From Corporate Environmental Management
to Green Business Models
Roland Geyer
The Donald Bren School of
Environmental Science and Management
University of California
at Santa Barbara
Bren School Corporate Partners Summit – 11 May 2007
Is there a relationship between
corporate financial performance
and
corporate environmental performance?
Bren School Corporate Partners Summit – 11 May 2007
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Monday January 31 2005
ExxonMobil reports annual profits of $25bn
Business: US oil giant reports annual profits that exceed the GDP of Syria.
More business news
Global warming 'may kill off polar bears in 20 years'
Life: Many Arctic animals could be extinct within 20 years because of
global warming, conservationists warn.
Special report: climate change
Source: http://www.guardian.co.uk/
Bren School Corporate Partners Summit – 11 May 2007
There certainly seems to be a relationship between Exxon’s
corporate financial and environmental performance
45
40
35
30
25
20
15
10
5
0
2002
2003
2004
2005
381
380
379
378
377
376
375
374
373
372
371
2006
Exxon's reported annual
profit (in billion $)
Global monthly mean
atmospheric CO2
concentration (in ppm)
A US company never reported higher profits.
For at least 650,000 years, CO2 concentration
has never been higher than 300 ppm.
Bren School Corporate Partners Summit – 11 May 2007
Who should solve our environmental problems?
1. Companies
2. Consumers
3. Government
4. NGOs
Bren School Corporate Partners Summit – 11 May 2007
We are all part of the way we produce and consume goods and services.
We are all equally responsible.
Needs & Wants
Services
Source of:
Materials
Energy
Water
Land
Products
Production
Sink for:
Wastes
&
Emissions
Anthroposphere
Ecosphere
Industrial production and consumption systems use the environment as
source of resources and sink for wastes and emissions
Bren School Corporate Partners Summit – 11 May 2007
Corporations just happen to play a crucial role in the production of goods and services
Needs & Wants
Services
Source of:
Materials
Energy
Water
Land
Products
Corporations
Sink for:
Wastes
&
Emissions
Anthroposphere
Ecosphere
• Only about 15% of all businesses are incorporated,
• Corporations account for nearly 90% of business receipts and 80% of net profits.
Bren School Corporate Partners Summit – 11 May 2007
The Development of Environmental Policy in Europe
1970s - Introduction of environmental regulations
(single process, single site and single medium)
1990 - Integrated pollution control
(single process, single site, all mediums)
1999 - Integrated pollution prevention and control
(whole environmental performance of a plant)
2003 - Integrated product policy
(adoption of life cycle perspective)
Source: European Commission White Paper COM(203) 302 final
Bren School Corporate Partners Summit – 11 May 2007
What is a Life Cycle Perspective?
Materials
Energy
Materials
Energy
Materials
Materials
Product Life Cycle
Energy
Energy
Use and maintenance
wasteMaterials
and emissions Materials
Energy
Energy
Transport and distribution waste and emissions
Raw
materials
mining
Primary
materials
production
Component
manufacture
Final
product
assembly
Product
use and
maintenance
Product
disposal
Service
Supply Chain
Production waste and emissions
Bren School Corporate Partners Summit – 11 May 2007
End-of-life
waste and
emissions
Life Cycle Assessment of Products
Environmental impact categories
Life cycle stages
Climate EcoPhoto-chemical Ozone
Change toxicity Smog
depletion
Etc.
Production of
materials
Manufacturing
of product
Use &
Distribution
End-of-life
management
Total life cycle
Life cycle assessment aims at quantifying the environmental impacts across
all relevant environmental concerns and all relevant life cycle stages.
Bren School Corporate Partners Summit – 11 May 2007
It is the material and energy flows in the life cycle of a product
that cause the environmental problems
Air emissions
Raw materials & energy
Waste water
Material
Transformation
Process
Products
Solid wastes
Bren School Corporate Partners Summit – 11 May 2007
If environmental problems are caused by material and energy flows,
solving them is also a material and energy issue.
There are essentially three ways to reduce the
environmental impacts of material and energy flows:
• Increase material and energy efficiency
• Substitute materials and energy sources
• Reuse & recycle materials and energy
Bren School Corporate Partners Summit – 11 May 2007
Examples for increased resource efficiency
• Advanced High Strength Steels (AHSS) in
automotive applications (25% weight reduction)
• Mass reduction of beverage containers
• Continuous casting technology in metals production
• Drip lines instead of sprinklers for irrigation
• Carsharing businesses
• Spaceframe design concept
• Miniaturization in the electronics industry
Bren School Corporate Partners Summit – 11 May 2007
Examples for substitution of materials and energy sources
• Crop-based ethanol instead of gasoline
• MTBE instead of lead as oxygenate
in automotive fuels
• Steel versus aluminum versus magnesium
versus composites in automotive
• Timber versus steel versus concrete in construction
• Glass versus aluminum versus PET versus laminated cardboard in packaging
• Bio-based plastics versus petroleum-based plastics
(e.g. polylactic acid)
• Lead-free solder (e.g. tin silver copper antimony)
Bren School Corporate Partners Summit – 11 May 2007
Examples for reuse and recycling of materials and energy
• Recycling of metals, e.g. steel and aluminum
• Recycling of paper and cardboard
• Recycling of carpet and apparel
• Combined-cycle and combined heat and power (CHP) power generation
• Remanufacturing of single-use cameras
• Refurbishment of cell phones
• Reuse of construction components
Bren School Corporate Partners Summit – 11 May 2007
How should companies implement these 3 strategies?
1. Focus only on profits and environmental compliance
2. Retrofit the strategies into a going concern
3. Build them into the business model
Bren School Corporate Partners Summit – 11 May 2007
Retrofit example: Ford’s Dearborn Plant
• 10.4 acres of green, living roof
• 30,000 bushes, flowers and trees
• 20,000 honey bees
• Energy recovery from paint fumes
• Gold LEED certified
• Clean Air Excellence Award
Bren School Corporate Partners Summit – 11 May 2007
Q: What is a green business model?
A: A business model that relates corporate financial
performance to corporate environmental performance.
Necessary ingredients
• Meaningful environmental performance measures
• Environmentally preferred products or services
• A business case for those products and services
Bren School Corporate Partners Summit – 11 May 2007
Green business model - Example 1: Nucor
• World’s largest steel recycler (19 scrap-based steel mills)
• First company to produce flat steel products from secondary (EAF) steel
• Tradition of technological innovation with environmental benefits (e.g. strip casting)
Environmental impacts of making 1 kg of primary (BF/BOF) and secondary (EAF) steel
5
4
3
EAF
BF/BOF
2
1
0
GWP
HTP
POCP
AP
(kg CO2 eq) (g p-DCB eq) (g ethylene eq) (g SO2 eq)
EP
(g PO4 eq)
Bren School Corporate Partners Summit – 11 May 2007
Green business model - Example 2: Kodak’s Single Use Camera
• Kodak’s single use cameras were introduced in 1987 as disposable products.
• Soon they were a target of environmental pressure groups.
• In 1990/91 Kodak redesigned the cameras to facilitate recycling and re-use of parts.
• Today, single use cameras are designed so that 77% to 90% (by weight) of the
product can be remanufactured.
• Everything else is recycled.
• In the U.S., the recycling rate for single use cameras is greater than 75%.
Bren School Corporate Partners Summit – 11 May 2007
Green business model - Example 3: InterfaceFLOR and Evergreen Lease
• InterfaceFLOR is the world’s largest manufacturer of carpet tiles.
• Interface created the Evergreen Leasing System in 1995 together with the Southern
California Gas Company for its Energy Resource Centre in Los Angeles.
• Interface uses life cycle assessment to evaluate its environmental performance.
• Interface is the first carpet manufacturer to use fibers from polylactic acid.
• Interface has very ambitious programs for recycled content and end-of-life recycling.
• Failure of the leasing scheme to secure a significant market share.
Bren School Corporate Partners Summit – 11 May 2007
Summary
• Corporate Social Responsibility is good (see Ford’s Dearborn plant).
The future belongs to corporations with green business models.
• Green business models require that corporations rethink their
products and service (e.g. Exxon vs. BP).
• Green business models require meaningful environmental performance
measures (e.g. life cycle assessment).
• Successful green business models still require a business case
(see Evergreen Leasing System).
Bren School Corporate Partners Summit – 11 May 2007