Finding the ROI of Sustainability

This article is part of a series on “The ROI of Sustainability,” written with the support of MeterHero. MeterHero helps companies and organizations offset their water and energy footprints through consumer engagement. To follow along with the rest of the series, click here.

By McGee Young

How can we measure the ROI of sustainability? This series explored that question by examining case studies of companies, organizations and communities that have successfully implemented sustainability programs. Is ROI simply a business calculation? Is the dollar value of sustainability -- as defined by conventional business metrics -- the best way to measure ROI?

We also brought ulterior motives to this question. MeterHero – as a concept – wants to challenge conventional notions around sustainability. We want to create a new framework for valuing water and energy. We want a future where we don’t have to battle big incumbent utilities for small, incremental changes in water and energy sustainability.

In our Stories & Beer Fireside Chat and in our essay on collaborative conservation, we previewed some of the key themes of the series. At the Sustainable Brands conference, we interviewed some of the leading practitioners of sustainability to learn more about how their companies and organizations measured sustainability ROI. We also offered tips to sustainability professionals on how to build programs that would survive and thrive. In this final essay, we lay out in more detail how we plan to create a new ROI of sustainability around water and energy.

Three things we believe

1. We believe that water and energy conservation is worth more than your bill “savings.” Your monthly utility bill represents the internalized costs of production plus certain profits for the supply chain that brings you your water and energy each day. The externalized costs – climate change, water scarcity, pollution, land destruction – are almost entirely absent from your bill. Therefore, when you save water and energy, the only value you are realizing is the profit value that has been defined by your utility.

By contrast, we believe that reducing your water and energy footprint creates enormous environmental benefits. You should be rewarded for your efforts -- independently of your utility’s assessment of these benefits. If they don’t care about pollution, they certainly don’t care to recognize sustainable actions. But when you install solar panels, when you use less water, when you insulate your home against the weather, you do a tremendous service to environmental sustainability.

To recognize this value, MeterHero pays people to save water and energy. Our software captures your home’s water and energy savings (using your utility’s own measurements) and issues cash rebates for your conservation, funded by companies who share our environmental values. By pricing water and energy conservation independently of your utility, we can reward you for reducing your impact on the environment.

2. We believe that monopoly utility business models can be disrupted through software. The clean-tech sector has long been enamored with physical products that promise a less polluting alternative to fossil fuels. Whether it’s algae as jet fuel, a higher-performing solar panel, or a newer/better nuclear reactor, we’ve seen many hundreds of billions of dollars poured into deep R&D. Several technology cycles later, CO2 concentrations are higher, global temperatures are hotter, and the same basic utility infrastructure exists to deliver us water and energy in the same way as before. By all measures, investors are still wary of the clean-tech sector – the ROI is too uncertain.

But what about software? To date, software has been deployed nearly entirely within the existing utility valuation framework. Companies like Opower provide software services to utilities to promote conservation. Building analytics software packages from companies like Johnson Controls and Lucid promise more efficient use of water and energy. But software is most definitely not eating the water and energy sector … yet.

We believe that software can disrupt the utility sector, but not by providing services within the existing value framework set by utilities. Water and energy need an abstraction layer – apart from the physical properties of the commodities themselves – in order to unlock value that is currently not recognized by utility providers. By abstracting the value of water and energy from the physical delivery of the product itself, we can unlock massive innovation potential to serve goals like conservation and sustainability.

3. We believe that disaggregated systems will create incredible value in coming years. Brittle and fragile, the utility ecosystem is poorly equipped to respond to environmental disruption. Hurricanes Katrina and Sandy reminded us how quickly our major cities can become incapacitated. Utility systems across the United States are in desperate need of investment. As much as 20 percent of drinking water is lost to leaks in some cities while others require massive amounts of energy to supply potable water to thirsty populations.

Disaggregating utility systems will create vast new markets for water and energy products. In most areas, the antiquated electricity grid barely accommodates rooftop solar. But in certain test locations, smart micro grids are organizing energy production and consumption on a peer-to-peer level. With onsite energy storage becoming market-ready, opportunities to fully disconnect from centralized providers are inching closer to the mainstream.

MeterHero connects people across the country and around the world in the common cause of water and energy conservation. It doesn’t matter which utility provider collects your bills or provides your services. It doesn’t matter how much you are charged for energy and water. You don’t have to wait for your utility to adopt a conservation program. By making MeterHero universally available, we aim to both disaggregate existing utility services and create a new aggregation layer of value that exists independently of any particular utility. As a decentralized network, we can capture the value of conservation for our users and empower them to create impactful change in their communities.

The ROI of sustainability

We began this series with more questions than answers. What does it even mean to calculate an ROI for sustainability? Is sustainability in and of itself a meaningful concept? Can you really calculate a value on a concept so nebulous? If there are no common definitions or standards, is it even possible to compare the success of one program to another?

The tricky thing about measuring the ROI of sustainability is that we won’t really obtain measurable outcomes until some point in the future, and even at that distant point we’ll be using counterfactuals to make our calculations. That’s why most companies interviewed for this series talked about specific cost-savings measures they’ve implemented under the banner of sustainability. And while goals like zero-waste are laudable, whether they create a sustainability ROI is more debatable.

We would like to leave this series with a final question to ponder. Should sustainability programs be designed to preserve today’s systems in the face of tomorrow’s uncertainty, or should they be designed to change today’s systems to better adapt to an uncertain future?

 

Image credit: Flickr/Pictures of Money

McGee Young is founder and CEO of MeterHero, a water and energy conservation platform. MeterHero allows companies to fund conservation rebates that consumers earn as they reduce their water and energy consumption. McGee was a winner of the Midwest Social Innovation Prize, a finalist in the Clean Energy Challenge, and his company was selected for the charter class of startups in the Global Freshwater Seed Accelerator. Prior to MeterHero, McGee founded H2Oscore, while also serving as an Associate Professor of Political Science at Marquette University. He is the author of “Developing Interests: Organizational Change and the Politics of Advocacy.”