During November, Ellen Sinreich instructed real estate professionals from coast to coast about green leases as she made formal presentations at the two-day Negotiating Commercial Leases program in New York City sponsored by the Practising Law Institute and at the two-day Retail Green Conference sponsored by the International Council of Shopping Centers in Phoenix.

Recognizing that the lease is the single most important legal document when it comes to greening a tenant-occupied commercial property (after all the lease governs how the property is occupied, operated and renovated and how the money flows between the parties), Ellen recommends the following step-by-step process:

Step 1

Start way before you get to the lease by formulating building-wide environmental standards. Standards should include resource consumption, data collection and sharing, indoor environmental quality and recycling.

Step 2

Educate every member of your team that will touch the lease/tenant about these environmental standards. These team members include the individuals responsible for leasing, property management, legal, construction and finance.

Step 3

Quantify how achieving and complying with the environmental standards will result in an economic win-win for landlord and tenants.

Step 4

Communicate about the win-win environmental standards to every member of the tenant team including the deal makers and people in the legal, facilities management, construction and accounting departments.

Step 5

Make going green easy with green talking points for your team members and a green guide for tenant team members.

This month Green Edge focuses its sustainability lens on green supply chains and what that means for the supplier. Although the momentum for climate change legislation and regulation has slowed here in the U.S., leading companies throughout the world continue to pursue green strategies as a means to enhance performance and profits. In addition to greening their buildings and operations, these companies are aggressively wringing waste, cost and emissions out of their supply chains.

So what does that mean for suppliers—- the millions of companies whose very existence depend on selling goods and services to the Ikeas, Procter & Gambles and General Electrics of the world?

For suppliers that are effectively managing their carbon footprint—- reducing the resources they consume and the waste they create—- and providing products that are carbon footprint solutions for their customers, this is good news.

For those suppliers that are not working on reducing their carbon footprint and whose products do not provide carbon footprint reduction solutions for their customers, their increasing obsolescence is inevitable, in our opinion.

Here are the two key questions that we recommend suppliers ask themselves, not only to preserve, but to increase their competitive prowess, given the importance of sustainability as a mainstream concern throughout the world:

Do your products provide a carbon footprint reduction solution to your customers?  

If you are a supplier to Coca Cola, McDonald’s, Pepsico or Unilever, all of whom have pledged to phase out HFC refrigerants completely by 2015, you’d better be able to say yes. If you manufacture or sell lighting equipment, you’d better be able to say yes, as improvements in lighting technology continue to meet the demands of companies like Best Buy, Deutsche Bank and Simon Property Group for lighting that provides greater energy efficiency and longer useful lives.

Is your company managing its carbon footprint? 

If you are a vendor to Home Depot, Citibank, Johnson & Johnson or IBM, you’d better be able to say yes. These and other corporate giants throughout the world are factoring environmental stewardship into their evaluations of existing and prospective vendors. Efforts on the part of their vendors to measure, monitor and reduce their energy, water and waste are becoming increasingly important as these and other corporate behemoths use green supply chain management initiatives to reduce costs and expand the emission benefits of green initiatives beyond the four walls of their own operations.

Leading corporations are evaluating the environmental stewardship of their vendors.

IBM was ranked #1 in Newsweek's 2011 U.S. Green Rankings

Following closely on the footsteps of the recently released Green Edge research report Green Ranking Systems: How They Really Work, Newsweek published its 3rd annual Green Rankings. Given our evaluation of Newsweek’s ranking system in the Green Edge Report, we were eager to review their latest rankings.

Of the top five ranked U.S. companies, three are information technology companies: IBM, HP and Dell.

Of the top five ranked global companies, four are financial services organizations: Munich Re (Germany), National Australia Bank (Australia), Bradesco (Brazil) and ANZ Banking Group (Australia).

These results are not surprising, given that Newsweek does not distinguish between companies in environmentally harsh industries like mining and those in environmentally tame industries like information technology and financial services.

We are pleased to announce that Green Edge has released an original Research Report entitled Green Ranking Systems: How They Really Work. In this report we provide an in-depth analysis of seven green company ranking systems that differ significantly in their approach and results.

Since 2000, close to 100 of such ranking systems have been established. Although this proliferation of green ranking systems is a testament to the remarkable transition of sustainability from a fringe movement to a mainstream concern, both the corporate subjects of the ranking systems and their stakeholders—- the investors, consumers and regulators to whom the rankings are directed—-are often confused as they attempt to navigate the myriad systems available.

Green Edge studied the following ranking systems in great detail over the course of more than a year: Corporate Knights Global 100, SB20, Tomorrow’s Value Rating, Southeastern Corporate Sustainability Rankings, Dow Jones Sustainability Indexes, Newsweek Green Rankings and the Toxic 100 Air Polluters Index.

Our Research Report compares and contrasts these systems and their divergent methodologies and foci in order to enable our corporate and stakeholder audiences to identify which systems they can rely on and, perhaps more important, why.

Please contact us for a copy of the report or to learn how your organization can improve its green rankings and enjoy the financial benefits that accompany widespread recognition of sustainability achievements.

We are pleased to announce that Green Edge has  released an original Research Report entitled Measuring the Sustainability of Real Estate Funds: A New Tool with Teeth. In this report we analyze a recently developed tool for ranking environmental stewardship, this time in the realm of public and private real estate funds.

This tool, the Global Real Estate Sustainability Benchmark (GRESB) was launched in 2009 by the GRESB Foundation,a consortium of academic institutions, institutional investors and industry bodies. Our Research Report follows the Foundation’s August 2011 publication of the results of the second GRESB Survey.

GRESB seeks to reduce the built environment’s carbon footprint by introducing transparency and competition. Real estate funds that choose to participate are asked to provide information about the carbon footprint of their investments including energy and water consumption, waste collection and recycling, greenhouse gas emissions and employment programs. The first series of questions focuses on policies and the place that environmental issues have in management decisions, while the second series of questions investigates the actual measurement and impact of these policies.

Please contact us for a copy of the report or to learn how your fund can be a leader rather than a laggard when it comes to carbon footprint reduction and the financial success that comes with it.

In this post, Green Edge focuses its sustainability lens on green company ranking systems that rate how sustainable an organization is. Since 2000, close to 100 of such ranking systems have been established. Although this proliferation of green ranking systems is a testament to the remarkable transition of sustainability from a fringe movement to a mainstream concern, both the corporate subjects of the ranking systems and their stakeholders—at whom the rankings are directed—are often confused as they attempt to navigate the myriad systems available.

Green Edge chose seven different ranking systems and over the course of more than a year studied each of them in great detail. The results of this effort are set forth in our upcoming research report Green Company Ranking Systems: How they REALLY Work.

Here is a summary of what we found.

The Systems

The systems we studied were Corporate Knights Global 100, SB20, Tomorrow’s Value Rating, Southeastern Corporate Sustainability Rankings, Dow Jones Sustainability Indexes, Newsweek’s Green Rankings, and the Toxic 100 Air Polluters Index. We chose these seven systems because they differ so drastically with respect to how they define sustainability, the population of organizations they evaluate, the information they rely on, the methodologies they employ to arrive at their conclusions and the transparency of their approach.

Making the List

Ranking systems fundamentally differ based on whether they select or order companies. What we mean by this is whether the ranking system is ranking companies that they have already determined meet some sustainability criteria (select) or whether they are ranking organizations based on selection criteria unrelated to sustainability, such as those companies that have the largest market capitalization (order). Newsweek, for example, orders the 500 largest companies in the United States from most to least sustainable. Thus there is no sustainability cache for those companies at the bottom of Newsweek’s list because they didn’t make it onto the list in the first place based on having satisfied sustainability related criteria. In stark contrast, Dow Jones selects companies for its Sustainability Indexes based on a comprehensive sustainability analysis and then ranks those companies that they have already determined to be sustainable. Therefore earning a spot on a Dow Jones Sustainability Index is a prestigious sustainability credential regardless of the actual rank.

Methods Matter

One of the most important things to consider when assessing the validity and usefulness of a ranking system is the methodology it uses to determine how an organization should be ranked.

The methodology reveals how a ranking system “defines” sustainability and the biases to which it is prone. Unfortunately, most green company ranking systems have been very cautious about revealing their methodology. Given the overall lack of transparency when it comes to the ranking systems themselves, it is ironic that the transparency of the companies being ranked is often a key consideration in the ranking results. One sustainability ranking system stands out from all the others we evaluated when it comes to transparent methodology and that is the Corporate Knights Global 100. The Global 100 relies entirely on quantitative metrics and is completely transparent about those metrics. The other systems we studied rely, to varying degrees, on a less tangible and less transparant set of criteria in making their determinations.

Sustainable, or More Sustainable?

There are two irreconcilable schools of thought where assessing environmental impact is concerned. The first is more relativist and believes that impact should be measured on an industry-by-industry basis. Individuals that subscribe to the first school view drilling for oil and harvesting lumber as necessary evils, and feel strongly that companies in these areas should be rewarded for mitigating their impact, even if that impact is still large relative to that of companies in other industries. The second school of thought is vehemently opposed to these ideas, and subscribes to the notion of absolute impact—that corporate activity should be compared to an ideal baseline of no environmental impact at all. Tomorrow’s Value Rating is generally aligned with environmental relativism, while the Toxic 100 falls on the absolutist side of the spectrum.

 Looking Ahead

Until the subjects of these ranking systems and their stakeholders—to whom the ranking systems are directed—understand how they work, confusion about how to use them and uncertainty about their validity will abound.

Our research report, which provides an in-depth analysis of ranking systems that differ drastically in their approach and results, will help the companies being ranked and their stakeholders understand how the different systems work and the purposes for which they can best be relied upon. We anticipate that the corporate sustainability rankings landscape, which is still in its early stages, will undergo dramatic changes in the near future. We look forward to continuing to help consumers, sustainability analysts and corporations navigate them with greater ease.

In addition to evaluating corporate sustainability ranking systems, Green Edge has taken a careful look at another tool for ranking environmental stewardship, this time in the realm of public and private real estate funds. The result is our upcoming report entitled Greening Real Estate Funds: Navigating a New Tool with Teeth.

The tool we analyze in this report is the Global Real Estate Sustainability Benchmark (GRESB). GRESB was launched in 2009 by the University of Maastricht and the University of California, Berkeley along with 11 of the world’s largest pension asset managers, together holding over $1.4 trillion in assets under management.

GRESB seeks to reduce the built environment’s carbon footprint by introducing transparency and competition. Public and private real estate funds that choose to participate are asked to provide detailed information about the carbon footprint of their real estate investments including energy and water consumption, waste collection and recycling, greenhouse gas emissions and employment programs. The first series of questions focuses on policies and the place that environmental issues have in management decisions, while the second half investigates the actual measurement and impact of these policies.

Initial results reveal that although many funds performed adequately on the first part (which the survey refers to as the “green talk”), they were across the board less successful on the second (the “green walk”). Furthermore, the results confirm that US funds lag well behind their European and Australian counterparts in all aspects of the environmental stewardship measured.

Please contact us to learn how your fund can be a leader rather than a laggard when it comes to carbon footprint reduction and the financial success that comes with it.

At Green Edge, we are firm believers that sustainability is a strategy for profitability as well as environmental well-being. The miraculous transformation of Walmart from PR disaster to one of the greenest companies in America, as recounted by Edward Humes’ Force of Nature: The Unlikely Story of Walmart’s Green Revolution, is a testament to Green Edge’s guiding premise—that sustainability is the single greatest business opportunity of our time.

Humes points out throughout the book that Walmart does everything big. He notes that with over 8,000 stores, Walmart’s total acreage exceeds that of Manhattan. Accordingly, when a former riverguide turned consultant convinced Walmart’s then CEO, Lee Scott, to pursue a green future for his company, Walmart went green in a big way.

Humes recounts that when Scott first agreed to sustainability for Walmart, he was hoping to decrease Walmart’s “exposure” on environmental issues. He ended up convinced that sustainability had merit because, “All this stuff that people don’t want you to put into the environment is waste; and you’re paying for it!” Scott ultimately launched a genuine corporate-wide effort to seek out and eliminate waste.

According to Humes, the largest savings that Walmart accrued revolved around procurement, supply chain, and operations. By ordering regular instead of waxed boxes for chicken shipments, Walmart is able to divert 2.5 million cardboard boxes from landfills annually. Ultimately, a corporation-wide packaging reduction initiative would save Walmart $3.4 billion annually.

In the transportation sector, the company retrofitted its trucks with small motors that power air conditioners, thereby preventing idling. This saves Walmart $25 million per year and curbs carbon emissions by 100,000 metric tons—the equivalent of removing 560 trucks from its 7,000 truck fleet. These initial savings imbued Walmart with both the courage and the capital to invest in both organic cotton—of which it quickly became the largest buyer in the world—and on-site renewable energy.

Throughout Scott’s tenure, Walmart used its enormous leverage over its 100,000 suppliers to purchase increasingly sustainable products while maintaining signature “everyday low prices.” As Ellison promised, Walmart continued to post record-breaking profits while fervently espousing sustainability. Eliminating waste was not only good for the environment and for humans as a species, but also sound economics.

One of the most compelling aspects of Force of Nature is how Humes chronicles the transition of Walmart executives from skeptics of sustainability to believers in the green movement. Lee Scott had an epiphany that his fishing hobby was contingent on a healthy ecosystem, as was the future of his newly born granddaughter. President of global procurement, Lawrence Jackson—who came from a poor urban background—resented sustainability as an elitist luxury until he realized Walmart had the power to give this luxury to the masses at prices they could afford. When Jackson heard board members expressing reservations about Walmart’s new sustainability initiatives at a later meeting, he tossed a large baggie filled with dirty powder onto the table, viscerally demonstrating to the board how much chemical pesticide goes into the production of one shirt. This top-down corporate cultural acceptance of sustainability was integral in successfully greening Walmart.

Walmart has always been a complex and somewhat paradoxical company. At first, its aggressive new sustainability initiatives and its commitment to low prices and profits may seem at odds with one another. But as Force of Nature exhibits, sustainability and profit go hand in hand. Force of Nature is a must-read for those interested in starting their own unlikely green revolution.

Every year, American companies incur costs of over $100B managing and disposing of products that have been returned by consumers. These products range from electronics to appliances to apparel. The continuing economic downturn, coupled with increasing concerns about the environmental ramifications of waste, has led to both new “extended producer responsibility” mandates and voluntary manufacturer “take-back” programs.

Both of these monikers refer to initiatives where the manufacturer of a product takes back its product after the customer has finished using it. Organizations that either choose, or are required, to participate in take-back or extended producer responsibility programs have an opportunity to transform their discarded products back into the raw materials they were composed of. This process is often referred to as “reverse logistics.”

Extended Producer Responsibility Mandates

Let’s first take a look at a new regulatory initiative in Vancouver, BC: A novel zero waste mandate requires product manufacturers to take-back their products when their customers have finished using them.

Thus far, Vancouver’s efforts have been highly successful, primarily due to high consumer participation rates and an infrastructure that can accommodate recycling beyond glass, plastic, and paper. Its programs currently cover most electronics, paints, oils, lightbulbs, and batteries. By 2017, all hazardous waste will be covered, as will over 60% of all landfill and incinerator waste.

Vancouver’s zero waste mandate will not only help the city achieve its zero waste goal, but will also bolster the economy. According to the Product Policy Institute, take-back programs in metropolitan Vancouver have created over 2,000 new jobs and achieved emissions reductions equivalent to removing 73,000 cars from the road.

The private sector initiatives used to accomplish this revolve around the notion that consumers want only the services provided by a given product. A consumer who purchases a refrigerator wants only the cold space it offers, but not the heavy metals and chemicals inherent in the appliance. Producers, on the other hand, value technical nutrients such as metals and chemicals and pay for them as supply inputs. By closing the loop between suppliers and consumers, producers can lower input costs while simultaneously internalizing full life-cycle product costs.

Voluntary Take-Back Programs

Although comparable zero waste regulations in the United States are still years away, a handful of progressive companies have preemptively established voluntary take-back programs. In our January newsletter, we discussed promising efforts in the electronics industry to increase recycling through take-back programs. Since its creation in late 2007, Electronic Manufacturers Recycling Management Company—-a dedicated recycling company created by Panasonic, Sharp, and Toshiba—- has recycled more than 112 million pounds of electronic waste. While progress in other sectors has been slower, innovative companies are gaining market share as a result of reverse logistics strategies.

See my prior posts today to learn more about Preserve and Patagonia, two great examples of reverse logistics and extended producer responsibility.

Preserve, a Massachusetts-based startup, is one example of a company that has had great success with take-back and recycling programs. Since the company’s inception, one of its most impressive business strategies has been a program called Gimme 5.

The name is derived from number five plastic, a plastic that—-despite being more easily recyclable and technically useful than other plastics—-is not widely recycled. Preserve urges consumers to either send in their number five plastic or drop it off at a local Whole Foods. The company then uses the plastic for its 100 percent recycled tableware and toothbrush product lines.

Once these products are sent back to Preserve they are completely recycled again. To make it easy for consumers to return their used products, Preserve designed packagingg that doubles as a mailing label. With substantially lower input costs than other companies, the small startup has grown quickly, roughly tripling revenue since 2007.

By taking back products that Preserve has not produced originally in addition to its own products, the Gimme 5 program enables Preserve to apply its reverse logistics strategies to a much broader universe of raw materials that would otherwise be treated as waste. We see this as a win-win or a 2 for 1 carbon footprint reduction strategy: Preserve gets to both push down its supply costs even further while it diverts even more potential waste from landfill.