Archive for January, 2012
Meet the NAEM Board of Directors: What are some of the lessons you learned in 2011?
In honor of this week’s 2012 Member Appreciation Week celebration, we sat down with members of the NAEM Board of Directors to talk about trends in EHS and sustainability management. Featuring Deb Hammond of Abbott Laboratories; Stephen Evanoff of Danaher Corp.; Bruce Karas of The Coca-Cola Co.; and Minda Sarmiento of Shaw Environmental Inc.
NAEM Board of Directors: What project are you most excited about working on this year?
As part of NAEM’s 2012 Member Appreciation Week, we sat down with members of the NAEM Board of Directors to chat about trends in environment, health and safety (EHS) and sustainability management. Featuring Kelvin Roth of AMCOL International Corp.; Sandy Nessing of American Electric Power Co. Inc.; Pat Perry of CVS Caremark; and John Reichling of CDM Smith.
Emerging Leaders Series: How WESCO Turned on the Savings with LEDs
Billy Grayson
For the past few months, I’ve had LEDs (light-emitting diodes) on the brain.
At WESCO, we sell a LOT of lighting, and have seen tremendous sales growth in more energy-efficient fluorescent bulbs, ballasts and fixtures.
There are a lot of factors driving this growth in fluorescent sales: Companies are looking to cut energy costs, and even without incentives an upgrade to T5 or T8 lighting from T12 or metal halide [1] often has a payback of three years or less. Companies are also looking to take advantage of state and federal incentives. In some areas, this can reduce the payback on a lighting upgrade from three to five years to 18 months.
Federal regulation is driving investment as well. In July 2012, most T12 technology will no longer be available (even if Congress does stop the 100-watt incandescent phaseout). Companies that do not upgrade their lighting may not be able to buy new bulbs by the end of the year.
So the business case for a fluorescent lighting upgrade is compelling, but with stories like Wired’s August 2011 cover feature on LED bulbs, stories like Wal-Mart, Denny’s and Starbucks investment in LEDs, and even some recent big WESCO LED projects (including streetlighting with Pacific Gas & Electric Co.), there are many wondering if they should make the jump to LEDs now, rather than make a short-term investment in a better fluorescent technology.
There really is no “right” answer in the debate over LEDs vs. high-efficiency fluorescents: The choice depends on a number of factors. Below are some of the things that are making LEDs look more and more attractive:
- The price of LEDs is coming down: Over the past two years, the price of many types of LEDs has come down significantly, more than 50 percent in many applications.
- LEDs are becoming more flexible: New entries to the market include LEDs that plug into existing ballasts, LEDs that provide easy upgrades as chip technology matures and LEDs that are “smarter,” with dimming and occupancy capabilities well beyond the traditional electronic ballast fluorescent.
- The price of fluorescents is going up: With recent spikes in the price of rare earth metals, the price of fluorescent bulbs rose more than 30 percent in 2011. Although the price has recently come down a little, it is possible that challenges in obtaining these materials could spike the price again.
- LEDs save a LOT: LED’s use less energy, last longer and require less maintenance than fluorescents.
- LEDs have a lighter footprint: Even outside of energy savings, LEDs are arguably better for the environment, as they require less materials to manufacture, ship and install, and they do not have the challenges associated with mercury disposal that fluorescents do.
- LEDs are much “cooler”: There’s a lot of new lighting options available with LEDs, and many of them are arguably more aesthetically pleasing than traditional fluorescents.
With all the arguments for LEDs, why would anyone make the shift from T12 to T8?
For WESCO’s internal lighting upgrades, it all came down to dollars and cents. For our portfolio, a switch to 25 and 28-watt T8s had an average payback after incentives of 1.9 years and a five-year return on investment (ROI) of 225 percent. For warehouse lighting, LED payback was slightly longer than five years.
What’s right for WESCO is not necessarily what’s best for other companies. We’ve recently completed LED lighting upgrades for companies ranging from utilities to food distributors to retail food chains. For these customers, the payback on LEDs was more compelling than a short-term move to fluorescents. Some of the factors for these customers included:
- Running their lights all the time: For companies ranging from food distributors to 24-hour mini-marts, LED investments can pay back faster than flourescents. Where a 40-hour-a-week facility may save $1,000 a year with fluorescents and $2,000 a year with LEDs, a 24/7 facility would save more than four times as much in annual electricity costs.
- Pricey power: WESCO’s LED business is strongest across the board in Hawaii. Why? $.25-$.40/kWh. When you pay that much for power, the deeper the energy savings the more compelling the business case.
- Long-term commitment: The federal government has become a strong customer for LEDs. With a 10-20-year investment horizon, LEDs make great business sense – even now most LED investments will outperform efficient fluorescents over periods longer than 10 years.
- Companies for whom image means a lot: A number of companies are willing to forego the short-term ROI of a fluorescent upgrade for the aesthetic and reputational benefits from a big LED investment. As I mentioned before, positive public relations and prettier store and restaurant lighting may trump straight payback and ROI calculations for some companies.
At WESCO, we’ve decided for the time being to put most of our investment in a fluorescent upgrade. But even in our portfolio there are places where LEDs make sense. We are upgrading parking lot lighting in a number of facilities to LED this year (the lifetime ROI on these investments beat our metal halide and HPS). We are also setting up some conference room and warehouse LED demonstration projects in Charlotte, North Carolina; Chicago; Los Angeles and Pittsburgh, Pa., artly to provide a showroom for our customers, and partly to act as “guinea pigs” for some of the cutting-edge technology being brought to market by Philips, CREE, and others.
Billy Grayson is the Director of Corporate Sustainability for WESCO Distribution, where works with both the marketing and operations teams to help the company “Go Green” – a program to reduce energy consumption and improve environmental performance and communicating WESCO’s energy and environmental achievements to customers, suppliers, and other stakeholders. Before joining WESCO, Mr. Grayson was a Senior Associate at ICF International, working with public and private sector clients on greenhouse gas mitigation, energy efficiency, and other environmental mitigation projects.
[1] For those not familiar with common lighting types, Philips has a good calculator to help you get started at http://applications.nam.lighting.philips.com/ecocalculator/
A Peek Underneath the Hood of CR Magazine’s “100 Best Corporate Citizens List”
Elizabeth Boudrie
Recognized by PR Week as one of America’s top three most-important business rankings, Corporate Responsibility Magazine’s “100 Best Corporate Citizens List” evaluates companies on 325 corporate social responsibility data points. This week we caught up with Elizabeth Boudrie, Vice President of Research for SharedXpertise (parent company of CR Magazine) to learn more about the methodology behind the ranking.
GT: With all the rankings out there, why should companies pay attention to this one? What makes this ranking unique?
EB: From a methodological standpoint, this is an audit versus a survey. One of the frustrations that I think a lot of people have in the corporate responsibility (CR) space is that “We get so many surveys, we have to pick and choose which one we’re going to do and we’re not going to do yours.”
We have to explain to people that it’s an involuntary audit—you don’t have to fill anything out. What we do is the IW Financial folks go and look for essential 325 data elements that are publicly disclosed for all Russell 1000 companies. There are a few data elements that are performance -based, but for the most part they’re disclosure-based. I think that the biggest way [the ranking is different] is that it’s very broad. We’re looking really across a broad spectrum of issues as opposed to others that are very specifically oriented to environment, social and governance (ESG), human rights or specific issues, versus our seven different categories.
GT: How did you come up with those categories?
EB: We have a methodology committee comprised of industry folks and academics and folks who together help us oversee the direction of the data elements and the whole process. And back when they originally started the process – I think this is the 13th year — they looked and said, “Ok, what are the main categories that we think make sense, that we think should be important?” And these are the categories that they came up with.
And over time, we continue to review them. They’re weighted differently based on how important the collective group thinks they are and over time we continue to review them and believe that these are the categories that do capture a broad picture of corporate social responsibility (CSR).
GT: And 2012 is the 13th year for the ranking?
EB: Yes. 2012 will be the 13th annual list.
GT: In the absence of widely agreed-upon performance metrics, I understand that many rankings currently rely on transparency as a proxy for progress. Is this the best way to evaluate companies?
EB: I think all of us would love to get past disclosure as the main determinant of ranks– and we do have some elements within our 300-some-odd data elements that are performance-based — but it’s predominantly disclosure-based. There aren’t enough people who are disclosing enough as it is. We have lots and lots of companies who disclose next to nothing out of the Russell 1000. We think of disclosure as the low bar, but if it’s the low bar there are a lot of people who aren’t stepping over it yet. So from that perspective, there’s still a long way to go.
The other issue is that with so many different companies doing so many different things, it’s very difficult to find a reasonable performance standard that you can apply across company size, across company industry, across company type. And I think everybody is still struggling to find out what that is in every ranking. So I think it’s a reasonable proxy for now because it’s the best we can do but I don’t think anybody’s happy with that forever. And I think everybody’s looking for a better way.
GT: What does transparency tell you about a company?
EB: Transparency maybe doesn’t tell you everything, but a company certainly doesn’t talk about things it’s doing poorly, typically. To us the willingness of a company to be transparent indicates strong management, a willingness to be self-reflective, to understand what’s going on within their environment—both within their own environment internally as well as externally– and it just demonstrates connection to what’s happening in the world right now. I think they’re recognizing over time that people are more interested in exactly what’s happening and that means being transparent about what’s happening with your organization, whether that’s your human rights record, whether that’s your impact on the environment, your philanthropic giving, all the categories we might address.
GT: How many of your top 100 companies are ‘repeat achievers’? How much turnover do you see year over year?
EB: It changes a fair amount. The turnover changes over time, which sort of depends on the changes in the methodology, the data set. We try to limit that so there isn’t so much impact, but there can be an impact. One of our data categories is financial performance and with the recent economic downturn that really impacted some folks. So there can be some churn.
GT: How often do you update your methodology?
EB: We try to take an evolutionary versus revolutionary approach. You’d hate to see 80 percent of the list change because it wouldn’t be meaningful…Ultimately what we’re trying to do is drive people to be as transparent as they can be. So ultimately if a company is being even more transparent in 2012 than 2011 we don’t want to penalize them randomly because the methodology has changed. So we’ll try to be very careful in doing that. What you’ll find is because it’s a comparative methodology a company can do exactly what they were doing the prior year and still fall in the ranking if other companies are doing better.
GT: How does the audit process work?
EB: IW Financial, as part of their process, sends out a correspondence file, which is an opportunity for a company that they’ve audited to review the file and make sure that everything is accurate. We’ve added a separate, additional review for companies that are potentially going to be ranked so they can have a second review.
GT: When does the ranking come out?
EB: In the Spring. This year it will come out in early April.
GT: What is the circulation of Corporate Responsibility Magazine?
EB: 19,000
GT: Is the ranking publicly available information? Or is it sold?
EB:The ranking is public. And free.
Elizabeth Boudrie is Vice President of Research at SharedXpertise, where she oversees all global research efforts addressing topics such as corporate responsibility, and transformation and outsourcing of business processes. She will share more information and answer more questions about CR Magazine’s “100 Best Corporate Citizens List” during the NAEM webinar on Jan. 24.
Life in the Fast Lane: Electric Vehicle Observations
Bruce Klafter
Recently I had the opportunity to use a Nissan Leaf™ for several full days, a much more interesting exercise than a simple test drive. As someone working in the sustainability area, as a co-chair of the California Clean Cars campaign and as a likely car buyer in 2012 (my current vehicle has over 230,000 miles on it) I am very interested in the electric vehicle (EV) market.
Nissan’s Leaf™ is among the handful of low emission cars that are presently authorized to carry a Clean Air Vehicle Sticker, entitling a single occupant to use the carpool lanes during rush hours – a very nice side benefit to EV ownership that helped speed my commute this week.
My general impression of EV driving is very favorable. This particular model is roomy, it has all the bells and whistles (bluetooth, navigation, backup camera, etc.) and most importantly, it really drives well. Acceleration, handling and power are all indistinguishable from a gas powered vehicle.
The only issue I’ve had this week is the one that continues to slow down growth in the EV market, namely range anxiety and ease of recharging. I have been charging the vehicle at home and at work using conventional 120v outlets and while the process is simple and easy, it certainly takes a while, e.g. 11 hours to get a full charge last night.
When I left my home the range indicator read “100 miles”, but 35 miles of highway driving depleted that amount to 42. In other words, at 60+ miles per hour, a 35 mile trip used up 58 miles of driving range. Keep in mind, I tried to use the EV just like I use my current one, driving as fast as usual as opposed to crawling along in the slow lane just to conserve the charge. With the indicator staring at you the entire time, you also start thinking about all of the devices that consume electricity in the car, such as the lights, the radio, and the seat warmers and so on. Since I want a fully functional vehicle, the notion of driving around in a dark, cold vehicle is not a selling point.
My conclusions: I love just about everything in the EV experience other than the limitations on range. If the car had a 200-mile range, I would be placing an order tomorrow. Until batteries are improved, however, fast charging 240v stations are essential and the buyers for whom EVs work perfectly may be limited. By the way, Applied Materials is among the companies working to address some of the battery issues. It will also be exciting to see a whole slew of new EVs and plug-in hybrids (PHEVs) in 2012.
Bruce Klafter is head of Corporate Responsibility and Sustainability at Applied Materials, Inc. and leads the effort to fulfill the company’s commitment to sustainability in the design and implementation of business strategies and worldwide operations.
Sustainability Strategy and Long-term Performance
Kimberly Gladman
At the NAEM conference in Fort Lauderdale last May, I spoke about recent academic research on the link between corporate responsibility—in particular, positive environmental policies—and stock price performance. (For a review of the studies I talked about, see my paper, “Ten Things to Know about Responsible Investing.” ) I promised NAEM staff that I’d stay in touch and keep them updated when I heard of additional research that might be of interest to the membership. A paper just out from Harvard Business School definitely fits the bill.
In “The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance,” Professors Bob Eccles, Ioannis Ioannou and George Serafeim began by identifying companies that disclosed a set of environmental and social policies in 2003-2005. They then conducted over 200 interviews with corporate executives to ascertain which companies had already begun to implement these policies internally in 1993.
Once they had a set of 90 early adopters, they created a matched sample of companies that had few sustainability policies, but were otherwise similar to the first group in terms of size, sector, growth stage and capital structure. Comparing shareholder returns for the two groups, they found that the high-sustainability group outperformed its low-sustainability peers by an annualized 2.3 percent on an equal-weighted basis,between 1993 and 2011.
The authors also demonstrated, based on a statistical analysis of keywords in analyst calls, that high-sustainability companies are more likely to discuss long-term trends and non-financial matters with investors. They study ownership and show that high-sustainability companies attract longer-term investors with more concentrated holdings. They also show that high sustainability companies also are more likely to have a board oversight of sustainability, to incorporate sustainability metrics into executive compensation, and to disclose non-financial performance. (The full study can be found at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1964011).
While the study’s performance numbers may be welcomed by corporate environment, health and safety (EHS) managers as evidence that sustainability pays, it would be interesting to know the relationship between a company’s survival rate and its sustainability activities. For example, does management of social and environmental issues acts as a kind of insurance policy, making a company more likely to be around long-term?
NAEM members would probably have valuable opinions on this question. They would also be able to offer useful perspectives on one of the study’s key follow-up questions: What ensures that companies stay the long-term course in terms of sustainability culture? Why do some companies’ programs fall apart if a key manager leaves, while other firms seem to have environmental consciousness baked into their “DNA”? These questions are just part of the lively discussion this paper is provoking.
What do you think?
Dr. Kimberly Gladman is the Director of Research and Risk Analytics at GMI, a leading provider of corporate governance, accounting, environmental and social research and ratings. Before joining GMI’s predecessor, The Corporate Library, in 2008, Dr. Gladman managed a team of associates researching global corporations at Domini Social Investments, a prominent socially responsible investment fund manager. She also served as Lead SRI Analyst for Domini’s European equity fund, and spent several years participating in the firm’s shareholder advocacy on social, environmental, and governance issues.
She began her career in academia, focused on interdisciplinary research and teaching. She earned a B.A. from Yale University in 1990, and a Ph.D. from New York University in 2001. Dr. Gladman also holds the Chartered Financial Analyst designation.
Emerging Leaders Series: Numbers Talk. But what are they saying?
Kimberly Wallis
It turns out that how you present a number is often as important as what that number actually is. Executives and investors tend to focus on numbers because they are quantitative, readily-comparable and solid. Or are they?
A given piece of information, such as the amount of energy a new light bulb uses, can be presented in a variety of ways. For example, it can be stated as watts-per-bulb, dollars-per-year, kilowatts-hours saved compared to the old bulb, net present value, or lifetime costs, to name a few. Each measurement brings to mind different considerations and highlights different comparisons. This can sway the reaction of the audience.
Rick Larrick, a professor of management at Duke University’s Fuqua School of Business, studies how a single piece of information can garner multiple responses, depending on how it is presented. After attending one of his lectures, I read a paper he wrote with Jack Soll. They found that people respond differently to MPG and GPM (gallons per hundred miles), even though the two ratios nominally convey the same information.
People tend to favor switching from a 30-mpg car to a 40-mpg car over switching from an 8-mpg car to a 10-mpg car. The first option seems to be a better deal. However, assuming the distance you travel remains constant, you actually save more gas (and therefore more money) with the second option.
In GPM terms, the first option involves going from 3.3-gpm to 2.5-gpm, while the second option involves going from 12.5-gpm to 10-gpm. Obviously, saving 2.5 gallons per hundred miles is better than saving less than one gallon.
This is why the new labels for cars require GPM as well as MPG. By presenting the information this way, people are encouraged to minimize their need for fuel. The facts don’t change, but policy and policy goals affect how the facts are presented, which demonstrably impacts how people react to the information. Here’s a quick example, expressed in numbers:
|
First Option |
Second Option |
|
30 mpg > 40 mpg (3.3 gpm > 2.5 gpm) |
8 mpg > 10 mpg (12.5 gpm > 10 gpm) |
Though it may seem that choosing to present facts in a certain way, such as GPM instead of MPG, is a form of manipulation, consider the fact that each choice is a manipulation. Every time you present a number, you are making decisions: which units to use, what to compare it to, what scale to use — and, of course, what to measure in the first place.
In business, numbers are presented all the time. The health of a company is often represented by a single number, as is the measure of sustainability. The context in which you place a number can emphasize certain things and downplay others – in fact, it always does, whether we intend it to or not.
Are your numbers saying what you want them to? What tactics do you use to convey important numbers?
Kimberly Wallis is a graduate student in environmental management at the Nicholas School of the Environment at Duke University, where she focuses on energy issues and effective communication. She is particularly interested in how individuals and organizations change.
Satisfaction Trumps Balance
Alex Pollock
As a New Year begins I’m sure many have added “find balance” to those New Year Resolutions…again. Many have had this dream before, but maybe this year, finally, you believe that the balance meter can be moved in a favorable direction.
Please allow me to share some personal reflections. I believe that people are really looking for satisfaction in their lives, both personal and professional. Satisfaction is different for everyone. It’s personal. We hold the key to satisfaction. We must make the effort to know what is really important to us. As leaders, we can contribute to the satisfaction of others but the responsibility for attainment is not ours.
Most people don’t have the energy they need to do the things they love and, disturbingly, don’t have the desire to do much about it. Being satisfied requires a strategy, focus, discipline and accountability. This is not a journey we should make on our own. We should have a coach or mentor alongside us.
Work is a richly rewarding part of a satisfying life. We need a workplace where we feel respected and appreciated, where our efforts make a difference, and where the challenges match our abilities.
Wishing you a year where what deeply satisfies you becomes clear and you have the courage to navigate a path to get there. Please be assured that satisfaction trumps balance!
What have been your experiences in finding satisfaction? What advice would you give those who are searching for it?
