Table of Contents

Executive Summary

Introduction

Methods

Analysis

Recommendations

Conclusion

Citations

Appendices

Executive Summary Salt River Project (SRP) is Arizona’s largest and oldest public utility, providing Arizona

customers with reliable water and power since 1903 (Salt River Project - Facts, 2015). SRP has historically taken a proactive stance towards environmental compliance; either meeting or exceeding standards, and has recently developed its own Environmental Management, Policy, and Compliance Division in order to begin exploring how sustainability can be a better business practice and a tool for the company (Stonefield, 2015). SRP is now looking to EcoPhoenix Consulting to provide comprehensive recommendations for how SRP can best use sustainability to transform itself into an industry leader and maintain its competitive advantage through an improved bottom line, integrated utilization of innovation and technology, and engaged community support.

SRP sits in a very favorable role as a first-mover utility in a necessary industry with no direct competitors and an indispensable relationship with local governments. While this position has benefited SRP until present day, resource depletion, water scarcity, population growth, innovative technologies, direct competition from private companies, and tighter regulations on fossil fuels represent some of the very real and impending threats to SRP’s continued success. A dramatic change is also underway in consumer energy preferences, as educated consumers are beginning to demand more sustainable alternative energy sources while demand for traditional energy is beginning to decline. These threats are largely driven by global and national sustainability trends related to climate change (Flaherty et al., 2015).

To conduct this sustainability assessment, a thorough literature review was completed by examining academic and industry publications, SRP publications and employee interviews.  Hart & Milstein’s (2003) Sustainable Values Framework (SVF) was used to guide an assessment of SRP’s business efforts in the areas of pollution prevention, product stewardship, innovation and sustainable vision. After completing an analysis of SRP’s sustainability activities, EcoPhoenix was able to assess that SRP has definite strengths and areas of opportunities. SRP has the largest number of established programs supporting its product stewardship and its sustainability vision. This shows that the majority of SRP’s sustainable activities are directed at external stakeholders.

EcoPhoenix has developed five main recommendations for SRP based on analysis of the SVF. They are as follows: building a sustainable vision empowered and lead by SRP leadership; creating an internal culture focused on understanding, promoting and living sustainability principles; organizational rebranding of communication related to sustainability and more urgent engagement of external stakeholders; moving innovative technologies out of research and into implementation, and focusing more on untapped areas of innovation; and increasing its national and global presence on sustainable utilities in order to better position themselves as industry leaders and make important impacts.

SRP stands as an industry giant, but one facing an equally powerful wall of forces which threaten the continued success of its functionality. While it boasts a long list of sustainable activities, deeper analysis reveals that these activities are not truly innovative or  urgency-driving activities that will allow SRP to continue to be at the forefront of industry standards and remain a leader in its field. In order to remain viable and ahead of regulation, SRP will need to consider radically changing the way it externally markets, internally operates, and relates to suppliers and

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regulating bodies. It will need to realize upfront costs, such as employee time and marketing cost, but also realize the continually increasing regulatory and financial cost of not implementing such sustainable processes, as well as the significant financial benefits of increasing efficiency and improving external relations by implementing such programs.

IntroductionProblem Statement

Sustainability can be defined as that which meets the needs of the present without compromising the ability of future generations to meet their own needs (Hart, 2005). The World Economic Forum currently lists the water-energy-food nexus as the third highest risk to the global economy (World Economic Forum, 2011). The water-energy-food nexus looks at how a rapidly growing global population can create a change to how we use energy and water, and feed current and future generations. It examines how the use of raw materials (fossil fuels being one), and water affect the planet. Statistics show that demand for water, food and energy is expected to rise by 30-50% in the next two decades (International Institution for Sustainable Development, 2012) . However, if society continues to spend its resources at its current rate, the planet will be unable to sustain life and it’s estimated that we will start to feel those effects as early as 2030, resulting in over 100 million people being driven into poverty due to food shortages (Worland, 2015). Additionally, shortages of natural resources could further exacerbate this problem causing economic, social, and political instability, geopolitical conflict, and irreparable environmental damage (Blackman and Baumol, 2008).

Utility companies play a large role in the water-energy-food nexus and global climate change as direct contributors of resource-based energy and as suppliers of necessary tools to distribute water and food. Currently, there is a movement to divest away from fossil fuels (Brackley & Bilgrami, 2015). The increase in divestments is not only a direct result of a significant increase in international attention on global climate change impacts, but also a means to get ahead of policy impacts (e.g. Clean Air Act) that require nationwide reductions of carbon dioxide emissions among other related policies. Regulations such as these will likely result in the accelerated closure of coal-powered plants and an escalated need for utilities to increase sustainability and renewable energy innovations (Brackley & Bilgrami, 2015; Flaherty et al., 2015). These impending regulations highlight the urgency of large utility companies such as SRP to implement more sustainable ways of developing and distributing energy.

Sustainability Matters Recent population estimates show that if economic activity is to support a population

double its current size, technology will have to reduce its impact twenty-fold to maintain today’s level of environmental impact (Hart, 2005). It stands then, that any organization wishing to remain viable in the global market for generations to come needs to start to identify not only areas where they can reduce their environmental impact, but areas of potential greater technological innovation (Hart, 2005). An organization that is able to successfully implement sustainable processes and technologies will be more likely to make gains in gross revenue, dollars saved, increased customer satisfaction, brand loyalty, and employee engagement and satisfaction, as well as leverage greater cooperation and acceptance from local, national and

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international governments, as well as NGOs (International Finance Corporation, 2012). An organization that wishes to successfully implement organizational change must keep in mind that it needs to establish a sense of urgency, create a powerful guiding coalition, have a vision, continuously revisit and create that vision, remove any obstacles to that new vision, systematically plan for and create short term wins, and be wary of declaring victory too soon. (Kotter, 2007)

SRP is currently in a very desirable position as a large, first-mover utility operating in a zoned location without direct competitors and a predetermined customer supply. However, its current organizational dynamics hinder its progress towards sustainability efforts. These dynamics include an older workforce that is resistant to change, a siloed departmental structure, a lack of widespread engagement with consumers around sustainability operations, and a failure of sustainability to be fully defined and implemented into policy and operational decision-making.

About Salt River Project Salt River Project (SRP) is an integrated utility, providing electricity and water to more

than 984,000 customers in the Phoenix metropolitan area via generation, transmission, distribution, metering, and billing services. They are one of the nation's largest public power utilities and the oldest multipurpose federal reclamation project in the United States. The company has served central Arizona since 1903, following the passage of the National Reclamation Act of 1902, nearly 10 years before Arizona became the 48th U.S. state (Salt River Project - Facts, 2015).  

Salt River Project is the umbrella name for two separate entities: the Salt River Project Agricultural Improvement and Power District (a government agency of the state of Arizona that serves as an electrical utility for the Phoenix metropolitan area) and the Salt River Water Users’ Association (a utility cooperative that serves as the primary water provider for much of central Arizona). The District and the Association are headed by separate boards and councils elected by landowners in the SRP service area (Salt River Project - Facts, 2015; Salt River Project - Governance, 2015).

SRP currently owns or operates, in part, twelve electrical generating stations, seven hydroelectric plants, six coal fired power plants and has energy purchasing agreements with four major hydroelectric stations along the Colorado River. In addition to the six reservoirs along the Salt and Verde rivers, SRP operates dams at the Blue Ridge Reservoir, as well as the Granite Reef Diversion Dam, and a number of canals. They also own and operate four additional reservoirs along the Salt River east of Phoenix which serve as water storage for the rapidly growing municipal area, as well as important recreational centers. (Salt River Project - Facts, 2015)

SRP’s Sustainability FocusSRP has a history of environmental stewardship that is intimately connected with

Arizona’s characterization as a desert state prone to drought and floods. Its vision is to help the Phoenix metropolitan area grow into a vibrant and sustainable metropolitan area. (Salt River Project-Annual, 2014) SRP’s Sustainable Portfolio Principles are integral to this vision through focusing on expanding environmentally sensitive supply- and demand-side options, exploring

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additional ways to displace the use of fossil fuels, and introducing new technologies and innovations. SRP has an established goal to supply 20% of its expected retail energy requirements with sustainable resources by Fiscal Year 2020, with aims to exceed this yearly target (currently 2% or less annual growth) (Salt River Project  - Sustainable Portfolio Principles, 2015). SRP’s current sources of renewable energies include biomass, hydropower, landfill gas, geothermal, solar, and wind. In 2012, SRP established its first division focused specifically on environmental sustainability, the Environmental Management, Policy, and Compliance Division and has utilized three separate Environmental Management Systems. (Salt River Project - Facts, 2015; Stonefeld, 2015)

SRP’s Compliance History  SRP has historically taken a proactive stance towards compliance, either meeting or

exceeding regulatory and internal standards by conducting audits and in-depth self-evaluations of their facilities and operations (Salt River Project - Environmental Policy, 2015; Stonefeld, 2015). However, SRP has had some occurrences of non-compliance, such as in 2008, when it was charged with violations of the Clean Air Act for unauthorized construction projects at the Coronado Generating Plant and completing projects without first undergoing Prevention of Significant Deterioration review. The settlement reached between SRP and the Environmental Protection Agency (EPA) stipulated that SRP would reduce emissions from the previous year, as well as implement three clean energy projects: the Clean Diesel School Bus Retrofit Project, Solar Photovoltaic Project, and Woodstove Changeout Project (Environmental Protection Agency-Enforcement, 2015). In response to the increasing compliance demands and requirements and to follow national standards towards the movement of organizational sustainability, SRP developed its current Environmental Management, Policy, and Compliance Division in 2012 (Stonefeld, 2015).

Relevant Environmental Regulations SRP is governed by a large number of federal environmental regulations and laws, the

most influential of which include the Federal Clean Water Act (amended 2005), the Federal Safe Drinking Water Act (1974), the Energy Independence and Security Act (2007), the Public Utilities Regulatory Policy Act (1978), and the Clean Air Act (2014). It is also governed by local regulations including the Renewable Energy Standard and Tariff (REST) enacted in 2006 requiring regulated utilities to generate 15% of their energy from renewable resources by 2025 (Arizona Corporation Commission, 2006).

Aside from federal and local government regulations, SRP falls under jurisdiction of several commissions including the North American Electric Reliability Corporation (NERC) and the Federal Energy Regulatory Commission (FERC). Under NERC, reliability standards are put in place to regulate bulk power transmission in the electric utility systems of North America. The reliability standards define the requirements for planning and operating the North American bulk power system and are developed using a results-based approach that focuses on performance, risk management, and entity capabilities (North American Electric Reliability Corporation, 2015). As a major electricity provider to Arizona and some of its surrounding neighbor states, SRP stands to be critically affected by the reliability standards set forth by these commissions and could face heavy fines, reputational damage, disruption to organizational operations, and more should they ever be found in violation.

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Moreover, global sustainability impacts are, in large part, the catalyst for federal regulation creation, stemming from international treaties and initiatives aimed at protecting and improving the environment. Some of the most important international-level influences on U.S. sustainability policies that directly impact utilities are the Kyoto Protocol, the North American Agreement on Environmental Cooperation, Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal, Environment and Security Initiative, the United Nations (UN) Environment Programme, and most recently, the newly established UN Sustainable Development Goals. Additionally, Europe’s progressive sustainability efforts, such as the German Energiewende, European Climate Change Programme, the European Union (EU) Energy Efficiency Directive, and the EU Water Framework Directive are of significance for the international ripple effects they have. Specifically, as a U.S.-Mexico border region state, SRP is also impacted by the International Boundary and Water Commission, Western Climate Initiative, Arizona-Sonora Regional Climate Change Initiative, and and Arizona Executive Order 2010-14 on Climate Change. These international influences will continue to push the U.S. and multinational entities to adapt similar sustainability protocols and increase their sustainability initiatives to focus on the global connectedness. (HG.org, 2015; Darnall, 2015)

See Appendix I for a complete reference list of the above mentioned regulating entities.

Industry TrendsThe world has seen an increase in awareness and action for sustainable development on

all levels of society, and will continue to see more deliberate actions by companies, governments, and other organizations internationally, which will steadily dominate the utilities industry. The following are significant sustainable development trends that reflect this.

Water-Energy-Food Nexus, Water ScarcityWith the expected increase in demand for water, food and energy, combined with rapidly

growing global population, access to resources, and consumer societies, long-term sustainability has been increasingly undermined. These impacts have become a supply chain and financial risk for which organizations are increasing their efforts to understand and act on the entire water-energy-food nexus issues to focus on collaboration and system-level solutions. Some such emerging innovations include watershed payments, water risk management tools, consumer engagement programs, environmental impact bonds, and long-term value in land and land investments focused on clean water supplies, soil productivity and energy systems, among others. (Brackley & Bilgrami, 2015; World Economic Forum, 2014)

Global Climate Change ActionsThe increase in divestments away from fossil fuels is a direct result of a significant

increase in international attention on global climate change impacts, resulting in policy implementation. Regulations such as these will likely result in the accelerated closure of coal-powered plants and increased need for utilities to increase sustainability and renewable energy innovations (Brackley & Bilgrami, 2015; Flaherty et al., nd, 2015).

Disruptive Technologies

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Currently, the demand for utilities is decreasing which in turn is causing prices to decrease and is leading to declines in revenue (Flaherty et al., nd, 2015; Hectrick, & Kilorian, 2015). Due to an increase in federal and state subsidies, some utility customers have begun investing in solar power. This move is perceived by many utilities as a threat in loss of additional revenue and as a free-riding move that allows customers to use the benefits of the electricity grid at reduced prices (McKibben, 2015). Large organizations such as Tesla are working to create large-scale batteries at reduced prices making it a possibility that solar owners will purchase those batteries thereby divorcing themselves from the grid altogether. Furthermore, utility firms are receiving competition from companies outside the industry (e.g. internet firms and cable operators) who are looking to provide energy services to traditional utility customers (Brackley & Bilgrami, 2015; Flaherty et al., 2015).

New Business Models and InnovationsFaced with these impending challenges, utility companies should invest in and develop

new business model strategies and innovations. Many organizations have diversified their portfolios, divorcing their business of power generation from power distribution (Flaherty et al., 2015). This move is especially prevalent in “hybrid” utilities which are experiencing reduced revenue growth in such an unregulated and highly competitive business as power generation, which is slowing down the performance of the regulated distributions operations (Flaherty et al., 2015).  Current trends for new distribution technology include smart grids, smart metering, smart thermostats, electric vehicle charging stations, and e-homes (Patel, 2014; McKibben, 2015; Flaherty et al., 2015). There are many other examples of unique opportunities for utilities companies. First, utility companies can create partnership with other organizations. For example, Green Mountain Power in Vermont works with contractors to provide energy makeovers (to include new insulation, heat pumps for hot water, LED lights, solar arrays, etc.), allowing customers to finance the improvements through their upcoming electric bill (McKibben, 2015). Another opportunity exists with community solar projects that allow customers to lease individual cells on a solar panel and be credited for every kilowatt generated by that cell at 70% of the cost (Patel, 2014).  

Changing Preferences and DemographicsTo curtail the trend of customer having increased control over energy usage and its threat

to drive down demand for energy, utilities are looking to manage the market by understanding customer demands and the changing demographics (Flaherty et al., 2015).  By 2017, the millennial generation will exceed baby boomers in their buying power. Uniquely, this generation does not rely on a healthy economy to give it headway in its financial savings; rather it will seek to find or create innovation solutions (Roth, 2013). This group is defined by its beliefs, is looking for authentic, affordable products and greatly values transparency (Roth, 2013). Companies are also making great headway in defining consumer groups by levels of sustainability commitment and marketing specifically to those groups. One such group is the Lifestyles of Health and Sustainability (LOHAS) consumer, who is defined as a member of a market segment focused on health and sustainable living. They are regarded as community influencers and, when successfully marketed to, can influence enormous product and business change (National Marketing Institute, 2006). Another such group is the low-income demographic, which, due to its large numbers and reception to cost-saving technologies, stands to be an influenceable and influential group (Hart, S. & Sharma, S., 2004). The Chief Executive Officer demographic is also

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appealing due to their focus on reducing operating costs, mitigating risk, and aligning itself with customer preferences (Roth, 2013). A company stands to experience huge gains by tapping into these consumer bases and exploring areas of growth that will lead to increased revenue.

Methods EcoPhoenix Consulting conducted a qualitative analysis into relevant local, national, and

international laws, regulations, agreements, and trends that are likely to affect the utilities industry, SRP stakeholders, and SRP’s ability to operate sustainably. We analyzed SRP’s websites and publications on compliance, environmental stewardship and sustainability, and collected information from SRP representatives from the Environmental Management, Policy, and Compliance Division and the Strategic Engagement, State and Local Government Relations. Additionally, several leading academic publications provided frameworks for the analysis.

Sustainable Values FrameworkHart and Milstein’s Sustainable Values Framework was used to assess SRP’s current

position on sustainability and to create a framework for this report. (Hart and Milstein, 2003). This framework serves as a management tool that allows SRP to frame its current business practices. It is set up to evaluate the present operating structure while still planning ahead to address tomorrow’s technology and market opportunities. It is also designed to nurture the internal business culture and capabilities while still accounting for external stakeholder perspectives that can help strengthen the business. To implement the framework, SRP’s business activities related to sustainability impacts were assessed and individually categorized into one of the framework’s four values: pollution prevention, product stewardship, innovation, and community vision. (See Figure 1 below for a summary of the Sustainability Values Framework.)

Pollution Prevention (internal/today)Pollution prevention is a sustainability strategy that encompasses both today’s operations

and operations that make up the internal culture and human capabilities of the organization.  It focuses on minimizing costs, risks, waste, and emissions from current operations (Jones & Klassen, 2001; Hart & Milstein, 2003), including efforts such as recycling, eco-efficiency building, and product reuse (Darnall, 2015). Organizations conducting pollution prevention efforts are in a better position to reduce operational costs and risk (Hart & Milstein, 2003).  

Product Stewardship (external/today)Product Stewardship encompasses both today’s operations and includes the perspective

of those external to the company (e.g. suppliers, regulators, communities, non-governmental organizations) (Vachon et al., 2001; Hart & Milstein, 2003). Product stewardship seeks to hear the views of these stakeholders, increasing the organization’s reputation and legitimacy. By working closely with these groups, the business is building and sustaining its reputation, and potentially avoiding risk (Hart & Milstein, 2003). Examples of business concerns that fall into this quadrant include stakeholder management, Environmental Management Systems, closed loop production, and life cycle assessment (Darnall, 2015).  

Innovation (internal/tomorrow)

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While organizations must focus on maintaining daily operations, they are also tasked with preparing themselves for the future. Innovation focuses on internal business operations and aims to preempt competition for tomorrow’s market. To do this, organizations must make sure they are innovating and repositioning themselves when faced with inertia and risk. To produce innovation, an organization must hire and train its internal stakeholders, build its employees knowledge, skill, and capabilities (Hart & Milstein, 1999; Hart & Milstein, 2003), and focus on restorative, sustainable and restructuring technologies. An example of an innovative technology in the utility field is the Ice Bear Technology, which dramatically rethinks the cooling process. The goal of innovation is to shape the business to create a niche market within its industry (Hart & Milstein, 1999).  

Sustainability Vision (external/tomorrow)Innovation is key to a company’s success but just as important is a company’s

sustainability vision.  A sustainability vision creates opportunities to work with external stakeholders to shape the future organizational growth and focuses on fostering the social element of sustainability by offering new products to existing customers or tapping into previously unserved markets (Hart & Milstein, 2003). Urban reinvestment and sustainable development projects are both examples of sustainability vision strategies.  

Figure 1Sustainable Values Framework

(Adapted from Hart & Milstein, 2003)

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A Balanced Portfolio & Organizational CultureIn order for an organization to be in the best position to succeed in the future, an

organization must make sure to build a balanced portfolio, one in which investments are made in all areas of the Sustainability Values Framework: pollution prevention, product stewardship, innovation, and the development of a sustainable vision. For example, if a company concentrates a majority of its efforts focusing on improving the current state (pollution prevention and product stewardship), it runs the risk of being vulnerable to both other organizations that are advancing technologies to capture the future markets and other external risks e.g. impacts of climate change. If however, an organization focuses too much on its position in the future (innovation and sustainability vision), it lacks the foundation and human capabilities that are needed to implement the envisioned future. The organization must also make sure to measure the input of both the external and internal environment surrounding its industry. For example, by looking too much at its internal capabilities and innovations and not considering the external stakeholders, companies may develop nearsightedness and may not be aware of important trends that will shape the industry. Likewise, if an organization focuses too much on getting external approval, it may run the risk of being labeled ingenuine or a “green washer’ (Darnall, 2015; Hart & Milstein, 2003). In addition to having a balanced Sustainable Values Portfolio, the sustainable operations should also be valuated based on the degree by which activities can be categorized into three levels:

Emerging: An organization is considered to be emerging in its sustainability efforts when leadership is interested. At this level business activities are just beginning and have not fully been integrated.

Established: An organization’s leadership not only accepts and supports change, but fully implements sustainability activities. Business activities have been fully integrated and are no longer in the research and/or testing phase.

Institutionalized: An organization is considered institutionalized when sustainability becomes a part of the organizational culture, business operations, and becomes a lens by which all decision are made (Darnall, 2015).

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Analysis Figure 2 represents a summary of each of SRP’s current sustainability activities in each

of the four quadrants of the Sustainable Values Framework, including the level the activities fall under.

Figure 2

SRP Business Activities Utilizing Sustainable Values Framework

See Appendix II for a complete citation and definition list of the listed SRP activities.

A cursory glance of the portfolio indicates that SRP’s established activities are mostly concentrated in the quadrants of Sustainability Vision and Product Stewardship, indicating stronger emphasis on engaging external stakeholders. It also has quite a few activities in the Pollution Prevention quadrant, which is to be expected, as pollution prevention is generally the area in which organizations make first steps to becoming sustainable (Hart and Milstein, 2003). This suggests that SRP could start making changes by focusing more on innovative technology and internal stakeholder engagement. SRP is faring well in that the vast majority of its activities

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are established, indicating that SRP has a solid organizational foundation on which to build more radically innovative processes and technologies.

Pollution PreventionSRP currently has several established business activities that aim to recycle and properly

reduce energy, waste and water waste. Most notably are SRP’s effluent water recycling program and its Investment Recovery Group that recycles many large materials such as transformers, metal, and office materials for proper reuse, donation or sale (SRP Investment Recovery Group, 2015).

SRP also has several emerging projects. Notably, it is in the process of renovating some of its buildings, such as the East Valley Service Center, and aims to LEED certify other buildings as they are due for renovation (Stonefeld, 2015). SRP is also expanding its internal green fleet. Both of these emerging programs are areas in which the company has the opportunity to advance its efforts in the future.  Additionally, SRP is deploying employee engagement programs. Most of these programs are built upon the initiatives currently found to be most relevant to its business model (i.e. recycling and travel). While such programs are promising, SRP openly states that much of their engagement by internal stakeholders is haphazard and is split between the younger and older generation of employees who have different levels of knowledge and understanding on sustainability themes (Hectrick, J. & Kilorian, 2015; Stonefeld, 2015). SRP therefore stands to strengthen and better promote its programs in the pollution prevention category. This will in turn strengthen the human capital needed to create innovations and sustainability vision planning.

Product StewardshipProduct Stewardship represents SRP’s second most robust quadrant, populated with

many quality local and national partnerships. SRP’s strengths are in educating its consumers in water and energy safety through programs such as Safety Connect and Energy Scorecard. It also strives to help create a “greener” product lifecycle by investing in programs such as the Cool Cash rebate that encourages consumers to replace air conditioning units with more efficient models (Salt River Project - Conservation, 2015).

Given that product stewardship aims to look at the full value system of an organization, SRP would benefit from consciously thinking about its product use and energy systems from raw materials through its full value chain. It needs to think critically on how its current structure will affect the environment and why adapting cleaner technology is important. One way in which this can be done is to undertake a list of standard requirements for its current supply chain. While SRP has developed a survey, it can promote sustainability to its third party suppliers by creating either a basic standards list or an incentive based program (Stonefeld, 2015). SRP represents a good foundation to a community-focused company, but is still lacking in large-scale community outreach or intensive consumer marketing surrounding sustainability. This may have to do, in part, with the haphazard way in which sustainability is understood and implemented by internal stakeholders.

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InnovationInnovation represents SRP’s most emerging quadrant. Currently SRP has many projects

in the research phase. While many of these technologies bode well for SRP’s future, their development progress is incremental at best. SRP needs to move towards proper implementation to remain a viable organization and keep their current clientele given projected population growth and environmental issues. For example, SRP is currently researching Ice Bear Technology, a technology that has the capability to reduce AC power consumption and electricity costs considerably (Salt River Project- About, 2015). However while it is still in the research phase, this technology has already been implemented by NRG, a privately owned energy company that currently utilizes this technology with Arizona State University (ASU), Chase Field, CityScape, the Phoenix Convention Center, Talking Stick Arena, and the Sheraton Hotel. NRG’s Ice Bear Technology is currently operating with a 95% reduction in AC power consumption and saving companies an average of 30% on electricity bills. (NRG-Business, 2015) Another example is SRP’s partnership with ASU to discuss the benefits of using algae plants to reduce carbon emissions. This method has already been implemented by Portland General Electric company and has been proven to be successful (Portland General, 2015).

Outside of moving towards faster implementation, SRP also needs to expand its innovation so that they can reposition themselves ahead of other industry leaders. For example, SRP’s introduction of flowtography, allowed SRP to monitor watersheds remotely, reducing time and greenhouse gas emissions made by travel (Salt River Project - Conservation, 2015). By increasing innovations such as these, they will begin to differentiate themselves not only amongst similar public utilities but those private companies and other entities that are attempting to tap into SRP’s clientele.  

Sustainability VisionSustainability Vision is SRPs most robust quadrant, including many successful and

established activities. SRP has invested greatly on engaging its employees in volunteer efforts, in creating community based programs, and in investing and promoting restoration programs such as the Rockhouse Riparian Project. SRP also has a Community Solar leasing program that allows sustainability conscious consumers to purchase their energy from alternative energy sources. While this program is important, it is has been under redevelopment and scrutiny by stakeholders for some time (Salt River Project - Get, 2015). SRP would benefit from promoting this program once it has been redesigned and relaunched. SRP is also championing many emerging programs such as its Drive Electric program, which help promote electric vehicle use. SRP can strengthen this program by moving beyond the education and surveying of such cars and modeling aspects of its program after other utility companies such as JEA (a northeastern Florida company), Georgia Power, San Diego Gas and Electric company who offer its customers rebates, incentives and reimbursements in buying electric cars. (Sierra Club, 2014)

An area of weakness however, is in SRP’s planning for the emerging market and broadly engaging its existing consumer base. According to comparisons between Phoenix’s demography and SRP’s operating area,  SRP serves many low-income and underserved communities within the Phoenix area (City-Data.com, 2015). As part of its sustainability visioning, SRP needs to create unique business models to better engage these communities. Not only will customized services help SRP’s mandate to provide reliable energy but it will also help SRP develop a

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unique opportunity that will lead to revenue growth. SRP would also do well to create a long-term sustainability plan that extends its vision through the next 10 years in order to keep itself ahead of regulation and position itself to be able to drive regulation.

Impact of Arizona Public Service Arizona’s second largest public utility, Arizona Public Service (APS), does not stand in

direct competition with SRP. However by generating greater stakeholder support through its current and future sustainability practices, APS could stand to become an Arizona leader in sustainable energy and receive, in turn, more revenue and greater customer satisfaction. APS brands itself as a company driven by sustainability. Their vision, according to their governing company, Pinnacle West, is “Creating a Sustainable Energy Future for Arizona” (Pinnacle West, 2014). APS is currently ranked 6th nationally for solar energy wattage and output by the Solar Electric Power Association; it generates 91.1 watts per customer of solar energy (Solar Electric Power, 2014). SRP does not appear on that list.  APS currently operates the nation’s largest Community Power Project out of Flagstaff, which generates solar power through an interconnected solar grid, and plans to install 10 MW of solar power on about 1,500 customer homes.  The grid draws its power from residential and business solar panels, who were offered a Community Power Rate for the portion of their bill equivalent to the panel’s generation, and a $30.00 rebate to cover the cost of installation and start-up. (Arizona Public Service-Community, 2015) This stands in contrast to SRP’s currently rising rates for individuals and businesses wishing to install solar panels (Salt River Project-Prices, 2015).

Recommendations SRP has long had a strong reputation in environmental stewardship, seen through its

commitment to its established and emerging sustainability initiatives. While this is extremely impressive and to be commended, sustainability efforts can not end there. It must include a commitment to the protection of our natural environment at its source, and requires a radical shift in how we conceptualize and work together with our planet in order to sustain its life for future generations.  Historically, SRP has remained ahead of incremental regulation but today new regulations, climate change, and technology pose a different landscape by which SRP must operate. SRP needs to anticipate and plan for more radical regulation, such as the possibility of a carbon tax and a natural resource depletion crisis. In addition to these planning efforts, to create a holistic and systematic approach to integrating sustainability at SRP, EcoPhoenix Consulting recommends the following actions:

Build a sustainable vision empowered and lead by SRP leadership Create an internal culture focused on understanding, promoting, and living sustainability

principles Rebrand organizational communication related to sustainability and focus on more urgent

engagement of external stakeholders Move innovative technologies out of research and into implementation and focus more on

untapped areas of innovation, and

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Increase its national and global presence on sustainable utilities in order to better position themselves as industry leaders and make important impacts.

Leadership and Creating Sustainability Vision To be an institutionalized leader in sustainability, it is important that a sustainable lens is

used in every facet of an organization’s decision making (Darnall, 2015). In order to accomplish this, sustainability efforts must be headed and supported by SRP’s leadership. Leadership should not only understand sustainability, but they should consciously work with board members, internal stakeholders, and regulatory leaders to make sure that it is thoughtfully incorporated into its key vision, mission, and operational strategy. Creating organizational change at this level will require organizational time and human resources but the benefit of such change will be a focused position by which SRP can build and maintain its sustainability brand (Kotter, 2007).

SRP is a unique entity in that it is a public and private organization that is highly reliant on state law. The majority of citizens voting in Arizona state elections are conservative, white males whereas those highly interested in environmental sustainability represent a small minority of the voters and are not directly influencing policy-makers. SRP sits on a challenging nexus where one side represents research and innovation catering to climate change (e.g. solar power) and global pressures to curtail threats to the environment, and the other involves combating constantly changing legislation and political barriers that bars evolution of development for the same innovations. While SRP stands at a difficult position, it must recognize that the Clean Air Act and other national and global influences will ultimately dictate regulation if SRP can not work collaboratively with state regulators. SRP must therefore work closely with regulators to create solutions that will allow it to comply with its mandate of reliable service and even place it in a position to be competitive.

One way in which SRP can begin to build a unified body is through the creation of a sustainability-focused leadership team. This team should include not only key members of its boards, but also important political figures, academic leaders in the field of sustainability, and SRP executives (Hoffman, 2008). It should include both key protestors and proponents of sustainability. The goal of these meetings should be two-fold. First, sustainability naysayers should be engaged by their respected peers, sustainability proponents. Not only will this help create buy-in but it will help create an arena of learning and collaboration. The second goal of such a team will be in helping SRP build a sustainable vision. This can be done with the help of sustainable leaders and can include visioning exercises where the team is asked to envision a desired and sustainable future scenario. This scenario should be a long-term goal (going beyond 20 years). From there the team should work with internal employees (Sustainability Dream Team discussed more below) to “backcast” . In other words, working backwards the team should create goals in five year increments, working its way to the present day (Holmberg & Roberts, 2000). By engaging in backcasting with these diverse stakeholders, SRP is helping to align its vision with the input and innovation of its employees (Hoffman, 2008; Kotter, 2007).  

Internal Cultural Shift Once SRP has established a sustainability driven, dynamic leadership team and an

effective sustainability vision, the company should begin to focus on ways to better engage and involve employees through the implementation of stronger environmentally focused initiatives

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aimed at kickstarting an internal cultural shift. Based on SRP feedback, EcoPhoenix has found that SRP is weakened by minimal support of sustainability initiatives from employees and the mediocre measures currently in place to gain their support. Thus far, SRP has done well with establishing and maintaining foundational initiatives internally including launching recycling programs throughout their corporate offices and rewards programs for rideshare participants helping to reduce GHG emissions (Stonefeld, 2015). However, these foundational initiatives still allow for a disconnect in terms of employee support, especially between tenured employees and younger employees, and can often receive push back despite being slower, incremental change based initiatives. In order for SRP to truly shift its internal culture, we believe it will need to establish slightly more radical and holistic initiatives to complement those already in place and implement sustainability focused internal educational programs to maintain leadership in its division--setting standards internally and externally.

First and foremost, in order for SRP to begin to effectively combat employee push back and ensure engagement, they need to establish a shared language when referring to sustainability initiatives. While conducting research, EcoPhoenix found that there was a lack of consistency in terminology used throughout the major sustainability and energy efficiency reports with “stewardship”, “sustainability”, and “conservation” often being used interchangeably. In order to engage employees and get them on board with internal initiatives, SRP must address this language issue and determine nomenclature standards so as to create a consistent, clear message and allow for employees to correctly interpret and understand the message so they can put the measures into action.

As soon as the language discrepancy is resolved, the next step EcoPhoenix believes SRP should focus on is the establishment of a Sustainability Dream Team to oversee and assist with implementation of more effective, radical internal initiatives. Similarly modeled after the leadership team, the Sustainability Dream Team would consist of representatives from each division of the company, supporters and skeptics, division experts, and department leaders. Collectively, the team would work to identify areas for improvement, address employee concerns and gather feedback, put forth stronger initiatives, and collaborate with the leadership team on development of these initiatives and major reports. Research has shown that effective organization strategy focuses on diffusing responsibilities throughout the organization and environmental strategy, in particular, needs to be embedded within the behavioral and cultural aspects of the organization in order for it to be advantageous (Hoffman, 2008). A prominent success story that demonstrates this is Dow Chemical’s Waste Reduction Always Pays (WRAP) program and the “dream team” at a plant in the Bayside Division in Maryland which brought together different department members with varying viewpoints that collectively implemented the company’s sustainability vision and inspired them to take on the initiatives in place.

With a Sustainability Dream Team established, SRP can begin to develop more strategic initiatives to engage and inspire employees including a Sustainability 101 training seminar. A seminar aimed at educating employees on best practices, current programs and services, and how to derive value from initiatives could have tremendous impact on the internal culture. Currently, SRP employees receive communication about new programs or services via email, newsletter, or on the internal employee website (Stonefeld, 2015). These educational pathways are quite segmented often focusing on one single initiative and allowing for employees to potentially be bombarded with information all day long rather than simplifying to a singular and more interactive form of communication that discusses all initiatives in place. On top of this, SRP has

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a program in place that offers free sustainability training for teachers throughout the Phoenix metropolitan area, yet they do not have a similar program in place for their employees (Stonefeld, 2015). If SRP incorporated such employee engagement and training sustainability initiatives during onboarding and professional development, the company could see an increase in employee involvement in current and future initiatives with relatively low resistance to change.

External Cultural Shift  After creating sustainability vision within leadership and radiating it to employees,

consumer and stakeholder engagement is the next most crucial element of developing a sustainable company. SRP currently operates many excellent consumer engagement programs, such as the Solar Electric program and Safety Connect, but in order to increase its operation and reputation as a sustainable company, SRP needs to undergo a significant rebranding campaign; one which definitely identifies itself as a company with sustainability in mind, targets LOHAS and other engaged populations, and more effectively and urgently drives its consumers to share in its sustainability vision.

SRP can do this through techniques of Community-Based Social Marketing, which include several steps. First they can create focus groups to determine barriers to action and develop commitment through public campaigns. Next they can create prompts to action which are noticeable, self-explanatory, positive and timely. They can also build social norms through utilization of community leaders and LOHAS consumers.  Finally they can more delicately craft effective messages that are vivid, personal, and concrete, enhance motivation through incentives, and then create an ease of action on those incentive programs (McKenzie-Mohr, 2013).  SRP should also consider its lower income demographic, which forms a large percentage of its customers, to determine income specific barriers to sustainability and more widely engage that community at their current level of need.

SRP also needs to respond to the requests of its external stakeholders and consumers, especially in the hotly contested area of solar rate hikes. Sandy Bahr of the Sierra Club states that “SRP is not doing enough to promote sustainability. SRP failed to consider the benefits or real value of solar in its calculations. Its actions have caused a real drop in new installations. That is bad for the environment and for the economy” (Bahr, 2015). Engaging these environmental groups is imperative in that it can create new opportunities to achieve both greater corporate profitability and stronger environmental protection (Rondinelli, L, 2003). In addition, the Arizona Republic recently published an article accusing SRP of spending large amounts of money on ad campaigns for their recent solar rate hikes that were targeted at a consumer base that had no influence over the policy in question (AZ Central, 2015). SRP has a unique supply chain in that the product, energy, ends with consumer. This means that all supply chain decisions must be made with the consumer ultimately in mind if they are to enhance their supply chain efficiency and perception.

With negative perceptions like these tarnishing SRP’s reputation, it is clear that a rebranding and consumer engagement campaign is urgent if SRP is to gain consumer loyalty ahead of possible market competition. SRP also needs to develop a more comprehensive and intimate engagement program for its suppliers; it currently surveys all suppliers, but as a company that orders large amounts of raw product from suppliers, it stands to multiply its

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sustainability impact by conveying its sustainability vision to its suppliers and incentivizing them to share in its vision. While both of these programs represent a significant upfront cost, in order to maximize profits from corporate social responsibility (CSR), which these rebranding initiatives represent, a company needs to understand that CSR is not the responsibility of HR, donations, or ENS department (Willard, 2008).

SRP also stands to benefit from a more engaged partnership with the municipalities in which it operates. While it currently is partnering with the City of Tempe in their Sustainability Plan, there is no comprehensive partnership between the City of Phoenix and SRP; SRP is not even mentioned in the city’s 2012-2013 Sustainability Report, SustainPHX (Phoenix.gov, 2013). A recent trend in sustainable cities such as Seattle, has city governments cutting ties with private utilities in favor of their own, fully government controlled utility programs that more significantly implement sustainable practices (City of Seattle, 2015). By neglecting these essential stakeholders, SRP runs the risk of being edged out by not only private companies, but by government enterprise.

Clean Technology and Innovation When it comes to clean technology and innovation, SRP currently has a lot of emerging

activities which are still being developed in the research phase such as photovoltaic cell research, a thermostat/large scale battery program, algae emissions study and Ice Bear technology. These activities have passed the stages of research and are currently being implemented by various utility related organization (e.g. Portland General Electric and Hawaiian Electric Company). It is therefore pertinent for SRP to focus more on clean technology and innovation in order to survive in this competitive market system where an estimate of more than 1,845 to 2,500 companies invest in long term innovative technologies and compete for sustainability recognition and awards each year (Dow Jones Sustainability Index, 2015).

When innovating, it is first important to realize the opportunities in which a company can create a niche and become a trend setter (Hoffman, 2008). For instance, the world’s top sustainable utility company, Iberdola, (Forbes, 2015) is gaining popularity because of its strategy to invest in areas of opportunities such as offshore wind renewable energy resources. In the case of SRP, the company can further their existing investments in air conditioning, wind power and solar energy. For example, Arizona requires 25% of its energy consumption portfolio to be devoted to providing power for air conditioning, compared to a 6% air conditioning requirement in the rest of the U.S. (U.S. Dept of Energy - Wind, 2015). (See Appendix III for wind power map.) Similarly Arizona has a capacity to produce 10.9 GW of wind power annually and is ranked second in the nation in terms of electricity generated from solar energy (U.S Dept of Energy-Solar, 2015).  Utilizing these areas of opportunities can make SRP increase efficiency while decreasing energy consumption, and help create a large market of benefit. Notably, investing in the Sustainable Values Framework’s higher level sustainability activities, such as innovation and sustainable vision, leads to greater financial benefits or profits in the long run (Kuraptskie & Darnall , 2013)

       According to several scholars, companies such as Brigelux, Biofuelbox, Altarock Energy, Achates Power and Coulomb Technologies are some of the companies to look out for in terms of clean technology innovation and revolution (Bloomberg Business, 2015). These companies are predicted to lead the business market overshadowing the traditional coal and petroleum

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dependent companies. While there has been regional conflicts and competition between utilities and solar panel companies, solar installations are gaining more significance among consumers. Additionally, APS is gaining an added advantage due to its lower solar cost use of $21 per month compared to SRP’s high fee charges of $50 per month. Since it is predicted that solar installations are to increase by 51% in the future, especially in Arizona (AZ Central, 2015), SRP can gain an added advantage by investing more in solar energy innovative technologies and by lowering its solar use charges. Some of the additional innovative technologies which SRP can look into or invest in are  micro-refinery sewage to diesel converters, universal geothermal boring wells, underwater energy converter turbines and new grid systems, these are the current new technologies which companies are successfully and frequently tapping into.

EPA’s Clean Air Act of 2014  requires organizations to reduce emissions by a range of 21% to 31% by the year 2020 (EPA-Greenhouse, 2015). While SRP’s sustainable portfolio creates a goal of  20% usage of renewable or sustainable energy by 2020 (Salt River Project-Renewable, 2015), other top sustainable companies such as Xcel Energy are setting higher goals to meet the highest range requirements of EPA by reducing their emissions through renewable energy 30% by 2020.  As a result SRP needs to formulate a stronger sustainability vision that focuses more on increasing long term sustainability goals in clean technology and innovation (Hart & Milstein, 2003).

Increase Global and National PresenceSRP has a unique opportunity and responsibility to not only become more enlightened

about the larger national and global conversations on utility sustainability, but to also benefit from becoming a more prominent contributor to such global conversations. As one of the nation’s largest public power utilities and the oldest U.S. multipurpose federal reclamation project, SRP’s operations are geographically, politically, and economically significant to the larger conversation and several outside influences pose real threats to Arizona’s water and energy sustainability. For starters, SRP’s customer base and operations are located in one of three desert regions in the world that are forecasted to experience some of the most serious challenges within the water-energy-food nexus over the next ten years (GEMI - Water Trends, 2015). The desert and mountains that supply Arizona’s water are shared by Mexico and several U.S. states (including California), and this area is facing major challenges (Brackley, A. & Bilgrami, R., 2015; Darnell, 2015; Flaherty III, T. et al., 2015; GEMI - Water Trends, 2015) that have the potential to pose very real legal and water and energy supply threats.

Furthermore, with heightened attention from both consumers and international organizations on the impacts of environmental threats to the continuation of society, mandates from international entities to expand environmental stewardship at all levels will increase (Brackley, A. & Bilgrami, R., 2015; Darnell, 2015; Flaherty III, T. et al., 2015). As a major utility provider, SRP is forecasted to be increasingly impacted by such pressures and threats in the near future. These may include looming U.S. federal carbon regulations, reductions in fossil fuel consumption, increases in alternative energy suppliers and demand, and potential legal threats from bordering states and Mexico. SRP is also not protected from the significant threats of unforeseen natural disasters (e.g. droughts, earthquakes, sinkholes, fishers, fires, floods) that impact Arizona and the surrounding region. By increasing its national and global presence SRP can begin to take a critical approach to mitigating and planning for such risks.

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SRP does currently engage in significant ways in the local conversation that is happening between utilities from Arizona, California, and other neighboring states. (Stonefeld, 2015) As globalization continues, however, to flatten the globe and the playing field, it will become increasingly imperative for SRP to reach beyond these local conversations and engage in more challenging global conversations about the very nature of energy production and consumption.

Specifically, SRP can join the conversation by first utilizing its future Sustainability Dream Team to lead the engagement in the conversation among both internal and external stakeholders. This will require an organizational mindset that is focused beyond the short-term to focus on long-term return on investment. This will also require a complete organizational mindset built upon sustainability principles and strategic planning for potential critical threats to the organization’s existence.  Such efforts will position SRP as a utility that can not only drive innovation based on foremost national and international models, but allow SRP to use innovation and collaborations with leading entities to become an industry leader and provide models that other utilities companies will strive to adopt. This would in effect take Arizona to a new level as a desert and border state and could create ripple effects on national and global models. (Darnell, 2015).

The bottom line for SRP depends on providing safe, reliable, affordable, and cleaner energy for the state. Joining the global conversation on utility sustainability is SRP’s responsibility as a public utility providing essential water and electricity resources to millions of people in a volatile desert region of the world with shared international borders. Becoming more involved in the conversation will be a proactive measure reflecting the organization’s serious commitment to sustainability that proves greater financial, operational, stakeholder, and consumer gains, while positively impacting the larger global arena through SRP’s unique geographic, political, and economic position.

ConclusionWhile high quality significant research and analysis was used in the creation of this

report, the report is ultimately impacted by limited direct stakeholder and internal SRP employee input, time constraints of the study, narrow economic analysis, and the role of the consulting team. These limitations can be overcome through SRP’s continued investment in their current Environmental Management Systems (EMS) with an increased focus on creating a long-term strategic plan incorporating significant attention on all-inclusive stakeholder and employee integration, and in-depth economic analysis using big data. A globally-experienced EMS consulting organization with experience in leading-edge utility sustainability initiatives should be contracted in the various phases of the long-term strategic plan.

EcoPhoenix Consulting’s extensive research into SRP and its sustainability practices has underscored the significant improvements that SRP should undertake to move towards greater organizational sustainability. While SRP does boast a vast array of initiatives that aid in progress toward better environmental practices, the business activities as a whole do not touch upon the interdependent elements of sustainability’s triple bottom line: social equality, economic and environmental stewardship. There is a lack of a holistic vision with a heavy emphasis on environmental stewardship programs. For an integrated model, see figure 4 (Willard, 2008). SRP appears to be playing it safe with a “if it’s not broken, don’t fix it” type of approach which

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hinders its progress in terms of building brand reputation, acquiring new customers, generating more revenue, and becoming an industry leader in sustainability. The majority of their business activities reside in a research phase which may indicate a focus on market justifications and softer regulations that will most likely never occur.

SRP needs to realize the very real and present threats of water shortage issues, water-energy-food nexus challenges, looming regulatory actions, and impending private sector competition, while making institutional changes that break departmental silos and engage entrenched leadership. This may result in an outpouring of more intense stakeholder and consumer demands, however, it stands that corporations that partner with demanding stakeholders will “earn the respect and gain a competitive advantage that opens the floodgates to rising profits.” (Willard, 2008). These sustainability investments will also be costly, however a high upfront cost will ensure SRP’s continued success, and will ultimately result in higher long-term profits through increased stakeholder engagement, and cost reduction through greater efficiency (Willard, 2008). With great power comes great responsibility, and SRP sits in a position of great industry power, as its leadership coalition has the ability to influence important policy makers. SRP therefore has the responsibility to implement these ambitious sustainability goals, as it stands to drive policy in a way that ensures its continued regulatory compliance, increase its profitability, solidify its leadership status in the local market, and significantly influence positive change in national and global sustainability.

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Sierra Club. (2014). Some utilities are making it cheaper to drive electric vehicles. Retrieved  from https://content.sierraclub.org/evguide/blog/2014/11/some-utilities-are-making-it-cheaper-drive-electric-vehicles

Stonefeld, L. (18 September, 13 October, 16 October 2015). Salt River Project. Policy Analyst. Personal communication - interviews and email correspondence.

Tempe Chamber of Commerce. (2015). Tempe Pledge for a Sustainable Community. Retrieved from http://tempe.pledge.green/

United Nations Environment Programme. (2015). United Nations Environment Programme.

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Retrieved from http://www.unep.org/

United Nations Framework Convention on Climate Change. (2014). Kyoto Protocol. Retrieved  from http://unfccc.int/kyoto_protocol/items/2830.php

United Nations. (2015). Sustainable Development Goals. Retrieved from  http://www.un.org/sustainabledevelopment/sustainable-development-goals/

United States Department of Energy (2015). Public Utility Regulatory Policies Act of 1978.Retrieved from http://energy.gov/oe/services/electricity-policy-coordination-and-implementation/other-regulatory-efforts/public

United States Department of Energy. (2015). WINDExchange. Retrieved fromhttp://apps2.eere.energy.gov/wind/windexchange/wind_installed_capacity.asp

Vachon, S., Klassen, R., Johnson, P. (2001). Customers as green suppliers: Managing the complexity of the reverse supply chain. Greener Manufacturing and Operations: From Design to Delivery to Takeback. Sheffield: Greenleaf Publishing Limited, 136-149.

Walley, N. & Whitehead, B. (1994).  It’s not easy being green. Harvard Business Review, 72, 2-7.  

Wellinghoff, J., Spitzer, M., et al. (2010). United States Federal Regulatory Commission revised policy statement on penalty guidelines. 132 FERC 61, 216. Retrieved from https://www.ferc.gov/whats-new/comm-meet/2010/091610/M-1.pdf

Willard R. 2008. Objection-handling clinic on inhibitors to the next wave. Russo R. (ed.) Environmental Management: Readings and Cases. Thousand Oakes, CA: Sage.

Worland, J. (2015). Time Magazine. Climate Change Could Drive More Than 100 Million Into Poverty by 2030. Retrieved from  http://time.com/4104289/climate-change-poverty-world-bank/?xid=emailshare

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Appendices

Appendix IRelevant Environmental Regulations

InternationalThe Kyoto Protocol is an international treaty, which extends the 1992 United Nations

Framework Convention on Climate Change (UNFCCC) that commits State Parties to reduce greenhouse gases emissions, based on the premise that global warming exists and man-made CO2 emissions have caused it (United Nations - Kyoto, 2015).

The North American Agreement on Environmental Cooperation (NAAEC) is an environmental agreement established in 1994 between the United States of America, Canada and Mexico as a side-treaty of the North American Free Trade Agreement that consists of a declaration of principles and objectives concerning conservation and the protection of the environment as well as concrete measures to further cooperation on these matters between the three countries. The Commission for Environmental Cooperation (CEC) was set up as part of the agreement. (Commission for Environmental Cooperation, 2014)

The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal, usually known as the Basel Convention, is an international treaty established in 1992 that was designed to reduce the movements of hazardous waste between nations, and specifically to prevent transfer of hazardous waste from developed to less developed countries (LDCs). It does not, however, address the movement of radioactive waste. The Convention is also intended to minimize the amount and toxicity of wastes generated, to ensure their environmentally sound management as closely as possible to the source of generation, and to assist LDCs in environmentally sound management of the hazardous and other wastes they generate. (Basel Convention, 2011)

The Environment and Security Initiative (ENVSEC) is a partnership of six international organizations – the Organization for Security and Co-operation in Europe (OSCE) , Regional Environment Centre for Central and Eastern Europe (REC), United Nations Development Programme (UNDP), United Nations Economic Commission for Europe (UNECE) , United Nations Environment Programme (UNEP), and the North Atlantic Treaty Organization (NATO) as an associated partner – with specialized, but complementary mandates and expertise, that provides an integrated response to environment and security challenges. Established in 2003, the Initiative assists governments and communities to identify common solutions and develop joint

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projects for achieving them, and facilitates dialogue and collaboration among policy makers, environmental experts, and the civil society across the borders, including national experts, ministries, and national agencies, as well as NGOs and research institutes. (Environment and Security Initiative, 2015)

The United Nations Environment Programme (UNEP) is the leading and oldest (established 1972) global environmental authority that sets the global environmental agenda, promotes the coherent implementation of the environmental dimension of sustainable development within the United Nations system and serves as an authoritative advocate for the global environment (UN Environment Programme, 2015).

The Sustainable Development Goals (SDGs), established 2015, are an intergovernmental agreement consisting of a set of 17 goals with 169 targets that are the successor of the post-2015 global development agenda (e.g. Millennium Development Goals). They provide the world with a framework for sustainable global development and include aspirations such as ending poverty and hunger, improving health and education, making cities more sustainable, combating climate change, and protecting oceans and forests. (UN Sustainable Development Goals, 2015)

Energiewende (German for energy transition) is the transition established in 2010 by Germany to an energy portfolio dominated by renewable energy, energy efficiency and sustainable development. The final goal is the abolition of coal and other non-renewable energy sources while stimulating the economy, which has become an international exemplar for green economy models. (German Energiewende, 2015)

The European Climate Change Programme (ECCP) was established in 2000 by the European Union's European Commission with the purpose of avoiding dangerous climate change. The European Union has long been committed to international efforts to tackle climate change and felt the duty to set an example through robust policy-making at home. At European level a comprehensive package of policy measures to reduce greenhouse gas emissions has been initiated through the European Climate Change Programme (ECCP). Each of the EU Member States has also put in place its own domestic actions that build on the ECCP measures or complement them. (European Commission, 2015)

The European Union (EU) Energy Efficiency Directive, established in 2012, creates a set of binding measures to help the EU reach its 20% energy efficiency target by 2020. Under the Directive, all EU countries are required to use energy more efficiently at all stages of the energy chain from its production to its final consumption and to transpose the provisions into their national laws. (European Union - Energy, 2015)

The European Union Water Framework Directive is a 2000 European Union directive which commits European Union member states to achieve good qualitative and quantitative status of all water bodies (including marine waters up to one nautical mile from shore) by 2015 (European Union - Water, 2015).

National - FederalThe Clean Water Act (amended 2005) is the primary federal law in the United States

governing water pollution. It’s the most influential modern environmental law and looks to restore and maintain the integrity of the country’s water. It provides financial assistance to publicly owned waste treatment works, funds construction of sewage treatment plants under

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grant programs, and above all recognizes the need to address problems posed by nonpoint source pollution. (Environmental Protection Agency- Summary, 2015)

The Safe Drinking Water Act (1974) is a principal federal law in the United States intended to ensure safe drinking water for the public. It set the standards on level of contaminants allowed in public drinking water, declared that all community water systems prepare and distribute annual reports about their water, and requires all water system operators to be certified by the Environmental Protection Agency to ensure systems operate safely. (Environmental Protection Agency- Safe, 2015)

The Public Utilities Regulatory Policy Act (1978) is part of the National Energy Act and was developed to promote energy conservation and promote greater use of domestic energy and renewable energy. It set promotional rate structures for water and energy billing, allowed for easier construction of hydroelectric plants, and mandated that energy companies share energy sources in an effort to reduce waste. (United States Department of Energy, 2015)

The Energy Policy Act (2005) attempts to combat growing energy problems by requiring all utilities to offer metering information, as well as providing subsidies for the implementation of innovative technologies, such as wind. (Environmental Protection Agency- Summary Energy, 2015)

The Energy Independence and Security Act (2007) is an Act of Congress concerning energy policy of the United States. The purpose of the act is to “move the United States toward greater energy independence and security, to increase production of clean renewable fuels, to protect consumers, to increase the efficiency of products, buildings, and vehicles, to promote research on and deploy greenhouse gas capture and storage options, and to improve the energy performance of the Federal Government, and for other purposes.” (Environmental Protection Agency - Energy Independence, 2015)

The Clean Air Act (2014) is currently the most critically relevant regulation as it mandates existing fossil fuel fired power plants to reduce CO2 emissions by 52% in Arizona, and achieve a 90% reduction in emissions by the year 2030. The federal law states that each state must develop their own reduction plan by 2016, on which SRP is currently collaborating with local policymakers. (Salt River Project - Response, 2015)  

The North American Electric Reliability Corporation (NERC) is a nonprofit corporation established in 2006 as a successor to the North American Electric Reliability Council of 1968. Its primary purpose is to promote reliability and adequacy of bulk power transmission in the electric utility systems of North America. Under NERC, reliability standards are put in place to regulate bulk power transmission in the electric utility systems of North America. Reliability standards define the reliability requirements for planning and operating the North American bulk power system and are developed using a results-based approach that focuses on performance, risk management, and entity capabilities (North American Electric Reliability Corporation, 2015). NERC’s standards are mandatory and enforceable throughout the United States and any entities found to be in violation of a standard can be subject to high fines upwards of $1 million per day per violation (Wellinghoff, et al.,2010). Reliability standards enacted under NERC encompass items such as resource and demand balancing, facility design and maintenance, nuclear, emergency preparedness, and communications. NERC works concurrently with FERC, which is the United States federal agency that monitors all interstate electricity sales, wholesale electric

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rates, hydroelectric licensing, natural gas pricing, and oil pipeline rates. (Reliability Standards, 2015)

The Federal Energy Regulatory Commission (FERC) is the United States federal agency with jurisdiction over interstate electricity sales, wholesale electric rates, hydroelectric licensing, natural gas pricing, and oil pipeline rates. (Federal Energy Regulatory Commission, 2015). It was established in response to the 1973 oil crisis in which Congress passed the Department of Energy Organization Act (1977) and named the Federal Energy Regulatory Commission the sole independent regulatory body (42 U.S.C. § 7134). The commission’s top priorities since 2014 have encompassed goals such as integration of renewables, natural gas and electric coordination, smart grids, and more. (Federal Energy Regulatory Commission, 2014)

StateThe Arizona Corporation Commission (ACC) is the state government entity that

regulates public utility companies. In 2006, the ACC established the Renewable Energy Standard and Tariff, which requires that regulated utilities must generate 15 percent of their energy from renewable resources by 2025 (Arizona Corporation Commission, 2006). Each year, utility companies in the state of Arizona are required to file annual implementation plans describing the ways in which they will abide by the REST rules. (Arizona Corporation Commission, 2006)

Appendix IISustainable Values Framework Items

Pollution PreventionCompact Fluorescent Lightbulb Project SRP has a partnership with local retailers to encourage customers to purchase Compact Fluorescent Lights (CFL). As of 2015, more than two million customers have purchased bulbs. This represents an effort to reduce pollution and waste in that CFLs have a longer investment period than incandescent bulbs (Salt River Project- Energy Efficiency, 2015).

Green Fleet Program SRP’s internal green fleet is one way in which SRP strives to reduce its carbon emissions. Its commitment includes adoption of electric, hybrid and alternative fuel vehicles. Alternative fuel vehicles include biodiesel fuel and E85 ethanol blend. Coupled with this, SRP follows high preventative maintenance standards and is initiating a pilot program to understand the effects of biodegradable synthetic oil. SRP currently leases 15 electric vehicles, with plans to add more. SRP also promotes its Share the Ride program for employees to carpool to and from work and between buildings as needed. (Stonefeld, 2015)

Employee EngagementEmployee engagement at SRP includes a variety of initiatives that help reduce its environmental impact. Employees are able to participate in bike and rideshare programs, can receive free metrocards for using public transportation, and get incentives for participating in internal

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recycling campaigns. In addition, employees receive optional web-based trainings to help change employee behaviors towards recycling. (Stonefeld, 2015)

Effluent Water UseSRP, and the city of Phoenix, represent one of the only cities in the United States to utilize 100 percent of its effluent water; water being a large waste product of energy production. SRP cleans its wastewater to non-potable standards and donates it to Native American communities in the Phoenix metropolitan area for use in their agricultural processes. (Salt River Project - Water, 2015)

Employee Education ProgramsEmployees are a crucial part of SRP’s intellectual capacity. Engagement for these stakeholders occur with individual company campaigns. Employees are educated on issues that are most relevant to the company’s culture of environmental stewardship. For example by presenting local food vendors to employees, they are introduced with knowledge into the sustainable food industry. (Stonefeld, 2015)

Investment Recovery ProgramSRP breaks down parts of its old, large equipment, such as transformers and generating stations, for recycling. In addition, SRP breaks its old technology down to its consumable materials and sells such materials as copper, back to the production process, and donates un-sellable materials to charity. SRP’s investment recovery program works to recycle that old equipment through online auctions of fleet equipment and machines, while its Ebay store sells old, usable technology, such as laptops, office equipment, and more. For example, they recently donated a large John Deere tractor to a local farmer. (Salt River Project - Investment Recovery, 2015)

City of Tempe Sustainability PledgeSRP is currently a partner with the City of Tempe in their city sustainability pledge program, which can be taken by citizens and businesses as a pledge to make sustainable efforts in energy, water, travel, waste, and purchasing. Actions taken by those companies will be recorded and recognized at year’s end at the Burnaby Board of Trade event. The pledge itself is a model adapted from Canada, and therefore represents an international partnership. (Tempe Chamber of Commerce, 2015)

Gatekeeper TechnologyGatekeeper technology is a series of 20 remote-operated water delivery gates that reduce carbon footprint by reducing the number of trips made to each water delivery gate and are able to more efficiently control water flow by providing digital water flow and control data to SRP control rooms. (Salt River Project - Water, 2015)

Green Facilities InvestmentsSRP is currently upgrading several of their buildings to achieve LEED certifications. They have also updated their East Valley Service Center to be more efficient. (Salt River Project - Electric, 2015)

Product Stewardship

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Safety ConnectSafety Connect is a program that educates consumers on water safety and responsible electricity use. SRP also offers over 20 energy-efficiency educational programs for its residential and business customers. (Salt River Project - Conservation, 2015)

Energy ScorecardThe SRP Energy Scorecard provides customers with personalized energy consumption data, and is sent to customers 6 times a year. It compares customer home energy use with other similarly sized and operated homes in order for consumers to understand their own energy demographic. (Salt River Project - Energy, 2015)

Cool Cash Rebate ProgramThe SRP Cool Cash™ Rebate Program gives rebates to customers who replace their old air conditioning unit with a new, high efficiency system that meets minimum efficiency ratings. The goal of this program is to incentivize customers to replace old materials with more energy efficient technologies. (Salt River Project - Cool Cash, 2015)

Standard Business Solutions and Custom Business Solutions ProgramThese business initiatives engage the external stakeholders and helps SRP obtain the feedback of these stakeholders so that it can run efficient and meaningful operations. These initiatives comes in the form of rebates for companies who replace common equipment with more energy efficient equipment. (Salt River Project - Conservation, 2015)

Granite Reef Underground Storage ProjectSRP has been operating the Granite Reef Underground Storage Project (GRUSP) outside of Mesa in the Salt River Bed since 1992. This facility currently stores one-million acre feet of water underground in order to ensure that Arizona continues to have a clean, reliable water source and does not experience the debilitating drought conditions currently faced by its neighbor, California. (Salt River Project - Water, 2015)

Northern Arizona Forest FundA partnership between SRP and the National Forest Foundation that supports high priority restoration projects on National Forests in the Salt and Verde River watersheds, including prescribed burning, wetland restoration, erosion management, and habitat restoration. (Salt River Project- Conservation, 2015)

Community Water Conservation programsCommunity-based conservation presentations, including the Annual Water Conservation Expo, which promotes water conservation products and services, and the Together We Conserve campaign, which helps to educate consumers about how to reduce water at home. (Salt River Project - Newsroom, 2015)

Trees for ChangeTo help restore Arizona's forests, SRP customers can donate $3 on their bills, which SRP matches and donates 100% to plant ponderosa pines in Arizona forests. (Salt River Project - Conservation, 2015)

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EarthWise Energy ProgramA voluntary program that SRP customers can join for as little as $3 a month, with 100% of the money going to build solar projects for nonprofit organizations in the Valley. (Salt River Project - Environment, 2015)

Solar Water Heating ProgramCustomers can receive incentives from SRP for installing solar water heaters in their homes. (Salt River Project - Environment, 2015)

Solar Electric ProgramIncentives provided to customers for installing solar electric systems on their homes. (Salt River Project- Environment, 2015)

Supply Chain Surveys for Green PurchasingSRP distributes surveys to supply chain partners and purchasing companies to determine their commitment to sustainability. Currently, the surveys are not used to determine which companies SRP will continue to partner with, only to begin to determine which companies have commitment to sustainability. (Stonefeld, 2015)

Partnership with CalEnergySRP recently added to their partnership with CalEnergy to purchase an additional 37 MW of geothermal energy from the California Plant, which would offset about 800 million pounds of carbon dioxide each year. SRP plans to increase their purchase every year to cumulate in a purchase of 80 MW by the year 2020. (Salt River Project- Environment, 2015)

Sustainability VisionRockhouse Riparian Demonstration ProjectThe Rockhouse Riparian Demonstration Project is a conservation project conducted by SRP. The purpose of this project is to set aside and restore land for the breeding purposes of two endangered species, the southwestern willow flycatcher and the western yellow-billed cuckoo. This restoration included the planting of native riparian tree and shrub plants known as breeding habitats for these species and the installation of a flood irrigation system. (Salt River Project- Conservation, 2015)

Drive Electric(™) SRP Drive Electric™ aims to educate customers on the benefit of electric vehicle (EV) use. Its purpose is to develop a future infrastructure that will prepare the community for adoption of electric vehicles. Currently SRP has two charging stations in their buildings available for public use. It also strives to engage current EV users through focus groups and surveys to understand how to better serve their future needs and understand EV’s impacts on the grid.  (Salt River Project - Conservation, 2015)

Employee Volunteer ProjectsVolunteerism drives the culture at SRP. In 2014 alone, SRP offered 250 volunteer opportunities and contributed $90,250 towards charity.  (Salt River Project - Conservation, 2015)

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Support of Audubon, Botanical Gardens, other environmental programsSRP financially supports environmental programs such as Audubon Arizona, Liberty Wildlife, Desert Botanical Gardens, and the Phoenix Zoo by promoting education, conservation, and rehabilitation in areas such as water and wildlife management, horticulture, and environmental stewardship.  (Salt River Project - Conservation, 2015)

Community Solar ProgramSRP’s Community Solar Program allows SRP customers to purchase their energy from solar cells at facilities operated by SRP; in effect, customers can lease solar panels for their energy production, allowing them to avoid costs associated with installing solar panels on their home, and consume solar energy while still adhering to rules set by their HOA or apartment complex. The program is currently down for restructuring, but will be up again soon, hopefully to increased participation; there are currently 1,600 customers registered. (Salt River Project - Energy, 2015)

Purchase of Energy from Sandstone Solar FacilitySRP has plans to purchase all of the solar energy from the new Sandstone Solar facility in Florence, AZ, which will be operational in 2015. This partnership represents a more efficient method of producing and distributing solar energy in that it will reduce total solar costs for SRP, allowing them to invest in more solar technology, will reduce total resource usage in that SRP will not be pressured to construct their own solar facility, and represents collaboration between producers and distributors of energy. Similarly, in the past year, SRP purchased and is now operating 19-MW solar facility in Queen Creek. They are also purchasing geothermal energy from Utah and biomass from Snowflake. (Salt River Project - Energy, 2015)

Research Partnerships with ASU, U of A, and other graduate-level research facilitiesSRP sponsored and assisted with 25 graduate-level research projects in the academic year 2014/15, including algae remediation projects at the Coronado Generating Station. (Salt River Project - Conservation, 2015)

Solar Summit for EducatorsSRP offers a two-day workshop for educators to learn about solar energy and technologies. Teachers learn how to use output data streaming from solar arrays in the community to build real-world, community-based learning experiences in their classrooms. (Salt River Project - Education, 2015

Energy Bike ProgramSRP partners with the Arizona Environmental Education Exchange to design and deliver more than 250 solar energy presentations annually to local sixth-grade classes. Students learn about energy transformations and generation, ride the Energy Bike to power different types of light bulbs, and study solar power and energy efficiency. (Salt River Project - Education, 2015)

Classroom Connection GrantsSRP provides funding to classroom teachers for innovative educational programs that promote students’ achievement in state-mandated competencies. SRP offers a total of $200,000 in funding

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for three distinct grant programs: Learning Grants by SRP, which is geared toward math and science programs; Social Studies Grants by SRP; and Powering Our Future Mini-Grants by SRP. (Salt River Project - Education, 2015)

Habitat Conservation programs SRP partners with the U.S. Fish and Wildlife Department, Arizona Game and Fish Department, and other organizations in the Arizona Bald Eagle Nest Watch Program, which works to preserve bald eagle habitats and works to reestablish a California Condor population in Northern Arizona, raptor populations, and the Southwest Willow Flycatcher.  (Salt River Project - Conservation, 2015)

Ecological Restoration InstituteA project initiated by SRP that represents a collaboration between SRP, the National Forest Foundation, the U.S. Forest Service, the Ecological Restoration Institute at Northern Arizona University, the Nature Conservancy, the state Forestry Department and private industry that seeks to find solutions to the issue of forest restoration and management. (Salt River Project - Water, 2015)

InnovationIce Bear TechnologyA technology that works in tandem with current commercial AC systems to store energy in the form of ice at night, when electricity is less expensive and in less demand, and uses that stored energy during the daytime as temperatures rise, and peak AC operating hours occur. When aggregated and deployed at scale, a typical utility deployment will shift the operation of thousands of commercial AC condensing units from on-peak periods to off-peak periods, reducing electric system demand, improving electric system load factor, reducing electric system costs, and improving overall electric system efficiency and power quality. SRP is exploring implementation of this technology in businesses. (Salt River Project - Energy, 2015)

Low Concentrated Photovoltaic Cells PartnershipSRP is currently developing a solar technology partnership with ASU with the intention of developing Low Concentrated Photovoltaic Cells, which are 6% more efficient than regular solar cells and can therefore produce more energy with less space, cost, and resources. When fully developed, these cells have the potential to increase demand and efficiency rates across the state for solar panels. (Salt River Project - Energy, 2015)

Dry Lake Wind Power ProjectBuilt in 2009, it is Arizona’s first large-scale commercial-scale wind farm. It is a 127 MW project that has the capacity to power more than 20,000 homes and operates on a combination of BLM land, private, and state land. It is operated by Idberola Renewables, a company out of Oregon, which sells the power it generates to SRP for distribution. (Salt River Project - Energy, 2015)

FlowtographySRP has innovated Flowtography, a method to measure baseline watershed conditions. This technology uses time-lapse photography and provides streamflow technology and other

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important hydrologic conditions. Information is captured through cellular network and monitored via web by SRP scientists. It allows for scientists to be on-site in the watershed from any internet site and is a simple and efficient way of managing watersheds. This technology is implemented in at least 7 sites and more installation plans are forthcoming. This is truly an innovative technology for SRP, as they were one of the first companies to implement and institutionalize the activity.  (Salt River Project - Conservation, 2015)

Thermostat and Large-Scale Battery Storage StudiesTwo forms of innovation technology. The thermostat study is conducted in partnership with the University of Arizona. It will develop a home energy unit that will communicate directly with the utility box that SRP installs on the home. It will assess whether these devices in connection with time-of-day price plans can produce comfortable living temperature while reducing monthly energy use, decreasing peak demand use, and making energy more affordable. The large-scale battery storage study is a study done by SRP and ASU that will examine the effectiveness of using battery storage to account for periods of discontinuous service that may occur with the use of renewable resource use such as solar and wind. This is an emerging activity, which points to an area for institutionalization.  Scientists predict that the success of this device is uncertain since today’s modern thermostat are complicated and cumbersome for consumer use, leading to errors and energy waste. (ACEEE, 2010;  Salt River Project - Conservation, 2015)

Algae Research StudyAnother example of a research study done in partnership with universities is the algae study conducted at the Coronado Generating Station. In this study plant water sources were reviewed for their ability to reduce carbon dioxide emissions using naturally occurring algae species.  (Salt River Project - Conservation, 2015)

Appendix III

Figure 3 Installed Wind Power Capacity by State as of 2015

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(U.S. Dept of Energy, 2015)

Figure 4

Traditional and Sustainable Business Models

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(Willard, 2008)

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For more information regarding this report, contact Arizona State University Professor:

Nicole Darnall, ndarnall@asu.edu