A Seat at the Table

At Google, Rick Needham, director of energy and sustainability, says that when he talks with his chief financial officer, he doesn’t have to start by justifying sustainability investments. “The conversation is, ‘Why can’t we do more?’” Needham says. Google’s renewable energy portfolio is proof, he says, noting that the company has invested $1 billion of capital in 10 large-scale wind and solar energy projects totaling 2 gigawatts, enough to power 500,000 U.S. homes for a year. “We’re the only nonenergy company doing these investments,” he says.

Similarly, sustainability is no longer a foreign topic when it comes up with management at Autodesk, a San Rafael, Calif.-based 3-D design, engineering and entertainment software and services company. Sustainability has become easy to communicate, said Mark Hawkins, executive vice president and chief financial officer at Autodesk, at Fortune Brainstorm Green in Laguna Niguel, Calif., last April. “Let’s preserve things that are really precious. Let’s minimize waste. What is hard to wrap your head around on that one?”

“The key for chief sustainability officers to have a seat at the table is the ability to draw linkages between a company’s business priorities and its sustainability programs.” -Kevin Anton, head of sustainability at Alcoa

Aluminum manufacturer Alcoa defines sustainability as using value to build financial success, environmental excellence and social responsibility in partnership with all stakeholders. “The goal is to deliver net long-term benefits to our shareholders, employees, customers, suppliers and the communities in which they operate,” says Kevin Anton, head of sustainability at Alcoa.

“The key for chief sustainability officers to have a seat at the table is the ability to draw linkages between a company’s business priorities and its sustainability programs,” he says. “When developing our sustainability programs, we focus on exhausting all noncapital solutions before we turn our focus to capital investments. When we have to deploy capital, it is subject to the same investment hurdles as all capital projects.”

Jumping Hurdles

Hawkins says he hears about communication mistakes some sustainability officers make with management teams. The deal-breakers happen, he says, when proposals lack creativity. Sustainability, he said, should mimic other investments, such as mergers and acquisitions or brand investments, when being proposed to CFOs. “Management is expecting you to do your homework, speak the language of finance, expect you to do the same level of rigor and the same level of measurement that anyone else would do,” Hawkins says.

The time frame for return on investments can be a stumbling block, though, and sustainability officers sometimes have difficulty jumping this hurdle when approaching management. Andrea Moffat of Ceres agrees that sustainability investments should be scrutinized just like any other, but, she says, “Since we know that the policy environment does not always account for sustainability issues, such as no price on carbon in the U.S., allowing a longer time frame for a return on investment might be needed.”

While companies such as Alcoa, Autodesk, Google and P&G have fully embraced sustainability throughout investments and decision making, much of Standard and Poor’s 500 companies lag on such efforts, Moffat says. “I’d like to see more CFOs involved in sustainability,” she says.

One way to propel sustainability to the fore is to charge the board of directors and executive management with the oversight and accountability of their company’s sustainability, according to “The Road to 2020,” a 2012 report by Ceres and Sustainalytics, an independent research and analysis firm. And, as with any aspect of business, a good governance strategy puts a company in better position to manage risks and capitalize on opportunities when it comes to sustainability. Leaders such as P&G and Alcoa, where sustainability officers report directly to CFOs, are setting the bar. But Moffat says more CEOs and CFOs need to become educated and involved in the role of sustainability. In fact, she says sustainability should be part of their job mandate, with compensation tied to targets such as greenhouse gas reductions, environmental risk management and supply chain human rights issues.

While it’s encouraging that a small cluster of leading businesses are on the front line of sustainability practices, when it comes to broad corporate action, according to Moffat, “There’s no critical mass yet.” The good news is that many companies are moving in the right direction by making sustainability part of everyone’s job. If the investments these companies are making today continue to pay off, others are sure to follow. View Ensia homepage

 

UPDATED 07.03.13: This essay was originally published on 07.01.13 and listed Bob McDonald as the CEO of Procter & Gamble. The previous day, 06.30.13, McDonald retired from P&G. This post has now been updated to reflect this.