Empowering Business through Corporate Responsibility

Sustainable Solutions Corporation 155 Railroad Plaza, Suite 203

Royersford, PA 19468

Tad Radzinski, PE, LEED AP, SFP

Over the past decade, the landscape of business has changed dramatically.

As the global economy expands, consumption and demand are on the rise.

Political policies and economic crises have challenged businesses to transform

their long-term strategies and identify new and innovative approaches.

Corporate Responsibility has been proven as the key to advance business

strategies and ensure continued success in a turbulent marketplace. This white

paper examines the growing need to revolutionize business, and the intrinsic

value of adopting sustainability as a business strategy.

Market Implications of Corporate

Sustainability Initiatives

Investor Relations and Stakeholder Demands

Recent reports are finding that major investors are quietly

pulling out of some firms that were once thought to be

“a sure thing”. This move by financial experts reflects a

lack of faith in traditional business strategies, and is

prompting the need for innovation and new sources of

sustainable revenue. These industry-leading companies

need something to differentiate their brand and ensure

the long-term viability of their business.

So what is the answer? Corporate Sustainability can be

vital in protecting critical resources and assuring investors

of your commitment to a secure future. A progressive

business strategy based on an understanding of future

trends, resource constraints and market needs is the key

to a successful Corporate Sustainability program. It leads

to innovative business practices that consumers, and

therefore investors, can’t wait to support.

In other instances, investors have specifically demanded

that companies address certain environmental

concerns. In the first quarter of 2013, Dunkin Donuts was

approached by New York State Comptroller, Thomas

DiNapoli. DiNapoli, responsible for the $1.9 million

pension fund investment in Dunkin Donuts, filed a

shareholder resolution regarding palm oil sourcing. Palm

oil is used in many of Dunkin Donuts products, which is an

area of concern due to the negative environmental and

social impacts of some producers. As a result of the

resolution, Dunkin Donuts has committed to sourcing

100% sustainable palm oil to reduce habitat damage

and support fair working practices. Several other

corporations that the pension fund has stake in,

including Sarah Lee and the J.M. Smucker Company,

have also agreed to exclusively source from Roundtable

on Sustainable Palm Oil certified sources.¹

1. http://www.triplepundit.com/2013/03/dunkin-donuts-source-only-

sustainably-produced-palm-oil/

Market Implications of Corporate

Sustainability Initiatives

Consumer Preferences

Today’s consumers are more educated about the environmental impacts of the products they

use and the companies they source from, and are proactively shaping the future of business.

Through their spending power and online influence, consumer groups like the Baby Boomers,

which control approximately 70% of disposable income in the U.S., and the Millennials, many of

whom have never known a world without smartphones, are demanding more sustainable

corporations.

Sustainable principles resonate with Baby Boomers who want to protect the interests of future

generations, including their children and grandchildren. Alternatively, Millennials are more

skeptical than previous generations and are wary of big business. Through transparency and

product innovation, Corporate Sustainability has helped companies like Apple, Timberland

and Unilever appeal to these consumer groups. As competition increases in today’s

marketplace, the need for inventive ways of conducting business and reaching consumers has

significantly advanced the role of Corporate Sustainability in strategic business plans.

Sustainable Procurement Policies

In answer to changing consumer preferences and stakeholder demands, many leading

organizations have implemented Sustainable Procurement Policies. These consist of standards

for locating and purchasing environmentally preferable products and raw materials. This

movement has fueled the green product market and created a system of supply chain

management that focuses on shared responsibility and impact reduction.

Resource Constraint Raises Costs and Drives Innovation

In examining the abundance of commonplace products that utilize petroleum, not only

in processing, but as a raw material, the results tend to shock most. The Institute for the

Analysis of Global Security projects that by 2020, 83% of the world’s oil reserves will be

controlled by Middle Eastern regimes, a monopoly that will be free to affect prices at

will.² Petroleum is only one example of the extreme resource dependency of developed

nations; for other examples, please refer to my previous white paper, Sustainable

Product Development: Critical for Resource Conservation and Product Innovation.

As more countries enter the developed world, resource consumption is going to increase

exponentially, which will drastically affect oil consumption. Organizations that are

heavily oil dependent, such as manufacturers of any of the products included in Figure 1

(below), as well as companies in the transportation and logistics industries, are going to

realize a significant price increase, and possibly resource shortages. Some progressive

businesses, however, are proactively addressing this impending issue.

Figure 1 – Household Products Made from Petroleum

Figure 1 http://www.ranken-energy.com/Products%20from%20Petroleum.htm

2. http://www.iags.org/futureofoil.html

Solvents Floor Wax Ballpoint Pens Football Cleats Dashboards Balloons

Ink Sweaters Boats Insecticides Cortisone Sun Glasses

Upholstery Tires Nail Polish Fishing Lures Purses Detergents

Dresses Dishwasher Parts Golf Bags Perfumes Shoes Heart Valves

Motorcycle Helmets Caulking Tool Boxes Shoe Polish Putty Crayons

CD Player Faucet Washers Petroleum Jelly Transparent Tape Dyes Parachutes

Curtains Food Preservatives Antiseptics Clothesline Deodorant Tents

Vitamin Capsules Antihistamines Basketballs Soap Footballs Enamel

Percolators Life Jackets Panty Hose Refrigerant Skis Pillows

TV Cabinets Rubbing Alcohol Linings Tool Racks Car Battery Cases Dishes

Shag Rugs Electrician's Tape Mops Slacks Epoxy Telephones

Paint Umbrellas Yarn Insect Repellent Oil Filters Anesthetics

Roofing Toilet Seats Fertilizers Hair Coloring Denture Adhesive Artificial Turf

Linoleum Fishing Rods Lipstick Speakers Plastic Wood Artificial Limbs

Ice Cube Trays Synthetic Rubber Tennis Rackets Rubber Cement Fishing Boots Cameras

Glycerin Nylon Rope Candles Trash Bags Dice Dentures

Water Pipes Hand Lotion Roller Skates House Paint Shampoo Model Cars

Wheels Paint Rollers Surf Boards Guitar Strings Luggage Folding Doors

Aspirin Shower Curtains Antifreeze Football Helmets Awnings Bandages

Interface® Case Study: The Business Value of Corporate Sustainability

Interface is the world’s largest producer of carpet tile, a petroleum based product. Thanks to

the foresight and leadership of the late Ray Anderson, Interface is on its way to phasing out the

need for oil in its production process. By setting lofty, seemingly impossible goals, Anderson

initiated one of the greatest examples of industry innovation of our time, and demonstrates the

value of Corporate Sustainability.

Monetizing Sustainability³

Aiming to reduce waste and remove oil from the supply chain, Interface has pioneered

carpet tile recycling. Now 49% of total raw materials the company uses are recycled or

bio-based, which helps mitigate fluctuating oil prices.

By reducing waste to landfill by 72% from 1996-2010, Interface’s QUEST program has

accumulated a total of $438 million in avoided costs.

Having renewable energy sources for 36% of total energy use alleviates rising utility costs.

Sustainable carpet options have increased sales by reaching demanding consumers.

3. http://www.interfaceglobal.com/Sustainability/Our-Progress/AllMetrics.aspx

Changing Climates Shift Market Preferences and Can Limit Production

Admittedly a ubiquitous term, climate change is affecting businesses – now and in the future.

As the climate changes, periods of extreme weather are increasing. The implications of this

include effects on natural resources, manufacturing plants and future product demands.

Natural Resources

Changing weather patterns are impacting many natural resources through inconsistent crop

yields, declining biodiversity, droughts/flooding, and lowering resource quality. Identifying

alternative materials and planning for sustainable acquisition is necessary to alleviate

uncertainty in future resource availability.

Manufacturing Plants

As periods of extreme weather become more frequent, manufacturing plants will need to be

designed to withstand changing local climates. Designing resilient buildings protects

organizations from unexpected delays in production due to natural disasters like flash flooding

or extreme wind and power outages.

Future Product Demands

Consumers will be affected by climate change and will demand more resilient products from

manufacturers. Changing regional weather will alter market preferences and should be

anticipated by forward-thinking corporations. At present, many consumers are unprepared for

the effects of climate change. One such example is the citizens of New York City and the

resulting floods from Super Storm Sandy in October 2012. As these events become more

common, a new product demand which was previously unneeded will enter the market.

Developing Countries and the Growing Middle Class:

How do we Give Nikes, Levis and iPhones to

Three Billion More People?

The world population continues to increase, and as more countries

become developed, the middle class is growing around the globe. The

BRIC countries alone – Brazil, Russia, India, and China – consist of 3 billion

people. These countries are all at a similar state of economic

development and are generating a new group of empowered

consumers. This begs the question: How do we give Nikes, Levis and

iPhones to three billion more people? Is it even possible?

We live in what I refer to as a “consumer-istic” society, and as more

individuals have the means and resulting purchasing power, global

demand for consumer goods is going to increase drastically. The current

manufacturing system of take-make-waste will be unable to support the

markets of the future. Resource conservation and increased resource

productivity are necessary to ensure continued product development

and to maintain the consumer economy as we know it.

Responsible Design principles engrained in a Sustainable Product

Development (SPD) Program provide manufacturers a realistic solution to

demand increases and resource constraint, while mitigating costs. SPD

programs are designed to identify opportunities for improvement and

generate more sustainable products. SPD teams use life cycle thinking

techniques and tools to consider alternative materials, processes and

sourcing that result in decreased environmental impacts throughout the

product’s life. Combining innovative design techniques with life cycle

data allows manufacturers to evaluate future products before going to

market, thus increasing environmental performance, enhancing market

appeal and maximizing ROI.

A Return to U.S. Manufacturing as Foreign

Wage Rates Increase

As countries develop and the middle class

grows, foreign wage rates are increasing. These

rate hikes have impacted the cost of production

and are beginning to fuel domestic growth.

Many companies are bringing manufacturing

operations back to the U.S. because of rising

overseas labor costs and increasing oil and

transportation expenses. Trends are showing that

U.S. manufacturing is becoming fiscally

beneficial again.

Speaking at the National Retail Federation's

(NRF) Annual Convention, Bill Simon, President

and CEO of Walmart U.S., announced Walmart's

commitment to revitalizing our domestic

economy. The retail giant plans to use its

extensive influence and buying power to

promote onshoring and increased production of

U.S. goods. Over the next ten years, Walmart

pledges to purchase an additional $50 billion in

U.S.-made goods. Bringing manufacturing back

to the U.S. not only boosts the local economy,

but will allow Walmart to reduce transportation

costs.

Onshoring manufacturing operations is going to

cause companies to reevaluate their supply

chains. Sustainable supply chain management

can improve quality control, reduce waste and

inefficiencies, as well as avoid other associated

costs.

Corporate Social Responsibility

A Key Strategy for Continued Success

An emerging focus in business strategy is measuring and leveraging social

performance. This includes enhancing the local communities in which corporations

operate, improving employee and customer relations, and actively affecting social

and environmental change. Industry has been cited as the only entity with the influ-

ence to affect rapid, substantial change in society. This is mainly due to the fact

that government and regulatory pressure move too slowly.

Having the power to shape society has given businesses the opportunity to progress

to new levels of production and enhance their market position. Corporations that

are advancing sustainable principles are driving toward this goal, creating new

markets, and establishing competitive advantage. Pioneering Corporate

Responsibility is a necessary step for companies that wish to excel, and a key

strategy for continued success. Organizations that

do not evolve and innovate will go extinct.

The old way of doing things is out, and

forward-thinking companies are setting the

standard for the new economy.

Sustainable Solutions Corporation 155 Railroad Plaza, Suite 203

Royersford, PA 19468

Tad Radzinski, PE, LEED AP, SFP Copyright 2013 by Sustainable Solutions Corporation