Greening the Corporation

Will O’Brien

Graduate School of Management

December 2010

"What we take for granted may not be here for our children." - Al Gore

Topics

• Definitions & Systems• Corporate Leader: Invensys, PLC• Business Challenges & Opportunities• Strategy & Environmental Stewardship• Sustainability & Innovation• Operations • Additional examples of Business Leadership• Sustainability Reporting• Students & Sustainability Planning• Additional Information

Definitions & Systems

Definition: Sustainable Development

Sustainable development seeks to meet the needs and aspirations of the present without compromising the ability to meet those of the future. Far from requiring the cessation of economic growth, it recognizes that the problems of poverty and underdevelopment cannot be solved unless we have a new era of growth in which the developing countries play a large role and reap large benefits.

Our Common Future, 1987The Brundtland Commission(UN World Commission on Environment & Development)

Environmental Footprint

Source: “Measuring Environmental Footprint: A Financial Services Industry Case Study”, 2008, UNC

An environmental footprint is a measure of the amount of resources consumed and the amount of pollution; e.g., green house gas and waste created by an entity and by the firms that serve the entity, usually summarized by the equivalent are of land needed to assimilate these impacts.

Examples:

Starbucks http://www.starbucks.com/aboutus/beantocup.asp

Xerox’ Sustainability Calculator http://www.betanews.com/article/How_big_is_your_environmental_footprint_asks_Xerox/1206561464

Weyerhaeuser

http://www.betanews.com/article/How_big_is_your_environmental_footprint_asks_Xerox/1206561464

Earth’s Systems Complexity, Cycles & Interconnections

• A system is a collection of interdependent parts (with flows and stores) enclosed within a defined boundary.

• The earth has four major systems

– Lithosphere – soil, rock

– Hydrosphere - water

– Biosphere – living organisms

– Atmosphere – air

• Human activity is disrupting

these systems in complex,

ways

Dave McKay, 2009

Sustainability Strategy at Invensys, PLC

Steve Sacco, VP Environmental, Health, Safety & Sustainability

December 2010

Our Businesses

– Invensys is a global technology and controls company – Headquartered in London– 3 divisions

• Invensys Controls – Residential & Commercial Building Comfort/Safety and

Automation – Thermostats, refrigeration, dishwashers, hot water heaters,

A/C & heating• Invensys Operations Management (IOM)

– Hardware/software to automate/regulate refineries, power plants, manufacturing, etc.

• Invensys Rail – Control and automate railway systems with

hardware/software

– Types of operations• Manufacturing facilities• Staging/Test centers• Offices• Projects

© Invensys 00/00/00 Invensys proprietary & confidential Slide 10

Our Customers

© Invensys 00/00/00 Invensys proprietary & confidential Slide 11

What does Sustainability Mean for Invensys?

11

– “a good employer, supplier, customer and neighbor, and that we protect the environment”

– Two key areas for us:

• Internally - being more efficient with the resources we use as a business

• Externally - offering new products, services, and solutions that help our customers to be more sustainable and competitive

11

© Invensys 00/00/00 Invensys proprietary & confidential Slide 12

Why is Sustainability important?

12

– It is the right thing to do for ourselves, our children, our company and our planet

– It helps Invensys reduce costs, minimize risks and create new value

– Our customers, investors and employees are asking us about our sustainability performance and our carbon footprint

– Our competitors are using it to their advantage

– Government regulations are requiring it

– Our Board has included sustainability as part of our business metrics

12

© Invensys 00/00/00 Invensys proprietary & confidential Slide 13

Sustainability Context

• Efficient use of materials

• Conserving energy and water

• Less waste disposal

• Better image and reputation

• Satisfying customer expectations

• Facilitate entry into new markets

• Create new and efficient products

• Stay in compliance

• Maintain positive community relations

• Avoid supply chain risk

• Avoid negative press

Minimize RisksReduce Costs Create Value

Invensys’ Sustainability Performance

© Invensys 00/00/00 Invensys proprietary & confidential Slide 14

Regulations and

reporting requirements Competitor

activities

CR indicesInvestment community

engagement

Employee expectations

Shifting customer behaviour

UK busines

s

UK Perspective - Factors Driving the Sustainability Agenda

Business & Environmental Sustainability

Business Has Traditionally Assumedan Infinite Capacity Planet

• Business principles based on assumption of infinite natural resources and waste absorption capacity

• “The concept of multiple industries collaborating on a ‘whole systems’ approach, recycling each other’s outputs into inputs is completely antithetical to the cult of the individual and the pioneer myth that so deeply characterizes American corporate culture.”*

• US antitrust legislation has not allowed “collaboration”

*Oliver Kellhammer, MBA Student, Bainbridge Graduate Institute

Industrial Pollution

• 22 billion disposal diapers in landfill/year

• 100 million cell phone put out of service/year

• 2 million tons of e-products disposed/year

• 63 million computers in the U. S. became obsolete in 2005

• Circuit boards - lead & cadmium

• Flat screen & switches - mercury

What is in a Landfill?

80% of Toxic Wastes are from Electronics Products

• The electrical and electronic waste (WEEE) law, in 2005, EU authorities introduce legislation for free take back of waste goods by final owners and ensure that equipment producers are responsible for financing the collection, treatment, recovery and disposal of all waste. – 30% of Fortune 500 companies’ business are in Europe

• Silicon Valley Toxics Coalition – http://www.svtc.org/ecomaps/svtc_ecomaps/index.html

• Oregon Natural Step• Zero-waste Coalition• Green IT

Industrial Ecology

Industrial ecology focuses on the redesign of manufacturing. The design idea is to mirror production in nature. Nothing in a production process is "waste" and everything that comes out of the process is either a product for sale or an input for another manufacturing process. Another term for this is cradle-to-cradle manufacturing.

Business is Providing Leadership

Why is Business Part of the Solution?

• Business is focused on learninglearning and changechange.– Change can and does happen relatively quickly

• Business is a globalglobal institution.– The challenges are fundamentally global in nature

• Business is the source of technological innovationtechnological innovation.– Technology is the proximateproximate cause of environmental

impact

Dr. John Ehrenfeld, Director Emeritus, MIT Technology, Business and Environment Program

Triple Bottom Line

The triple bottom line (abbreviated as "TBL" or "3BL", and also known as "people, planet, profit" or "the three pillars"[1]) captures an expanded spectrum of values and criteria for measuring organizational (and societal) success: economic, ecological and social. (Wikipedia)

Leadership Challenges

• Enrolling/aligning stakeholders• Managing an environmentally responsible enterprise:

– Business strategy

– Investment decisions

– Change management of staff

– Energy management

– Innovation

– Product design/ life-cycle management

– Supply chain management

– Waste management

– Reporting: internally and externally

– Marketing

Stakeholders

Engaging Stakeholders

• While executive support is a critical key component to business success, it is not the only form of leadership present in an organization.  Business sustainability leaders understand the value in leveraging their internal resources as well as their key business relationships.

• Whether led by a sustainability executive or traditional management, the pursuit of long-term business sustainability enables:

– Employees: Create incentives to lower costs, initiate process improvements, and stimulate innovation.

– Customers: Establish expectations that are defining products and service attributes.

– Suppliers: Align supply chain expectations to drive sustainable material requirements and efficiencies.

– Local Community: Defined framework for initiatives carried out at the local level through partnership with community groups, local businesses, and governing bodies.

– Investors: By comprehensive and accurate reporting; e.g., CDP, DJSI.– Others?

Source: http://news.socialyell.com/878/csr-advice/engaging-stakeholders-as-a-path-to-business-sustainability/

Sustainable Development for Business

• Sustainable development for business means

“adopting business strategies and activities that meet the needs of the enterprise and its stakeholders today while protecting, sustaining, and enhancing the human and natural resources that will be needed in the future” (International Institute for Sustainable Development 1994: 4).

• Sustainable business has interdependent economic, environmental, and social objectives (Triple Bottom Line)

• Long-term viability depends on integrating all three objectives in decision-making

Sustainability Drives Innovation

Sustainability Drives Innovation

Stages:

#1 Viewing compliance as an opportunity

#2 Making value chains sustainable

#3 Designing sustainable products and services

#4 Creating “next-practice “platforms

“ Why Sustainability is Now a Key Driver of Innovation”, Harvard Business Review, 2009

Sustainable Entrepreneurship

Businesses that are “Green”– Solar, Wind, Hydro, Geo-Thermal

Power– Recycling/Reprocessing– Eco-Friendly Products– Organic Agriculture– “Green” Non-Profits

• e.g., Sustainable Methods Institute

Examples of Sustainability Driving Innovation

Audi e-Tron

• Electric – 4 motors; 1 battery•313 horsepower• All wheel drive• 0 to 62 in 4.8 seconds• Estimated range = 154 miles

Nokia “Green Phone”

Feb. 12, 2008 , Mobile World Congress , Barcelona

“Called ‘remade’, the new phone, unveiled in a short video, is actually made of no new parts. Made entirely of recyclable materials like cans and tires, it clearly targets planet-conscious customers.”

http://www.marketwatch.com/news/story/reporters-notebook-android-based-phones-draw/story.aspx?guid=%7B2AA5FC69%2D24DE%2D418F%2DB26C%2D2808FD456E60%7D

Apple “ Green Computer”

The casing is 100% recyclable. It features Apple's first mercury-free, arsenic-free display. The circuit boards are PVC and BFR free. The box will also include about half the packaging of the current Macbook line.

99% recyclable. It's made without benzene, lead, mercury or solvents.

The $900 chair can be disassembled with basic hand tools in about 5 minutes.

HP Ink-jet Printer Cartridgemodular design

Steelcase's 'Think' chair

Ready for Carbon Labeling?

Jan. 23, 2007 Tesco, the largest supermarket chain in Britain, has announced that it will begin labeling all 70,000 products on its shelves with the amount of carbon generated from the production, transport and consumption of those items.

http://www.terrapass.com/blog/posts/british-superma

Business Operations

Operations

• Business & Operations Strategy• End-of-Life Product Management• Quality & Environmental Management• Energy Efficiency• Environmental Management System (ISO 14001)• Facilities Management• Project Management• Information Technology (“Green IT”)• Leadership in Energy & Environmental Design (LEED)• Lean Manufacturing (JIT)• Supply Chain Management

© Collins Family Foundation

Cost

Delivery

Flexibility/Customization

Service

1950s 1990s

Quality

2000s

Sustainability

Timeline of Competitive Priorities

Operations Strategy

• Company will only do what makes economic sense– Given its concern for environment, company still to

consider competition and bottom line

• Early-mover advantage– Look for better solution

• Service-based business model– chemical management services (Nortel)– floor-covering service (Interface)– leasing (Xerox)– printing service (HP)

fractal pattern, modular design

Projects per environmental concerns

Environmental concerns

Resource depletion

Global warming

Ozone depletion

Human toxicity

Exotoxicity (water and soil)

Ground level ozone

Acidification

Nutrification

Waste heat

Odor

Noise

Others

Quality Management

Percentage of projects

End-of life Product Management

Environmental Management SystemISO 14000- 14001

http://www.innovating-canada.com/iso14000.htm

http://www.youtube.com/watch?v=uCjK3lQhPDc

Facilities Management

• Energy & Greenhouse management• Water Management • Waste Management & Recycling • Biodiversity • Pollution Prevention & Environmental Risk Management • Transport • Community Awareness• Environmental Management

Green Information Technology

• “Going green — or the ability to be green — is definitely increasing in importance, not just from a power perspective but also from how we, as good corporate citizens, dispose of all this equipment and our electronic waste. We are all waking up to the realization that nothing, from electricity to the quality of the environment, is free or infinite.”

John Humphreys, IDC Enterprise Platform Group

Lean Manufacturing

Look at the “waste” and impact in the overall system

• Production process• Inventory• Material choice (recycled vs. virgin)• Energy usage of the product • Product impact on the local community

“Waste” is defined as anything more than absolutely necessary so any environmental residual is bad.

Facilities Design/Energy Utilization

Cooper and Omron takes the LEED™ in "green" design/build

LEED

The Leadership in Energy and Environmental Design (LEED) Green Building Rating System™ encourages and accelerates global adoption of sustainable green building and development practices through the creation and implementation of universally understood and accepted tools and performance criteria.

http://www.usgbc.org/

Project Management

Project Management Institute (PMI) Code of Ethics & Professional Conduct:

“We make decisions and take actions based on the best interests of society, public safety, and the environment.”

“Respect is our duty to show a high regard for ourselves, others, and the resources entrusted to us. Resources entrusted to us may include people, money, reputation, the safety of others, and natural or environmental resources.”

www.pmi.org

Supply Chain

• Integrated international networks of companies process, produce and distribute products.

Green Supply Chain ManagementEnvironmentalManagement

Supply ChainManagement

Green Supply Chain Management

Cu

sto

me

rs

Su

pp

liers

P1 Plan Supply ChainPlanPlan

P2 Plan Source P3 Plan Make P4 Plan Deliver

Source Make Deliver

S1 Source Stocked Products M1 Make-to-Stock

M2 Make-to-Order

M3 Engineer-to-Order

D1 Deliver Stocked Products

D2 Deliver MTO Products

D3 Deliver ETO Products

S2 Source MTO Products

S3 Source ETO Products

Return Source

P5 Plan Returns

Return Deliver

Enable

“Wal-Mart to Assign Green Ratings”

http://online.wsj.com/article/SB124766892562645475.html

Benefits of Sustainable Operations

The application of sustainable operations can result in

significant business benefits including:

• Greater operational efficiencies• Cost reduction• Quality image• Opportunities for new and growing markets• Conservation of the environment• Positive publicity• Respect from the local community• Staff loyalty

Examples of Leadership

ProductsEnvironmental Product Declarations, Life Cycle Assessments

Social responsibility

Transforming Sustainability into Customer Value

1990 1994

2000 2002

Triple Bottom Line

Environmentalmanagement

Local Regional Global

“Baseline management”

Sites Implementation of ISO 14001

ABB’s organizationalstructure

Customer centric

Social policy dialogue

ABB’s firstEnvironmental

Report

ABB’s firstSustainability

Report

ABB’s first triple bottom line

Sustainability Report

Bayerische Motoren Werke AG,

• Sustainability is an integral part of BMW business principles and practices, which has led to a confirmation of its leadership position in the automotive industry. The company has been able to surpass its peers by exhibiting unparallel commitment to environmental issues.

• BMW strives to conserve environmental resources throughout its value chain from production systems to materials used in-bound and out-bound logistics, and recycling and disposal of used vehicles.

• The company has implemented efficient environmental management systems, and undertakes regular external and internal audits for its operations as well as for its suppliers.

• BMW has also included a package of multiple emission reduction measures in large parts of the car fleet (called Efficient Dynamics) in order to meet the challenges of global warming and fossil fuel reserves, which is illustrated by 25 percent decline in car fleet emissions in 2008 as compared with 1995 levels.

• Along with various initiatives undertaken to achieve environmental efficiency, the company also takes measures, such as 360 degree feedback and benchmarking of brands against that of peers, to strengthen its brand image and gain competitive advantage.

Source: DJSI World

Kingfisher

• Kingfisher Plc is a London-based international home improvement retailer. The company's main retail brands run on the do-it-yourself (DIY) concept and include products such as complete kitchens, bathrooms and bedrooms.

• The company sets sustainability targets and regularly measures its progress through a social and environmental management system called 'STEPS'.

• Its "Future Homes" strategy for instance is designed to integrate sustainability into commercial operations, bringing innovative products to the market to help its customers adopt more sustainable lifestyles.

• In Kingfisher's specialized DIY home improvements stores (e.g. B&Q in the UK and Castorama in France) customers are increasingly enticed to choose from a wide range of green products.

• In 2008 this accounted for 7% of total sales.

Source: DJSI World

Panasonic Electric Works

• Panasonic ‘s concentrated efforts to develop environment-friendly operations has resulted in operational excellence, which is evident from a sharp decline in greenhouse gas and dust emissions; and reduced electricity, water and waste consumption.

• The concept of restoring bio-diversity is also adopted at a strategic level in the company; e.g., the company constructed a 'Prosperous Park' including biotope in a building premise in Osaka in March 2009.

• In the social dimension, the promotion of labor practices within the organisation differentiates it from other companies. The company has established 'Diversity Promotion Office', and has been awarded Diversity Award Semi Grand prize.

Source: DJSI World

StarbucksIn 2004, with support from CH2M HILL, Starbucks voluntarily conducted an inventory of its greenhouse gas emissions in an effort to understand and evaluate its contribution to climate change. Using the WRI Greenhouse Gas Protocol, Starbucks limited the inventory to areas with the biggest environmental impact: retail, coffee roasting, administration operations and its distribution network. Based on the results, Starbucks committed to reducing emissions by:

• Purchasing renewable energy—annually, five percent of the energy needed by its North America retail stores, generated by 11 large-scale windmills, and estimated to reduce CO2 emissions by two percent;

• Addressing the impact of its transportation operations—working with Business for Social Responsibility’s (BSR) Clean Cargo Group on ocean transportation and using the Clean Cargo tool to engage freight vendors;

• Monitoring roasting plant operations— an environmental team at each of the company’s four roasting plants are creating measures for reducing emissions and conserving energy;

• Taking leadership and raising awareness—by encouraging others to take action.

• Setting a reduction target—in fiscal 2005, the company established a gas emissions reduction target.

Sources: Starbucks http://www.starbucks.com/aboutus/beantocup.asp http://www.greenatworkmag.com/gwsubaccess/05julaug/starbucks.html

The Unilever Group

• Unilever is one of the world's leading food producers, and household and personal care product manufacturer. The company owns 270 manufacturing plants across six continents. It employs around 174,000 people in more than 100 countries worldwide.

• The company has out-performed others in the environmental and economic dimensions by strategically focusing on achieving a long-term sustainable business model. This is reflected through a decline in the ecological footprint of the company.

• The company has initiated the Sustainable Agricultural Initiative (SAI) and the Lead Agricultural Program to promote the adoption of a responsible approach towards farming practices and has also published guidelines for sustainable farming practices.

• Unilever has developed the 'Greenhouse Gas Profiling Tool' in order to assess the environmental impact of its new products. It also creates nutritional awareness among consumers by labeling the nutritional value of ingredients on packets.

Source: DJSI World

Examples of “Profitable Sustainability” Wal-Mart

Sustainability Reporting

• Carbon Disclosure Project (CDP)• Dow Jones Sustainability Index (DJSI)• Global Reporting Initiative (GRI)• UN Global Compact – Communications on

Progress (COP)

Carbon Disclosure Project

The Carbon Disclosure Project is an independent not-for-profit

organization holding the largest database of primary corporate climate

change information in the world.

Thousands of organizations from across the world’s major economies

measure and disclose their greenhouse gas emissions and climate

change strategies through CDP. We put this information at the heart of

financial and policy decision-making.

http://en.wikipedia.org/wiki/Carbon_Disclosure_Project

www.cdproject.net/en-US/Pages/HomePage.aspx

Carbon Disclosure Project (CDP) results and reports

Find out how organizations and public sector bodies around the world are responding to climate change by taking a look at the individual corporate responses to CDP or by reading our reports. Our reports provide detailed analysis of the information supplied each year to CDP and indicate important trends and developments.

Read our reports

Carbon Disclosure Project

Dow Jones Sustainability IndexesLaunched in 1999, the Dow Jones Sustainability Indexes are the first global indexes tracking the financial performance of the leading sustainability-driven companies worldwide.

The identification of sustainability leaders for the Dow Jones Sustainability Indexes is based on the Corporate Sustainability Assessment of SAM Research. A defined set of criteria and weightings is used to assess the opportunities and risks deriving from economic, environmental and social developments for the eligible companies. A major source of information is the SAM questionnaire which is completed by companies participating in the annual review.

The external assurance report by Deloitte ensures that the corporate sustainability assessments are completed in accordance with the defined rules.

Based on SAM Research's corporate sustainability assessment companies are ranked within their industry group and selected for the Dow Jones Sustainability Indexes, if they are among the sustainability leaders in their field.

For a detailed description of this selection process you can download the guidebook for the Dow Jones Sustainability World Indexes and the guidebook for the Dow Jones STOXX Sustainability Indexes. www.sustainability-index.com/

Global Reporting Initiative (GRI)

www.globalreporting.org/

2007 Global Reporting Initiative (GRI) Matrix

The Global Reporting Initiative (GRI) has pioneered the development of the world’s most widely used sustainability reporting framework and is committed to its continuous improvement and application worldwide. This framework sets out the principles and indicators that organizations can use to measure and report their economic, environmental, and social performance.

UN Global Compact COP

One of the explicit commitments that a company makes when it joins the UN Global Compact is to produce an annual Communication on Progress (COP). This is a requirement of participation which serves several important purposes:

• to instill accountability;• to drive continuous improvement;• to safeguard the integrity of the UN Global Compact as a whole;• and to contribute to the development of a repository of corporate practices.

www.unglobalcompact.org/cop/index.html

Students & Sustainability Planning

Background & Output

• Since 2008, a course called “Business Sustainability” or “Greening the Corporation” has been delivered to 190 graduate students at:– Bentley University– Clark University– MA Maritime Academy

• Student teams has developed and delivered Sustainability Plans to @50 organizations including:– Corporations– Municipalities– Non-Profits

Areas of Focus

• Organizational Mission• Integrated into Operational Strategy• Foster Sustainable Behavior• Specific Initiatives:

– Energy Use– Water Use– Waste & Recycling– Travel & Transportation– Supply Chain Management & Purchasing– Information Technology > “Green IT”– Building Design– Product & Service Design

Fostering Sustainable Behavior

• “Leading Change….” by John P. Kotter

• “Fostering Sustainable Behavior” by Douglas McKenzie-Mohr:

1. Set goals

2. Identify barriers

3. Plan and Implement

4. Evaluate

5. Revise and refine

Partnerships – Communities

Grafton Northbridge Sherborn Sutton Stow Worcester Woodstock, CT

Community Impact

Sustainability Plan

Examples of Sustainability Plans

www.greenprof.org

Additional Information

Information Sources Student Projects / Sustainability Plans & More www.greenprof.org

Books:• Anderson (1998), Mid-Course Correction• Brown, Christopher Stephen. (2005). Sustainable Enterprise• Cunningham, William P. (2007), Environmental Science • Doppelt, Bob (2003) Leading Change Toward Sustainability• Elkington (1997), Cannibals with forks (The “Triple Bottom Line”)• Epstein, Marc (2008), Making Sustainability Work• Esty, Daniel C and Winston, Andrew S. (2006), Green to Gold• Galea, Chris (August 2004). Teaching Business Sustainability• Graedel, T.E.(2003), Industrial Ecology• Hawken, Paul (1999) Natural Capitalism• Hawken, Paul (1993), The Ecology of Capitalism.• Holiday et al, (2002), Walking the Talk• McDonough/ Braungart (2002), Cradle to Cradle• Meadows, Donella H. (1992), Beyond the Limits• Savitz, Andrew W. & Weber, Karl (2006) Triple Bottom Line• Sitarz, Daniel, (2008), Greening Your Business• Willard, Bob (2002), The Sustainability Advantage

Strategic Sustainability Consulting

http://www.sustainabilityconsulting.com/

“Social Change”

Think Globally > Act Locally > Impact Globally

Understand challenges > Do what you can in: > Have a global impact

- your life

- your home

- your company

- your community

Chinese coal mine fires > I am powerless to > Do nothing

make any difference

My world view….one person can make a real difference.