GREEN BUSINESS: NEW DIRECTIONS IN THE GLOBAL ECONOMY

Robert Girling, Ph.D.
Professor; School of Business and Economics
Sonoma State University

"Sustainable development will be the primary driver of industrial and economic change over the next 50 years."
David Blood, former head of Goldman Sachs Asset Management

Beginning In 1992 with the Rio Earth Summit, the community of nations began the dawn of a new age in which we recognized that prosperity and protecting the environment are like Siamese twins. Increasingly, a broad range of companies are incorporating sustainability into their business strategies and plans.

Just what is meant by sustainability? There is remarkable agreement about human values. Most members of any community would like to see opportunities for good work for all, health food and clean drinking water, access to education and health care, responsible entrepreneurship and the preservation of sustainable and livable cities. Taken together these values add up to sustainability, the principle of ensuring that our actions today do not limit the range of economic, social and environmental options open to our children and future generations or simply "development that meets the needs of the present without compromising the ability future generations to meet their own needs." (UN Brundtland Commission)
The City of Berkeley’s, [California] Sustainable Development Initiative defines sustainability in terms of five elements: “Focusing on outcomes over future generations (life cycle cost analysis), creating integrative approach to meet interdependent goals of social equity, environmental quality and economic viability, multi-disciplinary, whole systems approach to problem-solving and decision-making, full cost accounting in decision-making, including environmental and operating costs and recognition of ecological limits as a fundamental constraint “

Why is sustainability important? Simply put, sustainability is proposed by business leaders, governments and non-profits as a solution for a number of global problems racing up the international agenda, including global warming, the collapse of the ocean fisheries, and the deaths of over 30,000 children every day from preventable diseases. Paul Hawken in his book The Ecology of Commerce argues

Quite simply, our business practices are destroying life on earth. Given current corporate practices, not one wildlife reserve, wilderness, or indigenous culture will survive the global market economy. We know that every natural system on the planet is disintegrating. The land, water, air, and the sea have been functionally transformed from life-supporting systems into repositories for waste. There is no polite way to say that business is destroying the world.

What has this got to do with business? While many business people will argue that it is their responsibility to make a profit—not save the world-- the fact is that business needs stable markets and healthy consumers and, uniquely, business has the technology, finance and management skills needed to achieve a transition to sustainability.

In its Global Sustainability Report 2006, Price-Waterhouse-Coopers put it this way:
Sustainability may sound like yet another corporate buzz word, the latest fad in a long line of management fads. But sustainability is serious business. A new standard of performance that measures the social, environmental, and economic effects of business activities—the so-called "triple bottom line"—it can mean the difference between a company’s long term success or failure. Alas, few corporations recognize the links between sustainability, reputation, and financial performance. However, without a sustainability risk management program in place, companies are flirting with disaster. A major misstep or miscalculation on triple-bottom-line issues can ruin reputations, jeopardize corporate financial integrity, and imperil relationships with customers, investors, and the banks….Companies are converging in first generation sustainability themes like corporate governance, and transparency and accountability along the whole supply chain are increasingly visible through policies and control mechanisms.

While much of the recent movement toward sustainability has come as a result of skyrocketing world oil prices and related energy and transportation costs, there are added factors driving business concerns with the environment. These include the problems of solid waste disposal, adequacy of water supplies and aggravated health risks, to name a few. Globally, we are fast approaching unmanageable levels of toxic, chemical and hazardous waste. Additionally, collapsing aquifers and widespread contamination of water supplies adds further risk factors, uncertainties and costs which challenge business planners. Finally, the issue of global warming, recently highlighted by the New Orleans catastrophe of 2005 and such films as An Inconvenient Truth has raised concern among the entire population.

What can enterprises do and what are they doing to address these environmental risks? One example is that of Scottish and Newcastle, a British manufacturer of beer and cider. As they state in their 2005 Annual Report
“During 2005 we approved a new group environment policy which puts greater emphasis on engaging employees on environmental issues and will ensure that environmental considerations are seen as an integral part of our business management. The rapidly rising cost of energy and the introduction of the EU Emissions Trading Scheme have intensified the strategic importance of energy management to the business. Development of a more rigorous energy efficiency programme is well underway, to achieve further reductions in both energy costs and CO2 emissions. We are also examining ways of generating our own energy to ensure that S&N is able to respond effectively to future cost and environmental pressures. In particular, we are evaluating the use of renewable energy. Bulmers has installed two micro wind turbines that provide electrical power to its orchard buildings. This is a modest start, but it reflects our intention to address the energy challenge as an opportunity to become a more efficient and innovative business.”(Scottish and Newcastle Annual Report 2005; p.12)
There are several ways in which some leading companies are in fact responding proactively and responsibly. We can summarize these as move toward sustainable designs by practicing whole system thinking by producing products with sustainable resources, using appropriate packaging thereby making the world’s problems, the company’s problems.

Some specific ways by which global companies are taking action to act sustainably at their own initiative or in response to governmental pressures and regulations are illustrated in Table 1: Corporate Sustainability Practices.

[INSERT TABLE 1 HERE]

CHANGING CORPORATE PRACTICES and GOVERNMENTAL POLICIES

The world’s financial markets are demanding that businesses pay attention not only to the financial bottom line, or profit, but take into account impacts on communities and the environment as well. Insurance companies, who have to pick up the tab for environmental disasters such as Hurricane Katrina, have moved to the forefront of those demanding sustainable solutions. Insurance companies are so concerned is that they are among those with the most to lose financially. The Wall Street Journal notes that U.S. insurers paid out a "record $71 billion in weather-related property payouts" in 2005. As a result the insurance industry is asking for new building codes, land use policies, and underwriting carbon-emission credits for businesses investing in emission-reduction projects in the developing world.

In its annual report Bulmers, a UK based brewer stated “A successful, sustainable business plan for the long-term, looking beyond immediate profit, to return that can be achieved over may years, in ways which maintain its social and environmental capital…. We believe there is an overwhelming business case for our engagement with sustainability, not least because our stakeholder—suppliers, customers, consumers, shareholder and all those affected by our operations—will increasingly expect it of us. There is a long way to go. But the journey has begun.” (Bulmers Annual Report, 2001) (Pg. 89)

The following section provides examples of corporate policies and government programs which address sustainability.

NORTH AMERICA

The US is home to only 5% of the global population but already consumes 24% of the world’s energy and emits a quarter of the world’s greenhouse gases; yet it has chosen not to enter into the Kyoto Protocol. Meanwhile the country is experiencing challenging environmental costs including soaring healthcare costs.
"Over 80% of the US’s energy demand is met by fossil fuels, and it is highly dependent on foreign nations for its petroleum needs. This will continue to shape its attitude towards issues such as the securing of energy supplies, climate change, air pollution and exploration for oil in ecologically sensitive areas. While there is no federal mandate for increasing energy generated from renewable sources, at least 18 states have established minimum percentages of energy that must be derived from renewable sources. The absence of a national climate-change policy has prompted several states to develop their own regulatory frameworks for greenhouse gas management. In the light of this patchwork regulatory regime, as well as the belief that a national climate- change policy is on the horizon, many companies are beginning to make voluntary commitments to manage their carbon footprints." (PWC.com)
In the US the City of Portland is one of the leaders in pursuing sustainability.
Led by the city's Office of Sustainable Development a Green Environmental Fund offered $500,000 in grants for cutting-edge projects. And the Green Building Program stipulates that all Portland Development Commission buildings must meet LEED Gold standard. Meanwhile the City Repair Project has turned busy intersections into public gathering places and a public-private partnership built a composting plant to handle the city's waste while reducing land-fill. In addition Portland has targeted developing alternative transportation by building 700 miles of bike lanes and bike and a program of car-sharing. (In Business, 2005)

And the State of California took the lead in passing a greenhouse gas bill. "We simply must do everything in our power to reduce global warming before it is too late," said Gov. Arnold Schwarzenegger at bill signing ceremony on September 21, making California the first state in the nation to mandate the lowering greenhouse gas emissions.

Interface, with sales of $1 billion is a global manufacturer, marketer, installer and servicer of commercial and institutional interiors. The Company operates in over 100 countries with 29 manufacturing sites located in the US, Canada, the Netherlands, Northern Ireland, Australia, Thailand and China. The company manufactures and sells an estimated 40% of all the carpet tiles used worldwide in commercial buildings. Its strategy is to diversify its operations while integrating worldwide. (Nattrass and Altomare, The Natural Step for Business, New Society Publishers, 1999)

In 1994, Ray Anderson CEO set the company on a course to become a truly sustainable and restorative company. A shift in company strategy was imitated by engineers who questioned the sustainability of the company's business model. "…In 1994 some of the people in Interface Research Corporation, our research arm, in response to customers who were beginning to ask what we were doing for the environment--questions for which we did not have adequate answers--decided to organize a task force of representatives from all our businesses around the world." p. 39 (Ray C. Anderson, Mid-course Correction; Chelsea Green Publishing Company, 1998) Anderson challenged the research group to come up with an environmental policy and mission: to reach sustainability and to become a restorative enterprise. What came out of this was a new strategic business model based on reduce; reuse, reclaim, recycle, redesign, adopt best practices, and challenge the suppliers to do the same. Interface initiated Evergreen Service Contracts. , which replaces purchase of flooring with leasing; Interface retains ownership of the carpet tiles, maintains them and selectively replaces and recycles worn out tiles. (Anderson, 1998)

General Electric became the biggest company to pursue a strategy of producing goods that minimize damage to the environment investing in a range of technologies from wind turbines to energy saving light bulbs. Its “Ecomagination” brand products and services registered a substantial increase in revenues from $6.2 billion in 2004 to $10.1 billion in 2005. (Financial times Sept 14,2006 p.4)
The global engineering firm CH2M Hill built its business on advising clients how to seek sustainable solutions. The $3.8 billion company which is based in Colorado, engineered an effective way to dispose of excess recycled water from Santa Rosa by converting it to “green” electricity to replenish The Geysers geothermal system making it the world’s only geothermal system to use recycled water to replenish its steam field.
Even global giant Wal-Mart has found that sustainability pays dividends. The company is working with the Environmental Defense Fund, which has set up an office in Wal-Mart's headquarters and Eaton, a manufacturer of power and drive trains for commercial trucks to back the development of a new generation of hybrid truck engines to improve the efficiency of its fleet of over 7,000 trucks. Wal-Mart recently pressured a supplier of Kid Connection toys to reduce its packaging enabling the company to ship 497 fewer containers a year at a saving of $2.4 million.
Meanwhile, Boeing has found that the competitive advantage of its $150 million, 250 passenger Dreamliner jet, which uses 20% less fuel than competitive models generated a jump in sales from 56 in 2004 to 235 in 2005.
Canada has identified climate change as the most significant sustainability issue facing the country. Since 2000, it has spent, or committed to spending, more than $3.7 billion on climate-change-related initiatives. In 2004, Canada ratified the Kyoto Protocol and, in early 2005, the federal government released its long-awaited climate-change action plan (“Project Green”), which focuses on investment in technology research and improvements in energy efficiency. The federal government has also targeted large final emitters – primarily the oil and gas, thermal electricity, mining and manufacturing sectors – and has announced plans to cap greenhouse gas emissions. Companies within these sectors will be required to achieve in-house greenhouse gas emission reductions or purchase credits on an open-market system. In the early 1990s, the once lucrative cod-fishing industry on Canada’s east coast collapsed as a result of over-harvesting. The region is still suffering economically. Canada has learned from this instance of unsustainable development and now devotes considerable attention to its natural resources, including the forest industry. It is, for example, the only nation in the world whose forest industry association has made third-party certification of sustainable forest management a condition of membership. (PWC.com)
[INSERT TABLE 2 ABOUT HERE]

EUROPE
A raft of new policies are being developed to take the EC to the next stage of sustainability including plans to promote eco-efficiency and integrate material and energy efficiency into all EU policies, by using economic incentives and the incorporation of environmental costs into prices to change consumption patterns, as well as a Green Paper on the use of market-based instruments for environmental policies which includes consideration of eco-taxes and the impact of subsidies that are harmful for the environment.
Under the EC’s Lisbon strategy (economic competitiveness, social inclusion and environmental protection) sustainable development strategy is considered the environmental pillar of the Lisbon strategy. Yet a key theme for the EC must be to encourage a shift in emphasis from traditional concepts of economic growth to sustainable development and eco-efficiency. Decisions are needed to deal with finding replacements for hazardous chemicals, the financial instrument for the environment (LIFE+), protecting air quality as well as climate change, biodiversity and the Sixth Environmental Action Program.
Meanwhile, the EU is faced with a growing problem of waste management:
• 1.3 billion tons/year: total waste generated in the EU
• 530kg/year: average waste production per person in EU-15 (300-350 kg in EU-10)
• 75 billion euros/year: cost of municipal waste and hazardous waste management alone
• Over 100 billion euros/year: estimated turnover of EU waste management and recycling sector
• Increase in total waste generation outpaced GDP growth between 1990 and 1995 in the EU-25 (10% against 6.5%)
• Municipal waste increased by 19% between 1995 and 2003, the single fastest growing waste stream
As a result, the Union developed a host of directives to deal with specific waste 'streams'. These include legislation on end-of-life vehicles, waste from electric and electronic equipment (WEEE), waste batteries, sewage sludge and packaging waste.
The call for producers, not just the government or the general public to be responsible for addressing environmental problems is increasing. Governments are requiring producers to design products that produce less waste, use fewer resources and contain more recycled and less toxic components. The European Union’s Directive on Waste Electrical and Electronic Equipment requires producers, importers and distributors to arrange take-back and recycle all waste electrical equipment. ( A similar resolution was introduced for approval by the San Francisco Board of Supervisors.)

In addition within a year, European nations will begin implementing the EU's "directive on eco-design of energy" using products which sets energy conservation standards for everyday household items such as washing machines, and refrigerators as well as commercial equipment and components
Climate change remains high on the list of priorities where it is expected that EU countries will agree to a minimum 30 percent reduction in domestic emissions by 2020 compared with 1990 levels, and national caps for the Emission Trading Scheme strict enough for the EU to comply with its Kyoto obligations. An important element is e-turn 21 which aims to identify a third way that bridges the present with the dream of a solar age and power generation based on renewable energy. Yet e-turn 21 acknowledges the economic necessity of some continued coal, lignite and natural gas power generation with the most efficient, low- or non-carbon use of fossil fuel sources that gradually gives way to renewable energy sources.
In Sweden, under the leadership of the Swedish Environmental Protection Agency (Naturvardsverket) and the country’s Ministry of Sustainable Development," all major gas stations are required by law to offer either sustainable produced ethanol or biogas." (E Magazine. July/August 2006 p 33)
In Germany many environmental laws follow from EU directives and are often incorporated into national legislation in more stringent form with strict requirements for environmental reporting. (PWC.com)
In the UK “all aspects of sustainable development are attracting greater scrutiny, particularly in the assessment of public-sector policy and major projects. The key challenges laid out by the UK government for its comprehensive spending review in 2007 include specific references to climate change and the management of natural resources. From 2006, listed companies will be required to produce an Operating and Financial Review that includes social, environmental and ethical matters.” (PWC.com)
Throughout the EU non-governmental organizations track the performance of companies and attend their annual general meetings. Consequently, sustainability is now a board-level concern and companies are under increasing pressure to publish sustainability reports that have been verified by an independent third party. These sustainability reports will eventually be expected to include information on companies’ supply-chain responsibilities. (PWC.com)
Yet critics argue that not enough progress is being made in light of the enormous environmental problems faced by the EC. "The EU has lost momentum in tackling environmental issues. We need new, strong incentives that drive the market towards sustainability, such as environmental fiscal reforms and systematic greening of public procurement, "says Bernt Nordman from the Finnish Society for Nature and Environment, one of the Finnish EEB member organizations.
Among the European companies, IKEA stands out as a company which is moving toward sustainability is IKEA, the global Swedish furniture manufacturer. In the 1980s Ikea’s German customers began to ask a series of questions that caused the company to review the sustainability of its production processes. The customers asked whether the wood in Ikea’s product line came from tropical rainforests, they asked about the toxicity of furniture lacquers that might affect their health and they enquired whether Ikea’s use of halogen lamps was exposing them to health risks. Meanwhile, the government of Denmark passed law against formaldehyde off-gassing in particleboard which precipitated a 1992 crisis as consumers boycotted the company's poisonous "Billy" bookshelves. These events triggered a set of new policies which the company termed its "stairway to sustainability" including measures to test products for harmful substances, the development of higher production standards, and examining the sourcing of raw materials to secure a minimal environmental impact. All in all these changes altered the company's approach toward its business and customer base.

Clearly consumers are exhibiting a growing concern about the environmental impact of the products they use. According to a study published by the HSBC Bank more than 20% of the total population in the US and the United Kingdom prefer to buy “green” products while in Germany the figure is 50% and in Japan 68%.

ASIA

Asia’s is home to about 60% of the human population comprising more than 40 incredibly diverse nations in terms of geography, climate, history, culture, ethnicity and politics. It hosts the fastest-growing economies in the world and the regional GDP rose 7.3% in 2004. Meanwhile the income gap between wealthy and poor is substantial and nearly a half of Asia’s inhabitants still live on less than $2 a day.

Some of the region’s countries, including China, Japan, India and Korea are rich in natural resources like oil, coal and iron have strong manufacturing industries. However, environmental degradation is a serious and growing problem, as the region becomes more polluted, less forested and less ecologically diverse and the health risks. [Price Waterhouse Coopers, www.pwc.com] Hong Kong's chronic air pollution was having such a negative effect on its economy, that it has affect companies' decisions to invest in the region.The revelation was followed by a Chinese government report that found pollution of all kinds – air, water and pollution from solid waste – caused Rmb1,080bn of damage in 2004, effectively reducing the country's gross domestic product by 3 per cent. A booming economy, rapid industrialization, a vast increase in energy use, many more cars on the road and the building of hundreds of coal-fired power stations have all had an adverse impact. (Financial Times Sept 27,2006)

“China has stringent Environment, Health and Safety (EHS) laws. However, many companies do not comply with them and enforcement is sporadic. This is partly because the relevant authorities are inexperienced and sometimes lack sufficient resources, and partly because they often place greater priority on short-term economic growth than other considerations. The Chinese central government devolves power to the provinces, autonomous regions and municipalities to establish their own local standards where no national standards exist. The delegation of regulatory power to local authorities has produced a myriad of different (sometimes conflicting) standards and caused confusion. The business case for CSR and sustainability is not widely understood in either the private or the public sectors. In addition, senior executives often lack the necessary technical expertise to control the social and environmental impact of the operations they manage, and many workers are unaware of their rights. Multinationals with supply chains in China have been focusing on reducing their business costs and expanding their capabilities. However, many of them have difficulty managing their suppliers’ adherence to social and environmental codes of conduct. Differences in culture and management styles also intrude.”(PWC .com)

“Companies that violate their ethical and environmental responsibilities may incur significant consequences, including remediation costs, fines and penalties, unexpected capital requirements, occupational liabilities and reductions in the quality of their products and performance. The Chinese government is actively strengthening the labour and environmental laws as part of its Program of Action for Sustainable Development in China in the Early 21st Century. It has formulated or revised over 120 laws, rules and regulations since 2003. NGOs, the global media and consumers are increasingly interested in the social and environmental performance of multinationals doing business in China. A growing number of NGOs have established a local presence to monitor conditions in factories owned by multinationals or from which they are sourcing. The media have also conducted various high-profile campaigns targeting companies that are allegedly performing poorly. Several investment firms are now screening companies on social and environmental criteria such as their efforts to address labor conditions in the supply chain and to maintain ethical and environmental standards in their overseas operations. (PWC.com)
While Western Europe and the Americas are taking steps to reduce global warming and slow the rate of industrial pollution, China is the second largest source of gases which contribute to global warming, with 80 per cent of its rapidly growing demand for energy met by coal-burning power stations. Governmental policies are in place; a renewable energy law introduced in January 2006 enabled development of solar, win, geothermal and even bio-mass and tidal power with the government setting a target of 15 percent renewable energy by 2015. Yet the rapid rate of automobile ownership threatens to undermine any gains in China the sites of the world's most polluted cities.

Nevertheless some companies in China are pursuing sustainable practices. Anshan Xin Yuan Agriculture Co. manufactures and sells construction materials and fuel made from agricultural waste while Beijing SYKW Biochem has developed a patented technology that uses lactic acid to produce biodegradable high grade plastic. And in Inner Mongolia, Huaqi Biotechnology Company uses a methane capture technology in order to recycle energy created from animal waste

India:” India’s large and expanding population – it is projected to reach to 1.6 billion by 2050, a 37.5% increase that will see the country far outstrip China as the world’s most populous state – has also contributed to the huge rise in its use of natural resources and massive environmental degradation. It already consumes more than 510 billion kWh of electricity a year and more than two million bbl/day, but domestic demand for energy is set to triple by 2020. Meanwhile, rapid industrial growth and streets choked with traffic have made the air in the largest cities more polluted than almost anywhere else in Asia. There is a very wide income gap between the wealthy and the poor, with only 15% of the population reaping the benefits of India’s economic growth and nearly 20% living below the poverty line. Recycling is rare, even though recycling policies exist. India has launched an aggressive drive to invest in clean technology and reduce emissions in order to reap the benefits offered under the Kyoto Protocol. Meanwhile, child labor is common, as are other human rights issues.”. [pwc.com]
However companies are beginning to realize the importance of preserving the environment. CleanStar Energy – grows and processes non-edible plants and trees on marginal lands to produce high-quaility substitutes for diesel and coal while EcoMantra is an eco-tourism and corporate training company that promotes responsible tourism using a non-formal, non-conventional and experiential approach

Japan “Japan is heavily reliant on nuclear power for its electricity. It is therefore vulnerable to incidents such as the accident that occurred at the Mihama nuclear power plant in 2004 (although it has not suffered any radioactive leaks so far). Air pollution from power-plant emissions has caused acid rain and the acidification of some lakes and reservoirs, threatening aquatic life. Japan is one of the largest consumers of fish and tropical timber, contributing to the depletion of these resources in Asia and elsewhere. Its dependence on imports also has a substantial impact on its economy. Lack of space is a major problem, so the conservation of urban areas and minimization of municipal waste is essential. Management of urban development is equally important to reduce the environmental damage from industry and construction, together with the impact on public health. Japan’s future rests on the creation of efficient industrial practices, including recycling, zero emissions and industrial ecology.”
“Japan’s formerly almost exclusive focus on economic development resulted in significant public health problems like “minimata” disease, which was caused by industrial emissions released in waste water. The social pressures to preserve the environment have increased significantly in the wake of such problems. The government now places great emphasis on protection of the environment. The Ministry of the Environment is the chief national authority for environmental matters, but other ministries also play a significant role. For example, the Ministry of International Trade and Industry funds a substantial amount of research, including research into global warming and the protection of the ozone layer. Japan was one of the foremost proponents of the Kyoto Protocol and has committed to reducing its total carbon emissions by 6%. This is a tough challenge, since it is the world’s fourth largest producer of greenhouse gases – although it is also a leading developer of environmental technologies. Japanese industrialists recognize that if the country is to remain a powerful industrial force, it must develop in a sustainable way.”(PWC.com)

LATIN AMERICA

"Latin America includes more than 40 countries and dependencies; has a population of about 560 million; and covers over 7.9 million square miles. Regional GDP rose by 4.7% in 2004, ending three years of low growth. It is forecast to fall back to 3.7% in 2006, and to average 3.6% a year for the next nine years, but this is still a relatively strong performance.

"Latin America is the richest developing region, with an average per capita income of $3,700. The number of people in the region living on less than $1 per day is expected to halve, from eight million to four million people, by 2015. However, there are substantial discrepancies in wealth distribution both between and within countries. GDP per capita is just $510 in Nicaragua, for example, compared with nearly $4,600 in Chile. The median income of the most affluent 20% of the population of at least 11 countries is also nearly 14 times higher than that of the poorest 20%.
"The income gap between the richest and poorest parts of the population has produced a desynchronised consumption pattern both within and between countries. Recycling policies exist, but recycling is still relatively rare. Although the collection of waste materials provides a source of income for the poverty-stricken, the cost of using recycled materials is often prohibitive. No formal obligations to reduce emissions exist, but the private sector has adopted a number of initiatives to cut the production of greenhouse gases." (PWC.com)
Meanwhile a number of newer companies are beginning to address these issues. For example, in Bolivia,Jolkya Bolivia produces alternative hardwood flooring and accessories from forest certified woods. While in Brazil-AmazonLife is a pioneer in the manufacture of leather-like rubberized fabric for the fashion industry from raw material extracted from the Amazon and another company, Limpa processes industrial waste and residue to manufacture products such as blocks, tiles, and panels. In Argentina,-Hidroinyección Fioramonti is marketing a device that reduces automobile exhaust contaminants and carbon monoxide emissions while increasing fuel efficiency.

AFRICA
“Most international institutions are now measuring and monitoring the impact of the projects they finance in terms of sustainable development. Some multinationals have begun implementing “minimum global” environmental standards within their subsidiaries, in anticipation of the introduction of local regulations. In February 2005, the Central African heads of state signed up to the development and use of a common sustainable forestry management policy during the Second Summit on Sustainable Management of the Eco Systems of the Congo Basin in Congo-Brazzaville.” (PWC.com)
In South Africa many multinationals “are adopting global trends in best practice reporting, including the disclosure of information on material non-financial issues. Market pressures are enforcing compliance with the Broad-Based Black Economic Empowerment Act. South Africa is in the final stages of a programme to reform its environmental laws and improve the environmental performance of its industries. It is also a non-Annex 1 signatory to the Kyoto Protocol, so interest in projects that will generate carbon credits is increasing.” PWC.com)

Meanwhile in other parts of Africa there are some efforts toward sustainability under way. Nigeria flares more gas than anywhere else in the world and has set a date of 2008 to end flaring. Recognition is growing that depletion of forest cover threatens the eco-systems of Kenya and other sub-Saharan nations.

SUSTAINABLE BANKING

Financial institutions have recently begun to take consideration of environmental actions and incorporate that consideration into their policies. More than 40 banks have signed the Equator Principles.

In the past three years, the UK-based bank, HBSC, has adopted environment-related policies and procedures including “guidelines on dangerous chemicals, freshwater infrastructure and forest products. In May 2005, it became the first major private bank to put its name to the World Commission on Dams [and] it plans to add an extractive industry policy to its growing catalogue of green tape.” HSBC’s “restricted appetite” for environmentally sensitive transactions began in 2002, when it set a standard “to minimize the environmental, credit and reputational risk associated with the bank’s investments.” (The Banker, July 3, 2006)

Merrill Lynch, JPMorgan and Goldman Sachs joined the growing list of international banks with environmental policies in 2005. “Contrary to perceptions, bankers are not becoming tree-huggers. Their reasoning is far more down to earth. Banks are increasingly conforming to the view that social and environmental risks pose a threat to long-term shareholder value. ‘Protecting our assets in a traditional sense is risk management and protecting shareholder returns,’ explains Andre Abadie, head of sustainable business advisory at ABN AMRO. ‘So if we are financing potentially socially and environmentally egregious projects in far flung corners of the world, then we also have the commitment to ensure that the social and environmental footprint of those projects is well managed.’… (The Banker, July 3, 2006)

The Equator Principles are based on the International Finance Corporation’s social and environmental standards and provide guidelines and procedures for banks to follow in evaluating the potential environmental and social impacts of large infrastructure projects. The Equator Principles set out a wide range of concerns that include
• compliance with applicable host country laws and international treaties;
• impacts on the environment and indigenous communities; and
• consideration of feasible environmental and socially preferable alternatives.

“If a project is shown not to comply with the principles, the participating banks commit not to finance it. Since the Equator Principles launch in June 2003, the initial 10 banks have increased to 41. Collectively, they now cover around 85% of the world’s cross-border project finance. The participating banks maintain that the principles have realized their initial objective of providing an industry-wide standard for institutions involved in project finance.” (The Banker, July 3, 2006)

According to the Financial Times (Sept. 18, 2006,p.10) banks have been driven to adopt a self-governing system of standards in part by “fear of reprisal from environmental groups if projects they finance turn out to be damaging and y an increasing awareness of “green” issues among mainstream consumers But they have also seen opportunities in areas such as renewable energy and low-carbon technology, and they area aware that the tide of government regulation is flowing in a “green” direction.” HBSC which started with only one staff member dealing with sustainability now has a team of 22 involved.

In addition, insurance companies are focusing on climate change as the new see global warming as one of the biggest risks to their profitability.

Bibliography

Ray C. Anderson. Mid Course Correction. Chelsea Green Pub. 1998
> John Elkington, Cannibals with Forks New Society Pub 1998

> Paul Hawken et al. Natural Capitalism Back Bay Books 1999
> William McDonough and Michael Braungart Cradle to Cradle, North Point
> press 2002>
> Brian Natrass and Mary Altomare; The Natural Step for Business, New
> Society Pub 1999
> _____________. Dancing with the Tiger: Learning Sustainability Step by
> Natural Step. New Society Pub 2002
> Lorinda Rowledge et al. Mapping the Journey: Case studies in Strategy and
> 'Action toward Sustain bile Development. Greenleaf Pub. 1999
Bob Willard The next Sustainability Wave, New Society Pub 2005
> Bob Willard the Sustainability Advantage. New Society Pub. 2002

Table 1: CORPORATE SUSTAINABILITY PRACTICES

Sustainable Design
• Elimination of use of hazardous chemicals
• Redesign of products to make them more durable or easily repairable
• Design life-cycle products—e.g. those that can be recovered and made into another useful product

Sustainable Production
 Replacement of nonrenewable materials with more sustainable materials, such as:
• organic materials and foods: wood, cotton, hemp, vegetable oils
• sustainable grown products, e.g. certified wood products
• materials which consume less embodied energy

Sustainable Operations
• Measures to use ‘green’ energy or reclaim waste heat e.g. co-generation
• Eliminate or reuse waste products
• Educate and press suppliers to follow sustainable practices
• Design ‘green’ facilities

Sustainable Packaging
• Redesign of packaging so that it is
• Part of product.
• Reusable or returnable
• Easily recyclable
• Biodegradable

Table2: Eco-Drivers

DRIVER EXAMPLE

Changes In Legislation IKEA's shift to glues without off gassing
Governmental initiatives China's development of 6 Eco-cities
Supply chains Home Depot's decision to sell forest certified products
Innovation Brazil's development of alcohol fueled engines and flex fuel automobiles
Disposal costs IKEA's use of minimalist packaging
Transportation costs Wal-Mart commitment to increase fuel efficiency of delivery fleet
Taxation California’s tax credits for solar
Consumer pressure Sainsbury’s broad introduction of organic foods
Health and Safety concerns Rapid growth of Whole Foods and organics brands
Secondary uses for waste Plastic decking materials marketed by Home Depot
Eco-design Tools and Methods LCA computer based life-cycle analysis programs
MET matrix materials
Education Growth of Green MBA and Design programs (see Table 4)

Table 3: Some Sustainable Educational Innovators

INSTITUTION/Location PROGRAM AND FOCUS

Haskayne School of Business
Calgary, Canada Global Energy Management and Sustainable Development (offered in Canada, Equador, China, and Iran)

INSEAD, Fontainebleau, France Center for the Management of Environmental and Social Responsibility (seminars, conferences and research on sustainability)

Sustainable Europe Research A Pan -European think-tank exploring sustainable development options for European Societies
Institute (SERI) Austria

Charles University, Prague Environment Center

York University, Canada Sustainable Enterprise Academy (also has partnership with Univ. of Dar Es Salaam, Tanzania)

New College, San Francisco, US Green MBA

Presidio College, San Francisco MBA in Sustainable Management

University of Calif. Berkeley Haas Center for Responsible Business (corporate social responsibility; teaching, research, outreach)

Table 4: SOME GREEN INVESTMENT DRIVERS

ORGANIZATION/COMPANY ACTIVITY

Goldman Sachs Funding Center for Environmental Markets; investing $1 billion in renewable energy, energy efficiency

Munich Re-insurance

CERES Boston-based coalition of investor and environmental groups

Table 5: SOME EXAMPLES OF GLOBAL SUSTAINABILITY
REGION COMPANIES GOVERNMENTS
NORTH AMERICA General Electric
Patagonia
Interface
CH2M Hill
Wal-mart
Whistler, Canada

King County Washington
Alameda County Calif
City of Portland, Oregon
WESTERN EUROPE

IKEA
Bulmers
Unilever
Arup
HBSC Bank

EU- Directive on Waste Electrical and EE

ASIA

China-Anshan Xin Yuan Agriculture Co.
China-Beijing SYKW Biochem has
China-Inner Mongolia Huaqi Biotechnology Company
India-CleanStar Energy – grows and processes non-edible plants and trees on marginal lands to produce high-quaility substitutes for diesel and coal.
India-EcoMantra is an eco-tourism and corporate training company that promotes responsible tourism using a non-formal, non-conventional and experiential approach
Intaran Indonesia produces organic fertilizer and pesticide using sustainably harvested parts of the Neem tree. Dongtan,China one of 6+ green cities
Shanghai subsidies to 100,000 solar roofs
LATIN AMERICA

Bolivia-Jolkya Bolivia produces alternative hardwood flooring and accessories
Brazil-AmazonLife is a pioneer in the manufacture of leather-like rubberized fabric for the fashion industry from raw material extracted from the Amazon.
Brazil-Limpa processes industrial waste and residue to manufacture products such as blocks, tiles, and panels.

Argentina-Hidroinyección Fioramonti is marketing a device that reduces automobile exhaust contaminants and carbon monoxide emissions while increasing fuel efficiency.
AFRICA

Namibia requiring use of solar water heaters
OCEANEA