How Many Patents Does It Take to Reinvent the Automobile?
General Motors received more clean-energy patents in the past year than any other company, according to data released a few weeks ago. The data comes from the Clean Energy Patent Growth Index, published quarterly by the law firm Heslin Rothenberg Farley & Mesiti (which also provides data for our annual State of Green Business report). In news reports on the findings, GM officials said its patents covered “hybrid electric vehicles, fuel cells and solar energy, with a focus on improvements to current and future technologies.”
That seemed both odd and interesting. Why was this venerable car company so focused on clean energy? True, GM had recently gone through a metamorphosis (not to mention a bankruptcy), around which it released a plug-in vehicle, the Volt, and made plans to produce other greener machines. But why was it racing ahead of other car companies like Honda, Toyota, and Ford, as well as other innovative companies, such as GE, Honeywell, Panasonic, Samsung, and Toshiba — all of which had fewer clean-energy patents than GM last year?
In search of answers, I dialed up Alan Taub, Vice President, Global Research & Development for GM. “We know the world is approaching one billion vehicles, and probably sooner than anybody thought,” he began. “The question is, can we do it sustainably?”
He answered his own question. “What we need to do is re-architect the vehicle and the personal mobility experience through the technology enablers that are converging in the next decade or two so that personal mobility can continue sustainably.” We spent the next 40 minutes or so parsing what that sentence meant.
Taub walked me through the problem statement. “Imagine the automobile was invented today and we were going to propose it to, let’s say, a venture capitalist. ‘Most of the time the vehicle is going to be carrying a single person, a weight load of about 200 pounds. I’m going to be putting that person in a 3,000- to 4,000-pound vehicle. I am going to power it by a single monogamist energy source — petroleum — and 80% of that energy is going to turn into heat, not into powering the vehicle.’ I mean, when you look at it that way, is that the personal mobility machine one would create?”
Of course not. But that’s what we’ve got. So, how do you go from today’s reality to tomorrow’s — the one where “personal mobility can continue sustainably”?
Taub recited the litany of changes underway. Lightweighting materials. Onboard energy systems, such as batteries and fuel cells. Sensors and controllers that ensure vehicles don't crash into things or people. More sensors and controllers that allow cars to drive themselves at times — “autonomous driving on demand,” in industry parlance.
“The way we see it playing out, you will always be able to [manually] drive,” Taub explained, waxing on about drivers’ “emotional attachment to a vehicle.” But, he added, “There are times where even a driving enthusiast would rather be doing email instead of driving. So cars will be autonomous when you want it, but you can take over the steering wheel when you’re in the mood.”
This isn’t just some cool way to get through your email in-box while driving. Smart, autonomous cars could help alleviate gridlock, congestion, and pollution in today’s and tomorrow’s mega cities, explained Taub, by keeping cars moving more quickly at closer range while not crashing into one another, or anything else.
Not (Just) Invented Here
All of this — “reinvention of the vehicle,” as Taub puts it — demands new and improved technologies — lots of them. Hence the push for patents. But there’s a bigger story here, too, about how GM is seeking and finding the innovations it needs to achieve its vision.
Ten years ago, General Motors had just one facility, in Warren, Mich., that housed researchers in science labs. Pretty much every innovation originated in Michigan. About 5 percent of its R&D budget was spent outside the company.
Ten years later, GM has eight labs located around the world, and nearly a third of its R&D budget is spent outside the company — collaborations and strategic alliances with universities, national labs, suppliers, and countless startups. “There’s no way all the technical challenges in a revolutionary period of technology development will be done just with the brilliant scientists inside GM,” says Taub. “Much has moved to an open innovation network. It’s become a team sport where everybody from academics to suppliers are working in collaboration.”
The Future Is … When?
I asked Taub when we could expect these innovations because — let’s face it — we’ve been hearing about “the car of the future” for decades. When will these lightweight, crash-proof, self-driving, clean-running, electric vehicles be hitting the showrooms?
“The end game is a revolution,” says Taub. “But the nature of the business is that each of these technologies will be implemented in various stages across initial vehicles and then cascade to fleets. I think this future is within the 10- to 20-year timeframe. We’re not talking about 2050. We’re talking about a lot of this coming to fruition in high volume in the marketplace between 2020 and 2030.”
Is GM on the VERGE?
I then shifted gears, as it were, to address the emerging convergence of vehicle, information, building, and energy technologies that my colleagues and I have dubbed VERGE. Is GM a VERGE company — that is, is it doing business in all four technologies? Clearly, the smart cars Taub and GM envision represent a mash-up of vehicles, information, and energy technologies. So I wondered about the buildings piece. I expected Taub would explain how homes would eventually house devices for recharging electric vehicles.
That wasn’t where he went.
“I don’t’ know if you know this,” he said, “but the BTU level of the air conditioning system on your vehicle is on the order of that which you need for a 2,000-square-foot home. The reason is that cars require very fast cool-down.” Moreover, he said, most people end up spending more on the entertainment system in their car than on the one in their home, and their car seat probably costs more than their living room couch. “So is there a future where everything we put in a vehicle integrates into the living experience when you go into your home? Today, we consider them two distinct spaces.” Someday, he says, we could go that next step, where “the vehicle becomes not something you park and leave alone next to your home, but can it be integrated into the home. By the way, this has been an idea that we’ve been floating around lately.”
Which brings us back to the patents. GM’s labs have had a sixfold increase in patent filings over the past decade, says Taub. They include not just those related to advanced technology, two-thirds of which focus on energy, environmental, and safety. Some extend to the technologies that have enabled fully half of the company’s 140-odd assembly plants around the world to achieve zero-landfill status, and to other energy and environmental achievements that don’t necessarily show up in its cars.
Out-zipping Zipcar?
Finally, I asked Taub whether all of these whiz-bang technologies could actually reduce vehicle ownership and lead us to a shared-use system, the business model pioneered by Zipcar and its ilk. This, it turns out, is part of GM’s vision, too.
“We see a world where there’s ubiquitous connectivity and therefore things like sharing a vehicle where the system, which I’ll call the cloud back office, knows my calendar, knows where I want to go, and the world will be able to rent by the hour,” explained Taub. “Will the world go to shared ownership? Probably. To what extent is what we’re going to have to learn.”
But then he reverted to that waxing thing I’d already heard from him and from so many other car guys. “There is something about people’s emotional attachment to the vehicle they buy. In some sense, it’s a highly irrational purchase. Its use is maybe 15 percent of the day. Its lifetime is 12 to 15 years, though most first buyers don’t keep it that long. And yet people buy it and actually care what color it is and how it looks. So I think you’ll see a proliferation of vehicle models that will accommodate shared ownership. But personally, I suspect personal ownership will dominate for a long time.”
Maybe. But if the engineers — and the marketers — at GM and the other car makers really do their jobs, they’ll innovate their way to a world where there’ll be an emotional attachment to getting from Point A to Point B in a chic, green machine that we didn’t have to purchase, insure, maintain, park, or own.
May 2, 2011 in Business Practices, Clean Tech, Trendwatching | Permalink | Save This Page | Comments (4)
Henkel's 20-Year View of Sustainability Reporting
I got a PR pitch recently about a multinational company’s just-published sustainability report. Nothing new there; I get those dozens of times a year. They’re sometimes interesting, though only rarely newsworthy.
This one was for the Henkel, the German-based maker of brands and technologies for laundry and home care products, cosmetics and toiletries, and adhesives. Henkel’s report seemed solid -- the company’s sustainability performance was outpacing its targets, etc. No big deal. I prepared to move on to the next thing.
But one thing jumped out: This was Henkel’s 20th annual report. That puts the company at the head of the class. Only a handful of firms have issued such reports annually for 20 years.
Intrigued, I reached out to Uwe Bergmann, Head of Sustainability Management at the Dusseldorf-based company. I wanted to know what Henkel had learned about sustainability reporting over the past two decades.
Bergmann has been with Henkel since 2000, “so technically this is my eleventh,” he quickly pointed out. But he’s no stranger to reporting. “I did my first bachelor project on reporting in 1995 and included Henkel’s report back then, and then again in my master thesis later on.”
Henkel’s first sustainability report came in 1992, the year of the Rio Earth Summit. That event spurred a handful of companies -- probably no more than a couple dozen -- to publish reports on their environmental commitments and performance, among them Bank of America, Baxter, British Telecom, Ciba-Gigy (now part of Novartis), Dupont, and Shell. These weren’t the first companies to report -- a few others first issued reports in the 1980s, notably from the chemical industry, which was under fire by activists for toxic misdeeds.
At Henkel, the assumption was that its first report would be followed two years later by its second -- a pace other companies were taking. But, says Bergmann, “There was so much internal and external feedback that we decided that we were going to account for it annually.”
He recalls: “The first one was very much centered on Germany and the data was basically just the headquarters, our biggest production site. Over time, the number or production sites we included increased to the bigger international sites. Nowadays we cover [sites representing] 98 percent of the production volume.” The quality of reporting grew, too, to include more aspects of Henkel’s operations, and some of its suppliers’ impacts. Over the years, the scope of the report broadened from environmental topics to include safety and health (starting in 1998), and sustainability (starting in 2001).
I plied Bergmann with questions to garner some of the lessons Henkel has learned from all these years of reporting. Following is an edited summary of what he shared.
Is the report an end unto itself or a tool for continuous improvement?
I would say it’s the end of a process. I mean, we report about our progress of the previous year. So, whatever is in there we have done and conceptualized. But the discipline of writing the report obviously gives some rationale to continuously work on your systems, on your coverage of reporting systems and gives the whole exercise an element of discipline.
You have to separate between the sustainability report and our internal reporting tools. We have tools to report our data from the sites and they do a quarterly reporting on their environmental data. And you have occupational health and safety reporting tools where you track any accident that happens.
Who is the principal audience for the report?
There are a number of expert audiences, especially in the socially and ethical investment community, and they will spend a lot of time reading it very intensively. Also universities. Internal audiences or customers won’t be reading it as intensively back-to-back but will be going through picking out interesting stories. So it’s basically a Swiss Army knife.
We try to write it in a way that it’s understandable for interested lay people, and there’s a lot of them around. They can be working for our customers. They can be working for authorities, or they can be interested teachers in the community or just interested consumers. So, they have to be able to understand it. It also has to be relevant and substantial enough for the expert audiences social and ethical investment specialists or even sustainability specialists, such as customers who assess their suppliers.
So, we try to cover all of those. And the feedback so far has been that we’re doing fairly successfully by having a pretty compact format, having the relevant examples, but pretty understandable language.
April 25, 2011 in Business Practices, State of the Art | Permalink | Save This Page | Comments (2)
Autodesk and the Future of Sustainable Design
If you start with the premise that many of the solutions to our global sustainability challenges require smart design and systems thinking, it doesn’t take long before you find your way to Autodesk. The 29-year-old design software company has made a series of impressive moves into the sustainability realm over the past few years. It’s one of those largely unheralded companies creating the tools used by architects, designers, manufacturers, and — most recently — cleantech entrepreneurs to produce the next generation of greener, cleaner, more efficient products.
Over the past year or so, I've had the opportunity to meet with or interview several members of Autodesk's sustainability team as well as its CEO, Carl Bass, on a number of occasions. Along the way, I have become increasingly impressed with how the company hasn’t merely expanded its offerings to help design professionals achieve sustainability goals, but has also set out to elevate the sustainability knowledge and capabilities of design students and professionals, from high schoolers to seasoned engineers.
Autodesk makes a suite of 2D and 3D design software tools commonly known as CAD, for computer-aided design. Its flagship product, AutoCAD, along with the more advanced tools that integrate with AutoCAD, is the standard design software in architecture, engineering, and construction firms; manufacturing environments, such as industrial machinery, tool and die, automotive, and consumer products; and media and entertainment companies. (Autodesk software has been used in the special effects of dozens of movies, from “Alice in Wonderland” to “X-Men.”)
Starting a few years ago, as green building grew from the margins to the mainstream, Autodesk began integrating components to help architects, engineers, and designers perform “whole building” analysis, optimize energy efficiency, even aim for carbon neutrality. It developed Building Information Modeling, or BIM, software, which allows architects, engineers, construction professionals, facility managers, and owners to break down barriers and bridge communication between design and construction teams, with the goal of optimizing buildings and creating predictable outcomes. Autodesk began using its own facilities as a living laboratory to gain real-world experience. “The idea is to use our own operations as a testing ground for prototyping new products, new features, new workflows that would serve our customers and rapidly green, in this case, existing buildings,” Emma Stewart, senior program lead for the Autodesk Sustainability Initiative, told me.
No Green Button. Those efforts created a gateway into sustainability for Autodesk that has spread beyond buildings to designing everything from products to cities.
Sarah Krasley, a product manager in Autodesk’s Manufacturing Industry Group, works with the company’s industrial customers to help embed sustainability. “We have customers in building products,” she explains. “We have customers who are designing apparel. We have customers that are designing consumer packaged goods. The myriad of sustainable design objectives across those industries is vast, and we realize that there is no green button. That is, there’s not one simple sustainability tool that you can put into a CAD system and solve everybody’s problems. So we’re doing a lot of exploration at where sustainable design comes up in the workflow, and where it’s most meaningful.”
One outcome of that exploration was a partnership announced last fall with Granta Design, a developer of materials databases, that combines Autodesk's Digital Prototyping technology with Granta's materials information technology to enable industrial designers, mechanical engineers, and others to more easily create products through sustainable design.
At the other end of the spectrum is a partnership with CDP Cities, a project of the Carbon Disclosure Project, which has worked to standardize carbon reporting and risk management. Now CDP is working to do the same with municipalities, from Beijing to New York. Autodesk partnered with CDP to standardize the software platform for how cities are tracking, managing, and reducing their carbon risk over the next 40 years, explains Stewart. “So all of a sudden, Mayor Bloomberg and his team are able to look out at New York City and understand the resource flows of energy, waste, water in a way they’ve never done before, and map that against the way sea level will rise over the next 40 years, and then make financial decisions accordingly.”
Class Acts. The city-level partnership exemplifies one of the things I find most interesting about Autodesk: It invests in educating the marketplace, seeding future customers with free or low-cost versions of its software. This isn’t unique to the sustainability space, but sustainability may be where it’s needed most. To limit sustainable design to the relatively small population of engineers, designers, and architects who already “get it” misses a vast opportunity for both the company and the planet.
Autodesk has more than 1.5 million students in its Education Community, which allows students, both undergrads and grads, to download and test-drive free software and other tools. The idea is that students learn their craft using Autodesk software and, of course, want to use it in their professional lives, too.
Those students, it seems, hadn't been learning much about sustainability in their studies. “The thing that kept coming up as we made new software innovations is that there are a lot of people who are not even familiar with the terminology around sustainable design, and are not familiar with how to take these high-level concepts and break them down into steps that are actionable,” Dawn Danby, Sustainable Design Program Manager at Autodesk, explains. “If we’re going to start building new solutions for doing all kinds of energy analysis or materials analysis, people need to understand why this stuff matters and have a context for it. We’re very aware that the hundreds of thousands of mechanical engineers every year who are being released into the marketplace are about to make very significant resource decisions.”
In response, Danby and her team last year launched the Autodesk Sustainability Workshop, a series of free online instructional videos. They’re short, clever works, produced by Free Range Graphics, the team that created Annie Leonard’s wildly popular viral video, The Story of Stuff, and its growing spinoff projects. Danby herself stars in the segment on Whole Systems Design, with sustainability education guru Jeremy Faludi leading most of the others. It’s a terrific public service and a fun way to learn, even for us non-designer types. (Autodesk also sponsored AskNature.org, a free portal for architects, designers, and engineers on bio-inspired design, produced by the Biomimicry Institute, on whose board I sit.)
Seeding the Market. And then there’s the company’s Clean Tech Partner Program, which aims to pretty much give away suites of software — about $50,000 worth — to hundreds of cleantech start-ups. Entrepreneurs submit an application, explain what they’re doing, and get a complete suite of Autodesk software for a nominal fee. The program started two years ago in the U.S., then spread to Europe and, most recently, to Japan. Again, the idea is to seed these startups with Autodesk tools, with the hopes that they’ll become paying customers as they grow.
“In the short term, [sustainability] is the most pressing problem we face as a society, and I think it's important that we do things to help solve the problem,” Autodesk CEO Carl Bass told me recently. “And I think a lot of the innovation is going to come from small companies.” Along the way, Bass has become a frequent speaker at cleantech conferences and an articulate advocate for cleantech entrepreneurs. (You can watch excerpts from an interview I did with Bass, below. I’ll be interviewing him again, onstage at the Green:Net 2011 conference in San Francisco, on April 21.)
As I said, much of these activities remain unheralded in the wider world of green business; Autodesk isn’t typically one of the companies that springs to mind when people name sustainability leaders. In some ways, that’s what I like most about Autodesk: a company that quietly is building the foundation for a sustainable future, creating tools and partnerships that are fundamentally changing the way things are designed and built. We may never see buildings or products that boast anything along the lines of “Autodesk Inside,” but in some respects, our sustainable future could well be labeled exactly that.
March 13, 2011 in Business Practices, Clean Tech | Permalink | Save This Page | Comments (0)
Storytelling and the Power of One Great Idea
A couple years ago, at a meeting of the GreenBiz Executive Network — my company's membership-based learning forum for chief sustainability executives — we began the meeting by asking each attendee to present “one great idea” from their company. It was an ice-breaker of sorts, a way for everyone to weigh in on something they were doing that was exciting, different, making a difference.
We budgeted 45 minutes for this. Five and a half hours later, we got to the second item on the agenda.
It wasn’t merely that the members were verbose. It was that each “great idea” spurred a lengthy period of questions and comments. We could have cut it short, hewing to our original agenda, but we didn’t. The conversation served perfectly the network’s mission: to allow executives at some of the world’s largest companies to learn from one another in an open, safe environment.
Since then, “One Great Idea” has become part of the GreenBiz brand. At last month’s three GreenBiz Executive Forums, we instituted a series of 15-minute, one-person stand-up presentations (yes: à la TED Talks) using that title. They covered a breadth of topics and presenters: from 25-year-old technology wunderkind Alexis Ringwald, who has three startups under her belt; to Johnson Controls’ Clay Nesler, giving the inside scoop on the greening of the Empire State Building; to Ina Pockrass, who aims to nearly singlehandedly prod the dental industry toward greener practices. There were corporate presenters from Adobe, BASF, Campbell’s Sopu, IBM, Intuit, Method, Microsoft, Nike, and others. And innovators like Jim Kors, creator of the world’s first 3-D printed car. Each democratically allotted 15 minutes.
(You can view videos of many of their presentations here.)
They were, I believe, a resounding success. At least, that’s what the audience told us. And it highlights a need in the green business arena: Nearly everyone, it seems, has One Great Idea. The question is how to bring them to the fore, let alone to share them as widely as appropriate.
John Davies, vice president and senior analyst at GreenBiz Group, and the leader of the GreenBiz Executive Network, gets credit for the One Great Idea coinage. “I think asking people for One Great Idea makes them focus in a way that is different from their day to day work,” he told me the other day. “When people are asked to make a presentation, they tend to throw out a number of ideas and hope some of it connects.”
Instead, says Davies, One Great Idea is more like the challenge of desert island discs or books. “It's asking for that one legacy idea, one thing that others might benefit from and you might be remembered for. I think the approach works because people think more about sharing the idea, communicating it clearly, and not just pulling out a tired slide deck.”
Granted, doing a One Great Idea presentation can be challenging. When we prepped speakers for our State of Green Business Forums, we found that, despite the title of the session, some were prone to throw everything into the hopper. I recall one speaker, a senior corporate executive, saying, “Wow, 15 minutes. It usually takes me 30 minutes to get through everything. I’ll have to talk fast.”
No, I pointed out. “This isn’t about getting through everything. This is about one great idea. Just one.” Even with this admonition, a few of our speakers tried to shoehorn in their life’s work or their usual dog-and-pony show. But most rose to the occasion. And when it works, it’s a beautiful, powerful thing.
The idea of presenting One Great Idea shouldn’t be unique to sustainable business, of course. But it plays a special role here. Sustainability is multifaceted and complex, and many people — including many professionals — quickly find themselves overwhelmed by all of the moving parts. The to-do list for sustainability is long and — by definition — never-ending. It’s easy to get paralyzed by the enormity of it all.
One Great Idea helps in two ways. First, it gets us focused on a single tactic, technique, or takeaway. Second, it involves a story. And in sustainability, the power of storytelling is huge. It allows us to combine the technical and the personal, head and heart, creating something both credible and compelling. It’s simply the best way we know to spread an idea.
So, what’s your One Great Idea? How are you sharing it with those who could benefit? I’d love to know.
March 7, 2011 in Business Practices, State of the Art | Permalink | Save This Page | Comments (3)
California’s Bold Move to Legitimize Sustainable Business
A bill introduced in California’s state Senate last week holds enormous potential to give sustainable business a push by making it — well, legal.
Under current law in California and most other states, companies can be sued by their shareholders or investors for taking environmental or social measures that negatively affect shareholders’ financial returns. The proposed bill would enable a new form of for-profit corporation, encouraging and expressly permitting companies to pursue other things besides simply making money.
This is no small matter. The legal issue of fiduciary responsibility has long been seen as a barrier to companies taking more proactive social and environmental measures. In many cases, it has given companies a fig leaf to avoid taking substantive measures to, say, clean up pollution or avoid sourcing from sweatshops. Indeed, the requirement for companies to put profits above all else has been blamed for much of society’s ills — at least the kind allegedly propagated by business. And the alternatives have been a cold cup of tea: to become a nonprofit organization, a hybrid model championed by social entrepreneurs, or some other legal entity frowned upon by capital markets. That pretty much guarantees that these "good" companies are destined to remain small.
For years, groups of socially responsible investors, social and environmental activists, and others have tried to change this state of affairs, with little success. Maryland and Vermont recently enacted measures to allow “for-benefit” companies, such as those advocated by the nonprofit group B Lab, and a few other states are considering them. However well-intentioned, these laws are limited in scope in that they focus principally on smaller, privately held firms.
Getting large publicly held companies to change has been all but impossible, which is why SB 201, the Corporate Flexibility Act of 2011 (download - pdf), introduced in California’s State Senate on February 8, is of such significance. It would authorize and regulate the formation and operation of a new form of corporate entity known as a “flexible purpose corporation.”
Under SB 201, “Any company establishing in California will be permitted to negotiate to include a social and environmental mission that is given equal weight, perhaps even greater weight, than profits,” Susan H. Mac Cormac, who co-led a working group that helped draft the bill, told me recently. “We have given additional protection to boards and management if they do that. We also have a metric for shareholders to enforce the social and environmental mission, just the same as shareholder value.” It’s a model, she says, that can be used by both public and private companies.
SB 201 differs from the “for-benefit” statutes in at least one significant way: It doesn’t proscribe what a company must do. The Maryland and Vermont laws, in contrast, spell out the requirements of a “benefit corporation” — a checklist that hews largely to B Labs’ model for sustainable business.
There are good arguments for both approaches. On the one hand, a set of criteria sets a standard for what a company must do to be “beneficial.” On the other, it lets legislators and regulators set those criteria, a process that often ends up muddled or worse. Unfortunately, traditional California corporations are not able to amend their articles to “embed” environmental and social criteria without considerable risk, thereby creating an issue for California corporations seeking “B Corporation” status.
Cormac, who co-chairs the 550-lawyer Business Department as well as the Cleantech Group at the law firm Morrison & Foerster, has been working on these issues for the better part of a decade. As co-chair of the California Working Group for New Corporate Forms, she and a small team spent nearly 18 months deliberating and drafting this proposed new division of the California Corporations Code. Along the way, the group solicited comments from an advisory committee comprised of members of the California legal and communities.
"We have the conservative folks behind us from the chamber of commerce," she says. "We have a lot of support and have spent a lot of time working with folks to get it right."
Cormac admits that big corporations aren’t likely to quickly adopt this new legal form should it become law. “The companies that could easily do this are the ones where there’s a really strong link between their profitability and their sustainability — the Methods or Revolution Foods of the world,” she says.
Even if SB 201 passes, it will be just one step in a longer journey to transform mainstream business to pursue environmental and social goals as aggressively as they do financial ones. To gain traction, these companies will need the support — or the demands — of institutional investors, such as large pension funds, embracing flexible purpose corporations. It will take leadership companies, government agencies, universities and other large buyers of goods and services to adopt policies giving procurement preference to these companies. And it may well take preferential tax treatment for flexible purpose corporations, or other policy mechanisms, such as fast-track permitting or reduced oversight.
All of which is only one part of the puzzle, says Cormac. “I’ve looked at every part of the system, and it’s not just corporate structure that ties it to profitability. It’s executive compensation with stock options. It’s the analysts on Wall Street and the quarterly reports, and a whole confluence of factors that lead to this unholy emphasis on shareholder value.”
I asked Cormac how she and her law firm would benefit if SB 201 became law. After all, she heads the corporate division of one of America’s larger law firms.
“This is pro bono,” she says. “We have no skin in this game.” To back it up, she explains that she is working working with law schools at Stanford, Berkeley, and UCLA to establish free legal help for companies that want to set up flexible purpose corporations. "This is a passion, not a business opportunity."
For now, it’s all about getting this bill passed — it needs to pass the gauntlet of two committees, then the full Senate, then the State Assembly and getting Governor Jerry Brown to sign it. It’s looking good, says Cormac, but we’ve all seen “sure things” blow up at the last minute.
This will take everyone’s best efforts — letters of support and all of the other usual tools of the trade. (You can send letters to Senator Mark DeSaulnier, State Capitol, Room 2054, Sacramento, CA 95814.) And it will take mainstream companies and investors standing up to be counted.
Without such a law, we’ll be stuck with business as usual — companies hamstrung by their legal obligation to put shareholders’ financial returns above all. But if bellwether California can get this passed, it will make it legally possible, once and for all, for companies to truly integrate the triple bottom line.
February 14, 2011 in Business Practices, Money Matters | Permalink | Save This Page | Comments (7)
The State of Green Business 2011
Today, we publish our fourth State of Green Business report, GreenBiz.com's annual effort to take the pulse of what and how the world of sustainable business is doing.
It's an interesting time to take this accounting, to say the least. In society, environmental issues seem to have faded from view, at least in the U.S., thanks in large part to the recession. "Saving the earth" has taken a back seat to simply saving the day. The politics of the moment seem to have made clean air, clean water, biodiversity, and planetary survival a controversial thing — something we can afford only in "good times." Consumers continue to sit largely on the sidelines, taking small (but, for them, meaningful) actions, like recycling, employing reusable shopping bags, and buying energy-efficient products.
And climate change, that inconvenient truth, has conveniently faded from view as an issue of national import.
It's a different story in the business world. In fact, it's hard to find a big company these days that isn't engaged in environmental issues in a meaningful way. Indeed, a dramatic shift is occurring in business: Companies are thinking bigger and longer term about sustainability — a sea change from their otherwise notoriously incremental, short-term mindset. And even during these challenging economic times, many have doubled down on their sustainability activities and commitments.
Exactly how and why is the story we tell in the State of Green Business 2011, a free downloadable report. As in the past, we identify ten key trends and measure the greening of the U.S. economy through 20 indicators, from carbon intensity to cleantech investing to corporate reporting.
The verdict? As always, it's mixed. Of the 20 indicators, 7 were found to be "swimming" — that is, making progress; 2 are deemed "sinking" — losing ground; and the other 11 are "treading" — just hanging on.
The bigger picture, though, is more positive. From the introduction:
During 2010, we saw a steady march of progress, with some of the world’s biggest companies and brands putting a stake in the ground in the name of environmental (and sometimes social) sustainability. Some are companies that hadn’t previously been visible in these ways. Others, it turned out, had been quietly taking action, walking more than talking, only recently discovering that modesty is no longer an asset in a world that increasingly demands transparency. Still others have only recently elevated sustainability to a level of importance, hiring their first senior executives to oversee and coordinate sustainability commitments and goals.
Some of the areas we found encouraging were energy efficiency (it now takes less than half the energy to produce a dollar of GDP than in 1970); green office space (the square footage of commercial green buildings continues to grow, a bright spot in an otherwise dismal real estate market); packaging intensity (the amount of packaging needed to produce a dollar of GDP has declined steadily since we began measuring it five years ago); and paper (every year, we use less paper per dollar of GDP and recycle more of it, nearing the point where all the paper that can reasonably be recycled is being collected).
But it's not all good news. Electronic waste recycling continues to grow, but so does the amount of e-waste coming into the waste stream); carbon intensity (the amount of energy-related greenhouse gases produced per dollar of GDP went up last year after dropping steadily); organic agriculture (it's growing, but still represents less than 1 percent of all U.S. cropland). On many of our indicators there was only a hint of progress, far too little to make a difference.
As always, a mixed bag. That's the way of the green business world.
What's encouraging about this year's report is the momentum we see, embodied in the stories my colleagues at GreenBiz.com bring every business day. While not every story is earth-shattering, the corporate commitments and achievements continue to grow every year in both size and scope. During 2010, for example, we saw major corporate commitments from Procter & Gamble and Unilever; major commitments to buy electric vehicles by GE and other companies; a new wave of water footprint assessments by several large companies; zero-waste accomplishments by GM, Kraft, and others; a new generation of green chemistry coming from Dow, BASF, and others; plant-based plastics being used by several major consumer packaged goods companies.
I could go on (and on). These aren't stories you would have seen two or three years ago, and that's the point. The state of green business is moving forward — sometimes way too slowly, but there's progress at every turn.
That's our story. Please read the report and let me know if you agree.
February 1, 2011 in Business Practices, State of the Art | Permalink | Save This Page | Comments (1)
Why Dow is Putting Nature on the Balance Sheet
Today’s announcement by Dow Chemical that it will launch a multi-year effort to measure and track the business value of ecosystem services represents a small step for a company, a giant leap for critters of all kinds.
Dow isn’t the first company to make the link between the services nature provides and their value to a company’s bottom line. But its new initiative — a five-year partnership with The Nature Conservancy — goes beyond the academic. Its aim is to create a set of tools and methodologies other companies can use to integrate the economics of ecosystem services in business decision making.
For the uninitiated, ecosystem services refers to the $33 trillion or so worth of “free” deliverables provided to us by a healthy planet, including clean water, breathable air, pollination, recreation, habitat, soil formation, pest control, a livable climate, and a bunch of other things we generally take for granted. As I’ve written about for years (see here, here, here, and here), such benefits aren't valued by companies, since they don’t directly pay for them; they don’t appear on a company’s balance sheet. But that doesn’t mean they aren’t critical to a company’s financial future.
Ecosystems have value, when you consider what a company would have to pay to replicate their services if they weren’t otherwise available. And as ecosystems get stretched and diminished — whether by human activity, changes in climate, or natural cycles — they can impinge not just on profits, but a company’s very ability to operate.
Under the agreement announced today, Dow and TNC will work together to examine how Dow’s operations rely on and affect nature. The aim is to advance the incorporation of the value of nature into business, and to take action to protect the earth’s natural systems and the services they provide business and society. One key objective is to share all tools, lessons learned and results so that other companies, scientists and interested parties can test and apply them.
Dow and its foundation are committing $10 million to this collaboration over the next five years.
What’s going on here? Why has this venerable chemical giant suddenly decided to put a price tag on nature?
“We have been on a sustainability journey for close to 20 years,” Neil Hawkins, Dow’s Vice President, Sustainability & EH&S, told me last week. “We had our first set of sustainability goals that ended in 2005. We’re halfway through our 2015 sustainability goals. They’re very focused on some of the areas you’d expect — EH&S performance, the whole life-cycle of our products, and delivering products that actually help the world solve major challenges.
“But the one area that we don’t explicitly address is ecosystem services and biodiversity. It’s an area we felt we needed to get better in. We have a long history in conservation, and probably have done as much conservation as most companies. But we needed a thoughtful, economic approach that builds directly into our business decision making the value of nature to Dow — be it water, wetlands, forests, etc. And also the value we’re providing, because we have a lot of land holdings and a lot of facilities worldwide.”
For example, Hawkins explained, consider water. Dow uses a lot of water in the production of its materials and chemicals. "Most places in the world don’t have a mechanism for understanding the value of the water from the point of view of pricing. But there are implications to Dow if we don't have the supply of water we need at the right time and the right place." If a plant is in a water-challenged region, finding ways to improve the water availability for everyone, including Dow's plant, can be a valuable opportunity. “There might be value in Dow’s making investments far away from our plant in order to secure more reliable supplies of water,” he said.
“Water supplies don’t just come from rivers on site. They’re also impacted by the ecosystems upstream, like forests,” explained Michelle Lapinski, Director, Corporate Practices at TNC. “Forest cover in a watershed significantly influences water quality and quantity. Trees naturally hold back water during rain events and release it slowly, preventing flooding and providing water during dry periods – and regulating the supply and quality of water better than many facilities can. By evaluating ecosystem services, a company like Dow may decide to invest in forest restoration to ensure continued water flow for their business, and others who rely on it.”
Of course, some of these decisions go beyond a single company’s — or even a group of companies’ — ability to control. It’s a societal matter, not a corporate one. That’s where a group like The Nature Conservancy comes in. “We work in a number of cities in water supply,” Glenn Prickett, TNC’s Chief External Affairs Officer, told me. “In Bogotá, Quito, and São Paulo, we’ve worked with combinations of bottling plants, hydroelectric facilities and local water utilities to help each of them understand the value of the water they’re getting from the watershed in terms of what it would cost to install their own reservoir or filtration plant if they didn’t have the water they need in the quantity and quality they’re currently getting it. That becomes the benchmark. Then there’s an economic case for them to provide some amount of money up to that value toward a common effort to protect and restore that watershed. So, we’ve set up water funds in those cities where different entities pay into the fund to work with upstream landowners to protect and restore forests in the riparian areas. That’s an example of how a company can do a very clear valuation and be part of a larger societal effort to maintain the resources.”
These are complex calculations, the stuff of doctoral dissertations, being applied to the down-and-dirty world of business activity in faraway places. As such, the Dow-TNC partnership will likely make only a small dent in understanding how to integrate the value of nature into business decisions, and in only a limited number of scenarios, let alone have the valuations appear on corporate balance sheets. But there’s significant potential here to bring the scientists together with the bean counters — and have them translate all of this complexity into a language meaningful to those who set corporate strategy. As Lapinski put it: “Businesses talk in dollars and numbers and scientists and conservationists talk about beetles and birds. We’re trying to take beetles and birds and put them into dollar numbers so that companies can value nature just as any other asset.”
Of course, the implications of this go well beyond accounting. I asked Hawkins how he would measure the success of this five-year collaboration.
Success, he said, would be, “if, at the end of this, we’re able to fully integrate this into our business decision making as we site facilities, as we make changes to existing facilities, as we look at our product development — if we can build in an economic valuation of nature and how we touch nature. If we can create environments and markets where business naturally is doing valuations and reaching the best economic outcomes while still meeting their growth objectives — I think that becomes a longer-term goal.”
TNC’s Prickett weighed in: “To me, most fundamentally, success comes if businesses start to see conservation — that is, helping to restore healthy ecosystems — as a source of cost reduction and revenue enhancement. This is business, not just a philanthropic exercise in corporate responsibility or regulatory compliance.”
It’s a first step, to be sure, but an important one. And it will take more than just one chemical company and one NGO, however well-funded, well-staffed, and well-intentioned, to bring this into the mainstream.
“You’ve got to have some companies that are willing to try this, to take it on, to partner and collaborate with another organization with similar interests,” says Dow’s Hawkins. “And that’s really at the core of this agreement: How do you take that first step to make this a reality by building it into a company and into a business and, hopefully, into a broader economic approach?”
January 24, 2011 in Business Practices, State of the Art, Sustainability | Permalink | Save This Page | Comments (0)
