Read about three CU boards setting direction for green facilities in Green Living. Read a CUES Skybox post about the strategic benefits of going green. And another one. And check out CUES Cost Control Series: Facilities, which includes green section

By Richard H. Gamble

July 29, 2009

Editor's note: This article first appeared in the August 2009 issue of Credit Union Management.

In choosing their shade of green, most credit unions are staying light. Among the color-coded priorities, black (ink) is driving strategy in most shops. Yet among the environmental pioneers-those that have built the strongest "green" programs, spent the most money and had the most experience-the mood is upbeat. They're gaining members, making money and burnishing their reputations as good corporate citizens.

The memory of $4-a-gallon gasoline and the Obama administration's message of change have fired up a lot of green enthusiasm, but wouldn't going green cost a lot of money CUs don't have to spare right now? Not necessarily, the green CU leaders say. You can fight the good fight, shrewdly position yourself for environmentally driven business and still keep a healthy bottom line, they argue.
Idealism-helping the underprivileged, saving the environment-shapes the mission of $55 million Alternatives Federal Credit Union, Ithaca, N.Y. Does the CU suffer financially for being idealistic?

No, says CEO Tristram Coffin, a CUES member. "Claiming that there is always a tradeoff between profits and environmental sustainability is a worn-out argument," he insists. "We're finding that we can be more profitable by being more sustainable. We get loans that no one else in our market gets because we have the only green loans available. That is a source of income that helps us financially. We're branded as the greenest financial institution in our market, and that attracts business."

ETHICAL, SMART AND PROFITABLE
Is Vancity, the $14.5 billion (Canadian) CU in Vancouver, British Columbia, a green leader because green is ethical, because green is smart marketing
or because green is profitable? "All three, really," says Andrea Harris, director of community leadership. "We started from an ethical premise, but we soon discovered that we could save a lot of money by conserving energy and recycling materials. It's neat to turn a waste stream into a revenue stream. And it has helped us develop a brand that stands out.

"Being an environmental leader has brought us new members and strengthened the loyalty of our old members," she explains.

For some CUs, being green means following a well-thought-out strategic plan that can be rewarding in both the short run and the long run. Being an effective green CU requires a long-range plan, says Priscilla Boucher, VP/corporate social responsibility at the $2.4 billion (Canadian) Assiniboine Credit Union in Winnipeg, Manitoba, but it has to be a high-level plan. "You need to recognize where you are, determine where you want to be, and then craft a plan to get there," she says. Then it's up to people to make the tactical decisions along the way, based on what is effective and what is affordable, she explains.

"Our mission and our strategic plan start with the board," says Garry Loewen, chairman of the Assiniboine CU Board. "We're very clear about social responsibility, and that includes environmental issues and climate change."

Sometimes what's right for society and what's right for the bottom line are the same, but when they diverge, the solution is "balance," Loewen says.

"We have a five-year plan that sets targets for growth, profitability and capital ratios, and that same plan says we'll be carbon neutral by 2013."

For other CUs, green will be a series of opportunistic tactical moves, which also could pay off, suggests George Hofheimer, CAE, chief research officer at Filene Research Institute, Madison, Wis. (Filene sponsored the 2008 study "Back to the Future: Integrating Sustainability Into Credit Union Strategy"; download a free PDF at http://tinyurl.com/filenereport.

How green moves will play out, Hofheimer predicts, will depend on local economies and cultures.

"Being green will be more important for some CUs than for others," he observes. The early adapters will reap the benefits of differentiation and getting the jump on trends. Those that wait will take advantage of improved technology, lower prices and best practices that have evolved through trial and error. But they will not be recognized as leaders and will be introducing products and services that are becoming common, he reasons. He cites CUs in the Northwest as regional U.S. leaders.

CUs that take a stand now on environmental issues will be admired, Hofheimer points out, especially by the younger generation, which has deeper environmental concerns than older generations. These CUs will be favored by the best and brightest coming out of universities and MBA programs as the places they want to work, he says. "Image will be important."

And it will bring members.

"People will want to do business with financial institutions that share their values," Hofheimer says. "Increasingly,corporate citizenship will be defined by positive actions taken to protect the environment. Those who understand the trends well and have the resources would be well advised to get started," he suggests. But to be a leader you have to take real action, not just 'greenwash' your marketing," he cautions.

Leadership in this realm has its rewards but also its risks, Boucher concedes. "You have to understand the state of the science and technology and decide how far ahead of the pack you want to be. The further ahead you get, the more risk you take on." True leadership takes risks and earns respect, but it has to be tempered with smart, pragmatic management, she indicates.

LEADERS' PLAYBOOK
What are leaders doing today? Consider the Alternatives FCU experience. "We're learning to think green in our internal operations," Coffin says. "We had a county agency come in and do a solid waste analysis. We're learning to do things like print on both sides of a piece of paper when we have to print at all. We've put electric dryers in the restrooms instead of paper towels. We compost food scraps from the lunch room. Through a power management program that shuts off electrical devices when they are not in use, we've cut 20 percent from our utility bills compared to last year. We subsidize employee bus passes, essentially giving them the money we'd spend for their parking."

When the city forester was hit with budget cuts that limited tree planting, Alternatives FCU came to the rescue and committed to planting 200 trees. "Things like that help us build our brand," Coffin says. "We've talked about the trees in our newsletter and mentioned them in our annual report, in lobby displays as well as at a local Arbor Day celebration. In addition, we came up with an alternate version of our logo with the tagline "Greening Our Community," which we've used in reference to trees and other environmentally related activities."

Mission-driven CUs like Alternatives FCU are magnets that attract staff who is interested in green and low-income issues, Coffin notes. "Our initiatives are shaped and led by our staff. They're eager to be involved. We have one officer who drives a car that runs on vegetable oil. Another sold his conventional home and moved into a yurt."

Green thinking is evident in Alternatives FCU's products and services. "We offer discounted loan rates for hybrid cars," Coffin reports. "We offer innovative mortgage products to finance houses that are off the grid-some for people who are literally building their own houses that will be on the leading edge of energy efficiency. We lend for projects that will develop alternative energy generation.

"We're the lender of choice for EcoVillage, a planned community built around sustainable living that was written up in Time magazine. We make loans for people converting to alternative energy in ways that will qualify for New York state incentives," Coffin explains.

Because Alternatives FCU is committed to helping finance the green revolution, it's an active lender to environmental businesses. "We're part of the Green Resource Hub," Coffin says, "which introduces us to different local businesses that are trying to have a positive impact on the environment. We lend to one business that delivers locally grown produce with an alternative-energy vehicle. We're strong supporters of our farmers' market, and about 40 percent of the farmers who participate are our members. We give members gift cards to be used at the farmers' market. We don't have anything against national chains, but we do what we can to encourage local businesses that are environmentally friendly and don't require long-distance transportation."

STAYING FLEXIBLE
For all its enthusiasm, Alternatives FCU's long-range plan is written in pencil. The destination is clear. The commitment is enduring, but the path to getting there is obscure. "We live in interesting times," Coffin observes. "Things will have to change dramatically over the next five to 10 years if we are to make the carbon emission cuts that scientists tell us are necessary. It remains to be seen what form those changes will take, so we have to remain flexible in how we stage and time our initiatives." For now Alternatives FCU largely plans to "extend what we are already doing," he concludes.

What are CUs that take small, tactical steps doing today? For that, look at $1.2 billion Technology Credit Union in San Jose, Calif., which is capitalizing on its tech-loving member base to push electronic statements. The prime driver is cost savings.

"We can save about $1 per member per month by converting them to receiving their statements electronically," says Kathleen Litman, VP/marketing. But the CU's management knows that environmental issues are popular in the Bay area and are also playing up the green benefits of eliminating paper. Promoting e-statements was linked to Earth Day, and those who signed up received a green gift.

ROI was never an issue at Technology CU since there was no "I"; it was a cost-saver from the beginning. About 39,000 of the CU's 78,000 members now get their account and tax statements electronically. At a savings of $1 each, that's $39,000 saved every month and growing, Litman says.

Moving to electronic statements would have been a smart move even without an environmental impact. Technology CU has not budgeted specifically for environmental initiatives. With all the pressures on financial institutions to cope with deteriorating loans and increased insurance premiums, "this is not the time for us to make big investments in infrastructure changes," Litman suggests. "We're very cost conscious these days."

On the lending side, the CU is mulling over a plan to offer a rate incentive on home equity lines of credit if the money is used for green projects, but is still weighing "what the revenue hit would be," she reports.

Technology CU is more mainstream than Alternatives FCU at this point. The most common green tactic so far among financial institutions is using electronic communication to reduce paper usage, reports Monica Touesnard, associate director of the Center for Sustainable Global Enterprise at Cornell University in Ithaca, N.Y. "That's an obvious thing to do, and many financial institutions are doing it," says Touesnard, who co-authored Filene's "Back to the Future: Integrating Sustainability Into Credit Union Strategy" report.

TURNING OFF LIGHTS
Besides pushing paperless communication, one of the primary ways many financial institutions are going green is by adopting sustainable business practices. Some, like $2.4 billion (Australian) mecu have been pushing the envelope. That CU created an internal team to build projects, so it had strong staff buy-in, Touesnard reports. They decided to save money by using energy more frugally and then used the savings to pay for a switch to alternative energy. They changed light bulbs. They educated staff about turning off electronic devices that weren't in use. They installed master switches so zones of electrical usage could be turned off at once. And they used the money they saved to buy solar panels, she explains. Switching to solar is especially expensive in Australia, where coal is cheap and abundant and coal-generated electricity is the least costly.

Among Vancity's green credentials are reaching a carbon-neutral footprint by April 2008, well ahead of its initial 2010 target, switching to all post-consumer-waste paper, subsidizing alternative transportation for staff and building high-efficiency buildings. Besides low-flush toilets and low-flow showers, Vancity captures and uses rain water. It is still putting together a comprehensive environmental management system that will allow the CU to set targets and measure progress, Harris says.

There is growing popularity for building "green" branches. $1.6 billion Rockville Bank in Rockville, Conn., opened its first green branch recently and helped promote it by giving away a hybrid car to one lucky winner. The financial impact was a secondary issue. "It cost us about 10 percent more than building a traditional branch," reports Joseph F. Jeamel Jr., chief operating officer, "and we expect a three- to five-year payback on that investment due to lower utility bills and other efficiencies."

Assiniboine CU has built two green branches that tap geothermal energy; one of them has a passive solar wall. The CU is seeking LEED (Leadership in Energy and Environmental Design) certification for the newest one, which has no drive-up ATM. Instead, members park close by and walk up. "No idling" signs are posted in the parking lot.

Prestige is important. "We were shooting for LEED silver certification but were advised that we needed a couple more points," reports William J. McGurk, president/CEO of Rockville Bank, so we added a bike rack and a shower and encouraged our staff to ride their bikes to work and shower here if they wanted to." Lighting was designed to make the most of natural light; toilets use less water; all materials came from within 500 miles, and supplies are recyclable when possible, he explains.

But cost is important too. "Even though we wanted LEED certification for our second green branch," Boucher says, "we decided we wouldn't buy points but would stick within our budget." While it does cost slightly more to build a certified green branch, the payback period from lower energy and operating costs is just three to five years, she estimates. "In our newest branch, we expect to cut operating costs by at least $8,000 a year," she notes.

Just where savings from switching to environmentally friendly alternative energy will pay for itself in a reasonable time varies from locale to locale and project to project, but the gap between conventional and alternative energy costs is closing, Touesnard says, partly as things like solar panels become more efficient and less expensive. However, the prevailing wisdom among CU leaders, especially when regulatory capital is thin, is that it pays to wait for the gap to close further.

When done right, environmental programs are part of a broader approach to sustainability, Boucher says. For example, Assiniboine CU knew it had to dispose of obsolete electronics responsibly. The CU teamed up with a local community organization, Responsible Electronics Recycling (www.rermanitoba.ca), which lends upgraded computers to low-income individuals. A grant from the CU buys the software licenses. The remaining waste is recycled according to standards set by Electronics Product Stewardship Canada.

Virtue and value have to be balanced on a case-by-case basis, Harris says. "When we switched to using only post-consumer-waste paper, it cost us more, but we knew this step would solidify our leadership. There are rippling benefits from leadership that you have to take into account, even if it's hard to measure them in dollars. But we didn't get solar panels until this year. For projects like that, we're pretty stringent about getting a good return on our investment, and we didn't make that move until the economics were right."

In the end, purely financial costs and cost-savings have to be factored in with brand value and leadership recognition. "We have a decision-making model," Boucher says. "It requires us to make a business case but the business case recognizes nonfinancial value. If something helps us attract and keep members, that's a payback. If we had to attract members in other ways, that would cost money. We need to demonstrate who we are and how we do business. That's our brand. And it's responsible for a level of loyalty that goes beyond products and prices," she says.

For CUs, the global trend toward sustainability, which includes green projects, represents a "sleeping giant" of opportunity, Hofheimer insists. "Credit unions are founded on the sustainability principle-slow and steady growth," he says. They are just starting to realize the potential, but this plays to their strength."

Richard H. Gamble is a free-lance writer based in Colorado.

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