Articles

Sustainability Prospecting for New Clients

Categories: Business Management, Sustainability & ESG

This article is not about the science or politics of sustainability, nor will it provide a detailed explanation of sustainability. Rather, this article is designed to help those in the cleaning industry prospect for business.

The article will explain the driver behind sustainability reporting and identify several leading sustainability and supply chain reporting programs that can serve as the foundation for an effective sales and marketing campaign targeting the needs of these prospects. In an era of consolidation and hyper-competition, this article is intended to drive marketplace success.

Lessons learned from LEED and green cleaning

There are important lessons learned from the United States Green Building Council (USGBC) and its green building certification program Leadership in Energy and Environmental Design (LEED). In 2002, USGBC released the pilot version of its LEED Rating System for Existing Buildings (LEED-EB). LEED-EB created a roadmap to help identify the requirements for a comprehensive green cleaning program addressing both cleaning products and services.

Beyond the roadmap, the USGBC provided on their website the ability to search their “project list” for buildings in the LEED Rating System as these clearly would benefit from purchasing green products and services. Using this prospecting approach, savvy salespeople could target those buildings and avoid wasting time trying to sell green products and services to those who might not care.

In the same way, sustainability presents an opportunity for business growth in a new niche representing hundreds of thousands of buildings worldwide. These building owners are again the early adopters who want to purchase their green products and services from like-minded suppliers who produce sustainability reports, report on carbon emissions, develop reduction targets, and more. Identifying the organizations participating in the following programs will serve as a roadmap to sales success for those selling cleaning products and services.

Investors—the driver of sustainability reporting

According to a recent article in the Wall Street Journal, “Within the next couple of years, every public company in the United States might well be required to report climate information.” Such an effort would be the biggest potential expansion in corporate disclosure since the creation of the Depression-era rules over financial disclosures that underpin modern corporate statements. “When it comes to disclosure, investors have told us what they want,” Securities and Exchange Commission Chairman Gary Gensler said recently. “It’s now time for the commission to take the baton.”

The demands for climate-related information carry weight as green financial products surge in popularity. Some US$51 billion poured into sustainable U.S. mutual funds and exchange-traded funds last year, according to data provider Morningstar Inc. That was almost 10 times the level of 2018 and represented nearly a quarter of the cash that went into all U.S. stock and bond funds last year, Morningstar said.

The U.S. Securities and Exchange Commission (SEC) is working on a potential climate-disclosure regulation. It has the backing of the White House, which has called for drastic cuts in emissions. Countries in Europe already require that companies doing business there honor governments’ demands for climate disclosures.

Regulators say climate change poses specific risks investors should be told about. Among them is the risk that companies producing a lot of greenhouse gases could be avoided by some lenders, insurers, or investors, either because those parties see the companies as harming the environment or because they view the companies’ businesses as vulnerable. A scientific panel working under the auspices of the United Nations stated in a report recently that the effects of a warming climate are unequivocally driven by greenhouse gas emissions from human activity.

Whether the demand for sustainability reporting is happening because of business risk, government requirements, climate concerns, or other reasons and commitments, what is important for the suppliers of cleaning products and services to understand is that it is happening amongst a broad swath of prospective businesses and organizations. As their reporting requirements grow, so too will their requirements of vendors, and being able to accurately and easily report on the information will be the “ticket to the dance,” and in many cases, will open doors or block the opportunity for business success.

What reporting is required: Understanding Scope 1, Scope 2, and Scope 3

Almost all of the investors, and programs they use, address greenhouse gas emissions categorized into three groups or scopes by the most widely used international accounting tool, the Greenhouse Gas (GHG) Protocol. 

• Scope 1 covers direct emissions from the facilities and vehicles owned or controlled by the organization.
• Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company.
• Scope 3 includes all other indirect emissions that occur in a company’s value chain and is incredibly important, as studies have indicated that for the average company, supply chain emissions are 11.4 times greater than their direct emissions.

It is these Scope 3 reporting requirements that affect the cleaning industry, as more customers will require this information as part of doing business with them.

Reporting programs used by investors

The following are examples of some of the major programs used for sustainability reporting. From a sales perspective, each organization identifies those who are reporting on their websites, and it is these organizations that present the early opportunity for sales success:

Carbon Disclosure Project (CDP) is a nonprofit that runs the global disclosure system for investors, companies, cities, states, and regions to manage their environmental impacts. Many consider the CDP to be the gold standard of environmental reporting with the richest and most comprehensive dataset on corporate and city action. CDP includes reporting from 10,000+ companies, cities, states, and regions.

Global Real Estate Sustainability Benchmark (GRESB) is used by more than 100 institutional investors, including pension funds and insurance companies, to optimize the risk/return profile of their investments. GRESB reporting is done by more than 1,200 property companies, real estate investment trusts (REITs), funds, and developers, covering more than 96,000 assets across 64 countries.

Global Reporting Initiative (GRI) defines sustainability reporting as the practice of companies disclosing the most significant economic, environmental, and social impacts that arise from their corporate activities, and thereby being held accountable for these impacts and responsible for managing them. The GRI is used by 73% of the largest 250 organizations in the world (G250) from over 70 countries, with over 1,300 reports from the United States alone.

Sustainability Accounting Standards Board (SASB) connects businesses and investors on the financial impacts of sustainability. SASB standards are industry-specific and are designed to be decision-useful for investors and cost-effective for companies including over 850 from the United States.

International Integrated Reporting Council (IIRC) Framework aims to improve the quality of information available to providers of financial capital to enable a more efficient and productive allocation of capital, and promote a more cohesive and efficient approach to corporate reporting. IIRC has been developed and used around the world, in over 70 countries.

Value Reporting Foundation was created in June 2021 through a merger between the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB). Its tools help businesses and investors develop a shared understanding of enterprise value and how it is created, preserved, or eroded over time.

Task Force on Climate-Related Financial Disclosures (TCFD) was established by the Financial Stability Board to develop recommendations for more effective climate-related disclosures that could promote more informed investment, credit, and insurance underwriting decisions and, in turn, enable stakeholders to understand better the concentrations of carbon-related assets in the financial sector and the financial system’s exposures to climate-related risks.

Supply chain and other reporting programs (e.g., programs for universities)

In addition to the above programs designed to help investors and others committed to sustainability, are other programs that create opportunities for suppliers in the cleaning industry.

• EcoVadis is used as a supply chain tool to evaluate how well a vendor has integrated the principles of sustainability and corporate social responsibility (CSR) into their business and management system. Their sustainability scorecard illustrates performance across 21 indicators in four themes: Environment, labor and human rights, ethics, and sustainable procurement. They have created a global network of more than 75,000 rated companies.
• Association for the Advancement of Sustainability in Higher Education (AASHE) has created the Sustainability Tracking, Assessment & Rating System™ (STARS^®), a framework for colleges and universities to measure their sustainability performance. The framework encompasses long-term sustainability goals for already high-achieving institutions, as well as entry points of recognition for institutions that are taking first steps toward sustainability. Over 1,000 institutions have registered to use the STARS Reporting Tool, of which more than 650 have earned a STARS rating.

About the Author.

Stephen P. Ashkin is president of The Ashkin Group, a consulting firm working to “green” the cleaning industry, executive director of the Green Cleaning Network, a nonprofit organization working to accelerate the adoption of green cleaning by building owners and managers, and cofounder of Green Cleaning University. He can be reached at 812-332-7950.