Sustainability, Part 2 So what do we do now?

1. Sustainability, Part 2So what do we do now? Dr. Ron Lembke

2. What is “Sustainability?” • The ability to keep doing something for the indefinite future • If it’s not profitable, it’s not sustainable • What allows a company to survive? • Meeting customer demands • Developing new products • Keeping costs low

3. Different metrics • Dimensions of Environmental Sustainability: • Carbon: energy burned by us, by our suppliers • Water: water used • Paper and corrugated used • Solid waste generated • Costs and Revenues: • Lower electricity, gas and water bills • Lower garbage hauling costs • Better public relations • How much do customers care? • If it makes them feel closer, there’s likely monetary value? • How much is your competition doing? • Watch out for GREENWASHING!!!! • Trivial gestures: attention misdirection – ski passes, plastic bags The Carbon Footprint of a plastic bag is 1/1000 that of the food in it!

4. More efficient Cars

6. Aka Suzuki Swift, Cultus • EPA 55/60 mpg

7. 2011 EPA Mileage ChampToyota Prius • MRSP $23,810

8. Camry Hybrid

9. Green SUVs? Isn’t that an oxymoron?

10. 2011 MSRP Info from cars.com

12. How have we fixed things before?

13. If cars are the problem… LET’S GO BACK TO HORSES! • Feeding: • 1.4 tons of oats, 2.4 tons of hay per year • 5 acres per horse • 15 million acres: West Virginia • 1,000 lb horse: • 50 lbs/day, 10 tons/year, quart of urine • “Crossing Sweepers” • 1898 first urban planning conference: horse manure • 1894 Times of London: 9ft deep by 1950 • Conference quit after 3 days, not 10 • Henry Ford saved us?

14. DDT • DichloroDiphenylTrichloroethane • Mosquitoes-malaria • Lice-typhus • Nobel Prize, 1948 • Rachel Carson Silent Spring, 1962 • EDF, 1964 • Banned, 1972 • Granny’s garage, 2005

15. Ozone Hole Return to 1980 levels by 2068 Photo: NASA http://www.nasa.gov/vision/earth/lookingatearth/ozone_record.html

16. CFCs • Chlorofluorocarbons • Break down, release chlorine • Chlorine destroys ozone • UV rays reach Earth’s surface • CFCs banned- Montreal Protocol, 1986

17. Leaded Gas • 1930s: Octane in 30s • Add Lead: 87! • Protected Valve seats • Catalytic converter problems • 1996 banned US • $10,000 fine

18. , • Feb 2, 1962 ad in Life magazine • Humble merged with Standard to become Exxon

19. So who Is going to do something?

21. Cap and trade vs carbon Tax • Cap and Trade • Amount of carbon is fixed, costs to companies are known • Complicated: • Permits are issued, based on past emissions, go down each year • If you reduce emissions and don’t need them all, sell them • If you don’t want to reduce, buy more from somebody else • Carbon Tax • Price is fixed each year, amount of carbon varies • Costs are known, it’s simpler, but it’s (gasp) a “TAX!” • Martin Feldstein, Reagan’s chief economic advisor – 20 years • Almost replaced Greenspan, but on board of AIG • Monies Raised help people affected by Climate Change

22. Acid rain • Sulfur Dioxide SO2 and nitrogen oxides NOx react • 1990 Clean Air Act • US coal plants cut sulfur emissions in half • Permits issued, reduce or trade • Emissions monitored

23. The Price of carbon • (and everything else) • Markets need a price signal • Right now, it’s an “Externality.” • You can’t MANAGE what you don’t _______? • And by the way, who testified before Congress in FAVOR of cap and trade?

24. Cap and Trade is Dead • American Clean Energy and Security Act • Waxman-Markey • Passed house 219-212 6/29/09 • Died in Senate • Environmentalists divided: • Too weak • Fuel MPG targets too low • Restricted EPA’s ability to regulate CO2 • If the politicians won’t save us… who will?

25. So who Is DOING Anything?

26. The SEC? • Risks to a company must be disclosed • Guidance about reporting Climate-change related risks • 2008 E&Y study listed climate change as #1 threat to insurance industry

27. MaybeWal-Mart Will? • 65% improvement fleet efficiency 2010 vs ‘05 • Power Units – idling • Truck skirts • 2010 – 57m more cases, 49m fewer miles • Better load planning • 7,600 cars off the road • World’s Largest Company • $419b ending Jan, 2010 • Told Congress to pass Cap and Trade • No fish left to sell? Largest organic cotton buyer, overnight.

28. Certification efforts • Seafood • Paper • Wood

29. Sustainability Index • 1. 15 questions for suppliers, Oct 2009 • 2. Lifecycle Analysis Database • Sustainability Consortium, ASU, U of Arkansas • 3. Simple Tool for Customers • Maybe rating 1-100 on • Carbon Emissions • Energy use • Water conservation • Deforestation • Scan QR codes for more info? • Nobody wants a red score

30. Sustainability Index? • Red, Yellow and Green labels on the shelves? • Relative to what? Industry? Other alternative products? • Plasma TVs vs. CRTs vs. LEDs vs. OLED • Scan barcode or QR code with smartphone? • Set up your own criteria • I care more about: water usage, child labor, sweatshops, chemical usage, pesticide usage, etc., etc. • Using ratings from Earthster? • Whatever Walmart wants may become a global standard

31. Sustainability Initiative • Not developing a consumer standard • Sustainability Measurement and Reporting Standards • What mfg should measure, and how • Report to common database • Common database used for indices • Wait, what? No Index or label? • Kicking the can down the road?

32. Maybe Wall Street will? • “Carbon is a financial risk” • Single reporting entity • 551 Institutional Investors • $71 Trillion in assets • Launched 2000 • Largest 2,500 corporations = 20-25% GHG • By supply chain, not by country • > 50% carbon emissions outside the four walls • Maybe 80% • 600% expected increase in carbon consulting and software • Dan Olson 11/3/11

33. CDP Supply Chain • 55 companies • “greater realization that carbon management presents a wider cost and revenue opportunity rather than being a pure risk mitigation activity.” • 90% members committed to reductions • 3.4% annual goals, up from 2.2% • Increased insight into baseline emissions • Growing expertise regarding reducing their emissions • Global 3.9% per year needed for 80% by 2050 • ONLY 1/3 of suppliers have targets

34. Importance of Carbon in Sourcing Decisions

35. Carbon Footprints

36. CO2e • The amount of CO2 that would have the same global warming potential (GWP). • CO2, by definition has GWP = 1.0 IPCC AR4 p. 212 • SF6 - 8,000 tons produced per year • 6,000 in electrical industry, inert gas for casting magnesium • Inert filling for insulated glazing windows • 0.2% of GHG emissions

37. CF per Unit • Add up total Carbon Footprint of all activities and inputs, divide by the number of units sold + + =

39. Patagonia – 15 products

40. Carbon Footprint as Multiple of Product Weight Product Average Shoes 40 Shirts 29.7 Jackets/vests 23 Sweaters/sweatshirts 46.7 Shorts8.5 Bottoms18 Dresses46 Luggage 8 Original data from Patagonia

41. World Resources Institute • GustaveSpeth, • “Bridge at the End of the World” • Natural Resources Defense Council • World Business Council for Sustainable Development • CEO led, 200+ companies • Stephan Schmidheiny • 1992 Rio Earth Summit • “The mission of the GHG Initiative is to develop internationally accepted GHG accounting and reporting standards and tools, and promote their adoption in order to achieve a low emissions economy worldwide”

42. Direct vs. indirect GHG emissions? • Direct: sources that are owned or controlled • Indirect: result of activities, but at sources owned or controlled by another entity. Scope: • Direct GHG emissions • GHG from purchased electricity, heat, or steam • Extraction and production of purchased materials and fuels, transport-related activities in vehicles not owned or controlled by the reporting entity, electricity-related activities (e.g. T&D losses) not covered in Scope 2, outsourced activities, waste disposal, etc.

43. Scope 1,2,3 Old Picture

44. GHG Protocol • 2,487 respondents for CDP • 85% used GHG Protocol Standard • “Often, majority of emissions come from Scope 3 sources, which means many companies have been missing out on significant sources of improvement.” • Kraft Foods found 90% from value chain • GHG Protocol Factsheet

45. Indirect Emissions

46. 2010 vs. 2011 2010 2011 50% outside four walls 80%? 90%?

47. Revised Picture, Oct 2011 Inherent Double-Counting

48. Corporate Perspective Supplier Retailer

49. Lifecycle Analysis End Of Life Production Distribution Usage

50. DOUBLE billingMfg and retailer both responsible Production Distribution Usage EOL MANUFACTURER’S FOOTPRINT RETAILER’S FOOTPRINT