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)
ULE 880: A New Year’s Report
Today marks another significant milestone in the development of ULE 880 – Sustainability for Manufacturing Organizations, the company-level standard we’ve been developing in partnership with UL Environment. Indeed, a great deal has been going on behind the scenes the past few months, so it’s time for an update.
First, a brief refresher. For more than a year, my team at GreenBiz Group has been engaged with UL Environment to develop and commercialize a company-level standard for sustainability — that is, environmental, social, and corporate governance issues — to be used as a tool for companies, government agencies, and other stakeholders. (I’ve previously provided a history of the project here.)
Last July, we released a draft of the standard for public comment. More than 700 individuals — representing companies, nonprofits, government entities, consultants, trade associations and concerned citizens — registered to review the draft. A subset of them submitted more than 1,500 individual comments on specific segments and indicators in the standard. Both numbers represent record stakeholder engagement in Underwriters Laboratories’ 116-year history.
In November, we convened a subset of stakeholders — roughly 20 representatives of major companies, accounting firms, consultancies, advocacy groups, and government agencies — to provide input to address some of the reviewers’ more challenging comments — ones where there was a wide range of conflicting opinion, for example. And at every step, the ULE-GreenBiz team waded through the feedback, making anything from minor tweaks to major adjustments along the way.
The fruits of those labors are being published today: ULE ISR 880. ISR stands for “Interim Sustainability Requirements,” part of the argot of UL’s standard-making process. If this were software, it would be the pre-release version.
The ISR will be used to pilot the standard with a small group of companies, which we’ll be announcing in the next couple months, and is also being made public for another round of comment. With the combination of additional comments and real-world piloting, the UL Environment-GreenBiz team will finish a final revision and issue the final ULE 880 standard this summer.
A lot has happened to the standard since its debut last summer. I can only summarize it here. The complete rundown can be found in a 256-page “response paper” published today. It provides details of the key comments and how they were addressed by the ULE-GreenBiz team, and includes a lengthy supplement that excepts some of the 1,500-odd comments.
Among the key issues:
- One Size Fits All. By far the most consistent feedback point was whether ULE 880 is applicable across all manufacturing sectors, specifically in the area of performance.
- Organizational & Product-Level Indicators. Many stakeholders expressed concern about how and whether to integrate more product-specific indicators into ULE 880.
- The Weighting of Domains. In the first publicly available draft of ULE 880, we sought to recognize social and environmental impacts equally, and highlighted governance as an area of particular emphasis in promoting sustainability within an organization. Stakeholders expressed a variety of competing opinions regarding the weighting across domains and indicators.
- Organizational Boundaries. We received a number of comments related to setting the boundaries of an organization for the purposes of certification.
- Baseline Years. The initial draft of ULE 880 attempted to treat the establishment of a baseline year on an indicator-by-indicator basis. In other words, an organization could have a baseline year of 2003 for a greenhouse gas inventory, but have a baseline year of 2006 for a water inventory. Many stakeholders pointed out how difficult and unmanageable such a mechanism would be for certification purposes, and suggested simplification. The simplest approach, they said, would be to establish a single baseline year for the scope of the standard, yet one arbitrary baseline year would potentially “penalize” companies by not rewarding them for work conducted prior to that date.
- Compliance and Regulation. Throughout the stakeholders comment process, many wanted greater understanding and explanation about how ULE 880 would address compliance and regulation.
I won’t address here how the ULE-GreenBiz team addressed each of these issues in the latest version of the standard — you’ll have to read the ISR, which can be downloaded on ULE’s CSDS, the online tool that we’ve used to collect stakeholder feedback. It’s free, though you’ll need to register. (If you registered previously as a reviewer, you’re already good to go.)
Much of these questions (and several others not mentioned above) point out the incredible complexity of creating a standard of this type. The ULE-GreenBiz team has navigated a thicket of such complexities since we set out on this course, and we feel confident that we’ve come up with practical and pragmatic solutions consistent with our original mission and values.
All told, it’s been a tremendous effort — not just on the part of our respective teams, but on the hundreds of individuals who devoted considerable time and effort to this. We were gratified, even surprised, by the passion and commitment with which people responded to the draft standard — clearly, hours of work for some of them. To all who participated, our sincere thanks.
What’s next? During the coming weeks and months, we’ll be announcing the companies that will be piloting the standard inside their own operations, as well as those that will begin to use it to assess their suppliers. We’ll also be announcing the first of the “Big Four” accounting firms that will sign on as independent auditors for the standard, along with several other parts of the system being built to support ULE 880.
For now, I encourage you to read the ISR document and let us know what you think.
January 11, 2011 in Business Practices, Sustainability | Permalink | Save This Page | Comments (2)
Sustainability Still Wins Elections
Sometimes, the voters get it right. For sustainability advocates, desperate to find something positive in this week's election, here's one: Proposition 23, the California voter initiative to undo America's most aggressive climate program, was soundly, roundly defeated.
It wasn't even close: More than 60 percent of California voters chose to stay the course on California's nation-leading green-economy march. The opponents of climate action didn't just lose, they were trounced.
Prop. 23, for the uninitiated, aimed to reverse California's sweeping greenhouse gas legislation, known as AB32, signed into law in 2006 by Governor Arnold Schwarzenegger. It requires a reduction in state greenhouse gas emissions to 1990 levels by 2020. The law will engage a broad-based effort by just about every business entity in the state, along with government at all levels -- and, of course, individuals in their roles as shoppers, drivers, and homeowners — in dramatically reducing California's climate impacts.
Reaching the law's mandates involves a low-carbon fuel standard for vehicle fuels as well as regulations for tires, engine oils, paints, window glazes, and vehicle insurance. It involves new regulations that affect housing, trucking, refrigerated vehicles, cargo vessels, rail freight, chemicals, and many other parts of the economy. It is, simply put, the most comprehensive climate legislation enacted, at least in the U.S.
Which is why some big companies hated it. Fossil fuel companies in particular. Valero and Tesoro, two Texas oil companies, provided the majority of funding in support of Prop. 23. The proponents took the stance that California simply couldn't afford to address climate change during a recession, with state unemployment at more than 12 percent. Proposition 23, had it passed, would have mandated that AB32 efforts be back-burnered until the economy greatly improved — until such a time that unemployment hit 5.5 percent for four consecutive quarters. That is to say, until never.
Proposition 23 was significant for one principal reason: It was the first time that action on climate change had been put to the voters.
And the voters spoke, resoundingly: Californians overwhelming agreed that this is no time to stop California's leadership on energy efficiency, renewable energy, clean technology, and greenhouse gas reductions.
And they shook off the claims that this would be a job-killer, agreeing instead that AB32 represented a tremendous opportunity for the state to build on its existing foundation as a leader in new technologies, companies, and industries. Indeed, it was the new-economy companies, investors, and entrepreneurs -- and the occasional large company, like HP — that stood on the side of climate action.
"Evidence says 'As goes CA so goes the nation,'" Sunil Paul, a clean-tech investor and entrepreneur, and creator of an initiative called the Gigaton Throwdown, told me last week. "It's true not just for food -- McDonalds to California cuisine — but for environmental laws. Environmental regulation in other states and at the federal level often starts here in California. But so can dismantling the laws. California policy instability in the early 1990s lead to the collapse of the U.S. wind turbine business and those anti-clean energy attitudes took root elsewhere in the country."
Another clean-tech VC, Rodrigo Prudencio of Nth Power, put it this way: "Prop. 23's biggest impact on California's clean-tech economy would not have been in the direct impact of killing AB32 — only a few cleantech companies rely on a price of carbon in their economics," he told me. "Rather, it would have been the surreptitious attack on the many laws and regulations that underpin California's environmental leadership, many of which, arguably, could be sidelined by passage of Prop 23. The proposition was a legitimate Trojan horse."
In this case, the big wooden horse of economic recovery was quickly seen for what it was: an diversionary insurgent effort by some of the biggest contributors to climate change to maintain the status quo in order to protect their narrow interests.
And so it went: Californians said, in effect: "Climate change is both a threat and an opportunity. The threat is to our homes, communities, and children. The opportunity is to reinvent our economy toward a low-carbon future — even if it takes significant changes in our economy and our lives. The promise of a green economy, and all of the companies and jobs that will create, is greater than the risks of change."
And just in case you think Californians were smoking something, consider that another initiative, Prop. 19, which would have essentially legalized marijuana, was similarly quashed by voters. Today, the sweet smell in the air is that of rational, progressive thinking.
November 3, 2010 in Climate Change, State of the Art, Sustainability | Permalink | Save This Page | Comments (0)
Shanghai: A City of Two Tales
I'm writing this en route home from Shanghai, where I've spent most of the past week touring, visiting, meeting, and experiencing this Asian megacity for the first time. The occasion was Expo 2010, the world's fair situated on both sides of the Huangpu River, which runs through the center of China's largest city.
I came to Shanghai primarily for the opening of an art installation, "The Nature of Cities," on cities and biodiversity, at the Expo's United Nations pavilion. The theme of the exhibition — created and produced by Art Works for Change, the nonprofit group founded and headed by my wife, Randy Rosenberg — reflected the theme of the Expo itself: "Better City — Better Life."
That "better cities" theme pervaded the pavilions representing nearly 200 countries, plus dozens more organizations and corporations that are exhibiting here. And it aimed to signify Shanghai's emerging status in the 21st century as the "next great world city" — at least by Shanghai's own reckoning. Shanghai, like most big cities in both developed and developing economies, is a study in contrasts: on the one hand, world-class shopping, fine dining, and some of the planet's most impressive buildings; on the other, choking pollution, gridlocked traffic, and a struggling underclass. A rich and tortured history; a promising but uncertain future.
For two days, amid some of the hottest temperatures Shanghai had seen in 50 years, we toured the Expo, at times standing in long lines. The story each national pavilion told was predictable: "We're a proud people with deep traditions and care for the land that is our home. We support progress and a clean environment. We have great hope for our children. Here are a few of the things we're good at. Come visit us! Come buy our stuff!"
But not the USA pavilion, which stood out among the others, less for its design than its content: Its primary purpose was to showcase the companies that sponsored the building, a roll call of American capitalism: Alcoa, Boeing, Caterpillar, Chevron, Citi, Corning, Dell, Dow, Dupont, Fedex, GE, Goodyear, Honeywell, Intel, KFC, Marriott, Microsoft, Pepsi, Pfizer, Pizza Hut, Procter & Gamble, Visa, Walmart, and more than a dozen others.
The message, as best I heard it: "We innovate to bring great ideas to the world! We build brands that the world wants! We create opportunity! Come visit us! Come buy our stuff!"
But it wasn't the country pavilions that most interested me. On my second day at the Expo, I made a beeline for the corporate pavilions, a smaller group of grandiose buildings across the river from the Expo's main crowds. It was here I found two competing tales of our energy and transportation future.
Up first: the General Motors Pavilion — actually the SAIC-GM Pavilion, reflecting GM's partnership with the Shanghai Automotive Industry Corporation. The pavilion's theme: "Drive to 2030," an engaging and highly optimistic tale of where transportation can take us within the next two decades, with an emphasis on China's vehicular future. That future, says GM, is one
in which driving will be free from emissions, accidents, petroleum, and congestion. It is a future in which driving will also be more enjoyable and fashionable than ever before.
The keys to this Utopian vision are electrification and connectivity — a technological mash-up of vehicles, energy, and information, where vehicles — from traditional cars, buses, and trucks to a new generation of cool "personal urban mobility" vehicles called the EN-V (pronounced "envy") — zip along at a decent clip, kept collision-free thanks to next-gen technologies GM is developing or integrating into vehicles — or at least plans to. Oh, and the sky is always blue.
I found the vision compelling and hopeful: a car maker that gets that the future is not just about cars and trucks, or even buses and trains — but about mobility: getting where you need to go, when you need to do it, in the least taxing (personally, economically, societally, environmentally) way possible. And maybe even tap into some cool, fashionable technology along the way.
(I'll admit to a little bias: GM is a client of GreenOrder, the strategy and management consultancy with which I am affiliated. But I would have been equally laudatory of any car company that promoted such a sustainable mobility vision. GM, as it turns out, was the only car company hosting a pavilion in Shanghai.)
You might respond, "Great. Nice vision. But when will we actually see it?" After all, we've been tantalized before at world's fairs with cool tech that never came to pass. (Picturephones, anyone?) And GM's track record for delivering on change isn't that great.
"This has become very strategic to GM," David Tulauskas, GM's head of public policy in China, told me over lunch at the pavilion. He cited the growing number of places like London and Singapore that are using congestion pricing; additional cities are creating "back office" traffic management technology platforms to manage vehicle congestion. He described the emergence of Dedicated Short Range Communications standards that can keep adjacent vehicles from colliding in order to utilize roadways more efficiently ("kind of like schools of fish that never run into each other," he explains). He explained how the expansion of GM's OnStar telematics technology could provide a range of consumer-friendly services. Tulauskas also pointed out that the "new" GM has taken a more aggressive stance on innovation, such as the venture fund it recently launched to develop and invest in advanced technologies, and a more robust long-range planning process being undertaken by GM that is approaching business development from a mobility perspective, and looking more frequently outside the company for technology solutions, a far cry from the inward-looking pre-bankruptcy GM.
Of course, it's all just talk and cool prototypes. But I walked away with the sense that this old-line company has a bead on where the future is headed, and wants to be in the driver's seat, so to speak, as that future comes into view.
That was not the case at the second corporate pavilion I visited, the Oil Pavilion, presented by three of China's largest petroleum companies, though it might as well have been sponsored by the American Petroleum Institute.
There was a decidedly old-world vision offered here — a propaganda machine spewing bromides about the wonders of petroleum in our world and how much we rely on it daily. Fortune-cookie-like reminders were everywhere you looked: "Convenient traffic conditions/70% are contributed by oil," read one. "One needs 551 kg of oil for food in lifetime," read another. (I'm guessing they weren't referring to this line of petrochemicals.)
The heart of the Oil Pavilion was an impressive 4-D movie (the fourth dimension is sensation: you "experience" snakes, flies, wind, ocean spray, and more). But its central message was decidedly one-dimensional: Oil is a critical part of everything we do, and it isn't going away, so learn to love it. Even when there is mention of the need for a "low-carbon economy," it quickly and curiously follows that "oil and gas will remain predominantly." Unlike GM's forward-looking message, this industry's viewed tomorrow as a carbon-copy of today — stay the course! — hardly a hopeful vision. Suffice to say that amid the petro-carnage in the Gulf of Mexico, not to mention the Persian Gulf, the core message of the Oil Pavilion seemed to have run out of gas.
And so went the Expo's two tales. Both anticipate a growing global population of urban dwellers seeking the good life, a life that demands mobility, not to mention food and shelter and fun. Both anticipate the challenges ahead of making cities that work, ensuring they aren't paralyzed by polluted air and congested roads, but which offer ways to get where people want to go.
But only one of those is a city I hope to see. The other is a city to dread.
July 6, 2010 in Clean Tech, Climate Change, State of the Art, Sustainability | Permalink | Save This Page | Comments (0)
The Green Business Decade in Review
Okay, I'll admit: The headline above is a bit of a come-on. I couldn't possibly do justice to the past 10 years' worth of green business activity — at least not in the following 1,500 or so words. But as we view the whatever-it's-called decade in the rearview mirror, it's tempting to assess what's transpired since the good old days of Y2K to see how far we've come — and how far we haven't. So, let's do that.
First, the good news: The greening of mainstream business has continued apace since the clock struck 2000, growing continually more rapidly as the decade wore on, even amid a Great Recession. The idea of green companies appears to have extended into the next concentric circle, beyond the true-blue, values-driven companies and the next tier of large leadership companies, to a third tier of companies that hadn't previously been concerned about global warming or other environmental issues. Today, it's hard to find a sizable company that isn't talking the talk and, to some degree, walking the walk. Trying to be seen as green is now more the rule than the exception.
The bar keeps rising, too: What seemed cutting-edge 10 years ago — carbon neutral products and companies, zero-waste factories, green chemistry, life-cycle analysis, green buildings — is now mainstream, or at least warrants a so-what? response when trumpeted by companies. Things that used to make headlines — or, at least, good promotional copy — are now business as usual.
And each year brings about a succession of whodathunk moments: Big-bad retailers committing to green up their supply chains, big-bad auto companies committing to transforming their products and manufacturing processes, big-bad packaged goods manufacturers launching green product lines, big-bad computer makers dramatically improving energy efficiency and recyclability, big-bad food processors and fast-food chains committing to sustainable sourcing, big-bad utilities committing to energy efficiency and renewables, and many other companies — big-bad and otherwise — announcing goals, partnerships, or achievements that wouldn't have seemed likely not that long ago.
Now, the big-bad news: Most companies are engaged in green business activities in only the most superficial ways, addressing just a small portion of their operations and impacts. Few have looked holistically at what they do from an environmental perspective, let alone made bold, audacious commitments to reduce their impacts or transform their products and processes to embrace a new green ethic. While more companies are engaged than ever before, their collective efforts are barely scratching the surface.
(On February 4, my colleagues and I at GreenBiz.com will issue our third annual State of Green Business report with specific measures of progress, or lack thereof. The report will debut at two State of Green Business Forums, in San Francisco and Chicago.)
So, while there is much to celebrate at the dawn of a new decade, there is a nagging feeling that much of this amounts to a false sense of hope — that all of this good news may be too little, too late. But maybe not.
In that decidedly indecisive context, here are three reasons why I'm discouraged, and three reasons that I have great hope for the decade ahead.
1. We're not moving the needle. As I said, the sum total of all this green business activity hasn't changed things much. Most global environmental indicators continue to head in the wrong direction. And where progress is evident, it isn't taking place at the scale and speed needed to address climate, water, air quality, toxicity, food security, biodiversity, and land-use challenges, among others. Even in developed economies like the U.S. and Europe, key indicators of progress — for example, the amount of energy and water consumed or waste and pollution emitted per unit of gross domestic product — has only mildly improved. In fast-growing developing economies — China, India, Southeast Asia, Latin America, and others — the story, in terms of consumption and emissions trends, is frightening.
2. The public still isn't getting it. There's little sense of urgency, and for good reason: Most people on the planet are focused like a laser on getting through the day — feeding and sheltering their families, staying alive and well, finding work, maintaining basic human dignities — and have little time or interest in protecting the commons. Meanwhile, the "haves" are largely focused on keeping what they've amassed, if not adding to it, and generally can't be bothered with the greater good. Most individuals have little understanding of the environmental impact of their lives, content to make a few simple, largely symbolic changes in their shopping or personal habits. As a result, consumer pressure on companies to transform their products and processes is relatively meek. Yes, there is a growing cadre of citizens concerned about the climate and other planetary ills, and a new generation entering the marketplace with a greater green ethic, but their power to effect change to date has been tepid at best.
3. There's little sense of urgency. In generations past, people took to the streets to protest wholesale injustices and inequities and, in the process, helped bring about sweeping changes, from the U.S. to the U.S.S.R. These masses were supported by political and business leaders who saw great opportunity in dramatic change, for both themselves and society in general. So, where are the masses marching in the streets demanding action on climate change in the name of future generations? Where is the anger over inaction on energy and climate issues — arguably among the greatest civil and human rights issues we've ever faced? Where is the bandwagon of consumer boycotts and shareholder actions forcing companies to respond? Where are the politicians expending their political capital fighting barriers to a green economy? Why aren't the threats to our security — food security, housing security, water security, energy security, national security — fomenting scores of green Manhattan and Apollo projects? Yes, there are encouraging examples of all of these things, but they are happening much too slowly and don't seem to be making much headway.
So much for the bad news. Amid all this, I'm encouraged, excited even, about where business is headed.
1. Green innovation is booming. There's a revolution taking place that even many of its participants can't yet see. It involves the confluence of energy, information, building, and vehicle technologies, and the promise of a wealth of impressive new goods and services. Some of these will be seen this decade in the emergence of the so-called smart grid, in which everything from appliances to automobiles are connected via two-way, always-on connections, enabling not just better management of energy resources, but an array of new capabilities that improve people's lives while reducing their impacts. These things may not be overtly marketed as "green," but much like the iPod and iTunes, they stand to transform how we live, work, drive, and play in ways that we can't yet imagine, while vastly reducing materials and energy needs. All of this will help to transform how companies think about what they do, leading to, among other things, closed-loop systems of commerce. And it's not just about technology. Innovations in food production, apparel and footwear manufacturing, and many other industrial processes and feedstocks are advancing faster than most people recognize.
2. Companies are reinventing themselves. Largely as a result of these innovations, companies will continue to find themselves crossing sectoral lines and entering new lines of business. I wrote in 2006 about the "new energy companies," old-line companies like chemical manufacturers, auto makers, IT companies, and food processors that have found themselves in the energy business. That trend has accelerated as the aforementioned technological convergence takes shape. So, too, with green building, as I noted recently: a new wave of old-line companies (think Firestone and Sanyo) are now in that sector, too. Each of these players brings new energy and momentum to the green business arena. Meanwhile, early-stage companies are getting out of the lab and off the ground, invigorated by capital flows that, while recently slowed, are beginning to rebound. Slowly but surely, some of these innovators are going public or are being swallowed by bigger fish, extending their capabilities and reach.
3. Sustainability is becoming about more than just the environment. This is long overdue. One of the more frustrating trends of the past decade was the conflating of "green" with "sustainability." The latter, of course, means much more than environmental responsibility, though you wouldn't know that listening to most corporate marketers and PR firms, which treated the two terms as one and the same. But that's changing. The social side of sustainability — a broad swath of topics including working conditions, community impacts, human rights, product safety, access to education and health care, increased opportunity for all, and more — is beginning to be considered by some large companies. It is showing up in corporate "responsibility" reports, of course, but also in the design and delivery of products and services for the poor, both in developed and developing countries. It is showing up in corporate concerns over obesity, product safety, access to clean water, and dozens of other things. Some of the companies involved were dragged to these issues by activists, but that's how many of today's environmental leaders were born — companies like Nike, McDonald's, Starbucks, Home Depot, and others. To be sure, the social side of sustainability remains early-stage, but the trends are encouraging.
At the end of the day — and the decade — how does all of this stack up? I won't venture to say. There are too many unknowables that could help or hinder the shift to greener companies and economies: the vagaries of world economics, rapid technological developments, dramatic political shifts, fast-emerging impacts of climate change, roller-coaster oil prices, natural disasters, populist movements, and many others.
One thing is certain about the green business decade before us: It will be at least as interesting as the one just passed. Whether that's a good thing or not remains to be seen.
January 3, 2010 in Business Practices, Clean Tech, Climate Change, State of the Art, Sustainability | Permalink | Save This Page | Comments (2)
Is There Hope for Business after Copenhagen?
I've been trying over the past few days to find some Hopenhagen in Copenhagen — that is, to see some positive outcome to the COP15 climate summit just concluded. The two-week event ended with a whimper, not a bang, a not-altogether-surprising conclusion to an overhyped event in which all parties had anticipating the entire world coming together to solve a single, critical issue affecting — well, the entire world.
When it was all over, the whole exercise — nearly 50,000 official attendees, and probably an equal number of unofficial ones, attending hundreds of events, from formal negotiation sessions to informal scrums of concerned souls conversing around a dinner table — seemed to be for naught, an exercise in futility born of a ideal that disparate parties could find common purpose in jointly solving global problems.
As you likely know by now, the Copenhagen Accord (download - PDF), which the summit ultimately yielded, is a meager statement cobbled together by five countries and "recognized," sometimes begrudgingly, by most but not all of the other 188 national delegations. It contained little that's new or actionable, acknowledging that "climate change is one of the greatest challenges of our time," that "deep cuts in global emissions are required according to science," and that "adaptation to the adverse effects of climate change and the potential impacts of response measures is a challenge faced by all countries." It recognized that actions should be taken to keep any temperature increases to below 2°C but contained no legally binding commitments for reducing greenhouse gas emissions. There are some multibillion-dollar financial commitments from developed countries to developing ones, but few specifics about where the money is coming from, or where it will go.
Was it a modest first step, a travesty, or simply a non-event? It's too soon to tell, of course, but pundits — those that aren't still shell-shocked, at least — already are spinning it in these and many other ways.
For companies, Copenhagen seems a setback, a lost opportunity, partly of their own making. As I've previously written, business executives were out in full force, whether speaking on panels, participating on workgroups, or seizing the opportunity to engage in wall-to-wall meetings with various other business folks, government officials, or NGO leaders present in Copenhagen. But business — at least the forward-thinking companies that have been pressing for more certainty about future carbon constraints and pricing — were not adequately represented at the negotiating table.
Some of this had to do with the fact that COP15 was a meeting of governments, each with their own issues about their economies, development needs, and energy and natural resource supplies. (Companies were represented only through business groups that were designated as nongovernmental organizations, or NGOs, and had the same status as activist groups and other nonprofits.) The interests of business seemed ill-represented in the negotiations, despite the fact that in most capitalist economies, companies are responsible for most of the emissions.
But it's much more complicated than that. During my brief stay in Copenhagen last week, I got a glimpse of the complexities and seemingly intractable issues the negotiators faced. For example, Brazil and Saudi Arabia feuded over whether and how to value their respective interests: avoided deforestation for the former and carbon capture and storage for the latter. Russia for a time held things hostage, negotiating to hold on to its massive store of carbon credits — one of the few positive things to result from its economic meltdown, since an idle economy tends to be a less-polluting one — past 2012, threatening to dump them all on the market at once if it didn't get its way, creating a glut that would lower their price to virtually nothing, potentially crashing world carbon trading markets. I'm sure there were many more of these governmental hissy-fits; much of it was beyond my knowledge or comprehension.
With all of these games being played, how could the bottom-line interests of business possibly compete?
The true business consequences of Copenhagen's COP-out will reveal themselves in the weeks and months ahead, as companies consider what, if anything, the summit's inaction means to their strategies and shareholders. I'll be among those watching closely.
What brings me solace amid all this is when I consider how far companies and technologies have come in recent years despite of any real political leadership on climate change. The Bush-Cheney administration did everything possible to maintain the status quo, even reversing what little climate progress had been made up to then. Yet during those years, the cleantech sector was born, blossoming into the global industry it has become. Renewable energy technology is on the march, growing rapidly in scale and efficiency in all corners of the world. Energy efficiency has become big business, especially in building retrofits, despite the near lack of regulation or energy or carbon price signals. Global companies are measuring, tracking, and reporting their carbon impacts, and an emerging industry of software tools, accounting services, and offsets is there to assist. The automobile industry has pretty much steered itself in the direction of electric vehicles. Even next-gen biofuels are looking viable these days.
Did I mention that I'm trying to find hope in all this?
Of course, all of this would scale much more quickly if the world's governments had risen to the occasion, providing a roadmap for companies to make investments, develop strategies, and innovate.
As a result, key questions loom large in COP15's aftermath: Will Copenhagen's impass stymie the corporate progress made to date? Will it give courage to the incumbent carbon-intensive interests (and their allied think tanks, politicians, and media outlets) that stand to lose in a low-carbon economy? Will companies continue their efforts to curb greenhouse gases? Will their efforts be at a scale and speed insufficient to address the problem at hand?
Is Hopenhagen still possible? I'd welcome your thoughts.
December 20, 2009 in Climate Change, Sustainability | Permalink | Save This Page | Comments (0)
A Night at Hamlet's Castle: Much Ado About . . . What?
Saturday night brought one of the plum events of Copenhagen, at least for the business crowd assembled in this city: a conference held at Kronborg, also known as Hamlet's Castle, in Elsinore, about 50 kilometers from Copenhagen's city centre. The 250 or so well-coiffed business executives who made the trek here did so in large part by the efforts of Danish media magnate Erik Rasmussen, a Michael Bloomberg sort whose business publication, Monday Morning, is the hub of a influential think tank that has placed Rasmussen at the center of the Danish business world.
Rasmussen created the Copenhagen Climate Council, a global collaboration between business and science, the host of tonight's event, cheekily titled To be, or not to be? New leadership for a sustainable economy — a rather ironic title, perhaps, given that this is a moment calling for bold, unequivocal decisiveness from the business community, not Shakespearean dithering.
It's hard not to be drawn to the Bard's quotes while sitting in this storied building, built in the 1420s and considered one of northern Europe's most important Renaissance castles. Will a climate agreement by any other name smell as sweet? Will a departure from business as usual be such sweet sorrow? Is all that glitters here truly green? Okay, I'll stop now. All's well that — oh, never mind.
Where was I?
Saturday night's nearly four-hour program brought an impressive array of speakers, mostly chief executives of companies from around the world: utilities and energy companies, high-tech giants, finance powerhouses, and the odd multinational (Diet Coke, anyone?). It was well orchestrated — brief speeches followed by discussions and audience questions (which were mostly underhand softballs), blissfully devoid of droning monologues and PowerPoint slides. Impressive stories: how China Power has closed hundreds of coal-fired power plants and installed 3,000 gigawatts of clean power, about 15% of its total capacity; how a Danish dairy is creating carbon-neutral milk; how a U.S. utility is reducing emissions at coal-fired power plants in China.
And then dinner, held in King Frederiks II's Wine Cellar in the basement, where the discussion continued to flow.
All good stuff. But if left me with nagging questions: How much are these business leaders being heard amid the cacophony of voices at the Bella Center back in Copenhagen, where the hard work of crafting a climate deal is being done? How much will these companies' leadership roles factor into the delegates' decisionmaking process? Will their corporate commitments and well-intentioned statements about the impact of the climate negotiations alter in any way the outcome?
As I sit here in this storied building, rich with history, inspiration for one of humankind's most famous tales, I continue to vacillate between hope and cynicism — between the inspiring innovation and commitment of a host of the world's biggest companies and their collective vision of a "low-carbon world" — and the fact that these are not the individuals debating our climate future. Inspired as I am by the stories being told here in Kronborg, I recognize that their collective voice is only one of many being expressed in Copenhagen this week.
And many of the important voices didn't make it past the castle's moat. At Hamlet's castle Saturday night, the presence of youth, the Southern Hemisphere, small business, consumers, social entrepreneurs, and those at the bottom of the pyramid were — well, not to be. Each of these brings a critical piece to the puzzle, including their own inspirational stories. Are all of these disparate voices being heard amid the raucous negotiations taking place at the Bella Center? And if so, are they truly being heard, or are the voices talking past one another? That will be a dominant question for the coming week, and the answer will influence all that follows.
For the companies assembled here in Kronborg and throughout Copenhagen, two additional and critical questions remain: In what way will business interests shape the climate negotiations, and how will the outcome of the negotiations themselves shape the future of business?
To be or not to be, indeed.
December 13, 2009 in Climate Change, State of the Art, Sustainability | Permalink | Save This Page | Comments (1)
