Dr. Ron Lembke SUSTAINABILITY, PART 2 SO WHAT DO WE DO NOW?

WHAT IS “SUSTAINABILITY?”  The ability to keep doing something for the indefinite future  If it’s not profitable, it’s not sustainable  What allows a company to survive?  Meeting customer demands  Developing new products  Keeping costs low

 Dimensions of Environmental Sustainability:  Carbon: energy burned by us, by our suppliers  Water: water used  Paper and corrugated used  Solid waste generated  Costs and Revenues:  Lower electricity, gas and water bills  Lower garbage hauling costs  Better public relations  How much do customers care?  If it makes them feel closer, there’s likely monetary value?  How much is your competition doing?  Watch out for GREENWASHING!!!!  Trivial gestures: attention misdirection – ski passes, plastic bags DIFFERENT METRICS The Carbon Footprint of a plastic bag is 1/1000 that of the food in it!

MORE EFFICIENT CARS

 Aka Suzuki Swift, Cultus  EPA 55/60 mpg

2011 EPA MILEAGE CHAMP TOYOTA PRIUS  MRSP $23,810

CAMRY HYBRID

GREEN SUVS? ISN’T THAT AN OXYMORON?

2011 MSRP Info from cars.com

HOW HAVE WE FIXED THINGS BEFORE?

IF CARS ARE THE PROBLEM… LET’S GO BACK TO HORSES!  Feeding:  1.4 tons of oats, 2.4 tons of hay per year  5 acres per horse  15 million acres: West Virginia  1,000 lb horse:  50 lbs/day, 10 tons/year, quart of urine  “Crossing Sweepers”  1898 first urban planning conference: horse manure  1894 Times of London: 9ft deep by 1950  Conference quit after 3 days, not 10  Henry Ford saved us?

DDT  DichloroDiphenylTrichloroe thane  Mosquitoes-malaria  Lice-typhus  Nobel Prize, 1948  Rachel Carson Silent Spring, 1962  EDF, 1964  Banned, 1972  Granny’s garage, 2005

OZONE HOLE Return to 1980 levels by 2068 Photo: NASA

CFCS  Chlorofluorocarbons  Break down, release chlorine  Chlorine destroys ozone  UV rays reach Earth’s surface  CFCs banned- Montreal Protocol, 1986

LEADED GAS  1930s: Octane in 30s  Add Lead: 87!  Protected Valve seats  Catalytic converter problems  1996 banned US  $10,000 fine

,  Feb 2, 1962 ad in Life magazine  Humble merged with Standard to become Exxon

SO WHO IS GOING TO DO SOMETHING?

 Cap and Trade  Amount of carbon is fixed, costs to companies are known  Complicated:  Permits are issued, based on past emissions, go down each year  If you reduce emissions and don’t need them all, sell them  If you don’t want to reduce, buy more from somebody else  Carbon Tax  Price is fixed each year, amount of carbon varies  Costs are known, it’s simpler, but it’s (gasp) a “TAX!”  Martin Feldstein, Reagan’s chief economic advisor – 20 years  Almost replaced Greenspan, but on board of AIG  Monies Raised help people affected by Climate Change CAP AND TRADE VS CARBON TAX

ACID RAIN  Sulfur Dioxide SO2 and nitrogen oxides NOx react  1990 Clean Air Act  US coal plants cut sulfur emissions in half  Permits issued, reduce or trade  Emissions monitored

 (and everything else)  Markets need a price signal  Right now, it’s an “Externality.”  You can’t MANAGE what you don’t _______?  And by the way, who testified before Congress in FAVOR of cap and trade? THE PRICE OF CARBON

 American Clean Energy and Security Act  Waxman-Markey  Passed house /29/09  Died in Senate  Environmentalists divided:  Too weak  Fuel MPG targets too low  Restricted EPA’s ability to regulate CO 2  If the politicians won’t save us… who will? CAP AND TRADE IS DEAD

SO WHO IS DOING ANYTHING?

 Risks to a company must be disclosed  Guidance about reporting Climate-change related risks  2008 E&Y study listed climate change as #1 threat to insurance industry THE SEC?

 65% improvement fleet efficiency 2010 vs ‘05  Power Units – idling  Truck skirts  2010 – 57m more cases, 49m fewer miles  Better load planning  7,600 cars off the road  World’s Largest Company  $419b ending Jan, 2010  Told Congress to pass Cap and Trade  No fish left to sell? Largest organic cotton buyer, overnight. MAYBE WAL-MART WILL?

 Seafood  Paper  Wood CERTIFICATION EFFORTS

 questions for suppliers, Oct 2009  2. Lifecycle Analysis Database  Sustainability Consortium, ASU, U of Arkansas  3. Simple Tool for Customers  Maybe rating on  Carbon Emissions  Energy use  Water conservation  Deforestation  Scan QR codes for more info?  Nobody wants a red score SUSTAINABILITY INDEX

 Red, Yellow and Green labels on the shelves?  Relative to what? Industry? Other alternative products?  Plasma TVs vs. CRTs vs. LEDs vs. OLED  Scan barcode or QR code with smartphone?  Set up your own criteria  I care more about: water usage, child labor, sweatshops, chemical usage, pesticide usage, etc., etc.  Using ratings from Earthster?  Whatever Walmart wants may become a global standard SUSTAINABILITY INDEX?

 Not developing a consumer standard  Sustainability Measurement and Reporting Standards  What mfg should measure, and how  Report to common database  Common database used for indices  Wait, what? No Index or label?  Kicking the can down the road? SUSTAINABILITY INITIATIVE

 “Carbon is a financial risk”  Single reporting entity  551 Institutional Investors  $71 Trillion in assets  Launched 2000  Largest 2,500 corporations = % GHG  By supply chain, not by country  > 50% carbon emissions outside the four walls  Maybe 80%  600% expected increase in carbon consulting and software  Dan Olson 11/3/11 MAYBE WALL STREET WILL?

 55 companies  “greater realization that carbon management presents a wider cost and revenue opportunity rather than being a pure risk mitigation activity.”  90% members committed to reductions  3.4% annual goals, up from 2.2%  Increased insight into baseline emissions  Growing expertise regarding reducing their emissions  Global 3.9% per year needed for 80% by 2050  ONLY 1/3 of suppliers have targets CDP SUPPLY CHAIN

IMPORTANCE OF CARBON IN SOURCING DECISIONS

CARBON FOOTPRINTS

CO 2 E  The amount of CO 2 that would have the same global warming potential (GWP).  CO 2, by definition has GWP = 1.0 IPCC AR4 p. 212  SF 6 - 8,000 tons produced per year  6,000 in electrical industry, inert gas for casting magnesium  Inert filling for insulated glazing windows  0.2% of GHG emissions GasLifetime (years) GWP 20yrs GWP 100 yrs GWP 500 yrs Methane Nitrous Oxide HFC ,80012,200 HFC-134a143,8301, Sulfur hexafluoride3,20016,30022,80032,600

 Add up total Carbon Footprint of all activities and inputs, divide by the number of units sold CF PER UNIT ++ =

PATAGONIA – 15 PRODUCTS

CARBON FOOTPRINT AS MULTIPLE OF PRODUCT WEIGHT ProductAverage Shoes 40 Shirts29.7 Jackets/vests23 Sweaters/sweatshirts46.7 Shorts8.5 Bottoms18 Dresses46 Luggage8 Original data from Patagonia

 World Resources Institute  Gustave Speth,  “Bridge at the End of the World”  Natural Resources Defense Council  World Business Council for Sustainable Development  CEO led, 200+ companies  Stephan Schmidheiny  1992 Rio Earth Summit  “The mission of the GHG Initiative is to develop internationally accepted GHG accounting and reporting standards and tools, and promote their adoption in order to achieve a low emissions economy worldwide”

Direct vs. indirect GHG emissions?  Direct: sources that are owned or controlled  Indirect: result of activities, but at sources owned or controlled by another entity. Scope: 1.Direct GHG emissions 2.GHG from purchased electricity, heat, or steam 3.Extraction and production of purchased materials and fuels, transport-related activities in vehicles not owned or controlled by the reporting entity, electricity-related activities (e.g. T&D losses) not covered in Scope 2, outsourced activities, waste disposal, etc.

SCOPE 1,2,3 OLD PICTURE

 2,487 respondents for CDP  85% used GHG Protocol Standard  “Often, majority of emissions come from Scope 3 sources, which means many companies have been missing out on significant sources of improvement.”  Kraft Foods found 90% from value chain  GHG Protocol Factsheet GHG PROTOCOL

INDIRECT EMISSIONS

2010 VS % outside four walls 80%? 90%? 2010

REVISED PICTURE, OCT 2011 Inherent Double- Counting

CORPORATE PERSPECTIVE SupplierRetailer

LIFECYCLE ANALYSIS ProductionDistributionUsage End Of Life

DOUBLE BILLING MFG AND RETAILER BOTH RESPONSIBLE ProductionDistributionUsageEOL MANUFACTURER’S FOOTPRINT RETAILER’S FOOTPRINT

EMBODIED CARBON Supplier Retailer

Scope 3 supply chain reporting is growing Still lags far behind other scopes

Upstream 1.Purchased Goods and Services 2.Capital Goods 3.Fuel and Energy-Related Activities 4.Upstream Transportation & Distribution 5.Waste Generated in Operations 6.Business Travel 7.Employee Commuting 8.Upstream Leased Assets SCOPE 3 GUIDELINES Downstream 9.Downstream Transportation & Distribution 10.Processing of Sold Products 11.Use of Sold Products 12.End-of-life treatment of Sold Products 13.Downstream leased assets 14.Franchises 15.Investments “Guidance for Calculating Scope 3 Emissions,” Aug. 2011

 Wal-Mart  Sustainability initiative  Carbon Trust  Labeled £2 billion last year  Patagonia  Footprint chronicles CARBON FOOTPRINT VISIBILITY

TESCO (UK) LABELED 500 ITEMS Carbon-label.co.uk Carbon Trust

APPLE CARBON FOOTPRINT

 Easier to open  Less materials  Ship in same box  Cheaper to pack  No twist-ties  No theft concerns  No display concerns FRUSTRATION-FREE PACKAGING

WAL-MART

 “These are not complicated questions, but we have never systematically asked for this kind of information before ” Mike Duke WAL-MART

 Sell 100 MILLION CFLS in a year!  Save customers $3b in electricity  20 millions metric tons of CO2  Save $40 over life of bulb WAL-MART CFLS

 Reduced packaging  497 fewer containers per year  $2.4m shipping costs  Straight to bottom line  4,000 trees saved  1,000,000 barrels of oil  $60m sales needed for that much profit  Why didn’t we do this sooner?  $2.4 million straight to the bottom line WAL-MART KID CONNECTION

 Don’t make the farmers to bad guy  Look at whole supply chain  Grow the crops to feed the cows  Methane from the cows and their manure  On-site power generation  Transport milk to process  Process milk into sour cream  Haul sour cream to Distribution Centers (DCs) WAL-MART DAIRY

 Measuring and Reducing GHG CARBON TRUST

 10% of impact is from stores, trucks, etc.  90% of its impact is from the Supply Chain  Fortune 1= 900 lb gorilla  Take the water out of Tide  ¼ the packaging, shipping cost, shelf space  95 million lbs plastic resin saved  400 m gallons of water  125 m lbs cardboard  500,000 gallons of diesel = 11m lbs CO2 WAL-MART

 128 facings of Tide brand products  13 facings of Coldwater products = 10% of slots  NW Reno Wal-Mart, Jan WAL-MART LAUNDRY SOAP

TESCO DROPPING ITS LABELS?

 2005 – 8% of shoppers left, unfavorable views went from 38% down to 20% in  Require top 200 Chinese suppliers to cut electricity by 20%  It’s still sold 35% more stuff in the US from 2005 to  Index will NOT account for durability  Carbon footprint per year, assuming it lasts 3 vs 5 years?  Index a Long way off  Why?  Nobody cares about carbon  Why?  Because there is no price on it STATUS OF WAL-MART’S INITIATIVE

SO WHAT MAKES SENSE?

Carbon = Energy = Money WHY WORRY ABOUT CARBON?

king/Unlocking_energy_efficiency_in_the_US_economy MCKINSEY STUDY

 Look for energy usage  What appliances use the most? TOOLS FOR FINDING CARBON?

 Input-Output  Total inputs and outputs of system, industry wide  Micro approach – look at each input  KWh used  Gallons of water, etc. LIFECYCLE ANALYSIS

 1kg of Tomatoes  0.4 kg organic loose tomatoes, grown locally in July  9.1 kg (20 lbs) average  50 kg (1110 lbs) organic, “on the vine” cherry tomatoes, grown in Ohio, in March  Flights, bread, wine – Ca vs. France  Bags vs food?  Attention Misdirection  Carbon Footprint of a plastic bag?  Recyclable ski passes  Recycled paper  Feels like something is being done CF OF TOMATOES, ETC.

 Great Basin Brewing Company  Compostable napkins, straws, silverware, boxes, etc.  Slightly higher cost  Vendors not even aware of their own products  Project lead by UNR MBA graduate  Waste hauled by Castaway Trash Hauling  Commercial composting  Landfills emit methane, a bad GHG, and usually don’t capture it  Composting emits less methane 30-70% less COMPOSTABLES

KILL-A-WATT

 Look up impact of things COMMERCIAL COMPOSTING

DISCOVERING OPPORTUNITIES

IMPACTS ALONG VALUE CHAIN

LIFECYCLE ANALYSIS

 US Green Building Council  Points system  Start with an architect that specializes in LEED  True believers who really know how to find cost-effective methods LEED: LEADERSHIP IN ENERGY AND ENVIRONMENTAL DESIGN

 Ecological Intelligence: The Hidden Impacts of What We Buy, Daniel Goleman  Force of Nature: The Unlikely Story of Wal-Mart’s Green Revolution, Edward Humes  How Bad Are Bananas? The Carbon Impact of Almost Everything, Mike Berners-Lee  Hot Flat and Crowded: Why We Need a Green Revolution – And How it Can Renew America, Thomas L. Friedman BOOKS TO CONSIDER