Tuesday, 05/20/2008 Print Version |

Governor Showcases California Businesses' Environmental Innovations

DAVID YARNOLD: Thank you. Good morning and welcome to the San Francisco office of Environmental Defense Fund. I'm David Yarnold, executive director of EDF and president of the EDAF, Action Fund. I'm a Californian, I spent 30 years at the San Jose Mercury News, and I'm thrilled to be back in my home state for this exciting event.

We're happy to be here today to celebrate innovation, the kind of innovation that will, by small steps and by giant leaps, help us save the planet. We want to hold up for all to see some of the creative ideas in our new report entitled "Making Green the New Business as Usual." To be sure, visionary transformational ideas lift our sights and our hearts. But it's real-world progress that comes through models that can be held up for others to replicate, and by standing on the shoulders of early successes -- successes that can give us confidence in a new future -- that really gives us courage to change.

The new business as usual looks less like a straight line and more like a series of loops, where wastes are turned back into energy or raw materials, where suppliers and clients work together to create efficiencies, and where corporate business plans see environmental issues not as challenges to be overcome, but as opportunities to be harvested.

For almost 20 years EDF has been working in partnership with business to help create the new business as usual. We've worked with corporate giants like FedEx and McDonald's and Wal-Mart to unleash innovations that reduce environmental impacts throughout the supply chain. Our newest partnership with KKR breaks new ground in the private equity field. Our unique blend of science, economics and advocacy challenges companies to create efficiencies, new markets and competitive advantage. Together we're greening the global supply chain, transforming industries and reinforcing that what's good for the environment is good for business.

I can't tell you how many times people ask, why do major companies come to an NGO to figure out this stuff? Well, the answer is they have lots of core competencies, but often finding the new green at the bottom line isn't one of them. Similarly, you'd be awfully surprised to know which multi-national companies have approached us just in the last year to say we want to go green but we don't know how to do it.

This report is one way that we're hoping to help answer those questions. Over the last six months we cast a wide net looking for innovations that were good for business, good for the environment, and had the potential to be implemented right now by a broad range of companies. While we tried to be as thorough and rigorous as possible, and consulted as many experts along the way, we know that there will be interesting innovations that we missed and are worth noting. I hope that readers of this report will let us know about the innovative things that they're doing and we've set up a website, www.edf.org/InnovationsReview, to help collect and share that information.

Over the next half-hour we're going to hear some truly cool ideas that have come out of the California companies that are here with us today. Before I introduce the Governor let me welcome the CEOs who are with us:

Charles Kavitsky, Chairman of the Board, Fireman's Fund Insurance Company,
Casey Sheahan, President and CEO of Patagonia,
Ken Grossman, founder and owner of Sierra Nevada Brewing,
Jonathan Schwartz, CEO and President of Sun Microsystems,
And Richard Swanson, Founder and CTO of SunPower.

So to start, I'm pleased to be able to introduce a true innovator, Governor Arnold Schwarzenegger. The Governor has shown unparalleled leadership in promoting his sustainability agenda and he has fostered a business climate in this state that encourages the private sector in California to lead the country by example, something California has a proud heritage of doing, and one of the main reasons why we've expanded our operation here.

We at EDF have worked with him on many critical statewide campaigns including AB 32, the Low-Carbon Fuel Standard, the California Clean Cars Bill among them. All of these initiatives reflect the Governor's innovative and collaborative approach to policy making, which is changing the rules of the game and creating new opportunities to grow the economy while protecting the planet.

Ladies and gentlemen, please welcome Governor Arnold Schwarzenegger. (Applause)

GOVERNOR SCHWARZENEGGER: Man, am I glad he found that last page! (Laughter) That was the page that had my name on it -- and you could have forgotten that. (Laughter) I've scrambled many times with my pages, especially when it's outdoors and the wind is blowing, and all of a sudden your pages are gone.

But anyway, it's nice to be here today, David, and thank you very much for the nice introduction and for the great work that you're doing. And I also want to thank, of course, Fred Krupp, who has been a great leader for many, many years of your organization and has been actually there when we did the whole cap and trade for acid rain. We took that principle and used it also for AB 32. So it's always great innovation like that that helps us so much to move the agenda forward. And then, of course, one of your board members, David Crane, or who used to be a board member, who has been very helpful to my administration in helping us coordinate between environmental protection and economic protection, so I want to thank him also for the great work that he is doing. And then Bob Grady, who has been very helpful when I ran in 2003, helped us with policy and so he was very instrumental, we want to thank him also.

And of course you know the Environmental Defense Fund has done great, great work for the last four decades and I think raising the bar here today will benefit everyone; as a matter of fact, the whole world. They recognized that business as usual was changing, so they created a new way to assess environmental innovation.

And it is fitting that they have come out here to make their announcement right here in California, even though their headquarters is in New York, because out of the 31 companies showcased by the Environmental Defense Fund for this report 11 are based right here in California.

So I want to first of all say congratulations to those 11 companies for showing such great leadership. And I love when California is number one, and that shows again that our companies are really number one. And they show to the rest of the world that it can be done, that you can run a clean business and, you know, think about the environment all the time. I think that a lot of those companies in California, and the ones that we're seeing out here today, they want to be part of the solution rather than part of the problem.

The companies' accomplishments include a headquarters fully-powered by renewable energy, or shuttle buses that transport hundreds of employees to work every day, or communication systems that reduce travel and eliminate commutes, which saves tens of millions of dollars and cuts carbon emissions. So these are just a few of the ideas that we have seen and these are, of course, contributing so much to help us with cleaning our environment and fighting global warming.

Now, even though they all have different things that they have accomplished and different innovations, one thing they all have in common, all of those companies, and that is great leadership. This is exactly what we need to tackle the enormous challenges of climate change while protecting our economic growth.

And I think we have seen it just again in what our state also has done. You know, we're closing I-5 and there will be huge traffic jams because of that. So I signed an executive order to have, once a week, our workers to telework, to stay at home, no driving, working off their computer. And I think that we will get everything else done by doing that except it will reduce our greenhouse gases and there will be less driving. And so these are the kind of things that we have to do; we always have to think ahead.

But California has been known to be in the forefront of fostering innovation and this is why we started building the Hydrogen Highway and we passed the Million Solar Roof Initiative and the Green Building Initiative and then, of course, our landmark greenhouse gas emission reductions under AB 32 and also the world's first Low-Carbon Fuel Standard.

Now, do we think in California we're going to wipe out global warming because of that? No, of course not. But what we are doing is we are contributing to fight global warming and we are inspiring other states and we are inspiring this country, especially Washington, and we are inspiring the rest of the world to participate and do the same thing.

And great things are happening all over America. Like, for instance, more than 700 U.S. mayors have joined now together in a Climate Protection Agreement, 32 of the largest, most influential American companies and environmental groups have formed an alliance to call for greenhouse gas reductions, and oil companies are pouring billions of dollars into renewable energy.

And last month at Yale University I joined 17 other states to sign a declaration calling on the next president and the next Congress to really make this the top priority in the next administration. So the environmental movement that is sweeping the nation from Main Street to Wall Street eventually will make its way to Pennsylvania Avenue, I guarantee you that. And I'm very happy that no matter who is going to be elected of the three candidates, all three of them are very good with the environment.

So our work is paying off and I'm confident that our momentum will grow and get stronger with every passing day, because we are very committed and because we want to keep our Golden State exactly that; a Golden State.

So thank you very much. And now you come back up again, David, and continue on with the program. Thank you very much. (Applause)

DAVID YARNOLD: And thank you for helping me cover up the lost page. The last time he introduced me he made fun of my name, so . . .

Before I introduce our CEOs and bring them up I'd like to start by recognizing David Murphy from Hewlett-Packard and my good friend Laura Ipsen, Global VP for Governmental Affairs from Cisco Systems. Both are here because of their companies visionary video-teleconferencing systems, which have tremendous potential to decrease business travel, something a lot of us are truly in favor of.

Also, I'd like to recognize Bill Weihl, energy czar at Google.com. While Google is doing many revolutionary things environmentally, such as their goal to make renewable energy cheaper than coal, their commitment to being carbon-neutral and their plug-in hybrid car project, we're recognizing them here today for their employee shuttle. That's something that Yahoo, which is here as well, is also doing with its Green Guzzler shuttle. It's an idea that many companies can replicate.

And Bank of America, the first financial institution to make greenhouse gas reduction commitments, along with other big initiatives such as investing billions in clean technologies and their Green Mortgage Program is also here.

Two other California companies doing truly groundbreaking things with their buildings:

Integrated Design Associates, whose founder, David Kaneda, is here, has created what experts believe is the first net-zero energy office building by redesigning a 1960's era bank with a variety of efficiency-maximizing technologies such as solar and geothermal.

Affordable Internet Service Online, whose co-owner and CTO Phil Nail, is also here, has created the first 100 percent solar-powered date center using tools from green building design and all of the latest technologies. These are what we call game changers.

So I'm going to get to the CEOs, but I also want to offer a quick thanks to EDF special friends and its trustees. Thanks to Michael Brown, one of the advisory panel members, for our Innovations Report. We also have Trustee Sally Bingham, Ann Dorn and George Montgomery here today. And in addition to our longtime corporate partnership supporters Bill Bose and Richard Goldman. Thank you so much for being our partners now and over the years.

So let me introduce our first CTO. They'll talk about their exciting innovations. First, Charles Kavitsky, chairman of the board, Fireman's Fund Insurance Company. (Applause)

CHARLES KAVITSKY: Well, thank you, David Yarnold. We're very, very honored to be here today. I'd also like to recognize Governor Schwarzenegger, who has provided clearly national and worldwide leadership in the fight against global warming.

Fireman's Fund is honored to be here. Frankly, we were an innovator in the insurance industry as it relates to this. It was over two years ago that we confounded what were skeptics. I think there was one part of the skeptics that was the insurance industry doing something innovative, so that was a surprise right there. But the other part of it was the element of actually recognizing the impact of green and what we could do. And today we actually know that green insurance makes perfect sense; it's a good thing for our customers, it's a good thing for our environment and frankly, it's a good thing relative to the bottom line of the company.

To date we have limited our green insurance products to business clients, insuring their buildings, manufacturing facilities and, in fact, their commercial insurance. We were the first to do that. I'm very, very proud to announce the fact that as of June 1st we will have a plan that will be out there that will actually allow for homeowners to be able to reap the benefits relative to what happens when you have a home that's green, or a home that's not green, and in the event of damage we will rebuild it to green specifications.

Now, that's something that we're very, very pleased with. We're starting to now see that other companies will copy where we're going. In fact, one of the greatest ways of knowing that they're copying is, we just had a report of someone that swears that they did not copy, but hey actually have the same misspelling on the actual petition that they've had to get their policy approved. So it was kind of fun to make sure the misspelling we had in there was copied; it was something we plant. (Laughter)

The element of green insurance is essentially enabling businesses and homeowners to upgrade their homes and buildings, do all the green features. This relates to from the heating systems to the kind of windows that are going to be used to the very nature of how clean the air is going to be. These are all things that mean something. It also goes all the way to the kind of fleets that are going to be with various businesses, and recognizing what happens with the hybrid vehicles and how that's different. In essence, we have a discount for those that have already been like that with the ability of rebuilding them. We also have the fact that we will rebuild them.

But one of the most significant decisions that we made just recently happened with the southern California fires. The fires that we just recently had was an opportunity for us, even though the policy that we had in force did not include it as a benefit, we actually made the decision as a company to rebuild those homes lost or severely damaged in that fire in southern California to green specifications. So we did that on our own as kind of a prelude to the fact that now we actually, effective June, will have a policy that includes it as a benefit. So these are some of the measures that really say that we do believe in it, we think it's the right thing to do.

One thing that I'd like to mention before I do close is, I do want to take the time to introduce the new CEO of Fireman's Fund. He literally just took this role in the last month and he replaces me. I was CEO for four years, now I'm Chairman. And Mike LaRocco, if you could please raise your hand? He is now going to be taking on that same mantle with the same dedication and the same belief going forward that there is so much more that we all can do.

So I want to thank again EDF for the excellent work, for highlighting these good business practices in your Innovations report. Your approach is right on, because no matter how good an idea is, if in the long run it's not sustainable economically it's not going to work. In this case we've got one that does. Thank you. (Applause)

DAVID YARNOLD: Thank you, Chuck. Those are truly remarkable innovations. Let me introduce Casey Sheahan, president and CEO of Patagonia. (Applause)

CASEY SHEAHAN: Well, I have a very small piece of paper, and if I lose this it's going to be pretty tough. Thank you for having me today. I'm quite honored to be here at the Innovations Review. Thank you to the Governor and David -- this is a huge honor for a small little company like Patagonia. But we have a long history of environmental leadership and we're very proud to be in the forefront of a revolution in business that we see that's taking place today, in which companies are learning that being environmentally responsible can also lead to stronger profits.

And there are a number of examples in the history of our company with our founder, Yvon Chouinard, where he made a real leap of faith. He took a real risk on a wild fabric, or changing from building pitons that left less damage in the rock, to hexcentrics in bolts. He made a clean sweep, told the customer that he was doing something different, and he ended up making money as a result of that action.

So I could cite countless examples. Our mission is to make the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis. We're well known for our pioneering effort to create a whole new global supply change for organic cotton and for recycling hundreds of millions of plastic soda bottles into our fleece jackets.

More recently, we announced our intention to produce a 100-percent recycled or recyclable apparel line; our entire apparel line, by the year 2010. This initiative, called the Common Threads Recycling Program, takes used and worn out Capilen, polyester, and Polartec fleece garments -- the garments that college kids and the rest of our outdoors people have been wearing to the mountains and to school for years -- you'll be able to take those back to recycling centers that we have at our stores or at our distribution center in Reno, or with partner retail shops around the country, and these garments can be recycled into new polyester fiber. So essentially the garments that we wear on our backs today are the garments our children will wear on their backs tomorrow.

Our garment-recycling program has now been expanded to include organic cotton and nylon 6, so we're getting closer to our goal. It's going to get harder and harder as we get down the road to the 100 percent, but we're completely dedicated as a company to doing that.

As a long-time environmental supporter, Patagonia donates 1 percent of our sales every year to grassroots environmental causes. Now, when you hear the word 'grassroots environmentalists' you're thinking maybe people are burning things or doing bad stuff. I'm talking about grandmothers, soccer moms that are sitting out in front of bulldozers that are trying to prevent extractive industries from doing things they shouldn't be doing, from stopping ridgetop coalmining -- basically, we're trying to get the government to enforce its own laws, and these women, these people that we support, are doing that.

We're big supporters of renewable energy, and have invested substantial amounts of capital to off set our energy usage with a photovoltaic solar installation at our home office in Ventura, California. It's huge. We did the same thing in our new distribution center in Reno. We have very innovative nighttime airflow mechanisms, solar tracking centers. We use a lot of low-impact CFLs. We got Gold Lead certification for this distribution center for its energy-efficiency measures. The building only cost us 47 percent more to build it, but we're getting a 40 to 50 percent energy efficiency benefit from having built it in a very green fashion, so we're very proud of that, and there are many other measures that we're taking as well.

So as stated in our mission, we're proud of our efforts to help inspire and implement solutions to the environmental crisis and we thank you all for having us here today. (Applause)

DAVID YARNOLD: Thank you, Casey. It's a great story. It's always nice to know that you're involved in enthusiastically and passionately supporting an environmental innovator, and so it gives me great pleasure to introduce Ken Grossman, the founder and owner and CEO of Sierra Nevada Brewing Company. (Applause)

KEN GROSSMAN: I'm going to grab a water here to start, because I've been having terrible allergies and driving up here I was hacking, so let me take a sip here before I get started.

GOVERNOR: Where's your beer?

KEN GROSSMAN: I brought you a beer. (Laughter) It's one of our special bottlings and I think you'll appreciate it.

GOVERNOR: Thank you.

KEN GROSSMAN: As a manufacturer of beer, and in the industry I'm in, I recognized very early on that we use a lot of resources and I've always felt it's our obligation to try to figure out how to do as good of a job as we can with managing our resources and using them wisely.

When I built my first brewery almost 30 years ago I was really into recycling. There wasn't one new piece of equipment in that brewery; everything was built out of cast-off dairy equipment or other things I scrounged up. But one of the first projects I did, over 25 years ago, was an off-peak energy storage system. I put in an ice filter where we could store energy at the nighttime rates and use it during the daytime. We both saved resources as well as money, and that's been our goal since then.

And we've done a lot of things over the years. When I built my new brewhouse 10 years ago I put a vapor condenser in, which took the steam that would normally go up the kettle stack and condensed it down, and that now provides for almost all of our heated water for cleaning around the brewery.

I've done a lot of boiler upgrades. We both increased our efficiency significantly as well as minimized our air emissions, so there's a double benefit for some of these projects. A couple years ago I put in a CO2 capture system. We actually collect all the carbon dioxide that comes off our fermentation tanks, we compress it, liquefy it and use it for bottling and dispensing beer. So I've eliminated our CO2 emissions and have a very high-quality source of CO2 for our operations.

We joined the California Climate Action Registry; we were the first brewery to do that, and we've been tracking our CO2 emissions from our operations the last two years.

We put in, about five years ago, a large anaerobic digester and we take all of our wastewater and we process it on site, also a financial benefit in that we don't have to pay the city to process our wastewater. But with an anaerobic digester we produce methane gas and the methane is now used in our boilers and our fuel cells.

About three years ago we installed a megawatt of fuel cell power. Governor Schwarzenegger was up for the commissioning of that. And that is a cogent system, so we actually get waste heat off of the fuel cells which go to boil our beer as well as provide all the base electricity needed for our operation.

We're just in the midst of installing a very large solar installation; we're on the last phase of it. We've currently got over a megawatt of solar being produced at our site in Chico, and we'll be up at 1.4 megawatts in the next two months. Between that and the fuel cells we're going to be about 80 percent of our own electrical generation on site.

Our goal is to get to 100 percent and it will probably take some conservation efforts as well as some additional initiatives to do that, but I think we'll get there in the couple of years. Some of these projects don't have the greatest payback. We've had things that we've done over the years that we felt were the right thing to do and we've really been investing for the long-term future of our company. I've got two of my kids involved in the business and I'm hopefully going to set them up so there'll be a good environment in the future as well as stable operations for us.

I've got lots more I can do. We've done a lot, but I've identified quite a few more things we can do over the years, and so our hope is we'll continue to keep innovating and doing things to help save energy as well as help save the environment. Thank you. (Applause)

DAVID YARNOLD: Thank you, Ken. Let me introduce Jonathan Schwartz, CEO and president of Sun Microsystems. (Applause)

JONATHAN SCHWARTZ: Good morning. I want to start off as well and thank David and the Governor for leadership on a topic that's of significant interest to us. And many of you many know Sun Microsystems and know that the tagline at the very foundation of the company is The Network is the Computer.

But many of you may not know that in pursuit of building out networks across the world our customers are actually faced with some pretty extraordinary challenges, one of which is the price of electricity today has become the second-largest discretionary expense for them in running data centers -- the second largest.

So for Sun, in building an eco-responsible agenda, as we look at it, the eco in eco-responsible is economics in addition to ecology. And by making investments in technologies that save our customers energy, we're in fact enabling them to save money and enabling them to deliver services they wouldn't otherwise have been able to deliver. So some of our fastest growing products at Sun are the result of investing for fuel efficiency, investing for energy efficiency. That allows us to differentiate in the marketplace in some pretty profound ways.

But in addition to that, as I made my way over here this morning, I also passed a gas station. And I don't know if you all have noticed the price of gas in California; at least in San Francisco it's about $4.25 a gallon. And so we are not simply in a competition in the industry for customers. We're actually in a, for us, a profound competition for employees. We want to get the best employees, we want to get the brightest employees in the state of California as well as across the world. So we figured a while back we'd actually give our employees a raise and give them the opportunity to not have to come to work. And through a program called Open Work and through an innovation called Sun Ray, which is a four-watt replacement for a 200-watt PC, we allow more than half of our employees to simply opt to work from home. And our assessment was the best way to deal with traffic congestion wasn't to go deal with the congestion, it was to try to eliminate the traffic.

As a result of that, our employees are able to keep the money they'd otherwise be spending on gasoline, they're able to work from home and work around the world. The network is not only the computer for Sun, it's also the workplace. And so the fact that we now have 18,000 employees across the world who are able to stay off the highway not only means that they are saving the planet from producing the CO2 emissions they'd otherwise be producing, they're also able to save the time, save the energy and save the frustration for those of you that have ever sat in a traffic jam. More than half of our folks don't have to deal with that. So that's certainly a differentiator for Sun, and again, not just in terms of our eco-profile in the ecology sense, but also the economics of the company. Our view is we've got more productive employees who are driving more value, not only for Sun, for our customers.

So again, I want to thank David and the Governor for highlighting the issue. It's an issue of profound importance not simply to businesses in California, but increasingly businesses across the world, and I too am proud to be a part of a state that is leading the world. Thank you very much. (Applause)

DAVID YARNOLD:

Thanks, Jonathon. That's a very progressive way of doing business. Our last speaker before we move to questions is Richard Swanson, founder and president and CTO of SunPower Corporation. (Applause)
RICHARD SWANSON:

Thank you, David. We at SunPower are honored to be recognized in this way; I think maybe tickled pink would be a better to put it, because everybody at SunPower came there to help the world transition from fossil fuels to renewable energy and it's nice to be recognized for your efforts in that direction.

I'd also like to recognize the pioneering efforts of Governor Schwarzenegger in that direction. You're probably all aware of the California Solar Initiative. This lit the world on fire, the photovoltaics world on fire. It's had the perhaps unintended consequence of bringing all our competitors into California in a big way, but . .

We also have ongoing battles in the investment tax credit, which is so important to our industry, and it's having trouble in Congress and we appreciate the support along that line.

When you buy a solar system you are in essence paying for your utility bill for the next 30 years all at once. And this has been one of the really significant barriers to the more widespread use of PV systems. We at SunPower are probably best known for the technology we developed, the high-performance solar cells, but we're actually being recognized here for the innovation of allowing customers to bypass that prepayment. It's called Power Purchase Agreements. Through our banking partners, such as New Resources Bank and others, we are financing that upfront purchase and making it very attractive for customers to buy and operate systems. In fact, I have to say it's been kind of an interesting experience, because when we introduced this in a big way for our commercial customers the industry changed overnight. One week we were trying to convince commercial customers to buy sytems; the next week they all knew about our purchase agreements and they wouldn't touch buying a system from us. They wanted power purchase agreements.

But in fact one of our people, Julie Blunden pointed out to me last night that SunPower has a long history in power purchase agreements. We recently merged with PowerLight Corporation in Berkeley, and PowerLight had the first power purchase agreement for a solar system with Green Mountain Energy; you might remember that company. So this innovation has now bubbled to the top. It's really helping to enable the widespread use of solar electricity. And I once again would really like to thank the Environmental Defense Fund for recognizing us. Thank you very much. (Applause)

DAVID YARNOLD: So, thank you all; your stories truly are inspiring. Every now and then, somebody asks us the question: So really, isn't this just about companies becoming more profitable? And our answer is: And your problem with that is what? And these companies do all demonstrate that there is new green on the bottom line.

So let's take some questions from the media. I'm going to wander around down there while we do that. Do I see a hand in the back?

QUESTIONS/ANSWERS:

QUESTION:                                                    Hi. This is for -- can you hear me?

DAVID YARNOLD:                                      M-hmm. Please.

QUESTION:                                                    This is for the Governor. Heather Ishimaru from ABC7. I'm wondering about your reaction to what appears to be evidence of White House meddling with the state's request for an EPA waiver.

GOVERNOR:                                                  Thank you for your question. And I have to just say that we, our state, is going to move forward and we are going to do everything we can legally so that we get that waiver, because I think it's very clear that states ought to have the right of determining of how they want to go and control greenhouse gas emissions, tailpipe emissions, all of those kinds of things, especially when the federal government doesn't show any leadership. And I think, as I've said many times before, that Washington is asleep at the wheel when it comes to this issue.

And it was very disappointing to find out that they administration was involved and Secretary Johnson did not listen to his staff, because his staff recommended very strongly that we should get the waiver and we deserve the waiver. And then he made a call, apparently, to the White House and he got his orders.

So it's disappointing, but it's not going to stop us. We're going to be like a bunch of Terminators; we're going to march forward. It's as simple as that. (Applause)

QUESTION:                                                    Hi, Governor, Edward Iwata from USA Today. I'd like to ask you and the other CEOs, what new metrics or measurements are being used to measure the bottom line and the impact of some of the new green products and services?

GOVERNOR:                                                 Well, David, you maybe can come up and --

DAVID CRANE:                                             So I'm not sure there are any. I mean, we're all for-profit businesses, we're all looking to generate a healthy return for our shareholders. Our customers are using very different metrics in terms of deciding which products they want to buy. I think, for the business sector, they're looking at work-per-watt as opposed to simply a fashionable technology trend. They're becoming much more metric oriented and objective. And I don't know about you, but as a consumer I tend to want to buy from companies that I view as responsible and as building sustainable practices, and I think that ultimately drives business. And I think those are both pretty traditional metrics.

DAVID YARNOLD:                                       Let me turn to Laura Ipsen, who is a Senior VP for Global Governmental Affairs at Cisco, who can talk to the metric question, I know.

LAURA IPSEN:                                             Well, I think one of the things that we believe is important is that the use of technology and really the network as a platform to account for greenhouse gas emissions. And so we can leverage the network and the technology to make sure that we're measuring consistently and perform those metrics. In the case of Cisco's telepresence technology, we're building that into the system. We'll be able to do carbon accounting based on standard protocols and then have that accomplished. So I think there's a role that technology plays in measuring metrics online, using the network, and so that's where we see some really great opportunities to work with companies like SASS that are also developing the analytics on top of that as well.

DAVID YARNOLD:                                      Question?

QUESTION:                                                   I have a question for the Governor. Lindy Yee from CBS-5. Your Legislative Analyst today said that your plan to expand the lottery and then borrow $15 million against it -- or billion dollars, I'm sorry -- will only exacerbate the state's financial problems. How do you respond to that?

GOVERNOR:                                                 Well, first of all, it is not borrowing. I think that it is a brilliant idea under the circumstances that we're in, where we have a $17.2 billion deficit. I said that we cannot really close this deficit with just cuts, because it would be too draconian, the cuts, and we would have to go too deep. And I think that $5 billion of revenues that we include in this will make us be able to do it. Now, the $5 billion of new revenues comes from the lottery, because our lottery is a state asset that is underperforming. And this is why we suggested that we are going to securitize future earnings and go and get $15 billion.

Now, she has praised this idea and said it is very creative, but she thought that maybe it was overly ambitious, the number. We have had all the experts look at those numbers and they all have said that this was actually a conservative number. So we differ in that, but I was very happy that she complimented us for being creative and creating these extra revenues.

And by the way, anyone that doesn't like my budget -- this is the only deal in town, as you know, and now it's up to the legislators, to the Democrats and Republicans, to come up with something better. So those that don't like it, or those that have criticized the budget, or the Legislative Analyst, it makes no difference, they have to come up now with a budget that is better than mine. And I will embrace it if they come up with something better. But I doubt it, because it's easy to talk, but action is more important.

QUESTION:                                                   But aren't you relying on a lottery that isn't doing well in California to begin with?

GOVERNOR:                                                 Yes. That's why it is so easy to rely on, because it is underperforming. It is only performing at 50 percent of its potential. And when we have an asset, it is the Governor's responsibility that we make government function at the 100 percent level, at its full potential. Right now that's a great asset but we are not letting it perform, because it has a stipulation in there that the technology that we use can only be used up until 1984 technology. I mean, how crazy is that, that we are holding it back because we are not using up-to-date technology?

So what I am saying is, let's modernize the lottery. The people have already made a commitment and said yes, we believe in the lottery, and they voted for it. So that's why we have the lottery. So now let's go and make it perform at the 100-percent level. And everyone agrees, all the experts, that right now it's performing at a 50-percent level. So I think there are extra revenues there and I think under the circumstances that we are in, like I said, with a huge budget deficit because of a dysfunctional budget system, I think this is the best time to use that kind of an asset without raising taxes.

Because there are some in Sacramento, as you know, that are screaming raise taxes. But I say, because the legislators and Sacramento didn't get their act together, and for four decades have a dysfunctional budget system and are unwilling to fix it, why should we go and punish the people of California? I don't see that. They should be punished, Sacramento should be punished, for not being able to fix the system. It's a dysfunctional system. Every single governor in the last 30 years has gone through the same problem, Democrat or Republican, because the legislators don't want to fix it and say let's not spend all the revenues when we have a surge in revenues. Let's put some money aside in a rainy day fund.

So what I'm trying to do this time is, we tightened the noose over the last four years. They can't steal any more money from local government, they can't steal any more money from transportation, they can't rob blind our pensions, any of those things, and they can't borrow for ongoing programs. So now the noose is tightened, so this year they have to deal with reality. And I love watching them now, how they deal with that, because this was my proposal in the budget, and now they have to come up with a better one if they don't like that one. (Applause)

DAVID YARNOLD:                                       I think we have another question from the media.

GOVERNOR:                                                 Yes?

QUESTION:                                                   My name is Bill Wilson. My partner of 22 years and I have already made an appointment on June 16th for a wedding ceremony at San Francisco City Hall.

GOVERNOR:                                                 Congratulations.

QUESTION:                                                 Thank you.And you're invited. (Laughter)

GOVERNOR:                                                 Thank you.

QUESTION:                                                   My question is basically, could you tell us your position on the proposed ballot initiative, and explain (Inaudible) Thank you.

GOVERNOR:                                                 Well, first of all, I respect the court's opinion, which I think was very important, to not just look at it from a point, do I believe that a marriage should be between a man and a woman or not, but that it looks at the constitutionality of the whole issue. And constitutionally they said it was not right to tell people you can't do that. Everyone should be treated equally. I think this is a very good way of approaching it, and it's the fairest way of approaching it, and that's why I said I respect their opinion. And, you know, I'm wishing everyone good luck with their marriages, and I hope that California's economy is booming because everyone is going to come here and get married. (Applause) I think all of this is great.

And I think -- and I'm against changing the Constitution. I'm against the ballot initiative that some are trying to put on the ballot. (Applause) Because it's unnecessary. I think that we have rules in place and after the decision was made to then change the rules because you're not happy with the outcome, I don't believe that's the right way to go. So I think that -- and may I remind you, I have said in the past -- you know, I see a marriage between a man and a woman. But that's my opinion. I don't want to force that opinion on anyone. So I respect that opinion, and I think we should live with that and everyone should move forward in the right way.

QUESTION:                                                 Thank you.

GOVERNOR:                                                 Absolutely. Thank you very much. Thank you. (Applause)