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25 November 2011

Are you ready for a resource crunch?

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.

Tags: closed loop economy, raw materials, recycling, resources, risk

Posted by Gareth Kane one response

12 October 2011

The Price of Doing Nothing

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.

That's no joke.

Tags: competitive advantage, costs, green business, risk

Posted by Gareth Kane no responses

14 March 2011

Japan's Double Jeopardy

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.

Tags: hazardous material, nuclear, risk

Posted by Gareth Kane no responses

23 February 2011

Are you prepared for an oil shock?

Yesterday I was writing a piece on major problems in the oil industry for The Sustainability Forum (it should go up today or tomorrow it'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.

Tags: low carbon economy, oil prices, peak oil, risk, transport

Posted by Gareth Kane no responses

13 October 2010

Toxic Sludge vs The Oil Spill

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.

Tags: environmental strategy, green business, oil spill, risk, toxic

Posted by Gareth Kane no responses

3 September 2010

Green Business Confidential Ep2: It Ain't Easy Being Green

Here's the second Green Business Confidential podcast, entitled "It Ain't Easy Being Green", for your listening pleasure:

Or, you can download it here and listen on your MP3 player:
GBC2: "It Ain't Easy Being Green

Podcast: Play in new window | Download

Tags: green business, green marketing, greenwash, podcast, risk

Posted by Gareth Kane no responses

28 July 2010

Why "irrational" fear is completely rational

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.

Tags: oilspill, risk, risk perception

Posted by Gareth Kane no responses

22 February 2010

The True Cost of non-Compliance

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.

Tags: beyond compliance, legislation, risk

Posted by Gareth Kane 2 responses

23 October 2009

The risk of oil price rises

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?

Tags: oil prices, peak oil, risk

Posted by Gareth Kane no responses

12 May 2008

Weekly Tip #14: Down the drain...

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;

Another tip next Monday!

Tags: drains, risk, tips, water pollution

Posted by Gareth Kane no responses

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