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Our home to share our thoughts and host an (e)discussion about the opportunities sustainability presents and how our world will be changing as a result. From savvy strategies for clients to our fleet of Schwinn 10-speeds and everything in between; we invite you to the conversation and hope that we can explore true.green. together.


We have several new projects underway that we’re really excited about and wanted to let you in on a little of what we’re up to. Let’s get right to it!

Methodist Health System brought us on board to complete some preliminary Sustainability Master Plan work. Our main objectives are threefold: 1) identify and articulate their previous accomplishments, 2) establish benchmarks in key areas such as energy and water consumption, waste diversion, commute modal split, and our Sustainability Engagement Index, and 3) set their sustainability vision and goals.

Countryside Community Church is in the process of building a new church, and we were brought onto the design team to ensure all involved are really taking a thorough and meaningful approach to sustainability. Their aspirations are impressive, and we’re excited about having such a great, sustainability–focused house of worship in Omaha.

Omaha’s Henry Doorly Zoo & Aquarium, a long-time client of ours, has us hard at work this year with several different projects, including the development of a new master plan for the Wildlife Safari Park (as a partnership with ASD Stanley J. How Architects), re-evaluating the goals in their Energy & Sustainability Master Plan, many of which have been met, and technical assistance with a new solar installation. We’re also continuing our implementation work at the Zoo.

The University of South Dakota (my alma mater) hired us to conduct our Sustainability Engagement Survey and to provide a suite of recommendations on how they might re-engineer their waste and recycling collection processes so as to increase their diversion rate.

In partnership with WELLCOM, we created and rolled out the Active Commuting Toolkit to help employers develop comprehensive active commuting programs. These programs support employees’ transportation choices such as walking, biking, riding the bus, and carpooling. Active commuting saves employees and employers money, improves health, and keeps our air cleaner. Our efforts earned recognition from Omaha by Design with the 2016 Access & Mobility Award.

Omaha’s Metropolitan Utilities District brought us on board to write their first ever Sustainability Annual Report. It’s been very exciting to learn about their past efforts and future plans!

Duchesne Academy engaged our team to help carry out a school-wide sustainability initiative this year. By engaging students, faculty and staff, we are helping them to hone in on the best opportunities for sustainable improvements and to implement them in ways that are smart, efficient, and fun.

Morrissey Engineering hired us to conduct a waste audit, and Soil Dynamics engaged our expertise to help them navigate the changes being considered to Omaha’s waste collection system.

Creighton University , partnered with us earlier this year to design and implement a peak energy reduction campaign that primarily focused on operational and behavioral strategies. We also conducted our Sustainability Engagement Survey for all CU staff and students and developed a sustainability engagement plan for one of Creighton’s residence halls.

New Mexico State University, our newest client, recently hired us to conduct our Sustainability Engagement Survey, which, for all you institutions of higher learning out there, will help them fulfill AASHE STARS credit EN-06: Assessing Sustainability Culture.

Last but certainly not least, our implementation work continues with the Omaha Public Schools, Kearney Public Schools, and UNMC/Nebraska Medicine.

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Everyone who cares about the natural environment recycles, right? Paper, plastic, glass…but what about money? It can be almost just as easy to recycle energy investments to address the serious global issue of climate change if you set up a Green Revolving Fund (GRF).

What is a revolving loan fund?
A revolving loan fund is a dedicated funding mechanism used to support specific projects that payback project costs to such fund. Often using cost savings from funded projects, loans given are repaid into the revolving loan fund. Then the money repaid to the revolving fund is lent again to finance additional projects.

What is a green revolving fund?
A green revolving fund (GRF) is a revolving loan fund used to finance projects that have specific ties to energy conservation or efficiency, renewable energy, or other natural resource-saving projects. Specifically tracked savings from projects funded are returned to the green revolving fund to be used for future projects.

How do GRFs perform?
Colleges and universities with GRFs have reported a median return on investment of 28 percent over the life of a typical project (see Sustainable Endowments Institute’s (SEI) Greening the Bottom Line 2012). GRFs are often focused on projects with a payback window of no more than five or ten years. The investments make economic sense. Often the biggest hurdle is working out the mechanisms to allocate savings appropriately within the constructs of a university’s current budgeting and finance structures.

To start brainstorming for high payback projects, review McKinsey & Company’s Global GHG abatement cost curve beyond business-as-usual, in its report Pathways to a Low-Carbon Economy. This chart and report provide insight into the investments that reduce greenhouse gas emissions with the highest financial payback. Of course, most everyone knows that changing an incandescent light bulb to a LED often pays back its investment in less than a year, but this report will get you thinking beyond lighting. If the McKinsey & Company report is too academic for you, just start talking to your facilities and maintenance leaders. They know what needs to be replaced and upgraded. Starting from there, look at your options for more efficient technologies. More energy efficient options often cost more upfront, but that additional cost will often be more than recovered in energy savings over the life of the equipment, saving money and reducing emissions.

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Image included with permission from Sustainable Endowments Institute

 

Who is using GRFs?
The most common users of GRFs are colleges and universities. AASHE has a database of information about many of the institutions that have started GRFs. The Sustainable Endowments Institute (SEI) has coordinated The Billion Dollar Green Challenge to encourage colleges, universities and other nonprofits to investment a cumulative total of one billion dollars into green revolving funds. As of July 2016, SEI has $131 million committed from 62 participating institutions. See if your alma mater is on the list, or your child’s dream school. As of July 2016, the University of Vermont boasts the largest GRF, with a $13 million fund started in 2012. They look for projects that pay back within seven years and cost no more than $3 million per project. Harvard University’s well know $12 million fund, established in 2001, has supported nearly 200 projects which now cumulatively save the school over $4 million each year (yes, each year!) on energy bills.

Schools have found that a GRF is a reliable mechanism to support cost-saving capital improvements even in the midst of budget cuts and rising energy costs. GRFs regularly outperform the investment returns for schools’ endowments and thus some endowments have become involved with initial funding support to GRFs.

Are you at a small institution or one that doesn’t have access to millions of dollars? No problem. The range of sizes (both regarding enrolled students and school endowment size) among colleges and universities with successful GRFs suggests that any school could implement a GRF. SEI reported that initial capital investments in GRFs are evenly distributed in the ranges: below $100,000, between $100,000 and $1 million, and above $1 million. The fund I helped start began with only $50,000 and is added to annually from various sources. As a result of projects funded by this GRF and through a number of other small cost behavior-based changes on the campus, the energy bills are down, and the institution is saving more than $400,000 annually on energy costs compared to a business as usual scenario.

How is a GRF formed?
GRFs are formed in many ways. The most common sources of start-up funding are one-time administrative budget allocations, prior efficiency or utility savings, private donations or foundation grants, and endowment funds. Although administrative involvement and support for a GRF is key, students are frequently involved in creating the GRF at colleges and universities.

Verdis Group helped Omaha’s Henry Doorly Zoo & Aquarium (“Omaha’s Zoo”) set up a GRF, starting with seed capital from a grant and growing through utility lighting rebates, recycling-focused grants, direct contributions, and of course energy savings. One of the hurdles the Zoo’s Green Team faced was having money to fund even small sustainability projects, and this fund has almost entirely resolved this issue. Each year projects are selected that are both high payback projects, such as lighting updates, and low or no payback projects, such as adding recycling infrastructure to make recycling easier, faster and more complete. These GRF bundles use the high payback projects to support the projects that don’t financially payback on their own, and everyone is happy—the accountants who are saving money on energy bills, the Green Team who now has funds to make the changes they view as most important, and the environment which benefits from resource conservation and reduced pollution.

How is a GRF administered?
It is important to get your administration and tracking set up before jumping into a GRF. There are many administrative models among GRFs. On college campuses, the governance of the fund often depends upon how it was formed. Typically, a small group oversees the finances of the fund, while a larger, more diverse group reviews project loan applications on an ongoing basis. Funds typically require projects to have a maximum payback period to ensure timely replenishment of principal to the fund. Some funds charge interest while others simply require repayment of the principal. Interest allows the fund to grow organically over time; however growth can also come from additional external contributions or allocations from operating funds. Other funds require a percentage of real energy savings to be paid to the fund even after the principal amount of the loan is returned, allowing the fund to grow from the additional savings.

At Omaha’s Zoo, Verdis Group currently administers the GRF in partnership with the Zoo’s accounting group. The Zoo wanted its GRF to financially benefit its general operating budget and serve as a continuing funding source for green projects. Thus, savings in the Zoo’s GRF projects are allocated with a percentage to the Omaha Zoo’s general operating budget and the remainder to replenish the GRF. Since the creation of the Zoo’s fund, SEI has developed a GRF tracking system (GRITS 1.5) that helps institutions manage and analyze project-level energy, financial and carbon data without developing a new process or tool just for the GRF tracking. SEI’s experience with GRFs is exceptional and the GRITS tracking tool has made setting up and tracking a GRF even simpler.

What are common GRF goals?
A GRF can focus on energy efficiency goals, such as reducing energy expenses and cost savings (a.k.a., fighting climate change with the bonus of saving money). In other cases, the GRF may support innovation and engagement projects that do not have direct significant financial payback. In the latter example, a GRF is replenished by grants or other funding, rather than repayment of project savings. GRFs are often operated as hybrid funds that fund both high payback projects along side engagement projects with low or hard-to-measure payback.

At Omaha’s Zoo, a hybrid fund was formed because engaging the staff and providing funds to implement staff-generated green projects was important. Yet, ensuring the revolving nature of the fund endured was critical because an ongoing source of contributions beyond savings was not guaranteed. Verdis Group works with the Omaha Zoo annually to analyze potential projects, determine project paybacks, and guide the Omaha Zoo’s GRF selection committee toward a group of annual projects that meet financial payback, employee engagement, and environmental goals.

So get out there and start recycling something even more interesting than those old aluminum cans – recycle your energy investments!

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Recycling is getting a lot of attention in Omaha these days. The Omaha World Herald ran an extensive story (Why is Nebraska Recycling in the Dumps?) in the Sunday, July 12 edition that summarized the challenges Omaha and Nebraska more broadly speaking have had with recycling. The key indicator is the recycling rate, which has hovered around 11% in Omaha since 2006, a figure that’s well below the national average (34%) and lagging that of the surrounding states.

Let’s not kid ourselves, managing waste streams is more difficult than most people imagine, even at the residential level. I just took my family’s trash and recycling to the curb tonight, and while doing so pondered all the different streams that leave our house in a given week (landfill, mixed recycling, glass, plastic bags, reuse items, my daughter’s to-go applesauce containers (I think she’s addicted), and compostable waste). Each one of them requires a separate staging area in our house and/or garage. It’s no wonder that I conduct a monthly educational campaign at home to ensure we’re all on the same page.

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Moody family outgoing trash and recycling. The volume in those two (yes, we have two…ssshh) green bins is more than what’s in the black trash container. I suspect if most Omahans had the opportunity and were properly educated, the same would hold true. The EPA estimates that 75% of residential trash is recyclable.

There are unquestionably advantages to recycling more, and the good news is that there are benefits that excite both fiscal conservatives and tree-hugging liberals alike. The financial savings alone are noteworthy; if Omaha improved to a mere 26% recycling rate (a very achievable figure), the city would be saving roughly $1 million per year. Certainly not chump change.

So how can Omaha improve its recycling rate? The Verdis Team spent an hour kicking around a few ideas, some of which are offered below. First, a caveat: we have not studied the situation (but would love to!). The recommendations below are based on 1) our materials management work with all of our clients, 2) our experiences as Omaha citizens, and 3) the knowledge and information we’ve gained through community involvement with efforts such as Environment Omaha. When we’re given the opportunity (the power of positive thought, right?) to really study the issue, we would most certainly refine and add to these recommendations. OK, with caveat in place, let’s get to it.

  1. Deploy larger bins with lids. Everyone acknowledges that this would have an immediate impact. Let’s make it happen. (See the July 13 OWH story for more details.) And, yes, the up-front cost ($6 million) is a bit much, but as the OWH reported on July 19, there are funding alternatives such as the Closed Loop Fund. The City should also consider the Nebraska Environmental Trust and the Nebraska Department of Environmental Quality grant programs as sources of funding.
  1. Overhaul branding and communication. There are multiple layers to this one, so let’s bullet them out:
    • Develop a sophisticated brand around Omaha’s recycling program
    • Reboot the website
    • Develop a one-page summary that’s easy for residents to review, pass around, print and post at home
    • Offer several materials in other languages, especially Spanish (the recycling rate per capita was worst in Southeast Omaha)
    • Rename and redesign the Wasteline publication that’s mailed to residences regularly
    • Do NOT over-emphasize the 11% rate. Doing so conveys a subtle social norm that only 11% of waste can be recycled and/or only 11% of people do recycle. Rather, focus on the fact that the majority of Omahans support recycling.
    • Messaging also needs to tap into multiple motivating factors – catching everyone from liberals to conservatives
    • Ramp up the social media platform (Verdis has more “likes” on Facebook, and we generally stink at social media)
    • Invest in other awareness and media efforts such as billboards, radio, and so on
  1. Start delivering bins again. Assuming that we really do need to wait five years before the large bins with lids are deployed, the City should reinstitute the program where the current curbside bins would actually be delivered to households that request them, which was in place several years ago. (Today, citizens must go to one of six locations to pick one up.) Partnerships could be explored with neighborhood associations, schools, a nonprofit such as Keep Omaha Beautiful, and maybe even churches to facilitate the distribution process.
  1. Connecting with the binless. We kicked around a handful of ideas to engage those households that don’t have a bin today. Here are a few:
    • Employe and send SummerWorks Omaha employees door to door on trash/recycling day. Have them contact (leave flyers or little yard signs) at every residence that does not have a recycling container out. Heck, give them a truck full of bins so they can distribute as the come across households that want one.
    • Automatically provide bins to all of Omaha with an opt-out alternative. With proper notice and an effective opt-out alternative, this could work.
  1. Ramp up recycling in public spaces. The City needs to walk the talk and deploy recycling containers in public areas with a goal to achieve a 1:1 waste to recycling container ratio in the city.
  1. Make recycling mandatory. Yes, I know this is a stretch and not likely to happen, but it still would be one of the single most effective means by which to increase recycling rates. In essence, recyclables would be banned from going into the landfill.
  1. Explore pay as you throw. A strong motivator for recycling more is charging fees for trash (known as a pay-as-you-throw system). Yes, there’s some concern about it being a regressive tax, but those issues can be overcome with a more sophisticated system design.
  1. Launch a composting facility. If the ultimate goal is reduce landfill tipping fees, then diverting food waste to a large-scale composting facility will have a huge impact. This is extremely complicated, and there’s a team exploring options now, as we understand it. But the implementation of as much would make a huge difference, especially for commercial customers.
  1. Address the gap in services to apartments. Renters like to recycle too, maybe more than homeowners. It would be great to address this gap in some way.

Team Verdis had close to a dozen more ideas that I’ll leave on the shelf for now. Suffice it to say there are undoubtedly ways to improve recycling in Omaha, and we’re anxious to play a role in making that happen. Because, and let’s be honest here, it’s a little embarrassing that the city has hovered around 11% for ten years. Let’s right that ship, shall we?

Onward and upward.

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Just over a year ago (May 2014), we conducted our first Passion Projects. In a nutshell, all six of us are given a 24 hour period to do just about anything. At the end of that period, we convene at Fontenelle Forest and we each spend some time talking about what we did and what we learned. There’s no expectation or requirement that the activities directly align or relate to our work, although they always have.

We’ve since repeated the exercise in February 2015. Here’s a list of a few Passion Projects from the team:

  • Researched local ecological impacts of and potential policy solutions for climate change
  • Researched water issues specific to the Omaha region
  • Researched recycling behaviors for the apartment dwellers in our building (Tip Top)
  • Researched and prepared a list of the top 20 best practices for conducting an effective meeting
  • Researched biomimicry and how it relates to our work

I have an interest in and passion for Omaha’s physical design characteristics and how they impact our daily lives. My time spent on Omaha’s Urban Design Review Board really opened my eyes to just how much (or how little) our community cares about improving our urban environment.

The way we design and build our largest public spaces – our streets and the associated right of way –  have a huge impact on our community’s health, safety, ability to safely and enjoyably use active transportation, and our well-being. So I decided I wanted to measure the quality of six intersections in Omaha to see what I could learn about how our community’s urban form is faring.

I focused on intersections that are traditional main street environments, as I have a high expectation that they are the best, most-inviting places for anyone and everyone. I then created a scoring system after doing a little research and set out to take measurements and conduct observations. The results:

  1. 11th & Howard
  2. 24th & N
  3. 24th & Lake
  4. 50th & Underwood
  5. 64th & Maple
  6. 33rd & California

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Rather than diving into the details via this blog post, I think it’s easiest to offer an actual summary of what I did, what I learned, and where these intersections excelled and fell short. Here are the results: Passion Project: Assessing the Quality of Six Omaha Intersections.

As noted therein, this is not necessarily my area of expertise. As such, many experts in the field will look to the methodology and chuckle. I’m cool with that. My hope was not to conduct a highly rigorous analysis. Rather, I wanted to learn something. And if what I did and the manner in which I did it sparks a discussion or could be used in some small way to improve Omaha’s urban environment, I’ll consider it a win.

Onward and upward!

 

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Last week was Climate Week in New York City, and I wish I could have been there. Around 400,000 people marched by my old apartment, bringing the world a message: The public cares about the issue of climate change and wants action from our global leaders.

Nebraskans made some great strides moving the public’s understanding of climate change forward and addressing the issue as well.

Here’s what caught my eye this past week or so:

  • For the first time in five years (since Copenhagen 2009), world leaders came together to discuss climate change at the Climate Summit on September 23rd. One hundred twenty heads of state, hundreds of business leaders, activists, and celebrities were at the United Nations in New York City for the Summit. The U.N. Secretary-General started the meeting with a statement that included:

“… Science says they [emissions] must peak by 2020 and decline sharply thereafter. By the end of this century we must be carbon neutral. … I ask all governments to commit to a meaningful climate agreement in Paris in 2015. … We are not here to talk, we are here to make history.”

The poem Dear Matafele Peinem (linked below) set the stage for the meeting with a standing ovation, and France led the statements by countries by committing $1 billion to the global Green Climate Fund. The intent of the meeting was to move global leaders toward a legally binding global agreement to address climate change at the meeting in Paris in 2015.

 

  • The People’s Climate March in NYC drew three or four times the number of expected participants, a number nearly equivalent to the population of the City of Omaha! Imagine that. I was surprised and happy to see Ban Ki-Moon, the Secretary-General of the United Nations join this march himself, marching with singer Sting, actor Leonardo DiCaprio, activist Bill McKibben (the environment’s rock star) and 400,000 others.
  • On Saturday, September 27, I attended the Harvest the Hope Concert in the middle of a northern Nebraska cornfield. It showed me that Nebraskans do care about their environment, and that our farmers, ranchers and Native Americans are willing to stand up for our land, clean water, and their property rights. The Willie Nelson & Neil Young concert was a fun afternoon for my family, and I was proud to have three generations there to support Bold Nebraska and the thousands of bold Americans working to stop the construction of TransCanada’s Keystone XL pipeline. These individuals appreciate how climate change will affect our children’s lives, and they are doing something about it.
  • Global average temperatures over land and ocean surfaces for August 2014 were the highest on record for the month of August, at 0.75 degrees Celsius (1.35 degrees F°) above the 20th century average.
  • A new report out by the Global Commission on the Economy and Climate challenges the idea that addressing climate change will be costly, indicating that climate fixes will cost effectively the same as forecasted investments in needed infrastructure.
  • At a meeting just last week, I was reminded of the great work being done by the Omaha Public Power District (OPPD). Leaping over many other U.S. utilities, OPPD plans to supply 33% of its retail load generation using renewable power (mainly wind power) by 2018.  OPPD is also positioning itself to stop burning coal in Omaha by retiring three units at the North Omaha coal plant in 2016, and retrofitting two other units to use natural gas (a cleaner fuel) by 2023. Way to go OPPD!

Even though all of these actions are wonderful news for our environment, they are not enough.

Without global participation in the effort to limit green house gas emissions, climate change will have dramatic effects on our planet within your children and grandchildren’s lifetime. In the United States, our greatest efforts should be around eliminating coal use, but if still developing countries like China and India are building more coal plants than we retire, progress on this truly global issue will not be possible.

The simplest, cheapest solution is clearly understood by economists: put a price on carbon (greenhouse gas emissions). NPR’s Marketplace did a good job explaining how and why this would work. Yale University professor William Nordhaus explains it in his book The Climate Casino. He says that putting a price on carbon for the top 100 countries by per capita income, plus India and China, would cover 90% of the globe’s emissions. This price could then be enforced through a country’s policy mechanism of choice. Prices drive choices made by corporations and individual consumers alike. More expensive carbon-intensive practices (due to the carbon price) would be replaced by the least expensive, cleaner solutions.

And voilà, climate change is no longer the greatest challenge of our century.

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It’s time for us to stop dancing around the issue of whether or not humans are causing climate change. The overwhelming evidence unequivocally shows that climate change is real and is primarily human-caused. This is no longer up for debate. It’s time to move on to solutions and, dare I say, adaptation.

Internally we’ve been talking about when and how we discuss climate change with our clients, partners and collaborators. We have always been very careful when bringing it up because we fear doing so will immediately alienate the “disbelievers.” I think it’s time we start talking about it. First, a little background on why I’m a little fired up about it. Over the weekend I watched a film and read several articles that put me in a bit of a tizzy.

Chasing Ice
First, on Friday night a few Verdisians and I took in the film Chasing Ice. It’s a documentary following photographer James Balog’s quest to document the rapid decline in glacial ice. As he put it in the film, glacial retreat is the canary in the coal mine when it comes to climate change. The film did a wonderful job of showing the eye-opening loss of glacial ice while being absolutely beautiful thanks to Balog’s stunning photography.

Chasing Ice really reached a crescendo for me when a few of Balog’s colleagues witnessed the largest calving event ever recorded on tape. Glacial ice roughly the size of Manhattan broke away from the main Ilulissat Glacier for 75 minutes, a portion of which was shown in the film and can be viewed in the clip above. It was absolutely jaw-dropping to see. If you haven’t seen the film yet, it’s worth seeing in the theatre (now playing at Film Streams!).

National Climate Assessment & More
When I awoke Saturday morning, there were three articles on the back page of the Omaha World Herald all covering climate change; two of which summarized findings from the National Climate Assessment (NCA) draft report. The first article focused on what’s been happening in the Great Plains and highlighted the crazy weather we experienced in 2011 as a perfect case-in-point for what we should expect going forward (of particular note: $12 billion in damages due to the extreme weather).

The second article summarized national trends and specifically mentioned the NCA’s finding that “warming of the planet is changing daily American life“. The report, which is a mere 1,100+ pages, cuts right to the chase and identifies the kinds of changes we should expect, region-by-region, and warns of the disruptions our society will likely experience as temperatures rise. While it’s not as epic as Waterworld predicts, the prognostications are a little scary.

The third article donning the back page of my Herald originally ran in the New York Times on January 10. Its focus was 2012’s worldwide weather and it noted that extreme weather is now the norm. Several extreme and highly abnormal weather events from all over the globe were cited. As was illuminated in the Times article, extreme weather is not uncommon, but the sheer number of extreme events that occurred in 2012 is what’s abnormal.

Where Do We Go From Here
Fortunately, many businesses are responding, which is becoming clearer every time a major consulting firm produces a sustainability-focused report. One indicator: more than 80% of the Global 500 responded to the Climate Disclosure Project’s 2011 request for carbon disclosure (PwC: Do Investors care about sustainability?). Additional good news is that those companies that are actually taking meaningful steps are often out-performing their competitors (MIT Sloan Management Review: Sustainability: The ‘Embracers’ Seize Advantage). 

Despite the clear evidence that 1) we are facing widespread institutional risk to all of our known systems due to climate change, and 2) implementing meaningful sustainable change is good for the bottom line, we still find that adoption of sustainable principles can still be a tough sell. Why? IBM’s recent report suggests that executive involvement and support is critical to success. We couldn’t agree more. Without the leader on board, it’s not worth doing, which is sad but true. Leaderless sustainability initiatives often struggle and face insurmountable challenges when attempting to make progress.

I think there’s more at play, though. The term climate change has become so politically polarized that some leaders will stop listening if it’s even mentioned, which means that when it comes time for them to understand the risks they face and the benefits they’re missing, they’ve already tuned out. It’s for this reason that we rarely talked about climate change in the past, choosing instead to focus on the more tangible benefits of sustainability initiatives: saving money, happier employees, healthier work environments, and more loyal customers.

It’s no longer enough. It’s time for us to start talking about the risks that organizations face as well. It’s not going to be easy, but if we’re going to do our job and do it well, they must be knowledgeable of and prepared to respond to the challenges that climate change is going to bring. These aren’t scare tactics; it’s reality. And if we aren’t prepared and helping our clients prepare, we aren’t doing our job.

Onward and upward.

 

 

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I went to hear Bill McKibben speak Saturday night at the Joslyn Art Museum.  McKibben is an author and the founder of an organization called 350.org.  They are working to bring the world’s carbon levels down to the safe level of 350 parts per million (ppm), a measure currently at 391 ppm.

As an accountant in my previous life (or career), I really liked and appreciated the lecture’s title – “Do the Math.” My colleague, Daniel, wrote about McKibben’s related article in Rolling Stone this summer.

 

So here’s the math – in only 3 numbers:

2 Degrees Celsius – Why is this number important?  Leaders from countries around the world have been working for years and years to address climate change.  This issue is so difficult because countries like ours (the developed world) have emitted so much carbon dioxide already, yet there are many countries around the world that are still developing.  Developing countries want our way of life and thus believe that it’s fair that they develop as we did (often requiring significant emissions).  A 2 degrees Celsius rise in the world’s temperature was the only hard number “the world” has agreed on thus far, in Copenhagen in 2009.  Here’s an excerpt from their statement:

“We agree that deep cuts in global emissions are required according to science, and as documented by the IPCC Fourth Assessment Report with a view to reduce global emissions so as to hold the increase in global temperature below 2 degrees Celsius, and take action to meet this objective consistent with science and on the basis of equity.” 

Nearly all heads of states from Albania to Zambia, including the U.S., Russia, India and China signed this Copenhagen Accord.  Science tells us that this is a good target. Unfortunately, the International Energy Agency (IEA) currently projects a long-term global temperature rise of 3.6 Celsius in its central projection scenario.

565 Gigatons – Scientists tell us this is the amount of carbon that can be added to the atmosphere before it is expected the earth will warm another degree Celsius; thereby getting us to the 2 degrees mentioned above.  The earth has warmed around one degree Celsius already compared to pre-industrial time, and if the extreme drought in Nebraska and throughout the country this year doesn’t give us a good example of what’s to come, one can look eastward.  Hurricane Sandy’s force and damage was a result – in part – because of climate change.  The destruction to New York, a city I called home for more than a decade, was unprecedented.  When I talked to my friends out there, they said this storm was different than any they have experienced before. The devastation was much worse and much farther reaching than anything in the past. My sister is on the ground cleaning up the mess, and she says that in places, it is like nothing she has ever seen before.

McKibben said that it will take ONLY 15 years for the world to emit 565 Gigatons at our current projected pace.

But McKibben saved the worst number for last.

2,795 gigatons – This is the estimated emissions that will result from the use of the fossil fuel that companies currently have in their reserves.  From my accounting days, McKibben said all the right things on how they computed reserves – looking at SEC filings, etc.  Reserves are difficult to calculate because you never know exactly what’s in the ground until you take it out, but SEC filings are going to be the best source for estimates, because the company’s auditors will have vetted them to some extent. The International Energy Agency adds credence to this number in its most recent World Energy Outlook 2012.

 

So let’s do the MATH.

If 565 gigatons gets us to an increase of 2 degrees Celsius, the fossil fuel companies have 5 TIMES that amount in reserves.  The business plan and goal of these companies is to sell all of their reserves to generate profits. The emissions from extracting, producing and using all of these fossil fuel reserves will mean chaos for our planet. The climate change the earth will experience from our collective human action is the most significant issue our generation and possibly humankind has ever faced.

But it wasn’t the math that really got me, even though I am still an accountant at heart, it was the picture of children standing in their flooded street in Haiti – holding signs that said:

 

YOUR ACTIONS

AFFECT ME

 

This picture and many others McKibben showed the crowd of at least six hundred on the Saturday night of the BIG TEN Championship football game, demonstrated that people around the world understand climate change, and that many Nebraskans care.  But can they do something about?

The other point that struck me as critical to appreciate is that the United States is where many of the large fossil fuel companies are headquartered or have significant operations and significant investors.  Exxon Mobil is currently the world’s largest company, headquartered in Texas. As a side note, its largest shareholder is Vanguard, a mutual fund many Americans invest in personally or through their retirement accounts. Royal Dutch Shell is the fourth largest company, BP is 11th, and Chevron is 12th, headquartered in California. Not only are the people of the U.S. emitting more greenhouse gasses per person than any other large country in the world, our citizens work at and control many of the largest suppliers of the fossil fuel reserves to be burned.

 

So what action is 350.org calling for?

Simple. Taking our money, and any money we can influence, out of the equity shares of the top 200 fossil fuel companies. The 350.org campaign is working to have students affect their university endowment investments, church-goers to get their places of worship to divest, and anyone who has a pension to get their future financial security disconnected from these fossil fuel companies.  It is perfect.

These companies are driven by share price; it’s something that their Board of Directors and their leadership cares very much about. It is how the worth of their company is valued. Creating a sustained and ongoing sell off of these companies will force the share price down… and possibly, hopefully, cause these companies to become energy companies, rather than fossil fuel companies.

I worked in the financial services industry in New York for more than a decade, and this action, if taken by a collectively large group, could be what needs to happen to redirect our climate future. We need to harness the sun, wind and geothermal power to change our direction, but talking alone with these fossil fuel companies has not convinced them that this direction is imperative. Taking our money out of these entities that are suppliers of the problem needs to happen to motivate their leaders. It is time to move the money.

 

So what would I tell a client?

Divestment of investments in the fossil fuel industry is just like any other strategy to be considered when trying to make one’s institution more sustainable. Verdis works with clients that are committing to becoming sustainable for different reasons and at different paces.  I would tell a client interested in the financial benefits of energy efficiency to consider moving money from fossil fuel investments to a green revolving fund (GRFs). GRFs are internal investment mechanisms to fund energy efficiency projects, and they use energy savings resulting from such projects to replenish the fund. Established GRFs reported a median annual return of 28%, compared to Exxon Mobil’s annual growth rate during the last decade of only 10.4%.

Even if a GRF is not a good alternative, there are many other non fossil fuel investments with excellent returns: Investments without a core business plan that is working against the efforts of all of the other sustainable strategies being implemented at one’s institution.  After all, changing an investment portfolio’s guidelines, in theory, is as simple as changing the list of allowable investments.  The impact could be substantial, and if it is, an institution won’t want to be left holding the stock of a company with a falling price.

 

Why I will act

Droughts, floods and storms are affecting so many people around the world already. Nebraska is even starting to see how droughts and floods will impact our businesses and lives. Droughts are destroying our crops here and around the world. We know rising sea levels are forcing people to relocate. And so many of the people directly affected don’t emit any carbon in their daily lives.  Many of these individuals around the world could work their entire lives and never be able to afford a plane ticket to see our developed world, let alone live it.

This is a huge global, moral issue. And because we are here, in the U.S., we can do something about it. So many, so far away, with scare resources, will feel the affects of our actions or inaction.  Our time is now.

We should care and we should act – for those who cannot act themselves. For those who are the future. For our children and our grandchildren. For those little children in Haiti. I will act for my daughter, who was born the very day this photo was taken in Haiti. There is no debate about the science. The debate is over.  It is time to change the course of our planet before it is too late.

 

 

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McKinsey & Company is a world-wide management consulting firm that happens also to provide consulting services related to sustainability. In support of that aspect of its business, McKinsey periodically surveys companies to learn more about how they incorporate sustainability into their businesses. Last year it published a report (free registration required to download) based  on that survey. The report is rich with information about how companies and CEOs view sustainability, and shows that recently more and more companies are embracing sustainability.

Page 13 of this report addresses how companies put sustainability into practice, particularly when it comes to capturing value from sustainability. Exhibit 1 specifically illustrates this concept graphically:

This diagram, created by McKinsey & Company, illustrates the mechanisms by which companies create value using sustainability.

As I was reviewing this portion of the report recently I realized there is another way to organize the information in this chart. McKinsey has essentially organized the areas by contemporaneous functions. However, I think it makes more sense to organize the areas into three planning domains: Strategic, Reputational, and Operational like this:

Modification of the relationship among the areas in which McKinsey sees the opportunity for businesses and organizations to capture value.

Let me first explain these new categories.

Strategic

The strategic category includes functions that address the where, what, and when of the organization: Where are we going? What should we be doing? When are we going to get there or do that thing? These are all forward and future thinking functions, so in the modified version I used fuchsia (or at least what I think is fuchsia) for “Strategic” because it sounds like “future.”

Operational

The operational category includes functions that address the how of the organization: How are we going to get where we are going? How are we going to do what we should be doing? (Notice how I referenced the questions from the strategic category?) This is orange because it starts with the same letter as “operational.” Interestingly, this was the only category that included functions from McKinsey’s diagram that actually use the word “sustainable.” Historically, the bulk of Verdis’ work with clients has focused in this area, because this is often where organizations see the largest opportunity for financial benefits. Therefore, it is probably not a coincidence that McKinsey listed them in the “returns on capital” category.

Reputational

I think “reputational” may not officially be a word, but it sounds good so I’m running with it. The reputational category includes functions that address the who questions: Who is the business? Who knows about the business? Who cares about the business? Who does the business care about? Interestingly, McKinsey’s graphic included a reputational function in each of its three areas. This really shows up in my version where each of the three shades of brown from McKinsey’s graphic fall under the red (R = red, R = reputation, get it?) group.

I think there is one more aspect to this. The why questions. Why are we doing X instead of Y? In my view, the why questions fall under both the reputational and organizational categories and help to drive the strategic functions. The reverse is also true. Strategies and strategic plans tend to drive operations and help make decisions that affect the company’s reputation.

One other way to visualize the strategic, operational, and reputational aspects of a business is in this little sketch I made:

A diagram to show the dynamic interaction of strategy (S), operations (O), and reputation (R).

Here, you can see the forward-thinking strategic functions (S), the internal ongoing operational functions (O), and the reputational functions (R) that influence how the organization interfaces with the outside world. Obviously this grossly oversimplifies many organizations, but provides a framework for thinking about sustainability. As I mentioned, most of our work focuses on the operational aspects, but we constantly encourage our clients to consider how sustainability integrates into the larger strategic plan. Most organizations that can successfully incorporate sustainability at a very high strategic level find that the operational savings and reputational benefits follow naturally.

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