Summary

In this Lesson, we begin understanding the structure and overview of modern Corporate Sustainability, primarily through standardized filings and how organizations measure sustainability.  During this exploration, we specifically seek to understand more about Planet-centric metrics and messages, and how organizations use them in Corporate Sustainability Reports (CSR).  As I hope will be developed throughout the course, we will begin to see how relative definitions are in sustainability, and how even seemingly similar efforts can have drastically different metrics and underpinnings.

Arguably, one of the the most valuable attributes a modern participant in Sustainability can have is the ability to discern and differentiate facets of programs in order to evaluate efficacy.  We will begin that journey in this Lesson.

Learning Outcomes

By the end of this lesson, you should be able to:

• discern Planet-centric metrics and initiatives within a Corporate Sustainability Report;
• evaluate an organization's approach to Planet issues through the lens of their stated Vision, Mission and Values;
• compare established and emerging environmental standards and initiatives;
• appraise how sustainability may reduce the environmental risk profile of an organization;
• discern "badge proliferation" and marketing from meaningful third-party certifications.

Lesson Roadmap

Questions?

If you have any questions, please send them to my axj153@psu.edu Faculty email. I will check daily to respond. If your question is one that is relevant to the entire class, I may respond to the entire class rather than individually.

“In its purest, most distilled form, the imperatives of sustainability are summed up by just three words: Planet. People. Profit..”

In the practice of sustainability, the "3Ps" are widely known, and while there may be a few variations on the theme, they are almost universally agreed upon. At this level, there is no nuance or measurement or hierarchy, just the simple imperative that the role of sustainability is to simultaneously maximize benefit to:

This all sounds lovely, until we remember that by this same reductive logic, many daunting tasks can be made to sound downright simple:

"It's simple, Orville. All we need to do is make a machine that flies. We have an entire garage full of bicycle parts and canvas!"

What we will see is that the complexity of sustainability lies one layer beneath the elegance of Planet. People. Profit., when one is tasked with the details of how to make all three of these imperatives–which are very commonly in direct opposition–thrive within the organization. As we will address in this lesson and many throughout this course, maximizing the 3Ps involves virtually every facet and function of an organization, and is never truly complete.

But, luckily for us, the constraints, unmet needs, scarcities, and imperatives that face those seeking to improve sustainability are the essential building blocks for developing compelling product and service offerings. As we will cover in the coming lessons, the 3Ps will become a framework for how we seek to innovate.

Variations on the Theme

There are a handful of other expressions of the sustainability imperatives, the leading probably being the "Triple Bottom Line." Though they may be stated or modeled differently, below is a matrix comparing the terminology used in a few different models for sustainability:

Elkington's Pressure Waves

In order for us to fully understand the Planet imperative of sustainability, it can be helpful to consider a historical context for the environmental issues that have shaped our world. Elkington has delineated the events of the last generation into three environmental "pressure waves" of public opinion occurring from 1961-2001:

Corporate Sustainability Report and Sustainable Development frameworks (frequency of mentions, 1961–2001).

Credit: Elkington, John. “Good News & Bad: The Media, Corporate Social Responsibility and Sustainable Development.” SustainAbility with Ketchum and the United Nations Environment Programme (UNEP). ISBN 190316804X

Three pressure waves
From 1960 to the present, three great waves of public pressure have shaped the environmental agenda. The roles and responsibilities of governments and the public sector have mutated in response to each of these three waves – and will continue to do so. Although each wave of activism has been followed by a downwave of falling public concern, each successive wave has significantly expanded the agendas of politics and business:

• Wave 1 brought an understanding that environmental impacts and natural resource demands have to be limited, resulting in an initial outpouring of environmental legislation. The business response was defensive, focusing on compliance, at best.
• Wave 2 brought a wider realization that new kinds of production technologies and new kinds of products are needed, culminating in the insight that development processes have to become sustainable – and a sense that business would often have to take the lead. The business response began to be more competitive.
• Wave 3 focuses on the growing recognition that sustainable development will require profound changes in the governance of corporations and in the whole process of globalization, putting a renewed focus on government and on civil society. Now, in addition to the compliance and competitive dimensions, the business response will need to focus on market creation.

(Elkington, 2004)

While he has not updated this annotated graph, it is important to note that Elkington has since referred to a "Sustainability Wave" which began in 2005, and reached its relative peak around 2012. Let's hope that peak continues to rise!

One pressure wave event not specifically noted in the graph, but which has had tremendous influence, is the creation of the Environmental Protection Agency (EPA) in 1970. While we will more closely examine the influence of the EPA and regulatory pressures later in this lesson and in future lessons, it is worth noting that in the American environmental movement, the influence of the EPA is not to be underestimated.

In the case of innovation, the regulatory realm presents a significant set of opportunities that can be leveraged to create sustainability-oriented products and services. We must always consider that with any set of constraints and limitations introduced into an organization, whether externally introduced (i.e., regulatory, competitive) or internally introduced (i.e., self-imposed), there is an opportunity for a product or service to bridge the void. We will dive more deeply into how exactly to accomplish this in later lessons, but it is important that we view every sustainability challenge as an opportunity.

The innovation implications of a single event

Credit: Left: 1973 Chrysler Newport Sedan, Right: 1973 Chrysler Newport Sedan by The Henry Ford is licensed under CC BY-NC-ND 2.0 DEED

In keeping with the idea that 'every sustainability challenge is an opportunity,' examine the pressure wave events Elkington notes and consider the implications of each event. Regardless of our views on any specific outcome, consider the depth of implications from even one of the environmental events.

Why do I mention these implications? Because in every case, growth and innovation was the response. We must always remember that regardless of the reason, any time an organization or industry is in a state of flux, it is an opportunity for the innovator or the upstart to gain a foothold. In the case of the 1973 Arab Oil Embargo, it was a groundswell of automotive innovation and a resurgence of development into technologies that may have been cost-prohibitive curiosities in the past.

It just happens that sustainability opens entire industries to innovation.

Diminishing Supplies, Increasing Demand

Today, we are faced with an increasing world population with increasing standards of living, and both trends place considerable pressure on a wide range of natural resources from water to tungsten to timber. This escalation of demand in the face of decreasing availability of resources leads to a natural increase in commodity prices... and therefore, more aggressive exploration. At its most extreme, very low supply with high demand can lead to aggression of a different kind: according to the United Nations Environment Programme, between 1990 and 2009, "...at least eighteen violent conflicts have been fuelled by the exploration of natural resources. In fact, recent research suggests that over the last sixty years, at least forty percent of intrastate conflicts have a link to natural resources" (UNEP, 2009).

Consider the overall trajectory of commodity prices now, as compared to other times of scarcity, namely World War I:

Credit: McKinsey Global Institute, Richard Dobbs, Jeremy Oppenheim, et al. Resource revolution: Meeting the world's energy, materials, food, and water needs.

One Economist's View on Scarcity in the Next 20 Years

Put simply, the world’s dwindling supplies of arable land, fresh water, energy, and minerals—essential for the production of food and appliances such as mobile phones, cars, televisions and washing machines— cannot meet rising global demand.

Commodity demand is being driven by three primary factors: the rising world population, expected to grow from roughly 7 billion today to 9 billion by 2050; increasing global wealth, with an estimated 3 billion people expected to join the ranks of the middle class by 2030; and a marked trend toward urbanization. On the last point, demographers predict that the number of urban dwellers will rise from 3 billion today to 5 billion by 2030, and each of them will demand better quality foodstuffs and modern conveniences that will accelerate the draw on the world’s resources.

On the supply side, however, arable land, potable water, energy, and minerals are finite, scarce and rapidly depleting. Take land—the earth contains approximately 13 billion hectares (32 billion acres) of land, or an area about 16 times the size of the United States. Of that, just 11% (1.4 billion hectares, or 3.5 billion acres) is arable and thus suitable to grow crops. The other 89%—including mountains and deserts—is prohibitively harder to exploit and farm. With the world’s population exploding, many more people will be looking to live and grow food on smaller patches of land.

Then there is water. Although the earth is 70% water, less than 1% is easily accessible fresh water that can be used for the sustenance of life, such as for drinking and sanitation. Meanwhile, by consuming about 85 million barrels of oil a day, we are living off oil discoveries that date as far back as the 1950s. Moreover, environmental concerns about fracking and shale gas could limit their promise so that such alternatives do not offer a real reprieve to global energy woes.

Finally, the global supply of minerals like copper is undermined by a decline in quality, a shrinking number of discoveries, and increased vulnerability to political interventions. Increasingly, companies have to go much farther afield, into more difficult terrain and riskier geopolitical environments, in order to secure these minerals.

Moyo, D. (2012, June 8). The resource shortage is real. Time. Retrieved Feb 2, 2015.

Scarcity and the Influence of Subsidies

It would be a natural response of consumers in a free market to respond to increasing prices by changing their behavior to consume less of the resource or product. If the price of gasoline reaches $3.50/gallon, people will tend to drive less than if gasoline were $1.00/gallon. If the price of electricity increased 500% overnight, people would take a much harder look at LED lighting, improvements to the energy efficiency of their homes, or perhaps invest in down jackets. Regardless of the mitigating behavior, in time, the market would find equilibrium between supply, demand, and price. But, that market balance can be upset in a significant way by subsidies. If there is an "invisible hand" which finds balance and equilibrium of market forces, we can think of subsidies as an "invisible finger" pushing down on one side of the scale. In essence, subsidies distort the balance of markets. If a government subsidizes the price of gasoline, it weakens the price signals which balance supply, demand, and price. This can lead to severe overconsumption of resources.

For decades, governments from Egypt to Indonesia have subsidised the price of basic fuels. Such programmes often start with noble intentions—to keep down the cost of living for the poor or, in the case of oil-producing countries, to provide a visible example of the benefits of carbon wealth—but they have disastrous consequences, wrecking budgets, distorting economies, harming the environment and, on balance, hurting rather than helping the poor.

Emerging markets are not the only places that distort energy markets. America, for instance, suppresses prices by restricting exports. But subsidies are more significant in poorer countries. Of the $500 billion a year the IMF reckons they cost—the equivalent of four times all official foreign aid—half is spent by governments in the Middle East and north Africa, where, on average, it is worth about 20% of government revenues. The proceeds flow overwhelmingly to the car-driving urban elite. In the typical emerging economy the richest fifth of households hoover up 40% of the benefits of fuel subsidies; the poorest fifth get only 7%. But the poorest suffer disproportionately from the distortions that such intervention creates. Egypt spends seven times more on fuel subsidies than on health. Cheap fuel encourages the development of heavy industry rather than the job-rich light manufacturing that offers far more people a route out of poverty.

The Economist (2014, Jun 14). Scrap them. Retrieved Feb 3, 2014.

Below is a Congressional Budget Office view of United States energy subsidies over the past decades. Consider the influence these subsidies may have had in increasing–or decreasing–innovation and natural market balance. In the next lesson, we will explore the relationships between subsidies, greenhouse gas emissions, and carbon taxes.

Credit: Congressional Budget Office. How Much Does the Federal Government Support the Development and Production of Fuels and Energy Technologies?

The Most Contentious Facet of Sustainability

I'd like us all to temporarily cleanse our minds of any preconceived notions of greenhouse gases or carbon. Deep breath in, hold for 5 counts, deep breath out. Go to a serene place. Get a beverage and come back. I'll wait.

There are entire swaths of the practice of sustainability which, with discussion, rationale, and logic, can be met with incredible support in virtually every corner. Waste minimization and energy reduction tend to fall into this category. It's about living lean, reducing waste, and saving money while saving the planet. It's about responsibility, stewardship, and not wasting all of the work it took to create that aluminum can. It takes a little messaging and discussion, but, invariably, success can be had with even the most skeptical among us.

And then comes the issue of greenhouse gases (GHG) and carbon taxes.

In this topic, I would like us to explore a concept known as The Tragedy of the Commons (Hardin, 1968) as an entry point to help us understand why carbon regulation is a logical step which can help drive innovation and eliminate the market-biasing subsidies mentioned in the last section. For more about this please watch the following 6:36 video.

Video: Tragedy of the commons | Consumer and producer surplus | Microeconomics (6:36)

If you would like, you can read Hardin's original 1968 article setting forth this concept.

The Tragedy of the Commons is an intuitive explanation of something that happens every day in the world around us: finite, common-access resources–such as air, water, or fisheries–are depleted when individuals are given unrestricted access. In this regard, we must remember that the concept of "maximizing gain" is not necessarily restricted to physical benefit, but to any erosion of public resources by the self-interests of individuals. Regardless of the specific expression of the Tragedy of the Commons, the ultimate result is the same: the resource is either depleted or eroded to the point of collapse.

Greenhouse gases could perhaps be the purest expression of The Tragedy of the Commons: a byproduct which is invisible and created in thousands of ways in daily life and that will damage entire systems of common resources, worldwide. The idea of a finite, tangible resource, such as a pasture or pond being depleted is quite accessible, but when it comes to impacts on the scale of greenhouse gases, it can be so large as to be almost inconceivable.

Greenhouse Gases

Greenhouse gases refer to a group of seven gases found in the atmosphere: carbon dioxide, methane, nitrous oxide, chlorofluorocarbons (CFCs), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride. There is also some level of discussion about other potential greenhouse gases, one of which is perfluorotributylamine, a man-made chemical which currently exists in extremely small quantities in the atmosphere, yet is "7.100 times more powerful at warming the Earth over a 100-year time span than CO₂" (Goldenburg, 2013). Typically, the discussion on greenhouse gases tends to center squarely on carbon dioxide, as it is the most prevalent greenhouse gas and is generated heavily through the combustion of fossil fuels. In total, greenhouse gases share a common attribute in that they trap heat (infrared radiation) in the atmosphere and work to elevate temperatures.

Credit: Earth Untouched

In sustainability reporting and in the calculation of the greenhouse gases generated from an entity (commonly referred to as the "carbon footprint"), the common measure used is carbon dioxide equivalent or "CO₂e", which accounts for the emission of carbon dioxide and methane. The amount of these gases generated is typically normalized as "kilograms of CO₂e" per (hour, mile, kilowatt or other measure of usage or operation) and can be utilized in measuring the emissions of virtually any direct or indirect activity, from operating a tractor to composting. Measuring and reporting carbon emissions is made easier by the excellent availability of data to calculate Scope 1 (direct) carbon emissions, but measurement becomes far more complicated in the calculation of Scope 2 and Scope 3 (indirect) emissions. These emissions are generated in the creation of energy utilized (Scope 2) or as consequences of transport, production, supply chain, and other outside activities (Scope 3). As we will see in many issues of sustainability in coming lessons, measuring and reporting Scope 2 or 3 emissions many times requires one to make estimations and judgment calls based on the best information available... and many times, comes down to being transparent about the assumptions made.

Carbon Taxes

We may consider that any currency, be it the US Dollar or any other, is not inherently "good" or "bad". It is simply a mechanism by which the market accepts and unifies around a means of trade. We may consider the sheer mechanism of CO₂e measurement in a similar way. It is a mechanism which the world at large accepts as the unified measurement of greenhouse emissions from virtually any activity from lighting a baseball field to burning off a wheat field. CO₂e is so able to be empirically measured, we can even go as far as discerning the difference in emissions from burning the wheat straw residue vs rice straw residue:

The versatility of CO₂e is that it can be a universal mechanism of measurement which may be applied to help us avoid The Tragedy of the Commons, and furthermore which may be used to eliminate the market biasing effect of subsidies. For example, imagine that, in attempting to avoid The Tragedy of the Commons, a government would like to tax the negative impact of emissions from antiquated power generation operations and use the funds to research alternative fuels.

Without measuring CO₂e, the government in question could attempt to modify behavior in a few different ways, all of which are somewhat removed from the actual goal of reducing damaging emissions:

• Tax on a per-site basis. This is flawed in that a power company could have a shuttered facility which is in no way contributing to the negative impact of carbon emissions. Furthermore, the emissions of the restricted class of plants could be drastically different, yet they would all be taxed in the same way.
• Tax the revenue of the site. This approach is difficult in that the accounting can be quite complex, and therefore prone to loopholes.
• Subsidize clean energy. This may sound appealing, but consider that these subsidies are reducing price signals in the market, and therefore distorting market balance. This would also not deter a profitable company with antiquated plants from continuing their operations.
• ... and so on

Taxing CO₂e emissions directly, on the other hand, would be considered a Pigovian tax, so named for British economist, Arthur. C. Pigou. Pigovian taxes are defined by the shared trait that they are designed to mitigate "negative externalities" (such as overgrazing, or greenhouse gas emissions) with the application of taxes specifically valued to offset the negative impacts. If you think back to The Tragedy of the Commons, it is an almost perfect parable of negative externalities: an activity where individual use of a shared resource is of detriment to others. In their purest form, we may think of Pigovian taxes as not artificially choosing "winners or losers" as subsidies may, but simply acting as an unbiased, unemotional accountant. These taxes essentially say, "You can build whatever kind of powerplant you prefer, but you will pay your share of any damage to shared resources."

The classic issue with Pigovian taxes is the valuation of the negative externality, essentially placing value on the erosion of a shared resource which is already difficult to valuate. For example, imagine placing a value on the shared visual damage wrought by a new residential development in a picturesque area, or the Pigovian price tag of a kilogram of carbon emissions. These are not easy determinations, but they may indeed change the landscape of daily life in the coming decades.

Current Reality

There are literally hundreds, if not thousands, of environmental certifications and standards today, ranging from those which could barely pass the sniff test of the marketing department in which they were incubated, to those which must pass formal audit and critical review by expert panels. Furthermore, to a casual observer, it may be difficult to differentiate between the extremes without performing research.

Unfortunately, the types of badges we may consider some of the most egregious offenders may have been created specifically to deflect or defuse what would be deserved criticism of environmental practices. This explosion of environmental marks may be referred to as "badge bloat," which is when there may be ten or more different standards all essentially certifying the same attribute. Unlike a battle of tangible and differentiated product standards (think of VHS v. Betamax or HD-DVD v. Blu-Ray) where the losing standard quickly ceases to exist because there is a direct cost, badges can live as long as the issuing industry group, NGO or corporation continues to exist. This persistence and proliferation can lead to tremendous confusion on the part of the consumer, and many a dinner debate among sustainability professionals as to the superior standard.

Prominent Certifications and Standards

Note that the term I use here is "prominent," and this is for a reason: below are some of the generally most referred to standards, and not necessarily the most valid or rigorous within a segment. As you gain more direct and indirect experience with certifications, you may begin to realize that some of those which are most popular may be beneficiaries of "first mover advantage" more than the most rigorous or well-defined.

A Summary of Different Certifications

Logo/Badge	Summary
	Leadership in Energy and Environmental Design (LEED) Primary domain: Sustainability of commercial, and increasingly, residential buildings. Primarily a US standard, though applied internationally. Statement: "LEED, or Leadership in Energy & Environmental Design, is a green building certification program that recognizes best-in-class building strategies and practices. To receive LEED certification, building projects satisfy prerequisites and earn points to achieve different levels of certification. Prerequisites and credits differ for each rating system, and teams choose the best fit for their project." Recipients: There are currently about 80,000 sites internationally holding a level of LEED certification or currently undergoing review. These sites range from Google locations and hospitals to manufacturing plants and private homes... and notably our Business Building, IM Building, and Moore Building on campus are all currently undergoing LEED certification. Notes: LEED is an example of a standard which gained a first mover advantage... and never stopped growing. It tends to be a bit of a hybrid standard in that it is partially prescriptive, yet flexible. To underscore this, it goes as far as to reward not only compliance with the various standards, but innovation in those areas. LEED AP (professional certifications) are very much in demand, with the U.S. Green Building Council reporting that over 9,000 job postings in the US between Mar 2013 and Feb 2014 required a LEED credential. To get a feel for what LEED looks like in practice, you can also peruse a database of LEED certified facilities and take a look at how your home might score according to the latest LEED standard.
	International Organization for Standardization (ISO) 14001 Primary domain: A framework for the creation and reporting standards of an environmental management system (EMS). Global standard. Statement: "ISO 14001:2004 sets out the criteria for an environmental management system and can be certified to. It does not state requirements for environmental performance, but maps out a framework that a company or organization can follow to set up an effective environmental management system. It can be used by any organization regardless of its activity or sector. Using ISO 14001:2004 can provide assurance to company management and employees as well as external stakeholders that environmental impact is being measured and improved." Recipients: Many, especially in manufacturing (General Motors, Ford) and large facilities (hospitals, universities). In all, as of the ISO 2013 Survey, almost 302,000 sites worldwide held ISO 14001 certification. Notes: Many of ISO's standards in the sustainability realm, notably 14001, are not at all prescriptive. In fact, a typical refrain from those sites holding ISO 14001 certification is that it is more about process reporting and record keeping than the specific environmental impacts. Consider that a site could conceivably violate state or federal environmental regulations, and yet still comply with ISO 14001 without as much as an infraction. Of late, there has been increasing discussion of ISO becoming more prescriptive in new revisions of standards. In keeping with their sometimes idiosyncratic ways, ISO does not have a badge for 14001 certification, instead allowing companies to create their own according to a very specific set of standards (and contingent on ISO approval). Ironically, the vast majority of these badges are in violation of ISO standards, as ISO strictly requires all badges to refer to standard year (i.e., ISO 14001:2004). Most do not. ISO has provided an 11-page document on specifically how to refer to ISO 14001.
	Global Reporting Initiative (GRI) 3.2 and 4.0 Primary domain: Organizational reporting and transparency, weighted toward large, publicly-traded corporations of all types. Global standard. Statement: "GRI's mission is to make sustainability reporting standard practice for all companies and organizations. Its Framework is a reporting system that provides metrics and methods for measuring and reporting sustainability-related impacts and performance. The Framework – which includes the Reporting Guidelines, Sector Guidance and other resources – enables greater organizational transparency and accountability. This can build stakeholders' trust in organizations, and lead to many other benefits. Thousands of organizations, of all sizes and sectors, use GRI's Framework to understand and communicate their sustainability performance." Recipients: A heavy percentage of the Fortune 500 and other large corporations worldwide, from Pepsi to Nike to Fiat. Overall, about 22,000 companies worldwide have filed reports with GRI, though many are not necessarily externally audited (you can submit what is called a "non-compliant" report, which basically means your company acknowledges that the report does not address each GRI reporting item). You can access all of the reports on their searchable Sustainability Disclosure Database, which we will be using more later in the semester. Notes: We will be using GRI quite a bit to unearth positions and potential areas for innovation, so I will delve into that discussion in those lessons. While it is also not a prescriptive standard, it is extremely rigorous in the items to be disclosed, from executive compensation to governance documentation. In essence, it forces transparency by capturing a company's responses to very specific questions.
	Sustainable Forestry Initiative (SFI) Primary domain: Lumber products, both domestic and exotic. Global standard. Statement: "The SFI program's unique fiber sourcing requirements promote responsible forest management on all suppliers' lands. SFI chain-of-custody (COC) certification tracks the percentage of fiber from certified forests, certified sourcing and post-consumer recycled content. SFI on-product labels identify both certified sourcing and COC claims to help consumers make responsible purchasing decisions. SFI Inc. is governed by a three-chamber board of directors representing environmental, social and economic sectors equally." Recipients: As we might expect, recipients are centered around wood products and fiber, including large wood products companies (Georgia Pacific, Boise Cascade) and major printers (QuadGraphics, R.R. Donnelley). Notes: A criticism leveled against SFI is that it is a "fluff" certification and sets a low bar. I have captured one of those lines of public discourse in the FSC Notes.
	Forest Stewardship Council (FSC) Primary domain: Lumber products, both domestic and exotic. Global standard. Statement: "The Forest Stewardship Council A.C. (FSC) shall promote environmentally appropriate, socially beneficial, and economically viable management of the world's forests." Recipients: HP, AT&T, Allstate and many others, notably also those who are using paper and fiber products as a relatively small part of core operation (i.e., Allstate). Notes: SFI and FSC are an example of two certifications occupying a rather similar space, and there have been some rather public criticisms and more than a few cease and desists exchanged in regard to SFI v. FSC.
	Energy Star ​Primary domain: Energy performance of appliances, lighting, HVAC components, and building systems. Primarily a US standard. Statement: "ENERGY STAR is a joint voluntary program of the U.S. Environmental Protection Agency and the U.S. Department of Energy that helps businesses and individuals save energy and fight climate change throughenergy-efficientt products, homes, and buildings." Recipients: Samsung, LG, Owens Corning, Carrier, and many other products have been rated to the Energy Star standard. Notes: Arguably, one of the more visible environmental standards in daily life, as it has become very widely used in everything from hot water heaters to refrigerators. (Interestingly, the yellow "EnergyGuide" label you see on every new appliance showing how it compares to peers in energy consumption has no affiliation with EnergyStar, as it is provided by the Federal Trade Commission, and not the EPA.)
	B Corporation ​Primary domain: 3P-centric organizational standard, favored by small- and mid-sized companies. Global standard, though primarily US-based companies. Statement: "B Corp is to business what Fair Trade certification is to coffee or USDA Organic certification is to milk. B Corps are certified by the nonprofit B Lab to meet rigorous standards of social and environmental performance, accountability, and transparency. Today, there is a growing community of more than 1,000 Certified B Corps from 33 countries and over 60 industries working together toward 1 unifying goal: to redefine success in business." Recipients: Companies from Ben & Jerry's and Patagonia to lesser-known LEAP Organics and Pachamama Coffee Co-op are all certified B Corps. Notes: Along with GRI, we will be taking a deeper look into B Corp later in the semester as a fertile ground for innovation.
	Terracycle ​Primary domain: Upcycling of packaging of consumer packaged goods, primarily food packaging, from large corporate partners. Global program, though heavily US-based companies. Statement: "TerraCycle is a proud triple-bottom line company. [...] More than just a recycling company, TerraCycle strives to be a driving force behind increasing environmental awareness and action. Our goal is to be a trusted resource for families, schools, communities, and even corporations to find tips, stats, facts, tactics, and news to help them live a greener, cleaner lifestyle. Together, we are Eliminating the Idea of Waste®. Today, TerraCycle is a highly awarded, international upcycling and recycling company that collects difficult-to-recycle packaging and products and repurposes the material into affordable, innovative products. TerraCycle is widely considered the world's leader in the collection and reuse of non-recyclable, post-consumer waste." Users: Target, Frito-Lay, Mars, and other consumer packaged goods and food companies. Notes: While not a certification, it is a mark that a given package waste can be collected and sent to TerraCycle for upcycling. There has also been some criticism leveled against TerraCycle for how and what they upcycle... if it is effective. (Note the comments section in the link, as a TerraCycle Co-founder rebuts some of the claims made.)

Critical Analysis of Certifications and Standards

We will be embarking on quite a bit of critical analysis this semester, the reason being that the explosion of the sustainability practice has come with a number of certifications and companies with creative, interesting, and compelling public faces... and little else. When examining potential standards for your organization or the claims of others, it can be useful to consider the following:

• What is the peer group? In essence, what organizations are supporting the standard and what are the resulting filings/reports/outcomes? While not perfect, it can be very useful to watch the moves that highly respected, and importantly, third-party verified sustainability leaders are making in regard to environmental standards.
• Are organizations making it a requirement of their own supply chains? We will spend some amount of time on this topic as a source of opportunity and potential innovation, but if a company requires suppliers to be certified to an environmental standard, chances are they have quite a bit of interaction with it and believe it has an important role. One caution here is that these certifications can be in vogue on an industry basis... for example, conflict mineral standards are emerging as a significant concern in electronics, but are barely on the radar of many other industries not using these materials.
• Are audits and reports public? In many cases, the results of third-party audits of the standards are made public, and these can provide an excellent view into how rigorous a standard is in practice. Metaphorically, think of certifications as a physical... if all that is being reported in the report is "blood pressure and heart rate," we could expect the doctor is not terribly concerned with the well-being of the patient.
• Who can you talk to? One thing to remember is that those in the sustainability practice tend to be very highly engaged, though perhaps time- and resource constrained. If you are interested in a standard or choosing between competing standards, find a small handful of sustainability peers at organizations utilizing the standards and get in contact. I believe you will find that many are very willing to provide unvarnished experiences with the standards.

Morning in America

It's a lovely Wednesday morning in February. The sun is shining and birds are happily singing about 900 miles south of your current locale. But you have hot coffee. You arrive at your office at about 8:30 a.m., and promptly at 8:45 a.m. every morning, between 150 and 600 pages of indecipherable legal text citing indecipherable legal text from years past metaphorically lands on your desk, and the desk of every single organization and person in the United States. Every single workday of every year.

Welcome to the Federal Register, "The Daily Journal of the United States Government."

While the word "journal" may conjure thoughts of sitting lakeside somewhere in an Adirondack chair and drawing ferns in your Moleskine, this is very different. This journal contains new rules, proposed rules, required notices, and other information with which your organization has to comply with in one way or another. These new rules and requirements can be literally decades in the making, or may arrive with no notice.

The fog of the regulations with roots in this document is literally so thick that the government many times does not agree with itself. Consider that a service of many environmental consultants is to literally take your organization's regulatory question, write a brief, submit it to a group of state or federal regulators, and ask for a formal ruling. If there are seven regulators on the panel, you could conceivably have seven different interpretations of the regulation, each of which could have wildly different implications for your organization. Perhaps this is an inflation. You may only receive four different interpretations with four wildly different implications for your organization.

While "E pluribus unum" may have appeared on the dollars you handed the barista that morning, the morning delivery of the Federal Register should bear "Ignorantia juris non excusat" – "ignorance of the law excuses no one."

Regulatory Influence and Legal Risk

The influence of regulations is not uniquely American. In fact, we may be beginning to see the creation of de facto global regulations due to the multinational nature of so many corporations. In essence, multinationals seek to unify systems and internal environmental reporting across international sites, as well as being able to sell products internationally, and they do so many times through the application of the more stringent regulations across all sites internationally. This, in turn, exerts downward pressure through the supply chains the company uses in each country as they similarly require suppliers to meet their standards. We are beginning to see this exercised with the application of European REACH chemical regulations being applied worldwide, as well as the very practical step of a unified chemical labeling and pictographic standard (the "Globally Harmonized System of Classification and Labeling of Chemicals" (GHS)).

Interestingly, in many cases, it has not necessarily been global accords or other international agreements which have led to this dissemination of regulations across the world, but it has been the multinational corporations and the desire for efficient international trade.

The influence of environmental regulations on the organization varies depending on the organization, as a small bakery will be subject to a fraction of the regulations borne by a chemical plant or a metal plating operation due to the complexity, volumes, materials, and chemicals used in their operations. As we will examine further in a moment, those regulations have very direct and indirect costs on the organizations, and becoming more sustainable is an excellent way to reduce regulatory influence–and risk–in the organization.

Below are a few examples of regulatory influences and how they can affect an organization:

Public Influence and Reputational Risk

Protest in Nike Store in support of strike at Dongguan Yue Yuen Shoes Factory, a supplier to many athletic brands.

Credit: Protesters marched in the shop by SACOM Hong Kong from Flickr is licensed under CC BY 2.0 DEED

In addition to the influence of required environmental regulations under which an organization operates, there is a significant component of risk to an organization's reputation. Reputational risk, stemming from poor environmental performance being brought to the public eye, is not to be underestimated. A notable case we will examine in the next lesson is that of the public's influence on the Nike approach to worker rights, and we will spend significant time in this course examining stakeholder engagement as a tool for innovation. I'd like to lay a bit of a framework for thought here, and we will be taking a far deeper look in the area of public influence throughout the semester.

Brands are the persona–the soul–of an organization, from the smallest non-profit to the largest corporation. Consider the years and billions of dollars spent annually to create and build brands that would otherwise sell commoditized goods, be they carbonated brown sugar water or printed T-shirts. The brands are what create the tremendous sales, continuous PR, and command a price premium in the market... as well as attracting investment. Despite their tremendous value, brands are extremely fluid and fickle, and it does not take catastrophic damage to a reputation to put the organization in peril. The damage to the reputation of a brand need be just enough to cause customers to consider other brands... after that door is opened with loyal customers, the market does the rest. The brand loses its gloss... it becomes less attractive, maybe people think twice about how they would be perceived as an owner of the product. In time, the brand–and sales–erode.

The easiest way to think of reputational risk to the brand is what I call "The Jilted Lover Effect." When a customer has a very personal involvement with your brand and strongly associates with the persona and there has been a significant transgression of those brand values, "The Jilted Lover Effect" dictates that those who once loved your brand the most will become your most vehement, vocal, and lasting critics. Imagine if Patagonia were found to be dumping toxic byproducts behind their plant... this would cause a very immediate backlash, beginning first in its (formerly) most passionate fans.

Primary and Secondary Damage to Reputation

While many of us may first think of protests as pictured above when thinking of "environment" and "public influence," it is necessary to look beyond the more limited and episodic risks and into the far more invasive secondary damages.

Sustainability's Role in Reducing Regulatory and Reputational Risk

Throughout this course, you will be asked to carefully consider the linguistics, metaphor, and frames that we use in both description and messaging. This is not an empty exercise. We do this in order to underscore that words not only have tremendous underlying meaning, but also so that we may more succinctly package our responses, messages, and arguments. A significant goal is for us to understand our philosophies on sustainability, how it fits within the organization, and how to create significant value from sustainability-driven innovation.

Allow us to take a moment to examine the word "footprint" as it is used in sustainability to describe the collection of impacts a person or organization makes on the world around it. It really is a passive, somewhat delicate word. Think of the places where one might encounter footprints... in sand, on grass, in snow, in freshly vacuumed carpet... in all cases, the footprint is temporary and easily remedied (if "remedy" is needed at all).

So, if "footprints" are of minimal impact, then "reducing our footprint" sounds to be of even lesser concern, akin to someone mentioning they are 'working to limit how many times they blink daily.' Blinking is not widely perceived to be a problem to start with, let alone something to be reduced.

So, we must be cognizant in our messages, frames, and arguments that some terms may work to trivialize sustainability and our need to reduce impact and risk (note: two very non-passive words).

When it comes to sustainability's role in reducing regulatory and reputational risk, consider that sustainability works to reduce the exposure of the organization subject to risk. An organization can't be fined by the EPA or state regulators for hazardous waste it doesn't have; it can't be devastated by a public campaign against environmental abuses in which it does not partake. Every movement the organization makes TOWARD sustainability is similarly a movement AWAY FROM legal, regulatory, and reputational risk. We must be clear that sustainability not only represents a very tangible opportunity for innovation and growth, but that it is part of a core business imperative to reduce risk to the organization. Some organizations place special emphasis on this role of sustainability, and structure sustainability as a function of the Legal department.

So, as we hear discussions of reducing an organization's "environmental footprint" or "carbon footprint," we should consider the frame we set and the message we convey using those terms... no matter how prevalent they may be. Let us consider sustainability as playing a far more directed, serious, and essential role in an organization, and that role is one of reducing the risk profile of the organization. Much as in the clinical setting, we seek to use every available means to strategically reduce our risk profile... be it through process innovation, reporting and goal setting, transparency, supply chain auditing, stakeholder engagement, reduction of hazardous materials, or otherwise.

An Explanation of Sustainability Reporting

The Global Reporting Initiative offers forth the following summary of sustainability reporting:

A sustainability report is a report published by a company or organization about the economic, environmental and social impacts caused by its everyday activities.

A sustainability report also presents the organization's values and governance model, and demonstrates the link between its strategy and its commitment to a sustainable global economy.

An increasing number of companies and organizations want to make their operations sustainable and contribute to sustainable development. Sustainability reporting can help organizations to measure, understand and communicate their economic, environmental, social and governance performance. Sustainability – the ability for something to last for a long time, or indefinitely – is based on performance in these four key areas.

Systematic sustainability reporting helps organizations to measure the impacts they cause or experience, set goals, and manage change. A sustainability report is the key platform for communicating sustainability performance and impacts – whether positive or negative.

To produce a regular sustainability report, organizations set up a reporting cycle – a program of data collection, communication, and responses. This means that their sustainability performance is monitored on an ongoing basis. Data can be provided regularly to senior decision makers to shape the organization's strategy and policies, and improve performance.

Sustainability reporting is therefore a vital resource for managing change towards a sustainable global economy – one that combines long term profitability with ethical behavior, social justice and environmental care.

We will spend significant time this semester working with CSRs as a type of source material for innovation and strategy. So while we will be taking a far more technical and critical view of CSRs as the weeks pass, I'd like to offer a primer here.

The Effective CSR

There tend to be two ends of the CSR spectrum: one of which represents the very conceptual and aspirational, long on vision, but short on execution… and the other which tends to take a more accounting-like view of reporting, simply laying out the numbers, without emotion, context, or philosophical underpinnings.

Upon reading many CSRs, you may begin to see that some seem to just flow. They're interesting, they're charming, they have aspiration and vision, but are also practical and show vulnerability. You may find you feel a certain bond to the brand after reading it. In fact, there is a case to be made that the purest expression of a brand may not lie in its advertising, but in its sustainability report. Advertising talks at you, but many times, sustainability reports talk to you. We may consider five facets of an effective CSR as a lens through which to not only critically evaluate the content of a sustainability program, but also how it is presented.

Vision, Mission, and Values

A section of the CSR I would like to call attention to specifically is the Vision, Mission, and Values (VMV) of the organization. It may go by any one of those names, or some derivative, but it is typically set forth quite clearly early in the CSR, and acts to set the context of the organization's sustainability. The VMV acts as the frame by which we can judge a company's sustainability efforts. VMV sets the desired destination, so our first goal is not necessarily to judge the destination, but to understand if the organization's stated strategy, approach, and indicators align with the destination. In essence, we do not bring our preconceptions or existing frames to measure the organization, but we use their own words and definitions of what is important to their organization.

In keeping with the theme of this week's case, the below is a sample of the stated VMVs for a handful of outdoor products companies:

Mission Statements

Organization	Stated Vision / Mission / Values
	[From CEO's letter] "Our love of the outdoors anchors our focus on exploration, protecting recreation areas, and addressing the environmental effects of our business. To marshal our resources most effectively, we are targeting our energies at the areas where we can achieve the greatest impact. For The North Face, this means focusing on resource efficiency and material selection in our product manufacturing."
	"Our Reason for Being: Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis."
	"REI’s purpose is to inspire, educate and outfit for a lifetime of outdoor adventure and stewardship. At the co-op, being a good steward is reflected in how we care for the world in which we play, work and live, and how we connect people to nature. Specifically, our efforts are designed to: Facilitate the active conservation of nature Inspire the responsible use and enjoyment of the outdoors Enhance the natural world and our communities and the places in which we work through responsible business practices Foster opportunities for outdoor recreation, with a focus on young people Maintain REI as an employer of choice, where employees are highly engaged and reflect the diversity of our communities"
	"At Columbia Sportswear, we are committed to building a company of which we can all be proud – not only of the innovative products we create and the financial results we achieve, but the manner in which we achieve them. Whether it’s responsible sourcing, giving back to our communities, or reducing our environmental impact, we believe corporate responsibility is a company wide effort."
	"The single biggest area of our company’s environmental impact is the products we design and make. As a result, our environmental initiatives are primarily structured to address the footprint and composition of our product and materials. In general, we seek to operate in a responsible, efficient, and mindful way. This translates to minimizing waste in our operations, to sourcing safe and effective materials, and perhaps most importantly, to designing and manufacturing products to be the longest lasting and best performing in our industry. Our environmental initiatives, like our product design in general, focus on extending the lifetime and performance of the products. These initiatives span product design and care, materials research and development, efficient manufacturing, and responsible sourcing."

As you can see, the VMVs of a relatively defined group of companies vary greatly in their formality, depth, and areas of emphasis, but nonetheless, set forth a context by which their sustainability efforts may be judged.

The White Whale of Sustainability Reporting

Credit: Melville, Herman, and Mead Schaeffer. Moby Dick. New York, Dodd, Mead and company, 1922. Wikimedia (Public Domain

There are hundreds, if not thousands, of Planet elements that could be addressed in a CSR, from solvent emissions to carbon emissions to chain of custody reporting, and it would appear that some organizations indeed feel compelled to address every single one. So, the CSR and sustainability program attempts to do everything, acquire every certification, address every standard... and in the process, does not actually progress toward any meaningful goal. For this reason, one might consider this overscoped organizational approach to Planet as pursuing some mythical "White Whale of Sustainability Reporting," as it represents a relentless, yet futile, chase on the part of the sustainability program.

If we try to understand the motivations of these organizations chasing the "White Whale," the underlying root cause may ultimately be a sustainability program weak in VISAS facets. Instead of concentrating on those Planet elements and metrics which are of high importance for their own sustainability vision, the tendency can be to "fill the void." Because the sustainability program lacks direction, purpose, and personality, it does what is easy and superficial... and it does so through a high volume of essentially meaningless activities. As we will see throughout the semester, effective sustainability programs are just as much about saying "yes" as they are about saying "no." We must make choices about what is important to the organization as we develop a platform for innovation.

For your consideration

BMW Group has more than 110,000 employees worldwide, around € 75 billion in annual revenue... and is arguably one of the most sustainable companies in the world.

It has three environmental Key Performance Indicators (KPI): (1) Energy consumption per vehicle produced, (2) Waste for disposal per vehicle produced, and (3) Water consumption per vehicle produced. It then adds three more measurements to create the core of its "group-wide environmental protection" program: Process wastewater, Solvent emissions, and CO₂ emissions.

If BMW can focus on only SIX top-level environmental metrics most important to its vision, perhaps this is a worthy aspiration for any organization. BMW has said "no" to a tremendous number of potential distractions to be able to say "yes" and devote appropriate attention to those six measurements.

Planet aspects and indicators in sustainability reporting

A note on terminology we will be using quite a bit in this course and in reference in CSRs:

Environmental aspect: Any means by which the organization directly or indirectly impacts the environment through the manufacture, transportation, use, or end of life. This could be anything from emissions from trucks idling at a loading dock to landfilled waste.

Indicator: A measurement of the extent to which an aspect impacts the environment, such as '50 tons of CO₂ generated per month 'or '450 gallons of hazardous waste generated per year.'

While there may be a seemingly infinite number of Planet aspects and indicators one could report in a CSR, there tends to be some level of uniformity on the generally most important aspect areas. Note that, while there may be best practices, there are no "required" units or means to state indicators in CSRs, even GRI-compliant ones. So, if you were compiling a CSR, you could choose to represent your energy consumption in BTU, joules, gigajoules, kWh... and potentially also index it to whatever baseline or other number you prefer. So, even if two companies state internal energy consumption in gigajoules, one could index to production ("gigajoules of energy consumed per 1000 cars produced"), while the other could index to a baseline ("gigajoules of energy consumed, compared to 2009 baseline"). So even if the aspect and core indicator are the same, they could be stated in drastically different ways.

Planet Aspects and Indicators in Corporate Sustainability Reports

Greenhouse Gas Emissions (GHG)

Solvent and Vapor Emissions

Waste and Byproducts

Energy Use

Water Use

Biodiversity and Habitat

Design for Sustainability

Lifecycle Analysis/Mapping

Beyond looking at the empirical measures or philosophies of sustainability, it can be highly valuable to examine the leaders (and failures) of sustainability in practice. The practice of sustainability has many component parts representing a very wide spectrum of ideas and material concerns, and with a seemingly infinite number of potential blends to be created in implementation:

The Emotional and the Rational

The Massive and the Minute

The Progressive and the Regressive

The Global and the Local

The Aspirational and the Tactical

A goal throughout this course will be therefore to understand both ends of the spectrum, map and distil the choices made by sustainability programs, and understand the opportunities created for the organization. As we understand more deeply, we may begin to understand how we can create spaces and niches for sustainability-driven innovation within any organization, and in an integrated and seamless way.

Below are three examples of initiatives within organizations leading the way in Planet-oriented sustainability initiatives, ranging from the billion-dollar Interface to the 47 employee Full Sail Brewing Co. From there, we will take a brief look into the component parts of each initiative, what Planet aspects they leverage, and how they uniquely create value for the organization.

Interface

Watch the following 16 minute video: The Business Logic of Sustainability. While it is not a "summary", it is a great story from an unlikely pioneer of sustainability.

Video: Ray Anderson: The business logic of sustainability (16:39)

The Insight

Ray Anderson's sustainability epiphany was the inspiration, and his position and conviction allowed him to apply significant resources to solving the problems of the carpet tile lifecycle. Regardless of whether it was guilt of a founder nearing retirement or the inspiration of a book, Ray Anderson devoted himself to creating a sustainable legacy.

The Opportunity

Creating an offering of "climate neutral carpet" to a primarily commercial building market. Importantly, the timing would be ideal, as this was happening when LEED, recycled materials, and sustainable sourcing in architecture were gaining significant headway. Interface would become the first sustainable carpet tile in a market where sustainable materials and surfaces were becoming a requirement.

GRI Planet Aspects

• Materials used by weight or volume(G4-EN1)
• Percentage of materials used that are recycled input materials(G4-EN2)
• Direct greenhouse gas (GHG) emissions (Scope 1) (G4-EN15)
• Extent of impact mitigation of environmental impacts of products and services (G4-EN27)
• Percentage of products sold and their packaging materials that are reclaimed by category (G4-EN28)

Vision

Significant, and with its foundations in Ray Anderson himself. While much of the original vision for infinitely recyclable, "climate neutral carpet" may have started with Mr. Anderson, it became a serious engineering, chemical, and logistical challenge to execute. It would be fascinating to learn if the profit and market share gains experienced were part of the early Interface vision, or if they turned out to be fortunate byproducts of what might have otherwise been considered a sunk-cost program. It would be an interesting learning experience to see what kind of test or Beta program Interface could have been established to understand the gains they were walking into for their nearly half a billion dollar investment.

The Interface Mission is extremely lofty, but one on which the company has done significant work and devoted significant resources to help make happen. Interface describes its Mission as:

"What drives us? A positive vision of the future and the determination to make it come true. The moral courage to do what is right, despite all obstacles. An abiding commitment to show that sustainability is better for business. We believe that change starts with us and is transforming Interface from a plunderer of the earth to an agent of its restoration. Through this process of redesigning ourselves, we hope to be a catalyst for the redesign of global industry."

Innovation

Significant. After the establishment of their original ReEntry process to recycle used carpet into 100% recycled carpet tiles, it tackled the issue of used commercial fishing nets washing up on shores worldwide. It not only developed a process to recycle this notoriously difficult material, but also partnered with the Zoological Society of London to establish a "community-based supply chain" by which communities in the Philippines could clear their beaches and reefs of the nylon nets while being paid for the material.

Storytelling

The Interface story has become one of the most hailed sustainability stories of the last 20 years, gaining attention everywhere from Forbes and the Wall Street Journal to Triple Pundit. The story of Interface has gone on to influence countless other businesses as to the possibilities of sustainability.

Achievement

Interestingly, Interface has not issued a CSR for some years, and is fairly limited on metrics. So despite spending millions on sustainability programs and gaining significant PR (as well as being a NASDAQ traded company), it does not disclose sustainability indicators.

Structure

Again, without a published CSR or real sustainability documentation, it can be difficult to evaluate the structure of their program.

The Secret

Most competitors (such as the Warren Buffet-owned Shaw Carpet) have closed the gap on recycled materials, and can offer the same level of recycled material. Interface has been able to hold much of its gains from its initial burst of growth as the first mover in recycled carpet.

Please watch the following 3:46 video.

Video: Worn Wear® Stories | Presented by Patagonia (3:46)

The Insight

In the face of increasing consumerism, immediate gratification, and disposable products, there is an opportunity to own a space around authenticity, durability, and modesty. Patches and repairs to an item of clothing should be considered a badge of honor from a life well lived.

The Opportunity

To own the space, and in the process, help justify the price premium of their well-constructed, sustainably sourced clothing. There is also an opportunity to distance themselves from other outdoor brands (i.e., North Face) which have lost their authenticity to some extent. Patagonia can provide information, materials, and support to those who seek to repair their clothing as opposed to throwing it out.

GRI Planet Aspects

• Extent of impact mitigation of environmental impacts of products and services(G4-EN27)

Vision

Patagonia Mission Statement: "Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis."

"One of the most responsible things we can do as a company is to make high-quality stuff that lasts for years and can be repaired, so you don’t have to buy more of it. The Worn Wear® program celebrates the stories we wear and keeps your gear in action longer to take some of the pressure off the planet."

Innovation

Many companies tout the durability of their clothing, but very few actively give you the tools and support to repair their clothing. Fewer still promote purchasing fewer of their products in the headlines of their pages.

If any additional evidence is needed that they are serious about this, Patagonia actively promotes a Black Friday "Worn Wear Swap" at eight of its flagship locations where you can bring in your used Patagonia and swap with others. Not many stores would devote the largest retail day of the year to encouraging used clothing.

Storytelling

Everywhere. The initiative is excellent at not only unearthing stories, but in the process reinforcing the bond between a piece of clothing and an emotional or memorable experience. They have a dedicated blog for the Worn Wear program, and you can easily see how customers will wax poetic about the memories they have of their favorite Patagonia item (and furthermore, reinforcing the durability of Patagonia used for years in rough conditions).

Achievement

While it would be nice to have a metric (i.e., "200,000 Patagonia garments NOT sold since 2012"), the Worn Wear program is more of a message or social imperative than anything. Participation in the program does not involve the purchasing or signing up for anything, so it would be hard to measure. It does capture quite a bit of vicarious achievement through the rich stories shared by customers about the adventures of their faithful Patagonia jacket or shirt.

Structure

Very little, which is keeping with the Patagonia sustainability ethos of initiative- as opposed to metric-driven sustainability reporting. While they lack in structure, they far exceed in framework and execution. Patagonia has offered this statement as to why they do not have a structured CSR:

"The advantage to the reader/user of sustainability reports that follow the GRI framework is the ability to easily compare data from different companies. The disadvantage: a sustainability report, like an annual report, can be a dull read held forth in specialized language that clouds as much as it reveals. Because we recognize the advantages of easy comparability, we are investigating the possibility of importing data we collect for the Footprint Chronicles into a GRI framework (and with as much plain speaking as possible). Sustainability reports can be expensive for a company of our relatively small size to research and produce and can only supplement, not substitute, for the Footprint Chronicles. We want to continually raise rather than lower the quality of the conversation we’ve created with our stakeholders over the past years."

The Secret

The Worn Wear program does a fantastic job of justifying a premium price and deepening the brand experience through storytelling and authenticity. It's in keeping with the Patagonia platform of 'a consumer brand that rejects consumerism.'

Full Sail Brewing Co.

Watch the following 2:44 minute video on Beer, Water, and Responsibility.

Video: Full Sail Brewing: Beer, Water & Responsibility (2:46)

The Insight

If you listen to what Jaime says in the video, it would appear that their world-leading water efficiency not only stems from a belief of responsibility, but also in remaining a welcome member of the Hood River community (this is an example of securing "license to operate," a topic we will address in a later lesson).

There may certainly be some technical prowess and innovations beyond those Jaime mentions, considering Full Sail uses only about 25% of the water per barrel of major breweries, and about 60% of the water per barrel of the much-touted sustainable brewer, New Belgium Brewing. In fact, Full Sail was named "Craft Brewer of the Year" by Beverage World Magazine, for their “sustainable stewardship, quality, consistency and operational ingenuity.”

The Opportunity

As mentioned in a Dec 10, 2010 interview with Jen Boynton of Triple Pundit, we can see a great example of operational sustainability:

What’s your biggest sustainability challenge?

As a brewer, water and waste water are our biggest issues. That is why we are so committed to reducing our usage as much as we can. Water use also impacts waste treatment, energy use, truck hauls, etc.

Any new sustainability projects in the pipeline that have you excited?

We have just installed a new piece of brewing equipment called a Mash Filter, and it will save us nearly a million gallons of water yearly enabling us to lower our water to beer ratio. This savings also extends to the number of truckloads (~70) of material that won’t be coming and going from the brewery on a yearly basis. And I haven’t even got my arms around the savings in heating/cooling/electricity usage yet, but all will be reduced.

GRI Planet Aspects

• Total water withdrawal by source (G4-EN8)
• Water sources significantly affected by withdrawal of water (G4-EN9)
• Percentage and total volume of water recycled and reused (G4-EN10)
• Materials used by weight or volume (G4-EN1)
• Extent of impact mitigation of environmental impacts of products and services (G4-EN27)

Vision

From Boynton interview:

What are your plans for growth, if any?
We believe it is important to grow our business in an organic and sustainable way. We only look at opportunities that will allow us to build our business year after year. Because we are a small, independent brewery in a very competitive environment, we need to be sure that our business decisions are responsible and careful of our limited resources.

Innovation

While Full Sail's sustainability reporting is basic and informal, it certainly befits a small company. More importantly, Full Sail has invested its innovation dollars on equipment and infrastructure that will make a tangible difference in water consumption, namely the investment in the fairly exotic Meura mash machine mentioned in the video.

Storytelling

Full Sail marketing and CSR does not have the gloss or reach of a larger company with creative departments and dedicated sustainability staff, but Full Sail certainly makes up for that in substance and a great sustainability story of 'the little brewer who could.' They do quite a bit of storytelling around sustainability in their blog, as well.

Achievement

The fact that they are leading the world in water efficiency for a brewery is a major achievement, in and of itself.

Consider Full Sail to be a perfect case of a company NOT chasing the White Whale... water is important to the business, community and founders, so Full Sail has invested its full consideration and resources on minimizing impacts to the Hood River. They have certainly done well in that regard, and more importantly, they have set the standard and openly share their water conservation measures and advice with other brewers via "Ask Jaime."

Structure

Very little, but they do not have a formal CSR. Again, like sustainability, in a resource constrained setting, we must make choices, and Full Sail is spending it on improving performance as opposed to talking about the improved metrics.

The Secret

Leading the world in water efficiency, wholly-owned by its 47 employees, and holding more than 130 Gold Medals for its beers, Full Sail is an example of what successful sustainability in a small business can look like.

Credit: Frank Lloyd Wright, Architect, Drafting the Marin County Civic Center, 1958 or 1959 ... by sswj from Flickr is licensed under CC BY-NC-ND 2.0 DEED

“No house should ever be on a hill or on anything. It should be of the hill. Belonging to it. Hill and house should live together each the happier for the other..”

In the first three weeks of this course, we may think of ourselves as the architect surveying the site. Our goal is to understand the sustainability landscape, its functions, and as much nuance as possible at this point. By closely examining the sustainability landscape as it exists today, we may only begin to find interesting areas and niches upon which to build our initiatives. As we explore sustainability further, participate in discourse and discussion, and examine research techniques, the goal is to provide the tools by which you can identify specific opportunities and placements for the foundations of innovation. From there, we begin to understand, quite literally, the architecture of innovation and how to design.

Recapping, our goals for this lesson are to: