Way back in 2002, Walsh and Associates, a family business of about 50 employees, moved into a new facility and watched its electric bill skyrocket because of an inefficient heating and air conditioning system.
That, and the increasing cost of electricity and gas, prompted the Midwestern chemical supply company to embark in 2003 on a series of energy efficiency initiatives. By 2009 Walsh had reduced its electricity use by nearly 50 percent, and a new solar roof — another sustainability project — was helping it lower its natural gas use by nearly 60 percent.
Randall Lewis, Walsh's director of operations, reckons it could have been even more. "We were (and are) saving an average of almost $30,000 per year. But we knew we could do better," he says. The company could have saved more money, he believes, if it could have predicted which projects would have been most successful and focused its investment on those.
Fast-forward to 2012, 10 years after Walsh first decided it wanted to be as energy efficient as possible. A Cambridge, Mass.-based sustainability management startup called Energy Points has given it the crystal ball Lewis yearned for, enabling the company — in advance — to identify what initiatives would save it the most money.
Ory Zik, founder and chief executive officer of Energy Points, believes many CFOs shy away from even thinking about sustainability because they struggle to determine the most cost-effective solutions. A Deloitte survey of 250 CFOs of companies with more than $1 billion in revenue in 2012 found that superior sustainability information is still somewhat elusive. Only 12 percent of CFOs believed they had "excellent" sustainability information, while 37 percent rated their information "good" and another 37 percent called it only "adequate."
Sustainability reports are emerging as a critical driver of shareholder value. According to a January report from the Governance & Accountability Institute, 53 percent of the S&P 500 issued sustainability reports in 2011, a huge increase from 2010's 19 percent. But Zik believes most of these reports are all but unintelligible.
Further, he says, they're not providing the context and insight needed by both executives and investors alike to make data-driven, informed environmental decisions. That's Walsh's concern. "It's like working in 10 different currencies without a currency converter," says Zik.
Energy Points's reports application works much like that currency converter, providing one universal metric for natural resource consumption. The application is designed to let executives make energy management decisions based on what will best improve the bottom line. The application also generates reports that more accurately show how the company is affecting the environment in a way everyone — even shareholders — can understand, and at what cost. "CFOs understand that sustainability is tied to shareholder value," says Zik. Indeed, the Governance & Accountability Institute study found that companies issuing sustainability reports attracted more investment dollars and offered shareholders better returns than competitors that didn't.
"CFOs recognize the importance [of sustainability reporting]; they just need the tools to report it," says Zik.
Next page: The universal sustainability metric