New trends in Green Buildings and sustainability Reporting: Integrity versus Applicability

According to the most recent GreenBiz State of Green Business report, an increasing number of environmental performance results will be both reported and explained in the form of an Integrated Report (IR). An IR accounts for the inclusion of absolute environmental costs, which are “tallied by compiling companies’ individual impacts, such as carbon emissions, water consumption and waste, and assigning a cost to each impact.” Very few companies have yet to factor these considerations into their accounting systems, let alone report such information to investors. But GreenBiz notes that as governments begin to regulate carbon and as the climate change causes shifts in the monetary value of resources companies rely on, environmental costs will become a bigger lever for success or failure.

When it comes to addressing environmental costs, the areas of requiring the most attention occur outside the corporate office, in sectors such as operations, facilities, fleets, energy and real estate. The buildings sector is one part of the climate change equation with the greatest potential for significantly reducing greenhouse gas emissions and addressing environmental costs. The United Nations Environment Programme (UNEP) estimates that buildings are responsible for more than 40% of energy use internationally, one-third of greenhouse gas emissions and 30% of raw material use. “Greening” corporate real estate can help achieve deep cuts in greenhouse gas emissions both rapidly and cost-effectively, while simultaneously allowing companies to better manage and measure their environmental performance.

The recent trend of integrative reporting is already accounting for this component by urging companies to provide a basis for identifying and quantifying the projected benefits from investments in green building, and by fueling interest in integrating building sector reporting standards under the GRI and other frameworks.

Given investor and consumer consciousness of labeling programs, it is no surprise that as sustainability reporting develops to include these factors, many companies also seek certification to better communicate their green building initiatives. Studies show that because of investor and consumer awareness, certified buildings often lead in business activity; for instance, PNC Financial Services Group’s LEED rated facilities opened more than four hundred additional consumer deposit accounts and had more than three million more in consumer deposit balances per facility per year than non-certified properties. Overall, certifying a facility can exponentially improve a company’s financial performance and help to lower its operational costs.

Yet, the green building certification process remains a huge barrier for many businesses seeking to incorporate green building in their sustainability strategies. Programs such as LEED (Leadership in Energy and Environmental Design) can add millions to construction costs while promising to cut other expenses. The additional costs of hefty certification fees and the soft costs of consultants and other hires leave little room in the budget for improving a buildings’ sustainability performance post-certification. And because corporations sometimes require various property types (whether owned or leased) to operate their business, there may exist drastically different conditions for each building seeking certification. Frustration over costs, building limitations and impracticalities of requirements consequently causes some businesses to throw their facilities to the wayside with certification.

But if the operation and management of corporate real estate plays a significant negative or positive factor in a company’s social responsibility, citizenship, or sustainability actions, then this shouldn’t be the case. Some may find that they can no longer afford to ignore the certification procedure – through certification they can more effectively address the critical role of their real estate assets.

One way that CSE is helping companies to achieve this in a less costly manner is through SERF, or the Society of Environmentally Responsible Facilities. SERF was designed in an effort to avoid many of the issues encountered with green building certification – mainly that it can be cost-prohibitive, timely, and oftentimes inaccessible. With SERF, integrity no longer trumps applicability – users avoid settling for a single trophy building by applying one rating system along an entire building portfolio at a much lower cost.

SERF offers an approachable method for certifying all facility types, whether that is a leased office or a warehouse, a small urban building or a large rural one. The process itself saves time and money by moving away from reliance on third-party consultants and commissioning agents for documentation (although all SERF documentation is verified by a licensed architect or engineer before certification is granted). Better yet, it’s flexible. Users can better address their sustainability goals by choosing to certify a building through a prescriptive pathway or a performance-based pathway. A dynamic scoring system also offers criteria that are considerate of building environment and limitations. The result? There’s no need to beat your head against the wall to achieve simple, streamlined results – you can have your green building and flaunt it too.

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Socially Responsible Investing: Cost or Not?

In recent years the power of corporate reputation has become a major issue both at a scientific level and in professional practice. The positive image of a company in any industry supports sales of existing products and services, respectively, while contributing to the successful introduction of new products and services. It is notable that most corporate reputation is part of the corporate balance sheet as a capitalized size and valued as such in the case of acquisitions, strategic alliances or joint ventures.

A large number of companies recognize the business benefits of CSR as a policy and practice. Simultaneously, a new practice that is constantly gaining ground in global investment is what is called “Socially Responsible Investing”. These investments are particularly popular, not only to large investors but also to small businesses, insurance companies and even to individual investors, while rated them as one of the most effective tools to serve the social and environmental objectives of corporate social responsibility. Furthermore, as a typical win-win opportunity they combine economic return by minimizing risks in economic, social and environmental terms.

However a question arises: Do socially responsible investments imply costs for investors in the form of lower performance, such as organic food is more expensive than conventional? Although this is theoretically possible, as the Citigroup Smith Barney observes, since it reduces investors’ options, the empirical data give contradictory answers which ultimately did not exclude the possibility of even higher yields.

Are Businesses Practicing What They Preach?

Sustainability issues are at the forefront of corporate agendas across the world. Investors, board members and consumers are all curious as to what practices companies are using to remain sustainable.

“Twenty years ago, there were very few businesses that even knew what sustainability was,” says Bill Ford, executive chairman at Ford Motor Company told The Guardian. “If they did, they were pretty much against it. Today, you’d be hard-pressed to find a business that doesn’t understand the importance of it.”

A new survey, released by Accenture and the United Nations Global Compact, showed that 93% of CEOs realize that sustainability issues are important to the future success of the companies that they lead. Additionally. 81% of CEOs surveyed believe that sustainability issues are fully embedded into their companies’ strategy and operations, with many moving focus to their supply chains.

Are these companies really implementing processes in their everyday practices?

John Elkington, founder of SustainAbility and Volans, explained to The Guardian that while CEOs have appointed CSOs and complete annual reports, they are not looking at sustainability as a transformative agenda.

Where does your company stand on this? Do you go beyond annual reports?

Sustainable Business Ethics on the Minds of Investors

Sustainable business and business ethics were a hot topic on the “Sustainability Evolved: Embedding ESG Performance in Corporate Valuation” panel that sponsored by The Robert Zicklin Center for Corporate Sustainability and the Sustainable Practice Network.

The panel addressed how consulting firms are using ESG reports to promote long-term sustainability. This included discussions on climate change, greenhouse gas emissions, waste and recycling ratios and quantified renewable energy use.

Clearbridge Advisors’ Assistant Vice President or Environmental, Social and Governance Investment Karoline Barwinski spoke on the importance of business portfolios and how her organizations provides investment service and ESG portfolios.

“ESG is about integrating environmental, social, and governance factors into our portfolios and making sure the performance of the portfolio is comparable to traditional investing,” said Barwinski. “I hope we can come across an idea that ESG can perform and is another investment strategy and if done right, it can really work.”

While this disclosure is great, an audience member at the panel wrote in an interesting question. “The question reads, Paul McCartney said ‘If every slaughterhouse had glass walls, everyone would be a vegetarian.’ So the question is, is having too much disclosure a bad thing? Are some aspects of business better left in the dark?”

Each panel member agreed that full disclosure is the best method to ensure sustainability and goodwill. Companies and their investors should possess the best tools to ensure the measurement of profitability and the sustainability of their business.

But as sustainability has come to mean more than saving the environment, The Guardian’s Adrian Henriques believes that as social matters, including stability, stakeholder relationships and well-being, have become regulated, investors are looking past sustainability to the core of a company. It changes the direction of the business.

And with this change in business, companies need to look at ethics. The European Commission recently redefined CSR, recognizing that “the responsibility of a business is co-extensive with the results of its actions.”

How is your company adapting to changes in business stemming from CSR? Have you needed to address ethical issues with investors?

Corporate Boards and Investors Should Partner on Sustainability

A new white paper from Ernst & Young asks corporate boards if they are ready for investors to focus on sustainability. According to GreenBiz.com, this is the third year in a row that sustainability has dominated major proposal categories.

Sustainable investors have gone mainstream, with the total  votes in support of environmental and social issues reaching 21 percent in 2011.  Investors are looking to companies to focus on the risks and opportunities that are associated with sustainability issues. Ernst & Young writes that this “reflect[s] the growing belief that a company’s environmental and social policies correlate strongly with its risk management approach and financial performance.”

As investors continue to seek greater accountability, they will challenge boards to further improve oversight on environmental and social issues, as well as increase the dialogue surrounding these topics.The white paper cites Microsoft Corp., Apple Inc., Hewlett-Packard CO, Chesapeake Energy Company, KB Home and PulteGroup Inc. as leaders in using engagement to achieve success.

As media coverage and legislation increasingly capture the eyes of investors, corporations will be asked to share information about the labor conditions of their global supply chain and the impacts of resource extraction practices.

For additional information on how investors are going to play an increased role in corporate sustainability in 2012, you can read the entire white paper from Ernst & Young here.

Have you seen an increase in investor questions on your company’s sustainability endeavors? Are these ideas you have already adopted?