It is one of the most repeated clichés in business:
The man who never made a mistake never made anything.
Sustainability requires innovation, innovation implies risk, risk inevitably means a degree of failure, right?
Yes. But...
The problem with sustainability, unlike, say, social networking or wireless payments, is the huge number of people waiting gleefully for those failures. Otherwise how would the plethora of idiot-reactionary newspaper columnists, bloggers and on-line comment trolls sustain their life's "work"?
I get particularly worried when sustainability projects with a large degree of public funding start getting hyped up. This conflates the two obsessions of those one-eyed smart-alecs and knuckle-draggers - the environmental movement and public expenditure. If the project goes down, it's like Christmas and their birthday rolled into one. And unfortunately the resulting sneer-fest permeates out into the general public.
I know of at least three publicly backed projects which have been heavily sold by charismatic figures, appearing weekly in the local press, whose progress has suddenly gone uncharacteristically quiet. And it worries me that if they fail the fallout will make those with hands on the levers of power fear more bad publicity and stick to the same old same old.
So, while we must try new things, must allow ourselves room to fail and learn from our mistakes, some prudent modesty is in order until the approach/technology/whatever is proven in practice. Then we'll show 'em...
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.
Yesterday I was delivering workshops at the Get It Sussed event in Gateshead. While for some the highlight was hanging around in the foyer with a rather sullen looking Little Mix showing no X Factor whatsoever during a fire alarm (their dark lord, Simon Cowell, was said to have been spotted as well), I was rather more starstruck by the keynote speech from Craig Sams, founder of Whole Earth Foods and Green & Black.
Sams tells a great story - from his parents growing up in the dust bowl in the 30s (flour companies started producing prettily decorated sacks as a form of marketing as it was standard practice for desperately poor farmers to upcycle them into clothes for their children) through the hippy entrepreneur days at Whole Earth to his more recent work on Green & Blacks and biochar. I took the following points away:
We are (or should be) all pioneers in this game. This takes resilience, guile and, above all, unrelenting optimism;
The product is paramount - Whole Earth peanut butter is very popular because it has a great taste, Green & Blacks because it is very rich chocolate AND they are both very sustainable;
Branding should be bold - they chose the name Green & Blacks because it was strong, easy to remember and had the hint of environment (green) and dark chocolate (black). Names with "eco" or the like in them were considered but quickly ditched;
Storytelling is a very powerful form of communication - and Sams is a master;
If you are not failing, you are not trying hard enough - he told us how at one point he had bailiffs evaluating how much his bakery was worth, but he managed to pay his tax bill just in time.
It was great stuff and very inspiring - I've heard him tell most of this story before but it was still worth sitting through again.
Living in Britain is supposedly synonymous with owning an umbrella. And a cagoule. And wellies. But something strange is happening - or not happening - rain. It has been very dry - and it is thought we might be heading for the worst drought in 30 years. We can pontificate on the reasons - the old 'can or cannot it be attributed to climate change' dingdong - but it is more fruitful to consider the potential impacts.
According to the Telegraph's Geoffrey Lean, we might be about to move from the second level of measures (possible hosepipe bans) into the third level which could include bans on washing vehicles and swimming pools closed. If it goes beyond that, level 4, we could be into strict rationing - and business will get hit first.
Water is a regional resource. Here in the North East we have a huge reservoir at Kielder which was built for an expansion of the Teesside chemical industry that never happened. So we're probably OK at Terra Infirma Towers, but if you are based in the South East, it is a quite different matter.
Do you know how would this impact on your business? Do you use water in production or operations? Do you have alternative sources? And how should a responsible business respond? Clamouring for a bigger share of a dwindling resource isn't going to look good.
Broadly there are two approaches: use less and use better water.
1. Less water:
Draw up a water balance to understand your water use and identify leaks and other uncontrolled losses;
Track down and fix any leaks - use ultrasonic detectors to find any underground;
Cascade water from uses where it has to be very clean down to uses where contamination can be tolerated;
Find internal recycling opportunities - eg use last wash water for first rinse or treat and reuse waste water on site;
Maintain land in a water friendly way to minimise the need for irrigation;
Invest in low water technology from hose nozzles through waterless urinals to advanced process plant;
Educate your staff on the important of good water management - you wouldn't believe the number of hoses left running for no good reason that I have seen on industrial sites.
2. 'Better' water
Capture and store rainwater to even out peaks and troughs in precipitation;
If you haven't already thought about the impact of water shortages, you'd better get moving. "Do a rain dance" is not a substantial risk management plan.
I had a very interesting day at the North East Recycling Forum annual conference yesterday. I don't attend a lot of events I'm not speaking at these days, but I wanted to catch up with the network members. To my delight the emerging theme from the speakers was one of my current hot topics - a possible 'resource crunch'. The killer question is are we focussing too much on outputs (waste, pollution, carbon emissions) at the exclusion of inputs (raw material, energy, water etc)?
The idea of a 'resource war' was mentioned more than once, meaning either commercial battles between companies for ever decreasing pools of virgin material, or indeed actual shooting-at-each-other battles between nations trying to protect their economic interests. Global extraction of resources are projected to hit double 1980 rates by 2020. Mineral ores are the fastest riser - predicted to rise by 200% over this period compared to an 81% increase in oil consumption. As a result, many resources are starting to become hard to get hold of: oil, rare earth metals, platinum group metals etc.
This issue is starting to go from jaw-jaw to war-war on the ground (at least in the commercial sense) - a number of manufacturing giants are starting to invest in the recycling industry to ensure a flow of materials into the future. Renault have bought into metal reprocessors. David Palmer-Jones, CEO of waste company SITA, told us that they themselves were investing in plastic-to-diesel plants to hedge against the risk of rising oil prices to their own operations.
There's a big challenge for the recycling industry here - to shift mindset from waste diversion to raw material production There's a threat too as, if they don't make the shift, they could get left behind those who do either from within the industry or manufacturers setting up their own functions (eg InterfaceFLOR's carpet recycling). I asked the question how far along this path the waste industry had gone - the CEO of the Chartered Institute of Waste Managers, Steve Lee, said he believes they are "in the early stages of a quiet revolution."
Lastly there's the much bigger risk to the manufacturers themselves. Many modern technologies, from high performance steels to the ubiquitous iPhone, rely on elements whose whose traditional sources are dwindling. There are three choices: find a substitute material, start sourcing recovered material, or stick your head in the sand and hope for a miracle. I don't recommend the last one.
So why bother? There's a recession on, times are tight, people are cautious. Why not sit it out and deal with all this green stuff when things get better? Or never?
Well, if your competitors decide to go green they will:
Spend less on compliance;
Cut the risk of prosecution with attendant legal costs, potential fines and PR fall out;
Cut their energy, waste, water and raw material costs;
Recruit better staff and retain them for longer;
Source more sustainable supplies of raw material;
Win more contracts;
Retain more existing customers.
They'd be mad not to wouldn't they?
And if you think I'm just being flippant, I recently came across a case where a medium-size company lost 60% of their business overnight when their biggest customer decided they weren't taking green issues seriously enough.
I can't think of a worse situation than the one Japan finds itself in. They have suffered a terrible natural catastrophe, killing thousands and wiping out local infrastructure. Then, with the country already reeling, a nuclear meltdown is ticking away - a race against time to avert another disaster.
I've never been a big fan of nuclear energy. While for some it is an issue of political identity or moral certainties, for me it is the practicalities - cost, the long term sustainability of a finite and rare fuel, the safe storage of waste for millenia, the risk of theft of radioactive material by malignant tendencies, and, most of all, the risk that it all goes horribly wrong. We can do all the risk assessments we like, but every so often a series of circumstances coincides and we witness a major accident, whether we're talking about Chernobyl, Hurricane Katrina or the Gulf of Mexico oil spill.
The whole point of being 'benign by design' is to remove potential hazards at the drawing board. If you don't have hazardous material in the system in the first place, then little or nothing can go wrong. This applies at the organisational level as well as international incidents. If you don't have hazardous material on site, then it doesn't matter how unlucky you are, the impacts of any incident are much diminished.
In the meantime, like everyone, my thoughts are with the people of Japan, hoping that the brave engineers can quickly shut down the at-risk nuclear reactors, leaving the country free to concentrate on rescuing the dispossessed, rebuilding what it has lost and taking time to mourn those who perished.
Yesterday I was writing a piece on major problems in the oil industry for The Sustainability Forum (it should go up today or tomorrowit's here). I was listing the various problems - the price hitting $108 a barrel, oil companies fleeing Libya, the IEA saying the price of oil was hitting global recovery etc, etc. This on top of the wikileaks revelation that Saudi oil reserves had been overstated by 40%, the BP oil spill, continuing debate about the onset of peak oil and suggestions that coal may stay so cheap for long.
What is pertinent for this blog is how should individual companies respond?
The first questions to ask concern your exposure. Are you dependent on logistics, business travel or commodities from overseas? Do you use oil based raw materials? Are you an energy intensive business? If oil prices stay above $100 a barrel, how does that affect the your long term viability? What about $150?
Once you have an idea of the risk, you can look for solutions: eg avoiding travel through teleworking, sourcing local or bio-based raw materials, alternatively fuelled vehicles, more efficient vehicles, smarter distribution and route planning, backloading of freight vehicles, eco-driving lessons for drivers, swapping to sea and/or train and electronic distribution (eg MP3s).
Don't stick your head in the sand here - even if a huge new source of cheap oil is found, most of the measures above will still cut your cost base, making you more competitive. You really can't lose.
I find it quite incredible that the Hungarian 'toxic sludge' disaster has only had a tiny fraction of the press coverage as, say, the BP oil spill in the Gulf of Mexico. A similar number of people have died, there remains an ongoing threat at the site itself, and one of the great rivers of the world, The Danube, is at great risk. The BBC has an incredible series of pictures here and here which brought home to me the scale of the disaster.
But the front pages of the paper have been largely sludge-free and I haven't noticed '#toxicsludge' trending on Twitter the way that the '#oilspill' hashtag took off. There was even a TEDxOilspill event, but no TEDxSludge. Why?
Is it because a big multinational was involved in the oil spill and not the sludge disaster? Do we mistrust big oil more than other primary industries? Or do we in the English speaking world simply care more about the US than Hungary?
In my opinion, the only legitimate factor that distinguishes between the two is that the oil spill was a warning of the challenges of pursuing a high carbon future, whereas the toxic sludge is a relic of Soviet-style indifference to the environment.
The two are representative of two very different but serious risks to business. The deep drilling in the Gulf is a canary in the mine telling us that business as usual is not an option. Sticking to a high carbon strategy will become increasingly expensive and risky. The toxic sludge is a reminder that industry needs to take a look at the legacy of its past, the obvious suspects including contaminated land, old oil storage tanks and waste dumps. But, as we move towards a low carbon economy, other 'assets' - inefficient buildings, plant and vehicles that are the norm now - could become liabilities.
A green business will have cleaned up any legacy, eliminated the storage of hazardous material and reduced its dependency on dwindling oil resources. It makes sense for the business and the environment.
I'm a engineer by training, and I was taught that:
risk = probability of something going wrong x resulting impact of that event
There's a big problem with this equation - it is out of sync with the public perception of risk. Our gut instinct is to fear one big accident much more than lots of little ones. So an air crash leading to the deaths of 100 people will get much more press coverage than 1000 car accidents killing one person in each accident.
There is a tendency to consider such risk perception as completely irrational, but in practice it provides an essential buffer to a number of metarisks (risks in measuring risks):
1. Mistakes - either mistakes in calculations, estimations and measurements, or not considering all the factors that apply. Such mistakes usually have much more serious consequences when working with high impact risks than in the case of lots of low impact risks.
2. Deliberate distortion of results - history is littered with cases of risks being deliberately played down in order to allow a project to proceed.
3. We tend to underestimate risks we are familiar with, or overestimate risks that we are unfamiliar with. Therefore people "in the know" tend to subconsciously play down risks.
So the public perception of fearing big impact risks balances the tendency of risk managers to make mistakes, be blasé or even, in the worst instances, distort results. The Gulf of Mexico oil spill was judged to have a negligible risk of the catastrophe occurring and a negligible impact - the latter prediction was certainly incorrect and the former is very likely to have been incorrect. Yet if you asked a member of the public whether drilling for oil in mile deep water is "risky", most would say "sounds like it to me".
Maybe we should trust our gut instincts a little more and our calculations a little less. But at the very least we should understand why the public perception of risks is as it is and use it as a spur to make sure that a 'rational' approach to risk management is not the result of wishful thinking.
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.
Very interesting speech this week by John B Hess of oil exploration company Hess Corporation at the somewhat unsubtly titled "Oil and Money" conference in London. He caught the attention of the audience by declaring "The price of $140 per barrel oil was not an aberration; it was a warning." He went on to say that demand was outstripping supply and while production had either peaked or plateau'd ouside OPEC, it was still unlikely that we would hit a target of keeping global warming below 2°C while oil prices soar. Bleak indeed.
The oil price risk is one I communicate to my clients - if if you can handle current energy prices - what happens if they soar? Oil going above $100 a barrel was unthinkable a few years ago, but it went way over in the spring of 2008 and appears to be on its way back. This is a serious risk for many businesses and organisations - are you ready for it? Resilience is a term I'm pinching from the Transition movement - is your organisation resilient to the risks ahead?
This is the fourteenth in a series of tips extracted from the forthcoming Green Business Bible e-book:
To avoid the risk of pollution incidences, map and understand your on-site drainage. Make sure all drains are colour coded: blue for surface water and red for the sewer is a standard approach;
It is one of the most repeated clichés in business:
