At the recent ‘Jumpstarting the New Green Economy‘ conference held at Fairleigh Dickinson University (FDU), Bob Willard and two separate panels of business and executive recruitment specialists discussed how new business models are being developed to help present a compelling business case for going green.
Throughout the three sessions that this post covers, the overriding message was this – a company has to ‘do the right thing, right and profitably’.
During his keynote presentation, Bob Willard used a metaphor of a three legged stool to describing sustainability – each leg denotes a different area: environment [eco efficiency and effectiveness], equity [employees, community, culture] and economy [growth, taxes, products and services]. These cover the foundations of most sustainability programs more commonly referred to as the ‘triple bottom line‘. In addressing the value of a company, Bob postulates that a company has tangible and intangible value. Tangible value is easily measured and can be understood through examination of a company’s financials. The intangible value is less easily measured and covers a company’s reputation which is a function of the relationship it maintains with public, media, customers, investors, NGO’s, government agencies and other similar stakeholders. Bob argues that the intangible value can be described by a company’s market capitalization (#shares x price of each share) – a poor reputation or perception can result in reduced share price and therefore market cap. despite the financials looking okay. With the high degree of transparency now available through news and media, the intangible value of a company has grown in importance over the last few decades and, using an iceberg as another metaphor, represents the body of mass lying beneath the water. Underestimate the impact of reputation and your ‘iceberg’ will be top-heavy and most likely the financials will go under! Bob Willard’s slides are available here
The first of the business sessions comprised sustainability officers or those engaged in associated activites: Ed Madzy, BASF, Dave Stingis Campbell Soups, Hugh Tole Roche, Ron Reisman NJ Board of Public Utilities, Kevin Tubbs Ingersoll Rand with host Victoria Zelin of Hudson Gain. Ron gave an overview of the energy efficiency and challenges faced in New Jersey together with some of the incentives already distributed (mainly lighting, electricity and HVAC system components). Kevin highlighted some of the projects undertaken at Ingersoll Rand which focused on lighting, boiler efficiency and remote monitoring elements. Of note was the benefit of sub-metering to determine which pieces of equipment are the heavy users and hence areas that might generate greater savings or opportunities for improvement moving forward.
Ed described sustainability within the highly matrixed BASF organization and described their eco-efficiency analysis which plots environmental impact against costs. Ed presented an interesting summary of their efforts as defined by projects in land use, toxicity and risk potential, resource and energy consumption and emissions. Dave, of Campbell Soups, explained what sustainability means to them in terms of consumers, the environment, workplace and society. Project examples included the use of fuel cells for power generation, reductions in packaged materials and efficiency improvements using heat recovery equipment. In a similar manner Hugh Tole of Roche described a cogeneration project as well as how Roche is engaging their employees to think about energy efficiency issues such as lighting both in the workplace and at home. In all examples, there were ‘low hanging fruit’ projects that require little investment as well as capital projects requiring capital investment. The latter require a strong business case to move forward especially given that corporate funds are scarce during the current economic climate. Different evaluation methods were adopted by each company but most were either Net Present Value (NPV), payback period or Return on Investment (ROI) based. I asked the panel if they were factoring in carbon credits or the price of carbon into their projects. The unanimous response was that although there is a price for CO2 in some geographical regions (EU, RGGI etc.), it is not currently being factored into their financial calculations. As CO2 regulation is developed and a price for CO2 becomes more robust, expect to see projects becoming more viable as the emission savings are more easily monetized. The slide-pack from the session is available here.
The seccond session entitled, ‘Changing business models in the green economy’ tied in nicely with some of the material presented by Bob Willard in the keynote. Speakers included Christoph Lueneburger (Egon Zehnder), Sandra Lauterback (EEP) and Krista Pilot (DKC) with host Anna Tavis (AIG). Christophe presented a model for corporate sustainability adoption which splits the process a company goes through in adopting a sustainability program into three phases – create the vision, implement the vision and then sustain the vision of the long term.
Egon Zehnder’s three phases of sustainability adoption
Given Egon Zehnder’s focus on executive recruitment, they developed a competency model for executives acting in the CSO role. Although all competencies are required, each phase is argued to require specific strengths: Phase 1 = change leadership, collaboration and influence, Phase 2 = commercial alignment and results delivery, Phase 3 = commercial alignment and strategic vision.
Christophe argued that the best background for a role in sustainability comes from individuals who have held profit and loss responsibility (P&L) and my understanding was that this comes from a need to present a strong business case for sustainable projects. Skillsets and competencies required for CSO’s has been studied by Hudson Gain and it’s interesting to compare the different models – clearly a topic for a future post.
Sandra from EEP presented a framework based on that outlined in Esty and Winston’s ‘Green to Gold‘ book. I think the ‘Esty’ framework clearly presents how the reputation based value of an organization – the below-the-water part of the iceberg, interacts with the different elements of an organization’s operations. Sandra gave an example of how a company, NetJets, has implemented a four-pronged climate initiative that focuses on energy efficiency and GHG reductions, technological transformation, offsetting and leveraging outside expertise in order to minimize their overall impact. In the Q&A, a question regarding the different drivers faced between small and large companies was asked. The discussion revolved around all companies having the same sustainability drivers although the nature of their business dictates the relative importance of these. In the case of small companies, my takeaway was that larger companies (who are greening their supply chain) are exerting increased pressure on their suppliers. The driving force to become more sustainable for the smaller companies comes more from this downward pressure from their large customers rather than their own investor and community stakeholders.
Krista Pilot gave an interesting talk that touched upon various green marketing and communication issues facing organizations implementing sustainability initiatives. The importance of sending out the right message at the right time is paramount – clearly a company’s communications function wants to advertise successes but if these aren’t done in a strategic manner, the message can draw focus onto other projects or operations that can undermine the initial message. Some interesting dialogue was generated around the area of ‘green intent’ and ‘green action’ – more people appear to be buying green despite the recession and a generation gap maybe appearing with the young being much stronger advocates of green practices and products.
Krista touched on an area I’ve often wondered about when traveling – what would change your actions: Being informed that 75% of guests re-use their bathroom towels or the standard message which asks you to help the company save resources by re-using? The latter message generates a ‘why should I help you make more money?’ response whereas knowing that the masses are adopting a more sustainable behavior or ‘following the crowd’ message appears to have a greater impact in hotels. I wonder if getting a dollar back on your bill would have even greater effect?
All told it was a very interesting day. That said, it was one that left a number of continuing questions including:
How does a company identify and prioritize sustainability projects?
Has the CSO position existed long enough for us to really be able to draw conclusions as to what makes a great CSO?
I’ll touch on these in future posts but appreciate any comments…
