Linking Sustainability and Performance Excellence Presented to: Minnesota Council for Quality Troy Goodnough, Sustainability Coordinator University of Minnesota, Morris January 8th, 2009
What is this talk supposed to do? • Explain the idea of sustainability and how it might connect to the MN Council for Quality mission • Explain why sustainability is an idea that is important and deserves consideration • Inform you about how several top thinkers have envisioned a business environment where sustainability principles are integrated • Make a case for why we should care about natural capital • Explain how some businesses and leaders are using this idea of sustainability to increase profitability • Illustrate how the University of Minnesota, Morris is putting these principles into practice
Some key themes I see: • An emphasis on results and service • An emphasis on relationships • An emphasis on measurement and analysis • An emphasis on learning and better organizational thinking • An emphasis on cross organizational thinking to solve economic and social problems • An emphasis on stewardship of resources, human, financial, time and other
Some thoughts from Al. • “The significant problems we face cannot be solved at the same level of thinking we were at when we created them.” - Einstein • “The world is a dangerous place to live; not because of people who are evil, but because of the people who don’t do anything about it.” - Einstein
Challenging our assumptions: GM’s principles after WWII. • GM is in the business of making money, not cars. • Success comes not from technological leadership but from having the resources to adopt quickly innovations successfully introduced by others. • Cars are primarily status symbols. Styling is therefore more important than quality to buyers, who are, after all, going to trade up every year. • The American car market is isolated from the rest of the world. Foreign competitors will never gain more than 15 percent of the domestic market. • Energy will always be cheap and abundant.
Ethos of an age…? 6. Workers do not have an important impact on productivity or product quality. 7. Consumer, environmental, and other social concerns are unimportant to the American public. • The government is the enemy. It must be fought every inch of the way. • Strict, centralized financial controls are the secret to good administration. • Managers should always be developed from inside the company.
What is Sustainability? • Sustainability is an idea… • We have typically thought of sustainability as: the ability to continue some process in perpetuity. • That is a large part of this new conversation.
What is Sustainability? • 1987 United Nations report, “Our Common Future”, known as the Brundtland report. • Sustainable development: is development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs.
Three-legged stool of sustainability. • Our past and present decision-making has been driven primarily by economic considerations. • Our future decision-making has the potential to be driven by environmental, social, and economic considerations. (especially, if we price things right) • People, Planet, Profit: The 3 Ps
Key elements of sustainability thinking. • Intergenerationality: thinking about the long term consequences future generations will need to deal with • Transparency: we make our assumptions known • Systems approach: use best available data, look at how multiple systems are affected • Pay the true cost for things: externalities considered
What’s going on in the world? • Climate change: 5% uses 25% • Exploding world population (6.7B) • Simultaneous wars • A catastrophic economic meltdown • Peak fossil-fuel supplies/easily recoverable • Globalization and interconnectedness • Radical redistribution of wealth between rich and poor • Lack of investment in infrastructure • Water resources being challenged • Soil being depleted…curiosity being depleted?
Is climate change real? • The Economist, The World in 2009, “Wonderful, wonderful, Copenhagen? : Don’t count on a climate deal” “The most important year for climate change since 2001, when the Kyoto protocol (which set targets for cutting carbon-dioxide emissions) was agreed, will be 2009. The first period protocol runs out in 2012. The deal to replace it is supposed to be done a the United Nations’ Climate Change Conference in Copenhagen, which starts on November 30th 2009 and is due to end on December 11th. No deal means that mankind gives up on trying to save the planet.”
Sustainability…is it a lasting idea? • The Economist, The World in 2009 • Article: The year of unsustainability • “For business, the buzzword of 2008 was “sustainability”. Never properly defined, it meant different things to different people, which of course added to its charm. In part it was a new way of packaging the clumsy old “corporate social responsibility” (CSR). And it added a virtuous green dimension: sustainable business would help to save the planet…But that was then. In 2009 sustainability will take on a new meaning in boardrooms: staying in business.” • Is sustainability just a fair-weather idea?
What’s going on in the world? • Climate change: 5% uses 25% • Exploding world population:1.6B (1900) , now 6.7B • Simultaneous wars • A catastrophic economic meltdown • Peak fossil-fuel supplies/easily recoverable • Globalization and interconnectedness • Radical redistribution of wealth between rich and poor • Lack of investment in infrastructure • Water resources being challenged • Soil being depleted…curiosity being depleted?
What’s going on?: opportunities • Growing on-line, high-speed, world-wide interconnectedness with huge amounts of great data and information ( like satellite imagery) • Expanding scientific understanding of world • Good educational institutions • 100’s of M lifted out of poverty (fueled by fossils) • To have a more informed, nuanced conversation, and to challenge our assumptions • To use new and old resources more responsibly • Entrepreneurship: to make new products and services that address these challenges and to be profitable
The 10,000+ foot view • The world at night • 5% vs. 25% • Indicators of climate change • 80% by 2020 • Our energy supply is a key challenge • It is not the only challenge. • Sustainability: A new ethic for education and how we do business?
Who is talking about sustainability (and these key challenges)? • Most of the publications you probably read: see Chemical and Engineering News • Most colleges and universities: see AASHE • Many (perhaps more than you think) of the top businesses in the world and country • Many of our top national voices and politicians: see Gore and IPCC Nobel Prize
So, how have our industrial systems been designed? • From Cradle to Cradle: Remaking the Way We Make Things • William McDonough (visionary architect) • Michael Braungart (chemist) • “We see a world of abundance, not limits In the midst of a great deal of talk about reducing the human ecological footprint, we offer a different vision. What if human designed products and systems that celebrate an abundance of human creativity, culture, and productivity? That are so intelligent and safe, our species leaves an ecological footprint to delight in, not lament? • “Consider this: all the ants on the plant, taken together, have a biomass greater than that of humans. Ants have been incredibly industrious for millions of years. Yet their productiveness nourishes plant, animals and soil. Human industry has been in full swing for little over a century, yet is has brought about a decline in almost every ecosystem on the planet. Nature doesn’t have a design problem. People do.”
Design the Industrial Revolution. • Put billions of tons of toxics into the air, water and soil every year • Produce some materials so dangerous that they will require constant vigilance by future generations • Produce gigantic amounts of waste • Put valuable materials in holes all over planet • Needs thousand of regulations, not to keep people safe, but to keep them from being poisoned to quickly • Productivity measured by how few are working • Erodes the diversity of species and cultural practice
Design the modern movement. • Release fewer pounds of toxics into the air, water and soil every year • Measure prosperity by less activity • Meet the thousands of regulations, that still keep people from being poisoned to quickly • Produce fewer highly dangerous materials requiring future vigilance • Produce smaller amounts of useless waste • Put smaller amounts of valuable materials in holes where they can never be retrieved
A sustainability movement. • Build buildings that produce more energy than they consume and purify their waste water • Factories produce effluents that are drinkable • Produce products that when useful life ends: they can become nutrients for soil or return to industrial cycles for new products • Billions and trillions of materials accrued for natural and human purposes each year. • Transportation that improves quality life and delivers goods and services • A world of abundance, not one of waste, limits, pollution and waste
Strategies to a sustainable future. • From Natural Capitalism : Creating the Next Industrial Revolution • Paul Hawken, Amory Lovins, L. Hunter Lovins • Radical resource productivity • Biomimicry • Service and flow economy • Invest in natural capital
Strategies to a sustainable future. • Radical resource productivity: it slows resource depletion at one end of the value chain, lowers pollution at the other end, and provides a basis to increase worldwide employment with meaningful jobs.
Strategies to a sustainable future. 2. Biomimicry: Eliminate the idea of waste, by redesigning industrial systems along biological lines that can change the nature of industrial processes and materials, enabling the constant reuse of materials in continuous closed cycles, and often the elimination of toxicity
Strategies to a sustainable future. 3. Service and flow economy: Shift from a economy of good and services to one of service and flow. This will entail a new perception of value, a shift from the acquisition of goods as a measure of affluence to an economy where the continuous receipt of quality, utility, and performance promotes well-being. Focuses on relationships that reward resource productivity and closed-loop cycles of materials use.
Strategies to a sustainable future. 4. Invest in natural capital: Work toward reversing world-wide planetary destruction through reinvestments in sustaining, restoring and expanding stocks of natural capital, so that the biosphere can produce more abundant ecosystem services and natural resources The four work together to: reduce environmental harm, increase economic growth, and increase meaningful employment.
What types of capital do we need. • Human capital: in the form of labor, intelligence, culture and organization • Financial capital: cash, investments, monetary instruments • Manufactured capital: infrastructure, machines, tools and factories • Natural capital: resources, living systems, ecosystems
Saving the planet, or saving our own butts? • Production of oxygen • Maintenance of biological and genetic diversity • Purification of water and air • Storage, cycling and global distribution freshwater • Regulation and chemical composition of atmosphere • Maintenance of migration and nursery habitats for wildlife • Decomposition of organic wastes • Sequestration and detoxification of human/industrial waste • Natural pest and disease control by insects, birds, bats, other organisms
Saving the planet, or saving our own butts? • Production of genetic library for food, fibers, pharmaceuticals, and materials • Fixation of solar energy and conversion into raw materials • Management of soil erosion and runoff • Protection against harmful cosmic radiation • Regulation of the chemical composition of the oceans • Regulation of the local and global climate • Formation of topsoil and maintenance of soil fertility • Production of grasslands, fertilizers and food • Storage and recycling of nutrients
Where is the “free market”? • All participants have perfect information about the future • There is perfect competition • Prices are absolutely accurate and up-to-date • Price signals completely reflect every cost to society: There are no externalities. • There is monopoly (sole seller) • There is no monopsony (sole buyer) • No individual transaction can move the market, affecting wider price patterns • No resource is unemployed or underemployed • There’s absolutely nothing that can’t be readily bought and sold • Any deal can be done without “friction” (transaction costs) • All deals are instantaneous (no transaction lags) • No subsidies or other distortions exist • No barriers to market entry or exit exist • There is no regulation • There is no taxation (or if so, it doesn’t distort resource allocation in any way) • All investments are completely divisible and fungible • At the appropriate risk-adjusted interest rate, unlimited capital is available to everyone • Everyone is motivated solely by maximizing personal “utility”, often measured by wealth or income
What might capitalism look like if living systems mattered? • The environment is not a minor factor of production, but rather is “an envelope containing, provisioning, and sustaining the entire economy” • The limiting factor to future economic development is the availability of natural capital, in particular, life-supporting services that have no substitutes and currently have no market value • Misconceived or badly designed business systems, population growth, and wasteful patterns of consumption are the primary causes of the loss of natural capital, and all three must be addressed to achieve a sustainable economy
What might capitalism look like if living systems mattered? • Future economic progress can best take place in democratic, market-based systems of production and distribution in which all forms of capital are fully valued: human, manufactured, financial and natural • One of the keys to the most beneficial employment of people, money, and the environment is radical increases in resource productivity • Human welfare is best served by improving the quality and flow of desired services delivered, rather than by merely increasing the total dollar flow • Economic and environmental sustainability depends on redressing global inequities of income and well-being
Waste not, want not. • The idea of eliminating waste is not new. It is deeply connected to the themes of sustainability and efficient management systems: below from Lean Thinking. • Sakich Toyoda’s “self-monitoring” looms: installing controls that measure what is going on NOW, not later, is an aspirational goal for most companies • Taiichi Ohno: was the father of the Toyota Production System and was a fierce opponent of waste • “ any human activity which absorbs resources but creates no value” • “mistakes that require rectification, production of items no one wants so that inventories and remaindered goods pile up, processing steps which aren’t actually needed, movement of employees and transport of goods from one place to another without any purpose, groups of people in a downstream activity standing around waiting because an upstream activity has not delivered on time, and goods and services which don’t meet the needs of the customer.”
So what about lofty principles? • From Built to Last: Successful Habits of Visionary Companies • James C. Collins, Jerry I. Porras • In their chapter, More Than Profits they discuss pragmatic idealism… no “tyranny of the or”’ • “Our research showed that a fundamental element in the “ticking clock” of a visionary company is a core ideology – core values and a sense of purpose beyond just making money – that guides and inspires people throughout the organization and remains relatively fixed for long periods of time.” • People like to do the right thing and make money. • To make money, you need to do the wrong thing. Really?
What companies are eliminating waste, increasing productivity and making money? • Pratt and Whitney: aircraft equipment • Freudenberg-NOK General Partnership: largest N.A. maker of seals and gaskets • Lantech: stretch wrapping machines • Interface: leading American carpeting manufacturer (resizing pipes, lowering pumping costs, and more) • Carrier: air conditioning • Electrolux: whole range of industrial uses • Green Bay Packaging Co.: (in WI paper is banned in landfills) papermaking (eliminated effluent, now can build plants in alternative locations)
A quick reading from Interface’s CEO… • From p.168 of Natural Capitalism • From the 1997, Interface Sustainability Report • “As I write this…
About UMM: The Legacy1887-1909 • American Indian Industrial Training/Boarding School • Founded by the Sisters of Mercy • Ownership transferred to the Federal Government in 1896
The Legacy:1910-1963 • Collapse of the national system of American Indian Boarding Schools led to the establishment by the University of Minnesota of… • West Central Agricultural High School and Experiment Station • 1911 and 1926: Morell & Nichols Landscape Architecture--Master Plans • 1911-1937: “Unpretentious hipped-roof Craftsman and Renaissance Revival buildings” designed by Clarence H. Johnston, Sr.
The Legacy:1960-present • Public Liberal Arts College on the Prairie • 1700 Students • 160 Acres • 26 buildings • Carbon Neutral by 2010
The Green Prairie Alliance: The Power of Partners • U of M, Morris (UMM) • Rigorous undergraduate education, research, demonstration and outreach • U of M, West Central Research and Outreach Center (WCROC) • Production agricultural systems, renewable energy, outreach • USDA ARS NCRC Soils Laboratory (Soils Lab) • Biofuels, carbon sequestration, soil conservation