By Ory Zik, Founder and CEO, Energy Points
It is a tale of two desks, the Chief Financial Officer (CFO) and the Chief Sustainability Officer (CSO). On the desk of the CFO sits a file of data points and calculated totals representing the company’s annual international revenues and losses by quarter. On the desk of the CSO are multiple files representing a myriad of environmental sustainability projects and initiatives, tallying the resulting kilowatt hours (kWh) saved, tons of CO2 abated, gallons of water reduced and so on.
The CFO knows that the data on the CSO’s desk is critical to the organization’s risk mitigation and branding and therefore Wall Street’s perception, shareholder value and ultimately financial success.
Just as they did last year, both executives will produce an annual report for the business. But while the CSO is trying to compare the environmental impacts of electricity to natural gas, determining how many gallons of water were saved, the CFO is converting yen, euro and pounds into total dollars spent and saved and asking for hard numbers on just what those gallons of water saved mean to the bottom line.
The CFO will use the same tried and true conversation and calculation tools in place for decades. Unfortunately, the CSO has no universal metric to provide a consistent, accurate means of measuring environmental sustainability measures over time and across all domains in a way that’s representative of both bottom line environmental and financial business impacts.
Despite the desire to account for and potentially even regulate corporate environmental sustainability initiatives, the industry lacks a common, shared language that accurately quantifies the impact of most projects and environmental sustainability decisions. Though dozens of companies in the past decade have jumped on the Corporate Sustainability Reporting (CSR) bandwagon, there has been no common denominator to allow them to state authoritatively that a gallon of water saved is equal to a pound of carbon abated.
It is this problem that is limiting the true integration of CSR and financial reports.
Capturing and communicating the value of environmental sustainability as part of a financial report requires that sustainability be quantified in a clear, rigorous and intuitive way. Simply showing CO2 abated or water saved doesn’t provide a full picture as to whether these initiatives are impactful beyond a cost-reduction standpoint. Businesses must be able to track their environmental and financial efficiency by integrating these different resource silos into one universal metric. When integrated with financial reporting, this provides a holistic look at a company’s environmental sustainability initiatives and their true impact on the business and environment.
For example: It may make sense for the CFO to look strictly at the dollars saved by instituting an energy retrofit of an inefficient plant in, say, California, or by implementing a wastewater reduction initiative in Georgia.
However, the CSO must also look at whether that retrofit would have a greater environmental impact in Georgia, where the kilowatt hours saved help reduce the burning of fossil fuels, or whether the wastewater initiative would be more beneficial in the dry, high-desert of Southern California. He or she must then compute across each domain the total environmental and business impact using a metric that accurately compares both resource types and regional impact in the same way the CFO’s conversions combine and calculate international currencies.
This is why the industry is in dire need of a universal metric for measuring sustainability. In our work with one of the leading academic institutions in the world, we’ve been able to help them integrate electricity use, water use, waste and other domains, and put them into primary energy terms. Translating these domains into a simple, universal metric allows the institution to accurately convey the true performance of their sustainability initiatives, while revealing new or different strategies that may be more effective.
To achieve optimal transparency and ROI, the CSO and CFO’s data points must be integrated in a shared report to reflect the use of universal metrics across all business and resource areas. Ultimately, that integrated report can and will define the decisions and results necessary to true environmental and financial sustainability.
In 2010, Dr. Ory Zik founded Energy Points to enable corporations capture the value of sustainability in a practical way.
Prior to founding Energy Points, he was the founding CEO of solar thermal augmentation company, HelioFocus Inc., which develops solutions for conventional power plants. Dr. Zik led HelioFocus from 2007 to 2010 and currently serves on its board. The company is now growing in Israel and China with strategic partners such as Israel Corp and the Sanhua Group. Dr. Zik holds a B.Sc. (cum laude) in Physics and Mathematics from Tel Aviv University; M.Sc. (cum laude) and Ph.D. in Physics from the Weizmann Institute of Science. He is a recipient of the National Amos De Shalit Physics prize. In 1993, he was the curator of Israel’s National Museum of Science. Dr. Zik holds worldwide patents for his inventions.