Business Sustainability: Building a Better World

1. Why Business Has a Sustainability AgendaENGR 4891February 2, 2015 Neil L. Drobny, PhD Fisher College of Business The Ohio State University

2. Theme • Sustainability is a holistic response to: • resource constraints, • limits of the earth’s carrying capacity and • expanding population to enable long-term healthy and prosperous human activity • Not: Philanthropy. • Money spent = investments, ≠ expenses.

3. What is Sustainability in the “Business Context”? • Strategies and practices that build shareholder value, enterprise resiliency and a better world by saving energy, resources, and money.

4. What do you Think? • Every year in the US we bury enough aluminum in landfills to manufacture X jetliners. What is X? • Every year worldwide we burn or bury waste with an embedded value in energy and material equal to Y billion dollars. What is Y?

5. Green vs. Sustainable • Often incorrectly used interchangeably. • “Green” – Environmental component. • “Sustainable” - embraces a “social” component. Just getting traction. • Human rights issues. • Community impacts. • Products and services for the poor. • Social issues: e.g. obesity; product safety; access to education, clean water, food security.

6. Definitions Abound • Sustainability: “Triple Bottom Line” – how effectively organizations use: • Economic capital and • Environmental capital and • Social capital • People, planet and profit.

7. Triple Bottom Line – Two Views

8. Dow Jones on Sustainability “a business approach that creates long-term shareholder value by embracing opportunities and managing risks that derive from economic, environmental and social developments.” - Dow Jones Sustainability Indexes

9. Putting the TBL into Practice • Creating repeatable economic value from human activity. • Living off nature’s interest vs. nature’s capital stock. • Create wealth based on use of resources in unlimited supply – renewable resources. • Avoid wealth creation that destroys nature’s life support systems - ecosystems • Assuring social equity through full cost accounting, transparency, and “fair” business practices – creating shared value.

10. Sunlight – the only renewable resource • Daily – the earth receives 5000 times as much energy is needed to support current needs. • Every 70 min. – enough solar energy to power the world for a year. • Solar works in Ohio!

11. Solar Energy Ohio’s Potential

12. Putting the TBL into Practice • Creating repeatable economic value from human activity. • Living off nature’s interest vs. nature’s capital stock. • Create wealth based on use of resources in unlimited supply – renewable resources. • Avoid wealth creation that destroys nature’s life support systems - ecosystems • Assuring social equity through full cost accounting, transparency, and “fair” business practices – creating shared value.

13. Food & fiber Fresh water Nutrient cycling Waste assimilation Soil formation Climate control Energy & fuel Flood control Ecosystem Services -regulate, control and provision the earth-global economic value - $33 T/yr.

14. Trees on OSU Campus

15. Dow/TNC Partnership on Ecosystems Valuation • Completed one year of a five-year $10 million collaboration. • Goal: “ build a roadmap for how companies assess, incorporate and invest in nature and the services it provides”. • Driver: Intelligent use of resources. http://corporateecoforum.com/ecoinnovator/?p=6845

16. Putting the TBL into Practice • Creating repeatable economic value from human activity. • Living off nature’s interest vs. nature’s capital stock. • Create wealth based on use of resources in unlimited supply – renewable resources. • Avoid wealth creation that destroys nature’s life support systems - ecosystems • Assuring social equity through full cost accounting, transparency, and “fair” business practices – creating shared value.

17. Why Creating Shared Value is Important • “…a sick and ailing community cannot produce the healthy, energetic, productive workforce our enterprises demand if indeed they are to be viable and even present at the end of this turbulent decade.” (Harvard Business Review) • Likewise: Business needs prosperous and healthy world populations to consume goods and services.

18. Evolution of Sustainability • Up to 1950s (or so): environment viewed as an inexhaustible resource. • 50s – 90s: wake up calls -- e.g. air and water pollution, toxic waste spills and dump sites, nuclear accidents. • Regulatory compliance was the focus for business. • 90s forward: focus on (1) prevention vs. compliance and (2) global vs. local impacts.

19. Compliance vs. Prevention • Compliance • Traditional focus on environment, health and safety “at the plant”. • Driven by regulation. Tactical not strategic. • Prevention • “Ah-ha” moment: Waste is a product produced (at a cost) that cannot be sold. Why not avoid producing it? • Emergence of strategic thinking.

20. Strategic Foundations for Sustainability in Business • Copy nature – in nature there is no waste • Industrial ecology, by-product synergy, biomimicry • Close loops – eliminate once-through flows. • Reduce impacts, optimize resource use across the entire value chain. • Life cycle assessment: optimize performance of systems not components. • Collaborate to reduce barriers (with suppliers, customers, competitors). • Acknowledge limits and interdependencies. • Create shared value.

21. Where Do We Stand? There’s a school of thought that says, in effect, it isn’t easy being green even in a good economy. If that’s true, sustainable business activities should pretty much have driven off a cliff during the Great Recession. But the opposite seems to have happened. Indeed, a dramatic shift is occurring in business: Companies are thinking bigger and longer term about sustainability — a sea change from their otherwise notoriously incremental, short-term mindset. www.stateofgreenbusiness.com

22. Business Case for Sustainability • Branding – strengthen & expand market share. • New product & service opportunities. • Reduced risk (insurers). • Enhanced business value (investors). • Improved employee morale, productivity and retention. • Reduced compliance issues (EPA, SEC, FTC). • Increased reputational capital/public image. • Protects the social license to operate. • Efficiencies and reduced cost.

23. Corporate Leaders 3M General Electric Toyota Interface Carpets Hewlitt Packard Wal Mart Alcoa Chipotle • Ben & Jerry’s • Tom’s of Maine • Patagonia • Generation Green • Northstar Café • Univenture/Algaeventure • Timberland • Possitivity

24. Interface Carpets • CEO/Founder (Ray Anderson) committed the company to achieve zero waste and zero environmental impact by 2020 (mid 90’s). • Framed as a journey up Mt. Sustainability. • Cost savings $433 million – 1st 15 years. • Personally led the effort. http://www.interfaceglobal.com/Sustainability/Our-Journey/7-Fronts-of-Sustainability.aspx

25. Ray Anderson on the Business Case • http://www.interfaceglobal.com/getdoc/7004276e-0f10-4c64-b08c-b7889a717b2b/Ray-Reflects.aspx

26. From Best Practices to Next Practices • Drive down fossil fuel usage. • Eliminate excess water and energy consumption. • Know and manage greenhouse gas emissions. • Demand sustainability in the supply chain. • Take responsibility for “end-of-product life” issues. • Design for re-cycle, re-manufacture and re-use. • Eliminate Waste. • Do “good” not just “less bad.” • Manage for stakeholders not just shareholders.

27. Parting Thoughts

28. Population: the “Elephant in the Room” • 4,000 years ago – about 50 million people on earth (agricultural revolution). • 1750 – 750 million people (industrial revolution). • Now 7 billion people. • 2050 estimate: 9 billion people. • Historical growth: http://www.youtube.com/watch?v=4BbkQiQyaYc • Problem: Impact = impact x population. person

29. Ecological Footprint Quiz • If X is the number of planet Earths needed to support per capita worldwide resource consumption on par with current U.S. levels what is X ?

30. Ecological Footprint X =5* To determine your personal footprint : www.myfootprint.org * www.footprintnetwork.org

31. Albert Einstein The world will not evolve past its current state of crisis by using the same thinking that created the situation.

32. Contact Information Dr. Neil L. Drobny Fisher College of Business The Ohio State University (614) 268-6100 drobny_3@fisher.osu.edu