Wednesday, April 12, 2006

Greening Business

I attended a portion of Harvard Business School's "Green Week" recently, a screening of the 2001 Documentary The Next Industrial Revolution and a panel discussion labeled "Bringing Environmental Sustainability to Business".

I read Cradle to Cradle by William McDonough and Michael Braungart a few years ago. I found the book interesting in its content and its form. It was printed on pages made of plastic resins and inorganic fillers designed to be recycled by conventional methods. From a content perspective it was full of the visionary messages promoting sustainability one would expect along with examples of how industry benefits from adopting design methodologies based upon natural models. It was worth the time I spent reading it.

The documentary, narrated by Susan Sarandon with a bit of an "advertorial" tinge to it, is worth viewing. It regurgitated a fair amount of Cradle-to-Cradle's content and added information in the form of interviews with Mr. McDonough and Mr. Braungart along with the people involved in the profiled projects. The projects from Rohner/Designtex, Ford, Nike, Oberlin College, and Herman Miller were very interesting, informative, and most of all, inspirational. There are companies and organization that are taking sustainability seriously. The changes are incremental, not sweeping and discontinuous as one may hope, but realistic in their scope and their execution.

What was most interesting to me was the incalculable benefits to the employees of the companies that undertook these projects. There was a profound sense of connection, accomplishment, and dedication by the people involved. They were engaged in vision-chasing in a way that appealed to them on a gut/personal level. How do you value that? Businesses reap the financial benefits of these projects, in part fueled by the productivity increase brought on by happy and engaged people. There is a power in this that cannot be underestimated.

What I am most concerned about from a long-term perspective is Ford's River Rouge project. This greening project started in the late 90's and was slated to take 20 years. Will the company be here in 20 years? With the immense financial pressure to reduce costs in the highly pressured automotive industry will this commitment last? Is the Greener Miles program for Ford vehicle owners a sign that their commitment is firm?

The panel discussion took place the afternoon following the documentary's screening. With the title "Bringing Environmental Sustainability to Business" I had high hopes for learning more from enlightened professionals. The panel was dedicated to discussing how sustainability was integrated in their companies; at what level and with what results (if any). The panel represented a fair cross-section of companies, including:
Tom Votta, Deputy Director at Chemical Strategies Partnership (CSP)
Paul Ligon, Upstream Waste Management
Eric Hudson, President and CEO of Recycline
Ed Costa, Director Global Technology Value Solutions (TVS) HP Financial Services
Jim Stanway, Project Manager Wal Mart
Professor Richard Vieter introduced the panel. Though I do not know any business school professors, he fit my preconception; tall, bespectacled, respectable, and somewhat stodgy looking. He led off the conversation with a healthy dose of skepticism, wondering if companies reap benefits in the form of competitive advantage and higher profitability when they undertake sustainable projects. While he indicated that there is some value in the concept, his overall tone was clearly pessimistic.

Mr. Votta led off the panel discussing CSP's efforts to help companies reduce the amount and number of chemicals they use. The main thrust of their efforts are to engage companies in the leasing of chemical services. In this business model, companies hire outside entities to provide the service they would normally buy the chemicals to perform. The vendors' incentives are to most efficiently and conveniently provide the service, not simply sell the product. In this way, waste is dramatically reduced and efficiencies increase. Everyone makes money. The incremental efficiency gains fall over time. The longer the system has been in place, the less efficiency there is to ring out of it. The example Mr. Votta used was that of automotive paint services. Companies like DuPont & PPG become part of the production flow, taking responsibility for the paint process. They are paid for the service of painting a chassis, not simply delivering paint in a sealed container. Therefore, it is in Dupont's or PPG's best interest to reduce waste as much as possible. The next step; eliminate the nasty chemicals found in the paint process in the first place.

Next up was Jim Stanway of Wal*Mart. He was candid about the fact that Wal*Mart launched their multi-faceted sustainability project as a response to the attacks Wal*Mart has been weathering over the past few years. Let's face it, Wal*mart is an enormous target. They are accused of everything from destroying small, downtown America to health care abuse, to driving slave labor practices in the third world. Whether or not people "like" Wal*Mart is irrelevant, they are supply chain management geniuses and have the purchasing power to direct the creation of the goods they sell. What Mr. Stanway was very good at was integrating Wal*Mart's core mission of [and I paraphrase] "Improving the quality of life of the average American by lowering prices" into the reason they are working on sustainability. It is not a "fluffy feel-good" project, it is something they view as yielding competitive advantage in the marketplace allowing them to sell more and increase the returns to their shareholders. What started as a defensive strategy turned into a core plank of their corporate strategy and marketing efforts with a large focus on their operations and influence in China.

The key elements of Wal*mart's program are:
  1. Zero Waste: Mr. Stanway keyed on excessive packaging as one of the main culprits, and I agree it is a good place to start. The fact is that everything is waste. Every item in a store that does not have an end-of-life design for complete reusability or biodegradation is waste. 
  2. 100% Renewable Energy: This requires Wal*Mart to play the part of investor. They do not have any interest in operating power plants, so their goal is to look upstream to the power providers and create demand for renewable energy. Signing long-term energy procurement contracts will do this. This is similar to what some military base administrators have done as a response to President Clinton's Executive Order 13123 from 1999.
  3. Sustainable Products: With Wal*Mart's clout in the supply chain, perhaps they will have an impact on their vendors' material and packaging procedures and practices. After all, they are an enormous force in the marketplace, and the opportunity for change is real and recognized.
I am sure they will be under the spotlight by environmental and SRI groups. Let's they're committed and serious.

Eric Hudson of Recycline stepped up the podium to share information about Recycline. I learned about Recycline a few years ago, I believe in 2001, when I started attending local events focuses on sustainable business. Eric was sometimes in attendance and helped encourage my continuing interest and research on sustainable business. Recycline was launched as a company to change the way we make things, appealing to "green" consumers that were willing to pay a premium for environment friendly products. As Eric mentioned, the Preserve toothbrush, Recycline's original (and still selling)product manufactured from used Stonyfield Farm yogurt cups, is the #1 selling toothbrush in the $40 billion natural food sector. More importantly, as the product matures, costs come down, more companies pay attention to green consumers, and the Preserve makes its way into larger retailers. A moment in the question and answer session that garnered a few chuckles was when Eric was asked about supplying a product like the Preserve, one dedicated to sustainability, to a company like Wal*Mart, one perceived as being on the other end of the sustainable spectrum. Of course Eric was seated next to Mr. Stanway. The potentially awkward moment was laughed off with a succinct answer about evaluating each distribution opportunity with equal and deliberate rigor.

I was looking forward to Ed Costa's talk about what HP is doing in the sustainability realm. I attended the 2005 CERES Conference in Boston and heard a member of HP discuss sustainability reporting and what it means to the company. While HP receives good marks for its reporting and its commitment to reusing old equipment, the overall electronics industry is still struggling mightily with what to do with its products when they are used up. It is a monumental task, dealing with this "e-waste". E-waste contains harmful substances like cadmium, lead, and mercury. Here is where I start to wonder about what we are doing with the health of our peoples and our planet when it somehow becomes OK to release known carcinogens into the environment we live in. Why is this acceptable? But I digress.

Ed showed us a video co-produced by the EPA highlighting HPs reuse program, a successful effort to keep old computers out of landfills. What happens when they really are scrap? The answer to this question, with all due respect to Ed, was less than satisfactory. They are disposed of "responsibly". There is no such thing. This is where regulation, undertaken properly, will help move industry in the right direction. Ed mentioned RoHS and producer take back legislation. This is a stronger concern for electronics manufacturers serving the European market. When it becomes in the suppliers financial best interest to create a product that they can reuse and "mine" for the creation of the next wave of products, they will act. I challenge HP to look beyond regulation and design the toxins out of their products in the first place. An ounce of prevention is worth a pound of cure.

The final speaker of the afternoon was Paul Ligon of Upstream Waste Management. I must admit that the idea WM came up with, of digging upward though companies' waste streams to reduce their waste and therefore increase their efficiency was quite interesting. He quoted an interesting statistic, for every $1.00 spent on disposal, a company spend $3-10.00 generating the waste. I suppose the sales pitch goes that if you eliminate that dollar in disposal costs, you have the potential to reap a $3-10.00 contribution to the bottom line. WM just takes a small cut. In any case, they analyze the customer's production systems, which are for the most part linear in today's manufacturing environment, and look for used and/or damaged materials that are no longer part of the value stream. By digging into these areas WM helps the company fix problem areas, reduce waste, and increase profitability. Upstream WM is the fastest growing and most profitable portion of WM's business.

With my interest in the impact of transportation on our energy use, I followed up with Mr. Ligon after the talk, remembering his comment at the beginning of his presentation that WM has one of the largest truck fleets in the world and thousands of landfills under management. Opportunity! With a diesel trash truck averaging 3 mpg, emitting particulates and GHGs linked to asthma and climate change, and oil topping $70.00/barrel, lets fire up the alternative fuels. I talked briefly with Terry Huie, an associate of Mr. Ligon's also attending the event about their work in biofuels, landfill gas, and the fact that in 10-20 years we'll be mining landfills for much more than methane.

With reports like the EPA's Toxics Release Inventory reporting the "good news" on toxic emissions reductions, there is still plenty of work to do.

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