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The Greening of Corporate America SmartMarket Report: A review


By: Sonja Persram, BSc., MBA, LEED AP - Monday, May 14, 2007
Source: Sustainable Alternatives Consulting Inc.

The new Greening of Corporate America SmartMarket Report, published May 2, is an in-depth summary that substantiates forecasts of green uptake acceleration and will fuel excitement in the green building industry. It provides a useful array of data for organizations that are facilitating greening, involved in the processes, or considering riding the wave.

The report, which was conducted by McGraw-Hill in partnership with (and funded by) Siemens, sampled 190 of the largest companies in the U.S. – each earning revenues of over $250 million. These corporations represented 75 percent of the U.S. equities market which is valued at $15 trillion dollars. 85 percent of the survey’s respondents were CEOs or CFOs.

Highlights of the findings:

By 2009, 82 percent of corporations will green a minimum 16% of their portfolios, based on projections. This is recognized by the study proponents as the industry tipping point.

Green activities and green building are perceived by 43 percent of respondents as an element in their corporate growth strategy

Leaders recognize the competitive advantage obtained from corporate greening, but their foremost reasons are not what might be expected, and some response trends indicate educational opportunities abound:

  • "Risk and liability are not the primary reason for corporate engagement in green activities"
  • 52 percent of respondents recognize green building an opportunity for market differentiation. 63 percent of CEOs do.
  • 58 percent of respondents see market differentiation in green buildings’ lower operations costs. 67 percent of CEOs and 50 percent of CFOs do.
  • 57 percent of respondents and 67 percent of CEOs see sustainability and green building facilitating an innovative culture. More firms with incomes ranging from $250-$500 million stated this than larger companies.
  • Since over 33 percent note benefits of green buildings to the bottom line, while many are unsure, the report highlights this finding as an occasion for educational intervention.
  • In fact, "companies that are 'going green' should move to secure early market advantage. Consumer loyalty will be important in the burgeoning socially-conscious consumer market."

Green building market drivers:
75 percent of respondents agree that increasing energy costs are driving the proliferation of green buildings

40 percent believe government regulations and tax incentives are factors

The key barriers identify structural and educational gaps in corporations that limit uptake:
Firstly, companies are not yet set up to address the multi-disciplinary nature of 'green.'

Corporate leaders, especially CEOs, need a greater understanding of ROI benefits to green building.

Overall, advantages of green buildings are not well understood among corporations.

The study also aggregates companies into 5-stages of activities directed toward sustainability. Some stage descriptors: an absence of green in a company’s mission (Stage 1) – through to recognition of green merely as a cost and function of compliance – to green as vested in corporate mission but not in operations, policies and technologies – next, acknowledging the company’s transformation toward green and recognition of sustainability as a key to competitive advantage - and the final stage, a company 'driven by a passionate value-based commitment to improving the well-being of the company, society and the environment.' By this analysis, 18 percent of companies in the study were found to be in stages 4 or 5.

As George Dallas, managing director and global practice leader for corporate governance at Standard & Poors states in the report: “Strong ESG (environmental, social, governance) performance is increasingly being identified as a proxy for good general management.”

It will be interesting to see how Greening of Corporate America SmartMarket Report will be utilized to address the industry and educational gaps identified. For instance, it was made apparent that existing modes of corporate structure with lines of responsibilities and communications systems, don’t fit the needs required for holistic organizational change toward sustainability. A structural solution is posed by Rick Walker, Sr. National Environmental Solutions Manager at Siemens Building Technologies who called in March 2007[i] for a Chief Sustainability Officer to be appointed within corporations, with a holistic purview of “coordination and advocacy to make change happen.”

Additionally, currently within the industry is an emphasis on greening investment and real estate portfolios, and the recognition within insurance sectors of losses due to climate change. I believe there are additional, significant factors in accelerating green uptake in corporations. These include focusing on:

Greening debt portfolios. Just as preferential rates for green proliferate within markets[ii] (with consideration for environmental justice), the converse may be increasingly recognized: debt instruments for conventional, non-green initiatives may become perceived as incorporating greater risk. This could have a tremendous impact on all building sectors.

Preferential green insurance premiums, for life/health as well as Employee Assistance Programs (EAPs), based on productivity data in green workplaces.

Corporate greening is well under way in the largest U.S. companies. See more details about how and why in the Greening of Corporate America SmartMarket Report, McGraw-Hill Construction Research & Analytics, 2007 http://construction.ecnext.com/coms2/summary_0249-238822_ITM_analytics



[i] Walker, Rick: GreenBiz.com, March 2007: http://www.greenbiz.com/news/columns_third.cfm?NewsID=34745

Green Syndicated Columnist Sonja Persram is author of: Green Buildings: A Strategic Analysis of North American Markets for Frost & Sullivan (published Aug 06) addressing Energy, Water and Facilities Management; and the U.S. portion of International Sustainable Building Policy Initiatives, a study for Canada Mortgage & Housing Corporation whose project lead was Nils Larsson, iiSBE Executive Director. She was a member of the City of Toronto’s Green Development Standards Working Group. Contact: Sustainable Alternatives Consulting Inc: sonja@sustainablealternatives.ca



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