Sustainable Buildings Mean Smart Business
TRIRIGA President and CEO George Ahn details a recent talk with Yale professor Daniel Esty about U.S. President Barack Obama's energy related goals, how buildings factor into a clean energy future and the role technology plays in moving toward a low-carbon economy.
In a recent conversation with Daniel Esty, Yale professor and chairman of Esty Environmental Partners, we spoke about the most critical aspects of Obama's energy-related goals, how buildings factor into the path to a clean energy future, and the role technology plays in all of this. Esty is an expert on corporate environmental strategy and served recently on the Obama Transition Team on Energy and the Environment. Esty runs the Yale Center for Business and The Environment and advises senior executives at Coca-Cola, Unilever and NetJets Europe, among others. He also co-authored "Green to Gold," a book about how smart companies use environmental strategy to innovate, create value and build competitive advantage.
My conversation with Esty follows, and we hope you'll join the conversation as well! We look forward to your thoughts and comments on today's green issues, challenges and solutions.
George Ahn: Based on your work at the business-environment interface, what do you see as the most critical aspects of President Obama's energy-related goals and policy proposals?
Dan Esty: President Obama has been unflinching in his commitment to a Clean Energy future, despite the challenging economy and other pressing priorities such as national security issues. He has taken a number of steps toward making a reality of his campaign commitment to developing renewable energy sources and improving America's energy efficiency.
More than $60 billion of the stimulus package goes in this direction -- supporting building efficiency investments as well as weatherization of homes in our low-income communities and improving the energy efficiency of federal buildings. Additional funds will go toward building a national "smart grid" and supporting investments in a range of renewable energy technologies including solar and wind power, biofuels, and geothermal energy. And the president's hard-charging new EPA Administrator, Lisa Jackson, has advanced greenhouse gas emissions reporting requirements and a regulatory process that could lead to controls on carbon dioxide under the Clean Air Act.
In addition, the Obama administration has signaled strong support for "cap and trade" legislation that would put a price on greenhouse gas emissions -- and make investments in energy efficiency and non-fossil fuel energy more valuable.
Ahn: You mentioned buildings as one important piece of the president's energy plan. Can you elaborate on how buildings play a role in the policy debates, especially around climate change?
Esty: Nearly half of America's energy consumption arises from our homes, offices, and other work spaces, yet most people don't think of buildings as the No. 1 culprit when it comes to carbon emissions. But about 40 percent of our nation's greenhouse gas emissions come out of buildings. Thus, we can be sure that buildings and the emissions that come from this sector will be a top policy priority as American gets serious about tackling climate change.
Ahn: Can you give an example of how buildings might be seen as a critical element of business strategy and cost savings?
Esty: Consider our nation's Fortune 100 companies. A typical organization with $1 billion in revenues and over 5 million square feet stands to save $250 million over 20 years by improving the environmental performance of their buildings. When it comes to the federal government, by modernizing more than 75 percent of federal buildings, according to Obama, the federal energy bill will be cut by a third and save taxpayers $2 billion each year. That's billions in savings and tremendous reduction in carbon emissions, and it's just from buildings.
Building performance is critical, moreover, to the way an office functions each day. Simply put, the management of fixed assets represents a significant item on a company's balance sheet. Using environmental performance improvements in buildings as a central focus of an "eco-efficiency" initiative offers a way to achieve overall cost savings that drop straight to the bottom line. So eco-efficiency should be top of mind for virtually all businesses, especially in this economic downturn.
Sustainability programs in buildings can also be highly visible and can engage employees, investors, and share holders in meaningful ways. When these and other stakeholders recognize that they are connected to an organization that demonstrates water use reduction, space consolidation, recycling, smart energy use, and other green programs, they'll feel more comfortable with and committed to the business as a whole.
Ahn: What is the role of technology in all of this?
Esty: Companies need to be able to systematically go after a broad set of efficiency opportunities. Like any other part of the business, you need technology to track progress and keep score on the various aspects of your program. The right technology can help you set your baselines, identify efficiency improvement opportunities, track your various initiatives through to completion, and measure and report the results. Consistent and accurate reporting also lends itself to constant improvement.
Ahn: How does a focus on buildings and sustainability as "smart business" help companies improve their competitiveness and prepare for the future?
Esty: Companies went through a lot of electricity price shock when rates began going up a few years ago. Although oil prices have now dropped, they are likely to rise again. And the pressure to use electricity more efficiently will come back in a big way. The long-term energy price trend is up, and CEOs that get their companies ready now will be competitively advantaged. Improving energy efficiency in buildings now, with a goal of continuous measurement, monitoring and reduction, is the smart business strategy. It's also clear that there will be a price on carbon dioxide emissions in the future. Companies that reduce their carbon emissions and manage their broader environmental footprints will save money, and step out in front of the competition. Because facilities consume so much energy, preparing now for higher electricity prices makes sense and will pay off even bigger as policymakers move to put a price on carbon.
Ahn: What are specific actions that you can recommend CEOs who want to focus on sustainability?
Esty: At the highest level, I argue that environmental issues and related energy efficiency concerns have now become a core element of strategy. Companies that manage this agenda well stand to be competitively advantaged in the marketplace. So it is critical for executives to apply the same systematic, disciplined approach to environment and energy management as they do elsewhere in the business. In short, think strategically about your risks and opportunities and develop an environmental strategy and implementation plan that fits your company's unique situation.
George Ahn is president and CEO of TRIRIGA. You may leave a comment on George's post in the section below or at [email protected].
Image CC licensed by Flickr user nautical2k.