GREENING OF BUSINESS
"As we go into the 21st century, sustainability is going to be a competitive advantage... We need to focus on how to make sure that before the 21st century rolls around, the United States has a green plan, on how it is going to [comprehensively] address issues like global warming, the endocrine disruptor concern, smog, clean water, and so on". Tom Zosel, 3M Company, 1998.
This discussion illustrates further how pioneering companies are taking on board the challenge of sustainability and are shifting their attitudes and practices to meet this challenge. It appears that there is a real transition from ways of thinking in the past, as businesses begins to realize the many opportunities inherent in such approaches as eco-efficiency and waste minimization, along with the importance of integrating sustainability principles across the board to achieve long-term business success. Case studies of individual companies making progress toward sustainable practices are presented, followed by an overview of business networks and collaboratives that are being established around the world to extend these best practices. The discussion concludes with a discussion of business-government partnership programs.
Sustainable Development: The New Business Paradigm?
It is becoming increasingly apparent that corporations which are environmentally responsible are also those which are fiscally successful: the environmental bottom-line does contribute to the business bottom-line. As a result, business and industry are increasingly becoming leaders in promoting the concept of sustainable development, a dramatic shift from the past when business was the constant enemy of progress on environmental matters.
A recent article in the New York Times is testament to this shift in thinking. An analysis of stock performance against environmental performance found that eco-efficient companiesthose that recapture raw materials from waste, for examplereward stockholders with higher financial gains than companies which are not eco-efficient.
An article from Business Week further supported this emerging concept, with examples of companies capitalizing on these emerging opportunities. The energy sector is perhaps the clearest illustration of this shift in thinking within the business community, as the oil and gas industry has split apart in opinion over the issue of global climate change. While industry groups such as the Global Climate Coalition espouse that climate change is a doubtful concept and that the impacts of changing to meet demands of emerging climate change protocols will adversely affect the U.S. and global economies, a number of oil companiesin particular Sun Oil, British Petroleum (BP), and Royal Dutch Shellhave broken away from the pack to state that global warming is real and that they plan to transition their operations and production processes to take account of this.
In a landmark speech, John Browne, CEO and Chairman of BP, broke ranks by saying that global warming is real and that BP is changing to take account of this: "...it would be unwise and potentially dangerous to ignore the mounting concern [regarding climate change]", he stated in 1997. This announcement was followed later that year with the establishment of the Pew Center for Climate Change, with membership including BP, Sun Oil, Toyota, and 3M. The Pew Center for Climate Change provides an important new business counterpoint in the climate change dialogue.
Although much progress is being achieved by business, many critics still state that the path being pursued does not go far enough, particularly that of eco-efficiency. A 1998 article in the Atlantic Monthly critiqued eco-efficiency for being an approach that will only slow environmental decline, as opposed to completely ending it. The authors of this article propose a new approach called 'eco-effectiveness', which promises the 'next industrial revolution'. Eco-effective industrial processes are designed to mimic natural processes whereby all byproducts of production processes become useful (and, most importantly, non-toxic) resources for further production processes. The same is the case for a product at the end of its useful life, whereby a company either includes a process to take back the product and dismantle it, or the product is designed to safely decompose or be recycled.
Perhaps the most significant player in the current paradigm shift underway is the World Business Council for Sustainable Development (WBCSD). As was discussed in Module One, the WBCSD is leading the way in envisioning a sustainable future from a business perspective. The WBCSD has made an important message of support for such concepts as pollution prevention, eco-efficiency, and, more controversially, the concept of full-cost pricing which makes corporations take account of usage of natural capital in their financial book-keeping. Carl Frankel, Tomorrow magazine's U.S. Editor, has talked at length about how the WBCSD has lead the way in corporate environmental responsibility. In this article, he also levels criticism at the WBCSD for falling short in not looking at the underlying issue of how corporate self-interest puts in place a barrier to achieving true sustainability: as he states "The unfortunate fact is that sustainable development and the current market economy rules of engagement may just be incompatible". (The problems of global capitalism and its effects upon both environmental and social sustainability is an area of emerging discussion by such ecological economists as Herman Daly and Hazel Henderson, as well as billionare George Soros). Frankel also criticizes the WBCSD for failing to look at "bigger picture" issues such as how sustainable development is a global and massively complex problem, and how micro-solutions such as eco-efficiency and pollution prevention shy away from such matters.
However, the WBCSD has more recently been working toward remedying some of these criticisms laid at them. For example, they have begun to integrate social justice principles into their work, and have more recently developed a global scenarios report that looks at underlying value-sets that will determine such global futures. Working with a number of corporations in Europe, and the U.S.-based Global Business Network, they developed global scenarios for the future which examined how environmental outcomes might be affected by the directions in which the global economy might shift and our social systems and value-sets might transform. The report makes a unique examination of the underlying 'myths' that have shaped global capitalism. The WBCSD scenarios are also discussed in the proceedings of a Colloquium of world business leaders held by the Arthur D. Little Company, a management consultancy group. This report, entitled Making Business Sense of Sustainable Development, provides a wide-ranging discussion of business perspectives regarding sustainable environmental futures. Business leaders at this colloquium represented ten companies, including Shell, Procter & Gow, Dow Europe, ICI, and Storebrand.
Best Practice Case Studies
The book Eco-Efficiency: The Business Link to Sustainable Development, previously discussed in Module One, provides numerous case studies of companies that have pioneered best practices in environmental and economic sustainability. Chapters 1 and 2 of Eco-Efficiency, provide an excellent introduction to the concept of eco-efficiency and its linkages to both the concept of sustainable development and its impacts on the business bottom-line.
One example of eco-efficient practice is the development of a company environmental management system, which allows it to look comprehensively at sustainability issues as they apply to its own operations, products, and services. Such an approach provides a framework for evaluating current conditions and determining where improvements can be made, identifying goals and strategies, integrating efforts throughout the organization, and providing continuous feedback for improvements. As was mentioned in earlier discussion, 3M became one of the first companies in the world to adopt environmentally progressive policies with its "Pollution Prevention Pays" (P3) program, established in 1975, which focuses on eliminating or reducing pollution at the source. 3M's P3 program has eliminated more than 1.2 billion lbs of pollution to the air, land, and water, with first-year savings alone totalling more than $70 million. 3M's continued leadership in the field has led it to adopt a broad array of environmental standards and guidelines, as well as numerous environmental policies dealing with such issues as energy use, environmental marketing claims, acquisitions and divestitures, and employee safety and health. It also conducts environmental performance audits and practices product lifecycle management.
Another interesting business best-practice example is that of the carpet company Interface. Though not a brand name familiar to the average consumer, Interface has grown to become the world's largest supplier of commercial carpeting. Led by CEO Ray Anderson, Interface has integrated sustainability principles through all levels of its operations, and is one of the first companies to release a 'Sustainability Report'. Interface has introduced a range of new programs and processes aimed at meeting sustainability goals. One example is a shift toward viewing products as services: Interface has introduced a program called "Evergreen Lease" where companies no longer purchase carpet tiles, they lease them. As a result, when Interface replaces carpet tiles the old ones are recycled and made into new tiles. This is but one example of the range of changes introduced by Interface.
Corporate Codes of Conduct
There are numerous business collaboratives around the world that are extending best practices in environmental management, and in particular are developing successful corporate codes of environmental conduct. According to Carl Frankel, in the book In Earth's Company (New Society, 1998) there are now over 40 such codes of conduct that exist worldwide. These include: the International Chamber of Commerce's 16-point Business Charter for Sustainable Development; the chemical industry's Responsible Care program, which was launched in Canada and is now operating in over 30 countries; and the 10-point CERES Principle, which was developed by the Coalition for Environmentally Responsible Economies and has about 80 signatories that include Fortune 500 companies such as GM and Bank of America.
In the U.S., the Chemical Manufacturers Association (CMA) describes Responsible Care as "a unique program to address environmental, health and safety concerns for the industry, their employees and the public". Member companies to the CMA are obliged to observe the following principles of Responsible Care: To recognize and respond to community concerns about chemicals and operations. To develop and produce chemicals that can be manufactured, transported, used and disposed of safely. To make health, safety and environmental considerations a priority in product planning. To report promptly to officials, employees and customers, and the public about information on chemical related health or environmental hazards. To counsel customers on the safe use and disposal of chemicals. To operate plants and facilities in an environmentally safe and healthy manner. To conduct or support research on the safety and environmental effects of products. To work with others on the safe production, transport and handling of chemicals. To participate with creating responsible regulations and standards to safeguard the community, workplace and environment.
The CERES Principles developed by the Coalition for Environmentally Responsible Economies (CERES) were originally known as the Valdez Principles. These principles include: Protection of the biosphere Sustainable use of natural resources; Reduction and disposal of wastes; Energy conservation; Risk reduction; Safe products and services; Environmental restoration; Informing the public; Management commitment; and Regular audits and reporting. CERES believes that success in achieving environmental progress depends on the willingness of corporations to lead, rather than be led, in the transition to a more ecologically sound economy. The focus of CERES work is upon making progress on standardized corporate environmental reporting and the promotion of transformed environmental management within firms. Initially supported by firms with strong "green" reputations, such as The Body Shop and Ben & Jerry's, CERES now encompasses such Fortune 500 companies as Sun Oil, GM, and Polaroid. By endorsing the CERES Principles, "companies not only formalize their dedication to environmental awareness and accountability, they actively commit to an ongoing process of continuous improvement, dialogue and comprehensive, systematic reporting". Obviously, CERES work has only just begun and they seem a group to watch as the corporate world becomes increasingly environmentally aware. CERES website can be found at http://www.ceres.org/.
Another more recently developed corporate code of conduct is ISO 14000, an environmental management standard that has been developed by the International Standards Organization. ISO 14000 was developed as a complement to ISO 9000, their first quality management system focused on the Total Quality Management (TQM) model. ISO 14000 complements ISO 9000 as a tool to manage environmental effects, and as a certification process for corporations to be recognized as meeting certain standards of environmental management. According to the International Standards Organization, the systematic approach of ISO 14000 can lead to benefits for business such as the following: Reduced cost of waste management; Saving in consumption of energy and materials; Lower distribution costs; Improved corporate image among regulators, customers and the public; and A framework for continuous improvement of environmental performance. Many see ISO 14000 as holding great promise: according to Carl Frankel (from 'In Earth's Company'), "these environmental management standards... have the potential to do for environmental management what ISO 9000 has done for qualitymake an in-place environmental management system premised on the TQM model of 'continuous improvement' a virtual prerequisite for doing business globally". ISO 14000 is still in the process of development, lead by a "technical committee" entitled TC 207. TC 207 is overseeing separate standards developed by sub-committees looking at such topics as environmental labeling, life-cycle assessment, and environmental auditing. One of the first standards to be finalized is ISO 14001, which covers environmental management systems.
Another innovative business-focused program is The Natural Step. Led by Dr. Karl Henrik Robèrt of Sweden, The Natural Step focuses upon systemic causes of environmental problems, refocusing the environmental debate away from downstream issues. "With the help of 50 Swedish scientists, Dr. Robèrt developed a consensus document that describes the basic knowledge of the biosphere's functions, how society influences natural systems, that humans are a part of natural systems, that humans are threatening themselves by deteriorating natural functions and, finally, that there are great possibilities to change the situation into an attractive sustainable society" (see The Natural Step website for further information, www.naturalstep.org), The document went through an extensive public consultation process in Sweden, and an important result was a set of four system conditions for sustainability which are based on laws of thermodynamics and natural cycles (see table, below). In the U.S., The Natural Step effort is being led by Paul Hawken, author of Ecology of Commerce and Natural Capital, who is working with many companies to integrate sustainability principles, such as the Interface carpet company.
The Four System Conditions of The Natural Step
1. Nature cannot withstand a systematic buildup of dispersed matter mined from the Earth's crust (e.g. minerals, oils, etc).
2. Nature cannot withstand a systematic buildup of persistent compounds made by humans (e.g. PCBs).
3. Nature cannot take a systematic deterioration of its capacity for renewal (e.g., harvesting fish faster than they can replenish, converting fertile lands to desert).
4. Therefore, if we want life to continue, we must (a) be efficient in our use of resources and (b) promote justice - because ignoring poverty will lead the poor, for short-term survival, to destroy resources that we all need for long-term survival (e.g. the rainforests).
Business-Government Collaboratives
Dutch business and industry is a world leader in integrating sustainability throughout all levels of operations and planning. Not only is industry working in partnership with government to reduce emissions through the covenant process, they are also working with government to ensure the Netherlands is a world leader in such fields as environmental technology and sustainable transportation. The example of leadership and cooperation between Dutch industry and government was recently outlined in a 1998 publication entitled Silent Revolution. This booklet provides an overview of some of the achievements of a relatively under-publicized process of trust-building, negotiation, and cooperation between Dutch industry and government, at all levels, to achieve environmental outcomes as set out in their National Environmental Policy Plan.
Here in the U.S., the Federal government has initiated a number of business-government collaboratives, many of which are modeled on overseas examples such as the Dutch covenant process. Project XL, which was discussed also in the last chapter, has had measured success in encouraging corporations to go 'beyond compliance' through incentives of reduced monitoring and regulation. The EPA has had greater success in topic-specific programs such as Energy Star, Green Lights, and WasteWi$e. Energy Star encourages computer manufacturers to produce equipment with reduced power usage, such as through "power down" when not in use. Green Lights promotes energy conservation by providing on-site technical guidance and resources to help companies switch to more energy-efficient lighting. WasteWi$e promotes cost-effective steps to reduce waste generated by businesses, and has approximately 300 participating companies of which half are Fortune 500 level.
Another green planning practice that companies can adopt is developing partnerships with governments and civic and environmental groups in their regional communities to work toward environmental, economic, and social goals. There is growing interest in such collaborations across the U.S., and we've seen examples of it in both Chattanooga and Oregon. Another example is Joint Venture Silicon Valley, a coalition representing a wide variety of businesses, civic organizations, and government agencies in the high-tech Silicon Valley region of California's Santa Clara County. Joint Venture has been active in numerous projects to improve the quality of life for area residents, including creating a "Blueprint for a 21st Century Community" that outlines a vision for sustainable development for the region. The Index of Silicon Valley 1996: Measuring Progress Toward a 21st Century Community, analyzes trends in a series of indicators that the group developed to provide a reliable, objective source of information about the economy and quality of life in Silicon Valley. The indicators range from job growth in various industry sectors to high-school dropout rates to the amount of toxic chemicals released into the local environment. This information can provide an important base for setting priorities and developing policies and programs to address them; it can also be used to monitor their effectiveness.
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Business and industry around the world is making a remarkable transition to more sustainable forms of production and service delivery. The above discussion is illustrative of new and progressive trends within the business sector that bode well for the green planning approach. Yet many challenges remain. For government, the challenge now is the development of national, state, and local environmental policies that are facilitative of environmental innovation within the business sectorthis is an important element of green plans, as the success of the Dutch covenants demonstrate with their more flexible arrangements for compliance. For the NGO sector, the challenge is to both learn how to work more closely with business to progress particular programs (for example, CERES and eco-efficiency), whilst remaining an outside critic pushing business further and further in regard to improved performance, and to, ultimately, achieve a recognition among the business sector that strategies for environmental sustainability must also include themes of social sustainability and the setting of limits to global capitalism.