A Green Formula
Sustainability and ROI Don't Have to be Enemies; to Achieve Balance, All It Takes is a Structured, Creative Approach
by Cara Cannella
Sustainability is already—or will soon become—a mainstream concern. Put simply, sustainable projects meet the needs of the present generation without compromising future generations.
Project professionals are in the unique position of proliferating the trend by garnering support from the top down, from executives to team members.
The reasons for encouraging sustainable development are multifaceted. Global warming, industrial pollutants and the burning of fossil fuels have all been linked to natural disasters such as the 2005 Gulf Coast hurricanes in the United States. The devastating economic impact of such instances—the cost of Hurricane Katrina in the United States has been estimated at $200 billion in Louisiana alone—has spurred many to take both retroactive and preventive measures against climate change. Compared with that expense, the long-term cost of going green is relatively small.
In all sectors, the days of unquestioned, unsustainable growth are coming to an end. But vital questions remain: Can an organization survive without implementing sustainable projects? And can an organization embrace the concept of environmental conservation while still improving the bottom line?
THESE DAYS, you can't pick up a magazine or turn on the television without learning that another company or industry is going green. For some, the feel-good factor is enough, but many demand their sustainability projects show a clear ROI.
“There is emerging evidence that sustainable [projects] can deliver superior financial returns and market performance,” according to Eric Lee, international director for property management firm Jones Lang LaSalle, Hong Kong.
London, England-based Radio Taxis Group understands that as well as anyone. In 2005, the U.K.'s largest operator of chauffeured vehicles embarked on a project to reduce and offset carbon dioxide emissions from its fleet of 3,000 black cabs. The large-scale project involved developing a long-term carbon management plan, prioritizing and scheduling carbon reduction, and managing its portfolio of offsets. Today, the company saves 24,000 tons of carbon dioxide at the cost of £100,000 per year and has attributed £1.2 million in new business to the project.
Clearly, sustainable projects and improving the bottom line don't have to contradict. “Companies of all sizes are realizing the enormous economic potential of being green. The latest wave of environmental awareness and the existence of a growing number of green technologies have placed within reach the possibility of being a good environmental steward while growing the bottom line,” says Thomas J. Basile, managing director of The Middleberg Sustainability Group—a New York, New York, USA-based firm that helps companies develop eco-smart products, practices and workplaces—and former communications director for the U.S. Environmental Protection Agency in Washington, D.C., USA. “More and more senior managers are realizing the two goals are not mutually exclusive.”
But seeing an improved bottom line from sustainable projects isn't that simple. Project leaders must get everyone on board and marry the creative aspects of the project with the number-crunching ones.
Planning From the Top Down
Key to linking sustainability and ROI is getting support from top executives. “Many [sustainable] projects fail because CEOs don't pay enough attention to them,” says Aaron Shenhar, PMP, institute professor of management and founder of the project management program at Stevens Institute of Technology, Hoboken, New Jersey, USA. “Too often, they see projects as costs, not investments. If we get the attention of CEOs, so they realize the competitive potential in project management, the business world will change.”
The best way to convince executives to get on board is to show ROI in terms of financial savings and improved brand loyalty and recognition, Mr. Basile says. “[Project managers should] be coaches and learn more about the business nature of their projects so they can present information about what others in the industry are doing and what customers' perceptions are about the industry, the company and its products,” he says.
Today, [London, England-based Radio Taxis Group] saves 24,000 tons of carbon dioxide at the cost of £100,000 per year and has attributed £1.2 million in new business to the project.
The executive suite must be committed to making environmental considerations a vital part of business strategy. In other words, they must walk the talk.
When Radio Taxis Group initiated its project to reduce carbon dioxide emissions, project leaders knew they needed full support from top management. The program included developing a full corporate social responsibility policy, signed off by the board of directors. The company also agreed to a set of key performance indicators, including one-and five-year targets related to its greenhouse gas emissions.
To educate its top executives on sustainable issues, London, England-based telecommunications operator BT (formerly British Telecom) has created a corporate social responsibility leadership panel comprising external experts. The panel, which meets four times a year, offers advice to BT executives about corporate strategy and evaluates past performance. The group includes representatives from London-based fund manager Henderson Global Investors; London-based sustainable development organization Forum for the Future; the Norwegian School of Management in Oslo, Norway; and London-based business research firm Tomorrow's Company.
Now, more than 10 years since the company made the decision to invest in sustainability, it has created a green corporate culture starting at the very top. “It's a cultural thing at BT,” says Steve O'Donnell, BT Operate's environment champion and global head of data centres and customer experience management. “We want to be seen as a corporately responsible, green, clean company.”
Putting the Customer First
To see the ROI of sustainability, project managers must ensure their motivations for going green are in line with stakeholder or customer requirements.
Green projects can help achieve customer satisfaction and loyalty by cutting long-term costs in many cases. Consider what Tokyo, Japan-based Toyota Motor Corp. has done with its in-demand hybrid car Prius. Fifth-year retained value projections show the car holds its value 5 percent to 10 percent better than similar gas vehicles, reports consumer group IntelliChoice. While hybrids in general cost significantly more to purchase than non-hybrids, average insurance costs and fuel costs are lower, and maintenance and repair costs are about the same, according to the group.
BT, now the world's largest consumer of green energy, has also been able to pass the financial savings from its sustainable projects to consumers and stakeholders. In 1996, the organization embarked on a project to cut pollution and carbon emissions by implementing energy-saving equipment in its data centers.
“We cut the amount of carbon we produced by 60 percent over the next 10 years,” Mr. O'Donnell says. “In 2006, we then set a new goal of cutting carbon emissions by 80 percent by 2016. In 1996, it sounded like a hippie thing to do. Today it's an absolute advantage. We can operate more cost-effectively and save money.” BT then passes on these savings to its clients.
“Funny enough, there is a direct linkage between corporate and social responsibility and shareholder value,” he says. “We've grown significantly, and that's directly related to how we behave.”
But because sustainability is a relatively recent concept, organizations that have rolled out green projects must find ways to communicate that to customers. Many organizations have partnered with green marketers, such as The CarbonNeutral Company. Based in London, it helps companies measure, reduce and offset carbon dioxide emissions, and then communicate those actions through marketing.
Radio Taxis Group enlisted the help of The CarbonNeutral Company to offset and cut carbon dioxide emissions, and since 2005, the company has emphasized its status as “The World's First CarbonNeutral Taxi Company” through marketing efforts. To win existing and potential client support, the company redesigned its logo—changing the color from orange to green to promote the sustainability factor—and launched a PR campaign with London Mayor Ken Livingstone.
“Radio Taxis Group's program was commercially focused. It wanted to differentiate its service offering from that of its competitors in an environment where large corporate clients were increasingly environmentally aware,” says Bill Sneyd, director of advisory services for The CarbonNeutral Company, whose client is Radio Taxis Group. “Within the first six months of its CarbonNeutral program, Radio Taxis Group won new accounts worth £1.2 million, where its CarbonNeutral status was a critical deciding factor.”
Sometimes it's necessary for project leaders to convince the rank and file. When done correctly, sustainability efforts can drive satisfaction, retention and personal growth in employees.
[Going green] creates a unique and exciting opportunity for project managers. [But] if you don't have employee buy-in, it's not going to work. They have to understand and believe in what you're doing.
—Thomas J. Basile, The Middleberg Sustainability Group, New York, New York, USA
“[Going green] creates a unique and exciting opportunity for project managers,” Mr. Basile says. “[But] if you don't have employee buy-in, it's not going to work. They have to understand and believe in what you're doing. They're your first and best advocates in helping to develop internal and external communications. Sustainability needs to permeate the entire operation as an integrated process. It's not for one office or division; it needs to permeate the corporate culture.”
Milwaukee, Wisconsin, USA-based KBS Construction is currently designing its new headquarters to be U.S. Green Building Council (USGBC) Leadership in Energy and Environmental Design (LEED)-certified. The company is doing so with the expectation that the sustainable building will improve employee morale and productivity, says Dennis J. Klein, KBS chairman. “Our employees have really bought into the idea that this is going to be a very comfortable working environment with better lighting and bathroom fixtures, better air filtration,” he says. “Hopefully their productivity will go up, and I can benefit from that.”
It's up to project leaders to find innovative, positive ways to encourage team members. Start with an informal survey of staff asking how and where they'd like to see growth in terms of sustainability. Soliciting input can boost employee morale. After all, most people want to feel proud of the organization to which they might devote half of their waking hours.
DuPont, Home Depot and HSBC are part of a long list of organizations adopting the chief sustainability officer role.
Consider developing a sustainability training program to excite employees. At Jones Lang LaSalle, project managers are encouraged to receive sustainability training and obtain green credentials. For many, obtaining accreditation is a call to action on their annual performance reviews. Today, 50 of its 950 U.S.-based project managers are LEED Accredited Professionals, a designation of USGBC for building professionals. The company's European and Asia Pacific regions are similarly active in the area of sustainability.
Organizations can also build their own internal certification programs based on their unique needs, with accreditation levels that reflect several stages of expertise. Make sustainability a professional track by which employees can climb the ladder to chief sustainability officer.
Many successful companies have already done so. GE's Lorraine Bolsinger is the vice president of ecomagination, the company's division that is committed to addressing global environmental challenges. Wilmington, Delaware, USA-based chemical company DuPont; Atlanta, Georgia, USA-based retail group Home Depot; and London-based banking group HSBC are part of a long list of organizations adopting the chief sustainability officer role.
The Bottom Line
Through the lens of sustainability, it is clear that project management goes beyond delivering projects on time, on budget and within scope. Instead, it involves serving a customer and creating business results to support the short- and long-term outcome of the organization and the environment.
Sustainability isn't always easy, but it's worth the effort. It requires long-range vision, and in some cases, a complete overhaul of company processes. The benefits of “eco-efficiency,” a term coined by the World Business Council for Sustainable Development in 1992, are not easy to quantify. And while installing new equipment and implementing new procedures can involve added costs, in the end, organizations can reap financial rewards from green projects.
More importantly, you can't always put a number on the advantage of having a green reputation.
“Reputation is your most precious commodity. If your reputation is damaged, it can take years and an enormous amount of resources to repair it,” Mr. Basile says. “While you may not always be able to put a dollar and cent value on sustainable business practices, the fact that your company is ahead of the game, ahead of the regulatory environment and responding proactively to what your customer base wants in this area helps solidify your reputation in the marketplace.”
Leadership 2008 / www.pmi.org