1. Sustainability: a business case Dr. Tim Smith Associate Professor, CEM & Bio-based Products Director, Forest Products Management Development Institute University of Minnesota BP 3503-5503 – Marketing Bio-based Products

2. BP 3503-5503: MARKETING BIO-BASED PRODUCTS © T. M. Smith, 2005 | UNIVERSITY OF MINNESOTA, Department of Bio-based Products DISCUSSION QUESTIONS Define sustainability. Why is the concept of sustainable development important for business managers? Marketers of renewable products? How do productivity, investment, and profit relate to sustainability? Are these at odds with societal pressures? If operations of many firms appear to be sustainable (even from a societal perspective) why aren’t we seeing more developments around social/environmental accounting?

3. BP 3503-5503: MARKETING BIO-BASED PRODUCTS © T. M. Smith, 2005 | UNIVERSITY OF MINNESOTA, Department of Bio-based Products SOCIAL COSTS OF FOREST DEPLETION Climate Mitigation –Global Warming – Cabon Dioxide (CO 2 ) 76% Fossil Fuel (wood as substitute for high energy products) 23% Tropical Deforestation (conservation and afforestation) 1% Cement Manufacture Recreation Protection (soil erosion, watersheds, biodiversity, etc.) Reinhardt –Carbon Tax (i.e. a price of $14-$23 per ton of carbon equivalent emissions) –Exxon - $32 profit per to of carbon emitted (still profitable) Elasticity of demand and Kyoto Protocol –Carbon sequestration - 5.4 million acres of G-P N. American lands ($30-400 million)

4. BP 3503-5503: MARKETING BIO-BASED PRODUCTS © T. M. Smith, 2005 | UNIVERSITY OF MINNESOTA, Department of Bio-based Products CONCLUSIONS AROUND SUSTAINABILITY Managers have a vested interest in encouraging public policies that force private and social costs to converge (complicated, but in the long run the best companies will succeed). Managers need to pay attention to parts of their businesses where private and social costs diverge dramatically, particularly where: –Resource rents are high (and/or a high percentage of profits), or –Profitability is low (less able to invest in new technologies)