Sustainability
Sustainability can be defined in many ways however the most referenced can be attributed to the United Nations World Commission on Environment and Development: "...Believing that sustainable development, which implies meeting the needs of the present without compromising the ability of future generations to meet their own needs, should become a central guiding principle of the United Nations, Governments and private institutions, organizations and enterprises." [4] The Native American Iroquois defined sustainability in a way that alluded to actions that guaranteed the survival of seven successive generations. Sustainability reflects simply that our current choices have a direct impact on the future of the planet. Sustainability is a relatively new word yet it represents an important shift in social and environmental thinking in addition to proactive efforts that millions of people around the world are participating in; Paul Hawken refers to this movement in his recent book title as "Blessed Unrest."
How does sustainability apply to business?
The sacred "Quarterly profit" is still revered as the key benchmark for performance within the financial community, however it no longer is an island. New market drivers have begun to place the Climate Crisis in the spotlight on corporate agendas. Investors, customers, shareholders and local communities are increasingly holding corporations accountable for many of the environmental issues confronting our society. As a result, the global business community is faced with decisions which will impact their survival which include Global Warming, rising fuel prices coupled with the threat of Peak Oil, environmental accountability and fair trade/equitable treatment of workers. Businesses will need to adopt sustainability in order to position themselves for a new economic climate placing a value on carbon footprint, increased regulation and heightened consumer scrutiny.
The challenges:
-Global Warming
The International Panel on Climate Change (IPCC) continues to perform research and provide startling data regarding the threat to species and ecosystems from increased Carbon Dioxide in the atmosphere, rising ocean levels, increased melting of the Arctic and Antarctic ice shelves, rising PH levels in the oceans, and the threat of methane release in subarctic regions to name a few of the pressures on the planet. The measure of carbon dioxide has now surpassed 385 ppm which is by far the highest level we have seen in the past 400,000 years based on samples taking through ice drilling in the arctic.
-Rising Fuel Prices
While the US remains the largest per capita user of fossil fuels, the price of oil (valued in US dollars) has skyrocketed placing business operating costs under stress. In addition, materials used in production have increased in price based primarily on the petroleum costs necessary in their mining and refining. Most importantly, transportation costs have dramatically altered the price of everything from food to feedstocks impacting all points along the supply chain across every industry. The US is a petroleum-based economy and with rising fuel prices, it is clear that this model is not sustainable in its present course.
-Environmental Responsibility, Health and Safety
Accountability comes in several flavors both for consumer health and safety and for the environment and ecosystems. Consumers are more educated and aware than ever before and this has meant that producers face heavier scrutiny. More scientific data is readily available via the internet and as a result, consumers, who used to trust the manufacturer's label for product information including its safety for consumption, now have alternative sources of information, calling out inaccurate or misleading product maker claims. With increased consumer awareness, products that are not safe and are not produced with the environment in mind are quickly losing credibility and manufacturers are being held responsible e.g. Mattel with lead in toys manufactured in China, the increasing presence of dangerous bacteria in meats and produce processing techniques, plastics made with Bisphenol A in baby bottles, etc. According to Anastasia Toomey, SVP, Consumer Insights, AMP Agency, "Consumers are becoming more savvy and inquisitive, increasingly challenging companies and their green claims and efforts and demanding certain factors in exchange for their loyalty." [6] In addition, the impacts to the environment as a result of unregulated techniques and materials used in production, extraction, refining, etc. are being challenged by consumer groups and more recently indigenous cultures who have learned they have much to say in how their land is used. Businesses must now practice and demonstrate a new level of credibility to their customers and suppliers and to the environment.
-Fair Trade
The treatment of workers on a world scale is more transparent as third party nonprofit action groups have focused on unfair labor practices and inhumane working conditions. Global conglomerates who in some cases were unaware of how their overseas manufacturing facilities were treating employees have now taken notice as consumer groups bring fast attention to the ethical component of business. The means in which workers perform their duties, the facilities in which they work, the number of working hours in a day, employee housing and the materials with which they work can now be monitored by independent research groups. Consumer groups are increasingly seeking higher levels of standards for the products they purchase including how and where they are made and will punish companies that don't subscribe to improving the conditions of their global workforce.
Market shift:
As a result of these issues, businesses now must face a new challenge and responsibility: to minimize their impact on the environmental and community while they maximize profitability. The standard guidelines for success in the marketplace are shifting and corporations must find new ways to adapt before they are displaced. Some corporate leaders are beginning to recognize this new landscape and understand that a huge market opportunity exists for those businesses that can adapt and shift in the turning tide. However, the opportunity to put off taking action is no longer a luxury for US Corporations specifically. According to a Country Performance Report Card which considered corporate practices, emissions and a country's environmental efforts, the US ranked in the bottom tier of the highest income class of countries, ranked overall as 39 behind all of Europe and Japan. [3]
A February 2008 McKinsey Report cited 60% of US executives as seeing the importance of making efforts toward sustainability as strategically important while a majority consider it important to product development, investment planning, and brand management. The key factor was in measuring how executives practice what they preach. The survey showed that more than one-third of executives said their companies were not including climate change in their development of overall strategy. [1] According to Mark Lebriech of New Energy Finance, companies addressing climate change proactively do tend to make more money. The 'Carbon Beta' study demonstrates that “companies minimizing risks and seizing opportunities associated with climate change financially out-performed their same sector peers over the past three years--with the premium growing over time as carbon regulations tighten around the world.”[2] What will differentiate successful businesses from one another will be their ability to reinvent themselves through an environmental lens and position themselves to capture market share early in the game.
New paradigm:
Triple Bottom Line (TBL) thinking, a term first used by John Elkington in the mid 1990s, is a systems-based approach to business that incorporates sustainability as "People, Planet and Profit." The traditional approach speaks in terms of responsibility to stakeholders to continue to generate profitability. However this constant drive to profitability has side effects that until recently, most of the world has conveniently overlooked specifically impacts to the environment and the worker. TBL creates an interdependent relationship between each part of the system: financial performance is predicated upon environmental impact and quality of life for the workforce. In return, environmentally friendly shifts in the operation and manufacturing provide added value to the brand enhancing the bottom line while healthy working conditions promote higher productivity. With increased employee morale and higher retention, costs for hiring and training decrease while higher productivity boosts profitability and provides for a leaner organization. [5] The systems approach is holistic and is crucial particularly for US-based organizations who will soon face a shift in policy both in terms of carbon-based regulation in addition to increased federal scrutiny on environmental and health impact e.g. FDA, FTC, USDA, EPA, etc.
Strategies for applying sustainability to business:
Sustainability can be a win-win for business in numerous ways. Each of the following sustainable practices or disciplines is an opportunity for a business to re-think their approach from "business-as-usual" to socially responsible business.
-Zero Waste
Companies can capture lost revenues through waste diversion and reduction strategies including recycling programs, supply chain management and using the waste stream as a resource or material for another. One example of this, termed "waste as resource" is using waste byproducts from a cafeteria as "food" for a composting site. The compost can in turn be used to provide nutrients for landscaping. Subaru and Toyota have made strong efforts in this department reducing their manufacturing waste stream in certain locations to "zero landfill."
-Energy
1. Conservation and efficiency - a minimum of 10-20% of energy costs can be saved through efforts based in reduction and conservation of wasted energy such as with lighting, insulation, outdated heating and cooling systems, etc. The first step is an energy audit performed by certified engineers who will assess the facility.
2. Cogeneration - renewable and alternative strategies are far more successful once conservation and efficiency measures have been undertaken. These strategies might include solar, wind, geothermal, cogen via biomass, etc.
-Facilities and building structures
New construction, renovations and retrofits aligned with the USGBC created LEED standards that aim to reduce energy loss and environmental impact through the use of more environmentally-friendly building materials and practices. This includes methods of new construction concepts such as a green roof and living system for water treatment, reclamation and recycling of Construction and Demolition (C&D) waste, use of alternative green products such as Ecostar-rated products and appliances, low-flush toilets/urinals, low VOC paints, sustainably harvested wood, recycled office furniture, LED/CFL lighting, and integrated EnergyStar/low impact and/or renewable energy design including passive and active solar, geothermal heating and cooling to name a few of the opportunities for higher building standards.
-Education
Educational programs for management and staff, customers and suppliers is an important factor in seeing that efforts such as zero waste and energy conservation are successful both in their planning and implementation. In many cases, staff and customers represent an enormous untapped knowledge base of ideas on how to improve the operation and reduce both wasted materials and energy.
-Product Design
The EU has initiated Extended Producer Responsibility laws on "substances of concern" in recent years. As such, manufacturers wishing to do business in the EU must comply with a series of regulations including the Packaging Directive, End-of-Life Vehicle Directive, RoHS and REACH. In each case, these directives require producers to remove any materials used in the product(s) deemed hazardous by the EU. To counter the mounting pressure of soon-to-come regulation, businesses need to adopt techniques that address the product in its early design phase vs. finding ways to recycle materials after the end of their use. The goal is to design a product that causes minimal environmental impact, is healthy for consumers and performs to industry requirements. Consumers who are more savvy and have more information at their disposal referred to as "Cultural Creatives", are increasing in number and are demanding new products that include environmentally beneficial qualities. Techniques for product design include Biomimicry (technologies developed by nature modeled to product form and functionality), Design for Environment (designing products to minimize environmental impact and future use) and Green Chemistry (using benign substances as building materials for products).
-Social Responsibility
Stakeholders, employees and consumers are looking for organizations that represent their interests in regards to the environment, social issues and society at large. The terms "corporate citizenship" and Corporate Social Responsibility are used to define a policy which encompasses more than giving to charity. Rather it is about how the leadership in many organizations regard their company being an integrated member of the community. Corporations such as Toyota, Hewlett Packard, Swiss RE and Unilever are among leaders in adopting sustainability as central to how they do business, how they treat their employees, how they create and distribute their products and how they impact the environment.[7] Their products, people and environment are integral components in the strategic decision making process. In these efforts, each of these companies has increased their revenues, their brand value and their public image not withstanding reduced environmental impact.
Summary
As the world faces a new era of increased environmental awareness due to global warming, a shift in policy and practice for businesses has begun to emerge. The shift reflects a new paradigm in the quest for profitability - corporate social responsibility. Stakeholders and consumers are increasingly interested in terms of how a company attains profitability but now with respect to the environment and community. This paradigm is forcing those companies who want to differentiate themselves in a global marketplace to look at their operations from a systems perspective and to incorporate sustainability as a core strategy for the 21st century.
Sustainability can be defined in many ways however the most referenced can be attributed to the United Nations World Commission on Environment and Development: "...Believing that sustainable development, which implies meeting the needs of the present without compromising the ability of future generations to meet their own needs, should become a central guiding principle of the United Nations, Governments and private institutions, organizations and enterprises." [4] The Native American Iroquois defined sustainability in a way that alluded to actions that guaranteed the survival of seven successive generations. Sustainability reflects simply that our current choices have a direct impact on the future of the planet. Sustainability is a relatively new word yet it represents an important shift in social and environmental thinking in addition to proactive efforts that millions of people around the world are participating in; Paul Hawken refers to this movement in his recent book title as "Blessed Unrest."
How does sustainability apply to business?
The sacred "Quarterly profit" is still revered as the key benchmark for performance within the financial community, however it no longer is an island. New market drivers have begun to place the Climate Crisis in the spotlight on corporate agendas. Investors, customers, shareholders and local communities are increasingly holding corporations accountable for many of the environmental issues confronting our society. As a result, the global business community is faced with decisions which will impact their survival which include Global Warming, rising fuel prices coupled with the threat of Peak Oil, environmental accountability and fair trade/equitable treatment of workers. Businesses will need to adopt sustainability in order to position themselves for a new economic climate placing a value on carbon footprint, increased regulation and heightened consumer scrutiny.
The challenges:
-Global Warming
The International Panel on Climate Change (IPCC) continues to perform research and provide startling data regarding the threat to species and ecosystems from increased Carbon Dioxide in the atmosphere, rising ocean levels, increased melting of the Arctic and Antarctic ice shelves, rising PH levels in the oceans, and the threat of methane release in subarctic regions to name a few of the pressures on the planet. The measure of carbon dioxide has now surpassed 385 ppm which is by far the highest level we have seen in the past 400,000 years based on samples taking through ice drilling in the arctic.
-Rising Fuel Prices
While the US remains the largest per capita user of fossil fuels, the price of oil (valued in US dollars) has skyrocketed placing business operating costs under stress. In addition, materials used in production have increased in price based primarily on the petroleum costs necessary in their mining and refining. Most importantly, transportation costs have dramatically altered the price of everything from food to feedstocks impacting all points along the supply chain across every industry. The US is a petroleum-based economy and with rising fuel prices, it is clear that this model is not sustainable in its present course.
-Environmental Responsibility, Health and Safety
Accountability comes in several flavors both for consumer health and safety and for the environment and ecosystems. Consumers are more educated and aware than ever before and this has meant that producers face heavier scrutiny. More scientific data is readily available via the internet and as a result, consumers, who used to trust the manufacturer's label for product information including its safety for consumption, now have alternative sources of information, calling out inaccurate or misleading product maker claims. With increased consumer awareness, products that are not safe and are not produced with the environment in mind are quickly losing credibility and manufacturers are being held responsible e.g. Mattel with lead in toys manufactured in China, the increasing presence of dangerous bacteria in meats and produce processing techniques, plastics made with Bisphenol A in baby bottles, etc. According to Anastasia Toomey, SVP, Consumer Insights, AMP Agency, "Consumers are becoming more savvy and inquisitive, increasingly challenging companies and their green claims and efforts and demanding certain factors in exchange for their loyalty." [6] In addition, the impacts to the environment as a result of unregulated techniques and materials used in production, extraction, refining, etc. are being challenged by consumer groups and more recently indigenous cultures who have learned they have much to say in how their land is used. Businesses must now practice and demonstrate a new level of credibility to their customers and suppliers and to the environment.
-Fair Trade
The treatment of workers on a world scale is more transparent as third party nonprofit action groups have focused on unfair labor practices and inhumane working conditions. Global conglomerates who in some cases were unaware of how their overseas manufacturing facilities were treating employees have now taken notice as consumer groups bring fast attention to the ethical component of business. The means in which workers perform their duties, the facilities in which they work, the number of working hours in a day, employee housing and the materials with which they work can now be monitored by independent research groups. Consumer groups are increasingly seeking higher levels of standards for the products they purchase including how and where they are made and will punish companies that don't subscribe to improving the conditions of their global workforce.
Market shift:
As a result of these issues, businesses now must face a new challenge and responsibility: to minimize their impact on the environmental and community while they maximize profitability. The standard guidelines for success in the marketplace are shifting and corporations must find new ways to adapt before they are displaced. Some corporate leaders are beginning to recognize this new landscape and understand that a huge market opportunity exists for those businesses that can adapt and shift in the turning tide. However, the opportunity to put off taking action is no longer a luxury for US Corporations specifically. According to a Country Performance Report Card which considered corporate practices, emissions and a country's environmental efforts, the US ranked in the bottom tier of the highest income class of countries, ranked overall as 39 behind all of Europe and Japan. [3]
A February 2008 McKinsey Report cited 60% of US executives as seeing the importance of making efforts toward sustainability as strategically important while a majority consider it important to product development, investment planning, and brand management. The key factor was in measuring how executives practice what they preach. The survey showed that more than one-third of executives said their companies were not including climate change in their development of overall strategy. [1] According to Mark Lebriech of New Energy Finance, companies addressing climate change proactively do tend to make more money. The 'Carbon Beta' study demonstrates that “companies minimizing risks and seizing opportunities associated with climate change financially out-performed their same sector peers over the past three years--with the premium growing over time as carbon regulations tighten around the world.”[2] What will differentiate successful businesses from one another will be their ability to reinvent themselves through an environmental lens and position themselves to capture market share early in the game.
New paradigm:
Triple Bottom Line (TBL) thinking, a term first used by John Elkington in the mid 1990s, is a systems-based approach to business that incorporates sustainability as "People, Planet and Profit." The traditional approach speaks in terms of responsibility to stakeholders to continue to generate profitability. However this constant drive to profitability has side effects that until recently, most of the world has conveniently overlooked specifically impacts to the environment and the worker. TBL creates an interdependent relationship between each part of the system: financial performance is predicated upon environmental impact and quality of life for the workforce. In return, environmentally friendly shifts in the operation and manufacturing provide added value to the brand enhancing the bottom line while healthy working conditions promote higher productivity. With increased employee morale and higher retention, costs for hiring and training decrease while higher productivity boosts profitability and provides for a leaner organization. [5] The systems approach is holistic and is crucial particularly for US-based organizations who will soon face a shift in policy both in terms of carbon-based regulation in addition to increased federal scrutiny on environmental and health impact e.g. FDA, FTC, USDA, EPA, etc.
Strategies for applying sustainability to business:
Sustainability can be a win-win for business in numerous ways. Each of the following sustainable practices or disciplines is an opportunity for a business to re-think their approach from "business-as-usual" to socially responsible business.
-Zero Waste
Companies can capture lost revenues through waste diversion and reduction strategies including recycling programs, supply chain management and using the waste stream as a resource or material for another. One example of this, termed "waste as resource" is using waste byproducts from a cafeteria as "food" for a composting site. The compost can in turn be used to provide nutrients for landscaping. Subaru and Toyota have made strong efforts in this department reducing their manufacturing waste stream in certain locations to "zero landfill."
-Energy
1. Conservation and efficiency - a minimum of 10-20% of energy costs can be saved through efforts based in reduction and conservation of wasted energy such as with lighting, insulation, outdated heating and cooling systems, etc. The first step is an energy audit performed by certified engineers who will assess the facility.
2. Cogeneration - renewable and alternative strategies are far more successful once conservation and efficiency measures have been undertaken. These strategies might include solar, wind, geothermal, cogen via biomass, etc.
-Facilities and building structures
New construction, renovations and retrofits aligned with the USGBC created LEED standards that aim to reduce energy loss and environmental impact through the use of more environmentally-friendly building materials and practices. This includes methods of new construction concepts such as a green roof and living system for water treatment, reclamation and recycling of Construction and Demolition (C&D) waste, use of alternative green products such as Ecostar-rated products and appliances, low-flush toilets/urinals, low VOC paints, sustainably harvested wood, recycled office furniture, LED/CFL lighting, and integrated EnergyStar/low impact and/or renewable energy design including passive and active solar, geothermal heating and cooling to name a few of the opportunities for higher building standards.
-Education
Educational programs for management and staff, customers and suppliers is an important factor in seeing that efforts such as zero waste and energy conservation are successful both in their planning and implementation. In many cases, staff and customers represent an enormous untapped knowledge base of ideas on how to improve the operation and reduce both wasted materials and energy.
-Product Design
The EU has initiated Extended Producer Responsibility laws on "substances of concern" in recent years. As such, manufacturers wishing to do business in the EU must comply with a series of regulations including the Packaging Directive, End-of-Life Vehicle Directive, RoHS and REACH. In each case, these directives require producers to remove any materials used in the product(s) deemed hazardous by the EU. To counter the mounting pressure of soon-to-come regulation, businesses need to adopt techniques that address the product in its early design phase vs. finding ways to recycle materials after the end of their use. The goal is to design a product that causes minimal environmental impact, is healthy for consumers and performs to industry requirements. Consumers who are more savvy and have more information at their disposal referred to as "Cultural Creatives", are increasing in number and are demanding new products that include environmentally beneficial qualities. Techniques for product design include Biomimicry (technologies developed by nature modeled to product form and functionality), Design for Environment (designing products to minimize environmental impact and future use) and Green Chemistry (using benign substances as building materials for products).
-Social Responsibility
Stakeholders, employees and consumers are looking for organizations that represent their interests in regards to the environment, social issues and society at large. The terms "corporate citizenship" and Corporate Social Responsibility are used to define a policy which encompasses more than giving to charity. Rather it is about how the leadership in many organizations regard their company being an integrated member of the community. Corporations such as Toyota, Hewlett Packard, Swiss RE and Unilever are among leaders in adopting sustainability as central to how they do business, how they treat their employees, how they create and distribute their products and how they impact the environment.[7] Their products, people and environment are integral components in the strategic decision making process. In these efforts, each of these companies has increased their revenues, their brand value and their public image not withstanding reduced environmental impact.
Summary
As the world faces a new era of increased environmental awareness due to global warming, a shift in policy and practice for businesses has begun to emerge. The shift reflects a new paradigm in the quest for profitability - corporate social responsibility. Stakeholders and consumers are increasingly interested in terms of how a company attains profitability but now with respect to the environment and community. This paradigm is forcing those companies who want to differentiate themselves in a global marketplace to look at their operations from a systems perspective and to incorporate sustainability as a core strategy for the 21st century.
References
- Mckinsey Report on How Companies think about Climate Change
http://www.mckinseyquarterly.com/Energy_ Resources_Materials/ Environment/How_comp anies_think_about_cl imate_change_A_McKin sey_Global_Survey_20 99_abstract - Innovest Advisors Carbon Beta Report
http://www.socialfunds.com/news/article. cgi/2416.html - Newsweek: A Global Report Card on nations doing the most, and least, to clean up the environment.
http://www.newsweek.com/id/143678 - United Nations. 1987."Report of the World Commission on Environment and Development." General Assembly Resolution 42/187, 11 December 1987. Retrieved: 2008-08-08
http://www.un.org/documents/ga/res/42/ar es42-187.htm - Sustainnovation Consulting, Inc. Systems thinking approach to sustainability
http://www.sustainnovation.com - "Green AMPlified" study conducted by marketing firm AMP Agency.
http://www.sustainablelifemedia.com/cont ent/story/brands/con sumers_want_companie s_to_shoulder_the_gr een_burden - The Global 100 - the most sustainable large companies in the world
http://www.global100.org
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