Sustainability and Corporate Strategy

I was at The Economist’s 2009 Sustainability Summit this morning. (Thanks for having me, Economist.)

It kicked off with a review of the global economic situation by Leo Abruzzese, Editorial Director for North America of the Economist Intelligence Unit. (They foresee a return to slow growth in the US sometime in the third quarter of this year.)

This was followed by three panel discussions.

Regulatory Changines and the Business Response to Climate Change

Here we heard from FedEx, Pitney Bowes and Shell. Key take aways:

To reduce Carbon emissions, Shell favors a cap and trade regime, while FedEx prefers a carbon tax. “ If Congress feels compelled to put a price on carbon, put a price on carbon,” said Mitch Jackson, Director of Environmental Affairs and Sustainability at FedEx. “Do it with a carbon tax.”

Kim Corley, US Director, CO2 and Environmental Affairs at Shell laid out her company’s position on cap and trade. She wants

  • Carbon allowances established to “grandfather” to current or recent levels of emissions
  • Half of the allowances to be auctioned and half to be given for free (with an end to free allocation sometime in the future)
  • the liberal use of offsets, to allow companies to fun low-cost methods of carbon reductions outside of their own operations

This reflects the company’s desire to phase in carbon constraints as slowly as possible. In deed Ms. Corley cited Michael Oppenheimer of the Intergovernmental Panel on Climate Change whom she claims endorses Shell’s view that there is no rush to tackle climate change quickly, that we are not in danger of passing some terrible tipping point as others have alleged. The spector of climate change is not Shell’s primary concern. “The biggest challenge we all face is this looming specter of climate regulation,” said Corley.

Pitney Bowes, represented by Vicki O’Meara, Executive Vice-president and Chief Legal and Compliance Officer, advocated substantial public support for various clean carbon technologies, as did Shell. Ms. O’Meara said that both the US and China possess enormous coal reserves and should join forces to find an ecologically sound way of exploiting those reserves.

In response to a question from the audience, all three companies said they had voluntarily purchased carbon offsets and/or renewable energy certificates.

Adapting the Business Model to Reduce Carbon Intensity

Here KPMG spoke of their investment in green IT (they have one person dedicated to it) and the substantial savings in energy, carbon and maintenace they have realized through relatively simple means such as server virtualization, Energy Star compliance and the like.

DuPont mentioned virtually eliminating landfill waste in their Building unit. An audience member from Turner construction said that 30% of their work this year and 40% of their backlog is seeking LEED certification.

P&G described product development approach grounded in consumer research and full lifecycle analysis that led them to develop cold-water detergent that requires no tradeoffs from consumers but whose use can save substantial amounts of energy. Len Sauers of P&G said that if everyone who does laundry in hot or warm water switched to cold we’d meet 7% of our Kyoto goal. Sauers said, in response to a question, that the company eschews “eco labels,” feeling they stifle innovation and confuse consumers.

Sustainability, Competitive Advantage and the Bottom Line

Baxter, Caterpillar and SAP were on this panel.  Most noteworthy to me:

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Joseph Allen of Caterpillar said that the company sees sustainability as an integrate part of their strategy. Sustainability metrics are built in along with the rest of the metrics they track, he said. Allen touted the company’s Remanufacturing Division, which receives worn out or defective parts from customers via a global reverse logistics network, “demanufactures” them, and then remanufacture them into new parts that carry a same-as-new warranty and which last as long and perform as well as new parts. Remanufacturing parts, he said, requires 80% less energy and releases 65% less greenhouse gas than manufacturing new parts from scratch.

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Filed under carbon, emissions, sustainability

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