sascom voices - The sascom magazine blog

Yesterday I had the opportunity to meet an innovator and entrepreneur in the banking industry – Henry McKoy. His green vision is to establish proven lending practices that consider not only a commercial applicant’s credit worthiness, but their quantifiable impact on the environment and community.

What are the potential benefits of this program? If the commercial loan is assigned a finance rate relative to expected sustainable performance, then organizations have incentive to structure a business plan that delivers the most efficient sustainable results – thus achieving the lowest lending rate.

Henry’s banking background proves that an organization can become very profitable with an employee-centric and environmentally friendly model. He’s done it before – and he’s taking his experience and contributing it to his network of community banks. The challenge will be establishing a consistent evaluation methodology that values an organization’s contribution to their community (education or hiring programs, for example) as well as environmental stewardship. Given how quickly the market is maturing, this dream will be a reality in the near future.

I'm not the only one who thinks so. Recently, Henry was invited to the White House to represent the work of his bank, Fourth Sector Bancorp, in a brainstorming session with President Obama.

What if all lending institutions applied this “green lens” to commercial loan applicants? It’s hard to underestimate the incredible impact this practice could have on business development and our ability to create a low carbon economy.

This Tuesday, I had the opportunity to participate in a half-day seminar on “What Sustainability Means to a Company’s Bottom Line.” The event was hosted by SAS in our green LEED-certified Canadian Headquarters in Toronto.

As I was preparing for the seminar, I reflected on the topic at hand. I posed the question: if sustainability doesn’t improve an organization’s bottom line, then would this be a hot topic in boardrooms around the world today? Some may argue that, yes, reputation and other intangible benefits are reasons for investing in green practices. And that is true. However, David Senf from IDC shared that brand value is the least compelling of the investment drivers. What is top of mind? Cost Reductions.

There are some real case examples of organizations that derive bottom line benefits from sustainable strategies. I shared examples from the Poste Italiane Group and an Event & Entertainment Company. But the one stand-out in my mind is the University of North Carolina at Chapel Hill . In 2006, the President of the University signed the American College and Universities President’s Climate Commitment, pledging to be carbon neutral – no net greenhouse gas emissions – by 2050. Given that the university operates like a small city with over 17.5M sq ft of space, public transit, and a coal fired power plant, they needed assistance to quickly assess areas for potential improvements. Using statistical discovery software and advanced data visualization tools, they are now able to look at 10 years worth of data on their 300 campus facilities.

In one recent case, they identified a building that was consuming significantly less resources after a maintenance upgrade improved energy efficiency. However, after 8 months, the building returned to its previous consumption pattern. The change in consumption was easily spotted in the visualization technology, reported to building engineers, and within two days the faulty valve was fixed. UNC estimates that this identified $30,000 of annual energy savings in that one building alone. What could be accomplished over the entire 300 asset inventory?

The progressive nature of UNC’s program is exemplary. Those of us working in the sustainability field at SAS believe that, in the future, managing carbon will be just as normal as managing your financial budget.

Please share your experiences with how sustainability contributes to the bottom line.

The top administrator for the US EPA recently released findings that will pave the way for legislation that limits greenhouse gas emissions in the United States. With this report, the US takes a big step closer to European Union nations, which have agreed to Kyoto greenhouse gas limits and are pushing for a new treaty on climate change at a December meeting in Copenhagen. While Congress has vowed to be sensitive to the economic ramifications of either a carbon tax or a cap-and-trade system, businesses face uncertainty until a formal regulation is passed. Particular sectors impacted are electric generation utilities, industrial emitters (oil & gas, mining, chemicals), large scale manufacturing operations, gas suppliers, and refineries. In these circles, this is Big News. It was immediately picked up by the top nightly news anchors, and published widely on Monday, including articles in The Wall Street Journal, The New York Times, and other members of the Associated Press. In the short term, these affected entities should proactively measure and monitor current emissions in order to (1) evaluate how regulation may affect them and (2) identify the most economical areas to improve. These are the first steps towards a comprehensive greenhouse gas emissions management system, which will be necessary to efficiently respond to future regulations. While legislation is working its way through Congress, the public (and some influential economists) are beginning to re-shape opinion about the most efficient way for the U.S. to reduce our total emissions. Today’s blog from John Sall on “Earth Day P’s and Q’s” is a testimony to such growing public interest. As he suggests, catch Earth Day fever and take this opportunity to learn more about environmental policies by reading his recommended articles. As always, your feedback is welcome. Happy Earth Day!

This week I had the rare opportunity to hear directly from CEOs and Senior Vice Presidents from diverse industries about the importance of corporate citizenship to their employees, customers, and bottom line. Marie Lowman, left, Director of International Development at SAS, participated on a panel with The Gap Foundation and the Abbott Fund. Here are the insights I took away from two days of great dialogue:

• Action matters more than rhetoric. Ray Anderson, legendary founder of Interface flooring and textile company, talked about the simple philosophy of empowering employees to achieve aggressive goals. Once your team understands that you are serious about changing the paradigms upon which your business operates, then innovation explodes, turnover reduces, and productivity increases. In the case of Interface, profit has doubled.

• Accountability is king. Particularly in the area of corporate philanthropy and social entrepreneurship, work is often handled in the developing world so outlining expectations from the beginning is imperative. Then, it is incumbent upon all parties to report performance throughout the project. Qualcomm shared their experience with providing a “business in a box” to women in Indonesia so that they can resell cellular and internet services to their community. Kiva talked about the necessity of trust and the importance of auditing in the world of microfinance, particularly when harnessing the power and anonymity of the internet.

• Alignment of incentives. John Replogle, CEO of Burt’s Bees, outlined the 2020 vision for his company. Among other things, he wants to be “off the grid” (generating their own power), provide zero waste to landfills, and cut water consumption by 50%. One way he is hoping to meet these goals is by linking incentives for each employee to these priorities through performance appraisals and bonus programs for specific achievements.

The elephant in the room was uncertainty about the impact that the current economic situation has on organizations’ ability to stay focused on corporate citizenship goals. The attendees this week were guardedly optimistic. My interpretation is that companies who cannot extract CSR or sustainability from their DNA will stick with their programs and emerge from these times with a competitive differentiator – either in terms of product innovation or internal efficiencies that keep costs low. As Ray Anderson repeated to the audience, embracing sustainability is “a better way to bigger profits”.

But for those organizations who only have one foot across the threshold or whose leaders are preoccupied with short term results, the commitment to sustainable innovation may wane unless employees find ways to articulate the business case. It will be the exception rather than the rule.

The discussion at “The Cost of Doing Business in a Cap and Trade World” was my first open forum that provided a glimpse into the financial and legal havoc that a carbon market could impose on many organizations.

Here’s a quick carbon market primer: proposed regulations cap the amount of carbon emissions by providing a set number of carbon credits to businesses in a defined set of industries. Businesses that exceed their amount of credits must purchase them on the market. Those who can operate below the number of credits can sell the credits to the market and use the revenue to pay for the emissions reductions projects. The success of the carbon market depends on whether or not companies are accounting for CO2 accurately (either emissions or offsets). This has created a new field for auditors and independent verifiers.

There have been numerous studies on the costs and benefits of a carbon market. The disappointing realization that I came to is that the real cost of a carbon market not only comes from the investment in new technologies, the need to purchase credits in the market, or the efforts to find programs with partners that offset current emissions through renewable energy investment or aforestation (creating forests where none existed before).

The real cost will come in lawsuits and insurance. According to recent research, “climate change litigation is booming. The past five years have witnessed a proliferation of global warming lawsuits brought under an array of novel legal theories.”

Therefore, directors of many companies face liabilities that the insurance companies are writing new policies to underwrite. I find that this is an unfortunate influence on an otherwise efficient use of economic markets. I am no economist, but I think it must be difficult to get good estimates of the financial impact on all market players. And that is precisely why businesses are worried.

Let’s just hope that common sense will prevail and a good solution will emerge from the industry that can be sponsored and managed efficiently among engineers, lawyers, and environmentalists. Your comments are welcome!

I recently had the opportunity to attend a Community Success Forum on the topic of our water supply in North Carolina. The drought of 2007 catapulted state water management issues high on all public officials priority list.

The state climate office said that 2007 was the worst drought on modern record. In May 2007, the base flow from snow and collected rain did not fill reservoirs to necessary levels. August 2007 was the hottest August ever recorded. Ever. No measurable rain came. Where were our offshore hurricanes?

So we started 2008 with a significant deficit. This conference, five and a half months into the year, came one week after reservoir levels were finally back to normal. But the pressure is not off. With 100-150 years of data, the climate expert could not provide any confidence in a weather prediction for this year. There's a 50% chance that the storms will come up the Atlantic and we’ll have enough storms. But there's also a 50% chance that the storm pattern will move up the Gulf and hit Texas and Louisiana again this year. Additionally, even though we look pretty good now, the monthly rain levels charted over the past 20 years shows that it is the second half of the year that really determines our water forecast. So we must still ask ourselves, what can I do to conserve? What can my company do to operate responsibly?

Mayors and commissioners described their water supply interconnectedness and the benefit of regional collaboration. In particular, the Mayor of Durham provided a colorful tour of the water management education resources that her city provided to citizens. A new toilet flapper, ballast to reduce water held in the toilet tank, and an hourglass to help keep showers short were the highlights for me. I could definitely use each item!

What’s in your water management toolkit?

In a panel discussion about innovation Tuesday at the Premier Business Leadership Series in London, the CEO of Telstra, Sol Trujillo, called upon business leaders to employ the “Wayne Gretzky” management technique. Instead of reacting to play occuring right now, move ahead to where you predict the puck will be and position yourself to receive the puck and score on the competition.

It’s hard to argue with the success that this technique brought Gretzky in his illustrious career – four Stanley cups, nine Hart Trophies as the most valuable player, and ten Art Ross Trophies for most points in a season. And Telstra, the largest telecommunications company in Australia, is in a transformative period under the direction of Mr. Trujillo as it moves from a state-owned monopoly to a competitive market. Telstra is anticipating the future and positioning themselves as the media and communications provider in Australia, with rapid expansion plans for Asia.

I heard this comment just a few hours before SAS launched a new business-focused solution: SAS for Sustainability Management. And as I studied the notes for our press panel where the launch announcement was made, I thought -- we’re anticipating the puck!

This is the first solution of its kind on the market today. With global sales and delivery teams, SAS is well-positioned to address specific sustainability initiatives for key industries and regions around the world.

Market analysts, the perennial bellwether of IT trends, have been beefing up their research agendas on the topic of corporate social responsibility, the “triple bottom line” and green IT. But no market sizing or magic quadrants exist today. That is due, in large part, to the lack of definitive global standards for measurement and management of carbon. While the standards evolve and converge, we have to anticipate how that landscape is evolving and offer a solution today that advances the needs and interests of our customers.

So how do we “own the puck” and deliver value for our customers? We will apply the best practices in sustainability decision-support that we have learned in partnership with Cisco, and here at SAS, to other leading organizations.

Leading up to this product launch, I had conversations with companies across the financial services, paper and packaging, hospitality, government, and high tech industries. I learned that many of them have recently initiated projects to determine what data is required (and available) to calculate their carbon footprint. Others are setting groundwork to adopt sustainability performance reporting, such as the Global Reporting Initiative.

So it’s the perfect time to tie sustainability initiatives together and converge on a single platform for operational intelligence. The only way we … or our customers … will know if we’re staying in front of our competition is by analyzing data, setting goals, measuring our progress toward those goals, and exploring what-if scenarios to help us determine where the greatest impact can be made.

In a recent interview with CNN, Trujillo reflected on the competitive nature of business today. “[Y]ou keep score by how you're growing [compared with] your competitors, how you're growing your revenues, [and] growing margins.” Now, organizations will be keeping score on environmental and social responsibility. In fact, Telstra just released a report entitled. “Towards a high-bandwidth, low-carbon future.”

It is exciting for SAS to be in front of this wave. However, as we continue to develop and refine solutions that address sustainability management, we must keep Trujillo and Grezky in mind and anticipate the future challenges and opportunities that will be coming our way!