Green for Green
Is environmentalism worth it to you?
By Robert J. Derocher
Recycling containers in the lunch room, brown paper in the copy machine, compact fluorescent bulbs overhead...It seems so easy for businesses of just about any size to go green. But is it?
Measuring “the impact of a company’s operation on the environment—the cost—and quantifying the benefit of adopting more environmentally friendly processes—going green—is difficult,” says Karen Schuele, CPA, dean of the Boler School of Business at John Carroll University, Ohio. “The measurement difficulty seems to be the biggest stumbling block.”
As Schuele and fellow finance and environment observers note, hardly a day goes by without a firm making a proclamation about its commitment to going green, whether that means using environmentally friendly products or eliminating environmentally unfriendly business practices.
Yet the commitment to going green also requires a financial investment that, for many companies, is a tough pill to swallow. For CPAs and financial services firms in particular, the cost of going green can be an internal and external dilemma. Often, that’s where the deliberation ends, which is a very big mistake.
While operational savings from going green can sometimes be elusive, the public relations and marketing opportunity might provide enough of a financial boost to make it worthwhile for accounting firms and their clients.
Why Go Green?
When viewed globally, the task of going green might seem impossible. A lengthy report issued in June by the International Energy Agency estimates that it would take a worldwide investment of $45 trillion over the next 40-plus years to reduce CO2 emissions by 50 percent from current levels. It would take only $17 trillion to return CO2 levels to 2005 levels by the year 2050.
“A global revolution is needed in the ways that energy is supplied and used. Far greater energy efficiency is a core requirement,” the report stated. “A dramatic shift is needed in government policies, notably creating a higher level of long-term policy certainty over future demand for low carbon technologies, upon which industry’s decision-makers can rely.”
That’s not to say companies shouldn’t do their part, however. The Canadian accounting firm of Bennett Gold LLP in Toronto, for example, says that taking steps toward sustainability can increase the profits of small and medium-sized firms by up to 65 percent over a five-year period.
The seemingly simple steps of reducing water, paper and electricity consumption, combined with recycling programs, can get companies well on their way to going green and saving green, says Hilary Kusel, executive director of the Green Business Alliance in Boca Raton, Fla. The alliance calls these and other environmentally friendly steps an effort to Greenify™ the business environment.
“A few of the most compelling reasons for a company to Greenify are to benefit the environment, gain a competitive advantage, boost company morale, set a positive example for employees and lower expenses by improving efficiency,” Kusel explains. “CPAs should lead by example and Greenify their practices and be recognized for their efforts in order to differentiate themselves from their competition.”
Where CPAs Play In
Like any other attempt to change a business strategy or outlook, the C-suite needs to stand firmly behind the message. However, involvement at all levels is key, says Robert Pojasek, senior associate with First Environment, Inc., an environmental management consulting firm with offices nationwide. Pojasek has visited hundreds of worksites over the course of his career to help establish and improve environmental operations.
“The employee has to be involved in the planning process. You need to make everybody in charge,” says Pojasek, who lectures on business sustainability at Harvard University. “They’re all (about) environmental, health and safety in their jobs. They’re the risk managers on the job. You need to get them to think about their jobs from an environmental point of view.”
Pojasek says accountants are ideally situated to track the costs associated with going green, and advocates keeping “a second set of books” to track activity-based costs. While he admits that accountants at some of the factories and businesses he’s visited have been reluctant to keep dual books, he believes that the practice can help to ferret out waste, and therefore save money while making the company greener.
“Yes, it’s a second set of books, but every project manager reconciles these books,” he says. “You can look at them and feel better about what you’re accomplishing environmentally, and be impressed at your cost savings. There are a lot of intangibles.”
These intangibles are important, not only internally for employees, but externally for clients as well, says George Elvin, director of the Green Technology Forum, an environmental consulting firm. Although there may be upfront costs involved, dividends will come down the road.
“Companies are finding that going green improves customer loyalty,” says Elvin. “Green buildings typically cost less than 5 percent more than standard ones, but green improvements pay for themselves quickly through energy cost savings and improved worker health, thanks to improved indoor environmental quality.
“Most initial costs of going green end up saving money in the long run, insulation and energy conservation being a good example, since they save on fuel costs,” he continues. “Energy conservation is critical. Reducing transportation of products and employees helps considerably. But the biggest impact is actually through green building. Insulation is the most economical way to reduce carbon emissions.”
Incentives for Going Green
While good public relations offers the impetus for voluntary green efforts, government programs also can be attractive. Some states provide tax incentives for business owners to operate in a more environmentally conscious manner, Kusel explains, with more states and the federal government also intending to add or increase these perks.
“If you want to build a commercial building in Chicago, you have to meet certain green building standards,” says Elvin. “But the city offers expedited permitting to green projects, which allows businesses to open their doors sooner.”
A challenge for risk-averse accountants in particular, says Pojasek, is convincing them that any additional upfront costs or changes in established practices will be beneficial—eventually. “You have to identify for them the risk you’re avoiding by not going green,” he explains.
The same holds true for accounting clients, he adds. “If a CPA has a customer who improves his or her operations by going green, then they’re going to have a bigger customer and more business.”
Ultimately, says Jim Key, CPA, a risk management consultant and former IBM Corp. auditor, a company’s decision to go green can be an all-around sound business option for most any financial services firm—both for themselves and their clients.
“I believe it’s an opportunity for CPA and audit professionals to add value to the companies they serve,” he says. “They can identify processes that present opportunities for the enterprise, and provide consulting and assurance services to provide management with recommendations to more effectively meet corporate social responsibility (CSR) objectives. It’s a competitive issue: If enterprises want to maintain their competitive advantage, they need to embrace CSR objectives that will satisfy various stakeholders.”