When Green Power meets Green Business by Kevin Hagen

When Green Power meets Green Business

by Kevin Hagen, Shuksan Energy Consulting

"It is hard to understate the speed at which the renewable energy industry is moving."

March 29, 2004 [SolarAccess.com] Nearly everyone has had a bad experience with matchmaking or knows someone who has. When one realizes that two friends might make a good couple the best policy is full disclosure rather than a blind date; so here is fair warning: this is a set up.

The Renewable Energy industry and the Sustainable Business movement have much in common and some firms have found excellent pay-offs by making the connection, but based on the evidence, many on each side have not really considered what the other has to offer. Ironically executives on both sides make the same comment about the other, "nice, but where's the business case?" The RE industry has been quick to identify Sustainable enterprise as a potential customer, but all too frequently we have not looked deep enough to understand their strategy and consider it for ourselves. Conversely, many organizations pursuing the path to sustainability have missed green power solutions that make sense for their circumstances. Every company in one of these groups is likely to have a high probability of success with the other, but both industries have been moving so quickly that it's hard to keep up with current developments. So here's a quick introduction with a focus on where companies can get results.

What is Sustainable Business?

Call it Environmental and Social Responsibility (ESR) or Corporate Social Responsibility (CSR) or just call it Sustainable Business, this is a major business movement that challenges the belief that companies must choose between the bottom line and social and environmental protection. It suggests that if we approach problems differently it is not only possible for businesses to achieve both; it is the only way to ensure long term success.

Important works such as Natural Capitalism , Cradle to Cradle and John Elkington's "triple bottom line" concept have created a solid philosophical foundation for sustainable business. The case history is piling up and leading organizations are demonstrating that with this approach they can achieve solid financial, environment and social performance at the same time. While some high profile businesses such as Ben and Jerry's or Patagonia have made sustainability a part of their public brand, many "mainstream" companies are adopting sustainability programs, reaping the benefits and being recognized for their efforts. The DOW Corporate Sustainability Index has over 300 companies worldwide including companies like Caterpillar Inc. who has been listed for three years running. Sustainable business means moving beyond ethical behavior or regulatory compliance, it means transcending the "either-or" mentality with a fundamental shift in the way we approach business challenges. These companies are creating real financial returns in many ways including reducing costs, increasing efficiencies, managing risks, improving sales, better employee recruitment and retention and improved goodwill among a variety of stakeholders. At the same time the environmental and social benefits are adding up.

Good results don't go unnoticed in the investment world. According to the socially responsible investment forum, about 10% of all funds under management, over $2 Trillion, are now invested through socially responsible investment (SRI) funds. These funds are not only rewarding corporate behavior; they are investing in businesses that they believe will deliver the best long term results. Their success is being noticed by savvy mainstream investors and analysts who increasingly look for sustainability frameworks and an ESR decision process as a proxy for overall good management. They reason that successfully tackling ESR issues is a sign that the company can deal with other complex challenges.

The Renewable Energy Industry today

There was a time when the RE industry was dominated by tiny entrepreneurial firms and organizations doing research and developing technology. While there is still a lot of R&D going on, today we are a multibillion dollar Industry made up of manufacturing and service firms delivering real products to customers worldwide. Renewable energy is now a viable alternative and is being used cost effectively to manage energy costs and volatility, deliver reliable autonomous power and make a difference in environmental performance.

We are now mature enough as an industry and as individual companies to know that it takes more than a product and a buyer to make a successful business. We are increasingly moved to consider enterprise solutions and strategies that will create the organizational infrastructure for long term success. The timing is excellent for us to consider sustainable business philosophy and operational methods.

What should Sustainable Businesses know about Green Power?

Whether it was electricity cost management, reduced exposure to power reliability and financial risks, or sustainability goals such as emissions reductions, many renewable energy customers have found that they have not only achieved their original objectives but have experienced many additional benefits. Despite this track record of success, too many businesses still view solar, wind or other environmentally preferred options as premium cost power that is out of their reach. These companies often underestimate the maturity of the products and the total value proposition of today's Renewable Energy solutions.

It is hard to understate the speed at which the renewable energy industry is moving. Over 500 utilities now offer some type of Green Power product. Over 100 providers are marketing Tradable Renewable Certificates (Green Tags), and this market has reached 1.2 billion kWh -- up 30 percent over 2002. It is also no coincidence that the renewable energy industries have likewise averaged close to 30 percent growth margins. Green tags are a big part of the fuel behind this fire.

Green-e, a ground breaking certification body that was virtually unheard of just three years ago, has now certified nearly 2 million Megawatt Hours of power transactions. On site generation options such as commercial PV installations are now common in many areas with robust sales, installation and support networks. There is even a national certification body for installers called NABCEP. It is no wonder that prospective corporate clients don't often have a full view of the choices let alone the many business paybacks available.

From on-site generation to green power contracting there are many strategies which can offer direct financial paybacks as well as secondary business benefits, all while improving environmental performance and reducing exposure to utility risks. Often the best solutions are dependent on circumstances and therefore require some research to find the best strategies; fortunately the resources available to aid businesses are growing as fast as the industry, a good example is the EPA Green Power Partnership.

What should the Renewable Energy Industry know about Sustainable Business?

If corporations like Interface, DuPont, and Dow can enjoy the financial returns of pursuing a sustainable business agenda, certainly companies who's products and services are inherently "green" have something to gain. There are three steps that RE companies should consider. Evaluate a Sustainability framework, review your ESR risks and opportunities and start the process of sustainability reporting.

Frameworks: In the decade or more that the sustainable business movement has taken shape, at least a dozen ESR frameworks have been published. Each of them offers guidelines or organized methods and procedures for how to make better business decisions by considering the sustainability point of view. Examples include The Natural Step, The CERES principals and ISO 14000. Many of the major frameworks share basic tenets but differ in emphasis, approach and implementation. Good research, case studies and design resources exists for all of them. Some firms adopt a framework wholesale while others combine elements to create their own guidelines.

Risks & Opportunities: Every company has Environmental and social risks, some that they might not be aware of. From the risk that an overseas supplier is using unacceptable labor practices to efforts to include your next product in pending e-waste mandatory recycling legislation, a 360 view of the market and an internal review of activity through the lens of sustainability could turn up both opportunity and risks that should be included in your business plan.

Sustainability reporting: The CSRwire, an On-line Corporate social responsibility newswire service, has on-line access to over 350 ESR reports from mainstream corporations. These companies realize that disclosure and transparency are not only their best defense; they have turned reporting into an excellent opportunity to communicate actions and activities that previously went unnoticed. While a report published solely for PR purposes is unlikely to achieve the desired result, reporting about status and genuine improvement is celebrated and rewarded by a surprising array of influential stakeholders. Companies would be wise to begin the baseline data collection process at least a year before they plan on issuing an external report, so it's never too early to start preparing.

Green Business and Green Power are indeed a perfect couple, but both industries have been moving so fast it has been hard to take the time to notice. If you believe you're one and have not checked out the other lately, it's time. All three of your bottom lines will be glad you did.

About the author:

Kevin Hagen is principal of Shuksan Energy Consulting, a leading advisor to business on sustainable energy and green power procurement strategy. He has 20 years of experience in leadership roles with Fortune 500 companies to successful entrepreneurial organizations and has been recognized for innovation on both the supply and procurement side of the renewable energy industry.

Footnotes

1. Paul Hawkens, Amory Lovins and Hunter Lovins
2. William McDonough and Michael Braungart

For Further Information:

• Shuksan Energy Consulting

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