Monthly Archives: April 2007

The Hard Path to Sustainability

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Murray Hogarth of Ecos Corporation writes a honest op-ed in The Age today about the real challenge of climate change.

With everybody getting unto the green bandwagon it is important for companies to understand where they stand. Is it all trying to catch the latest trend or something more important. Are they really trying to make a transition to a low-carbon economy?

He believes that there is a genuine danger that business and politicians will underestimate the challenge and “that they will be wrong-footed by seeing responses framed by “soft” CSR thinking as adequate when super-hard, far-reaching decisions and actions are needed.”

As I have emphasized before, the concept of CSR is mushy I am not comfortable with the language.CSR is just too good to be true. The language gives it away: “Win-wins” for business and society; “doing well by doing good”, and “capitalism with a heart”.

What is the solution?

Such gushing tag lines can make for a lot more PR sizzle than business-value sausage. How easy is it to just sign on for “Earth Hour”, “Cool Aid”, “Cool the Planet” or other media-orchestrated, climate-related initiatives that suddenly abound now that global warming action, both real and symbolic, is so fashionable?

Climate change for business is about core risk and opportunity, not nicely presented sustainability reports and conference-going. If this is an injustice to some tougher-minded practitioners of CSR, it accurately captures how many pursue it as they sidestep the real issues of rising greenhouse gas levels, changing atmospheric composition, higher average temperatures and extreme weather shifts.

The real test of how green or responsible a business or brand is now is simple. If they don’t have a hard business strategy to cut greenhouse gas pollution fast, they are faking it or at least dodging the main game.

Murray Hogarth puts it well. It is important to stop talking and walking the talk.

Open a Window

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So open a window. Open the windows of your home, of your car, the bus, the train, the place where you work. Reconnect with the outside world again, not just to slow disease. Go beyond the city limits and remember the way man had lived for more than a hundred thousand years. Go beyond the forest and try to find a place where no human traces exist. It may feel “foreign” at first, but then again we must ask why it should feel foreign in the first place.

Sustainability Theory Dharma

Climate change and War

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Reading the news that US Army generals are urging US President George W Bush to cut down greenhouse gases seem too extreme. However, I think their argument may have some merit.

It warns that over the next 30 to 40 years, there will be conflicts over water resources, as well as increased instability resulting from rising sea levels and global warming-related refugees.

“The chaos that results can be an incubator of civil strife, genocide and the growth of terrorism,” the 35-page report predicts.

Writing in the report, Gen Zinni, a former commander of US Central Command, says: “It’s not hard to make the connection between climate change and instability, or climate change and terrorism.”

Their timing of 30 years could be too early, but there could be conflicts if not war over natural resources including Water.

Small Business and Greening

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Valerie Khoo writes the Enterprise Blog at The Age. She seems to have a wonderful grasp of what a small business needs.

In one post she asks whether a small business owner wanted to leave a legacy.

Small business is generally not considered a major problem or part of the solution in the greening area. However, with a little over 90% of companies in Australia categorized as small business they can make a huge difference.

Valerie suggests to go green, carbon neutral, checking on suppliers and outright donations to charities. Another aspect was to become a social enterprise.

Since a small business is generally run by a entrepreneur this could a personal issue and which is where the legacy aspect comes in. This could be a strong reason to go green.

A little greenwasher in all of us

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Joel Makower writes a enlightened post about the “green washing” of organizations.

Greenwashing is “what corporations do when they try to make themselves look more environmentally friendly than they really are,” in the words of the watchdog group Sourcewatch.

Do BP’s, or Wal-mart’s, or GE’s green initiatives render them benevolent leaders or malevolent greenwashers? You can find passionate opinion claiming both.

And while it’s generally good that we maintain high standards for companies’ seeking to claim environmental leadership, I can’t help but ponder the hypocrisy of it all: how much more we expect of companies than of ourselves.

When I speak to audiences about the greening of business — nearly every week these days, or so it seems — I often conduct an informal poll to see how audience members behave in their personal lives: how many drive hybrids or carpool to work, or are simply driving less; how many have installed solar panels or purchase green energy for their homes; how many use organic or low-toxic gardening techniques; how many seek out locally produced goods; how many have taken the basic measures at home — have installed energy-efficient light bulbs and appliances, water-saving devices, insulation and weatherstripping, and the like.

Some audiences are more tentative than others in volunteering answers, but even the most enthusiastic groups tend to have only a handful of members who appear to taking more than a few token actions.

I’m not for a minute suggesting that companies be let off the hook. As I’ve said, they need to be held to high standards, especially those making green claims. But all of this begs a question that I’ve been asking audiences and discussing with hundreds of people over the past couple of years: What must a company do to be considered “green”? What is the minimum level of policies, programs, performance, and progress that a company must exhibit to be seen as green?

As we watch and read these stories and, perhaps, proffer some inner expression of support — “Attaboy! Nail those bastards!” — it may well be worth committing a split second or two to self-reflection: “Am I really doing all that I can to address the environmental problems that concern me most?” “Do I profess one thing and do another?” “Do my friends think I’m greener than I really am?” “Am I holding others to a higher standard than myself?”

And, in the process, perhaps acknowledge that there is, indeed, a little greenwasher in all of us.

Hot Rocks – The Green Nuclear Power

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GeoDynamics Ltd is focused on the development of zero emissions, renewable energy generation from hot fractured rocks (HFR) in Australia.

The Company’s CEO says “The granite is hot because of the natural nuclear activity in there – it’s green nuclear,”

The company plans to pipe high-pressure hot water from the granite bedrock four kilometres beneath the Queensland-South Australia border, where the slow decay of potassium, thorium and uranium generates temperatures as high as 300 degrees.

Dr Williams expects the company to send electricity to the national power grid by 2010 and later directly to western Sydney. By 2015, it could produce as much electricity as the Snowy Mountains hydro scheme.Geodynamics process

“There’s enough energy to run the country for thousands of years,” said Prame Chopra, a scientist who sits on the Geodynamics board. According to a conservative estimate by the Centre for International Economics, Australia has enough geothermal energy to meet electricity consumption for 450 years.

Australia is home to all of the world’s six listed hot fractured rock geothermal energy companies. One, Petratherm, recently signed a memorandum of understanding to supply geothermal electricity to South Australia’s Beverley uranium mine by late 2009.

Torrens Energy, which listed on the stock exchange three weeks ago, is exploring hot sites near Adelaide.

Geodynamic, assisted by $11.8 million in federal grants, said it would produce one megawatt of electricity for about $45 an hour – compared with coal power of about $35.

The Prime Minister’s taskforce on nuclear energy estimated the cost of nuclear energy at $40-$65, “clean coal” at $50-$100 and photovoltaic solar energy as high as $120.

The beauty here is that if the technology is proved then a small carbon price is enough to make this viable. The prospect of atleast 450 years of energy for Australia is exciting.

Recently, Torrens Energy debuted in the ASX at a 75 per cent premium to its offer price of 20 cents a share with promise of No fuel, no emissions, no waste.

A recent MIT study backed “heat mining” as a key energy source for the US.

The study shows that drilling several wells to reach hot rock and connecting them to a fractured rock region that has been stimulated to let water flow through it creates a heat-exchanger that can produce large amounts of hot water or steam to run electric generators at the surface. Unlike conventional fossil-fuel power plants that burn coal, natural gas or oil, no fuel would be required. And unlike wind and solar systems, a geothermal plant works night and day, offering a non-interruptible source of electric power.

… “This environmental advantage is due to low emissions and the small overall footprint of the entire geothermal system, which results because energy capture and extraction is contained entirely underground, and the surface equipment needed for conversion to electricity is relatively compact,” [Jefferson W.] Tester [the H. P. Meissner Professor of Chemical Engineering at MIT] said.

Corn – The Currency of America

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Bill Bonner, the founder and Editor of The Daily Reckoning; gives a fascinating history of corn in America. In the Easter Monday newsletter, he talks about how Corn (go down for the article, THE FRUITED PLAIN) grew into the currency of America and the current boom due to the rise in ethanol from corn in the US.

But now, there’s a new bubble out on the plains…and a new political scam
to go with it. In Martin County, Minnesota, says Fortune Magazine, six new
ethanol plants are either in operation or being built. In the last eight
months, the price of corn has doubled, from $2 a bushel to $4.

Corn is not just a crop in the America; it is a currency. Corn is used to
feed pigs and cattle. Corn syrup is a main ingredient in Coca Cola,
candies, cakes, ice cream, hamburgers and many other products. When the
price of corn changes, every calculation changes with it. The price of
land, for example. An average acre in the mid-west produces 180 bushels.
At $2, that puts the gross yield per acre at only $360. After costs,
farmers had little left over – only about $30, according to Fortune.

But at $4 an acre, farming becomes much more profitable…with net yields
10 times higher than they were two years ago. With that kind of money
rolling over the plains, farmers grow bold. They begin to cast an eye over
the “Property for Sale” section of the newspaper…and stop in at the John
Deer dealership. In fact, Citigroup is expecting a 25% increase for John
Deere shares.

Part of the trouble with this boom is that it depends on ethanol.
Thirty-one new ethanol plants have been built in the United States since
2005. When corn was $2 a bushel, and oil was $70, they could make more
than a dollar per gallon. But at $4 a bushel, their profits have fallen to
3 cents per gallon. And if corn continues to rise, even with their
subsidies, they will be losing money.

For more on fuel and food, check out these articles.

Climate Change Adaptation

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The IPCC report (Download: PDF) on Climate Change impacts talks about the need for adaptation. The problem gets bigger because the poor in the world, even in the well developed countries, will be the worst effected.

Sub-saharan Africa has little capacity to introduce adaptation schemes, water resources are becoming increasingly scarce and dry areas are forecast to get drier. A high percentage of people are already suffering as they are poor or marginalised.

According to World Health Organisation figures, climate change already claims the lives of 150,000 people a year through natural disasters, disease and malnutrition. As temperatures rise we could see an increase in disease, malnutrition and water borne diseases.

Key findings of the report include:

75-250 million people across Africa could face water shortages by 2020

Crop yields could increase by 20% in East and Southeast Asia, but decrease by up to 30% in Central and South Asia

Agriculture fed by rainfall could drop by 50% in some African countries by 2020

20-30% of all plant and animal species at increased risk of extinction if temperatures rise between 1.5-2.5C

Glaciers and snow cover expected to decline, reducing water availability in countries supplied by melt water

This report is based on actual observed data rather than models. Ian Pearson, environment and climate change minister, said: “This report provides further evidence of why all countries need to work urgently to agree a global deal to combat climate change. But reducing emissions is not enough. We must plan for the changes ahead, including changed stability and security conditions.”

Competitive Advantage in a Warming World

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Various reports around the world have been coming out on climate change and its effects on the planet. Businesses around the world are recognising the need to change. For example, in Australia the Business Council of Australia has asked for a regulated carbon trading scheme, something the Howard government is still thinking about.

An example from the Pew Center showed the Carbon Leaders of the future. In this scenario, how do we create competitive advantage, the ultimate goal of any business strategy leader in a carbon-constrained future.

Jonathan Lash and Fred Wellington offer a guide in the Harvard Business Review on the risks and opportunities of a warming world. Their message is simple: It’s not enough to do something; you have to do it better –and more quickly – than your competitors.

The authors suggest that companies generally think of environment risk in terms of “regulatory compliance, potential liability from industrial accidents, and pollutant release mitigation” however, since this is a global and long term issue it is different this time.

They quote Wal-Mart CEO Lee Scott who says that, a corporate focus on reducing greenhouse gases as quickly as possible is a good business strategy: “It will save money for our customers, make us a more efficient business, and help position us to compete effectively in a carbon-constrained world.”

A set of six climate change risks are identified and these can be converted into opportunities.

Regulatory risks: It is inevitable that there will be some kind of emissions trading scheme in the world in the coming years. Companies need to model how this will effect them and create a strategy to gain advantage over less prescient rivals.

Supply Chain risk: All the risks suggested can extend to the supply chain and they could pass on their increased costs to the companies. In a globalized world, the supply chain could be spread across multiple regulatory environments and companies need to be working with their suppliers in managing the risks.

Product and technology risk: This is basically a new opportunity in a carbon-constrained world. From new technologies (carbon sequestration) to products (hybrid cars) to financial services (brokers for carbon markets). Companies which understand this sector will be able to create new growth opportunities better than their competitors.

Litigation risk: Equating the risk to ones faced by tobacco, pharma and asbestos companies, the carbon heavy companies can face significant law suits in the future.

Reputational risk: Genuine Green companies have a stronger brand. Period.

Physical risk: Climate change will pose direct physical risks in terms of the change in physical environment.

The authors provide a four step plan to create a competitive advantage in this area.

  • Step 1: Quantify your carbon footprint. – Use the GHG Protocol or something similar. The idea: You can’t manage what you can’t measure.
  • Step 2: Assess your carbon-related risks and opportunities. – Use the above risks to assess your business.
  • Step 3: Adapt your business in response to the risks and opportunities – Use best practices and create new business models.
  • Step 4: Do it better than your competitors. – This can be achieved by “reducing exposure to climate-related risks and finding business opportunities within those risks.”

    • As Jeffrey Immelt commented, “Our customers have made it clear that providing solutions to environmental challenges like climate change is essential to society’s well-being, and a clear growth opportunity for GE. Companies with the technology and vision to provide products and services that address climate and other pressing issues will enjoy a competitive advantage.”

    Lash and Wellington have provided a good framework to understand this new area. Translating this into a strategic and financial model for a company is a hard act. However, the framework is a good starting point.

    The Carbon Leaders

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    Scott Deatherage, a Environmental Lawyer points to a number of companies identified by the Pew Center on Global Climate Change who have set major greenhouse gas reduction targets and have achieved them.

    In a carbon constrained world of the future, these companies are way forward than anybody else.

    Alcan

    Reduce GHG emissions by 575,000 tons CO2e between 2001 and 2005.
    (To date, emissions have been reduced by more than 2.9 million tons CO2e.)
    Reduce GHG emissions by 35% from 1990 until 2005.

    BP

    Reduce GHG emissions by 10 percent from 1990 levels by 2010.

    Maintain net emissions at or below 2001 levels over the next decade.

    DuPont

    Reduce GHG emissions by 65 percent from 1990 levels by 2010.
    (Actual reduction by 2002 is 67 percent.)

    Hold total energy use flat at 1990 levels through 2010. (Actual use in 2002 was 9 percent below 1990 levels while production has increased by almost 30 percent.)

    Rio Tinto

    Reduce on-site GHG emissions per unit of production by 4.8 percent from
    1990 levels by 2001.

    Toyota

    Reduce energy consumption per unit of production by 15 percent from 2000
    levels by 2005.2

    The companies identified above are some of the leaders who have set targets and have achieved them. For example: Dupont decreased its energy use while increasing its production.

    The Pew Center suggests that “Many companies are not waiting for government mandates. They are taking steps to reduce their emissions right now by implementing targets and other innovative programs in areas such as energy, carbon sequestration, and waste management.”

    They list many strategies that the corporations are taking to decrease their carbon footprint.

    Like Innovation in areas of technology, the internet, products and even processes; the corporations at the forefront of the new rules of the game will have a better chance of success in the future.