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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