With climate change top of the agenda for governments and organisations alike, it seems that the best green business practices stem from innovation.
By Ellie Duncan
The phrases ‘green business’, ‘carbon offsetting’ and ‘carbon neutral’ have become buzzwords as governments worldwide implement policies on climate change, and organisations adopt initiatives to reduce their carbon footprint. The British government’s recently-launched ‘low-carbon revolution’ offers support to companies who want to save energy through a Business Link service. A £3 trillion industry in the UK, climate change policies are now an economic imperative for businesses.
Exec Digital spoke to Emily Farnworth (pictured), Director of Corporate Engagement for The Climate Group. The international organisation has created a coalition of governments and influential businesses, committed to tackling climate change.
Is there any excuse for companies not to implement more sustainable business practices?
Emily Farnworth: I think what most companies find when they start looking at this area is that there are a number of cost benefits, and sometimes broader business benefits, of addressing a range of environmental issues. So in some ways, it’s not necessarily that they should have an excuse, it’s more a question of its just good business and it’s mostly common sense.
From our perspective, we’re very focused on energy and carbon emissions and so the minute you start looking at reducing energy, you’re looking at reducing costs.
Can a green business also be a profitable one then?
Yes, definitely, particularly for organisations starting it for the first time because quite often what they find is there’s quite a lot of easy wins in the beginning where they can find some quite quick paybacks around different initiatives that they might implement.
Many of the businesses we work with talk about the benefits for their employees as well in terms of boosting morale.
Gordon Brown has said that the UK needs to match the ‘tremendous focus of energy’ being applied to climate change in the US. Is this accurate?
I think in order for the UK to stay ahead and be in line with some of the things that are going on in the US and China, it’s more about innovation and new types of businesses, not just every organisation implementing best practices, so I think maybe that’s what he was referring to.
We have a lot of organisations within the UK who have reached a leadership position; companies like Tesco, Sky, BT and HSBC have really embraced the issue and implemented a lot of operationally-focused programmes that will help reduce energy.
I think it will be interesting to see some of the newer entrepreneurial companies springing up to see what kinds of product offerings we can incubate in the UK.
Tell me more about the HSBC Climate Partnership (HCP) and your involvement.
So in the most part, HSBC and our involvement in the programme, is very much because of our vision as an organisation; that was one of the reasons we were chosen as a partner.
In terms of the HCP partnership, it’s a combination of what The Climate Group does on global policy and global demonstration, in addition to any local projects that might be going on, which align well with our local missions and the HCP partnership missions.
Are organisations taking an increasingly active stance on climate change?
All of the organisations we work with are, which I guess is why we work with them. Our organisation is very much focused on leadership. We tend to naturally partner – we’re sort of a natural place for organisations that are taking huge steps to move forward. Our membership reflects a number of different sectors and so each sector generally focuses on different things.
I would say, across the board what we find is, the companies that are the most progressive and aggressive have their senior board very much involved in the project and signed up to it, right up to CEO level.
Is there enough support out there for companies implementing green business practices?
I think there is a lot of support in the UK for small and medium-sized businesses and even the larger businesses, both from a government-funded perspective and also private organisations.
The good thing in the UK is that there is so much experience now of implementing best practices and some really solid frameworks that organisations can use to systematically look at where their biggest issues are; whether it’s energy use, waste, or water use.
What is the best advice you can give to businesses that are considering going green?
Regulatory measures are always a really good way of pushing things forward and I think the carbon reduction commitment, given that it will include a much broader range of organisations, from schools and hospitals, to the service sector in particular, that will really help to drive awareness and the implementation of energy savings.
Jumping on the Green Band wagon
As the renewable energy market gathers yet more political recognition, more and more companies are jumping on board the bandwagon. Exec Digital looks at how business can reap the rewards of going green.
By Sarah Wolfe
The US has typically lagged behind other countries when it comes to renewable energy. In 1997, when solar and wind power were just beginning to attract mainstream notice in America, the European Union launched an ambitious plan for 12 percent in renewable energy by 2010. Germany alone surpassed the EU’s goal in 2007 when its share hit 14 percent, according to the country’s Federal Ministry for the Environment, Nature Conservation and Nuclear Safety, and the EU’s next target is 27 percent by 2020.
The US is finally starting to catch up, installing more than 5,000 Megawatts of wind energy per year since mid-2000. Though wind power makes up a little more than one percent of the nation’s electricity supply, the US now ranks second only to Germany.
An increased acceptance of green thinking is moving the US forward. Al Gore’s “An Inconvenient Truth” was pivotal in reaching the masses about the environmental damage future generations could inherit, and government and businesses are understanding better how going green can also benefit them financially.
During his inaugural speech, President Barack Obama – a strong supporter of sustainable solutions – pledged his administration would invest in the development of greener fuels and technologies to cut carbon emissions and reduce the country’s reliance on foreign oil.
A growth opportunity
With the US’s growing renewable energy market come more opportunities for businesses, whether it’s founding a new company with a renewable energy focus or expanding services to that sector.
It’s especially encouraging, in the midst of a recession, to see an industry growing when the sectors that companies traditionally relied on are shrinking. Longo Electrical Mechanical of Wharton, NJ, is one who’s seen this benefit.
The Northeast has been losing manufacturing facilities for years from shutdowns and overseas relocation, including some who’ve been Longo’s clients. The company, however, has established a foothold in the wind sector.
“We’ve only been involved in the wind industry for two years, but already it’s grown to be almost 25 percent of our business,” says President Joseph Longo.
The company’s involvement started when wind-industry player, Hitachi, approached Longo a couple of years ago looking for a way to provide nationwide in-warranty service for generators they supplied to wind turbine manufacturer, GE. Longo pitched the idea of outsourcing the work to their company and was given a contract for all of North America.
“Longo in turn went out and handpicked strategic partners around the country,” says Joseph Longo. “We’re now the North American Wind Service Alliance (NAWSA), a network of ten independent electric motor/generator service centres that have joined together to provide rapid response, up-tower service to the wind farms, focusing on generator repairs. We’re the only network of our kind designed to provide this service to the wind industry in North America.”
The total wind turbine capacity in North America is expected to grow from 22,000 MW to more than 26,000 MW by 2010. The heaviest concentrations are in Texas, California, the Pacific Northwest and the Northern Plains.
To further reap the benefits of the growing wind industry, Longo hopes to partner with another business to manufacture wind turbine generators in addition to servicing them through NAWSA. Those parts are not manufactured in the US and NAWSA wants to be the first to do so, developing relationships with wind industry suppliers like Siemens and Vestas.
Going solar
Though wind power shows promise, some speculate solar energy is where companies and investors should focus with its recent upswing.
“I started [with the Solar Electric Power Association] almost ten years ago but I jokingly tell people I feel like nothing much has happened until the last eight months or so,” said Julia Hamm, Executive Director, in a 2008 interview with Exec Digital.
Hamm says price has always been the biggest barrier, but executives are now recognising, beyond the initial instalment fees, that solar is much cheaper than traditional resources. Solar power’s popularity rests on risk mitigation, she adds. Utilities will have to secure long-term contracts to lock in the price of power for 20 to 30 years.
Germany dominates the world solar market with nearly 50 percent of all the grid-connected facilities in the world. Spain, home to Global Energy Services, is at 23 percent and the US has nine percent.
“Everyone in the industry believes the US will eventually become the leader in solar, but currently lacks the adequate tax and investment credits, which solar and wind installations rely heavily on,” says David Fernandez, COO of GES USA, based in Conshohocken, PA. The company is currently invested in the US wind industry.
When credits expire and are turned down, or if there’s uncertainty over their presence long-term, developers are hesitant to proceed with projects. That, in turn, impacts companies like GES, which has yet to work in solar in the US.
The production of silicon raw material needed to create photovoltaic solar panels is on the upswing, creating more growth in solar and more opportunity for companies to offer repair work or to manufacture parts.
The biodiesel market
Biofuel – notably biodiesel – is another viable market. Produced from oils or fats (like soybean) using transesterification, it’s similar in composition to mineral diesel and an alternative to petroleum. Roughly 80 percent of commercial trucks and city buses run on diesel in? The US, making the switch to cleaner fuel easy.
Riksch BioFuels of Iowa was founded in 2005 in response to a growing interest in biodiesel and it’s been producing high-grade biodiesel for consumption in the Midwest to increase energy security.
There is, however, an overstock of biofuel resulting from farmers planting quickly to meet demand. The Iowa Soybean Association predicted last year that the state’s biofuel industry would invest more than $417 million to build production plants and more than $2 billion in labour and goods and services by 2010. This spending would add more than $3 billion to the Iowa economy by 2010, put an additional $1 billion of income into the pockets of Iowans and create 14,000 jobs.
However, those predictions came before the economic downturn, which has led to a period of mergers and buyouts. Fallout from higher-than-expected feed stock prices has also affected the industry.
Despite the slowdown, Don Miksch – VP, CFO and co-founder of Riksch BioFuel – recently told Exec Digital he believes the market has a strong future because biodiesel is 100 percent biodegradable and low-emission, which creates less environmental restrictions.
“My experience with biodiesel started in 2004 and since that time I have discovered that it is full of potential,” says Miksch.
Geothermal, future of renewables
Geothermal is beginning to see more growth and Nevada Geothermal Power plans to open the Blue Mountain Faulkner I project plant by December this year. When finished, it will have a guaranteed 50 MW output, 40 MW of which will feed into transmission lines through a 20 year Power Purchase Agreement with NV Energy. Three other NGP geothermal projects are expected to go live within two years, with a total output of 200 MW, enough to power approximately 200,000 homes.
“The reason I like geothermal better than other clean technologies is it’s available 24 hours a day from the earth versus 30 percent of the time with wind or only in daytime with solar,” says Brian Fairbank, CEO and Founder of NGP. “It’s also the most environmentally benign in emissions with very little surface footprint.”
Whatever the clean energy modality may be, Fairbank believes the US and world needs to press on in renewables and cease dependence on oil.
“We’ve only been into oil for 100 years and production peaked in the 1970s in the US” says Fairbank. “They expect world production to peak in 2050 and go downhill, but many believe it’s actually coming earlier – sometime in the next generation.
Timberland Green tax
Jeff Swartz is both the highly successful CEO of the Timberland Company and also an evangelist for responsible, ethical business practice. He argues that this should be the norm, not the exception. Exec Digital takes a closer look.
By Hannah Eiseman-Renyard
“You run a big corporation… billions of dollars, right? Okay? But you’re also an environmental activist,” says the interviewer, perplexed. “I thought corporations were supposed to dump heavy metals in our rivers and cause birth defects. Isn’t that part of your job?”
Few CEOs would subject themselves to this kind of interview, on Comedy Central’s The Colbert Report, but then few would do any of the things that Timberland CEO Jeff Swartz is doing. More’s the pity.
“You want to be carbon neutral… sounds wishy-washy to me,” continues satirist Stephen Colbert. “You should be pro-carbon or anti-carbon but carbon neutral sounds like, y’know, Switzerland. Pick a side!”
Timberland, maker of outdoor footwear and apparel, has refused to ‘pick a side.’ “It’s not commerce or justice,” says Swartz. “They’re not opposing notions, they can co-exist together, and for the last 20 years, we’ve been living this value.”
“I am absolutely convinced that I’m not the only one in the Fortune 1000 that believes that,” says Swartz. “You can make a living, you can create wealthier shareholders, and you can have a positive social impact.”
STURDY ORIGINS
The Timberland Company began in 1955 when Jeff Swartz’s grandfather, Nathan Swartz acquired the Abingdon Shoe Company. In 1973 the iconic yellow boot was introduced, which the company later took as its namesake. In 1986, Nathan’s son Sidney took the reins and still acts as Chairman. Sidney’s son, Jeff, became Head of International Sales, rising to CEO and President of the company.
“Now we’re third generation it’d be hard to sustain what we do if there wasn’t a mission at the heart,” says Swartz. “How could we be the voice of the authentic outdoors and the despoiler of the same? It just doesn’t seem to make sense.”
Since then, Timberland has aggressively greened its operations and supply chain, from the glues used in the boots to generating its own electricity with a wind farm near its Dominican Republic factory and running its California distribution hub on solar energy. “It’s one of the largest privately-installed solar arrays in the world and I think it’s beyond cool,” Swartz enthuses.
However, the initial costs of such a project can affect quarterly profits, and therefore the share prices. “Every company wants to see some kind of return. Investment to reduce emissions often reduces energy spend and if a company can see a cost benefit then they will go for it, but usually it has to show a cost benefit within at least two to four years,” says Niall Thorburn of Ecosecurities, a leading company dealing with emission reduction credits. “If companies had a longer investment-acceptance range, such as ‘this investment will pay for itself in ten years, and that’s acceptable because it reduces our carbon emissions,’ that would help.”
Timberland has had to fight hard for its principles. Though the company grew eightfold between 1992 and 2005, a large portion of its success was down to high-profile hip-hop artists adopting of Timberland boots as fashion accessories. One notable example even took the company’s name as his own. However, when the hip-hop crowd moved on the company lost $150 million in annual sales, and the stock price has dropped around fifty percent from its all-time high.
Swartz has publically stated that the fashion-related high “is not coming back” and one banker told him in as many words: “None of this hugging trees and painting fences. It stops.” However, the banker did not count on another consumer trend: the ecologically-conscious consumer groundswell that Timberland is both tapping into and pushing further.
So at what point would a company rule out green initiatives based on cost? “It’s a difficult question. What you’d need to do is to say ‘here’s the money that a company has spent versus their operating costs. It’s not a calculation I’ve done for anybody actually,” says Thorburn, whose company has been in the carbon reduction industry for 11 years. “Most companies look on an ad hoc basis for each initiative…. Every company will be different, but every company wants to see some kind of return.”
AMBITIOUS GREEN GOALS
Timberland has set itself the ambitious target of becoming carbon neutral by 2010. Reducing a carbon footprint is not just the right thing to do environmentally: “You can actually save money,” says Thorburn. “Your carbon emissions are often tied in with energy spend. If you know where that fuel consumption is taking place, you can identify if there’s an opportunity to make it more efficient, reduce your energy spend, save money.”
However, Timberland realised that it needed to deal not just with its own house, but to raise awareness: challenging its competitors to keep up the green pace. “Where it really becomes powerful,” says Swartz, “is when the consumer says, ‘That’s interesting to me, that information’s accessible to me, and I’m going to act on that information.’
“What lacks in the footwear, the apparel, and the fashion industry is access to that data... We put a nutrition label on the shoebox that talks about renewable energy content, that talks about the absence of child labour, that talks about the number of trees we’ve planted.”
INFORMATION INNOVATION
Those labels now go on every single pair of Timberland shoes. “[If] even one in every three consumers, raised their hands and said, ‘Why doesn’t the other guy have a label on?’, there’ll be labels.” says Swartz. “The labels will reveal information and that information creates pressure on the CEO so the value chain will respond.”
As Swartz predicted, other CEOs are already responding. Footwear company Nike has eliminated the use of fluorinated gases across its operations, and plans to become carbon neutral by 2011; British crisp manufacturer Walkers has also taken a leaf out of Timberland’s book, putting carbon labels on all its crisp packets. “It’s kind of contentious because there’s a complication in how you measure, and will customers actually understand?”Says Thorburn. “But again it’s leading by example.”
Swartz believes the expanding organic food sector has already demonstrated the power of informed choice. “The consumer says, ‘Here are two apples: One, according to the nutrition label has this kind of pesticide, this kind of herbicide, this kind of carbon footprint. The other one, organic, has a very different profile …Y’know what? I prefer that [organic] apple.’ That’s revolutionary stuff.”
WHAT CAN YOU DO?
But how replicable is Timberland’s example? It certainly helps that Timberland is a company with an annual sales of over $1,436 million. So what can smaller companies wanting to go ‘green’ do for their own business? Switching business to more ecologically responsible contractors and suppliers is one option which many are already choosing.
“There are examples such as a London taxi firm which has gone public and said that since going carbon-neutral they’ve won new contracts specifically because of it,” states Thorburn. “It may be very difficult to decide between three suppliers, and people are bringing sustainability and emission performance into their buying decisions.”
Though reducing the ecological footprint of a business will likely cost money at the outset, it often saves money in the long term, and can attract new clients. Trailblazers such as Timberland are ensuring that environmental impact is increasingly becoming one of the criteria on which businesses are judged, and could be a facet that distinguishes your business from the competition.
The biggest thing in building.
The renewables revolution has been labelled “the biggest thing in building.” Is this true? Exec Digital takes a look
Written by Hannah Eiseman-Renyard
The Greater Gabbard wind farm, begun in July 2008, marks a new level of renewable energy. Built so far offshore that it’s in international waters, this massive construction will have 140 turbines, producing 1,750 GWh annually, or enough energy to supply all of Suffolk.
Begun as a joint venture between Siemens Energy and Fluor Ltd, the massive wind farm will be built on the Inner Gabbard and Galloper sandbanks, around 23km out to sea. This is modern wind power generation, with larger turbines, producing more electricity, and has, understandably, been described by some in the industry as “the biggest thing in building,” as well as a “renewables revolution.”
Though the added complications of marine construction and transferring the energy to land mean the costs of building offshore are around double the costs of building on land, the benefits are also many – offshore wind farms risk less complaint from locals for whom the sight and sound of the turbines is not a problem, and the turbines can catch far higher wind speeds offshore, where hills and buildings do not interfere with this raw force of nature.
On June 26 2008 the government revealed its plans for this sector in its Renewable Energy Blueprint, which contained incentives for businesses aimed at encouraging £100 billion of investment from the private sector. The 289 page document goes a long way to removing the red tape which had, until recently, plagued those trying to create renewable energy sources. Business Secretary John Hutton stated it could lead to the creation of 160,000 jobs. Leading experts from the private sector such as Andrew Lee, Managing Director of Good Energies, also praised the proposals, which he says “appear to cover every aspect … they are taking a much wider view of the issues than has been the case in the past.”
With projects and government plans this large, there is little room for doubt that the renewables sector of the market is becoming big business. With the government’s aim to have 10 percent of energy renewable by 2010, and 20 percent by 2020, it’s only going to grow. Hutton believes this will “maximise the economic benefit for the UK by creating a new generation of green collar jobs and make the UK “a world-class centre of energy expertise and a leading location for inward investment.” This means massive investment opportunities, and a renewed focus on British technology.
While UK government policy becomes increasingly interested in energy independence to hit Kyoto-agreed targets, the spiraling prices of over US$100 per barrel of oil has added an economic urgency to creating clean, renewable energy, which Britain is primed to take advantage of. “The conditions in the UK are perfect for wind …like photovoltaics are perfect for California because they have plenty of sunshine,” says Viktor Jovanovic, CEO of Stormblade Ltd. “We’ve got the best quality wind resource in the whole of Europe in the UK, and there is potential to produce much, much more power from wind than we’re doing at the moment. We’re crazy not to use it.”
So who should be interested in renewable energy? “Everyone,” says Dr Jane Powell, Director of Environmental Futures Ltd and a lecturer at the University of East Anglia. Neil Gray, Associate Director with real estate consultancy Colliers CRE agrees: “I think everybody should be interested, to put a catch-all, but I think mostly the young generation given that we’re talking about sustainability, making sure we don’t damage the environment and protecting it for the future.”
EGGS IN ONE BASKET?
However, doubts have also been raised about wind power. While a recent Telegraph article branded wind an “intermittent and at times virtually non-existent energy source,” even companies which have invested in green energy, such as Eon, have raised doubts about the reliability of an energy source which varies according to the weather.
Gray estimates that wind energy makes up around “80-90 percent” of the renewables market, but attention is increasingly being drawn to the fact that during peak winter demand, wind power generation is at its lowest as seasonal wind speeds drop. It is estimated that 92 percent of current wind capacity would need to be backed by traditional power stations.
Is it strange that such a variable source of energy has become the poster child of renewables? “I don’t see it as being odd,” says Gray. “I think it’s just a symptom of the technology that’s available.” What other renewable energy sources should we pay attention to? “We’ve got a world leading wave capability in the UK, and other countries such as Portugal would be quite glad to buy the technology from the UK” says Gray.
Dr Powell believes the answer is in diversification: “I don’t think it’s one or the other,” she says. “The answer is to make sure you don’t have all your eggs in one basket.”
THE FUTURE
Viktor Jovanovic would appear to be the future of the wind power business. His new Stormblade turbines, currently still at the prototype stage, are quieter than current turbines and around a quarter of the size. They can also work at far higher and lower wind speeds, creating a more constant supply than current technology. Laboratory tests have shown Stormblade to be 70 percent effective compared to 30 percent with the current generation. “I think that the next generation of ultra-efficient wind turbines will be very price-competitive,” he says.
Jovanovic believes the industry could do better in adapting to such innovations “naturally there will be some resistance to something that’s completely new and departs completely from the conventional design, and that’s understandable, but I think once we break into the market the larger manufacturers will adopt the Stormblade design, if not to replace their existing generators, then at least it will be useful to them in areas where conventional wind turbines can’t operate profitably.”
Gray concurs, stating: “I think there’s always going to be a market for new technologies, but also commercially for the operators or investors because these [technologies] would have to be replaced – the [current] turbines have a life of 25 years and if they’re shown to be successful businessmen will want to build new ones once their life is finished. In which case, there’s always an investment opportunity for future business.”
If the industry can adapt swiftly enough in investment terms to support the development of these newer, more efficient technologies, the Kyoto targets for 2020 may be well within the energy industry’s – as well as the planet’s – grasp.
CSR the Halo Factor.
Can corporate social responsibility programs really benefit both businesses and society as a whole?
Written by Austin K. Welch
Promoting a company’s commitment to all things virtuous is great if its operations and motives are truly whiter than white. But let’s face it, when you’re a major economic player in an industry trying to attract the best new talent and you preach a little too loudly, isn’t it bound to raise an eyebrow or two?
Cynicism aside, corporate social responsibility, or CSR, has taken businesses across all sectors by storm. Companies are now zealously telling us how much they are prepared to give back to the world. In contrast to the perception that profit is the sole criteria for measuring success, there is a shift to proclaim political, ethical, cultural and environmental objectives as well.
The general public and shareholders have begun to expect a lot more from businesses, but how much faith do they really have in the rhetoric? And how much sway does CSR hold when attracting employees?
A recent Mori poll found that 58 percent of British workers firmly believed in the importance of their company’s social and environmental responsibilities. Further research has confirmed new graduates are becoming savvier in their career choices and are actively seeking out companies with a recognised and measured positive impact on society. So significant is this movement that universities are now churning out high-flying graduates into the labour market with an expert knowledge and dedication to CSR.
Nottingham University Business School now puts CSR high on the agenda with an MBA course specifically focused on the topic. Its website proclaims it’s “the first of its kind in Britain”, but undoubtedly it won’t be the last.
For those starting off or moving up in their careers, association with a socially responsible organisation could be enticing. They may view the opportunity to work for a company that reflects their own personal beliefs as fulfilling.
Since healthcare company Novo Nordisk launched its Values in Action programme, which aligns its business objectives with sustainable development principles, the company has seen a five percent drop in staff turnover.
In fact, according to research by public relations company Cherenson Group, 78 percent of employees now place working for an ethical and reputable company above receiving a higher salary. It’s an ideology echoed by General Electric’s former CEO Jack Welch. “For stars there is a choice,” he says. “They work for companies that are in accord with their own value systems. If they don’t want to work for a polluter they will not. After all, people want to hold their heads up when they are with their peers. They don’t want an embarrassed silence when they announce who they work for. These days we value a great mission and a great working lifestyle as much as a bigger desk and the prospect of promotion.”
So the current promulgation of CSR makes it hard to believe that the top 400 companies in the UK still only invest a measly 0.4 percent of pre-tax profits in community ventures. If organisations want people to believe they are not just being sucked in by some great PR machine, they have to demonstrate a true commitment to CSR.
Valuable lessons can be learnt from companies such as Enron – once incredibly active within its local community in the US and involved in numerous high-profile charity projects, but ultimately exposed as fraudsters.
There are, however, great difficulties with recruitment and retention for organisations that suffer from negative PR and public lobbying. Starbucks, rarely out of the news for a variety of ventures and associations, has now launched its own CSR programmes. In 2007, it aims to buy 60 percent of its coffee under Coffee and Farmer Equity Practices rules that promote socially and environmentally responsible farming.
There is no doubt that CSR can do a lot of good for branding, especially when it promotes the “thinking globally, acting locally” ethos. Yet, as many schemes are still in their infancy, only time will tell how successful they are. But as the old adage goes, “Happy workers are loyal workers”.
