The energy efficiency panel at the FT Investing in a Sustainable Future conference held March 29th in New York City.
The rapidly growing sustainable investing trend is driving more companies to examine how they can cut back on their energy expenditures, which account for a significant portion of many businesses’ operating costs. It’s a straightforward benefit: Investing in energy efficiency saves money and returns value to shareholders.
Industry leaders at the recent FT Investing in a Sustainable Future conference in New York had much to say — and learn — on the subject.
A 2011 Harvard Business School study examined Bloomberg terminal data and found significant investor interest in environment, social and governance metrics. But there was an interesting split: Sell-side firms were primarily interested in greenhouse gas emissions data, while buy-side firms were interested in a broad range of environment, social and governance information.
“Beauty is in the eye of the beholder,” said Mark Sloss, Head of Sustainable Investing at UBS Wealth Management Americas, to characterize the way companies identify sustainability opportunities. The metrics that define sustainable corporate behavior vary widely between companies and sectors.
When evaluating car companies, for example, one might look downstream at whether customers are purchasing more fuel efficient models and thus reducing greenhouse gas emissions. By contrast, when looking at pharmaceutical companies, water usage might be a key metric.
Power to the People
Many companies are setting up internal systems to help empower employees to make energy efficiency breakthroughs. “Green teams” within companies monitor suggestions by employees and act to spread best practices. Thus, ideas like using whiteboards to save paper can catch on in one location, then be adopted by others throughout the company, amplifying total savings.
Senior management “buy in” and transparency are keys to the success of corporate sustainability initiatives, said Lee Coker, Green Returns Project Manager at the Environmental Defense Fund. Publicly reporting the results of sustainability efforts increases employees’ incentives, and breeds healthy competition, he said.
Leaving Money on the Table
The number of U.S. companies failing to take advantage of energy-efficiency tax incentives is surprisingly high. Why companies forego these often simple savings opportunities is unclear. One possibility: Firms may be reluctant to start down the path for fear of being locked by government regulators into mandatory energy efficiency requirements in the future.
For more on energy efficient programs Con Ed offers New York metropolitan area businesses, read here.
Luxury car manufacturer BMW takes sustainability seriously, said Sean Noonan, CFO and Vice President of Production Control and Finance: The company has baked sustainability into its target management system. Specific targets like reducing energy consumption per unit or water consumption per unit are considered equally as important as financial goals, said Noonan.
It’s a focus that has produced results, he noted. For example, one of BMW’s South Carolina car factories achieved a 30% energy consumption reduction by streamlining its painting process, providing a significant cost savings directly traceable to its energy efficiency efforts.