World is Green

The Martu people are Australian Indigenour people living in the western desert. The Age reports that they have formed a deal with Reward Minerals, which will reward them with 7 million options at a strike price of 50c, valid for 4 years, amounting to 10% of the shareholding of the company.

This deal is being suggested a landmark deal in terms of securing appropriate compensation and ownership to the traditional owners of the land, the Martu people. The share price traded up to tis highest ever and at the current share price, the deal is is worth a little above $ 5 million.

The indigenous community believes that “the presence of a generous indigenous equity component as part of the transaction is the way of the future in mining negotiations,”.

This could well work out in a positive way, depending on the development of the mine. It may also act as a blueprint for deals in India where tribal people are being evacuated for industrial and mining projects with payments in cash now. With many issues around compensation arrangement including the sensible use of cash for the financial inexperienced tribals, a cash+stock compensation option may be a good deal.

Some 300 construction companies have been awarded the Chartered Environmentalist (CENv) qualification from Chartered Institute of Building (CIOB).

Michael Brown CIOB deputy chief executive said,

“Construction is an environmental industry and its importance to such issues like sustainability, energy efficiency and climate change cannot be underestimated. We know that the buildings we live and work in are the largest source of carbon emissions and our members and other professionals can be part of the solution to that problem.
“When we talk about the environment and those topics that challenge us like climate change we should also remember that these are international issues and not just local ones. So it is with some pride that we have CIOB members in the UK and abroad who are qualified Chartered Environmentalists.

“We see the role of the Chartered Environmentalist as an important part in the promotion of those values and beliefs that the construction industry needs to positively embrace.”

 Things are improving but need to go further:

The annual Pilot BeGreen Office Audit, to be released today, says 70% of Australian businesses use continuous air-conditioning while 10% leave office lights on at night.

More than a third of office workers said they left their computers on at night and 86% said they unnecessarily printed documents instead of reading them on screen.

A very practical suggestion from Developer Lend Lease.

Lend Lease’s global head of sustainability, Maria Atkinson, who is at the Bali conference, said building emissions totalled 40 per cent of global greenhouse gas emissions.

Yet the built environment had more potential for quick, deep and cost-effective greenhouse gas mitigation than any other industry, she said.
[...]
Ms Atkinson said an emissions trading system would address the “split incentives” nature of the industry — where the developer, owner and tenant of a building were often three different entities
[...]
“But by being able to trade and effectively make a financial return on their investments in emissions reduction initiatives, developers and portfolio owners will have an incentive to deliver deep greenhouse gas emission cuts of 60 per cent or more.”

Ms Atkinson said the report showed high value carbon credits of $34 per ton (ton) of carbon dioxide equivalent could realistically achieve a carbon zero position in buildings at nil cost.

The Australian Financial Review (AFR) carried yesterday an article by Scott Gallacher about Food Miles. It is a very balanced look at an idea which is gaining high recognition by consumers around the world; but especially in the UK and Europe.

(Unfortunately, I cannot link to the AFR article as the paper has decided to restrict its online content, even to its paper subscribers. For a paper subscirber like me; I need to pay additional monthly fees to access a online software version which cannot be linked. Think about the decision. Which publication in the world creates a online non-linkable, non Googlable edition in the year 2007. Considering the monopoly of the business paper in Australia it may last for a while but slowly its ability to influence matters will come down especially with similar coverage by its sister publications and increased online coverage by The Australian and other News limited papers.)

Coming back to Scott’s article.

Food Miles is the idea of calculating the distance travelled by a particular food item (fruit, veggies, meat, dairy products, wine) from farm/production to table. The contention is that; the greater the distance the higher the transport emissions and hence, less sustainable.

This perception of carbon content of food is very important for companies engaged in the export of food
products.

The Guardian article in 2003 suggets this:

our food is transported further than ever before, often by air. That makes it a major contributor to greenhouse emissions and climate change. It also means a heavy dependence on a resource that is not only finite but also highly politically-charged: oil. So our food supply is more vulnerable than before. By blockading a few depots during the fuel strike in the autum of 2000, protesters were able to bring the system perilously close to collapse.

Similar ideas in The Independent in May 2007.

When I pick up a carton of organic Chilean blueberries, Argentinian blackberries, or Zambian sugarsnap peas, all air-freighted from their countries of origin, my carefully constructed rationale for buying organic is shot full of holes. Only the most stubborn climate-change deniers still challenge the notion that air-freight, with all its CO2 emissions, is contributing to global warming and helping to heat up the planet towards the point of no return. Air freight emits more greenhouse gases per food mile than any other mode of transport. This is what I am aiding and abetting when I pick up any air-freighted product - whether or not it carries an organic stamp.

However, what is the truth? or should I say the ’whole truth’. Clearly transportation is not the only aspect of food production and distribution. Water, fertilizers, energy, production efficiencies and much more go into any food production.

Scott suggets two studies which have a different opinion.

The first study is by Defra, the UK Department for Environment, Food and Rural Affairs, titled “The Validity of Food Miles as an Indicator of Sustainable Development” conducted in 2005.

The study suggets that “a single indicator based on total food kilometers is an inadequate indicator of sustainability“. It provides data on the economic, social and environmental impact of food transport including pollution, congestion and noise. The interesting thing it finds is that most of the impact of transport is for food within UK (cars to supermarkets, trucks to distribute around the country etc) compared to international transport. In the international area, if transported by sea or rail it is much better than Air.

Coming to the life cycle of food Defra’s study suggets that “a case study showed that it can be more sustainable (at least in energy efficiency terms) to import tomatoes from Spain than to produce them in heated greenhouses in the UK outside the summer months. Another case study showed that it can be more sustainable to import organic food into the UK than to grow non-organic food in the UK.” Again this can change from case to case depending on the type of international transport used.

A second study by the New Zealand based Lincoln University (PDF) in 2006 shows that the carbon footprint of lamb, dairy products and apples are far less than that of their european equivalents even after the long journey from New Zealand to Europe. A simple reason is that NZ products are produced more efficiently than European ones.

They have undertaken a detailed anaylsis of a various inputs and outputs in farm in NZ and compared this to the ones in Europe and then arrived at this conclusion.

This entire exercise is important because from a business point of view if customers start buying their products based on “food miles” then; a large number of exports from countries like NZ and Australia and other places could be effected.

Considering that between the 2003 Guardian aricle and the 2007 Independent article, the above two studies have been published the explanation of Food Miles has not changed.  This is dangerous territory. Like the push against nuclear power; this suggets that there could be a strong idealogical notion around food miles.

A simpler explanation to all this is to look at the price of a product. If a product is cheaper; in general;
it means that it would consume lesser resources. The price of a product would encapsulate the energy, transportation, inputs, labour costs and other resources used in creating and distributing the product.

A much better explanation of this comes from the economic concept of Comparitive Advantage; which was first suggested by David Ricardo.

Lauren Lansberg explains:

Someone who is the best at doing something is said to have an absolute advantage. Lance Armstrong has an absolute advantage at cycling. For all I know, Lance Armstrong may also be the fastest typist in the world, giving him an absolute advantage at typing, too. Since he’s better at typing than you, can’t he type more cheaply than you? That is, if someone has an absolute advantage in something, doesn’t he automatically have a comparative advantage in it?

The answer is no! If Lance takes time out from cycling to do all his own typing, he sacrifices the large income he earns from entertaining fans of the Tour de France. If, instead, his secretary does the typing, the secretary gives up an alternative secretarial job—or perhaps a much lower salary as a cyclist. That is, the secretary is the lower-cost typist. The secretary, not Lance Armstrong, has the comparative advantage at typing! The trick to understanding comparative advantage is in the phrase “lower cost.” What it costs someone to produce something is the opportunity cost—the value of what is given up. Someone may have an absolute advantage at producing every single thing, but he has a comparative advantage at many fewer things, and probably only one or two things. (In Lance’s case, both cycling and also as the entrepreneur behind the yellow LiveStrong wristband.)

[...]

The moral is this: To find people’s comparative advantages, do not compare their absolute advantages. Compare their opportunity costs.

The point is simple. If NZ has a comparitive advantage in producing lamb meat; then it provides UK the opportunity to spealize and create another product at a lower cost. The result from a carbon point of view is that it will decrease the carbon footprint of both the products.

This case underscores the point that it is important to question the agreed upon wisdom of the experts and be open minded in our thinking.

Businesses make decisions based on costs and revenues. This fundamental fact is important to understand in the work towards a better environment.

A Grant Thornton International Business Report (IBR) explains that “raw material and energy costs increasing pressure on global business and businesses to lose competitiveness if no action is taken to combat environmental issues”.

The The International Business Report covered the opinions of 7,200 privately held businesses in 32 countries, representing 81% of global GDP.

The report concludes that raw material and energy costs are major cost pressures for many companies around the world.

Energy costs appear to be affecting Europe more than the rest of the world with five of the region’s top ten countries citing energy as having a major impact on cost pressures: Germany (58%), Ireland (47%) and France, Luxembourg and Italy (all 44%). Globally, companies in the Philippines (68%) are due to be most impacted by energy cost pressures, followed by Botswana (65%). Companies in Australia (18%) are least likely to be impacted by the cost of energy.

However, this is not true for all the countries. For example, Australian companies are least impacted by the cost of energy. Due to this they energy conservation and efficiency is not a major issue say compared to something like the Philippines where a large number of companies have energy cost pressure.

The Border Mail reports that Australian businesses are not “green enough” and that “Companies in the Philippines led the world with 410 points, followed by Brazil with 360 and mainland China with 341.”

But why is this so?

A briefing paper from the Australian Uranium Association suggests that “Australia is heavily dependent on coal for electricity, more so than any other developed country except Denmark and Greece. About 80% is derived from coal [and] Australia’s electricity is low-cost by world standards.”

The Manila Times reports that “THE Philippines has one of the highest electricity rates in Southeast Asia, having posted a national average of P6.80 per kilowatt hour (kWh) at the end of last year…Data from the Department of Energy show that the Philippines has the highest electricity rates in the 10-member Association of Southeast Asian Nations after Cambodia. Throughout Asia it has the highest electricity rates after Cambodia and Japan.”

Using data from the NSW Dept. for State and Regional Development I created this graph using Swivel.

As the above relative graph clearly shows, Australia’s energy costs are less than half of Japan. Philippines has a higher cost than other countries in the list.

The same can be said about raw material costs.

In comparison, raw material costs are due to have a greater impact on global businesses with companies from every continent appearing at the top of the table. Businesses in Spain (61%) are due to be most impacted by the cost of raw materials, followed by Botswana and Singapore (both 60%), and Thailand and France (both 56%). Raw material costs are due to affect businesses least in the Netherlands (29%), followed by the US, UK and Sweden (all at 31%).

In the book, Natural Capitalism, the authors provide “radical resource productivity” as one of the four strategies of natural capitalism. They believe that “nearly all environmental and social harm is an artifact of the uneconomically wasteful use of human and natural resources, but radical resource productivity strategies can nearly halt the degradation of the biosphere, make it profitable to employ people, and thus safe-guard against the loss of living systems and social cohesion”.

Alex MacBeath global leader of privately held business services for Grant Thornton International, provides their findings:

“There is a simple clear message from our findings. Unless environmental factors such as energy and raw material costs become issues that significantly affect a company’s profitability there is no incentive for it to take action, and reduce its impact on the environment. There must be motivation to take action on raw material and energy costs or companies will continue to focus on other cost pressures such as salaries and wages.

“There is also a role for national Governments to look at the long-term competitiveness of their economies and factor energy and raw material costs into that equation. Unless they take action to actively encourage businesses to invest for the future and reduce their impact on the environment, they will ultimately damage their economies.”

Unless governments provide avenues to incorporate the external costs of power generation into the cost of electricity through mechanisms like carbon trading or carbon tax, the cost of electricity will not be enough to make the change possible.

Even though radical resource productivity could be a great strategy to implement, unless the right price signal is provided it may not be implemented.

Absolute costs are not everything. Relative costs matter too. If energy costs are lower than say property and human resource costs, then businesses would tackle the higher costs first before moving towards the lower ones.

However, this report from Grant Thornton is further evidence of the fact that even though environmental issues are important to address, business will not work towards it unless it effects their bottom line. The price of raw materials and energy need to incorporate their full cost to create innovation and change.

Noam Ross writes about the honey bee pollination service and the importance of ecosystem services to a business.

If your business’s only supplier of a key service folded all of a sudden, what would you do?

That is what a lot of agricultural companies are asking themselves right now. As reported in the New York Times last week, honeybee colonies in 24 states have collapsed. Colony populations have crashed by 30-70 percent, causing bee prices to skyrocket at and sending a $14 billion agricultural sector scrambling for insects to pollinate their crops. Yet there are not many options out there. The U.S. agriculture has grown increasingly dependent on trucked-in bees as natural pollinator populations have declined from habitat fragmentation and pesticides since the mid-20th century.

If a business had such a clear warning about its supply chain, one would think it would work to diversify or at least do what they could to shore up their suppliers to ensure their continued viability. Yet as we’re learning from the bee crisis, few companies examine the risks related to ecosystem services, like pollination, that they rely on. These risks may be large — according to the Millennium Assessment, two-thirds of ecosystems worldwide are being degraded or used unsustainably, and degradation will likely accelerate over the next 50 years.

Hanson is leading the development of a “Corporate Ecosystem Services Review”, a methodology to assess business risk and new opportunities arising from the damaged state of ecosystems. The review will be designed to help companies figure out what ecosystem services they depend on and impact most, and then devise strategies to deal with the risks and opportunities represented.

Chinese Premeir Wen Jiabao pledged for environmental and equitable growth in the future for the Chinese Economy.

As the Australian reports:

Launching the annual session of the National People’s Congress, Mr Wen said future economic growth would hinge on “environmentally friendly industries”.

Projects would be assessed for “energy consumption and environmental impact”. Those that failed to meet such standards would be stopped. Mr Wen said China would close “backward” iron foundries with a production capacity of less than 30 million tonnes and “backward” steel mills that could produce 35million tonnes.

Mr Wen said “key energy-saving projects” would be introduced in industries including steel, other metals, coal, chemicals, building materials and construction.

Mr Wen also signalled the Government would control the scale of urban development and instead direct resources towards water conservation projects, energy production bases and trunk rail lines and highways.

The Guardian tackles the emphasis on Education and the rural poor:

`We must put people first, promote faster progress in social programs, work energetically to solve the most practical problems that are of greatest concern to the people … and ensure that all of the people share in the fruits of reform and development,” Wen said in a speech to China’s legislature, the National People’s Congress.

Tuition and other fees for all rural students will be eliminated, easing financial burdens on 150 million rural households, the premier said. The education program and an expansion of a subsidized rural health insurance system would complete in two years projects originally scheduled to be fazed in over five years.

“Education is the bedrock of China’s development, and fairness in education is an important form of social fairness,” Wen said in a 2 hour and 15 minute speech at the cavernous Great Hall of the People in central Beijing

In the countryside, where most Chinese live, spending on agriculture, schools, medical clinics and other programs will rise 15 percent to $51 billion, Wen announced.

With growing concern over China’s role in climate change and the increasing un-sustainable nature of its growth, the Chinese Premier’s speech comes at the right moment.

It remains to be seen what specific programs and policies will be announced and how it will be implemented.

Textiles could be one of the most un-sustainable products in the world. In their entire lifecycle from growing the raw material or creating it from oil to manufacturing and selling and final disposal they can create a serious problem.

The Worsted Witch provides an excellent overview of “Textiles and Sustainability“.

She says:

Not all textiles are created equal. Some fabrics, such as polyester and nylon, which are petroleum-derived, are downright unsustainable. And although rayon is composed of wood pulp, its production is a polluting bad boy. Even ubiquitous cotton isn’t untouchable…

And continues by quoting from the an/Feb 2006 issue of Natural Home & Garden had this to say:

The textile industry creates a host of pollution problems. Factories discharge dyes and chemicals into waterways, and they release heat, fly ash, formaldehyde, and sulfurous and nitrous compounds into the air, thereby contributing to acid rain. Textile packaging, drums, and toxic chemicals are dumped into landfills. Even the used fabrics themselves are a problem. Many can’t be recycled because of their mixed-fiber content.

In this context, The Mint talks about the recent textile trade fair in Paris, Texworld, (Free Reg.) where organic cottons and fair-trade were the new trends helping companies to cash in.

As consumers wake up to global warming and globalization, ethical issues are gaining ground and spinning more and more hard cash in the competitive world of international textiles.

And textile ground-breaker Tencel, one of the world’s leading companies highlighting health and environmental concerns, said business was growing. “Demand for organic cotton is gaining momentum,” said Ram Srinivasan, general manager, marketing, KG Denim Ltd.

Socota uses clean cotton grown in Cameroon, which is then spun in Madagascar, woven in Madagascar and Mauritius, and turned into garments in Madagascar.

But as buyers worldwide look increasingly to eco-friendly fabrics, the ground-breakers in the field are having to look beyond purely environmental concerns to market their goods. Austrian firm Lenzing, which produces the new-age Tencel fibre made of wood pulp that revolutionized textiles in the 1990s, claimed that the fibre was perfect for people with sensitive skin.

As The Worsted Witch reminds us, “When a textile is labeled “organic,” it generally refers to the fiber itself, as opposed to the textile production process.”

There are benefits at different life-cycle stages of the organic and eco-friendly fabrics trade, both for consumers and producers however, in the larger scale of things it is important to see that organic cotton may travel half way around the world to reach the ethical customer.

Resources:

• A tutorial from the Charles Sturt University in Australia.