Why Solar Should Care About Sustainability

Solar power is a poster child of sustainability, at least from the standpoint of energy users. It provides a clean alternative to GHG-emitting fossil fuels and runs indefinitely on free energy from the sun. What more, then, is there to the sustainability of solar energy?

Plenty, and the industry’s largest gathering, Intersolar, which I attended in San Francisco this week, offers a glimpse into why.

The event is an exhibition of more than 800 companies selling their wares—everything from wafer etchers, adhesives, and gauges to gears, filters, and fire alarms. They sell the equipment that makes equipment, and the equipment that makes that equipment. And they are the purveyors of exciting items like plasma applicators, robots, and lasers.

As for the attendees, it’s all black suits and ties, and the discussions are on engineering specs and market trends. It feels more like a summit for making deals, rather than achieving some vision of “ecotopia.”

While there is nothing wrong with all of this, it does bring to light an important truth: The parts that make up the whole of the solar industry are little different than those of any other. And while environmental conservation may be a side effect, the efforts, by and large, are about capitalism.

Thus, as manufacturers, solar companies may cause damaging environmental impacts from their use of water, gasses, chemicals, minerals, and nanomaterials. As designers of large, long-lived physical goods, they are seen as part of a great network of potential e-waste, with end-of-life responsibilities that extend beyond the law. And as global businesses that seek low-cost employees and supplies, the emerging markets that offer so much promise are rife with potential social challenges such as protecting human rights.

If the solar industry is to create the most value for its investors, customers, and communities—all of whom have growing concerns about sustainability and greater means for comparing companies and industries to one another—it has to make sense of all of this. The good news is that others have taken the lead. The information communications and technology (ICT) industry, for example, has started complying with best practices for responsible policy advocacy and working with their suppliers to improve labor conditions and environmental impacts. Since solar companies have similar production processes and supply chains, they can build off of the foundation that the ICT industry has already established.

Yet solar is different: It makes a promise, however implicit, to offer a clean alternative to fossil fuels. This expectation makes the industry a target, and if solar companies can’t objectively demonstrate better overall performance, they risk having their credibility undermined and their technologies devalued.

Some quick parting advice for solar companies new to managing sustainability: Consult the Global Reporting Initiative to understand the full breadth of key issues. Know who your stakeholders are, and identify and synthesize their concerns. Make sustainability a C-level concern, so when decisions are made about maximizing the all-important parameter of per-watt productivity, sustainability opportunities and risks are appropriately considered. And finally, attend this year’s BSR Conference, and join me at the panel, ”The CSR Blueprint for Renewable Energy.”

FTC’s New Anti-Greenwashing, Good-for-Business Green Guides

The U.S. Federal Trade Commission (FTC) has released its long-awaited draft guidance on environmental marketing. The so-called “Green Guides” tell companies how to prevent misleading customers—and avoid FTC actions against them.
Why now? The FTC says consumers are confused about environmental claims such as “sustainable” or “offset,” which lack consistent rules for usage. In response, the FTC’s proposed guidance does three things:
  1. Requires claims to be substantiated. Companies should communicate on specific issues for which they provide competent and reliable scientific evidence and avoid ambiguous umbrella terms like “green” or “eco-friendly.”
  2. Prescribes action on targeted issues. While the FTC leaves methodology mostly to companies, it advises on a few issues where deception is rife and solutions are particularly obvious. For example, the guides say that if companies generate renewable energy onsite and then sell their environmental attributes separately, they shouldn’t also say that they use that renewable energy themselves. Categories of specific advice include: certifications and seals, degradability, compostability, ozone-safe/ozone-friendly, recyclability, free-of/non-toxic, renewable materials, renewable energy, and carbon offsets. See the FTC’s cheat sheet.
  3. Defines where to tread carefully. The FTC acknowledges that some issues are difficult to provide blanket guidance on. For example, life-cycle assessments and ecolabeling are complex and require context, while the determination of carbon offset quality may be better handled by agencies with more expertise. In cases where the FTC “lacks sufficient information on which to base guidance,” it promises to analyze claims on a case-by-case basis.
What does this direction mean for business? I asked three individuals. Kevin Myette, director of product integrity at outdoor retailer REI, told me: “Guidance on green marketing claims has been extremely loose for years, and as a result, industry and marketers have operated virtually unchecked for too long. The FTC’s action to further define the rules is not a bad thing as they are only asking for the truth.”
Stanford Graduate School of Business Professor Erica Plambeck was similarly hopeful. She told me that the guidance “will increase incentives for retailers like Walmart to invest in the measurement of environmental performance and to provide detailed information about environmental performance to consumers. Transparency will lead to improvement.”
Finally, Dara O’Rourke, founder of the Good Guide—a product-rating initiative—said that more FTC involvement isn’t only good for consumers, but also for business. That’s because “the more there is transparency, the more the leading firms will do well in the marketplace. It’s a win for smart, thoughtful, progressive companies. This is basic ‘Econ 101’.”

What to do next: In the near term, leave any suggestions you have for finalizing the Green Guides below (with your name and affiliation) or contact me, and we’ll aggregate and submit your suggestions to the FTC before the comment period closes on December 10.

First posted at BSR.


Here’s a Plan B

Our global climate agenda may need a Plan B, but if we are to choose the right one, some popular misconceptions need to be clarified.

Fossil fuels are not cheap. Utility bills and per-gallon prices are just the tip of the iceberg of our energy costs. Governments pay hundreds of billions of dollars every year in subsidies, with the United States alone spending over US$72 billion since 2002. According to one account by the Natural Resources Defense Council, if you factor in the whole picture, including indirect support, subsidies are in the trillions.

Renewables are cheap, and will only get cheaper. When consumers pay more for oil and gas, their renewable alternatives become viable. But there is a twist. Fossil fuels are finite, so they get more expensive as sources dwindle. Renewables, on the other hand, are unlimited, and actually get cheaper to produce as more is produced. Moving onto the latter economies-of-scale track is not a cost or a burden so much as it is an investment, and if carbon polices are clear and predictable, the breakeven point will be quick. We could power the planet with 100 percent renewable energy by 2030.

The poor lose first. Accounts as varied as the IPCC, Six Degrees, Maplecroft’s climate risk map, and testimonies at Copenhagen by Tuvalu and the Republic of Maldives make it clear that developing countries face the most urgent and severe vulnerability to climate change. On top of already being prone to dangers such as desertification, droughts, disease, and sea-level rise, they have fewer facilities than their wealthier counterparts to insulate themselves against harmful effects. And as negotiations at COP15 demonstrated, they often have the least recourse in international forums.

What then of Plan B? Our task should be to seize this moment in order to usher in policy frameworks that are clear and predicable for enabling multi-decade capital investments in low-carbon technology. At least, according to the World Wildlife Fund, that’s what over 1,000 companies representing US$11 trillion in market capitalization and 20 million jobs think. Our Plan B should be to grab this terrific opportunity of having the world’s attention on climate and call on the United States and other national policymakers to enact a global framework which enables companies to invest and unleashes the potential of a clean-energy economy now.

First posted as a response to The Wall Street Journal Op-Ed, “Time for a Plan B,” by Nigel Lawson on 12/21/09, and then at BSR’s The Business of a Better World.

Five Reasons You Should Consider Generating Your Own Green Energy

Over the past six months, oil prices have plunged more than 50 percent, renewable energy company asset values have taken an even bigger dive, and financial institutions have collapsed completely, leading to a worldwide credit crunch.

Is this really the best time for your company to be thinking about generating renewable energy onsite?

Before answering, consider these forecasts by the International Energy Administration (IEA) in its recent World Energy Outlook 2008:

—   Energy is going to get more expensive, with oil reaching $200 per barrel by 2030.
—   Carbon-intensive energy, which comprises well over half of the energy in the United States, is going to get much more expensive-in part due to a cap on carbon that could reach $180 per ton.
—   The price and supply of fossil fuels will continue to be volatile.

In that context, it’s clear: Companies can’t afford not to think about investing in renewable energy, especially those with high energy-to-raw-material cost ratios, such as firms in agriculture, food processing, metal refining, paper manufacturing, and chemicals.

What follows are five key reasons why you should consider generating renewable energy onsite to power up your business.

Renewable Energy is Beating the Grid

In some regions, the cost of generating onsite renewable energy is already beating electricity bought from the grid. This “grid parity” is currently happening in places like California, Hawaii and Japan, where electricity costs are high and renewable resources are abundant. By 2012, Australia and Italy will likely achieve grid parity, and by 2015 much more of the United States will as well.

Threatened Supply and Hungry Demand Build the Case for Self-Production

Oil production is expanding to regions with increasingly unstable governments and crippling poverty, such as Iran, Russia, and Qatar, which together hold 56 percent of known new oil reserves.

On the demand side, the world is hungrier than ever: Even with the extremely high per-capita oil needs of OECD countries, fully 80 percent of projected new demand is coming from China, India, and the Middle East, while 1.6 billion people around the world still go without any electricity. As for logistics, the bulk of oil moves through international waters where there is growing banditry, such as the $100 million oil tanker heist by Somali pirates that is still unresolved. The result: The fossil fuel supply chain poses tremendous uncertainty on both price and physical delivery.

Carbon Legislation is Pushing Up Costs

Carbon cap-and-trade regulations, in some form or another, are descending on economies around the world. Already underway for several years, the European Union Emission Trading Scheme charges European heavy emitters $21.39 for every ton of carbon above their cap. In October, the U.S. inaugurated its first cap-and-trade program, the Regional Greenhouse Gas Initiative (RGGI), which regulates utilities in the Northeast with a cost of $3.07 per ton. Regulation is just around the corner for other parts of the U.S., as well as for China and Canada. The IEA, an energy policy advisor to 28 member countries, predicts that by 2030, the average carbon prices will climb to $90 or even $180 per ton.

In addition to cap-and-trade regulations, low-carbon product standards and border tax adjustments also will put pressure on supply chains and buyer demand. All this means that carbon-intensive energy is a growing liability, whether at your own operations, upstream with suppliers, or downstream with the use of the products you sell.

Incentives for Onsite Renewables Production are Rising

“Feed-in tariffs,” which require utilities to connect small, onsite renewable projects to the grid and pay their generators for surplus energy generated, are gaining traction. Countries such as Germany and Spain have adopted such policies successfully, and others like the U.S. (in California) and China are in the midst of implementing and scaling them up.

Creative Finance Options Abound

There are numerous ways to gather the resources to make onsite projects happen. Thanks to the grid, energy service companies can provide some or all of the financing needed. The grid also enables creative partnerships. For example, in partnership with Xcel Energy, Colorado’s Aspen Skiing Company recently financed $1.1 million for a 147-kilowatt solar energy array. Of the energy produced, a third goes to a local school, and two-thirds is sold back to the grid, with profits given to Aspen Skiing Company.

There is a good chance you will find financing for onsite renewable energy projects by exploring partnerships with foundations or exploring funding available in carbon markets for carbon-offsets projects.

With the energy crisis likely to outlast the current economic crisis, investing in onsite renewable energy generation can insulate your company from the shocks, scarcity, and rising prices of energy. And with recent political discussions about a “New Green Deal” and a climate change “Manhattan Project,” it’s even possible that governments will add to or reconfigure the $300 billion in energy subsidies around the world.

So, in response to the question we started with: Is this really the best time for your company to be thinking about generating renewable energy onsite?

Yes, now more than ever.

First posted at Greenbiz.