Slides for Chapter 5

Sustainability

The term ‘sustainability’ was defined by the UN’s Brundtland Commission in 1987, as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs

The triple bottom line of 21st century business

It is usually represented as a Venn diagram with three overlapping circles. They are labelled ‘Economic’, ‘Environment’ and ‘Social.’

Sustainability

Two things are undeniable: in the last fifty years the human population of the Earth has more than doubled: from 3.1 billion in 1961 to 6.8 billion. Secondly, each of us in the developed - and developing - world (West and East) is using up a great deal more in terms of raw materials than we were in 1961.

Sad But True……..

1 billion people are illiterate; only 700 million people have no access to a mobile phone signal but 1.3 billion have no access to clean water; and two thirds of the world’s population live on less than $2 a day.

Population changes

The population (in China) is now 1.34 billion and it is expected to be about the same in 2040. India, meanwhile, will grow from 1.15 billion now to 1.52 billion by 2040. In the same period, Africa is expected to double from 1 billion to 2 billion.

Tracking changes to resources

The Living Planet Report (LPR), issued by the World-Wide Fund for Nature (WWF) every two years, tracks the levels of consumption of the human race and the impacts upon our sole supplier of physical resources: the Earth.

(See http://panda.org/downloads/lpr2010.pdf).

Major Changes

In 1961 there were few, or no, central heating and air conditioning systems, computers, automatic washing machines and tumble driers, dishwashers, multi-car households, colour television, personal electronics, mobile phones, holidays and business travel involving extensive flying, motorways, plastic packaging, and factors in general over-consumption, such as junk food (in supermarkets or fast food outlets), direct marketing and avaricious youth cultures.

Key Facts

•The average USA citizen consumes 43 times each year as much as the average African. •The average European cat has a larger environmental footprint in its lifetime than the average citizen of Chad. •Income, and thus expenditure, in developing countries is expected to grow by 500% between 2010 and 2050.•The Earth’s 6.9billion consumers speak 7000 languages (350 of them ‘major’ languages; and fewer than 1% of Chinese speak English).

Guidelines

The UN has issued Principles for Responsible Investment (www.unpri.org) and there is a draft international standard for Social Responsibility: ISO26000, issued in May 2010 (www.iso.org/iso/social_responsibility)

Externalities

In addressing the sustainability agenda it is important to consider unintended consequences of operations strategies. Economists call these ‘externalities’ – things you think you can safely ignore in planning your business. For example, some years back, lung cancer due to smoking would have been an externality for restaurant owners; now it is a constraint and very much an operational issue.

Externalities

Before 2010, BP thought that the risk of not quite meeting regulation could be considered an externality (i.e. the risk of a fine, probably easily accommodated, if found out), and learned an expensive lesson, in the Gulf of Mexico disaster, as a result: it was not an externality.

Carbon leakage

For some western countries more than 30% of consumption-based emissions are imported and hence not accounted for, whilst for China 22.5% of its emissions are generated for the production of goods for consumers elsewhere (Davis & Caldeira, 2010) That is why this is called ‘carbon leakage’ - carbon emissions slip through the measurement net and this can introduce significant inequalities on countries’ rights to carbon allowances

Standards

As the awareness of environmental management grew, the ISO 14000 series emerged (formally BS7750), designed to instil ‘best practice’ – again including supply chain management, in an environmental management context. ISO 14000/01 was a success and is still very well respected. As with ISO 9000/01, the environmental standard is focused on how a product or service is produced rather than on the product itself. ISO 19011 is a combined scheme for an organisation that wishes to be accredited for both standards at once.

An Example of the ‘Triple Bottom Line’

Population Growth Forecast 2010- 2050

Year 2010 2050

billion billion

Africa 1.00 2.00

Asia 4.10 5.20

Europe 0.73 0.69

USA/Canada 0.35 0.48

Latin America 0.58 0.73

World 6.76 9.10Source: UNDP 2010

Population growth forecasts – graphical representation

Population growth forecasts – graphical representation

Population growth in the past

Depletion in the Capacity Of Earth’s Resources and the Increase in Global Demand

Source: WWF Living Planet Report 2010

Depletion in the Capacity Of Earth’s Resources and the Increase in Global Demand

Source: WWF Living Planet Report 2010

Key Points

The combination of population growth and increasing standards of living are leading to a situation in which established ways of producing products and services cannot be sustained at a global level

Key Points

While the connections between this and climate change may be the subject of debate, it is clear that wasting resources is a part of the problem and this is very much an operations strategy issue.