to save more than $2 million and enabled all of the company’s U.S. facilities to use a common reporting process.

Ultimately, this affirms that growth in our space will occur not only because compliance is a strategic objective of nearly every company. It will happen because executives worldwide have discovered that compliance helps companies lower costs and reduce operational risk.

Add comment October 14th, 2008

Fallout from Bailout Bill Will Bring GRC Process into Greater Focus

Our longtime friend Michael Rasmussen of Corporate Integrity has once again sent a thoughtful email to advise us that the execution of Governance, Risk and Compliance policies will be changing again after Congress passed the financial bailout legislation last week. More and more investors and stakeholders will demand greater oversight of business operations because of what has happened to Wall Street and the investment banking industry. The current financial “spill” is not unlike an oil spill; it may be inadvertent, but it leaves behind a toxic environment.

The speed with which events multiplied to destroy century-old firms tells us that companies cannot afford to have systems that are outdated or siloed anymore. Risk can come from anywhere, at any time. Managing risk well demands an investment in the latest information technologies for collecting, analyzing and reporting information. Organizations all over the world, especially large global enterprises, will not be able to raise capital without proof that they are adequately managing business risk and market risk. In addition, stakeholders are looking to management to enhance EHS sustainability for more favorable corporate responsibility reporting.

Businesses that must comply with environmental, health and safety regulations are not immune to this trend. We have seen increasing year-over-year regulations for the past thirty years. This trend is not going to stop; rather, regulators are now empowered to both adopt and enforce an increasing number of regulations on behalf of their constituencies.

Here’s a list of questions Rasmussen suggests business leaders ask themselves right away:

• Do you have the correct risk management oversight across business operations and relationships?
• Do you have appropriate compliance processes?
• Do your compliance processes get to the principle of the matter; or are they simply about checking a requirement?
• Are the values and code of conduct of the corporation adequately defined and communicated?
• Are people properly trained on the expectations set before them?
• Are risk and compliance managed across business relationships?
• How do Governance, Risk and Compliance practices intersect and support corporate responsibility?

We have been urging that businesses ask these questions. It is more important than ever in the current environment. Are your GRC processes set up to be a holistic ecosystem or are they just a set of applications that don’t prompt your company’s managers to talk to each other or the C-suite?

Add comment October 6th, 2008

Corporate Responsibility Gaining More Visibility in the Enterprise

Wall Street is being called on the carpet for doing what Milton Friedman told it to do: maximize profits and nothing else. However, in the current financial climate, investors and stakeholders want more. They want companies to move toward sustainability.

Wall Street may be the last to know that investors, employees, governments and Main Street require more of corporations. Stakeholders require companies to implement corporate responsibility best practices that are comparable to or exceed the performance of their industry peers. That’s because executives now regard corporate responsibility as a business differentiator that separates companies based on their ability to effectively manage operational risks.

Therefore, climate change occurring on the planet mirrors the climate change concerns that are addressed by the enterprise. This is magnified by the global connectivity provided by the internet and the increasing ability of stakeholders to form activist groups demanding change in emissions policies and manufacturing processes. These groups cannot be ignored because they affect a company’s ability to raise capital for operations and expansion.

Corporate responsibility itself has changed, becoming at once a more inclusive and a more specific term. It used to refer to philanthropy — the volunteerism of employees coupled with the pet projects of the CEO. But now, according to Jeff Hitner of IBM Global Business Services, corporate responsibility is an investment that can bolster a company’s performance. That’s because customers are demanding that the companies they buy from maintain sustainability practices that are measurable. Earth911.com, a consumer recycling site, even has a series called “CSR for Dummies” that evaluates and comments on the sustainability reports of major consumer-facing companies.

In this atmosphere, it is best for companies to be transparent and provide accurate, comparable reporting that shows investors and stakeholders that they are working to achieve sustainable operations. Be proactive, rather than reactive. Companies can set themselves apart by demonstrating leadership in environmental, health and safety best practices. It’s always best to be a leader in times like these.

Add comment September 29th, 2008

Chinese Energy Companies Showing Leadership in Sustainability

While I was in Asia last week, I met with the CIO of PetroChina and China National Petroleum Company (CNPC) and learned of his desire to expand on our great success consolidating all applications in the Environmental Health and Safety arena into one platform for efficiency and centralized reporting. I was really impressed when he told me they have more than 70,000 users.

This has to be the largest EHS sustainability platform ever deployed. He also told me it was the first and “only” software within PetroChina and CNPC that has been deployed across the entire company. We want to enhance our value to their business users by providing tools like role-based Key Performance Indicators to help them improve performance within their specific business units.

I also met with the CIO of China Light and Power (CLP) in Hong Kong. This is meaningful because CLP is followed and benchmarked as best of breed throughout Asia for its best practices in using information technology to enhance business value. He gave me a tour of the company’s technology center, which was quite impressive, and we spent a good deal of time talking about translating technology investments like ESS software into real business value.

These CIOs are true thought leaders and our plan with them in the area of GHG emissions management and corporate responsibility reporting will set the standard not only in Asia but across the world. For those of us who think our companies are in the vanguard of sustainability, here’s a word of caution: Look out. You may just find yourself following leaders from Asia.

Add comment September 25th, 2008

Regulations Pose Potential Risks to the Enterprise

We have provided our customers with important updates to help them stay on top of key regulatory activities that could impact their operations. It’s worth noting that there has been increased activity recently, focused on GHG management, and not all of those proposals are coming from environmental regulators. Here are three examples, courtesy of Jeff Ladner, Director of ESS’ Climate Change Solution Practices:

Binding requirement to disclose climate risk for energy company

• “Under a first-ever binding and enforceable agreement with New York’s Attorney General Andrew M. Cuomo, Xcel Energy will have to disclose the financial risks that climate change poses to its investors in its annual SEC filings.” The deal also commits Xcel to a broad array of climate change disclosures including: projected increase in CO2 emissions from planned coal-fired power plants; strategies for reducing emissions; and corporate governance actions related to climate change.
• Important tip for you: This agreement is expected to set a precedent for climate risk disclosure requirements from the SEC.
• On a related note, 70 institutional investors are following up on earlier petitions to the SEC. The institutional investors are driving the requirement to disclose climate change risk for all public companies.

FASB proposing new standard for disclosing loss contingencies, including environmental liabilities

• The proposed accounting standard seeks to modify the rules currently governing loss contingencies [financial reserves]. The new amendment reflects the growing pressure that large investors are placing on FASB to force companies to come clean about their liabilities in the name of increasing transparency.
• If the rule remains unchanged, it will become effective for annual financial statements issued for fiscal years ending after December 15, 2008.

Climate related shareholder proxies

• You can now track climate/environmental related proxies demanding improved disclosure and transparency. Numerous companies with whom we are actively engaged are involved in addressing shareholder issues THIS YEAR. The file for the proxies is available for download.

Although we’ve been talking about these issues for many years, they seem to be accelerating, and the regulatory environment is changing daily. That’s why we continue to remind decisions makers that integrated information technology is an essential tool for companies that want to successfully navigate through today’s complicated regulatory environment.

Add comment September 12th, 2008

ESS Announces Publication of “Executive Ethics”

This is the first time we’ve been asked to contribute to a book, and the reason I said “yes” is because it’s a book on corporate ethics, which has always been one of the most important subjects in my life. In fact, when I started the company I did so out of a concern for the ethics involved in preventing refrigerant emissions from releasing CFCs into the ozone layer. That sure seems like a long time ago, in the environmental Dark Ages. Or maybe it’s better to call it the beginning of the Renaissance of a concern for sustainability.

At any rate, I’m pleased to announce ESS’ contribution to the recently-published book, Executive Ethics: Ethical Dilemmas and Challenges for the C-Suite.

Recognized subject-matter experts and business leaders were invited to provide commentary on topics that apply various aspects of business ethics to executive decision making. I was honored to contribute the chapter on environmental ethics, which summarizes social and political movements and events that transformed environmental concerns from a stakeholder concern to a matter of business ethics. Issues like major industrial accidents, conversion of atomic (and later, nuclear) power from military to commercial use and the development of EHS information technology, like ESS software, helped drive greater awareness of and benefits from incorporating corporate responsibility strategies into executive decision making.

The book, published by Information Age Publishing, is now available from leading retail and online booksellers, including Amazon, Barnes and Noble and Borders.

Our participation has already paid dividends for our company, as the book’s worldwide acclaim has provided a new forum for ESS - already acknowledged as the global industry leader - to be recognized as a thought leader.

We run our business with the conviction that what we are doing is not only good business, but good for everyone around us. We’re a cog in the great machine that can create and preserve global sustainability.

Add comment August 20th, 2008