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Corporate sustainability commitments

Here comes the sun–into corporate sustainability commitments

solar panels (image)

Announcing his company's commitment to getting 100 percent of its energy from renewable sources by 2021, Walmart CEO Mike Duke described the objective as "the right goal," but not for purely political or altruistic reasons.

"The math adds up pretty quickly," Duke said in 2013. "When we use less energy, that's less energy we have to buy, and that means less waste and more savings."

As sustainable energy sources become more accessible and economical, making them increasingly viable alternatives to traditional energy markets, many multinational companies are emulating the world's biggest retailer by setting renewable-energy goals. In fact, 60 percent of Fortune 100 companies have set clean energy targets, according to a recent report by the environmental advocacy group Ceres.

But for some of these global companies, renewable targets have proven easier to announce than to achieve. Three of the Fortune 100 companies that had expiring renewable energy targets in 2012 missed their publicly-stated goals. The Ceres report points to internal challenges as a key reason why these large companies struggled to meet their renewable energy commitments.

"As companies try to source and execute [solar] projects to meet their targets, even the largest companies can lack capacity to handle the complex deal structures and financial instruments needed to buy renewables," the report states. "Understanding these financial accounting and legal structures often requires extensive outside expertise."

A growing source for that expertise: a new breed of consultants known as energy "matchmakers" who help connect large corporations with the technology and capital required to make renewable goals a reality. "In the matchmaker model, a renewable energy services consultant understands the needs of its corporate client and each of its unique sites," says Dave Gralnik, Global Director of JLL's Alternative Energy Services group. "The matchmaker assesses appropriate technologies and providers, helps select vendors, supports negotiations of agreements and can manage the ongoing relationship with the energy provider, including post-implementation monitoring of annual energy plans."

In this scenario, the energy provider makes the upfront capital investments, such as solar panel installation, and charges only for the power acquired by the corporation via a Power Purchase Agreement (PPA). For companies unable or unwilling to provide their own capital for a renewable energy project, PPAs secure third-party financing and then lock in renewable-energy prices to reduce market volatility. Typically, the corporation is only obligated to enter into a PPA if the cost is equal to or less than the cost of its existing energy rates. PPAs have the added benefit of making another company responsible for owning and managing the renewable-energy project.

Third-party financing provided by PPAs are mostly commonly used to implement solar technology on roofs of warehouses, big-box retailers and manufacturing sites. Walmart, Costco, and Kohl's hold the top three spots in the U.S. for onsite solar capacity, and most of their combined 216 megawatts of installed solar energy at the end of 2013 was third-party financed, according to California electrical utility IID. Thanks to PPA-provided third-party financing, Walmart now has more solar capacity than 35 U.S. states and the District of Columbia, according to trade association Solar Energy Industries Association (SEIA).

"As companies pursue their corporate sustainability goals, many are challenged to implement an on-site renewable energy solution to scale," says JLL's Gralnik, "Through a third-party energy consultant, companies can harness solar technology to reduce greenhouse gas emissions and improve energy cost predictability without any upfront investment or technology risk."

Gralnik cites a JLL "matchmaking" client that is installing 70 megawatts of solar power capable of generating up to 100 million kilowatt hours of electricity per year through a PPA. The result: an estimated savings of 87,000 metric tons of carbon dioxide and more than $2 million in the first year alone.