From Corporate Environmental Managementto Green Business Models Roland Geyer The Donald Bren School ofEnvironmental Science and Management University of California at Santa Barbara
Is there a relationship between corporate financial performance and corporate environmental performance?
Search this site Monday January 31 2005 ExxonMobil reports annual profits of $25bnBusiness: US oil giant reports annual profits that exceed the GDP of Syria.More business news Global warming 'may kill off polar bears in 20 years'Life: Many Arctic animals could be extinct within 20 years because of global warming, conservationists warn.Special report: climate change Source: http://www.guardian.co.uk/
There certainly seems to be a relationship between Exxon’s corporate financial and environmental performance A US company never reported higher profits. For at least 650,000 years, CO2 concentration has never been higher than 300 ppm.
Who should solve our environmental problems? • Companies • Consumers • Government • NGOs
We are all part of the way we produce and consume goods and services. We are all equally responsible. Needs & Wants Services Source of: Materials Energy Water Land Sink for: Wastes & Emissions Products Production Anthroposphere Ecosphere Industrial production and consumption systems use the environment as source of resources and sink for wastes and emissions
Corporations just happen to play a crucial role in the production of goods and services Needs & Wants Services Source of: Materials Energy Water Land Sink for: Wastes & Emissions Products Corporations Anthroposphere Ecosphere • Only about 15% of all businesses are incorporated, • Corporations account for nearly 90% of business receipts and 80% of net profits.
The Development of Environmental Policy in Europe 1970s - Introduction of environmental regulations (single process, single site and single medium) 1990 - Integrated pollution control(single process, single site, all mediums) 1999 - Integrated pollution prevention and control (whole environmental performance of a plant) 2003 - Integrated product policy (adoption of life cycle perspective) Source: European Commission White Paper COM(203) 302 final
Use and maintenance waste and emissions Materials Energy Materials Energy Materials Energy Materials Energy Materials Energy Materials Energy Product Life Cycle Transport and distribution waste and emissions Supply Chain End-of-life waste and emissions Production waste and emissions What is a Life Cycle Perspective? Raw materials mining Primary materials production Component manufacture Final product assembly Product use and maintenance Product disposal Service
Life Cycle Assessment of Products Environmental impact categories Life cycle stages Life cycle assessment aims at quantifying the environmental impacts acrossall relevant environmental concerns and all relevant life cycle stages.
It is the material and energy flows in the life cycle of a product that cause the environmental problems Air emissions Material Transformation Process Products Raw materials & energy Solid wastes Waste water
If environmental problems are caused by material and energy flows, solving them is also a material and energy issue. • There are essentially three ways to reduce the environmental impacts of material and energy flows: • Increase material and energy efficiency • Substitute materials and energy sources • Reuse & recycle materials and energy
Examples for increased resource efficiency • Advanced High Strength Steels (AHSS) in automotive applications (25% weight reduction) • Mass reduction of beverage containers • Continuous casting technology in metals production • Drip lines instead of sprinklers for irrigation • Carsharing businesses • Spaceframe design concept • Miniaturization in the electronics industry
Examples for substitution of materials and energy sources • Crop-based ethanol instead of gasoline • MTBE instead of lead as oxygenate in automotive fuels • Steel versus aluminum versus magnesium versus composites in automotive • Timber versus steel versus concrete in construction • Glass versus aluminum versus PET versus laminated cardboard in packaging • Bio-based plastics versus petroleum-based plastics (e.g. polylactic acid) • Lead-free solder (e.g. tin silver copper antimony)
Examples for reuse and recycling of materials and energy • Recycling of metals, e.g. steel and aluminum • Recycling of paper and cardboard • Recycling of carpet and apparel • Combined-cycle and combined heat and power (CHP) power generation • Remanufacturing of single-use cameras • Refurbishment of cell phones • Reuse of construction components
How should companies implement these 3 strategies? • Focus only on profits and environmental compliance • Retrofit the strategies into a going concern • Build them into the business model
Retrofit example: Ford’s Dearborn Plant • 10.4 acres of green, living roof • 30,000 bushes, flowers and trees • 20,000 honey bees • Energy recovery from paint fumes • Gold LEED certified • Clean Air Excellence Award
Q: What is a green business model? A: A business model that relates corporate financial performance to corporate environmental performance. • Necessary ingredients • Meaningful environmental performance measures • Environmentally preferred products or services • A business case for those products and services
Green business model - Example 1: Nucor • World’s largest steel recycler (19 scrap-based steel mills) • First company to produce flat steel products from secondary (EAF) steel • Tradition of technological innovation with environmental benefits (e.g. strip casting) Environmental impacts of making 1 kg of primary (BF/BOF) and secondary (EAF) steel (kg CO2 eq) (g p-DCB eq) (g ethylene eq) (g SO2 eq) (g PO4 eq)
Green business model - Example 2: Kodak’s Single Use Camera • Kodak’s single use cameras were introduced in 1987 as disposable products. • Soon they were a target of environmental pressure groups. • In 1990/91 Kodak redesigned the cameras to facilitate recycling and re-use of parts. • Today, single use cameras are designed so that 77% to 90% (by weight) of the product can be remanufactured. • Everything else is recycled. • In the U.S., the recycling rate for single use cameras is greater than 75%.
Green business model - Example 3: InterfaceFLOR and Evergreen Lease • InterfaceFLOR is the world’s largest manufacturer of carpet tiles. • Interface created the Evergreen Leasing System in 1995 together with the Southern California Gas Company for its Energy Resource Centre in Los Angeles. • Interface uses life cycle assessment to evaluate its environmental performance. • Interface is the first carpet manufacturer to use fibers from polylactic acid. • Interface has very ambitious programs for recycled content and end-of-life recycling. • Failure of the leasing scheme to secure a significant market share.
Summary • Corporate Social Responsibility is good (see Ford’s Dearborn plant). The future belongs to corporations with green business models. • Green business models require that corporations rethink their products and service (e.g. Exxon vs. BP). • Green business models require meaningful environmental performance measures (e.g. life cycle assessment). • Successful green business models still require a business case(see Evergreen Leasing System).