New Metrics

Wanted:
A Single, Unifying Metric for Quantifying Source Energy

By Ory Zik | Published 10 years ago | About a 6 minute read

Integrated reporting is the core of corporate sustainability. It is critical to organizations communicating their value creation over time and acts as a benchmark for future progress. Global brands including Walmart and Coca-Cola spend millions to collect vast amounts of data from their immense supply chains to report on their sustainability initiatives. Meanwhile, NGOs such as the CDP (formerly the Carbon Disclosure Project), the Global Reporting Initiative (GRI), and the Sustainability Accounting Standards Board (SASB) aim to develop sustainability reporting standards.

But all of these initiatives have one problem in common — the absence of a single unifying metric that accurately accounts for environmental impact. The consequence? Corporations struggle to drive sustainable business practices because they lack the tools to guide decisions.

‘State of the Art’ Today Is the Same as 12 Years Ago

In 2002, Jeanette Schwarz et al wrote a great article that describes what was then the state of the art for measuring energy, water, materials and emissions. However, it uses different ‘engineering units’ without any integration between them. Unfortunately, not much has changed since then — a 12-year-old paper still describes what many consider ‘state of the art’ today.

Consider a typical sustainability report: Electricity, materials and water are measured in their separate ‘engineering units,’ which generally measure the quantity of resources that the organization is consuming within its facility walls.

Conceptually a standard sustainability report looks something like this:

What if we could have the following report?

Trusted — so that it is widely used and corporate and industry benchmarks can be established

Steven Cohen of Columbia University recently wrote: “Corporations and environmental interest groups are key stakeholders in any metrics discussion, but they each have their own axe to grind and cannot be allowed to have the final word. Government has a key role to play.”

But the government has already spoken: “EPA has determined that source energy is the most equitable unit of evaluation. Source energy represents the total amount of raw fuel that is required to operate the building. It incorporates all transmission, delivery and production losses.”

So the big question remaining is: How do we quantify source energy?

Accurate — because the business-critical decisions that result from it have important implications for the bottom line as well as climate and the environment

Accuracy is the key challenge in quantifying source energy. While the EPA tells us that source energy is what we should measure, it only provides one conversion factor for source energy for the entire USA.

In reality, there are critical regional differences. For example, electricity across the US has varying combinations of natural gas, coal, nuclear, etc. that feed the grid in different locations. The contribution of renewable energy also varies in each location.

Water also varies by region. Measuring water in kilogallons implies equivalence between drought-stricken California and water-rich New England. This is clearly not the case and each location needs to have its own time-dependent conversion factor for water.

Lastly, there are the various types of materials that become ‘waste,’ each with its own toxicity, embodied energy, and end-of-life treatment.

Precise, geo-specific data and algorithms on energy and climate conditions can enhance the EPA’s concept and provide the most accurate measure of source energy. Relevant energy concepts include:

Coupling thermodynamics with the concepts of scale of energy quality and embodied energy, following Odum’s seminal work on emergy.
Available energy (exergy), use Life Cycle Assessment (LCA), Energy Return on Investment (EROI), and analyzing water within the framework of the water-energy nexus, using geospatial specific analytics.
And new concepts — for example, mitigation energy for emissions and water scarcity.

Intuitive — because executives, finance and sustainability professionals, as well as facility managers, need to understand their environmental performance in context

If the metric they use is relevant and easy to understand, such as a gallon of gas equivalent (which has been around for a while), environmental performance becomes a tangible concept that drives better decision-making. The intuitive metric ensures that the complex algorithms and physics concepts (necessary to accurately quantify source energy) do not overwhelm decision makers. Rather, information is provided in such a way that makes it possible for action to be taken based on the results.

Actionable — since no report is better than the actions derived from it

Source energy analysis makes one integrated metric possible. With it decision-makers can make direct comparisons between resources. Pain points can be discerned across resources and locations. Management can look at electricity, fuels, materials and water and determine which of these resources impact their bottom-line the most — and how best to address them.

Moreover, because source energy is decoupled from volatile financial markets it is immune to fluctuating market sentiments. It is another dimension by which to assess the ROI of sustainability initiatives, namely EROI.

Analytics & Big Data Make Measuring Source Energy Possible — and Corporate Sustainability Reporting Better

The problem with integrated reporting until now has been the limited availability of geo-specific energy data as well as not having mathematical modeling that can analyze the data. But great progress has been made in the last few years. Databases of energy, environment and climate information are available and the mathematical models to analyze them have been developed. Accurately quantifying source energy is a reality; and a solution that can turn “corporate sustainability” into simply “good business.”