Wharton Social Impact: Business is Making Sustainability Mainstream

“Sustainability has become more mainstream now,” says Eliza Eubank, assistant vice president for the environmental and social risk management department at Citigroup. “It is not just something that the do-gooder environmentalist cares about. It is something that is on the priority list of CEOs.”  This came out of the recent Wharton Social Impact conference in the US. In fact, for savvy companies, a strategy built around sustainability can be a critical advantage, Boston Consulting Group senior partner Martin Reeves pointed out.

From  Knowledge@Wharton (19 January 2011):

If building a sustainable enterprise was a fashionable trend five years ago, today it is a business imperative. Forward-looking corporations have figured out that a focus on environmental, social and governmental (ESG) factors is not just a bid to burnish their image, but rather it is a necessity in today’s marketplace. And if done well, it is a true competitive advantage.

A panel of senior executives from consulting, banking and the chemical industries sat down to debate and discuss this critical shift during the recent Wharton Social Impact conference.

The panel, “Sustainability and Corporate Social Responsibility: Is ESG the New CSR?” included participants from a variety of backgrounds and experience. Still, all were in agreement that what was a somewhat nebulous (but fashionable) movement five or 10 years ago has become a focused, integrated way of doing business at many firms.

“Sustainability has become more mainstream now,” said Eliza Eubank, assistant vice president for the environmental and social risk management department at Citigroup. “It is not just something that the do-gooder environmentalist cares about. It is something that is on the priority list of CEOs.” Stephane N’Diaye, senior manager of strategy-sustainability at consulting firm Accenture, echoed that view. The progress over the last several years in sustainability efforts, he noted, stems from “where it stands on the CEO’s agenda.”

In fact, for savvy companies, a strategy built around sustainability can be a critical advantage, Boston Consulting Group senior partner Martin Reeves pointed out. Even when government action puts more burdens on business, Reeves said there can be an upside. When you change the rules of the game, you “are putting a floor on certain behaviors [and] raising barriers to entry.” Case in point: the establishment of the Food and Drug Administration, which Reeves contended “essentially took a snake oil industry and turned it into an industry with very strict scientific standards.”

Certainly a focus on sustainability has changed the way many big firms operate on a daily basis. Citigroup’s Eubank pointed to the firm’s work in financing projects such as oil and gas pipelines. The bank requires borrowers for those types of projects to meet certain environmental and social guidelines.

 ”We work with our sponsors who are developing these projects to make sure they have consulted the local community, that they are using adequate pollution control technology, and that they have good environmental and health and safety standards for their workers,” Eubank said. There are real repercussions for failing to meet those standards. “We agree on an environmental action plan, which is a formal to-do list that the company needs to follow in order to bring their operation into compliance with international standards. It actually becomes an event of default if they stop complying with the environmental standards that we require of them.”

According to Eubank, the motivation for this push comes from practical concerns. For one thing, the loans are repaid when the project becomes operational and starts generating cash. So if the project sponsor has done a poor job of building local support for a pipeline, for example, there is a risk that someone will sabotage the project, potentially delaying the repayment to Citigroup.

In addition, if lenders like Citigroup fail to police their borrowers, they run the risk that their own brand becomes tarnished. The reason: Over the last decade, environmental groups began focusing their campaigns on the companies financing controversial projects. “You don’t want to be on the front page of The New York Times [with a headline] saying ‘Citigroup financed some mine and this mine spilled cyanide into the local river and poisoned the drinking water for all the villages downstream,’” Eubank noted.

Accenture’s N’Diaye said that concern about reputational risk is widespread. According to a 2010 survey of more than 750 CEOs by Accenture and the United Nations Global Compact, 93% viewed sustainability as important to their future success, while 72% said “strengthening [the] brand, trust and motivation” was the biggest driver of their action on sustainability issues.

In fact, the right sustainability formula can transform a brand. N’Diaye pointed to the Swedish burger chain Max Hamburgerrestauranger AB. In 2007, the company, in response to evidence that the meat industry was a key contributor to greenhouse gas emissions, overhauled its business. The chain measured the climate impact of its food from the farm to the restaurant and printed that information on its labels.

In addition, the firm shifted to wind energy and has supported reforestation projects in places like Uganda. The result: Between 2007 and 2009, an independent survey found customer loyalty for the chain spiked 27%, mostly driven by its sustainability blitz.

“Here is a company that in the downturn has invested pretty heavily in environmental sustainability, in social sustainability and in paying attention to the consumer and making bold choices,” N’Diaye said. “With all of those programs, they still manage to keep growing revenues.”

Growing Green

Despite these success stories, however, the science of understanding how such social and environmental programs drive consumer behavior remains an inexact one. “We don’t have the right metrics,” N’Diaye noted. “We haven’t done a good job of tying sustainability performance with business performance. We need to better understand the consumer and see how sustainability can drive the purchase decision. About 75% of people would say, ‘All things being equal, I would buy green’. How you translate that into an actual purchase decision … is something else.”

Beyond brand protection, however, there are some very tangible benefits to these practices, as panelists made clear. Catherine Hunt, R&D director of external science and technology for Dow Chemical, said sustainable business practices can drive profitability. “If you use less energy, that affects your bottom line. If you generate less waste and, particularly in the chemical industry, [if] you don’t have to get rid of chemical waste, you improve your bottom line.”

Indeed, for companies like Dow that are actually developing green products, finding a showcase for those efforts can enhance their brands while expanding their markets. Dow’s Hunt highlighted her company’s co-sponsorship of RetroFIT Philly’s “Coolest Block” contest, in which Philadelphia neighborhoods competed to win an energy efficiency overhaul of their homes, including installation of a “cool roof” using Dow technology.

“The Dow Chemical Company Foundation funded this,” Hunt stated. “And I was asked ‘If you paid, what is sustainable about that?’ But it is about education. If you don’t know what it means to have a cool roof, and what a difference that makes to your neighborhood, you are not going to do it.”

For other companies, the benefits to their business may be less obvious but no less critical. According to Boston Consulting Group’s Reeves, one of the biggest challenges for his industry is finding and retaining the right employees. That talent pool is a product of the education system in this country, which Reeves noted “is not in a great state.”

That is why BCG has partnered with Chicago Public Schools, which teaches some 400,000 children, in an effort to boost performance and cut the dropout rate. The firm put its consulting expertise to work, analyzing what was wrong with the Chicago system, where, for every 100 freshman high school students, a scant six go on to graduate college. The project resulted in new efforts, including a scorecard for parents of high school students and new, intensive support for math, science and English teachers in struggling schools.

More recently, Reeves was part of a team using a logistic regression model to understand what was causing the unacceptably high rate of high school shootings. “We are applying analytical, business approaches to a social problem,” Reeves said. “Some of this is not about new ideas, but it is about applying existing ideas and clear thinking to places where that has been absent.”

And when it comes to borrowing good ideas on sustainability, the panel made it clear that innovation can come from surprising sources. Citigroup’s Eubank pointed out that Chinese banking regulators have required banks in that country to take a look at the environmental impact of their lending activities.

“The Chinese Banking Regulatory Commission came down with a mandate that all banks in China need to start developing environmental policies,” Eubank said. “There is actually a black list of about 200 companies in China that banks are not allowed to finance because they are too polluting.” A representative from the Commission visited with Citigroup executives last summer and talked to them about the policy.

Among the panel’s key messages was that the need to address ESG issues will only intensify over time, in part because the next generation of business leaders is demanding it. One of the audiences most keenly interested in the report Citigroup puts out annually on its sustainability record, Eubank noted, is the company’s recruiting operation.

“Students these days are much more environmentally aware, and they want to know what a company’s sustainability policies are,” Eubank said. “Bankers want to know that they are working for a company that is being responsible.”

Source: www.knowledge.wharton.upenn.edu

Singapore Launches Eco Food Courts & Envirofriendly Gets Down to Work

An obsession with food and a growing desire to do more for the environment has led to the establishment of a new certification standard for food courts, introduced by the Singapore Environment Council. Meanwhile Australia’s innovative liquid waste solution, Envirofriendly is getting down to work in Singapore at two Sentosa resorts and in the Environment Building.

Singapore Environment Council (19 January 2011):

Singapore, 19 January 2011 – Food courts are undeniably the most popular and ubiquitous communal spaces in Singapore. Their operations generate huge amounts of waste and consume massive amounts of energy and water every day. To address these environmental challenges, the Singapore Environment Council (SEC) today launched the Eco-Foodcourt certification to facilitate the adoption of environmentally sustainable practices among local foodcourt operators.

“It was reported last year that Singapore saw an alarming increase of 31 percent of waste generated since 2000, with food waste as one of the top five waste types. A natural choice was to focus on foodcourts as they are a great avenue to not only reduce waste but also to save resources. Foodcourts are a great platform for outreach on conservation and recycling because they are a big part of our culture in food-loving Singapore,” said Mr Howard Shaw, SEC Executive Director.

The Eco-Foodcourt certification assesses the environmental management system in a foodcourt. It addresses the key components of a food court’s environmental policies, air quality, the twin resource of water and energy management, as well as waste management.

One of the mandatory requirements for attainment of the Eco-Foodcourt status is the non-usage of Styrofoam packaging as a takeaway option for customers. This is a tough stance taken by SEC to promote the reduction of the harmful impact on our environment and to introduce environmentally preferable options such as biodegradable packaging.

Guest-of-Honour, Dr Amy Khor, Minister of State, Ministry of the Environment and Water Resources, unveiled Singapore’s first Eco-Foodcourt, The Deck at Faculty of Arts & Social Sciences (FASS), at the National University of Singapore (NUS). The NUS is the first educational institution to be awarded this certification. Also receiving this award at the launch was the Kopitiam @City Square Mall from the commercial food and beverage (F&B) sector.

“We are pleased to be awarded the Singapore Environment Council’s Eco-Foodcourt Certification which recognises the environmentally sustainable practices implemented at the The Deck at FASS. As the University continues to strive for positive solutions to pressing environmental problems, the adoption of these sustainable initiatives reduces the environmental impact of canteen operations. In our campus, while waste materials such as plastics, cardboard boxes, aluminum cans, cooked oil and food waste are recycled, promotional campaigns on bringing your own lunch boxes for takeaways and using fewer plastic bags drive home the message of being environmentally responsible,” said Mr Joseph P Mullinix, Deputy President (Administration), National University of Singapore.

Examples of environmentally sustainable practices implemented at the The Deck (NUS Arts Canteen) include organic food recycling, recycling of cooking oil, use of eco-friendly Microwave Packaging food boxes, use of reusable boxes and promotion of meat-free meals. Some of these practices are also adopted at other NUS canteens.

Kopitiam’s Corporate Communications Manager, Ms Goh Wee Ling, shared about the impact of going for the Eco-Foodcourt certification, “As we went about raising the awareness of our tenants on environmental sustainability, they began to see the importance of adopting practices friendly to the environment. A big bonus to the tenants for being environmentally responsible was the realisation that they were reducing their operating expenses when they managed the use of energy and water wisely. Kopitiam is happy to partner SEC in their mission to reach out to more people with the important message of being eco-conscious.”

At this event, the SEC also took the opportunity to launch its new logo. SEC has, in the last 15 years, grown from a small non-governmental organisation (NGO) that provides environmental outreach and education to businesses and the community to become an authority in the endorsement of environmental standards and the promotion of best practices. The new logo represents both its current role in highlighting environmental sustainability issues to the community, and reflects its ongoing role as an expert in framing new opportunities that others may not see.

Source: www.sec.org.sg

Envirofriendly Makes its Mark in Singapore

By Ken Hickson

Envirofriendly – the innovative liquid waste solution from Brisbane, Australia – is being introduced into Singapore and is already on trial at two resorts on Sentosa Island and in the Environment Building in Scotts Road.

Neil Christie, the inventor and owner of the microbial water saving and waste management process, was in Singapore early in January, along with Maree Norton Managing Director of Envirofriendly Product Distribution, to get the trials under way.

This followed exploratory work and market development by Sustain Ability Showcase Asia in Singapore, including gaining approval from Public Utilities Board (PUB) and National Environment Agency (NEA) for trials to be undertaken.

The Environment Building, where trials using Urinalkleen are underway in bathrooms on two floors, also houses the Ministry of Environment & Water Resources, as well as offices of the PUB and NEA.

Neil Christie has also checked out the building’s grease trap to see how its performance can be improved. The building has already set very high standards in environmental management, winning regional awards after a major retrofit, for energy efficiency, water and waste management.

On Sentosa, trials using two products – UrinalKleen and Drainsolv – are underway at the Siloso Beach Resort, which is owned by a dedicated and far sighted environmental enthusiast Ng Swee Hwa and managed by his son, Kelvin Ng. The boutique resort is the winner of many environmental awards.

Drainsolv is also being put to the test at the nearby Rasa Sentosa, a member of the Shangri-La group of hotels and resorts. As this resort has only just re-opened after many months of renovation, the Envirofriendly product will be seen at work through all the resorts nine kitchens to reduce water use and manage the waste going into the grease traps.

This Envirofriendly product works to eliminate odour causing bacteria and speeds up the breakdown of waste in sinks, drains, pipe work and greasetraps. It can also significantly reduce the frequency of costly evacuation of grease traps.

It is too early to tell from the trials at Rasa Sentosa as the resort has only just re-opened (19 January), but early observations of the use of Envirofriendly at Siloso and the Environment Building indicate it is working to plan and producing the improvements expected.

UrinalKleen ensures the effective operation of both waterless and flushing urinals in bathrooms, significantly reducing water use, breaking down waste that causes blockages and also removing lingering unpleasant odours.

Ken Hickson is based in Singapore as Founder Chairman and CEO of Sustain Ability Showcase Asia, which represents a number of businesses (products, processes and services) in Asia Pacific. For further information on Envirofriendly products and their application in Singapore and Asia, please contact Ken Hickson – kenhickson@sustain-ability-showcase.com

The Heat is On: Flooding Our Minds, Homes and Streets

The reluctance of our politicians and media to attribute the devastating floods in Queensland to climate change is nothing but cowardice. The science is in. We must accept the verdict that climate change leads to more frequent and severe disasters. So says Matthew Wright writing in the Daily Telegraph. For a slightly more restrained overview, we look to Mike Steketee writing in The Australian, who draws attention to the warming world and the disastrous extreme weather many parts of the world experienced in 2010. He says: Even if the world achieved what so far has proved beyond it – a mechanism to stabilise greenhouse emissions at 450 parts per million of CO2 – global temperatures still will rise by an estimated 2C; that is, four times the increase that has occurred in the past 30 years.  That means further consequences already are locked in and we will have to turn our minds increasingly to adapting to them. For the full story from both of these commentators: Read More

 Matthew Wright writing in the Daily Telegraph (17 January 2011):

I’D LIKE to know how much money the coal industry will chip in? The reluctance of our politicians and media to attribute the devastating floods in Queensland to climate change is nothing but cowardice. The science is in. We must accept the verdict that climate change leads to more frequent and severe disasters.

Denying the link between climate change and extreme weather events such as the Queensland floods is akin to the way the tobacco companies denied the link between smoking cigarettes and cancer.

Just as smoking increases the risk of cancer, emitting carbon changes our climate and increases the risk of extreme weather.

The connection between flood and climate change was put well by home-grown climate scientist David Karoly, who said recently that Australia has been known for more than 100 years as a land of droughts and flooding rains, but what climate change means is Australia becomes a land of more droughts and worse flooding rains. Speaking to The Australian, Monash University’s Professor Neville Nicholls said you’d have to be a brave person to say climate change was not having some sort of effect.

Dozens of scientific studies by governments and the insurance industry released over the last decade, including the Queensland Government’s inland flooding study released last November, accept the link.

The floods have affected an area the size of Germany and France combined. And Queensland Premier Anna Bligh says the reconstruction effort facing the state is one of post-war proportions. The damage is currently estimated at a whopping $5 billion and the economic impact of the disaster is expected to wipe one whole point off GDP.

As flood victims come to terms with their losses and get on with rebuilding their lives with savings, government assistance and charity, I’d like to know how much money the Australian coal industry will chip in?

Given that they are a major driver of climate change, they should be the ones forking out money to help affected Australians recover. Will they pay the increased premiums and cover rises in excesses as everyone’s insurance costs rise?

Eventually tobacco companies were compelled to pay damages to the victims of their harmful product. So too should the coal industry. They have contributed massively to the cumulative carbon emissions and must finance rebuilding Queensland.

Queensland is the world’s largest exporter of seaborne coal. As the floods shut down the state’s supply chain, global coal prices shot up by 20 per cent. This rise clearly demonstrates the scale of Australia’s contribution to the coal market and to climate changes.

The industry should also be held accountable for the impacts of mine heavy metals the waterlogged mines have injected into floodwaters.

While there is no legal precedent or legislation that obliges the coal industry to help pay for the damage it is fuelling through climate change, they have a moral obligation to make sizeable donations to the recovery.

Failure to do so will not only demonstrate contempt for Australia’s fragile climate, but contempt for the flood victims.

Source: www.dailytelegraph.com.au

Mike Steketee in The Australian (8 January 2011):

NOW for the good news: Australia has just had its coolest year since 2001, with a mean temperature in 2010 of 22C.

You probably already had guessed something like that was going on and it may have eased your concerns about global warming.  Perhaps it even made you more inclined to the view of geologist and paleontologist Bob Carter that it is “the greatest self-organised scientific and political conspiracy that the world has ever seen”?

If only.  Being duped is preferable to being fried.  Unfortunately, it is hard to find such comfort from the data.  But then perhaps that is because it has been collected by the alleged co-conspirators.

The Bureau of Meteorology said this week the 2010 mean temperature was above the average of the three decades to 1990, which is the standard reference period, though only by 0.19C.

The first decade of the 21st century was also the warmest since standard records began in 1910.  And based on preliminary data to November 30, sea surface temperatures around Australia were the warmest on record last year, as were those for the past decade.

The news for the rest of the world is not so promising, either.  The World Meteorological Organisation, on the basis of data collected from 189 countries and territories (co-conspirators all?), says the year to the end of October was the warmest since instrumental climate records started in 1850 – 0.55C above the 1961-90 average of 14C.

Perhaps the cold northern winter will bring the final figure, which will not be published until March, down a little but the WMO was confident enough last month to say that 2010 would rate in the top three warmest years.

And the decade also was the warmest on record – despite the annual peak in 1998.

That puts a bit of a dent in the argument that the world has been cooling since 1998.

While the records cover only a relatively short period, the trends happen to follow closely the predictions over the past 40 years of temperature rises resulting from increased greenhouse gas emissions.

In 1972, John Sawyer of the British Meteorological Office estimated an increase of about 0.6C by the end of the century.  The actual figure was about 0.5C.

Most scientists agree that doubling the carbon dioxide in the atmosphere is likely to lead to warming of 2C-3C, an amount that risks significant economic and environmental damage.

So far the increase since the mid-18th century of all greenhouse gases has been 38 per cent, including a 27.5 per cent rise from 1990 to 2009.

As well as rising temperatures, the WMO says that Arctic sea ice shrank last year to its third lowest area in the satellite records and was offset only slightly by Antarctic sea ice at just above the long-term average.  Global snow cover is falling and sea levels rising.

Despite that, much of the debate about global warming still is conducted in terms of future and uncertain consequences.

Perhaps we should start looking harder at the present.  Recent extreme weather events include not only the Victorian bushfires and record floods in Queensland.  According to the international insurance group Munich Re, 2010 saw the second-highest number of natural catastrophes since 1980, with 90 per cent of them weather-related.

Australia always has been a land of drought and flooding rains, and weather records are broken as regularly as cricket records. But not in the way they have been recently.

The temperature of 46.4C in Melbourne on Black Saturday was more than 3C above the previous highest for February.

July 29 last year saw the temperature reach 38.2C in Moscow, while for the whole month the mean temperature was more than 2C above the previous record.

Munich Re says the heatwave and associated fires and air pollution in central Russia killed at least 56,000 people, making it the worst natural disaster in Russia’s history.

Pakistan experienced its worst ever floods, costing 1769 lives.  Munich Re says the hurricane season in the North Atlantic was one of the most severe in the last century even though most countries, including the US, had a lucky escape, with the storms mostly over the sea.

So, can we blame climate change?  Probably to some degree, even cautious scientists tend to say.

CSIRO research has identified climate change as contributing to the 20 per cent decline in rainfall in southwest Western Australia over the past 40 years, as well as the reduced rainfall in southeastern Australia.

Neville Nicholls, meteorologist, Monash University professor and one of the lead authors of the 2007 Intergovernmental Panel on Climate Change report, says of the Queensland floods: “The reality is that we don’t know if there is a climate change component in it.”

On his estimate, the current La Nina that usually generates higher rainfall in eastern and northern Australia is the strongest or second strongest we have ever experienced.  While there is no evidence to link La Nina to climate change, one possible connection is that water temperatures in the oceans around Australia have never been so warm and the La Nina has been unusually strong.

“But honestly we don’t know,” says Nicholls.

Nor does he attribute the Victorian bushfires per se to global warming.  “The particular weather situation we had is the kind of weather situation we have had in the past: it was hot, it was dry and it was windy.”

The differences were that the 12 years of drought was twice as long as the previous longest drought in the region, the heatwave at the end of January 2009 was the worst Melbourne had ever experienced and the temperatures on Black Saturday saw a large step up from the previous record.  “What you can say is that there is very strong evidence that global warming exacerbated the fire situation.”

Applying the same reasoning, Nicholls does not argue that climate change is responsible for any other single event.

But he does point to the succession of extraordinary heatwaves, with big jumps in record temperatures, starting in Europe in 2003 and continuing all around the world, culminating in Russia last year.  More than 17 countries broke their maximum temperature records in 2010.  “Putting them together, you really have to strain credibility to say it has nothing to do with climate change,” he says.

“With climate change you expect many more of these really hot events and that is what we are getting.  At the same time there are still records being set for cold temperatures.  But for the last couple of decades we have certainly been getting more hot records being set than cold records.”

Even if the world achieved what so far has proved beyond it – a mechanism to stabilise greenhouse emissions at 450 parts per million of CO2 – global temperatures still will rise by an estimated 2C; that is, four times the increase that has occurred in the past 30 years.  That means further consequences already are locked in and we will have to turn our minds increasingly to adapting to them.

Nicholls says most developed countries, including Australia, already have set up heatwave alert systems.

Other changes will be harder.  Reducing water allocations in the Murray-Darling Basin is still years away at best, and the recent rain will tempt politicians to postpone it further.

Building rail lines that don’t buckle and electricity systems that don’t fail, as they did at the time of the Victorian bushfires, let alone the bigger tasks of managing increasingly vulnerable coastlines and transforming agriculture, will be big challenges but ones that only will get bigger the longer we delay.

Source: www.theaustralian.com.au

Meeting of Minds

The great things about being in Singapore and in this line of work, is the opportunity to meet and work with great people, who have a commitment to all things green, sustainable, ecologically and environmentally friendly. The new year continues in that vein, not only because I’ve been in the company of Dr Martin Blake, Chairman of Carbon Zero Solutions, for the best part of the past fortnight, but largely through meetings with many more great thinkers and doers.

It was a pleasure to attend the launch of the Eco Food Court, initiated by the Singapore Environment Council and meet (again) Isabella Loh and Howard Shaw, as well as  the guest of honour, the Minister of State, with responsibility of Environment and Water Resources, Dr Amy Khor.  Building Energy Efficiency supremo from the UK, David Strong, was also in Singapore, conducting a series of workshops for the National Environment Agency and Sustainable Energy Association of Singapore for Energy Managers.

Then there was the international sustainability guru himself, John Elkington – the main who coined the term “triple bottom line” – speaking at a seminar organised by Thomas Thomas and the Singapore Compact. More on all that in future issues. Without wanting to offend by omission many others we met and enjoyed the company of, I will only touch on one other – George Hatzimihalis, MD of the Hatlar Group, visiting from Melbourne, Australia, who is already doing some amazing work in Asia in water and waste management and energy efficiency. If great minds think alike, we all have a lot more work to do!

Ken Hickson