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The Business of Sustainability

Your parents were wrong

February 7th, 2010

The Sierra Club and American Electric Power, the nation’s largest coal-burning utility, don’t agree on much, but there is this:

Money does grow on trees.

Along with other big environmental groups and such businesses as Duke Energy and El Paso Corp., they are part of a coalition that wants to use markets to protect the world’s forests and curb climate change.

Jeff Horowitz

Jeff Horowitz

The coalition—called Avoided Deforestation Partners, a name that will never win a branding contest—is the brainchild of Jeff Horowitz, a 58-year-old architect and newcomer to the environmental movement who has quietly become an influential player as climate change legislation inches its way through a divided Congress.

Protecting forests “is our single most important strategy, with respect to solving the climate crisis,” Horowitz says. “If we don’t tackle forestry immediately, we can’t buy enough time to get at the technological advances we need and scale them.”

I met Jeff in December at the UN climate talks in Copenhagen, and visited him last week at his office in a lovely, hilly neighborhood of Berkeley. A mechanism to protect forests by steering millions of dollars from the developed world to poor countries, known as REDD (Reducing Emissions from Deforestation and Forest Degradation), was endorsed by governments in Copenhagen, so Horowitz felt good about the climate talks. “As far as we’re concerned, Copenhagen was a tremendous victory,” he told me.

Now he wants to make sure that forestry offsets are part of a U.S. climate bill. That will enable regulated polluters in the U.S. to offset their carbon emissions by paying to protect forests elsewhere. Protecting forests is a cheaper and quicker way to curb emissions than by switching from coal or natural gas to low-carbon energy sources like nuclear, wind or solar power. Read the rest of this entry »

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Why green business is like teen sex

February 4th, 2010

Corporate sustainability is like teen sex.

Everybody talks about it.

Nobody does it very much.

And when they do it, they don’t do it very well.

My friend and colleague Joel Makower likes to tell that joke, and it’s as good a way as any to introduce Greenbiz.com’s third annual State of Green Business report. The wide-ranging report was unveiled today in San Francisco at a conference hosted by 100203-sobg1-wJoel. I won’t try to summarize it;  it’s available free for download here, and well worth a read. Among other things, Joel and his colleagues identify 10 green business trends–they include radical transparency, green fleets, toxics as strategy, and the rethinking of packaging–and they measure progress (or the lack thereof)  around 20 different metrics, including carbon transparency, carbon reporting, clean-tech investments and green power use.

The teen sex joke is fitting because the ratio of of talk to action in the green business arena remains high. Particularly when it comes to climate change–now and most likely forever the No. 1 environmental issue for business, and for everyone else–progress has been halting because of the absence of consistent government policy, at the national or global level. Only 34% of the S&P500 companies have promised to Read the rest of this entry »

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Faith-based economics

February 2nd, 2010

Did the stimulus package jump-start the economy? Will climate regulation create jobs? Are clean energy subsidies an efficient way to curb pollution? Is health-care spending worth it? And how worried, really, should we be about budget deficits?

Those are questions for economists. With those issues in the news, economists are in demand. They’re quoted in the press, invited to conferences, even sought out at cocktail parties. But what, really, do they have to tell us?

Russ Roberts

Russ Roberts

“It’s a very funny time to be an economist,” says Russ Roberts, an economics professor at George Mason University and a research fellow at Stanford University’s Hoover Institution. “Our reputation isn’t very good. Probably shouldn’t be very good. We didn’t predict the recession. We don’t have a theory on how to get out. Yet people ask us for guidance. It’s bizarre.”

Russ is an unusual economist because he spends a good deal of time trying to explain his trade to a broad public. He hosts an excellent weekly podcast called EconTalk. He has written “an economic romance” called The Invisible Heart. He blogs at Café Hayek and, most recently, produced a rap video showdown between Frederick A. Hayek and John Maynard Keynes that has amassed an astonishing 500,000 (!!!) views on YouTube.

But when Russ spoke the other day during a  day-long media colloquium at Hoover, where he was joined by John Taylor and Robert Hall, who are distinguished Stanford economists, he titled his talk: “Is Economics a Progressive Discipline?”

By progressive, he didn’t mean left of center. (Not at Hoover!) Instead, he was asking whether economics, like physics, evolves, to develop deeper or more precise knowledge about how the world works. “Do we make any progress?” he asked. His answer, in sum, was not much. Unlike physicists or mathematicians (or even, I daresay, climate scientists), economists today can’t agree on what would seem to be very fundamental questions. Read the rest of this entry »

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The power of small changes

February 2nd, 2010

When Chris McKenna, who manages a fleet of trucks for Poland Spring, learned that the company’s drivers were racking up as much as 1,400 hours a month of idle time, he saw an opportunity to make a difference. Running truck engines in winter kept the cabs warm — the company is based in Maine — but it cost Poland Spring money and polluted the air.

To see which of the company’s 65 drivers were racking up the most idle time, McKenna ranked them, based on data from onboard computers. “All we did was talk to them about it, and put a list up in the break room,” he told me. “Human nature, no one wants to be at the bottom of the list.” To sweeten the deal, the 10 drivers with the lowest idling time got a gift card for fuel they could use for their own cars.

The results were dramatic. Idle time dropped from 1,400 hours in February 2007 to 1000 hours in February 2008 to just 380 hours in February 2009. Depending on fuel costs, cutting idle time has saved the company thousands of dollars a year—roughly $20,000 during 2008, for example.

There are two lessons here. First, as I wrote recently about OPower, changing behavior is a powerful and low-cost way to curb climate change. Second, small changes can add up to big impacts, as the Environmental Defense Fund makes clear in this cool video from its Innovation Exchange website.

As EDF notes, fleet vehicles are driven hard, averaging nearly double the mileage, fuel consumption and emissions of personal vehicles. Currently, EDF says there are more 3 million corporate fleet vehicles in the United States emitting 45 million metric tons of carbon dioxide per year.

I spoke with Chris McKenna last summer while helping EDF write a series of case studies on greening fleets. (The case studies Read the rest of this entry »

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GE and Washington: Too cozy?

January 31st, 2010

Since 2004, when I wrote a story for FORTUNE called Money and Morals at GE , I have been an admirer of General Electric and its CEO, Jeff Immelt. My admiration deepened when GE unveiled EcoMagination, its effort to solve important environmental problems. Immelt and GE also led the U.S. Climate Action Partnership, an alliance of big business and big NGOs committed to getting the government to regulate greenhouse gas emissions.

Jeffrey Immelt

Jeffrey Immelt

But–and you knew there’d be a but, didn’t you?–I’ve got a couple of questions about GE and Immelt that have been nagging at me. First, has GE become overly focused on Washington? Second, when will Immelt deliver for GE shareholders?

The first question was prompted by an aside in John Harwood’s column in The Times a week ago, about the Obama administration’s all-out effort to get Ben Bernanke confirmed as Fed chief. He wrote:

The investor Warren Buffett and Jeffrey R. Immelt, the chairman of General Electric, helped contact senators, a senior official said.

There’s nothing wrong with this, of course; Immelt has the right to ask senators to support Bernanke. But it reminded me that this registered Republican and his company have closely aligned their interests with the administration. Immelt serves on the president’s Economic Recovery Advisory Board. Newly-released figures show that among big companies or unions, GE was second only to Exxon Mobil in lobbying expenses during 2009, spending $21.4 million. (Other sources put the figure higher.) This isn’t a surprise–GE is a huge company (2009 revenues were $156 billion) and it has a myriad of Washington interests, including taxes, trade, energy policy and financial regulation.

But there’s more. GE’s Washington operation is a case study in Washington’s revolving door. Nancy Dorn, who runs the office, Read the rest of this entry »

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Rich Liroff on BPA: Better safe than sorry

January 29th, 2010

Today’s guest post is from Richard A. Liroff, Ph.D., the founder and director of the Investor Environmental Health Network (IEHN), a group of investors and NGO that advocates for safer corporate chemicals policies to reduce financial and reputational risk to companies, and grow long-term shareholder value. That’s a mouthful, but in essence, Rich and his allies try to persuade companies to use safer chemicals; you can find a list of shareholder resolutions on safer chemicals policies at the IEHN website, www.iehn.org.

Rich Liroff

Rich Liroff

A lifelong environmentalist, Rich has worked on toxic issues of various kinds since the late 1980s, when he looked at indoor air quality. “That work exposed me to the idea that air pollution hazards from toxics might be greater indoors than outdoors,” he told me. He formed IEHN in 2004 and says: “I thought the best way to move the issue forward was by working with the private sector.” Since then, of course, we’ve heard a lot about chemicals in products ranging from household cleaners to toys to cosmetics. This article is about BPA, which has interested me since I wrote a long story for cnnmoney.com called Wal-Mart: the new FDA in 2008. I worried then that the BPA controversy was more about emotion and entrenched interests (on both sides) than it was about science. I’m not sure things have improved much, but you can be the judge of that. Rich’s column originally appeared at Greenbiz.

On January 15, 2010, The U.S. Food and Drug Administration (FDA) shifted its position on the safety of the chemical Bisphenol A (BPA), expressing for the first time some concern about safety, announcing further research, and providing tips for parents to minimize infants’ exposure.

As a result, smart companies will change the way they communicate about BPA and as well as search for alternatives to better align themselves with consumer concerns. Some companies could gain reputational benefits and free media attention from supporting proposed legislation restricting use of BPA. Read the rest of this entry »

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Siemens energy plan: Diversify

January 28th, 2010

When it comes to the energy, Randy Zwirn doesn’t play favorites. As CEO of the global energy service division of Siemens and president of Siemens Energy, Zwirn has a stake in the coal, nuclear, gas, wind and solar industries, as well as the smart grid and transmission business.

Randy Zwirn

Randy Zwirn

It’s a big stake, too. When we spoke today, Zwirn told me that one-third of all the energy-generating capacity in the U.S. uses Siemens’ power-generating equipment. Impressive. Siemens Energy employs about 12,000 people in the U.S., mostly in manufacturing and services.

Siemens has factories that make rotor blades and nacelles for wind turbines in Hutchison, Kansas, and Fort Madison, Iowa. It operates a factory that make turbines for gas-powered plants in Charlotte, N.C. In nuclear, after pulling out of a joint venture with Areva in which it was a minority partner, Siemens has formed a partnership with Rosatom, a fast-growing state-owned atomic energy firm in Russia. Last year, Siemens bought a 40% stake in Arava, an Israeli firm that makes utility-scale solar thermal power plants. That’s a business that should work in the southwest U.S., Zwirn says.

As for coal, Siemens has turned to the U.S. Department of Energy for help in going forward with projects designed to capture and store carbon emissions from coal plants. It’s working with Tenaska, an independent power producer, on a $3,5 billion – not cheap! – clean coal plant under development near Taylorville, Illinois. That plant has been selected by DOE for a loan guarantee of up to $2.5 billion. Meanwhile, DOE has provided a $350 million grant for a coal plant near Odessa, Texas, proposed by Summit Energy that will use Siemens gasification and power generating technology. “We need to figure out a way to utilize coal,” Zwirn says. Read the rest of this entry »

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Rappin’ economists: Keynes v. Hayek

January 27th, 2010

Here’s a treat for those of you, like me, who are interested in economic theory. (I know, I’m a bit of a geek.) My favorite economics teacher, Russ Roberts, who’s at George Mason U. and the Hoover Institution, has put together a rap video with a Spike TV producer named John Papola that, believe it or not, illustrates the debate between free-market economist F.A. Hayek and macro-economist John Maynard Keynes. You may have heard about it on Planet Money or NPR’s All Things Considered. Russ is a multi-media threat–he’s written a “economic romance” novel called The Invisible Heart, he hosts a terrific podcast called EconTalk and now he’s branched into video. Last time I looked, some 250,000 people had watched this on YouTube. Enjoy!

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Electric cars: all systems go

January 26th, 2010

Despite the disappointments of Copenhagen, despite the inaction on climate-change regulation in Congress, despite the global recession, the momentum behind electric cars keeps building.

Yesterday, Better Place, the Silicon Valley-based electric car startup, raised $350 million in financing—the biggest clean tech investment ever, the company said, and a validation of a business model that has been scoffed at by the auto industry. The investment round, led by HSBC, values Better Place, which has yet to put a car on the road, at $1.25 billion.

“Electric vehicles are, at this point, inevitable,” said Jason Wolf, vice president of Better Place. “We’ve broken through, and there’s no turning back.”

Big automakers, meanwhile, are pushing forward with their electric offerings, as executives from Nissan and Ford affirmed yesterday during a “Green Car Summit” held at the U.S. Capitol.

Nissan Leaf

Nissan Leaf

Nissan has been taking its all-electric Leaf, which will be introduced next fall, on a 24-city U.S. tour.  “The market is ready,” said Scott Becker, senior vice president of Nissan North America. “We’ve had an incredible reaction from consumers.” He said more than 38,000 people have signed up to get more information about the car.

“This is going to be a vehicle designed and made for the mass market,” Becker said. The car will have a range of about 100 miles before needing a new charge, good enough to meet the needs of 90% of U.S. drivers.

Lots of forces will bring an array of new electric cars to market in 2010 and 2011–technological improvements in batteries, concerns about climate change (despite legislative foot-dragging), worries about the U.S.’s dependence on imported oil and, most of all, the increasingly attractive economics around electric cars, which we’ll get to in a moment.

Having said that,  significant disagreements remain even among electric-car advocates about how fast the new technology will be adopted, and what form it will take. Will gas-electric hybrids like the Toyota Prius or Ford Fusion dominate, or will the market shift to plug-in hybrids like the Chevy Volt or all-electrics like the Leaf? Will electric cars be a niche business, a mainstream product or–maybe, just maybe–will they come to dominate? Or are they being overhyped? Certainly, there’s no shortage of skepticism out there, particularly from auto-industry incumbents.

“Yes, you will have the intellectual guys who drive electric vehicles,” scoffed Stefan Jacoby, CEO of Volkswagen Group of America, who spoke at the “green car” event. But, he argued, mass-market consumers won’t pay a premium for electric cars and they don’t want to deal with the hassle of charging their car batteries.

When Jason Wolf of Better Place opined that 50% of new car sales could be electric by 2020, Jacoby shot back: “That’s totally impossible. We need to be realistic.”

Still, Better Place has made more progress in the last couple of years–during a global economic meltdown–than most people would have expected. It’s got the support of the governments of Israel and Denmark for widespread rollouts, which require

Renault Fluence ZE

Renault Fluence ZE

building charging stations as well as battery-switching operations throughout those two countries. (The Better Place model envisions battery switches for long trips.) It’s got a commitment from Renault build 100,000 electric cars, a new model known as the Fluence ZE (for zero emissions, a car that I wrote about here.) And yesterday’s round of Series B funding brings in new investors including HSBC, Morgan Stanley Investment Management, and Lazard Asset Management. Charles Stonehill, Better Place’s CFO, wrote on the company’s blog:

Our investors represent some of the largest financial institutions in the world, employing exceptionally thorough due diligence processes that are commensurate with the size of investment.

Given Renault’s commitment and the infusion of equity, don’t be surprised if the next country where Better Place rolls out its cars and its unique business model is France. Higher gasoline prices in Europe make Better Place a better business there.

Which brings us to the economics. While you’ll get arguments about the specific numbers, most people who have looked at electric cars will tell you that as battery costs come down, electric-powered engines are more efficient and less expensive to operate that gas-powered ones. Better Place’s Wolf says the cost per mile of fueling an electric car is two to three cents for the electricity, plus another five to six cents for the battery when amortized over the life of the car. Figure a dime a mile. In the U.S., with gasoline priced at $3, powering a car with gas costs 12-14 cents a mile. In Europe, where drivers pay $6 to $8 per gallon of gas, you can double that. The point is, there’s enough money to be made so that carmakers and consumers can both do well as electrics roll out, even though the upfront costs of an electric car are higher.

Not surprisingly, the start-up companies who are building only electric cars expect the technology to be embraced relatively quickly and widely. Established automakers, even those committed to electrics, are more cautious.

“We view this as a revolutionary journey,” said Nancy Gioia, director of global electrification at Ford Motor. Evolution might be more like it: By 2020, she said, Ford expects that between 10 and 25% of its new car sales will be electric. The bulk of those, she added, will be hybrids like the Fusion. With a hybrid, a gasoline engine can be used to overcome what the industry calls “range anxiety”–the driver’s worry that a battery could run out on long trips.

But Kevin Czinger, the dynamic CEO of CODA Automotive (who will be speaking at FORTUNE’s Brainstorm Green), proudly says that his company will be “100 percent independent of the oil industry.” CODA intends to start small, selling cars only in California beginning later this year, but Czinger is counting on market dynamics to both improve the product and drive sales.

“Do I think I can sell 1,000 high quality electric cars in California? Absolutely,” he said. That will signal markets that the business is real. “Do I know what the market will do with that signal? No. But market forces should work to drive down costs and drive up performance.”

He’s got a point. You never know what will happen with a disruptive technology comes along. When is the last time you bought a CD? Or a a new landline phone?

Says Czinger: “We envision an affordable electric car in every American garage.”

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Next steps: Climate action and green business

January 25th, 2010

Under the category of shameless promotion of self and friends, I want to call your attention to three upcoming events where I’ll be asking questions of some very smart people.

Tomorrow (Tuesday, January 26), I will be moderating a webinar for my colleagues at The Energy Collective called Is Global Action on Climate Change a Pipe Dream? Breaking Down What Was (Or Wasn’t) Achieved at COP15.

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Next Thursday, February 4, I’ll be in San Francisco to join my colleagues at Greenbiz.com, led by executive editor Joel Makower, at their annual State of Green Business Forum at the PG&E Auditorium.

logo_sogbf_2010

The following Tuesday, February 9, Joel and I and the Greenbiz crew will reconvene for a State of Green Business Forum at the Chicago Mart Plaza.

Here are some details:

We’ve got a great panel for The Energy Collective webinar, which is free of charge. Robert Stavins, the Albert Pratt Professor of Business and Government at the Kennedy School at Harvard, as well as director of the Harvard Environmental Economics Program. Prior to Harvard, Stavins was a staff economist at the Environmental Defense Fund. You can read one of his thoughtful blogposts about Copenhagen here. Aimée Christensen is an activist and consultant who’s worked in government, business, law and the nonprofit world on climate, human rights and development issues. She’s now got her own company, Christensen Global Strategies, which advises corporate, governmental,  and non-profit clients seeking to address the global challenges of climate change, ecosystem degradation, and resource scarcity. Her clients have included the Clinton Global Initiative,  Swiss Re, the United Nations Development Program, Virgin United, and Wolfensohn + Co.  Our third panelist will be Dirk Forrister, managing director at Natsource, a leading carbon finance company. Dirk previously worked for the Clinton White House and the Department of Energy, so he knows the Washington scene.  We’ll begin our conversation at 1 p.m. ET, and allow plenty of time for questions from the audience. You can register for the event here.

In San Francisco and Chicago, after Joel Makower and Greenbiz release their annual State of Green Business report, we’ll spend the day talking about where green business is going with an impressive array of business leaders. In San Francisco, they will include Carl Bass, the president and CEO of Autodesk, Rob Bernard, chief environmental strategist for Microsoft, entrepreneur and MacArthur fellow Saul Griffith, Rich Lechner, v.p. of energy and environment at IBM,  Rick Rommel, who leaders emerging businesses for Best Buy and Kevin Surace, CEO of Serious Materials. (Van Jones, the former White House green jobs czar, is also on the SF agenda, but he will be appearing by telepresence from Washington, D.C.) In Chicago, we will be joined by David Baum, president of the Baum Realty Group, Jim Davis, executive director for sustainability at SAP, Donna Ducharme of the Delta Institute, Rich Lechner, Sonia Medina, U.S. country director for EcoSecurities, C. David Myers, president for building efficiency at Johnson Controls, and Richard L. Sandor, chairman and founder of the Chicago Climate Exchange, among others. To register for either event, or obtain further info, visit the State of Green Business website. We’ll be talking about these topics:

Carbon Management After Copenhagen: How are companies considering carbon now that the Copenhagen summit is behind us? Hear how companies are viewing carbon as a strategic issue, implementing sophisticated new accounting schemes, realigning their products and processes, and preparing to compete in a low-carbon economy.

Green Marketing in the Age of Radical Transparency: In a world in which vast amounts of information are available about companies and products, the rules of green marketing have changed. Today, companies must respond to green ratings and rankings from websites, media companies, nonprofit organizations, and big players like Walmart. In a world where consumers have unparalleled access to data about products and companies, how does a company truly be seen as green?

Can IT Solve the World’s Problems? The information technology sector is responsible for 2% of the world’s greenhouse gas emissions, but its impact on the other 98% is growing rapidly. Hardware, software, and service providers are creating new products and services that are enabling large and small companies to better measure and manage their environmental impacts.

When Green Business Meets Cleantech: It used to be that green business and clean technology were separate realms. No longer. Today, the two are converging, as global companies and start-ups alike are harnessing clean technology as the foundation for a new generation of green business opportunities. The result are some unlikely corporate players and alliances.

On a personal note, it’s been about a year since I began working with The Energy Collective and Greenbiz. Robin Carey at TEC and Joel Makower and Pete May at Greenbiz are great partners, and their support for my writing makes this blog possible. So, thanks guys!

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