This extraordinary conversation took place at the third annual Wall Street Journal ECO:nomics conference in Santa Barbara. I went there hoping to hear what business was thinking in the wake of a disappointing Copenhagen convention and stalled action in on climate and energy in Congress.

Were they backing away from their environmental initiatives? Waiting it out?

Overwhelmingly, the answer was no.

Mike Morris, CEO of American Electric Power may have put it best when he said that if the science is wrong and we act now, we’ll still have made the world a better place and have strengthened our business position. If the science is right, and we don’t act now, there could be devastating results.

Boone Pickens hit hard on the competitiveness angle, noting China’s aggressive investments in clean energy manufacturing. This view was shared by Secretary of Energy Steven Chu, who said, “America still has an opportunity to lead, but time is running out.”

These business leaders are moving ahead to get in front of the clean energy economy and to hedge against resource constraints and volatile oil prices. They know it’s a great bet, no matter what your ideology. If only our political leaders could do the same.

Is it all about the bottom line?  Then environmental costs and opportunities need to be melded into financial planning instruments.  If it’s a focus on innovation and product design, then what tools and information can help designers create environmental value?  Perhaps it’s a focus on process efficiency.  If so, environmental metrics might be the key.

Kathrin has given this quite a bit of thought, and has even blogged about.  She asks, “But how the heck do you instill environmental considerations into every operation of the company?” and later answers, “It requires a culture change, and that's always the hardest thing to do.”  Take a look at some of the things that EMC is doing to create that culture change, and ask yourself how it’s happening at your organization.

But be prepared to take a leap, because once you tap into the heartbeat of your organization, things can move fast.  Kathrin says she doesn’t even know everything that’s going on at EMC, but asks, “How cool is it that it's happening organically?”

GE has conducted more than 200 treasure hunts at its facilities worldwide, a process that has driven a reduction in GHG emissions of 400,000 metric tons and saved the company over $100 million. (Read more about how they did it on GreenerBuildings)

The event marked the culmination of a three-day process where teams of GE employees combed its plant in Lynn, Mass., which manufactures jet engines, marine engines, turbofans and aircraft engines, looking for energy savings.  Team members confessed that they were a bit skeptical about finding much this time around, since the plant had participated in a similar Treasure Hunt process in 2006.  But they – and I – were excited to learn that, rather than coming up dry, they discovered almost twice as much energy savings this time around.

In just two and a half days, the teams  identified projects that could cut annual energy costs by 25% – with an average project payback of just under one year.

How is that possible?

As one participant said, it's all about focus and looking at operations from a different perspective.  Cross-functional teams allowed employees to learn from and challenge each other, asking the "what if" questions that can lead to real innovation.  And making energy the top priority for two and a half days – including Sunday afternoon, when many were surprised to find plant equipment powered up even without production underway – allowed team members to really focus on the task at hand.  Even those folks who missed the New England Patriots victory that Sunday felt it was time well spent.

With greenhouse gas emissions on the rise and energy security on the top of the national agenda, just imagine if the whole country embarked on a hunt for energy savings – what treasure we might find!

At the same time, legislation to cap greenhouse gas emissions is making its way through Congress and the world community is preparing to hammer out a new climate treaty in Copenhagen this December.

So are we done? Not by a long shot.

While many on the biggest companies “get it,” there remains “the next 50,000” – those companies that make up mainstream corporate America that don’t yet get environmental sustainability or worse, haven’t even heard of it. So where must we go from here to spread environmental sustainability from the Fortune 500 to the next 50,000?

Building an energy efficiency movement

Every company uses energy and could do so more efficiently. A 2009 McKinsey study found that we can get 4 to 5 gigatons of greenhouse gas reductions through cost-positive building and vehicle efficiency. In other words, we can make a lot of money and cut a lot of emissions simultaneously using proven technologies.

Unfortunately, it won’t be as easy as it sounds. Companies fail to reap the benefits of energy efficiency for reasons that have nothing to do with what we learned in Econ 101. In the real world, managers are overburdened, useful information is hard to find, lease arrangements stand in the way of smart investments and competition for corporate dollars is sharp.

Even if energy prices rise under a future climate cap (estimates range from 25 to 50 cents per household per day), it likely won’t be enough to overcome organizational barriers. But to stabilize the global climate, we simply must harvest these savings. We need to build a new business movement for energy efficiency – one based not on cardigan sweaters but on smart economics and a new generation of business leaders that will cut through organizational red-tape to find real savings.

Stimulating innovation

A cap on carbon, if enacted, will go a long way to stabilize carbon financing and provide a level playing field for investors in low-carbon innovation. Capital will flow to support advances in clean vehicles, renewable energy and carbon sequestration. But not all progress comes from start-ups with angel investors. We must also stimulate environmental innovation within the corporate structure.

The impetus can come from the top because when executives set rigorous goals and metrics for measuring them, they unleash innovation throughout the company. GE’s Ecomagination program, which has reduced costs by over $100 million while building clean tech solutions, is a good example of this approach. Innovation can also come from the bottom up, as illustrated by Toyota’s “Treasure Hunt” process, which uses operators, engineers and maintenance staff to find process innovations and energy savings.

Capturing operational excellence

For most companies, including those that provide business capital, environmental issues are still thought of as a liability rather than an opportunity. To build value, firms must think beyond compliance. Smart companies are positioning themselves to compete in a carbon constrained world, where efficiency and innovation trump risk management.

More and more tools and best practices are available for systematically identifying opportunity and measuring improvements in environmental and business performance. We must build those tools into standard business investment decision-making and move toward a world where environmental management is synonymous with asset management.

Driving lifecycle improvement

Companies will want to focus first on their own operations, but for many small and medium-sized businesses, their biggest impacts lie not within their own fencelines but in the lifecycle of the products they buy and sell. And while smaller companies may not feel that they have the clout to create supply chain mandates, they do have ability to ask pointed questions and shop around for the best prices. Why should any purchaser pay for the extra energy or water or wasted raw materials embedded in products made by another company that has not yet embraced sustainability?

Today, we are all feeling the stress of a pinched economy, resource constraints and future regulatory mandates. At the same time, we’re seeing examples every day of companies that have successfully turned environmental sustainability into competitive advantage. By building an energy efficiency movement, stimulating innovation, capturing operational excellence and driving lifecycle change, we can bring the next 50,000 companies along on the ride.

This content is cross-posted on Environmental Leader

National fuel costs for tractor-trailers alone come to about $25 billion a year.  And again, there are many proven techniques and technologies to cut those costs by 10-40% with little or no up-front investment.

• Fleets utilizing a greenhouse gas management program we developed with fleet management company PHH Arval have reduced fleet emissions on average by 14% and operating costs by 7%. In addition, they improved their miles per gallon an average of 16%.

• And for some truck models, hybrids are becoming more readily available and getting 30-50% increases in fuel efficiency.

• Even the simplest things can have a big impact.  We worked with US Foodservice and Sealy last year to save almost $10M in annual fleet costs just through driver training, low cost speed governors and automatic idle shutoffs.

*The vertical axis shows cost per ton of emission reductions.  And all the blocks hanging below the horizon represent things we can do now that have “negative cost” – in other words, we save more money than we spend.

The U.S. commercial sector spends $108 billion/year on building energy bills, with more than $20 billion spent on office building energy costs alone.  Typically, a 50,000-square-foot office building of average operating efficiency can reduce costs by $40,000 per year just through no-cost and low-cost efficiency upgrades.

EDF has a program called Climate Corps that places MBA students at host companies for a summer to “run the numbers” on energy efficiency and greenhouse gas reductions –and the results are almost always astounding.  Here are a few examples to give you a sense of the range of savings to be had:

• An intern at the IT services company SunGard uncovered lighting timer errors that, when fixed, will save the company nearly $20,000/year.

• An intern for Houston-based property management firm Crescent Real Estate identified efficiency upgrades at key properties that would cut electricity costs by $400,000 annually.

• An intern at grocery company Ahold (owner Stop'n Shop and Giant) calculated that if skylights were installed at just a third of stores, they'd save over 13,000 tons CO₂ per year with a 5 year NPV nearing $30 million.

We’re recruiting now for companies to participate in the Climate Corps program next summer – join us!

*The vertical axis shows cost per ton of emission reductions.  And all the blocks hanging below the horizon represent things we can do now that have “negative cost” – in other words, we save more money than we spend.

It’s from a McKinsey report that shows the estimated cost for CO₂ abatement using various technologies.  The vertical axis shows cost per ton of emission reductions.  And all the blocks hanging below the horizon represent things we can do now that have “negative cost” – in other words, we save more money than we spend.  Notice that virtually every one of them involves energy and fuel efficiency.  We can get four or five gigatons of emissions savings – that’s four or five billion tons of emissions reductions – while saving money!  So the opportunity is huge.

But at ground level it may feel more like this:

In these lean economic times, we’re all under enormous pressure to cut costs.  At the same time, companies are feeling new demands from investors as shareholders, banks and even private equity funds are asking their holdings to at least to report on greenhouse gas emissions.  And if you’re in the middle of the supply chain, you’re probably already seeing demands related to the sustainability of your products and operations.  Add to that the need to stabilize your own supply chain – if you’re in a sector such as agriculture or hospitality where seasonality and weather play a big role, then you may already have had to adjust to climate-related changes.

So while new regulations could impact the degree to which you feel any of those things, the pressure to act is here now.

In my next two posts, I will showcase innovations that address the two biggest pieces of the “low hanging” emissions from the McKinsey graphic: commercial building energy efficiency and fuel efficiency.

The real question is why aren’t these “low hanging” emissions being addressed more widely?  Because there’s a disconnect between what we believe and what really is.  Think about how many times you’ve heard people say that it costs too much to do something about climate change or that there’s no point in acting now since we don’t know what the regulations will be or that the latest technology – solar, ethanol, fuel cells, you fill in the blank – is not commercially ready yet.

But we have the technology now to solve a pretty big part of the problem, and it’s affordable.  I’ll give you a couple of examples in my next two posts, but there are thousands more.

I believe that what’s holding us back are other kinds of market failures like poor access to information about energy and fuel efficiency, inconsistent metrics (or lack of metrics altogether) for measuring and managing environmental footprints, organizational barriers that separate energy use from energy costs and even our corporate compensation systems, which generally don’t acknowledge innovation around energy efficiency.  Do you agree?

Tell us what you’re doing to overcome these barriers at your own company, and what organizations like EDF could do to help.

First, let’s talk about the basics for a sustainability program and report:  meaningful and ambitious goals along with interim milestones and clear timelines are essential.  How can we tell whether a company is on track?  Pretty simple – the goals are associated with clear metrics and the data supporting them is transparent.  Wal-Mart’s new report represents a big improvement over its predecessor (PDF) in straightforwardly matching goals with progress.  Metrics are explicitly described and Wal-Mart is candid about where goals have changed, progress has been slow or measurement unclear.  We applaud this.

The Achilles heel of this report, however, is data.  In a company as big and complex as Wal-Mart, transparency is key to ensuring the credibility of its claims and the impact of its leadership.  The data behind claims of progress should be made available.  For example, the report states that water use declined by 35% at Wal-Mart China.  Is that aggregate water use for all stores in China?  Average per store?  Over what time period? What was the baseline and what is current usage?  This information would allow the reader to understand the context for the claim and to more readily benchmark Wal-Mart's performance.

Now let’s talk about the substance of Wal-Mart’s sustainability initiative.  Wal-Mart has some truly ambitious aspirational goals: to be supplied by 100% renewable energy, to create zero waste and to sell sustainable products.  The company has also jumped headlong into sustainability across the company, perhaps more deeply than any other company we’ve worked with – working on fuel-efficient trucks, sustainable seafood, organic clothes and food, building efficiency and renewable energy, among others.  Wal-Mart has also been masterful at harvesting business benefits as they go, reinforcing the importance of the sustainability program among its managers and Board.

But what do we know about how Wal-Mart’s actions are measuring up against its aspirations?  Well, not surprisingly, it’s a mixed bag.  Some really impressive efforts and leadership…

Take renewable energy.  According to the figures presented in this report, Wal-Mart anticipates that during 2009 it will source about 1% of its energy in the U.S. from renewables, so there’s a long way to go to reach the 100% renewable goal.  Yet the company is a major solar installer in the United States, recently announced plans to nearly double solar capacity in California and is working with EDF to bring next generation thin film solar technologies into the marketplace.  These facts tell you the magnitude of the challenge facing both Wal-Mart and the country on renewable energy.

On waste, the company reports diverting 57% of the waste generated at US stores and Sam’s Club facilities from landfills.  Laudable.  At the same time, it reports that stores in Japan have reached 75% waste recycling and a model store in the UK reports that 95% of its waste is diverted from landfills.  What will it take to get to these levels across the globe?

And some missed opportunities …

Wal-Mart is lacking an ambitious goal on climate change – the most pressing environmental issue of our generation and one which must be a component of any comprehensive sustainability program.  Yes, the company has set goals for reducing greenhouse gas emissions at existing stores and increasing energy efficiency in its truck fleet.  The problem is that, as Wal-Mart grows, so does overall greenhouse gas emissions.  In fact, the report includes graphs showing that, while CO2 per unit of sales has declined over three years, total corporate CO2 emissions have increased.

In other words, the company’s contribution to the problem of climate change continues to increase.  Yet we know that, with gutsy leadership, companies of Wal-Mart’s size and scope can find ways to grow their business while shrinking their footprint.  GE, which has grown 13% annually on average since 2003, recently reported that it had exceeded its goal by reducing greenhouse gas emissions 13% below 2005 levels.

We’d like to see Wal-Mart make a corporate commitment to reduce total greenhouse gas emissions, perhaps by using its strongest leverage – its supply chain.  With a unique opportunity to help its suppliers decrease their carbon output, Wal-Mart can reduce total emissions associated with its business even while it expands.

There’s much to be positive about in Wal-Mart’s sustainability program, but there’s also a long, long way to go.  In future entries on the EDF Innovation Exchange blog, we’ll drill down into specific issue areas to provide commentary on progress made and to help impart a sense of urgency, imperative and inspiration for that yet to come.

This post is cross-posted on GreenBiz.com

While we face these challenges, we may also have a once-in-a-lifetime opportunity to radically transform the auto industry. More than 50 years ago, GM President Charles Wilson reportedly said that, “What’s good for General Motors is good for the country.” The opposite may also be true – that what’s good for the country’s air quality and energy security may help lift GM out of chaos.

Last week the auto industry bowed to the inevitable and accepted new higher fuel economy standards. This is a step in the right direction, but it represents only a fraction of what the auto industry could do. Instead of a piecemeal approach, car companies could use their unique place in American life to bring environmental leadership into the design, production, sale, service, financing, insurance, and even use of the cars and trucks they sell.

The most immediate opportunity is at Saturn, which GM has said it wants to sell, and for which there are at least two interested buyers. Launched in 1985 as a competitive response to the success of small-car imports, Saturn has sold over four million vehicles, of which 3.3 million are still on the road. The Saturn brand stood for distinctive, low-priced, fuel-efficient cars and a best-in-class customer experience with “no haggle” pricing.

At launch, then GM CEO Roger Smith declared that "Saturn is the key to GM's long-term competitiveness, survival and success. Its mission: … [to] affirm that American ingenuity, American technology and American productivity can once again be the model and the inspiration for the rest of the world." We now know that vision was never fully realized. Still, the Saturn brand is distinctive in the car marketplace, and Saturn buyers exhibit a loyalty to the “Saturn experience” that positions it to lead the way to a new kind of car company.

Imagine a car buying experience that really is no hassle for the customer and the planet. What would this look like? Saturn showrooms would become showcases where customers are guaranteed not only no haggle pricing, but also no haggle mileage, with all vehicles meeting high fuel economy standards as well as “green” design standards for materials, production and recycling

Saturn dealers would do more than just sell cars. They would offer training on how to drive and maintain your vehicle to get peak performance and lower fuel costs. They would develop new financing programs with better rates for higher mileage cars, and build partnerships with insurance companies to provide mileage-based policies that reward lower mileage (and therefore lower risk) drivers. After all, as fuel bills and insurance bills and car payments go down, customer satisfaction, return business and word-of-mouth reputation goes up.

Some dealers might even help their customers find car-pool options, or might offer hourly rentals on small, fuel efficient cars. On the surface it might seem nonsensical for a dealer to offer alternatives to car ownership, but it fits right in if we think of dealerships not as sellers of cars, but as providers of mobility. These kinds of mobility services have environmental benefits, but they also represent new revenue streams for the dealer and create an entirely new customer base and experience.

Last but not least, dealers will need to “walk the talk” by building and operating their showrooms and service centers with the lowest possible environmental footprint. Energy efficient lighting and ventilation systems, water conservation, minimal use of toxic materials, waste recycling – all would be hallmarks of a Saturn facility.

Shareholders and regulators should challenge any party interested in acquiring Saturn to demonstrate how it will create a different kind of car company, committed to building high-quality, fuel efficient cars that are designed, manufactured, sold and repaired with both the customer and the environment as objectives.

This truly would be a new kind of car company. And might just be a glimpse of a hard-to-find silver lining in the auto industry downturn that is impacting so many hardworking Americans.

Gwen Ruta is vice president of corporate partnerships at the Environmental Defense Fund. She is based in Boston, Massachusetts.

This post originally ran in the Detroit Free Press on May 29th.

With the global economy in turmoil, corporate environmental initiatives could have faced a fatal blow. The good news is that companies today have not forgotten that green business is good business. The question that remains for many executives is not whether to embrace environmental sustainability, but how to get it done.

One path of action that has gained traction in recent months is for businesses to partner with Non-Governmental Organizations (NGOs) on environmental initiatives. On a macro level, this is a good thing. Both businesses and NGOs have a lot to learn from each other; neither can solve today’s global environmental challenges going solo; and it will take a newfound collaborative spirit and sharing of best practices to both address challenging issues like climate change and succeed in today’s challenging economy.

But on a micro level, businesses and NGOs should avoid the dating game unless their relationships are meaningful and lasting. It’s not the volume of business/NGO partnerships that will change the world, but the quality of the results produced.

It’s been almost twenty years since Environmental Defense Fund (EDF) worked with McDonald’s on our first partnership to conserve resources and cut waste. Since then, we’ve found time and again that these unique relationships can achieve remarkable business and environmental results. Most recently, our “green portfolio” partnership with KKR, the giant private equity firm, resulted in $16 million in annual savings from measures that included reducing truck fuel usage at US Foodservice, cutting paper consumption at Primedia, and improving material use at Sealy. And that’s just the start. We’re now working with KKR to roll the project out to its entire portfolio of companies.

So what’s the recipe for success? While no two partnerships are alike, we’ve found the following principles invaluable for us over the years.

1. Have a clear end goal in sight. Both partners must be clear about what they are trying to achieve together. Tons of greenhouse gas avoided? Costs savings through efficiencies? Employee awareness around eco-innovation? Spell out the goals and ensure that all parties involved are committed to them.

2. Measurement is key. We’ve all heard the maxim “you manage what you measure.” Progress can only be celebrated when you know where you started. And quantitative results make is clear when success has been achieved.

3. Mutual commitment is a must. If one side of the partnership is doing all the work, the risk is lack of buy-in from the other side. The project will lose momentum and results will be far less impressive than they could be.

4. Timelines matter. Set up check-ins and updates to make sure that both sides are achieving intermediate objectives, increasing the likelihood that partnership goals are achieved within the agreed upon timeframe. This keeps stakeholders focused and engaged in the project at hand.

5. Objectivity ensures transformational change. At EDF, we take no funding from our corporate partners. We act as advocates for eco-innovation, not corporate consultants. This enables us to push our partners beyond their comfort zone and keeps our eyes on the right prize – transformational environmental change.

6. Transparency enables economies of scale. Even if a partnership involves only two partners, the results can transform an entire industry – as long as they are widely and publically shared. For example, EDF teamed up with FedEx to develop a cleaner, more fuel-efficient delivery truck. We spread the news and the technology, and within two years of our partnership, no fleet tradeshow was complete without a hybrid offering.

7. Communications shouldn’t be taken lightly. In any NGO-business partnership, it’s critical to track communications closely. Both sides need to agree on how the partnership will be characterized to outside audiences and not over – or under-state the commitments and the work at hand. This will prevent message distortion and avoid “greenwashing.”

NGOs have deep expertise in social and environmental issues combined with an unwavering passion to make the world a better place.

Corporations have the power of commerce and markets on their side, helping catalyze change quickly and enabling scalable concrete results.

This combined ability to capitalize on rather then cower from today challenges, both environmental and economic, will enable companies and NGOs to achieve and maintain long-term success.

Partnerships will play a significant role in this success, but only if they are treated as value-creating relationships, not marketing maneuvers. Through such collaborations, the environment moves out from the sidelines to become a key driver of innovation and growth.

This column originally appeared on Environmental Leader.