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Why Standards Would Benefit the Green Finance Industry

The SSC Team July 26, 2018 Tags: , , , , , , , , , , , , , , , Strategic Sustainability Consulting No comments
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It’s safe to say we all agree that green efforts in any industry should be applauded and the same is true when it comes to finance. But while a desire for green finance continues to grow worldwide, how can investors and issuers best identify and evaluate risk when the industry has no standards?

It’s clear that the industry is seeing major growth. In 2017 the issuance of labeled green bonds (PDF) jumped to nearly $160 billion and the self-labeled U.S. green bond market more than doubled, powered by a mix of municipalities, states and large corporations. But as these new and innovative financing options are being established, it seems increasingly important that some mandatory standards be created to guide those working in the industry.

Standards in the world of green finance would be beneficial for both investors and for issuers. For investors who are building their green portfolios and need assurances of best practice and reliable ways to monitor the quality of green instruments — regardless of which geographies or industries they invest in — a sense of best practices and who is meeting them would clearly help with decision making. When it comes to issuers, common standards would clarify options in terms of issuance while also ensuring that deals are being appropriately structured and reaching the right investors for each project.

Standardization also serves to enable innovation because it establishes a level playing field. While ING was first to issue a sustainability rating-linked loan, they have since observed that other banks have embraced different set-ups. Five years ago, Climate Bonds Initiative (CBI) and the International Capital Markets Association (ICMA) both set out to establish a voluntary set of guiding principles for participants.

The framework from both organizations was focused on the process that needed to be followed when issuing green bonds: how issuers should describe the allocation of proceeds to investors; how a second opinion should be obtained; and how they should set about reporting in a transparent way.

And as a way to help kick-start the market, these served as helpful principles that could reassure investors and facilitate the uptake of green bonds, without being overly prescriptive about the use of the finance.

But the market has greatly expanded since 2013 and questions related to the use of green bond proceeds — their so-called "content" — have inevitably arisen: Which projects will qualify in specific sectors? Where should the boundaries be set? Where should classifications lean towards green or social bonds?

While CBI and ICMA with the input of other banks and stakeholders have continuously refined their earlier standards, the fact that the principles remain voluntary means that issuers do not need to follow them. On the flip side, if the standards around the industry become too settled, it will be difficult for the market to support the wide range of investor who would like to participate.

Who are these investors? Well the green finance industry has groups coming from varying green backgrounds, including investors with dedicated mandates for green bonds, investors with diversified portfolios that include pockets of green, and investors who find green bonds attractive but don’t have a dedicated mandate in place.

Because of their varying levels of commitment to being green, the investors might have different standards. Those with a dedicated green mandate are going to put potential issuers under much higher scrutiny than others.

And this is where there is a fine line to maintain between what investors want and expect, and what issuers want and need. It’s simply a fact that different industries are moving at different speeds when it comes to sustainability and different industries will face distinct challenges along the way. Within the investor community, there are a range of perceptions about standards and the various investment opportunities available.

Chief executive of the Loan Market Association, Clare Dawson, summed up the need for green finance standards perfectly, "With any new market, establishing a general framework for the product such as the Green Loan Principles (GLPs), which we recently launched, is beneficial as it helps create a common understanding of what people are looking at. We will be seeking to develop the GLP further to accommodate a wider range of loan structures, including revolving credit facilities, to maximize the number of borrowers able to take out green loans."

While issuers and investors have managed admirably with a voluntary patchwork of existing guidelines this far, a fresh set of commonly adopted standards will be the key to allowing green markets to expand. If these standards put the emphasis on process over content, it should create better conditions for green markets to thrive in future. And that’s great news for everyone.

Data or Your Gut? Understanding Your True ROI

The SSC Team May 8, 2018 Tags: , , , Strategic Sustainability Consulting No comments
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When it comes to business there will probably never be an end to the discussion of return on investment talk. But it’s important to remember that while financial returns may be easier to document and demonstrate, there is a lot of "data" that's simply subjective, part of the institutional knowledge, or coming from the expert you've hired that you clearly expect to trust. When all these issues are floating around the world of statistics, here’s why going with your "gut" isn't wrong.

 

In the world of sustainability measuring your ROI cannot be based on stats alone. Sure, if you reduce your energy and water usage it’s great to watch your bill go down. However the bigger savings is the enormous — and less immediately clear — impact that these efforts are having on the environment. What’s more important? Saving $50 or reducing your carbon footprint? Hopefully it’s the second one.

 

Paul Marushka adds to the narrative by examining how a “prove it” mentality challenges the value that environmental health and safety bring to the workforce. Despite our obsession with being able to use data to prove the worth of an initiative, sometimes we simply know the intrinsic value in something. Even if there aren’t stats to back it up. Marushka uses the former CEO of Alcoa as an example of what significant results can be achieved without having data to support the efforts: After he challenged the company to become the world’s safest, Alcoa saw an increase in earnings of 600 percent with sales growing by 15 percent per year during a 5-year period. Seems pretty clear that you can prove to leadership the value of investing in environmental health and safety — even if you don’t have software to examine everything and back you up.

 

Because when it comes to sustainability you have to look past the simple dollar value of your business efforts. There may be other ways to measure ROI. Although these efforts may be less tangible immediately, as a business owner you should start trusting your instincts. In a piece for Inc., Peter Kozodoy brought up a unique concept: how trusting your instincts over hard data could help you make better business decisions. And science is supporting the notion that your intuition is there to help you.

 

In a report published in Psychological Science Joel Pearson, an associate professor of psychology at the University of New South Wales, and his research team found evidence that people can use their intuition to make better, faster, more accurate and more confident decisions. Considering how much we tend to cling to data in the business world, this may seen like an unreliable option, however Pearson’s study showed that surrounding ourselves with more positive, subliminal inputs not only helps us make better choices, but it helps us to trust those choices. Engaging in this concept of picking up on other’s subconscious messages could explain why some folks get "luckier" than others — they always have the uncanny ability to spot exceptional business ideas, or seem to find the best people to work with. Individuals who are more in tune with their intuition over what statistic might tell them may be coming out ahead.

 

As you continue forward in your sustainability efforts, remember that your decisions shouldn’t be based on stats alone. There are a little of elements to consider and numbers don’t always tell the full story. 

4 Tips for Getting Closer to Zero Waste

The SSC Team February 9, 2017 Tags: , , , , , , Strategic Sustainability Consulting No comments

Enjoy this post from the SSC archives.

Zero waste is a lofty goal, but it generally pays off because most of the time less is actually more in sustainability planning. Here are a few helpful hints about waste and recycling to push your waste strategy to zero.

1. Choose “single stream.” By allowing employees to sort recyclable material into a single receptacle, you can expect to see an increase in recycling of up to 50%. Make it easy for employees, and they’re more likely to participate!

2. When crafting a zero-landfill strategy, don’t just focus on recycling. Be sure to include options like: closed loop solutions (reuse), composting, and supply chain management.  Remaining materials that can’t be recycled or reused can be converted to energy through conversion technologies: waste to energy, plasma gasification, and anaerobic digestion.

3. Think about waste conveyance design during new construction. Make sure you consider the following:

  • Internal areas for collection, storage, and separation of materials
  • External space for multiple container sizes and service areas
  • Design for ease of use

4. Cover all of the bases when reviewing recycling, sorting, composting or other waste stream management programs

  • Signage
  • Bin size
  • Bin type
  • Tenant education, key component to gain buy-in maybe have a kick-off meeting and continuous reminders with metrics and goals
  • Space constraints
  • Service area

If your organization wants to get a better handle on its waste, a great first step is conducting a waste audit. We’ve developed a toolkit (webinar, guidance, and templates) all around How to Conduct a Waste Audit. If you find that your team doesn’t have the gumption to sort through all that trash, contact us to arrange a waste audit done by sustainability professionals!

 

Sustainability Consulting Round-Up: Best of the Blog for January 2017

The SSC Team January 31, 2017 Tags: , , Strategic Sustainability Consulting No comments

Each month, we highlight some of our more popular content on the SSC blog!

In case you missed them, here's a round-up of our most popular blog posts from this past month. These are the articles that received the most attention from our online audience. Check them out!

  1. Incorporating 30 Elements of Consumer Value to Maximize Sustainability Returns
  2.  Integrate Total Cost of Ownership with Your LCA to Make Sustainable Choices
  3.  3 Ways to Engage Suppliers on Sustainability
  4.  Is Your Sustainability Strategy Too Complicated?
  5.  Future of the FSC: What Happens When Manufacturers Reject Certifications

 If you like an article, please consider sharing it online via your favorite social media platform. Helping us grow our audience is the #1 way you can show your support for the work that we do.

The Business Case for Sustainability

The SSC Team January 12, 2017 Tags: , , , , , Strategic Sustainability Consulting No comments

Enjoy this post from the SSC Archives. 

Each year we try and start fresh, assuming that our potential clients may be learning about sustainability strategy from a practical implementation standpoint for the very first time.

Even though this post is from our archives, this webinar presented by, SSC President Jennifer Woofter called "The Business Case for Sustainability" presented to the DC chapter of Net Impact a few years back is a great primer on  how to identify, calculate, and prioritize social and environmental benefits to organizations.

We recorded the session, and you can watch it here! 

Some people still think that implementing sustainability might be great for the company's image, but bad for its bottom line. Nothing could be further from the truth, and you will learn how sustainability makes both Sense and Cents. 

Over the course of the webinar we will identify key areas where "going green" can pay off, calculate basic savings opportunities for energy, water, transportation and other issues, and understand basic financial models for calculating return on investment (ROI). We will also discuss how to value a company's reputation, brand image, and stakeholder relationships, as well as how to reduce certain costs borne by the company. We will focus on the following areas and demonstrate with real-life case studies: 

  • Economic: Promoting business excellence and maintaining the highest ethical standards 
  • Social: Engaging with community and exemplifying corporate responsibility 
  • Environmental: Employing green building practices and minimizing carbon emissions

 If you found this webinar helpful, you may also want to check out our white paper, Sustainability Through the Value Chain.  For a complimentary conversation about the topics in the webinar or white paper, please contact us.

What does gender equality have to do with climate change?

The SSC Team January 10, 2017 Tags: , , , Strategic Sustainability Consulting No comments

Trick question. 

We believe strongly in the concept of sustainability in terms of both the environmental AND social impacts of an organization's operational practice.

Often we find that these two concepts are less of a dichotomy and more of a series of interconnected pieces where human factors and environmental factors blend and create causes and effects that may not have been previously expected. 

So, as we engage in carbon footprint calculations and LCA's, we also encourage our clients to look at their sustainability strategy holistically. 

Gender equality has a strong business case, is right for developing nations as well as advanced economies, and can improve retention and productivity. As human factors are taken into consideration alongside environmental ones, the entire global economic, social, and natural "ecosystems" will be positively impacted. 

As your company looks to boost gender equality, check out this practical guide to putting gender on the agenda.

By using the GRI standards for sustainability reporting, companies will be able to include a full set of data as it relates to environmental and social impact, including things like gender equality. If you're ready to talk sustainability reporting, now's the time! Contact us today. 

 

Sustainability Progress Check: Manufacturing Firms in the Architecture and Engineering Industry – Sustainability Lessons from ArchitectureBoston Expo (ABX)

The SSC Team January 5, 2017 Tags: , , , , , , , , , Strategic Sustainability Consulting No comments

In November, we headed out to ArchitectureBoston Expo (ABX) to get the pulse on sustainability from the perspective of architects, engineers, builders, contractors, manufacturers, and other AEC professionals. We spoke to dozens of representatives from the more than 400 exhibitors about sustainability programs, sustainability strategy, and what they think of it all.

Our conversations resulted in two really great questions:

Additionally, we took extra time and conducted a survey specifically targeted at companies that manufacture products (as opposed to service providers and distributors) used in the AEC field to delve deeper into what types of companies are doing what types of sustainability programs and why.

We gathered survey results from 30 manufacturers ranging in size from 1-10 employees to 550+ employees to gauge their sustainability performance and pressure from stakeholders. Exactly ⅓ of the respondents are doing little to no work in sustainability - not tracking any metrics other than those required by law and, in most cases, offering LEED credits. On the flip side, ⅓ have completed full sustainability reports and many had done EPDs, HPDs, and/or LCAs or carbon footprints for their core business. The remaining ⅓ was - obviously - somewhere in the middle, having a largely uncoordinated sustainability program that has been pieced together based on stakeholder pressure - certifications, submitting energy or water or supply chain data based on customer requests.

Essentially, the industry seemed evenly split with regard to tracking sustainability information, but as predicted, the companies with the most employees and most visible global brands are doing the most work and completing more comprehensive analysis - and seeing financial returns on their sustainability efforts. The larger the company, the more resources to dedicate to sustainability, the more they benefit.

However, companies across the board reported that they were feeling pressure from stakeholders - whether architects or builders or developers - to report more thoroughly on sustainability. More than 42 percent of respondents said they have been asked for carbon footprint data, LCA, and/or HPDs/EPDs in the past year. Nearly 30 percent of respondents have been asked for specific data points - water use, supply chain certifications, energy use, and/or waste information. An additional 7 percent have been asked by shareholders or clients for a full sustainability report.

Although stakeholders are asking for information, very few draw hard lines when the information isn’t readily available, with companies noting that the frequency of being asked for the information is increasing, but they have yet to feel a negative effect for not having the information on hand.

The question is: When will the critical tipping point be reached when an LCA or EPD or HPD be required as a standard part of an RFP for a major construction project, and will the ⅔ of companies with little to no comprehensive data be ready in time to be competitive on the project?

The average GRI-compliant sustainability report, an HPD or EPD, or a comprehensive, third-party verified life-cycle assessment can take more than six months to complete, start to finish. And the investment in a sustainability project for a small to medium sized manufacturing firm can range from tens of thousands of dollars to 10-times that amount...

So what should your company do? 

We believe it’s time for companies to build a sustainability reporting strategy into the overall operating budget so all of the reporting mechanisms and comprehensive data are on-hand when that critical tipping point is reached.

The next questions are:

  • What type of reporting should your business be focused on?
  • What should you budget for sustainability?
  • How do you use the sustainability tools to your competitive advantage?

Luckily, with more than 10 years’ experience in the field, we can answer all of these questions for you in less than it cost to attend ABX in the first place.

We encourage all of our potential clients to invest in training for their employees so they understand the advantages of strategic sustainability implementation, the material issues for the industry segment you compete in, what your peers are doing, and how you can take a leadership role in sustainability through effective planning.

Instead of engaging us for a year-long life-cycle assessment project, when you really just need an EPD or to start your first annual sustainability report, take advantage of our 1-Day Sustainability Assessment and Rapid-Decision Making Workshop. For a fraction of the cost of your sustainability program, we will guide you and your team through

  • Sustainability 101
  • Give you our recommendations for the best-course for your company
  • Facilitate a rapid-decision making discussion to further narrow down a path forward that meets your company's needs, budget, resources, and goals. 

We'd love to hear from you! Check out our full service offerings and submit a contact form and we'll be happy to schedule a 15-minute phone call to help you clarify next steps on your sustainability journey.

 

 

6 Ways to Get Executive Buy In for Sustainability

The SSC Team December 6, 2016 Tags: , , , , Strategic Sustainability Consulting No comments

Enjoy this post from the SSC Archives.

What do executives have in common with school kids? They both can be pretty picky. So when we read 6 Quick Lessons from the School Lunch Line for Pleasing Picky Customers, we realized that the tips applied equally well when trying to convince company executives to green-light a sustainability project. We've taken the article's six lessons which are listed below, and added our own commentary.

1. INVOLVE THEM INTO THE PROCESS.

It's easier to get approval for something when the person you are trying to convince feels ownership of it -- so ask for input and solicit feedback as you begin to plan and refine your proposal. Find out what makes your executives tick (cost savings, innovation, beating a competitor, etc.) and work that aspect into your pitch.

2. GIVE A NOD TO WHAT THEY KNOW.

If you can build on an existing program or process that is well-tested and well-loved, all the better. Anything you can do to reduce the risk (or perceived risk) of a new sustainability venture will make it more palatable for executives to swallow.

3. FREE SAMPLES NEVER HURT.

Can you give executives a taste of what's to come? Whether it's the results of a small pilot study ("Look, in just a week we saved $568- Imagine what we could do by rolling out this program company wide!") or a tangible thing to hold (a prototype of a new product), giving people a "bite" to try before committing to the whole meal can lower their resistance to something new. 

4. USE PEER DYNAMICS. PEOPLE ARE NATURALLY COMPETITIVE.

Sometimes you can use C-Suite dynamics to your advantage -- but tread carefully. You may find that certain executives are eager to prove themselves. That may mean that they challenge each other to find better and better sustainability initiatives. (Or it may mean that they undercut each other -- so again, be thoughtful in how you play office politics.) Alternately, consider framing your idea in terms of your company versus your competition. How can your initiative help leapfrog over your industry peers? How can it help you stay competitive? How can it open new markets that others haven't yet spotted?

5. DON’T GIVE UP IMMEDIATELY.

Anyone who has tried to sell their idea at the executive level has probably already learned this lesson, but it's worth repeating. It's unlikely that any significant initiative will get immediate approval -- so think early and often about how to introduce a phased approach, or plan your requests so that executives have plenty of time to consider and decide. 

6. ON THE OTHER HAND, ACCEPT YOUR LIMITATIONS.

Sometimes you just have to let it go. If executives are dead set against your program, move on. The beautiful thing about sustainability is that there is never a shortage of great ideas. So find the next one and start planning. (And don't forget that it's possible that your timing was just off -- keep your rejected idea in a drawer somewhere. It might be just what's needed six months from now!)

Thanks to 2degrees for publishing a version of this article!

If you are interested in reading more on this topic, check out our blog post: Does Your Executive Team Really Understand Your Sustainability Strategy?

 

Incorporating 30 Elements of Consumer Value to Maximize Sustainability Returns

The SSC Team December 1, 2016 Tags: , , , , , , , Strategic Sustainability Consulting No comments

Occasionally we run across an article that is so jam packed with information and application to the world of corporate sustainability that we don't want to summarize a single word.

Instead, we recommend you stop what you're doing right now and read every single word of the recent article, The Elements of Value, from the September issue of the Harvard Business Review.

The article's implications for how B2C companies can position their own sustainability activities to generate consumer value are invaluable ways to approach sustainability strategy in product and service design and development. 

Yes. Mind. Blown.

Now that you're really understanding how this can truly transform your business, contact us so we can help get you on the path. The hardest part is usually the first step. We're here to help.

 

Integrate Total Cost of Ownership with Your LCA to Make Sustainable Choices

The SSC Team November 17, 2016 Tags: , , , Strategic Sustainability Consulting No comments

Sustainability professionals speak the language of quantifying carbon emissions. Most other business professionals, however, speak the language of currency. Budgets. Market fluctuations. Stock price. Cost of materials or labor.

For most procurement professionals, pricing out goods and services generally means looking at the bottom line cost per unit over time. For example, a restaurant chain looking at cloth versus paper napkins is factoring in the annual cost of purchasing and disposing of paper napkins versus the prorated annual cost of purchasing, laundering, and replacing cloth napkins over their useful life. It’s dollars and cents.

Where natural capital accounting is a way to present the balance sheet of an organization by factoring in environmental impact, total cost of ownership, or TCO, helps firms better integrate sustainability information into the procurement process.

By taking the LCA data and drilling into each stage in the life cycle and calculating an environmental “cost,” a firm can create a TCO framework for a product or service. Or, better yet, can create better procurement guidelines based on optimal TCO variables that balance environmental and financial choices.

A Big Leap

TCO work is not easy. It requires firms to “dive deep into the value chain, and look at factors including manufacturing time, costs of parts, research and development, and environmental sustainability. This includes emissions from suppliers as well as those of consumers using the products and services.”

However, by using TCO purchasing practices firms are finding new business opportunities by meeting the increasing demands of consumers seeking “green” goods and services, decreased overall costs as waste reductions are targeted, and helps firms focus on the long term benefits of spending more up front, for example on energy efficient or renewable energy technology, resulting in a net decrease in operational costs over time.

Just like natural capital accounting, TCO work is difficult, not quite standardized at the level of most carbon emissions calculators, and underutilized. We hope to see more firms take up both practices, further integrating the bottom line dollar with the bottom line for the environment.