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Sustainability-Driven
Trends in the
Context of Global Business
Carol Hee PhD
Director , Center for Sustainable Enterprise
Associate Clinical Professor of Strategy &
Entrepreneurship
Co-Chair UNC Sustainability Advisory Committee
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Sustainability at UNC Kenan-Flagler Business School
• Center for Sustainable Enterprise founded in 1999
• 31% MBA class of 2013 graduated with a Sustainable Enterprise Concentration
During the 2013-2014 academic year, UNC’s Business School received FOUR top-ten rankings:
• #7 for Sustainability by Businessweek
• #7 “Best Green MBA” by The Princeton Review
• #9 for Corporate Social Responsibility and Ethics by the Financial Times
• #9 “Top Program for Sustainability” in the Net Impact 2013 Business as Unusual Guide
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Sustainability at UNChttp://www.sustainability.unc.edu/
Sierra Club ranks UNC-Chapel Hill 15th “Coolest” School
UNC-Chapel Hill 2013 Campus Sustainability Report
Download
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How to define “Sustainability”
in the Business Context ???
4
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What is Sustainability?
“Sustainable” Enterprises measure
success in terms of “triple bottom line”
3Ps: People – Planet – Profits
3Es: Equity – Environment - Economics
Sustainability requires:
* Innovation *
= the ability to address problems creatively
1. Understanding the desired result
2. Comprehending root causes
3. Consideration of the entire set of variables involved
4. Appreciation of the needs, desires, abilities, context of
the end user
5. Iterative problem solving
The ability to PERSIST into the future!!
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www.globalwarmingart.com/wiki/Image:Carbon_Dioxide_400kyr_Rev_png andhttp://grist.org/climate-energy/the-10-things-you-need-to-know-from-the-new-ipcc-climate-report
Evidence of Climate Change
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Outside the Realm of Human Experience
• Milanković Cycles: Variations in eccentricity (100k), axial tilt (41k), and precession (26k) of the Earth's orbit • First hominids, about 4 million years ago• Archaic Homo sapiens evolved between 400,000 and 250,000 years ago
LucyAustralopithecus Homo
neanderthalensis
Homo sapiens
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Conclusions of IPCC 5th Assessment Report, 2013
• Warming in climate system is “unequivocal.”
• Human influence on climate system is clear.
• Greenhouse gas concentrations are “unprecedented in at least the last 800,000 years.”
• Global surface temperature change for the end of the 21st century is likely to exceed 2°C.
• Each of the last three decades has been successively warmer at the Earth’s surface than any preceding decade since 1850. In the Northern Hemisphere, 1983–2012 was likely the warmest 30-year period of the last 1400 years.
• Prediction of a global sea level rise by 52-98 cm by the year 2100, which would threaten the survival of coastal cities and entire island nations. But even with aggressive emissions reductions, a rise by 28-61 cm is predicted.
http://www.ipcc.ch/pdf/assessment-report/ar5/syr/SYR_AR5_SPM.pdf
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What are predicted consequences of climate change?
• Sea level rise between 4in-3ft due to thermal expansion and melting of glaciers
• Increased evaporation increase in precipitation and in frequency of extreme weather events such as floods and droughts
• Intrusion of salt water into freshwater reservoirs
• Migration of ecosystems depending on ability and tolerance
• Reduction of population size of some species; extinction of others.
• Changes in amount of arable land changes in crop yields
• Change in rate of damage from agricultural pests
• Increase in range of infectious diseases such as malaria, dengue, and yellow fever
• Increase in mosquito-borne diseases due to expansion of mosquito range
• Increase in salmonellosis, cholera, giardiasis, cardiorespiratory mortality & illness
Source: “Global Climate Change and Emissions Trading. “ HBR 9-707-015. 12/2006
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World Business Council for Sustainable Development CEOs from > 200 companies , 35 countries, 20 major industrial sectors
President BjornStigson:“Business does not question climate science…Business is looking at a fast-growing world that is going to be resource and carbon-constrained. [Focus is on] energy efficiency, green technologies, new societal infrastructure, efficient markets, and changes of lifestyle and consumption patterns.”
“Business has the knowledge, management capacity, and financial resources to contribute. …[Governments] will not solve climate change without business at the table as an engaged, involved partner.”
Documentary about business responses to climate change:Part IPart II
Getting Ahead of the Curve: Business Responds to Climate Change
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Freshwater Availability
• Countries with < 5000 cubic meters of freshwater per capita = “in shortage”
• 41% world's population, or 2.3 billion people, live in areas with < 1,700 m³/year
• 1.7 billion people live in areas with < 1,000 m³/year
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Some Water Facts
• Less than 1% of the world’s fresh water (or about 0.007% of all water on earth) is readily accessible for direct human use.
• Approximately 1 in 8 people lack access to safe water supplies.
• Global water consumption rose six-fold between 1900 and 1995 — more than double the rate of population growth.
• 3.575 million people die each year from water-related disease; 84% children (0– 14yrs).
• Every 15 seconds, a child dies from a water-related disease.
• 98% of water-related deaths occur in the developing world; 43% of water-related deaths are due to diarrhea.
• At any given time, half of the world’s hospital beds are occupied by patients suffering from a water-related disease.
• An American taking a five-minute shower uses more water than the typical person living in a developing country slum uses in a whole day.
• About a third of people without access to an improved water source live on less than $1 a day. More than two thirds of people without an improved water source live on less than $2 a day.
• People living in slums often pay 5-10x more per L H2O than wealthy people in same city.
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Evidence of Over Consumption
• 60 billion tons of resources are extracted annually; 50% more than 30 yrs ago
• Consumption of natural resources between 1950-2005:• Metals production grew 6x• Oil consumption 8x• Natural gas consumption 14X
• World’s richest 500 million (7% pop) are responsible for 50% of world CO2 emissions, while the poorest 3 billion are responsible for 6%.
• U.S. population is 5% global population but is responsible for 32% consumption.
Source: State of the World 2010: Transforming Cultures - From Consumerism to Sustainability
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Millennium Ecosystem Assessment (MEA) found 60% earth’s ecosystem services are being degraded or used unsustainably.
Source: World Business Council for Sustainable Development
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World Population Growth 1800-2050
• At the turn of the 21st century,
75 million people were being added to the earth every year.
• Equivalent to an increase the size of ¼ total U.S. population.
• Growth is disproportionally centered in less developed countries.
12/5/2014 15
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Rising Middle Class
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Land Area-Based World Map
Source: http://www.sasi.group.shef.ac.uk/worldmapper/index.html
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Population-Based World Map
Source: http://www.sasi.group.shef.ac.uk/worldmapper/index.html
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Land Area-Based World Map
Source: http://www.sasi.group.shef.ac.uk/worldmapper/index.html
| Source: http://www.sasi.group.shef.ac.uk/worldmapper/index.html
Ecological Footprint
Average US footprint is 5x world average, 10x sustainable level.
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Footprint by National Average per Person Income
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Personal Ecological Footprints
Source: http://www.myfootprint.org
Average per Capital Footprint by Consumption Category
Total Footprint = 23.47 Hectares
There are only 15.71 global hectares available per person on a renewable basis.
This means we are overshooting the Earth's biological capacity by nearly 50%.
What would happen if the whole world lived like Americans?
Thomas Friedman – Hot, Flat, and Crowded
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Why China? …Air Pollution
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Air Pollution
iPhone App from US Embassy
EU “safe” = 50January 16, 2014:
• ‘Airpocalypse’ Smog Hits Bejing at Dangerous Levels
• AQI > 500 “beyond index”
• > 300 = Hazardous
WHO “safe” = 20
Air Quality Guide
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Why China? …Air Pollution & Health Effects
1. Only 1% of the urban population breathe air considered safe by the EU
• PM10 “safe” at <50 µg; avg Beijing 141, among world capitals, only Cairo is worse
2. China is the world’s largest contributor of sulfur oxides, chlorofluorocarbons and other ozone-depleting chemicals
3. ~350,000 to 400,000 people die each year from ambient air pollution according to 2007 Chinese government report; 2010 estimate = 1.2 million (WHO 2011)
4. Indoor air pollution est. as contributing to deaths of an additional 300,000 (2007)
• 4,700 people died last year in China’s coal mines ( < 50 in US)
• 89,000 people were killed in road accidents in China
5. According to a Chinese government report, the effects of pollution negated $67 billion, or 3% of the nation’s GDP, in 2004.
6. The World Bank calculates the cost as even higher, estimating that pollution costs China approximately 5.8% of its GDP every year.
7. By 2050, 3.6 million people could die prematurely from air pollution > water-related deaths.
8. “China exports pollution to US” NY Times, Jan 20, 2014“Because the Eastern United States has a much denser population, the outsourcing of manufacturing to China still resulted in “an overall beneficial effect for the U.S. public health,” even if Western states suffered, the scientists wrote.”
Sources in notes.
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Why China? …Water Pollution
Lake Tai (Taihu) Slide Show
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Why China? …Water Pollution
1. China has 20% of the world’s population but only 7% of the world’s water resources (equivalent to less than ¼ world average)
2. Water usage in China as quintupled since 1949
3. China uses 3-10x more water per unit production than global average
4. China's Ministry of Environmental Protection finds groundwater at 57% of its monitoring sites in cities is polluted or extremely polluted.
5. One third of all river water have water graded level 5, unfit for industrial or agricultural use
6. Nearly 500 million people lack access to safe drinking water
7. 60,000 deaths from diseases caused by water pollution (diarrhea, bladder and stomach cancer)
8. 5/6 of wetlands in North China Plan have dried up
9. South to North water transfer project, designed to funnel more than 12 trillion gallons northward from the Yangtze River basin north, is estimated to cost $62 billion and be completed in 2050.
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Why China? …It’s “The World’s Factory”
China’s Manufacturing as % Global Total
Toys 70%
Shoes 66%
Air conditioners and copy machines > 60%
Televisions and digital cameras 58%
Chemical fibers > 50%
Cement 50%
Glass ~50%
Cell phones 47%
Crude steel 36%
Aluminum 33%
Computers and refrigerators 33%
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“Business—more than either government or civil society—is uniquely
equipped at this point in history to lead us toward a sustainable world in the
years ahead…[Corporations] are the only entities in the world today with the
technology, resources, capacity, and global reach required. Properly focused,
the profit motive can accelerate (not inhibit) the transformation towards
global sustainability.”
Stuart Hart, co-founder Kenan-Flagler Business SchoolCenter for Sustainable Enterprise (with Jim Johnson and Al Segars)
Capitalism at the Crossroads
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Global corporations and businesses of all sizes recognize that sustainability is critical to their competitiveness in the 21st century.
• 93% CEOs see sustainability as important to their company’s future
success. (Accenture, 2010)1
• 50% CEOs view sustainability as among their top 3 priorities.
(McKinsey, 2014)2
• 70% executives rated environmental issues as significant or very
significant, with energy efficiency, pollution, and waste management
emerging as the top three issues. (MIT/BCG, 2013)3
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Green Economy as an Employment and Innovation Strategy
Van Jones
“When we think about a green economy, should be an economy where we don’t have any throw away resources, don’t have any throw away species, don’t have any throw away children or neighborhoods either, don’t have any throw away nations either. We can’t just build a green economy reclaiming thrown away stuff, it should also be based on reclaiming thrown away lives.”
“Shift from green consumer to green workers…we’re not just talking about building a green economy for affluent people to spend money as important as that it, it’s also a green economy for ordinary people to earn money and for poor people to save money…if you’re talking about jobs, if you’re talking about health, if you’re talking about wealth creation, people say ‘I want to be a part of that.’ The challenge has been that we’ve spoken so much about the crisis, we haven’t talked enough about the opportunity.”
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Sustainability-Inspired Innovation & Entrepreneurship
TNT-Jatropha
P&G PUR
Dannon-Grammen
d.light
Nokero
KickStart
Puma’s InCycleShoes
NorthFace
Patagonia
Greyston Bakery
Kings Kitchen
TROSA
Pro
du
ct T
ype
Business Type
Inn
ova
tive
Exis
tin
g
InnovativeTraditional
33
B Corps, WISE
Social Entrepreneurship
Websites & CSR/Sustainability
Reports
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Life Cycle Thinking = a way of thinking that includes the economic, environmental and social
consequences of a product or process over its entire life cycle.
= a business approach that goes beyond short-term success and aims at long-term value creation.
• Requires companies to not just looking at their own operations and to look at what is happening in their value chain, outside the company’s direct control
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Simplified Car Value Chain
Supplier Operations and Parts
Manufacturing (Assembly and
Painting/Finishing)
DistributionCustomer
Use
Focus here for Toxics, emissions,
hazards
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Extended Car Value Chain
Supplier Operations
• Energy
• GHGs
• Toxics
• Waste Water
• Air Pollution
Manufacturing
• Energy
• GHGs
• Toxics
• Waste Water
• Air Pollution
Distribution
• Energy
• GHGs
• Air Pollution
Use
• GHGs
• Air Pollution
End of Life
• Energy
• Landfill
• Ground Contamination
TransportationTransportationTransportationTransportation
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Life Cycle Assessment (LCA)
Raw Material Acquisition
Materials Manufacturing
Product Manufacturing and Packaging
Product Use or Consumption
End of Life
TransportationTransportation Transportation Transportation
What are the environmental and social impacts at each stage in the life cycle?Which impacts are:
the largest ? most harmful ?
most costly ? most under public or investor scrutiny ?
most (or likely to be) regulated ? easiest to minimize ?
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Create Life Cycle Inventory (LCI)
1. Definition 2. Inventory 3. Impacts 4. Interpretation
= Detailed, quantitative list of inputs and outputs of material and energy for the product system throughout its life cycle.
Raw Material Acquisition
Materials Manufacturing
Product Manufacturing and Packaging
Product Use or Consumption
End of Life
• Cotton (from water, fertilizer, soil, farm trucks, seeds)
• Dye, thread, metal zipper and buttons
• Weaving, dying, and cutting equipment
• Electricity and water for washing
• Landfill• Decomposition
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Step 3: Impact Assessment
1. Definition 2. Inventory 3. Impacts 4. Interpretation
= Detailed, quantitative list of inputs and outputs of material and energy for the product system throughout its life cycle.
Raw Material Acquisition
Materials Manufacturing
Product Manufacturing and Packaging
Product Use or Consumption
End of Life
• Cotton (from water, fertilizer, soil, farm trucks, seeds)
• Dye, thread, metal zipper and buttons
• Weaving, dying, and cutting equipment
• Electricity and water for washing
• Landfill• Decomposition
Fertilizer Nutrient run-off Water pollution from nitrates Birth defects & fish kills
Human health & ecosystem degradation
Dyes to color the fabricExposure to carcinogens in factory
Cancer Human health
Solid Waste Landfills
Methane Climate change
Health & ecosystem degradation
Laundry Washing and DryingWater and detergent use
Water pollution and scarcity Birth defects & fish kills
Human health & ecosystem degradation
Energy for hot water and for the washing machine and dryer
CO2 , SOx, NOx, PM Climate change, acid rain, smog
Human health & ecosystem degradation
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Step 4: Interpretation
Make conclusions and recommendations
Should include an evaluation of data quality and sensitivity analysis
Consider review by independent experts
1. Definition 2. Inventory 3. Impacts 4. Interpretation
Product Use or Consumption
Electricity and water for washing and drying
Water and detergent use Water pollution and scarcity Birth defects & fish kills
Human health & ecosystem degradation
Energy use(powering the washing machine, heating the water,
and powering the dryer) CO2 , SOx, NOx, PM
Climate change, acid rain, smog Human health
& ecosystem degradation
CorporateSustainability
Initiatives
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LCA-Inspired Corporate Initiatives
Video of Campaign Ad with Habitat for Humanity Partnership
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Sustainability-Inspired Innovation & Entrepreneurship
TNT-Jatropha
P&G PUR
Dannon-Grammen
d.light
Nokero
KickStart
Puma’s InCycleShoes
NorthFace
Patagonia
Greyston Bakery
Kings Kitchen
TROSA
Pro
du
ct T
ype
Business Type
Inn
ova
tive
Exis
tin
g
InnovativeTraditional
42
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PUMA’s Environmental P&L Statement (Access Report)
“Though we pay fees to local authorities for services such as the treatment and
supply of water, or the disposal of waste, the true costs of our environmental
impacts remain externalized and unaccounted for.
The E P&L represents how much we would need to pay for the impacts we cause
and the services nature provides that enable PUMA to produce, market and
distribute footwear, apparel and accessories made of leather, cotton, rubber or
synthetics.”
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Offices, IT, Business Travel , Shops, Warehouses
GHGs from energy use, product distribution and travel
NOx and SOx from energy use, product distribution, and travel
Shoe, Apparel,
and Accessory
Manufacturing
Waste from material cutting
GHGs from energy use and transport of products
NOx and SOx from energy use and transport of products
Outsole and insole production
Textile embroideryand cutting
Adhesive and paint production
Waste from material cutting
GHGs from energy use and transport of products
NOx and SOx from energy use and transport of products
Leather tanning
Cotton weaving and dyeing
Water use in leather tanning
GHGs from energy use and transport of products
NOx and SOx from energy use and transport of products
Cattle rearing
Rubber and plantations
Petroleumrefining
Methane, SOx, NOx, GHG
Water for irrigation
Conversion of ecosystems to agricultural land
Cradle to Gate Impacts
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Quantifying the Drivers of Impacts
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PUMA’s Environmental P&L Statement
Environmental Impact Cost (millions)Total = € 145
Generation of greenhouse gas emissions € 47
Water use € 47
Conversion of land for agriculture for key raw materials (leather, cotton and rubber)
€ 37
Air pollution affecting acid rain and smog € 11
Impacts of waste € 3
Millions
2010 Sales € 2,706.4
2010 Net Earnings € 202.2
Net Earnings – Enviro Costs € 57.2
Enviro Costs as % Earnings 71.7 %
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PUMA’s Environmental P&L Statement
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PUMA “Re-Suede”• Made of 100 percent recycled materials and an outsole derived from rice
husks.
• Compared with virgin materials, the synthetic ultrasuedereduces energy consumption and carbon emissions by 80%.
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• Web-based video collections:
e.g.: TED (Sustainability thought leaders, e.g., Bill McDonough, Jane Beynus) Social Edge (Social Entrepreneurs)
• Green business news web sites:
e.g.: GreenBiz.com, Sustainable Brands, Ethical Corp
• Articles from popular and business press:
e.g.: Financial Times (P&G’s CSDW), Fast Company (TerraCycle)
• Visits to/from local companies with strong green initiatives
• Documentaries
e.g., Switch, No Impact Man, Chasing Ice, The Next Industrial Revolution
Sources of Teaching Material
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• Understanding Climate Changehttp://climateinteractive.org/simulations/climate-momentum-simulation
• The Switch Energy Project – Free DVDhttp://www.switchenergyproject.com/
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More examples of sustainability-driven innovation:
• About Interface and NetWorks, watch:
– Ray Anderson: https://www.youtube.com/watch?v=4bAdsJCHGyU
– NetWorks: https://www.youtube.com/watch?v=DX6Uidpg3VM#t=149
– The Net Effect: https://www.youtube.com/watch?v=uwC2F43WM2U
• About Kit Yamoy, watch:
– Movie Trailer: https://www.youtube.com/watch?v=zGn0kmII1B0
– Simon Berry’s “Colalife” TED Talk:
https://www.youtube.com/watch?v=PWJUhKF7xik
– Product Details: https://www.youtube.com/watch?v=ZGjdtU-XJyk
– Optional: https://www.youtube.com/watch?v=ag03gX_XkPk
• About Kickstart, watch:
– Martin Fisher: https://www.youtube.com/watch?v=s2DIM_bIGUM
– MoneyMaker Pump Commercial:
https://www.youtube.com/watch?v=zIDzBQ6meYY
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Using FACEBOOK toCrowd Source Teaching Material:
Green Building
“Post and comment on a green building innovation that has the potential to create positive change.”
52GOALS SOURCESSTRUCTURE
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FACEBOOK to Supplement Written Assignments:
“Post a link to the web site of the social enterprise you researched along with a brief statement explaining why you chose to write about that particular company.”
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