August 2011 Archives

Corporate sustainability strategy: now part of the CFO's remit

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Sometimes it seems as if corporate responsibility within the organisation for sustainability strategy is being passed around like a relay baton.

So far, those touched with responsibility for sustainability include the corporate social responsibility (CSR) team, marketing (because of the future brand and reputation implications in the UK of the Carbon Reduction Commitment (CRC) league tables), IT and Facilities who are having to manage and measure energy usage, and in theory, the CEO who should surely know the big picture at least.

Now, an Ernst & Young report, 'How Sustainability has Expanded the CFO's Role', recommends it is also the CFO's turn to pick up the baton, because, in the US at least, as Triple Pundit explains, sustainability trends are shifting the role of the CFO into three key areas:

  • Investor relations:  "Shareholders are speaking much louder and much more stridently than they did just a few years ago.  During the 2011 proxy season, 40 percent of shareholder resolutions were related to ESG issues. And over a quarter of ESG-related resolutions gained a 30 percent "Yes" vote, which Ernst & Young describes as a critical threshold (other observers say anywhere from a 10 to 20 percent vote can motivate companies to rethink their policies).  Mutual fund companies are paying more attention to sustainability related issues, and the rating companies are directing more focus towards ESG matters as well.  All this leads to a shift in the duties of companies' investors relations staffs; and CFOs, according to Ernst & Young, will lend more than a few hands with the demands placed on IR departments.
  • External reporting:  More than 3000 multinationals issue sustainability (or CSR or ESG) reports, and many of these companies now provide more than static or trite glossy PDFs. Companies including UPS, Timberland, and Microsoft are raising the bar in offering frankness while encouraging increased stakeholder engagement.  To that end, more companies are having their sustainability reporting audited by third parties (such as the Carbon Disclosure Project for carbon emissions performance).  And that experience with third party performance falls into the CFO's lap because they know how to balance the challenges and opportunities that arise from third-party verification.
  • Operational controllership and financial risk management:  Early last year, the US Securities and Exchange Commission issued guidelines to companies on how to disclose risks possibly related to climate change.  Carbon data, and more frequently, water data, is becoming financial data because of these resources increasing price.  What was once tangential to the costs of running businesses has and will be central to the financial risks that come when running a company.  Whether evaluating the costs of large capital projects or ascertaining the reliability of sustainability data, CFOs and the departments they head will be careful when ensuring that all this data is accurate."

Five suggested actions that CFOs can take to enhance corporate value through sustainability include the following:

• Actively pursue a sustainability and reporting program.
• Ensure that those responsible for sustainability matters do not operate in isolation from the rest of the enterprise -- especially the finance function.
• Enhance dialogue with shareholders and improve disclosure in key areas, particularly those related to social and environmental issues.
• Ensure that directors' skills are relevant to the chief areas of stakeholder concern, including risk management tied to social and environmental matters.
• Consider using nontraditional performance metrics, including those related to environmental/sustainability issues.

 

Knowing which carbon compliance scheme you fall under

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Just a short line about a tool I came across from Carbon Guerilla which has produced a useful graphic for organisations to see where their compliance lies.

As Carbon Guerilla director Mark Clayton says, deadlines are concentrating minds, and in terms of finding ways through the various elements of legislation, this flowchart might be useful in the future for deciding whether you're affected by CRC (the Carbon Reduction Commitement Energy Efficiency Scheme), a CCA (Climate Change Agreement) or the EU ETS (European Union Emission Trading Scheme)

 

Using IT to focus on reducing excess inventory and improving sustainability

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A recent blog post on the Harvard Business Review has raised the issue of inventory, its impact on sustainability, and what IT can do about it.

The piece, by Andrew Winston highlighted organisations' previous inability to do much about their estimation processes, and what the consequent excess inventory's impact is on sustainability,

Winston suggests that the world is sitting on roughly $8 trillion worth of goods held for sale.That's $8 trillion worth of embedded environmental footprint, which could be reduced, saving money, energy and material.

The problem is that when it comes to managing inventory levels, organisations are falling down on demand planning i.e.predicting how much product customers want. As Winston points out, consumer product goods (CPG) companies spend a fortune on demand planning. And they have to: P&G's 2010 total inventory, for example, was valued on the balance sheet at $6.4 billion. 

Effective use of IT can play a significant role in making operations more efficient and sustainable. Winston suggests that using both demand sensing software and good management practices has helped P&G cut 17 days and $2.1 billion out of its inventory, saving money in manufacturing, distribution, and ongoing warehousing - and carbon, material, and water.

You can read the complete piece here


 

GE goes Platinum with pioneering green data centre

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There has been much coverage of GE's unveiling in the US of a new pioneering "green" data centre, built on the original site where the world's first commercial computer was deployed in 1954.

The new data centre, developed by GE's IT department is based at GE Appliances & Lighting in Louisville, Kentucky.

 

The data centre is one of the world's first to achieve Leadership in Energy and Environmental Design (LEED) Platinum Certification, a rating awarded by the U.S. Green Building Council for projects that go above and beyond standard building codes to create sustainable, energy-efficient buildings.

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To get the Platinum rating, GE ensured the data centre hit a few targets:

 

  • 98.3% of the walls, floors, and roof were existing space that didn't require new construction
  • The data centre is 34% more energy-efficient than a comparable code-compliant building
  • It reduces by 50% the amount of space used by the previous data centre by using high-density servers
  • Water consumption inside the building is being reduced by 42% of the industry baseline by using ultra low-flow fixtures
  • 50.7% of construction materials were sourced regionally
  • 30.2% of the building materials were recyclable materials
  • 85.4% of construction waste was diverted from the landfill (mostly through recycling)

 

http://www.gereports.com/new-ge-appliances-lighting-data-center-opens-wins-rare-platinum-leed-certification-for-energy-savings-and-sustainable-features/

Green IT: how to deliver value to your business

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This article by Sheila Upton is worth taking a look at. It discusses how Green IT can help deliver value to the business, and also covers managing expectations of Green IT, as well as what IT brings to organisations' sustainability programmes.

Identifying governance best practices for managing corporate sustainability projects

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I recently came across this post  on Greenbiz.com by Christopher Mines from Forrester which discusses the need for coherent governance of sustainability initiatives.

He suggests there are three critical categories of setting governance best practices:

1. Setting goals

2. Creating incentives

3. Formalising structure

The post makes the point that the likely buyers of sustainability software will be business leaders who hold the budget for sustainability technology, with business and IT coming together around two important capabilities: integration with existing systems, and analytic capabilities. A sustainability software solution must be able to integrate with existing systems in, e.g., ERP, building management, and supply chain.

 

 

 

Sustainability: driving innovation and growth in IT, telecoms and cleantech

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This blog by Steve Goldstein of Growth Advisors on Greenbiz.com discusses how companies in a range of industries, including the IT indstry, are using sustainability and innovation as a springboard to growth.

Goldstein makes the point that although in the communications and high-tech industry, "much has been written about how software will play an important role in monitoring environmental performance - an estimated $12 billion market this year with some of the world's and industry's leading companies like IBM, HP and SAP actively competing for it.. sustainability is playing a much larger, even pivotal role in remaking the competitive fundamentals, business models, and direction and growth of the industry itself."

He cites three sectors where an industry-wide growth opportunity is being provided by sustainability.

• High-tech equipment and services - "Cloud computing is fundamentally shifting the way enterprises use communications and high-tech products and services. Enterprises are embracing "the cloud" to reduce capital and operating expenditures. Of course, one of the biggest operating expenditures in a data centre is the cost of energy. The use of virtualisation software (central to the operating effectiveness of servers in data centers) from the leading provider (VMware) saves more power than the amount of electricity used annually for heating, ventilation and air conditioning across all of New England. Further, the energy efficiency of computing and network equipment has improved by 70 percent to 90 percent in recent years. "Cloud" is the competitive game changer and a big growth opportunity that every major player in this industry is working on and sustainability is a fundamental reason for its emergence."

• Telecom services - "For major telcos and other players in the communications business, the focus on sustainability is reviving established services like video conferencing, fleet telematics, and telecommuting that date back a few energy crises. It is also putting communications companies in position to compete for business in the rapidly growing markets for cloud, hosting and vertical solutions like e-health against IT providers. New and potentially very large markets for smart buildings, smart grids, remote monitoring, and electric vehicle charging are also in the sights of many companies in this space. Leading telco services providers are beginning to put sustainability at the centre of their product strategies and are looking to address the competitive and regulatory pressures customers are feeling around the sustainability issue. They are in a unique position to provide a broad and integrated set of solutions to the range of an enterprise's sustainability needs."

• Cleantech
- "Clearly a new and rapidly emerging, yet already large space ($188 billion market value in 2010, according to Clean Edge), more money is going into cleantech than any other communications or high-tech segment. Billions are being invested by venture funds, Internet players like Google and long established tech giants including Intel. Why? Solar, water, wind, power, electric vehicles and other cleantech products are highly dependent on information technology and communications in both their operation and distribution and represent the most significant growth and value creation opportunities in this industry for the foreseeable future."

 

Carbon Disclosure Project report details low carbon benefits of cloud computing

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One of the most informed and engaging writers around sustainability and business is Andrew Winston, who writes a blog called Finding the Gold in Green and writes for the Harvard Business Review as well. (The Harvard Business Review blogs, by the way, are well worth a read)

 

One of Winston's recent blogs discusses a new report from the Carbon Disclosure Project about the sustainability benefits of Cloud Computing

Here's the intro to the report:

 

Across business, executives are looking for ways in which they can operate more sustainably and thereby increase their competitive edge. Information Communications Technology (ICT) is seen as a key area of focus for achieving sustainability goals. This report shows that business use of cloud computing can play an important role in an organisation's sustainability and IT strategies: improving business process efficiency and flexibility whilst decreasing the emissions of IT operations.

 

This study used detailed case study evidence from 11 global firms and assessed the financial benefits and potential carbon reductions for a firm opting for a particular cloud computing service. It also demonstrates how projected cloud computing adoption could drive economy-wide business benefits from a financial and carbon reduction perspective in the US.

 

The results show that by 2020, large U.S. companies that use cloud computing can achieve annual energy savings of $12.3 billion and annual carbon reductions equivalent to 200 million barrels of oil - enough to power 5.7 million cars for one year.

 

The report also delves into the advantages and potential barriers to cloud computing adoption and gives insights from the multi-national firms that were interviewed.

 

In addition to a predicted aggregate, annual carbon reduction of 85.7 million metric tons by large U.S. companies, cloud computing can:

  • Help users avoid costly up-front capital investments in infrastructure
  • Improve time-to-market as a new server can be created or brought online in minutes
  • Provide greater flexibility as clouds allow firms to pay for excess capacity only when they need it
  • Avoid the continual maintenance of excess capacity needed to handle spikes
  • Improve automation that helps drive process efficiencies

"The study results make a powerful case for businesses to continue to explore and adopt secure and flexible cloud computing solutions," said John Potter, Vice President, As-a-Service Solutions, AT&T.

 

Winston added: "Finding providers and partners that can take some of your energy-using operations to scale, and manage them in a shared capacity, is good for both business' carbon footprint and its bottom line."

 

I suspect the report's conclusions on cloud computing may be a case of preaching to the converted here, but the insight of some of those interviewed for the study may be useful.

 

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