As point person for finance and risk management, the Chief Financial Officer plays a critical role in advancing corporate sustainability. Much support for this theme came in the form of a lively and highly quotable CFO panel discussion at the Silicon Valley Leadership Group’s annual Sustainable Corporation conference, held on May 2^nd.

For those requesting investment dollars to make a company’s products or operations more sustainable, visiting the CFO’s office can be about as much fun as a root canal. A CFO’s traditional focus on quarterly results and return on investment criteria makes ‘no’ a common answer for investment requests, especially those justified mainly on qualitative merits of sustainability. But it doesn’t have to be this way.

Three Chief Financial Officers, Lauralee Martin of Jones Lang LaSalle, Mark Hawkins of Autodesk, and Chuck Boyton of SunPower shared their experience and advice on effective cases for corporate sustainability. The conversation was moderated by Gil Friend of Natural Logic.

The panelists each described how their respective companies are committed to sustainability. In so doing, they provided a view into the CFO’s motivations and contributions, and the importance of being strategic, shareholder value-driven, and numbers oriented. Among the conversation’s punchier points:

• carbon is not how CFOs think
• calling something a sustainability investment can result in problems from the start
• economics versus the environment is a false choice
• there’s a need for bold action, and the world won’t be saved with two-sided paper
• there has to be numbers, and there has to be math
• CFOs love to find real value, and push it out to investors

Lauralee Martin of JLL noted that "carbon is not how a CFO thinks”. Rather, cases for carbon reduction and improved sustainability must be equated with economic opportunity – meaning energy savings, cost/revenue dollars, brand, risk management and the like.

For instance, while their direct carbon footprint is small, JLL manages a huge real estate footprint on behalf of their clients. Through efficiency efforts, JLL has helped clients save $125M in energy costs, and reduce carbon footprints accordingly. Further, this cash savings amounts to an increase in client property values of $2 billion. This is an example of the need she sees for "doing something bold” for sustainability, and at the same time, producing the kind of "value a CFO loves to find and push out there to investors”.

At Autodesk, CFO Mark Hawkins stresses support for "numbers and math”. Efficiency efforts in the company’s data centers are demonstrating measurable energy savings of 60%, and a clear business case for investment.

At the same time, he notes that a far more leveraged opportunity for Autodesk is helping their customers "imagine, design, and create a better world” through use of new sustainability-related features in the company’s design software offerings. Along these lines, Autodesk is actively expanding its product capabilities related to energy efficiency in building design, and is engaging in new software partnerships with a rapidly expanding market of clean technology companies.

SunPower, a manufacturer and integrator of solar photovoltaic systems, is striving to "change the way the world is powered”. Sustainability is core to the company’s mission and business value, and as such, reputational risk is taken very seriously. CFO Chuck Boyton notes that it is hard to quantify such risk, but it’s important to frame these intangibles as "our reputation is a huge asset and must be protected accordingly”. Also, he sees reducing freight costs and improving supply chain efficiency having strong sustainably benefits and value to customers.

As a group, the CFO panelists agreed that sustainability is most compelling in terms of what makes, and keeps, a company valuable to its shareholders. While two-sided paper is a smart thing to do, CFOs are motivated by higher level needs, strategies and opportunities. They stressed that sustainability should not be treated as a check-the-box exercise.

For those seeking investment, it is important to get the dialog right, and focus on the potential for high-value impacts. In CFO terms, the panelists all agreed that saying ‘yes’ to sustainability-related initiatives becomes easy when it means setting new standards for products and operations, establishing new levels of performance, and growing markets.

At an executive briefing I recently attended, a panel of Fortune 500 CEOs was asked if their organizations aspired to leadership in sustainability. Polite laughter broke out, with comments like "would we really want to be up here advocating for the alternative?”

They went on to say aspiration is no longer the issue with sustainability– every business wants to be good at aligning economic interests with environmental and social concerns. The real questions are about focus and competency. They admitted being less clear on "what exactly does the organization need to do?”, and "how do we effectively get there?”

These questions are complicated, and with good reason. As an operating philosophy, sustainability has implications for an organization’s strategy, processes, roles, and technology infrastructure. Further, if affects all functions within an organization. Yet when done right, organizations are enhancing brand value and reputation, differentiating their products, managing risk, using resources more efficiently and saving money.

Figure 1: Top-Level Sustainability Competency Model

Over the past few years, major companies such as Intel, Whole Foods, Starbucks, and HP have been regularly identified as sustainability leaders in investment indices such as the Dow Jones Sustainability Index, and press rankings such as Newsweek’s Green Company Rankings. A common attribute shared by these organizations is that they are developing new competencies for sustainability across multiple business functions.

Our competency model above outlines the scope and dimensions of sustainability within an organization. Leaders are performing traditional functions in new ways, incorporating new strategies, competencies and technology related to sustainability. Goal setting, customer interaction, design and certification of products, energy sourcing, employee engagement, vendor management, corporate reporting, risk management, and facility energy efficiency are all examples of functions being transformed in the context of sustainability.

We see many specific examples of leadership in sustainability, coming from a wide variety of organizations and functions. In the coming months, we will be involving a number of these organizations in online briefings and case study reports, so their insights can be shared with a broader audience. Our goal is to get below the headline level, to explore economics and the detailed ‘how’ questions most useful to those considering similar efforts.

An outstanding leadership example in facilities resource efficiency is Adobe Systems. In 2011, for each of its three headquarters high rise towers in San Jose, California, Adobe earned an EPA Energy Star rating of 100. This puts them in the top 1% for energy efficiency among similar facilities. At an upcoming online conference in March, we will hear representatives from Adobe, Cushman-Wakefield, and the US EPA Energy Star program describe their extensive efficiency program, leading practices and metrics for building energy management, monitoring, and related incentive structures.

Another such example is IKEA, and their efforts in sourcing renewable energy. IKEA has become a leading commercial adopter, with on-site solar at 85 percent of their U.S. stores by the end of 2012. IKEA is one of a number of major organizations significantly scaling their solar deployments around the country, in response to falling solar prices and broadening a broadening of incentive programs. Later in March, we will hear from IKEA and others in an online conference focused on the details of how and why organizations are moving beyond experimentation with solar solutions to broad-scale deployment.

In summary, it is exciting to see how major corporations and institutions around the world are benefiting by embracing sustainability. Yet it is still early, and organizations are looking to learn and develop new competencies across a wide range of business functions. We remain focused on providing relevant market analyses, frameworks, and leading practice examples, to help organizations convert a philosophy of sustainability into new operating competencies.

At Hara’s Executive Summit held on September 20^th, new CEO Dan Leff described energy cost savings as a ‘here and now’ opportunity, a clear call to action for corporations and institutions. Yet to realize these savings, structural hurdles must be overcome. Disaggregated data, misaligned organizational incentives, heterogeneous energy management infrastructure, and issues with business case credibility have been common issues, slowing energy efficiency investment.

"This low hanging fruit has been hanging low for about 20 years” said Jim Sweeney, a Summit speaker, and Executive Director of Stanford University’s Precourt Energy Efficiency Center. "There seems to be an electric fence around that orchard – the question is, what is that electric fence?”

In this context, Hara introduced Mr. Leff, an energy industry veteran, and presented the company’s latest product development roadmap, outlining a number of new capabilities for energy management. While careful not to dismiss carbon management and sustainability, the clear direction going forward is to help customers save money on energy. Hara aims to provide better data, enterprise-level integration, and business support for efficiency investments in a way that is CFO-relevant.

Hara’s direction is consistent with other major players in this growing software market. Sustainability-related offerings from SAP, IBM, CA, Enablon, C3 and others are increasingly focused on helping customers drive measurable cost savings in energy use at an enterprise level. This was highlighted as a major trend in AltaTerra’s June 2011 industry landscape report titled ‘Enterprise Sustainability Management Solutions: Reference Architecture and Buyers Guide’.

Customers and experts presenting at the summit described energy costs ranging from 5-30% of operating profits, with a savings potential of up to 10% of operating profits. They also detailed the different ways that energy costs add up – directly on energy bills, and indirectly through freight and MRO (maintenance, repair, and operational costs).

Customers agreed that energy saving opportunities abound within most large organizations, and are very material to the bottom line. Not only that, many customers are demanding energy & GHG reduction programs at their suppliers. The challenge remains getting better visibility to energy use data, and establishing better enterprise-level disciplines for identifying and executing the highest-return efficiency improvements.

Hara provided a preview of new functionality currently under development – some of which will be released in the next 45 days, followed by additional releases in 2012. The outlines of three new modules included ‘Insight’, which will report enterprise-level energy performance, and analyze energy investment broadly in terms of a percentage of the organization’s operating profit. The new ‘Modeling, Forecasting and Budgeting’ module allows organizations to model best and worst-case enterprise-level energy cost scenarios, based on a range of internal and use and pricing variables. And a new module for ‘Efficiency Planning and Optimization’ supports top-down target setting for energy efficiency and cost savings objectives, enforcement of ROI calculation disciplines, and advanced project portfolio analysis.

We will continue to actively track Hara’s progress in development of this important new functionality, and in a larger context, highlight customer experience with deploying energy management capabilities.

Learn more about Hara, C3, and other sustainability management vendors in AltaTerra’s latest report "Enterprise Sustainability Management Solutions: Reference Architecture and Buyer’s Guide.”