in the world. Reporting more than $112 billion in sales in 2007 Siemens AG is a global giant employing more than 390,000 employees worldwide with operations in 190 countries.To support new market access and continued competitive growth this global giant is also an innovation leader. Siemens has 50,750 patents worldwide and in fiscal year 2007 the firm spent more than $3.4 billion on R&D. Strategic R&D topical pursuits for Siemens include: technology for the environment, digital health, the thinking car, intelligent networking, personalization, remote services, elements of life, always-on-society, software, sensor technology, clean energy, materials research, new light sources, medial imaging, robotics and agents, usability, factories of the future, and logistics.
Without even exploring each of these R&D topics in depth one can begin to see the depth and breadth of Siemens innovation pursuits as well as how the firm is positioning its future products with social and environmental needs including environmental management, energy efficiency, healthcare, resource conservation, and global connectivity. Siemens Building Technologies, for
example, is looking at the building retrofit and new build markets as opportunity for innovation and social response through energy efficiency, smart sensor technology and new sources of lighting and intelligent networking. Data from McGraw-Hill and Siemens shows that corporate America may be at a “green building tipping point”, and that a technological and social transformation is underway in how corporations do business.The Tipping Point for Green Buildings
In 2007 a McGraw-Hill Construction study, commissioned by Siemens Building Technologies, Inc., reported out on the “attitudes of corporate leaders toward sustainability and green building”. The study relied on interviews and surveys with close to 200 corporations with revenue exceeding $500 million. The McGraw-Hill Siemens study reported the following insights:
· 63 percent of CEOs recognize financial benefits of green building.
· 67 percent see a specific operating cost benefit from
Green.· 57 percent of respondents think green fosters innovation within their companies.
· 60 percent of CFOs see the market differentiation sustainability activities and green building can provide their companies as a definite benefit, with over half of the other executive respondents agreeing as well.
These findings are significant, and Siemens believes they point to a green building “tipping point” among American corporations. Although there are many drivers impacting the transformation of Corporate America to greener pastures, rising energy costs were identified by more than 75 percent of the McGraw-Hill and Siemens survey participants as a major motivator for building or retrofitting buildings with more energy efficient technologies and green building solutions.
In the US buildings account for approximately 65% of total US electricity consumption, 36% of total US primary use, 30% of total US greenhouse gas emissions, 136 million tons of US construction and demolition waste (about 2.8 lbs. per person per day), 12% of potable water, and
40% of annual raw materials use globally (3 billion tons). Most all corporations operate and maintain buildings as part of their daily business. Driven by the cost of energy and growing concern over the influence of carbon on future business risks, design and development of “green buildings” has emerged as a business strategy and sustainability objective. Every sector of society (businesses, universities, governments) are looking at greening their buildings as a way to reduce operating costs, reducing their carbon footprint, creating a competitive edge, and delivering more value to their bottom line and to their stakeholders. For many, carbon will either be a cost or revenue stream in the future. Thus organizations need to understand their carbon footprint in relation to their competitors, industry sector and society. Most firms are doing this by inventorying their greenhouse gas (GHG) emissions for all segments of their operations. And smart firms are beginning to assess “what stage of sustainability” they are in, and how to improve.
Five Stages of Sustainability
I recently listened to Rick Walker, Manager of Sustainability Initiatives for Siemens Building Technologies, Inc. outline what he termed the “Five Stages of Sustainability” at a private Leadership Benchmarking Workshop facilitated by the AHC Group, Inc. in Phoenix, Az. Mr. Walker identified the following Five Stages:
Stage 1 - Green not part of the company mission
Stage 2 - Green enters into the company mission as it is legally required
Stage 3 - The company considers the proactive application of Green to be consistent with the profit mission
Stage 4 - The company transforms into a Green organization. Green is viewed more as an opportunity than a cost
Stage 5 - The company approaches business as a holistic, restorative company
The majority of companies are in stages 1, 2 and 3. And fewer companies have entered into stages 4 and 5. Companies that we study at AHC Group, Inc. are in all Five Stages of Sustainability as defined by Siemens, but we typically report on those companies that clearly fall in Stage 4 and 5 as they’ve typically developed internal management practices, governance policies, reporting structure and operational strategies for sustainability within their organizations and often, within their supply chains and internal/external partnerships. In addition, the companies we see in Stage 5 usually have an enlightened sense of the near future and an intelligence and innovation infrastructure that allows them to rapidly sense market needs and deliver new products that have social and environmental consequence more competitively than firms that have not yet arrived to Stage 4 or 5.
Another compelling insight of Stage 4 and 5 firms is the use of internal and external “Sustainability, Environmental Leadership, or Green” Committees. The members of these committees typically consist of all segments of the organization (finance, sales/marketing, product/service development, legal, facilities management, risk management, HR) and at decision making levels. Companies/organizations including LP Corporation, Siemens, USDOD, HSBC, and Mitsubishi have internal committees that report through a governance structure to their respective executive committees. Internal “sustainability” committees are the eyes, ears and mouth for the company. They communicate the vision and mission sustainability roadmap to internal and external audiences. They listen to internal and external stakeholders on needs and requirements. They seek to coordinate the design and implementation of sustainability strategies internally and externally. And they seek to build trust and reputation through transparency and visibility of how sustainability strategies are developed and implemented as well as the overall “sustainability performance” of the organization.
Amid the evolution of “sustainability and green” committees has been the slow metamorphosis of the “Chief Sustainability Officer (CSO)” for many leading firms. The CSO has emerged as the internal champion for sustainability initiatives, but more than that, we find CSO’s to be revenue generators and responsible for overall risk management. For more insight on the emerging roles of CSO’s and those firms in Stages 4 and 5 please see World Inc.
Staging the Transforming Within Your Organization
Mr. Walker’s presentation and summary of the “Five Stages of Sustainability” encapsulated the idea that sustainability is a continuum as well as a process of transformation for businesses, governments and consumers. Sustainability is not something that can be delivered to a company’s doorstep in a UPS box, opened and installed. Instead, sustainability has to be studied, defined, embraced, implemented and measured by each organization. The corporate trend toward sustainability involves elements of social, technological, and business transformation. Thus corporations, governments and consumers alike will discover what sustainability means to them and how much emphasis to place immediately or over a longer term on transformation and going through the stages of sustainability.
As you begin or continue your journey of sustainability, keep in mind firms like Siemens that have much to offer by way of tools, technologies and services that can aid in your organizations transformation. As the cost of energy and collision of carbon on business risks elevate discussions of sustainability within your organization consider the following questions to help you navigate your course:
Strategy & Roadmap Development
· What stage of sustainability is our organization in? What are the practical solutions oriented strategies we can develop and deploy to continue our journey toward the next stage?
· Has our organization established strong pillars of sustainability: vision and mission, roadmap and implementation strategy/plan, an open learning environment and a way to inventory, measure and report out on progress/goals?
· Do we have an existing “sustainability or green” strategy and roadmap?
Commitment & Communication
· Because “green” and “sustainability” are philosophies that organizations adopt and a journey each organization takes, there needs to be commitment from all stakeholders, internal and external (from executive management to vendors and customers). Has our organization communicated its philosophy for “sustainability” to stakeholders and been granted their commitment to see it through?
· Do we have an internal “sustainability or green” committee that overseas the strategy roadmap and implementation? Has the committee developed a vision, mission and goals for the strategy roadmap?
· Has top level support for the strategy roadmap been achieved? Have operational level personnel been educated and involved in the strategy roadmap development?
· Is our strategy communicated at all levels of our organization and to our partners, suppliers, customers? Do our employees, vendors, suppliers, customers know what is expected of them?
· Do our stakeholders know the performance of our strategy? Has it been communicated to them successfully?
Competitive Differentiation
· What is unique or different about our organizations’ strategy? Compared to competitors, compared to other industries?
· Have we evaluated our product and service impacts and how to innovate better?
· Do we have the need for a cross functional CSO that is an internal enabler for governance, environmental/operational excellence, design of environmentally benign products/services and risk reduction?
· What is the carbon footprint of our buildings/facilities? Does our carbon footprint matter relative to our peer companies? How can we reduce our carbon footprint at our facilities, fleets, purchasing and other business units?
The road to sustainability is not yet paved. In fact it has barely been scouted. As you chart a path toward the destination that most suits your business, products, organizational culture and industry sector remember that sustainability is a journey. The journey is rich with opportunities, but also risks. So chart your course with care, and where possible, learn from other leaders that have, like Siemens, much to offer by way of social response intelligence and innovation.
Tell us about the challenges and opportunities you’re experiencing during your journey to sustainability.
Mark C. Coleman
Senior Associate & World Inc. Case Leader, AHC Group, Inc.
Mark@ahcgroup.com
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