Corporate America's Adoption of Green Practices Doubles, Study Says

Corporate America's Adoption of Green Practices Doubles, Study Says

Courtesy of Siemen Building Technologies and Mc-Graw HIll Construction

Corporate America's embrace of sustainability has more than doubled in strength in the past three years with 76 percent of the largest U.S. firms reporting efforts and commitments that exceed those required by law, according to a new study from Siemens Building Technologies Inc. and McGraw-Hill Construction.

Sustainability is no longer seen as a niche activity in corporate America," the study said, adding that its findings show "a substantial growth in sustainability activity over the last three years with a shift in focus from internal operations and public relations to a core part of business performance."

A strong indicator of that shift is the growth in green building, said the report that was released Wednesday in Washington, D.C. Twenty-one percent of the respondents involved in this year's research said at least 60 percent of their building portfolio is green. That's up from 10 percent in 2006 who reported having a 60 percent-plus green portfolio and 17 percent in 2008 who reported having similarly proportioned green portfolios. The study projects that 42 percent of companies will have green portfolios exceeding 60 percent by 2012.

"Over the past three years, the level of involvement has increased steadily, with the market fully shifting toward green building adoption," the report said. "By 2011, more firms will be dedicated to green than will be moderately involved or less. This tipping point marks a more complete entrenchment of green building into standard corporate practice and as a core component of the sustainability plans of large firms."

The report, called "2009 Greening of Corporate America," revisits territory charted by McGraw Hill and Siemens in 2007, when they reported on the green landscape of some of the larger U.S. businesses in 2006. The current study is based on research conducted in February and March this year. The 203 firms interviewed represent more than 75 percent of the $36 trillion equities market in the U.S., and no participating firm had less than $250 million in revenue.

Energy savings continues to be the primary driver for firms' sustainability efforts, 91 percent told researchers, and 71 percent said they expect to realize costs savings as a result of their efforts. However, a growing number of firms now see sustainability as a source of revenue in addition to a means of cutting expenses: 56 percent of the companies said they provide sustainability related products or services to clients, the report said.

As had its predecessor, the study looked at attitudes, practices and strategies relating to environmental responsibility among businesses. The new study also reexamined forecasts made in the initial report, particularly in the area of building.

Adoption of green building practices has been steady and strong in recent years. For example, in 2005 green building accounted for just 2 percent of general construction -- an estimated $10 billion value, the study said.

In 2008, the green building market size grew to an estimated 15 percent to 20 percent of new construction starts by value -- an amount that's equivalent to a $36 billion to $49 billion marketplace.

That has growth occurred, the study noted, against a backdrop of turmoil in the overall construction market, which fell 7 percent in 2007, 14 percent in 2008 and is projected to sustain a 17 percent drop this year.

Nevertheless, the green building market is expected to grow further, expanding to as much as $140 billion by 2013, the study said. The green commercial and institutional market share is projected to increase from a $24- to $29-billion marketplace in 2008 to $56 billion to $70 billion based on new starts by value.

In its broader findings, the study concluded that:

• Sustainability will continue to become part of standard corporate practice. As such, firms have a short window of engagement before they will lose first-mover advantage.

• At some level, sustainability is insulated from economic downturns—most likely due to the innovation it can spur. Firms should capitalize on the advantages of sustainability in order to position themselves to reap the benefits when the economy rebounds.

• Increased regulation is likely to occur. Firms should look for opportunities to position themselves ahead of regulation. Those that do will be able to compete in more markets and may also gain incentives offered to early adopters.

• Public reporting and transparency is becoming routine. Firms should take stock of their current baselines in order to be able to report accurately their performance and set goals and metrics for improvement. Customers will start to expect sustainability reports.

• Larger corporations are embracing sustainability more enthusiastically and engaging in more benchmarking activities. As a result, these large firms will influence the supply chain by requiring their vendors to provide them with sustainability and environmental reporting information. Smaller firms and service providers should establish their energy use, carbon emissions and other environmental and sustainability metrics in expectation of these requirements.

Image from the 2009 Greening of Corporate America report.