June 11, 2021
How Green are You?
As an energy efficiency expert, I continue to propose upgrades to companies that claim to have sustainability goals or carbon reduction goals.
However, after making proposals for upgrades to these companies, the conversation often ends with the phrase, 'we need a three-year payback, so this project will not go forward.'
Companies claim they are invested heavily in sustainability but continue to invest with their standard investment requirements or hurdle rates.
The projects we propose can have an expected life of 20 years and payback of 4 to 10 years or 25% to 10% ROI. These projects will save energy and reduce carbon emissions for much longer than their three-year requirement, yet they do not invest in these projects.
My solution to stopping Green Washing is simple. Require companies to state the hurdle rate or ROI of any projects that are energy or environmentally intensive. This is not a goal this is a publicly stated number that they will be required to state the reasons in their annual reports if they do not meet. Should they lie about these numbers, they could be accused of stock fraud or manipulation.
The actual value is not mandated by the government but is determined by the company. This allows investors to select the companies they want to invest in based on the company's actual action, not \"goals.\"
If a company wants to require a 33% ROI and another company needs only 10% on these investments, that is up to them. The investor is now informed.
The auditor or CPA would need to verify these statements as to the accuracy of the investments.
Besides the benefits to the investor, this system gives power to the plant people submitting these projects to the CFO. They can remind the CFO if this project is not approved, the company will need to adjust its stated investment goal.
This system is an easy way for any company to answer the question 'How Green are You' If the company requires a 3-year payback or 33% ROI, they are much less Green than the company with only a 10-year payback 10 ROI.
This would apply to investments such as HVAC, insulation, boilers, process equipment, vehicles, windows, insulation, etc.
This system is only focused on the current and future activities of the company and is not concerned about what the company did in the past or its carbon emissions 20 years ago. It only focuses on what they are doing now to reduce pollution and reduce energy consumption.
I have prepared a paper on this subject if you are interested, please contact me for more details.