Global Corporations & Environmental Sustainability Will O’Brien April 2010.

Global Corporations &

Environmental Sustainability

Will O’BrienApril 2010

Objectives

To increase understanding of: Definitions Triple Bottom Line (TBL) Business Impact on the Environment Global Challenges re: Sustainability Doing business in…..

Australia

China

Europe

Japan

Integrating Sustainability into Business Models What are Global Corporations doing? Where to go for additional Information

Sustainable Development

Sustainable development seeks to meet the needs and aspirations of the present without compromising the ability to meet those of the future. Far from requiring the cessation of economic growth, it recognizes that the problems of poverty and underdevelopment cannot be solved unless we have a new era of growth in which the developing countries play a large role and reap large benefits.

Our Common Future, 1987The Brundtland Commission(UN World Commission on Environment & Development)

Environmental Footprint

Source: “Measuring Environmental Footprint: A Financial Services Industry Case Study”, 2008, UNC

An environmental footprint is a measure of the amount of resources consumed and the amount of pollution; e.g., green house gas and waste created by an entity and by the firms that serve the entity, usually summarized by the equivalent are of land needed to assimilate these impacts.

Weyerhaeuser’s Environmental Footprint:

http://www.weyerhaeuser.com/Sustainability/Footprint

Triple Bottom Line

The triple bottom line (abbreviated as "TBL" or "3BL", and also known as "people, planet, profit" or "the three pillars"[1]) captures an expanded spectrum of values and criteria for measuring organizational (and societal) success: economic, ecological and social. (Wikipedia)

Business Has Traditionally Assumedan Infinite Capacity Planet

• Business principles based on assumption of infinite natural resources and waste absorption capacity

• “The concept of multiple industries collaborating on a ‘whole systems’ approach, recycling each other’s outputs into inputs is completely antithetical to the cult of the individual and the pioneer myth that so deeply characterizes American corporate culture.”*

• US antitrust legislation has not allowed “collaboration”

*Oliver Kellhammer, MBA Student, Bainbridge Graduate Institute

Industrial Pollution

Earth’s Systems Complexity, Cycles & Interconnections

• A system is a collection of interdependent parts (with flows and stores) enclosed within a defined boundary.

• The earth has four major systems

– Lithosphere – soil, rock

– Hydrosphere - water

– Biosphere – living organisms

– Atmosphere – air

• Human activity is disrupting

these systems in complex,

ways

Dave McKay, 2009

• 22 billion disposal diapers in landfill/year

• 100 million cell phone put out of service/year

• 2 million tons of e-products disposed/year

• 63 million computers in the U. S. became obsolete in 2005

• Circuit boards - lead & cadmium

• Flat screen & switches - mercury

What is in a Landfill?

80% of Toxic Wastes are from Electronics Products

• The electrical and electronic waste (WEEE) law, in 2005, EU authorities introduce legislation for free take back of waste goods by final owners and ensure that equipment producers are responsible for financing the collection, treatment, recovery and disposal of all waste. – 30% of Fortune 500 companies’ business are in Europe

• Silicon Valley Toxics Coalition – http://www.svtc.org/ecomaps/svtc_ecomaps/index.html

• Oregon Natural Step• Zero-waste Coalition• Green IT

CO2 CH4 NOx, others (CFCs, PFCs)

Global Business Challenges• Recruiting, hiring, and developing talent around the world• Acquisition and diversification strategies encompassing a global outlook• Business and market expansion opportunities worldwide• Understanding international politics• Environmental challenges that will vary greatly by country• Managing global supply chains• Communication across the organization in several different languages• Organizational change challenges in different cultures• International law and exchange rates• Risk management priorities in different parts of the world

Source: http://globalization.suite101.com/article.cfm/global_business_challenges

Government Trends

• Australia

• China

• European Union

• Japan

Agenda 21• Agenda 21 is a comprehensive plan of action to be taken globally, nationally and locally by

organizations of the United Nations System, Governments, and Major Groups in every area in which human impacts on the environment.

• Agenda 21, the Rio Declaration on Environment and Development, and the Statement of principles for the Sustainable Management of Forests were adopted by more than 178 Governments at the United Nations Conference on Environment and Development (UNCED) held in Rio de Janerio, Brazil, 3 to 14 June 1992.

• The Commission on Sustainable Development (CSD) was created in December 1992 to ensure effective follow-up of UNCED, to monitor and report on implementation of the agreements at the local, national, regional and international levels. It was agreed that a five year review of Earth Summit progress would be made in 1997 by the United Nations General Assembly meeting in special session.

• The full implementation of Agenda 21, the Programme for Further Implementation of Agenda 21 and the Commitments to the Rio principles, were strongly reaffirmed at the World Summit on Sustainable Development (WSSD) held in Johannesburg, South Africa from 26 August to 4 September 2002.

Source: www.un.org/esa/dsd/agenda21/

Australia

• Environmental and planning laws in Australia have undergone, and continue to undergo, significant change.

• There is new legislation at both the Federal and State levels in all jurisdictions including laws which specifically respond to climate change.

• This, combined with changes in the policies by regulatory authorities, particularly in relation to enforcement, means that the extent to which that legislation impacts on the day-today operation of businesses has significantly increased.

Source: www.lexmundi.com/images/lexmundi/PDF/GuidesToDoingBusiness/Guide_Australia.pdf

• Australian consumers (in general) are more knowledgeable about environmental sustainability

• “How to spot greenwashing”

www.gogreeneraustralia.com/blog/index.php/2010/02/02/how-to-spot-greenwashing/

China & Environmental Challenges

China & Agenda 21Leading Group of China's Agenda 21: After the UN Conference on Environment and Development held in 1992, the Chinese Government began the process of formulating China's Agenda 21. The Chinese Government decided to establish a Leading Group and an affiliated office, under the direction of the State Planning Commission (SPC) and the State Science and Technology Commission (SSTC), to engage in the formulation of China's Agenda 21 and the associated Priority Programme.      Completion: In March of 1994, China's Agenda 21 was finally completed, based on China's specific national conditions and paying attention to population, environment, and development, sets up a strategic goal of sustainable development that can promote coordinated development of economy, society, resources, and environment.      China's Agenda 21 can be categorized into four parts:

• Comprehensive strategy and policy of sustainable development • Sustainable social development • Sustainable economic development• Rational utilization of resources and environmental protection

Europe 2020 Strategy

• …a clear pathway to an innovative, sustainable and competitive Europe.

• should focus decision-makers’ attention on a manageable number of priority issues consistent with the objective of achieving long-term growth in line with the multi-faceted nature of sustainability.

• To this end, the Europe 2020 Strategy should:– aim to keep the overall cost of doing business in Europe at a globally competitive

level– put in place an industrial policy supportive of innovation and private investment– encourage entrepreneurship– put more emphasis on fostering a culture of responsible risk-taking within a

smart, science-based regulatory framework implement the recommendations of completed High Level Groups, for example the High Level Group on Competitiveness, Energy and the Environment and the High Level Group on the Competitiveness of the European Chemicals Industry.

Source: www.europeontrack.eu/_SiteNote/WWW/GetFile.aspx?uri=:/default/en-us/media/Files/MainBloc/Vision%202025%20Quick%20Wins_ae8260f6-54f3-42ae-a298-508fdc00d477.pdf

Source: http://ec.europa.eu/youreurope/business/doing-business-responsibly/keeping-to-environmental-rules/index_en.htm

EU Environmental Rules

EU companies have to meet certain environmental requirements, some of these include:

• Emissions Trading Scheme

The EU has established an Emissions Trading Scheme to reduce greenhouse gas emissions. Firms in the energy, iron and steel, paper/board, and mineral industries are required to monitor and report their CO emissions. They receive free "allowances" (permits) from their national authorities entitling them to emit a given quantity of CO or other greenhouse gas over a given period.

• Waste management

Companies must comply with legislation on avoiding, recycling and re-using waste.

• Eco-design of energy-using products

Energy efficiency aspects should be taken into account at an early stage in the design phase of a product. The EU has passed laws requiring energy-using products, especially those with high potential for energy saving, such as electrical and electronic devices and heating equipment, to be designed to be more energy-efficient.

Energy Efficiency - UK

Energy Efficiency in UK

Japan

Check out : http://www.slideshare.net/Fred09/japan-environment-trends

Global Corporations are Providing Leadership

Why is Business Part of the Solution?

• Business is focused on learninglearning and changechange.– Change can and does happen relatively quickly

• Business is a globalglobal institution.– The challenges are fundamentally global in nature

• Business is the source of technological innovationtechnological innovation.– Technology is the proximateproximate cause of environmental

impact

Dr. John Ehrenfeld, Director Emeritus, MIT Technology, Business and Environment Program

Sustainable Development for Business

• Sustainable development for business means

“adopting business strategies and activities that meet the needs of the enterprise and its stakeholders today while protecting, sustaining, and enhancing the human and natural resources that will be needed in the future” (International Institute for Sustainable Development 1994: 4).

• Sustainable business has interdependent economic, environmental, and social objectives (Triple Bottom Line)

• Long-term viability depends on integrating all three objectives in decision-making

Areas of Opportunity

• Managing an environmentally responsible enterprise:– Integrating environmental sustainability into business models– Environmental management systems; e.g., ISO 14001– Greening the supply chain– Sustainability > Innovation & Entrepreneurship– Investment decisions– Change management – Fostering Sustainable Behavior– Energy management– Waste management– Reporting: internally and externally– Marketing

• Start…enrolling/aligning stakeholders…who are they?

Stakeholders

Engaging Stakeholders

• While executive support is a critical key component to business success, it is not the only form of leadership present in an organization.  Business sustainability leaders understand the value in leveraging their internal resources as well as their key business relationships.

• Whether led by a sustainability executive or traditional management, the pursuit of long-term business sustainability enables:

– Employees: Create incentives to lower costs, initiate process improvements, and stimulate innovation.

– Customers: Establish expectations that are defining products and service attributes.

– Suppliers: Align supply chain expectations to drive sustainable material requirements and efficiencies.

– Local Community: Defined framework for initiatives carried out at the local level through partnership with community groups, local businesses, and governing bodies.

– Investors: By comprehensive and accurate reporting; e.g., CDP, DJSI.– Others?

Source: http://news.socialyell.com/878/csr-advice/engaging-stakeholders-as-a-path-to-business-sustainability/

Integrating Sustainability into Business Models

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M3 Engineer-to-Order

D1 Deliver Stocked Products

D2 Deliver MTO Products

D3 Deliver ETO Products

S2 Source MTO Products

S3 Source ETO Products

Return Source

P5 Plan Returns

Return Deliver

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Supply Chain Management

Environmental Management SystemISO 14000- 14001

http://www.innovating-canada.com/iso14000.htm

http://www.youtube.com/watch?v=uCjK3lQhPDc

Green Supply Chain ManagementEnvironmentalManagement

Supply ChainManagement

Green Supply Chain Management

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S3 Source ETO Products

Return Source

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“Wal-Mart to Assign Green Ratings”

http://online.wsj.com/article/SB124766892562645475.html

Green Supply Chain > Carbon Labeling

Jan. 23, 2007 Tesco, the largest supermarket chain in Britain, has announced that it will begin labeling all 70,000 products on its shelves with the amount of carbon generated from the production, transport and consumption of those items.

http://www.terrapass.com/blog/posts/british-superma

Sustainability Drives Innovation

Stages:

#1 Viewing compliance as an opportunity

#2 Making value chains sustainable

#3 Designing sustainable products and services

#4 Creating “next-practice “platforms

“ Why Sustainability is Now a Key Driver of Innovation”, Harvard Business Review, 2009

Sustainable Entrepreneurship

Businesses that are “Green”– Solar, Wind, Hydro, Geo-Thermal

Power– Recycling/Reprocessing– Eco-Friendly Products– Organic Agriculture– “Green” Non-Profits

• e.g., Sustainable Methods Institute

Fostering Sustainable Behavior

• “Leading Change….” by John P. Kotter

• “Fostering Sustainable Behavior” by Douglas McKenzie-Mohr:

1. Set goals

2. Identify barriers

3. Plan and Implement

4. Evaluate

5. Revise and refine

Benefits of Sustainable Operations

The application of sustainable operations can result in

significant business benefits including:

– Greater operational efficiencies; e.g., eliminate wasteful practices– Cost reduction– Quality image– Positive publicity– Opportunities for new and growing markets >incremental revenue– Conservation of the environment– Respect from the local community– Staff loyalty

Global Environmental Leadership Examples

Dow Jones Sustainability IndexesLaunched in 1999, the Dow Jones Sustainability Indexes are the first global indexes tracking the financial performance of the leading sustainability-driven companies worldwide.

The identification of sustainability leaders for the Dow Jones Sustainability Indexes is based on the Corporate Sustainability Assessment of SAM Research. A defined set of criteria and weightings is used to assess the opportunities and risks deriving from economic, environmental and social developments for the eligible companies. A major source of information is the SAM questionnaire which is completed by companies participating in the annual review.

The external assurance report by Deloitte ensures that the corporate sustainability assessments are completed in accordance with the defined rules.

Based on SAM Research's corporate sustainability assessment companies are ranked within their industry group and selected for the Dow Jones Sustainability Indexes, if they are among the sustainability leaders in their field.

For a detailed description of this selection process you can download the guidebook for the Dow Jones Sustainability World Indexes and the guidebook for the Dow Jones STOXX Sustainability Indexes. www.sustainability-index.com/

ProductsEnvironmental Product Declarations, Life Cycle Assessments

Social responsibility

Transforming Sustainability into Customer Value

1990 1994

2000 2002

Triple bottom line

Environmentalmanagement

Local Regional Global

“Baseline management”

Sites Implementation of ISO 14001

ABB’s organizationalstructure

Customer centric

Social policy dialogue

ABB’s firstEnvironmental

Report

ABB’s firstSustainability

Report

ABB’s first triple bottom line

Sustainability Report

Bayerische Motoren Werke AG,

• Sustainability is an integral part of BMW business principles and practices, which has led to a confirmation of its leadership position in the automotive industry. The company has been able to surpass its peers by exhibiting unparallel commitment to environmental issues.

• BMW strives to conserve environmental resources throughout its value chain from production systems to materials used in-bound and out-bound logistics, and recycling and disposal of used vehicles.

• The company has implemented efficient environmental management systems, and undertakes regular external and internal audits for its operations as well as for its suppliers.

• BMW has also included a package of multiple emission reduction measures in large parts of the car fleet (called Efficient Dynamics) in order to meet the challenges of global warming and fossil fuel reserves, which is illustrated by 25 percent decline in car fleet emissions in 2008 as compared with 1995 levels.

• Along with various initiatives undertaken to achieve environmental efficiency, the company also takes measures, such as 360 degree feedback and benchmarking of brands against that of peers, to strengthen its brand image and gain competitive advantage.

Source: DJSI World

Kingfisher

• Kingfisher Plc is a London-based international home improvement retailer. The company's main retail brands run on the do-it-yourself (DIY) concept and include products such as complete kitchens, bathrooms and bedrooms.

• The company sets sustainability targets and regularly measures its progress through a social and environmental management system called 'STEPS'.

• Its "Future Homes" strategy for instance is designed to integrate sustainability into commercial operations, bringing innovative products to the market to help its customers adopt more sustainable lifestyles.

• In Kingfisher's specialized DIY home improvements stores (e.g. B&Q in the UK and Castorama in France) customers are increasingly enticed to choose from a wide range of green products.

• In 2008 this accounted for 7% of total sales.

Source: DJSI World

Panasonic Electric Works

• Panasonic ‘s concentrated efforts to develop environment-friendly operations has resulted in operational excellence, which is evident from a sharp decline in greenhouse gas and dust emissions; and reduced electricity, water and waste consumption.

• The concept of restoring bio-diversity is also adopted at a strategic level in the company; e.g., the company constructed a 'Prosperous Park' including biotope in a building premise in Osaka in March 2009.

• In the social dimension, the promotion of labor practices within the organisation differentiates it from other companies. The company has established 'Diversity Promotion Office', and has been awarded Diversity Award Semi Grand prize.

Source: DJSI World

StarbucksIn 2004, with support from CH2M HILL, Starbucks voluntarily conducted an inventory of its greenhouse gas emissions in an effort to understand and evaluate its contribution to climate change. Using the WRI Greenhouse Gas Protocol, Starbucks limited the inventory to areas with the biggest environmental impact: retail, coffee roasting, administration operations and its distribution network. Based on the results, Starbucks committed to reducing emissions by:

• Purchasing renewable energy—annually, five percent of the energy needed by its North America retail stores, generated by 11 large-scale windmills, and estimated to reduce CO2 emissions by two percent;

• Addressing the impact of its transportation operations—working with Business for Social Responsibility’s (BSR) Clean Cargo Group on ocean transportation and using the Clean Cargo tool to engage freight vendors;

• Monitoring roasting plant operations— an environmental team at each of the company’s four roasting plants are creating measures for reducing emissions and conserving energy;

• Taking leadership and raising awareness—by encouraging others to take action.

• Setting a reduction target—in fiscal 2005, the company established a gas emissions reduction target.

Sources: Starbucks http://www.starbucks.com/aboutus/beantocup.asp http://www.greenatworkmag.com/gwsubaccess/05julaug/starbucks.html

The Unilever Group

• Unilever is one of the world's leading food producers, and household and personal care product manufacturer. The company owns 270 manufacturing plants across six continents. It employs around 174,000 people in more than 100 countries worldwide.

• The company has out-performed others in the environmental and economic dimensions by strategically focusing on achieving a long-term sustainable business model. This is reflected through a decline in the ecological footprint of the company.

• The company has initiated the Sustainable Agricultural Initiative (SAI) and the Lead Agricultural Program to promote the adoption of a responsible approach towards farming practices and has also published guidelines for sustainable farming practices.

• Unilever has developed the 'Greenhouse Gas Profiling Tool' in order to assess the environmental impact of its new products. It also creates nutritional awareness among consumers by labeling the nutritional value of ingredients on packets.

Source: DJSI World

Examples of “Profitable Sustainability” Wal-Mart

Sustainability Reporting

• Carbon Disclosure Project (CDP)• Dow Jones Sustainability Index (DJSI)• Global Reporting Initiative (GRI)• UN Global Compact – Communications on

Progress (COP)

Carbon Disclosure Project

The Carbon Disclosure Project is an independent not-for-profit

organization holding the largest database of primary corporate climate

change information in the world.

Thousands of organizations from across the world’s major economies

measure and disclose their greenhouse gas emissions and climate

change strategies through CDP. We put this information at the heart of

financial and policy decision-making.

http://en.wikipedia.org/wiki/Carbon_Disclosure_Project

www.cdproject.net/en-US/Pages/HomePage.aspx

Carbon Disclosure Project (CDP) results and reports

Find out how organizations and public sector bodies around the world are responding to climate change by taking a look at the individual corporate responses to CDP or by reading our reports. Our reports provide detailed analysis of the information supplied each year to CDP and indicate important trends and developments.

Read our reports

Carbon Disclosure Project

Global Reporting Initiative (GRI)

www.globalreporting.org/

2007 Global Reporting Initiative (GRI) Matrix

The Global Reporting Initiative (GRI) has pioneered the development of the world’s most widely used sustainability reporting framework and is committed to its continuous improvement and application worldwide. This framework sets out the principles and indicators that organizations can use to measure and report their economic, environmental, and social performance.

Additional Knowledge & Information

Information Sources

Books:• Anderson (1998), Mid-Course Correction• Brown, Christopher Stephen. (2005). Sustainable Enterprise• Cunningham, William P. (2007), Environmental Science • Doppelt, Bob (2003) Leading Change Toward Sustainability• Elkington (1997), Cannibals with forks (The “Triple Bottom Line”)• Epstein, Marc (2008), Making Sustainability Work• Esty, Daniel C and Winston, Andrew S. (2006), Green to Gold• Galea, Chris (August 2004). Teaching Business Sustainability• Hawken, Paul (1999) Natural Capitalism• Hawken, Paul (1993), The Ecology of Capitalism.• Holiday et al, (2002), Walking the Talk• McDonough/Braungart (2002), Cradle to Cradle• Meadows, Donella H. (1992), Beyond the Limits• Savitz, Andrew W. & Weber, Karl (2006) Triple Bottom Line• Willard, Bob (2002), The Sustainability Advantage

Strategic Sustainability Consulting

http://www.sustainabilityconsulting.com/

Additional Knowledge & Information

• GSOM course – May 17th – July 1st :

“Greening the Corporation” (MGMT 5505)

• www.greenprof.org