Summary of Keynote Speech at CMC Green Certification Banquet

June 5, 2013

Sustainability is an often-cited word, idea, and movement.  By definition, sustainability is occurs when we “meet the needs of the present without compromising the ability of future generations to meet their own needs.”  This definition—taken from the Brundtland Commission Report, “Our Common Future,” to the United Nations in 1987,—is the standard definition, but it lacks the specificity required for business.



Look to the basics of economics— supply and demand—to provide the needed specificity.  Drawing on the work of the Global Footprint Network, we can look at the most macro of comparisons: 



Demand: how fast we consume the earth’s natural resources and generate waste

versus

Supply: how fast nature can absorb our waste and generate new resources.

It is that simple.



How are we doing? Not well.  We currently consume “1.5 Earths” worth of materials now.  Our global Demand for resources outstrips the Supply that nature can regenerate. This is called Overshoot.  Think of a water well that has 1,000 gallons of water: if you take 150 gallons every year and it rains back 100 gallons each year, what happens?  You still have water. But unless you look down into the well, you won’t notice the water level, the Supply, is dropping.



We need to look down into the well.



On top of the Overshoot issue, we are also playing out a game that has never been played in history (or as far back as ice core stocks can go): we have industrialized our way to over 400 parts-per-million (ppm) of CO2 in the atmosphere.  Scientific consensus (98+%) states that this will lead to temperature increases, which will likely lead to weather pattern changes, coastline changes, and changes in vegetative type, distribution, and coverage.  This could lower our Supply of available natural resources and increase climate casualties.



What can we do? Respond.



Business is responding and arguably leading the way. Corporate leaders like GE, Wal-Mart, and Bridgestone (all chosen from my past list of sustainability project engagements) are setting visionary goals and making great progress.



To paraphrase Nobel prize winning economist Milton Friendman, “the business of business is business,” i.e. to make profits.  As the list of corporations engaging in sweeping sustainability initiatives increases, we must surmise that sustainability is actually advantageous to business.



It is. But like anything done in business, it must be done well.



The profit equation is simple: Profit = Revenues - Costs.


There are four advantages to businesses engaging in sustainability effectively:



1.) Cost Savings, in the immediate or short-term;


2.) Risk Reduction, a.k.a. reducing the risk of future costs;

3.) Revenue Generation, in the immediate or short-term; and,

4.) Brand/Reputation Enhancements, a.k.a. increasing the likelihood of revenues in the future
.

Using an environmental lens, sustainability is only met when we get back down to using “one earth” annually.  Thus, we have to reduce our global demand over one-third while taking on an ever increasing global population (slated to move from 7 to 9B in the next few decades) and ever increasingly wealthy BRIC (Brazil, Russia, India, China).



Using a business lens, I see “sustainability” as the fifth step in what is now an eight-step process.
 
Here are the steps, defined by a summary statement and the inherent “business value.” The steps are grouped in Stages based on degree of difficulty.



Opening Stage: The First Few Steps

Step 1: Foundational

Summary:  Step 1 is getting started, which is different for every organization.  It is highly correlated to your team's current levels of awareness, understanding, and past performance.  This is the “upfront investment” stage.

Business Value:  As with most upfront investments, the initial steps are loss leaders. It costs money to put systems and structures in place and get the foundational language and common vision in place.



Step 2: First Wave Greening

Summary:  Step 2 is most commonly focused on cost savings— the easiest to attain,  a.k.a. the “low hanging fruit.”

Business Value: Step 2 initiatives usually have a short payback period (0-2 years) through cost savings, e.g. lighting upgrades.


Step 3: Second Wave Greening

Summary: Step 3 is most commonly a gradual progression from cost-centric activities to adding one of the other three business values, e.g. risk reduction.

Business Value: These efforts usually have a mid-range (2-4 years) payback from cost savings. They also benefit businesses through risk reduction activities such as screening suppliers for environmental/social performance, e.g. Walmart's Supplier Sustainability Scorecard.



Advanced Stage: Building to Sustainability

Step 4: Third Wave Greening

Summary:  Continuous progression leads to the third wave of greening, or realizing a third business value from sustainability, e.g. revenue generation.

Business Value: The third wave offers continued cost savings, risk reduction activities, and opportunities to generate new revenue streams by solving your customers’ environmental problems, e.g. GE's ecomagination.


Step 5: Sustainability 

Summary: From a business standpoint, sustainability is reached when you can derive all four business values—cost savings, risk reduction, revenue generation, and reputational/brand enhancements.

Business Value: Well-executed sustainability in a business provides continued cost savings, risk reduction activities, new revenue streams, and ways to enhance your brand and reputation, i.e. doing something new and unique, such as Bridgestone's One Team One Planet Spent Tire Program.



The Frontier: Beyond Sustainability to Restoration and Thrivability

Step 6: Net Zero

Summary: Net Zero is attaining a level of performance where the existence of your product, your building, or your business has a net zero impact on the earth’s natural resources. For example, a Net Zero Energy Building is one that generates as much energy as it uses. 

Business Value:  Achieving Net Zero is at the leading edge of sustainability, and the business value is reputational -- standout leadership.



Step 7: Restorative

Summary: Restorative is attaining a level of performance that exceeds Net Zero and pushes into restoring the natural environment, i.e. the presence of your business has a positive impact on the earth’s natural resources. For example, if you source tree materials to make paper, you plant back twice as many trees as you use. (Of course, this is only one aspect—a truly Restorative business would need to address energy, water, and waste, too).

Business Value: TBD, this may be a case of “License of Operate” in the future.



Step 8: Thrivability 

Summary: Thrivability takes into account the net impact of you business over the life of its operation. Once you have passed Net Zero and covered enough restoration activities to account for the life of your business, you reach a net restorative zone or Thrivability.

Business Value: TBD, again, this may be a case of “License of Operate” in the future.



Sustainability is an ever-evolving space. The above steps are my current views of the landscape of sustainability, which will surely change over time.



Please contact J. Gowdy Consulting to see how we can help your organization, regardless if you are just starting Step 1 or moving into The Frontier.


Jeff@JGowdyConsulting.com

 

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