Which bag of coffee is more sustainable? Which television emits the lowest levels of greenhouse gases over its lifetime? Does a grass-fed beef hamburger use less water? For many who want to do right by the environment, these questions are not easily answered. Now, imagine that you buy hundreds of thousands of products every year. How would you decide which make the most difference from an environmental standpoint? Whether suppliers’ environmental performance claims hold water? What combination of environmentally preferred purchases is most cost-effective?
These questions are increasingly being asked by sourcing and supply chain managers at the largest global corporations and governments — arguably, some of the biggest buyers in the world. Today, the Global Environmental Management Initiative, in collaboration with the Institute on the Environment’s NorthStar Initiative for Sustainable Enterprise and Climate Earth, introduced a tool that takes a first step at helping answer some of these questions.
GEMI’s Supply Chain Sustainability tool helps businesses identify the purchased inputs that emit the highest levels of GHGs and use the most water in their production. It then helps supply chain managers assess, within three initial categories (paper packaging, plastic film and sheet packaging, and soap and cleaning compounds), strategies for reducing GHG emissions and water use.
“Although many have talked about the need for organizations to coordinate environmental improvement opportunities across sourced inputs, this is the first time that a user-based system has been developed to move the discussion into action,” said Tim Smith, NiSE director, in a news release. “We still have a long way to go before environmental performance can stand alongside price and quality at the scale of corporate and institutional sourcing, but this tool demonstrates that with improved information and coordination across supply chains, cost-effective environmental improvements can be found,” he added.
The NorthStar Initiative for Sustainable Enterprise works with the private sector to develop sustainable solutions to production and consumption challenges — reducing adverse impacts and accelerating innovation to meet the growing demand for materials and energy. NiSE is a strategic initiative of the Institute on the Environment.
Last month I was invited to participate in a workshop aimed at transforming the way community conservation benefits are provided to local villages around the Serengeti ecosystem in Tanzania. This was not a new topic for me—my Ph.D. dissertation examined conservation strategies in 20 villages across this ecosystem, exploring the costs and benefits locals view conservation as possessing. Despite decades of community conservation activity, not only were locals not perceiving benefits, but also less than a third of the people living in the ecosystem knew about Serengeti National Park. Imagine if the majority of people in Montana, Idaho, and Wyoming did not know about Yellowstone! One reason for this lack of knowledge is that community-based conservation efforts have traditionally given villages public goods like schools, village offices, and boreholes. While important for development, the problem with public goods for conservation is that, by definition, everyone, including those who might harm conservation efforts, gets to use a public good. Poachers or others negatively affecting conservation cannot be excluded from using a school or borehole. There is a great need for development in this area, in which people live on $0.16 to $0.40 a day, but conservation stakeholders must stop pretending that these development activities aid conservation.
The German bank KfW wanted to provide development assistance in the ecosystem, but not without positive implications for conservation. An easy ask in theory, but the Tanzanian National Parks (TANAPA) and Frankfurt Zoological Society (FZS) had been trying to do this for decades with their public good benefit schemes. How could KfW suddenly develop a link between infrastructure and conservation? This challenge is what brought me to a three-day workshop in Arusha, Tanzania, along with key individuals from TANAPA and FZS, the head of Serengeti National Park, government officials, and 30+ key stakeholders. Our task was to come up with conservation criteria for use in selecting which villages get money for their village projects. Each criterion had to address key conservation challenges and have a set of metrics for measurable and transparent assessment of village conservation performance. Villages selected with these criteria will receive money for public goods, but they will also need to show positive impacts on conservation if they want access to these funds.
The work we did at the workshop marked a fundamental shift in conservation benefit thinking; however, we were still constrained by the requirement to provide money for village infrastructure (i.e., public goods). This led us to concerns regarding whether villages will be motivated to continue improving their conservation performance after receiving their funds. The World Bank economist in the room likened our plan to paying an employee their annual salary on the first day of the year and asking them to then come to work every day thereafter. Our solution: asking the funding party to amend their designation of funds. Rather than providing a school, could the aim be, say, to improve education in the village? This could begin with a school, but continue with teacher houses, latrines, school lunches, etc., provided the village continues to meet the conservation criteria. This then provided a continuous incentive for villages to improve their conservation performances.
We will have to see how this project plays out, but I hope the revolution is beginning.
Companies are increasingly interested in where and how they can reduce the environmental impact of their supply chains. The focus frequently lands on agriculture, which is a large contributor to the environmental footprint of many of the products we buy. However, a recent study of the breakfast cereal supply chain by researchers at the University of Minnesota’s Institute on the Environment found that manufacturers can have a far greater ability than farmers to reduce the carbon footprint of food. The study, carried out by IonE’s NorthStar Initiative for Sustainable Enterprise, found that manufacturing has more than six times the ability of agriculture to reduce the carbon footprint of corn cereal products and nearly three times the ability for wheat cereal products.
“Many companies that have agriculture as a component of their supply chains are under the impression that, because agriculture is a ‘hot spot’ for carbon production and other environmental impacts in their supply chains, they are off the hook to improve their own operations,” said study co-author Rylie Pelton, a doctoral student in the U’s College of Food, Agricultural and Natural Resource Sciences. “We found that they themselves are actually in the best position to reduce the carbon footprint of their products.”
The study also illuminated the importance of measuring and comparing the environmental impact of product environmental claims, finding that some are much more effective than others at reducing impact, and some even increase impact relative to the conventional product in certain areas. “It is important to recognize that there are often trade-offs in environmental impact when comparing eco-improvement options,” said NiSE director and CFANS associate professor Tim Smith. “While the study found that eco-attributes in agriculture had less effect in reducing the carbon footprint than attributes implemented in manufacturing, the opposite could be true when looking at alternative impact categories such as eco-toxicity and water quality.” The study currently looks only at carbon and water impacts.
The study, published online this week in the Journal of Industrial Ecology, was based on a Hotspot Scenario Analysis, a new method of streamlined life cycle assessment developed by Pelton and Smith. HSA makes it possible to identify the points along the supply chain that are “hottest” and assess common eco-claims against a baseline conventional product to understand how effective each of the claims are at reducing the environmental footprint.
“There are many potential improvement options that are available throughout the supply chain that may but don’t necessarily improve the environmental performance — claims like energy efficiency, recycled content, organic, precision farming, biobased, recyclable, compostable,” Pelton said. “The key is identifying which options are most effective in reducing environmental impacts — and at which points along the supply chain — so that any investments and effort at improvement provide the greatest reductions in impact.” said Pelton.
The study suggests that not all improvement options are created equal. Managers seeking to improve the environmental profile of their products and supply chains would benefit from a strategic approach to investing in meeting their sustainability goals, especially if we, as a society, are to rise above these grand environmental challenges we must increasingly face.
To read the entire article in the Journal of Industrial Ecology, visit http://onlinelibrary.wiley.com/journal/10.1111/%28ISSN%291530-9290/earlyview.
The University’s NorthStar Initiative for Sustainable Enterprise (NiSE) is featured in the recently launched CDP annual supply chain report. In their commentary, NiSE explores how the “low hanging fruit” of energy efficiency improvements may not be sufficient for meeting aggressive corporate carbon reduction targets. Using CDP’s data on thousands of companies and their emissions reduction activities, NiSE found that activities like product design and process emission reductions yield the “biggest bank for the buck”.
The University’s NorthStar Initiative for Sustainable Enterprise (NiSE) has teamed up with CDP (formally the Carbon Disclosure Project) to increase the number of carbon emission reduction activities undertaken by global suppliers. An average of 80% of a company’s carbon emissions rest with their suppliers. These supplier companies have increasingly been reporting their carbon emissions, with over 2,800 companies reporting to CDP in 2013. However, over that same time, the number of supplier actions taken to mitigate these carbon emissions has remained low, well below the number of activities of these suppliers’ customer companies (e.g. retailers and end product manufacturers).
In response, CDP is testing a new pilot program, the Action Exchange (AEX), with six large customers; Bank of America, L’Oreal, PepsiCo, Philips, Vodafone and Walmart, and over 100 of their suppliers. AEX is “designed to equip companies with the intelligence and solutions that will help them take action to reduce greenhouse gas emissions and realize financial savings”. NiSE is the analytics partner for this pilot program. Using CDP’s massive multiyear dataset on corporate carbon emissions, NiSE is providing data driven recommendations on supplier preparedness to enact carbon reductions, reduction opportunities and program success reducing supply chain emissions.
More information about AEX can be found in the CDP Supply Chain Report 2013-14.
Over three years of University of Minnesota research to create a streamlined method for assessing the environmental performance of products is being put into practice. In partnership with the Global Environmental Management Initiative (GEMI), researchers at the NorthStar Initiative for Sustainable Enterprise (NiSE) are leading a team of scholars, business intelligence practitioners and corporate experts in developing an interactive decision tool for sustainability and supply chain professionals.
The GEMI Supply Chain Sustainability Tool™ (SCS) will help users assess the sustainability of procured product/service systems by linking market-oriented sustainability indicators (e.g., recycled, renewable, organic, local), scientifically based assessment methodologies and supply chain operational metrics. The free, Web-based module “will include new functionality, which will help companies prioritize supply chain processes, identify opportunity indicators, model ‘hot spot’ processes, and provide guidance toward ‘hot spot’ reduction,” said GEMI Solution Tools chair Steve Shedroff of the Procter & Gamble Company.
“The new GEMI SCS™ tool will open a new, and much needed, degree of transparency deep into the supply chain using a practical and scalable platform,” said GEMI Supply Chain Work Group co-chair Bill Gill of Smithfield Foods.
In the initial pilot year, tool development will focus on identifying high-impact purchases of large institutional and corporate buyers, leveraging the software platforms of Climate Earth, Inc. In addition, parameterized streamlined life cycle assessments will be conducted to assess improvement opportunities for three to five commonly purchased product categories. Finally, in collaboration with colleagues at the Erb Institute for Global Sustainable Enterprise at the University of Michigan, functionality will be developed to help managers evaluate economic trade-offs and efficiencies associated with alternative purchasing strategies.
Unlike current approaches, it is anticipated that the GEMI SCS™ Tool will be expandable to include a wide range of purchasing categories, improvement scenarios and methodological upgrades over time as the science and product systems evolve. “The result of this unique collaboration will be an extraordinarily valuable, publicly available tool for use by many companies and organizations – linking GEMI’s commitment to creating valuable solutions tools to cutting edge research and expertise of universities and information systems developers,” says GEMI Supply Chain Work Group co-chair Keith Miller of 3M.
The University of Minnesota Institute on the Environment’s NorthStar Initiative for Sustainable Enterprise, along with the Environmental Defense Fund, have released a new report titled, Supply Chain Energy Efficiency: Engaging Small & Medium Entities in Global Production Systems (PDF). Based on a two-day workshop tapping the brains of 31 representatives of energy service energy service companies, financers, retailers, nongovernmental organizations, government and academia from around the world, the report provides an intriguing look into thinking about industrial energy efficiency within the system of a supply chain, and highlights opportunities for corresponding cost-, reputation- and energy-saving improvements.
The report highlights four recommendations that came out of the two-day workshop spanning many of the actors involved in the supply chain of a saved kilowatt hour. The four recommendations are:
1. Engage leading companies to identify high-quality suppliers for pilot supply chain energy efficiency improvements.
2. Create one or more sector-based collaborations for improving supply chain energy efficiency by assembling groups of peer manufacturers within a supply chain and using benchmarking, process capability analysis and best practice sharing to identify and improve energy efficiency and industry competitiveness.
3. Increase transparency and standardization of energy use, audits and supply chain information.
4. Create finance and credit risk approaches and models for portfolio-level energy efficiency and energy management projects.
Since 1947, the board of directors of the Bulletin of the Atomic Scientists has maintained the Doomsday Clock – a symbolic estimate of the world’s proximity to global disaster. Originally a measure of the threat of global nuclear war, since 2007, it has also reflected risks of climate-changing and life-sciences technologies that could inflict irrevocable harm.
Alarmist? Of course, and by design – which is why a recent article appearing in the Bulletin of Atomic Scientists, “Climate Change: Corporate Sustainability in the Supply Chain,” by Dr. Timothy Smith, Director of the Institute on the Environment’s NorthStar Initiative at the University of Minnesota, is garnering attention.
Most of the attention paid to climate change, and the technologies associated with its causes and solutions, are focused on the megatrends of food (e.g. land-use change and high-input agriculture) and energy (e.g. dependence on carbon intensive fossil resources). However, these megatrends are only part of the story. In fact, agriculture, mining, transportation, and gas and electric utilities account for only about 30 percent of environmental ills in the US. The other 70 percent of the economy’s environmental impacts are the result of complex supply chains, strung together to produce value-added products and services.
Neither public policy nor corporate sustainability is effectively addressing these massive “indirect” effects. While most of the world’s attention has been focused on (largely failed) global policy attempts to reign in greenhouse gas emissions, private sector voluntary efforts operating under the umbrella of corporate sustainability have increasingly gained favor as means for progress. Unfortunately, to date, corporate sustainability programs have focused on firms’ responsibility for their direct impacts on land, air and water, and on communities – they rarely address indirect impacts that occur within a company’s value chain (interlinked activities performed to deliver a valuable product or service) but outside its immediate control.
But the rules of the corporate sustainability game are changing, slowly. A growing number of companies have become aware that changes in Earth’s climate – an increased risk of intense storms or prolonged droughts, for example – can make supply chains more vulnerable to disruptions that increase costs and damage reputations. The impending “doom” of a changing climate, particularly impacting to upstream supply, is becoming much more urgent and real than ever before – driving corporate sustainability out of the backroom and into the boardroom of many global manufacturers and retailers.
Investors and other stakeholders are responding by pressuring companies to disclose and quantify emissions and other supply chain environmental impacts. But it is imperative that public policy institutions respond and support these efforts. Leveraging the power of large global brands at the end of global value chains holds significant promise in speeding up the implementation of sustainability strategies in upstream operations – perhaps buying society critical seconds, or even minutes, on the clock of global disaster. Averting disaster – or at least significantly reducing the costs of responding to increasing and more intense catastrophes – on the other hand, must be a society-wide effort. After all, the lion share of these costs is, and will likely continue to be, placed on the shoulders individuals and governments.
Photo Credit: Suman Park, Some Rights Reserved
It’s Not Just About Minnesota Anymore
On July 17-18 NAEM will host its annual EHS Compliance Excellence conference at General Mills Inc.’s headquarters in Minneapolis. As part of this event, the members of NAEM’s Upper Midwest chapter will take the opportunity to discuss how local, regional and global compliance issues affect Minnesota business.NorthStar Initiative for Sustainable Enterprise at the Institute on the Environment is pleased to be a sponsor.
Here are a few of the issues I expect we’ll address at the chapter meeting next month: http://www.thegreentie.org/
In the 1980s film “Field of Dreams,” Kevin Costner’s character pays tribute to Shoeless Joe Jackson and other players unable to fulfill their baseball dreams by following a voice telling him, “if you build it, he will come.” He built the field, and people (plus a few ghosts) came. In the world of renewable energy, the opposite tends to be the case. As of the end of 2011, 32 states had come to the table by developing mandatory renewable portfolio standards (RPS). But, by setting these renewable electricity goals, typically a percent of total electricity sold by a specified year, has more renewable power been deployed than what would have otherwise been expected?
This question is at the heart of the newly released paper, Revisiting renewable portfolio standard effectiveness: policy design and outcome specification matter, by Miriam Fischlein and Timothy M. Smith.
Renewable portfolio standards differ widely across the U.S., making it difficult to compare state-level outcomes directly. In addition, power often crosses state lines, making it difficult to use readily available state-level renewable capacity or generation data as an appropriate measure of RPS effectiveness. For example, Minnesota’s RPS may be much more effective in stimulating new wind power in South Dakota, a major supplier of renewable energy for the state, than in Minnesota where fewer wind resources are available.
The authors investigate patterns of RPS policy design and analyze the effects on policy outcomes measured at the level of utility compliance. “This work brings tremendous amounts of new data to this problem,” says Dr. Timothy Smith, associate professor of environmental sciences, policy and management University of Minnesota. In this paper, all relevant state statutes were coded, more that 3,000 pages of text, to account for the complexity of RPS design across states, something that has never been done before. Forty-two design elements were tracked, including compliance schedule, scope, eligibility of resources, quotas and subsidies, renewable energy credit provisions, as well as aspects of enforcement and penalties. In addition, the paper develops a more accurate measure of RPS outcomes by measuring policy response in terms of the share of renewable energy sales reported by each utility in a given state. A total of 250 RPS compliance reports were collected and searched for information on renewable energy capacity, generation and purchases, as well as renewable energy credit purchases. Together, the map of state RPS design and the new approach to RPS outcome analysis illuminate the diversity of RPS policy practice across the United States.
So, does RPS work? As with just about everything, it depends, “but, we now know a lot more about what effectiveness depends on,” says, Dr. Miriam Fischlein, study manager and consultant, Southern California Edison. Overall, utilities reported higher proportions of renewable power in states with stronger renewable targets and where renewable energy credits (REC) may be traded to achieve compliance. In contrast, lower proportions of renewable power were reported in states where only RECs of instate origin can be traded.
That said, these results are limited to only one year of data; RPS policies are simply too new to be measured at the utility compliance report level across multiple years. As more data become available, future evaluations of these policies need to both account for the variety of design characteristics and accurately specify the policy outcomes.