Eco-Friendly, Profit-Friendly

This article was co-authored by Robert D. Hormats, who serves as Under Secretary of State for Economic, Energy and Agricultural Affairs, and Kerri-Ann Jones who serves as Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs.

American companies face numerous competitive challenges today. While many are unique from those of decades past, one constant remains -- the success of our businesses and economy as a whole is dependent on our ability to innovate and compete. To do this, we need to develop new products, new services, and new ideas. We also need to re-think how we do business, that is, we need to emphasize creativity and efficiency. The McKinsey Global Institute reports that to match the GDP growth of the past 20 years and the rising living standards of past generations, the United States needs to boost productivity growth from 1.7 to 2.3 percent a year. That's a daunting figure. To achieve it, American companies need to examine all aspects of their operations, one of the most important being how they use energy and other natural resources. For example, the Environmental Defense Fund (EDF) has had great success working with businesses -- from farmers to Fortune 500 companies -- to improve their bottom lines by adopting environmentally friendly, eco-efficient practices to improve their operations. The central point is that eco-friendly and money-saving are not mutually exclusive terms -- in fact, often simple changes in a company's operations can accomplish both.

Beginning in the 1990s, EDF and McDonald's worked together to switch from foam-plastic sandwich boxes to paper-based sandwich wraps, eliminating some 300 million pounds of packaging waste over ten years. McDonald's also saved $6 million per year. In 2000, EDF began a collaboration with FedEx to develop a cleaner, more efficient delivery truck. FedEx now operates one of the largest hybrid fleets in the industry, with more than 1,800 alternative energy vehicles worldwide, including the first all-electric parcel delivery trucks in the United States. As a result, FedEx saved over 66 million gallons of fuel over the last 10 years. And recently, EDF began working with Walmart to meet its goal of running entirely on renewable energy, creating zero waste, and selling a greater share of sustainable products.

EDF is not alone in helping green American businesses. Indeed, many groups are engaged in similar efforts and achieving positive results that merit our recognition. For instance, The Dow Chemical Company and The Nature Conservancy recently announced a collaboration to develop new approaches to world challenges while demonstrating that environmental conservation is also good for Dow's business model. Organizations such as the U.S. Green Building Council -- a group of builders and environmentalists -- are working to green and make more efficient companies' infrastructure by designing buildings that will consume less energy, mitigate their environment impact, and cost less throughout their lifespan. The Council's "Leadership in Energy and Environmental Design" or LEED rating system is setting a high standard for green buildings in the United States and is rapidly spreading to other countries. Businesses are saving money through LEED certified building designs and consumers throughout the world are demanding green buildings, creating an opportunity for American companies to show leadership and build value in a growing market.

We at the State Department have partnered with the World Environment Center and multinationals such as Walmart to help small and medium sized enterprises around the world improve their environmental performance, reduce costs, and improve efficiency and competitiveness. Thirty-five small and medium sized businesses from Guatemala and El Salvador participated in the project to improve their environmental performance and have achieved a combined total savings of over $621,400 from an initial investment of $293,500. That's a very attractive return on investment, in addition to the environmental benefits.

Smart investors also recognize this opportunity. The private equity firm Kohlberg Kravis & Roberts (KKR) launched their Green Portfolio Program in 2008 to improve both the financial and environmental performance of their portfolio companies. The Green Portfolio Program focuses on areas such as greenhouse gas emissions, waste, water, and forest resources. The first eight of KKR's portfolio companies to enroll in the program have thus far reported savings of over $160 million in operating costs; 345,000 metric tons of CO2 emissions; 8,500 tons of paper; and 1.2 million tons of waste. Because of these savings, KKR's companies are better able to compete domestically and abroad.

Here in our nation's capital, the State Department is working with foreign embassies and international organizations, such as the World Bank, through the D.C. Greening Embassies Forum. In this venue, the diplomatic community exchanges best practices to improve their facilities and environmental sustainability. Foreign embassies are encouraged to install more efficient appliances, lighting, and plumbing fixtures, helping them to reduce their environmental impact and contribute to a better environment for the local community, all while saving money -- a huge plus during these times of tight budgets. On the commercial side, it also enables embassies to showcase the latest and greatest green technologies and services, functioning as a marketing platform for each nation's green industries.

The State Department, through the Greening Diplomacy Initiative (GDI), is moving forward with ambitious plans to make its global operations more resource efficient and eco-friendly. We're reducing energy consumption by consolidating our information technology platforms, lowering fuel costs by increasing the number of alternative fuel vehicles in our fleet, and improving the overall performance of our buildings by deploying efficient building design, practices, and equipment. In March of this year, the State Department stimulated the building of new wind and solar farms by entering into an Energy Savings Agreement with Constellation Energy, whereby 45 percent of the energy delivered to the Department's capital region facilities will be new-source renewable energy. This agreement is not only cost neutral, but greatly enhances the Department's ability to reduce its green house gas footprint and promote the U.S. renewable energy sector. It also complements the President's goal of 80 percent clean energy for the nation by 2035. With more improvements underway, the Department expects to track significant cost savings while reducing its environmental footprint.

Eco-friendly, profit-friendly efficiency is a win-win solution. This is a perfect opportunity for business, environmental groups, governments, and international institutions to work hand-in-hand to adopt new models for their organizations and infuse efficiencies that afford cost savings and a smaller eco-footprint.