Dr. Ron Lembke

SUSTAINABILITY, PART 2

SO WHAT DO WE DO NOW?

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

Dimensions of Environmental Sustainability: Carbon: energy burned by us, by our suppliers Water: water used Paper and corrugated used Solid waste generated

Costs and Revenues: Lower electricity, gas and water bills Lower garbage hauling costs 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

DIFFERENT METRICS

The Carbon Footprint of a plastic bag is 1/1000 that of the food in it!

MORE EFFICIENT CARS

Aka Suzuki Swift, Cultus

EPA 55/60 mpg

2011 EPA MILEAGE CHAMPTOYOTA PRIUS

MRSP $23,810

HybridMPG 33Gas 454.5Fuel/yr $1,591Fuel/mo $133

Fuel Price / gallon $3.50

CAMRY HYBRID

Jan 17

, 200

5

Apr 0

4, 20

05

Jun 20

, 200

5

Sep 05

, 200

5

Nov 21

, 2005

Feb 06

, 2006

Apr 2

4, 20

06

Jul 10

, 2006

Sep 25

, 200

6

Dec 11

, 2006

Feb 26

, 2007

May 14

, 2007

Jul 30

, 2007

Oct 15,

2007

Dec 31

, 2007

Mar 17,

2008

Jun 02

, 200

8

Aug 1

8, 200

8

Nov 03

, 2008

Jan 19

, 200

9

Apr 0

6, 20

09

Jun 22

, 200

9

Sep 07

, 200

9

Nov 23

, 2009

Feb 08

, 2010

Apr 2

6, 20

10

Jul 12

, 2010

Sep 27

, 201

0

Dec 13,

2010

00.5

11.5

22.5

33.5

44.5 Avg US Retail Gas Price

Regular HybridMPG 26 33Gas 576.9 454.5Cost $2,019 $1,591$ saved $428% fuel reduction 21%

Base MSRP 20,580 27,435Breakeven years 16.0 Fuel Price / gallon $3.50

GREEN SUVS? ISN’T THAT AN OXYMORON?

Regular HybridMPG 17 21Gas 882.4 714.3Cost $3,088 $2,500$ saved $588% fuel reduction 19%

Base MSRP 42,580 54,490Breakeven years 20.2 Fuel Price / gallon $3.50

2011 MSRP Info from cars.com

Regular HybridMPG 14 21Gas 1071.4 714.3Cost $3,750 $2,500$ saved $1,250% fuel reduction 33%

Base MSRP 32,515 38,340Breakeven years 4.7 Fuel Price / gallon $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

DichloroDiphenylTrichloroethane Mosquitoes-malaria Lice-typhus Nobel Prize, 1948

Rachel Carson Silent Spring, 1962

EDF, 1964Banned, 1972Granny’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

LEADED GAS

1930s: Octane in 30s

Add Lead: 87!Protected Valve

seats Catalytic

converter problems

1996 banned US $10,000 fine

,

Feb 2, 1962 ad in Life magazineHumble merged with Standard to become Exxon

SO WHO IS GOING TO DO SOMETHING?

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

CAP AND TRADE VS CARBON TAX

ACID RAIN

Sulfur Dioxide SO2 and nitrogen oxides NOx react

1990 Clean Air ActUS coal plants cut sulfur

emissions in halfPermits issued, reduce or

tradeEmissions monitored

(and everything else)Markets need a price signalRight 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?

THE PRICE OF CARBON

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 CO2

If the politicians won’t save us… who will?

CAP AND TRADE IS DEAD

SO WHO IS DOING ANYTHING?

Risks to a company must be disclosedGuidance about reporting Climate-change related

risks2008 E&Y study listed climate change as #1 threat

to insurance industry

THE SEC?

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.

MAYBEWAL-MART WILL?

SeafoodPaperWood

CERTIFICATION EFFORTS

1. 15 questions for suppliers, Oct 20092. Lifecycle Analysis Database

Sustainability Consortium, ASU, U of Arkansas3. 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 INDEX?

Not developing a consumer standardSustainability 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?

SUSTAINABILITY INITIATIVE

“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

MAYBE WALL STREET WILL?

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 reductions3.4% annual goals, up from 2.2%

Increased insight into baseline emissionsGrowing expertise regarding reducing their emissions

Global 3.9% per year needed for 80% by 2050

ONLY 1/3 of suppliers have targets

CDP SUPPLY CHAIN

IMPORTANCE OF CARBON IN SOURCING DECISIONS

CARBON FOOTPRINTS

CO2E The amount of CO2 that would have the same global

warming potential (GWP). CO2, by definition has GWP = 1.0

IPCC AR4 p. 212 SF6 - 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

Gas Lifetime (years)

GWP 20yrs

GWP 100 yrs

GWP 500 yrs

Methane 12 72 25 7.6Nitrous Oxide 114 289 298 153HFC-23 270 12000 14,800 12,200HFC-134a 14 3,830 1,430 435Sulfur hexafluoride 3,200 16,30

022,800 32,600

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

CF PER UNIT

+ +=

PATAGONIA – 15 PRODUCTS

CARBON FOOTPRINT AS MULTIPLE OF PRODUCT WEIGHT

Product AverageShoes 40Shirts 29.7Jackets/vests 23Sweaters/sweatshirts 46.7Shorts 8.5Bottoms 18Dresses46Luggage 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 emissions2. GHG from purchased electricity, heat, or steam3. 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

2,487 respondents for CDP85% 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 chainGHG Protocol Factsheet

GHG PROTOCOL

INDIRECT EMISSIONS

2010 VS. 2011

201150% outside four walls80%?90%?

2010

REVISED PICTURE, OCT 2011

Inherent Double-Counting

CORPORATE PERSPECTIVESupplier Retailer

LIFECYCLE ANALYSIS

Production

Distribution

Usage EndOf

Life

DOUBLE BILLINGMFG AND RETAILER BOTH RESPONSIBLE

Production

Distribution

Usage EOLMANUFACTURER’S FOOTPRINT

RETAILER’S FOOTPRINT

EMBODIED CARBON

Supplier Retailer

Scope 3 supply chain reporting is growingStill lags far behind other scopes

Upstream1. Purchased Goods and

Services2. Capital Goods3. Fuel and Energy-Related

Activities4. Upstream

Transportation & Distribution

5. Waste Generated in Operations

6. Business Travel7. Employee Commuting8. Upstream Leased Assets

SCOPE 3 GUIDELINES

Downstream9. Downstream Transportation

& Distribution10. Processing of Sold Products11. Use of Sold Products12. End-of-life treatment of

Sold Products13. Downstream leased assets14. Franchises15. Investments

“Guidance for Calculating Scope 3 Emissions,” Aug. 2011

Wal-Mart Sustainability initiative

Carbon Trust Labeled £2 billion last year

Patagonia Footprint chronicles

CARBON FOOTPRINT VISIBILITY

TESCO (UK) LABELED 500 ITEMS

Carbon-label.co.ukCarbon Trust

APPLE CARBON FOOTPRINT

Easier to openLess materialsShip in same boxCheaper to pack

No twist-tiesNo theft concerns

No display concerns

FRUSTRATION-FREE PACKAGING

WAL-MART

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

WAL-MART

Sell 100 MILLION CFLS in a year!Save customers $3b in electricity20 millions metric tons of CO2Save $40 over life of bulb

WAL-MART CFLS

Reduced packaging497 fewer containers per year$2.4m shipping costsStraight to bottom line

4,000 trees saved 1,000,000 barrels of oil

$60m sales needed for that much profitWhy didn’t we do this sooner?$2.4 million straight to the bottom line

WAL-MART KID CONNECTION

Don’t make the farmers to bad guyLook 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)

WAL-MART DAIRY

Measuring and Reducing GHG

CARBON TRUST

10% of impact is from stores, trucks, etc.90% of its impact is from the Supply ChainFortune 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

128 facings of Tide brand products13 facings of Coldwater products = 10% of slotsNW Reno Wal-Mart, Jan. 2012

WAL-MART LAUNDRY SOAP

TESCO DROPPING ITS LABELS?

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 offWhy?

Nobody cares about carbon Why?

Because there is no price on it

STATUS OF WAL-MART’S INITIATIVE

SO WHAT MAKES SENSE?

Carbon = Energy = Money

WHY WORRY ABOUT CARBON?

http://www.mckinsey.com/Client_Service/Electric_Power_and_Natural_Gas/Latest_thinking/Unlocking_energy_efficiency_in_the_US_economy

MCKINSEY STUDY

Look for energy usage What appliances use the most?

TOOLS FOR FINDING CARBON?

Input-Output Total inputs and outputs of system, industry wide

Micro approach – look at each input KWh used Gallons of water, etc.

LIFECYCLE ANALYSIS

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 MarchFlights, bread, wine – Ca vs. FranceBags vs food?Attention Misdirection

Carbon Footprint of a plastic bag? Recyclable ski passes Recycled paper Feels like something is being done

CF OF TOMATOES, ETC.

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

COMPOSTABLES

KILL-A-WATT

Look up impact of things

COMMERCIAL COMPOSTING

DISCOVERING OPPORTUNITIES

IMPACTS ALONG VALUE CHAIN

LIFECYCLE ANALYSIS

US Green Building CouncilPoints systemStart with an architect that specializes in LEED

True believers who really know how to find cost-effective methods

LEED: LEADERSHIP IN ENERGY AND ENVIRONMENTAL DESIGN

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

BOOKS TO CONSIDER