By Dr. Aruna Ram
My previous article reviewed the drawbacks of current environmental rating schemes, why we need a good environmental scorecard and what functions it needs to fulfill. This article details issues in the rating schemes, potential solutions and introduction to a new methodology to address these issues.
Below is a good example of how a narrow range of indicators chosen can distort the bigger picture. Figure 1.1 shows the energy intensity graph for various companies analyzed. IKEA data is unavailable. All data were acquired from publicly available records. Finally, this is not to make any company look bad but to let companies know about how they can improve their environmental performance.
Figure 1.1 Normalized Energy Intensity for companies
From above, the normalized energy intensity is highest for JCPenney’s (JCP) followed by Kohl’s. However, Kohl’s has recently targeted to become carbon neutral by year end 2010. If so, Kohl’s non-renewable energy intensity will be zero, the first general retailer to do so in the US. The above graph shows that though JCP is claimed one of the greenest companies due to its tremendous efforts in greening which is highly commendable, its normalized energy intensity is still very high compared to its peers. JCP’s energy intensity is almost twice that of Walmart. JCP has invested heavily in energy efficiency projects which makes sense, since its energy usage itself is very high. However, if one looks only at the efforts and brands a company green, it is a mistaken identity since the load itself may be higher. Also, JCP has invested less than its peers like Kohl’s, Walmart or Macy’s in renewable power, which should affect its GHG as well. Hence, JCP needs to seriously look at its energy usage, reason why its intensity is so high in the first place, despite investing heavily in energy efficiency programs.
UK’s Marks and Spencer’s and France’s Carrefour energy data were used to compare global grades for the same. Carrefour has one of the lowest energy intensities in the industry of 63.6403 while JCP has the highest of 122.7956, almost twice the usage of Carrefour.
To understand the load verses efforts to mitigate the load matrix better, Figure 1.2 is a good visual aid. In any category, the desirable quadrant in the matrix below is the 2nd quadrant of high efforts/ low load or where the efforts are high enough to mitigate the load. JCP’s energy use lies in the first quadrant, where its energy usage is very high despite its high efforts. Thus, the conclusion is that its efforts are not high enough to mitigate the load.
Figure 1.2 environmental load vs. efforts to mitigate load
Thus, we can see how a narrow range of measures like Newsweek’s which has awarded JCP the greenest in its industry, or an absolute system like ULE 880 that rewards for net % reduction, (Assuming JCP gets the maximum 6 points by making the required 12% reduction in energy usage compared to the baseline energy usage, its reduced energy intensity will still be one of the highest in the industry) can eclipse a more complete picture.
Potential solutions to the above issue are to choose a complete range of indicators that will promote higher efforts, lower load among other reasons for choosing indicators in relevant categories and rate with respect to “Best in class” globally to promote environmental sustainability. The reality is that even the most leading companies have a long way to go before they reach true sustainability. Hence, in time, raising “the Best of” bar to an absolute scale with zero impact such as zero energy buildings, etc, would more stimulate continuous improvement and tell you how much work remains to be done, where the scale will not change from year to year.
The quest to address such issues led to the research and development of Corporate Environmental Performance Rating (CEPR), a new methodology to rate corporate environmental performance that includes the entire cradle to grave environmental activities of a company, addresses current issues, is based on sound sustainability principles and fulfills all functions of a complete, comparable and credible environmental scorecard. The following articles will detail other issues, potential solutions and why CEPR could be a better environmental methodology for companies to adopt than the Newsweek’s or the ULE 880.
The rest of Dr. Ram’s Environmental Sustainability Scorecard series can be found here.