By Sarah Fister Gale
Unemployment is up and spending is down in most homes and businesses across the country. In an economy where companies have to justify every dollar spent, a lot of people may assume that investment in green initiatives would be plummeting. But that's not the case.
In some ways the lagging economy has done more for green projects than any amount of environmental encouragement could, because it's forced business owners to acknowledge that going green is good for the bottom line.
Chris Mines, an analyst for Forrester Research in Cambridge, Mass., predicts that spending on green IT initiatives will actually increase in 2009. This includes investments in projects to improve the efficiency of data centers, optimize technology, and reduce technology-related energy use across businesses.
"Companies are starting to recognize that green means green," he says, noting that energy saving initiatives deliver easy to quantify financial and environmental returns. "The motivation for these projects is foremost cost savings, and the environmental benefits are an added 'nice to have.'"
Lockheed Goes Green
This trend is a reality at Lockheed Martin, the multinational aerospace manufacturer headquartered in Fort Worth, Texas. The company launched an aggressive company-wide Go Green initiative in January 2008, through which it set goals to reduce water usages, carbon emissions and waste to landfills 25 percent by 2012.
While the program was launched when the economy was sunny, the company's commitment to sustainability hasn't wavered, reports D.D. Curry, senior manager of environmental resources for Lockheed Martin's aeronautics division in Fort Worth.
"In the past, all of our green initiatives were driven by regulatory issues," she says. "But since the Go Green initiative was launched, senior leadership has gotten behind these goals. They see sustainability as a risk management issue, and recognize the business benefits of these projects."
As a result, green projects are easier to fund than they had been in the past. And, even when earmarked funding fell through for the Go Green projects, the leadership team asked Curry to identify those projects that were critical for meeting the 2012 goals, and they would receive funding.
Her selections included a water reduction project at the company's Marietta facility; an energy-saving project that involves a volatile organic compound (VOC) capture system at the Palmdale facility; and a project to reuse clean wastewater in Fort Worth.
"Those projects were chosen because they produced the best business case for cost and energy savings in a short term implementation," Curry says.
Making the business case for green projects is critical even when you have leadership support, says Curry. That's why fuel and energy related projects get top priority. "If something is emitting CO2 it means it's using energy which translates to a rising cost for the business."
Curry expects to push some smaller projects through that don't have as clear an ROI, such as buying more recycle bins to encourage a culture of recycling, but bigger projects with longer-term returns, such as LEED accreditation, are not being considered until the economy improves.
Small is the New Big Thing
This focus on small projects with shorter term returns is a trend that will hold for a while, notes Mines. "Budgets are tight, so big-bang projects, such as building new data centers, are beyond the threshold," he says.
Mickey Lee, strategic director for Carbon Concierge, a climate reduction strategies consultancy in Portland, Ore., concurs that interest in bigger long-range green projects has fallen off. He typically gets a 30 to 50 percent return rate on companies that express initial interest in working on climate reduction projects. "This fall it was hard to get anyone to follow up," he says.
He's finding those companies that had budgets set aside for major green investments, such as carbon offset projects, before the economy begin to struggle are moving forward with them, but those who were just in the planning stages are slowing or delaying implementation.
"A lot of companies are now saying, 'this is something we want to do, but we can't do it yet,'" he says.
Instead, companies are spending smaller amounts on easy-to-implement projects, such as recycling programs, energy use reduction and technology optimization efforts, which require little investments and show tangible returns.
Phyllis Barber, sustainability coordinator with Highmark, a health insurance company in Pittsburgh, Pa., is taking this approach to green projects at her company. "We look at the business case for everything on a project by project basis," she says.
|Green initiatives, especially those around energy conservation, can translate into short and long term cost savings, which is a benefit in any economy. The trick is establishing the business case to support the investment. These experts offer advice on how to make the case for green initiatives in a slumping economy, and what programs get the most bang for the buck.
1. Partner with the facilities group to prove ROI. Chris Mines of Forrester Research notes that for energy saving IT projects, the group that implements the initiative doesn't benefit from the payoff because utility costs are part of the facilities budget. "The IT group and the facilities group need to work together to realize a cross benefit," he says. He suggests having the finance team oversee these projects to ensure that they are mutually beneficial.
2. Don't just look at the hard numbers. "You have to think globally about the impact of your projects," says D.D. Curry of Lockheed Martin. That includes assessing the impact of global climate change on the business, energy costs, recruiting, public perception and corporate social responsibility. "It's not just about bean-counting. When you see the larger picture it's easier to see the value of the project."
3. Learn to talk in business terms. "Our environmental team used to just talk about regulations, Curry says. "We've had to learn to put projects in terms of business and finance to get the leadership on board."
4. Measure the short- and long-term payoff of a potential project. "The long-term view is so important to the true ROI of a project," says Phyllis Barber of Highmark. "It really helps you make the business case."
5. Implement programs that focus on behavior, such as recycling or shutting off computers. "Employee participation is a great way to start working on conservation efforts, and they require zero upfront costs," notes Barber.
The company has shown a long term commitment to being a sustainable organization because it's in line with the corporate mission, she says. "A healthy environment creates healthy people and a healthy business."
That's especially true in a troubled economy, she adds. "Being good environmental citizens saves Highmark money."
However, she admits that securing funding for new projects isn't as easy as it had been in the past. At Highmark, the green projects that were already underway, such as a new green roof on the company's Pittsburgh headquarters, kept their funding, while those that were just in the planning stages have been delayed or slowed down.
The green roof project, which was started in 2006 and completed at the end of 2008, had obvious environmental and economic benefits. A new roof was needed, and the green roof is estimated to last 40 years – twice the lifespan of a conventional roof, she points out. It is also projected to deliver a 12 percent reduction in energy use in the areas that the roof directly covers, and will absorb 60-70 percent of storm water, which is a major issue for Pittsburgh.
"The roof shows definite paybacks," she says, "but it's a long term view."
And while Highmark is considering other major infrastructure projects, such as investing in renewable energy, in the short term Barber expects to focus on smaller low hanging fruit projects that require smaller capital investment for the time being. She's currently looking at projects focused on conservation of resources, such as paper recycling, energy audits, and energy conservation campaigns.
"Employee engagement doesn't cost anything and it promotes eco-friendly behavior across the organization," she says.
The bad economy is also a great time to plan for future green initiatives, suggests Carbon Concierge's Mickey Lee. "Take this time to educate yourself on what you need, and what you want to work toward, so that when the economy gets better you'll know what decisions you want to make."
He advises reading credible news sources, taking classes, and working with sustainability experts to establish a long term future plan. "You need someone on your team who understands the sustainability framework and how to develop a business strategy to implement your goals," he suggests. "Enthusiasm is great, but if you just throw together a 'green team,' and expect them to implement your goals, you can easily end up spinning your wheels."