SUSTAINABILITY & MANAGEMENT

Will O’Brien

Executive-in-Residence, Clark University

Director, Worcester Sustainable Business Leader Program

Email: wobrien@clarku.edu | Cell: 978-793-1635

WILL O’BRIEN

MBA, University of Albany Juris Doctor, Suffolk University Law School @40 years in Management and Consulting Teaching since 2002 Executive-in-Residence, Clark University, GSOM Lecturer, Johns Hopkins University Director, Worcester Sustainable Business Leader Program Research Interests:

Business and Environmental Sustainability Change Management & Leadership Entrepreneurship Project Management Viet Nam

Websites: www.greenprof.org www.sustainablebusinessleader.org/

FIVE FORCES DRIVING CORPORATE SUSTAINABILITY MANAGEMENT

1. Brand Competition

2. Risk Disclosure

3. Regulatory Compliance

4. Innovation

5. Good Business

THE SUSTAINABILITY IMPERATIVE

Megatrends force fundamental and persistent shifts in how companies compete.

Megatrends require businesses to adapt and innovate or be swept aside.

Examples of megatrends include: Electrification Mass Production Globalization Quality Management Information Technology

Firms must: Rethink what they do Recast how they operate

REFERENCE

Daniel Sitarz, (October 2008) Greening Your Business: The

Hands-on Guide to Creating a Successful and Sustainable

Business, Earthpress, Carbondale, IL ISBN-10: 1892949466

TABLE OF CONTENTS

1. Introduction2. Business Strategy3. Sustainability Planning4. Fostering Sustainable Behavior5. Energy Efficiency6. Waste Management7. Green IT8. Green Supply Chain Management9. Entrepreneurship & Innovation10. Green Marketing11. Conclusion12. Additional Information

INTRODUCTION: FOUR BASIC PREMISES:

1. Human civilization faces an array of profound environmental problems that have already begun to negatively affect the foundations of life on this planet.

2. Business is the only force on earth with enough reach to confront and correct the most serious environmental problems that face humanity.

3. Every single business in the world has both the ability and the opportunity to thrive and prosper by becoming more sustainable in every phase of its operations.

4. Creating a green and sustainable business is a daunting task, but the steps to doing so can be both straightforward and understandable to anyone.

BUSINESS STRATEGY: WHY GO GREEN?Doing well by doing good

COST SAVINGS

Why are we in business?

How do we reduce our costs of running a business?

The “myth” of the Environmental Premium

“Going green” = “growing green” i.e. money!

EMPLOYEES

Employees will be motivated They will work harder They will be more productive

Attract employees who want to work for you Less turn over Better products & services

Workplace becomes a safe, clean place

COMPETITIVE ADVANTAGE

By going green, you can…

Operate more efficiently than competitors

Offer products that are superior in quality

Better cater to customer needs

Lower health insurance premiums

Gain the trust of investors

BUSINESS STRATEGY: CALCULATING COST SAVINGSThe proof is in the numbers

PAYBACK ANALYSIS

# years required for improvement to pay for itself is equal to:

Total initial cost of the improvementFirst year cost savings produced by improvement

Example: We want to replace 100 old incandescentbulbs with 100 new fluorescent bulbs

PAYBACK ANALYSIS

1 incandescent bulb = 100 watts

On 18 hours a day/260 days a year

Uses 468 kWh energy (100 x 18 x 260)

10 cents per kWH = $47 a year per bulb.

For 100 bulbs, this is $470 annually.

1 fluorescent bulb = 20 watts

On 18 hours a day/260 days a year

Uses 94 kWH energy (20 x 18 x 260)

10 cents per kWh = $9.40 a year per bulb.

For 100 bulbs, this is $94 annually.

Incandescent Bulb Fluorescent Bulb

PAYBACK ANALYSIS

100 new compact fluorescent bulbs @ $5 a bulb costs $500.

$470 - $94 = $376 first year cost savings

Total initial cost of the improvementFirst year cost savings produced by

improvement

$500$376

= 1.33 Years

Payback

RETURN ON INVESTMENT

Return on Investment (ROI) =

Net return*Capital cost of investment

*Net Return = Net annual savings x life of investment

RETURN ON INVESTMENT

Using the same example…

Assume 10 years of life for fluorescent bulbsNet annual savings: $376

$376 x 10 = $3,260 net return

Recall that 100 fluorescent bulbs costs $500

RETURN ON INVESTMENT

Return on Investment =

Net returnCapital cost of investment

$3,260$500 = 652%

ROI over 10 years

SUSTAINABILITY PLANNING:HOW TO GREEN YOUR BUSINESSA business’s guide to going green

SUSTAINABILITY PLANNING: INTRODUCTION

Every business should have a sustainability plan

Plan is the “go to” source for a company’s stance on environmental issues

Defines clear employee responsibilities

Sets clear, measurable goals

Details how to achieve goals

SUSTAINABILITY PLANNING: 5 STEPS

1. Develop a Company Environmental Policy Statement

2. Determine Employee Responsibilities

3. Prepare the Green Plan

4. Implement your Green Plan

5. Communicate Efforts

DEVELOP A COMPANY ENVIRONMENTAL POLICY STATEMENT (VISION)

Shows stakeholders that environmental issues are important to your company

Keep it simple: No longer than one page.

Make it clear and easy to read and understand, since it is meant for everyone to see.

It should be realistic, achievable and relevant to a company’s activities and practices.

It should have top-level support (i.e., endorsement from managing director, president, chief executive or other).

VISION EXAMPLE

The University of New Hampshire (UNH) is nationally recognized as a Sustainable Learning Community* -- a land grant, sea grant, and space grant university that unites the spirit of discovery with the challenge of sustainability across its Curriculum, Operations, Research and Engagement:

• Curriculum: Educating citizen-professionals to advance sustainability in their civic and professional lives• Operations: Embodying first principles and best practices of sustainability• Research: Serving society with scholarship that responds to the most pressing issues of sustainability • Engagement: Collaborating locally to globally with extension and outreach

-- through four initiatives designed around four foundational systems of sustainability – biodiversity, climate, food, and culture.

COMPANY EXAMPLE ENVIRONMENTAL POLICY STATEMENT: WALMART

“At Walmart, we know that being an efficient and profitable business and being a good steward of the environment are goals that can work together. Our broad environmental goals at Walmart are simple and straightforward:

To be supplied 100 percent by renewable energy;

To create zero waste; To sell products that sustain people and the

environment.”

DETERMINE EMPLOYEE RESPONSIBILITIES Assign particular roles and responsibilities to attain company’s

environmental goals

Clear definition = better employee accountability & support

Some work that employees may be assigned to do:

Collecting information for various environmental assessments of the business, such as energy use, water use, waste disposal, etc.

Preparation of various worksheets and process maps regarding your business plan.

Participating in training or education efforts to understand any new policies.

Implementation of any of the changes that your company environmental plan requires.

Communicating your new environmental commitment to customers and the public.

PREPARE THE SUSTAINABILITY PLAN Choose which areas of your business you plan to

assess: i.e. energy, waste, water, green IT, etc.

Carry out assessment/audit

Review results of assessment

Determine if action is necessary, and if it is, outline the necessary steps to solve the problem/opportunity

Compile all additional information/paperwork

Set meaningful, manageable goals/targets

IMPLEMENT YOUR SUSTAINABILITY PLAN

Follow the outline you created for each of your target areas

Focus on fostering sustainable behavior

Monitor progress towards goals

Document everything

Gather employee feedback

Review goals & employee accountability periodically

COMMUNICATE EFFORTS

Share your successes!

Be open and honest about your failures, and make suggestions about how you will fix or improve upon them in the future.

Reap the rewards of a better public image: more customers, more investors, and jealous competitors.

FOSTERING SUSTAINABLE BEHAVIOR: MAKING SUSTAINABILITY THE BUSINESS OF YOUR BUSINESSSuccess is a business-wide effort

FOSTERING SUSTAINABLE BEHAVIOR

Sustainable behavior can start off strong…and then taper off.

Sustainable behavior only long lasting if: Employees motivated and involved

Top management is on board

It becomes a part of corporate culture, so that rules and regulations are in place, i.e. environmental management system

Want to create a culture of: “this is how we do things here.”

FOSTERING SUSTAINABLE BEHAVIOR

Motivating Employees: Build awareness of the company’s sustainable

development commitments and performance

Incorporate sustainable development in performance evaluation, compensation, personal development plans

Create partnerships with NGOs and local communities

Motivating Top Management: Provide tangible, cost-benefit analysis of improvements

Incorporate sustainable development in performance evaluation, compensation, personal development plans!

FOSTERING SUSTAINABLE BEHAVIOR

Environmental Management Systems (EMS): a formal set of policies and plans that defines how a company will evaluate, manage, and track its overall environmental impacts.

The presence of an EMS can have a variety of benefits, such as: Improved environmental performance Better regulatory compliance Certification and recognition (IS0 140001)

FOSTERING SUSTAINABLE BEHAVIOR

Five Key Elements in an EMS

Commitment and policy

Planning

Implementation &

operation

Monitoring,

Evaluation

Review

FOSTERING SUSTAINABLE BEHAVIOR

For more information, both documents are available at http://www.greenprof.org/?cat=29

“Leading Change......“ by J. P. Kotter, Harvard Business School

"Fostering Sustainable Behavior: Beyond Brochures" by Douglas McKenzie-Mohr

ENERGY EFFICIENCY: HOW TO REDUCE ENERGY COSTSThe sweetest of the low-hanging fruits

LET’S EXAMINE ONE COUNTRY

VIETNAM’S ENERGY USE Electricity counts for 35% of all energy demands.

In 1998, industry accounted for 1/3 of final energy use. In 2007, it accounted for 46 %.

Electricity use by electrical appliances accounted for 39% of total electricity use in Vietnam in 2007.

In 2009, Vietnam… Exported 535 million kWh. Imported 3.85 billion kWh.

Vietnam’s consumers currently pay some US$14–15 billion per year for energy!

ENERGY USE IN VIETNAM

ENERGY EFFICIENCY Lighting is a critical component of every small business

and can be a source of immediate savings.

The Electric Power Research Institute estimates that an aggressive drive to reduce energy costs can reduce electricity use by up to 25 to 45%.

The quest for energy efficiency entails a careful look at two main areas:

Examine how your business uses energy and investigate every possible way to reduce or eliminate that use of purchased energy.

Look closely at any possible way to replace that purchased energy with renewable energy sources.

ENERGY EFFICIENCY: WHAT’S USING IT? Lighting is the biggest expense for retailers, at about

37% of total energy use. Retail businesses spend nearly $20 billion on energy each

year. A 10% reduction in energy costs for the average retailer

can boost net profit margins by nearly 2% and sales per square foot by $25.

Office businesses attribute 16% of their energy use to office equipment – more towards equipment to cool it.

It is estimate that 42% of all lodging energy is used towards the heating of water, water which could otherwise be heated by thermal solar systems rather than electricity.

ENERGY EFFICIENCY: LIGHTING

Highest returns are usually on lighting

Always upgrade your lighting first

Improved lighting = improved productivity

Lighting also the easiest change to make: Switch from incandescent to fluorescent bulbs Use timers/dimmers/motion sensors

ENERGY EFFICIENCY: HVAC

Heating, Ventilation and Air Conditioning account for 40% of electricity used in commercial buildings

Benefit from upgrades and building improvements

But also benefit from cleaning.

Remove need for HVAC by using awnings, shades, trees, etc.

ENERGY EFFICIENCY PLAN

1. Conduct a comprehensive energy use assessment of your business operations

2. Create a strategy to eliminate problems

3. Evaluate energy efficiency actions on an economic basis

4. Implement the plan

ADDITIONAL INFORMATION

For additional information, read “Energy Efficiency: Teaching Module” by the Aspen Institute, available at http://www.greenprof.org/?cat=31

WASTE MANAGEMENT: REDUCING YOUR WASTE-RELATED COSTSWaste is money

WASTE MANAGEMENT The current lifestyle that the developed world leads

is not sustainable.

The average North American consumes 10 times as much as the average person living in China. 30 times as much as the person living in India.

Across the globe, only 7% of materials consumed actually become saleable products, 93% is waste. 99% becomes waste within six weeks.

Vietnam produces over 15 million tons of waste each year. Urban areas produce 60% of this waste, but have only

24% of Vietnam’s population!

WASTE MANAGEMENT

Waste is money lost: Every single thing that your company disposes

of, from used packaging, to trimmings, to waste oil, to smoke stack emissions, to plant effluents – were all initially purchased.

When purchased materials become waste, you are throwing away money.

Waste is money gained: Turn waste from an expense item into an income

item

WASTE MANAGEMENT: PRIORITIESReduce waste at the source

Recycle as much generated waste as possible

Treat waste

Dispose of waste

Most Preferred

Least Preferred

WASTE MANAGEMENT: HOW TO REDUCE WASTE AT THE SOURCE

Are you are overproducing?

Are you keeping unnecessary inventory?

Are you controlling for product quality and defects?

Are you over-processing materials?

Is there excessive waiting?

WASTE MANAGEMENT PLAN

1. Conduct a comprehensive waste assessment of your business operations

2. Create a strategy to eliminate problems

3. Evaluate waste management actions on an economic basis

4. Implement the plan

ADDITIONAL INFORMATION

To read about a waste management business, please go to http://www.greenprof.org/?cat=66

GREEN IT: REDUCING IT COSTS A growing problem with easy solutions

GREEN IT: THE FACTS By 2008, over 1 billion computers have been put into

use around the world. Due to rapid expansion in computer use in China, that

amount is expected to double by 2015.

A generation ago, a six person office might have used 600 watts of power. Today, a similar size office has a connected load of over

7,000 watts of power.

According to a recent UN report, the amount of fossil fuels necessary to manufacture one desktop computer is over 500 pounds. This is over ten times the weight of the computer itself. Many harmful chemicals, like lead, go into the computer.

GREEN IT: THE BURDEN OF COMPUTERS

Computers not designed to be biodegradable at the end of their lifespan

A computer is used on average for 3 years before it is replaced In 10 years that’s 3 computers. That’s 3 billion computers being disposed of

every 10 years worldwide, releasing lead, mercury, cadmium, and chromium into the soil.

Instead of buying new computers: focus on upgrading computers!

GREEN IT: THE BURDEN OF BEHAVIOR

Technology isn’t inherently bad; our behavior is.

Changing behavior is very difficult.

The changes we make, however, can be very small: Turn computer off at the end of the day Make double-sided copies Use low-power management modes Run data centers 4-8 degrees higher Discourage screensaver use Buy energy efficient electronics Switch to laptops

GREEN IT CONSERVATION PLAN

1. Conduct a comprehensive computer & electronics of your business operations

2. Inventory your current electronics and computer equipment

3. Create a strategy to eliminate problems

4. Evaluate strategy on an economic basis

5. Implement the plan

ADDITIONAL INFORMATION

“Green IT and the Bottom Line”, KPMG’s story is available at http://www.greenprof.org/?cat=37

GREEN SUPPLY CHAIN MANAGEMENT: MAKING YOUR SUPPLY CHAIN SUSTAINABLEBecause every business is also a customer

SUPPLY CHAIN

GREEN SUPPLY CHAIN MANAGEMENT Operating your business in a leaner, more efficient

manner can result in incredible cost savings.

Spend less on inventory carrying costs

Spend less on producing goods that spoil in storage because of excess inventory, and thus turn into waste

Spend less on resources you otherwise would only turn into waste

Spend less on getting rid of that waste

Spend less on facility upkeep and maintenance by downsizing due to efficiency

GREEN SUPPLY CHAIN MANAGEMENT

These savings BEGIN and END with the supply chain.

Supply chain is the span of operations that range from harvesting the materials necessary for making a product, to the final delivery of that product into the customer’s hands.

Efficiency should be a target for the entire supply chain.

Every business is both a supplier and a customer

GREEN SUPPLY CHAIN MANAGEMENT: WALMART

In 2008, Walmart began to rate their suppliers based on their packaging.

Supplied scorecards to all its suppliers, assessing the type of material used, the amount of packaging, the amount of recycled content, and other environmental factors.

Those suppliers with low scores were dropped.

If Walmart does it…so will everyone else. They will have to.

GREEN SUPPLY CHAIN MANAGEMENT PLAN1. First, examine what your supply chain actually consists of. W hat

are your suppliers and where do they come from?

2. Develop an approach to purchasing with will incorporate your environmental concerns, such as healthy lifecycles or low pollution.

3. Identify the impacts of each product in your supply chain. You will need to know:

1. Whether the product’s raw materials are produced in a sustainable manner. 2. Whether the product or material contains hazardous chemicals. 3. Whether the product or material is packaged in reusable/recyclable packing. 4. Whether and to what extend the product itself contains recycled content. 5. Whether the product or material is produced under verifiable fair labor

standards. 6. Whether the product or material is traceable to its source with a barcode or

other label. Whether and to what extent the product or material is produced with renewable energy.

7. What measures if any have been taken to assure that the product will be reused, recycled at the end of its product life.

4. Implement the actions that you have decided upon.

ADDITIONAL INFORMATION

“Leading Brands Engaging Suppliers” and Case Studies for:

Levi-Strauss Marks & Spencer Nike

are available at http://www.greenprof.org/?cat=42

ENTREPRENEURSHIP & INNOVATION: DEVELOPING GREEN PRODUCTS & SERVICESCatering to your customers’ needs

ENTREPRENEURSHIP & INNOVATION

Product and service design are the heart and soul of the sustainable process.

Is this product worth it?

Green innovation: the biggest inspiration is nature! Example: natural packaging

Walnut shell Eggshell Banana peel

ENTREPRENEURSHIP & INNOVATION: THE 10 BASIC RULES OF GREEN DESIGN1. Business operations should be designed to produce no waste.

2. Businesses should be designed to be easily adaptable to all foreseeable innovations.

3. Everything that enters a manufacturing process should leave as a usable product.

4. Every bit of energy used in manufacturing should produce a material transformation.

5. The absolute minimum of materials and energy should be used in all processes.

6. The materials used should be the least toxic available.

7. Industry should get most of its materials by recycling material already in use or disposed of, rather than from raw materials.

8. Every product should be designed so that it can either be reused itself or used to create other useful products.

9. Every business should be designed to improve the local habitat and species diversity and to minimize any effects on natural resources.

10. Close interactions should be developed between suppliers, customers, and competitors to minimize packaging and maximize reuse and recycling.

ENTREPRENEURSHIP & INNOVATION: THE GREEN DESIGN PROCESS

1. Consider the Entire Life Cycle of the Product

2. The Raw Material Stage

3. The Manufacturing Stage

4. The Distribution & Use Stage

5. Providing Services Instead of Products

6. The End of the Product’s Life

ENTREPRENEURSHIP & INNOVATION: GREEN PRODUCT DESIGN PLAN

1. Understand the life-cycles of both your current products and any future products.

2. Develop an approach to product design that will incorporate sustainability and environmental concerns into the design criteria.

3. Identify the impacts of each product in your business.

4. Implement the design criteria that you have decided upon for each product.

ADDITIONAL INFORMATION

“Why Sustainability is Now the Key Driver in Innovation” by Ram Nidumolu, C.K. Prahalad, and M.R. Rangaswami, Harvard Business Review, September 2009

Article is available at http://www.greenprof.org/?cat=35

GREEN MARKETING: RAISING CONSUMER AWARENESSLetting customers know you have what they want

GREEN MARKETING

…is the marketing of products that are presumed to be environmentally safe.

Customers see this “environmentally safe” component as a benefit and adjust buying preferences accordingly.

Effective Green Marketing requires an intrinsic knowledge of your business! Supply chain Inputs/Outputs Tangible environmental benefits

GREEN MARKETING IN VIETNAM

According to the Vietnamese Chamber of Commerce and Industry…

“Most Vietnamese consumers have tended to approach environment friendly brands through products with natural ingredients, having no chemical agents, especially health and beauty products such as food, beverages, pharmaceuticals, cosmetics, toys and resort tourism.”

However, the shift towards green trade is slow.

GREEN MARKETING: AVOIDING GREENWASHING

Greenwashing is the deceptive practice of using green marketing to mislead consumers about products that are not environmentally friendly.

Example: European McDonald’s changed their packaging color from yellow & red to yellow & green.

ADDITIONAL INFORMATION

“New Rules of Green Marketing” by Jacqueline A. Ottman, January 2011

Article available at http://www.greenprof.org/?cat=47

CONCLUSIONEvery end is a beginning

CONCLUSION

Our current way of life is unsustainable

Business has the power to influence our way of life

There are many different ways for a business to “go green”

Any business can do it

Any business can find an economic reason to do it

QUESTIONS?

ADAPTED FROM… Sitarz, D. (2008), “Greening your business: The hands-

on guide to creating a successful and sustainable business”, Carbondale, IL: EarthPress.

Additional information: CIA World Fact Book: Vietnam The World Bank: ASTAE Vietnam Environmental Monitor Vietnam Chamber of Commerce and Industry www.greenprof.org