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Outside In
Exploring corporations’ voluntary integration of
“sustainability” into business discourse and operations
as a potential force for stabilizing atmospheric
concentrations of greenhouse gases
By Susan Russell
[email protected]
Today’s Presentation
• Corporations as potentially powerful forces
in fight against climate change
• Overview voluntary corporate adoption of
“sustainability” discourse, performance
and disclosure agenda
• Sustainability and GHG reduction
– Examples: Smithfield Foods and BP
• Wrap up
Harnessing Powerful Forces for Positive
Change
“Businesses are among the world’s most
influential institutions. As society’s
mechanism for production and
consumption, their decisions have
significant environmental effects.”
- World Resources 2002-2004,
Decisions for the Earth, Balance, Voice
and Power.
Harnessing Powerful Forces for Positive
Change
 Reach: Corporations are “glocal” citizens: multinational, cross-cultural, multi-lingual
Harnessing Powerful Forces for Positive
Change
 Reach: Corporations are “glocal” citizens, multinational, cross-cultural, multi-lingual
 Corporations constitute 51 out of world’s 100 largest
economies
Harnessing Powerful Forces for Positive
Change
 Reach: Corporations are “glocal” citizens, multinational, cross-cultural, multi-lingual
 51 out of world’s 100 largest economies
 Corporations house unique business-specific
expertise
 Transform impacts into opportunities
Harnessing Powerful Forces for Positive
Change
 Reach: Corporations are “glocal” citizens, multinational, cross-cultural, multi-lingual
 51 out of world’s 100 largest economies
 Corporations house unique business-specific
expertise
 Transform impacts into opportunities
 Needs of corporations can shape policy decisions
Defining Sustainability
• “Sustainable development is
development that meets the needs of
the present without compromising the
ability of future generations to meet
their own needs.”
– Brundtland Report, 1987
• “Forms of progress that meet the
needs of the present without
compromising the ability of future
generations to meet their needs.”
– World Business Council for Sustainable
Development
And One More …
“Triple bottom line” business agenda and
performance: improved integration of
concepts of economic prosperity,
environmental regeneration and equity to
achieve win-win-win situations.
– John Elkington,
Chairman of SustainAbility, Author of
Cannibals With Forks and The Chrysalis
Economy
A Definition of Its Own:
Internal Corporate “Sustainability”
• Trend: Corporations making sustainability
meaningful within unique business context
– Mind-set that gets threaded into business
– Various sustainability “value propositions”
– Finding the language that works as an
organizational concept
A Definition of Its Own:
Internal Corporate “Sustainability”
• Sustainability by other names:
– Environmental, health and safety
performance
– Sustainability
– Corporate Social Responsibility
– Stewardship
– Global Citizenship
– Etc., etc., etc.
Voluntary Adoption of Sustainability:
A Brief History of Disclosure
• Since early 1990s voluntary environmental
reporting
– Majority viewed as “green washing,” PR
efforts, very little credibility
– All the “positive” things
Voluntary Adoption of Sustainability:
A Brief History of Integration and
Disclosure
• 1990s to present:
– Trend toward increased accountability and
transparency of companies across all levels,
functions, operations
• Currently
– 1999: 35% of Fortune global top 250 companies
producing reports
– 2002: 45% of Fortune global top 250 companies
producing reports
– Still small fraction of all companies.
– Improved information
• Good, bad and the ugly; more credible, balanced
Adoption of the Sustainability
Performance Agenda and
Disclosure
• Trends and Drivers:
– External stakeholder pressure and informational
demands
• Communities
• NGOs
• Governments
Sustainability Performance
Disclosure
• Trends and Drivers:
– Shareholder pressure, resolutions
Sustainability Performance
Disclosure
• Trends and Drivers:
– Business value from improved performance
• Top and bottom-line value
• Reputation
• Risk reduction
Sustainability Performance
Disclosure
• Trends and Drivers:
– Growth in investment
indices and rating
firms
• E.g., Dow Jones
Sustainability Index,
Innovest, FTSE4Good
• Lengthy questionnaires
Value of Disclosure: Company
• Issuance of public report helps drive evolution of concept
and improvement of performance
– Process stimulates integral exploration of nebulous concept
– Reporting drives accountability for performance and desire to
improve
– Process important part of the learning within the corporation as
well as for gathering relevant information
– Potential to speak first on key issues
– Economies of information
– Top-line value
– Bottom-line value
– Reputational value
• Industry leader
• Preferred supplier
Value of Disclosure: Public
• More information about the corporation is
publicly available
• Transparency promotes dialogue
• Informed decision-making
– Improved democracy
• Improved accountability
Energy Strategy: Important Part of
Sustainability Commitment
• Energy and CO2 reduction
strategies standard part of most
sustainability commitment
• Create tangible bottom and top-line
value
Two Companies:
Smithfield Foods and British Petroleum (BP)
• Rationale
– Both produce an abundance of gas
– Both have integrated “sustainability” in a manner fitting for their
company
– Both have a commitment to voluntary public disclosure
– Both are performance leaders in their respective industries
– Both are global corporations
• Caveat:
– Will only do BP if time permits
Energy Hogs
Smithfield Foods’ waste-to-energy
strategies within the context of the
company’s “stewardship” commitment
Company Profile
• World’s largest pork producer and processor
• 2004
– Sales: $9 billion
– Hogs produced by 650 company-owned
farms and 1,800 contract growers
worldwide
– U.S. Operations:
• Produced 14 million hogs
– 1750 Contract farmers and 450
company-owned farms
• Processed 24.7 million hogs
• Processed 2 million cattle
Defining “Stewardship”
• The “ongoing efforts to protect the natural environment,
the safety of our employees and the welfare of the
animals we raise … stewardship is not just an ethical
responsibility. It’s also a critical investment for building
trust with our stakeholders and positioning our company
for responsible growth now and in the years to come.”
• Transforming respect for employees, the animals raised
for food production, the environment and stakeholder
into a driving force for performance improvement,
innovation and value creation.
• Disclosure
– Annual Stewardship report
– Web site
– Stakeholder engagement
Environmental Management
Systems
• First in industry to implement ISO 14001-certified systems in U.S.
production and processing operations.
– Basis for compliance, pollution prevention, continuous
improvement.
– ISO 14001: systematic method for managing aspects and
impacts of facility
• Annual audits by third-party accredited auditors
• Identification of eco-efficiency opportunities
Stewardship Challenge and Opportunity:
Waste-to-Energy
• Key environmental aspects
– Hog manure
– Wastewater residuals
– Animal fats
– Vegetable oils
• Key energy-related business opportunities:
– Process innovation
– Waste-to-energy technology investment
– Unique ventures for renewable fuels
– Exploring partnering opportunities and policy change
Process Innovation:
Patrick Cudahy
• Adapted boilers and employed leading-edge system
technologies.
• Allows meat processing plants to supplement fuel needs
by recycling animal fats and other byproducts captured
during wastewater treatment process
• Extraction of 175,000-200,000 gallons of grease for fuel
– Environmental and business benefits
• Offsets purchase of natural gas for same purpose.
– Cheaper source of fuel
• Burning of animal grease for reuse as fuel
compared to natural gas
– Lower nitrogen oxide
– Lower sulfur dioxide
• Reduced disposal costs
• Conservation of landfill space
Process Innovation: Moyer Packing
Company, Southern PA
• Specially adapted boiler technology
– Powered by animal fats and
vegetable oils from rendering
operations
• Benefits
– Cheap, renewable source of fuel
– Cleaner burning fuel:
• Reduction of NOx and SOx
Investment in Hog Waste
Management Technologies
• 2000: Smithfield Voluntary Agreement with
North Carolina’s Attorney General’s Office
– $15 million
– Program pursued by team at NC State
University
– Investigating roughly 18 technologies
– A number of these are waste-to-energy
– Smithfield piloting some technologies
www.bestbiofuels.com
Business Ventures:
BEST BioFuels, LLC
Livestock waste to biogas  ASTM-standard biomethanol  biodiesel
Business Ventures:
BEST BioFuels, LLC
• Major partner in
BEST BioFuels, LLC
– Invested $20 million
2003 in building waste
collection system and
central treatment
complex at Circle Four
Farms, southwestern
Utah
Business Ventures:
BEST BioFuels, LLC
• Utilizes Biomass Energy
Sustainable Technology (BEST)
• Environmentally superior
technology that Smithfield helped
pioneer and pilot
• How it works:
– Separates hog waste into partially
purified liquid and solid material
– Solid material transported from
farm to centralized processing
facility
– Technology transforms solids into
various forms of energy, methane,
and methanol
– Ash produced can be used as
fertilizer
Business Ventures:
BEST BioFuels, LLC
– Circle Four Farms:
• 23 Circle Four Farms produce livestock waste
– High concentration of animals (144,000
head of finishing hogs)
• Waste is piped to central location through 40
miles of pipe and concentrated at four centrally
located digesters
• Concentrated waste is heated and anaerobically
digested to yield biogas
• BEST converts biogas to biomethanol, using
patented thermo-catalytic process
Business Ventures:
BEST BioFuels, LLC
• Key benefits:
– Reduces waste volume
– Captures methane
– Creates valuable commodity
• Potential commercial uses
– Biodiesel, clean-burning
renewable fuel typically
blended with conventional
petroleum diesel at 20/80 ratio
Business Ventures:
BEST BioFuels, LLC
• Next Steps …
– BEST BioFuels produces 2,500 gallons of
biomethanol from 500,000 gallons of hog
waste per day
– 2005, anticipates work will be completed on
biodiesel manufacturing facility in Texas
• Biodiesel generation
Increased Biogas Usage
• 2004 overall biogas usage increased 19 percent over
2003 usage
– From 247,111 to 293,862 Decatherms
Partnering to Promote
Renewable Energy Demand
• Participation in North Carolina Green Power
– Independent nonprofit program that uses voluntary
contributions to purchase electricity generated from
renewable resources to NC
• Energy to be purchased by homes/businesses in NC
– 2004:
• Among seven energy producers who signed agreements to
provide renewable sources
– Small, tax-deductible premium
• Methane from hog waste converted to electricity through
microturbine at waste collection site
BP Profile
• Leading global energy company
– Sales and other operating revenues
“turnover” $285 billion
• Reputation as global sustainability
leader
– Dow Jones Sustainability Index
• Many firsts:
– First internal emissions trading
– Achieved industry’s lowest rates of gas
flaring
Sustainability at BP
“For us, ‘sustainability’ means the capacity to endure as
a group by renewing assets, creating and delivering
products and services that meet the evolving needs of
society, attracting successive generations of employees,
contributing to a flourishing environment and retaining
the trust and support of customers, shareholders and
communities.”
• Disclosure
– Annual sustainability report available online at www.bp.com
– Detailed information on science of climate change and search for
solution
– Verification of reporting information by third-parties
Sustainability and Climate Change
• Provides access to overview of the issue and science of climate
change
• 1997: first in industry to publicly state precautionary action justified
– Set initial target for 2010: GHG emissions from operation 10%
lower than 1990 emissions
• Achieved target in 2001
• 2003 BP engaged in more focused inquiry on what is required to
stabilize GHG concentrations and further work to minimize
emissions from own operations
– Set new target for 2012: No increase in net emissions from 2001
levels by 2012
Actions on Climate Change
• Emissions reduction strategies
– Emissions trading
– Strategic energy management
• Improved operational efficiencies
• Technological innovation
– Investment in renewable energy technology business
• BP Solar is one of the world’s largest solar
electric companies
• BP’s renewable energy business
• Growth goal: 25% per year
– Product innovation
– Research partnerships
Emissions Trading
• Jan. 2000: launched first global emissions trading
system for all 150 corporate business units to participate
– First year: 2.7 million metric tons of CO2 equivalent exchanged
at average price of $7.60 per metric ton
• Active promotion of/participation in market mechanisms
– Helped develop existing UK emissions trading scheme
– Involved in helping to develop European Union Emissions
Trading Scheme
– Largest and first international market for CO2
– Voluntary schemes in United States
Products and Innovation
• Emissions from products roughly 15 times higher than operational
emissions
• Product innovation 2003:
– 2003: BP Ultimate fuels compared with standard fuels “twice the
cleaning power of normal fuels”
• 14.5% reduction in CO compared with traditional fuels
• 5.3% reduction in NOx emissions
• 2.2% reduction in CO2
• 5.6% reduction in unburned hydrocarbons
– Lower-sulfur diesel and liquefied natural gas
– Hydrogen production and demo projects
Research Partnerships
– Princeton U, Massachusetts Institute of Technology
• Carbon Mitigation Initiative
• Identifying technology applications to mitigate climate change
– Stanford U
• Three-year, $2 million agreement
• Public policy aspects of modern energy markets
– Initiated Carbon Capture Project
• Industries first large-scale project to develop tech for
capture/storage CO2
– Clean Energy Facing the Future
• $10 million, 10-year program, project with the Chinese Academy of
Science and Tsinghua University
• Studying implications of clean energy technologies for China
– Royal Academy of Engineering, Imperial College London,
Princeton University
Wrap Up
• Voluntary adoption of sustainability performance and
disclosure potentially power force for reducing GHGs
• Concept of sustainability within corporations:
–
–
–
–
–
Improves performance,
And promotes commitment to disclosure/corporate transparency,
which promotes internal and public access to information,
which promotes accountability,
which promotes overall environmental performance
improvement,
– which includes valuable strategies for reducing GHGs and
responses to climate change,
– which promotes value to business and multiple stakeholders.
Questions?
Thank You