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

CSR Report Shows Marathon’s Commitment to Reduce Emissions

With oil companies in the headlines every day and people understanding as little about how the oil business works as they do, I thought I’d read the 2007 Marathon Oil CSR Report and see what an oil company has to say about its environmental stewardship activities. Especially one that has just bought our software. Naturally, we think companies invest in the tools they need for more than just corporate responsibility reporting. Executives are looking to manage the company’s overall business risk and measure its progress toward true sustainability.

Once again, I’m struck by how these reports have changed. This one is full of real data. For oil companies, a principal measure of environmental performance is oil spills, because they have a big impact on the environment. The 2007 report is full of facts and data showing that the company, over a five-year period, has reduced the number and volume of oil spills equal to or greater than one barrel, and reduced both its upstream and downstream spill rates. Marathon also is using a Gas-to-Fuels technology at a demonstration plant built purely to explore the potential for turning natural gas into transportation fuel.

Since 1999, Marathon has invested $450 million in technology to reduce emissions. It’s going to invest another $30 million through 2008 and Q1 2009. In all, capital investments for environmental projects totaled $199 million last year, which was about 4 percent of total capital expenditures. It’s a clear indication that Marathon is committed to address emissions management concerns.

On the Health and Safety side, Marathon has developed metrics for incidents and near misses and leading indicators to track and improve process safety performance. The company is expected to use the data in next year’s CSR report, where there will be better measurements of success.

Eyes glazed over by data? That’s good. Marathon has shown that it’s serious about controlling its emissions, preventing spills and accidents and doing more than just giving lip service to corporate responsibility reporting.

Add comment August 7th, 2008

Report Tracks Growth of Corporate Sustainability Reporting

What are the implications when an organization forms solely to research and analyze sustainable investments? It means that institutional investors are requiring corporations to present sustainability performance data in their corporate responsibility reporting. If you haven’t already heard of the organization, meet the Sustainable Investment Research Analysts Network (SIRAN), which has just issued a report on the corporate responsibility initiatives of the S&P 100 companies.

According to the report, more than half of the U.S.’s largest publicly traded companies now report on their sustainability efforts. Over a third integrate elements of the Global Reporting Initiative (GRI) sustainability reporting guidelines. The GRI guidelines establish a standard for what should be in a sustainability report. Clearly this group puts pressure on the rest of the S&P 400 to “belly up to the bar.”

To me, the existence of a group like this demonstrates the extent to which sustainability initiatives have graduated out of Environmental Health and Safety departments into the corporate boardroom. Companies are being watched for their efforts to become sustainable and judged based on publishing real metrics, not glossy photos.
Out of the 100 companies:

• 86 have corporate sustainability sites, a 48 percent increase from 2005
• 49 produced a sustainability report in 2007, up 26 percent from 2005
• 41 incorporate GRI standards, a 71 percent increase from 2005
• 34 include a GRI Index in their report, up 70 percent from 2005

The SIRAN study says a sustainability report must include data covering three or more areas of corporate responsibility performance or execution on corporate governance initiatives.
What does this mean? It means your organization’s EHS data needs to be defensible in front of an industry analyst if it courts both institutional and individual investors.

Add comment July 23rd, 2008

Australia Implements New Regulation for GHG Reporting

Effective this month, Australia has a new National Greenhouse and Energy Reporting System that’s designed to monitor the emissions that cause climate change. Australian businesses that exceed greenhouse gases (GHG) limits will be required to monitor, measure and report emissions data to the government by 2009.

It’s the first step of Australia’s emissions trading program, which requires robust and comparable information –much of which is already demanded by the public.

Katie Lahey, chief executive of the Business Council of Australia, wrote last October in “The Age” newspaper, “…businesses cannot afford to sit back and wait for trading to formally start before addressing the implications of the new requirement on their strategies and operations. It’s a fundamental long-term transition from a high-emissions to a low-emissions world economy.”

This year, Australia will quantify emissions produced by large corporations. Businesses that emit more than 125 kilotons of greenhouse gases or consume or produce more than 500 trillion joules of energy will be required to collect data to meet annual reporting requirements.

Individual facilities that emit more than 25 kilotons of greenhouse gases, or use or produce 100 trillion joules of energy will also need to collect and report data. Twenty-five kilotons of greenhouse gas emissions is the equivalent of the annual emissions of more than 6,200 cars; 100 trillion joules equates to the annual energy use of about 1,900 households.

While the National Greenhouse and Energy Reporting Act takes effect this month, businesses will have until August 31, 2009 to register and until October 31, 2009 to submit their first annual greenhouse and energy report.

Most Australian corporations already report their GHG information because of increasing pressure from stakeholders, but the new program will standardize what is monitored and measured.
A rapidly growing number of jurisdictions worldwide are adopting new standards for GHG reporting that require robust information management. The ESS GHG/Carbon Management Solution is designed to help businesses comply with regulations in Australia and most other countries worldwide. Whether your organization is conducting internal baseline calculations or complying with laws that require greater levels of transparency and accountability, integrated information management systems are a necessary component of a corporate carbon management plan.

Add comment July 2nd, 2008

Report Says Smart Technology Could Reduce Global Emissions by 15 Percent

SMART 2020: Enabling the low carbon economy in the information age, a new report published by the Global e-Sustainability Initiative (GeSi) and The Climate Group indicates that the technology industry’s unique ability to provide tools to monitor and maximize energy efficiency both inside and outside of its own sector could cut carbon emissions by up to five times the amount generated by its own carbon footprint.

SMART 2020, the world’s first comprehensive global study of the Information and Communication Technology (ICT), shows that information management is key to enabling organizations to reduce emissions. Global management consultants McKinsey & Company independently conducted the report’s supporting analysis

Transforming the way people and businesses use technology could reduce annual man-made global emissions by 15 percent by 2020 and deliver energy efficiency savings to global businesses of more than 500 billion euros (nearly $800 million USD), according to the report. This represents a reduction of 7.8 billion metric tons of carbon dioxide equivalent released into the environment by 2020 – an amount greater than the current annual emissions of either the U.S. or China.

Although tele-working, video-conferencing, e-paper and e-commerce are increasingly commonplace, the report notes that replacing physical products and services with the virtual equivalents is only a small part (approximately 6 percent) of the estimated low-carbon benefits the ICT sector can deliver. Far greater opportunities for emissions savings can be generated when organizations and industries implement a technology infrastructure to address carbon reporting and management.

The report cites four major opportunities where the use of information technology can make further transformational cuts in global emissions. These exist globally within smart building design and use, smart logistics, smart electricity grids and smart industrial motor systems.

I may have said this too many times lately, but it’s still true: we can’t reduce GHG emissions until everyone uses the right platform to measure and monitor them.

1 comment July 1st, 2008

Study Promotes Transparency in Corporate Responsibility Reporting

In the race to put metrics around enterprise sustainability initiatives, there is now a published study that grades California public companies on their sustainability reporting. In this report, our client Chevron got an A+, while a leading IT company got an F. It’s not about what you say you are doing — this study grades how you are REPORTING what you are doing. The PDF of the report is available for download. The Roberts Environmental Center of Claremont McKenna College of Claremont, California, conducted the study and concluded that many companies do not adequately report their sustainability efforts on their websites.

This is a move to promote greater transparency in EHS and CSR reporting, much as Sarbanes-Oxley requirements encourage greater transparency in financial reporting.

On the environmental side, the most frequent reporting subject is accountability and the most frequently reported environmental performance topic is energy usage. Many companies have posted their intent to be accountable for executing on their sustainability goals. The one objective where they seem to have made the most progress is energy efficiency. Companies are reporting energy savings that are clear and measurable.

The Roberts Environmental Center rates sustainability reports on the basis of intent (based on a discussion of a topic and an example of an initiative undertaken on a reported topic); reporting (transparency in public discussion of the issues); and performance (measured by meeting industry standards, external awards or achievement of numerical goals).

We are moving in the direction of greater transparency and greater inspection of sustainability efforts, which can only be proven by better data. How is your organization’s data? Why not share in the comments section what your company is doing and how you are measuring your efforts.

1 comment June 27th, 2008

Climate Leaders Helps Companies Meet GHG Reduction Targets

Deere & Company is one of a growing number of companies that have announced plans to reduce their total global greenhouse gas emissions by a specific number — in this case 25 percent per dollar of revenue from 2005 to 2014. The company has committed to the reduction goal in conjunction with its participation in the U.S. Environmental Protection Agency’s (EPA) Climate Leaders program, which Deere joined in 2007.

Climate Leaders is a voluntary industry-government partnership that works with companies to develop long-term comprehensive climate change strategies. Participants set a corporate-wide greenhouse gas emissions reduction goal and annually report their progress to EPA. Through program participation, companies create a credible record of their accomplishments, reduce their impact on the global environment and identify themselves as corporate climate leaders.

Becoming a corporate climate leader can’t be easy for companies in industries such as oil, energy and equipment because direct greenhouse gas emissions are generated from both plant operations and from the final product. Monitoring and collecting data across the organization as well as tabulating and benchmarking against publicly stated goals requires an enormous amount of data integration and reporting capability.

We have been seeing this trend across the enterprise lately, in all industries, as corporate social responsibility becomes a matter of setting and reaching sustainability goals that are expressed in numbers and percentages. Moreover, we’re seeing a need to allow this kind of data aggregation and reporting from mobile platforms as well as from desktop PCs. As a result, we have set out a product roadmap that meets these needs for our customers more completely and fully than any of our competitors. Fortunately, we have the talent on our team to get this done!

Add comment June 19th, 2008

Study Shows Spreadsheets Can Increase Data Quality Risks for Corporate Reporting

Be careful with uncontrolled use of spreadsheets to track and manipulate corporate data. Spreadsheets can become a huge problem for companies that have regulatory reporting requirements or planning requirements, according to a KMPG study. The study concluded that the basis for as many as 95 percent of financial models were flawed. Spreadsheets that collect and manipulate data were deemed inadequate to save companies from corporate risks associated with data quality.

I just finished reading an article in Information Age about analysts at market intelligence company, The Data Warehousing Institute (TDWI), which in 2007 set out to investigate the uncontrolled use of spreadsheets by end-users when undertaking data analysis tasks.

The findings make for sobering reading: of the 200 companies surveyed, including companies of all sizes and from a wide range of industry sectors, 90 percent reported that they were living with the problem of so-called spreadmarts. Spreadmarts are shadow data systems that extract, transform and format data and publish reports.

If you have EHS reporting requirements or if your CSR reporting goals will be measured, you can’t afford to have data aggregated from separate PCs across the enterprise. You must have an integrated platform to collect, analyze and report out uniform data.

In case I haven’t alerted you sufficiently, the article highlights the experience of a major U.S. utility that hiked consumer gas prices by between $200 million and $1 billion due to a mistake in a spreadsheet file. In another example cited in the article, a U.S. mortgage company was forced to write down $2.4 billion in mortgages due to a change control error in a spreadsheet. Spreadsheets over 200 lines long are almost guaranteed to be flawed.

Companies continue to allow employees to take corporate data out of their primary systems, massage it and write it back to a core transactional system because it is very hard to stop that process. We are trying to alert the key decision makers worldwide about the risks associated with inconsistent and poorly manipulated data and encourage the use of an integrated data collection and management platform to reduce the associated complexities, costs and risks.

Add comment June 16th, 2008