Global

Transcript Global

SUSTAINABILITY, PART 2 SO WHAT DO WE DO NOW?

Dr. Ron Lembke

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

DIFFERENT METRICS

 Dimensions of Environmental Sustainability:        Costs and Revenues:   Carbon: energy burned by us, by our suppliers Water: water used Paper and corrugated used Solid waste generated Lower electricity, gas and water bills Lower garbage hauling costs The Carbon Footprint of a plastic bag is 1/1000 that of the food in it!

 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

MORE EFFICIENT CARS

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

2011 EPA MILEAGE CHAMP TOYOTA PRIUS  MRSP $23,810 MPG Gas Fuel/yr Fuel/mo Hybrid 33 454.5

$1,591 $133 Fuel Price / gallon $3.50

4,5 4 3,5 3 2,5 2 1,5 1 Avg US Retail Gas Price

CAMRY HYBRID

0,5 MPG Gas 0 Cost $ saved Regular Hybrid 26 33 576.9

$2,019 % fuel reduction 454.5

$1,591 $428 21% Base MSRP 20,580 Breakeven years Fuel Price / gallon 27,435 16.0

$3.50

GREEN SUVS? ISN’T THAT AN OXYMORON?

MPG Gas Cost $ saved Regular Hybrid $3,088 % fuel reduction 17 882.4

21 714.3

$2,500 $588 19% Base MSRP Breakeven years 42,580 Fuel Price / gallon 54,490 20.2

$3.50

2011 MSRP Info from cars.com

MPG Gas Cost $ saved Regular Hybrid $3,750 % fuel reduction 14 1071.4

21 714.3

$2,500 $1,250 33% Base MSRP Breakeven years 32,515 Fuel Price / gallon 38,340 4.7

$3.50

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 http://www.nasa.gov/vision/earth/lookingatearth/ozone_record.html

CFCS

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

 1930s: Octane in 30s  Add Lead: 87!

 Protected Valve seats  Catalytic converter problems  1996 banned US  $10,000 fine

LEADED GAS

,

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

SO WHO IS GOING TO DO SOMETHING?

CAP AND TRADE VS CARBON TAX

 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

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

THE PRICE OF CARBON

 (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?

CAP AND TRADE IS DEAD

   American Clean Energy and Security Act    Waxman-Markey Passed house 219-212 6/29/09 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?

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?

MAYBE WAL-MART WILL?

 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.

CERTIFICATION EFFORTS

 Seafood  Paper  Wood

SUSTAINABILITY INDEX

 1. 15 questions for suppliers, Oct 2009  2. Lifecycle Analysis Database   Sustainability Consortium, ASU, U of Arkansas 3. Simple Tool for Customers  Maybe rating 1-100 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 INITIATIVE

 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?

MAYBE WALL STREET WILL?

 “Carbon is a financial risk”  Single reporting entity  551 Institutional Investors  $71 Trillion in assets  Launched 2000  Largest 2,500 corporations = 20 25% 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

CDP SUPPLY CHAIN

 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

IMPORTANCE OF CARBON IN SOURCING DECISIONS

CARBON FOOTPRINTS

CO

E

  The amount of CO 2 potential (GWP).

that would have the same global warming CO 2 , by definition has GWP = 1.0

Gas Lifetime (years) GWP 20yrs GWP 100 yrs GWP 500 yrs Methane 12 72 25 7.6

Nitrous Oxide HFC-23 HFC-134a Sulfur hexafluoride 114 270 14 289 12000 3,830 3,200 16,300 298 14,800 1,430 22,800 153 12,200 435 32,600 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

CF PER UNIT

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

PATAGONIA – 15 PRODUCTS

CARBON FOOTPRINT AS MULTIPLE OF PRODUCT WEIGHT Product Shoes Shirts Jackets/vests Sweaters/sweatshirts Shorts Bottoms Dresses Luggage Average 40 29.7

23 46.7

8.5

18 46 8 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 GHG from purchased electricity, heat, or steam 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

GHG PROTOCOL

 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

INDIRECT EMISSIONS

2010

2010 VS. 2011

2011 50% outside four walls 80%?

90%?

REVISED PICTURE, OCT 2011

Inherent Double Counting

Supplier

CORPORATE PERSPECTIVE

Retailer

Production

LIFECYCLE ANALYSIS

Distribution Usage End Of Life

DOUBLE BILLING MFG AND RETAILER BOTH RESPONSIBLE Production Distribution Usage EOL MANUFACTURER’S FOOTPRINT RETAILER’S FOOTPRINT

Supplier

EMBODIED CARBON

Retailer

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

SCOPE 3 GUIDELINES Upstream

Downstream Purchased Goods and Services Capital Goods Fuel and Energy-Related Activities Upstream Transportation & Distribution Waste Generated in Operations Business Travel 9.

10.

11.

12.

13.

14.

15.

Downstream Transportation & Distribution Processing of Sold Products Use of Sold Products End-of-life treatment of Sold Products Downstream leased assets Franchises Investments Employee Commuting Upstream Leased Assets “Guidance for Calculating Scope 3 Emissions,” Aug. 2011

CARBON FOOTPRINT VISIBILITY

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

TESCO (UK) LABELED 500 ITEMS

Carbon-label.co.uk

Carbon Trust

APPLE CARBON FOOTPRINT

FRUSTRATION-FREE PACKAGING

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

WAL-MART

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

WAL-MART CFLS

 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 KID CONNECTION

 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 DAIRY

 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)

CARBON TRUST

 Measuring and Reducing GHG

WAL-MART

 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 LAUNDRY SOAP

   128 facings of Tide brand products 13 facings of Coldwater products = 10% of slots NW Reno Wal-Mart, Jan. 2012

TESCO DROPPING ITS LABELS?

STATUS OF WAL-MART’S INITIATIVE

 2005 – 8% of shoppers left, unfavorable views went from 38% down to 20% in 2012.

 Require top 200 Chinese suppliers to cut electricity by 20%  It’s still sold 35% more stuff in the US from 2005 to 2011.

  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

SO WHAT MAKES SENSE?

WHY WORRY ABOUT CARBON?

Carbon = Energy = Money

MCKINSEY STUDY http://www.mckinsey.com/Client_Service/Electric_Power_and_Natural_Gas/Latest_thin king/Unlocking_energy_efficiency_in_the_US_economy

TOOLS FOR FINDING CARBON?

 Look for energy usage  What appliances use the most?

LIFECYCLE ANALYSIS

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

CF OF TOMATOES, ETC.

 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

COMPOSTABLES

 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

KILL-A-WATT

COMMERCIAL COMPOSTING

 Look up impact of things

DISCOVERING OPPORTUNITIES

IMPACTS ALONG VALUE CHAIN

LIFECYCLE ANALYSIS

LEED: LEADERSHIP IN ENERGY AND ENVIRONMENTAL DESIGN

 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

BOOKS TO CONSIDER

 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