BP 3503-5503 – Marketing Bio-based Products

1. Sustainability: a business caseDr. Tim SmithAssociate Professor, CEM & Bio-based ProductsDirector, Forest Products Management Development InstituteUniversity of Minnesota BP 3503-5503 – Marketing Bio-based Products

2. DISCUSSION QUESTIONS • Define sustainability. • Why is the concept of sustainable development important for business managers? Marketers of renewable products? • How do productivity, investment, and profit relate to sustainability? Are these at odds with societal pressures? • If operations of many firms appear to be sustainable (even from a societal perspective) why aren’t we seeing more developments around social/environmental accounting? | UNIVERSITY OF MINNESOTA, Department of Bio-based Products

3. SOCIAL COSTS OF FOREST DEPLETION • Climate Mitigation • Global Warming – Cabon Dioxide (CO2) • 76% Fossil Fuel (wood as substitute for high energy products) • 23% Tropical Deforestation (conservation and afforestation) • 1% Cement Manufacture • Recreation • Protection (soil erosion, watersheds, biodiversity, etc.) • Reinhardt • Carbon Tax (i.e. a price of $14-$23 per ton of carbon equivalent emissions) • Exxon - $32 profit per to of carbon emitted (still profitable) • Elasticity of demand and Kyoto Protocol • Carbon sequestration - 5.4 million acres of G-P N. American lands ($30-400 million) | UNIVERSITY OF MINNESOTA, Department of Bio-based Products

4. CONCLUSIONS AROUND SUSTAINABILITY • Managers have a vested interest in encouraging public policies that force private and social costs to converge (complicated, but in the long run the best companies will succeed). • Managers need to pay attention to parts of their businesses where private and social costs diverge dramatically, particularly where: • Resource rents are high (and/or a high percentage of profits), or • Profitability is low (less able to invest in new technologies) | UNIVERSITY OF MINNESOTA, Department of Bio-based Products