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Counting the Costs: A Comment on the Importance of Sustainability Disclosure

  • Accurately reporting sustainability metrics can seem overwhelming to companies. But with the data becoming increasingly important to investors, it's a challenge companies must get to grips with, argues Chet Chaffee.

    Many leading financial companies today are embracing sustainability practices because they understand that this method is not simply a reporting exercise. And they realize that full and transparent disclosure to all stakeholders is crucial for success.

    CDP Leader: Bank of America

    CDP?s Climate Performance Leadership Index member, Bank of America is one of the companies that has taken this issue seriously. The company has created numerous policies and relationships to manage the environmental footprint of its supply base as an integral part of its sourcing and vendor management activities. For example, in 2012, Bank of America requested disclosure from 163 of its significant vendors and achieved an impressive 88% response rate.

    Bank of America also has integrated environmental sustainability criteria into its vendor sourcing processes. In 2012, they initiated a carbon reduction grant program encouraging qualifying vendors to establish a public carbon reduction target, for example. As part of this collaborative effort, they offered executive coaching and financial support to encourage vendors to overcome hurdles and work toward the publication of specific goals to reduce greenhouse gas emissions.

    From harnessing wind energy in Illinois to financing an expansion of geothermal energy in Kenya, Bank of America has been supporting the global transition to cleaner and more sustainable energy sources for many years.

    For example, in 2012, The Reinvestment Fund, a community development financial institutions (CDFI) program that is a national leader in financing neighborhood revitalization projects, used Bank of America funding for the redevelopment of Ambler Boiler House in Ambler, Pennsylvania. This financing helped turn a former power station into a Leadership in Energy and Environmental Design (LEED) Platinum-certified office space.

    The site is near a regional mass-transit hub, which encourages the use of public transport. It is also near the Main Street District, which promotes a pedestrian-and bicycle-friendly environment. The energy consumption for the building is 44% lower than the average office building in the US mid-Atlantic region. Revitalization of the site has restored a vacant, deteriorating building, eliminated a threat to public safety and provided a permanent employment center for the area.

  • Counting the Costs: A Comment on the Importance of Sustainability Disclosure

    These financial service organizations are not only integrating sustainability themes into their overall corporate mission, vision and values, but are also incorporating sustainability directly into their brand and customer value propositions.

    Recent enhancements in corporate transparency and performance on sustainability issues are proof that leading financial companies are making decisions in response to the growing interest from their investors and customers regarding environmental sustainability performance.

    Results from the CDP (formerly known as the Carbon Disclosure Project) survey in 2012 offer evidence that the S&P 500 is making significant advances in terms of transparency and progress on carbon goals, and that this progress is rapidly moving forward.

    And while many financial organizations have made notable progress in addressing the risks and opportunities regarding climate change, many of the CDP?s leading members – including those listed in the organization?s Climate Performance Leadership Index (CPLI) – are way ahead of the curve regarding incorporating climate change into their enterprise risk management and strategic decision making.

    This broader view of climate change and environmental impact has enabled these leading CDP companies to realize lower energy costs and increased productivity, and to obtain the knowledge needed to develop low-carbon, energy efficient products and services.

    These top finance companies also are taking seriously the physical risks that stem from climate change, especially since there is increasing realization that an escalation in the frequency and severity of extreme weather events – like heat waves, cold snaps, hurricanes, flooding and wildfires – can threaten business continuity with interruptions in power, supply and transportation networks.

    As one of the most important organizations to lead the dialogue around measurement, rigor and transparency – and recognized as one of the most credible sustainability rating/ranking indices in the world by Globescan?s 2012 Rate the Raters survey – CDP provides data that can help companies leap beyond guesswork and get straight to the facts.

    The data compiled and reported by CDP has had a tremendous impact on current and future business behavior. It offers insights for executives trying to understand why climate change matters, and it allows companies already taking action to track their progress and better inform their critical policy and planning decisions.

  • CDP Leader: Wells Fargo

    Wells Fargo, another CDP Climate Performance Leadership Index member, is another company embracing the corporate sustainability issue. As stated in its Environmental Stewardship plan, Wells Fargo seeks to ensure that as its team members conduct business, natural resources are protected and environmental, social and economic needs are part of their everyday decisions.

    The organization?s goal is to find new ways to minimize its energy consumption, address climate change, use renewable energy sources, and inspire others to do the same, so they lower their impact on the planet.

    Wells Fargo has made a huge commitment to green buildings in recent years, for example. In 2012, Wells Fargo provided more than $4.7 billion to finance buildings complementary to the environment. Their support included $3.1 billion for Leadership in Energy and Environmental Design (LEED)-certified buildings, $180 million toward brownfield redevelopment projects, and more than $700 million toward Energy Star certified properties.

    Approximately $900 million of these loans and investments benefited low income communities or housing projects. In addition, leading by example through their own operations is critically important. Wells Fargo leaders say they seek to ?walk the talk? and do their part to help protect the environment. Here are examples of ways they make their own buildings greener:

    They are in the process of achieving LEED recognition for all of their retail banking stores, representing about 6,000 buildings or approximately 30 million square feet.

    At least 19 of their office buildings (average more than 400,000 rentable sq. ft.) meet LEED standards or are Energy Star 2010 rated.

    The company installed and activated solar panels on 11 banking stores in the Metro Denver area – combined, those systems helped Colorado avoid 296 metric tons of greenhouse gas emissions in 2011.

    Mastering 'Big Data'

    Enabling better decisions by providing investors, companies and governments with high quality information on how they are managing their response to climate change and mitigating the risks from natural resource constraints has never been more important.

    Stakeholders today want more than the mission-vision statements of a company. They want real statistics, and most important, real results in terms of corporate social responsibility. In other words, they need accurate 'Big Data' including a company?s environmental sustainability information.

  • Because a company?s environmental impact data is not easily collected, nor is it usually given out to the public on a regular basis, numerous organizations are available to assist with carbon collection and reporting, and helping executives stay aware of the ever-changing rules and regulations governing compliance on local, federal, national, and even international levels.

    By using the latest in these lifecycle assessment services, network design, optimization and planning systems, executives can integrate environmental practices within their company and supply chain, while at the same time providing investors with a transparent view of their organization.

    More financial services companies are starting to recognize that failure to anticipate and properly prepare for the impacts of climate change may leave them without adequate plans to mitigate damages to their business, develop new products, and implement business strategies necessary to respond to changing customer needs.

    Moreover, failure to successfully execute a proper climate change strategy could risk damaging the support of stakeholders against those who fail to plan. The consequences could ultimately affect reputation, as well as damage a company?s customer loyalty and investor confidence.

    The ?Big Data? challenges don?t have to be overwhelming. The keys are determining the critical issues and relevant data for your organization and your stakeholders; prioritizing that data to narrow things down; collecting that data into standard formats; and finally, finding and using the best tools to help manage and apply that data.

    This article was originally published in Environmental Finance on September 26, 2013.


    Chet Chaffee
    FCS' Director of
    Sustainability and
    Life Cycle Assessment

    Dr. Chet Chaffee's expertise is Life Cycle Assessments, Certification Programs, and Carbon Management. With 30 years experience, Chet is an industry expert on life cycle and sustainability undertakings. He has directed over 200 notable life cycle and sustainability initiatives for clients, including The International Olympic Committee, General Motors, Home Depot, Pacific Gas & Electric, Unilever, the Steel Recycling Institute, and the Canadian Electricity Association. Chet is a founding partner of Boustead Consulting & Associates, an affiliate of one of Europe's leading life cycle firms, well known for developing the first leading life cycle process; the blueprint from which many others have been based over the years. He is well versed in a wide range of life cycle assessment and modeling methods, including KCL Eco, TRACI, SimaPro, GaBi and Boustead. He has also been intimately involved in various software development activities with regards to life cycle, carbon and energy inventories, and other greenhouse gas applications. Chet also leads projects in Sustainable Management, Energy Analysis, and Carbon accounting for a number of FCS clients.

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