Author Archive

May 24, 2012

Silence on Sustainability: Not as golden as it used to be

Dave Newman, Senior Strategist, Brightworks Enterprise Solutions GroupBy Dave Newman, Enterprise Solutions Group

A sustainability thought leader shared a cautionary tale with me recently. His former company had received a sustainability questionnaire from a non-governmental organization (NGO). The CEO told him not to respond. The firm’s responses wouldn’t be ideal, and they weren’t sure how much to disclose. When the report came out, the cost of that decision became clear: The company received an “F” ranking. When the survey arrived the following year, the CEO instructed him to respond with whatever information the company had. Anything would be better than their current grade!

Companies are being publicly rated on sustainability criteria – whether they know it or not and whether they participate in the process or not. The newly updated Ceres report on corporate sustainability progress among 600 top U.S. companies is just the latest publicized ratings example. No doubt the results caught at least a few businesses off guard.

The challenge for businesses is that these inquiries from industry watchdogs, NGOs or clients call for complicated responses and are probably not on your ideal timeline (of, say, “later, maybe never”). As my acquaintance’s experience illustrates, sharing your progress is better saying nothing, even if you don’t have all the answers. And just asking the questions will give you a sense of what some of your next moves should be.

Why are large companies falling short of Ceres’ expectations?

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March 7, 2012

Is Your Supply Chain Prepared for the Future?

Dave Newman, Senior Strategist, Brightworks Enterprise Solutions GroupBy Dave Newman, Senior Strategist

The humble supply chain will undergo a dramatic change as our energy network and systems transition from oil (fossil fuel) to renewable energy. Which begs the question: Is your company ready?

A business’ success or failure always depends on its ability to source and deliver products and services to the marketplace. Let’s look at how that delivery has historically taken place, how it will change as our energy network changes and how smart companies are preparing themselves.

Supply Chain Evolution

A supply chain is a system of organizations, people, technology, activities, information and resources that move a product from a company or supplier to the customer.  Picture a relay race of many runners: Each participant moves the relay baton until it reaches the finish line or, in this case, the marketplace where the product can be purchased.

Reviewing the evolution of the supply chain gives us a valuable foundation to discover what it may look like in the future.

Pre-Industrial Supply Chain

Before the industrial revolution, most people grew, raised or hunted for their food. All basic needs were available in the nearby town mercantile. In early America, some products were imported from European nations, but they tended to be expensive and were available only to the more affluent and urban populations. Goods traveled by truly sustainable supply chains – across oceans via sailing vessels powered by winds and currents, and locally via horse-drawn wagons.

Pre-Industrial Supply Chain: Companies, Manufacturing and the Marketplace in One Location

Pre-Industrial Supply Chain: Companies, Manufacturing and the Marketplace in One Location

January 23, 2012

Three Strategies to Achieve Corporate Sustainability

Dave Newman, Senior Strategist, Brightworks Enterprise Solutions GroupBy Dave Newman, Senior Strategist, Enterprise Solutions Group

After spotting the trends that corporate sustainability practitioners see in their daily work (Read: Four Trends in Corporate Sustainability), I looked deeper to figure out which strategies were getting leaders ahead. My conversations with some 20 leaders in Fortune 500 companies revealed three key strategies:

  1. Changing how the business views sustainability benefits – from cost reduction to revenue growth
  2. Moving sustainability out of departmental silos into shared business goals
  3. Reporting and sharing the things that matter with the people who care

In this follow-on post, I’ll highlight some of the common obstacles to implementing sustainability within companies, how leaders are overcoming them to achieve true sustainability leadership, and what laggards can start doing now to catch up.

 Efficiency is not innovation

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December 8, 2011

Four Trends in Corporate Sustainability

Dave Newman, Senior Strategist, Brightworks Sustainable Systems Groupby Dave Newman, Senior Strategist

This two-part post is the result of more than a dozen in-depth conversations with leading sustainability practitioners, most of them within Fortune 500 companies. We wanted to understand the sustainability trends these practitioners see to help us convey where, why and how leading companies are engaging sustainability to achieve their business goals.

This piece will explain the trends themselves. Part two will focus on how leaders are accomplishing their work and the first steps others can take to stay competitive.

In the last four months of conversations, we saw consistent sustainability themes emerge as companies move through the cycles of their business: from procurement and resource use to measuring and marketing. Leading companies are:

  • Acknowledging their supply chains
  • Examining their relationship to nature’s systems instead of single elements
  • Improving their data quality
  • Telling customers simple, memorable stories with that data

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November 15, 2011

Climate Neutrality: A Viable Corporate Strategy?

Dave Newman, Senior Strategist, Brightworks Sustainable Systems GroupBy Dave Newman, Senior Strategist, Sustainable Systems Group

In September 2011, the London 2012 Olympic Games made news by dropping plans to offset the event’s carbon emissions. The Games organizers said offset projects would have taken place away from Britain, and they prefer to maximize their environmental efforts locally.

The London Olympics 2012

Development for the London Olympics in 2012, photo via

This dramatic change made me wonder what caused the London Olympic organizers to renounce their offset plans, besides the estimated $4 million price tag. Climate neutrality was considered a leadership position back in the mid 2000s. But in recent years the value of climate neutrality has diminished, mostly because carbon offsets have fallen out of favor.

What changed the landscape for carbon offsets? Could it be trendy sustainability measures are losing currency as companies find and adopt strategies whose business benefits better align with their needs?

What is a Carbon Offset?

A carbon offset is a “promise” to avoid creating a ton of carbon emissions somewhere else in the world, typically in a developing country.

An example of a carbon offset project is a factory in Indonesia replacing an oil-fired boiler with a natural gas boiler. The sale of these carbon offsets would provide the necessary return on investment to pay for the cost of the new gas boiler. The owner paying for the gas boiler can sell carbon offsets equal to the amount of CO2 they will avoid emitting by upgrading their equipment.

It was an elegant idea, but eventually problems surfaced:

  • Many projects did not produce the carbon offsets they promised or their measurements could not be independently verified.
  • Investigations revealed many of projects would have occurred regardless of whether carbon financing was included – thus the purchase of a carbon offset produced no added benefit.
  • Many U.S.-based companies want local carbon offsets so they can be seen as helping their own communities, but offset projects are typically located in the developing world.

Unclear ROI: A Recipe for Disaster

The cost of carbon offsets ballooned in the late 2000s, selling anywhere from $8 to $20 a ton. Renewable Energy Credits (RECs) became a very popular substitute for carbon offsets and were much cheaper, priced from $.50 to $3 a ton. The use of RECs came under heavy criticism as they were used by some companies like offsets to reduce a firm’s overall carbon footprint. Whether businesses purchased carbon offsets or RECs, they incurred costly annual expenses from offsetting their CO2 emissions.

Most companies featured these programs in corporate responsibility reports or related marketing efforts, but they began to ask: Should a U.S.-based company invest in carbon offsets to achieve climate neutrality goals when a large percentage of the U.S. population does not believe climate change is real? Do U.S. or global customers care if a company has either achieved or established a climate neutrality goal?

As these questions became harder to answer, many companies re-examined climate neutrality as a corporate goal: If consumers don’t believe in or care about climate charge, why make the investment?

The deepest liability of carbon offsets, and the reason their ROI is so hard to quantify, is they are frequently just a band-aid on business-as-usual practices. Environmentalists frequently saw them as a way for companies to pay their way out of their carbon “sins.” This made them unsatisfying for the audience companies wanted to win over with their environmental initiatives.

Environmentalists were frequently right. Many companies were not making offsets part of a broader effort to take sustainability deeper into their organizations, find recurring cost savings and spark innovation (Click here to read some success stories of companies that did). As a result, these companies were not capturing any real value or public relations value from their offsets.

Every Business Case for Sustainability is Different

The Business Case for Sustainability, Brightworks Sustainability Advisors

Every business will find its own unique mix of business benefits from sustainability (learn more about the Business Case for Sustainability). Buying carbon offsets alone seemed to be of less value than many companies hoped when this trend took hold. But there are still exceptions. About one month after the London Olympics announcement, British Petroleum (BP) and their not-for-profit carbon management arm, BP Target Neutral, announced they would purchase carbon offsets to cover the emissions from spectator travel to the London Olympic Games at no cost to the ticket-holder.

BP Target Neutral is hoping to sign up enough spectators to set a new world record for the largest offset as measured by number of participants. Participants can sign up using BP Target Neutral’s London 2012 web page or its Facebook page.

Making the offsets an interactive event with customers is probably an effort to build goodwill and customer engagement. BP and its subsidiary perceived a business value from purchasing carbon offsets that just wasn’t there for the Olympics organizers.

That’s the business case philosophy in action – sustainability makes sense for everyone differently. The trends of the moment won’t last if they can’t create real value for businesses. As companies think more deeply about how to create and capture the sustainability benefits they need most, we can expect carbon offset programs to continue falling away.

October 6, 2011

Are You Ready For The New Scope 3 Greenhouse Gas Emissions Standards?

Dave Newman, Senior Strategist, Brightworks Sustainable Systems Groupby Dave Newman, Senior Strategist

Ready or not, Scope 3 is here. And you’d be well advised to understand what it means for your business and prepare for its impact sooner rather than later.

Two new international greenhouse gas (GHG) emissions standards — known as Scope 3 — were launched October 4 at events in New York and London. They were released by the Greenhouse Gas Protocol, a global collaboration led by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD).

The Greenhouse Gas Protocol previously released GHG emission standards for owned manufacturing and operations (known as Scope 1) and for purchased energy (known as Scope 2). The two are considered the de facto standard for global GHG emissions reporting.

Scope 3 ups the ante considerably. It enables companies to fully measure and manage emissions across their value chains and product lines for the first time. Researchers at Carnegie Mellon University have estimated two-thirds of U.S. industries would overlook 75 percent of GHG emissions if they neglect reporting on Scope 3 emissions.

Greenhouse Gas Emissions

The new Corporate Value Chain Standard helps companies discover the biggest opportunities to reduce emissions within those parts of their supply chain (manufacturing, transportation) they don’t own. The new Product Life Cycle Standard enables firms to measure the GHG emissions of an individual product, including its use by the consumer, using a credible international approach.

Among the businesses affected by the introduction of Scope 3 are consumer products companies whose value chains can stretch around the world, as well as suppliers to these companies. Scope 3 will lead companies to look both upstream and downstream in their value chain for ways to reduce GHG emissions, lower fossil fuel consumption and cost and decrease risk exposure due to future spikes in fossil fuel prices.

Here’s where it gets interesting. All companies are either producers or suppliers. And in one role or another, there’s a good chance your business will be brought into Scope 3 reporting — maybe happily, maybe kicking and screaming.

As a producer, you may choose to embrace Scope 3 and turn it into a competitive advantage. Or you may ignore Scope 3 altogether — until you can’t. At some point, a large customer is likely to ask your business to report your scopes 1, 2 and 3 emissions. At that point, choosing to ignore any of the scopes will no longer be realistic.

Walmart is the most prominent company to lean on its suppliers to report emissions and other sustainability measurements. However, that expectation or demand is becoming increasingly prevalent among larger companies and promises to gain momentum as Scope 3 reporting catches on.

Adopting Scope 3 proactively or in response to customer demand will seem daunting to many small to medium sized businesses. It will mean tracking GHG emissions, for example, from:

  • Employee commuting or from their choices of transportation and accommodations when traveling on business
  • Product movement as goods are transported from factory to store or warehouse; this would include factors that influence emissions, such as carrier type (air, ship, ground) and volume and weight of shipments
  • Materials, manufacturing, customer use and disposal of the company’s products
  • Firms that outsource their supply chain management may have little visibility into the makeup and sustainability performance of their suppliers. Similarly, they may struggle with how to gauge emissions from customer use and disposal.

Assessing, managing and reporting GHG emissions and other environmental impacts are fundamental steps for companies interested in mitigating risk (see our free webinar on the subject) and creating competitive advantage.  Our consultants have years of experience in sustainable design, manufacturing and transport for companies like Nike and for suppliers to major retailers like Walmart as they have managed Scopes 1 and 2. Clients like these sometimes need help to map their value chains and product lifecycle components to locate and gather the appropriate data, effectively engage suppliers to provide Scope 3 data and produce reports that are appropriate for customers asking for emissions data, or for other constituents interested in the client’s sustainability performance.

While Scope 3 may appear complex and confusing, the two new standards have been in development for more than three years with numerous stakeholder events, multiple drafts, comment periods and road testing by more than 60 companies. So the Greenhouse Gas Protocol has taken good care to address and remove obstacles to rapid adoption of the new standards.

The question is: are you ready to add Scope 3 to your list of sustainability advantages?

September 13, 2011

Manufacturer Value Chains: Turning Sustainability Risks into Opportunities

Dave Newman, Senior Strategist, Brightworks Sustainable Systems GroupBy Dave Newman

Senior Strategist, Brightworks Sustainable Systems Group

Businesses with global value chains can find any of their three core responsibilities – meeting consumer demands and legal requirements while also making profitable products – suddenly disrupted by sustainability-related trends and impacts.

Sustainability related trends and impacts

Companies often have difficulty understanding how these issues may affect their value chain of suppliers, operations, customers and consumers. And if the issues are understood, how will they influence corporate strategy and deployment of resources?

We at Brightworks use a systems thinking approach that looks beyond the problem at hand to include all the related possibilities. Systems thinking enables companies to design and implement strategies that reduce market uncertainties.

How Unsustainable Practices Create Risk

The risks and uncertainties inherent in emerging sustainability trends and impacts can be illustrated by several examples:

  1. Energy costs: A primary economic threat for most companies, and especially in extended value chains, is the unpredictable, volatile cost of energy, mostly tied to the cost of oil. Oil is the material basis of many products and provides the primary feedstock to transport goods from manufacturers to markets across the globe. So, what happens when the price of oil rises from $90 a barrel to $125…$150…$200? These price fluctuations put profitability at a high risk.
  2. Consumer expectation: Consumers and customers vote with their dollars every day when they purchase goods and services. Growing numbers of global consumers do care about their environment and want to purchase products from companies they believe are good corporate citizens.
  3. Pressure from business: Businesses are also dictating the demand for sustainable practices among their suppliers. Walmart, for instance, introduced a Sustainability Index in October 2009 to their largest suppliers. Their goals were to help create a more transparent supply chain, accelerate the adoption of best practices, drive product innovation and ultimately provide their customers with information they need to assess a product’s sustainability. If a supplier receives a failing score, it may at some point be dropped as a Walmart vendor. Other well-known companies, including Proctor & Gamble and Staples, have introduced sustainability scorecards, ratings and performance targets for their suppliers. Expect more businesses to introduce environmental programs targeted to their suppliers. Those suppliers ignorant or dismissive of this trend stand to lose business.
  4. Legal risks: In 2009, the State Council of China announced that China will commit to reduce its carbon intensity (defined as a reduction in CO2 per unit of gross domestic product) by 2020. It is highly likely that the carbon intensity goal will bring with it a similarly serious commitment and effort on the part of the Chinese government. For many businesses, the Chinese commitment provides certainty. That’s not the case in the U.S. The Environmental Protection Agency formally declared that carbon dioxide from the burning of fossil fuels poses a threat to human health in 2009. However, this “endangerment” finding has been challenged in federal court. No one in the U.S. can be certain EPA or Congress will establish any CO2 regulations.

Turning Risk Into Opportunity

With risks like these posing threats to manufacturers, no wonder leading companies are planning ahead instead of waiting to be disrupted.

Consider, for example, Nike’s goals for footwear manufacturing: zero waste, zero toxics and 100% closed loop systems by 2020. Waste from footwear production was substantial and often was incinerated or sent to landfills. In pursuit of its goals, the company sought to reduce post-manufacturing waste and responsibly manage its disposal. If Nike had viewed this as an issue-specific, isolated problem, it might have mitigated the risk by simply purchasing a different feedstock or attempting to recycle more. By viewing the solution as part of a connected system, Nike was able to achieve greater environmental and business results.

Post-production rubber from the creation of outsoles produced one of the largest waste streams. So the footwear sustainability team developed markets for post-production rubber. One buyer was Nike itself. Once the post-production rubber was ground up, it could be used as feedstock for rubber outsoles. Working with the footwear design team, Nike began to market “regrind” rubber in various models and use it for up to 5% of the rubber outsole.

The company then looked to develop markets in Asia and the U.S. for regrind rubber. One such market was artificial athletic fields that used reground, used tires. Nike successfully positioned its regrind rubber as superior. For example, it could be sorted by color, contained zero additional materials and did not mark footwear and field equipment.

Through the sustainable footwear team’s vision and action, Nike was able to meet corporate waste goals, responsibly manage factory waste and create income from royalties by licensing “Nike regrind” to artificial field developers.

A Lesson in Systems Thinking

Any enduring initiative within a business, including sustainability, requires a comprehensive approach. By focusing first on a set of goals to chart their course, and then viewing their goals and challenges as an interrelated system rather than an isolated problem, Nike reduced one of their manufacturing waste flows and transformed it into top line revenue growth.

All businesses run their own sustainability risks, especially if they sell to consumers or manufacture products. And like Nike, they have access to these corollary sustainability opportunities. Systems thinking helps businesses spot these opportunities and better position themselves to withstand the changing environment of regulation, consumer demand and energy volatility.

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