Stages of ROI on Eco-efficiency

Eco-efficiency pays dividends year after year. Various practitioners have different titles and phases for implementing sustainability in organizations (and buildings for that matter). I have taken those stages and put them in financial terms. The good news is the more mature you get in the phases, the more money you make over time.

1. Pre-compliance was what we had at the turn of the 20th century all the way until as late as the 1960's. Reckless abandon with regard to worker rights, the environment and the community.

2. Compliance is where about 90% of buildings and companies are right now. They are doing what they need to do to meet the minimal requirements to stay out of the courts.

3. Easy money is the current sweet spot for most companies and buildings. If you haven't initiated any green initiatives or if you've implemented only a few, this is where to start. Usually by upgrades in buildings and the waste stream you can see huge savings. There are two great benefits to this phase at this point in history. First, there are plenty of tax breaks that make this available without any money up front and immediate additional cash flow. Second, these items require no cultural or work practice changes by employees or building occupants. So they can be done easily for immediate cash flow.

4. Long Term Gain happens when you combine what you have already done in stage 3 to changing procedures, supply issues, stakeholder relationships and more. At this phase your profit margins will soar as you can keep price where it is (or even raise price) but your customers stay with you and you even gain more customers because your reliability is so high and people like dealing with a firm they can trust (see the book "Firms of Endearment" for plenty of evidence of this). You will be able to recruit and keep the best employees and they will be more productive than they would have been if they worked for your competitors. You are now in the virtuous cycle (the opposite of a vicious cycle). At this phase employee turnover is very low, customer loyalty is high, margins are high and sales can withstand economic downturns. If you don't believe it just ask the owners of Stonyfield Yogurt, The Body Shop and many more...

5. Highest Company Value is where the dividends really pay. Because your firm has such high margins and is at low risk, the value of the company itself is very high. When you are ready to take on new investors or sell the company or building, you will get a premium price for it.

The bottom line: The more eco-efficient you are the more money you make at every phase of implementation.

Employees forego pay for carbon neutrality

Think employees only care about money and time-off. Think again. New Belgium Brewery in Fort Collins Colorado is most famous for its wonderful Fat Tire Amber beer. But it is also one of the leading companies in the world for creating a sustainable business. But the story of how it went to clean renewable energy deserves a page in HR manuals as well.

The owners of the business are committed to the environment and wanted to run on completely renewable clean energy. This is done through wind power and the on-site waste-water treatment operation.

In 1998 the 32% employee owned company brought the idea of going to wind power to a company vote. At the time it meant a 30% higher cost of electricity, most likely meaning the loss of significant end-of year bonuses for the employees. Despite knowing that their bonuses were going to suffer, the vote was unanimous to go to the clean energy solution. And not surprisingly, because of these high moral decisions, turnover is low and productivity is high because people feel like they are contributing to something bigger in the world.

To see how New Belgium produces some of its own power through it's waste-water treatment, check out this video.

New Belgium Brewing from whatis waste on Vimeo.

Speaking of Banks

Just for fun, lets say you inherited 4 million dollars from someone you didn't know. You could live off the interest right? After taxes, say 200K per year. So long as you don't screw with the principal, you have created a scenario of sustainable development. As a human you are still going to develop. Some of that interest paid to you will be invested for development (like buying a house or personal development training), but you haven't spent the principal so even if you lose the entire investment your still in a sustainable situation.

Isn't humanity in the same situation? The resources of the earth are our principal. We can use some of them and they grow back. But if we take more than the earth can regenerate, as a global society we are not in a sustainable life. Eventually the principal will run out and we will quickly starve to death.

Normally I focus on issues for entreprenuers and business owners... I know none of us alone can create a sustainable society. But the sum of our choices will create the tipping point that brings it about.

Vote with your dollars and your choices.

The Real Debacle of the Oil Spill

There are about a million reasons why the oil spill is such a problem. But the issue I see comes in the form of missed opportunity. The senate was ready to take up a rare bipartisan energy bill soon co-sponsored by a Democrat, an Independent and a Republican. Sure, the bill has its problems but it genuinely is a shot at real reform that will seriously kick-in growth of R & D and implementation of renewable's.

But instead we got bogged down in a debate about what to take up first, energy or immigration.

The lost opportunity comes in the fact that there is no better time for a debate about energy policy (from my perspective anyhow) than right on the heels of a great "un-natural" disaster that comes from our old ways of generating power.

Nobody predicted the spill to happen now... but it is not too late to put energy policy on the agenda. Just when our televisions are blaring why the old way is so bad is right in our face.

The Economics of Climate Change

I have worked in several areas of green business and things are getting better for sure. Nevertheless the bottom line that is stopping growth of clean energy use is the fact that it is free to pollute. When I have this discussion with friends that do not study this stuff on a daily basis we often end up in the same place. The friend claims that they want to do the right thing but it is just too expensive. If solar or wind were simply cheaper than coal, then that would have no problem buying solar or wind for their home.

Of course the discussion takes many turns. First I tell them that to buy solar or wind for their own home is like buying a power plant for the house. Right now they pay by the month because the central power plant was financed, so why not finance your own power plant?

Secondly though, I explain that the health and environmental costs are currently not figured in to existing pricing when buying energy from the grid that is usually produced from coal. I then go on to explain externalities. This usually takes at least one beer's worth of discussion for the non-financial types. Once they get it though, they see their energy in a whole new light.

Until there is a cost to energy, only a breakthrough technology will get us over the hump. The long but interesting article in the New York Times magazine is a great primer.

http://www.nytimes.com/2010/04/11/magazine/11Economy-t.html