By Mike Bertolucci, President, Interface Research Corporation, Emeritus
Sustainable manufacturing: oxymoron or emerging reality? It is a question Interface has been struggling to answer for more than 12 years.
No doubt the linear, Take-Make-Waste model of the prototypical company of the 20th Century based on the assumption of limitless resources and sinks into which to dump wastes and products at the end of their useful lives is a preamble to environmental collapse. And, the engine which is driving atmospheric greenhouse gas increases at an unprecedented rate.
For some “the sky is falling”, for others “the sand is cool around their neck”. For a growing number of companies the opportunity to deliver value to their shareholders and indeed for future generations is at hand.
In 1994, Ray C. Anderson the then founder and CEO of Interface was struck by what he calls “a spear in the chest”, an epiphany of sorts after reading Paul Hawken’s The Ecology of Commerce. Ray describes Interface’s climb up the metaphorical Mt. Sustainability in his book, Mid Course Correction published in 1998. I came along in the middle of that time line to help carve out the technical transformation needed to materialize that dream. Ray and I along with a team of others, created a vision of what a truly sustainable company might look like and what the requirements on material sourcing and manufacturing processes would be, in fact what a prototypical manufacturing company of the 21st Century would look like and how it would operate.
First it would generate no more waste or emissions than could be rapidly assimilated in nature and would therefore not create toxic pools doing harm to the biosphere.
It would not be extractive of limited and finite resources for its material and energy demands to produce its products and grow at a rate compatible with the demands of its shareholders and environment within which it operates.
It would be cyclic in all its material flows, recycling its own products and others compatible with its business requirements, and it would drive its manufacturing processes with renewable energy, either directly sourced or supported through green energy offset programs, also called renewable energy credits (REC’s).
This manufacturing company would be sensitive to the needs of its associates and the communities in which it operates.
If done correctly it should be constantly reducing its environmental footprint, driving toward zero, growing market share with its products and reducing all operating costs related to virgin raw materials, energy consumption and transportation. Inescapable corollaries to these objectives are the growth in renewable energy use and the reduction in green house gas emissions over the full life cycle of it products (Creation to Resurrection).
One paradigm from the 1st Industrial Revolution (which we are trying to overthrow) is operative in the Interface Model: “What gets measured gets done”. Our metrics are the backbone supporting our manufacturing teams’ creative charge up the mountain over the last 12 years.
Globally, Interface has cumulatively avoided over $300 million in waste through our QUEST, (Quality Using Employee Suggestions and Teamwork), programs.
Reduced the total energy consumption per square meter of modular carpet tile production by 41 %
Reduced the total absolute tons of green house gas emissions of our world wide operations by 56 %
Diverted over 90 million pounds of carpet from landfills through our ReEntry recycling initiative.
All while increasing the value of our company to its shareholders as its stock price has rebounded from under $2.00 per share in 2003 to over $16.00 in Feb. 2007.
End of story? Of course not. Our drive toward creating a sustainable company and reaching the top of Mt. Sustainability by 2020 is only half over. Wish us luck.
1. What trends do you see in the field of “sustainable investing”? Where has the field come in the past five years and where do you see it going in the next five years?
The term “sustainable investing” is being used in many different ways. For investors, it has become very confusing to know what is “green” and what is “greenwashing.” The trend we are seeing is an increase in the number of companies racing to tell us how much they care, and what they are doing to improve our planet. Through detailed research, we distinguish the companies that are truly backing up their words with action from the companies that are greenwashing. This is one way we try to help investors navigate the confusion.
The first place to start is with a clear definition. For us, sustainability is simply “securing people’s quality of life within the means of nature.” This working definition acknowledges the limits of nature and society’s dependence on nature. It recognizes the fundamental challenge we face in meeting human needs without undermining nature’s ability to support our economy into the future. The primary issue is the limited biocapacity of the earth’s ability to provide the ecosystem services necessary to maintain the products and services we depend on.
The next step is applying this definition with specific evaluation criteria. Portfolio 21’s detailed evaluation criteria identify companies that truly recognize the enormous opportunity that exists to save money by saving natural resources and prosper by providing the products, services and technologies that are needed to create a sustainable society. These companies are developing cleaner and more efficient energy solutions, products designed to be reused and rebuilt, and processes that eliminate the need for toxic inputs while producing little or no waste.
The business and investment case for environmental sustainability has become increasingly clear and corporations that are embracing it are strategically positioned to prosper in the 21st Century.
2. There are clearly more sustainable investment options than ever before. Are there third-party verification processes that exist to help investors decide where to put their investment dollars?
The most helpful resource for investors is The Social Investment Forum, a national non-profit organization specializing in the field. Their website, www.socialinvest.org, has a lot of educational information including a directory of investment services.
3. How do sustainable investment funds perform compared to investment funds that don’t take into consideration social or environmental questions? Are there differences in short-term and long-term performance for these funds?
From our own experience, since Portfolio 21 started more than seven years ago, the fund has outperformed the markets as defined by the S&P 500 Index as well as the global MSCI World Equity Index. This competitive performance has certainly added to investor support for an investment approach based on the understanding that adaptation to changing global environmental investment risks is inevitable. The earlier this thinking is integrated into business practices, the more natural capital we will be able to retain for future generations, and the greater the economic stability we will be able to achieve. We believe companies that prove this understanding by innovating with environmental sustainability strategies have a real competitive advantage today and are poised for further leadership and innovation in the future.
4. What are the investment criteria and holdings of Portfolio 21? What makes it different from other sustainable investment options offered today?
Portfolio 21’s investment criteria seek companies that recognize environmental sustainability as a fundamental human challenge and a tremendous business opportunity. Our unique selection criteria allow us to identify and invest in companies that understand their ecological risks and opportunities and are taking positive action to integrate sustainability strategies in their business models. These companies see the real opportunities and future successes in understanding the ecological crisis and figuring out how to use environmental sustainability principles as core components of an intelligent business strategy.
Over 70 percent of the holdings are international and some of the most innovative holdings include: Swiss Re, East Japan Railway, Dell, Electrolux, Vestas Wind, Herman Miller, Whole Foods, and Interface.
There are six key components of our criteria:
Impact of Products/Services
The company understands the ecological impact of its products and/or services and has taken steps to significantly reduce those impacts. Priorities include:
Corporate behavior is driven by what is profitable and offers a competitive advantage for shareholders. Sustainable business strategies offer companies the ability to meet these objectives by designing ecologically superior products, using renewable energy, and developing efficient production methods.
6. Are there market or policy options that could encourage the growth of sustainable investment opportunities in the United States?
Sustainable investment strategies will continue to grow, by definition, because they will continue to offer the most competitive solutions. Countries with progressive environmental policies will offer the leadership and competitive edge for companies residing in those countries. The fact that Portfolio 21 invests less than 30 percent of its assets in the United States illustrates the leadership is coming from Europe and Japan and that the U.S. is lagging.
By Reid Lifset, Editor, Journal of Industrial Ecology, Associate Director, Yale School of Forestry and Environmental Studies
In his famous book on conservation, The Sand County Almanac, Aldo Leopold urged that we “think like a mountain”. As the pioneer in wildlife management and the U.S. wilderness system, Leopold was drawn to articulate the connection between people and the land. In modern technological society, that metaphor must be extended—we need to think like an ecosystem.
The emerging field of industrial ecology seeks to do just that. Seeing the efficacy with which natural systems cycle resources, industrial ecology explores the “biological metaphor,” asking in what ways can environmental goals be accomplished through lessons drawn from nature.
The field dates its self conscious beginnings to a 1989 article, “Strategies for Manufacturing” in Scientific American by Frosch and Gallopolous. The leadership of Frosch, then the head of R&D for General Motors, was soon complemented by workshops and books organized by the U.S. National Academy of Engineering and prescient support from the AT&T. Equally important was the joining of an extensive Northern European community of researchers, managers and activists working on similar concepts under the rubric of cleaner production.
The result is a growing global research community that systematically examines local, regional and global materials and energy uses and flows in products, processes, industrial sectors and economies. It focuses on the potential role of industry in reducing environmental burdens throughout the product life cycle from the extraction of raw materials, to the production of goods, to the use of those goods and to the management of the resulting wastes. Industrial ecology encompasses:
• material and energy flows studies (”industrial metabolism”)
• technological change and the environment
• dematerialization and decarbonization
• life cycle planning, design and assessment
• design for the environment
• extended producer responsibility (”product stewardship”)
• eco-industrial parks (”industrial symbiosis”)
• product-oriented environmental policy
The field began to take on an institutional identity with the establishment of the Journal of Industrial Ecology, a peer-reviewed international quarterly owned by Yale and published by MIT Press as well as a professional and scientific society, the International Society for Industrial Ecology.
Given this august parentage and the ambitious agenda, the name of the field, “industrial ecology” may seem odd, even oxymoronic. Indeed, the name is intended to be evocative—and provocative—in several ways. The underlying idea is that the entities that have been major sources of environmental damage can be converted into agents for environmental improvement. Industries design and produce goods, and so they possess the tools and technological expertise needed to create environmentally informed products and manufacturing processes. That is what motivates the word “industrial.”
The word “ecology” is intended in at least two senses. First, it refers to the fact that the flow of industrial resources can be compared to the flow of resources in nonhuman, “natural” ecosystems—with the implication that the industrial flows can become just as efficient.
The second reason for the word “ecology” is to place human industrial activity within the context of the larger ecosystems that support it. Traditionally, manufacturing has been regarded as beginning when raw materials enter a factory and ending when the finished product is shipped. But industrial ecology expands that view to include an understanding of the sources of the raw materials, the effects of their extraction, and the fate of products after their useful lives have ended, what is increasingly called the product life cycle perspective.
Much of industrial ecology is motivated by an impulse to approach environmental problems from a systems perspective, so as to avoid gaps and unintended consequences. This impulse is often manifested in careful, even fierce attention to the quantification of stocks and flows of materials and energy at many scales. Materials flow analysis (MFA) provides a foundation for examining carefully and comprehensively the biophysical phenomena and human activities that are at the core of environmental problems. This tracking of resources is yet another dimension of the biological metaphor—borrowing approaches from ecosystem ecology and biogeochemistry.
The pursuit of a systems approach is embodied the frequent and conspicuous use of a life-cycle perspective, i.e., examining products, materials, services and facilities from “cradle to grave”. This in turn results in strategies more often associated with European and Japanese environmental policy than in the US: extended producer responsibility (product take-back), design for environment, eco-labeling, green procurement, and environmental supply chain management. On the scientific side, life-cycle assessment (LCA) is the tool that is used to characterize the resource inputs and outputs of pollution and waste across an entire life cycle.
In actual fact, a great deal of the practice of industrial ecology has revolved around environmental assessment—investigating the relative environmental merits of products, technologies, choices of materials and so on. This has generated a rich, albeit complex, body of knowledge and technique regarding “green” choices.
Mostly recently, industrial ecologists have worked to extend the core concepts in the field. A growing cadre of researchers now use input-output analysis, a form of economic analysis originally developed by Nobel Laureate Wassily Leontief, to capture, in a more thorough way, the indirect effects of production and consumption choices. The use of input-output analysis holds out the promise of making LCA and related forms of green assessment more comprehensive and thus more reliable, because it can incorporate resource use and pollution effects throughout the entire economy, rather than just a particular production/supply chain. These analytical advances are likely to change our understanding of what makes for a green product and lead to some surprises.
In a different vein, one stage of the product life cycle, consumption, is attracting greater attention as policymakers and researchers realize that consumption drives much of the economic activity that in turn produces our environmental challenges. In some ways, this represents merely an elaboration of long standing approaches in the field; after all consumption is part of the product life cycle. At the same time, efforts to understand what constitutes sustainable consumption require a larger dose of social science than has traditionally been part of this field.
The study of consumption seeks to go beyond bromides and platitudes above over-, unequal and unfulfilling consumption to meld an understanding the social drivers of what we buy and use with a careful quantitative analysis of the environmental implications of those choices. For examples of what this has yielded, see the special issues of the Journal of Industrial Ecology on consumption and on priorities for environmental product policy.
Perhaps the most conspicuous success story in industrial ecology to date is an industrial district in Kalundborg, Denmark. The area is home to a cluster of industrial facilities that exchange by-products, or what would otherwise be called wastes—including petrochemical gases, cooling and waste water, steam, and scrubber and fermentation sludge—in a network of cooperative relations that began in 1972 and has grown ever since. Kalundborg thus became a prime example of “industrial symbiosis.” The term is an explicit analogy to the mutually beneficial relations found in nature.
For several years, Kalundborg was both an icon and a lonely example of one. Early attempts to replicate the networks of by-product exchanges and resource sharing in the US and elsewhere foundered, but more recently industrial symbiosis has gained traction. Important examples in Australian minerals industry and a Chinese sugar-paper-alcohol complex have been documented.
Perhaps more important, China has adopted the notion of the circular economy (循环经济xun huan jing ji) —the term connotes the cycling of resources and closing of materials loops so central to industrial ecology—as a central tenet of its environmental policy. This strategy encompasses initiatives at many scales from the individual firm to networks of firms to entire cities or provinces. It includes programs to stimulate the application of industrial symbiosis to the multitude of industrial parks that are the location of much of China’s rapidly growing industries. Similar efforts to create “eco-industrial parks” in Korea, Taiwan and Thailand are underway.
The organizers of this forum asked me to address the barriers to industrial ecology. In some cases, they are legal as when some forms of recycling or by-product reuse are made prohibitively expensive by regulation. More challenging, however, are the social, psychological and political obstacles. Taking a systems view of environmental problems is often daunting and doesn’t lend itself to sound bites. Many of the changes impose costs on industry or consumers and thus generate political opposition. Equally important, over a decade’s worth of research and debate have made it clear identifying what is “green” product or technology is fraught with both values and technical ambiguities. “Good science” does not provide a ready or uncomplicated answer to many of these questions.
The elements of industrial ecology are increasingly well known throughout the world. Most environmental professionals have heard of design for environment, LCA, or eco-industrial parks. Those concepts have been adopted by related frameworks and promoted under other names. In that sense industrial ecology, like a species in a dynamic ecosystem (or perhaps a set of self genes to push the metaphor in another direction) has succeeded in spreading its seed widely.
In 1979, with the country still reeling from the effects of the oil price spikes in the mid 1970’s, President Carter installed a solar hot water system on the White House roof, and the nation was excited about alternative energy. By 1986, the price of oil had fallen dramatically, and no one noticed when the presidential solar panels were removed.
In 2000, investors staggering from the dotcom crash turned to alternative energy as the next big thing, sending the price of many solar and fuel cell company stocks soaring. By 2003, oil prices had again fallen dramatically, investors moved on, and the highflying stocks crashed – and some burned.
Then in 2006, with oil prices sky-high again, politicians, investors, and even farmers began touting the benefits of alternative energy again. So as we enter 2007, with worldwide oil prices having moderated slightly and hovering around $60, even strong advocates of green energy have to ask: is it any different this time?
While there’s plenty of political uncertainty ahead of us, at Winslow we believe the outlook for alternative energy is indeed different this time, and it is here to stay. We see a wide-ranging and compelling list of reasons new to this cycle, both for continued elevated oil prices, and for long-term confidence in alternative energy, regardless of the price of oil:
As New York Times columnist Thomas Friedman often points out, developing viable alternative energy sources that reduce reliance on oil will reduce payments to governments hostile towards America, while encouraging reform within those governments by reducing their oil revenue. In addition, a May 2006 Times article pointed out that national oil companies, which do not grant access to international oil companies, own 77% of the proven oil reserves – oil that we cannot depend on being able to access.
While some American businesses, communities, and individuals have voluntarily cut their emissions, it has not been enough. Both grassroots and political momentum is building towards a regulatory approach of reducing emissions. Seven states are current participants (as of December 2006 – hopefully this number grows over time) in a regional plan to reduce emissions, 28 states have established renewable energy standards, and the first carbon tax was passed in the U.S. in November, when the voters of Boulder, CO approved a carbon tax for all consumers of electricity generated by fossil fuels.
A New Direction
A recent issue of The Economist echoed the fears of many, comparing current interest in alternative energy to the dotcom boom, pointing out that venture capital investments have more than doubled from $30 billion in 2004 to an estimated $63 billion in 2006. At the same time, the current energy system leaves us vulnerable on many fronts – to shortages, to increased and increasing prices, to hostile governments, and to perhaps the biggest threat, a changing climate. We feel that these supply, demand, price, trade political, safety, and climate factors point to an undeniable need for a new direction.
As we examine our global energy situation today and the alternatives, both bad and good, is it any wonder that the demand for green energy is attracting so much interest and capital? We don’t think there has ever been a stronger investment story for alternative energy – increasingly cheaper, undeniably better, and more important than ever before.
By Stephen G. Bushnell CPCU ARM, Director Product Development, Commercial Business, Fireman’s Fund Insurance Company
The Front Edge in Insurance:
Fireman’s Fund Insurance Company is on the front edge of financial protection for green buildings as the first and only insurance company to develop a series of commercial insurance products, risk management tools and policyholder information addressing the special risks and recognizing the superior features of green buildings.
Green buildings have moved into the mainstream due largely to the profound value proposition they bring (energy efficiency, superior indoor air quality, lower absenteeism, higher retail sales, tenants willing to pay higher rents) and their significant environmental benefits (lower green house gas generation, water conservation, reduced pressure on landfills). We fully expect that Green construction will become the “standard” over the next two years as building owners recognize the benefits and municipalities mandate green construction (as have Boston and Washington D.C., among others).
Fireman’s Fund® understands that green buildings have physical features that may not be fully covered by traditional property insurance policies (vegetative roofs, alternative power equipment and water systems) and has crafted the coverage green building owners need to fully protect their investment. The coverage form also includes coverage to divert debris from landfills following a loss and costs to completely flush out the building following post-loss reconstruction. Many green buildings use their alternative power generation equipment to sell excess power back to the grid; we provide coverage for the loss of this income if the equipment is damaged in a loss as well as the cost to purchase replacement power while the equipment is being replaced.
The commissioning process that certified green buildings undergo directly addresses the most common causes of property loss we pay: electric fires, HVAC fires and plumbing leaks. Commissioning means these systems are not only more efficient, they are safer. Accordingly, we offer our Certified Green Building coverage at a reduced price.
We take this a step further with our Building Commissioning Expense coverage. Following a loss we will pay for the building owner to hire a professional engineer to commission the repaired or replaced building systems. The building is more efficient and safer. As an additional benefit, we will pay for the engineer to “test and balance” the HVAC system to optimize its performance.
Green Building owners have made significant capital and emotional investments in their properties. They deserve proper protection and an insurance partner who understands their commitment.
Barriers to Growth:
Insurance companies typically face legal and regulatory barriers as they introduce new coverages. That was not the case for these “Green” products. State Departments of Insurance recognized the value and quickly approved the coverage filing. The market has enthusiastically received the coverages. The Green Building Community is excited that a major insurance company recognizes the value of their work. Green and traditional building owners need coverages that both protect their investment and offers them the opportunity to become greener.
As a large commercial insurer, our obstacles lie in the prospect of the increased risk of obsolete buildings and the unpredictable catastrophe exposure of climate change.
The proliferation of green buildings, supported by the demands of tenants for green space, poses a real risk of obsolescence for traditional buildings. In addition, climate change experts hold that a majority of traditional buildings in the US must become carbon neutral (through energy efficient/green energy generation upgrades or purchase of renewable energy certificates – RECs) if we are to avoid irreversible climate change.
Fireman’s Fund offers a solution for these traditional buildings – our Green Upgrade coverage. Following a loss, we will use green, energy/water efficient products and components in the repair or reconstruction of the building. Other insurance coverages will only replace with “like kind and quality” materials, essentially returning the building to its pre-loss traditional state. If the building suffers a total loss, we will rebuild as a “certified” green building (based on USGBC’s LEED Rating System), including the costs to hire a LEED Accredited Professional to assist in the redesign and the cost of the LEED registration and certification fees.
Stephen G. Bushnell is the Director Product Development for Commercial Business at Fireman’s Fund Insurance Company
By Ben Packard, Director of Environmental Affairs, Starbucks Coffee
New Approach to Purchasing
After years of traveling to coffee-growing regions around the world, we have come to deeply appreciate the care that goes into producing high-quality coffee. These visits are always worthwhile, especially when we have been able to engage directly with farmers, observe their best practices, gain insight about their short- and long-term challenges and identify ways that Starbucks can contribute to the sustainability of their business and community. More important, they have helped to raise our awareness about the need for a more sustainable approach to coffee production – one that touches on every essential aspect of the supply chain – from farming to processing to exporting.
The Conservation Principles for Coffee Production, a set of multi-stakeholder criteria launched in 2001, became the original platform that Starbucks used to evolve and eventually develop a more holistic set of coffee-buying guidelines that is now known as Coffee and Farmer Equity (C.A.F.E.) Practices. These guidelines were designed to ensure the sustainable supply of high-quality coffee; achieve economic accountability; promote social responsibility within the coffee supply chain; and protect the environment.
C.A.F.E. Practices encompasses various sustainability measures that are defined by 28 criteria, extending to both the farming and processing of coffee. The criteria, which serve as the basis for a comprehensive scorecard, fall under four focus areas: product quality; economic accountability; social responsibility; and environmental leadership.
Thousands of participants – from our largest coffee suppliers to many small-holder farms and cooperatives – have applied and been approved as C.A.F.E. Practices suppliers since 2004. When suppliers apply to C.A.F.E. Practices, they must undergo a third-party evaluation to verify the degree to which their practices are aligned with the criteria.
In 2004, Starbucks opened a Farmer Support Center in Costa Rica, which has allowed us to work more closely with farmers and suppliers on their sustainability measures and coffee quality. Shortly thereafter, suppliers in that region began applying and were approved under C.A.F.E. Practices, and the number has kept growing ever since.
The coffee market has always been prone to ups and downs, mostly related to the balance between supply and demand. Back in 2001, coffee prices fell to a record low of $0.42 per pound ($0.91 per kilogram), and fluctuated near the bottom for several years. These particular market conditions created a climate of economic instability that had an impact on many farmers and their communities. Today’s market conditions are greatly improved, evident by recent prices of coffee traded on the New York “C” market (the worldwide reference used by coffee traders). In fiscal 2006, world coffee prices averaged $1.04 per pound ($2.29 per kilogram).
We believe that with any product there is an inherent link between quality and price. Through our close working relationships with coffee farmers and suppliers, we have always emphasized the importance of quality as the best, most sustainable driver of higher prices
paid. We understand that coffee farming, like any business, must be profitable to be sustainable. Furthermore, we know that when coffee farmers do not earn enough to cover their production costs and/or provide a reasonable income; they may switch to other crops or perhaps stop growing coffee altogether. In fiscal 2006, Starbucks purchased 294 million pounds (133 million kilograms) of coffee and paid an average price of $1.42 per pound ($3.12 per kilogram).
Starbucks commitment to pay premium prices for premium quality coffee has not wavered over the years. It is an approach that not only serves the short- and long-term economic interests of coffee farmers and suppliers; it also serves Starbucks interests by creating an incentive for farmers to improve quality and increase production that in turn contributes to a more sustainable supply of high-quality coffee which we depend on to support Starbucks continued growth.
To help assure that the farmer receives an equitable share of the price paid by Starbucks, a requirement for economic transparency is included in our coffee contracts, including all of our contracts with suppliers participating in C.A.F.E. Practices. This provision stipulates that our suppliers must provide credible evidence of payments, usually in the form of receipts indicating payments made at all levels along the coffee supply chain, including prices paid to farmers. In fiscal 2006, 98 percent of our coffee contracts included an economic transparency clause requesting documentation of payments made to various participants in the supply chain. In 95 percent of these contracts, economic transparency was required to the producer level.
Requiring coffee suppliers to provide evidence of payments was almost inconceivable several years ago, especially given the diffused and complex nature of the coffee supply chain and the historical lack of record keeping. However, since Starbucks instituted this requirement, a notable change has started to take place in the specialty coffee industry, with more serious attention now being focused on assuring that farmers receive an equitable share of the purchase price. We believe this ultimately benefits coffee farmers and other key suppliers who add value along the supply chain.
While we are encouraged by the progress to date, institutionalizing this new requirement has come with certain challenges:
• Standardized Economic Tracking Mechanism for Entire Coffee Industry
Currently, the coffee industry does not have a standardized mechanism in place that allows all parties across the coffee supply chain to easily submit evidence of payment in a consistent, uniform manner. We receive different forms of documentation – from a simple receipt for the coffee cherries that the farmer delivered to the mill to full purchase agreements that include more levels along the coffee supply chain. These documents not only differ in quality, they reflect variations in currency, industry standards and laws, units of measure and are prepared in many different languages.
• Continued Emphasis on Relationships, Communication and Training
As our demand for coffee grows and our already complex supplier network expands, we understand the importance of staying in touch with and training our suppliers so they understand how to complete the application forms for C.A.F.E. Practices, manage the required verification process, and adapt their practices to improve their scores. We must also seek efficiencies on our end that enable us to respond more quickly to the needs of our suppliers.
• Verifiers and Improved Systems Needed
Our plan to buy more sustainable coffee in the future can only be realized if our network of approved suppliers participating in C.A.F.E. Practices grows. The process of approving more suppliers will involve conducting a great number of inspections by third-party verifiers. At the end of fiscal 2006, we had 143 trained and approved verifiers in the field, which was 43 more than the previous year.
Going forward, we expect that more verifiers will be needed to keep pace with the increasing number of verifications that will be required. We see the need for more trained verifiers as an opportunity, and we are encouraged by the interest farmers have shown in becoming approved C.A.F.E. Practices suppliers. And because of this, verifiers will need to be responsive to the increasing demand of more inspections.
• Extending C.A.F.E. Practices to Africa and Asia Pacific
Increasing our focus on C.A.F.E. Practices in Africa and Asia Pacific has proven to be difficult, as expected. In both Africa and Asia Pacific, Starbucks has been working to introduce C.A.F.E. Practices to coffee farmers, processors and suppliers. Progress has been slowed by realities of local coffee industries, lack of financial transparency, minimal understanding of C.A.F.E. Practices among local suppliers, and too few trained verifiers.
We realize there may be a need to consider regional guidance for C.A.F.E. Practices to make the criteria more relevant to unique conditions in Africa and Asia Pacific. Also, the need for more locally based support through regional Farmer Support Centers has been confirmed. In Kenya, Starbucks has been collaborating with the African Wildlife Foundation (AWF) on various sustainability initiatives as a first step toward advancing C.A.F.E. Practices in Africa.
Given our optimistic mindset at Starbucks, we choose to view the barriers outlined above as opportunities for improvement. The amount of time, energy and resources needed to implement and manage C.A.F.E. Practices across such a complex, diverse and sprawling supply chain is considerable – and at times more than we anticipated.
When we first introduced C.A.F.E. Practices, we were inspired and motivated to help create a better future for coffee farmers and their communities, based on a shared interest to sustain the production of high-quality coffee. We did expect the process to involve challenges, but these challenges have not changed our vision. In fact, our vision – and commitment – has only deepened.
Ben Packard is Director of Environmental Affairs for Starbucks Coffee
On February 5, Kirk Koepsel who worked with the Sierra Club in Wyoming posted a comment on this blog. He was a dedicated conservationist who committed his life to the cause that he loved.
I just received news that he passed away last night after suffering a massive heart attack while playing hockey. My heart
goes out to Kirk’s friends and family who will miss him dearly. May
his dedication and conviction be a motivation for all of us in our own
Environmental Communications Comes to the Fore
Today’s broadened concern about the environment has created new opportunities for smart businesses to communicate in a way that connects much more deeply with target audiences than traditional advertising and marketing ever has before.
With every opportunity, however, comes barriers and this one is no different. The barriers to successful environmental communications include the seeming inability of traditional ad agencies to communicate effectively about meaningful values combined with self-styled green police using blogs to hold companies to account.
But the biggest barrier is probably the old-school thinking of the companies themselves. A recent Financial Times article referred to green communication as a matter of “corporate hygiene” – a mindset as stuck in the past as a horse and buggy is compared to a hybrid car.
We advise clients to think in terms of opportunity not obligation, in other words, provide authentic examples of environmental progress, then play offense. This thinking needs to replace defensiveness.
It is also imperative that the communications provide an honest representation of what the company is doing – the public, and even activist interest groups, do not expect perfection nearly as much as they look for sincerity and progress.
This mindset is a reflection of the fact that the audience for green communications has changed – it’s no longer a narrow, highly motivated niche but a mainstream swath of the public. Naturally, this means a different message and a higher profile for green attributes.
Understanding this new, broader audience gets to the central point of green marketing today – environmental values should stand at the center of a company’s brand and overall image.
British Petroleum (BP) is a great example with their “Beyond Petroleum” campaign. They got out early, put their alternative energy research and development front and center but didn’t pretend they are something they aren’t.
We took the same approach with a Canadian client, Epcor, a power and water producer. We zeroed in on the great work they do cleaning up water pollution at a high profile site. This got them important notice from green activists as an innovative and sound approach to the environment on this specific issue, building credibility for future work.
The main thing for businesses today is to move quickly, be authentic and then do what we call “greening their brand” – putting an important, values-based message front and center.
Don Millar is President of The Element Agency a communications, advertising and online firm specializing in environmental communications from offices in New York, Vancouver and Mexico City. firstname.lastname@example.org.
By Terry Kellogg, Executive Director of 1% For The Planet
At its best, the field of environmentally preferable purchasing can take credit for the birth and development of the natural and organic product market, projected to reach global sales north of $100 billion next year. On a micro level, it can now boast of significant success stories like the Toyota Prius and EPA’s Energy Star program. The broader LOHAS (Lifestyles of Health and Sustainability) market paints an even more compelling picture: estimated at $230 billion in the US alone.
Even with double digit compound annual growth rates for more than a decade, however, the LOHAS market is still seen as largely untapped. Its remaining potential exists because more than 30% of Americans seem ready and willing to support companies whose values are perceived to be in line with their own. And to this day there are many categories with underdeveloped values-oriented offerings.
Stories about the LOHAS market over the next two years will be headlined by more mainstream (Wal Mart and GE have already perked up) entrants. These players will underscore the market’s transition from a niche opportunity to a powerful segment that no company can afford to ignore.
But this market is not cut out for companies with unexamined practices looking to make a quick buck where flush demand coupled with relatively thin offerings has created very attractive margins. The interplay between conscious consumers and companies hoping to gain their preference has already helped to establish very high expectations for performance standards across a wide range of initiatives. Ignorance of these expectations could spell disaster for a new entrant.
In looking for a way in, some companies will take a piecemeal approach to reducing their own ecological footprint or developing a more sustainable product line. There is a tremendous amount of information available to guide such decisions and almost without exception, case studies illustrate a strong correlation between environmental gains and positive business results, particularly in the early stages of adaptation.
Even for the well-informed, however, there remains the challenge of moving effectively beyond low hanging fruit. Today’s paradigm offers a finite supply of cash positive investments that yield solid environmental gains. Positioning ahead of the curve requires an appetite for risk that too few companies are ready to embrace. Thus the critical requirement for additional investments aimed at changing today’s paradigm.
A subtly different way to approach the LOHAS market is to ask: how can we as a company maximize our potential to affect change on a macro scale, and how can we do it in a way that best supports our long-term business interests. Looking through this lens, opportunities will emerge that tightly knit sustainable business practices with overall business strategy. Theses initiatives will garner the internal resources required for success; and their success will ensure both their longevity and the opportunity for similar efforts down the road. Many such initiatives will be the same as those surfaced through a purely internal assessment of options. But overall, they are more likely to maximize returns to both the environment and the sponsoring enterprise.
1% For The Planet (1%FTP) is an increasingly attractive initiative for many companies. Members of 1%FTP – companies that commit at least one percent of their sales (or the sales from a brand) to environmental causes every year – have grown in number from 90 to nearly 500 in less than two years. They hail from nearly every sector imaginable, and range in size from billion dollar publicly-traded entities to pre-revenue start-ups and family owned businesses. They are attracted to the network for a wide range of reasons including connectivity – with other members, with causes they care about and with committed consumers.
1%FTP is a tool that can help address important barriers that still exist in the LOHAS arena. Because it’s a program that has the potential to be adopted widely (unlike labeling schemes limited to certain sectors) it also has the potential to become recognized and acted on widely. One Percent also reflects the kind of clear and powerful commitment that easily resonates with a wide audience. This helps address the challenge of effectively communicating what can be confusing initiatives that lack relevance to enough people.
As a tool to affect change, it is hard to match the potential embodied in purchasing power. But for the market to work effectively in this regard, a spectrum of meaningful choices must be available with enough information to drive consumer decision-making. The growth of the legitimate LOHAS segment speaks to the steady erosion of these barriers. One Percent works to align and reward committed companies and activists, two powerful macro-societal change agents. In doing so, 1%FTP places a significant amount of potential power in the hands of a consumer base that appears ready and eager to use it.
Terry Kellogg is the Executive Director of 1% For The Planet. Prior to joining 1%, Terry ran Timberland’s Environmental Stewardship department and worked for the renewable energy retailer Green Mountain Energy. Terry began his career in environmental work at the Greater Yellowstone Coalition in Bozeman, MT.
We have just fixed a technical glitch that was preventing comments from posting to the blog. Our apologies for the confusion. If you have posted a comment, it should now appear linked to the blog. If you have not posted a comment yet, now is your chance to do so! As noted above, we encourage everyone to provide additional examples and information to this blog to allow it to be as robust as possible. Thanks for your input and, again, our apologies for the delay in publishing these initial comments. All the best, Brian Kuehl
By Arthur B. Weissman, Ph.D., President and CEO, Green Seal, Inc.
Almost like the Arctic ice breaking up, the public’s awareness of global warming and its responsibility for causing it has broken through dramatically in the past year. Soon people may realize that the products and services they purchase can affect the climate, their health, or the rest of the living world. At that point, the continuing effort to promote green products and services may indeed succeed in making the world more sustainable.
For several decades, a small group of quasi-governmental or private national organizations around the world has been quietly promoting a green economy by identifying green products and services. The tools they have employed typically include developing environmental leadership standards, certifying products and services that meet the standards, licensing use of a seal or logo to certified products and services, and working with institutional purchasers to green their procurement and operations. In the United States, Green Seal, Inc., has been active since 1989 as the national program (although it is a non-profit organization). There are now around three dozen such programs around the world, organized through the Global Ecolabeling Network.
Recent Developments and Directions
In the past few years there has been a veritable explosion of interest in certain institutional and industrial sectors in green products, services, and operations. Environmental standards that received little attention for years suddenly became adopted as the de facto product standards by government agencies and other large purchasers, causing industry to scramble to meet the standards. For example, Green Seal’s standard for institutional cleaning chemical products was adopted by Massachusetts for cleaning its facilities, then by other States and even US EPA, and last year New York State required all its elementary and secondary schools to be cleaned by products meeting the Green Seal standard or its Canadian equivalent.
Concomitantly, these large public and private institutions are increasingly looking at their entire operations, including their purchasing and facilities management, from an environmental and energy perspective. In these assessments, the institutions seek available environmental standards to ensure that the products and services they buy and their operational practices are environmentally responsible. We have had direct experience in evaluating purchasing and facilities management at the World Bank, University of Miami, and other institutions. They can collectively exert a significant pull on the market in a more sustainable direction.
Lately, this kind of greening of institutions and the supply chain through adoption of environmental standards and criteria has extended to large retailers. Initially certain retailers like Home Depot and Lowe’s adopted environmental standards and certification for particular commodities like wood, primarily under pressure from advocacy groups. Now, however, they are increasingly embracing green standards across a range of different categories. The world’s largest retailer, Wal-Mart, has committed to greening its product line by using environmental criteria or metrics assembled in a scorecard to evaluate each product along with traditional measures of price, performance, and availability.
The big question is whether the use of environmental standards and certification will successfully transition to the consumer world. Programs like Green Seal were originally intended for consumers, but it was too difficult in the 1990s to break into the consumer market. Nor is it clear even now whether consumers will truly pay attention to environmental and social considerations in their purchasing on a regular basis. If they did, consumers could collectively cause an enormous pull toward sustainability. Consider it like an anti-SUV movement – something like the current fad for hybrid cars magnified many times.
In the meantime, we continue to work primarily in the institutional realm to make products and services more healthful and environmentally responsible. The health angle on everyday products and services is extremely powerful, and could potentially reach to the consumer level. In the janitorial industry, for example, there is growing awareness of the effect of building materials and chemicals on human health, particularly with respect to respiratory systems. Cleaning chemicals themselves are now implicated in the asthma epidemic in schools nationwide, as some products still contain powerful respiratory irritants and asthmagens.
In fact, New York State is sponsoring an update and revision of Green Seal’s environmental standard for cleaning chemicals to ensure that it protects sensitive and vulnerable populations such as children. We will be working at the frontier of science and its applications to the marketplace in this revision project, because the science behind asthmagenicity and related effects is still uncertain. We are including nationally-recognized pediatric health experts and experts from such agencies as the Center for Disease Control. At the end, it is hoped that the revised standard will identify the current environmental leadership products in the market and also those that are specially formulated to protect the most sensitive and vulnerable populations.
Another highly significant area to which these tools could be applied is energy and climate change. The Federal government’s Energy Star program may be able to guide the consumer market for goods and appliances, and a likely cap-and-trade policy may take care of industrial output. In between, institutional buyers and facilities will need guidance on reducing their energy and carbon impact. For example, a current evaluation Green Seal is conducting for The Pentagon includes finding efficiencies in its lighting systems and heating, ventilating, and air-conditioning systems. Just this one enormous building can yield tremendous savings, but consider the result multiplied thousands of times. Directing institutions to energy-efficient, low-carbon-impact products, services, and systems could be the next frontier for our programs.
Green Seal and its sister programs have faced enormous hurdles over the years, especially from U.S.-based multinational companies that saw us as a threat to their marketing hegemony. While some countercurrents remain in industry, their blatant opposition from the 1990s is largely past, thanks to the greening movement in Europe and other forces. Still, promoting green products and services in the U.S. economy and getting environmental standards and certification incorporated on a larger scale are a challenge.
As much as industry, corporate America, and governments at all levels are beginning to embrace green practices – from green building construction and maintenance to green operations and green procurement – on the whole they continue not to consider the environmental effects of their actions. This is largely due to cultural norms and traditional practice, rather than conscious opposition. After all, we are all engaged in a kind of cultural revolution in trying to consider and incorporate the environmental aspects of our economic activities, after centuries of paying scant attention to them (externalities largely unchecked). Institutions tend to take time to change course and incorporate new paradigms, and that is what is happening now. For some of us the progress is excruciatingly slow, especially given the magnitude and severity of the world’s environmental problems, including loss of species and biodiversity, deforestation and other habitat loss, climate change, and pervasive toxic pollution.
The wild card may be the consumer market. It is a market where tens of millions of dollars are required to establish brand recognition; where sellers continue to emphasize appearance, price, and superficial performance above all other characteristics; where consumers say one thing and buy another (many more profess to buying green than actually do so); where service providers like hoteliers fear to do anything to compromise what they call guest satisfaction. Yet, if everything aligns correctly, the consumer market can much more quickly make changes for the better. In fact, let us declare for once and all that no green product should perform less well than comparable leading brands if the green products movement is to take hold. The reason the hybrid car is selling is not just that it is environmentally preferable but also that it saves on fuel and drives well. Nor can we expect consumers to pay more for green products out of altruism or abstract concerns. That might be the exciting result of large retailers promoting green products: they can control costs in the supply chain by creating the needed economies of scale.
If industry makes green products that perform as well and are price-competitive, is the battle won? Perhaps – if we know for sure which products are green. And that is where we come back to environmental standards, certification, and labeling programs. Independent, credible groups like Green Seal are striving to provide the technical and evaluative framework for the greening of the economy. The time is growing more ripe – and more urgent – for both consumers and institutions to embrace this framework.
Arthur B. Weissman, Ph.D. is President and CEO of Green Seal, Inc.
By Michelle Wyman – Executive Director, International Council of Local Environmental Initiatives, USA (ICLEI-USA)
Eighty percent of Americans now live in cities. By 2050, 90 percent will. Cities are also where most of the energy derived from fossil fuels is consumed, where economic and political power is concentrated, where decisions that are felt everywhere are made. That’s why cities are the places that have the most direct and effective access in the effort to reduce global warming pollution and pioneer sustainable development.
Cities across the country and, indeed, around the world are demonstrating their commitment to sustainable development and climate protection through “green purchasing” initiatives, also known as “sustainable purchasing” or “environmentally preferable procurement.” Doing so also reflects the cities’ commitments to fiscal responsibility, social equity, community and environmental stewardship.
U.S. cites large and small can exercise their significant buying power to have both a direct impact on the market because of the volume of products and services they procure and an indirect impact by spurring similar action across the private sector. They do so while also increasing their bottom line. The growing emphasis on green purchasing presents unprecedented opportunity for the business community.
Think about all the local government facilities in your city: courtrooms, city halls, office buildings, police and fire stations, recreational facilities, parking lots, and libraries. Consider their computers, photocopiers, refrigerators, fax machines and lighting, heating and cooling needs. Cities also deal in landscaping, catering, conferences and meetings as well as vehicle fleets.
If cities choose to make all of their buildings, products and services “environmentally friendly,” it’s dizzying to consider the widespread and long-lasting benefits for our lives today as well as those of our children and grandchildren and for the business community. It’s estimated that replacing 500 incandescent exit signs with ENERGY STAR versions would save $25,700 a year and $208,300 life cycle on maintenance and energy costs and 119 and 1,190 tons of carbon emissions, respectively.
There are plenty of important lifestyle changes that people can and should be making on an individual basis, but the impact of even simple changes at the city level can quickly multiply by the thousands and beyond. Together, U.S. state and local governments spend more than $385 billion on goods and services and billions more to power those products. For cities embarking on a path to slash carbon emissions, purchasing greener, more energy efficient products and services can make a huge difference. It’s estimated that by specifying energy efficiency in purchasing policies we could cut energy costs in half, not to mention significantly reduce global warming pollution.
Cities aren’t just viewing green purchasing as a one-time cost savings; they are calculating the direct and indirect costs for the full life cycle of products. It’s about how we create, use and dispose of the products. Seattle’s Environmentally Responsible Purchasing Policy directs departments to consider life cycle effects from: pollution, waste generation, energy consumption, recycled material content, depletion of natural resources, and the potential impact on health and nature. This opens even more windows for local governments and for business.
Not only can local governments pack a financial punch at the point of purchase, they can shift the market in favor of energy efficiency. Adopting a formal policy of green procurement sends a message to manufacturers, service providers and the market as a whole: “We’re demanding green products and services. You must supply them.”
Here in the U.S., plenty of cities are establishing or ramping up sustainable purchasing policies.
The city of Chicago passed its own standards for energy-efficient buildings, the Chicago Standard, and the writing was on the wall that new construction and major renovations must achieve the Leadership in Energy and Environmental Design (LEED) standards.
Same thing for Austin, Texas, which in 2000 passed a resolution requiring all public projects larger than 5,000 square feet to be LEED certified.
In Denver, which has launched the “Greenprint Denver” initiative to further encourage sustainable purchasing and other green practices, the Wellington E. Webb Municipal Office Building was built in 2002 to Energy Star qualifications to consolidate 40 agencies and provide the city government with a number of energy saving measures. In addition, Denver voters approved a $378 million bond in May, 2005 for the creation of a new justice center, which will be built to LEED certification standards. New York City has earned the nickname “the Big Green Apple” by switching all of the traffic signals to energy-efficient lighting (LEDs), saving $6 million a year, and replacing about 200,000 refrigerators in public housing with energy-efficient versions, saving $7 million a year. Cities like Charlotte, North Carolina, and Houston, Texas, are greening their municipal vehicle fleets by adding more fuel-efficient and hybrid vehicles.
By making green choices, local governments can encourage citizens and businesses in the community to follow their lead. After the city moved further along the green spectrum, the private sector in New York quickly followed suit, with green building design becoming the new status symbol. Landmarks of the sustainable building craze include the Conde Nast Building at 4 Times Square, the residential Solaire in Battery Park City and the Hearst Tower.
Of course, making sustainable purchasing choices also enhances the sheer quality of life in communities. It provides direct health benefits for city employees as well as less global warming and air pollution, all of which makes these cities cleaner and safer places to live, work and raise families. Taxpayers can also rest assured that their money is being spent in an efficient manner. As the head of the Commission for a Sustainable London 2012, which is planning a “green” Olympics, said recently, “Sustainability isn’t just about buying recycled paper - it’s about using purchasing power to do some good.”
It’s easy to see why sustainable purchasing practices have taken hold in so many cities.
At ICLEI-Local Governments for Sustainability, we work closely with more than 240 cities in the U.S. and more than 800 around the world working to improve the global environment through local action. We provide resources, tools, and technical assistance to help local governments measure and reduce greenhouse gas emissions in their communities through our Cities for Climate Protection ® (CCP) campaign. We are engaged with ENERGY STAR, a joint program of the Environmental Protection Agency and the Department of Energy designed to alert consumers to more energy efficient appliances and equipment. Through this partnership and our work with cities designing sustainability and climate protection plans, we strongly encourage cities to go green when possible.
As more cities sign the U.S. Mayors Climate Protection Agreement (which commits a city to the Kyoto target of reducing emissions 7 percent below 1990 levels by 2012) and join the CCP, there will be a surge in demand from local governments for green products and services that will help them meet their emissions reductions goals.
The sustainable purchasing movement has grown leaps and bounds in the global market as well. In 2002, the World Summit on Sustainable Development in Johannesburg committed public authorities to “promote public procurement policies that encourage development and diffusion of environmentally sound goods and services.”
ICLEI is a partner in Promoting an Energy Efficient Public Sector (PePS), working with 40 municipalities in Mexico to make green purchasing choices. Mexico’s government sector energy conservation activities began in the early ’90s and have burgeoned into perhaps the broadest government end-use program in the world, impacting hundreds of government facilities. The country’s energy management agency, CONAE, an ICLEI partner which houses our Mexico office, provides a strong example of how limited resources can be leveraged into enormous savings. The Administración Pública Federal (APF) program, for example, is a lighting initiative that has resulted in audits and retrofits in almost one thousand Mexican government buildings.
ICLEI-Canada also serves on the North American Green Purchasing Initiative (NAGPI) steering committee that works to coordinate green purchasing activities, engage other stakeholders and pool information and resources. ICLEI-Europe is leading a collaborative, continent-wide effort on sustainable procurement. This is an extensive effort that includes trainings and workshops, surveys and research, and multi-country partnerships. We recently co-hosted the sixth EcoProcura ® conference in Barcelona, Spain, where 360 delegates from 53 countries gathered to provide a mechanism for dialogue between the private sector and the public sector to advance sustainable product innovation and further promote a market for sustainable products and services.
Despite the enthusiasm for sustainable purchasing, plenty of challenges remain. City staff who ultimately implement these policies require proper training as to the merits of green purchasing and the options available to them. Agencies shouldn’t feel pressured not to procure a more expensive product or service if, when you calculate the associated use and disposal costs, it will actually save the city money. This underlying philosophy – saving money, saving energy, creating better communities – must also become part of the culture within local government.
As with many policies, the scope of local government purchasing makes it inherently difficult to monitor and enforce. Some governments are addressing this through permanent mechanisms and tools in municipal management to ensure unwavering implementation, effective monitoring and continual improvement. Competing laws and bureaucracies can sometimes stand in the way, raising questions as to a city’s authority. A more centralized system might allow policing of purchasing and blocking undesirable products.
Some vendors and businesses claim they are excluded by green purchasing policies. In reality, they are entering a market of great possibility. Rather than harming industry, sustainable procurement is a market-based tool which provides incentives to stimulate innovation and improve the sustainability of production patterns. As the international regulatory framework and consumption patterns change in the context of current events and demands, sustainable procurement provides an opportunity for companies offering innovative solutions to find markets for their products and to develop further.
The most well-known example is Wal-Mart which announced in the fall of 2005 that it plans to increase fuel efficiency in its truck fleet by 25 percent over three years and doubling it within 10 years; reduce greenhouse gases by 20 percent in seven years; reduce energy use at stores by 30 percent; and cut solid waste from U.S. stores and Sam’s Clubs by 25 percent in three years. Wal-Mart is also now the biggest seller of organic milk and the biggest buyer of organic cotton in the world and is working with suppliers to figure out ways to cut down on packaging and energy costs. Wal-Mart is taking such profound steps because it’s good for the environment, and their investments represent revenue increases and a positive presence in local communities.
The EPA recently ranked Wells Fargo & Co., which uses some 550 million kilowatt hours of renewable energy to light up its financial centers each year, the top buyer of “green” power in the country. The financial giant is among 40 Fortune 500 firms that have committed to doubling their renewable energy purchases this year.
There is clearly a new level of awareness about global warming – President Bush gave it credence in his State of the Union address the day after 10 CEOs from the likes of Duke Energy and General Electric called on the government to address the problem – and a burning desire on the part of the world’s citizens to take action now to curb global warming pollution. This is a desire that only burns hotter with every day. People are making changes in their daily lives and demanding that their elected officials – at the local, state and federal level – make changes on a larger scale.
Local governments have an invaluable role to play in promoting the use of green products, services and buildings. The great thing about green purchasing is that cities don’t have to start from scratch or move toward these goals in isolation. By working together, cities can learn from each other and send powerful and consistent signals to the market. Government organizations find that green procurement policies reduce overall costs, offer significant opportunity to use materials, resources and energy more effectively, improve employee health and stimulate markets for innovative new products and services. With sustainable purchasing, cities can set the pace and lead the way as they have done in so many other aspects of climate protection and sustainable development.
Michelle Wyman is Executive Director of ICLEI-USA
Promoting an Energy Efficient Public Sector
North American Green Purchasing Initiative
ICLEI-Europe’s Sustainable Procurement Program
EPA’s Environmentally Preferable Procurement Program
EPA and DOE’s ENERGY STAR Program
ENERGY STAR’s purchasing and procurement information
Center for a New American Dream’s Procurement Strategies Program
On Monday February 12, 2007 the Turning the Ship blog will host the topic Sustainable Purchasing. We are pleased to announce the following contributors who will guide the discussion:
Michelle Wyman, Executive Director, International Council of Local Environmental Initiatives
Sustainable Purchasing by U.S. Cities
Arthur B. Weissman, Ph.D., President and CEO, Green Seal, Inc.
Promoting Green Products and Services: Cure for Asthma and Global Warming?
Terry Kellogg, Executive Director, One Percent for the Planet
Ben Packard, Director of Environmental Affairs, Starbucks Coffee Company
A Wall Street Journal reporter asked me last week whether climate change was spurring a fundamental change in environmentalism. He was referring to the surge of corporations getting involved in climate protection, such as those investing in projects to prevent Brazilian rainforest deforestation to capture potential “carbon credits. I answered, yes, the scope of the climate problem is so broad that it is drawing all kinds of groups and perspectives into the environmental effort – not just companies and pension funds, but also cities, religious groups, and labor unions.
On reflection, I may have framed the answer too narrowly. It’s not just environmentalism that’s changing. The flip side is that business is changing dramatically too. I’d suggest that the climate challenge is forcing society as a whole to alter the way we manage both our economy and our natural assets – even assets as hard to grasp as the systems that regulate rain, wind, and temperatures around the globe. This change is still in its infancy, but we already can see the signs, and we can begin to see where these changes may eventually take us.
A prime example is the January 22 debut of the U.S. Climate Action Partnership (USCAP). Ten large corporations teamed with the
Consider the scope and diversity of USCAP’s initial membership: Alcoa, BP America, Caterpillar Inc., Duke Energy, DuPont, Environmental Defense, FPL Group, General Electric, Lehman Brothers, Natural Resources Defense Council,
And USCAP is just a subset of companies actively engaged in developing progressive climate solutions. The
Reasons for Change
The reasons why companies are engaging in the BELC, USCAP, and related entities are almost as significant as USCAP’s recommendations themselves – and these reasons may provide a useful start for the Turning the Ship discussion.
From my own experience working with the business community, leading the BELC, developing USCAP, and working with Dr. Andy Hoffman from the
So, how are companies pursuing strategies to address climate change? I encourage those interested in the details to read our Corporate Strategies Report, as well as our compendium of climate programs BELC companies have undertaken. The report serves as a “how to” guide with steps for strategy-making based on collaboration with BELC member companies, six in-depth case studies with Alcoa, Cinergy/Duke Energy, DuPont, Shell, Swiss RE, and Whirlpool, and the Strategies survey of 31 large corporations. The report finds:
Companies that take action now will be best positioned to thrive in future carbon-constrained markets, which will be transformed by the demand for energy efficiency and no- or low-carbon technologies. As worldwide efforts to combat climate change intensify, the development of an integrated global carbon market with countless suppliers of emissions reductions appears increasingly likely. A global carbon market would also create thousands of new investment opportunities that new players – down to individual households — could involve themselves in, either directly or indirectly. With the correct price signals in place, technological innovation would flourish and hasten the development of the “iPod for energy,” to borrow a line from David Hone, Group Climate Change Adviser at Shell.
So to go back to the question from the Journal reporter: there is no doubt that climate change is spurring a fundamental change in environmentalism. But that’s just part of the story. Climate change is altering the way companies do business, from the products they offer today to the strategies they put in place to prepare for the future. Climate change is an issue that will affect virtually all aspects of society. The consequences of these changes will be most severe for those who do nothing to prepare for them today. The companies that the
By Dan Esty, Director of the Yale Center for Environmental Law and Policy
Ford’s announcement last month of a major financial restructuring, on top of earlier news of third-quarter losses of $5.8 billion as well as plans to lay off one-third of its 47,000 salaried workforce and shutter 16 facilities, shocked many people. The company’s disintegration should not, however, come as a surprise. Ford’s blue- and-white logo once embodied America’s industrial might. It now stands as a symbol of short-sighted management.
In particular, Ford executives misjudged the strategic importance of a cluster of energy and environment issues. The company continued to bank on gas-guzzling SUVs and light trucks even as fuel prices shot up, tailpipe emissions loomed larger as an issue, and consumer tastes shifted toward more fuel-efficient cars. Meanwhile, Toyota’s brisk trade in green vehicles like the hybrid Prius and a “cool” and eco- friendly reputation leave it enjoying record profits and poised to overtake GM as the world’s largest auto maker.
Ford isn’t the only company to have been blindsided by the “Green Wave” washing over the business world. But it is ironic that just- departed CEO Bill Ford, who was known for his environmental interests, never succeeded in getting his leadership team to understand the need to make the environment a core element of the company’s business strategy.
Today, no company can afford to ignore the challenges posed by pollution control, natural resource management and energy consumption. Business leaders in manufacturing and services, big companies and small, must prepare for a world of tighter supplies of fossil fuels (and resulting high prices), greenhouse gas emissions controls, limited water and rising resource costs. Businesses also face demands from an array of new environment-oriented stakeholders including bankers, market analysts, customers, employees and communities, in addition to the traditional pressures from regulators, environmental groups and other NGOs.
While every business must manage the risks and costs of environmental protection, some are also finding an upside to going green. With its “ecomagination” thrust, GE has positioned itself to respond to society’s environmental problems. CEO Jeff Immelt envisions billion-dollar businesses selling wind turbines, more efficient jet engines and drinking-water purification systems. From Ikea to Coca- Cola, companies are finding ways to differentiate their products, create new lines of business, win customer loyalty and enhance their brand value by taking up their customers’ environmental interests and values.
Even Wal-Mart has emerged as a major player in the world of corporate sustainability. CEO Lee Scott has promised to cut his company’s energy use by 30%, reduce waste by 25%, and become the world’s leading seller of organic products.
So what went wrong in Detroit? And what are the lessons for the business community more generally? Three main points can be drawn from Ford’s collapse, which has a number of causes, including skyrocketing health-care costs and burdensome retiree benefits, but a fundamental link to mishandled environmental strategy.
First, the Green Wave is real. Companies need to learn how to manage environmental challenges or they will be taken under. It is not enough to sponsor beach clean-ups and contribute a few dollars to the local environmental group. Corporate leaders need to look at their operations through a green lens and fold environmental thinking into their core business strategy.
Second, to target their environmental efforts, companies need to map their ecological “footprint.” Ford had eco-initiatives, but they failed to address the company’s real vulnerabilities. In fact, Ford’s redesigned River Rouge manufacturing facility had state-of-the-art environmental features including a grass roof and natural ventilation. And the company contributed millions of dollars to rainforest protection. But Ford’s problem wasn’t pollution at its factories, and it certainly wasn’t deforestation of the jungle. No, Ford’s strategic focus needed to be on its vehicles. The market shift toward more eco- friendly and efficient cars caught Ford flat-footed with a product line heavy on fuel-chugging and pollution-spewing behemoths like the Expedition and Navigator.
Every business needs to understand its environmental exposure. If you’re Coca-Cola, you need to face up to water issues — as CEO Neville Isdell is doing. If you’re an auto maker, fuel efficiency and tailpipe emissions have to be at the heart of your strategy.
Third, there is money to be made solving society’s environmental problems. If GE’s multibillion-dollar bet on ecomagination is not a sufficient signal of this reality, Toyota’s success surely is. Dozens of other companies are finding opportunities to turn green to gold. Shaklee, for example, has built a thriving business selling nutritional supplements and eco-safe cleaning supplies with a focus on living in harmony with nature. To back up its green image, the company has promised to offset all its carbon emissions and to plant a million trees in North America.
The bottom line is clear: Environmental factors have emerged front and center in business. Ford is paying a high price for missing this development. No company can afford to ignore this object lesson.
Dan Esty, a professor at Yale, is the Director of the Yale Center for Environmental Law and Policy and the author, with Andrew Winston, of “Green to Gold” (Yale University Press, 2006).
Reprinted from The Wall Street Journal © 2006 Dow Jones & Company. All rights reserved.
By Joel Makower, Executive Editor of GreenBiz.com
The drumbeat of headlines has become steady and strong. Each week, it seems, the rhythm of news stories about the greening of business picks up tempo.
Just since new year’s, for example, we’ve reported in GreenBiz.com that: Swiss Re will give rebates to employees for purchases that helped reduce their carbon footprint; GE and AES will jointly develop greenhouse gas reduction projects; Tesco, Britain’s largest supermarket chain, will label the products it sells according to their carbon footprint; HP will surpass recycling a billion pounds of used electronics; Morgan Stanley’s vice chair will head a new group focusing on market-based economic solutions to global environmental and climate issues; Wal-mart’s new 360 Sustainability plan will make environmental concerns central to its business decisions. And ten big companies joined forces with a activist groups to demand that Congress enact comprehensive global warming legislation.
And 2007 is barely a month old.
Meanwhile, over the past several months, Business Week, The Economist, Forbes, Fortune, and Business 2.0 have all run cover stories on the greening of business.
What, in Al Gore’s name, is going on here? Could the mainstreaming of green business finally be upon us?
Maybe. But we’ve only just begun — and we’ve got a long, long way to go.
There’s no question that green has, as columnist Tom Friedman has noted, become the color du jour. More companies are doing more things, and doing them better, than ever before. The actions they are taking cover a wide spectrum, from carbon neutral products and processes, to products designed to be fully recycled into their constituent ingredients, to biobased alternatives for toxic chemicals. Green advertising is coming back after years of languishing, as companies feel more confident telling their stories. CEOs are becoming more forthright and outspoken on the issue — to their customers, shareholders, and political leaders.
Is it a tipping point? Probably not: corporate environmentalism is still far from a universal, self-sustaining movement. But increasingly, companies are tipping toward action, and the list of laggard and recalcitrant companies is getting shorter by the day.
But let’s not break out the organic champagne quite yet. For green to be truly mainstream will require breaking down a host of political, economic, and cultural barriers. We’ll have to rethink some of our assumptions about the role of government. Politicians will need to decide whether to lead, follow, or get out of the way. Environmentalists will need to develop some new tools and rules of engagement. Wall Street will need to pay attention, and to better track companies’ environmental risks and opportunities. And the public will need to change its attitude, big time.
The public perception paradox is particularly problematic. As it stands, most Americans seem to be of two minds on business and the environment. They want companies to step up to the plate, recognizing that they are, at once, the biggest contributors to environmental problems and the best chance of solving them. Yet, when a big company does get proactive, there tends to be widespread suspicion and cynicism among the citizenry about whether it’s genuine, or a cover-up, or outright greenwash. Environmentalists have been known to punish many a good corporate deed.
There’s good reason for skepticism, given some company’s past failures to walk their talk, but such skepticism is becoming increasingly counterproductive. As companies move past their early timid and often misleading stances on the environment, and start to take real, substantive action, we’ll need to suspend critical judgment, at least a little. We’ll need to give companies room to innovate, experiment, and fail. We’ll need to accept incremental improvements. And we’ll need to acknowledge and reward good company behavior, even if it’s far from perfect.
Most of all, we’ll need to foment a much more dynamic conversation than ever before among all the players in the marketplace, examining how best companies can move the needle on our biggest environmental challenges, do it quickly, and make it equitable and rewarding for all involved.
So, let the conversation begin.
“We must raise our sights all along the production line. Let no man say
it cannot be done. It must be done – and we have undertaken to do it.”
President Franklin D. Roosevelt
Address to Congress, January 6, 1942
In 1942, faced with the newly realized threat of World War II, the U.S.
economy turned on a dime. Virtually overnight, U.S. businesses moved
from producing cars to producing planes. Cosmetic factories began
producing munitions. Roosevelt’s War Production Board rationed
gasoline, heating oil, rubber, metals, and plastics. Nationwide,
communities organized drives to collect scrap iron, tin cans, rags,
paper and cooking fat.
The American public had been reluctant to engage in the war overseas.
Nearly a year-and-a-half had passed since the start of the Nazi
blitzkrieg in Europe and over a year since the Japanese invasion of
Indo-China. The American public was still reeling from the expense of
World War I and the Great Depression and was loath to take on the cost
and risk of entering a new war that might never reach American shores.
Of course, that all changed on December 7, 1941. And though America
had resisted engagement in the conflict, once the threat was clear we
turned our full attention and economic muscle to one overriding
national goal: victory.
Today, America is facing a challenge of a different sort. One that we
have been slow to face, believing perhaps that our involvement may not
be necessary or that the cost will be too great. But once again, it is
becoming clear that this threat cannot be avoided and must be
confronted head-on. And once again, the American economy is being
called upon to undertake a dramatic transformation to assure victory.
Three days ago, the world’s leading network of climate scientists
concluded for the first time that climate change is “unequivocal” and
is “very likely” caused by human activities including the burning of
fossil fuels. The Intergovernmental Panel on Climate Change report
found that the temperature of the oceans has increased, that mountain
glaciers and snow cover have declined in both hemispheres, and that
widespread decreases in glaciers and ice caps have already contributed
to sea level rise.
This grim news follows the release last October of the Stern Report,
prepared by the former Chief Economist to the World Bank, which
concluded that climate change could impact the global economy on the
scale of the Great Depression or the First and Second World Wars,
causing environmental damage that could cost between 5 to 20 percent of the world’s annual gross domestic product.
And while climate change has become the most widely discussed
example of unsustainability, it is only one example. From the depletion
of ocean fisheries, to the loss of the rainforests, to drawdown of
fresh-water aquifers, many significant regional and global
environmental challenges have gained greater public recognition in
Threats that for decades have seemed to most Americans as too distant
or as too costly to confront are suddenly looming very large in the
This shift in awareness can be readily seen in the responses of major American companies. From Wal-Mart’s sustainability
initiative, to Home Depot’s embrace of FSC lumber, to GE’s
Ecomagination, to the coalition of major U.S. businesses that last
month called for caps on carbon dioxide emissions, a green wave is
clearly moving through U.S. business.
The Turning the Ship dialogue seeks to explore this on-going market
shift — what are the causes, drivers and magnitude of this
wave? And the Turning the Ship dialogue seeks also to
ascertain whether there are market or policy barriers that
are preventing additional businesses from participating in this
The online dialogue will explore the market forces that are already
driving change and the tools that companies are using to become more
sustainable. For the next five weeks, this blog will host short
articles by some of the world’s leading thinkers on a series of topics
relating to the environmental transformation of the U.S. economy.
Following completion of this online dialogue, the Harvard University Graduate School of Design, Loeb Fellowship, and The Clark Group will
convene a one-day roundtable on March 13, 2007 to explore whether there are market or policy options that can accelerate this environmental
transformation in light of today’s pressing environmental challenges.
The roundtable discussion will be convened at the Genzyme Center, a
platinum-rated green building in Cambridge, MA. The discussion will be
for invited guests, with a public presentation hosted afterward at the
Graduate School of Design.
Complete details on the Turning the Ship dialogue can be found at
I encourage you to comment on the articles that will be posted in the
coming days and weeks. Add your own examples of exciting developments that you have seen and note market or policy barriers that you believe should be addressed – I look forward to hearing from you online!
Let me close in the same way that I started – with a quote from President
Roosevelt’s January 6, 1942 address to Congress:
“Lost ground can always be regained – lost time, never. Speed will
save lives; speed will save this nation which is in peril; speed will save
our freedom and civilization – and slowness has never been an American