How to use “Green” Business methods to create (More) Profits (for All)

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What’s a “Green” or Sustainable Business?
The “Doux Commerce” Principle: no transparency, no business deal - it’s in your best self-interest to act in a transparent way.
Adam Smith explaining the Dutch superior trading skills.
Smith postulated that Reputation is extremely important in Business.
Jane Jacobs, a top American anthropologist (1992) stated on Humans: either we steal, or we trade to make a living (51-53).

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How to use “Green” Business methods to create (More) Profits (for All)

  1. 1. RENACER Presents: Workshop How to use “Green” Business methods to create (More) Profits (for All) Presented by Douglas Lezameta & Hernan Vargas, RENACER Sam Jensen Augustine, PG&E Antioch, CA October 2013
  2. 2. AGENDA • Introduction • A brief perspective – the social role of business in History • What’s a “Green” or Sustainable Business? • How to use “Green” business practices to generate more profits • Special Presentation by PG&E • Cases – restaurant, construction contractor, janitorial services • Q&A, Conclusions and Recommendations
  3. 3. A brief perspective – the social role of business in History From Corporate Responsibiity by Toby Webb, www.tobywebb.blogspot.com
  4. 4. A brief perspective – the social role of business in History • From Corporate Responsibiity by Toby Webb, www.tobywebb.blogspot.com
  5. 5. A brief perspective – the social role of business in History The 1800’s Cadbury Family expansion plan The Bournville manufacturing plant – first workers’ village in Victorian England Designed explicitly and purposefully to create a high quality of life environment for workers Results:  Significant accident reduction  Very low absenteeism  Dramatic reduction in employee turnover  Much increased profits, successful market expansion, market domination From Corporate Responsibiity by Toby Webb, www.tobywebb.blogspot.com
  6. 6. A brief perspective – the social role of business in History The 1911 Manhattan Sweatshop Fire The Nov 2012 Tazreen Bangladesh Sweatshop Fire The April 2013 Rana Building Collapse in Bangladesh
  7. 7. A brief perspective – the social role of business in History
  8. 8. A brief perspective – the social role of business in History • Bangladesh: Minimum average wage $ 37 monthly, in Cambodia is $ 61 a month, and in industrialized China is $ 150 per month • The average cost of manufacturing a dress shirt is between $1 to $1.50 in Bangladesh, and in industrialized China is between $3 to $4. • But after what happened…what is (was?) the true cost of production (including “bad publicity and bad reputation” risks)?? • This is when the concept of ”Externality” comes into place From The Wall Street Journal Online article “Before Dhaka Collapse, Some (Western) Firms Fled Risk”, May 8 th, 2013
  9. 9. A brief perspective – the social role of business in History Externalities usually show up in unexpected ways, mostly through significant (and destructive) legal costs associated with damages…. From Corporate Responsibiity by Toby Webb, www.tobywebb.blogspot.com
  10. 10. A brief perspective – the social role of business in History …a present debate: “Fracking” in the extraction of Natural Gas Obvious benefits of natural gas… ….but the Fracking process, based on water usage, is fraught with big questions….. ..No doubt on the significant visible benefits of the Marcellus Shale and its economic value… …but we know the costs???? Fracking exemption of the Clean Air y Water Acts
  11. 11. A brief perspective – the social role of business in History
  12. 12. A brief perspective – the social role of business in History There is no available data to assess quantities of water used, nor the impact on the quality of water sources caused by fracking We can’t know if the fracking process is dangerous to human health and the environment….exactly what happened with DDT some 40 years ago…. …and that’s the nature of Externalities
  13. 13. A brief perspective – the social role of business in History The banking and financial sector became Too Concentrated, Too Complicated and Interconnected, Too Distant from their clients, Too Big to Fail…. …until the point when those externalities became realities, and we all suffered the consequences, not just the entities that indeed failed.
  14. 14. What’s a “Green” or Sustainable Business? • The “Doux Commerce” Principle: no transparency, no business deal - it’s in your best self-interest to act in a transparent way. • Adam Smith explaining the Dutch superior trading skills. • Smith postulated that Reputation is extremely important in Business. • Jane Jacobs, a top American anthropologist (1992) stated on Humans: either we steal, or we trade to make a living (51-53).
  15. 15. What’s a “Green” or Sustainable Business? • Human TRUST is thus paramount in business dealings…. • …Trust rests on two key assumptions:  The Market must have complete information on the transaction at hand (including the effect of externalities), and,  The Parties involved in the transaction deal believe and understand that both can be accountable and suffer / enjoy the consequences of the trade
  16. 16. What’s a “Green” or Sustainable Business? “The Capitalism System is in danger…. We are not valuing things correctly…. We all are to blame for this predicament….” Dr. Michael Porter, the most prestigious Strategy Guru in the world, HBR 2011
  17. 17. What’s a “Green” or Sustainable Business?  These are the 10 global megaforces WE have created that make our world and the way we live not viable in the not so long run  From the research paper performed in2012 by KPMG, Expect the Unexpected
  18. 18. What’s a “Green” or Sustainable Business?
  19. 19. What’s a “Green” or Sustainable Business?
  20. 20. What’s a “Green” or Sustainable Business?
  21. 21. What’s a “Green” or Sustainable Business?  The famous 2007 paper by The Hartman Group:  Sustainability is becoming more and more important as a key attribute in purchase decisions by prospective clients across many industries and business segments  Sustainability = social aspects - employees welfare and wellness  How has this dynamic continued evolving?
  22. 22. What’s a “Green” or Sustainable Business?
  23. 23. What’s a “Green” or Sustainable Business?
  24. 24. What’s a “Green” or Sustainable Business?
  25. 25. What’s a “Green” or Sustainable Business?
  26. 26. What’s a “Green” or Sustainable Business?
  27. 27. What’s a “Green” or Sustainable Business?
  28. 28. What’s a “Green” or Sustainable Business? Sustainability, or “Green Business”, it’s a growingly very significant business opportunity:  It’s creating new opportunities for high-growth markets, sales and revenues,  It’s facilitating the implementation of processes and tools that help reduce operating costs, thanks to enhanced cost efficiencies in resource utilization,  It’s increasing the productivity and yields of resources due to lower usage of them in creating the same products, or by increasing the volume produced while using the same level of resources
  29. 29. What’s a “Green” or Sustainable Business?
  30. 30. What’s a “Green” or Sustainable Business? A not-so-fairy tale from Disney: The risk (and opportunity): the discovery of Nike’s children sweatshops - 1994 Disney’s solution: the implementation of Disney’s International Labor Standards It required significant effort and enforcement together with the support of Governments and Licensees It cost Disney $$$$$$$$ Sustainable Shared Value created: Preservation, if not enhancement, of the Disney brand, organic less risky sales growth  Financial Sustainability Fact: the shared value created was much higher than the direct cost of the initiative and than the potential liabilities  Social Sustainability Fact: workers’ rights and welfare indicators improved in many regions around the world where Disney operated with their standards
  31. 31. What’s a “Green” or Sustainable Business? • But “green business” or sustainable practices are neither only for big corporations….nor just focused on environmental issues….
  32. 32. What’s a “Green” or Sustainable Business? • The U.S. Federal Government Plan to confront Climate Change, June 2013 • The Federal Government will issue new regulations through EPA and other agencies • The Plan is focused on three key areas of the American economy: “We have to act”, President Obama at Georgetown University, June 2013 – To significantly reduce pollution in energy generation and reduce the consumption of energy – To significantly increase the utilization of renewable energy – And to Build sustainable infrastructure • Which Small Business sectors will be affected the most? – – – – Construction – standards for “green building” Commerce and Retail – standards for the use of energy in refrigeration, heating Restaurants – standards for water consumption and others applicable to retail Transportation, distribution and logistics – standards for efficiency in energy consumption – And all suppliers of goods and services to large, big corporations
  33. 33. What’s a “Green” or Sustainable Business? …to become “green” or sustainable, it can be an advantage for small and mid-sized (SMBs) businesses…  SMBs are local, and locality is becoming a major selling point,  It’s usually easier to differentiate their value proposition, and  They are more agile to respond and adapt to changing environments …and the biggest impediments to become a “green”, sustainable business?:  ..surprisingly, it’s not financing, but…  Technical capabilities and managerial acumen, and  Access to entrepreneurs’ support networks Plus, of course, an open mind and motivation
  34. 34. How to use “Green” business practices to generate more profits Building a sustainable business is a Journey. There are diverse paths for all. We propose the following method: 1. Pick two or three quick positive hits you could get by using green practices 2. Build on those quick successes by taking on one or two structural fundamental operating challenges that could benefit from a “green” solution 3. Seek and utilize continuously available support networks (many of them free!) 4. Make a habit of controlling and measuring results and adjust your plan as you go
  35. 35. How to use “Green” business practices to generate more profits 1. What could you change quickly in your business that your clients would appreciate or would reduce your operating costs without doing a major investment, using “green” practices?      Something related to quality of life? An upcoming change in regulations? Are new materials available? Could a new technology be implemented? Are there networks of sustainable support services available we haven’t used?
  36. 36. How to use “Green” business practices to generate more profits 2. For structural changes: – How do you really create sustainable value: • • • Can you enhance your productivity? Can you improve the welfare and wellness (of your workers and/or community)? Can you regenerate or restore resources, can you eliminate waste, can you use non-toxic materials and processes? – Could you or should you differentiate, or target a specific market niche better than others? – This is a more complex process, but you can do it.
  37. 37. How to use “Green” business practices to generate more profits 1. Seek and utilize continuously available support networks (many of them free!) – National, regional and local resources • Trade groups, associations, conferences • Suppliers networks • Nonprofits (like the ones that certify green businesses) • Chambers of Commerce • Public / Private Partnerships • Educational institutions • Social media platforms • Traditional media • Government agencies • Financiers and financial institutions • Investors’ groups
  38. 38. Cases
  39. 39. Cases • The issue: Construction industry’s challenges – – Sector Construcción, muy lenta recuperación… Las oportunidades: en el sub-sector construcción “verde”
  40. 40. Cases Environmental Leader, “Green Building Market To Hit $173.5 Billion by 2015,” July 1, 2010 ..la construcción en general crecería solamente un 7%...  …en dónde se está produciendo este cremiento de construcción “verde” 
  41. 41. California’s ZNE Plan for Buildings Zero Net Energy (ZNE) Action Plan for Buildings (Aug. 2010). To shift California’s 5B ft2 of commercial property space from using 38% of the state’s energy to “net zero” energy users by 2030. ZNE buildings have net energy consumption of zero, using energy efficient construction and use on-site renewable energy sources. 1. 2. 3. 4. 4 Big Bold Energy Efficiency Strategies (BBEES) All new residential construction will be ZNE by 2020 All new commercial construction will be ZNE by 2030 Optimize / upgrade existing HVAC systems Low-income energy efficiency program by 2020 Environmental Leader, September 2, 2010 “California Rolls Out Zero Net Energy Plan for Buildings”
  42. 42. Cases • – – – – – – – – And there’s more: Recommissioning of old abandoned commercial buildings into “green infrstructure”: urban gardens, schools, hospitals “Green” Hospitals – this is a large part of President Obama’s plan Renovation and remodeling of schools – one of the three fastest growing sectors Infrastructure for mass transit – BRT in Oakland / Berkeley Energy distribution and generation – the largest and fastest growth sector Sewer, water treatment and wastewater treatment plants Brownfield restoration and detoxification (Oakland Army base) “Green” remodeling and renovation of old multifamily and apartment complexes
  43. 43. Cases • What’s going on, what to do? – Change in market preference – sustainable buildings – Change in regulations – sustainable buildings – A challenge: availability of resources – qualified, skilled workers in green sustainable building practices – If you are not “green”, you are risking losing sales and getting out of the market – First step – to get certification - training – Engage in training opportunities- network – USGBC and a few non-profits, community colleges • Owners and Partners must get LEED certification • Workers can get formal training and certification through USGBC associated entities or through authorized nonprofit institutions • A great way to begin is to connect with your County’s ABAG Green Business program representative http://www.greenbiz.ca.gov/BGRemodeler.html – Join a trade group (like the NorCal USGBC) or at the minimum actively participate in USGBC’s regional expos, conferences and events
  44. 44. Cases
  45. 45. Cases  Not all restaurant “concepts” suffered during the Great Recession    The sub-sector called “fast casual” kept growing vigorously All projections indicate that this sector will be the most dynamic and most profitable in this decade “Fine Dining” and other options seen as “not healthy” will suffer during the following years
  46. 46. Cases  Case: Antojería Mexicana El Chilar, Oakland, CA  Started as a very small place inDowntown Oakland  Fresh, delicious and practical menu inspired in popular Mexican and TexMex cuisine, at accessible prices  Established strategic alliance with local supplier of red meats produced organically and sustainably in the region– Niman Ranch  Implemented some sustainable business practices for workforce management to enhance productivity  Connected with local resources  Established a successful catering line of business  It became one of the highest ranked Mexican restaurants in Yelp (learnt to use social media)  It eventually expanded and opened a full-service restaurant, Molcajete
  47. 47. Cases
  48. 48. Cases
  49. 49. Cases Connect and use your local resources - EBMUD
  50. 50. Cases
  51. 51. Cases
  52. 52. Cases
  53. 53. Cases
  54. 54. Cases  Connect and use your local resources  ABAG Green Business Program http://www.greenbiz.ca.gov/BGrestaurants.html  The Food Service Technology Center PG&E in San Ramon  http://www.fishnick.com/  And also regional and national resources  The CONSERVE Program of the National Restaurant Association http://conserve.restaurant.org/
  55. 55. Cases • – – – – – Other issues and opportunities in the restaurant industry: Two of the highest operating costs in a restaurant are energy consumptions and water consumption. Another significant cost is the so called FOGs (Fats, Oils and Grease) For cities, FOGs are also a headache. In San Francisco, the city spends a $ 3.5 Million annual budget to declog and clean up sewer systems congested by these FOGs. These FOGs are highly toxic, pollute the ocean and devastate the marine biodiversity Nowadays, San Francisco and other Bay Area cities have programs that pay you for the FOGs you produce. You could establish and alliance with Northern California’s People’s Fuel Cooperative and / or register with the Office of SFGreaseCycle.
  56. 56. Conclusions and Recommendations • • • • • “Green” sustainable business practices are not a fashion or a fad, they are the present and the future of business management practices “Green”, sustainable business practices are not applicable the same way in all industries nor in all enterprises It’s an evolving business model, but it is already generating proven positive results, which go beyond the so called “green” economy There are several good examples of successful small businesses that applied these principles even though they were in a disadvantaged situation It is not too late, in fact it is still in its early stages of its widespread and mainstream acceptance

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