ST 520 Responsible ManagementSession 7

CSR and the Environment

Don Minday

"The economy is utterly dependent on the environment, and it is utter stupidity that we keep fouling up the source of our wealth"

- Ray Anderson, CEO of Interface22

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Agenda

• Approaches to the environment• Our problem with the environment• World's 3 economies• Environmental issues• Environmental issues for companies• Carbon footprint

• Break

• GSK presentations

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Can business save the planet?

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Challenge

Develop a global economy that the planet is capable of sustaining indefinitely.

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Trends

Businesses unaware of their negative impactYesterday

Reduce to zero impactToday

Make a positive impactTomorrow

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Our problem with the environment

• Western philosophy– Self-contained moral identities (Kant, Mill)

• Consequences: – Self / firm distinct from the natural

environment– "Atomic individualism": isolated ego, self-

gratification

• Some think environmental concern: – Is a luxury– Is for "tree huggers"

• Alternative approaches to the above?

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Feng Shui

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Common good approach

• The common good - the supreme good of the society.

• A concept traditionally confined to philosophy, theology, and economics, more than management

• Means of existence– Access to drinkable water– Basic alimentation– Energy– Habitat– Health

• Co-existence between peoples– Freedom of information– Cultural diversity– Civil and political rights

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Common goodMeans of existence issues

Environmental threats• Climate change, protecting the biosphere• Greenhouse gases, ozone layer depletion• Pollution: air, water, noise, land• Access to water• Land use and pollution (chemicals, toxics, heavy metals, nuclear wastes)• Resource depletion

– Shrinking agricultural lands– Oceans and fisheries Biodiversity– Deforestation

• Energy– The end of oil– Renewable energies: wind, solar, water, biomass,…

Social issues• Poverty: the north-south divide• Economic development in emerging countries• Overpopulation• Inequality – growing in western countries

"The Future We Want" - Improving the urban environment from "Force for Good"

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Common goodCanon example

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Worlds in collision

Market economy

Survivaleconomy

Nature's economy

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Market Economy• Developed nations and emerging economies

• A billion people live in developed countries

• Developed countries consume 75% of the world energy and resources

• Impact of ecological footprint

• Economic growth = urbanization

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Survival Economy• Traditional and rural parts of developing countries (3 bn. people)

• Breakdown of ecosystems due to infrastructure development and intensive agriculture

• High fertility rate

• Short term survival pressures vs. long-term damages

• Contaminated water: 8 millions deaths / year

• Rural urban demographic shift megatropolises

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Nature’s Economy• Natural systems and resources that support the market

and the survival economy

• Non-renewable resources : technological innovations creates substitutes (chemical fibers…)

• Reduction of renewable resources (soils, forests, water…)

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Challenges for each economy

Developed Economies

Emerging Economies

Survival Economies

Pollution- Greenhouses gases- Toxic materials- Contaminated sites

- Industrial emissions- Contaminated water

- Lack of sanitation- Ecosystem destruction

Reduction - Low recycling- Scarcity of materials

- Overexploitation of renewable resources- Overuse of water

- Deforestation- Overgrazing- Soil loss

Poverty - Unemployment-Population migration-Lack of skilled workers

-Population growth-Low status of women

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ConsumerDevelopedCountries

ProducerEmerging

Economies

ProviderSurvival Countries

ProducerEmerging Countries

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Environmental burden

EB = P x A x T• Environmental Burden (EB) is created by human

activity in function of 3 factors: – P: Population– A: Affluence (consumption) – T: Technology

• Technology is the only one factor on which we can stabilize or reduce thanks to its business dimension

• Others are societal issues = no control

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Easing the burden

Pollution Prevention

Clean Technology

Product Stewardship

More at end of presentation

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Climate change

Evidence for rapid climate change (NASA)

• Rise in sea water level• Rise in global air temperature• Rise in ocean temperatures• Shrinking ice sheets• Declining arctic ice shelf• Diminishing glaciers• Extreme weather: hurricanes, temperature,…• Ocean acidification

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Global warming perceptions

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Sharp increase in atmospheric CO2 since industrial revolution

Data from NASA website

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If the world were 3° warmer video

• European heat wave of August 2003

• 14,000 deaths in France alone over a 3- week period

Depleted Rare Earth Mine in Australia

Deforestation in the Amazon Rain Forest

Elephants killed for tusksSoil erosion

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Resource Depletion

Biodiversity

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Biodiversity mini-case

• Conservationists-logging company conflict in Canada

• The near extinct spotted owl lived in trees that were being cut down.

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Controversy

• Rights: owls' vs. loggers.

• Preserve jobs or species?

• Source: Time Magazine, June 1990

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Land pollution

• Toxic chemicals: herbicides, benzene, other carcinogens.

• Solid wastes: residential, industrial, agricultural.– 220,000 industrial waste dumps in the U.S.– 24,000 uncontrolled hazardous sites.– Waste management: a promising future!

• Nuclear wastes (plutonium,…)– Remain hazardous for at least 100,000 years.– European debate about place of disposal– Nuclear energy French choice – Areva's energy diversification

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Wasted food, electronic waste, landfills

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Waste – land pollution

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Bio-engineered food - GMOs

• "Genetically modified organisms refer to plants and animals with an altered genetic make-up. GMOs are generally altered or manipulated by a non-natural means in order to incorporate genes from another organism.

• Usually genetic engineering (GE) is done to achieve a trait not normally held by an organism, such as longer shelf life, disease resistance or different colors or flavors." Source: www.about.com

• European – US differences regarding safety and legislation

• Video: GMOs – the world's greatest scam

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"Beyond Petroleum?"

Deepwater Horizon Oil Spill 2010

Former BP CEO Tony Hayward before a U.S. Senate commission hearing on June 17, 2010 to defend BP's actions in its attempt to stop the oil leak in the Gulf of Mexico after the destruction of the Deep Water Horizon platform

Where did the company go wrong?

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Water pollution• Oil spills (BP, 2010)• Salt from mines and oil wells• Metal cleaning acids• Inorganic pollutants - mercury, cadmium• Radioactive waste in oceans.• Water tables - nitrates in Brittany• Access to clean water - a major future challenge

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Air pollution

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Chinese electric cars Pollution or solution?

• The implications of hundreds of million new vehicles over the next 30 years?

• Recent government initiatives in favor of the environment

• BYD's solution for an electric car

• China's renewable energy plan

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Overpopulation

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World population distribution

More people live in cities than in rural areas• Pressure on environmental resources, but• Opportunities for environmentally sustainable service

delivery to large numbers of people

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Challenge of urbanization

Energy

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Renewable energies

• Solar • Wind• Water (hydroelectricity, tidewater)• Biofuel: liquid biofuel, solid biomass,

biogas

Peak Oil Production

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Growing energy demand

Wind & Nuclear Energy Development

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Tidewater dam in St. Malo

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Biogas plant 80 km north of Rennes

5 mn. video in French

Pig manure can light up your day

Biomimicry: 9 Laws of Nature Janine Benyus

• Nature runs on sunlight• Nature uses only the energy it needs• Nature fits form to function• Nature recycles everything• Nature rewards cooperation• Nature banks on diversity• Nature demands local expertise• Nature curbs excess from within• Nature taps the power of limits.

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TerracycleTrenton, New Jersey

• Vision: Transform waste into useful products

• Tom Szaky, founder and CEO of Terracyle, "built on garbage, run by a kid, loved by investors"

• Videos– That's a bunch of garbage– Entrepreneurial convictions– How it's done

Biomimicry in action

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Waste management

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Waste management at PumaThe clever little bag

Growing Water Crisis

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Water Decreases while Population Grows = Disaster

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Water issues• Conservation

– Garric, Audrey (2012), Qui consomme vraiment l’eau de la planète ? , Le Monde, accessed 2012 02 17

• Accessibility

• Pollution

• Privatization of water utilities– Argument for: efficiency, service, less corruption– Argument against: full-cost recovery, the nature of water (a

public good – should be managed by the government)

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Coca Cola Bottling PlantKerala, India

• $ 1 bn. invested in Indian business 1993-2004

• Problems– Used 510,000 liters of groundwater daily– Water table levels fell by 8 – 12 m

• Kerala bottling plant– 2001-03 Campaign to close plant– 2004 court order closing plant

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Coca Cola Bottling PlantReaction, stakeholder issues

• Reaction– Reduced water use by 24% in plants– Installed rainwater collection systems in 26 of their plans

• Stakeholder partnerships of Coca Cola with– Water Stewardship Initiative*– WWF (partnership policies)– Attention paide to water footprint

– See also Alliance for Water Stewardship

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Coca Cola Bottling PlantCommitments to:

• Reduce

• Recycle

• Replenish

• See WWF India's partnership policy

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Key environmental issues for firms

• Carbon management• Water management• Energy management, alternative energies• Waste management: minimizing, managing,

recycling• Preventing pollution: air, water, noise • Greening of (innovation in)

– Product stewardship eco-product design– Processes clean technologies – Supply chain

• Meeting environmental standards: ISO 14001

See the OECD's "Transition to a Low-carbon Economy: Public Goals and Corporate Practices"

Key !

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Carbon management

• Eco-friendly building design– Example: Positive energy

building at Abalone Temporary Employment near Nantes

• Greenstone specialist solutions company

• Carbon Management Canada

• BBC's carbon management• Your carbon footprint

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Clean Technology

• "… a diverse range of products, services, and processes that harness renewable materials and energy sources, dramatically reduce the use of natural resources, and cut or eliminate emissions and wastes." - Clean Edge research firm

• Clean Technology Business Review

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Clean Technology• Includes:

– Renewable energy information technology– Green transportation– Electric motors– Green chemistry and lighting– Appliances that are now more energy efficient. – Green construction - buildings both more energy efficient and

environmentally benign. • Environmental finance – new clean technology projects

that go beyond "business as usual" can obtain financing through the generation of carbon credits.

• Carbon project - a business initiative that receives funding because of its potential to reduce greenhouse gases (GHGs) emission.

• Norwegian CT site

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Clean tech & financial performance

• "Venture investing in clean tech reached a nearly $9 billion annual run rate in 2008."

• "Recent academic studies offer new data correlating strong environmental or sustainability performance with superior financial returns,…what we call an eco-premium."

• "Don't rest on your green laurels…continued innovation [in green technology] is required to stay in front of the pack."

Lubin, D.A. & Esty, D.C. (2010), The Sustainability Imperative, Harvard Business Review, May

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Product Stewardship• Reduce consumption in developed economies

• Minimize also all the environmental impacts linked with the product life cycle– DFE – Design for environment: Create products easier to

recover, reuse or recycle– "Cradle to cradle" concept

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CanonVision: "Through technological innovation and improved management efficiency, Canon aims realize a society that promotes both enriched lifestyles and the global environment"

Source: Canon website – Canon's envrionmental vision

Product developmentTransportationProductionProcurement

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Green supply chain management

Stonyfield Farm example

Business logic for greening• Traditional operational logic

– Cost-cutting logic – Re-engineering– Risk management– Ex. Pollution prevention, waste management

• Strategic thinking– Greening = opportunity "of staggering proportions"– A source of revenue growth– New technology development. Ex: Interface carpets

• See – Knowledge @ Wharton 7/02/07

It's Not Easy Going Green: Environmentalism May Help Your Corporate Image, but Will It Keep You in the Black?

– Book Green to Gold– Carbon management site– The Body Shop environmental video

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Your turn:Design an eco-friendly business school

• What issues could you address? • What issues will you address?• How would get buy-in

– With management, faculty, administrative staff?– With students?

• How will you enforce it?• How will you make it part of the culture?• Refer to Lewin's 3-phase change model

Unfreeze Movement Refreeze