In 2007, Siemens and McGraw-Hill jointly released an important report entitled “The Greening of Corporate America.” Based on extensive surveys, the report indicated that “corporate America was approaching a tipping point, one in [which] our nation’s most prominent business leaders were beginning to embrace sustainability and energy efficiency and make it an integral part of their corporate strategy – more the rule, rather than the exception,” according to recent comments from Siemens President and CEO Daryl Dulaney. Now, three years later, these two firms have updated this report to determine “how far corporate America has come in the adoption of sustainability across the enterprise and to assess the impact of today’s economic conditions on their progress.” Here we take a look at some of the key highlights from the 2009 report.

- Corporate building portfolios steadily becoming greener. Back in 2007, McGraw-Hill estimated the “tipping point” (when green building becomes a core component of the sustainability plans of large firms) to occur in 2009. The 2009 report indicates that the tipping point actually “occurred sooner, with ongoing steady, significant growth taking place between 2006 and 2009.” To illustrate how common green building practices are becoming, consider that 21 percent of firms in 2009 reported that 60 percent or more of their buildings were green, vs. 17 percent in 2005. By 2012, that figure is projected to rise to 42 percent.

- Rising energy costs a major incentive toward green building practices. This is far and away the biggest motivation for adopting green building practices: 73 percent of survey respondents agree with this statement, virtually unchanged from 2006 when 75 percent said the same thing. One significant change over the past three years was the percentage of respondents saying that “government regulation is driving green building.” In 2009, only 29 percent said so, down from 40 percent in 2006. The report’s authors explain this by noting that “less emphasis on government regulation indicates the maturity of the industry as outside incentives become less important than the inherent business benefits these initiatives can yield.”

- Corporations increasingly think that sustainability leads to market differentiation. In 2009, 61 percent of firms agreed with this statement, up from 31 percent in 2006. This is an interesting phenomenon, in our view, because at some point (probably in the not too- distant future), the vast majority of companies will have some sort of sustainability program in place. At that point, sustainability practices are unlikely to lead to market differentiation, in our opinion, since they will have become so widespread. Nonetheless, the trend toward sustainability is positive for consumers and businesses alike.

- “Greenwashing” remains a concern. This is a topic that we have covered in The Green Scene from time to time (mainly on the “Under Construction” page), but it merits note again. As marketing claims about green products continue to increase (see previous bullet point), there is a danger that the term “green” will lose meaning (some say that’s already occurring). The Siemens/McGraw-Hill report states that 20 percent of the industry is concerned about greenwashing currently, and points out thatthis percentage has increased over the past several years based on surveys of owners, architects, engineers, and contractors. Interestingly, third-party certification is only recognized by 43 percent as a key green/sustainable feature, but the report’s authors anticipate this percentage will increase as concerns continue to grow.

- Expected benefits from corporate sustainability practices are conservative. Only 12 percent of the executives interviewed expect productivity gains or cost savings related to sustainability initiatives to be greater than 10 percent, according to the report. Siemens/McGraw-Hill speculates that this figure is so low because there are only a limited number of companies that are currently measuring performance. What is really intriguing, in fact, is that 21 percent of respondents can’t even guess what their expected percentage drop in costs will be, and 18 percent don’t know how to measure the potential increase in productivity. These percentages include responses from chief sustainability officers (who presumably were hired to implement and monitor these programs), as well as CEOs, CFOs, and COOs.

Concluding thoughts

We can’t say that we’re surprised by the findings in the latest edition of the Siemens/McGraw-Hill “Greening of Corporate America” report. The survey results are consistent with our research in the green building/energy efficiency markets, as well as what we’ve heard from a variety of public and private companies. In summary, companies are increasingly making sustainability initiatives a core part of their businesses – not only to lower their operating costs and improve efficiency, but also to attract and retain customers and employees. In addition, companies seem to be recognizing that customers and shareholders are increasingly demanding public disclosure and transparency of sustainability practices – a trend that is likely to spur even greater investment in green building/energy efficiency programs.

Meanwhile, the latest data from Pike Research indicates that green building certification programs (LEED, BREEAM, etc.) continue to experience rapid growth, with space covered by such programs forecast to increase from six billion square feet worldwide in 2010 to 53 billion square feet by 2020. Interestingly, Pike Research anticipates that newly developed green building programs in China and India will represent about 30 percent of all certified green new construction by 2020.

Reprinted with permission from The Green Economy