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How impact mapping opens value chain conversations

Published September 01, 2014
How impact mapping opens value chain conversations

The term "value chain" was originally used by Michael Porter in his 1985 book "Competitive Advantage: Creating and Sustaining Superior Performance." Porter contends that an organization is more than a random compilation of machinery, equipment, people and money; rather, the organization's ability to perform particular activities and to manage the linkages between these activities is the very source of competitive advantage.

When we apply Porter's theory within the context of sustainability, a new and fundamentally valuable conversation begins.

Examining the impacts

Where along an organization's value chain do the potentially positive and negative environmental, social and governance impacts occur? What are the consequences of these impacts, who should manage them, and how should they be managed? BrownFlynn refers to this process as impact mapping, as it prompts conversations that ultimately help an organization answer these important questions while visualizing how sustainability topics affect its value chain.

Impact mapping is an essential step as companies begin to undertake ESG "materiality assessments." The process can shed light on stakeholder concerns, business continuity or risk management issues. The release of the Global Reporting Initiative G4 Guidelines is a key driver for employing this type of process. GRI's new definition of boundary, Aspect Boundary, asks companies to describe where impacts occur for each material aspect.

Specific GRI disclosures encourage companies to develop a greater understanding of their sustainability value chain. For example, G4-20 and G4-21 ask that organizations report locations (such as particular entities or geographic regions) of material topics. As a result, companies look beyond directly controlled operations to develop a more holistic view of their impacts.

With the first season of GRI G4 reporting behind us, it is interesting to notice the benefits that companies gain when putting impact mapping into practice. We have observed six key benefits through our experience with impact mapping.

1. Perspective: Impact mapping enables companies to view their value chain in a new way, which widens their perspective and often highlights impacts that previously may have been overlooked. For example, Claire Castleman, sustainability analyst at Eaton Corporation, described that impact mapping "helped us identify where we have sustainability impacts upstream and downstream. It was beneficial to get clarity about who is involved in the value chain. It was also useful to consolidate information from various parts of the value chain to have one clear description of our sustainability impacts." By understanding the various ways companies affect their stakeholders and the community at large, companies such as Eaton can begin to prioritize their sustainability efforts where their risks and opportunities are the greatest.

2. Identification: Impact mapping often reveals management gaps in unexpected areas. Traditionally, companies divide their value chain into business units. The focus is often product- or service-based, considering the associated suppliers, customers, product or service uses, and lifecycle assessments. Beyond that, it is critical to identify impacts by region as well, as geographic diversity affects a company's influence. For example, one of our global manufacturing clients looked at its current operations' locations and where it was considering expanding its presence. Through this lens, it was able to identify risks, opportunities and impacts associated with specific regions. One sustainability topic is often more or less significant in different locations and identifying that is critical to determining boundary for particular metrics. A company also may uncover material topics unique to each region and can explore the significance based on presence, impact and future plans.

Credit: James Steidl via Shutterstock

3. Precision: Rather than listing broad sustainability topics, Impact mapping enables companies to describe exactly where in the value chain the sustainability topics are addressed or need to be addressed. For example, the same global manufacturing client mentioned above recently catalogued all of its suppliers by spend. Together, we were able to identify the major categories of supplies/services being procured and their transportation mode. As a result, we uncovered the most significant impacts and where they can be better managed in the supply chain. This deeper understanding enabled the client to execute management strategies in a more precise manner.

4. Engagement: Impact mapping engages internal and external stakeholders in conversations about their impacts and how their work affects the "big picture" of the organization. By engaging stakeholders involved in and affected by different activities in the value chain, the company builds a deeper understanding of the significance of certain impacts, risks and opportunities. It's nearly impossible for leaders to know every facet of the business at a detailed level, so engaging those closest to the work and outcomes helps to put things in context. An added benefit of stakeholder engagement is that employees get a voice in the business, strengthening internal relationships and surfacing great ideas for sustainable developments. One transportation supplier told a client of ours that if instead of issuing RFPs that desire the use of carbon natural gas in the transportation of its products, it required it, that would help build out the U.S. CNG infrastructure, thereby helping our client to continue to reduce its carbon footprint.

5. Actionability: Based upon where the impact occurs in the companies' value chain, impact mapping illuminates how difficult or easy it will be to address an issue by understanding how deep in the value chain the issue is occurring and what controls they have to take action. For example, if a residential real estate company discovers that tenants buying local goods have more of an impact on the local economy than hiring local contractors during construction, then establishing a program that encourages residents to purchase locally would be more effective than training development staff on how to hire local contractors. The real estate provider becomes aware of where its time and investment in sustainability will have the most influence.

6. Planning: Impact mapping helps companies anticipate and plan for future risks and opportunities. For example, our global manufacturing client's impact map shed light on sustainability topics that were not receiving much attention, and sparked discussions about further research, greater focus, new partnerships and increased budget. As companies develop their materiality assessments, this widened perspective of company impacts will ensure that sustainability efforts are prioritized according to where they have the greatest impact.

To practice what we preach, BrownFlynn is conducting our own materiality assessment. As a part of the impact mapping process, we began with interviews with our senior leadership to identify where our impacts occur. We are mapping the management of those impacts to our organizational objectives and beginning the prioritization process. In the near future, we will identify and interview external stakeholders to deepen our understanding of how our business affects our stakeholders. We look forward to sharing our key findings when we release our sustainability report next year.

Top image of water drop impact by Vlue via Shutterstock.


Also in The Shift Happens Blog:


Daniel C. Esty

Yale University
Daniel C. Esty is the Hillhouse Professor of Environmental Law and Policy, with appointments at both the Yale Law School and the Yale School of Forestry & Environmental Studies. He is also the Director of the Yale Center for Environmental Law and Policy as well as the Center for Business and the Environment at Yale. Professor Esty's research has focused on "next generation" regulation and the relationships between the environment and trade, competitiveness, governance and development. He is the author or editor of ten books and numerous articles on environmental policy issues.

The Future MBA, week 8: Don't get tied to the business suit

Published August 29, 2014
The Future MBA, week 8: Don't get tied to the business suit

For 100 days I am posting 100 ways that we could rethink and reimagine the MBA, to transform it into a tool for creating the sustainable leaders that our organizations and the planet need.

I’ll explore all aspects of the MBA, ranging from curriculum and research to partnerships and campus activities. Some ideas could be put into practice tomorrow while others would require a complete rethinking of the way we view the MBA.

This brainstorming of ideas is meant to encourage discussion, so please share your thoughts and comments and elaborate on the ideas you find the most interesting.

Day 50: Communication 102

As previously discussed, communication is a key skill that managers need, but have to different degrees. Communication 102 continues on from Communication 101, to explicitly teach students a range of important communication skills that will enable them to be more successful in their professional lives and overall careers.

This course will explore communication in a day-to-day work environment in order to create future leaders and managers able to more effectively manage their time, engage those around them and make an impact. The course will investigate how to organize and facilitate effective meetings, how to observe and listen effectively and how to contribute in meaningful ways. The course also will explore how to assess the strengths and weaknesses of those working around you and how to give and receive constructive feedback and criticism.

Day 51: Peer to Peer MBA

In the future, individuals will be able to create their own MBA, taking a range of core topics whenever and wherever they want. Students would note their current knowledge level in a particular topic (beginning, average, advanced), and would be given the opportunity to join classes that correspond to that level in terms of the content that it provides and the way it is delivered (language, tone, speed). Students then would be connected with a range of courses delivered by faculty, fellow students and other experts in the business sector, NGOs or International Organizations. The courses could be delivered online, over the phone, on campus or in person anywhere around the world.

While this system would work for full courses, it would be even more useful for specific parts of courses. A lecture for an MBA class in the UK on how to manage conservation projects in rural communities could connect to a student doing his MBA in India working in a rural community on conservation projects, or a course exploring reporting standards could connect with the Global Reporting Initiative.

Day 52: Local government

Business schools are within neighborhoods, cities, regions and countries. How can the schools and their students get more engaged in what is happening in their area as both a learning experience and an opportunity to engage local government?

The Future MBA would have a formalized relationship with local, city or national governments. This relationship could take many forms. It could involve working directly with city councils and government providing advice, creating new programs or carrying out existing ones, doing consulting work, research, etc. On the other hand, these relationships could enable government to use the services of business schools to explore, create and test innovative sustainability ideas in the community, using the community as a living laboratory. For students, this would be an opportunity to not only learn about local government and how it operates but to also contribute to creating stronger communities where they are studying.

Day 53: Suits

Put a suit on someone and she looks more respectable, smarter, more prepared. But a dark suit with a light colored shirt (the typical MBA uniform) also makes everyone in the room look similar. One could argue that requiring students to wear suits to certain functions also encourages them to act, maybe even think in a certain, similar way. It adds an element of formality that can stop students from speaking up, being open to discussion and exploration. It even may discourage those who don’t own, have never worn and are not interested in careers that require suits from applying in the first place.

If business schools are about bringing together a diverse group of people, sharing and connecting those differences to create a future workforce that can strengthen and innovate the business sector and make it more sustainable, then differences should be celebrated within the school. Creating a more casual dress environment (within reason) may provide a better setting for the sharing of information and insights, drawn both from successes and failures. It may give students the opportunity to focus on being what they are and not what the sector wants them to be.

This may seem like a small thing, but sometimes the small things make the biggest difference.

Day 54: At your fingertips

A key feature of The Future MBA will be creating more sustainable, self-sufficient and innovative campuses. In order for a business school to know exactly what is happening at any given moment on campus relating to energy and water use or waste generation, students and staff will have access to a platform which will give real-time data. The platform also could collect and present information about how many cars and bikes are on campus and even how many windows are open while the air conditioner is running.

Day 55: Connecting faculty

A key challenge in ensuring that the next generation of leaders is fluent in sustainability is to embed it into the curriculum so that students not just understand these concepts as they relate to core topics taught in the MBA, but also know how to put them into practice. The challenge is that faculty often does not have the expertise, knowledge or time and space to explore these topics in useful and relevant ways. How do we connect faculty so it can learn how to incorporate sustainability into courses and research?

The Future MBA will have a social network for faculty which enables members to connect, collaborate and learn from each other. The network will connect faculty from within the same university to facilitate the sharing of information. It also will connect faculty based on location, subject matter or research interests. Faculty can connect with others teaching the same course at other schools to share course material, experiences and resources. A series of regular virtual brown bag lunches will give faculty the chance to learn more about the work being done by other faculty around the world around sustainability topics.

Day 56: Collaborative solutions

Business schools of the future will organize all their research agendas to align with international priorities and real business challenges. Businesses, governments, NGOs and international organizations at the local, national, regional and international level would post on an online platform the range of challenges they encounter in their work regarding moving sustainability forward. Business school researchers then would connect their current work to current challenges, as well as use this to inspire their own research.

Top image by Andrey_Popov via Shutterstock.



5 ways to prevent sustainability efforts from failing

Published August 29, 2014
5 ways to prevent sustainability efforts from failing

You're not the first person to struggle with changing corporate behavior. In fact, the biggest obstacles probably don't have anything to do with sustainability per se, but rather with the reluctance and difficulty associated with corporate change management in general.

You're heard the "reasons" often given, such as, "We've never done it before," "We tried it before," or "We're doing all right as it is."

Do any of these sound familiar? They are part of "50 Reasons Why We Cannot Change," a list first published in 1959, then republished in Fast Company in 1993. And as Bill Taylor pointed out in a Harvard Business Review article last year, "The More Things Change, the More Our Objections to Change Stay the Same," one thing remains just as amazing 20 years later: "Most leaders in most organizations face precisely the same set of worries and pushbacks today."

Taylor goes on to posit five principles to "change how we make change." I've listed them below, and added my own comments about how they apply, particularly to sustainability change agents.

1: Be original

Taylor: "Most organizations in most fields suffer from a kind of tunnel vision, which makes it hard to envision a more positive future. That's why the first principle of change is originality — for leaders to see their organization and its problems as if they've never seen them before, and, with new eyes, they need to develop a distinctive point of view on how to solve them."

So often we begin a discussion about sustainability with a list of what we need to stop doing. Stop wasting electricity. Stop traveling by airplane. Stop using that type of packaging. Stop using that supplier. It can be a bleak conversation, especially when the tone is negative and restricting.

A better option is to make specific reference to what doors sustainability can open up  how can sustainable innovation lead to new product design? What new revenue might appear by rethinking our waste streams? What new customers might we attract by revising our product line? What new kinds of collaboration could we discover by partnering with our suppliers to reduce logistics?

2: Be forward-looking

Taylor: "In troubled organizations rich with tradition and success, history can be a curse — and a blessing. That's why the second principle of change is to break from the past without disavowing it."

You can't turn a page and  —  poof!  —  have a totally new organization, with a fresh culture, blank supply chain and no Internet history. Companies come with baggage, both positive and negative. Effective sustainability change agents will identify and use the best of a company's history to drive new initiatives.

History of outsourcing? Use that experience to focus on supply chain collaboration. History of leveraging lobbying and public policy to create legislation in your favor? Use that expertise to push government to act faster on sustainability (in a way that will let you leapfrog competitors!). History of litigious behavior? Decide how your legal know-how can be leveraged to advance your sustainability goals.

3: Be transformational

Taylor: "The job of the change agent is not just to surface high-minded ideas. It is to summon a sense of urgency inside and outside the organization, and to turn that urgency into action. ... That's why the third principle of change is for leaders to encourage a sense of dissatisfaction with the status quo, to persuade their colleagues that business as usual is the ultimate risk, not a safe harbor from the storms of disruption."

I mentor a number of fledgling sustainability consultants. One of their biggest gripes is that clients don't act on their brilliant ideas. I've seen it a hundred times, both by internal and external sustainability professionals. A challenge is identified, a solution is presented — and nothing happens. In most cases, the decision-maker even agrees that the solution is a good one, but doesn't feel a sense of urgency to make the change. Effective change agents must find the sense of urgency and make change a more attractive option than staying the course.

4: Be collaborative

Taylor: "It may be lonely at the top, but change is not a game best played by loners. That's why the fourth principle of change requires a sense of "humbition" among leaders — enough ambition to address big problems, enough humility to know you don't have the answers."

Sustainability initiatives by their very nature are complex, with unintended consequences, trade-offs, and competing interests. Whether your goal is to mitigate risk, drive innovation, or improve employee engagement — you will be most effective when you take multiple perspectives into account. The worst enemy of a sustainability initiative is a decision-maker in a vacuum.

5: Be values-driven

Taylor: "Change is as much about consistency as it is about disruption. ... And that speaks to the fifth principle of changeIf, as a leader, you want to make deep-seated change, then your priorities and practices have to stay consistent in good times and bad times."

Sustainability can't just be a priority in good times or, alternately, as a last-ditch effort to save the company from ruin. It can't just be today's hot topic (as quality was in the 1990s). It requires nothing less than totally rethinking your entire business, business model, industry, personal values, workforce development strategy, and approach to strategy and planning.

Overwhelmed? You should be; it's a giant undertaking. But take heart because you don't need to do sustainability in addition to everything you already do. You just need to use a lens of sustainability to view things, such as your personal values or your business model, in a new light.

When you tackle risk management, use the lens of sustainability to expand your vision and consideration of material issues. When you think about talent attraction and retention, consider how sustainability trends will influence hiring practices over the next decade. In essence, integrate sustainability into what you already do  don't create a separate system.

This article originally appeared at 2degrees. Top image by aslysun via Shutterstock



Meet the new 'operating system for energy'

Published August 29, 2014
Meet the new 'operating system for energy'

Ryan Wartena, CEO and founder of Growing Energy Labs, could have decided to create a new, inexpensive battery for energy storage, based on his experience working at the U.S. Naval Research Lab in Washington, D.C., where he learned how to make micro batteries.

When he started GELI, his partner was working at Harvard University, and Wartena was at the Massachusetts Institute of Technology. His ultimate goal was to boost the use of energy storage so that “we can run the world on renewable energy,” he said.

And that’s all about networking energy storage on the grid — and ensuring more consumers become producers.

“We could have started a new battery company to make a cheaper battery,” he said. But the real obstacle to getting more energy storage online is the automation related to the energy services. It’s all about the “Internet of Energy,” the business and operational layer associated with energy production and storage, Wartena said.

So Wartena decided to focus on software — creating an “operating system” for energy.

While lots of hardware systems are available, he saw a dearth of “platforms,” or operating systems. And as we add electric vehicles, renewable energy and energy storage to energy system, we need such operating systems more than ever.

For example, if companies are generating more power than they need using renewable energy, and selling that power to the utility, they need an energy operating system to allow them to track changing prices, generate and store power, and sell it back to the grid.

That’s where GELI’s software comes in.Ryan Wartema

In a microgrid, GELI’s software makes operational decisions based on the price of power and energy, in addition to the electrical status and activity of the microgrid itself and other system components. It optimizes the energy storage system within the context of the microgrid and the power grid.

For this work, GELI recently garnered an Innovation Award by Energy Storage North America. The awards identified the leading energy storage projects in North America.

The company’s business model focuses on getting energy storage out there as quickly as possible. Rather than offer a turnkey system, the company brings different components together, provides integration software and lets its customers — solar developers — buy from original equipment manufacturers.

“We provide the software and define the systems so they can go to OEMs and get components; this results in lower-cost systems,” he said.

For example, the company has a microgrid in Marin County that integrates diesel, solar and some facility loads. Another project in Los Angeles focuses on demand-charge management behind the meter.

Craig Wilkins, chairman and founder of ViZn Energy Systems, which produces large-scale energy storage technology, agreed that integration is key.

In a microgrid, a little micro environment, you have few assets to pull from, unlike the grid,” he said. "If all you have is solar and wind, the battery is the focal point. It’s the energy reservoir. You need to shift energy from one part of the day to another using storage. We’ll be seeing more integration services."

GELI’s system can control electric vehicles, solar, storage, diesel backups and mechanical systems, said Wartena. For example, one project will control lighting and mechanical systems during demand-side programs.

“We can ask the lighting system to dim a little to do demand-side management,” he said. “We can coordinate systems to maximize their value.”

Wartena sees many opportunities to better integrate resources and focus on the Internet of Energy: “When I see a lot of cars on the road, I realize they are stationary 95 percent of the time. They have a generator in them that’s not providing value to the building where they are parked.” We need to focus more on being producers, rather than consumers, he added.

“With the Internet of Energy, you are an interactive part. Everything is automated, from the TV to the Internet," he said. "You can put information or services back up, rather than just consuming.”

We’re not there yet, but it appears we’re moving toward "prosumer-ism." Advances in software, such as the work being done by GELI, make an Internet of Energy seems less and less futuristic, more within reach.

This article originally appeared at Energy Efficiency Markets. Learn more about new energy systems at VERGE San Francisco, Oct. 27-30. Top image by isak55 via Shutterstock



Why CGF and TSC are collaborating to end deforestation

By Alisha Staggs
Published August 29, 2014
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Tags: Forestry, Nonprofit
Why CGF and TSC are collaborating to end deforestation

Deforestation can pose significant operational and reputational risks to companies, and we at EDF see companies start to take action in their supply chains. Deforestation accounts for an estimated 12 percent of overall GHG emissions worldwide — as much global warming pollution to the atmosphere as all the cars and trucks in the world. In addition, deforestation wipes out biodiversity and ravages the livelihoods of people who live in and depend on the forest for survival.

Unfortunately, it's a hugely complex issue to address. Agricultural commodities such as beef, soy, palm oil, paper and pulp — ingredients used in a wide variety of consumer products — drive over 85 percent of global deforestation. Companies struggle to understand both their role in deforestation and how to operationalize changes that will have substantive impacts.

When drivers of deforestation are buried deep in the supply chain, innovative and collaborative solutions are required. In the past several years, we have seen many in this space make big commitments toward solving the problem, but gaining transparency into tracking against these commitments has been almost as difficult as gaining transparency into the supply chains themselves. For many companies, the hope for making good on their promises may come in the form of powerful partnerships.

Change starts with commitments

In 2010, the board of directors of the Consumer Goods Forum — a consortium of 400 companies with combined sales of around $3.5 trillion — committed to help achieve zero net deforestation by 2020, mobilizing the resources of the world's largest companies to achieve their goal. This commitment is focused on the key commodity drivers of deforestation: soy, beef, palm oil, paper and pulp.

In the last four years, to encourage their members to implement this commitment, CGF has published commodity specific sourcing guidelines, created an Activation Toolkit and launched the Tropical Forest Alliance 2020 in partnership with the U.S. Agency for International Development and the State Department. However, despite making many resources available, there has yet to be a concerted effort to measure or track against the commitment, leaving many in the NGO community skeptical.

Partnerships to build transparency

Enter The Sustainability Consortium with its membership of non-profits (including EDF), government agencies, university partners and consumer product companies with combined revenues totaling over $2.4 trillion. The Consortium's goal is to create systems that accurately measure and report environmental and social impacts associated with particular product categories in order to help retailers — and eventually consumers — make smarter decisions about what goes onto shelves and into shopping bags.

Credit: Mike Mozart via FlickrTo create common ways to measure and report impacts, TSC membership has developed Product Sustainability Toolkits for 110 product categories (and counting), including all major commodity drivers of deforestation. For the last two years, Walmart has been implementing these toolkits through its Sustainability Index. Walmart has been able to extrapolate the toolkits to cover over 700 categories and more than 2,500 suppliers.

While Walmart's achievements are very exciting for EDF, what's even more exciting is that what was once only happening in-house at Walmart is now easily implementable by all TSC members and others across the consumer goods industry through the new SAP Product Stewardship Network  — an online community that enables companies and their supply chains to efficiently exchange sustainability data.

This marks a major milestone in TSC and a huge opportunity for action. TSC will deliver an updated version of its TSC Product Sustainability Toolkits, including Key Performance Indicators, in October, which will offer even more harmonized and easily comparable metrics across commodities.

A call to action

Many companies have taken extensive steps internally to reduce their risk of deforestation. Often, though, the efforts are disjointed in relation to supply chain activity and consequently do not easily ladder up to meet an umbrella goal such as that of CGF. TSC's KPIs provide a much-needed solution for this.

TSC has developed broad, globally applicable, outcome-based metrics for tracking land transformation/deforestation. Because these metrics are nonprescriptive, they are compatible with a wide range of strategies. In addition, TSC has included specific KPIs to track the use of certification as way to address issues such as deforestation, including RSPO and FSC, both of which have been endorsed by CGF.

TSC is working to drive adoption of the toolkits within its own membership, which has more than 30 member companies in common with CGF — including Walmart, Ahold, Marks & Spencer, Tesco and Kroger. CGF and TSC officially joined forces in 2012 when they announced a partnership between the two organizations, but we have yet to see this partnership live up to its potential. CGF has recognized that it cannot stop deforestation by itself and has called on governments around the world to "secure an ambitious and legally binding global climate deal" at the UN Paris Climate Summit in 2015 and to prioritize the implementation of REDD+ (Reducing Emissions from Deforestation and forest Degradation) policies, which will be the focus of our next blog in this series.

Top image of logs by Rick Payette via Flickr. This article first appeared at EDF+Business.

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Is sustainability reporting missing the mark?

By Heather Tallis
Published August 29, 2014
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Tags: Organizational Change, Reporting & Transparency
Is sustainability reporting missing the mark?

"Corporate sustainability reporting is dead."

Not the words of an anti-corporatist radical green — but of Peter Bakker, president and CEO of the World Business Council for Sustainable Development, on stage at this year's recent EAT Forum in Stockholm.

You could feel the shock wave move through the audience. Corporate sustainability reporting has taken off in recent years, with thousands of companies publicly disclosing everything from use of recycled materials to energy savings to water withdrawals to biodiversity and habitat protection efforts.

Some observers call such reports nothing more than public relations. Sustainability reporting, though, has been one of the few environmental memes that actually has gained ground in the last decade.

But Bakker's declaration wasn't about the trend of reporting — it was about its substance, or lack thereof.

His point was that it separates sustainability from the real business of business, a sidelining that's fatal to real sustainability (and not smart for business, either).

I'll go Bakker one further: corporate sustainability reportin is just one example of how marginalized sustainability and conservation are in public and private decision-making.

Yes, we've made progress. But the numbers we tout as measures of green hope and success often are not as good as they first sound.

The marginalization of 'natural capital accounting'

For instance: 69 countries have committed to natural capital accounting, the act of adding natural capital to the government accounts that track national assets and income flows.

These national accounts are what countries use to calculate GDP and other key economic indicators. Good news, yes? Now both the public and decision makers will understand how unsustainable use of natural resources is hurting their national economies.

But these income and wealth accounts will be satellite accounts. That's accountant speak for stuff that should be important, but isn't used to calculate core metrics such as GDP.

While satellite accounts can be informative, they're largely relegated to the periphery — especially in the news. When was the last time you read or even heard about a major report on unpaid household labor in the mainstream press?

Natural capital data will be launched as satellite accounts — distantly circling GDP and other core accounts that get all the attention. This is a clear signal that governments will talk the talk but not walk the walk on counting nature as a core part of national wealth.

China & the United States: Subsidies for non-sustainable ag practices don't measure up

Another example: China has been a global leader in developing subsidy programs that encourage farmers to manage their land more sustainably. The largest subsidy program of this kind is the Grain for Green program, which at its peak in 2009 gave about $6.8 billion to rural farmers — a staggering figure, and one often cited as a huge advance for sustainability.

Unfortunately, this figure accounted for less than one-third of China's total direct agricultural subsidies that year (not even counting import tariffs or price programs), few of which give any consideration to sustainability. The program's investments have fallen, and it now makes up only about 19 percent of China's total agricultural subsidies.

Credit: nosha via FlickrSo what's the trend for sustainable agriculture in China?

The situation is even more dramatic in the United States. Conservation-related agricultural subsidies totaled $38.9 billion from 1995-2012, an enormous figure. But other agricultural subsidies moved almost an order of magnitude more federal funds over the same period, coming in at $252 billion.

Let's make sustainability relevant to major decisions

The sustainability victories we are claiming these days are still marginal to the core work of the world. They are small steps in the hinterlands of our major social and economic systems. I am not suggesting they are not advances — compared to past efforts on sustainability, they are monumental. They are just nowhere near monumental enough.

We need to shift our focus to that core work, and find more direct ways to understand how the environment supports and is impacted by major decisions:

All agricultural subsidies should be designed with real consideration of their environmental costs relative to production benefits. Subsidies that lead to over-fertilization and downstream pollution should not be countered by costly water treatment. Instead, they should no longer be allowed.

We also need the same kinds of major shifts in core subsidies for energy and mineral extraction.

Corporate supply chains will not be truly sustainable until sourcing decisions directly consider environmental and social risks, and companies go beyond environmental disclosure to cease sourcing from water-stressed, soil-stressed, mineral-stressed and climate-stressed regions. Even with current reporting, we should aim for much higher uptake. CALPERS, the largest public pension fund in the United States, takes account of environmental, social and governance factors in all of its investments. This should be the norm.

Governments must put natural capital into accounts in ways that matter for core economic indicators. Other entities that use information on governments — such as the World Bank and credit rating agencies — should follow suit, using natural capital information in debt ratings and loan determinations.

Come on, sustainability revolution. It's time to go big — or go home.

Top image of darts missing the board by sergign via Shutterstock. This story originally appeared in The Nature Conservancy's Cool Green Science blog.

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RP Siegel

President
Rain Mountain LLC
RP Siegel, author and inventor, shines a powerful light on numerous environmental and technological topics. He has been published in business and technical journals and has written three books. His third, co-authored with Roger Saillant, is Vapor Trails, an eco-thriller that is being adapted for the big screen. RP is a professional engineer and a prolific inventor, with 50 patents, numerous awards and several commercial products. He is president of Rain Mountain LLC and is an active environmental advocate in his hometown of Rochester, N.Y.
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How the zero-waste economy benefits everyone

By Marc Gunther
Published August 28, 2014
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Tags: Consumer Products, Cradle to Cradle, More... Consumer Products, Cradle to Cradle, Design & Innovation, Life-Cycle Management, Recycled Products, Resource Efficiency, Supply Chain, Waste Reduction & Recycling
How the zero-waste economy benefits everyone

“Don’t let fashion go to waste,” says H&M, the global clothing retailer that booked $20 billion in revenues last year. So I brought a bag of old T-shirts, sweaters and khaki pants to an H&M store in Washington, D.C., which took them, no questions asked, and gave me a coupon for 15 percent off my next purchase. H&M takes back clothes in all of its 3,100 stores in 53 countries.

Next, I pulled an ancient iPod and an iPhone 4S with a cracked screen from a desk drawer. On the website of a company called Gazelle, I answered a few questions and learned that the company would pay me $37 for the pair. (Without the cracked screen, the iPhone would have been valued at $135.) I printed out a free shipping label, and they were on their way. Not to landfills, but to a new life.

Meanwhile, not far from my home, a garage owned by the Washington Metrorail system is about to undergo a makeover. Existing lighting fixtures will be replaced by LEDs that are expected to reduce energy usage by 68 percent. The LEDs will be manufactured, owned and monitored by Philips, which will take them back when they need to be repaired or replaced.

Welcome to the emerging world of the circular economy. Faced with rising prices for energy and raw materials, along with pressures from environmentalists and regulators who have passed “extended producer responsibility laws” in Europe and some U.S. states, forward-thinking companies are finding ways to take back, reuse, refurbish or recycle all kinds of things that otherwise would be thrown away. In contrast to the traditional “take-make-dispose” linear economy, which depletes resources, a circular economy is an industrial system that is restorative or regenerative by intention and design. Inspired by nature, a circular economy aspires not merely to limit waste but to eliminate the very idea of waste: Everything, at the end of its life, should be made into something else, just as in the natural world, one species’ waste is another’s food.

Refined and rebranded

This isn’t entirely new, of course. Recycling has been around for centuries — iron pots, for example, were melted down to make armaments during the American Revolution — and, when done right, it delivers significant environmental benefits by reducing demand for raw materials, energy and water. (It takes around 700 gallons of water to make a cotton T-shirt such as those I brought to H&M.) In the 1990s and 2000s, pioneering environmental thinkers such as Paul Hawken, Amory Lovins, Hunter Lovins, Janine Benyus and William McDonough laid the intellectual groundwork for the circular economy by developing such concepts as natural capitalism, biomimicry and cradle-to-cradle design. But they were slightly ahead of their time, as pioneers often are.

Now their ideas have been refined and rebranded by influential business thinkers as the circular economy — and they are getting the attention of big companies.

The timing is no accident: Prices for oil and energy have more than quintupled since 1998, metals prices have tripled and food prices have risen 75 percent, according to "Resource Revolution: How to Capture the Biggest Business Opportunity in a Century,"  a new book by Stefan Heck and Matt Rogers. “What we are seeing are two concurrent trends,” explained Heck, a former McKinsey consultant. “First, the cost of extracting resources is going up dramatically. That’s driven by the fact that we went after the cheap and easy stuff first.” (Think about the costs of drilling for oil in the Arctic or extracting it from Canada’s tar sands.) More important, Heck said, is that an estimated 2.5 billion people in China, India and other developing countries will move out of poverty and into cities by 2030. They’ll want apartments, cars, air conditioning and electronics, creating massive demand for energy and raw materials.

No wonder companies see the circular model as a business opportunity. The transition to a circular economy could generate savings of more than $1 trillion in materials alone by 2025, according to an analysis by the U.K.-based Ellen MacArthur FoundationMcKinsey & Company and the World Economic Forum, which are collaborating to promote circular thinking. The foundation’s partners include Philips, Cisco, Unilever, Renault and Kingfisher, Europe’s largest home improvement retailer, all of which are testing circular models.

“Companies are getting much more interested in how they can recover products at the end of life,” former foundation CEO Jamie Butterworth said.

Usership, not ownership

Philips has gone further than most. The company began incorporating circular-economy thinking into its activities two years ago, the company’s CEO, Frans van Houten, recently told the McKinsey Quarterly. The thinking is applied to the company’s lighting and health care businesses.

LED streetlights in Singapore and Buenos Aires, like the new fixtures in Washington, D.C., Metro garages, will be owned by Philips, saving government customers the capital outlays. The governments will pay monthly fees based on usage. In Amsterdam, an office building being designed for accounting firm Deloitte will showcase a smart lighting system equipped with sensors that will deliver information to building managers about which offices are occupied and which need to be heated and cooled. The system is owned and managed by Philips, which will upgrade the technology as needed, while Deloitte pays for lighting as a service.

“We keep the ownership of the products, and we redesign them in such a way so that they have more value at the end of life,” said Henk de Bruin, head of sustainability at Philips. “Usership rather than ownership is a trend we see emerging.”

Stockholm-based H&M has been taking back clothes worldwide since 2013. The fast-fashion retailer contracts with a Swiss-based company called I:Co (which stands for I Collect) that collects the used clothes, sorts them by hand and either sells them for reuse in poor countries or recycles them into a variety of products, including automobile seats, insulation and stuffed toys.

The economics work well, according to H&M sustainability manager Henrik Lampa — enough revenues are generated at the end of life to pay for the collection and sorting and fund research into recycling innovation. However, “there’s a big need for technology development,” Lampa said. Chemical as opposed to mechanical recycling could enable used cotton to be turned into new clothes without degradation in quality.

“Ideally, we want to make new commercial fibers out of this,” Lampa said. “Then we will have new materials that do not have the price volatility of agricultural commodities.”

Rapid upgrade

The circular model makes particular sense for technology products that go through rapid upgrade cycles. By buying back and refurbishing mobile phones from customers who no longer want them, Sprint has saved “over a billion dollars” that it otherwise would have spent buying new devices from manufacturers such as Apple, Samsung and LG, said Darren Beck, director of environmental initiatives. About 90 percent of the phones Sprint collects are returned to the market as replacements for lost or damaged phones or as “certified pre-owned phones” sold to new customers. For its part, Verizon recently introduced a free application that gives customers an instant quote for their used device, which then can be returned for cash at a Verizon store. All told, the U.S. consumer electronics industry took back or recycled 620 million pounds of electronics in 2013, twice as many as 2010, according to the Consumer Electronics Association.

The number would be higher, Beck said, if device makers could be persuaded to design phones so that they can be disassembled or recycled more easily. Some manufacturers — HP and Herman Miller are among the leaders — have embraced the idea of designing goods with their end of life in mind by, for example, using screws instead of glue to hold things together and choosing pure materials over composites.

While market forces are the primary driver of circular practices, government regulation has played a role, too. More than two dozen U.S. states have passed laws mandating recycling of electronic waste, according to the Electronics TakeBack Coalition. States with stronger laws report that their efforts generate 5 pounds or more of recycling per person, while those with weak or no laws bring in much less, the group said.

Barbara Kyle, the coalition’s national coordinator, said that without government intervention, electronics with little or no value, such as TVs with cathode ray tubes or accessories made of cheap plastics, are unlikely to be recycled. “It’s negative cash flow to take back CRTs,” Kyle said.

In U.S. states without regulation, electronics recycling is harder than it needs to be. While Best Buy, the nation’s biggest electronics retailer, has a comprehensive take-back policy, neither Walmart nor Amazon makes it easy for consumers to return electronics they no longer want.

Intrigued

How consumers feel about all this is unclear. Young consumers appear intrigued by circular models. Millennials are buying fewer cars and driving less, and the marketplace is responding with companies such as Zipcar that facilitate car-sharing. Rent the Runway enables women to rent designer dresses and accessories, reducing the demand for new clothes.

“A lot of venture capital money is going into start-up companies that enable greater asset productivity,” said author Stefan Heck. Yet those same young consumers buy single-serve coffee machines from Keurig, Nestlé and Starbucks and fast fashion from companies such as H&M and Zara — generating more waste, not less.

So are we moving closer to the circular economy — or further away? Accurate data is hard to come by, but the U.S. Environmental Protection Agency estimates indicate that recycling rates grew rapidly from 1980 through 2000, and only gradually since then. Disposal of waste to landfill declined from 89 percent of the amount generated in 1980 to 54 percent — about 135 million tons — in 2012.

Lots of work clearly is ahead for advocates of the circular economy. But the vision they are pursuing is bold: In a truly circular economy, where waste becomes nutrients and energy is renewable, economic growth would be decoupled from environmental restraints. Companies could sell more stuff without generating pollution. Consumers could buy more stuff, without guilt. What’s not to like?

This story originally appeared at EnsiaTop image: clothes stand at a flea market by Ilya Shapovalov via Shutterstock.

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Real estate pros strive to explain building energy performance

By Chris Potter
Published August 28, 2014
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Tags: Employee Education & Training, Real Estate
Real estate pros strive to explain building energy performance

Commercial buildings are some of California's largest energy- and water-guzzlers. With 58 percent of the state locked in the highest category of drought, many commercial property owners are seeing increased utility bills, and with a new building energy benchmarking and disclosure law on the books, building owners seek energy efficiency solutions as a common-sense way to ease some of the pressure. One key trade association in California, the AIR Commercial Real Estate Association, is taking the lead by educating its members on the benefits of energy efficiency.

AIR, founded in 1960, is a regional commercial real estate brokers association with more than 1,700 members across southern California, and is one of the nation's largest organizations of its kind. It's recognized across the U.S. for its ever-expanding library of sample lease forms, which members use to stay updated on industry and lease language trends — several of which now include sustainability. When California's energy benchmarking law, AB 1103, went into effect in January, AIR responded by creating sample energy disclosure lease and sale addenda (PDF) and began educating its members on these new tools.

Brokers are in the thick of it

The law states that any time a non-residential building owner finances, sells or leases a whole building, the property owner is required to use Energy Star portfolio manager to benchmark the building and provide the Energy Star rating and supporting consumption information to the lender, buyer or tenant in the transaction. As brokers are central to every aspect of a commercial transaction, their participation is essential for the law to have its intended effect. AIR's lease and sale addenda effectively address these energy disclosure requirements in one document, providing real estate professionals, building owners, tenants and attorneys with a framework template for compliance with the regulation.

Brokers hold the key to increasing stakeholder awareness, potentially boosting compliance rates, benchmarking data quality and ultimately better building performance and energy management — and educating the community about new regulations and tools is essential to unlocking this potential.

"I really think communication is the key here. It's very important to educate and communicate with the broker community on the benefits of [energy benchmarking] and its long-term economic potential, especially since energy and water costs continue to climb," said Marika Erdely, founder and CEO of Green EconoME, an energy service company based in Malibu that helps building owners in California reduce their energy costs and offers free training on AB 1103 and California's energy code (Title 24), both of which went into effect this year.

Last year, Erdely collaborated with AIR and Elizabeth Watson — one of California's few LEED-accredited lawyers and a partner in the Real Estate Group at the Los Angeles-based law firm Greenberg Glusker — to host a series of AB 1103 education events in the Los Angeles basin that were free and open to AIR members. More than 200 brokers and other key stakeholders attended each event.

Through these sessions and conversations with California's commercial real estate community, AIR quickly discovered that most brokers were unaware of AB 1103 and why benchmarking was important, exposing a major information gap that potentially could lead to significant energy and water waste and higher utility bills if left open. "There are so many brokers doing business every day that call me and have no idea," said Erdely.

AIR's sessions focused on the long-term view for why benchmarking matters — explaining how it's a simple way to save clients money, create more value and attract and retain better tenants. And while there is still a strong need for more education, brokers have started to pay attention. "It seems in general the brokers are becoming much more aware of AB 1103, and my recommendation has been for them to get in touch with an energy consultant like GreenEconoMe to help them through the process," AIR Executive Director Tim Hayes said.

Jeff Gould, director of the Los Angeles Better Buildings Challenge agreed: "We are seeing an increasing interest from brokers, landlords and tenants alike on how to integrate energy and water efficiency into the conversation during a transaction — the natural intervention point for this conversation is during a sales, lease or financing event."

More than the letter of the law

Such conversations don't have to be limited to AB 1103 compliance. Benchmarking, in addition to highlighting areas of poor performance, also typically serves as the foundation for a complimentary suite of energy-saving initiatives such as green leasing. A 2012 report (PDF) commissioned by the California Public Utilities Commission found that benchmarking was highly correlated with building energy improvements and management actions and boosted customer participation in utility rebate and incentive programs.

The potential ripple effect is large, but benchmarking laws are only valuable if the market acts on the information created by compliance. For that to happen, all primary stakeholders, such as brokers, must be invested. This is where education and outreach efforts such as AIR's are key. Through its actions, AIR is providing the kind of leadership we need if these policies will fulfill their long-term goals of reducing energy waste in commercial buildings and maintaining a sustainable and high-performing building stock.

Top image by TAGSTOCK1 via Shutterstock. The Los Angeles Better Buildings Challenge contributed to this article.

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