Tuesday saw the fourth meeting of our Corporate Sustainability Mastermind (CoSM) Group. This time we went for a rural location - the Crown Hotel, Wetheral, Cumbria - with another great restaurant (one of the rules of the group is "no executive buffets").
The theme of the meeting was greening the supply chain. As the group operates under the Chatham House rule, I can't share the company specific solutions we discussed, but here's a sample of the three dozen or so generic lessons we recorded at the meeting:
Sustainability risks in the supply chain often exceed risks within the factory fence
Proactive anticipation is essential – reacting is usually too late
Need to continuously scan horizon for future legislation from around the world - legislation has impacts way beyond its immediate jurisdiction in a globalised world
The business model defines the supply chain – only incremental improvements can be made without rethinking that business model
Awareness days are highly effective ways of sharing good practice across silos and identifying synergies
Identify the ‘difference makers’ and make them your champions
Use competition to drive performance above standards eg allocate 15% of tender scoring to sustainability and let bidders compete for those points
Investment appraisals must be made on through life costs, not just capital costs
Joint research with suppliers on greener options can deliver synergistic benefits
There is plenty of scope for closed loops for certain materials, particularly metals
Small products can be very difficult to recover. Composting and energy recovery may be preferential routes
Widen tolerances on inputs to open up a wider range of raw material sources
Chicken and egg situation with closed loop business models and civic infrastructure (materials recovery/composting) – need to be proactive and lead
As always, the real benefit was how we got to these generic points and the examples of company specific challenges and shortcuts members threw in to the discussion.
The CoSM Group is for senior sustainability managers in large organisations which meets quarterly in great locations for open and frank discussion - and NO Powerpoint. The next meeting will be in September and will be themed around Sustainability Strategy: The Next Generation. If you'd like to learn more, please drop me a line.
"Hurrah!", shouted the green world, as the neonicotinoid pesticides blamed by everybody (except their producers and their political allies) for the worrying decline in bee numbers.
Bans work. Some major environmental problems have been pretty much fixed by banning the substances involved:
The Montreal Protocol banned the use of CFC refrigerants, leading to a stabilisation and slight closure in the hole in the ozone level.
The ban in leaded petrol has been credited for great improvements in local air quality - and even for the steady reduction in violent crime which has occurred since the ban.
Restrictions on DDT use have been attributed to the rebound in Bald Eagle numbers in the US (although eggs shells remain thin). A ban in lead shot fishing weights led to a massive increase in swan numbers in the UK.
What is inevitable, however, is that those threatened by a ban (and those who are against any environmental protection as a 'cost' to business) will resist, producing their own research to prove that, in the memorable title of a book on the subject, "toxic waste is good for you." This happened in response to the call to phase out DDT in Rachel Carson's Silent Spring and it is happening in the neonicotinoid ban now.
This economic barrier is bunk as bans lead to innovation which is good for the economy. We still have fridges despite the CFC ban. Non-toxic 'sharkskin' anti-fouling paint was developed in response to a ban on toxic TBTs. So we shouldn't listen to the voices of 'no change'.
You don't have to wait until international authorities act, of course. Many organisations run black and grey lists of undesirable chemicals and other materials. Black listed substances must never be used, and whoever proposes a grey list chemical must make the case why it should be used over alternatives. This pre-empts legislation and makes sure the company is ahead of the curve. Some companies have added green lists of preferred chemicals too.
InterfaceFLOR deleted quite a number of carpet tile lines because of the flame retardants required by the other raw materials. The company sees ruling out toxic materials as a drive to innovate and maintain competitive advantage, so they're quite gung-ho about it.
So, over to you. What would you ban, if you could?
I've recently noticed a real gulf in the way top sustainability practitioners talk about environmental legislation and the way everybody else does.
When you read the press or listen to many business executives, these laws are said to be stifling growth, raising prices and putting people out of business (ignoring the fact that most of the energy price rise has been due to stubbornly high oil prices). Legislation = bad.
But when we touch on legislation in, say, my Corporate Sustainability Mastermind Group, there is a completely different tone to the conversation. These guys believe that legislation is their ally - driving innovation, getting the attention of senior management and punishing those who don't invest in sustainability. Legislation = good.
As always it comes down to mindset. Do you want to surf the waves or let them knock you over in the shallows?
Yesterday I hosted another of our Corporate Sustainability Mastermind Group at another fantastic venue, this time the Biscuit Factory art gallery in Newcastle, said to be the largest commercial gallery outside London. Membership of the Group is open to senior managers and directors of large organisations who want to take sustainability to the next level.
The theme of the meeting was Global Megatrends in Sustainability and we used my sustainability PESTLE analysis as a brainstorming tool (note the lack of Powerpoint in the picture above). Group members identified key opportunities and risks they perceive and used that to discuss ways forward.
Here's just a flavour of the take away points generated during the discussion:
Risk of unavailability of raw materials rising to be equal to or even above risks from, say, climate change to business;
This in turn is opening opportunities for circular business models;
Philanthropy can come in the form of advice as well as cash - and is often more effective in this form;
Gamification is an interesting new development, but need to be cognisant of company culture or it could backfire;
'Base of the pyramid' markets ripe for Creating Shared Value (CSV) type investment;
'Soundbite environmentalism' is a real risk to practical sustainability solutions - if people object, remind them of the alternative - the status quo - which they are effectively defending;
Legislation can be a boon - grabs attention of board members and drives innovation;
'Lean' and other business process improvement programmes are a prime opportunity to embed sustainability into core processes;
Greening supply chain can be difficult eg when there is a narrow choice in suppliers and in the case of land use changes;
Flood and drought risks are not being taken seriously enough by business or authorities.
After almost 3 hours of intense discussion, we had a great lunch in the David Kennedy Food Social restaurant - and continued talking sustainability over the food.
There's another big call out for a plastic bag tax in England and Wales. I'm not against such a tax per se, but it is far from the top of my list of priorities. OK, single use plastic bags cause litter, but nearly as much as, say, crisp packets (if you have ever been on a litter pick you will know what I mean), and can harm marine life (ditto), but they're said to represent 0.1% of the average person's carbon footprint, so if we wanted to make a 50% cut in humanity's carbon footprint, we'd need to find 500 such measures to do so.
"So what?", you may ask, "this is an easy win, a symbolic gesture, something we can do." Yes, but, have we not had enough symbolic gestures, enough pilot projects, enough green grandstanding when we really need to be delivering improvements at scale? This is no time to be lowering our sights down to something even the Daily Mail can support - we've got to raise them, challenge ourselves and make a real difference.
The same thing can happen at the organisational level - people pursuing "safe" incremental improvements at the expense of more ambition. The third "secret" in my first book, The Three Secrets of Green Business, was "take some huge leaps and lots of small steps." If you focus just on the latter, you'll soon come up against diminishing returns - you need the huge leaps to propel you you towards sustainability. My second book, The Green Executive, called for organisations to set themselves stretch targets, to escape "the tyranny of the present", change the mindset and make those ambitious changes.
So yes, let's have a plastic bag tax, but don't see it as a significant achievement and don't waste much time and effort on it - and for goodness sake don't rest on your laurels - but understand it would be a tiny incremental improvement and we need to be looking for those huge leaps.
There's an old(ish) tech saying "Never buy version 1.0 of anything." The thinking is that the first version of anything hasn't been 'battle hardened' by use and is usually in need of immediate upgrade to make it work as expected.
I'm reminded of this when I hear discussions about changes to new environmental laws - the Carbon Reduction Commitment, the Feed-in Tariff, the Green Deal etc. Most of these descend rapidly into rants about the stupidity of politicians who just don't understand what it's like etc, etc.
As long as I've been in this line of work I've heard similar complaints. I remember a company who a decade ago invested in a waste electronic/electrical equipment (WEEE) recycling facility to get first mover advantage when the WEEE Directive came in. The Government of the day decided the industry as a whole "wasn't ready" and delayed implementation for a year. Frustrating for the company - who had done what the Government wanted - but a year or so before, new legislation on the disposal of ozone depleting substances had led to an embarrassing 'fridge mountain' as there was no capacity to process them, so the risk of delay was there.
One of the most interesting points made at last week's sustainability mastermind group was (I paraphrase) "markets change, legislation changes, that's the way of the world, get over it." I found this a really refreshing point of view - after all we are (largely) talking about for-profit businesses and the first rule of a business is that no-one owes you a living. We are used to working in uncertain markets, so we should be able to handle uncertain policy frameworks.
This isn't to play down the frustration of those affected by Government prevarication, but railing against the world won't help your business. Much better to prepare up front - identify the risk(s), assess potential scenarios and impacts and make the necessary arrangements to manage that risk. Trying to build a whole business model on the back of a forthcoming piece of legislation without considering potential changes, delays and even last minute cancelation is simply naive.
Unintended consequences, unforeseen loopholes, unexpected events, media campaigns, skittish politicians, changes in Governments - there is a whole raft of reasons why laws change, good and bad. But they change - get used to it.
On Wednesday this week I launched my sustainability mastermind group with an inaugural meeting at the Baltic Art Gallery. We booked a third floor meeting room with stupendous views along the Tyne (see above) and worked through to lunch which we took in the sixth floor restaurant - this was delicious and accompanied by even better views!
The concept behind the mastermind group is to bring together a small group of sustainability practitioners from some of the country's largest organisations to explore sustainability in depth and share experiences and insights. We were operating under Chatham House rules so I'm not going to reveal who exactly was at the event, but here are a few of the key 'take homes' which arose from our discussions:
Need to reframe the argument from "environment or profit" to "environment and profit".
There is a need to focus on intent rather than process. The intention of, say, implementing ISO14001 is to improve environmental performance, not simply to achieve and maintain certification.
Likewise with targets, you need to focus on the purpose of the target, not simply meeting it.
If your business and sustainability targets are intertwined, why bother trying to separate them?
The political policy framework will always be uncertain, so you need to accept that fact and work with it. After all, we accept and manage the inherent uncertainty in markets.
If you have stretch target and you think you are never going to meet it, don't dilute it, redouble your efforts - that's where innovation can kick in.
On the other hand if you are meeting a target easily you should raise the bar, not sit on your laurels.
It is important to nurture personal passion for sustainability and not frustrate it.
Middle management is where green projects go to die. The answer is to work with HR to embed sustainability into job descriptions, personal targets, appraisals and personal development.
When delivering workshops, I normally adhere strictly to my timetable, but this time I took a "while the discussion is generating more nuggets of value, I'm not going to curtail it" approach. There were so many of those nuggets, we only got through half of the exercises I had planned out. For once I saw this as a sign of success.
I'm really looking forward to the next one!
If you are interested in the mastermind group and you are a senior practitioner within a large and/or asset-intensive business, then please drop me a line for more details. Places are limited.
I still hear people trot out the old line that the sole responsibility of a business is to act in the best interests of its shareholders - by which they usually mean maximising short term profits at the expense of all else. Here in the UK, at least, this isn't exactly true. In the 2006 Companies Act, directors' duties are defined as:
S172 Duty to promote the success of the company
(1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members [ie shareholders] as a whole, and in doing so have regard (amongst other matters) to—
(a) the likely consequences of any decision in the long term,
(b) the interests of the company’s employees,
(c) the need to foster the company’s business relationships with suppliers, customers and others,
(d) the impact of the company’s operations on the community and the environment,
(e) the desirability of the company maintaining a reputation for high standards of business conduct, and
(f) the need to act fairly as between members of the company.
[Emphases are mine]
In other words company directors are obliged by law to consider long term issues, employees' welfare, communities, the environment and the company's own reputation when making decisions.
Most of us in the green business world are very gung ho about "going beyond compliance", but I've started adding a caveat to that - "but don't forget about compliance". In my business case for sustainability model, compliance is the base of the pyramid - lose sight of that and everything else collapses - just ask BP.
You should note that "beyond compliance" and "compliance" often converge over time as the latter does not stand still. More and more gets added to the statute book every year and much which is there tightens automatically. Here in the UK, environmental permits for 'dirty' industries require the use of "Best Available Technology (BAT)" to prevent pollution - so the bar rises as technologies improve. For other large organisations, the CRC Energy Efficiency scheme is designed to tighten the screw on carbon emissions as the years go on. So incremental improvements may simply keep the wolf from the door for a year or two - another good reason to focus on step changes.
Another interesting recent development is business calling for increased legislation to punish environmental laggards - such as airlines calling for air travel to come under the EU's Emissions Trading Scheme. Far better to set the agenda than react to it.
I was at the North East Recycling Forum (NERF) yesterday - catching up with contacts and the latest in the waste industry. One of the interesting points coming out was that the new Waste (England & Wales) Regulations 2011 - to give them their full title - now enshrine the waste hierarchy. Whether this is a tick box exercise or not, what I always find interesting is that nobody ever subjects the waste hierarchy to the Toddler Test and asks "why?".
Let's get one thing straight. The waste hierarchy is simply a rule of thumb. It has no basis in science or economics whatsoever.
Some people look at me as if I have blasphemed when I say that.
Take nature. Nature is very inefficient - a birch tree releases 15-17 million seeds every year, but at best only a few saplings will result. What happens to all the millions of 'wasted' seeds? They are recycled as nutrients back into the system. The waste hierarchy says we should prioritise minimising waste over recycling, yet clearly nature does the opposite - preferring recycling over minimisation. And nature is sustainable, we're not.
I'm not just being a smart alec here - there are practical scenarios where religious adherence to the hierarchy will end up in a suboptimal result. Say you produce 11 tonnes of a particular waste a week and you can get any amount over 10 tonnes collected and put to good use by a recycling company, it makes no economic or environmental sense to invest in a new technology which only produces 9 tonnes if that 9 tonnes ends up being landfilled at a higher cost because no-one can afford to collect and recycle it. I have seen a similar situation happen in reality.
As with all rules of thumb, the waste hierarchy should always be used in conjunction with a dose of common sense. In fact the new legislation does have a caveat which allows companies to ignore the hierarchy if they can demonstrate good environmental reasons to do so. Very wise.
There's a big problem here - the aluminium produced by the smelter (and associated carbon emissions) will still be produced somewhere in the world, just not here. The global climate doesn't care where the emissions come from, so there is a strong possibility that the Government's commitment will simply push more industry and emissions overseas. If you don't believe me, figures from Oxford University show that, despite the official Government line for many years, the UK has not been cutting its carbon emissions, but has simply leaked them to other countries while our overall carbon footprint has continued to grow.
If I was a right-wing commentator I would now start harrumphing about the idiocy of carbon emission restrictions, how they're destroying our Great British Industry and how we should drop the whole bally lot. But that's a stupid argument - first of all it ends with The Tragedy of the Commons (ie we all lose through selfishness) and, secondly, in a globalised economy it is our Western consumption levels that drive global emissions and we can't duck responsibility for that.
What we need to do instead is develop a smarter way of dealing with each country's emissions - considering emissions from our consumption as well as our production. A few years ago I explained this to both the then UK climate minister, David Miliband, and the current one, Chris Huhne. Both listened politely, did some mulling on it and acknowledged my point, but I suspect both filed it in the 'too difficult' tray.
Business is way ahead of Government here. About five years ago many, if not most, major companies only considered emissions from within their factory fence (plus those from power stations producing their electricity). Most have now faced up to the fact that their carbon footprint does include that of the suppliers - it was crazy when say Tesco, whose purchasing power is driven by £1 in every 8 we Brits spend, didn't acknowledge responsibility for supply chain emissions. Now Tesco and the other big retail sheds, along with major consumer goods manufacturers like P&G and Unilever, are actively decarbonising their supply chain wherever that supply chain may be - national boundaries are no restriction. Some are looking the other way along the supply chain too and 'choice editing' for the consumer, such as when B&Q stopped selling patio heaters. I suspect the massive buying power of such powerful companies could have more impact than any Government targets.
Great news in the Guardian this morning that the EU is to end the incredibly wasteful practice of fish discards. This is the situation where fishermen could catch however many fish they want, but can only land a certain number, so the rest are thrown back - usually dead. This is worse than landing them where at least they would be put to good use - and would offset other food production.
The story illustrates a number of important points:
The power of perverse incentives - fisherman are currently encouraged to be wasteful;
The risk of unintended consequences - the landing quota was introduced to try and protect fish stocks but has arguably made the situation worse;
The stultifying effect of institutional inertia - everybody has known discarding fish is a problem, yet it has taken decades to actually do anything.
These are three potential pitfalls that all of us in the sustainability world come up against some time or other, whether in communities, organisations or in international policy. Watch out for them!
I've long written, lectured and broadcast about the true cost of waste. Most businesses simply measure the cost of disposal, but to have something to throw away, you first need to have bought it, processed it and segregated it from non-waste - all of which costs. If it is waste product then you also need to factor in the cost of disruption to the production system to fulfill orders and the opportunity cost of not being able to sell it (or the cost of producing a replacement).
There are similar hidden costs to non-compliance with environmental legislation. The full cost can consist of many or all of:
1. Fines - for some companies these can go into 8 figures;
2. Remediation costs - then BP polluted groundwater in Leagrave, the remediation cost 40 times more than the fine;
3. PR/Brand damage - Union Carbide never recovered from the Bhopal disaster and DOW who bought the flailing company out still attracts flack from activists.
4. Disruption to business - Sony had a shipment of Playstations impounded by the Dutch authorities for having too high a level of cadmium. The resulting disruption has been estimated to be between $90-160m.
So, while I'm always urging clients to go way beyond compliance (which reduces the risk of non-compliance by removing hazards at source), I still emphasise - you'd better make sure you stay compliant too.
If you are a UK-based large organisation and you haven't checked whether you will come under the Carbon Reduction Commitment (CRC) yet, then you'd better get moving. In this presentation, Jane Dennett-Thorpe of The Department of Energy and Climate Change (DECC) explains some of the latest developments as the consultation on the CRC comes to an end (source: edie).
The scheme is due to begin in 2010, and will apply to around 5,000 large, non-energy intensive organisations that have half-hourly electricity meters and use more than 6,000 kWhr of electricity per year. Roughly speaking if you have a bill over £500k you'll be hit.
If so you will have to buy allowances from the government to cover all of their emissions - not just electricity. They are expected to cost around £12/tCO2. For the first 3 years there will be no restriction on the number of allowances, then a new Committee on Climate Change will set caps for 5 year phases. Organisations will then have to trade between themselves.
All the more reason to start cutting those carbon emissions back now. You may be able to profit from your tardy peers.
This week I've dealt with my second large company, another major household name, who hasn't fully understood their responsibilities under the Waste Electrical & Electronic Equipment (WEEE) Directive. The Directive has been developed to ensure that those who produce or sell electronic and electrical equipment make a financial contribution to its recycling.
This year's NetRegs survey of UK Small and Medium Enterprises has shown a sudden jump in awareness of environmental issues and legislation - but the overall result is still poor. Only one in four small business owners can name one piece of environmental legislation that applies to them - despite the fact that all businesses have a duty of care for their waste and all are expected to recycle their Waste Electrical and Electronic Equipment (WEEE). The only good news is that this is up from one in seven last year.
Something I have come across this year is unscrupulous companies trying use this lack of awareness to scare people into accepting their services. One lady, who ran a jewellers' shop, had been told by a waste company that the Landfill Directive now meant that all waste had to be pre-treated before it is landfilled - the implication being only this company could provide a legal landfill service. Pre-treatment is indeed required, but the Environment Agency expects the waste management industry to deal with this requirement - not small businesses and retailers.
So there is a double imperative to understand environmental legislation - to make sure your business is neither hauled up in court by the Environment Agency nor ripped off by the sharks.
It is a busy time on the legislation front with the Registration, Evaluation and Authorisation of Chemicals (REACH) directive coming into force on 1st June and the Waste Electrical and Electronic Equipment (WEEE) directive's latter stages coming into force in the UK on 1st July.
I've been pretty impressed with the businesses I have visited over the last few months - most of them have understood the implications of both and have action plans in motion. I did however speak to one major highstreet retail chain who had an unrelated query about some electrical devices. The end of the conversation went:
Me: "You do realise they come under the WEEE directive." Client: "Ah, but, we're not selling them." Me: "Doesn't matter, you still need to dispose of them via an approved facility." Client: (long silence) "Oh."
I'm not surprised he hadn't grasped this as most of the focus on the legislation has been on domestic WEEE and it is more difficult to find information on industrial WEEE. The moral of the story is to make sure you do understand exactly what the implications are for your business. Trade bodies are a good source of information and your regulator can help (certainly in England & Wales, the Environment Agency tries to be a coach as well as a policeman).
UK businesses can also contact Envirowise on any environmental issue relating to your business - the phone number is 0800 585794. The NetRegs website is also good, but seems to have become a little harder to navigate in the last couple of years.