outside in
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Outside InExploring corporations’ voluntary integration of
“sustainability” into business discourse and operations as a potential force for stabilizing atmospheric
concentrations of greenhouse gases
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: multi-national, cross-cultural, multi-lingual
Harnessing Powerful Forces for Positive Change
Reach: Corporations are “glocal” citizens, multi-national, 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, multi-national, 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, multi-national, 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:– 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
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.
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