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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.

Do You Need Expensive Software for Environmental Reporting?

The SSC Team July 10, 2018 Tags: , , , , , Strategic Sustainability Consulting No comments
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Enjoy this post from the SSC Archives. 

 

According to a recent press release by the Environmental Business Journal (EBJ), the U.S. environmental industry grew 3.9% in 2014. Although the data will take another 10 months to come together for 2015, it’s fairly safe to say the sector saw growth again last year as the economy held steady.

EBJ reports on 14 business segments divided into three categories, all three categories showing upward trends in 2014.

The largest single growth area in 2014 was a double-digit gain in environmental software and information systems.

The industry has seen many environmental, health, safety and sustainability software vendors disappear as quickly as they appear, but every industry sees the tech start-up side get red hot, cool off, and heat up again.

With evolving needs, evolving science, and evolving technology capabilities, it is not at all surprising that many start-ups struggle in this field.

Complicating matters is the fact that many of the customers that a software company in the environmental software and information systems field would need to acquire aren’t fluent in what they actually need to purchase (or how to use it).

Environmental reporting and data management systems are a lot like complicated legal matters or the tax code: companies likely need a specialist, and we haven’t reached a tipping point in the business community where enough companies have specialists.

Companies might buy a software license from a promising start-up with good software, yet not know how to actually collect the appropriate data and end up not using the tool to its potential. By the time they’ve got the team in place and are ready to ramp up, the software tool they’ve purchased needs an expensive upgrade because of changes in the science, regulations, or standards of sustainability reporting. You can see how the CEO might balk on a second wave of investment when the first wasn’t a huge success.

It’s not that start-ups are struggling in a silo, it’s more likely that we just haven’t reached a critical mass of companies with the in-house resources that can gain maximum value from a well-built environmental software tool. Combine that with a standard of reporting that itself is a moving target, and it is really difficult to gain traction as a environmental software company.

If you know your company is ready to do begin sustainability reporting, but don’t have the in-house team to manage the software tools on the market, contact us. We work with leading software programs for tracking and reporting on environmental data, and help companies determine what might will for them. 

Sustainability Resources You Might Have Missed

The SSC Team November 24, 2016 Tags: , , , Strategic Sustainability Consulting No comments

Enjoy this post from the SSC archives.

It seems like every day there is a new sustainability tool on the market. Some are awesome, some are interesting, and some will make you scratch your head in confusion. But don't worry, we've done the heavy lifting and highlighted three sustainability tools below that are worth your time. Enjoy!

World Resources Institute (WRI) Climate Analysis Indicators Tool, or CAIT 2.0 - "The platform offers free online access to global greenhouse gas (GHG) emissions and other climate data, enabling researchers, policymakers, media, and others to download, visualize and share data for analysis and communications on climate change."

Value Chain Mapping - "Obtaining a clear picture of the fundamental inputs and outputs of your business provides valuable information for sustainability program development, as well as CSR reporting. CR professionals are developing sustainability-specific value chain maps in order to systematically assess the company's impacts throughout product sourcing, transport, development, use and disposal."

Sustainable Apparel Coalition's Higg Index Web Portal - "The Higg Index is used by the coalition's members to measure metrics such as energy usage, greenhouse gas emissions, water consumption, chemicals policies, waste management and labor practices from factories around the world... Although you must be a coalition member to gain complete access to the index, any invited supplier can submit data about its facilities and business practices. This will turn the Higg Index into a valuable Web resource that will help apparel and footwear companies collect and consider environmental and social information from potential suppliers or production resources."

Want to know more about sustainability reporting?  Check out our white paper, Sustainability Reporting and SMEs:  A Closer Look at the GRI.

 

The Earth Genome: New Natural Capital Accounting Software Being Tested

The SSC Team June 28, 2016 Tags: , , , Strategic Sustainability Consulting No comments

Global leaders in sustainability measure much more than impact, they are focused on measuring all up and downstream inputs and outputs to really find ways to improve performance on social and environmental metrics, and to translate those improvements into a common denominator that everyone understands: currency.

Tracking performance this way is often called natural capital accounting.

Many organizations that delve this deeply into the cost, benefit, risk, and impact of the “use of nature” in performing business tasks use a host of methodologies to fully analyze all of the different datasets and translate them into a coherent report.

For example, Kering, the parent company of the clothing and footware manufacturer, Puma, published its methodology as an open-source tool for others to use.

Recently, a non-profit organization called The Earth Genome, launched a software tool that may help standardize and simplify the process of natural capital accounting. Currently, the chemical giant Dow is testing the software, and eventually the organization plans to make the tool more widely available.

Accurate and trusted industry-wide tools, like CDP and GRI, help better benchmark and assess sustainability progress, so we can’t help but be a bit optimistic about The Earth Genome project. We look forward to the wider launch to see how this tool compares in its ability to collect data and generate accurate results.

If your company is ready to develop its sustainability action plan, and fully understand its impact, risk and opportunities, contact us. 

The Earth Genome: New Natural Capital Accounting Software Being Tested

The SSC Team June 28, 2016 Tags: , , , Strategic Sustainability Consulting No comments

Global leaders in sustainability measure much more than impact, they are focused on measuring all up and downstream inputs and outputs to really find ways to improve performance on social and environmental metrics, and to translate those improvements into a common denominator that everyone understands: currency.

Tracking performance this way is often called natural capital accounting.

Many organizations that delve this deeply into the cost, benefit, risk, and impact of the “use of nature” in performing business tasks use a host of methodologies to fully analyze all of the different datasets and translate them into a coherent report.

For example, Kering, the parent company of the clothing and footware manufacturer, Puma, published its methodology as an open-source tool for others to use.

Recently, a non-profit organization called The Earth Genome, launched a software tool that may help standardize and simplify the process of natural capital accounting. Currently, the chemical giant Dow is testing the software, and eventually the organization plans to make the tool more widely available.

Accurate and trusted industry-wide tools, like CDP and GRI, help better benchmark and assess sustainability progress, so we can’t help but be a bit optimistic about The Earth Genome project. We look forward to the wider launch to see how this tool compares in its ability to collect data and generate accurate results.

If your company is ready to develop its sustainability action plan, and fully understand its impact, risk and opportunities, contact us. 

Solutions for Replacing Spreadsheets in Your Sustainability Reporting Practices

The SSC Team April 26, 2016 Tags: , , , , Strategic Sustainability Consulting No comments

Enjoy this post from the SSC archives.

The old saying goes “If it is important, you must manage it; if you want to manage it, you must measure it,” but too many companies today use spreadsheets to track their environmental impacts.

Would you use a spreadsheet to track your corporate finances?  To monitor your inventory?  To log all of your personnel data?  Using a spreadsheet may seem like the simplest way to track your sustainability reporting, but in reality using this as part of your process is risky.

Don’t get us wrong, we love Excel as much as the next person, but for sustainability tracking, a spreadsheet is cumbersome and prone to errors. Whether you make a data entry mistake while flipping back and forth between screens or you simply have incorrect data to start, once you get it wrong in a spreadsheet, it is difficult to figure out where exactly you went astray. After all of that work, why risk losing all that information, inaccurate information, or user confusion?

Fortunately, an entire industry of software providers has cropped up to combat the problem of spreadsheet-based sustainability reporting, each promising to streamline the data collection, validation, and reporting of all things sustainability-related for you. These programs come in all shapes, sizes, specifications and styles. Some of these software platforms are fabulous; some, not so much. While many of the systems are more appropriate for big companies, some of them will be just right for you. Here are some questions you might want to start asking yourself in your hunt for a provider:

Do you know what you will be measuring and reporting on with this software? Your intent may range from being able to perform life cycle analysis (LCA) for your product supply chain to fulfilling a need to report on your carbon emissions to a customer such as Walmart onward to one of various international reporting protocols. Maybe you are being audited by an NGO or other stakeholder group. Knowing the reason for making your purchase will be essential to making the right decision as every package provides some or all of these functions to varying degrees. Plus, if you have a specific use in mind, you may be able to more easily narrow your list of vendors to review.

What are your customers, suppliers, competitors, friends and neighbors using? It’s unlikely that your business is operating in a complete bubble isolated from any other enterprise carbon accounting software users. Assuming that you are on good terms with at least some of these folks, it probably makes sense to reach out to them and see what direction they’ve chosen. For your customers and suppliers, it may make sense to select an option that aligns more easily with their own selections. With regards to your industry, you may be able to pick something that gives you a competitive advantage – at least in the near term – until the competition buys the same software. In any case, take advantage of what other smart people know and use that knowledge to your advantage.

What business processes will you need to adapt to your software? What business processes will your software need to fit? Understanding both the flexibility of you and your company in terms of implementing a new system is critical. Unless you are developing your own custom sustainability software solution that exactly fits your business process, you will most likely need to be able to change your process or customize the software somewhat. Understanding the ease and cost of going in either direction is important to your final decision. At the end of the day the cost of purchasing this system must be outweighed by some combination of cost savings and other benefits if you are to pull out the corporate credit card and make a purchase.

Looking for more guidance?  To help you find the right solution, we’ve combed through a myriad of different sustainability software options and took a look at best practices in software selection. Our white paper “Choosing Sustainability Management Software for Your Business” provides a process for determining what type of sustainability software provider can meet your needs. To help you find a program that is the perfect fit for your business, download this complimentary white paper here to get started and find out more!

Solutions for Replacing Spreadsheets in Your Sustainability Reporting Practices

The SSC Team April 26, 2016 Tags: , , , , Strategic Sustainability Consulting No comments

Enjoy this post from the SSC archives.

The old saying goes “If it is important, you must manage it; if you want to manage it, you must measure it,” but too many companies today use spreadsheets to track their environmental impacts.

Would you use a spreadsheet to track your corporate finances?  To monitor your inventory?  To log all of your personnel data?  Using a spreadsheet may seem like the simplest way to track your sustainability reporting, but in reality using this as part of your process is risky.

Don’t get us wrong, we love Excel as much as the next person, but for sustainability tracking, a spreadsheet is cumbersome and prone to errors. Whether you make a data entry mistake while flipping back and forth between screens or you simply have incorrect data to start, once you get it wrong in a spreadsheet, it is difficult to figure out where exactly you went astray. After all of that work, why risk losing all that information, inaccurate information, or user confusion?

Fortunately, an entire industry of software providers has cropped up to combat the problem of spreadsheet-based sustainability reporting, each promising to streamline the data collection, validation, and reporting of all things sustainability-related for you. These programs come in all shapes, sizes, specifications and styles. Some of these software platforms are fabulous; some, not so much. While many of the systems are more appropriate for big companies, some of them will be just right for you. Here are some questions you might want to start asking yourself in your hunt for a provider:

Do you know what you will be measuring and reporting on with this software? Your intent may range from being able to perform life cycle analysis (LCA) for your product supply chain to fulfilling a need to report on your carbon emissions to a customer such as Walmart onward to one of various international reporting protocols. Maybe you are being audited by an NGO or other stakeholder group. Knowing the reason for making your purchase will be essential to making the right decision as every package provides some or all of these functions to varying degrees. Plus, if you have a specific use in mind, you may be able to more easily narrow your list of vendors to review.

What are your customers, suppliers, competitors, friends and neighbors using? It’s unlikely that your business is operating in a complete bubble isolated from any other enterprise carbon accounting software users. Assuming that you are on good terms with at least some of these folks, it probably makes sense to reach out to them and see what direction they’ve chosen. For your customers and suppliers, it may make sense to select an option that aligns more easily with their own selections. With regards to your industry, you may be able to pick something that gives you a competitive advantage – at least in the near term – until the competition buys the same software. In any case, take advantage of what other smart people know and use that knowledge to your advantage.

What business processes will you need to adapt to your software? What business processes will your software need to fit? Understanding both the flexibility of you and your company in terms of implementing a new system is critical. Unless you are developing your own custom sustainability software solution that exactly fits your business process, you will most likely need to be able to change your process or customize the software somewhat. Understanding the ease and cost of going in either direction is important to your final decision. At the end of the day the cost of purchasing this system must be outweighed by some combination of cost savings and other benefits if you are to pull out the corporate credit card and make a purchase.

Looking for more guidance?  To help you find the right solution, we’ve combed through a myriad of different sustainability software options and took a look at best practices in software selection. Our white paper “Choosing Sustainability Management Software for Your Business” provides a process for determining what type of sustainability software provider can meet your needs. To help you find a program that is the perfect fit for your business, download this complimentary white paper here to get started and find out more!

Are Google and Amazon Underestimating Their Own Carbon Footprints?

The SSC Team March 15, 2016 Tags: , , , , Strategic Sustainability Consulting No comments

Two of the world’s leading technology companies are under fire for underestimating data centers’ carbon footprints amid claims they use an obsolete tool for calculating emissions from electricity they purchase off the power grid.  

Lux Research, an independent research and advisory firm, went after the two tech giants for using tools that make broad generalizations about power production in the regions where Google and Amazon have large data facilities – reporting that the two companies may be underestimating their carbon footprints by 42,000 MT CO2e per year and 85,000 MT CO2e per year, respectively.

It’s pretty clear that Lux is using Google’s and Amazon’s data – data based on the EPA’s Emissions & Generation Resource Integrated Database (eGRID) – to tout its own analytical tool that estimates GHG emissions from electricity use.

What is important to note here is: the world of sustainability tools out there is rapidly moving. What you report today can be disputed tomorrow as new analytical tools, calculators, and data sets are developed.  

It’s not that eGRID is a terrible tool, or that Lux has built a surefire new solution, it’s more about choosing the right tool, at the right time, and at the right level of detail for your individual case.

Not every company needs a power-plant-by-power-plant analysis of its power sourcing, as the cost of a microscopic look at GHG emissions in this area may outweigh the overall variation in results. In other words, for many companies, the eGRID analysis would be absolutely acceptable based on moderate use of electricity in a given area as the overall data is within an acceptable margin of error.

However, power-intense companies like Google and Amazing, using vast amounts of energy, should absolutely be looking for the most refined and detailed tool to analyze power use impact. Being off by just a small percentage can represent tens of thousands of tons of CO2 being left un-reported, and more accurate data should help inform locations of future data centers to optimize clean power use.

If an organization is new to sustainability reporting, GHG calculating or meeting industry standards for environmental data, it is highly unlikely that that organization is going to be able to navigate these ever-changing waters without help.

Partnering with an experienced consulting firm like SSC, with the background knowledge and experience, to choose the best-fit reporting tool for every individual case is critical. Contact us today to talk about your carbon footprint analysis.  

 

 

Are Google and Amazon Underestimating Their Own Carbon Footprints?

The SSC Team March 15, 2016 Tags: , , , , Strategic Sustainability Consulting No comments

Two of the world’s leading technology companies are under fire for underestimating data centers’ carbon footprints amid claims they use an obsolete tool for calculating emissions from electricity they purchase off the power grid.  

Lux Research, an independent research and advisory firm, went after the two tech giants for using tools that make broad generalizations about power production in the regions where Google and Amazon have large data facilities – reporting that the two companies may be underestimating their carbon footprints by 42,000 MT CO2e per year and 85,000 MT CO2e per year, respectively.

It’s pretty clear that Lux is using Google’s and Amazon’s data – data based on the EPA’s Emissions & Generation Resource Integrated Database (eGRID) – to tout its own analytical tool that estimates GHG emissions from electricity use.

What is important to note here is: the world of sustainability tools out there is rapidly moving. What you report today can be disputed tomorrow as new analytical tools, calculators, and data sets are developed.  

It’s not that eGRID is a terrible tool, or that Lux has built a surefire new solution, it’s more about choosing the right tool, at the right time, and at the right level of detail for your individual case.

Not every company needs a power-plant-by-power-plant analysis of its power sourcing, as the cost of a microscopic look at GHG emissions in this area may outweigh the overall variation in results. In other words, for many companies, the eGRID analysis would be absolutely acceptable based on moderate use of electricity in a given area as the overall data is within an acceptable margin of error.

However, power-intense companies like Google and Amazing, using vast amounts of energy, should absolutely be looking for the most refined and detailed tool to analyze power use impact. Being off by just a small percentage can represent tens of thousands of tons of CO2 being left un-reported, and more accurate data should help inform locations of future data centers to optimize clean power use.

If an organization is new to sustainability reporting, GHG calculating or meeting industry standards for environmental data, it is highly unlikely that that organization is going to be able to navigate these ever-changing waters without help.

Partnering with an experienced consulting firm like SSC, with the background knowledge and experience, to choose the best-fit reporting tool for every individual case is critical. Contact us today to talk about your carbon footprint analysis.  

 

 

3 Sustainability Tools that got our Attention in 2015

The SSC Team January 7, 2016 Tags: , , , , , Strategic Sustainability Consulting No comments

We appreciate good calculation tools. We are constantly looking for the most comprehensive or best combinations of calculation tools to cross check and ensure our clients are getting the best possible data. 

Here were three tools that got our attention in 2015:

GCSP-ITC Quick Scan Tool – Launched in June, this open-source tool allows companies to compare their compliance policies against best practices in order to inform improvements in supply-chain management. Provided by the Global Social Compliance Programme (GCSP), it is open to GCSP members and others free of charge.

  • How it works: Buying companies can identify standards others use in purchasing. Suppliers can create a self-assessment, benchmark the assessment against peers, and identify immediate steps to move toward best practice.
  • Who should use it: Anyone with a medium to lengthy supply chain or who is a supplier.

Water Risk Valuation Tool – Launched in September by Bloomberg ESG Data and Tols, this calculator illustrates how water risk can be valuated in corporate mining valuation models. Based on the gold and copper mining industries, this tool can inform all mining companies on how water risk might effect earnings and operations.

  • How it works: The tool models potential “asset stranding” based on estimated future water scarcity and risk factors related to that scarcity.
  • Who should use it: Mining companies, especially in precious metals

RiskHorizon – Launched in October by Anthesis Group, this web-based toold quantifies and monetizes environmental, social, and governance risk over 25 political, economic, social, and environmental areas, aggregating 100 different datasets.

  • How it works: The tool is designed to help “futurecast” risks and opportunities in assets, supply chain, and business model and then quantify and prioritize the value of that risk. A big job.
  • Who should use it: Investors, risk management professionals, supply chain managers, and strategic leaders should all be interested in a company’s risk profile.

One thing to remember - data out of context or too generalized really won't do anyone any good. Ensure you're working with a sustainability professional that can help validate and contextualize your data in your reporting process and sustainability planning programs.  

Have you used a calculator, but aren’t quite sure how to take action on results? Let us know. We can help assess your findings and customize a plan to help your company align with best practice in sustainability.