By Liz Delaney

Energy management can be complicated, and the projects that organizations must tackle run the gamut: from small-scale lighting and HVAC upgrades to whole building retrofits, from baselining energy consumption to data analysis of enterprise-wide energy management systems and from volunteer employee engagement programs to executive-level goal setting.

So if you’re an energy manager, there’s no doubt that you are busy! But, when you’re deep in the middle of so many “weeds,” what’s often not so clear is this: Is your organization making real progress to improve the way it thinks about and manages energy? What does real progress look like?

The Virtuous Cycle of Strategic Energy Management

Several years ago, Environmental Defense Fund (EDF) and partner MIT started to address these questions through the  development of a framework for strategic energy management that showed the dependency of truly successful programs on a holistic and multi-faceted management approach—one where five focus areas work in concert to create a virtuous cycle of continuous improvement:

This year, we’re taking this work a step further by addressing another question that organizations frequently have: where are we on the journey?

To that end, EDF Climate Corps is proud to announce the launch of a simple and free benchmarking survey called the Smart Energy Diagnostic, designed to help energy managers assess the overall health and progress of their energy management programs.

In just 15 minutes, energy managers can zoom out of their day-to-day project work and get a big-picture view of their programs. Answers to just 14 multiple choice questions provide users with a quick snapshot that clearly and simply identifies areas of strength and weakness, and can be leveraged as an internal communications tool. Energy Managers often use it to build the case for increased attention and investment in energy management programs, as well as proof of the results of their hard work.

Sample Smart Energy Diagnostic Snapshot:

In addition to this benchmarking snapshot, energy managers can place their answers on EDF’s detailed rubric of energy management best practices and see what progress in each category looks like.

We’re excited to share the knowledge and insight that we have gained through our program with a wider energy management community. If you’ve ever wondered whether your energy management strategies are the right ones, or which specific next steps will advance your projects, the EDF Smart Energy Diagnostic tool will help you assess real progress toward achieving a holistic energy management system.

Click here to take the Smart Energy Diagnostic

By Jason Mathers

Did you know that, as the energy demand for passenger vehicles declines steadily over the next 25 years, the fuel demand for commercial transportation is predicted to increase 40 percent over current levels?

That’s a difference of well over 10 million oil-equivalent barrels per day.

Most of that demand will come from heavy-duty trucks, which account for 57 percent of all logistics-related greenhouse gas (GHG) emissions, and 16 percent of total corporate GHGs.

As a society, our appetite for goods of all kinds—food, electronics, apparel, housewares – is growing. As the population grows, demand grows, and so does the number of trucks on the road.

But the predicted rise in CO2 emissions from Class-8 trucks is just that.  A prediction.  One that assumes the logistics community will not take aggressive action to adopt more sustainable freight management practices.

The fact is progress can be made, and is being made.  Companies are recognizing the enormous potential of greener freight strategies to reduce GHGs and, at the same time, drive down costs.  And it’s this marriage of business and environmental benefits that’s driving even the most bottom-line oriented companies to think green when it comes to shipping their products to market.

What are these companies doing to become greener, AND more profitable?  Many of these success stories are documented in EDF’s Green Freight Handbook.  Download the Handbook for a practical guide to the strategies companies are using to cinch their GHG waistline, and their freight budget. The handbook includes some practical tools for assessing strategies and calculating freight emissions, as well as advice from some of the world’s top green freight practitioners.

Compelling scientific assessments of climate change make it clear that society must dramatically cut greenhouse gases.  Logistics and transportation professionals can play a critical role in addressing this global imperative and reducing freight’s impact on greenhouse gas emissions.

Has your company’s logistics operation made greener freight practices and CO2 emissions reduction a priority? If not, there’s a good chance your competitors have, and are reaping the financial benefits as a result.

Go ahead, make a resolution.  Start your green freight journey today.

By Ben Ratner

After months of anticipation, the Obama Administration this month released its new methane emissions strategy – a plan that opens up new opportunities for industry writ large, and especially for operators that want to cut waste and get ahead.

The centerpiece of the strategy are imminent rules that will help us meet a new national goal to reduce harmful methane pollution from oil and natural gas operations by 45 percent by 2025.

But the rules also bring direct industry benefits. Here are four reasons the new methane emissions strategy is a boon, rather than bane, for America’s $1.2-trillion oil and gas sector:

1. It tackles $1.8 billion in annual waste and adds market certainty

Leaky infrastructure and unnecessary venting across the oil and gas value chain cost an estimated $1.8 billion in wasted product and lost revenue annually.

The new rules require companies to include up-to-date controls as they build out new and modified infrastructure, keeping gas in the pipeline while making new facilities more efficient.

Research shows such investments would cost industry no more than a penny on average per one thousand cubic feet of natural gas produced, and even save money in some cases.

The new rules also help bring market certainty.

As Goldman Sachs has pointed out, methane regulations are needed to address investor concerns, and unlock job creation and the most positive future for this American fuel.

Yes, as popular as the trend may be with consumers, today’s low oil prices cause economic pain for producers, and some operators are cutting back on costs.

But executives with vision beyond the next quarter can see that small, short-term investments in emission reduction technologies and practices are part of the longer game.

2. It builds goodwill and trust = good for business

Recent polling by the American Lung Association found that while less than a quarter of Americans have a favorable view of the oil and gas industry, two-thirds support new federal limits on methane emissions.

Hydraulic fracturing bans in New York and Denton, Texas, reinforce that industry simply must do more to earn public trust.

Welcoming rigorous rules builds trust. That's one reason oil and gas companies in Colorado actively supported the ground-breaking policy enacted last year to begin limiting methane emissions.

Getting behind well-designed policies – and engaging in a collaborative way with the administration throughout the rulemaking process – is simply good business.

"Just say no" is not a credible position; it's time for the industry to show what it's for.

3. It sorts winners from losers

You can tell a lot about a company by how far its environmental strategy goes beyond mere compliance.

This first iteration of the national methane rules will only set requirements for new and modified infrastructure. To achieve the national target, existing sources will need to be regulated as well, and indeed, they already are in Colorado and parts of Ohio.

Speed defines winners and losers in this industry.

Leading companies will get ahead of the curve – and of their competitors – by bringing existing facilities up to the standards of new facilities before they’re required to do so.

Companies such as Southwestern Energy have demonstrated a drive to excel with their use of infrared cameras for leak detection and repair, among many other control strategies.

Others such as EQT Corp. responded to last week’s announcement saying “we are committed to… even go beyond the White House’s focus of only new and modified emissions sources by targeting potential emissions at existing sources.”

4. It can help operators attract new talent in a competitive field

There is a well-known battle for talent in the hyper-competitive oil and gas sector. As environmental concerns swell – particularly for skilled young people in the labor force – companies can seize competitive advantage by supporting solutions-oriented environmental policies of which employees can feel proud.

With the methane strategy now announced, companies in the oil and gas sector face a choice.

They can seize an opportunity and help build a clean energy future. Or they can cling to old ways of doing business that fuel uncertainty and lingering doubts about license to operate.

Also of interest:

• Methane Mitigation Sector: EPA Actions Good for Industry, Will Curb Waste and Protect Communities
• Investors Voice Market Support for Methane Regulation
• Financial Sector Focuses on Risks from Methane

By Victoria Mills

Business leaders have long agreed on the “why” of environmental management: seeing the value in increased profits, reduced waste and a smaller carbon footprint. But the “how” has often been the stumbling block.

Two case studies released today from adidas Group and the Housing Authority of the City and County of Denver (DHA) help to answer that question, detailing energy management strategies that deliver tremendous value and are great examples for other organizations to follow.

Material Handling Equipment at adidas Group

The adidas Group tackled the dual challenge of improving efficiency in existing distribution centers as well as when specifying material handling equipment in new facilities. Recognizing that only reducing upfront costs during design won’t optimize efficiency over the long term, the adidas Group is now analyzing the lifecycle cost of conveyer belts and other equipment. See the full case study here.

Meanwhile, DHA tackled the challenge of expanding renewable energy resources despite limited capital funds. The solution: an innovative power purchase agreement that enabled the installation of a 2.5 megawatt solar project with minimal upfront costs and a stream of lease payments to benefit DHA. If the 3,300 housing authorities in the U.S. duplicated Denver’s success, their rooftops could produce enough solar energy to power more than 1 million homes. See the full case study here.

Solar installation at DHA

Today’s announcement comes on the heels of the recently released case studies of JLL and Urban Innovations, which have risen to the City of Chicago’s challenge to reduce commercial building energy consumption by 20 percent in the next five years. By focusing on education, automation and data, JLL and Urban Innovations each took leaps forward in energy efficiency.

EDF is thrilled to share these case studies as scalable solutions that companies across a wide range of industry sectors can adopt. Together, they show the diversity of organizations that benefit from EDF Climate Corps, and whet our appetite for the projects on tap for the summer of 2015, including Verizon, Shorenstein Properties and Hill+Knowlton Strategies.

We are seeing the dawn of a new era for EDF Climate Corps, as our eight years of partnerships bear new and interesting fruit, with the potential to save energy in hundreds – or even thousands – of organizations. We are eager to hear how you are making the transition from “why” to “how” in energy management, and how EDF can help. Contact us at info@edfclimatecorps.org.

By Tom Murray

For most of us, New Year’s marks the time when we set annual resolutions (personal and professional) and get to work on tackling the priorities for the year ahead. In my hometown of Washington, DC a new year also means that Congress comes back into session, lawmakers and speechwriters ready their agendas and proposals, and the president delivers the State of the Union address.

From what we heard last night and in recent announcements, 2015 could be a big year for action on climate – from government and the private sector alike. But big results will take leadership on all fronts.

Leadership from our government…

Addressing climate change is supported by the vast majority of Americans and the Obama administration is taking bold steps to curb the United States’ contribution to climate change. Last night, we saw President Obama tell the nation “no challenge – no challenge – poses a greater threat to future generations than climate change” in his State of the Union address. The President also strongly reiterated his commitment to work to ensure “American leadership drives international action” on climate change.

It is clear that climate change is an urgent national priority. Fortunately, the Administration is carrying out its promises under the Climate Action Plan, and steps taken and soon-to-be-taken have helped put us on the right path. From the proposal to reduce carbon pollution from power plants, expected fuel economy standards for medium- and heavy-duty trucks, to last week’s announcement of steps to address methane emissions from the oil and gas sector, we have seen a lot of progress to address climate change since the last State of the Union. Further, the November announcement of a joint China-U.S. agreement to address climate change on a global scale underscores how crucial U.S. leadership is at this juncture in achieving a binding worldwide climate deal. Much more work remains and leadership at all levels will be necessary to meet our climate goals.

…and from our peers

Leadership can and should also come from top U.S. companies. By both leading in efforts to reduce emissions from their operations and supporting the policy changes needed to solve climate change at scale. We saw this trend last year, when a range of companies and investors took bold steps in terms of climate action:

• 19 companies, such as Facebook, General Motors, and Walmart, joined forces with nonprofit leaders to develop a set of renewable energy buyers’ principles;
• A group of investors managing $300 billion in assets called for federal regulations to reduce methane emissions from oil and gas as an important step in reducing financial and environmental risk;
• Lastly, more than 200 companies sent a letter to President Obama and the EPA publicly supporting the proposed Clean Power Plan.

Supporting the EPA’s Clean Power Plan

The Clean Power Plan would create the first national limits on carbon pollution from exiting power plants and the EPA is scheduled to finalize the plan this summer.

Through flexible, state-specific implementation plans, it is expected to achieve a 30% reduction in carbon pollution from the U.S. power sector by 2030, compared to 2005 levels. In finalizing the plan, the EPA paves the way for states to present their individual plans for meeting the standards by June 2016.

Public opinion polls across the country have consistently found strong support among Americans for reducing emissions from existing power plants. EDF has been active in rallying its members to submit comments in support of the EPA’s proposed Clean Power Plan – in fact, we delivered nearly half a million comments last year – and we’ve also reached out directly to companies to talk about how they can benefit from engaging in the rule’s implementation, as we did during our November webinar.

21 companies joined us for the webinar, where EDF Senior Manager Mandy Warner and I answered questions about how to get involved, and what the midterm elections would likely mean for the Clean Power Plan’s implementation.

Time to act

By engaging on the Clean Power Plan, companies that care about clean energy have near-term opportunities to expand the demand and market for renewable energy and energy efficiency and shape policy in the regions where they operate.

Companies across sectors can leverage the changing policy landscape to better meet their carbon reduction, green power purchasing and efficiency goals. For those firms in energy efficiency, renewable energy and metering / demand response sector, there are clear growth opportunities as well.

EDF stands ready to help businesses figure out the best avenues for engaging – whether it’s sharing their stories, making public comments or engaging constructively in the public policy debate in the states where they operate.

The Plan represents an important occasion for companies to benefit and lead by aligning their internal energy strategy and operations with their external engagement in public policy. This alignment is what we call the business-policy nexus and represents the next step in corporate sustainability leadership.  It’s what is needed to solve the climate challenge and we’d be thrilled to have you join us in paving the way to a clean energy future this new year.

By Jason Mathers

The Green Freight Journey is a five-step framework for freight optimization projects. Leading up to our January 14th webinar, EDF is taking a brief look at each of the steps along the Journey.

The first step, Getting Started, is about deciding where you want to go. To do this, companies:

• Gather internal stakeholders — such as supply chain or transportation executives, sustainability officers or EHS professionals, and an executive sponsor.
• Define their green freight objective — such as reducing climate warming emissions or cutting fossil fuel consumption.
• Determine key metrics – by reaching each agreement on how to objectively measure progress. A metrics-driven approach helps to keep you focused on the actions that will deliver the biggest results for the best returns.

When determining your metrics, consider these examples from the EDF Green Freight Handbook:

Join me on January 14 at 12PM ET for a webinar that will introduce you to the full Green Freight Journey framework, review real-world case examples and highlight tools EDF is making available to help companies progress on their journey.

Register here today for this informative webinar.

By Sean Wright

An inspector uses a FLIR camera to detect methane gas leaks. (Source: FLIR)

Out of sight, out of mind. This certainly applies to methane emissions from the oil and gas sector.

That’s because methane, a highly potent greenhouse gas and the primary constituent of natural gas, is invisible to the naked eye.

And it’s one reason methane emissions, while a significant threat to our environment, don’t get the attention they should from policymakers or the public when compared to, say, conspicuous oil spills.

But we have the technology to make the invisible visible. As you’ll see in the video below, fugitive methane emissions look very much like an oil spill in the sky.

The footage comes from FLIR, a maker of optical gas imaging cameras and one of the largest companies in the methane mitigation industry.

The company participated in a recent briefing on Capitol Hill intended to educate policymakers on the negative environmental implications of methane emissions, during which they showed the video.

I was there and saw what impact these images had.

Around me, people were gasping as they watched plumes of methane leaking from well sites, processing plants and valves – pollution that was now visible through the infrared camera.

We had already heard a number of great presentations on the issue that day, but once FLIR hit the play button, everyone got it.

The ominous large black plumes of methane and other hydrocarbons show how methane pollutes our atmosphere, endanger workers, and risks the health of local communities.

Making progress on methane

Enough methane is lost each year to fill more than 120 tanker ships carrying liquefied natural gas, about $1.7 billion worth. This is massive waste, but it also contributes in a big way to climate change; methane is 84 times more potent than carbon dioxide in the short-term.

The good news is, we have proven technologies available today to find and fix methane emissions – investments that would cost industry less than a penny per thousand cubic feet of produced gas. If deployed, these technologies could slash onshore methane emissions by 40 percent in just five years.

To get the full extent of these reductions, however, it's critical that we get good, comprehensive federal policy that covers both new and existing sources of methane.

This is because nearly 90 percent of emissions in 2018 would come from sources already in existence today – meaning we would only address 2 percent of methane pollution with a policy focused on new sources only.

It's time we tackle these "oil spills in the sky," once and for all, and with rules that apply to all oil and gas operations.

This post originally appeared on our EDF Voices blog.

By Michael Reading

The results are in. As my colleague Victoria Mills wrote recently, this year’s cohort of EDF Climate Corps fellows found $130 million in potential energy savings across 102 organizations.

Among the engagements, 12 fellows worked with private equity firms and portfolio companies on a diversity of projects. Each engagement offers its own story, but we’d like to showcase a few examples demonstrating the value the Climate Corps program can bring to firms of all sizes and at all stages of understanding of energy management.

Energy audits and retrofits for a major manufacturing company

Hellman & Friedman’s portfolio company Associated Materials, which specializes in exterior building products, hosted two fellows this past summer, its first year with the Climate Corps program.

Fellow Karunakaren Muthumani Hariharan audited two of the firm’s 11 manufacturing locations to identify opportunities for energy efficiency, including lighting upgrades, process equipment upgrades and manufacturing process modifications. He suggested improvements with potential net present value savings greater than $1.4 million and reductions of greenhouse gas emissions by approximately 2,700 tons per year. Hariharan also proposed funding the energy efficiency projects through a new Green Energy and Sustainability Fund.

Krishna Chaitanya Vinnakota analyzed Associated Materials’ total expenditure on energy, over $15 million, and focused on energy saving opportunities in the company’s supply centers, including an approach that could result in energy expenditure savings of 20 to 50 percent in some supply centers. He also suggested strip doors as a simple but effective way of conserving energy during winter. It’s a project that save the approximately half a million dollars per year if rolled out across the company’s 125 supply centers and 11 manufacturing plants.

Developing playbooks for the portfolio

Like Associated Materials, KKR & Co. L.P. (KKR) also hosted two fellows this year, both of whom worked at the firm level primarily focused on KKR’s Green Portfolio Program. Sophia Luo developed playbooks and spreadsheets for portfolio companies to demonstrate the returns from key areas of energy efficiency improvements, focusing on HVAC systems and lighting.

Lana Zaman created a prioritization framework and questionnaire to identify the best opportunities for energy efficiency improvements within KKR’s private equity portfolio companies and real estate portfolio. She interviewed representatives from portfolio companies to understand barriers to taking action and the possible tools to address them.

Strengthening an existing sustainability strategy

Fellow Meaghan Krohn worked with IT provider Syniverse, a portfolio company of The Carlyle Group, on achieving its 2015 Carbon Reduction Goals, conducting a materiality assessment to bolster the company’s sustainability strategy.

Surveying employees across Synverse’s global workforce, Krohn analyzed how various stakeholders prioritized the sustainability-related aspects of operations – information that can greatly inform the company’s sustainability strategy and reporting. She also assessed ways to design employee engagement programs aligned with the company’s perspectives on sustainability. Such a program could save more than $68,000 and 751,000 kilowatt hours annually at the company’s Tampa, FL headquarters alone, and could impact the company’s 2,700 employees around the world.

More and more stories to share

I recently had the opportunity to hear more stories about this year’s Climate Corps cohort at an event hosted by the Private Equity Growth Capital Council, the U.S. trade association for the private equity and growth capital industry, that focused on how firms approach the management of environmental, social, and governance (ESG) issues. The event included a panel featuring Beth Lowery, Principal at TPG Capital, whose portfolio companies have hosted five fellows to date, and Kevin Ruuhela, who served as a fellow this past summer at TPG portfolio company Avaya, as well as EDF’s Victoria Mills.

Beth and Kevin’s comments offered a high-resolution view of the value that Climate Corps can offer a variety of stakeholders (read more about Kevin’s experience here). Ali Hartman, Vice President of ESG Strategy & Stakeholder Engagement at KKR, also contributed to the conversation insights into the kinds of projects fellows have tackled at the firm and its portfolio companies, including the two mentioned above.

These are always more great stories to tell and hopefully those highlighted here give a sense of the power of EDF Climate Corps to achieve measureable results for investors, companies, and the environment.

Also of interest:

• From the inside-out: Warburg Pincus and EDF Climate Corps’ recipe for replication
• Private Equity Interest in EDF Climate Corps at All-Time High

By Michael Reading

I recently read the inspiring story of how Farmers Electric Cooperative, one of the smallest utilities in the country, overcame some formidable financing challenges to develop the biggest commercial solar project in Iowa.

The example called to mind a comment made by Lisa Jackson, Vice President of Environmental Initiatives at Apple and former Administrator of the U.S. EPA, during the closing plenary of GreenBiz’s VERGE conference earlier this fall. She told the audience that, at Apple, the best way to get something done was to say “it can’t be done.”

This idea, of conquering seemingly impossible obstacles, is one I’ve seen reflected in a number of new advances in corporate sustainability, including many discussed at the conference and others from our own work. Each demonstrates how entrepreneurs (and intrapreneurs) are harnessing major environmental and social challenges to create real solutions:

• The lack of transportation infrastructure often blocks the delivery of medications and other critical supplies to remote areas in developing countries. Rather than wait for new roads to be built, startup Matternet is developing a “drone delivery” system – distributing packages via a network of small automated vehicles and landing stations.
• While most efforts to mitigate the effect of climate change aim to stabilize the level of greenhouses gases in the atmosphere, Project Drawdown, helmed by Paul Hawken and Amanda Joy Ravenhill, is cataloging technologies with the potential to reduce the levels of greenhouse gases.
• The current power generation infrastructure and the complicity of electricity markets make it difficult for companies to source clean power, a challenge that the World Wildlife Fund (WWF), the World Resources Institute (WRI), and the companies behind the Renewable Energy Buyers’ Principles seek to overcome by signaling their shared goals and needs “to open up new opportunities for collaboration with utilities and energy suppliers to increase their ability to buy renewable energy.”
• We recently saw General Mills make a bold move to address the twin challenges of boosting farmer productivity while reducing nutrient losses. The company will adopt the SUSTAIN platform, created by United Suppliers after they reached out to EDF for help in developing a set of tools to meet growing sustainability demands in the agricultural supply chain. General Mills’ decision will equip the company and its suppliers with a platform that includes nutrient use efficiency and soil health technologies with training and implementation practices.

Lisa Jackson presented her comment as a process that works well at Apple, but I think her observation holds a lesson for all of us – to find opportunity, rather than merely discouragement, in the scale of the environmental issues we face, and to respond in ways that create value for both the environment and business.

By Kate Zerrenner

On December 11th, the U.S. Chamber of Commerce Foundation (USCCF) Corporate Citizenship Center will host The Energy-Water-Food Nexus: Risks and Opportunities for the Private Sector, the second in a series of roundtables based on a report released earlier this year. The USCCF’s report and surrounding events are highlighting success stories, and more importantly, opportunities for the business community to address the energy–water nexus: the idea that energy and water use are fundamentally intertwined. In order to accurately address water risks across operations and supply chains, businesses must take a more holistic look at their water and power usage.

The business world is quickly beginning to understand the intersection of these two sectors and the significant impact that they have on business operations.

Business and the energy-water nexus

In the commercial, industrial, and institutional sectors, energy efficiency and other measures could save as much as 15-30 percent of water use without reducing operations. This is particularly important as businesses consider how they manage water risks in areas where they operate. The 2014 Carbon Disclosure Project Water Disclosure Global Report, conducted on behalf of 573 investors with assets of $60 trillion, reported that 68 percent of responding companies say water is a substantial risk to their businesses, but only 42 percent have publicly demonstrated a commitment to water efficiency. Interestingly, 43 percent of reporting businesses said that water stress and/or scarcity was a top risk driver versus 16 percent that said drought was a top risk driver. This indicates that companies are more focused on longer-term risk management, as opposed to reacting primarily to drought conditions and concerns about short-term profits.

Compounding issues

December’s roundtable is presented in partnership with Lockheed Martin, and will look at issues specific to three U.S. regions:  the Western Rocky Mountains, the Great Plains, and the Gulf of Mexico. Participants will also hear from technical experts from the Sandia National Laboratory, which is at the forefront of cutting-edge research on nexus-based approaches to solve compounding issues in the western United States.

Every respondent in the energy and utility sectors reported that water poses a substantive risk to their business, both now and in the future. And almost two-thirds of respondents in each sector have already experienced detrimental impacts related to water in the past five years. In the 2013 CDP report, Brown-Forman, one of the survey respondents, stressed that “water supplies could impact the electric utilities that provide us electricity. Potential curtailments and utility cost increases due to inadequate cooling water for power generation present a potential financial risk to our company in terms of increased electrical costs.”

Another compounding problem for a lot of businesses is how to account for costs and savings across their operations, especially when companies work in regions across the country or globe. Water is not perfectly replaceable and consumption cannot be compared on an apples-to-apples basis. For instance, water withdrawn in an arid, urban area it does not have the same impact to its environment as when water is withdrawn in a rural, wet region. It’s important for companies to accurately understand and measure their impact on the local environment.

Leading practices

The Chamber Foundation report, a focal point for the roundtable discussion, highlights some case studies of companies making efforts to tackle the energy-water nexus impacts on their businesses. Some highlights include:

• American Water installed the largest ground-mounted solar electric system in New Jersey at one of its water treatment plants, which supplements 20 percent of the peak power needed to run the plant;
• Dow Chemical created a public-private partnership to establish a water recycling program that generates steam to power its manufacturing plants;
• General Motors set up a robust, measurable energy efficiency program that has reduced energy intensity by 11 percent compared to its 2010 baseline; and
• MillerCoors introduced a smart irrigation system and a Showcase Barley Farm to demonstrate best practices to other farmers.

In addition, AT&T, collaborating with EDF to reduce water impacts from its operations, has worked to optimize building cooling systems across its portfolio to reduce water use. Through this and other efforts, the amount of water AT&T uses to run its network has decreased from 105 gallons per terabyte of network traffic in 2010 to 48 gallons in 2013—a drop of almost 54 percent. In addition, through a multi-year collaboration, AT&T and EDF developed a Water Efficiency Toolkit that distills the best practices identified through our work into a set of tools any organization can also use to reduce their building water use.

These are just a few of the initiatives companies are employing to address the challenge of constrained power and water resources that are facing them now and into the future. But there is still much work that needs to be done by both the water and the electricity sectors, which rely on each other but do not fully consider the lifecycle costs of the other sector’s resource.

The Chamber Foundation’s roundtable series will help bring together experts to tackle the commercial sector’s challenges. This “convening of the minds” will also help companies get the information and resources they need to reduce their impacts, curb costs, and mitigate risks to their own operations.

Originally posted on the EDF Energy Exchange blog.

By Namrita Kapur

As noted in my last post on green bonds, there has been a recent dramatic growth in green bond issuance. Supply is responding to a burgeoning demand. Quite simply, investors are snapping up these debt instruments that are linked to an environmental benefit. Three recent transactions highlight this seemingly insatiable appetite:

• Massachusetts’ sale of $350 million in green bonds in September attracted more than $1 billion in demand from retail investors and institutions. This — the state’s second green bond issuance — will fund clean water, energy efficiency, open space protection and river preservation projects.
• The order book for the Nordic Investment Bank’s $500 million green bond issue quickly climbed to $800 million, with more than a third of investors being new to NIB. This bond will funnel proceeds to climate-friendly projects in Nordic countries, such as renewables, energy efficiency, green transportation and wastewater treatment.
• In September, the World Bank tripled the size of its planned structured green bond to $30 million in response to investor demand, raising more than expected for climate projects, such as energy and forestry initiatives. Since its first green issuance in 2008, the World Bank reports raising more than $7 billion from 77 bonds in 17 currencies.

These data points back up the buzz I’ve heard among market players. At the recent Associated Grant Makers fossil fuel divestment panel, Sonia Kowal of Zevin Asset Management talked about the tremendous interest Zevin has seen from clients for buying green bonds.

This swelling demand could be just the catalyst we need for success in the Paris climate talks next year. A robust market of green bonds being deployed to finance projects that have an environmental impact helps alleviate concerns about access to capital – a key barrier in past negotiations.

A new report from HSBC estimates a $300 billion annual gap in green investment needed to achieve 2 degrees Celsius.  Green bonds hold the potential to put a significant dent in this figure by attracting non-specialist, fixed-income investors who otherwise would be putting their money into government bonds, corporate debt or even credit derivatives. If even a fraction of this $80 trillion market moves to environmental finance, it could tip the scales in the climate fight, as noted by Angus McCrone, chief editor for Bloomberg New Energy Finance.

We will be following this sector closely, as it may hold the key to turning the course on climate, and will blog in more depth about specific transactions.

By Jason Mathers

Many leading companies are creating business value today by cutting carbon emissions from freight moves. These companies, such as Walmart, Ikea, Unilever and Ocean Spray, are following a similar path, one we at EDF are calling the Green Freight Journey, a five-step framework for freight optimization projects.

Sign up to learn more about the Journey.

Define the path. Then take a step. Then take another.

Companies start by taking the nebulous concept of sustainability and making it mean something specific and material to their company, for example, “we are going to use fuel more efficiently." They create specific metrics to track this objective, such as product moved per gallon of fuel consumed, or emissions per ton-mile.

Next, these companies develop pilot green freight projects to test out that objective, using the metrics they chose to evaluate the projects’ efficacy. The projects that deliver financial and environmental returns are scaled up and those that don't are redesigned or scrapped.

Leaders have a critical role to play in this process as well: they create long-term improvement goals for their company’s key metrics. This enables them to focus day-to-day on continuous improvement, and it inoculates them against the siren call of “big shiny object” projects – ones that might be good for a press release but won’t move the needle on their metrics.

By taking these steps, companies advance along their Green Freight Journey, and along the way, cut costs and emissions.

Now it’s your turn.

Every company that uses the freight system to move products to market has opportunities to reduce operating costs and greenhouse gas emissions by taking a Green Freight Journey. Join me on January 14 at 12PM ET for a webinar that will introduce you to the Green Freight Journey framework, review real-world case examples and highlight tools EDF is making available to help companies progress on their journey.

During the webinar, participants will:

• Be introduced to the steps of a Green Freight Journey and receive tips for success on each;
• Hear real-world examples of companies that have cut emissions and costs by optimizing freight moves;
• Review existing tools, including a green freight benchmarking survey and the EDF Green Freight Handbook; and
• Learn how an EDF Climate Corps fellow helped Ocean Spray Cranberries identify new green freight opportunities.

Register here today for this informative webinar.

By Jason Mathers

2014 is shaping up to be a great year for truck equipment manufacturers. Sales through October are running 20% higher than their 2013 levels. It’s a banner year that continues to pick-up steam. 2015 is looking even stronger, with forecasts suggesting it will be the 3rd strongest year ever for truck sales. There are several factors driving this market. Higher fuel efficiency is top among them.

This point was brought home recently by the lead transportation analyst for investment firm Stifel, who noted that “the superior fuel efficiency of the newer engines” was a key in getting fleets to buy new trucks now.

The CEO of Daimler Trucks, the leading producer of class 8 trucks for the U.S. market, acknowledged recently that their most efficient engine and transmission combination was “already sold out for 2014” and that the “demand is beyond their expectations.”

It’s not just Daimler that is having a good year.

• Cummins posted higher-than-expected quarterly profits recently “lifted by strong sales of its vehicle components in North America.”
• PACCAR announced strong quarterly earnings that, according to CEO Ron Armstrong, “reflect the benefits of strong truck sales in the U.S.”
• Navistar also “had a good month in October,” according to its CEO Troy Clarke. He noted that the demand for new trucks is being driven by the fact that “new trucks have lower operating costs” –which is of course due to increased fuel efficiency.

2014 is a banner year for truck sales; and 2014 trucks are the most efficient ever.  2014 trucks are the most efficient ever because of smart, well-design federal policy.  This is the first year of the 2014-2018 heavy truck efficiency standards that will:

• reduce CO2 emissions by about 270million metric tons,
• save about 530 million barrels of oil over the life of vehicles built between 2014 – 2018,
• provide $49 billion in net program benefits.

The 2014-2018 heavy truck fuel efficiency and greenhouse gas program demonstrates that climate policy benefits businesses, our economy, and human health, while also cutting harmful climate pollution.

Or, as Martin Daum, president and CEO of Daimler Trucks North America noted, these standards “are very good examples of regulations that work well.”

In its first year of existence, the 2014-2018 fuel efficiency and greenhouse gas program is boosting sales for manufacturers, reducing operating costs for fleets, and cutting climate pollution for all of us. It is clear that well-designed federal standards can foster the innovation necessary to bring more efficient and lower emitting trucks to market.   That is very good news, because we have an opportunity to further improve and strengthen these standards – creating more economic and environmental benefits in the process.  For this, we all can be thankful.

By Tom Murray

Last year, Oak Hill Capital Partners released its inaugural environmental, social, and governance (ESG) performance report. While you may have read about similar reports from private equity firms like KKR and The Carlyle Group on this blog, Oak Hill Capital’s report was significant because it were first among U.S. middle-market private equity firms to publicly release an ESG performance report. In doing so, the firm increased transparency and offered other mid-market firms a blueprint to follow. Last week, it issued its second annual report, offering an inside look at the firm’s progress to date.

A comprehensive approach

In its new report, Oak Hill Capital outlines its approach to ESG management, measuring progress in integration, results and leadership: three of the key building blocks for a successful ESG management program that are included in our ESG Management Tool for private equity.

For Oak Hill Capital, integration refers to the ways it embeds ESG management practices across the firm’s operations to ensure it can best deliver results at portfolio companies. Key examples from the report include its responsible investment policy, incorporation of ESG in due diligence, and its recently becoming a signatory of the United Nations Principles for Responsible Investment (UNPRI). Management of environmental performance is also woven into the management of the firm, through its ESG Committee, which is made up of senior executives and chaired by Oak Hill Capital’s general counsel.

Results speak to how the firm evaluates the ESG performance of potential new investments and how it tracks and supports the sustainability efforts of portfolio companies. This year’s report includes how the firm considered ESG factors in the due diligence process of three new investments and how existing portfolio companies have benefited from the firm’s expertise in ESG issues. One example is an energy efficiency project Oak Hill Capital initiated at its portfolio company, Dave and Buster’s, with Entouch Controls, a leading energy management solution for restaurants and schools.

Lastly, Oak Hill Capital takes a broad approach to leadership, both within the industry and in the communities in which it operates: promoting lessons learned among similarly-sized firms, as well as engaging employees in business-focused mentorship opportunities.

A diverse portfolio of sustainability initiatives

Oak Hill Capital considers a diversity of ESG issues and this year’s report provides several in-depth case studies, emphasizing how it evaluated the environmental performance of new investments and how it supports the efforts of companies already in its portfolio:

• Pulsant: A U.K.-based data center host and IT infrastructure provider, and new Oak Hill Capital investment, Pulsant impressed the firm with its advanced approach to energy management, including sourcing all its electricity from renewable sources and making significant improvements in energy efficiency.
• The Hillman Group: Another example of the driving force of energy efficiency, the company hosted an EDF Climate Corps fellow to uncover opportunities to save energy in its warehouses and offices. Recommendations made by Climate Corps fellow Gary Gao could pay off to the tune of cutting the company’s energy use by 20% and reducing carbon emissions by 600 tons annually. The Hillman Group is the third Oak Hill Capital portfolio company to host an EDF Climate Corps fellow, continuing the trend established in 2011 by ViaWest and Dave & Buster’s.

Success builds on success

When EDF and Oak Hill Capital partnered two years ago, we showed that opportunities to align financial and environmental benefits are available for private equity firms of all sizes. Oak Hill Capital’s second ESG performance report proves that its initial wins were not beginner’s luck and that sustained attention to ESG management can yield increasing success over time.

For companies feeling inspired to see how they could benefit from an increased focus on ESG measurement, we recommend checking out EDF’s ESG Management Tool for private equity firms, which describes the kind of management practices needed to ensure a robust ESG program.

By Suzy Friedman

Isn’t it nice when somebody steps forward boldly to do the right thing and is rewarded for doing so? General Mills did just that for United Suppliers and the SUSTAIN platform, which will help farmers improve nitrogen use efficiency and productivity.
In July, General Mills put out a call for proposals to help the company meet increased production needs in ways that contribute to cleaner air and water.

It was almost like a future posting in sustainability want ads: “General Mills, a 17+ billion dollar food company, has the following need: Seeking best practices in nitrogen fertilization (nitrogen optimization) technologies for sustainable agriculture.”

The company recognized the pressing need to limit nutrient losses while also helping farmers produce more of the wheat, corn, soybeans and other crops it needs to make the products we buy.

And the winners are….

United Suppliers got the nod with its SUSTAIN platform. As I blogged earlier this fall, United Suppliers has really stepped out front with this platform, recognizing the growing  sustainability demands from retailers and food companies as a real business opportunity. They knew they were taking a risk when they reached out to Environmental Defense Fund last spring for help in developing a program to meet the changing needs of the supply chain.

If they built this program, would anyone care? Would their owner retailers sign up to implement the program? Would food companies want to use it?

Well, we still have a long way to go. But the signs are good, and this success with General Mills is a big step forward. General Mills saw the huge value in SUSTAIN, which includes nutrient use efficiency and soil health technologies, practices  and products, as well as the extensive training and implementation infrastructure needed to take it to scale.

The other winner of the General Mills competition was Adapt-N, a breakthrough nitrogen use efficiency platform that is also included in SUSTAIN.

Ramping up

This winter will be very busy with grower meetings and trainings for the agronomists and owners of participating ag retailers and cooperatives, as well as deployment of the robust data platform needed to maximize value back to the ag retailers and growers and aggregate data for supply chain reporting.

We are very excited to see SUSTAIN become part of General Mills’ work to meet its goal of being 100 percent sustainably sourced by 2020 for its 10 priority ingredients. These ingredients – corn, oats, wheat, dairy, fiber packaging, cocoa, vanilla, palm oil, sugar cane and sugar beets – represent half of the company’s total raw material purchases.

The commitment builds on the company’s sustainability mission to conserve and protect the resources upon which its business depends. Currently, General Mills has five regional sustainability engagements for commodity crops using the Field to Market continuous improvement framework , and it will deploy SUSTAIN and Adapt-N across these regions.  These programs will support General Mills’ primary purpose in advancing agriculture sustainability and grower profitability.

This post was originally published on EDF's Growing Returns blog.

By Jason Mathers

As we head into the last months of 2014 – and more importantly, the holiday season — I'm ready to make my nomination for the "word of the year." And no, it’s not “salmon cannon,” “bromance,” or others proposed by John Oliver or Stephen Colbert. The word supply chain and sustainability leaders should take away from 2014 is omnichannel.

At its core, omnichannel is an approach to retail that aims to deliver a holistic shopping experience that integrates in-store and online platforms, combining the supply chain of brick-and-mortar stores and e-commerce. It recognizes the staying power of each, the expectation of the customer for consistent prices across platforms and the ability to choose how, when and where to receive his/her purchases.

Folks that make a living thinking about how to allocate and where to place inventory have been using the word for a few years. In 2014, though, omnichannel crossed the chasm from being wonky, industry-speak to being a mainstream business concept – covered recently in USA Today – and a core aspect of competing in the digital age.

Which brings us to an important question: what are the environmental implications of omnichannel retailing?

As omnichannel is an integration of the brick-and-mortar and ecommerce worlds, it moves past the old debate about which is lower impact: in-store or online shopping? As with that question, the answer for omnichannel is largely, "it depends." There are aspects of omnichannel retailing that have likely environmental benefits and some aspects that could result in less efficient use of transportation resources.

An effective omnichannel strategy requires retailers to have real-time visibility into their inventory regardless of its location — on shelves, in warehouses, or in a truck trailer. Retailers need to place this inventory close to the likely customer in order to provide quick access to the product, whether in-store or for home delivery. Getting the necessary level of inventory visibility is hard work and requires significant investment into data systems. The retailer also needs to accurately forecast where demand will be strongest in order to best position its inventory.

The greatest potential environmental benefit of omnichannel likely is in enabling better long-term forecasting and reducing excess inventory. Materials and manufacturing, after all, typically are the largest contributor to the environmental footprint of most products. Better matching inventory levels with demand leads to less waste.

Omnichannel also has clear and significant ramifications for product distribution. Holding inventory at more locations leads to more inbound transportation miles. Having multiple locations for inventory will result occasionally in having to shift inventory from low-demand areas to higher-demand areas. By holding inventory closer to the customer, companies can reduce outbound miles and decrease the likelihood that rush deliveries will be sent by air freight. In turn, this will save a lot of fuel and emissions..

What will all of these variables mean in the end in terms of environmental performance? I think, on balance, omnichannel will more likely reduce environmental impacts.

The data and computing power revolution that is driving customer expectations and demand for omnichannel can also is being leveraged to improve forecasting and identify opportunities for multi-company collaborations. Better forecasting means more inbound product can be sent via intermodal transport. The potential for lower productivity of inbound transport can be offset by collaboration among consumer goods companies to co-load and/or co-locate freight.

Ultimately, embracing an omnichannel strategy and improving environmental performance can go hand-and-hand. At the heart of each is efficiency and good data. Capturing and leveraging these synergies, though, requires a deliberate, metrics-driven approach.

This metrics driven-approach is at the heart of the tools EDF has developed to assist companies in their efforts to improve the efficiency of product distribution. The Green Freight Journey framework highlights the importance of core key performance indicators and long-term goals. The EDF Green Freight Handbook provides guidance on choosing and calculating these key metrics, as well as identifying and implementing improvement projects. Our EDF Climate Corps fellows can help companies identify opportunities to reduce costs and greenhouse gas emissions from product distribution.

By Tom Murray

Ken Mehlman, Global Head of Public Affairs, KKR

Last week in Atlanta, Kohlberg, Kravis & Roberts (KKR) Member and Head of Global Public Affairs Ken Mehlman summed up his approach to sustainability in a single sentence:  “it’s got to be about what you do.” The comment was in response to a panel that EDF moderated at KKR’s first annual sustainability summit, where guest panelists Jeff Foote from Coca-Cola, Mitch Jackson from FedEx, and Maury Wolfe from Intercontinental Hotels Group shared their successes and challenges in improving their organizations’ environmental performance. Ken highlighted a common theme in all three panelists’ remarks: for a company’s work on sustainability to have a real impact, it needs to be integrated into its core business model.

KKR has clearly taken the same lesson to heart. By integrating environmental, social and governance (ESG) issues into how it evaluates and manages portfolio companies, KKR has shown what that thinking can achieve for a private equity firm and its portfolio companies.

Growing the Green Portfolio Program

Six years ago, EDF started on a journey with KKR to improve the environmental and financial performance of its  global portfolio of companies  Since then, KKR’s Green Portfolio Program has added a cumulative $1.2 billion to its portfolio companies’ bottom lines while avoiding more than 2.3 million metric tons of greenhouse gases, according to new results announced last week.

KKR’s initiative has had ripple effects throughout the private equity industry. What KKR did, with our help, was groundbreaking, but now it’s becoming the norm–leading PE firms have hired internal ESG experts, are actively managing ESG performance, and are reporting publicly on their progress.  In addition, new consultancies have sprung up to help PE firms seize the opportunities for revenue generation, cost reduction and risk management that successful ESG programs deliver.

What’s also notable is how the issues that private equity firms are dealing with have matured, expanding from energy efficiency and waste management to strategic energy management, worker safety, employee and consumer health and even cybersecurity.

These topics were discussed and debated at KKR's Sustainability Summit for its North American portfolio companies last week in Atlanta. Some takeaways:

• Set goals to align efforts at all levels of the organization. Speakers and attendees alike echoed the importance of goal-setting to achieve buy-in for sustainability initiatives from the executive suite to the shop floor, and to establish accountability for progress.
• Speak their language. Whether it’s communicating with cleaning services about a new recycling program, or building a business case for equipment upgrades that the CFO can say yes to, sustainability initiatives need to be framed in terms that matter to one’s target audience.
• Pick the low-hanging fruit, and reach higher for even bigger savings. Energy management can deliver huge cost savings and emissions reductions, but only if it is elevated from a one-off investment to a strategic business priority. This requires looking at volume of return along with time to payback, and building capacity within the organization to set in motion a “virtuous cycle” of continuous improvement in energy performance.
• Policy engagement is the next frontier in corporate sustainability. Corporations have an outsized influence in public policy, and their lobbying efforts need to be consistent with their sustainability initiatives. For example, Mitch Jackson shared how FedEx supported higher fuel economy standards for trucks as the company was seeking to improve the efficiency of its truck fleet. The new regulations helped to improve the economics of more fuel-efficient vehicles not just for FedEx, but for the entire marketplace.

Embedding Sustainability Organization-wide

But the bigger achievement is how KKR continues to find ways to integrate ESG risk management across its own organization. Through collaboration between its ESG/sustainability, regulatory and operational teams, KKR has made consideration of ESG issues a key part of the culture that will carry forward as its portfolio shifts and new opportunities for smart energy management, waste reduction and other initiatives emerge.

This is the kind of strong partnership EDF points to again and again as benefitting the environment and bottom line, while offering a roadmap for other firms just starting out on their own ESG initiatives to follow. It confirms what we suspected when we launched the program: good environmental management is an investment with a terrific return.

Also of interest:

• Sustainability and the Responsible Investor
• From the inside-out: Warburg Pincus and EDF Climate Corps’ recipe for replication
• Sustainability and Finance – Momentum Building, But a Long Way to Go

By Tom Murray

This past year, we’ve seen some bold action by companies in what we’ve dubbed the business-policy nexus, and it’s taking several different forms. Some have been calling for state or federal action on environmental impacts, while others are taking far-reaching voluntary efforts that could help support policy advocacy in the future.

Whether you view engagement on public policy as risk mitigation, providing market certainty, supporting corporate sustainability goals or securing competitive advantage, leading businesses are increasingly stepping up their efforts to support smart policy reform that will benefit the environment and economy.

Keeping toxic chemicals out of supply chains

Walmart and Target are moving to proactively get harmful chemicals out of their supply chains, even though the nation’s main chemical safety law, the Toxic Substances Control Act (TSCA), is outdated and hasn’t been reformed in nearly two decades.

Earlier this year, our long-term partner in this area, Walmart, took a big step forward by announcing a new sustainable chemicals policy focused on cutting 10 chemicals of concern from home and personal care products it sells. Chemicals of concern – for example, formaldehyde, a known carcinogen – have been found in about 40% of the formulated products on Walmart shelves, including things like household cleaners, lotions and cosmetics.

That policy includes requiring Walmart’s suppliers to disclose the chemical ingredients of their products as well as phase out or declare on their packaging the ten high-priority chemicals of concern. Walmart is also moving to have its private label products meet the EPA’s Design for the Environment safety standards.

Building upon this, Walmart and Target convened a Beauty and Personal Care Products Sustainability Summit aimed at surfacing ways both companies and their suppliers can increase consumer safety, sustainability and transparency through the entire supply chains of their products.

By engaging early—especially in areas where federal action is expected in the future, as with reform of TSCA—companies can reduce their risks, whether from legal action or public perception, and build greater trust with the public. These efforts also create a lens into companies’ operations that will shape the debate as changes to federal regulations take form.

Curbing methane leakage from the oil & gas sector

Another area where companies have been voicing support and helping guide policy is the push to reduce emissions of methane, a powerful greenhouse gas, from the oil and gas sector. Methane emissions are 84 times more potent than CO2 emissions over a 20-year timeline, and are increasingly seen as a major environmental and financial risk by both the energy and investment sectors.

That risk is driving companies in the oil and gas sector and elsewhere to encourage the federal government to regulate methane emissions. For example, in June Goldman Sachs CEO Lloyd Blankfein voiced his support of methane regulation on the Charlie Rose Show. Just two weeks ago, a group of investors managing $300 billion in assets (including the $160 billion NYC pension funds) sent an impassioned letter to EPA Administrator Gina McCarthy calling for federal regulation of methane emissions.

Your opportunity to lead in the transition to a clean energy future

Engagement starts with being informed.  That’s why EDF is eager to help you understand the need and opportunity for leadership on the EPA’s proposed Clean Power Plan (aka the Carbon Pollution Standards or 111d).

This proposed rule is the biggest single action the federal government has taken on climate change, and will help curb carbon emissions from the largest source of carbon pollution in the United States. Proposed by the EPA earlier this year, the Clean Power Plan is projected to reduce greenhouse gas emissions from existing power plants by 30 percent below 2005 levels, with room for custom implementations on a state-by-state basis so that state and local leaders can decide what solutions best fit the needs of each state’s specific economic, corporate and energy sectors.

Any sustainability officer who has tried to competitively price green power or build the business case for an energy efficiency program has a stake in the outcome. The Clean Power Plan can help shift us towards a lower-carbon economy and expand the demand and market for renewable energy and energy efficiency.  But this depends on how the plan is implemented, and getting that right depends on you.

Tom Murray, VP Corporate Partnerships, EDF

Mandy Warner, Senior Manager, Climate and Air Policy, EDF

Join us November 19th for a webinar with myself and Mandy Warner from EDF’s Climate & Energy team. We will walk you through how the Clean Power Plan is structured, what it means for businesses and why companies should make their voices heard as plans to implement the rule take shape.

Register here today for this informative webinar.

By Michael Reading

Directing capital toward better results for the planet requires that companies and investors have clear information about how environmental, social and governance issues translate to real business risks and opportunities. Of the many groups today that are looking to standardize how companies report on sustainability issues, the Sustainability Accounting Standards Board (SASB) takes a distinct approach by zeroing in on what publically traded U.S. companies should disclose in their filings to the Securities and Exchange Commission (SEC). I learned more about what SASB is up to and what impact the group’s work could have when I attended a recent workshop the organization hosted in Boston as part of Sustainable Brands’ New Metrics conference.

What is SASB and Who is the Reasonable Investor?

SASB was founded in 2011 to “develop and disseminate sustainability accounting standards that help public corporations disclose material, decision-useful information to investors.” The group’s name and approach parallel those of the Financial Accounting and Standards Board (FASB), which was established in the 1970s to create financial accounting and reporting standards for publically traded U.S. companies in their filings to the SEC. Like FASB, SASB works within the SEC’s existing guidelines on disclosure, determining how they apply to reporting of sustainability issues.

As background, companies must disclose to the SEC all “material information” about their business, defined as information that would affect the valuation of the company in the eyes of the “reasonable investor” (See SASB Conceptual Framework for more details). For SASB, the “reasonable investor” is largely synonymous with any mainstream investor, and while investors in the past may have been focused solely on conventional measures of profitability, today’s reasonable investors recognize the importance that sustainability plays in their portfolios. In 2012, over $3.7 trillion of U.S. assets were managed using sustainable and/or responsible investment criteria, representing over 11% of total U.S. assets under management and a 22% increase over 2010 (US SIF).

How Does SASB Work?

Determining which issues are material for which companies is an intensive process – one in which SASB assesses the relevance of 40 distinct issues for each of 80 industries. For each issue, the group assesses materiality for the industry based on three key criteria:

1. Evidence of interest – How frequently is the issue cited by companies within an industry and among their stakeholders?
2. Evidence of financial impact – How does managing or mismanaging the issue affect the valuation of the firm?
3. Forward-looking adjustments – Does the issue create negative externalities that affect other industries or stakeholders? Could it present a potentially systemic impact?

SASB has so far used this process to identify the material issues for companies in 33 different industries within five sectors, as well as the metrics companies should use for disclosure.

Why Is SASB Important?

It draws a clear link between sustainability issues and financial performance of a company. As the correlation becomes clear, investors will pay attention and “vote” with their dollars. In other words, strong sustainability performers will attract capital and weak ones will be motivated to improve their sustainability practices.

More tactically, SASB’s process for developing standards offers real opportunities to engage companies, NGOs, and anyone else interested in driving toward a more sustainable future. The process of determining materiality involves a variety of stakeholders, and SASB convenes working groups for each industry and sector. Right now, SASB is forming working groups on Consumption (covering everything from food to consumables to apparel), Renewable Resources, and Infrastructure – all sectors with significant sustainability impacts and opportunities.

Challenges Ahead

SASB’s first sets of standards were released just over a year ago, and since they are voluntary, it’s not yet clear if companies across industries will adopt them. Also, it’s not yet clear how companies will use SASB’s standards in light of other prominent initiatives to standardize reporting on sustainability issues, namely the Global Reporting Initiative (GRI), CDP (formerly Carbon Disclosure Project) and the International Integrated Reporting Council (IIRC).While SASB has taken strides to demonstrate how these approaches complement each other and emphasize its focus on SEC filings, the multiple standards still risk confusing companies who may want a single protocol to follow. However, if SASB can overcome these challenges, the effort stands to make a real difference in the world – driving resources toward investments that can deliver both environmental and economic returns.

Additional reading:

• Financial Sector Focuses on Risks from Methane

By Tom Murray

Last week, financial community leaders took a big step into the intersection of business and policy on the urgent need to curb methane emissions from the oil and gas sector. A group of investors managing more than $300 billion in market assets sent a letter to the U.S. Environmental Protection Administration and the White House, calling for the federal government to regulate methane emissions from the oil and gas sector. The letter urged covering new and existing oil and gas sites, including upstream and midstream sources, citing that strong methane policy can reduce business risk and create long-term value for investors and the economy.

Spearheaded by Trillium Asset Management, the cosigners of the letter to EPA Administrator Gina McCarthy included New York City Comptroller Scott M. Stringer, who oversees the $160 billion New York City Pension Funds, and a diverse set of firms and institutional investors. They spelled out in no uncertain terms that they regard methane as a serious climate and business problem – exposing the public and businesses alike to the growing costs of climate change associated with floods, storms, droughts and other severe weather.

Study after scientific study shows just how damaging methane is to the climate. Meanwhile, the nation’s largest industrial source of this pollution – the oil and gas sector – is expanding rapidly. Consequently, methane is not only being acknowledged as one of the most pressing climate issues of our time, but as a substantial investment risk if left unaddressed.

The 18 signers make the point that proven, low-cost solutions already exist to cut methane emissions from the oil and gas sector by 40 percent. And while they support state-level action, including the steps taken in Colorado and California, and voluntary measures by industry to reduce emissions, they are clear that these efforts alone cannot address the problem at enough scale, nor as quickly as we need. They assert that because the industry is spread across the country, “uniform rules are the only way to level the playing field and ensure high performance across the board.” Further, the letter stated that a  national framework would “ensure simplicity, consistency and certainty.”

I wrote in this space a few weeks ago about how voluntary corporate efforts are important, even critical, but that to meet the challenge that climate change presents, businesses have to lead on policy as well. We need more of the type of constructive industry engagement we saw in Colorado. Having three of Colorado’s largest energy companies sit down with state regulators and environmentalists to help craft smart methane policy, with rules that stand today as a national model, shows us what’s possible.

Working proactively with lawmakers to develop a rule on methane emissions is in the industry’s best interest, as federal regulation would provide much-needed market certainty for companies regarding emission standards and monitoring and repair requirements for new and existing projects. Goldman Sachs concluded in a 2014 report that a lack of certainty in potential federal environmental policy is a major risk factor limiting investment and job creation in natural gas projects.

By providing support and insight to shape the regulatory and policy changes we need, companies can help protect our communities, climate and economy. Read the letter, and if you find it inspires you, add your voice to the growing group of businesses in support of federal action on methane emissions from the oil and gas sector.

Also of interest:

• The Business-Policy Nexus: Clean Power Plan Offers Opportunity for Companies
• Report Finds Opportunity for Natural Gas Job Growth—But It’s Not Where You Think
• The Business-Policy Nexus: The Next Frontier for Corporate Sustainability Leadership