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How Different Does Sustainable Business Have to be for Business to be Sustainable? Markus J. Milne College of Business and Economics University of Canterbury SANZ Public Seminar 25 March 2009 Sustainability goes mainstream? CFO NZ Branch of a Global Brand:

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slide1

How Different Does Sustainable Business Have to be for Business to be Sustainable?

Markus J. Milne

College of Business and Economics

University of Canterbury

SANZ Public Seminar

25 March 2009

slide2

Sustainability goes mainstream?

CFO NZ Branch of a Global Brand:

'Sustainability isn't anything new for us,'…. 'It's a term that pools together a number of activities we've been practising for the last 100 years.'

'We have to think about the next five, 10 or 15 years, so that as new technologies become available, we can employ them quickly to come up with sustainable solutions.'

slide3

Business “takes up” sustainability

The Issue/Concern:

How do businesses engage with a concept like sustainability? What does business mean by “sustainability”?

How does business reconcile concern for the environment with concern for development within the constraints of a capitalist system that demands ever increasing profits? And what role does corporate reporting play in this?

Is business confusing “sustainability” with corporate social & environmental responsibility? (Hawken, 2002). And, if it is, what sort of business organisation would be sustainable?

slide4

Outline/overview

  • Focus - Sustainability (and Climate Change) and how organisations “take-up” these agenda.
  • Examine and critique some practical efforts to date and warn of dangers of becoming confused, self-deluded, and/or perhaps downright misleading.
slide5

Survivialism – New Environmental Paradigm

  • WWF “Living Planet” Reports
  • UNEP “Global Environmental Outlook”
  • Worldwatch “State of the World”
  • World Resources Institute Reports
  • Millennium Assessment Reports
  • IPCC Reports

Global emissions of CO2 reached a new high in 1996 - nearly four times the 1950 total. In 1996, 25 per cent of the world's approximately 4630 mammal species and 11 per cent of the 9675 bird species were at significant risk of total extinction. If present consumption patterns continue, two out of every three persons on Earth will live in water-stressed conditions by the year 2025…(UNEP Global Environmental Outlook 2, 2000).

slide6

Parliamentary Commissioner for the Environment

Creating our Future (2002), See Change (2004)

The fundamental task in front of us over the coming decades is to redesign our socio-political-economic system in ways that reintegrate the dependencies between people and our underpinning ecological systems. And redesign we must:

This century may well be one of relearning on a grand scale – relearning how we Homo Sapiens can sustain ourselves on a planet that has limits… I am suggesting that we need a much deeper understanding of the demands and pressures of our current society and its economic systems on the health and long-term sustainability of our natural resources… We are living beyond nature’s income…

slide7

Sustainable?Sustainable Development?

Sustainability implies maintaining or sustaining something(s). “If these things/conditions are worth sustaining, then their un-sustainability matters…”

What is to be sustained?

How long is it to be sustained?

And in whose interests is it to be sustained?

slide8

WCED (1987) Our Common Future

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. (Futurity – inter-generational equity)

________________________________________

It contains within it two key concepts:

The concept of ‘needs’, in particular the essential needs of the world’s poor, to which overriding priority should be given; and (Equity – intra-generational equity)

The idea of limitations imposed by the state of technology and social organisation on the environment’s ability to meet present and future needs (Environment – carrying capacity)

slide9

Daly, 1992; Hawken, 1996; Sachs, 1999

Scale of economic activity relative to its ecological life support systems.

Maintaining “natural capital”, or “critical natural capital” intact and learning to live off natural income

(1) rates of use for renewable resources that do not exceed their rates of regeneration;

(2) rates of use for non-renewable resources that do not exceed the rate at which sustainable renewable substitutes are developed; and

(3) rates of pollution emission that do not exceed the assimilative capacity of the environment.

slide10

The Challenges

Our national CO2e inventory

slide11

NZ’s CO2e emissions sustainability gap?

Stern (2008) LSE

2050 target

of 2 tonnes

CO2e/capita

CO2 “sustainability gap”?

NZ’s target 2050

8-10mt CO2e?

slide23

NZ Business “Talking” sustainability

“Industry will have the primary role in making (sustainable development) work.

We are the experts at development”

Edgar S. Woolard CEO Dupont 1990

slide25

DEDICATED TO MAKING A DIFFERENCE

Drivers for a Sustainability Focus

  • Values Driven
  • - Hubbard Foods
  • The Warehouse
  • Interface.
  • Ministry for the Environment
  • DoC
  • Inherent Business Model
  • Body Shop
  • Living Earth
  • Ecostore
  • Phoenix Organics

SD Impetus

  • Transformational Opportunity or Strategy
  • - BP
  • Westpac
  • Sanford Sustainable Seafood
slide27

“Talking” sustainability & sustainable development.

  • Key messages (language used)
  • Journeying – a start, progress, learning, continuous imprv. leadership, knowledgeable
  • Expert management – ‘measure to manage’, rational, science, efficiency, being in control
  • Win-win– eco-efficiency (less waste, less cost), competitive advantage, risk reduction, ‘doing well by doing good.’
  • Caring for stakeholders – commitment
  • Balancing – achieving economic growth and ecological conservation at the same time.
slide29

DEDICATED TO MAKING A DIFFERENCE

DEDICATED TO MAKING A DIFFERENCE

…the business case

  • Financial performance of Dow Jones Sustainability Index
  • Forum for the Future study – 60% positive correlation between out performance and CSR
  • July 03 study “Responsible business attracts the best people”.
  • Starbucks – low staff turnover pays
  • For the NZBCSD it’s about profits + people + ecological balance - and we never forget that profits are essential for true sustainability.
  • Shareholder returns
  • Attracting and keeping talent
  • Risk management
  • Appealing to markets
  • Appealing to investors
  • Efficiency
  • Opportunity identification
  • IAG – managing climate change risk
  • Nestle, Nike etc – activist/boycott risk

Sanford – Marine Stewardship Council certification of Hoki fishery

  • Westpac; DJSI sector leader
  • Ports of Auckland – FTSE 4 Good
  • BP – emissions management.
  • 3M vapour recovery; The Warehouse – towards zero waste
  • New business or transformational opportunities
  • Westpac, IAG, Toyota
slide32

So what is a sustainable corporation?

Urgent Couriers (2001, pp. 5-6), report they are able

“to lead the way in minimising vehicle impact on the natural environment by reducing emissions and using alternative fuels”, yet wish to maintain “a profit margin that will allow the business to expand and effectively participate in a highly competitive market place.”

Sanford Seafoods (2000/2001 report, p. 26). is

“committed to continually improving its environmental performance, operating in a socially responsible manner and maximising economic growth while ensuring financial stability, for the benefit of all stakeholders”

slide33

Air New Zealand

Eco-efficiency

Efficiency Gains over 15 years ~ 11%

slide34

Air NZ’s

Carbon Footprint

Net Cumulative Gains in C02 Footprint over 15 years ~ 60%

Efficiency Gains over 15 years ~ 11%

slide35

Airbus (Aircraft manufacturer)

50% loading efficiency over last 45 yrs

40% fuel efficiency over last 20 yrs

slide36

Back to Airbus – Planned Growth in Air Traffic

Percentage increase in world air travel over last:

15 years = 120% cum

20 years = 145% cum

35 years = 630% cum

40% fuel efficiency over last 20 yrs

The next 20 years?

4.4 trillion RPKs to 11.6 trillion RPKs

160% increase (5% compound annual )

>2.6 times

slide38

Problems with “sustainable business” thinking

  • “Rebound” or “Boomerang” – eco-efficiency needs to deliver at the scale of ecosystems, the economy and the planet, and not just the product or organisation – it requires “systems level thinking” – not currently required of managers.
  • (2) Corporate “sustainability” reporting simply makes no sense, and the triple bottom line (as practised) is illusory - Social and environmental interactions are not given equal billing with the financial. The financial dominates. Reporting/verification is poor, is entity controlled and focused, lacks rigorous standards.
  • (3) Stakeholder engagement is often nothing short of “stakeholder management” - Stakeholders are often “engaged’ as a threat to be managed for the ultimate stakeholder – to protect economic returns for the shareholder.
  • (4) Dematerialisation is also not sufficient. -while it reduces absolute levels of resource use, it still involves waste and toxic emissions, just less of them.
slide39

Core business up for change? Reducing scale of impacts? - Paul Hawken (2002)

The question we have to ask is what is enough? Is it enough that one in five meals in the US is a fast food meal? Does that satisfy McDonald's? Or do they want that figure to be one in three, or how about one in two?... Do they think every third global meal should be comprised of greasy meat, fries, and caramelized sugar? They won't answer those questions because that is exactly their corporate mission.

A valid report on sustainability and social responsibility must ask the question: What if everybody did it? What would be the ecological footprint of such a company? What is McDonald's footprint now?

slide40

Concluding remarks

  • Organisations conceptualise sustainability first and foremost in terms of themselves. (Eco)efficiency, stakeholder management and continuing access to “resources” dominate.
  • A critical question to ask, then, is how does sustainable business differ from business as usual? What makes it “sustainable”, and sustainable in what sense?
  • At best (as per externally verified standards), TBL reporting is a necessary but insufficient first step towards a new model of ecological consciousness. At worst (as per current practice), it is a serious (and perhaps deliberate) impediment to transformed thinking that bolsters BAU.
slide41

Moving beyond eco-efficiency?

  • Stop kidding ourselves… Sustainability is not something that’s been practised for 100 years…
  • Core TBL reporting to externally verified
  • reporting and auditing standards – GRI/UNEP
  • Language matters… often it defends the status quo
  • e.g., CO2 - “avoid the unavoidable” “offset the rest”
  • (Economic) Burden to (Ecological) base
  • Ecological (carbon) footprints
  • Ecological (carbon) rucksacs – MIPS
  • Factor-10, breaking step-locks and decarbonising activity
  • Products as services (leasing vs. ownership)
  • Design, cradle-to-cradle, waste=food & bio-mimicry
  • Redefining “success” – sufficiency, selective slowness