We all know that “Sustainability” has morphed from catchphrase to mandate, yet despite widespread adoption and co-option of term, it’s not at all clear how sustainability is achieved, measured, and valued. One of the biggest stumbling blocks to wide-scale implementation of sustainable practices is the lack of definition and the sketchy connection between cause and effect. Reducing greenhouse gas emissions and increasing energy efficiency are laudable goals, but what about the myriad of other factors that impact communities: water resource management, environmental protection, workers rights, infrastructure impacts, and quality of life?
A couple of weeks ago, I was lucky enough to attend the first annual SXSW Eco in Austin, TX. One of the highlights of the three-day conference included a panel discussion focusing on “tools and techniques that will enable businesses to understand and control their energy and utility costs”, entitled “From Site to Corporate: Managing Energy and Utilities in a Global Economy”, with commentary from professionals in the field, including Paul Allen (Constellation Energy), Alison Taylor (Siemens Corporation), and Karl Van Orsdol (Hewlett Packard). The panelists offered a wide range of perspectives and prognostications—below some highlights.
The conversation began with a question—given the slow global economy, how can energy and sustainability managers best continue to demonstrate the value of expenditures on energy efficiency? The answer: establishing financial value and incentives/tailored financing options, defining a “sustainability value” and brand (with a focus on investor/stakeholder expectations), and creating an environmental benefit methodology.
According to Allen, establishing corporate sustainability involves providing customers with “a whole variety of tools to limit their exposure to commodities variables.”
“What we want to do is retain them as customers,” said Allen, who went on to explain that when commodities are high, energy efficiency is on everyone’s mind, but “the truth is, it never really goes away.”
Taylor believes CEOs see efficiency as a bottom line issue because often technological overhauls and retrofits require capital. “They’re thinking more broadly about their reputation about their costs over a longer view,” said Taylor.
For the ESCO (or Energy Service Company), that means fostering a collaborative conversation, explains Taylor. By helping customers achieve sustainability goals and exploring creative financing options, companies will begin to see sustainability not only as a long-term business strategy, but also as an investment and an enhancement of their brand’s reputation. According to the Taylor, a reputation for sustainable business practices has a real impact: professional rankings, stock prices, public perception—they all have an effect on a company’s bottom line.
But what about life beyond the boardroom? According to Allen, Taylor, and Van Orsdol, ESCO are discovering that their most vibrant customer base is the “city audience.” The new megatrend involve the expansion of urban populations, with more people moving into cities and living longer once they are there. These urban expansions are impacting municipal infrastructure and energy use. As a result, despite the economic downturn, “we saw an uptake in the number of comprehensive sustainability plans that actually costs their citizens some money.
“Expenditures are being made despite a down economy,” said Taylor, “and city managers acting more like CEOs.”
According to Allen, in many ways regulation is a driver, because when it comes to energy generation, “regulation is still an extremely important component.”
“We were very staunch supporters of cap and trade for regulating greenhouse gasses,” explained Taylor; “without a price on carbon, it is much harder to create a decent performance for what investment in a new carbon technology might look like.”
“We see robust demand for solar generation, and some of it is driven by regulation,” he continued, “but we also find a number of business susceptible to the ‘Walmart effect.’” As Walmart began to enforce its own efficiency and sustainability standards, suppliers and vendors found themselves scrambling to comply, resulting in a more “voluntary” adoption of sustainability practices and protocols.
And while Allen believes that “things could be better with a different regulator than climate change,” things are not “dead in the water by any means.”
“What might come about in this kind of environment may, in the end, be more robust than what’s been generated as a result of fleeting tax incentives.”
For Taylor, a competitive space emerges when it comes to sustainability. While a few years ago customers were anticipating carbon regulations—which resulted in “lots of talk about prepping and more attention being paid to the price of carbon at the upper levels of decision making”—ultimately in the US, mobilizing for carbon regulation compliance ended up “not being an important business strategy.”
Instead, Taylor has seen the pendulum swing towards green building, with a lot of municipal and local government activity replacing federal action. In fact, a new survey indicates that out of the 27 cities contacted, 21 have some sort of GHG action plan. Taylor predicts that using regulation as a planning mechanism at the city level, means that GHG regulation will be implemented, but “not like it might have been if the feds were to step in.” In San Francisco, CA, for example, the city has had a sustainability plan for 15 years or so, and many other municipalities are “realizing this is a way to compete.”
Allen has also seen an expansion in leadership at the municipal level as cities compete with one another for an ideal citizenry—educated, affluent, and able to contribute to the community and the city’s tax base.
Van Orsdot pointed out how the city of Austin has stepped into the sustainability mix. With a goal of reaching 100% renewable energy by 2035, Austin is endeavoring to “balance the financial needs of the city with the much larger global needs,” spurred in part by the voices of the citizenry.
“When you work for a city,” explained Van Orsdot, “every month you go to a meeting where residents can speak. It’s a way to have energy management in the public eye and get public feedback.”
(Next week: the panel discusses the financial issues that play a role in energy efficiency investments, and the role technology and governance play in the decision-making.)