Monthly Archives: July 2007

The Most Environmentally Friendly Court

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The Supreme Court of India is considered by many to be the most environmentally friendly court in the world. We do not know how this assertion has come about but it points to other things.

Before we go ahead lets check out what the Court has accomplished.

The Indian Supreme Court has been most effective in protecting the environment. It is considered as one of the most environmentally friendly courts in the world. The Supreme Court of India has delivered landmark judgements. It has protected the Taj Mahal, which is one of the wonders of the world, has protected the Ganges, which is one of the holiest of holy rivers, from pollution. The Court also directed that every day on television and radio networks in the country at least seven minutes programme on environment should exclusively given and one prime programme should be given at prime time each week on environment.

The Daily Pioneer editorial discusses the request of the Indian government to the Supreme court to stop interfering in environmental matters.

The Union Government has made an outrageous demand to the Supreme Court that it should wind up its ‘green’ bench and stop ‘interfering’ in environmental matters…What the Supreme Court has wisely done is to expand the fundamental right to life to include the right to live in a healthy environment through its enforcement of the various environmental laws. In contrast, the record of the executive in relation to the ecosystem is far from satisfactory. One does not have to look too far, for the facts about India’s vanishing tigers are in the open, and shrinking forest cover, widespread pollution and a host of other issues that plague India are the result of executive bungling and corruption.

The Supreme Court has done some important work in the environmental area however, this points to a bigger problem of law making, execution and managing environmental issues in the country.

However, this suggests (PDF) the following:

The judiciary, a spectator to environmental exploitation for more than two decades has recently assumed a pro-active role of public educator, policy maker, super-administrator, and more generally, amicus environment. We can say environmental law in India as the story of India’s judiciary responding to the complaints of its citizens against environmental degradation and administrative sloth.

I am no expert on law making and definitely not environmental law but this constant tinkering is not the solution.

Emission reductions and Development

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Economic development is generally considered the most important aspect of the development a country. However, as Amartya Sen; the Nobel laureate has explored many years ago in his book ‘Development as Freedom’; the relationship is not that straight forward and it is important to understand the role of freedom and development.

Freedom is both constitutive of development and instrumental to it: instrumental freedoms include political freedom, economic facilities, social opportunities, transparency, and security, which are all different but inter-connected.

Once we understand this then it is clear that concentrating on economic development is not the only goal for development. Development can be better termed as well-being.

We need to remember here that it is easy to understand this in the context of a developed country. However, for a developing country the sequence of freedoms are important too.

One explanation on this is from Atanu Dey:

I don’t know why but some people just draw good cards from the random draw that is life. Singaporeans are lucky. I am sure there are those who will immediately retort that the Singaporeans don’t have the freedoms that are normally associated with a liberal democracy. And I am also sure that the person making that statement is sitting comfortably well-fed in his nice office or home accessing the world wide web for knowledge and entertainment. For the average schmuck in a third world country, he would any day trade in his imaginary freedoms for a decent shot at a full stomach, a roof over his head, and a chance to get his children educated. After the average schmuck has achieved those basic necessities, he would ask for all sorts of goodies that a liberal democracy provides. And that is when the society should become a liberal democracy.

The sequence is important.

In this context, lets look at Geoff Wells’ post about the study by the New Economics Foundation on the relationship between national well being and carbon emissions.

It’s often been assumed that a heavy carbon footprint is highly correlated with levels of national development. Moreover, it’s assumed that economic development is an essential part of building national well-being. The logical conclusions of such propositions is that national well-being must decline if carbon emissions are to be cut…

nef begins by rating countries in the EU on a well-being index, which combines life satisfaction and life expectancy measures…nef then rates these countries by carbon footprint, the amount of resources used by each European nation to support its lifestyles.

[...]

Combining the two indices gives a picture of how well countries are doing in delivering well-being to their citizens with low impact on carbon emissions. Scandinavian countries stand out, as having some of the lowest per capita carbon footprints while delivering high levels of economic, social and personal well-being. Iceland rates highest in Europe, along with Sweden and Norway. The UK sits at 21st (out of 30), just behind France and Germany, with only transition countries such as Portugal, Greece and Luxembourg doing worse. Latvia, despite being a transition country, come a respectable eleventh.

[...]

nef concludes: “Individuals, communities, governments and societies at large can afford to greatly reduce their levels of consumption without it needing to undermine the well-being of the citizens of Europe.”

Once we combine the view point of Sen and this study; it becomes clear that carbon emission reduction is not that worrisome as originally stated.

The majority of the emissions are from the developed countries and it is these countries that need to cut down their emissions. The consequences of carbon reduction has always narrowly concentrated on economic development. Even then the various modelling studies suggests that the effect of carbon reduction will not have a large effect on economic growth in the long run. Considering Sen’s point of instrumental freedoms; developed countries have the option of improving the well-being of their citizens even with a slight reduction in economic development and at the same time reducing their carbon emissions.

I have yet to see this viewpoint of well-being and ‘freedom as development’ discussed in the climate change debate. Carbon reduction has a greater chance of acceptance in this scenario.

Andrew Winston and Toyota

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Andrew Winston; the co-author of Green to Gold; blogs about a disturbing story about Toyota’s hybrids.

This past weekend, The New York Times published a scathing, but fair, article about the new Lexus hybrid (cover of the Automobiles section, titled “Conspicuous Consumption with Green Illusions“- ouch).

However, what caught my attention was this statement by Andrew.

From a strategic perspective, none of this makes much sense to me. A big part of Toyota’s rise to world’s #1 was what it did right on green issues – mainly the Prius. I hope this won’t happen, but Toyota may find out that brand good will can be destroyed much faster than it’s built.

Andrew’s assertion that a big part of Toyota’s rise is due to the Prius is in my view a great simplification of what Toyota as a company does. Andrew does suggest other aspects of Toyota’s success “The combination of the most successful eco-product every (Prius), the leanest manufacturing, and top-notch marketing make the company extremely hard to beat.” However, the focus on Prius is what I think is wrong.

Toyota’s lean manufacturing, quality controls, marketing skills, good leadership and financial management are all known. The stock market believes that Toyota is worth around $200B while its competitors like Honda (67B); GM (20B); Nissan (44B); Ford (16B) together are worth less.

Remember that Toyota surpassed GM in worldwide sales just recently. Sales are only one part of the equation. Because in terms valuation; Toyota was worth a lot more than GM a long time back.

Now lets look at the sales of Toyota and its sales of Hybrid vehicles. While Toyota sold 4.716 million cars around the world in the first half of 2007; in the same time it sold about 1.33 million cars in the US.

Of this; Toyota’s hybrid cars (Prius, Camry Hybrid, Highlander Hybrid) have sold a total of 135,075 through to May 2007. Based on these numbers we can forecast sales of around 170,000 Hybrids for the first half of 2007 for Toyota in the US. Hybrids make up 8% of Toyota’s US sales (first half of 2007) and this share has been increasing over the years.

However, in no sense we can ascertain the gains Toyota has made in sales, profits, quality, and other parameters to its green focus.

Do not get me wrong here. I think that Hybrid engines have a great future. In the coming years and decades hybrid engines will be standard like air-cons, high quality, safety standards etc have become part of modern cars. If Toyota leads this in comparison to it’s competitors in this area then; in the coming decades the Hybrid component can help propel Toyota’s future leadership.

At this time the green lens for Toyota is the birth of a fast selling new product line.

To clarify; I have seen some people make this point about Toyota’s green focus but when Andrew made the point I thought it was important to present a more balanced view on this.

Green lens are important for business but not the overwhelming answer to all business issues.

Green China and Young China

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Pan Yue at China Dialogue writes a two part series on the need and possibilities of sustainable development in China.

From Part 1:

What do we mean by the phrase “green China”? We mean a China that is sustainable, democratic, fair, harmonious and socialist. This conclusion has been reached after many years of struggle. Each word is the distillation of the blood, sweat and tears of several generations. We want to build a green China because green is the colour of life, of sustainability. For something to be called “green” it has to be sustainable – and currently China has yet to achieve sustainability.

The model of economic development that we are currently pursuing is unsustainable. Our energy consumption per unit of GDP is seven times that of Japan, six times that of America, and even 2.8 times that of India. China’s labour productivity is less than 10% of the world total, and yet our emissions are over 10 times higher than the global average.

[...]

Development is a good thing in itself. But it must be integrated development across all areas, not just economic development. Only all-round, coordinated development is a good in itself. We have always taken “development” to mean economic development alone, and this to mean the simple accumulation of wealth. As a result, the pursuit of wealth has become the sole aim of society. In theory, the value of all resources is determined by the market price, but the latent value of scarce resources such as land, water, the environment, and biodiversity has been ignored. Many social resources have been absorbed by projects designed to help people “get rich quick”.

[...]

There are four different ways of approaching the issue of environmental protection: it can be seen as a specialised and isolated field in itself, as an economic issue, as a political and sociological issue, or – at the highest level – as a cultural and ethical issue. In China, we have always looked at the environment as an isolated subject, whereas abroad it is already being treated as a political and sociological issue. In the last few years, the conflict between the environment and the economy has become unprecedentedly intense – the environment has begun to place limits on economic growth, and economic growth has destroyed much of the environment; this has led to our conservation work being rapidly elevated to the economic level.

From Part 2:

Why is environmental protection considered a cultural issue? One of the core principles of traditional Chinese culture is that of harmony between man and nature. Different philosophies all emphasise the political wisdom of a balanced environment. Whether it is the Confucian idea of man and nature becoming one, the Daoist view of the Dao reflecting nature, or the Buddhist belief that all living things are equal, Chinese philosophy has helped our culture to survive for thousands of years. It can be a powerful weapon in preventing an environmental crisis and building a harmonious society.

[...]

A Chinese saying goes: “a sparrow may be small, but it has all five organs.” Similarly, the field of environmental protection is a microcosm of the issues facing China today. Attempts to solve these problems would be useful experiments for transforming China in a wider sense. For example, coming up with an answer to the problem of green production would also help to solve the problem of core competitiveness. Solving the problem of environmental compensation would provide experience for the solution of societal injustices. Establishing a system for democratic environmental decision-making would open paths for reform of the whole system of government. Solving problems of environmental culture could provide a vibrant new ideological system suited to the rise of a green China. It is for these reasons that I say that environmental protection is not a specialised, isolated issue, but an issue that concerns economy, society, politics and culture. It is, in short, a “global complex”. Only by placing the issue in an elevated position can we gain a wide enough visual field to truly understand the importance of environmental protection in today’s China. Only in this way can we understand the need to build a green China and how to go about its construction. One must learn how to participate in public life through a wide variety of channels.

13 Socially Responsible Careers in Finance

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In Green jobs with Growth potential; I wrote that; “Makower has some good advice. It is important to gain a skill and then have a green tinge to it and not get pigeonholed into a environmental division… In that sense, environmental divisions will become redundant. The environmental lens will become part of the other lenses used by executives.”

Now ‘The forex blog has more on how to green (environmental and social aspects) your financial career:

If you’re interested in a financial career, you might be curious about how your interests can lead to reconciliation between your job and your belief system…Social finance means that financial instruments are used to promote social goals. Financial instruments used to accomplish these goals include credit, savings, investments, and loans, among other devices.

[...]

Social finance careers have expanded to the point where you can attend a school in London that focuses solely on social entrepreneurship. Whether your interests lie in a nonprofit or for profit participation in this specialized industry, you might wonder where your opportunities lie. Some social finance positions might include:

Community Investor: The community investor works with other individuals to gather, oversee, and direct capital to community investment opportunities in local or regional areas or abroad.

Micro-Financier:This individual seeks to provide impoverished individuals or communities with the means to invest or borrow money for business or community development.

Nonprofit Sector: The nonprofit sector is also the most diverse when it comes to opportunities. While some individuals are content to volunteer for nonprofit efforts, you can also seek a career as an executive or work as a freelance grant writer or project coordinator.

Social Entrepreneur: Unlike venture capitalists, social entrepreneurs provide innovative solutions to difficult social problems usually without seeking personal profit.

[...]

If you want to incorporate a social angle to your career objective, you will also need to expand your skills and experience through education and work. You can expect to gain the following:

Interdisciplinary Skills:You can also focus on technological, environmental, or leadership facets to social financial careers. Your interdisciplinary needs will depend upon whether you want to focus more on social or financial aspects within this field.

Leadership Opportunities: Social financing is a means to create innovative ways to improve social environments, and this field needs creative leaders who can take the initiative in many situations.

Flexibility: Careers in social financing currently may be definitive or broad and fairly undefined. You many find a way to travel the globe, or you may seek a situation where you’re alone and surrounded by books and archival materials.

Global Knowledge: Even if you end up in a back office surrounded by social financing accounting books, you will learn much about how people live in other communities around the world

Government and carbon trading

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Today the Howard government in Australia is set to come out with its cap-and-trade system. In this context it is important to remember the “government risk” in a system like this.

Charles Morand from Alternative Energy Stocks has more on this:

…as the market for carbon emissions grows, the need for standardization and collaboration between governments and regulators will become ever more pressing. This could create problems.

The carbon market is unique in that the commodity traded derives its
value primarily from its ability to meet the requirements set by an
environmental regulator…

As the hype around emissions trading and global carbon markets engulfs you, be sure to always keep in the back of your mind the fact that one of the largest risks this market faces is governments and their regulatory agencies. Like any market, it won’t take much of a faux pas for investor confidence to be severely shook and for millions or even billions of dollars in market value to be wiped out overnight. This would be bad for the market and the environment.

Sunil Paul on Clean Tech

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GigaOm; the technology blog started by Om Malik of Business 2.0 has started morphing into a media network of its own sometime back starting with the move to group blogging and then various tech related blogs and even a jobs section.

Now they are moving into the Green sector; “Apparently like everyone else…”.

The Earth2Tech blog will concentrate on the growing Clean tech industry.

So we envisioned our site this way: One part clean tech startup coverage – (a quick look at clean tech venture numbers shows the growing ranks of startups in hot areas like solar and biofuels); One part reviews of tech giant’s eco-initiatives (is Google’s carbon neutral initiative more marketing or responsible plan?); One part a resource page for entrepreneurs and Valley types looking for green tech [tools, rules, tips] – LBS meets ethanol?

One of the first posts is an interview with VC Sunil Paul who compares the Clean Tech industry with the IT/Internet industry.

One thing that has remained the same is that there are huge amounts of capital required for this business, which is very different from the Internet world. Two opposite extremes.

Another thing to realize is that compared to all the IT sectors, cleantech is a very slow moving industry. For example, batteries, which are fundamentally driven by product cycles at the customer level. Customers expect a product with a 25-year lifetime, or a 10-year lifetime – you’re not going to suddenly have a 6-month product life cycle. That is an important lesson.

Another important lesson is that engagement with government is fundamental. For IT or biotech, you didn’t have to think too much about government. But in the energy world that is just not the case. Regulations are changing all the time.

The clean-tech world has been built by environmentalists going to bat for technologists. The environmentalists have carried our water for us. At some point we will have to step up and be more engaged because this is an important battle.

I blogged sometime back on the Energy investments of Vinod Khosla. Clean tech is growing everywhere and this could be one of the exciting new frontiers for the business world.

Environmental challenge for a wood products company

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To increase my understanding of the environmental management issues and to gain a professional accredition I have joined the “Integrated Environmental Management” course from the University of Bath by Distance learning. This core module when completed will provide a Associate Member accredition to the Institute of Environmental Management & Assessment (UK) and can lead to the Chartered Environmentalist (CEnv) qualification in the future after many years of experience.

The initial section of the study workbook explains the Environmental Challenge for a business. A small exercise in this section is about the environmental challenge faced by a Wood products company. The simple response that I have written is an example of “sustainability and business strategy”.

The Exercise:

You have recently been appointed environmental manager of a wood products company. One of the first requests made of you is to make a presentation to the board of directors explaining the environmental challenge confronting the company. In preparation for your presentation, draft an outline of the general issues that you wish to cover. (emphasis in original)

My response:

Environmental challenge for a wood products company.

A definition of a wood products company is one provided by North American Industry Classification System (NAICS) of “wood products manufacturing”.

This subsector comprises establishments primarily engaged in manufacturing products from wood.

There are three industry groups in this subsector, comprising establishments engaged in

• sawing logs into lumber and similar products, or preserving these products;
• making products that improve the natural characteristics of wood, by making veneers, plywood, reconstituted wood panel products or engineered wood assemblies;
• and making a diverse range of wood products, such as millwork.

And the exclusions:

Establishments primarily engaged in the following activities are excluded:

• logging; and chipping logs in the field (NAICS 113, Forestry and Logging);
• manufacturing wood pulp, paper and paper products (NAICS 322, Paper Manufacturing);
• manufacturing wood kitchen cabinets and counters, and bathroom vanities (NAICS 337, Furniture and Related Product Manufacturing); and
• manufacturing wood signs and coffins (NAICS 339, Miscellaneous Manufacturing).

[Source: http://strategis.ic.gc.ca/canadian_industry_statistics/cis.nsf/IDE/cis321defe.html]

The Environmental challenge for the organization is:

The current scenario:

1. Even though wood is a renewable resource; due to the non-sustainable use of forest land (grazing, agriculture, timber production, logging and natural causes) there is a trend towards a decreasing source of resources for the company.

2. Greater consumer and NGO involvement in the sector in connection with climate change issues.

3. Consumer activism is driving people away from natural products.

4. Investor concern in managing stakeholders and natural resources risk.

The challenge:

1. To continue to maintain a supply of sustainable resources; further defining, branding and communicating what it means to be sustainable

2. To create production processes which will increase the productivity of the use of these resources

3. To change design and product development to create long lasting and alternate products (e.g sustainable bamboo, recycled wood chips, wood waste from manufacturing)

4. To create a new marketing system where these changes are communicated, a new customer segment is targeted which understands and pays for the value of the sustainable products.

5. To create a new business model for the company which can combine the above requirements to create a viable, profitable business which is attractive to investors.

The benefits:

1. A more environmentally friendly company (more efficient, less waste production, higher productivity & lower costs)

2. A lower risk from stakeholders

3. An avenue for talent management (Gen X & Y, attraction and retention of current talent)

4. Creation of new products and markets

5. Targets the new and growing LOHAS customer segment

6. A new business model which is more attractive to investors (lower risk, new markets, higher profits)

Systems Thinking and Environmental issues

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In a previous post, I pointed out to the news report where the Royal Bank of Scotland was held responsible for the carbon emissions “of oil and gas projects which it finances” and the banks’ Chairman, Sir Tom McKillop suggesting that this would mean “banks would be responsible pretty much for the carbon emissions of the world”; assuming that everything is financed by banks in some sense.

I suggested that this was a non-sensical view to take by the report authors PLATFORM.

Rob Mattson, a long time Canadian reader of this blog comments that:

To take a lesson from ecology, everything is connected to everything else. As for cars …yes, the banks are to blame. So is the auto manufacturer, the guy who designed the ICE, the advertiseres who make us (some of us) believe we need SUV’s and the guys who drives them. Of course the government gets tax on it all. This mess is going to be a great finger pointing!!

I further added some ideas from Dr. Edward Deming:

Some quotes from Dr. Edward Deming…What is a system?

“A system is a network of interdependent components that work together to try to accomplish the aim of the system. A system must have an aim. Without an aim, there is no system. The aim of the system must be clear to everyone in the system. The aim must include plans for the future. The aim is a value judgment.”

And the 85/15 rule:

Use statistical techniques to identify the two sources of waste — system (85%) and local faults (15%); strive to constantly reduce this waste.

When you consider these two statements, in the bigger picture it is the system which needs to be changed and not any one single entity is directly responsible.

If business need to understand that the economic system is part of the environment; then environmental activists need to understand that a “corporation” is part of the larger economic system.

In the IEM workbook from the University of Bath there is a good example of this in the context of transportation; especially cars.

  • At the business level you need product and manufacturing eco-efficiency.
  • At the local level you need facilities for inter-modal linkage with local, regional and national transport infrastructure (i.e. trains, buses, local car usage.)
  • At the national and international level, you need developments in transport infrastructure and actions to motivate usage of alternative modes of transport.
  • At the societal level, you need people and communities to alter their habits and expectations.