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Industrial ecologists use the term "partially diminished fraction," or PDF, to assess the extent to which a product somewhere along its life cycle harms ecosystems. Virtually every manmade object has a PDF impact, however miniscule -- like the palm oil in a shampoo harvested on plantations where rain forest was clearcut, or the cotton in a t-shirt that comes from farms that over-draw water in arid areas. For BP, the PDF of its oil has become massive, and growing.
In an uncanny coincidence, just weeks before the BP spill the Harvard Business Review ran a featured article proclaiming that it is no longer possible for business leaders to ignore what economists call 'externalities' like pollution. For Big Oil, that's now an understatement. Add to that the imperative for investors to avoid sustainability risks: BP's market value has tanked, shedding tens of billions of dollars. The Gulf crisis stands to stamp externalities (though not the term, hopefully) on the national consciousness with the same traumatic force as 9/11 did for terrorism.
What a difference a year makes. Last spring I dialogued with Joel Makower on whether radical transparency -- the surfacing of a company's or brand's hidden ecological impacts -- was the future for green business, as I argue in Ecological Intelligence: The Hidden Impacts of What We Buy. I had connected the dots on emerging trends in information systems and industrial ecology, and projected a future where shoppers would routinely compare eco-impacts of what they buy just as they do today with price, shifting market share so that companies would compete to upgrade their own ecological footprints. Joel, understandably at the time, argued that was a bit of a pipe dream.
Then just months later came a seismic shift, with Walmart announcing its intention to create a sustainability index, and notifying its 100,000-plus suppliers that they either share metrics on their products' ecological impacts or become "irrelevant." Andy Ruben, then head of Walmart house brands, wanted to help his suppliers understand the big picture on the disruptive technology eco-impact information systems are creating. So he asked to condense and distribute to his suppliers audio interviews I had done with the developers of the two main emerging platform prototypes: GoodGuide -- the consumer-facing comprehensive eco-rating system -- and Earthster, the open-source supply-chain eco-impact tracker.
Ruben (now head of Walmart's global sourcing for foods) also asked Gregory Norris, developer of Earthster, to pilot life-cycle analysis evaluations of seven product lines. The metrics chosen for the pilot were global warming impacts, resource use, and "disability adjusted life years," or DALYs, a public health measure of the degree of disability caused by the product at any point in its life cycle. And, oh yes, one more: PDF. No one can say if these metrics will end up incorporated into the final sustainability index Walmart plans one day to post next to price tags. But the smart money thinks so.
The momentum for radical transparency builds. In April, I attended a meeting in Washington DC on Earthster held by the EPA for a host of folks from various government agencies with a stake in sustainability. The interest was in how to find a unifying information platform that could be used, say, by the GSA to build in perpetual ecological upgrades in the course of purchasing the half-trillion dollars or so it spends yearly. A federal library is considering using Earthster 2.0 (now in development) as the model platform for a data commons on ecological impacts, creating an information utility that businesses can use as they work to assess and reduce their externalities.
Next page: The good news for companies joining this race to the top.
Hi. I am partly agree with
Hi. I am partly agree with you. Yes, it would be much more easier in principle but it is practically not feasible, I suppose. This would let us think that all human creations are made with only one purpose the sustainability. Just one source of ideas for one use only is not sustainable. It is to forget all past investment made by men since living on earth.
And also, I suppose the Patent offices for sustainable designs may be full of futuristic products that are sustainable that nobody wants or cannot transform into real products. Men brain is full of ideas, it is transforming them, which is hard because of botltlenecks of all kinds (I think in the bible their is a good example for that, which is the "Babel Tower").
So, sustainability, we should go for it. It should not be because humanity is threatened by quality or quantity resources but just because we are deeply concerned with status: a better live,equity, biodiversity... for the wealth they bring that cannot be assessed in term of hard currency (perhaps) at first sight but, which is good for our psychology. It is preservation versus conservation, for instance. Anyway, we need to get flexible solutions in space and time to remove bottlenecks that everybody should be agreed on. About free society, I think you have considered also, free riders (for instance for public goods). I am sure nobody wouldlike to be charged for somebody else.
Small businesses are an important part of the solution
Asking how small businesses can fit in is essential in my view. Big companies can write excellent powerpoints about sustainability, but they are maybe not to best placed to deliver the most sustainable services. The risk is to exclude small initiatives that can offer a more sustainable service than Walmart for example. Transparency needs not only to increase, but information also needs to be free and manageable. Who is the actor that ensures that the competitiveness of small companies is respected in this movement of elephants toward transparency? If I'm an entrepreneur and want to launch a new product, it should be very easy to first calculate the impact of this product, and secondly publish and validate it.
The hybrid between Environment and the Economy
Yes! There may be differeces between small, medium and large companies. Myself, I have a small entity, certainly the way I am making the sustainability princile effective, is different that a bank or a charity. Noneless to say, their black box are the same e.g. you watch your inputs, ouputs and box process windows with these ratios and indicators (including sustainable ratios) -and being sure, you do not follow what you want to follow but only the sustainability principle. You are the boss with all kinds of contractual agreements, cultural values and individuals choices. Now, possibly, probably or certainly environmental friendly has different shapes, if it is a water business or an ICT firm. And also, the sustainability concept and its application can derive also, from the balance between science and pre-science. We all know - I suppose, at least that each business has its behavior and company language (I do not think harmonization will be for soon-the Esperanto of companies would fail like Dr Zammenhof world language to unify the world). All these differences find a ground, Isuppose on the market place with more or less incentives or penalties to regulate the game. Mid 20 century, E. F. Schumacher was the best advocate of sustainable development. He has passed in history in books as the master of mission unit organization with goal purpose is the connection of people, the environment and the economy.
The balance between eco-logy and eco-nomics
I agree with Aaron - Small businesses do not have the same budgets as large businesses to invest in sustainability. Unfortunately, that's the bottom line.
As suppliers to organisations such as WalMart transition towards becoming greener, their prices will increase to accommodate for the transition. This in turn will make them a lesser attractive supplier to smaller retail chains that supply local economies. It open doors to cheaper but less governed / controlled products to enter the market, putting the consumers at risk.
I'm currently working on a framework that hones in efficiency models in processes to reduce cost and streamline the business, with sustainability as its core driver. Its an open source framework and I'm happy to discuss with anyone who is interested. But what I'm trying to address here is there is an opportunity for larger organisations to invest in ways to reduce cost whilst being green; not only will it drive the cost of their products down, it will maintain their competitive advantage and keep things affordable for consumers such as you and I. And it would give smaller businesses an economically viable case study they can implement.
So, the question here is: Is there an economically viable environmental solution out there that can be used by both large and smaller organisations?
Where Do Small Businesses Fit In?
Insightful article. How do small businesses think about PDF, radical transparency, externalizes, etc.? The vast majority of resources and focus you mention is on large, publicly-traded companies How can small companies think through these issues, and incorporate them into the ethos of what they do, especially given 99% of all companies are indeed small businesses.