Sustainability is just an accounting problem

In the end we as individuals and businesses pollute because it is free or nearly free to do so. The actual costs of our actions are recognized elsewhere in taxes, healthcare or put off for future generations to pay. They are called externalities. Sustainability is not free

All of the products (like water, coal, oil and other extracted things) and services (like air that does not make us sick and allows food to grow) that we get from the earth and atmosphere are ecosystem services. And those services have a price.

The solution is to value these ecosystem services. “This is nothing to do with corporate social responsibility and the green agenda, it is hard-nosed economics,” says Chris Knight, assistant director of the forestry and ecosystems team within PwC’s sustainability practice in the Financial Times.

The challenge is to link the scientific data with business and personal choice. And the way businesses and individuals make choices is based (mostly) on cost and benefit. Also known as accounting in business speak.

The World Business Council for Sustainable Development, a global coalition of some 200 companies, is about to release a guide to corporate ecosystem valuation.

A new report, The Economics of Ecosystems and Biodiversity, aims to put a price on those products and services that we get from nature, so we can recognize the costs. I believe there is nothing more critical to sustainability than paying the price of all we consume at the time of use.

The Financial Times article referenced here is "Biodiversity: Valuing nature can cut business costs" published on March 21, 2011.

To see the report The Economics of Ecosystems and Biodiversity you can go to

Efficient Buildings Pay You

Sometimes they say the devil is in the details. For those that care about sustainability and jobs, the God is in the details. Tax rules and regulations that will decrease energy use and increase jobs without sacrificing tax dollars. Its a rare, true win-win-win. Win for business, win for jobs, win for the environment and energy security. It adjusts the EPAct Section 179D from a tax deduction to a tax credit.

In previous years if you bought a $50,000 HVAC or building management system you could deduct (reduce your income) by $50,000. Assuming a 35% tax bracket this would have saved you $17,500 in taxes, making your net cost of the new system $32,500. This was still a great deal for a building owner.

The new proposal (and it is just a proposal, not law yet) will allow you to have a tax credit of the $50,000. So instead of saving 17,500 in taxes you will save the entire 50,000 in taxes, bringing your net cost on the system to ZERO.

The tax system will not suffer from a loss of revenue though. Although the building owners will pay less taxes when making the upgrades, the employers and employees doing the work will add to the tax rolls.

100% Wind Power Cheaper Than Coal

The Empire State Building has gone to 100% wind power for one reason. It is cheaper than using coal and prices are more stable. Not only are operating costs lower, but the building owners are able to attract the best tenants and higher rent because of the switch. "Clean energy and our nearly 40% reduced consumption of watts and BTUs gives us a competitive advantage in attracting the best credit tenants at the best rents" said Anthony E. Malkin, president of Malkin Holdings, which runs the building, in an announcement.

"Everything that we're doing at the Empire State Building is about business and bottom line, that's the first and most important thing," Malkin said. "We're not about paying more to do something qualitatively different, we're about market-ready solutions. We didn't know we were doing green power until the bid was won by Green Mountain."

I speak to building owners all the time. Two of the biggest objections I hear is "my building is too big for this" and "my building is too small for this." Those are excuses to stop people from doing better because change is scary. Embrace the change. You will feel better and you'll prove your a better business-person than the others.

Read more:

New Codes Improve Efficiency By 30%

Code and government officials meeting in Charlotte, North Carolina voted to improve the 2012 International Energy Conservation Code (IECC) standard by 30%. This is a great start on the road that we need to travel for energy neutral buildings. This is action that was not taken by Washington, but by state and local government agencies that see the need.

Buildings are responsible for 50% of the energy consumption and CO2 emissions in the US. Without fixing this we will never become energy independent or truly reduce our greenhouse gas output.

According to Edward Mazria, CEO of Architecture 2030, "By the year 2035, three-quarters of the built environment... will be either new or have been renovated, and that is the opportunity for this sector to basically slow down and reverse the destructive trend of global warming."

See this clip from the PBS show E2 (pronounced E-Squared): The Economies of Being Environmentally Conscious, hosted by Brad Pitt.

Commercial Property Owners: Doing It Green Means Cash in Your Pocket

Does doing the right thing pay in the pocket book. Hell Yes! A recent study of 144 LEED Certified homes that included apartments, townhouses and duplexes and single family homes recently showed a 40% savings in utilities. 64% of the properties surveyed were NOT single family dwellings.

For commercial property owners utilities can make up 35% of a buildings overhead so this  savings will go straight to the bottom line. Add to that the fact that you can charge a higher rent for a green rental and you quickly can see the benefits.

Estimates to remodel or build to LEED standards range anywhere from 2-15% of the building or remodeling cost. If it is financed in the same way as the rest of the building, and incentives are thrown in, the investment is cash flow positive from day 1.

For more info on the study go to:

Stages of ROI on Eco-efficiency

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

Stages of Sustainability

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

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

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

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

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

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

Barriers to Green Building Go Beyond Cost

I spend lots of time in the green building world. In my role as Executive Director at the Institute for Building Systems I talk to all kinds of people in the field and see it myself day to day. Existing regulations and inertia are as big a barrier as price.

Check out the article I just had published in Sustainable Living Magazine.