Insight Magazine September / October 2008

The Magazine of the Illinois CPA Society

www.icpas.org/insight.htm | September/October 2008

In this issue

Eco-minded CFOs see the green Low-cost, highimpact sustainability Business greening: altruism or greenwashing?

Environmental accounting comes of age Goodbye office park, hello green office Have a conscience, see the profits Illinois legislators push for green Follow in big business’ green footsteps Track your corporate social responsibility Green investing: Will the bubble burst?

Eco-friendly tax incentives Plus, How Green Are You? survey results

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cover stories

September/October 2008 Vol.58 No. 3

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The Visionary CFO CFOs across the nation are waking up to the legitimate call for corporate greening.

index

columns

40

Saved High-impact, low-cost ways to green your office…and pad your budget.

46

The Greening of Business Is ecological economics an altruistic money pit? Or can going green actually improve the bottom line over time?

10

Research

How Green are You?

Is Illinois’ finance community answering the call for greening?

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Corporate Finance

Follow the Leaders

The biggies are taking leaps and bounds towards the Green Zone.

16

Bottom Line

Green for Green

Is environmentalism worth it to you?

www.icpas.org /insight.htm

18

Workplace

Office 2040

The workplace of the future will be anything but gray.

22

Young Professionals

Tree Huggers Wanted

“Think Green” is the motto of the 21st century finance pro.

24

Reporting

CSR on the Radar

Your impact on society, the economy and the environment is now crystal clear.

28

Investing

Birth of a Bubble

While investors see green technology companies as the next panacea, financial experts cast their minds back to the dotcom bubble that burst.

30

Government

Lincoln Green

Illinois lawmakers still have a long way to go on the road to environmental sustainability.

regulars

34

Tax

Environmental Tax

Do you know your solar from your hydro?

4

First Word

6

Seen + Heard

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FIRST WORD Publisher Elaine Weiss

There’s no denying or escaping the fast pace of our 21st century lives. Change happens at an ever-quickening rate. Tomorrow our morning paper may be unrecognizable and our cell phone outdated.

The same is true of our profession. In what seemed like only a moment to catch our breath following issues of financial fraud and the passage of Sarbanes-Oxley, comes another fundamental change: The introduction of International Financial Reporting Standards (IFRS).

Are we up to this latest challenge which asks us to drastically rethink our way of doing business? There’s been a lot of talk about going global; now that global accounting is on our doorsteps, does it seem just too close to home? Can we adapt and redefine ourselves?

The world is showing a preference for IFRS over Generally Accepted Accounting Principles (GAAP). The Security and Exchange Commission (SEC) has already proposed a timetable for transitioning publicly traded companies to international reporting standards. Despite ongoing public debate over its pros and cons, IFRS is gaining momentum. By some accounts, it could be a reality as early as 2011.

What we choose to do in these next two years is critical.

Rather than just debating the issues or taking a wait-and-see approach, the Society is getting right down to the work of planning, and preparing and educating our members. If you haven’t already done so, check out the IFRS section on our website (www.icpas.org) for answers to your questions, as well as materials and resources.

A task force headed by Immediate Past Chairperson Debra Hopkins is exploring ways to educate members, identify and assist in reconciling practice issues, and reach out to our network of educators on all IFRS-related issues, such as changes to curricula, books and materials, and even the CPA Exam.

All of us will be affected by the switch to IFRS. It may seem that only big companies with international clients need to worry, but repercussions will be felt from the largest to the smallest CPA firm, and even by the general public.

The global reach is wide, whether we’re talking about going green (the theme for this month’s issue of INSIGHT) or changing accounting standards. Each requires coming together from all corners of our small worlds for something better, be it a quality set of standards or a livable environment for generations to come. The world is changing. How that change happens is up to us.

Editor-in-Chief Publications Director Judy Giannetto Creative Director Gene Levitan Design Manager Rosa Garcia Mary Burr Assistant Editor Derrick Lilly National Sales & Advertising Patrick Filippelli pfilippelli@connect2amc.com Lindsay Lozmack llozmack@connect2amc.com Advertising Sales Associate Tito Apatira apatirat@icpas.org Circulation Jim Jarocki jarockij@icpas.org Editorial Office 550 W. Jackson, Suite 900, Chicago, IL 60661 Advertising Sales Office 4700 W. Lake Avenue, Glenview, IL 60025 INSIGHT is the official magazine of the Illinois CPA Society, 550 W. Jackson, Suite 900, Chicago, IL 60661, USA. Its purpose is to serve as the primary news and information vehicle for some 23,000 CPA members and professional affiliates. Statements or articles of opinion appearing in INSIGHT are not necessarily the views of the Illinois CPA Society. The materials and information contained within INSIGHT are offered as information only and not as practice, financial, accounting, legal or other professional advice. Readers are strongly encouraged to consult with an appropriate professional advisor before acting on the information contained in this publication. It is INSIGHT’s policy not to knowingly accept advertising that discriminates on the basis of race, religion, sex, age or origin. The Illinois CPA Society reserves the right to reject paid advertising that does not meet INSIGHT’s qualifications or that may detract from its professional and ethical standards. The Illinois CPA Society does not necessarily endorse the non-Society resources, services or products that may appear or be referenced within INSIGHT, and makes no representation or warranties about the products or services they may provide or their accuracy or claims. The Illinois CPA Society does not guarantee delivery dates for INSIGHT. The Society disclaims all warranties, express or implied, and assumes no responsibility whatsoever for damages incurred as a result of delays in delivering INSIGHT. INSIGHT (ISSN-1053-8542) is published bimonthly except monthly in July and August by the Illinois CPA Society, 550 W. Jackson, Suite 900, Chicago, IL 60661, USA, 312-993-0393 or 800993-0393, fax 312-993-0307. Subscription price for nonmembers: $30 U.S., $40 Canada and International addresses, $42 Mexico. Copyright © 2008. No part of the contents may be reproduced by any means without the written consent of INSIGHT. Permission requests may be sent to: Editorial Director, at the address above. Periodicals postage paid at Chicago, IL and at additional mailing offices. POSTMASTER: Send address changes to: INSIGHT, Illinois CPA Society, 550 W. Jackson, Suite 900, Chicago, IL 60661, USA.

ICPAS President & CEO

I C PAS O F F I C ER S C h a i r p e r s o n , D e b r a R . H o p k i n s , C P A Northern Illinois University CPA Review S e n i o r V i c e C h a i r p e r s o n Sheldon P. Holzman, CPA Virchow Krause & Company LLP V i c e C h a i r p e r s o n , Sara J. Mikuta, CPA The Leaders Bank V i c e C h a i r p e r s o n , Ira Solomon, CPA University of Illinois V i c e C h a i r p e r s o n , Kathryn A. Stanton, CPA Follett Corporation S e c r e t a r y, C o n n i e S . W a t k i n s , C P A Lakeside Bank (Retired) Tr e a s u r e r, Lee A. Gould, CPA Gould & Pakter Associates LLC I m m e d i a t e Pa s t C h a i r p e r s o n , Lawrence A. Wojcik, CPA DLA Piper US LLP

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I C PA S B O A R D O F D I R E C TO R S Therese M. Bobek, CPA PricewaterhouseCoopers LLP Robert E. Cameron, CPA Cameron Smith & Company PC William J. Cernugel, CPA Alberto-Culver Company (Retired) Daniel J. Fensin, CPA Blackman Kallick LLP Anthony Fuller Grant Thornton LLP William P. Graf, CPA Deloitte & Touche LLP James P. Jones, CPA Edward Don & Company Charles G. Kuyk III, CPA Crowe Chizek & Co. LLC Annette M. O’Connor, CPA RR Donnelley Logistics Mary Lou Pier, CPA Pier & Associates Ltd. Marian Powers, PhD Northwestern University Eunice K. Sullivan, CPA S&P Tax Solutions Ltd. Mary Ann Webb, CPA Sulaski & Webb, CPAs Ray Whittington, CPA DePaul University

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SEEN HEARD NEWS BYTES, SOUND ADVICE AND PRACTICAL BUSINESS TIPS

Banking Execs See Green IBT Enterprises’ 2008 Market Pulse Survey revealed that going green is no longer just a trend or an environmentalist initiative. Of the 124 predominantly bank and credit union financial executives who participated in the survey, 70 percent said “being green” is important to their financial institutions—not only for the good of the environment, but also for reasons of reduced operating costs and importance to members and customers. In fact, 86 percent of survey participants said being green is important to their clientele.

“We have found that green efforts tend to start small but grow into important initiatives,” said Tom Tedrow, IBT Enterprises vice president of design and construction services. “Like many organizations, banks and credit unions truly understand the benefits associated with going green.”

Visit www.ibtenterprises.com or www.arketi.com for more.

12 trillion

The pounds of junk mail estimated to be produced by the United States each year.

The Greensource List Call them “greensources”—places you can go online to find resources, ideas, tips and trends for ways to make your business world a little greener. Here is a partial list. Some websites provide links to other useful sites.

The Green Business Alliance www.greenbusinessalliance.com/go-green-business.aspx Become green by following the alliance’s Greenify™ program.

Xerox Calculator www.consulting.xerox.com/flash/thoughtleaders/suscalc/xerox Calc.html Use this plug-in-the-numbers calculator to determine how much energy, waste and greenhouse gas emissions can be reduced by making changes to your office products.

GreenBiz www.greenbiz.com Get the latest on all things relating to business and the environment, as well as a daily news round-up and the weekly GreenBuzz newsletter. A similar site, www.environmentalleader.com, is aimed at company executives.

Texas A&M University acct.tamu.edu:80/smith/env_acct/envmain.htm Accounting professor L. Murphy Smith talks about environmental auditing and accounting issues.

Environmental Defense Fund www.edf.org Access comprehensive research, combined with the latest news and ideas to promote the green life.

Database of State Incentives for Renewables & Efficiency www.dsireusa.org Get state-by-state rundowns of energy-saving credits and incentives, as well as green federal incentives.

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Ways to Stop Unwanted Mail

1. Remove the name of your business or employees from major mail databases like Dun & Bradstreet and InfoUSA. 2. Purge former employees from existing mailing lists. The Ecological Mail Coalition allows businesses to remove employees from marketers’ lists for free.

3. Prevent companies from adding your business to mailing lists in the first place. Specifically, ask to be excluded from mailing lists at conferences and events, and while placing orders.

For more mail reduction tips, visit www.go-green.com.

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400,000 small businesses trust ADP. To an employee, it’s more than just a paycheck. It’s a ticket to a richer life.

That’s why ADP is the preferred payroll provider for so many small businesses — and the accountants who serve them. When it comes to managing payroll, ADP offers accountants more choices. And more ways to succeed. Want to provide more value and more enhanced services to your clients? You can start today. accountant.adp.com 1-866-4ASK ADP

Chris Vitrano Marketing Director ec-connection Milwaukee,Wisconsin

© 2008 ADP, Inc. The ADP Logo is a registered trademark of ADP, Inc.

INSIGHT Wins Award

$2.1 billion

INSIGHT Magazine has been awarded a Communications Concepts 2008 Apex Award for Publication Excellence in the category of Magazine & Journal Writing (for the May/June 2007 Small Business Special Issue). This is the 20th annual Apex Award Program, which recognizes “excellence in publications work by professional communicators.” Since its redesign, INSIGHT has been honored with 12 industry awards. Visit our archives at www.icpas.org/insight.htm to read the winning issue.

The amount Goldman Sachs invested in alternative energy projects last year.

Green Technology FYI Green Technology Forum Director, George Elvin, says that leading green technology advances in the years ahead will include: • Solar nanotechnology. “[N]anotech-based cells like those made by Nanosolar can be printed on plastic or metal substrates, making them much less expensive than silicon.”

• Lignosic cellulose-based biofuels. “Companies like Range Fuels...are perfecting techniques that will enable us to make fuel from trees and agricultural waste.”

• Algae-based biofuels. “A number of companies worldwide are working to make fuel from algae, which is cheap to grow, requires little energy input and doesn’t compete for cropland the way corn does.”

• Carbon sequestration. “New technologies will enable us to store carbon underground or in oceans rather than release it into the atmosphere.”

Citi Takes the “LEED” A recent Commercial Property News (CPN) article by Dees Stribling revealed that financial powerhouse Citigroup, Inc. has entered into a new pilot portfolio program with the US Green Building Council (USGBC) to integrate permanent green building and operational measures into the company’s practices and facilities. The portfolio program has been designed to cut the costs of LEED (Leadership in Energy and Environmental Design) certification and building operational expenses. New CitiFinancial branches in Austin, Texas and Flint, Mich., and the Citibank financial center in Warrington, Pa., are the first Citi branches to be certified in the pilot program. Twenty-seven additional CitiFinancial and Citibank branches under construction are in the process of pursuing LEED certification. Citi has already earned its first LEED certification for its office parks in Irving and Las Colinas, Texas, and has since been awarded LEED Gold certification for a new 15-story skyscraper in New York City.

For more on LEED certification and green building, visit www.usgbc.org.

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THE GREEN ISSUE - PLEASE RECYCLE

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RESEARCH

How Green Are You? Is Illinois’ finance community answering the call for greening?

By Judy Giannetto

W

hen you’re making a business case for going green—especially to a group of accountants and finance executives—you’ve got to expect a bit of a mixed bag of reactions— from, “We’re making our business green and loving it” to “What’s green got to do with us?”Admittedly, it’s going to take a major feat to engage the finance community. But engage it must.

Why? Because green isn’t just about improving air quality or preventing deforestation. That’s an extremely blinkered view.

Rather, it’s about public image, employee retention, client satisfaction, marketability and, most important for most, the bottom line. The Internet is swimming in studies, surveys and research that prove the point again and again and again…

Still adamant that environmental issues don’t impact your corner of the business world? Then cast your mind back to the boss who said information technology would never have a place in finance, and that no self-respecting, reputation-worthy accounting firm would need a website to market its services. You get the point, right?

To gain insight into what Illinois CPAs think about “the greening of business,” the Illinois CPA Society recently surveyed a group of 113 ICPAS members—all holding leadership and major decision-making positions, including CFO, controller, president, executive director, vice president, owner, principal and director of finance.

The majority (66 percent) were drawn from small businesses (less than $50 million in annual revenues), with the next largest segment (14 percent) representing large companies (over $250 million in revenues).

Sixty-five percent of respondents identified themselves as business & industry, 20 percent as public practice, and 14 percent as nonprofit/government/education.

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When asked about the level of importance of green initiatives within their organizations, only 22 percent reported that these initiatives are a high or moderately high priority. The majority (43 percent) indicated that they are moderately important, while 35 percent stated that they are either not a priority or a low priority at best.

Furthermore, only 11 percent stated that their organizations currently have a green policy in place, versus 84 percent who have no green policy. Only 17 percent intend to implement a policy in the next 3 years. The majority (82 percent) either do not intend to implement a policy or don’t know whether a policy is on the horizon.

And yet, when asked about the importance of corporate social responsibility (CSR) to their organizations, only 6 percent responded “not at all.” In fact, 26 percent stated that it is very important, and 68 percent consider it to be moderately important.

Taking a “glass is half full” approach, perhaps this indicates an awakening within the finance industry—an acknowledgement that corporate social responsibility is important to business sustainability. However, a disconnect obviously exists between recognition and implementation when it comes to the role of environmental issues in CSR programs.

Of the greening strategies outlined, the vast majority (69 percent) do make it a policy to recycle, with 61 percent encouraging their employees to do so. Sixty percent indicate that their organizations recycle paper and paper products specifically, while 48 percent use recyclable supplies and 44 percent refill ink cartridges. Other high-scoring initiatives include energy-saving lighting (48 percent) and paperless technologies (40 percent).

Among those organizations planning for the future, the top three initiatives under consideration are paperless technologies

(43 percent), energy-saving lighting (33 percent) and recyclable supplies (33 percent). Less popular are per-department paper quotas (71 percent not interested), initiating a double-sided print policy (57 percent not interested), owning, renting or leasing hybrid cars (48 percent not interested), using renewable energies (42 percent not interested), using biodegradable supplies (31 percent not interested), and installing water-filtering systems (34 percent not interested). It’s worth noting that, of the least popular greening strategies outlined, the top two—paper quotas and double-sided printing—offer companies the means to save money without any initial investment. Are we missing a golden opportunity here?

Making it a policy to do business with green companies and suppliers also fell to the bottom of the list. Only 19 percent indicated that they do indeed make this a policy.

Analyzing responses to questions concerning eco-friendly workplace practices, the numbers look a bit more promising. A whopping 81 percent of respondents favor teleconferencing and telemeetings, 57 percent support sensitivity to paper usage, 56 percent support telecommuting, and 40 percent support public transportation. However, only 17 percent promote carpooling.

Vital to an understanding of where we stand in the move towards greening is an awareness of the barriers to implementing green programs. Topping the list of major obstacles is a commitment to other priorities (55 percent), followed by cost and not having enough time to devote to such programs (both at 28 percent). Considering that the majority of respondents herald from small businesses, the validity of these reasons isn’t hard to appreciate.

In light of these responses, you’d think that the question, “Do you support the government mandating green compliance among businesses in the United States,” would meet with a resounding “No!” Surprisingly, though, the split was far more 50/50—48 percent do support government mandates, while 52 percent do not.

In the context of the United States, the concept of green business is still in its infant stages, which is probably why some of the responses to this survey fall in the “split personality” category. A point in fact: “Going green will positively impact the organization’s public image”: Yes 53 percent No 28 percent Not sure 19 percent However, “Going green will help my organization hire and retain top recruits”: Yes 11 percent No 59 percent Not sure 29 percent And, “Going green will boost customer/client loyalty to our product/service”: Yes 24 percent No 51 percent Not sure 25 percent Historically, perhaps, the finance industry has been cautious when it comes to jumping on bandwagons. Caution isn’t a bad thing. Resistance to change, whether in business practices or world view, is.

We wish to thank those ICPAS members who participated in our survey. Your comments and involvement are invaluable to our continuing efforts to meet the needs of an increasingly diverse membership.

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CORPORATE FINANCE

Follow the Leaders The biggies are taking leaps and bounds towards the Green Zone.

By Carolyn Tang

M

ore and more, global corporate leaders are leveraging their resources and influence to positively impact the environment. Through the use of alternative energy sources, widespread recycling programs and other green-oriented initiatives, the following big name firms, among many others, are leading by example.

KPMG “Climate change is now widely regarded as one of the most serious challenges the world faces. It has reached a tipping point in global awareness and demands a global response.” Timothy P. Flynn, Chairman, KPMG International KPMG recently announced a three-tiered global approach to help to address the challenges of climate change. The principal ambition of the financial firm’s “Global Green Initiative” is a 25-percent reduction of its carbon footprint by reducing waste and consumption of non-renewable resources. It hopes to achieve this through energy-efficient building and alternatives to business travel, and by working with its business partners and selected not-for-profit organizations to identify verifiable and credible environmental programs. “[O]ur core values call for us to care for the communities where we live and work,” says Bruce Piller, KPMG LLP’s Chicago managing partner.

The Chicago KPMG office recently completed an expansion of its work space area, in which it used recycled furnishings as opposed to new acquisitions. “The calculated sustainability benefits of this furnishing decision include energy conservation equal to powering 4.6 homes for a year, disposal cost avoidance and conservation of landfill space,” says Piller.

Additionally, the firm is increasing its use of recycled paper, leveraging digital-scanning technologies, and reducing its use of bottled water and disposable beverage containers, which is expected to result in a 10-percent decrease in waste volume.

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Furthermore, KPMG expects to reduce its office-related energy consumption by 5 percent by using green building standards on all new office construction, including the use of energy-conserving technology.

“As global citizens, KPMG member firms have responsibilities to do what we can to improve our impact on the environment,” says Piller. “And we expect that by working together to raise awareness, apply our collective knowledge and put our ideas into action for improving the environmental performance of our business and promoting change in our communities, KPMG will set the standard for thought leadership and measurable results that will motivate all global firms.”

Goldman Sachs

“We take seriously our responsibility for environmental stewardship, and believe that as a leading global financial institution we should play a constructive role in helping to address the challenges facing the environment.” Goldman Sachs Environmental Policy Framework

In November 2005, Goldman Sachs announced an ambitious environmental policy framework, which outlined the firm’s philosophy that capital markets “can and should play an important role in addressing today’s environmental challenges.” The framework touches upon key topics such as climate change, ecosystem degradation and other critical environmental issues, and then defines how the firm intends to leverage its resources to find effective marketbased solutions to address those issues.

“Goldman Sachs believes that a healthy environment is necessary for the well-being of society, our people and our business, and is the foundation for a sustainable and strong economy,” says Michael DuVally, spokesman for Goldman Sachs.

According to DuVally, the key to the framework’s success is that it begins with a focus on minimizing operational impact.

“Accordingly, we will make efforts to ensure that our facilities and business prac-

www.icpas.org/insight.htm

SEPTEMBER/OCTOBER 2008

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tices adopt leading-edge environmental safeguards. We will disclose the environmental impact of our operations and reduce those impacts, wherever possible,” he explains.

For example, the firm has committed to building environmentally sound procurement practices and incorporating environmental criteria into its supplier selection and review process. Additionally, the firm seeks to purchase local products in order to reduce the environmental impact associated with shipping. In accordance with these goals and others, Goldman Sachs releases an annual report that documents investments and actions taken in the context of the framework.

The firm further committed to investing up to $1 billion in renewable energy and energy-efficiency projects. By the end of 2006, it had surpassed that goal with an aggregate investment of more than $1.5 billion in alternative energy projects in the United States, Europe and Asia. And in 2007, Goldman Sachs invested more than $600 million in new technologies related to alternative energy and energy efficiency.

Another way that the firm incorporates its environmental philosophy into the workplace is by leveraging its own core competencies to advance green measures. For example, its investment arm actively incorporates an environmental review into its process for evaluating potential investments. “The environmental review process is an integral part of our private equity investment groups’ due diligence review of companies and their management,” explains DuVally. “The review process analyzes our prospective portfolio companies’ compliance with applicable environmental laws and regulations.”

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HSBC

“HSBC is determined to develop a sustainable business.

Our shareholders, customers and employees consider these issues to be important, and (our actions) demonstrate our continuing progress in placing sustainability at the very core of how we do business.” Simon Martin, head of Group Sustainability and Corporate Responsibility, HSBC With a physical presence in 83 countries, it’s certainly no small task for HSBC to embed sustainable business practices into its operations. So, in June 2007, HSBC committed to investing $90 million in a Global Environmental Efficiency Program designed to reduce the firm’s impact on the environment.

“Sustainability is at the heart of HSBC’s global strategy, and our aim is to be one of the world’s leading brands in corporate sustainability,” says Francis Sullivan, advisor on the environment, HSBC Holdings Plc. Just one look at the firm’s London-based global headquarters confirms its commitment. In May 2008, HSBC announced that it had completed installation of 422 solar panels on the roof of its corporate office building, which, according to the firm, will generate enough electricity to power 20 homes a year.

“Not only do the panels increase the energy efficiency of our building, but they also symbolize our commitment to the environment and send a strong message to our corporate real estate teams across the world—that HSBC supports and promotes the use of renewable technology,” explains Sullivan.

HSBC also can be credited with building the first structure in Latin America that is Gold certified by the Leadership in Energy and Environmental Design (LEED) organization. The building serves as

HSBC’s Mexico headquarters and showcases the latest energy- and water-efficiency measures. For example, the building utilizes partitions and clear walls, and makes maximum use of daylight to reduce the need for artificial lighting. The building also features the largest green roof in Latin America, which serves to enhance biodiversity and, in conjunction with highly reflective surfaces, reduces potential heat island effects. Further, the building utilizes a graywater recycling system, which includes a treatment plant and storm-water tank to eliminate the need for potable water for irrigation. HSBC believes that the cost-effectiveness of such projects will provide the firm with a short-term return on investment.

HSBC’s environmental efforts don’t stop there. Employee remuneration and reward is also based on the achievement of green objectives. “Sustainability targets are included in the annual objectives set for senior managers and so is cascaded down the organization,” says Sullivan.

Hewlett-Packard “HP has a responsibility that starts with the design of a product and goes right through to its disposal, and we take that responsibility very seriously.” Thoko Mokgosi-Mwantembe, managing director, HP South Africa With technology developing at lightning speed, new devices quickly become obsolete, resulting in a growing pile of discarded equipment and parts. This pile of neglect is commonly referred to as electronic waste, or e-waste. Since many components of e-waste are considered toxic and/or nonbiodegradable, the human impact of technology on the environment is substantial.

Hewlett-Packard is tackling this issue head on. In March 2008, the company unveiled a pilot project in South Africa that not only focuses on dismantling electronic waste in a safe and responsible way, but also succeeds in creating new jobs in disadvantaged communities by equipping people with the relevant training needed to break down discarded equipment.

“We see this project as a way to help develop a sustainable infrastructure to safely deal with electronic waste based on local practices that will benefit local communities. Once fully operational, this pilot project will process up to 150 tons of equipment per year and create around 20 jobs,” said Thoko Mokgosi-Mwantembe, managing director of HP South Africa in a press release.

The main focus of the Cape Town-based e-waste facility is to maximize the potential for refurbishment, repair and reuse of equipment, with environmentally responsible dismantling and recycling only as a last resort.

“This equipment is being refurbished to be used by the community, and people are making everything from toys to art out of it,” says Garry Newson of Recover-e Alliance, an organization that partnered with HP on the South Africa e-waste project. “We are looking to develop effective methods of dealing with waste that will allow this sector to flourish in a safe and sustainable manner.”

This isn’t HP’s only attack on e-waste. The company has similar projects underway in Morocco and Kenya.

These are only four of countless high-profile companies—both public and private—that are taking the initiative to go green. Is this merely a case of expendable income gone wild? No. These successful businesses recognize the value of greening, not only to the environment, but also to their profitability.

www.icpas.org/insight.htm

SEPTEMBER/OCTOBER 2008

15

BOTTOM LINE

Green for Green Is environmentalism worth it to you?

By Robert J. Derocher

R

ecycling 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 require16

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ment,” 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.”

2 0 0 9

P U B L I C

S E R V I C E

A W A R D

Nominations Now Being Accepted

The Illinois CPA Society is seeking nominations for its prestigious 2009 Public Service Award, which is presented each year to a Society member in recognition of his or her lifetime of public service contributions and for presenting a positive image of CPAs and the accounting profession.

Criteria to be considered include: > Impact on a community

> High level of involvement

Incentives for Going Green

> Unique efforts

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.”

> Leadership and initiative

> Diversity of public service work > Illinois CPA Society membership

Recent Award Honorees: 2008 Dan G. Loescher, CPA Cheryl S. Wilson, CPA 2007 Michael A. Cullen, CPA 2006 Gregory S. Dowell, CPA 2005 David A. Hirsch, CPA

2003 Jerome H. Lipman, CPA 2002 Walter F. Nolan, CPA 2001 Howard G. Kaplan, CPA Kenneth R. Diel, CPA 2000 Ernest G. Potter, CPA

2004 John F. May, CPA

To request a nomination form, contact Judi Kulm at 800-993-0407 ext. 251 or email kulmj @ icpas.org.

You also may go online to www.icpas.org.

Deadline: January 18, 2009

www.icpas.org/insight.htm

SEPTEMBER/OCTOBER 2008

17

WORKPLACE

Office 2040 The workplace of the future will be anything but gray.

By Christine Bockelman

T

he city of Chicago is devising aggressive plans to reduce urban traffic congestion, currently boasts miles of green bike trails, and has supported the creation of more than 200 green rooftops, including one on City Hall. This, however, is only the beginning.

The federal and state funded Chicago Metropolitan Agency for Planning (CMAP) is developing a long-range, wide-reaching plan for future land use, economic development, human services, transportation and more. Called the GO TO 2040 plan, it addresses how Cook, DuPage, Kane, Kendall, Lake, McHenry and Will counties will ideally function in 32 years time. If CMAP’s

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ambitious plans succeed (read more at www.goto2040.com), every moment of your day, from picking up a gallon of (organic) milk to balancing a spreadsheet at the office, will be greener.

We asked environmental experts and others in the know what might be different about the 9 to 5 in the not-so-distant future.

This is what they had to say.

Technology Technology is changing fast, and while it’s hard to predict what we’ll be using—or not using (remember VHS tapes?)—32 years from now, there are some definite green trends to watch for.

First, the process of manufacturing technology will change. Laptops, PDAs, and the like will be made using more recycled content, says Yalmaz Siddiqui, director of environmental strategy for Office Depot, the global multi-channel retailer based in South Florida, with more than 60 locations in Illinois. “The greening of businesses is already starting in Europe and will continue to grow in the United States.” Companies are paying attention to “removing lead and mercury, increasing the recycled content of the product, and designing for recyclability,” he explains.

Remember how big desktop computers and cell phones were in the 1980s? Well, they, and other gadgets, are probably going to continue to shrink, says Siddiqui. “This design for minimization dovetails with the trend of portability,” he adds. The petite size also means there’s less product to dispose of and recycle—a big environmental plus.

What’s more, the amount of work-related travel will most likely take a nose dive by 2040, Siddiqui predicts, thanks to spectacular advances in videoconferencing. Companies already have developed systems that eliminate grainy visuals and time-lag conversations.

“You can hold global meetings and it almost feels like everyone is sitting at the same table talking with you,” he says. “This is a very exciting innovation.”

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Facilities Chicago’s proliferating green roofs won’t be the only earth-friendly aspect of the 2040 office building. Commercial properties actively will look for ways to waste less energy and bring workers closer to nature.

“In Chicago, we have to look into adaptive reuse of existing buildings, and part of that will be a bigger connection to nature,” says Frank Pettinati, a regional discipline leader at the Chicago office of Perkins+Will, a design firm with expertise in sustainability.

Office parks, in particular, are in for big changes. How big? By the year 2040, they might not even exist. “The idea of the office park where everyone drives from a house and then goes into an office where the windows don’t open—those kinds of architectural designs will be rethought,” says Dr. Mark Laska, Ph.D., president of Great Eastern Ecology, an ecological consulting group. “Offices will be clustered more, and public transportation to them from suburban areas will increase.”

Expansive concrete and heat-absorbing parking lots may be another casualty. “One of the strategies of the 2040 plan is conservation design,” says Talbot. “For example, we’d use plants that are native to the Chicago metropolitan region, like prairie grasses and other plants present before the area was developed.”

“I think in the future we’re going to look more at a site holistically, in addition to the building,” says Talbot. “Is the office near transit? Can we minimize parking? Are there parks outside? Can people walk to lunch? The whole commercial site will be better throughout, and be much more efficient.”

Utilities In many cases, the air you breathe all day at work isn’t very healthy.

“A lot of buildings recirculate air without introducing enough conditioned fresh air,” says Scott Lenger, director of strategic relation-

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ships at Trane. “Without adequate fresh air, carbon-dioxide levels increase throughout the building. Recirculated air, if not properly treated, doesn’t filter the germs, and allows them to recirculate.

Also, one of the big issues is that if a building’s air, fresh and recirculated, is not properly dehumidified, you could exacerbate mold and mildew growth.”

Moving forward to 2040, newly constructed buildings will bring in more fresh air and do a better job with filtration and dehumidification, while older buildings will have their HVAC systems retrofitted. “There are going to be some big changes,” says Lenger.

“The generation about to enter the workforce has much different expectations of their working environment. They’ve grown up thinking sustainable.”

Commercial buildings will be more energy efficient, with systems being used only as much as needed. “Rather than having a system that’s always on full speed if there’s one person in the building or 500, you’ll be able to measure what the needs are to bring the air to a high quality for the number of occupants,” says Legner.

An example of this type of forward-thinking, energy-efficient building is the Chicago Tribune’s pressroom, which was designed

by Perkins+Will.

“There’s a three-story space down the middle of it. We devised a strategy where we only heated and air-conditioned where people are going to be. That extra 10 to 15 feet of space above isn’t the same temperature as the floor, so less energy is used,” says Pettinati.

What’s more, energy will come from natural, renewable resources. “There will be times of the year when buildings will take power off the grid, but will be able to replace that energy over time through solar, geothermal and wind power. That’s something that’s highly probable for two to three decades out from now,” Legner projects.

Lake Michigan might be in for a rest, too. In future office buildings, rainwater and the water that washes hands and cleans dishes in the cafeteria—called graywater—might be recycled through the system and used to flush toilets.

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20

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“I think there will be much more consideration of the lifestyle impacts of furniture—not only toxin reduction, but also the recycled content and the entire lifecycle impact of the furniture,” Siddiqui predicts.

Bamboo flooring, non- or low-toxic paint, and other eco-friendly building choices are likely to become the norm, says Laska.

“Sealants can emit chemicals, carpets can emit chemicals, and that’s all added to the air and recirculated through many buildings,” says Talbot.

Another improvement will be greater individual control over the environment. “We tend to generalize how people work,” says Pettinati. “Everyone is in a cube.” By 2040, he predicts flexible workstations where wall panels open and close depending on whether the space is being used by a lone worker or a collaborating group.

A flat screen or keyboard might be integrated into the furniture, and workers will be able to customize the level of light at their workspace and even the level of privacy.

“They have this technology now in hotels and high-end properties where you can flip a switch and glass goes from clear to opaque. I think it will make its way into the office,” says Pettinati.

Although the workspace of the future will be more functional, there will be much less of it. With people working from home more and more, there’s less need for everyone to have their own desk, Siddiqui states. If businesses can get by with only, say, two-thirds of their current space, they will be using less energy for heating, cooling and lighting.

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YOUNG PROFESSIONALS

Tree Huggers Wanted “Think Green” is the motto of the 21st century finance pro.

By Judy Giannetto

F

or all those young professionals out there who want to make a difference just as much as they want to make a buck, the wave of environmentalism embracing the nation is opportunity knocking.

No longer solely the domain of government and nonprofits, green accounting is expanding into the private sector, as well.

Environmental accountants bridge the gap between the bottom line and environmental sustainability by factoring environmental costs into the financial strategic plan and decision-making process. In other words, they touch upon profitability, risk management, operations, sourcing, waste management, and more, to look for ways to save businesses money through measures that also protect the environment.

Sounds appealing, doesn’t it? Remember, though, that environmentalism is a scorching hot topic. If being financially accountable weren’t stressful enough, this new breed of professional has the weight of environmental accountability resting on its shoulders as well.

Broadly speaking, positions fall into three areas: Environmental management accountants, environmental financial accountants and environmental national accountants.

According to John Rossheim, senior contributing writer for Monster.com, the first collects and analyzes “information on materials flows and pollution controls for an internal audience of executives.” The second makes “analogous reports to external audiences, including investors and regulators.” The third looks at the big picture, “analyzing how national resources are used and how environmental impacts are managed across the nation.”

The majority of professionals entering this field first gain experience in general accounting, earning their CPA credentials before focusing in on green accounting. In preparation for their specialization, they keep up-todate on environmental legislation and learn all they can about environmental policies.

Traditionally, the majority of these positions are found in government agencies and 22

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the nonprofit arena. And, obviously, a good place to start for anyone interested in this career path is the Environmental Protection Agency [www.epa.gov], which was ranked one of the top ten “Best Places to Work” in the federal government in 2007.

However, a growing number of consultancies and private businesses are integrating corporate responsibility into their strategic statements, which means businesses that have made green issues a driving force in their corporate missions are also good places to look.

While a professional designation for environmental accounting isn’t yet offered, the game has changed with the introduction of “Green MBAs” from universities such as Presidio School of Management in San Francisco, Stanford Graduate School of Business, Dominican University, San Rafael, Calif. and Bainbridge Graduate Institute, Wash. These new Green MBAs target three key areas: people, profitability and the health of the planet. As such, ethics, environmentalism and social values are incorporated into the curriculum.

Rebecca Massoud, director of marketing for Presidio, stresses that, “All the traditional courses are offered—economics, accounting, finance—but all incorporate how to use business for positive social and environmental change while making money.”

“We attract students who are passionate about advancing environmental and social initiatives through business,” says John Stayton, co-founder and director of the Green MBA program at Dominican University.

With regulatory pressure mounting and public opinion on green issues shifting more favorably towards companies that practice green business, graduates of these types of programs could have a distinct advantage over their traditional peers in the very near future.

The existence of these programs is a neon flashing light of sorts, advertising the fact that the accounting profession is taking a new direction...and staying on course.

The best and the brightest interns are at your fingertips.

The Illinois CPA Society has made it easier than ever to identify the up and comers in the accounting profession.

Just visit the Illinois CPA Society’s Career Center and search student resumes to fill your next internship.

All across the state, Illinois CPA Society student members have uploaded their resumes for you to view online. These students represent the future of the profession and your guidance as a seasoned member of the profession can put them on the right track. These students are available for summer, fall or spring internships.

You can search by various criteria, including: Geographic Location Timeframe Paid or College Credit Internships

Visit www.icpas.org and click on the Career Center. www.icpas.org/insight.htm

SEPTEMBER/OCTOBER 2008

23

REPORTING

CSR on the Radar Your impact on society, the economy and the environment is now crystal clear.

By Selena Chavis

C

onsider companies like Coca-Cola and UPS—industry giants with farreaching global impact, huge supply chains and many stakeholders. Alongside their public financial reporting initiatives, these companies also have opted to voluntarily and publicly divulge how their operations and strategies affect the social and environmental landscape.

It comes in the way of corporate social responsibility reporting (CSR)—an emerging trend touching small, mid-sized and large companies alike. Specifically, CSR reporting means that organizations actively consider the interests of society by reporting the impact of their activities on customers, suppliers, employees, shareholders, communities and the environment.

Why the trend? Many industry experts believe this is the result of a better educated public.

“What’s happening is that people are much more aware of the impact companies are having on the environment and people,” says Gregg Anderson, executive with Crowe Chizek and Company LLC. He adds that the public at large expects a greater level of accountability from businesses.

“End-consumers are looking for more responsibility,” he says.

Kathryn Pavlovsky, a principal leading Deloitte's Corporate Responsibility & Sustainability group, suggests that there are three overall trends impacting the growth of the movement: 1). Recognition of the need to protect and conserve our natural resources; 2). Producer responsibility, or accountability spread across the supply chain; and 3). Growing emphasis on transparency and governance.

“It’s truly the perfect storm—businesses are recognizing procurement and operational risk associated with natural resource scarcity, and regulation of materials harmful to human health and the environment.

At the same time, the scientific community is coming to consensus regarding impacts 24

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of climate change, and the government is becoming more responsive to demands for consistency, comparability and transparency of environmental and social performance for both regulatory and financial reporting purposes. (This is all) alongside the greater awareness of the impact by consumers and the general public,” she notes.

Flashback to June 2007, when the India Resource Center organized a protest at Coca-Cola’s museum in Atlanta. In a country plagued by water shortages, Coca-Cola’s India-based bottling plants were condemned for leaving many communities without water suitable for drinking.

“When you are taking that much water out of an area that is faced with those kinds of shortages, it becomes clear that business practices are about much more than the bottom line,” says Jim Fuehrmeyer, associate professional specialist with the University of Notre Dame’s Mendoza College of Business. He points out that, since that time, Coca-Cola has taken exhaustive measures for improvement, including a threeyear, $20 million partnership with the World Wildlife Fund (WWF) to “conserve and protect freshwater resources.” “Now their sustainability report talks about their commitment to being neutral—putting as much water in as they take out,” says Fuehrmeyer.

Workforce globalization is also driving the push for greater transparency in US businesses, largely due to the fact that corporate responsibility has a much broader footprint in overseas markets.

“International markets have been at it a little longer,” notes Eric Hespenheide, partner in Deloitte's Corporate Responsibility & Sustainability group, adding that, while businesses in overseas markets have been providing corporate social responsibility reports, there’s a lot of room for improvement in respect to the standards and metrics being applied. “Making sure it is rooted in the basic

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define what CSR covers and business strategy of the comwhat business aspects should pany is important,” he says. be considered for reporting In other words, CSR needs to incorporate the same skill that people are much more aware of the impact purposes. “That’s one of the first steps. A company has to sit sets and reporting tactics that a company would use for companies are having on the environment and people. down and figure out who all its constituencies or stakeholders financial reporting. “Reporting are,” Hespenheide explains, comes across as hollow if it is End-consumers are looking for more responsibility.” pointing to typical groups such not part of the business culture,” Hespenheide explains. “It’s generally easy to tell which as employees and unions, and atypical groups such as families and reports are created by communications departments as opposed to communities where a company does business. “You think about all those that have meaningful metrics and measures that directly the different ways and all the different people you touch. There are many direct and indirect paths.” relate to the company’s business.”

The definition of those paths can have a considerable impact on On the surface, the CSR movement might seem little more than a marketing strategy—a way to put a company’s practices in a pos- the supply chain, Anderson explains, especially when a company itive light. And while many industry professionals agree that pub- such as Wal-Mart institutes practices for corporate responsibility. “It lic relations has been a driver for CSR in the past, most also agree has a ripple effect throughout the supply chain,” he says. To maintain a platform for corporate responsibility, a company has to do that the tides are changing.

“Increasingly, as our natural resources become threatened and business with companies that engage in the same practices.

Acknowledging that one of the challenges of beginning CSR regulation evolves to protect and conserve those resources, there will be a convergence between voluntary reporting and regulatory reporting is a lack of standards, many industry professionals refer reporting,” says Pavlovsky. “The movement we’ve seen during the to recommendations outlined by the Global Reporting Initiative last two years over all levels of an organization is the result of a (GRI). Formed in 1997, the GRI’s mission is to make sustainability growing recognition of the CSR imperative. The challenge for com- reporting as routine and comparable as financial reporting. While panies reporting now in an environment characterized by lack of not the only standard currently available, Hespenheide explains consensus regarding relevant standards and metrics, is that they that, “It’s probably the one that is most widely referred to.” More may suffer negative perception or penalties if they have voluntarily than a thousand companies are currently using the GRI framework.

Pavlovsky agrees, noting that “It’s a leading framework for identifyreported on a metric that is subsequently mandated by regulation.

They have to address changes in public representations of perform- ing the components involved with the three-pronged effort for reportance associated with this metric, because the regulatory standard ing across the economic, environmental and social dimensions.”

For example, GRI offers a number of standard indicators on labor for measurement was more conservative than what they had practices, including areas such as total number of employees, rate reported voluntarily.”

That’s where accounting professionals play a crucial role, says of employee turnover, education availability, counseling and risk Anderson, adding that as part of this movement, stakeholders and programs provided to employees, rates of injury, health and safety topics covered in formal agreements with trade unions, training consumers are starting to question reporting accuracy.

“What we see is a standard emerging. In any type of reporting provided and diversity issues. Other protocol areas covered process, how do you know it’s complete? How do you know it’s include economic, environment, human rights, product responsiaccurate?” he says, pointing to trends that bring in third-party bility and society.

Defining a company’s core reporting elements for CSR won’t accounting involvement. “The skills in preparing financial statements are the same when preparing statements about corporate be the only challenge. Accounting professionals will have to responsibility. The financial professional has been trained in mak- work in a framework that bears little resemblance to black-andwhite financial reporting. “Impacts may not be directly measuraing sure reporting is complete and accurate.”

Pavlovsky adds that, “[T]he financial and accounting profes- ble. It’s more open-ended,” Hespenheide explains. Examples sional has to be supported by a cross-functional team that under- include programs that assess and manage the impact of how a stands the environmental technical considerations, legal require- company enters, operates and exits a community; how a company responds to corruption; public policy positions and particiments and operations, amongst others.”

Hespenheide agrees, noting that process-oriented people who pation in public policy development; and information related to understand the flow of information are “going to be in high demand.” anti-competitive behavior.

Anderson cautions companies to consider their overall business Specifically, he’s speaking to accountants, auditors and CFOs. The roots of CSR are planted in the “Triple Bottom Line” strategy when defining aspects of their reporting, and to ensure approach to reporting originally coined by John Elkington in the reporting doesn’t conflict with where the company is headed. mid-1990s. Described by BusinessWeek as the “dean of the corpo- “Once you decide what you are going to report on, you set a precerate responsibility movement for three decades,” Elkington sug- dent,” he says, adding that it will be difficult for a company to gested that the Triple Bottom Line is made up of social, economic change its course once it’s already set into motion.

In an ever-evolving global marketplace, companies that embrace and environmental impacts. It affects anyone or anything that is CSR early on will become leaders in their industry. “In one sense, influenced, either directly or indirectly, by a firm’s actions.

The terms “sustainability reporting” and “CSR” are often used there’s a certain amount of competitiveness that goes into this,” interchangeably depending on the industry, but many suggest that Fuehrmeyer suggests. “To the extent that one company becomes a CSR is just one component of the overall category of sustainability leader in their industry with this reporting, then there’s pressure for reporting. The challenge for many companies is how to accurately other companies to follow suit.”

“What’s happening is

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33077

INVESTING

Birth of a Bubble While investors see green technology companies as the next panacea, financial experts cast their minds back to the dotcom bubble that burst.

By Bradley K. Walton, CPA, CFP, CLU

E

veryone’s talking about global warming. If we don’t drive hybrid cars and bolt solar panels to the roof, we’ll face certain extinction, right?

Added to the atmosphere of impending crisis are skyrocketing oil prices. No wonder we’re panicking.

In financial terms, these factors have come together to create a boom in green investing. Just try searching for “green investment” on Google. You’ll find more than three-million entries. If you want more proof, consider the fact that venture capital investment in green technologies has more than doubled since 2006.

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THE GREEN ISSUE - PLEASE RECYCLE

Green investing is a very specific form of socially responsible investing, where investors look at industry and company practices in the context of their social, economic and environmental impact. They focus on issues such as corporate ethics, workplace practices, product safety, human rights, environmental sensitivity and community investment to identify securities that will simultaneously generate successful returns and make the world a better place.

Historically, the returns on socially responsible investment practices have been mixed. But investors are willing to place their values and societal convictions on an equal or greater footing than their desire for pure ROI. When speaking of green investing, the term “green technologies” is probably first to spring to mind. Loosely grouped into the categories of water conservation and treatment, energy efficiency, sustainable agriculture, environment-friendly materials and manufacturing, emissions reduction and filtration, and alternative energy sources, it’s the latter—alternative energy sources—that’s attracting the most attention. This sector includes wind, solar, hydro and geothermal power; biofuels; fuel cells; and, depending on the investor’s point of view, clean coal and nuclear energy.

The reasons for its popularity are varied, but gas prices loom large as a cause. What’s more, we’re looking at legislation in the near future that will place limitations, and a de-facto tax, on the release of carbon emissions. This will significantly impact the economy, employment levels and our standard of living.

It doesn’t matter whether an individual investor personally believes global warming is an impending catastrophe; the truth is that our lawmakers and our next president believe it. On a broader basis, most of society accepts that fossil fuels eventually will run out, pollution is a bad thing,

and we should take reasonable steps to protect the environment.

In many ways, green investing is a lot like the technology investments of 30 years ago. Like the dotcom sector, the green sector promises significant benefits to mankind, is highly unlikely to just go away, and eventually will change the way we lead our lives. Green energy companies are in their infancy, and if we manage to identify the green equivalent of technology’s Microsoft or Intel, then we’ll be rich!

However, many, in fact most, of these startup companies will falter, leaving behind a few amazing success stories. Remember that people who invested all their assets in technology portfolios during the dotcom craze 10 years ago have yet to recoup their investment following the bear market that unavoidably followed.

I’m not saying that green investments are unwise. Certainly, there will be a few winners among the many losers. Simply, use moderation in these types of investments. As the sector matures and successful companies prove themselves, new “blue chips” that belong in welldiversified portfolios will definitely make themselves known.

Remember that all bubbles eventually burst.

“Going green” is now a media darling, and the focus of a public consciousness that believes green technologies to be the next panacea.

This sector will undoubtedly attract huge sums of investment dollars, deliver incredible investment returns for a time, and then suffer the devastating shakeout that is part of the growth cycle of any nascent industry. If this forecast sounds a bit grim, please note that the list of now defunct US auto manufacturers numbers approximately 2,000.

Given all this, tread carefully with clients.

Some will understand the need for moderation; others will insist on outsized investment positions. These investors will have many choices to pick from. The green wave of IPOs is only just beginning. There are already hundreds of green mutual funds and dozens of ETFs, with more coming every week. All the aggressive green investor has to do is identify the handful of companies that will become the long-term winners.

Bradley K. Walton, CPA/CFP/CLU is a shareholder in Signature Advisers Group, Ltd., a graduate of the University of Illinois and former Elijah Watts Sells Award recipient.

upcoming events making your life easier September 17, 2008 - Chicago, Illinois TECHNICAL WORKSHOP SERIES Revenue Recognition in Today’s Business Climate George Heyman, CPA - Professor, Oakton Community College

c

September 19, 2008 - Chicago, Illinois Using Financial Statements to Drive Better Business Decisions Marian Powers, PhD - Adjunct Associate Professor, Kellogg School of Management, Northwestern University September 25, 2008 - Chicago, Illinois

e Corporate Income Tax: Analyzing the Impact of FAS 109

Mark A. Sellner, CPA, JD, LLM (taxation) - Graduate Tax Professor in the Master of Business Taxation Degree Program at the University of Minnesota’s Carlson School of Management September 26, 2008 - Rosemont, Illinois Midwest Financial Reporting Symposium October 17, 2008 - Oak Brook, Illinois October 23, 2008 - Chicago, Illinois October 24, 2008 - Northbrook, Illinois BREAKFAST SERIES International Financial Reporting Standards (IFRS) are Coming.

Are You Ready?

Marian Powers, PhD - Adjunct Associate Professor, Kellogg School of Management, Northwestern University October 22, 2008 - Chicago, Illinois e Implementing FIN 48 for Privately-Held Companies

Mark A. Sellner, CPA, JD, LLM (taxation) - Graduate Tax Professor in the Master of Business Taxation Degree Program at the University of Minnesota’s Carlson School of Management October 29, 2008 - Chicago, Illinois e Strategic Cost Analysis: Tools for Lowering Your Company’s Cost

John W. Hill, PhD, MBA, JD - Arthur M. Werner Chair in Business, Kelley School of Business, Indiana University

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SEPTEMBER/OCTOBER 2008

29

GOVERNMENT

Lincoln Green Illinois lawmakers still have a long way to go on the road to environmental sustainability.

By Margaret Schroeder

W

ith the third largest city in the United States, surrounded by ever-sprawling suburbs and heavily worked farmland, Illinois is a prime candidate for an environmental makeover.

Whether it’s lessening carbon emissions on highways, fighting pollution in the Great Lakes or keeping agricultural runoff out of the downstate waterways, Illinois citizens and businesses both have a stake in ensuring a green future.

The challenge for local governments is finding a balance between environmental and business sustainability. The 2007 Smoke Free Illinois Act is a good example of the fine line lawmakers walk. They ultimately agreed to protect air quality in public places by banning smoking, but at the risk of putting some businesses in a tight spot when their customers chose to stay away.

While states like California have been at the forefront of environmental sustainability efforts, Illinois is actively setting the wheels in motion. Whether it’s the doom and gloom of statistics on pollution and global warming, or the looming liability potential, even skeptics are sitting up and taking notice of the green movement.

“We are at the very beginning,” observes Peter Nicholson, president and executive director of the Foresight Design Initiative, a nonprofit Chicago organization working toward collaborations that will improve and encourage sustainable practices. He believes the environment is finally on the radar in a way that it has never been before, and will quickly create positive improvements. “I think our perspective is changing, which is necessary for actions to change,” he says.

Last fall Governor Rod Blagojevich’s Climate Change Advisory Group finished work on a detailed report suggesting a wide range of improvements. The group was charged with evaluating potential options for the state 30

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to cut down on greenhouse gas emissions like carbon-dioxide and methane, and included business, labor, energy and agriculture representatives, as well as scientists, economists and members of environmental organizations. The wide-ranging report includes recommendations such as expanding mass transit, carbon-offset requirements for newly generated fossil fuels, and emissions performance standards for electricity generation or procurement.

Furthermore, the Global Warming Response Act of 2008 (Senate Bill 2220) includes several measures that would reduce the state’s contribution to air pollution. But the bill is currently tied up in a longer-term process that may take some time. Oak Park Democratic State Senator Don Harmon, who chairs the Senate Subcommittee on Global Warming and Energy Efficiency, says the group plans to meet in hearings and working groups over the coming months to decide on final legislation.

The most significant piece of environmental law to come out of the 2007 session is the renewable energy portfolio standards, which were part of the Electric Deregulation Bill. The measure includes graduated goals for reducing the amount of electricity used to meet consumer needs. It also requires the use of alternative energies like wind and solar power. Last year, there were also two bills designed to cut down on mercury pollution by prohibiting the sale of devices that contain the substance.

For 2008 and beyond, the spectrum of potential legislation is broad, ranging from air quality standards to requiring energyefficient lightbulbs; some laws could have a major impact, while others might prove to be less noticeable.

Elmhurst Republican State Senator Dan Cronin, who has been called a “Friend of Industry” by the Illinois Chamber of Commerce and has received high marks from

environmental groups, says that, “We can accomplish environmentally friendly policies with the support of the business community.” Business organizations and manufacturers need to be part of the discussion, he explains.

“The best approach to implement meaningful change in business practices that have an impact on the environment is one of collaboration, negotiation and, perhaps, incentives. In the end, it is about responsibility.“ While regulation of power companies and car manufacturers traditionally has captured headlines, other measures would have a significant impact as well— both environmentally and economically. Barry Matchett, co-legislative director for the Environmental Law and Policy Center, says energy efficiency for buildings has been one of the main issues on the table for lawmakers this year. The measure would increase energyefficiency requirements for new homes. “We think this is a pretty good first step,” he says.

The nation’s current economic condition could be part of the reason why this hasn’t been a more productive year in terms of legislation. Sen. Harmon, who has been recognized by the Illinois Environmental Council for his environmental voting record, says that, “With rising prices on everything from energy to construction materials, the business community is apprehensive about policies that may contribute to higher costs. That’s why I think it is so important to engage stakeholders on all sides of the issue.”

On the other hand, this legislative year has not garnered any proposals that would evoke any major concern or opposition on the part of environmental groups.

“This session is relatively clean in terms of bills we’re looking to fight,” says Matchett.

Looking to the future, it’s a certainty that the state legislature will continue to move forward in many areas of sustainability, including those that affect businesses.

And there are plenty of motivations for that, from constituent concerns to long-term healthcare cost challenges. Perhaps one of the biggest motivators will be federal regulation. Nicholson says federal, state and even local government policies as they relate to climate change will be a major driver in the decisions businesses make. “This will be huge down the road. Every major company that I know of is looking at it. If they’re not, they’re foolish.”

While he characterizes Illinois government as “not very progressive on these issues,” he says Chicago plays an important role in setting the standard for the rest of the state. Environmental leadership under Chicago Mayor Richard Daley is part of that. “As mayors go, we are very fortunate,” he says.

Mayor Daley’s push for environmental sustainability has included planting 500,000 new trees, constructing 300 gardens and green roofs and, over the last 20 years, spearheading the implementation of sustainable urban practices, including a commitment to reducing greenhouse gases, the development of Millennium Park, which was built on a deck over railroad tracks, brown-

2009

Lifetime Achievement Award Recommendations Now Being Accepted

The Illinois CPA Society is seeking recommendations for the 2009 Lifetime Achievement Award, which is presented each year to an individual(s) who has provided distinguished service to the profession in Illinois and/or nationally.

Candidates are selected based on a lifetime of service to the profession. Factors to be considered include: > Contribution to the profession > Professional position attained > Length of service > Illinois professional involvement

Recent Award Honorees: 2008

Belverd E. Needles, Jr.

2007

Edwin Cohen

2006

Richard T. Sullivan

2005

Vincent E. Villinski Richard E. Ziegler

2004

Lawrence M. Gill Jerome A. Harris Cheryl S. Wilson

2003

Daniel W. Cadigan Lester H. McKeever Jr.

2002

Robert E. Brooks Sr. Margaret A. Cartier

Letters of recommendation with information supporting the individual’s qualifications (resume, biography, etc.) can be sent to: Eileen Robbs, Lifetime Achievement Award, Illinois CPA Society, 550 W. Jackson Blvd., Suite 900, Chicago, IL 60661 Or by email to: robbse@icpas.org

Deadline for recommendations is December 15, 2008

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SEPTEMBER/OCTOBER 2008

31

Reach Your Target Audience

For an INSIGHT Media Kit

email Tito Apatira at apatirat@icpas.org or visit www.icpas.org/insight.htm.

32

field (former industrial land) remediation, the Leadership in Energy and Environmental Design (LEED) Platinum-rated Center for Green Technology, a Green Business Strategy and Green Construction Permit Program, and the conversion of the downtown airport into Northerly Island Park, now a planned Olympic venue site and nature preserve.

In terms of state lawmakers, support for environmental initiatives tends to be spread out geographically, coming from both republicans and democrats downstate, “Often from those who are interested in conservation and clean water for hunting and gaming purposes,” Matchett explains. There’s also bipartisan support in Chicago and the suburbs, but the focus is more likely to be on issues like clean air and the water quality of the Great Lakes.

It’s impossible to deny that policies can have positive and negative effects on the business community. “We should reward positive actions through tax credits and other tools, and also offer financial assistance for energy-efficiency strategies and other measures which may have prohibitively high initial costs but offer savings in the long term,” says Harmon. “However, the legislature is responsible for making difficult choices for the benefit of our whole state. Incentives are not always enough; the legislature also has to be willing to establish standards and penalties in order to achieve its goals.”

Government aside, Nicholson points out that Illinois businesses have plenty of motivation to go green. One of the biggest reasons is the threat of future liability. He says businesses want to be responsible citizens because if they are not, they are increasingly likely to pay for it in the future. Other motivators include good public relations, lower energy costs, investor pressure for publicly traded companies and employee retention. Many employees, in fact, now want to work for a company that shares their values. Younger employees, in particular, seem to be expressing a strong desire for their employers to take these issues seriously.

As businesses move closer to environmental sustainability, accountants may find themselves in a new role. Nicholson foresees a time when they will be in the business of certifying carbon emissions for trading purposes. Companies already do this trading on a voluntary basis through the Chicago Carbon Exchange, but, according to Nicholson, its use will become more widespread. “I can see this in the future for the accounting field,” he says.

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Illinois CPA Society

member

Rockford | September 17, 2008 11:30AM - Networking and Lunch 12:00PM - 1:00PM - Program and Q&A Best Western Clock Tower Resort 7801 E. State Street, Rockford, IL

Champaign | October 6, 2008 11:30AM - Networking and Lunch 12:00PM - 1:00PM - Program and Q&A Hawthorn Suites 101 Trade Centre Drive, Champaign, IL

town hall forums Please be our guest.

Come for complimentary breakfast or lunch and hear the latest international, national and Illinois trends impacting your day-to-day practice: > International Financial Reporting Standards (IFRS) They ARE coming and WILL impact you.

Springfield | October 7, 2008 8:00AM - Networking and Breakfast 8:30AM - 9:30AM - Program and Q&A President Abraham Lincoln Hotel 701 E. Adams Street, Springfield, IL

Peoria | October 28, 2008 11:30AM - Networking and Lunch 12:00PM - 1:00PM - Program and Q&A Hotel Pere Marquette 501 Main Street, Peoria, IL

Bloomington | October 29, 2008 8:00AM - Networking and Breakfast 8:30AM - 9:30AM - Program and Q&A

> Ethics Standards Know the current rules. Avoid seeing your name in the press! > Merging Generations in the Work Place Skills to develop tomorrow’s leaders.

Don’t miss this opportunity to share your thoughts and ideas with Elaine Weiss, ICPAS President & CEO, and Sheldon Holzman, Chair of the ICPAS Board of Directors.

Chateau Hotel and Conference Center 1601 Jumer Drive, Bloomington, IL

Glenview | January 21, 2009 8:00AM - Networking and Breakfast 8:30AM - 9:30AM - Program and Q&A Wyndham Glenview Suites 1400 Milwaukee Avenue, Glenview, IL

Oak Brook | January 26, 2009 8:00AM - Networking and Breakfast 8:30AM - 9:30AM - Program and Q&A

Bring a Young Professional Colleague Help develop the future of our profession. This is an excellent opportunity for young professionals to network with colleagues and hear first-hand the latest developments within the profession.

The Wyndham Drake 2301 York Road, Oak Brook, IL

Downtown Chicago | January 27, 2009 8:00AM - Networking and Breakfast 8:30AM - 9:30AM - Program and Q&A The Crowne Plaza 733 West Madison, Chicago, IL

To REGISTER for this complimentary program in your area, call 800-993-0393.

1 CPE Credit Hour. COST IS FREE.

TAX

Environmental Tax Do you know your solar from your hydro?

By Harvey Coustan, CPA

T

here are numerous provisions in the Internal Revenue Code that encourage environmental protection, and some that penalize anti-green activities. As we all know, one of the non-revenue reasons for enacting various provisions is to encourage societal good. I thought that discussing some of the more notable provisions would be an interesting tie in with our theme for this month.

Section 38, “General business credit,” allows a number of individually calculated amounts as credits against federal income tax. The following are related to environmental issues:

• Section 40—Alcohol used as fuel • Section 40A—Biodiesel and renewable diesel used as fuel

• Section 45—Electricity produced from certain renewable resources, etc.

• Section 45H—Credit for production of low-sulfur diesel fuel

• Section 45J—Credit for production from advanced nuclear power facilities

• Section 45K—Credit for producing fuel from a nonconventional source

• Section 45L—New energy-efficient home credit

• Section 30B(g)(1)—New qualified fuel-cell motor vehicle credit

• Section 30C(d)(1)—Alternative fuel vehicle refueling property credit

• Section 46(2)—Energy credit (including §§48,48A, and 48B).

Section 48 allows a direct credit against income tax of an amount equal to a percentage (10 to 30 percent) of the basis of “energy property” placed in service during the year. Energy property includes a number of environmentally related items, such as equipment that uses solar energy to generate electricity, to heat or cool a structure, or to provide solar process heat (heating a swimming pool doesn’t count). The definition includes a “plant” that converts a fuel into electricity using electro-chemical means. Other energy-saving equipment is included, but its description is beyond the 34

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grasp of this accountant—“qualified microturbine property” comes to mind.

One practical problem is that some environmental tax benefits, including those just described, were in need of extension as I was writing this column. Many energy properties that would otherwise qualify would expire at the end of this year.

Another expiring provision, and one that is somewhat easier to understand, is the credit under Section 45L, which relates to certain contractors and “manufacturers” of qualified new energy-efficient homes.

While the credit can be $1,000 or $2,000 per dwelling unit, substantial savings in energy consumption must be certified. To qualify, a constructed (as opposed to manufactured) dwelling unit must be certified to: (1) have a level of heating and cooling energy consumption that is at least 50 percent (30 percent for certain manufactured homes) below the annual heating and cooling energy consumption of a comparable dwelling unit.

(2) have “building envelope component improvements” that account for at least 1/5 of the 50 percent (1/3 of the 30 percent for manufactured homes).

Again, a working knowledge of non-tax terms—in this case real-estate development —is necessary to wade through this benefit.

Credits for energy-efficient vehicles such as hybrids and those that use alternative fuels are available under Section 30B. Furthermore, the Internal Revenue Code provides incentives for conserving energy at the energy-generation level, for those who house us, and for those of us who choose to drive energy-efficient vehicles. It also provides incentives in a number of other areas, including for those who provide refueling facilities.

Clearly, Congress wants to encourage us to go green. However, a major issue—which I alluded to earlier—is the technical jargon involved in many of the provisions. Without some basic understanding of the qualification requirements, a tax practitioner likely would be reluctant to recommend claiming

the benefits to his or her clients. A plain language summary of the benefits and ways to qualify them is needed, and Congress should act (if it hasn’t already) to extend these benefits to assist in an overall strategy of improving the environment and reducing our dependency on fossil fuels.

A recent development is also worth noting. On May 21, the House passed H.R. 6049, the Renewable Energy and Job Creation Act of 2008.

The bill, at the time of this writing, was in the Senate where passage was far from assured. H.R. 6049 would provide extensions for renewable energy production credits. It would also extend and modify the solar and fuel-cell investment tax credit. In addition, H.R. 6049 would extend the credit for residential solar property for six years through the end of 2014. Many of the extended provisions would be allowed to offset Alternative Minimum Tax. The bill authorizes $2 billion of new Clean Renewable Energy Bonds to finance facilities that generate electricity from wind, geothermal, hydropower, trash combustion, and other non-traditional sources. It contains carbon-mitigation provisions and numerous other provisions that demonstrate Congressional concern in this area. For example, the bill directs the Treasury to request that the National Academy of Sciences undertake a comprehensive review of the tax code to identify the types of specific tax provisions that have the largest effects on carbon and other greenhouse gas emissions, and to estimate the magnitude of those effects.

Let us hope that this or similar legislation is passed, and that the IRS takes steps to publicize the availability of green tax incentives in a way that is both user-friendly and encourages us to maximize their use.

Harvey Coustan is an Ernst & Young retired partner. He is presently consulting on substantive technical and professional standards issues and has been an expert witness in a number of cases.

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CFOs across the nation are waking up to the legitimate call for corporate greening.

By Sheryl Nance-Nash Some say the greening of corporate America is a revolutionary change—one that has already impacted the lives of CFOs, and likely will continue to do so. This greening is, in fact, part of a broader movement, known as “corporate social responsibility” or CSR, which hinges on demonstrating concern for the environment, employees and local communities. As companies focus on sustainability, the competitive landscape changes. A company lacking a viable social responsibility message may have a harder time building its customer base, while a company with an attractive CSR message may find it easier to attract and retain employees.

Think of it in terms of the birth of personal computers and the death of mainframes, says Gary Patterson, president of FiscalDoctor, a financial consulting firm. “A new industry was born, and a new way of doing business, communicating and relating to the customer emerged. Seen this way, the biggest challenge CFOs face is the limits of their own mindsets and attitudes. They can resist the burgeoning clean energy industry and go the way of dinosaurs, or they can embrace the new industry and fly like eagles. Think of how the former Fortune 500 Digital Equipment Corporation (DEC) was displaced by then-upstart Dell Computers, which ironically became a Fortune 500 behemoth,” he says. “CFOs need to roll up their sleeves and get involved in strategy planning, technology innovations, and evaluating and preparing to make technology decisions of the same magnitude as the entertainment industries faced in the Beta versus VHS issues.”

The Future is Now...Sixty percent of global executives recently surveyed by McKinsey Quarterly said they regard climate change as strategically important; the majority consider it particularly important to product development, investment planning and brand management. And yet, the survey shows that fewer companies are acting on these opinions. More than one-third of executives, in fact, said their companies seldom or never consider climate change when developing overall strategy.

On a more positive note, executives expressed optimism about the business prospects of addressing climate change, with 61 percent expecting issues associated with it to boost profits— if managed well. More than 80 percent also expect some form of climate change regulation in their companies’ home country within five years.

Another recent study—of CFOs specifically—conducted by Jones Lang LaSalle, outlined key challenges to nationwide greening. These challenges include a lack of a standardized decisionmaking framework, regulatory compliance, improving energy efficiency, reducing greenhouse gas emissions, measuring the effects of sustainability on shareholder value, and the financial impact of greening the corporation.

True enough, the green movement has tremendous impact on the CFO. “CFOs now have to evaluate risk from a new dimension not previously assessed by them. They have to consider the longterm environmental impact of their operations, products and financial performance as a company, particularly if they are publicly traded,” explains Mark Coleman, senior program manager at the Golisano Institute for Sustainability at the Rochester Institute of Technology in Rochester, New York.

“Many financial leaders now believe that future financial risk is directly related to a company’s performance on environmental, social and governance (ESG) indicators,” he continues. “The more CFOs understand how their firm gets financially rated by rating agencies like INNOVEST or socially conscious mutual funds, the better suited they will be to understanding what the firm needs to account for with regards to financial data and reporting, as well as establishing internal controls and metrics to assess the firm’s financial performance as it pertains to environmental, energy, social and governance factors. The key for the CFO is greater awareness of how the firm’s overall ESG data is used by external stakeholders to inform the investment decisions of large institutional investors that literally make or break many corporate futures.”

According to the Social Investment Forum, shareholder resolutions on social and environmental issues increased more than 16 percent from 299 proposals in 2003 to 348 in 2005.

Patterson agrees that the green movement adds an enormous responsibility to the CFO’s charter. “They will need to obtain 38

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enough clean energy expertise to understand how renewable energy mandates and initiatives will affect their operations, business models, industries and competitive positions. Otherwise, how can they make intelligent assumptions and obtain critical operating information for budgets and the wide range of analytics needed in their industries? There’s no doubt they will be affected, if not traumatized, by changes in technology, resource availability, logistics stress, green customer attitudes, and additional regulatory roadblocks,” he explains.

Many believe that climate-related legal risks for companies and their directors are growing, and recent legal history seems to support the claim. In Connecticut vs. American Electric Power, for example, eight states and New York City filed a lawsuit against five of the nation’s largest power companies demanding that they cut CO2 emissions. In California vs. General Motors, the State of California filed suit against six motor vehicle manufacturers on a public nuisance theory. While many of these suits will be dismissed, their emergence is cause for concern among corporate law firms, as well as major insurers.

Some organizations have reached a tipping point in the green movement, from complacent recognition to decisive action. The issues of oil, CO2 emissions and global warming impact every organization’s social and environmental performance and financial health. “This has led to the term ‘Triple Bottom-Line reporting,’ meaning profit, people and planet,” says Gary Cokins, global product marketing manager for performance market solutions at SAS, a $2 billion global data management, business intelligence and analytical software firm.

Since the CFO is a key player in creating shareholder value for the organization, the greening of corporate America means that finance chiefs increasingly are being charged with connecting their value creation skills with the “sustainability” of the company, its immediate profits, and the short- and long-term impact on operating costs and the environment, says Lisa Tromba, a vice president at executive search firm Battalia Winston in New York.

Specifically, the CFO is tasked with managing the company’s risk in implementing green initiatives, and is responsible for tracking and measuring initiatives in order to provide insight into how those initiatives are affecting the company’s financial performance and shareholder value.

What’s more, the CFO is destined to play a part in providing guidance on sound environmental programs and practices, and by helping to identify revenue-generating opportunities. Remember that green initiatives often have financial incentives associated with them, such as tax credits or deductions. The challenge lies in aligning green strategies with the financial structure of the company, and in being realistic about short- and long-term rewards. “CFOs will

need to stay on top of ever-changing green regulations, incentives and tax implications to do this successfully,” says Tromba.

Simply put, the CFO is becoming the strategic and financial green partner to the business. This fact heightens the critical need for enhanced “engagement skills,” says Tromba. “Engaging in the business and with the business partners will be critical to ensuring the awareness required to guide the organization toward financially responsible green practices. The CFO will need to be environmentally aware and savvy in order to be the ‘voice of reason’ for the organization. The more a CFO embraces the green movement, the greater the value he or she can create for the organization. Moreover, CFOs who increase their green skills increase their professional value, as well.”

“CFOs will either make things happen or get in the way,” adds Jean Houston Shore, a CPA with the Business Resource Group consulting firm. “Building respectful relationships with other company leaders becomes more important than ever. There is no room for silos or turf building if the goal is to become sustainable while remaining competitive.”

It’s a no-brainer for CFOs to understand and build the business case for energy efficiency on the cost side of the equation, says Leigh Anne Palmer, CFO for Trane’s commercial business in the Americas. The Piscataway, NJ company provides heating, ventilation and air-conditioning systems and services to residential and business customers.

“When analyzing whether to make a capital investment to improve energy efficiency, CFOs need to evaluate the total cost of owning a system, particularly when it’s a building investment.

Energy-efficient building systems may have a 1 to 3 percent greater upfront cost, but could have as little as a two-year payback. The key is seeing the whole picture,” says Palmer.

The green movement shines a light on the importance of the CFO’s ability to recognize and manage resource constraints of all kinds. “Whether it’s reducing energy use, making environmentally responsible product packaging choices, or purchasing only from local vendors, CFOs control the purse strings that affect resource consumption. In general, the CFO will lead the push to reduce waste, save money, reduce energy use, lower carbon emissions, conserve forests, reduce water use and air pollution, and more. It’s a tall order,” says Houston Shore.

Peter Csathy, CEO of SightSpeed, Inc., a provider of video calling and multi-party video conferencing via the Internet, thinks it’s well within his CFO’s scope of responsibility to suggest technology like video communication as a substitute for carbon-emitting travel, whether for meetings that are across town, across the country or around the world. The company’s engineers are encouraged to travel to the office no more than twice a week. Other employees are assigned to work from home and use the company’s technology to collaborate with team members via video. Embedded in the email signature of each employee is a “Call Me on SightSpeed” button that sets up a video call with a single mouse click.

Csathy, who runs the company from San Diego via web-based conferencing, says, “CFOs can cut down on employee travel, fuel consumption and carbon emissions by considering changes in corporate culture, like reducing the number of days spent in the office.”

Then too, many green initiatives are in the early stages. It’s unclear whether they will evolve into products that function better or whether they’ll simply get more expensive, says Mark Laska, CEO of Great Eastern Ecology, an energy consulting firm in New York City. For instance, solar power is becoming increasingly efficient and continues to be a better product for alternative energy

supplies, he says. In contrast, biofuels, once considered a very good solution to traditional petroleum-based products, have both financial and environmental hidden costs, making this product less attractive than originally assumed.

While some CFOs are embracing the green movement, others are sticking their heads in the sand, says Patterson.

Christopher Park, principal with Deloitte Consulting in Detroit, explains that, “The jury is still out on the real near-term business benefit of going green; some companies are taking a leading approach and having some positive results, while others are taking a more cautious wait-and-see approach.”

One of the biggest mistakes a CFO can make is to think that corporate greening doesn’t apply to them because they don’t make chemicals or manufacture durable goods. “The trend applies to everyone,” says Houston Shore.

When Chicago-based commercial real estate services company Jones Lang LaSalle surveyed finance executives about their companies’ priorities for sustainability, reporting to investors—a task that clearly falls to the CFO—was among the lowest priorities on the list, says Lauralee Martin, Jones Lang LaSalle’s chief operating and financial officer. “Communicating to customers ranked as a high priority. It’s interesting that so many of us know that sustainable practices will enhance customer loyalty, which will increase revenue, but we don’t believe investors know it,” she says.

SAS’ Cokins advises finance executives to, “Start thinking of your organization’s social and environmental responsiveness as an asset and opportunity, not as a liability and extra cost. When reasoned actions are taken they can favorably result in improved processes, innovations, improved reputations and increased financial profitability. Investing in sustainable practices can deliver a positive financial return for shareholders.”

Getting up to speed is not an option—it’s an imperative. “Environmental disclosure is required under the Sarbanes-Oxley Act of 2002 (SOX). Environmental liabilities and risks are valuated, reported and financially disclosed under new reporting requirements. In some cases, says Coleman, firms that have failed to take action on environmental disclosure under SOX have experienced a learning curve, which in turn has resulted in financial penalty and, in some cases, legal action against individual executives.

Coleman offers this advice: “Understand what your peer companies and sectors are doing on environmental disclosure and reporting. Seek to understand all corporate green initiatives within your firm and how best to disclose the benefit of those initiatives. Work with industry associations to better develop your internal metrics and control.”

Look globally too, says Brian Smith, a senior tax manager with Ernst & Young’s State and Local Tax Practice in Chicago. “Capitalize on Europe and other countries’ aggressive lead, and establish targets for renewable power, energy efficiency and carbon reduction in your domestic and overseas operations. As the US government increases its focus on green policies and sustainability reporting, CFOs should be prepared to leverage upcoming changes and maximize efficiencies,” he explains.

Immerse yourself in the issues to gain the knowledge you need to catapult your company into the 21st century, says Patterson, adding that, “As typically happens in periods of seismic change, some companies will make lemonade out of lemons. Others will get a puckered mouth from unanticipated factors that create painful consequences. Will your company produce lemonade or be a lemon?”

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SAVED High-impact, low-cost ways to green your office… and pad your budget.

By Judy Giannetto

Why go green?

Why spend your business’s hard-earned cash to give a tree a hug, spruce up your air supply and patch up the ozone layer?

If you see the long-term survival of the planet as something more than a “fluffy kitten” type of issue, then the long-term survival of the planet is reason enough. If, on the other hand, you’re all business, no fluffy kittens, then you’ll likely need a bit more persuading. Let’s start with this...

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wo key human aspects of the business marketplace determine success or failure: Your employees and your customers. Showing that you care about more than the bottom line sends an influential message of corporate altruism to your staff—a staff that is increasingly difficult to attract and retain. It inspires loyalty to the company, and allows employees to stand behind a corporate mission they can believe in and be proud of.

In fact, a June 2008 UC Santa Barbara survey of 759 MBA grads at 11 top business schools revealed that these up-and-coming professionals would consider taking a significant salary cut in order to work for a socially responsible employer.

On the customer side, corporate social responsibility is becoming less of a choice and more of a necessity. Seeing the devastating effects of climate change, customers are demanding that businesses play a key role in social responsibility and environmental sustainability. If you want to keep your customers, and win new ones, then you need to show them that you care about the planet.

Take a cue from the biggies—Citibank, Wells Fargo, Adobe Systems Incorporated, Toyota…need we say more?

And there’s another benefit to going green—differentiation.

Green companies stand out in the marketplace. They have an edge over the competition. They are newsworthy. They are selffulfilling marketing machines.

And, because being eco-friendly means reducing waste and using less or alternative energy, green businesses may benefit from improved efficiencies and lower operating costs in the long run.

In pinpointing the most cost-effective strategies for going green, we not only looked at US practices, but also turned an eye across the pond, where the green movement is already well underway. And so, coupling what’s going on overseas with what’s going on at home, we give you our list of eight high-impact, low-cost green initiatives.

1

USE LESS WATER

Why should you care how much water your company uses?

Because, says Envirowise [www.envirowise.gov.uk], “[A]s a utility charge, any savings you make will be added directly to the bottom line. Although water is relatively cheap compared to energy, it can still equal as much as 1 percent of a business’s turnover, particularly when you consider the hidden costs associated with water usage, such as heating, pumping and treatment.”

Envirowise, which provides free government-supported environmental consultation, advice and documentation for UK businesses, goes on to say that, “By implementing no-cost and lowcost measures, it is possible for a site that has not considered its water use before to make savings of up to 30 percent of its water and effluent bills, and this could increase to 50 percent by investing in capital.”

The organization also estimates that, “A tap dripping two drops a second could waste nearly 10,000 liters of water in a year.”

To help to conserve water and save on your bill, • Ensure pipes are well insulated and regularly check equipment for possible leaks.

• Investigate opportunities for reusing process water.

• Consider alternative water sources such as rainwater or graywater (residential waste water from domestic processes such as dishwashing, laundry and bathing).

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• Invest in water-efficient fixtures and appliances such as automatic faucet valves and low-flow toilets. Although this equipment may cost more at the outset, it usually pays for itself relatively quickly.

2

SAVE ON ENERGY

While installing solar panels and wind turbines takes a lot of cash and aggravation, there are some pretty basic ways to conserve the energy you’re currently using. Tips include: • If you’re not in the room, switch off the lights. Or, even better, install motion-detector lighting. Or, better yet, rearrange the office to maximize on all natural light sources.

• If natural light isn’t an option, then wave goodbye to your incandescent lightbulbs and say hello to compact fluorescents (CFLs). CFLs are touted as saving more than $30 in electricity costs and 2,000 times their own weight in greenhouse gases. Another alternative is LED lighting, which has a long lifespan, while drawing very little electricity.

• Don’t heat unused spaces such as storerooms, corridors and garages. Alternatively, schedule planned outages. When Adobe reduced the operating hours of its garage’s exhaust fans at a cost of $250, for example, it realized an annual savings of $98,000.

• Turn down or turn off the heating/air-conditioning when the building is not in use.

• Regularly inspect your heating and cooling equipment.

Assess your building’s insulation and, if necessary, plug the drafts. Lack of maintenance can add to your bill significantly.

3

GREEN YOUR TECHNOLOGIES

Closely related to the issue of energy conservation is that of green technologies. And, in case you think, “We’re just fine with what we’ve got,” the following facts may prove you wrong.

“HP has seen a 120-percent increase worldwide in the number of inquiries connected to the environment since the last half of 2006. In 2005, the company saw $6 billion in requests for proposals that had some environmental element,” explained a recent ABC News article, “Tech Firms Tap Into the ‘Green’ Movement.”

In the meantime, “IBM launched its ‘Project Green’ program in early May, committing $1 billion per year to increase the level of energy efficiency in the information technologies markets, and since then has been bombarded by customer requests.”

Whether you’re talking paperless technologies or energyefficient servers, the movement is rapidly gaining speed.

Starting at the 101 level of greening technology, make a commitment to purchasing energy-saving equipment that carries the Energy Star seal. Energy Star laptops, for example, promise to use 90-percent less energy than their desktop counterparts. Also look into multifunction devices (MFDs), which combine copying, printing and faxing into one machine.

“The idea is, if you unplug several old, power-draining copiers, printers and faxes, and trade them in for fewer MFDs, you reap cash and carbon savings,” says Ted Samson, a senior analyst for the InfoWorld Test Center and author of the InfoWorld Sustainable IT weblog [weblog.infoworld.com/sustainableit].

Which brings up a good point: As long as equipment is plugged in, it’s using up energy. At the very least, switch off computers, printers, fax machines, coffeemakers, etc. when not in use. Simply asking employees to switch off their monitors at the end of the work day can make a big difference.

As Samson explains, “For every PC and monitor left on at your company 24/7, you’re paying between $25 and $75 more per year on power bills.” He suggests investing in PC power management solutions from companies like 1E, BigFix, Kace, or Verdiem. “[Y]ou can set policies to ensure that machines automatically power down when they’re not in use and get woken up for patching, backup and so forth.”

4

USE LESS PAPER

While it costs more to buy paper than it does to dispose of it, says Envirowise Director Adrian Cole, paperless technologies can seem a bit intimidating to some companies, whether because of difficulties in managing technological change within the organization or in finding room in the budget for the initial expense.

However, there are non-technological strategies you can adopt to reduce paper waste in your office. They include specifying a monthly per-employee or department paper quota, launching an internal “think before you print” campaign (which is especially effective in reducing unnecessary email printing), and implementing a double-sided print policy, in which employees print on both sides of a sheet of paper before throwing it into the recycling bin. “[T]he average employee wastes $85 worth of printer paper and ink each year through unnecessary printing,” says Samson.

To prove the point, Goldman Sachs estimates that it saved 14.9 million sheets or 178,800 pounds of paper last year through doublesided printing and enforcement of an electronic statement policy.

Alternatively, consider technologies specifically designed to reduce printing waste. Tools such as those offered by Equitrac “let admin set up policies that prevent users from, say, printing web pages in costlier color ink, or defaults certain types of documents to two-sided printing instead of one,” Samson explains.

If going paperless is within the scope of reason for your company, then note that these technologies are now more affordable and easier to use. In the accounting arena, for example, CPAs use software to scan, manage and store tax returns, financial reports and correspondence, which means less drain on the raw materials used to manufacture paper, cost-cutting in areas such as office supplies and offsite document storage, and instant access to information.

As a statement of just how popular paperless environments are becoming, on July 13 of this year, health insurance giant Blue Cross and Blue Shield of Illinois added to its “Blue goes Green” program by committing to reduce the number of Explanation of Benefits (EOBs) it prints, and bundling most EOBs for weekly mailing. Its mission, says Blue Cross, is to save thousands of trees and gallons of water every month by reducing paper mailings.

What’s more, consider using either post-consumer or FSC paper products. Post-consumer recycled products tell you that the recycled content was used at least once before being recycled. Forest Stewardship Council (FSC) products indicate that any virgin wood used in the paper comes from sustainable, well-managed forests.

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5

CHOOSE EARTH-FRIENDLY PRODUCTS

Whether for the break room, the janitorial storeroom or the main office, make it your policy to buy recycled, compostable, reusable or biodegradable products.

For instance, trade in plastic plates, cups and cutlery for the reusable china and stainless steel variety. Or, buy biodegradable supplies such as cutlery primarily made from potatoes or wheat, which are fully biodegradable and compostable, or from polylactic acid (PLA), which is derived from agricultural crops such as corn. Similarly, Chinet plates are made from post-industrial waste from poly-coated milk carton production. Bagasse plates are made from sugar cane fiber that is a byproduct of the sugar-refining process. Both are biodegradable and compostable.

Furthermore, consider fitting your break room with a water-filtering system that can be hooked up to the existing water line. Encourage employees to refill from this source rather than buying plastic bottle after plastic bottle of water.

Moving onto janitorial supplies, couple recycled paper towels with non-toxic, biodegradable and/or agriculturally based products such as Orange Plus, which is an all-natural plant-based sanitizer and cleaner, and Window Cleaner, which utilizes vinegar and coconut-based soap. Both are offered by Earth-Friendly Products [www.ecos.com].

Taking the green movement to the main office, provide employees with remanufactured toner and inkjet cartridges; refillable pens and pencils made from recycled materials such as cardboard, plastic and newspaper; dual-powered calculators (solar and battery); and recycled post-its, binders, folders, indexes, report covers and copy paper, for starters. (For more ideas, take a look at Green Earth Office Supply [www.greenearthofficesupply.com] and The Green Office [www.thegreenoffice.com].)

Wells Fargo has taken the concept of earth-friendly products a step further, practicing what it calls “responsible purchasing,” which means avoiding furniture made from exotic woods, using sustainable carpets and buying Energy Star-rated equipment. You can also make it a policy to donate rather than throw out equipment and supplies that you no longer need or that you’re upgrading, and to issue recycling bins to each employee for paper, cans, glass bottles, plastics, etc.

6

SCRAP THE CAR

Aside from the environmental issues at hand, the current cost of a gallon of gas has caused a wave of sweaty-palmed panic to sweep the nation. Opting for alternatives to the daily car commute, then, is a win-win for both you and the environment. And, just maybe, there’s room in the budget to give employees some kind of monetary reward or other perk for their willingness to try something different.

Back to Adobe for an example: The company offers secure bike parking and a monthly subsidy for employees who don’t drive to work.

Along the same lines, here are some strategies to test drive.

• Support an employee carpooling program.

• Encourage employees to cycle to work.

• Offer incentives for using public transportation—perhaps a subsidized travel card or a transit plan where employees set aside funds from their pre-tax salaries for commuting costs.

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• Make it a policy to purchase or rent hybrid cars. Goldman Sachs estimates that it saved 31,093 gallons of fuel by adding hybrid vehicles to its executive transportation fleets. Hertz and Enterprise also have added hybrids to their fleets—$68 million between 2007 and 2008 for Hertz alone. Another alternative is electric cars, which use energy stored in rechargeable battery packs and electric motors and motor controllers. Although there have been challenges, such as low battery life and the inconvenience of recharging, the technology has come a long way, and continues to improve.

7

MAKE GREEN SPACES GREENER

If your office features outdoor landscaping, then ditch traditional turf in favor of native plants and grasses, which usually need significantly less water to survive and flourish. By adding an automated irrigation system that adjusts its flow according to incoming weather data, you can also save big. Adobe did just that, investing $3,610 in the system and realizing a $9,100 annual saving.

An increasing number of companies also are incorporating live plants into their interior design. The reasons aren’t merely aesthetic.

Rather, live plants act as air-cleaners, filtering out toxins emitted by modern office furniture and equipment. For example, since a lot of office furniture is constructed from particle board, and particle board contains formaldehyde, the EPA has identified this toxin as the most prevalent in office and hospital environments. Tests have shown, however, that plants such as the Dwarf Date Palm can remove 1385 micrograms of formaldehyde from the air per hour (source: www.livingsoil.co.uk). What’s more, plants decrease CO2 levels, which experts say can cause eye irritation and headaches.

Scientific trials in this area do make for some pretty interesting reading. Dr. Roger Ulrich of Texas A&M University found that study participants exhibited a higher level of problem-solving skill and innovative thinking in an environment that featured interior landscaping. And the results of a study conducted by Dr. Virginia Lohr at the Department of Horticulture and Landscape Architecture, Washington State University, contend that productivity increases as much as 12 percent in an environment that includes plants, and that stress levels are reduced. She also found that plants helped to increase the humidity level within an office environment to the ideal human comfort range of 30-60 percent.

On a more ambitious (and therefore costly) level, green roofs can qualify you for LEED (Leadership in Energy and Environmental Design) certification, which rewards businesses with various tax benefits. These roofs not only reduce the urban heat island effect (where heat is absorbed and stored by a sea of black roofs), but they also promote improved energy efficiency by acting as an insulator. As the EPA explains, “On hot summer days, the surface temperature of a vegetated rooftop can be cooler than the air temperature, whereas the surface of a traditional rooftop can be up to 90°F (50°C) warmer.” Green roofs also “Absorb air pollution, collect airborne particulates, and store carbon. Protect underlying roof material by eliminating exposure to the sun’s ultraviolet (UV) radiation and extreme daily temperature fluctuations. Serve as living environments that provide habitats for birds and other small animals. Offer an attractive alternative to traditional roofs, addressing growing concerns about urban quality of life. Reduce noise transfer from the outdoors.”

8

SPEND LESS TIME IN THE OFFICE

Ok, this one may seem a bit radical. But a recent Fast Company article, “All in a Day’s Work,“ made some compelling arguments for less time in the office. That, however, does not mean less work.

“The United States leads the world in two categories: Work and waste. American employees put in more hours and take fewer vacations than just about anyone else in the industrialized world, and our individual ecological ‘footprints’ are much larger….The more we work, the more we drive, the more energy we burn, the more Styrofoam to-go containers we use. At the end of the day, we’re so tired, we devour more takeout and TV, often falling asleep in front of the latter,” explained the article’s author, David Roberts.

In case you think, “So what?” Roberts puts a financial spin on the facts: “France, home of the 35-hour week, creates more GDP per work hour than the United States ($37 versus $34, as of 2003). Norway spanks us too ($39), and Norwegians work 26 percent fewer hours a year than Americans. It’s a myth of modern hypercapital-

ism that an overworked, sleep-deprived, stressed-out workforce is a necessity.”

If a shorter workweek is more a pipedream than a reality (and for most of us it is), consider a flexible work environment, where telecommuting is approved for workers whose jobs don’t require them to be physically present at all times. In a similar vein, rather than sanctioning business trips, look into video conferencing and telemeeting capabilities, such as Adobe Acrobat Connect, which is an alternative to in-person meetings. Air travel, incidentally, is one of the most carbon-intensive means of transportation.

There are many more strategies you can use to green your business environment. But, admittedly, some take a lot more cash and effort than others. Think of what it would take to commit to doing business with only green suppliers, for instance, or to re-engineer your production line in order to reduce waste.

The eight strategies outlined here, however, are intended as a viable departure point. Your ultimate destination? Sustainability and conservation—of both our ecosystems and our profits.

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The

GREENING of BUSINESS Is ecological economics an altruistic money pit? Or can going green actually improve the bottom line over time?

By Kristine Blenkhorn Rodriguez

THINK QUICK: GE. What comes to mind? Jack Welch? Earnings? Diversification?

Sure. All of the above. But did you think “green”?

THINK IKEA. Inexpensive. Streamlined. Great meatballs. (What, you’ve never eaten in its cafeteria?). And environmentally friendly.

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hat’s the difference? Ikea is a company that, from the very start, has made its position on the environment clear. It keeps its impact on the environment as light as possible—and it has spent money to ensure its buying public around the world knows its position on the issue.

GE, on the other hand, has an established reputation for coal-fired steam turbines and power plants.

To change that reputation and become a greener entity, the company began Ecomagination, an initiative intended to unite GE’s green technologies (wind turbines, solar panels, etc.) under one umbrella.

While European companies have generally outpaced their American peers in environmentally friendly business practices, US businesses are now greening themselves at an increasingly frenetic pace. Far from alone, GE is joined in its green efforts by its larger brethren around the world: Unilever reconfigured its plastic Suave shampoo bottles to use less plastic.

Office Depot saved nearly 66 million kilowatts of electricity in an energyefficiency campaign conducted for warehouses and stores. DuPont has been working on reducing its carbon footprint for two decades.

Which begs the question: Where is all this altruism coming from? Are we, in fact, being greenwashed?

“Greenwashing” is defined as a large company’s effort, usually mediaintensive, to convince the buying public and investors that its practices are environmentally friendly in every possible way.

While the truth probably lies somewhere between altruism and greenwashing for any big business, one fact is emerging undisputed: If you do it right, the greening of business saves big dollars over current resource-intensive processes. With just about every resource rising in price, even green technologies and processes that initially cost a bit more than traditional ones are becoming economically advantageous to companies of all sizes.

These savings were not always possible, but recent advances in green technologies—building materials, supply chain modifications, etc.—and the boom of companies offering green products and services, have made going green a downright profitable move. And with government regulation becoming what most analysts would call a sure thing, companies now have more incentive to be proactive; regulating themselves before Big Brother does it in a much more painful manner.

Before we cry any tears for big business, consider this: Office Depot trimmed its electric bill by $6.2 million when it made its stores and ware48

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Lucky if You’re Local Illinois hasn’t traditionally rivaled more progressive states like California or Vermont when it comes to environmental practices. OK, let’s be honest, we weren’t even remotely in the same league.

Enter the Green Exchange, a 272,000-square-foot building at 2545 W. Diversey Ave. in Chicago, housing 400 to 600 professionals who focus on various aspects of environmental sustainability. This puts the organization in an ideal position to serve the needs of local businesses that either want to launch or further develop a green initiative.

The Green Exchange’s location is also worth a mention. The facility is, of course, green, replete with a 41,000-gallon rain cistern, a 9,000-square-foot organic garden, an escalator that uses 30-percent less energy than traditional models by slowing to a crawl when not in use, and solar thermal panels for hot water and air-conditioning.

“Green design buildings have been shown to increase employee productivity up to 15 percent,” says Phil Baugh, the Green Exchange’s director of community development.

“You think things like indoor air quality don’t matter, but studies show that they do. A green building reduces absenteeism. Its natural light increases productivity. When you give the majority of young people a choice—work for a green or a traditionally minded company—the Turner Barometer Study tracked 78 percent choosing green.”

Housed in the old Frederick Cooper lamp factory, the Green Exchange is expected to open to the public in the first quarter of 2009.

For more information, visit www.greenexchange.com.

houses more efficient. Unilever saved the equivalent of 15 million plastic bottles per year on a billion-dollar brand. DuPont’s lighter carbon footprint saved it $3 billion. And Ikea’s flat-pack boxes have saved the company about 15 percent per item per year in transportation costs.

Enter Ecological Economics To Dr. Karel Samsom, the greening of business makes perfect sense, but would have made the same sense 10 years ago. As a professor of ecological economics, he may be dismissed by the average reader as a tree hugger who knows more about the ozone layer than big business. His résumé begs to differ, however.

Samsom is a former Towers Perrin consultant, a former international executive with Eli Lilly & Company and Alcon Laboratories, and was a source of assistance on high-level projects for the Netherlands Ministry of Economics.

“I have always been fascinated with the naked power of economics,” he explains. “As entrepreneurs and businesspeople, we throw our weight around in such a heavy-handed way. We sometimes lean too hard on our social and environmental resources.”

In the past, Samsom has felt stymied by those who have, in his opinion, missed the point. “In business, the fastest way to your objective is usually measured via currency. But currency no longer represents well-being,” he explains. “Educated consumers seem to understand this and yet many executives trying to attract them still miss the point…When the byproducts of our expediency-driven economy are visited on people that are not part of the transaction, we have failed. This is the bottom line of ecological economics.”

The savings companies reap from green practices are important to the average investor only inasmuch as they affect the balance sheet, says Alex Seagle, a principal in contrarian investing firm Fraser Management. A skeptical view? Yes. But while socially responsible investing continues to grow, “At the end of the day, my clients will ask one question: ‘Have you made me money?’” he comments. That question makes Seagle a choosy investor—one that cares less about social and environmental responsibility than he does about fiscal responsibility.

The solution? Green companies that are rolling in the green. For example, green construction. “What was a $2 billion industry in the US in 2005 is now projected to be $60 billion by 2009,” says Seagle. Green construction involves everything from designing a new green building using only ecologically friendly materials and processes, to retrofitting an existing building to have a lighter impact on the environment.

Seagle cites China’s Pearl River Tower, a 71-story building slated for completion in 2009, as an example of how far green construction has come in a very short period of time. Relying solely on wind and solar power for its energy, “It may be the first building that produces more energy than it consumes,” he says. It’s an example of turning ecological economics on its head in a beneficial way. If those not part of the transaction are subject to the byproducts of this building, they will be positively rather than detrimentally impacted—particularly as we head into what many experts describe as another energy crisis.

Ground-up Momentum Samsom was thought of as a “liberal softie” 15 years ago when he taught a graduate seminar in ecological economics. “My students would laugh, thinking I took things too far,” he recalls. “I asked them, ‘Would you expose your children to this?’ meaning whatever pollution or wasteful action the company under discussion

was guilty of. The minute I asked that, the conversation changed.

They started to care.”

Samsom experiences the same sentiment today, but on a much broader scale. Executives from the lowest to highest levels are seeing the results of managing a business and its resources the traditional way. And it’s not pretty.

In years past, individuals who brought up environmental concerns from the boardroom to the factory floor got little respect.

“Now, these individuals have a community to turn to,” says Liz Maw, executive director of Net Impact [www.netimpact.org]. The organization has a mission to “change the world through responsible business practices.” More than 10,000-members strong in corporations, nonprofits and universities on six continents, Net Impact offers resources for individuals who want to make their organizations more environmentally or socially responsible.

Skeptics may picture a lot of hemp-wearing former hippies holding hands and singing about Mother Nature. Debra Natenshon, Chicago’s Net Impact professional chapter leader, says “no way.”

“Most of our members work 60 to 80 hours a week in very traditional corporations. They’re in their mid-thirties and have worked hard on their careers. They’re entrepreneurs, consultants—not lightweights. And yet, many have felt disenfranchised because they had difficulty finding kindred spirits at work—people who think the business of making money can be combined effectively with ecologically and socially responsible practices.”

Members’ actions have had various results, from the formation of a US environmental task force for Accenture and subsequent decisions to pursue LEED (Leadership in Energy and Environmental Design) certification for a US building under construction, to installing printers capable of double-sided printing to reduce paper waste at Brown-Forman, the spirits company that distributes brands such as Jack Daniels and Southern Comfort.

In the Final Measure Heavy hitters like McDonald’s Corporation, Levi Strauss and Kraft are not content to take social and environmental savings as they come. These companies are evolving their corporate social responsibility (CSR) departments into strategic business units that track and report on outcomes intended to benefit their social agenda as well as the business’ bottom line.

Erin Simmons, a campaign manager for Mission Measurement, has seen firsthand how projects meant to make an impact get a sometimes skeptical reception from the CEO. “They usually say, ‘So what? What’s the impact on my business? How do we justify the money we are spending on CSR and sustainability?’” she admits.

Mission Measurement is a Chicago-based firm that helps to incorporate social impact into the business case for firms of all sizes. “The market for good has expanded: Consumers, investors and even employees want companies to produce positive social or environmental impact. We help to align these outcomes with the desired business outcomes,” says Simmons. After all, no corporation fancies itself a social agency, but most won’t object to leaving the communities in which they do business better off than when they entered them.

Samsom sees that willingness as an entry point. “You have to be an egomaniac not to see that if economy and ecology continue to deviate, we’re digging our own graves. And we’re doing this to the next couple of generations…I used to be a financial guy. Even the most hard-nosed financial executive will agree that pure greed is not what it’s about.”

www.icpas.org/insight.htm

SEPTEMBER/OCTOBER 2008

49

BUSINESS SERVICES

BUSINESS SERVICES ILLINOIS PRACTICES FOR SALE

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VALUATION OF YOUR CLIENT’S BUSINESS OR PRACTICE

THINKING OF SELLING YOUR PRACTICE? Accounting Practice Sales is the leading marketer of accounting and tax practices in North America. We have qualified buyers waiting and cash-out financing available to sell your practice quickly and get you the best deal possible. To learn about our risk-free and confidential services, call Trent Holmes with The Holmes Group at 1-800-397-0249 or email trent@accountingpractice sales.com.

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JOBS EQUITY OPPORTUNITY

Small CPA firm in Lincolnwood seeks CPA for ownership succession career track. Preferred candidate with 3-5 years experience in tax and public management responsibilities.

Strong verbal and written communication skills required. lhambourger@pinfs.com

NAPERVILLE/LISLE AREA

N. Washington at Diehl near I-88. Premier executive offices.

Top quality accoutrements. One office suite w/reception area or five individual offices. Kitchenette. Internet and phone wired. Dish TV available. Ample parking.

Art Littlefield 630/408.0110/aslittlefield@fssg.biz.

ADVERTISER INDEX Visit these websites for more information on the services and products provided by advertisers featured in this issue of INSIGHT.

PAGE 13

ONLINE 1stglobal.com

7

ADP Small Buisness Services

accountant.adp.com

11

Audimation Services Inc.

audimation.com

CCH

cch.com

9

Camico

camico.com

1

CPA2biz

cpa2biz.com/paychexprogram

Back Cover

32

Garelli Wong

garelliwong.com

3

Harris Bank

harrisbank.com

11

Herbert Landy

landy.com

5

Institute of Management Accountants

imanet.org

15

Jackson Wabash

jacksonwabash.com

8

Loyola University

LUC.edu/exec-ed

27

Marsh Affinity Group Services

cpainsure.com

National City

nationalcity.com/businesschecking

Robert Half International

rhi.com

35

RSM McGladrey

rsmmcgladrey.com

14

Sure Payroll

surepayroll.com

21

Thomson Tax Accounting

thomson.com

19 Inside Front Cover

50

ADVERTISER 1st Global, Inc.

THE GREEN ISSUE - PLEASE RECYCLE

JOBS TIME TO PARTNER WITH US

If you have at least 5 years of supervisory level CPA firm experience and feel

that your career is stalling due to limitations within

your current firm you need to meet with us.

We are a 40+ year old CPA firm located Downtown and preparing to open another office in the Phoenix area.

If you posses the ability to detect opportunities,

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deal with changing issues, email your resume in confidence to:

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MERGER/SALES

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Mark Your Calendar!

We are a full service CPA firm that would like to discuss purchasing and/or merging with your firm. We have completed 14 such transactions over the past 17 years. Please contact me at e a r l h @ m s c o . n e t to begin building our future together.

Thank you, Earl Holtzman

Fall 2008

Conferences Financial Institutions Conference September 18, 2008 | Lisle, IL

M i ch a el Si l v er & Com pan y

Mergers & Acquisitions Conference

5 7 5 0 O l d O r c h a r d Ro a d Su i te 2 0 0 S k ok i e, IL 6 0 0 7 7

September 25, 2008 | Chicago, IL

847 982-0333 w w w. m s c o . n e t

Midwest Financial Reporting Symposium September 26, 2008 | Rosemont, IL

Insurance Conference October 21, 2008 | Chicago, IL

IRS/Tax Practitioner Symposium October 22, 2008 | Rosemont, IL

Healthcare Compliance & Fraud Half-Day Conference October 28, 2008 | Rosemont, IL

Construction Industries Conference October 28, 2008 | Oakbrook Terrace, IL

Fraud Conference November 6, 2008 | Rosemont, IL

Accounting & Auditing Conference November 7, 2008 | Springfield, IL

Tax Conference November 12, 2008 | Rosemont, IL

Real Estate Conference November 13, 2008 | Rosemont, IL

Not-for-Profit Half-Day Pre-Conference November 17, 2008 | Rosemont, IL

Not-for-Profit Conference

All conferences offer CPE credit.

November 18, 2008 | Rosemont, IL

Check website for info on CLE and other specialty credits.

Accounting & Auditing Conference December 9, 2008 | Rosemont, IL

Not-for-Profit Conference December 11, 2008 | Springfield, IL

Employee Benefits Half-Day Conference December 11, 2008 | Rosemont, IL

For more classified listings, visit us online at www.icpas.org/insight.htm

For additional information or to register, call 800.993.0393 or visit www.icpas.org

www.icpas.org/insight.htm

SEPTEMBER/OCTOBER 2008

51

Standing Ovation

Everyday, Illinois CPA Society members provide countless volunteer contributions that deserve applause. Whether it’s speaking to college students, providing pro-bono tax preparation, or lending technical expertise, their volunteer activities support a strong accounting profession and make us proud to be CPAs.

CPAs Contribute to the New Wave of Gulf Coast Recovery This summer, members of the Illinois CPA Society’s (ICPAS) Young Professionals Group spent a week in New Orleans, La helping in the rebuilding process following the devastating effects of Hurricane Katrina. The trip was made possible in part by the generous sponsorship of Leaders Bank of Oak Brook, and was held in conjunction with Operation Hope and coordinated with the North Carolina Society of CPAs. Hearing and seeing the impacts of Hurricane Katrina, and gathering information from area CPAs and federal and local agencies, the Society’s Young Professionals took advantage of a unique opportunity to use their skills to work with smallbusiness clients. They coached and counseled a daycare provider, a shrimp boat operator, a cupcake business operator, a modular home seller and others on business essentials like tax returns, spreadsheets and software.

A standing ovation to the ICPAS Operation Hope Outreach Team: Kory Blumer, CPA

Ernst & Young. LLP Chicago, IL

Jason Parish, CPA Blackman Kallick LLP Chicago, IL

Andy Dumich Crowe Chizek and Company LLC Chicago, IL

Sonya Solomon Gimbel, Abrams and Singer Chicago, IL

Sara Mikuta, CPA Leaders Bank Oak Brook, IL

Porschia Thomas-Quinn Institute of Real Estate Management Chicago, IL

Bill O’Hara, CPA John Buck Company Chicago, IL

Genevieve Waldron, CPA Virchow, Krause & Company LLP Chicago, IL

Beata Parada, CPA Deloitte Tax LLP Chicago, IL

Ross Thomson Leaders Bank Oak Brook, IL

Special Acknowledgement The trip to New Orleans would not have been as successful without the assistance of members who gave generously of their time to prepare the young professionals for their trip. For their special contributions to the Operation Hope Outreach team, a special standing ovation to these volunteers: William M. Dumich, CPA William M. Dumich, CPA Schaumburg, IL

Steven D. Masur, CPA Warady & Davis LLP Deerfield, IL

Burton W. Goode, CPA Burton W. Goode, CPA Buffalo Grove, IL

Special thanks also to Microsoft and the IRS for their donations.

We have done our best to compile the full list of volunteer names. However, if we missed anyone, we deeply regret the omission.

To submit information for an upcoming “Standing Ovation,” please email Judi Kulm at kulmj@icpas.org.

www.CCFLinfo.org

15th Annual Midwest Financial Reporting Symposium

Accounting and Financial Reporting Updates from the SEC, FASB, IASB, AcSEC and PCAOB Gregory J. Jonas, CPA Team Managing Director of Corporate Communications, Moody’s Investors Service

A comprehensive overview of the latest developments and projects impacting your business and/or clients.

James L. Kroeker Deputy Chief Accountant, US Securities and Exchange Commission (SEC)

A unique opportunity to interact with panelists to pinpoint your specific concerns.

Friday, September 26, 2008 Donald E. Stephens Convention Center Rosemont, Illinois Time: 8:20AM - 4:45PM Code: C36293 CPE:

8 Credit Hours

Cost:

$325 Member/$395 Non-member

SPECIAL OFFER $100 off each additional registration when submitted together via mail only.

An incredible line-up of speakers all under one roof!

An all-star lineup of the “who’s who” in financial reporting - all in one information-packed day.

James J. Leisenring, CPA Board Member, International Accounting Standards Board (IASB) and IASB Liaison to the FASB Benjamin S. Neuhausen, CPA Chairman, AICPA Accounting Standards Executive Committee, National Director of Accounting, BDO Seidman, LLP Tom Ray, CPA Chief Auditor, Public Company Accounting Oversight Board (PCAOB) Katherine Schipper, PhD Thomas Keller Professor of Business Administration, Duke University Lawrence W. Smith, CPA Board Member, Financial Accounting Standards Board David M. Wing, CPA, MBA Vice President and Controller, United Airlines, Inc.

To register, visit www.CCFLinfo.org or call 800.993.0393.

David L. Landsittel, CPA Symposium Chair