Business and Sustainability Professor Craig Diamond BA 385 November 18, 2009

2 Presentation Overview  Global environmental problems  The sustainability business opportunity  Business approaches to sustainability  Discussion of some current trends

3 History of the Earth present4.5 billion Earth formed 7 million present First humans 10,000 BC present First agriculture

4 History of the Earth – cont AD Industrial Rev begins 1776 Wealth of Nations (Adam Smith) 1804 World pop reaches 1 B 1908 Ford Model T 1999 World pop reaches 6 B 2200 World pop Reaches 10 B

5 Inputs, Outputs, and Waste Resources Fossil fuels Water Metals Minerals Wood Other Products Wastes Gases Liquids Solids Consumed 5% 95% Annual waste in U.S. ~15 B tons Production Mostly a Linear Process Note: numbers are approximate, U.S. data

6 Labor and Resource Productivity 1750: “unlimited” natural resources made labor much more expensive relative to resources Since Industrial Revolution: huge gains in labor productivity (e.g., farming, manufacturing) In future: huge gains in resource productivity will be required

7 Global Environmental Challenges Global Climate Change Pollution and accumulation of toxics Destruction of forests Diminishing supplies of clean drinking water Declining fisheries Deterioration of soil quality in agriculture Accelerating growth of mega-cities

8 Global Environmental Problems - Extraction and Accumulation Build-up in Environment Carbon Dioxide combustion Global Climate Change

9 Carbon Cycle Rapid rise in greenhouse gas concentration in atmosphere causing temperature to rise Carbon dioxide is the primary “greenhouse gas”

10 Environmental Economics “Tragedy of The Commons” Externalities Ecosystem Services

11 Environmental Ethics What are the rights of nonhumans (plants, animals, ecosystems, etc.)? What are the rights of future generations? What is the right balance between economic growth and the resulting environmental consequences of growth?

12 Global Social Problems –Poverty: approximately 50% of the world’s population lives in poverty or near-poverty conditions –Reliance on dirty fuels (e.g., manure) and unsafe drinking water –Environmental conditions (air and water pollution in particular) worse in underdeveloped areas

13 Growth of Wealth (Environmental Impact) GDP per capita (real$, in 1,000s) IndiaChinaU.S * Population (in billions) *Est.

14 Definition of Sustainability Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Brundtland Commission Report, 1987 Economy EnvironmentEquity “3-Legged Stool” or “Triple Bottom Line”

15 The Sustainability Dilemma Need to slow or stop growth in environmental burden, but… Need to increase wealth to address global poverty EB = P x A x T EB = environmental burden P = world population A = affluence (consumption per capita) T = technology (means of production)

16 Sustainability: a Huge Business Opportunity EB = P x A x T EB = environmental burden P = world population A = affluence (consumption per capita) T = technology (means of production) To slow or stop the growth environmental burden (EB), huge advances in technology (T) will be needed. This is the role of business. From Stuart Hart, “Beyond Greening: Strategies for a Sustainable World,” 1997

17 History of Environment and Business in the U.S. Early 1900s: laws to protect forests, natural areas : growing pollution concerns 1970: U.S. Environmental Protection Agency established : several environmental laws passed and implemented (compliance only mindset) 1990s-present: growing recognition in business and government of need to go “beyond compliance” (voluntary actions and partnerships)

18 Types of Environmental Stakeholders Stakeholder Type  Mixed Blessing Strategy: Collaborate Stakeholder Type  Mixed Blessing Strategy: Collaborate Stakeholder Type  Nonsupportive Strategy: Defend Stakeholder Type  Nonsupportive Strategy: Defend Stakeholder Type  Supportive Strategy: Involve Stakeholder Type  Supportive Strategy: Involve Stakeholder Type  Marginal Strategy: Monitor Stakeholder Type  Marginal Strategy: Monitor High Low Potential for Cooperation HighLow Potential for Threat ? Figure 3-9

19 Progression of Environmental Management Approaches Description Environmental issues viewed as…. Role in Business Compliance Comply with federal, state, local regulations Cost center/riskOperational Eco-Efficiency Same products, minimize inputs (energy, materials) and waste Cost center/risk, but with ability to cut costs Operational Product Design Change Same/similar products with environmentally preferable design Cost center/risk, but also source of competitive advantage Strategic New Products New products to address sustainability marketplace needs Source of competitive advantage Strategic

20 Progression of Environmental Management Approaches Example: Agriculture Compliance Comply with regulations in regard to pesticide use and clean water Eco-Efficiency Eliminate unnecessary use of pesticides and other chemicals, or use less toxic ones Product Design Organic farming, Integrated Pest Management New Products Grow crops for use in energy production (biofuels)

21 Progression of Environmental Management Approaches Example: Auto Manufacturing Compliance (plant focus) Comply with regulations for air, water, solid waste, hazardous waste; “CAFÉ” standards Eco-Efficiency (plant focus) Reduce use of energy and materials, reduce solid and hazardous waste Product Design (auto focus) Hybrid electric vehicles New Products (auto focus) Cars for disassembly; FlexCar (car sharing)

22 Progression of Environmental Management Approaches Example: Electric Utility (fossil fuel) Compliance Comply with regulations for air, water, solid waste, hazardous waste Eco-Efficiency Maintain efficient power plant to avoid wasting fuel inputs (coal, natural gas, oil); min. releases to air, water, land Product Design Advanced coal plant with near-zero emissions; renewable sources New Products Innovative ways to deliver electricity (“Smart Grid”)

23 Natural Capitalism Foundational book on sustainability –by Paul Hawken and Amory Lovins Argues for a fundamental shift in our economic system –Place same value on natural resources (“natural capital”) that we currently place on commodities, human capital, and other kinds of capital –Huge shift toward resource productivity –Modeling our production on natural processes (“biomimicry” and “industrial ecology”)

24 Industrial Ecology Resources Fossil fuels Water Metals Minerals Wood Other Products “Wastes” Consumed Nothing is wasted, as in natural ecological cycles Minimized use over time

25 The Natural Step A business framework, based on scientific principles, for understanding what sustainability means for an organization 4 System Conditions for sustainability: A society cannot systematically.... 1)Build up concentrations of materials taken from the earth’s crust 2)Build up concentrations of materials produced by society 3)Degrade natural resources and ecosystems 4)Fail to meet human social/economic needs

26 Environmental Management Systems (EMS) A systematic approach to managing environmental issues (based on quality mgmt) If include social issues, can be a “sustainability management system” Businesses can get certified to the ISO international EMS standard Can integrate with Natural Step and industrial ecology concepts

27 Wal-Mart and Sustainability Sustainability programs News Videos