CSRHub Blog Research on ESG metrics and comments on sustainability best practice

By Carol Pierson Holding

Why isn’t technology solving our energy problems? As venture capitalist Elton Sherwin discovered, you have to get people to buy the technology first.

Sherwin invested in energy efficiency devices that had huge potential, only to see them flounder in the market. That’s why he got involved with Washington, DC-based Institute for Market Transformation (IMT), whose mission of “addressing market failures that inhibit investment in energy efficiency and sustainability in the building sector” is close to his heart.

One of IMT’s efforts is to work with state and local agencies to introduce ordinances for building energy performance benchmarking and disclosure. This could mean installing energy control and measurement devices, which Sherwin invests in.

I heard about IMT from Seattle building performance consultants Theresa Stroisch and Kevin Dingle of Sustaining Structures, which was recently featured in an IMT report on Energy Disclosure. Seattle is one of five urban centers that have established ordinances that require energy disclosure and reporting.

But which tool would be best for reporting and benchmarking? Turns out, it’s an easy decision. Energy Star for Buildings is centralized, free and neutral. Better yet, it already has a blue-chip reputation. And Energy Star already has had accepted ratings for buildings in place since 1996. Lots of data. Lots of credibility.

And what about disclosure? Energy Star’s labeling program for appliances was not successful until Energy Star began airing advertising to get the word out, then linking the brand to cost savings. (Full disclosure: I worked on Energy Star branding in the 1990s.) The environmentally friendly argument alone wasn’t enough for consumers, and if consumers didn’t care, why should manufacturers care? So Energy Star made consumers into activists by putting the energy savings on every appliance. In return, consumers rewarded Energy Star appliances by buying them, often paying more for energy transparency.

What would it take for commercial building customers to do the same? This is what IMT figured out. First, local building codes would have to include compliance with an Energy Star for Buildings minimum rating. Then these ratings would have to be made public. Three of IMTs trial cities – New York, San Francisco and Washington, DC – are doing just that, plus requiring that buildings publish their utility costs. Tenants and buyers are able to compare future utility expenses between buildings they are considering.

And just like with appliances, energy transparency makes all the difference. In New York, where the Energy Star for Buildings ratings are highly publicized, compliance is at 80 percent. In Seattle, where it’s not, it’s 30 percent.

The final argument for making buildings energy efficient is that it creates local jobs in construction, manufacturing and consulting. Dingle describes his experience this way:

“Ordinances like the one in Seattle uncover opportunities for improving building performance.  In turn jobs are created that have a focus on energy efficiency.  I have worked with building owners who were initially reluctant to comply with the ordinance… ultimately earning an Energy Star Label for their building, leading to near 100 percent occupancy.”

The appeal of renewable energy as an investment may dim with the decline of subsidies in that area of green, as the New York Times and others predict. But Sherwin’s existing and future investments in devices that measure and control energy are looking good. And once those devices are in commercial buildings, they might gain traction with consumers, also eager to reduce energy costs.

IMT and Energy Star are definitely on a roll, even if it feels like a rewind. Jimmy Carter tried to make building conservation work in the 1970s through government regulation and guidelines. We lowered thermostats to 68 degrees and installed flow restrictors for showers. Not very appealing. IMT adds entrepreneurship and energy transparency to the mix. This time, it's working a lot better.

Photo published under Creative Commons license. Courtesy of John Picken on Flickr.

Carol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council's Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 5,000 companies worldwide. Carol holds degrees from Smith College and Harvard University.

By Carol Pierson Holding

As though the merging of electric car and the Internet were already a well-known fact, BMW, a leader in CSR among automakers, dared to name its hybrid/electric car brand BMWi. “i”? Sure, thanks to Apple’s ubiquitous advertising campaigns, “i” is as well known as its predecessor “e” for electronic (email, e-commerce), and “x” for one level higher (xBox). Still, you have to wonder why BMW chose consumer shorthand for Internet, for innovation and cool, over eco or green, to signal environmentalism. Or even “e” for “electric car.”

Could BMW be doing what so many have failed to do—move the overall positioning of energy efficiency towards something, well, sustainable? At least when it comes to cars? Green appeal comes and goes. For many efforts, green positioning has given way to saving money — remember Energy Star’s transition in the 1990s? And more recently, the Prius’ push beyond celebrity environmentalists to mass market, cost-conscious consumers? But saving gas only goes so far, especially when gas is cheap.

KC Golden, the visionary behind the Seattle-based Climate Solutions, pretty much predicted an i-car evolution.  KC grew up in Los Angeles, the apex of the automobile worship.  He witnessed what having a cool car –a lot of horsepower under the hood —could do when it came to getting the girl. That link between horsepower and sex is permanently fused in youthful minds. And it never really goes away.

Today, KC lives in Seattle, where the major source of carbon emissions, about 40%, is from cars. To lower emissions, we must either get people to ride public transportation, which in the West is extremely tough, or more practically, get them to drive low-emission cars. What KC sees as the primary challenge is breaking our insistent connection, even in politically correct Seattle, between sex appeal and horsepower.

And what better voice to change attitudes about cars than the car companies themselves, starting just where you’d expect it to start, with Volkswagen—the first small car brand. KC sent me this typically counter-intuitive Volkswagen ad, which mocks drivers who still believe that horsepower enhances ego. Its tag line is “lowest ego emissions:” VW TV Commercial.

I’ll bet this commercial is not all that funny to BMW drivers. It appeals to those whose ego is wrapped around environmentalism, the very group KC wants to enlarge. I’m not saying that KC is wrong about green being sexy one day. In fact, even BMW thought the time had come in its first and second tries at an electric car. First was the MiniE, an electric MiniCooper. Launched in China, it was positioned as the first of its MegaCityVehicle line— a luxury version of Indian car-maker Tata’s Nano. Then the company tried the ActiveE, a sedan that was “bringing sustainable electric mobility on the road” as their ActiveE spokeperson, a female sustainability consultant intoned on their website. The ActiveE does not look “muscular;” its spokesperson is not sexy.

But with BMW’s third try, the BMWi, I think BMW has found its answer. Even though the tag line for the BMWi is “Born Electric,” the message is about performance first. BMWi uses battery power not only to cut emissions, but also to boost performance. Sure, the women in the BMWi web video are good-looking, but not blatantly sexy. And someday, maybe just the energy savings will be enough.

With the BMWi, BMW returns to its roots. It’s a smart strategy and may take us right where we want to go. As smart branders know, a slow transition works best with consumers. German luxury carmakers promoting behavioral modification in service of sustainability? Now that’s brand evolution.

Carol Pierson Holding is a writer and an environmentalist; her articles on CSR can be found on her website.  

By Bahar Gidwani

The folks at BigRoom have worked for a couple of years on a side project (their main goal is to launch an  .ECO suffix for the Internet).  They are trying to capture, document, and categorize the various green, eco, and sustainability-oriented certification programs.  So far, they’ve found more than 300.

Some are pretty well known.  For instance, the Department of Energy and the EPA combined in 1992 to launch their Energy Star ratings.  They now put Energy Star ratings on appliances, building supplies, and homes.  Underwriters Laboratories—which is famous for its hugely-respected safety ratings—also offers UL Environment (ULE) certificates.  The Forest Stewardship Council has gotten a lot of wood and paper manufacturers to make the changes needed to earn its FSC certificate.  And buildings that conform to the US Building Council’s LEED standard get a lot of attention both from their owners and from those who work in the buildings—and seem to enjoy them.

Certification is also becoming part of supply chain management.  Manufacturers (like Procter & Gamble and Seventh Generation) want to ensure that their suppliers are well-behaved.  Retailers (like WalMart and Home Depot) need to be sure that the products they sell are socially responsible.  These companies are sending out surveys and asking for data on carbon use, chemical emissions, and labor practices.  Suppliers are hoping that getting approved in one program will turn into a credential they can use to get passes from other programs.

Of course, it is hard to know how far to trust certificates.  How can a consumer know whether or not the wood in a chair really came from a sustainably harvested tree?  How can we know that the chair wasn’t made using child labor or that the varnish on it didn’t pollute the water in the community where it was made?  How do we know that the drivers who transported our chair were properly trained and that their pensions and health care are adequate?  Can we be sure that the store we bought the chair in didn’t just stick a fake certificate on it?

The fact that most certification programs rely on self-reported data can make things worse.  Some suggest that a third party, like a consultant or an accounting firm, verify this data.  But there is obvious pressure on these third parties to give favorable rulings.  In most certification programs, there is no central repository of the data that has been collected.  Thus, there is no easy way to cross check the data, either at a top level or in detail.

There are a few independent organizations that  do their own testing and rating of products.  For instance, the Eco Index is tracking 377 eco labels in 211 countries and trying to put together a supply-side view of product sustainability.  ULE is working on an ambitious plan to integrate rigorous third party review of sustainability information into a standard called ULE880.  We are also seeing people use our ratings as a high-level way to test whether or not a company is likely to be telling the truth, when it claims to be performing responsibly and sustainably. 

In the end, certification systems need the same kind of independent audit process that financial statements receive—plus the same external review and criticism that financial statements are supposed to get from investors and analysts.  We hope that our CSRHUB ratings may eventually become part of this feedback loop.

Bahar Gidwani is a Cofounder and CEO of CSRHUB. Formerly, he was the CEO of New York-based Index Stock Imagery, Inc, from 1991 through its sale in 2006. He has built and run large technology-based businesses and has experience building a multi-million visitor Web site. Bahar holds a CFA, was a partner at Kidder, Peabody & Co., and worked at McKinsey & Co. Bahar has consulted to both large companies such as Citibank, GE, and Acxiom and a number of smaller software and Web-based companies. He has an MBA (Baker Scholar) from Harvard Business School and a BS in Astronomy and Physics (magna cum laude) from Amherst College. Bahar races sailboats, plays competitive bridge, and is based in New York City.

Photo inset: Creative Commons licensed by joiseeshowaa.