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Lecture Notes

  1. 1. A Course in Sustainable Design, Manufacturing, and Management Realizing the Promise of Sustainability Spring 2007 - E298-8 Dept. of Interdisciplinary Studies Ed Quevedo WSP Environmental North America
  2. 2. Part 1 – Clear Speaking About Sustainable Development
  3. 3. What does Sustainable Development Look Like?
  4. 4. What does Sustainable Development Look Like? Is this the Realm of Sustainable Development?
  5. 5. Well, No <ul><li>Not Really . . . </li></ul><ul><li>So, then, what is the better picture??? </li></ul>
  6. 6. A More Accurate Picture Economics Our Business Social Responsibility Stakeholders Customers, Investors, Suppliers, NGOs… Environment Natural Resources
  7. 7. “Defining” Sustainability – A Realist View of Naming Things Quevedo
  8. 8. Realism and Naming <ul><li>The precise definition we give words determines their value in communication </li></ul><ul><li>Consider: </li></ul><ul><ul><li>Value-Add </li></ul></ul><ul><ul><li>Fair price </li></ul></ul><ul><ul><li>Homeland Security </li></ul></ul><ul><ul><li>Deincentivize </li></ul></ul><ul><ul><li>Environmental Performance </li></ul></ul>Quevedo
  9. 9. The Name Should Mean Something <ul><li>Sustainability can be used to describe: </li></ul><ul><ul><li>a desirable state of affairs (a sustainable community) </li></ul></ul><ul><ul><li>a way of thinking (the triple bottom line), or </li></ul></ul><ul><ul><li>a way of accounting for resource use (natural resources, financial resources, human resources) </li></ul></ul>Quevedo
  10. 10. Classical Naming <ul><li>1987 Brundtland Commission report “Our Common Future” - coined the term “sustainable development” </li></ul><ul><ul><ul><li>Development that meets the needs of the present without compromising the ability of future generations to meet their own needs </li></ul></ul></ul>Quevedo
  11. 11. Progressive Naming <ul><li>The pursuit of long-term viability and progress of our business while taking responsibility for listing, calculating, and improving the environmental, social, and economic consequences of our enterprise. </li></ul>Quevedo
  12. 12. Simple Naming <ul><li>Living well, and in a health way, taking care of those who depend on you, as though tomorrow mattered. </li></ul>Quevedo
  13. 13. Implementing Sustainability <ul><li>“ Defining” Sustainability – A Realist View of Naming Things </li></ul><ul><li>Policy History – 1972 Stockholm Convention to the 2002 WSSD in Johannesburg </li></ul><ul><li>Implementation History – Private Sector, Agenda 21, Moving from Recycling and Bike Lockers to Measuring Social and Human Capital </li></ul>Quevedo
  14. 14. With only Three Resource Accounts, must we learn to use them, each and all, with caution, humility, and maximum effectiveness Used to grow or enhance: Used with a view to protecting and growing: Invested to enhance: Better decision-making & Organizational performance Financial Resources Human/Social Resources Natural Resources $   
  15. 15. Back to the Three Books of Account <ul><li>Human Capital </li></ul><ul><li>Economic Capital </li></ul><ul><li>Environmental Capital </li></ul>
  16. 16. The Fundamental Challenge <ul><li>Balancing the Books of Account </li></ul><ul><li>Providing tools to managers to </li></ul><ul><ul><li>Enabling withdrawals from the Financial Capital Account to grow the Environmental Capital and Human Capital Accounts </li></ul></ul><ul><ul><li>Enabling withdrawals from the Environmental Capital Account to grow the Human Capital and Financial Capital Account </li></ul></ul><ul><ul><li>Enabling withdrawals from the Human Capital Account to grow the Environmental Capital and Financial Capital Accounts </li></ul></ul>
  17. 17. What Approach Do We Take to the Three Kinds of Capital We Have? <ul><li>Human Capital, Financial Capital, Natural Capital </li></ul><ul><li>Options for Duty: </li></ul><ul><ul><li>Compliance </li></ul></ul><ul><ul><li>Performance </li></ul></ul><ul><ul><li>Protection </li></ul></ul><ul><ul><li>Restoration </li></ul></ul><ul><ul><li>Stewardship </li></ul></ul>
  18. 18. Examples of Key Sustainability Risks  Climate Change Gas Emissions  Supply Chain Misconduct  Community Relations Issues  Failure to anticipate regulatory shift
  19. 19. Business Drivers: Marketplace Pressures Behind Sustainable Development
  20. 20. CSR and Sustainability Can Bring Focus to Protection of Intangible Assets <ul><li>We are well versed in tangible assets </li></ul><ul><ul><li>Stock value </li></ul></ul><ul><ul><li>Capitalization </li></ul></ul><ul><ul><li>Physical plant </li></ul></ul><ul><ul><li>Intellectual property rights </li></ul></ul><ul><ul><li>Good will (somewhere between tangible and intangible) </li></ul></ul>
  21. 21. What of Intangible Assets? <ul><li>Ability to attract human capital (technical know-how – specific expertise and knowledge at all levels) </li></ul><ul><li>Ability to retain human capital once attracted (loyalty, morale) </li></ul><ul><li>Ability to get the most out of human capital (motivation) </li></ul><ul><li>Ability to grow or develop human capital and develop management excellence (culture) </li></ul><ul><li>Reputation and Brand Equity (trust) </li></ul><ul><li>Product quality </li></ul>
  22. 22. Discussion – How do we protect and measure these? <ul><li>Ability to attract human capital (technical know-how – specific expertise and knowledge at all levels) </li></ul><ul><li>Ability to retain human capital once attracted (loyalty, morale) </li></ul><ul><li>Ability to get the most out of human capital (motivation) </li></ul><ul><li>Ability to grow or develop human capital and develop management excellence (culture) </li></ul><ul><li>Reputation and Brand Equity (trust) </li></ul><ul><li>Product quality </li></ul>
  23. 23. Valuing the Intangibles <ul><li>Valuation is hard </li></ul><ul><li>Valuing them is not </li></ul><ul><li>Remember what values are </li></ul><ul><ul><li>They are what the company stands for </li></ul></ul><ul><ul><li>They are not priorities </li></ul></ul><ul><ul><li>Priorities can be ranked </li></ul></ul><ul><ul><li>Values cannot be ranked – they are principles of action </li></ul></ul><ul><li>RCI Intangible Values? Talented and Motivated People? </li></ul>
  24. 24. Valuing the Intangibles <ul><li>See Value and Values, p. 23 </li></ul><ul><li>Intangible Assets and Shareholder Value </li></ul><ul><ul><li>Percentage of fund managers, analysts and Investor Relations Officers (IROs) who believe intangible assets contribute to shareholder value </li></ul></ul><ul><ul><li>55% of IROs responded “Yes, significantly” </li></ul></ul><ul><ul><li>92% of IROs responded either “Yes, significantly” or “Yes, a little </li></ul></ul><ul><ul><li>Less than 5% felt intangible assets are not a factor in shareholder value </li></ul></ul>
  25. 25. A Sustainability perspective means that the BIG ISSUES can be discussed <ul><li>Ethics challenges </li></ul><ul><li>Politics </li></ul><ul><li>Global issues </li></ul><ul><li>Obligations and duties that extend beyond legal minimums </li></ul>
  26. 26. Why are businesses interested in ‘Sustainability’ - Pressures Organization Regulators Public / NGOs Financiers/ Insurers Competitors/ Partners Employees Customers and Suppliers Stewart
  27. 27. <ul><li>The Gap between stakeholder perceptions & expectations? </li></ul><ul><ul><li>Political donations, lobbying and government influence </li></ul></ul><ul><ul><li>Not accepting the science on global warming </li></ul></ul><ul><ul><li>Oil exploration and threat to biodiversity in Alaska </li></ul></ul><ul><ul><li>Human rights abuse in developing world </li></ul></ul><ul><ul><li>Consumer boycott and NGO campaigning </li></ul></ul><ul><ul><li>Media scrutiny and global coverage in a “CNN world” - spotlight can be placed instantly anywhere in world. </li></ul></ul>Stewart
  28. 28. <ul><li>“ A company’s ability to fulfil its purpose (to make profits) depends on the decisions and choices made every day by all the people with whom they do business – governments, other companies, staff and, in our case, the 10 million or so people who buy things from us around the world every day. Our ability to do business is determined by our capacity to meet the needs of those people.” </li></ul><ul><li>Sir John Browne, Chief Executive, BP - April 2001 </li></ul>Stewart
  29. 29. Financiers and Investors <ul><li>Socially Responsible Investment (SRI) funds </li></ul><ul><ul><li>worth $3 trillion in US and £250 billion in UK (2001) </li></ul></ul><ul><li>UK Fund Managers with social responsibility policy: e.g. Morley, Friends Provident… </li></ul><ul><li>FTSE4Good and Dow Jones Sustainability Index (DJSI) </li></ul><ul><li>Pensions Act amendment (1999) </li></ul><ul><ul><li>funds to explain the extent to which they include social and environmental issues in their investments </li></ul></ul><ul><li>Business in the Environment </li></ul><ul><ul><li>50% of FTSE 350 participate (85% of FTSE100) </li></ul></ul>Stewart
  30. 30. From Risk to Opportunity Stewart Organization Regulators Public / NGOs Financiers/ Insurers Competitors/ Partners Employees Customers and Suppliers
  31. 31. Creating New Opportunities for Firms to Create Financial Value <ul><li>Reduced costs from increased process efficiency </li></ul><ul><li>Revenue gains from branding and market recognition </li></ul><ul><li>Securing supply chain relationships </li></ul><ul><li>Reducing reputation and operating risk, and getting ahead of legislative and regulatory change </li></ul><ul><li>Attracting capital </li></ul><ul><li>Intangibles: attracting talent, better educated labor force, better off local consumer base, etc. </li></ul>Stewart
  32. 32. 2002 Survey of 140 US businesses <ul><li>75% of respondents say they have adopted some sustainable business practices. The top three reasons for doing so were: </li></ul><ul><ul><li>Enhanced reputation (90%) </li></ul></ul><ul><ul><li>Competitive advantages (75%) </li></ul></ul><ul><ul><li>Cost savings (73%) </li></ul></ul><ul><li>However… </li></ul>Stewart
  33. 33. 2002 Survey of 140 US businesses <ul><li>The top five sustainability initiatives being pursued by these companies are: </li></ul><ul><ul><li>Pollution prevention (91%) </li></ul></ul><ul><ul><li>Environmental Management Systems (88%) </li></ul></ul><ul><ul><li>Employee volunteering (77%) </li></ul></ul><ul><ul><li>Community outreach (74%) </li></ul></ul><ul><ul><li>Corporate philanthropy (74%) </li></ul></ul><ul><li>Is this what is meant by Sustainability in Business? </li></ul>Stewart
  34. 34. How to move towards Sustainability <ul><li>Understand what it means </li></ul><ul><li>Understand how the organization interfaces with Environmental, Social and Economic issues </li></ul><ul><li>Accountability to stakeholders </li></ul><ul><li>Communication and Reporting </li></ul><ul><li>Benchmarking and Assessment </li></ul>Stewart
  35. 35. Applied Ethics <ul><li>Consider and reflect concern (via action) for the well being and views of others </li></ul><ul><li>Implement decisions with the goal of minimizing harm and not just maximizing profit </li></ul>
  36. 36. Applied Ethics <ul><li>Ethical decisions can trump non-ethical ones </li></ul><ul><li>Only violate an ethical position to advance one that is judged more important under the circumstances </li></ul><ul><li>Key: Who is the judge? </li></ul>
  37. 37. Applied Ethics <ul><li>Before acting, identify impacts and stakeholder claims/concerns </li></ul><ul><li>Identify and authentically express the ethical issues in play </li></ul><ul><li>Make a decision </li></ul><ul><li>Remember – you may be wrong </li></ul>
  38. 38. Tests for Sustainability Governance <ul><li>Acknowledge Challenges and successes </li></ul><ul><li>Saying No to some opportunities </li></ul><ul><li>Taking the Long Term View </li></ul><ul><li>Humility </li></ul><ul><li>Collaboration (selfless and risky) </li></ul><ul><li>Creating new institutions </li></ul>
  39. 39. Challenges & Successes <ul><li>We have failed </li></ul><ul><li>We have miles to go </li></ul><ul><li>We are puzzled </li></ul><ul><li>We are confused </li></ul><ul><li>We need to do better </li></ul><ul><li>We have made errors </li></ul>
  40. 40. Saying No <ul><li>Filter for profits that takes into account the TBL – we will not engage in activities that we know could make us money if it does not pass the filter </li></ul><ul><li>There are limits to growth, but not to development </li></ul><ul><li>We will voluntarily restrict our impacts and seek higher value and more innovation </li></ul><ul><li>Entrepreneurship and sustainability </li></ul>
  41. 41. Taking the Long Term View <ul><li>What counts </li></ul><ul><li>A generation </li></ul><ul><li>Looking forward as long as we have been profitable in the past </li></ul><ul><li>Taking responsibility for our past mis-steps </li></ul>
  42. 42. Humility <ul><li>We have miles to go </li></ul><ul><li>We can and must learn from others </li></ul><ul><li>We are just experimenting </li></ul><ul><li>We need help – please provide it </li></ul>
  43. 43. Collaboration <ul><li>Not working together </li></ul><ul><li>Taking mutual risks </li></ul><ul><li>Inviting others in where the “intellectual property” resides </li></ul><ul><li>Building things new together </li></ul>
  44. 44. Building new institutions <ul><li>Permanent stakeholder processes </li></ul><ul><li>Product input from civil society and not just focus groups </li></ul><ul><li>Contributing to your communities and their sustainable Economic Development </li></ul><ul><li>The Global Compact </li></ul><ul><li>The UNEP Network </li></ul><ul><li>Partnering in new and productive ways with academic institutions </li></ul><ul><li>Education for SD all levels – k-12 included </li></ul>
  45. 45. <ul><li>“ We have to choose between a global market driven only by calculations of short-term profit, and one which has a human face. Between a world which condemns a quarter of the human race to starvation and squalor, and one which offers everyone at least a chance of prosperity, in a health environment.” </li></ul>
  46. 46. <ul><li>Between a free-for-all in which we ignore the fate of the losers, and a future in which the strong and successful accept their responsibilities, showing global vision and leadership. </li></ul><ul><li>I am sure you will make the right choice.” </li></ul><ul><li>U.N. Secretary General Kofi Annan </li></ul><ul><li>On the occasion of introducing the </li></ul><ul><li>Global Compact at the 1999 Davos Conference </li></ul>
  47. 47. “ The gross national product includes air pollution and advertising for cigarettes, and ambulances to clear our highways of carnage. It counts special locks for our doors and, jails for the people who break them. It grows with the production of napalm and missiles and nuclear warheads… And if the gross national product includes all this, there is much that it does not comprehend. It does not allow for the health of our families, the quality of their education, or the joy of their play.
  48. 48. <ul><li>It does not account the beauty of our poetry or the strength of our love for each other, the intelligence of our public debate or the integrity of our public officials. </li></ul><ul><li>It measures neither our wit nor our courage, neither our wisdom nor our learning. </li></ul><ul><li>The gross national product measures everything, in short, except that which makes life worthwhile, and it can tell us everything about us-- except whether we are a good people. . . .” </li></ul><ul><li>Robert F. Kennedy, May 1968, Chicago </li></ul>
  49. 49. <ul><li>Key References </li></ul><ul><li>Agenda 21 , United Nations Conference on Environment and Development (New York 1992) (www.unep.org; www.undp.org) </li></ul><ul><li>BMW Sustainable Value Report: www.bmw.de/sustainability </li></ul><ul><li>Business in the Community (www.bitc.uk.org) </li></ul>
  50. 50. Edward L. Quevedo Senior Director, Global Integrity and Sustainability Management Programs WSP Environmental Solutions 405 Howard St., Suite 310 San Francisco, CA 94105 (c) 415.806.0355 (e) edward.quevedo@wspgroup.com Offices also in San Francisco, Austin (TX), London, and throughout the World