The Corporate Sustainability Dilemma: Policy Or Pragmatism?

While every forward-thinking company has certainly become aware that it’s good business to be more efficient, to create less waste, and to monitor energy usage and expenses closely, what’s going to drive real changes in behavior that lead to those ends: public policy from federal and local governments, or free-market innovation and pragmatic self-interest?

At an intriguing panel discussion last week in New York City, SAP pulled together four voices representing various points of view on that question, and each of those four panelists shared a range of opinions on how and why corporate sustainability programs are inextricably tied to the competitive success of not only those individual companies but of the United States as a whole.

I use the word “intriguing” because while each of the panelists came at the subjects from different points of view, they also shared the common goal of working to identify ways to stimulate and spread innovation, to boost job creation, and to spur economic competitiveness locally, regionally, and perhaps even nationally.

Each of the four speakers was passionate, knowledgeable, and deeply engaged—yet it was also clear that each believes in a very different approach toward achieving the laudable goal of sustainable corporations and communities.

Bruce Katz, vice president and director of the Brookings Metropolitan Policy Program at the Brookings Institution, emphasized repeatedly that the biggest risk facing the U.S. is the lack of a federal policy. Katz warned that in the absence of such a policy—and in the absence of significant federal funding for “green” R&D and advanced technology—“We run the risk of falling behind not just Germany but also China and some other rising economies” in the pursuit of viable “clean” technologies.

Katz also seemed tie himself in a knot with the juxtaposition of two points that he himself made: first, he emphasized that the vast majority of innovative ideas and technological breakthroughs are coming out of American cities and major metropolitan areas—probably more than 85%, he said. Those major urban areas, Katz said, are the engines of innovation for the clean/green-energy industry.

But later he said he couldn’t fathom why cities and regional governments were outpacing the federal government in developing policies that would encourage such growth, and yet again reiterated that the United States is in for deep trouble without an overarching federal policy.

If cities are leading the way in innovation, shouldn’t they also be at the forefront of legislative actions as well?

The next panelist was New York City director of long-term planning and sustainability David Bragdon, who spoke of the city’s multiple roles as a provider of assets, as not only a regulator but also a deregulator, as a financier, and as an advocate.

Bragdon described a broad and highly active set initiatives being undertaken by New York City, including solar empowerment zones, the banning of certain types of heating oil, the tailoring of regulations to allow for solar panels since none existed when the original rules were written, and the putting up $37 million in financing for efforts to “prove the market.”

Given Bragdon’s position in the NYC administration, it was not surprising to see his perspective that city government should be a leading player—perhaps the leading player—in setting policies and initiatives with which businesses and individuals must then comply.

If you’re a government-first advocate, Bragdon’s highly activist stance will appeal to you; if you’re in the private sector, well, perhaps not so much. But either way, Mayor Bloomberg’s administration is clearly determined to play a major role in shaping that future.

From the private sector, Steve Corneli, senior vice president for sustainability, strategy and policy for NRG Energy, attempted to blend free-market principles with an unquestioning belief in claims by climate-change advocates that have yet to be backed up with conclusive proof.

Corneli, whose company is a major provider of electricity in New York City and other markets, said that consumers will be more likely to begin making the transition to electric cars if car companies and energy providers can make electric cars that can perform as well or better than traditional vehicles while also matching them in price.

But Corneli also based much of his belief in the inevitability of this transition on the fact that the Earth is heating up and that human beings are responsible. It’s clear that many people believe that, but it’s also clear that many do not believe that because of the lack of conclusive, verifiable evidence.

Corneli also cited other factors, including the dependency of the U.S. economy on stability/unstability in Middle East that results in Americans having to pay higher prices either way. He also mentioned adverse public reaction to the “shocking” series of major disasters around traditional energy production: the BP Gulf oil spill, coal-mine disasters, and the tsunami that hit the Fukushima nuclear reactors.

So it was unclear to me what Corneli thought NRG Energy’s strategy might be if the hypothesis of man-made global warming gets shot down: will consumers still want to make the move toward electric vehicles that can be recharged by the power stations that NRG and other energy providers are rolling out?

The final panelist was SAP vice president Scott Bolick who cited examples of a few companies using SAP sustainability tools that have saved tens or even hundreds of millions of dollars in energy usage.

For energy company Valero, the savings were $200 million over two years, Bolick said, while mining company DeBeers is deploying SAP’s sustainability solutions to monitor fuel levels and expected usage at its extremely remote mining operation near the North Pole to ensure it doesn’t run short, which in that location would be not just inconvenient but possibly deadly.

Bolick also cited the example of specialty-gas supplier Air Products, which has been able to save large amounts of energy by using analytics tools to monitor and predict consumer demand and thereby optimize timing and efficiency of delivery routes.

Touting the pragmatic approach of basing decisions first and foremost on economic benefits, Bolick described tools that allow one SAP customer to monitor and measure the “embedded energy” and related costs of the 35,000 products it makes. And with that sort of insight, he said, companies can begin to leverage energy efficiency as a source of significant competitive advantage.

From that starting point, Bolick said, all of the various stakeholders across the sustainability spectrum—private industry, federal government, and local governments—can begin to collaborate to frame reasonable goals and initiatives that will help establish the appropriate balance between what are often the competing interests of policy and pragmatism.

Article by Bob Evans of The Innovation Business, appearing courtesy 3BL Media.

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