2012 greening of corporate america - siemens usa

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2012 Greening of Corporate AmericaThe Influence of Sustainability on Transforming Business Strategy

Answers for infrastructure.

Report created by McGraw-Hill Construction

Introduction

Matthias RebelliusPresidentSiemens Infrastructure & Cities,Building Technologies, Americas

We are pleased to present the results of the Siemens and McGraw-Hill Construction 2012 Greening of Corporate America study, which tracks the continued evolution of sustainability within our nation’s leading fi rms. The results of the study reinforce our belief that Corporate America

remains fi rmly committed to sustainability as a strategic imperative. In fact, the percentage of fi rms that view sustainability as a cost, which made up over 40% of respondents in the 2006 study, has fallen by more than half, while those fi rms that embrace sustainability as part of corporate strategy has more than doubled.

This dramatic shift indicates that fi rms equate sustainability with competitiveness and differentiation—a way to connect with their customers through energy effi ciency and cost savings. Sustainability also acts as a key driver in attracting and retaining the best employ-ees. As a result, we have seen more fi rms with dedicated sustainability budgets and staffs, and with corporate sustainability offi cers whose roles are becoming increasingly transfor-mational within an organization.

While our research indicates that Corporate America fi rmly embraces sustainability and has moved to institutionalize it within their policies, practices and reporting, we still face a number of challenges in translating strategy into action. For example, our research indicates that while energy and operational savings are the key drivers to sustainabil-ity, budgetary constraints remain the greatest obstacle. In fact, the current state of the economy—a key barrier to investment—dropped in importance compared to the 2009 study, as budgetary constraints grew.

In today’s marketplace, Siemens is uniquely positioned to support sustainability efforts in the areas of energy and water conservation, clean energy technology, effi ciency infra-structure and green buildings. As evidenced from this year’s study:

■ Energy and cost savings were cited as the main drivers for corporate sustainability initiatives, and are most frequently used to make the fi nancial case for investment.

■ Energy effi ciency, along with waste reduction, are the most common targets used to measure sustainability performance.

While we continue to face ongoing economic challenges, it is clear that corporate Amer-ica remains more committed to sustainability than ever. We hope you use this research to spark debate and challenge the status quo at your own organization, so that no matter what you’re doing today, you are ready to do more tomorrow.

As president of Siemens Infrastructure & Cities, Building Technologies, Americas, Matthias

Rebellius is responsible for the fi nancial, operational and competitive success of the building

automation, fi re safety and security, and control products and systems businesses across the

Americas. Prior to his appointment, Rebellius served as global General Manager, Fire Detection

Product & Solution Business and Head of Strategic Marketing and Portfolio Management. He

has 24 years of Siemens experience. Rebellius earned his degree in Electrical Engineering from

University of Applied Science in Trier, Germany.

First Name TitleCompany

We are excited to have partnered with Siemens for the third time on this research, examining how executives in corporate America have em-braced sustainability over time. When we fi rst studied this topic in 2006, we found that corporate America was still exploring how to incorporate

sustainability into their practices. Now, six years later, we fi nd that executives understand sustainability and recognize the advantages it can create for their fi rms. In fact, virtu-ally all fi rms have incorporated some level of sustainability initiatives that goes beyond requirement—83% of the largest U.S. fi rms report corporate commitments to sustainable practices that go beyond regulation, up from 76% in 2009 and 57% in 2006. It is clear that fi rms are turning sustainability into corporate advantage.

The research also reveals that corporate America’s investments in sustainability have become integrated into their standard business practices, and they are increasingly expecting signifi cant social and health benefi ts from their sustainability efforts that extend beyond operating cost savings. About half of the executives we surveyed expect both lower health care costs and greater worker productivity as a result of their sustainability investments. Understanding these benefi ts may help drive investments even further, yet that measurement remains diffi cult to measure and track.

Some other key fi ndings:

■ Sustainability is becoming “business as usual” with more fi rms increasing sustainability investments. 60% report investing in dedicated sustainability staff while fi rms largely or fully dedicated to green building have doubled since 2009, up from 12% to 30%.

■ Corporate leaders are expecting signifi cant benefi ts from sustainability invest-ments—92% report drop in operational costs, 88% cite improved company image, and 74% report higher customer retention and attraction.

■ Firms are starting to drive sustainability in their supply chains. Our fi ndings show that among fi rms that are in the highest stages of sustainability, 67% are requiring their suppliers to incorporate green and sustainable practices.

It is encouraging to see that sustainability is becoming more integrated within corpo-rate America’s business practices and that the business benefi ts are being recognized. However, there is still room to grow. Corporate America is not yet fully capitalizing on the business opportunities sustainability can offer, with only a third of fi rms report that sustain-ability is tied to revenue generation. In order for companies to evolve to the highest stages of sustainability, they will need to consider sustainability in making decisions on their products and services—and not just view it as a way to achieve effi ciencies, cost savings and improved public relations.

We appreciate Siemens enabling us to bring this important research to the market, reveal-ing valuable data and analysis for industry players interested in pursuing their own paths to sustainability.

Harvey M. Bernstein, F.ASCE, LEED APVice PresidentIndustry Insights & AlliancesMcGraw-Hill Construction

Introduction

Harvey M. Bernstein, F.ASCE, LEED AP, has been a leader in the engineering and construction

industry for over 35 years. Currently, as vice president of Industry Insights & Alliances for

McGraw-Hill Construction (MHC), he has lead responsibility for MHC’s market research group

and thought leadership initiatives, including conceiving and launching MHC’s SmartMarket Report

series. He also sits on Princeton University’s Civil and Environmental Engineering Advisory Council

and is a visiting Professor with the University of Reading’s School of Construction Management and

Engineering in England.

Introduction Letter from Siemens Infrastructure & Cities

Letter from McGraw-Hill Construction

1 Executive Summary

3 Corporate Involvement in Sustainability

3 Levels of Corporate Sustainability Commitment

4 External Infl uence—Public Expectation of Good Corporate Citizens

5 Levels of Involvement in Green Building

6 Dedicated Sustainability Budget

7 Infl uence of the Chief Sustainability Offi cer

7 The Chief Sustainability Offi cer and Dedicated Sustainability Staff

8 Infl uence and Integration of the Corporate Sustainability Offi cer

9 Benefi ts of Involvement in Corporate Sustainability

9 Expected Benefi ts from Sustainability Adoption

11 Sidebar: Corporate Sustainability and The Next Generation

12 Impact of Sustainability Practices on Company Value and Financials

13 Infl uencing Corporate Sustainability—Drivers and Challenges

13 Drivers Promoting Sustainability

15 Sidebar: The Impact of Corporate Sustainability Rankings and Ratings

16 Challenges to Corporate Sustainability

18 Sustainability Metrics and Measures

18 Metrics that Make the Business Case for Sustainability

20 Soft Measures to Track the Benefi ts of Sustainability

21 Challenges in Measuring Sustainability Performance

23 Infl uencing the Marketplace

23 Green Products and Services

24 Supply-Chain Demand

25 Sidebar: Transparency in Corporate America: Rise in Sustainability Reporting

26 Corporate Sustainability Activities

29 The Role of Government

30 Interview: The Government Perspective: Sustainability in Philadelphia, Pennsylvania

33 Methodology

34 Resources

Contents

Corporate Involvement in Sustainability

1

Sustainability is becoming business as usual in corporate America. This study, surveying the largest corporations in America, con-tinues research conducted in 2006 and in 2009 and shows that virtually all fi rms are engaging in sustainability efforts beyond what they are required to do, indicating that sustainability offers tangible business value.

Corporate Sustainability Commitments and Activities

Adoption of sustainability continues to grow in corporate America. In 2012, 83% view sustainability as consistent with their profi t mission. This is an increase over 76% in 2009 and 58% in 2006. And nearly a half (43%) of the fi rms now identify themselves in the higher stages 4 and 5, having transformed themselves into green organizations.

Firm involvement in green building is increasing and deepening. There has been a rise in the number of fi rms that are largely dedicated to green building—with fi rms doing green building on more than 60% of their building portfolio increas-ing from 12% in 2009 to 30% in 2012.

Firms are investing in dedicated sustainability staff. In 2012, about 60% report having a person or team dedicated to the sustainability function, and the proportion of fi rms with dedicated sustainability budgets has increased signifi cantly from 31% in 2009 to 43% in 2012.

The infl uence of the CSO in corporate decision mak-ing has increased. More corporate executives are report-ing the level of infl uence of the CSO is at a transformational level—28% in 2012 compared to 19% in 2009.

Number of sustainability activities occurring at fi rms has in-creased. In 2012, 81% report doing three or more sustain-ability practices compared to 69% in 2009.

Source: Siemens/McGraw-Hill Construction, 2012

Executive Summary

Company Involvement in Sustainability Over Time (2006–2012)

0%

10%

20%

30%

40%

201220092006

Stage 5Stage 4Stage 3Stage 2Stage 1

11%

34%

30%

15%

40%40%

15%

20%

32%

2%4%

9%7%

3%

39%

AS REQUIRED DOING INTERNALLY; SEEN AS A

COST

ENGAGING; CONSISTENT WITH PROFIT

MISSION

SELLING SUSTAIN-ABILITY

PRODUCTS/ SERVICES

TRANSFOR-MATIONAL; DEFINED BY SUSTAIN-ABILITY

Involvement of Firms in Green Building Across Their Portfolio Over Time (2006–2012)

21%

Largely/FullyDedicated (More than 60%of Projects)

Exploring Involvement (Less than 16% of Projects)

10%

20%

30%

40%

50%50%

13% 12%

47%

30%

201520122009



Number of Sustainability Activities Occurring at Firms (Over Time)


0% 10% 20% 30% 40% 50%

None

One to Two

Three to Four

Five to Six

43%

5%

18%

40%

38%

29%

1%

26%

20122009

Executive Summary

2

Drivers and Benefi ts of Corporate Sustainability

Strong business benefi ts are expected from sustainability adoption. And although they are diffi cult to measure and track, social and human benefi ts are gaining more attention and are expected by corporate executives as a result of their sustainability investments. It is clear that the industry needs to be able to better evaluate benefi ts along the triple bottom line—that is, fi nancial, social and environmental benefi ts.

Many factors are driving corporations to sustainability—there is no one primary driver. In fact, more than a third cite six factors as critical drivers. However, for obstacles, reconciling capital expenditures against operational paybacks is consis-tently viewed as the largest challenge.

Corporate America still has the opportunity to increase value from sustainability initiatives. While 58% of fi rms report hav-ing sustainable products/services, only 37% of fi rms report that their sustainability is tied to revenue generation.

Government can infl uence some factors, such as energy effi -ciency, but overall, corporations are driving their own initiatives.

With sustainability becoming embedded into corporate prac-tices, the data suggest that fi rms not investing in sustainability will lose competitive edge.

Set benchmarks and track benefi ts of activities and investments. Companies are expecting benefi ts from their sustainability initiatives, but challenges remain in measuring and proving those impacts. Sustainability reports are becoming standard, but measures are still limited. Firms that can quantify more of their results will be able to justify investments and gain market advantage through substantiated benefi ts that others cannot prove.

Educate fi nancial offi cers in the value of sustain-ability. CEOs, COOs and sustainability staff are aware of sustainability’s benefi ts. There has been an increase in awareness in sustainability by CFOs from 2009 to 2012, but they remain cautious in attributing benefi ts.

Look at sustainability through a profi t lens—embed it into product and business development. Sustainability is becoming common practice in companies’ operations and internal activities. Therefore, these types of initiatives will not yield the same competitive advantage move for-ward. However, overall, companies are not yet embracing sustainability into their product and business development strategies. Firms that can tap into this potential market will be better positioned to continue to gain market differentia-tion from sustainability.

Benefi ts of Corporate Sustainability Efforts

FINANCIAL BENEFIT% EXPECTING BENEFIT

Energy and Operational Cost Reductions 92%

Improved Company Image 88%

Customer Retention and Attraction 74%

Competitive Advantage 72%

SOCIAL AND HUMAN BENEFIT% EXPECTING BENEFIT

Lower Health Care Costs 51%

Attracts a More Qualifi ed Workforce 51%

Greater Worker Productivity 50%

Important Drivers Promoting Corporate Sustainability Over Time (2009–2012)


0% 20% 40% 60% 80% 100%

Staff Retention

Public Relation/Media Coverage

Competitive Advantage

Customer Need

Increases in Regulation

Changes in Technology

Energy and Cost Savings

79%

67%

59%

70%

96%

91%

81%

66%

43%

46%

65%

66%

20122009

67%

68%


Recommendations


3


Stages of Corporate Sustainability

second line of text if needed

Stage 1

Stage 2

Stage 3

Stage 4

Stage 5

DescriptionSTAGESustainability is not part of the company mission and at times weakens the effectiveness of the company to accom-plish its mission. The company views sustainability as a matter of complying with government regulations only.

Company meets all legal standards for sustainability and does so well—following all labor, environmental, health and safety regulations. Sustainability enters into the company mission based on legal requirements. Sustainability is viewed as a cost, but it enters into company mission.

Proactive application of sustainability is considered consistent with the company’s profi t mission. The fi rm benefi ts from lower costs through ad-hoc operation eco-effi ciencies, cleaner processes and better waste manage-ment. However, the company has not built sustainabil-ity into its technologies, policies and operations on an institution-wide basis.

Company is transforming into an organization oriented around sustainability. The company re-brands as a business committed to sustainability and integrates sustainability with key strategies. Green is viewed more as an opportunity than as a cost. The company makes cleaner products or services, applies eco-effectiveness and lifecycle stewardship, and enjoys competitive advantage from sustainability initiatives.

Company Involvement in Sustainability Over Time (2006–2012)


0%

10%

20%

30%

40%

201220092006

Stage 5Stage 4Stage 3Stage 2Stage 1

11%

34%

30%

15%

40%40%

15%

20%

32%

2%4%

9%7%

3%

39%

Company is driven by a passionate, values-based commit-ment to improving the well-being of the company, society and the environment. The company approaches its busi-ness as holistic and restorative.

Levels of Corporate Sustainability Commitment

Corporate America has continued its adoption of sustainability and green practices over the past three years. Despite economic challenges facing corporations and political ideology shifting away from sustainability, more corporations adopted sustainability prac-tices from 2009 to 2012.

Following this upward trend, in 2012, virtually no corporation in America is merely meeting the bare minimum legal requirements when it comes to sustainability practices. And 83% view sustain-ability as part of their business practices—not an activity with negative bottom-line impacts.

These shifts can largely be attributed to the increased reporting of corporate sustainability investment by chief executive offi cers (CEOs), chief fi nancial offi cers (CFOs) and chief operating offi cers (COOs)—collectively referenced as C-suite executives—compared to the corporate sustainability offi cer and executives dedicated to sustainability (referenced in the study as CSOs).

C-Suite Executives: 41% place their fi rms at the upper stages of corporate sustainability—slightly lower than the 43% reported by all respondents (shown at right). This is a signifi -cant increase compared to 2009, when only 36% of this group placed their companies at these upper stages.

C-suite executives may be paying attention to the internal benefi ts offered by sustainability initiatives. With rising energy, water and employee costs, these executives may view some sustainability ef-forts, such as high-performance building investments, as lowering operating costs through lower energy and water bills. In recogniz-ing these benefi ts, these executives may be more supportive of efforts that they were less attuned to in the past.

In the wake of the credit crisis, the past three years have also seen sharply increased expectations of transparency and public disclosure of corporate practices. The C-suite may be sensitive to these pressures and encouraged to support corporate sustainabil-ity. (See page 4 for more on public expectations of corporations.)


4

0% 20% 40% 60% 80%

2006

2009

2012 81%

66%

*Not Asked in 2006

Percentage That Believe the Public Expects Firms to Be Good Corporate Citizens in Sustainability (Over Time)


Average Share of Sustainability Practices That Is Internal Versus Revenue-Generating (2012)


Internal Activities

Revenue-Generating37%

63%

Internal Versus External Sustainability Practices

Overall, the share of fi rms’ sustainable practices that are dedi-cated to internal activities is signifi cantly larger than those that are generating revenue. However, still more than a third of corporate activities are being focused toward profi t, suggesting that fi rms are recognizing the profi t potential of sustainable products and services.

A few fi rms—5%—are entirely dedicated to sustainability as a business practice, while 16% only see sustainability as an internal activity. These numbers are consistent with the fi rms’ positions on the spectrum (see page 5), where 9% are in stage 5 and 17% are in Stages 1 and 2.

Variation by Executive Position

Consistent with their positions, CSOs report that their fi rms are more heavily invested in revenue-generating activities, with 42% of them reporting so compared to 34% of CEOs. This again refl ects the fact that the C-suite views sustainability as an effec-tive cost-saving practice. It also suggests there is more room for growth—even in fi rms that report themselves at Stage 4.

Variation by Size of Firm

Executives at larger fi rms also report more sustainability activities tied to revenue—42% of those from fi rms with annual revenue over $2.5 billion report this compared to 34% of those from fi rms with annual revenue under $2.5 billion.

External Infl uence—Public Expectation of Good Corporate Citizens

Over the past three years, signifi cantly more executives in cor-porate America report public expectations around their need to practice good corporate citizenship. In 2012, 81% of the largest fi rms in the U.S. report meeting public expectations as the primary reason for corporate involvement in the areas of sustainability and green building. This is signifi cantly more than the two-thirds that reported the same in 2009.

In the last few years, the distrust of corporations and the private sector has increased as concerns over the global fi nancial crisis and perceptions of corporate greed have grown. As a result, the demand for transparency around corporate practices is higher than it has ever been.

While there is very little difference in opinion among most demo-graphic groups, COOs are least aware of public expectation—only 68% report this expectation compared to 86% of other execu-tives. This is likely because COOs are internally focused, whereas CEOs, CFOs and CSOs interact more closely with external groups.

Variation by Region

More executives in the West—45%, compared to 36% in other regions—report that their sustainability practices are tied to rev-enue generation. With high-tech companies located in this region, there may be more occasion for these fi rms to take advantage of sustainability as a product/service opportunity.


55

Levels of Involvement in Green Building

As the adoption of sustainability and green practices has contin-ued to grow, fi rms have also increased their commitment to green-ing their building portfolios.

Over the past three years the level of involvement in green build-ing has steadily increased. In 2012, executives from fi rms largely to fully dedicated to green building surpassed those at a low level of involvement, and that trend is only expected to continue to increase.

This steady growth suggests that green building is well on its way to becoming a standard practice in corporate America. The results are consistent with McGraw-Hill Construction’s sizing of the green building marketplace, which has shown the share of green construction to have grown dramatically over the last four years. In 2012, green is expected to be represent 44% of all nonresidential construction starts by value, up from green to be 41% in 2011, 31% in 2010 and only 12% in 2008.1

Government as a Driver of Green Building

The percentage of executives that believe government will require green building have decreased since 2009, though it has still increased since 2006.

Due to the economic crisis and Congressional stalemates, the federal government has shifted away from mandates to regulate corporations. Though there remains a heavy focus toward greener buildings at the state and local levels, the recent trend has been around public disclosure and energy use reporting versus a policy based on mandates. Additional non-regulatory policies, such as voluntary programs and fi nancial incentives to encourage green building, have steadily grown over the past several years, which may have also lowered the expectation that future policies would establish an enforceable standard.

Variation by Region

While there is little variation among most demographic groups, executives in the West are more likely to expect government man-dates—74% versus 58% in the other regions. This is consistent with the stronger environmental policies, greenhouse gas emission mandates and other standards in California and the states in the Pacifi c Northwest.

Involvement of Firms in Green Building Across Their Portfolio Over Time (2006–2012)

21%

Largely/FullyDedicated (More than 60%of Projects)

Exploring Involvement (Less than 16% of Projects)

10%

20%

30%

40%

50%50%

13% 12%

47%

30%

201520122009


0% 20% 40% 60% 80%

2006

2009

2012 60%

47%

72%


Percentage of Executives That Believe Govern-ment Will Eventually Require Green Building in Nonresidential Construction (Over Time)

1 2013 Dodge Construction Green Outlook, McGraw-Hill Construction, October 2012


6

Percentage of Firms with a Dedicated Sustainability Budget Over Time (2009–2012)


Dedicated Sustainability Budget

Establishing a budget for sustainability has become much more common in 2012 than it was in 2009. The proportion of fi rms with a dedicated budget, although still less than half, has increased signifi cantly from 31% to 43%.

CSOs are more likely than C-suite executives to report having a budget—54% report doing so, compared to 38% of C-levels.

In terms of budget sources, for the most part fi rms are drawing from operations budgets rather than capital budgets, while less than a fi fth (17%) have established a new, separate budget for these activities.

This is consistent with other survey results indicating that cor-porate leaders still view sustainability as an internal, cost-saving or effi ciency-generating activity as compared to a true business opportunity. This suggests that the private sector still has not recognized how to use sustainability for business development. It will be important to track this trend over time to see if companies start to shift their perception and engage in sustainability activities to yield profi t rather than reduce costs.


The average 43% of fi rms that report having sustainability bud-gets, responses from the C-Suite vary from the CSOs:

CSOs are more likely to report having a dedicated budget compared to other executives—54% report having a budget for sustainability initiatives compared to 38% of others.

CSOs are also more likely to report that their companies rely on a capital budget—69% compared to 55% of C-levels.

This is to be expected. If a fi rm is invested enough in sustainability to have a CSO, it would be more likely to dedicate a budget to that position and/or department.

Variation by Firm Size

Larger fi rms (annual revenues over $2.5 billion) are more likely to use a separate sustainability fund—34% report doing so com-pared to 10% of smaller fi rms (annual revenues of $250 mil-lion–$500 million).

Source of Sustainability Budget (2012)


0% 20% 40% 60% 80%

Other

Separate Sustainability Fund

Capital Budget

Operations Budget 78%

9%

17%

60%

0% 10% 20% 30% 40% 50%

2009

2012 43%

31%


7

Influence of the Chief Sustainability Officer

The Chief Sustainability Offi cer and Dedi-cated Sustainability Staff

In 2012, about 60% of fi rms have a person or team solely dedicated to sustainability efforts. This percentage has remained unchanged since 2009.

A much higher percentage of executives in fi rms at Stages 4 and 5 report having a dedicated CSO or sustainability team—82% of them report this compared to 49% for executives in fi rms at the lower stages. This is not surprising since to be at Stage 4 or 5, a fi rm must have embedded sustainability into its business practices, not just in its operations.

Location of the Sustainability Function

When a dedicated chief sustainability offi ce or sustainability team exists in a company, they most often report to the CEO/Presi-dent—with 22% reporting to this position, far more than to any other named position. They also sometimes report to the opera-tions leadership. The senior level of these positions indicates that when a sustainability team exists, there is support at the highest levels of the fi rm.

In contrast, when a fi rm does not have a dedicated position, the sustainability function is most often assigned to real estate, environmental health and safety, or the operations division. This suggests that these fi rms perceive sustainability as more of a regulatory or cost-saving practice.

Percentage of Firms with a Dedicated Chief Sustainability Offi cer or Team (2012)

No

Yes8%

60%40%

82% of Firms at Stages 4 and 5

Location of Sustainability Function in Firms Without a Corporate Sustainability Offi cer or Dedicated Team for SustainabilityEnvironmental Health and Safety (19%)

Real Estate (15%)

Operations (11%)

Marketing (7%)

Position That Corporate Sustainability Offi cers Most Often Report ToCEO/ President (22%)

Vice President, Operations (8%)

Chief Operating Offi cer (6%)



8

Infl uence and Integration of the Corporate Sustainability Offi cer

The level of sustainability adoption by corporations can also be determined by gauging the level of infl uence of the CSO or other staff dedicated to this function. The four-level CSO infl uence scale, developed by McGraw-Hill Construction and Siemens for the 2009 study, measures this trend and ranges from peripheral to transformational. (See the chart on the right for descriptions of the levels of infl uence.)

In 2012, CSO or sustainability infl uence has increased notably over the past three years, with 28% of corporate executives reporting their CSOs at the highest level, indicating their involve-ment is at the highest level of leadership—contributing to corpo-rate strategy and business development. However, this shift has primarily come from those that were at level 3 in 2009, not from a widespread shift across the spectrum.

This suggests that when a CSO is at level 3, where he/she can help inform goals, the company recognizes the value of the posi-tion and instills it with decision-making authority. However, the steady numbers at the lower levels indicates that there is still a need to demonstrate the larger value of the CSO role to a good share of corporate America.


Not surprisingly, the presence of a dedicated CSO or sustainability staff is refl ected in the infl uence of that role—40% of them report their infl uence at level 4 compared to 22% of other executives. This correlates to the corporate position of a dedicated CSO, where 22% report directly to the CEO/President (seen page 7).

Infl uence in Firms Without Dedicated Sustainability Staff

These fi rms are more likely to report that the function responsible for sustainability has at a lower level of infl uence. However, there has been a signifi cant increase in the percentage of fi rms report-ing that the function has reached level 4.

43% report their fi rm at level 2, compared to 35% in 2009.

20% report their fi rm at level 4, compared to 8% in 2009.

Infl uence of the Chief Sustainability Offi cer in Corporate Decision Making


Influence of the Chief Sustainability Officer

Levels of Corporate Sustainability Officer Influence

second line of text if needed

Level 1

Level 2

Level 3

Level 4

DescriptionSTAGEPeripheral: No involvement in corporate strategy.

Minimal: Some infl uence and input into corporate strategies and goals.

Contributing: Helping to inform goals and reporting, with the CSO position integrated into some areas of company operations.

Transformational: Informing goals and setting direction, leading implementation, and deeply integrated into com-pany procurement and operations.

28%

Level 1Peripheral

0%

0%

0%

0%

0%

0%

20122009

Level 4Transformational

Level 3Contributing

Level 2Minimal

46%

19%

34%

30%27%

8%8%


9

Benefits of Involvement in Corporate Sustainability

Expected Benefi ts from Sustainability Adoption

Corporate executives expect many benefi ts from their sustain-ability efforts. No longer is sustainability seen as solely a public relations activity.

Benefi ts include both internal factors—such as reduced costs, lower greenhouse gas emissions, employee retention and lower health-care costs—and external-facing ones, including improved company image, customer retention/attraction and stronger competitive advantage. These are all expected by the majority of respondents.

Therefore, there is a high level of pressure on fi rms to deliver results from their sustainability investments, particularly in proving the expense savings and branding benefi ts.

Signifi cant Differences Among Respondents

85% of CSOs expect lower greenhouse gas emissions for their fi rm compared to 73% of C-suite executives. Though it is to be expected that CSOs would report this at higher levels, the fact that nearly three-fourths of other executives report this as an expected benefi t in the face of decreased attention to climate change issues suggests that companies are still focused on emissions as one element of social responsibil-ity and are tracking emissions. Because many of the largest companies are global, the stronger concern with emissions in the European Union might infl uence this factor.

Even more executives at fi rms in Stages 4 and 5 of corporate sustainability expect benefi ts, particularly in the areas of at-tracting customers (84%), competitive advantage (87%) and retaining/attracting employees (72%). This suggests that com-panies are expecting tangible payoffs from their investments in sustainability.

Shift in Expected Benefi ts from 2009 to 2012

Of the four benefi ts asked about in both 2009 and 2012, reduc-tions in energy and operational costs are expected by an over-whelming percentage of executives—92% compared to 71% in 2009. Otherwise, the expectations remained consistent over time.

Rising utility costs coupled with the energy and water savings that high-performance building upgrades and green building invest-ments can yield have increased corporate expectations that there will be payoffs in operational cost savings from these and other waste reduction practices.

In 2012, 90% of C-suite executives expect a reduction in energy and operational costs, while in 2009, 80% of CEO/COOs and only 67% of CFOs had the same expectation. This suggests that these executives have started to become believers in the business case for sustainability and have started seeing the returns of their

Expected Business Benefi ts from Sustainability Adoption (for All Benefi ts Asked About in 2012)

0% 20% 40% 60% 80% 100%

More Tax Incentives

Greater Manufacturing Productivity

Lower Absenteeism

Greater Worker Productivity

Lower Company Healthcare Costs

Employee Retention and Recruitment

Stronger Competitive Advantage

Customer Retention and Attraction

Lower Greenhouse Gas Footprint

Improved Company Image

Drop in Costs 92%

39%

37%

40%

50%

51%

61%

72%

74%

76%

88%

0% 20% 40% 60% 80% 100%

20122009

More Tax Incentives

Employee Retentionand Recruitment

Customer Retentionand Attraction

Drop in Costs

39%

61%61%

73%74%

71%

92%

39%

Expected Business Benefi ts from Sustainability Adoption Over Time (2009–2012)



investments.

Agree

Neutral

Disagree

8%

51%

35%

14%


10

Market Differentiation and Improved Financial Performance

Though many corporations are infl uenced by business motives such as cost savings, competitive advantage is a key factor sup-porting adoption of sustainability and green practices.

66% of executives believe that they are seeing market differentia-tion from their sustainability investments, while only a small number do not believe they are seeing competitive advantage from sustain-ability initiatives. These fi ndings are consistent with the number agreeing in 2009 (61%), which points to the enduring value of differentiation. But it also indicates that sustainability has not been fully adopted in corporate America, since fi rms are still able to gain some advantage from their efforts. However, as fi rms continue to increase investment and move along the spectrum (see page 3), this advantage will start to diminish. Therefore, fi rms that want to cement this advantage should establish their commitment now, rather than waiting until the rest of the market catches up.


Executive Position: Though most players remained consis-tent over time, the evolving opinion of CFOs is striking. Clearly, sustainability is starting to make its way into the fi nancial leadership, which is a key factor for sustainability to become fully adopted into corporate practice.

Dedication to Sustainability: As might be expected, execu-tives with fi rms at upper stages of corporate sustainability, those with a dedicated CSO/sustainability team, and a dedi-cated budget for sustainability all more often perceive they are gaining competitive advantage. This indicates that as invest-ments in sustainability increase, fi rms are seeing competitive advantage from those investments.

Attracting More Qualifi ed Employees

More than half of fi rms also are seeing their sustainability invest-ments yield a more qualifi ed workforce. These results are consis-tent with the results in 2009 (48% reported the same), with one important difference. Smaller fi rms (those with annual revenues from $250 million to $500 million) are also seeing this benefi t at comparable levels to their larger counterparts. In 2009, only 34% reported this benefi t, compared to 42% in 2012. It is no longer just large companies that are using sustainability as a recruitment tool.

As might be expected, a greater number of executives in fi rms making stronger sustainability investments—those at higher levels of sustainability and those with staff and resources dedicated to sustainability—are recognizing this benefi t at more signifi cant lev-els. Again, companies that are making investments are maximizing the benefi ts. This is particularly important given the attention the Millennial generation is placing on corporate social responsibility.

0% 20% 40% 60% 80%

CSO

CFO

COO

CEO

100%

76%

80%

38%49%

58%

74%

73%

58% 20122009

Percentage That Believe Sustainability Investments Increases Market Differentiation (by Executive Position)

Percentage of Firms That Believe Sustainability Investments Increases Market Differentiation (Total in 2012)


Disagree

Neutral

Agree

8%

66%26%

9%

Percentage of Firms That Believe Sustainability Investments Attract a More Qualifi ed Workforce (2012)



Corporate Sustainability and The Next Generation

Corporate sustainability practices are becoming increasingly im-portant for companies due to the growing interest of the younger generation in how businesses can be more sustainable and green. Today’s younger generation, also referred to as the Millennial gen-eration or Gen Y, having been raised on environmentally friendly and sustainable values, are keen to work for employers whose values align with their own.

Millennial Characteristics

Millennials, as the most technologically savvy and informed gener-ation to date due to the Internet and social media, are more likely to weigh a company’s social and environmental impact record before deciding about working there. However, as the fi ndings of the Robert Half International survey on Gen Y shows, while they believe that companies should benefi t both the individual and the broader society, they are reluctant to sacrifi ce their professional security. Millennials still select salary, benefi ts and opportunities for growth above company reputation.

However, the younger generation may also be using a company’s reputation on sustainability as an indication of other positive qualities such as how progressive they are in the way they treat their employees As the most diverse generation of adults the U.S. has seen yet, Millennials generally believe that a diverse range of ethnicities, religions, cultures and lifestyles should not just be toler-ated but also embraced.

Motivated by Solving Social and Environmental Challenges

A recent Deloitte survey shows that compared to business leaders of today, Millennials place greater emphasis on the potential of business to solve some of today’s greatest societal and environ-mental challenges. Over 50% of Millennials believe that in the future, business—more than any other sector of society—will have the biggest impact on solving society’s problems, while only 35% of business leaders think the same.

The fi ndings of McGraw-Hill Construction’s recent study on the construction industry workforce, published in the Construction

Industry Workforce Shortages SmartMarket Report (2012), also show that architectural students and recent graduates value sus-tainability highly. A higher percentage are infl uenced in their deci-sion to pursue green design by a personal sense of environmental responsibility compared to current practitioners. The study shows that 93% of architecture students and recent graduates believe that architects should practice sustainable design whenever pos-sible, and 65% say they will do green design out of a sense of

personal responsibility, a factor that only motivates 39% of current practitioners.

These fi ndings suggest that to attract more top Millennial talent to their organizations, corporations in America should be striving to do more to help overcome social and environmental challenges, and if they are, to make sure they are emphasizing through internal and external communication the role their business plays in sustainable development.

Why They Matter

Millennials, generally born between 1980 and 2000, make up close to 25% of the U.S. population and have now passed the baby boomers as the largest generational group. The majority of them are now entering the workforce, and they will soon become the driving force of our economy and the future leaders of U.S. businesses. As a result, their values and their concerns will shape how corporate America develops, builds and delivers products and services in the future. ■

11


12

Impact of Sustainability on Company Value (2012)


38%

62%

48%

40%

0% 20% 40% 60% 80%

Increased Customer Loyalty

Drives Creation of New Product/ Innovation

Improved Competitive Market Positioning

Increased Corporate Value

Impact of Sustainability Practices on Company Value

Executives are also starting to connect sustainability to benefi ts beyond operations and market differentiation. In particular, they are connecting it to increased company value, supporting the increased attention the public is placing on corporations—and potentially shareholders as well.

It will be important to track these corporate valuation benefi ts over time—particularly as they relates to company products and innova-tion. Still, at 40%, an important share of fi rms are already looking at sustainability with an eye on product and business development.

Notable Demographic Differences

Increased Corporate Value: COOs report this benefi t at higher levels than other position—even CSOs. 73% report this benefi t compared to 65% of CSOs, 63% of CEOs and 49% of CFOs. This result may suggest that the COO is attuned to the operational savings coming from sustainability and is calculat-ing that into better corporate value.

Driving Innovation: A signifi cantly higher number of execu-tives in the West report this benefi t compared to those in other regions. This is likely due to the types of fi rms headquartered in California and the Pacifi c Northwest.

Impact of Sustainability Practices on Company Financials

The 2012 study also started to benchmark the impact of sustain-ability on corporate fi nancials. As might be expected, a majority of executives (53%) perceive that adopting sustainability practices will have a positive impact on manufacturing productivity.

A third also expect sustainability to lead to increased profi ts and revenue. There is more uncertainty when it comes to premium pricing for green/sustainable products and services. Most notable, however, is the signifi cant share of respondents that do not have an opinion. This fi nding suggests that most corporations have not yet tapped into sustainability as an intrinsic part of profi t genera-tion. Instead, they view it in terms of manufacturing, operations, marketing advantage and public reporting instead of a business opportunity. For sustainability to truly take hold in corporations, fi rms will need to recognize these key fi nancial benefi ts.

As might be expected, CSOs are already reporting these benefi ts at higher levels:

Profi tability: 45% of CSOs

Revenue: 49% of CSOs

Therefore, it is incumbent upon CSOs to demonstrate these benefi ts to company leadership in order to increase investment in sustainability business activities.

0% 20% 40% 60% 80% 100%

PositiveNeutralNegative

Premium Pricing for Green Products

Revenue

Profitability

Manufacturing Productivity

24%

6% 41% 53%

18% 47% 35%

32%47%21%

21%55%

Impact of Sustainability on Corporate Financials (2012)


Influencing Corporate Sustainability—Drivers and Challenges

Drivers Promoting Sustainability

Energy and cost savings are still recognized by fi rms as the most important driver in promoting sustainability. 96% identify it as a key driver in 2012, up slightly from 91% in 2009. The fact that it has remained the most important driver over time is testament to its importance for both corporate sustainability and the bottom line.

Other factors identifi ed as key drivers of corporate sustainability:

Changes in Technology: 81% of executives see this as the second biggest driver of corporate sustainability. Although it has stayed at approximately the same level since 2009, technological advances and innovations in cleantech, cloud computing, smart grid, green chemistry and others could be factors that have increased this slightly as a major driver in the minds of corporate leaders.

Increases in Government Regulation: There has been a sig-nifi cant increase in fi rms identifying government regulation as a key driver promoting sustainability—up from 59% to 70% in three years. In fact, it is the only driver to experience a statisti-cally signifi cant increase in importance. Notably, more C-suite executives point to this driver in 2012 compared to 2009—at 71% and 59% respectively.

This increase could be infl uenced by local and state govern-ment policies and federal legislation passed between 2009 and 2012, including the American Recovery and Reinvestment Act, which supported sustainable investments such as energy effi ciency and green building. Additionally, government and utility incentives have helped drive growth of the renewables market.

Customer Need: The demand for greener products and more transparency by customers should make this an important driver of corporate sustainability in the future. It will also be the key factor in driving profi t-oriented sustainability activity. It will be interesting to see if this driver increases as the economy improves.

Competitive Advantage: The importance of this driver re-fl ects the market differentiation companies are reporting from their sustainability activities (see page 10). In order for this to remain a driver, fi rms will have to continue to look for ways to continue to invest and expand their sustainability efforts. Other-wise, they will lose the opportunity to differentiate themselves in the market.

Public Relations/Media Coverage: Clearly, commitment to sustainability remains an important factor driving investment. Firms still want the improved image they can garner from engaging in corporate social responsibility—including good

Important Drivers Promoting Corporate Sustainability Over Time (2009–2012)


0% 20% 40% 60% 80% 100%

Staff Retention



Customer Need




79%

67%

59%

70%

96%

91%

81%

66%

43%

46%

65%

66%

20122009

67%

68%

governance practices as well as environmentally and socially benefi cial activities.

Variation by Level of Involvement in Sustainability

A greater number of executives in fi rms dedicated to sustainability report the following as drivers:

Customer Need: 75% of those in stages 4 and 5. These fi rms are more likely to be providers of green products and services and to be more responsive to customer demand in this area.

Competitive Advantage: 80% of those in stages 4 and 5

PR/Media Coverage: 79% of those in stage 4 and 5.


Not surprisingly, smaller fi rms are even more driven by energy and cost savings compared to their larger counterparts. In fact, every respondent (100%) in a fi rm with revenues of $250 million–$500 million reported this as a major driver in promoting sustainability. Because fewer resources are available to these fi rms, these sav-ings can have a bigger impact.

13


14

The MOST Important Drivers Promoting Corporate Sustainability Over Time (Respondents Could Only Select One Driver as Most Important)


The Most Important Drivers

When corporate executives were asked to select just one driver as most important, energy and cost savings remained at the top of the list. However, fewer than half of respondents selected this as the most important, indicating there are many drivers infl uencing corporations to embrace sustainability. Understanding the most critical driver will be key in infl uencing corporate behavior and increased levels of investment.

Customer Need: When respondents rated the importance of several drivers, customer need was fourth overall; however, when they were forced to select just one driver as most impor-tant, customer need moved up to second—reported by 20%, just behind energy and cost savings. Additionally, a greater share of respondents selected this as the most important driver in 2012 compared to 2009. These results indicate that consumer demand for green products and services could rap-idly increase corporate investment.

Competitive Advantage: The third most important driver is competitive advantage, again considered more important than in overall drivers, where it was fi fth highest. Again, this is a critical benefi t of sustainability efforts. Notably, public relations became a less important driver, which may suggest that it is becoming standard practice for fi rms to be engaged in sustain-ability, thus making it harder for fi rms to get the same media attention they did in the past.

Changes in Technology: Even though it ranked second in overall drivers, changes in technology ranked much lower as the most critical driver. This is consistent with the underlying drivers that infl uence corporate behavior—namely, increased profi t and lower costs.

0% 10% 20% 30% 40% 50%

Staff Retention



Customer Need




5%

12%

5%

8%

43%

40%

6%

12%

4%

2%

9%

5%

17%

20%

20122009

The Impact of Corporate Sustainability Rankings and Ratings

Companies today are receiving a growing number of surveys and questionnaires from customers, investors, analysts, NGOs and media organizations to collect information on their sustainability programs. This information is then being use to rate and rank com-panies based on their sustainability efforts and their level of good corporate citizenship.

Investor Interest and Corporate Reputation are Key Drivers

This rising interest in corporate sustainability rating and rank-ing systems is driven by several factors. Sustainable investing is steadily growing and driving the need for information on the sustainability performance of corporations. From 2007 to 2010, sustainable investing enjoyed a growth rate of more than 13%, increasing from $2.71 trillion to $3.07 trillion. Today, about one out of every eight dollars under professional management in the U.S. is involved in sustainable investing.1 The corporate sustainability information used for ratings and rankings helps to determine inclu-sion in socially responsible and sustainable funds whose composi-tion is based on the best-in-class principle. These funds strive to include the most socially responsible and sustainable companies within each industry. The idea behind this is that these companies are better at managing and reducing risk, they are generally more innovative, better equipped to take advantage of sustainability-related business opportunities, and as a result, more profi table. According to the Carbon Disclosure Project (CDP) 2011 Global Report, companies in the Carbon Disclosure Leadership Index (CDLI) provided approximately double the average return of the Global 500 between January 2005 and May 2011.2

Many large pension funds, seeing long-term value, have increas-ingly become involved in socially responsible and sustainable investing. According to a BNY Mellon survey, 35% of pubic pen-sions have a sustainable investing component, compared to only 16% of corporate plans.3

Since major mainstream investors use market indices that have sustainability focus such as Dow Jones Sustainability Index (DJSI) and the FTSE4Good Index Series in their investment decisions, companies can fi nd being included in them fi nancially reward-ing. Of course, the other major benefi ts are prestige and positive public relations from being able to publicly state their position on one or more of these indices—or of getting a good rating or a high ranking on one of the sustainability rating and ranking systems. As an example, Waste Management recently announced in a press release its inclusion in the 2012 DJSI and being ranked in the CDP’s top 10% of industrial companies.4 The positive corporate image and reputation is highly important to companies, particularly publicly traded companies that are heavily watched by nongovern-mental organizations. It also can help in attracting and retaining top talent. Sustainability and green have become part of the ethos of the Millennial generation, who are in the early parts of their careers or entering the workforce, because they had concepts such as reusing, reducing, recycling and responsible consumerism embedded into their everyday lives.

15

Positive Impacts on Corporate Sustainability

Ratings and rankings serve a critical function within companies as well. They can help sustainability offi cers bring C-suite attention to sustainability matters, by pointing to what customers and share-holders care about. They also serve as a useful tool in benchmark-ing performance against peers.

Those at the DJSI believe that due to their best-in-class approach, companies are now competing to be included in the DJSI and con-tinually improving their sustainability programs. Advocates argue that overall, these are the right kind of incentives for companies to incorporate sustainability practices and that this is good news for all stakeholders, and ultimately, society and the environment.

Importance of Credibility in Rating and Rankings

There is a multitude of sustainability rating and ranking systems in the market today—over 100 exist, while in 2000, there were only 21.5 Among these, a few are well-regarded. According to a GlobeScan/SustainAbility survey of sustainability experts, the most credible are the CDP Leadership Index, which gives a score to all companies with a suffi cient level of disclosure of their sustain-ability performance in response to its questionnaire, and the DJSI and the FTSE4Good Index Series, both of which are indices that track the stock performance of world’s leading companies in terms of economic, social and environmental performance and serve as benchmarks for investors who want to integrate sustainability considerations into their portfolios.6

The survey fi nds that experts cite several key criteria that make a sustainability rating and ranking system credible. Objectivity and credibility of data resources rank highest, followed by disclosure and consistency of methodology and focus on material issues. Companies complain that a majority of the rating and ranking systems out there lack transparency in their methodologies and as a result lose credibility.

Proliferation of Systems and Lack of Standards

While companies can benefi t from sustainability ratings and rank-ing systems, the sheer number of surveys and questionnaires can be burdensome. Companies have to ensure that what is said about them is accurate, which means time and resources must be spent to collect and provide updated information. However, the ques-tionnaires are not in standardized formats, and questions seeking the same basic information are asked in slightly different ways, requesting different metrics, time frames or organizational scopes.

This confusion over the proliferation of sustainability ratings and rankings, and the lack of standards, has prompted Ceres, an inves-tor and environmental organization, along with Tellus Institute, a Boston-based research organization, to develop the new Global Initiative for Sustainability Ratings (GISR). The GISR will develop a framework and bring more coherence, transparency and coordina-tion to sustainability ratings. GISR plans to release its version of a sustainability ratings framework by the end of 2012. ■

1 Forum for Sustainable and Responsible Investing. SRI Facts. Website. Accessed October 8, 2012. 2 CDP Global 500 Report 2011: Accelerating Low Carbon Growth. Carbon Disclosure Project. 2011. 3 The Bank of New York Mellon Corporation. Press Release. Oct 2, 2012. 4 Waste Management. Press release. http://www.wm.com/about/press-room/2012/20120917_Dow_Jones_Sustainability_Index.jsp September 17, 2012. 5 Business Ethics. Corporate Sustainability Ratings: New Global Framework Proposed. June 08, 2011. 6 Rate the Raters 2012: Polling the Experts. A GlobeScan/ SustainAbility Survey. September 11, 2012.


16

Challenges to Corporate Sustainability

Though economic concerns remain primary challenges to cor-porate sustainability, signifi cantly fewer respondents report the economy as a challenge in 2012 compared to 2009. In fact, this was the only challenge that was important to fewer executives during this time period. This drop may correlate with the recent increase in consumer confi dence in the economy, and therefore also infl uence corporate leaders in turn.

The real challenge is around challenges with budgeting that con-tinue to plague corporate and government players alike. Because many savings of high-performance and sustainability initiatives come from operating budgets, the need to make investments with capital dollars continues to pose challenges in getting approvals for such efforts.


Implementation Issues:

Executive Position: Signifi cantly more CFOs rate imple-mentation issues as a challenge—71% compared to only 50% for the other players. Among other reasons, CFOs may be less familiar with sustainability practices, and therefore more prone to see this as a challenge.

Region: Signifi cantly fewer in the West rate it as a chal-lenge—30% compared to 57% for the other regions.

Government Incentives: Signifi cantly fewer in the West rate the lack of government incentives a challenge—26% compare d to 42% in the other regions. This may be due to more mature sustainability markets in the region.

Measuring ROI: More C-suite executives fi nd measuring ROI to be an important challenge over time as compared to CSOs—41% report it as a challenge in 2012 compared to only 26% in 2009.

Many of the benefi ts of sustainability are hard to quantify. McGraw-Hill Construction’s 2012 Determining the Value of Green Building Investments SmartMarket Executive Brief in-cluded perspectives from leaders on triple bottom line decision making. Leaders emphasized the challenges they are facing in capturing the full benefi ts from their sustainability invest-ments. Currently, some benefi ts, such as energy and water savings, are quantifi able, but these are a very small portion of the benefi ts that companies can realize through green invest-ments. Until environmental and social benefi ts can be equated with a fi nancial valuation, executives will continue to fi nd this a challenge.

Important Challenges to Implementing Sustainability Over Time (2009–2012)


0% 20% 40% 60% 80%

Shareholder Opposition

Organizational Issues/Lack of Leadership

Availability of Data

Difficulty Measuring ROI of Sustainability Activities

Lack of Sufficient Government Incentives

Implementation/Operational Issues

Current State of the Economy

Budget (Capital versus Operational)

53%

36%

30%

40%

79%

74%

54%

5%

4%

20%

26%

31%

38%

67%

59%

*Not Asked in 2009

20122009


17

The Most Critical Challenges

When corporate executives are asked to select just one challenge as most important, the rank order of the challenges remained the same, for the most part, with the majority citing budget challenges as most important.

Budgeting: Though ranked as the most critical by the largest number of respondents overall, budgeting was an especially important factor to CFOs—55% cited it as the most critical challenge, compared to 33% of the other executives on aver-age. This was their top challenge, consistent with the chal-lenges they face in fi nancing investments.

State of the Economy: Though the economy ranked as the second most critical challenge, it was ranked as such by nearly half as many in 2009, again indicating a positive economic outlook.

Diffi culty Measuring ROI: This moved from being the fi fth most critical challenge in 2009 to being third most important in 2012. In particular, CEOs are concerned about this fac-tor—21% ranked this as most critical, second to budget (30%) and higher than the economy (16%).

Again, the ability of executives to quantify benefi ts will be important for fi rms to deepen their sustainability investments. To move beyond operational or internal practices, executives—particularly CEOs—need to be able to make the business case for those investments.

The MOST Important Challenges to Implementing Sustainability Over Time (Respondents Could Only Select One Challenge as Most Important)


0% 10% 20% 30% 40%

Shareholder Opposition

Organizational Issues/Lack of Leadership

Availability of Data

Difficulty Measuring ROI of Sustainability Activities

Lack of Sufficient Government Incentives

Implementation/Operational Issues

Current State of the Economy

Budget (Capital versus Operational)

7%

6%

4%

8%

37%

35%

11%

2%

1%

6%

8%

5%

12%

32%

18%

*Not Asked in 2009

20122009

Sustainability Metrics and Measures

18

Metrics have become an important aspect of corporate sustain-ability programs, increasingly established by fi rms committed to adopting sustainability and green practices. Firms are also increas-ingly taking these metrics and establishing targets around them, then doing sustainability reporting, which is becoming a more widely adopted practice (see page 22).

Metrics That Make the Business Case for Sustainability

Corporate executives fi nd that cost savings and lower operating costs are the most effective metric (30%) used to make the busi-ness case for sustainability adoption. Energy effi ciency/reductions is cited as the second most effective metric.

This is consistent with other fi ndings in this report, which show energy and cost reductions as the top benefi t expected by fi rms that adopt sustainability practices (see page 9) as well as the top driver that is promoting sustainability (see page 13).

Metrics Considered Most Effective for Making the Business Case for Sustainability Investment


However, what is notable is how many other metrics are also considered important. This indicates that corporate America is not uniform in what motivates it, and consumers and practitioners who want to accelerate sustainability adoption need to tailor arguments to the measure that will be most impactful.

For the most part, respondents agree. Notable differences:

Water Conservation: Signifi cantly more CSOs cite this as an effective metric—12% compared to 4% for other executives.

Cost Savings Versus Energy Savings for CFOs: For CFOs, energy savings is a distant second in effective metrics to make the business case for sustainability. In fact, an overwhelming 40% cited cost savings as most infl uential, making CFOs the only executive position to have a pronounced opinion.

Customer Loyalty: Signifi cantly more fi rms in the Midwest cite this as an important metric—16% compared to 4% for the other regions.

#1 Cost Savings/Cost Effi ciency/Lower Operating Costs

30%

#2 Energy Effi ciency/Reduction

22%

#3 WasteReduction

13%#4 Increased Sales/Profi t

9%#5 Carbon Footprint

8%

#6 Customer Satisfaction/Loyalty

8%

#8 Reduced Greenhouse Gas Emissions

6%

#7 Water Conservation

7%

#9Return on Investment

5%

#10Community Image/Positive Press

4%

52%


19


Sustainability Metrics Being Used

Close to three quarters of executives (73%) report having estab-lished internal benchmarks to measure the effectiveness of their sustainability efforts, up from 67% in 2009. This growing trend indicates that fi rms are increasingly focusing on demonstrating the results of their sustainability investments. But the fact that fi rms are setting their own benchmarks reveals a gap in the existence of acceptable universal benchmarks.

Other Important Sustainability Metrics

ROI: 65% of corporate executives report the use of ROI to measure the effectiveness of sustainability practices, signifi -cantly more than the 55% reporting the same in 2009. This is a clear sign that corporate America is looking more at fi nan-cially quantifi able data to evaluate the performance of sustain-ability investments. CFOs are often reluctant to fund these investments because there are not enough hard data to justify the expenditure.

Emission Footprint: A signifi cantly higher number of execu-tives are measuring their emissions and tracking reductions. Use of this metric rose from 46% in 2009 to 57% in 2012. Firms are increasingly interested in tracking their efforts to reduce emissions, waste, water, and energy use in order to measure their impacts not only on the environment but also on their bottom line. These environmental footprint reduction efforts are generally highlighted in annual sustainability or corporate responsibility reports, which in turn have a positive impact on corporate reputation and branding.


CSOs versus Other Executives: As might be expected, CSOs are more invested in measuring the success of projects compared to C-suite executives. In particular, they are using emission footprint reductions and lifecycle assessment data at signifi cantly higher levels—66% and 60% respectively. These same variations also occur for respondents working in fi rms at stages 4 and 5. There were no signifi cant differences in the other measures.

Larger Firms and LEED: Executives from larger fi rms (those with annual revenues over $2.5 billion) are much more likely to use the amount of LEED space as a metric, with 45% report-ing so, much higher than the 18% of smaller fi rms ($250 million–$500 million in annual revenues) reporting the same.

Sustainability Metrics Tied to CSO Evaluations

Despite the increasing use of metrics, the fact that so few com-panies are evaluating their CSO and sustainability teams against these metrics indicates that fi rms are not yet comfortable with these evaluation criteria.

However, for sustainability to become truly ingrained in corporate activities, there must be accountability of staff to specifi c metrics and goals.

Metrics Used to Measure Effectiveness of Sustainability Practices Percentage of CSOs Evaluated Based on Sustainability Metrics

0% 20% 40% 60% 80%

Amount of LEED Space

Tracking Price Premiums

Lifecycle Assessment Data

Reduce Emissions Footprint

Return on Investment

Use Own Internal Benchmarks for Measurement of Efficiency

20122009

55%

45%

46%

57%

67%

65%

36%27%

38%

*Not Asked in 2009

*Not Asked in 2009

73%34%

11%

12%

15%

24%

22%


20

0% 20% 40% 60% 80% 100%

Customer Loyalty

Absenteeism

Employee Retention/Turnover

Worker Productivity

Health Care Claims

90%

52%

66%

65%

62%

68%

65%

59%

48%

58%

20122009

Soft Measures to Track the Benefi ts of Sustainability

Soft measures, such as productivity, employee health care costs, absenteeism and customer loyalty, are much harder to measure but can have paybacks that are signifi cantly greater than those offered by utility savings. According to the Building Owners and Management Association and U.S. Bureau of Labor Statistics, only 10% of their budget in buildings is due to operating costs, such as utility bills, rent, etc., compared to 90% on employee costs, such as healthcare. This means that even slight savings in employee costs can eclipse signifi cant operating cost savings.

However, measuring these benefi ts can be very diffi cult. As a result, only 16% of fi rms report doing so, only slightly up from the 14% that reported doing so in 2009.

On a positive note, the number of CSOs that report they have ways of evaluating the effectiveness of soft benefi ts from sus-tainability efforts jumped from 4% in 2009 to 18% in 2012—a dramatic and notable difference.

When fi rms are tracking soft benefi ts, they most often do so for a number of different factors, including health care claims, produc-tivity and employee turnover. For the most part, the soft measures tracked in 2009 and 2012 are similar, with one notable exception. In 2009, nearly all those fi rms measuring soft benefi ts were evalu-ating worker productivity. In 2012, there is slightly more emphasis on health care and absenteeism—likely more specifi c measures than productivity, which for most professions is hard to evaluate.

This measurement along the triple bottom line—fi nancial, social and environmental—is particularly critical in providing executives with a full view of the benefi ts that sustainability investments can yield. Yet, it is clear that there is still a lot of work to do in fi nding ways to quantify the value of these “soft” social benefi ts.


C-suite executives are most likely to track health care claims, whereas CSOs are more likely to track customer loyalty as well as worker productivity and employee retention.


Percentage of Firms That Measure Soft Benefi ts of Sustainability (2012)

No

Yes

8%

16%

84%


Types of Soft Measures Tracked 2009 versus. 2012 (for Firms that Are Measuring Soft Benefi ts)


21

Challenges in Measuring Sustainability Performance

As indicated by the other data results, measuring sustainability performance, although critical for corporate decision making, still is a challenge for many fi rms. In fact, 62% of fi rms cannot even identify the right metric.

Other key challenges are the availability of data and how to mea-sure ROI, the latter being one of the biggest challenges to sustain-ability overall (see page 16).

It is already becoming critical to give executives the tools they need to make sustainability decisions, including ways to weigh options and evaluate success. Without this, deeper investments in corporate sustainability will stall.


Overall, C-suite executives fi nd measuring sustainability perfor-mance more challenging than CSOs. The most signifi cant differ-ences are:

Identifying the Right Metric: 70% of C-suite executives report this as a challenge, compared to 48% of CSOs.

ROI: 58% of C-suite executives report measuring ROI to be a challenge, compared to 43% of CSOs.


Executives at smaller fi rms (those with annual revenues of $250 million–$500 million) have a harder time identifying the right met-ric. In fact, the disparity between smaller and larger fi rms (those with revenues over $2.5 billion) is dramatic—66% compared to 46%. Given the resources needed to develop a robust measure-ment system, it is not surprising that smaller fi rms have more signifi cant measurement challenges.

Variation by Region

Firms in the West are much less likely to be challenged by man-agement buy-in. Only 13% of them report this as a challenge compared to 29% of other fi rms.


Challenges to Measuring Sustainability Performance (2012)

0% 20% 40% 60%

Lack of Management Buy-In

Making Public Commitments

Engaging Employees

Management of Complex Data

Measuring ROI

Data Availability

Identifying the Right Metric

44%

27%

32%

42%

62%

55%

53%


422

Use of Technology Tools and Software to Track Sustainability Activities

To evaluate sustainability effectively, executives need to be able to share and access information in formats that are easy to under-stand. Use of technology tools and software can help fi rms more easily measure, track and report on progress.

45% of executives report that they are using these tools. The fact that such a signifi cant share have invested in these tools under-scores the importance of sustainability—as well as the desire to be able to produce quantifi able results.

One tool, building information modeling (BIM), is being increasing-ly adopted by the design and construction industry. In McGraw-Hill Construction’s 2012 Business Value of BIM SmartMarket Report, 71% of design and construction professionals were using BIM, up from 49% in 2009. Currently, the use of these tools for green goals is still lagging in adoption overall. However, the industry reported future plans to use BIM for energy modeling in McGraw-Hill Construction’s Green BIM SmartMarket Report, demonstrating how these industry tools are being adapted and used for green purposes.

Types of Uses of Technology Tools

Most fi rms (93%) using these tools and software are doing so in order to measure energy consumption. This is consistent with the fi ndings that the top drivers promoting sustainability and the top benefi ts expected from sustainability in corporate America are energy and cost reductions (see page 13). It is also because these tools are more broadly available and easy to incorporate into exist-ing technology systems.

Firms that use technology tools and software also report at fairly high levels that they are using them to track sustainability initia-tives (70%) and to measure water consumption (69%). Again, these factors are more easily set up in a system compared ROI or fi nancial analysis.


COOs: Overall COOs are more likely to report using tools for a number of different functions—more than any other player. In particular, they report using tools for transparency at much higher rates compared to other executives.

Larger Firms (annual revenues over $2.5 billion): 84% of larger fi rms are using tools for tracking greenhouse gas emissions compared to only 58% of fi rms with lower annual revenues. Given the more complex emission data that larger fi rms would have to track, this is to be expected.


Uses of Technology Tools for Corporate Sustainability (2012)

0% 20% 40% 60% 80% 100%

Funding Support for Initiatives

Sustainability Reporting (e.g., GRI)

Return on Investment Calculations

Financial Analysis

Transparency and Communication

Greenhouse Gas Emission Tracking

Waste Construction Management

Sustainability Initiative Tracking

Energy Consumption Measurement

58%

43%

54%

55%

70%

69%

64%

93%

56%


Percentage of Firms Using Technology Tools to Track Sustainability Activities (2012)

No

Yes

8%

45%55%

Influencing the Marketplace

23

In order for companies to shift to the most advanced stages of corporate sustainability, they need to start to look at sustainability as a business opportunity. In order to do that, they need to provide green products and services to the market.

Green Products and Services

58% of corporate executives report that their fi rms are provid-ing green products and services to their customers—up slightly from 56% in 2009. This number increases for executives at fi rms highly committed to sustainability. For those, 70% say they provide green products and services. Notably, there is no variation in opinion among CSOs, CEOs and COOs, though signifi cantly fewer CFOs report having green products (31%).

There is slight variation by region—78% of fi rms in the West report providing green products and services, while only 58% of fi rms in the Northeast and Midwest and 50% in the South report the same. Again, this result is consistent with the many green technologies and innovations that were developed in the West.

Features of Green Products and Services

The features that make products green refl ects some trends oc-curring over between 2009 and 2012.

Increasing attention on energy consumption and fuel costs: In the last few years, energy effi ciency and the cor-responding expected cost decreases have dominated the discussion on green products and services. Therefore, it is not surprising that nearly all respondents consider energy effi -ciency to be a key green feature. It also explains the increase from 2009 to 2012 for products that help reduce the carbon footprint of buildings and have a lower footprint in manufactur-ing.

Consumer skepticism of corporate claims: Products that have third-party certifi ed has become more highly reported, which points to the need for fi rms to build consumer trust in their green products and services. With the infl ux of green products in the market over the last fi ve years, these labels and standards can be important market differentiators.

Waste also matters: With the economy still in recovery, fi rms are looking to save resources, and the results refl ect that. Products that help save resources are more often reported as green.


CSOs fi nd the contribution to LEED points more important to a green product compared to other executives, who look for prod-ucts to be energy-effi cient. This has become more important to

Percentage of Firms with Green Products/Services (2012)


No

Yes

8%

58%42%

Features Making Products/Services Considered Green (Over Time)


0% 20% 40% 60% 80% 100%

Is Certified by a Third Party

Is Water Efficient

Has a Lower Footprint in Its Manufacturing

Contributes to LEED Credits

Improves Health and Well-Being

Helps Reduce Carbon Footprint of a Building

Saves Resources

Is Energy Efficient

72%

56%

75%

72%

92%

78%

75%

43%

54%

61%

61%

60%

65%

84%

91%

64%

20122009

these C-suite executives over time. In 2012, 95% reported it as a key factor, compared to 75% in 2009.

Influencing the Marketplace

24

Supply-Chain Demand

As consumer interest grows in understanding a product’s impact throughout its lifecycle—how a product is made and how much energy is used to create and transport it—corporations have be-gun focusing on improving the sustainability of their supply chains, wanting to reduce risk, costs and waste.

A growing trend across the supply chains of many industries is the use of sustainability scorecards, which help buyers determine the environmental footprint of a product and supplier. One of the most recognized scorecard program is Walmart’s Supplier Sustainability Assessment. Larger companies like Walmart have been putting pressure on suppliers to be more sustainable as a condition for doing business with them, requesting them to reduce their waste and emissions and disclose their data. Smaller companies have started following suit.

This study fi nds that 46% of corporate executives say they request their suppliers to incorporate green or sustainability into their practices. This percentage is slightly down from the 53% that reported doing so in 2009.


In 2012, C-suite executives (44%) are almost as likely as CSOs (49%) to ask suppliers to adopt green and sustainable practices. This is a signifi cant change from 2009, when 64% of CSOs and only 49% of C-levels made such requests. This indicates that all executives understand the benefi ts of supplier transparency.

Sustainability Practices Requested of Suppliers

The sustainability practice that fi rms are asking suppliers to incor-porate the most is the listing of materials or ingredient sources. 79% are requesting this of suppliers today, compared to 66% in 2009, which is a signifi cant increase over three years. This is con-sistent with the growing trend of public transparency. Consumers want to know exactly what they are buying, and fi rms want to meet these expectations. To that same end, more fi rms are also request-ing an energy/emission footprint information from their vendors.

A consistent practice, 74% of fi rms are still requesting that sup-pliers use a specifi ed portion of recycled content in their products when applicable. Resource effi ciency is relatively easier to track, and fi rms that put these requirements in place can more easily report on these benefi ts in annual reports and other public forums.


Executive Position: C-suite executives are much more con-cerned with asking for third-party certifi cations from vendors compared to CSOs. This may be because CSOs are more knowledgeable about green products and do not need to rely as much on outside sources.

Level of Sustainability: 82% of fi rms in stages 4 and 5 request suppliers to use recycled content compared to 60% of fi rms in stage 3. This yet another indication that sustain-

Percentage of Firms Requiring Sustainability Reporting from Vendors (2012)


No

Yes

8%

46%54%

Type of Sustainability Information Required from Vendors (Over Time)


0% 20% 40% 60% 80%

Provide Energy/Greenhouse Gas Emission Data

Have Third-Party Certification/Verification

Bought Locally

Reduced Energy/Greenhouse Gas Emissions Used

Percentage of Recycled Content Used

List Materials/Ingredient Sources

20122009

74%

56%

63%

66%

74%

40%

31%

53%

*Not Asked in 2009

*Not Asked in 2009

79%

*Not Asked in 2009

able practices like these are more embedded in the business practices of fi rms with higher levels of commitment to sustain-ability.

Smaller Firms (revenues of $250 million–$500 million):

Recycled Content: 91% request this of their suppliers, compared to only 50% of larger fi rms (revenues of $2.5 billion and more).

Buy Local: 64% request this of suppliers, signifi cantly more than the 25% of larger fi rms reporting the same.

Larger Firms (revenues over $2.5 billion): 46% request greenhouse gas footprint information from vendors, compared to only 18% of smaller fi rms. This may be due to the public attention to the greenhouse gas emissions and footprint of the largest corporations.

Transparency in Corporate America: Rise in Sustainability Reporting

Over the past two decades the issue of sustainability has con-tinued to gain importance on the corporate agenda. Faced with growing pressure to be transparent about their business practices, companies are increasingly choosing to report on their sustain-ability practices. Largely motivated by the demands of sharehold-ers and other stakeholders—including investors, communities, customers and employees—this reporting aims to help audiences make informed decisions about companies.

Benefi ts of Transparency

Sustainability reports help the public understand how well a com-pany abides by the “triple bottom line” of environmental, social and economic performance. Companies that embrace transparency and report on their sustainability practices, report not only on their successes, but also their shortcomings. The perceived riskiness of this approach is, in fact, outweighed by its benefi ts.

In addition to gaining greater stakeholder trust, companies benefi t from the internal processes they put in place to better measure, track and analyze their environmental and social performance. The ability to capture data such as greenhouse gas emissions, energy use, water use, and employee health and satisfaction are critical to improved operational effi ciencies as well as to managing and reducing risk. As the fi ndings of this report show, energy and cost savings are a primary driver and benefi t of incorporating sustain-ability practices in corporate America. (See page 13.)

In light of the growing public expectation for companies to be good corporate citizens, those companies that choose not to pub-lish sustainability reports run the risk of appearing less transparent and less socially responsible, and consequently, behind the times. Meanwhile those that decide to publish a sustainability report, but do so without the required attention and detail, could be accused of greenwashing and could run into problems down the road if this type of reporting becomes mandatory.

Ripple Effect of Supply Chain Reporting

For many companies, the biggest opportunity for improving sus-tainability performance lies in their supply chain. These companies have increasingly started requesting their suppliers to report on their sustainable practices. Initially these requests were most com-mon for consumer brand companies that wanted to make sure their products were not connected with practices such as child labor or deforestation.

Today, however, companies are requesting their suppliers to dis-close information related to their broader social and environmental performance, not just their products. As a result, many of their suppliers, in turn, are requesting the same information from their own suppliers. By engaging suppliers in this way, companies are achieving their sustainability performance goals but also creat-ing a ripple effect, which raises standards deep within the supply chain. A good example of this is the Ford Motor Company’s recent

initiative that tripled the size of its program to measure its suppli-ers’ carbon footprint. The company is now surveying 128 of its global suppliers, which make up 60% of its annual purchasing, an increase from 35 suppliers in 2010. Ford is encouraging its sup-pliers to manage sustainability issues and risks within their own operations and supply chains by providing resources, training and tools for tracking and reporting greenhouse gas emissions and code of conduct development.1

Growth in Corporate Sustainability Reports

Corporate sustainability reporting has been growing in the U.S. and throughout the world, as evidenced by both the number of reports and quality of reporting. 300 fi rms engaged in sustainabil-ity reporting in 1996, but this number rose to 3,100 in 20102 and in 2011, 5,5003 such reports were published worldwide.

The Carbon Disclosure Project (CDP) 2012 S&P 500 Climate Change Report, an annual report on greenhouse gas emissions data and climate change strategies at America’s largest public cor-porations, reveals that the average disclosure score, calculated by CDP to refl ect each company’s transparency on climate change, has increased by 13%. Further, among the S&P 500, 92% of the survey respondents report board or executive-level oversight compared to 86% in 2011.4

The growth is not just in the quantity of reports but in their quality as well. Increasingly companies are utilizing verifi cation of data by independent third parties. They are also reporting not only on op-erations but also looking at products from a lifecycle perspective.

However, according to the fi ndings of this study as well as other studies, companies are still using few technology tools and specialized software programs to measure, track and report their sustainability performance. (See fi ndings on page 22 for more details). This could effect the further growth of sustainability reporting unless companies start embracing more state-of-the-art reporting systems. ■

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1 Ford Motor Company. 2011/2012 Sustainability Report. Website accessed October 8, 2012. 2 KPMG International, “Corporate Responsibility: A Progress Report,” 2011, p.27.3 GreenBiz.com, “Will Sustainability Reporting Ever Grow Up?” March 06, 2012. 4 Carbon Disclosure Project. “Accelerating Progress Toward a Lower Carbon Future,” CDP S&P 500 Climate Change Report. September 2012.

25

Corporate Sustainability Activities

26


0% 20% 40% 60% 80%

Green Buildings in Portfolio

Energy/Greenhouse Gas Emission Reduction (for Customers)

Human Factors

Water Conservation

Corporate Social Responsibility

Energy Efficiency

Waste Management

100%

60%

51%

55%

58%

88%

87%

67%

Sustainability Activities Tied to Specifi c Targets (2012)

Other Activities with Metrics (reported by more than 40%)

Renewable Energy Use (48%)

New Product Development (46%)

Business Risk Management (44%)

Business Growth (40%)

Sustainability Goals Tied to Targets

According to corporate executives, waste reduction and energy effi ciency are the most common goals tied to sustainability targets and activities. 88% report waste reduction, closely followed by 87% reporting energy effi ciency.


94% of CSOs report that they tie waste reduction to a target com-pared to 85% of other C-suite executives.

Variation by Level of Sustainability Involvement

Firms with a higher commitment to sustainability (stages 4 and 5) report tying all sustainability practices to targets at higher levels than average, with the exception of waste reduction and energy effi ciency. These fi ndings reinforce that fi rms higher on the cor-porate sustainability spectrum are likely to be embedding sustain-ability practices throughout their business practices and looking at them from a holistic perspective.


72% of larger fi rms report tying energy or greenhouse gas reduc-tions/savings for customers to a target, compared to 42% of smaller fi rms.

59% of larger fi rms are also tying new product development asso-ciated with sustainability to a target, compared to 33% of smaller fi rms.


27

Since 2009, companies appear to be engaged in a higher number of sustainability practices. In 2012, 82% report engaging in three or more sustainability practices compared to 69% in 2009. This is consistent with the shift in companies to higher stages of sustain-ability.

Most Common Corporate Sustainability Practices

Across the board, a greater number of executives report engaging in sustainability practices from 2009 to 2012.

Waste Reduction and Recycling: In 2012, nearly all fi rms (96%) report that they are practicing waste reduction and re-cycling. There has been a signifi cant increase in fi rms report-ing this in the past three years—up from 89% in 2009. Clearly, recycling has become a standard practice in offi ces.

Employee Engagement: Employee engagement in green was one activity that stayed relatively consistent from 2009 to 2012. Firms have found that green teams and other activities can help increase employee engagement and foster stronger corporate commitment. Another benefi t is that through these kinds of programs, employees often identify ways to increase effi ciency.

Renewable Energy and Credits (RECs): 59% report onsite renewable energy usage or purchasing renewable energy and carbon credits (RECs), up from 50% in 2009. This practice has increased steadily over the last three years as a result of tax incentives. However, with the recent scandals around abuse of RECs, corporations may back off from buying them in the future and look to offset energy use in other ways.

Annual Sustainability Reports: The practice of fi rms publishing an annual sustainability report has also increased signifi cantly. As sustainability gains importance and demands for accountability and transparency increase, sustainability reporting continues to grow in corporate America. In fact, the Corporate Register lists reports from 9,442 companies, and the reports are becoming more sophisticated, with fi rms pro-viding quantifi able goals and progress against those goals.


Firms Committed to Sustainability: For fi rms at higher stages of sustainability and those with dedicated sustainabil-ity staff and budgets, a higher percentage are engaged in all activities—except for waste, which is a universal activity.

Publicly Traded Companies: They are more likely to have employee engagement efforts—78% compared to 65%.

Number of Sustainability Activities Occurring at Firms (Over Time)


0% 10% 20% 30% 40% 50%

None

One to Two

Three to Four

Five to Six

43%

5%

18%

40%

38%

29%

1%

26%

20122009

Corporate Sustainability Practices (Over Time)


0% 20% 40% 60% 80%

Publishing Annual Sustainability Report

Engagement with NGOs

Green Buildings in Portfolio

Renewable Energy Credits

Employee Engagement in Green

Waste Reduction and Recycling

100%

69%

58%

50%

59%

96%

89%

71%

53%

30%

43%

41%

50%

20122009


28

Internal Activities to Encourage Corporate Sustainability

Corporate executives report forming green committees (i.e., inter-nal staff groups dedicated to encouraging sustainability within a company) and communicating externally on sustainability as the top activities to encourage sustainability adoption. 62% report forming green committees, and 59% report they have communi-cated with the public and stakeholders on sustainability initiatives.


Executive Position: A greater number of CSOs report form-ing green committees compared to other C-suite executives— 74% versus 56%.

Stage of Corporate Sustainability: Firms at higher stages of sustainability (see page 3 for descriptions of the stages) have signifi cantly higher reported engagement in every sustainabil-ity practice.

Firm Size: 61% of large fi rms (those with annual revenues over $2.5 billion) report creating dedicated sustainability re-sources, compared to 36% of smaller fi rms (revenue of $250 million–$500 million). They also more often report having a separate budget—41% for larger fi rms compared to only 18% for smaller ones. This is not surprising given the availability of resources for larger fi rms.

Firms Hired to Advise on Sustainability

Environmental consulting fi rms are the most common type of fi rm hired to advise companies about sustainability, closely followed by service-based sustainability/green building companies and archi-tecture fi rms. This fi nding is fairly consistent compared to 2009. Overall, 69% reported hiring environmental consultants in 2012 compared to 67% in 2009.

However, hiring of service-based sustainability/green building companies has gone up more signifi cantly—from 54% in 2009 to 65% in 2012. Hiring architecture fi rms for advice has also increased—up from 58% to 65%.


More CSOs report hiring environmental consulting fi rms com-pared to other executives—77% versus 65%. They also more frequently hire architecture fi rms—74% versus 60%.

Variation by Level of Sustainability Involvement

75% of fi rms with a higher sustainability commitment (stages 4 and 5) report hiring architecture fi rms, compared to only 33% of fi rms at lower stages—more than twice as many.

Activities to Help Encourage Corporate Sustainability (Over Time)


0% 20% 40% 60% 80%

Developed Separate Sustainability Budget

Hired Outside Firmfor Advice

Created Dedicated Sustainability Resources

Received CEO Mandate for Sustainability

Communicated Externally on Sustainability

Formed Green Committees

20122009

52%

49%

53%

50%

62%

59%

28%

38%

47%

*Not Asked in 2009

*Not Asked in 2009

*Not Asked in 2009

The Role of Government

Government Level with the Most Impact on Sustainability

Close to half of all respondents feel that the federal government has greater infl uence than state or local government on their fi rm’s sustainability program. Over a third (36%) report that state government has the most impact, while only 16% fi nd that local government does.

These fi ndings could be infl uenced by factors such as the many federal-level initiatives started or continued under the Obama administration that focused on promoting sustainability. One of the most notable was the American Recovery and Reinvestment Act of 2009, which included billions of dollars to stimulate energy effi ciency improvements, green renovation projects, smart grid technology and renewable energy. The Act also included money to help states develop energy effi ciency programs.

Notably, the only statistical difference for respondents was by fi rm size.


63% of larger fi rms (annual revenues over $2.5 billion) fi nd federal government to have the greatest impact on sustainability, compared to 44% of smaller fi rms ($250 million–$500 million).

An equal 44% of smaller fi rms fi nd state government to have the most impact, compared to only 28% of larger fi rms.

These fi ndings could be infl uenced by the fact that smaller fi rms are less likely to have national or global operations, and therefore may be more focused on and aware of the actions of their state rather than the federal government.

Level of Government with the Biggest Impact on Corporate Sustainability (2012)


Federal

State

Local

8%

49%

36%

15%

29

Katherine GajewskiDirector, Mayors Offi ce of Sustainability City of Philadelphia

Katherine Gajewski, Director, Mayors Offi ce of Sustainability at the City of Philadelphia, is responsible for coordinating the implementa-tion of Greenworks Philadelphia, the city’s comprehensive sustainability plan. The plan covers operational and policy work involving nearly every department and agency in the city. Katherine and her offi ce play a project management role in that process, track-ing progress and providing support where needed. Her offi ce is responsible for develop-ing metrics, tracking and reporting as well as communicating the city’s sustainability initia-tives to the public.

What prompted the City of Philadelphia to put a program in place exclusively dedicat-ed to sustainability? How did you do this in light of the slow growth of the economy?

All of this came from the advocacy effort of residents during the mayor’s election in 2007–2008. It was at a time when other cities were making sustainability commitments, and we had a number of people who wanted to see Philadelphia follow suit. We had a coalition that formed, called the Next Great City Coalition. It was about 130 or so different community groups and nonprofi ts and others who came together to form this coalition, and they put out a 10-point agenda which was signed on by all the mayoral candidates. When he came into offi ce, our mayor started by establishing the Offi ce of Sustainability, and then we built those 10 agenda items into our Greenworks Philadel-phia plan to be responsive to the constituents that started this all in the fi rst place.

What are the goals of the program?

Our visionary goal is one that we share with many other cities, which is to become a leading green city. To give us a roadmap for how we can get there, we have 15 target-level goals that all have metrics underneath them. These target goals are: energy reduction in city build-ings, energy reduction citywide, increase in re-newables, open space, tree canopy, water and stormwater drain infrastructure, waste manage-ment, food access, air quality, growth of the clean economy and engagement. We have 168

separate initiatives that we have identifi ed that we’re committed to pursing, and about 89% of them are either underway or complete.

We’ve set 2015 as our target goal date, which is also the end of the mayor’s term. We wanted to acknowledge the period of time that we had some responsibility over so that is why we set a more compressed time frame, but we also wanted to be able to build momentum and show quick wins. We wanted to show people that we followed through on our commit-ments, but we also hope that we are laying the groundwork for the next mayor.

How important is it to engage the private sector in your activities and in reaching your goals, and why?

I think government is just one piece of the puzzle, so I think it’s important for government to lead by example. We see a lot of importance in working with residents, community groups, nonprofi ts, and certainly, the business com-munity. Right after we put our plan together, the economy went into a recession and companies were going through a tough time. But no one said we shouldn’t keep doing this. In terms of long-term economic growth, where we want to go as a city and a region, we’re hearing from businesses all the time, and their prospective employees and their current employees want to be in a vibrant city. These are things that they care about, and so the business community is seeing the role that they can and need to play in creating that environment for their own busi-ness growth and development.

What do you think the role of corpora-tions should be with respect to increasing sustainability in Philadelphia? And given that role, what are your expectations from them?

I think that the profi ts of place need to be considered along with the bottom line consid-erations. I think it’s important that if you have a presence in a community, you should be a part of that community in multiple ways and to con-sider your built environment and your opera-tions as part of your impact. And [it’s important] to fi nd ways to contribute in a positive way,

Sustainability in Philadelphia, PennsylvaniaS t i bilit i Phil d l hi P l i

The Government Perspective

Every business that tells that story [of their sustain-ability efforts] helps convince the next business that it’s not a crazy thing to do.

30

K th i G j ki

The Government Perspective: Sustainability in Philadelphia, Pennsylvania

whether that’s through community development or through resource conservation.

My personal belief is that all boats rise with the tide when that kind of an approach is taken. I also wish that the business community in Phila-delphia was a bit more loud and proud about what they are doing with respect to sustain-ability. Every business that tells that story helps convince the next business that it’s not a crazy thing to do. Every business that talks about how they are conserving energy helps when you need to start making the case for why the city wants to set conservation goals. I think that the business community can be hugely infl uential in that regard, and if you can have businesses and government both preaching this, that’s about as powerful as you can get.

What programs and partnerships have you put in place to encourage corporate involvement in increasing sustainability in Philadelphia?

We have all sorts of partnership opportunities with the private sector. Companies have been helpful in launching our tree planting pro-grams, and certainly from a community giving perspective, there are a lot of opportunities. We’re also trying to fi nd ways through zoning codes and comprehensive planning. We are providing companies a new framework for where we want to go as a city and taking input and thinking about the business community. Just like many cities, we’re rediscovering our waterfront, and we have plans for growth that are hugely dependent on private investment and development. We are sharing our vision with businesses and seeing how that matches up with where there might be opportunities for business development. Our goal is for busi-nesses to grow and become profi table and the city to have a revitalized waterfront. I think that we’re thinking more and more about business-es really being a part and a driver for positive and sustainable growth.

What do you think the role of your offi ce should be with respect to encouraging corporate involvement in sustainability?

If it’s imposed on you, these kinds of programs generally are the ones that go away as quickly as they can. So how do you set the context, as a city, to say “These are our shared values. This is why we think it has benefi t”?

We think that being a competitive and resilient city for the next 50 years means thinking about resource conservation and thinking about qual-ity of life. I think that’s where the city can play the strongest role in trying to get corporations involved in sustainability. We want to have basic rules and regulations, but we wouldn’t want someone to tell us, necessarily, how we have to run our program, and I don’t think we would want to do that to others. I think we want to set the tone and the expectation, and also fi gure out how to congratulate people who want to be a part of that with us.

What do you see in the foreseeable future for your program and sustainability at large in Philadelphia?

I think sustainability is going to become better integrated into regular daily decision making. We’re starting to see that. That’s our goal for government; that it’s not like there’s a sustain-ability offi ce over there and they are the only ones thinking about it. We’re really trying to fi nd the ways to ingrain it into the way we do policy and operational decision making. I think that, for us, we’re going to be taking stormwater and drain infrastructure to an amazing scale, but I think behind that will be different scales in terms of energy use and reductions, renewable energy and alternative fuel vehicles. I just think that some of the things now that feel kind of new and special through a sustainability lens are just going to become more normal.

If you can have businesses and government both preaching [the benefi ts of sustain-ability], that’s about as powerful as you can get.

31

The Role of Government

Infl uence of Government Decisions on Company Activities

According to corporate leaders, government decisions are most likely to infl uence their company’s energy-effi ciency activities—with 58% reporting so. This is not surprising given that energy-effi ciency initiatives have been a major focus of government incentives.

Use of renewable energy is also cited by 44% as an activity infl u-enced by government decisions. Renewable energy has benefi ted from government investment through vehicles such as ARRA, which allowed companies to take advantage of tax credits when purchasing equipment to generate renewable energy. Renewable energy standards have also benefi tted companies in this sector.


Executive Position: 68% of CSOs fi nd energy effi ciency most likely to be infl uenced by government decisions, com-pared to 53% of other C-suite executives. This fi nding could be due to CSOs having more awareness because they track policy trends in this area. They would also be most likely to help their companies receive these benefi ts.

Level of Sustainability Involvement: 53% of fi rms with higher sustainability commitment report that the use of renew-able energy will be infl uenced by government decisions com-pared to 33% of fi rms with a lower sustainability commitment.

Region: 61% of fi rms in the West report that use of renew-able energy will be infl uenced by government decisions compared to 50% of fi rms in the Northeast. This fi nding may be infl uenced by several factors, including the policies in California encouraging renewable energy, the plethora of cleantech fi rms making technology more readily available, and the sunnier, warmer climate more conducive to solar power.

Effectiveness of Government/Utility Activities

Utility rebates are perceived to be the most effective activity that can help advance sustainability in corporate America, with 72% of fi rms reporting so.

Tax incentives are also looked upon as effective at spurring corporate sustainability. Interestingly, in spite of the resistance of corporations to increased regulation, 59% reported that mandates could also be an effective trigger.


Level of Sustainability Involvement: 44% of fi rms with a higher level of sustainability commitment report building energy performance disclosure as most effective in advancing corporate sustainability, compared to 25% of fi rms with less commitment to sustainability.

Firm Size: 72% of larger fi rms (revenues more than $2.5 billion) compared to 44% of smaller fi rms (revenues of $250

Sustainability Activities That Government Can Highly Infl uence (2012)


0% 20% 40% 60%

Development of Smart Grid Technologies

Research and Development

Use of Renewables

Energy Efficiency

44%

29%

36%

58%

million–$500 million) fi nd mandates to be the most effective government activity to promote sustainability. This is probably because larger fi rms are more often affected by regulation. A greater number of larger fi rms also believe government could help with alternative fi nancing—42% compared to 17% of small fi rms.

Region: 72% of fi rms in both the Northeast and Midwest re-port mandates as the government activity that is most effective when it comes to advancing corporate sustainability, compared to the 59% national average.

Government/Utility Activities Deemed Effective by Corporate America (2012)


0% 20% 40% 60% 80%

Voluntary Programs

Alternative Financing

Building Energy Performance Disclosure

Mandates

Tax Incentives for Renewable Energy

Tax Incentives for Energy Efficiency

Utility Rebates

59%

30%

35%

37%

72%

69%

63%

32

Methodology

Greening of Corporate America Study Research

The research in this report was conducted by McGraw-Hill Construction in order to investigate, examine and explore the broad patterns of adoption of sustainability among the largest fi rms in corporate America.

A representative sample of 200 fi rms was contacted by phone to participate in the research. Sample fi rms include a diverse range of sectors, including manufacturing, pharmaceutical, construction, computer technology, retail, real estate, insurance, energy and natural resources. 68% of respondents were C-level executives (CEO, CFO, COO, general manager, principal, senior vice president), and the remaining 32% were respondents holding responsibility in the area of corporate sustainability.

Data were collected between June 11 and July 24, 2012. The total sample size benchmarks at a high degree of accuracy: 95% confi dence interval with a margin of error of +/- 6.8%. This study is the third in a series, including the Greening of Corporate America SmartMarket Report (McGraw-Hill Con-struction/Siemens, 2006) and the 2009 Greening of Corporate America: The Pathway to Sustainability—from Strategy to Action Report (Siemens/McGraw-Hill Construction, 2009). This research allows for longitudinal analy-sis by returning to the same sample population over time.

Position of Respondents in Studies from 2006 to 2012

Revenue of Respondents’ Firms

48%

0%

10%

20%

30%

40%

50%

60%

CSOCFOCEO/COO/Other

32%

22%18%

48%50%

57%

52%

201220092006

N/Afor 2006

0% 10% 20% 30%

N/A (had over 1,000 employees)

$250 million to less than $500 million

$500 million to less than $1 billion

$1 billion to less than $2.5 billion

$2.5 billion to less than $5 billion

$5 billion to less than $10 billion

$10 billion or more

19%

10%

17%

25%

6%

9%

14%

Regions Where Buildings Located Among Total Sample

12%

28%

35%

26%

Regions Where Respondents Are Located (2012)

33

Resources

34

Resources

Siemens

■ Main website: usa.siemens.com

■ Infrastructure & Cities Sector: usa.siemens.com/ infrastructure-cities

McGraw-Hill Construction

■ Main website: construction.com

■ Dodge Research and Analytics: construction.com/market_research

■ GreenSource: greensourcemag.com

■ Architectural Record: archrecord.com

■ Engineering News-Record: enr.com

■ Sweets: sweets.com

Federal Government

■ Energy Star: energystar.gov

■ U.S. Department of Energy: energy.gov Offi ce of Energy Effi ciency and Renewable Energy Site: eere.energy.gov

■ U.S. Energy Information Administration: eia.gov

■ U.S. Environmental Protection Agency: epa.gov EPA Energy Portal: epa.gov/energy Climate Leaders: epa.gov/climateleaders Green Power Partnership: epa.gov/greenpower

■ White House Council on Environmental Quality: whitehouse.gov/ceq

■ White House Offi ce of the Federal Environmental Executive: www.ofee.gov

Nonprofi t Organizations

■ Alliance to Save Energy: ase.org

■ American Council for an Energy-Effi cient Economy: aceee.org

■ The Business Roundtable: businessroundtable.org

■ Businesses for Social Responsibility: bsr.org

■ Building Owners and Managers Association International: boma.org

■ Carbon Disclosure Project: cdproject.net

■ Center for Climate and Energy Solutions: c2es.org

■ Ceres: ceres.org

■ Clinton Climate Initiative: clintonfoundation.org/what-we-do/ clinton-climate-initiative/

■ Database of State Initiatives for Renewables and Effi ciency: dsireusa.org

■ Environmental Defense Fund: edf.org

■ Global Environmental Management Initiative: gemi.org

■ Global Reporting Initiative: globalreporting.org

■ Harvard Business Review: hbr.org

■ Natural Resources Defense Council: nrdc.org

■ The Nature Conservancy: nature.org

■ Sustainable Buildings Industry Council: sbicouncil.org

■ U.S. Climate Action Partnership: us-cap.org

■ U.S. Conference of Mayors: mayors.org

■ U.S. Green Building Council: usgbc.org

■ World Business Council for Sustainable Development: wbcsd.org

■ World Wildlife Fund: wwf.org

Acknowledgements

The following individuals were responsible for the leadership of this project:

■ Siemens Infrastructure & Cities:

Brad Haeberle, Head of Building Automation Service, Building Technologies

Ari Kobb, LEED AP, Head of Sustainability and Green Building Solutions, Building Technologies

Jeffrey Kosiorek, Marketing Communications,Building Technologies

■ McGraw-Hill Construction:

Harvey M. Bernstein, F.ASCE, LEED APVice President, Industry Insights & Alliances

Michele A. Russo, LEED AP Director, Green Content & Research Communications

Susan Barnett, MRA, PRCManager, Market Research

Reproduction or dissemination of any information contained herein is granted only by contract or prior written permission from Siemens Infrastructure & Cities orMcGraw-Hill Construction.

Copyright © 2012Siemens Infrastructure & CitiesMcGraw-Hill Construction ALL RIGHTS RESERVED

Siemens Infrastructure & Cities Sector, with approximately 87,000 employees worldwide, offers sustainable technologies for metropolitan areas and their infrastruc-tures. Its offerings include complete traffi c and transportation systems, intelligent logis-tics, effi cient energy supply, environmentally compatible building technologies, moderniza-tion of the way power is transmitted and distributed, and smart consumption of electricity. The sector is comprised of the Rail Systems, Mobility and Logistics, Low and Medium Voltage, Smart Grid and Building Technologies Divisions as well as Osram Sylvania. For more information, visit www.usa.siemens.com/infrastructure-cities.

The Siemens Building Technologies Division is the world’s market leader for safe and energy effi cient buildings (“green buildings”) and infrastructures. As a service provider, system integrator and product vendor, Building Technologies has offerings for building automation, heating, ventilation and air conditioning (HVAC), fi re protection and security. For more information, visit www.usa.siemens.com/buildingtechnologies.

McGraw-Hill Construction (MHC), part of The McGraw-Hill Companies, connects people, projects and products across the design and construction industry, serving own-ers, architects, engineers, general contractors, subcontractors, building product manufac-turers, suppliers, dealers, distributors and adjacent markets. A reliable and trusted source for more than a century, MHC has remained North America’s leading provider of con-struction project and product information, plans and specifi cations, industry news, market research, and industry trends and forecasts. In recent years, MHC has emerged as an in-dustry leader in the critical areas of sustainability and interoperability. In print, online, and through events, MHC offers a variety of tools, applications, and resources that embed in the workfl ow of our customers, providing them with the information and intelligence they need to be more productive, successful, and competitive. Backed by the power of Dodge, Sweets, Architectural Record, Engineering News-Record (ENR), GreenSource and SNAP, McGraw-Hill Construction serves more than one million customers within the global construction community. To learn more, visit us at www.construction.com.

Siemens Industry, Inc. Infrastructure & Cities Sector Building Technologies Division 1000 Deerfield Parkway Buffalo Grove, IL 60089 Tel: (847) 215-1000 Fax: (847) 215-1093

Copyright 2012 Siemens Industry Inc. and McGraw Hill Construction All rights reserved. (9/2012)

growing. For our customers, success is defined by how well they manage these challenges. Siemens has the answers. “We are the preferred partner for energy-efficient, safe, and secure buildings and infrastructure.”

Answers for infrastructure.Our world is undergoing changes that force us to think in new ways: demographic change, urbanization, global warming, and resource shortages. Maximum efficiency has top priority – and not only where energy is concerned. In addition, we need to increase comfort for the well-being of users. Also, our need for safety and security is constantly

www.usa.siemens.com/buildingtechnologies

2012 greening of corporate america - siemens usa

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