Kurt Kuehn and Lynette McIntire wrote an article called “Sustainability a CFO Can Love” in the April 2014 issue of Harvard Business Review. The article addresses the long standing problems of acceptance by financial professionals of sustainability as producing acceptable returns on investment. I normally find that many of the articles on sustainability that I read in HBR are somewhat highbrow and philosophical but this one I found very practical and full of ideas and valid suggestions.

The authors of the article were part of the logistics company, UPS, which meant that some of the examples used had a logistics/transportation flavour but this did not detract from the generic ideas and thinking that was presented.

The article benefitted from some very interesting and insightful case studies which illustrated bridging points between business and corporate responsibility which have spin-offs benefits. They demonstrate that if return on investment is viewed from not a financial perspective but from an additional dimension which encompasses enhanced brand and reputational credibility,

An important factor in influencing decision making and resource allocation in sustainability investment is how it is seen and affects stakeholders. I found the UPS materiality matrix most interesting. Materiality often only arises in discussion when it comes to reporting and performance testing. However, the table has some surprising judgement calls from stakeholders which suggest that in many areas, there is a real need to “educate” stakeholders on how various initiatives fit into the business model and why they are important.

 The side bar discussion on “Why ROI analysis falls short” puts into plain language some of the conflicts that often occur between financial professionals and sustainability professionals. To my mind, it provides some common areas for discussion which could help improving the dialogue between the professionals and achieving some consensus.

 Overall, a stimulating article with plenty of ideas that could be applied in other business sectors.

 AJH

This article appeared in Environmental Health Perspectives, Volume 122, No 1, January 2014. It talks, initially, about a case where a family built a house just under 5,000 metres from a wind turbine. One of the family members began to experience headaches, dizziness, insomnia and a ringing in her ears. Two years later, the family was forced to leave the house because of the environmental noise identified as coming from the wind turbine.

The article states, “..Turbine noise is often deemed more annoying than transportation noise because of its high variability in both level and quality. Unlike vehicle traffic, which tends to get quieter at night, turbines can sound louder at night. And they generate lower frequencies of sound, which tend to be judged as more annoying than higher frequencies and are more likely to travel through walls and windows…”

The article notes that, as wind turbines are a relatively recent innovation, the body of peer reviewed research addressing the wind turbine noise issue is “…sparse and particularly unsettled…”.

This does highlight the fact that alternative options in managing and minimising environmental impacts are not devoid of their own impacts which need to be considered when looking at the wider picture.

The Downfall of the Plastic Bag: A Global Picture is a thorough and detailed global review of plastic bag usage and controls produced by the Earth Policy Institute.

The side bar of the web page containing this article also includes a table of worldwide plastic bag regulations, as well as a number of papers and studies focussing upon plastic bag usage and control throughout the world. South Africa features prominently in the references and controls, as well as in the research conducted.

The article contains interesting facts from throughout the world. A trillion single use plastic bags are used each year, almost 2 million a minute. A European Commission memo noted, “….in the North Sea, the stomachs of 94% of all birds contain plastic…” In the capital of Mauritania, an estimated 70% of cattle and sheep deaths are from plastic bag ingestion. In the United States, 133 city – or county-wide anti-plastic bag regulations have been passed.

Authors Janet Larsen and Savina Venkova make a telling comment, “…Plastic bags clearly have a cost to society, one that is not yet fully paid. Reducing disposable bag use is one small part of the move from a throwaway economy to one based on the prudent use of resources, where materials are reused rather than designed for rapid obsolescence…”

The Earth Policy Institute (EPI) was founded in 2001 by Lester Brown, the founder and former president of the Worldwatch Institute, to provide a plan of a sustainable future along with a roadmap of how to get from here to there. EPI works at the global level simply because no country can fully implement a Plan B economy in isolation.

EPI’s goals are (1) to provide a global plan (Plan B) for moving the world onto an environmentally and economically sustainable path, (2) to provide examples demonstrating how the plan would work, and (3) to keep the media, policymakers, academics, environmentalists, and other decision-makers focused on the process of building a Plan B economy.

Since “sustainability” became a buzzword in the nineties, many companies have “dipped their toes into the water” to varying degrees, to proclaim their commitment to achieving sustainable business practices. However, very few have been really successful and are committed wholeheartedly and completely to the philosophy…and then been able to show the results. One of the few exceptions is global carpet tile manufacturer, Interface.

Interface, Inc. began life in 1973 when founder, Ray C. Anderson, recognised the need for flexible floorcoverings in the modern office environment. In response to the needs of the commercial office sector, Anderson led a joint venture between British company, Carpets International Plc. (CI), and a group of American investors to produce and market modular soft-surfaced floorcoverings and, with this, Interface was born.

On its first day in business, the new company had only 15 employees, and was immediately faced with the challenge of the sharply rising cost of petrochemicals, which were key raw materials in the carpet industry at the time.

CI’s advanced cutting and bonding technology helped sustain the company and enabled it to meet the demand created by the office building boom of the mid-1970s. Modular carpet tiles continued to grow in popularity and by 1978 Interface sales had reached $11 million. The company went public in 1983.

Through acquisition, Interface entered the European and Middle Eastern markets, and the core business extended to include woven broadloom carpet products, specialty carpet-related chemical operations and other associated office furnishings industries.

In 1987, the company’s name was changed to Interface, Inc. With its acquisition of Heuga Holdings B.V. – one of the world’s oldest manufacturers of carpet tiles – Interface became the undisputed world leader in modular flooring.

A short time later, Interface invested in Prince Street Technologies, Ltd., a producer of upper-end broadloom carpet now known as Bentley Prince Street, Inc. It entered the residential market in 2003 with the introduction of FLOR. Over the years, the company’s growth has been augmented by more than 50 acquisitions.

In the mid-1990s, Anderson took the decision to completely shift the company’s strategy, aiming to redirect its industrial practices to include a focus on sustainability without sacrificing its business goals.

This shift in corporate strategy was to ultimately result in achievements such as a reduction in energy usage of 40% per unit of production, water usage reduction of 77% per unit of production and zero waste to landfill. The company’s impressive list of “Firsts” include:- First carpet tile, first take-back scheme for carpet tiles, first carpet tile with recycled content in the yard and backing, first carpet manufacturer to make use of life cycle assessment as a decision making tool, first to launch a carbon neutral carpet, first glue-free carpet tile, and first carpet tile with 100% recycled nylon.

He wrote his first book, entitled Mid-Course Correction, in which he discussed his own awakening to environmental concerns and presented a model of how Interface would become truly sustainable by 2010. He called this Mission Zero.

Anderson then wrote his second book, Confessions of a Radical Industrialist, in 2009, in which he continued to build on his vision of how businesses can alter their past ways to operate in a more sustainable way in the future.

In February 2014, a report entitled “The New Industrial Model: Greater profits, more jobs and reduced environmental impact”, was prepared by Lavery/Pennell for Interface, which documents the practicalities of the company’s sustainability journey and charts the lessons that others can learn from and implement themselves.

Two powerful documents, Let’s be Clear – Go beyond labels and claims, and Just the facts – How to choose the most sustainable products, demonstrate how powerful using the sustainability successes can be as a marketing tool. However, don’t just look at these documents, explore the Sustainability page and see what else the company has covered in its sustainability journey!

 

Posted 7^th May 2014

 

The United Nations Environment Programme (UNEP) used the World Economic Forum meeting in Davos, Switzerland, as a platform to launch an inquiry into policy options for guiding the global financial system to invest in the transition to a green economy.

Mobilising the world’s capital is seen as an essential part of the transition to a sustainable low-carbon economy. It is reported that the green economy will require a capital intensive transition (up to US$6 trillion a year), with investment in new skills, institutions and technologies replacing resource use and pollution. Most flows within and between nations will be capital sourced from commercial financial institutions, institutional investors and public investment vehicles.

Building on the two pillars of UNEP’s Green Economy Initiative and the UNEP Financial Initiative, the Inquiry will assemble the world’s best practice and forward looking expert knowledge through an Advisory Council; practitioner dialogues and research.

Continue reading “Inquiry into the Design of a Sustainable Financial System” →