The goal of carbon accounting is for businesses to adopt target reduction goals for their greenhouse gas (GHG) emissions.  We can only track what we measure.  To get to the point of setting carbon reduction goals, companies need to establish an emissions trend line. Makes sense.  A company needs to know whether its GHG emissions are increasing or declining over time. To develop a trend line, at least two points of data need to be available to plot the progression of corporate emissions.

SETTING A BASELINE

Before any GHG reduction targets can be set, a company must set a carbon baseline.  Specifically, a baseline year represents the initial level of greenhouse gas emissions for a company against which all future carbon inventories are compared.  Think of a company’s baseline as business stasis by which future efforts to pursue energy efficiencies, technology upgrades, process changes, and product design innovations are measured.  Ideally, efforts made by a company to decarbonize and resource optimize will reflect declining carbon totals from a baseline year equating to “progress made”. 

Setting a baseline year is arbitrary.  Some public companies and many nations and trading blocs such as the EU-15, use the year 1990, a baseline emissions year established by the Kyoto Protocol in 1997. Most companies set their baselines to a year when either their first carbon inventory was conducted or when the confidence level in the available data was high and the carbon accounting data, complete. 

“STRUCTURAL CHANGE” RECALCULATIONS

Just as baseline years from company to company are non-standard, they can be also relative. Guidance from the GHG Protocol requires baseline recalculations when “structural changes” occur for a company.  Some of the more typical structural changes include a new company acquisition or business unit divestment.  Years in which companies register unusual drops in carbon inventory totals due to an acute economic contraction, such as during the 2007-2009 Great Recession, can arguably be considered exogenous structural changes that warrant baseline recalculations as well.

With Covid-19 we are experiencing a virtual halt in economic activity worldwide.  This crisis will register as a period of significant reductions in GHG emissions worldwide. Business baseline year recalculations are in order.

THE RELEVANCE OF COVID-19

We should acknowledge that the novel coronavirus poses an incredible health threat to human populations.  And, it will inflict lasting damage on national economies.  The number of small business deaths will be shocking.  Individuals will remain fearful of infection until a vaccine is identified and rolled-out en masse.  Understandably, this apprehension will tamp down consumer demand for non-essential goods for several years to come.  A more relaxed version of social distancing will be the de facto norm over the medium-term as individuals pursue activities such as shopping, recreation, and travel in their everyday lives while seeking to avoid contracting the virus.

SERENDIPITY & THE CORONAVIRUS

By most accounts, the “time of Covid-19” is terrible:  uncertain, scary, prolonged, disruptive and isolating.  And we remain squarely in the middle of it with little ability to maneuver forward or wiggle free of the economic malaise.  As Ram Dass might say, we are living this moment, right here, right now.  Without discounting our concentric circles of pain:  job losses, disappearing cash flows, halted economies, and lack of clarity or uniformity for how to re-open communities, there remain spots of good news and useful learnings to be applied. This author’s ask is for businesses to acknowledge the data and synthesize it into their strategic business planning. 

CLEARER SKIES, CLEANER AIR

One major environmental outcome from the novel coronavirus is clearer skies and better air quality from reduced carbon emissions into the atmosphere.  In Los Angeles where 80% of its air pollution is caused by transportation-related emissions, the air is so clear and smog-free that people are enjoying views of the coastline, long obscured by pollution, anew.  Aclima, a California-based company that studies local air quality, studied greenhouse gas emissions levels in San Francisco for a two week period in March (9^th– 20^th, exempting weekends) as compared to three prior years and noted that total CO₂ levels were down 10% and nitrous oxide (N₂O),emitted from combusting vehicle engines, was down a whopping 56%.  On the other side of the world, NASA reported China’s N₂O levels for March were down 30% from prior years.  More stunningly, a CarbonBrief study concluded that China’s CO₂ levels were cut 25% because of the impact from coronavirus.  The near complete halt on daily commutes and reliance on telecommuting for work has had a dramatic effect on local air particulates that contribute to climate change. 

MAJOR CARBON REDUCTIONS

There is an opportunity to be seized here.  Before the current administration decided to announce the United States’ withdrawal from The Paris Climate Accord (COP21), America had set itself a target to cut emissions at least 26 percent by 2025 and to target 80 percent emissions reductions by 2050.  For China, the largest GHG emitting country in the world contributing 27% of the world’s carbon emissions, having it meet a leveling in its national CO₂ emissions before 2030 would be a welcome achievement.   Significantly, Covid-19 has been a catalyst for measurably impactful climate change mitigation.  Without discounting the individual and economic toll the virus is exacting on thousands of communities nationwide, can we consider adjusting our business sites to a middle-view and incorporate this opportunity to recalibrate our carbon inventory baselines?

As a business community, we can take a proactive stance to set new carbon baselines using early 2020 GHG emissions numbers.  During this economic pause, all kind and manner of scenario planning, business pivots, new product innovations, work process digitalization, and supply chain agility work is occurring.  Businesses are developing strategic plans for how to navigate this quiet time and push the start button when national and state policymakers decide to wave the checkered flag signaling an economic reboot.  None of these plans are a continuation of existing ones, pre-March 2020.  These planning iterations are not to get business back to “normal”, but to set a course forward in consideration of a new normal.

GETTING BACK TO NORMAL

Are we craving for business to “get back to normal”? Yes, we are.  It’s an understandable desire: to fall back on the known, the expected, and to rely on the processes and systems that were in place to guide business decision-making, set strategy, and meet the demands of the marketplace.  There is comfort in talking about ‘business as usual’.  It connotes that the business of business is important, life is productive, and the world as we know it has a relative sense of certainty and order. 

The problem though is that our way of operating, up to this point, has become anachronistic, if not entirely unrealistic. The existence of climate change began the (invisible) march of death for industry’s linear, neo-classical, negative externality-dependent, extractive material throughput, economic production model.  The growing threat of climate change to global supply chains; human-dependent natural resources; and economic and human productivity levels has revealed the mirage we view as success and well-being.   It feels more comfortable to fall back to a known way of operating, than to embrace change, which requires a new way of doing, being, measuring and goal-setting.  And yet, here we are in a moment when the time before now is gone, irrevocably altered. 

A NEW NORMAL

We are operating in unchartered territory.  The acute economic crisis we continue to face with Covid-19 is going to wane in the coming months but not entirely disappear until a vaccine is readily available for human populations.  This is not a “V” curve recovery.  It’s not even a long “U” shaped one, like that of a bathtub where we could expect a drawn-out period of economic silence with a medium-term recovery that is quick and back to pre-coronavirus levels.  No, what the financial analysts at JP Morgan are predicting is more of a “W” shaped curve of recovery.  We should expect iterations of economic productivity alongside retractions that could last a half-decade or more.  The world economies are not going to snap back into action.  The system of global value chains and corporate interdependencies has gone dark.  Similar to a manufacturing facility, rebooting the economy will be a process, often slow, requiring re-calibrations, and process dependent. 

These are not normal times.  In fact, they are extraordinary.  Unprecedented.  For the foreseeable future, the landscape ahead will be new and unchartered. 

This author is asking businesses, in consideration of that reality, to recalibrate their expectations of:

• how they should operate,
• what products and services will be offered,
• how employees will engage, and
• in what ways will consumers be serviced?

A NEW BUSINESS BASELINE

In this new normal can, nay, will businesses set a new baseline for what it means to be market-driven, carbon neutral, purpose-driven, multi-stakeholder serving entities?  Can companies embrace the silver-lining of this acute economic crisis?  That from disruption can rise business transformations that are economically-viable, environmentally-stabilizing, and socially, equity-enhancing?

Here is the opportunity:  to take the “progress” of steep carbon reductions seen across the globe, in Italy, China, the U.S. and other nations, place them in context (that it was simultaneously driven by economic shut-downs (not good) and telecommuting workforces (good)), and map a strategic business plan that uses those GHG totals as a baseline for future carbon emissions reductions for businesses across all industries and sectors.  What business transformations would that new carbon inventory downward trend line require as economies re-open and businesses start producing goods and services for the market?   Applying a rubric to our decision-making may aid our thought-process.

CARBON EMISSIONS REDUCTION RUBRIC

First, identify the carbon benefits (economic, societal, environmental) that have materialized from the continued Covid-19 crisis.  Determine what to keep and to develop further, as business assets or standard processes.  Examples of benefits could be product innovations like digitalized product and service offerings, as well as a predominate telecommuting workforce.

Second, look back to the time before the coronavirus and aggregate the sustainability initiatives that had merit but were deemed hard to implement or for which it was difficult to identify a short-or-medium-run path forward.  One example of this could be sourcing a majority of one’s energy from renewable energy sources.  Think outside the box.  Consider the installation of a solar microgrid or the implementation of a community solar array, where both the investment expense and energy savings are shared across a community.  Another example is to take the leap and conduct a full carbon inventory for your business, to suss out areas of quick energy efficiencies, new technology deployments, and operational process changes that fundamentally make a company smarter and more attractive to investors and consumers alike.       

Third, chart a sustainable path forward, not in parallel to your business goals, but embedded within them.  The embrace of business sustainability imparts competitive advantage.  There are cost savings to be realized, increased access to capital driven by socially- and environmentally-conscious investors, swelling brand ambassadorship by employees, sustained consumer loyalty, and long-lasting product differentiation. 

A TREND LINE OF BUSINESS TRANSFORMATION

Climate change impacts to your business and value chain are material.  Just as 100-year floods are occurring yearly in some parts of the U.S., and wildfires have become year-long “phenomena” in dryer, windier climates; acute economic crises brought on by Covid-19 and extreme weather events driven by global warming, are not one-and-done occurrences.  There lies opportunity in this moment. As we rejigger our businesses to come-out from under coronavirus, simultaneously, we can transform how we operate in support of significant corporate carbon reductions and a sustainable future by:

• driving deep energy efficiencies within our operations,
• sourcing near-100% renewable energy,
• developing processes and standards that reinforce carbon minimization within the value chain,
• dematerializing and revalorizing materials within the supply chain, and
• embracing a circular business model that for product companies means, developing a service-model to manufacturing.

This is a key moment for companies to double-down on their carbon mitigation goals and set a new baseline for business ‘normal’.  This author hopes that’s a trend every business can get behind. 

TripleWin Advisory develops sustainable business cases and supports strategic decision-making through value-chain mapping and Scope 3 inventories of companies’ greenhouse gas emissions. In so doing, it unlocks opportunities for greater profitability, relevancy, and longevity for businesses. Learn more.        

The post Setting a New Baseline for Normal appeared first on Triple Win Advisory.

Sometimes humanity really pulls together and solves problems.  One example is the 1987 Montreal Protocol, an agreement among countries to ban ozone-hole creating refrigerants. The hole in the ozone layer of Earth’s atmosphere is now shrinking. Nations succeeding together! 

Another “success story in the making” has been emerging over the last decade.  Again, it comes from the refrigeration world.  The industry is showing great promise with retail store and warehouse refrigeration systems that work with natural refrigerants.  At the February 2020 AHR Expo, North America’s biggest heating, cooling and refrigeration industry event, the top innovation award went to a new carbon dioxide-based system from Danfross.

BROAD DEPLOYMENT BY LARGE PLAYERS

The world’s biggest retailers and food and beverage manufacturers have been testing natural refrigerants since the early 2000s, and since approximately 2010 they have moved beyond pilot projects, undertaking mass rollouts of successful natural refrigerant systems.

Three trends have taken hold in retail settings:

• R290 propane based standalone refrigeration cases

• Carbon dioxide (C0₂) – based transcritical systems for supermarket rack refrigeration

• Energy recovery, also for rack refrigeration.

COCA-COLA, PEPSI & UNILEVER

During the UN climate Summit in New York in September 2019, Thomas Lingard, Global Sustainability Leader from Unilever updated delegates on his company’s longstanding alliance with Pepsi and Coke and their widespread global use of plug and play cabinets that use natural R290 propane refrigerant. Target and Walmart have also begun using them.

In 2016 Guillaume Grolier, a commercial director for AHT Cooling Systems in France said, “We’re recording better energy efficiency results than with HFCs.” His comment was based on the installation of about 10,000 R290 cabinets each year in Europe, with a total, at that time, of about 70,000 in France alone.

MACDONALD’S, STARBUCKS & RED BULL

Writing on r744.com in 2019 Pega Hrnjak president of Creative Thermal Solutions, and research professor at the University of Illinois said; “Hydrocarbons, notably R290, have also become…adopted by chains like McDonald’s and Starbucks, as well as brands like PepsiCo, Red Bull (using isobutane) and Coca-Cola.”

TARGET & WHOLE FOODS

Target has deployed such cases in more than 1,000 of its 1,800 U.S. stores, while Whole Foods has them in 500 stores, according to the Energy Information Administration of the US Department of Energy. They are self-contained display cases at the checkout or in spot merchandising locations, with a maximum charge of 150 grams.

“More recently, some U.S. supermarkets have begun installing R290 cases in partial or whole-store configurations, creating an alternative to centralized rack systems. One example is Hannaford, a Maine-based grocer, which is testing R290 in complete frozen-food lineups in some new stores, with heat removed by a glycol loop.”

H.E. Butt Grocery, is a Texas chain that became an early US adopter of R290 cases in 2013. Hannaford and H.E. Butt are using R290 cases from Hussmann, which recently unveiled a new line of R290 self-contained, glycol-cooled cases called MicroDS. Hannaford also began using transcritical CO₂ rack refrigeration from Quebec’s Carnot, in July 2013.

NESTLE

Vincent Grass, Global Refrigeration Leader for Nestlé, told the attendees at the 2019 ATMOsphere Europe Conference in Poland that becoming “fully transferred to natural refrigerants” ties into the company’s plans to become net-zero. At the end of 2018, the firm’s emissions were down by 22%.

Nestlé is known for its food and beverage products, but it also operates 21 supermarkets in Switzerland. Since 2016, the company has only used hydrocarbons in its ice cream freezers, (Propane R-290, Isobutane R-600a, and Propylene R-1270),and it started employing transcritical CO₂ for refrigeration in its supermarkets six to seven years ago, according to Grass.

WALMART

Walmart opened its first store in the USA using C02 refrigeration in 2009 and has been adding stores since. In 2013 the Environmental Investigation Agency said Walmart was using a secondary loop refrigeration system that combines either carbon dioxide or glycol and HFCs in about 125 stores. In 2016 Walmart built a store in Guelph, Ontario and installed a C02 refrigeration system, heat reclaim and geothermal heating and cooling. It saves about $130,000 on energy each year compared to comparable Walmart stores.

Around the same time, Walmart built a 450,000 square foot refrigerated distribution center near Calgary with a modern ammonia refrigeration system and a handful of other clean energy technologies. It saves about a million dollars on energy each year.

ALDI

The ALDI U.S. supermarket chain operates more than 320 stores using transcritical CO2 refrigeration.  ALDI’s main transcritical system supplier has been Conyers, Ga.-based Hillphoenix, which has been a leading provider of CO2 technology to U.S. food retailers.

WHOLE FOODS & PIGGLY WIGGLY

Whole Foods, Albertsons and Raley’s are also operating successful ammonia/ C02 systems. Whole Foods has at least 20 installations.

In 2015 Piggly Wiggly opened a 36,000-square-foot store in Columbus, Georgia using an ammonia/C02 refrigeration system. It employed an ultra-low 53 pounds ammonia charge and a CO2 charge of 1,400 lbs. It also saves about 25% on energy. As long ago as 2009 Tesco in the UK and Metro in Germany each had five grocery stores using C02 refrigeration.

HEAT RECOVERY

Some of the earliest Transcritical CO₂ refrigeration systems in North America were installed in approximately 2008, in the Sobeys supermarket chain. Sobeys now has an estimated 140 stores equipped with the technology, many supplied by Carnot or Lesage-LMP Inc. Other Canadian chains, like Loblaw and Longo’s, have followed suit.

One of the key features of these systems is that they recapture heat from the refrigeration system and use it for space heating in the store. In many regions including some cold places in Canada, the result is an abundance of heat available, and no other heating system is needed.

INDUSTRIAL SYSTEMS

As mentioned, Walmart’s modern ammonia system at its 450,000 square foot refrigerated distribution center near Calgary saves about one million dollars on energy each year, compared to similar facilities using conventional refrigeration.

For warehouses and production facilities, Nestlé also utilizes ammonia and ammonia/ CO₂ for refrigeration. For large and medium-sized systems, and for processing, the go-to solution is ammonia/CO₂; the latest example of this is being built for a large factory in Mexico.

Most of the Nestlé factories have now transitioned from HFCs to natural refrigerants. “Not many” are left to convert, according to Vincent Grass, Global Refrigeration Leader.

OEMs like Evapco, Azane and NXTCOLD (marketed by Hillphoenix), among others, have unveiled low-charge packaged systems and contractors like CIMCO and Stellar have begun installing them. Low-charge central systems have also emerged in the last few years.

KEY BENEFITS OF C02/LOW CHARGE AMMONIA

Here are some excerpts from a piece in Manfacturing.net by Chuck Taylor and Todd Allsup on the reasons this technology is emerging as a top solution:

The CO2, used on the low stage, is distributed to the evaporators throughout the facility. Ammonia, used on the high stage, is completely contained in the machine room. This configuration facilitates the use of two of the most energy-efficient refrigerants on the market while minimizing the risk of distributing large charges of ammonia throughout the facility. For industrial applications, this is an excellent solution.

SAFETY, OPERATING COST, SMALLER EQUIPMENT

The real advantage of using CO2 is mitigating risk. For example, a typical 200,000-square-foot refrigerated warehouse using a conventional central station ammonia system will have a refrigerant charge in the neighborhood of 40,000 lbs of ammonia. The same facility using CO2 on the low stage and ammonia on the high stage will have a refrigerant charge of less than 7,000 lbs. This level of charge is below the threshold limit that triggers requirements with OSHA for compliance to Process Safety Management (PSM) and with the Department of Homeland Security for compliance with the Chemical Facility Anti-Terrorism Standards (CFATS) program.

From a pure theoretical standpoint, CO2 is slightly less efficient than ammonia, but this difference decreases as the evaporator temperature drops. But because CO2 is a very dense gas, the size of the equipment needed to provide the same refrigeration effect is significantly smaller.

A compressor running with a -40 °F saturated suction temperature (SST) on CO2 is almost 10 times smaller than the same compressor for ammonia. This facilitates the use of reciprocating compressors, which have a better part load efficiency than standard screw compressors—and they’re cheaper.

Since most refrigeration systems operate in some form of part loading over the year, the CO2 system’s efficiencies are very competitive with ammonia systems and in some cases even more efficient, especially at lower temperatures.

From an initial cost standpoint, CO2/NH3 cascade systems have historically cost 10 to 15 percent more than conventional two-stage ammonia systems. However, as manufacturers have started bringing a complete line of standard products for CO2 to market and as more engineers and contractors become comfortable with providing these systems, the cost is becoming very competitive with a typical ammonia system. And for applications where the evaporator temperatures are below -40 °F, the systems are becoming less expensive.

A comprehensive peer-reviewed report was published by accelerate24news.com and Shecco in 2019, aimed at identifying the underlying trends for low-charge ammonia technology in different parts of the world.

THE PAYOFF: INVESTING IN NATURAL REFRIGERANTS

According to Freor.com R290 propane systems offer 30% operating savings compared with now obsolete HFC systems. For rack refrigeration C02/Ammonia systems have a higher up front cost than HFC systems, but they also have lower operating costs resulting in a 3-5 year payback on the investment.

Jim Knudson of the North American Sustainable Refrigeration Council prepared the following notes in 2016, which is already dated information in the context of the quickly changing natural refrigerants landscape. The trend since then has been continuously more efficient natural refrigeration systems at competitive costs, including up front cost.

Investment

Some physical properties of CO2, such as high working pressures and relative performance through the heat rejection and expansion process, pose inherent challenges to its efficiency as a refrigerant, but these disadvantages can be mitigated through system design.

Other properties of CO2 contribute to its efficiency in food retail applications, including excellent volumetric efficiency (more than six times the cooling effect per volume as R22); low compression ratio (the ratio between inlet and outlet pressures at the compressor); and low viscosity (making it easier to pump).

Saving Energy: High-efficiency HFC vs. High-efficiency CO2

Certain technologies typically used on CO2 systems, such as electronic expansion valves with case controllers, variable speed drives, and heat reclamation, can also be applied with great effect…Several new CO2-specific technologies squeeze even more efficiency into a CO2 system’s design.

As the table below illustrates, transcritical CO2 technology is being developed to be deployed in nearly any climate and can provide substantial environmental and financial benefits. So why invest more upfront for CO2? Simply put, not only are the environmental benefits significantly greater with CO2; over time, the energy savings achieved with CO2 make it the better choice.

SEA FOOD PLANTS, BREWERIES, INNOVATION

Colin James, Service Manager and technician for Mayekawa, a Japanese compressor manufacturer says more innovative designs are emerging as technicians become familiar with natural refrigerants. He describes an installation in a northeast seafood plant that uses a large volume of hot water in its operations. There is no gas service in the region, so the plant was using very expensive oil-fired water heaters.

“It already had a regular ammonia system for making solid ice blocks. We took the gas from that system before it is rejected outside and increased it to 450 pounds pressure, using a heat exchanger and ammonia and two 125 horsepower electric compressors. Now they have plenty of far less expensive hot water at 158^oF without fossil fuels.”

James has been working on the large systems for 24 years and says his company and others are creating big systems, including one at a brewery, with much lower ammonia charges and with heat exchangers and secondary loops of C02, brine or food grade glycol.

“The ammonia doesn’t have to come in contact with the building or the product, but the added heat exchanger does increase the system cost.” This also means the ammonia charge is small, which seems to be the current trend. I haven’t been seeing brand new systems with massive ammonia charges.”

The bottom line on natural refrigerants is that they have come of age, and there is no longer any reason to use HFCs and blends, most of which will soon be banned all over the world and cost more. Some natural refrigerant systems still have higher up front costs, but this is changing quickly. In addition they all offer significantly lower operating costs with payback periods now compressed to a few short years. Efficiencies and safety concerns have been addressed and natural refrigerant systems are now in widespread use.

TripleWin Advisory develops sustainable business cases and supports strategic decision-making through value-chain mapping and Scope 3 inventories of companies’ greenhouse gas emissions. In so doing, it unlocks opportunities for greater profitability, relevancy, and longevity for businesses. Learn more.        

The post The Up-and-Up on Natural Refrigerants appeared first on Triple Win Advisory.

There’s no consensus yet on whether chemical recycling is the silver bullet for the growing plastic pollution problem. What is clear, however, is that a solution needs to be found — and fast.

Plastic and the use of plastic are not going away anytime soon. This quintessential representation of environmental pollution is readily available and highly valued in product packaging.

Despite consumer calls for bans on single-use plastic and statewide legislation addressing these demands, plastic in all its forms has a large global market. Current demand for PET/PETE plastic and polyester fiber alone is nearly $130 billion with global production expected to grow 3-4% annually through 2022.

For the foreseeable future, companies will remain bound to plastics in their production cycles. This article will look at how industry can reduce the environmental impact of plastic, reuse material already circulating in the economic value stream, and create a circular recycling mechanism is at the heart and promise of chemical recycling.

How Plastics Are Recycled Today

Historically, the U.S. used two mechanisms for managing plastics recycling efforts: shipping plastic waste to China and Southeast Asia to recycle and discard; and mechanically recycling a small portion domestically.

In 2018, China stopped accepting plastic imports and other Southeast Asian countries like Thailand and Vietnam swiftly followed suit. Now, municipalities across the U.S. are collecting the full spectrum of “recyclable” plastics and promptly routing them directly to landfills or incineration sites.

Commonly used PET/PETE (#1) and HDPE (#2) plastics are still mechanically recycled in the U.S. but at varying levels of effectiveness due to the expense and energy required. Batch contamination from mixing incompatible plastic types (e.g., PET/PETE with PVC) remains an ongoing recycling challenge, too.

The most significant limitation to mechanical recycling is its ability to only downcycle plastic or to produce lesser-value plastic items. The result is that less than 10% of all plastic gets recycled in the U.S. today.

What Is Chemical Recycling?

Chemical recycling takes plastic back to the source. Plastics are polymers made by fusing two kinds of oil via chemical reaction. In the chemical recycling process, plastic is decomposed or separated into its essential parts: crude oil and natural gas. After the depolymerization process, contaminants like food or coloring are removed so that the material can be repolymerized and recycled into good-as-new plastic.

Chemical recycling offers several advantages to traditional mechanical recycling. First, plastic batch contamination is not a roadblock. Most low-value and waste plastic can be deconstructed, decontaminated, purified and repolymerized into recycled plastic resin.

Second, chemically recycled plastic can be recycled a near infinite number of times with minimal material loss. Third, it can be upcycled into products of same or increased value from its original use. Fourth, the “gold standard” in chemical recycling does not involve the use of external heat or pressure, which significantly reduces the energy intensity of operations.

Chemical Recycling Is Not a One-Size-Fits-All Cure

Chemical recycling is an umbrella term that conveys the different technologies for deconstructing and repurposing various plastic types to be used as raw material inputs for new products. The more than 60 global technology providers at various levels of commercialization fall into three main technology buckets:

Purification: a process that dissolves plastic in a solvent to separate and purify the plastic mixture and does not break down the polymer into separate monomers.

Decomposition: a depolymerization process that uses thermal, chemical or biological starter components to break plastic polymers into base monomers and purify the plastic waste for reuse.

Conversion: a process similar to decomposition with outputs of liquid or gaseous hydrocarbons to be used in intermediate materials and monomers to make new plastics.

Systemic Hurdles to Scaling Chemical Recycling

For chemical recycling technologies to meet the demands of plastic-use growth and create a circular system of upcycled plastics, several challenges need to be resolved in the coming decade.

1. The cost of recycled materials needs to be on par or less than the cost of virgin plastics. Today, there is little market incentive for companies to pay a premium for plastic material inputs. Crude oil prices hover below $60 per barrel, propping up our dependency on virgin plastics. The break-even cost for recycled plastics is closer to $100 per barrel.

2. Processing capacity for chemically recycled plastics must increase exponentially. Global market demand for polyethylene alone in 2017 was 80 million tons. Only a few chemical recyclers, such as Loop Industries and Carbios, are commercial and actively processing plastics, albeit at low-volume levels — around 10,000-15,000 metric tons of plastic per plant per year. Agilyx, with its Tigard, Oregon, facility, processes less than 4,000 metric tons of polystyrene annually.

3. Production scale is wholly reliant on facilities that exist and are operational. All major chemical recycling companies are planning new facilities or retrofitting existing plants between now and 2025.

4. Proving to the public that chemical recycling is more environmentally friendly than virgin plastics production and mechanical recycling. Doing so would go a long way toward making a value-added sustainability business case for pursuing these technologies.

Steps Industry Can Take to Adopt Chemical Recycling

Coca-Cola, Unilever and Nestle have pledged to source recycled plastic for their food and beverage and consumer product goods. Industry players in textiles, agriculture, construction and consumer electronics must quickly follow suit. Here are three ways companies can pair desire with action:

1. Build an internal business case for executive leadership that emphasizes the medium-to-long-term value of investing in chemical recycling technologies. Quantify how chemically revalorized plastics will optimize and streamline a company’s product design processes, material sourcing strategy, and value chain GHG emissions.

2. Partner with the right chemical recycler for your business needs. Focus on your company’s product waste streams and the regions in which they occur. Research the technology that best supports your company’s needs and engage the innovators that offer the capacity and willingness to partner with you.

3. Plan to co-locate manufacturing facilities close to municipal recycling waste streams and chemical recycling facilities. Without a clear strategy to maximize waste feedstocks into the system and minimize travel for processing, chemical recycling will not be market competitive anytime soon.

Chemical recycling can tackle the three Rs of sustainability: reducing material throughput of virgin plastic resin by creating a system of near-infinite plastic, and reuse within a circular plastic material system that prizes recycled content over virgin. With a focus on overcoming the systemic hurdles the process currently faces, a path to widespread implementation will open.

TripleWin Advisory develops sustainable business cases and supports strategic decision-making through value-chain mapping and Scope 3 inventories of companies’ greenhouse gas emissions. In so doing, it unlocks opportunities for greater profitability, relevancy, and longevity for businesses. Learn more.        

The post Achieving the promise of reduce, reuse, recycle with chemical recycling appeared first on Triple Win Advisory.

The sustainability world places a heavy reliance on the use of acronyms. And the field of acronyms seems to grow by the year. In order to keep our heads straight around the standards, frameworks, guidelines, disclosures and indices that encompass sustainability and the organizations they represent, we’ve made a list below (in alphabetical order) of each and their meaning, intended purpose and the value they bring to bear on corporate sustainability efforts. We promise not to quiz you. Let us know if we missed an acronym that absolutely should be included in our tally. Sustainability acronyms are sneaky that way: as the business imperative increases and greater opportunities are uncovered around climate change mitigation, the universe grows.

Here’s the list:

BIA = B Impact Assessment.
It is the sustainability reporting tool of B Labs, a certifying body that publicly rates a company’s sustainability performance across various impact areas. Although it would make sense to have the “B” stand for “Business”, it doesn’t. Instead, it serves as a brand amplifier of the organization’s name. B Lab is a non-profit that supports adoption of a broader set of values to guide for-profit companies. These values equate to sustainability goals that support not just profit-making but also societal well-being and environmental stewardship. The BIA tool allows B Lab to make companies’ sustainability measures more transparent in the marketplace. The value of BIA is that is forces registered organizations to go through the process of making transparent their sustainability efforts and to improve on those measures over time.

CDP = Carbon Disclosure Project.
This organization used to be known by its full name but currently is known by its acronym. CDP is an international sustainability disclosure body for companies as well as other entities such as investors, cities, states and regions. The CDP is focused on persuading entities to disclose their sustainability goals, particularly around greenhouse gas (GHG) emissions reduction efforts in support of global climate change mitigation. The value of CDP is in its disclosure policy: it seeks for companies to set meaningful GHG emissions reduction targets and then compiles that data across regions and sectors to report on trends toward that goal.

DJSI = Dow Jones Sustainability Indices.
The various indices are a collaboration with S&P Dow Jones and RobecoSAM. It is a set of global best-in-class financial benchmarks that rate, group and class companies that have submitted to their rigorous questionnaire process. The companies that are picked to be included in the DJSI are recognized for their commitment to business sustainability, goals in support of climate change mitigation, and sustained long-term value creation for their shareholders, and rewarded with like-minded investors and capital investments. The DJSI is part of a family of financial benchmark indices including the S&P 500 ESG Index, the S&P Fossil Fuel Free Index and the ESG Factor Indices. The DJSI provides value only for publicly-traded companies by increasing their access to sustainable capital while serving to promote the companies chosen as true exemplars in their particular industries. 

GRI = Global Reporting Initiative.
GRI is the global standard for sustainability reporting by companies, mostly public but increasingly, for companies of all sizes and types. The GRI standard allows reporting companies to standardize their disclosures and approach to reporting within industry and across sectors to allow for in- and out- of industry sustainability comparison, transparency, and ease of data accessibility for key stakeholders. 

ISO 26000: 2010 = International Organization for Standardization Guidance on Social Responsibility.
ISO is an independent, non-governmental international membership body consisting of “national standards” or standard organizations within nation-states. There can be only one standard body from each country as a member. No individual or company can be a member. ISO 26000 provides guidance for all types and sizes of organizations and is intended to persuade companies to go beyond any legal compliance around social responsibility and to take a more proactive stance toward creating social good within their daily operations.  ISO 26000 supports the following UN SDGs: 1-16.

ISO 14001: 2015 = International Organization for Standardization Environmental Management Systems.
ISO 140001 specifies the requirements of a company’s environmental management system, which helps perform, track, and report life cycle assessments of product impacts on the environment through the value chain. ISA 14001 is usually adopted by multi-national product manufacturers that operate a global supply chain, which are subject to a diverse set of regulations around labor, the environment and manufacturing practices. 

SASB = Sustainability Accounting Standards Board.
SASB was initially created to sit alongside FASB (Financial Accounting Standards Board) that establishes and updates the GAAP principles for public-company financial disclosures to the market. SASB was intended to create “sustainability standards” for market disclosure of material (relevant and business affecting) ESG (environmental, social and governance) impacts that would be included with corporate filings to the SEC.  SASB’s Materiality Map matrix is the truly valuable gem. Companies that are just beginning their sustainability reporting would be wise to consult SASB’s Materiality Map, which identifies by industry and sector, what issues are likely to be considered important under five broad reporting categories including:  Environment, Social Capital, Human Capital, Business Model & Innovation and Leadership & Governance.    

SBTi = Science-based Targets Initiative.
The organization in collaboration with CDP, the UN Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF), seeks to set a business practice standard for defining corporate carbon footprint goals that are in-line with the climate change targets of the Paris Climate Accord. The SBTi educates companies on how to set a science-based target (2^oC or less), verifies and approves corporate GHG emissions reductions targets. The value of SBTi is it compels companies to set GHG performance targets that are aligned with the Paris Climate Accord’s goal of climate change mitigation. 

TCFD = Task Force on Climate-Related Financial Disclosures.
Yes, it’s a mouthful and increasingly, relevant to corporate reporting of sustainability performance goals. TCFD asks companies to consider the physical, liability and transition risks associated with climate change to their business and stakeholders and then to make financial disclosures of those risks. TCFD formed an alliance with CDP in 2018.  In so doing, part of CDP’s criteria for rating disclosing companies’ efforts to mitigate their GHG emissions in their operations is to have those businesses report on how they are addressing climate change risks and embedding risk mitigation as well as scenario planning into their strategic business decision-making. The growing value of TCFD’s framework is that it allows companies to articulate their long-term business goals framed by climate change impacts foreseen and anticipated. 

UN SDGs = United Nations Sustainable Development Goals.
The UN SDGs (a.k.a. the UN Global Compact) are 17 goals that all 193 member states of the United Nations adopted in support of eliminating/eradicating poverty, inequality and injustice, and tackling climate change. These goals define a roadmap, of sorts, for businesses and nations to achieve “sustainable development” by the year 2030. The 17 SDGs are listed below:

The UN Global Compact asks companies to operate sustainably AND to pursue additional opportunities, as laid out in the SDGs, to solve societal challenges through business innovation and collaboration.

Business Takeaway 

Which tool is best to employ for your organization?
The answer depends on your company’s strategic sustainability objectives. Below is a graphical representation of the ‘sustainable toolkit’ universe organizations can employ in their corporate sustainability efforts. Each sustainability ‘tool’ is mapped on an X/Y axis that delineates commitment to sustainability against the level of transparency and integration of measures into a company’s strategic goals. Commitment to sustainability necessarily entails taking a multi-stakeholder approach to value creation which is highly correlated with increasing levels of transparency of an organization’s business practices, which in turn, further drives strategic decision-making for the benefit of those stakeholders a company seeks to serve.

TripleWin Advisory develops sustainable business cases and supports strategic decision-making through value-chain mapping and Scope 3 inventories of companies’ greenhouse gas emissions. In so doing, it unlocks opportunities for greater profitability, relevancy, and longevity for businesses. Learn more.        

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The True Business of Business

I want to make an overly obvious (some will say, ambitious) statement:  “We are all in the business of saving our planet” whether we know it or believe it to be true.  Our very existence depends on it.  Asking others – scientists, policymakers, activists – to do the work we are all tasked to do and responsible for completing is a failure of conscious, a waste of capabilities, and a rejection of leadership. 

Corporate sustainability requires big, heavy, systemic change.  It can be both complicated and challenging to implement.  The hardest part is often in deciphering how to answer, “Where to begin?”  Some companies eager to begin, fail to identify where the finish line resides.  Complicating matters more, no one-size-fits-all solution exists within and across industries. 

Looked at from a particular angle, that should be a relief.  Independent thinking and creating solution-setting remain valuable traits toward this endeavor. 

Corporate Sustainability’s Need, Value and Imperative

What companies do need to understand is where they are presently and what they need to journey towards.  Call that the path-forward.  There are many frameworks and tools available to help organizations understand how to walk that path; to take the first foray into their sustainability journey.  For many, it starts with writing a corporate sustainability report.  For others, the push is to report their greenhouse gas (GHG) emissions.  It’s worth stepping back for a moment though, to understand and put into context the need, value, and imperative of corporate sustainability.

The Need:  to affect a fundamental transformation in how business is conducted to neutralize its impact on the planet’s eco-system in support of human communities.

The Value:  these are numerous and include operational savings and efficiencies, cost reductions, new revenue models, distinct product differentiation, competitive advantage, and a host of beneficial employee and supplier productivity, longevity, and loyalty metrics to be realized.   

The Imperative: to support a livable and healthful planet.

Within corporate sustainability’s Need, Value and Imperative matrix, we can explore four value-creation paradigms that are separate yet intertwined; each reinforcing the other to pull companies toward becoming proactively and implicitly inclusive, civil-minded, and eco-system restorative.  Realize that most every organization will explore each of these journeys in time, at individual paces, and through unique mechanisms and means.

The Process of Sustainability Journeys

Let’s not forget the oft-quoted adage of Peter Drucker “what gets measured, gets improved.”  As you walk through these value-creating mindsets, remember how corporate (sustainability) journeys are built:

1. Assessment of the current state
2. Definition of business goals
3. Measurement of business risks & opportunities
4. Prioritization of the doable, the impactful, and the business critical
5. Development of an action plan
6. Quantification of progress
7. Review, analysis, and refinement of goals, performance metrics and action plans
8. Iteration to reach the next level

Four Value-Creation Paradigms for Corporate Sustainability

I will discuss each of four value-creation paradigms separately.  Ultimately, they fit together like four pieces of a puzzle.  See them as four quadrants of a two-dimensional XY axes. By identifying where your organization is today within each quadrant, a 2-dimensional map can be drawn among them to understand where sustainability efforts are lagging or require additional attention.  Note:  each of these value sets often follow in tandem with the others.  That is:  if stakeholder engagement is low, an organization can likely find that there is low organizational embeddedness of material issues and organizational sustainability implementation is stubbornly stuck below non-strategic levels. 

Paradigm 1:  Level of Corporate Responsibility

Assessing where a company is in its corporate sustainability journey is the appropriate right step before defining priority goals, stakeholder engagement and material issue embeddedness.  Four corporate responsibility levels exist.  The first and most rudimentary is Compliant.  A company pursues corporate responsibility measures where it has to; where it must abide by the rules and regulations governing areas of operation.  Think here:  Environmental Health and Safety (EHS) compliance, Labor rights, Air Quality safety, and Health Insurance Portability and Accountability Act of 1996 (HIPAA) in Health Care.  Compliant-level companies are pursuing bare-minimum corporate sustainability measures. 

Managerial-level corporate sustainability implementation considers and engages the company’s stakeholders; making transparent their issues of concern within reporting documents, such as in a sustainability report.  Strategic-minded companies proactively engage their key stakeholders, identify their key concerns, prioritize those into strategic business decision-making and actively address them through process modifications (e.g., non-dyeing and stone-washing with lasers in apparel making), product changes (e.g., substituting corn syrup with cane sugar in sodas), and/or policy, procedure and mission overhauls (e.g., change in women-athlete pregnancy policy).  At the civil implementation level, companies have fully embedded a sustainability mindset internally, have met with success, and work as external change agents for their stakeholders – partners, suppliers, customers – persuading them to pursue the same or similar levels of sustainability within their business operations. 

When you look at this quadrant, ask yourself: 

“How does my company approach corporate sustainability today?”

Paradigm 2:  Organizational Sustainability Implementation

Existing companies run the gamut from operating Unsustainably to pursuing environmentally Restorative business goals. An organization that orients around having a Neutral Impact is one that is pursuing net zero carbon emissions goals across its value chain.  Often, that type of goal is articulated as a RE100 goal:   sourcing and utilizing 100% renewable energy by a certain timeframe (say, by 2030) across a company’s chain of business through a diverse strategy of say, on-site generation of solar or wind energy, carbon offsets and the purchase of renewable energy certificates.  More and more Fortune 1000 businesses have declared this their organizations’ sustainability goal.  Companies goal-orienting around “Restorative”, is to have organizations committed to pursuing net-positive carbon emission goals.  Said another way:  a company determines to capture and sequester carbon in their business operations, which entails going beyond achieving zero carbon emissions and seeking negative carbon emissions goals in its operations and in the products it manufactures.

When you look at this quadrant, ask yourself:

“What should my company’s sustainability goal(s) be?”

Paradigm 3:  Responsiveness to Stakeholders

Corporate Sustainability and “Stakeholder Engagement” go hand-in-hand.  Sustainable projects can be pursued.  Sustainable reports can be written.  Sustainable priorities can exist.  But if a company has not gone out and conducted the work of identifying its key stakeholders, engaging them in communication feedback and soliciting their concerns as it relates to the organization’s operations, then a company has yet to truly understand the meaning of what corporate sustainability is. A company exists because of its stakeholders (the market of buyers), for its stakeholders (the suppliers and employees who keep operations running, investors), and in support of its stakeholders (productive workforce, healthy environment, strong economy). 

So here goes:  if an organization fails to consider its key stakeholders in the course of business, that company operates Reactively and unwittingly, in an extremely high-risk environment.  Think:  Volvo’s diesel-gate scandal, Facebook’s privacy scandal involving Cambridge Analytica, child labor scandals that have affected some of the largest apparel makers in the U.S. including The Gap and Nike, and of course, the Enron financial and accounting scandal of breath-taking proportion.  All of these companies at the time their particular scandals hit, were operating with a Reactive Stakeholder mindset:  they did not/were not/had not considered the issues of concern for their stakeholders and by doing so, breached their trust, caused considerable damage to their brands and reputations, lost a fair amount of value in their businesses, and in one case, ceased to exist.   

Reactive companies once called-out, move quickly to Defensive-mode.  Philip Morris (now Altria) has operated with this mindset from its very inception.  It has long known that its products kill but the profits from those products are too enticing to give-up.  Oil & Gas is an industry made up of Defensive companies.  Exxon Mobil, Shell and the like absolutely know they directly contribute to accelerating global climate change.  And while they offer modest, conciliatory overtures to pursue “clean” fuels, their corporate interests solidly lie in keeping their stakeholders on the cheap-train of fossil fuel use. 

Companies that accommodate their stakeholders’ concerns have provided some channels of communication for interaction and accept feedback.  The downside of an Accommodative approach is that lines of communication are not deliberate and stakeholder concerns fail to be incorporated into the strategic business decision-making of organizations.  A Proactive stakeholder engagement strategy is an active, ongoing and deliberate action plan for identifying and communicating with stakeholders, understanding their concerns and issues, and taking the next step of embedding them into the sustainability decision-tree of a company.

When you look at this quadrant, ask yourself these questions:

“Does my company know who its key stakeholders are?”

Hint:  The Environment should be one.

“Has my company identified what its stakeholders’ priority concerns are?”

Hint:  Each stakeholder group will have a unique set of concerns.

Paradigm 4:  Maturity of Materiality Embeddedness

This quadrant seeks to push companies to move away from making decisions from an Institutional mindset where only direct business impacts of the company are prioritized by its operating leaders with no accommodation of non-financial stakeholder viewpoints, to a Latent one, where decision-making is collaboratively identified, shared, and executed upon through a corporate system that has prioritized sustainability measures, enlisted the consent of its stakeholders, set-down clear rules of engagement that define sustainability work and progress, and where standards become habits that build a collective consciousness.  Uber operates with an institutional mindset with its “We employee zero automobile drivers” declaration.  The company seeks to protect solely its own self-interests. Decisions are made to the exclusion of its stakeholders.  Uber’s direct competitor Lyft operates with a Consolidating mindset.  The company absolutely knows that its drivers mostly drive combustion-engine cars that emit millions of tons of carbon dioxide into the atmosphere, directly contributing to global warming.  So, it takes a Consolidating view:  where it can it will support neutralizing its drivers’ carbon emissions through the purchase of one-to-one carbon offsets.  Most companies are not going to that length to neutralize their climate carbon contributions.  Just as importantly, buying carbon offsets is an acceptable way to build sustainability into one’s operations (albeit, without fundamentally changing one’s way of conducting business).

An Emerging company is one that is taking its sustainability commitments and goals to the next level:  not everyone knows about the efforts and presently, only a rare few are pursuing these types of sustainability goals.  Think:  Interface, the carpet manufacturer.  Its “Climate Take Back” sustainability initiative seeks to go beyond having a zero carbon impact on the world and to take-back or sequester carbon already in the atmosphere, through its operations and the carpet tiles it sells and installs.   Emerging materiality companies are seeking to solve the world’s most challenging problems.

A Latent-operating company is taking its traditional business model and transforming it to fit the needs of the market while solving for a universal imperative.  Signify (formerly Philips Lighting) is one such company.  It has committed itself to achieving carbon neutrality by 2020 (end of next year), transitioning to selling only sustainable products (i.e., LED lighting systems), sourcing 100% renewable energy, and achieving full circularity in its manufacturing operations, where waste and materials have revolving value.  So too, Signify has committed to solving some of the world’s biggest challenges from regenerative agriculture to solar electrification in support of the UN’s Sustainable Development Goals (SDGs).  Latent mindset companies are actively pursuing business transformation; acting as leaders to showcase how it’s done and the over-arching value deeply-embedded sustainability provides.

When you look at this quadrant, ask yourself these questions: 

“How transformative are my company’s sustainability goals?” 

“How are our pursuits changing the paradigm of how businesses’ operate, manufacture, produce, recycle and support climate change mitigation?”

The Sustainable Value-Creation Matrix

Here’s where we take each of the individual paradigms and coalesce them into a unified matrix on corporate sustainability value-creation.

Map your company’s present mind-set on the four concentric circles within the XY axes.  Ideally, you should map its existing sustainability expression as well as the future state to be achieved.  The goal is to move outward in each of the four quadrant realms:  pursuing higher levels of value creation through 1) increasingly proactive stakeholder engagement, 2) greater materiality inclusion into prioritized business goals, 3) sustainability goals that emphasize no or a net-positive impact on the planet and 4) a globally-minded corporate responsibility that is strategically-embedded in business decisions. 

At TripleWin Advisory, we help companies execute Stakeholder Interviews and we map organizational value chains to identify prime areas of opportunity to implement sustainability measures that have quick and measurable financial pay-backs.  If you are looking for tools to support your company’s Stakeholder engagement work, call or email us to receive a deck with useful frameworks to start the process.

TripleWin Advisory develops sustainable business cases and supports strategic decision-making through value-chain mapping and Scope 3 inventories of companies’ greenhouse gas emissions. In so doing, it unlocks opportunities for greater profitability, relevancy, and longevity for businesses. Learn more.        

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There are key foundational aspects to corporate sustainability.  The triple-bottom line philosophy is the stool on which all else stands.  The legs of that stool are to bear weight in balance:  a company is to equally emphasize in its course of operations 1) profit-making, 2) environmental pollution mitigation, and 3) societal health and wellbeing or using a different phrase: community-building. 

Within the triple-bottom line framework and clearly emphasized among the various reporting standards such as GRI, SASB, and B Lab, three other concepts are critical to ‘authentically’ pursuing corporate sustainability within business.  Those are:  inclusion and consideration of stakeholders, transparency of operations, and materiality (detailing the most critical and significant aspects of one’s business).

THE ESSENCE OF PURPOSE-DRIVEN LEADERSHIP

Purpose-driven leadership harnesses stakeholder engagement, transparency, and materiality to realize meaningful corporate sustainability goals. Stakeholder inclusion is amplified. The core mission of a company is transparently and declaratively broader than itself. Materiality to a purpose-driven led business includes a set of critical issues broader than a business, a sector, an industry. Thus, materiality becomes an exercise in identifying, prioritizing, and distilling the issues that affect all stakeholders, no matter what name they go by. 

THE UNIVERSAL SUSTAINABILITY TRUTHS

If business system boundaries are expanded large enough, we come to see that only two main issues are material to corporations and stakeholders alike:  1) environmental over-shoot (using 3-4 times the earth’s resources that are able to be regenerated) and 2) global warming.  If you operate a business or work for an organization that has not or will not articulate the shared challenges we all face, you have not yet employed purpose-driven leadership to effect a sustainable business outcome. 

Truly sustainable businesses are working on those great-big, grand, dual goals:  driving the regeneration of materials through the supply chain so that earth’s resources are sustained (and not depleted) indefinitely, and seeking the mitigation and reversal of climate change through their choices in how they source and use energy, optimize efficiencies, and support development of renewable energy markets globally. 

APPLYING A PURPOSE-DRIVEN FORMULA

The good news is that purpose-driven leadership has a formula.  How it gets applied and in what context will differ from one organization to the next but the basic tenants are the same. 

RIGHT PURPOSE: Businesses are built with a specific idea in mind for solving a defined problem or to fill a known gap in the market.  Anyone that has started a business knows this to be a universal truth.  No company starts with the statement, “We need to make a lot of money.”

SETTING MISSION AND VISION

So, too, all companies, at some point early in their existence, set down a clear mission and vision for themselves.  What does the company what to accomplish and how will it get to that goal?  This exercise is often translated into a Value Proposition:  what value does a company’s product or service deliver to its intended target customer?  

What is also true is that companies that are 10-, 20-, 50- even a hundred years old can lose their way; experience drift from their original mission and vision statements.  Often that is perfectly fine and natural.  Companies morph and change as they grow.  Fluidity is a valuable trait for survival.  But, in that drift period, which can be long or short, hazy or conscious, companies can lose their focus on what is important to it, to its employees and customers, and that loss of mission clarity can start to deeply affect employee motivation, supplier relationships, competitive edge and most visibly, financial performance.

CAPTURE THE ‘TRUTH’ OF YOUR COMPANY

A purpose-driven company has worked to crystalize its identity, to capture the ‘truth of the company’ and its authentic spark, and embody the true self in its culture. 

For Fishpeople Seafood, it considers itself a consumer product goods company where sustainability lies at the heart of everything it seeks to achieve.  It sources non-depleted, lesser-known yet high-quality fish from sustainably-managed fisheries found in the pacific northwest to support stable economies of otherwise marginalized coastal communities.  It pairs its protein with local, organic ingredients and seeks out the most sustainable packaging for its off-the-shelf and ready-to-eat meals with the goal of raising consumer awareness around how and where fish protein is sourced, in what ways quality affects price and health, who are the actors within the supply chain, and why fish protein is valuable and sustainable.  To Kip Baratoff, the co-founder of Fishpeople Seafood, sustainability is embedded in all the strategic functions of the business:  into the operating structures, work processes and knowledge sets.  The entity beats and breathes sustainability.  All its stakeholders innately know this truth.    

STAKEHOLDER ENGAGEMENT:  the core of a sustainably-minded company is the recognition of and engagement with its key stakeholders.  Stakeholders are those sets of constituents that have to live with and work under the objectives set-down by business leadership.  If strategic priorities are set from above, with no buy-in or integration of stakeholders’ points-of-view, business goals may lack teeth and performance metrics may disappoint and not deliver. 

Purpose-driven leadership will seek to leverage stakeholder involvement and build inclusivity structures at all levels of an organization to guide the strategic vision of the business with broader, more global implications.  Listening and applying the collective wisdom of company stakeholders can amplify purpose and future vision-getting. 

INTERFACE’S MISSION ZERO VISION TRANSLATED

Jay Gould, the CEO of Interface, talks about how he took the time a year into his tenure, to understand what the Mission Zero sustainability vision, set back in 1994 by the company’s founder, meant to employees, suppliers and clients alike.   Jay talks about this purpose-driven exercise as getting to the “why behind the what?”. 

Jay with the help of an outside consultancy, conducted 1000’s of Stakeholder Interviews asking each individual to articulate what made Interface unique, special and meaningful.  Those insights were distilled into a purpose-driven statement, “Lead industry to love the world”.  That phrase was then more formally articulated into a vision statement that guides the broader corporate vision of “Climate Take Back”:  to operate with the goal of having a net zero carbon impact on the planet.   The groundwork of stakeholder involvement in shared vision-making supported Interface to catalyze purposeful action and impactful goal-setting above-and-beyond the operating bounds of the company itself.

UNIVERSAL LEADERSHIP:  ‘Universal’ is a nod to what we all know to be true and/or a recognition that we should think and act bigger than ourselves, more broadly than the context of one individual, one company and a single-minded approach to survival and growth.   Universal leadership is the embodiment of being a “more than” organization: 

• more than a focus on just revenue and market share;
• more than beating quarterly and annual financial targets,
• more than one entity striving, competing and thriving with a potentially zero-sum mentality. 

Instead, companies with universal leadership strive to make the world a better place.  It’s why more and more companies are becoming B Lab certified.  It’s the reason more states are offering a Benefit Company designation when registering as a new business. 

A RETRO-MOD BUSINESS NOTION

It’s this retro-mod notion of why business is in business:  to provide products and services of benefit to consumers while supporting the communities in which they serve and exist and (this is a newer epiphany) ensure that impacts on and to the environment are mitigated or avoided altogether.    

A BROADER ECO-SYSTEM OF OPERATING

Purpose-driven leadership fundamentally understands a business’ place in the broader eco-system of operating.  Businesses are not solely competing in a globalized economy. They reside, increasingly precariously, within a planetary system that supports its very existence, not to put too blunt a point on it.  The actions that any one organization takes that positively (or negatively) impact that eco-system, profoundly affect the health, well-being and resilience of the environmental and social systems that are inextricably intertwined within it.

It cannot be overstated:  purpose-driven led companies strive implicitly and explicitly towards making the world continuously better, more sustainable and resilient for our future selves.  That is why companies that state they are purpose-driven, speak of their purpose-driven values that extend beyond the boundaries of their footprints and operational value chains, the talk about carbon neutral goals and circular production models, and seek to accelerate development of renewable energy markets across the globe. 

THE GROUP OF RE100 COMPANIES

It is also why the group of RE100 corporations, of which Signify and Interface are a part, create tangible value in a traditionally measured way: by outperforming their financial targets.   Interface’s year-over-year quarterly revenue has continuously grown for nine straight quarters since Jay Gould took over as CEO in early 2017.  The company’s earnings per share (EPS) is up 43% from last year and the company is expected to finish 2019 with a 15% uptick in net sales growth.  This is from a company that has as its vision statement:

“To be the first company that, by its deed, shows the entire industrial world what sustainability is in all its dimensions:  People, process, product, place and profits – by 2020 – and in doing so we will become restorative through the power of influence.”

How many corporate vision statements from public companies have you read that talk about ‘proving through theirdeeds what sustainability is’?  Rare indeed.

SIGNIFY’S 100% GOAL

For Signify, the company has been able to grow its earnings year over year while it actively seeks to make obsolete a large (but declining) portion of its historical product sales:  energy-hog incandescent lighting.  The company is committed to driving LED-based sales to encompass all of its products and services portfolio.  Signify saw a 6% increase in LED-based sales and grew by 2% its revenue (79% of total) from sustainable products between 2017 and 2018.  The market is not requiring Signify to make this wholesale transition from energy-inefficient to 100% efficient products. It does so because it believes that the mission to operate at a net carbon neutral capacity is the only vision worth meeting.  That is a purpose-driven company. 

LOFTY VISION:  Purpose-driven companies lead through their actions and not by the words set-out in their corporate sustainability reports.  Eric Rondolat, Signify’s CEO, articulates the vision for his company this way:

“At the start of Signify’s new life [spun off from Royal Philips in 2016 and changed its name in 2018], we tried to keep it simple.  We have purpose and we have values. We lay out why the company exists:  to unlock the extraordinary potential of light for brighter lives and a better world.  Sustainability is at the center of the purpose of the company. We display it everywhere and we created identity cards for every employee that states that purpose.  We are clear that the market and growth opportunities we are pursuing are also making the world a better planet.  That is our purpose.” 

A SIMPLE MECHANISM FOR SUSTAINABILITY

Purpose-driven leaders ask their stakeholders to reach higher and beyond the traditional boundaries of an organization’s operations.  They ask their constituents to do-away with limiting notions of what can be done now and center around what should be done no matter what.  Eric articulates how Signify came to embody its sustainability mission in every action and decision it makes.  “There is a very simple mechanism for infusing a sustainability mindset throughout an organization:  first, we were talking about sustainability consistently, and then, we were achieving sustainability measures consistently.  Signify achieved a reinforcement of its words through results.  The message was strong and grew stronger.”

KEY TAKE-AWAYS FOR BUILDING A PURPOSE-DRIVEN ORGANIZATION

1. Approach the business of business transformation as a happy challenge and not one to be avoided or not discussed. 
2. Where there is calculated risk, there is reward.  The rewards come in various packages including:
   • A deeply dedicated, motivated, and productive workforce. 
   • A clear, competitive advantage that can be articulated through corporate cost savings but also through product and process innovations throughout a company’s value chain. 
   • Shaping market perception and personifying business leadership by broadly considering and meaningfully addressing universal challenges we all face today. 
   • Delivering stronger financial performance, more consistently than that of non-purpose-driven businesses.  By one Ernst and Young study, purpose-driven companies enjoy a financial results premium of 42%.

TripleWin Advisory develops sustainable business cases and supports strategic decision-making for companies. In so doing, it provides businesses with continued profitability, relevancy, and longevity in the market. Learn more.        

The post Linking Purpose-Driven Leadership with Value Creation appeared first on Triple Win Advisory.

WHAT IS CORPORATE SUSTAINABILITY?

In the world of sustainability, as applied to corporate industry, we’re often met with varying approaches to and different definitions of business ‘sustainability’.  Companies can view it as:

• a mindset (i.e., longevity of a business model),
• an approach (i.e., promote human productivity and satisfaction, a signal to the market or key customers),
• an environmental imperative (e.g., prevent chemical pollution to water bodies and land, reverse climate change),
• a social equity issue (i.e., mitigate negative externalities, halt the export of pollutive practices to developing countries),
• a regulatory mandate (e.g., EHS laws, hazardous waste regulations),
• a strategic, competitive endeavor (e.g., eligibility to SRI and ESG financing, capturing valuable cost-savings)

or a combination of multiple above approaches.  Definitions can be tweaked.  Approaches can be multi-faceted.  But the goal for all companies is the same. 

THE BOTTOM LINE OF CORPORATE SUSTAINABILITY

The bottom line of corporate sustainability is to achieve net-zero carbon emissions[1] or as close to it as virtually possible.  Sustainability strategies, projects, works and measures with a ‘sustainability’ label that don’t contribute meaningfully to a net-zero approach to conducting business are just window-dressings:  pretty drapes that substantially add very little to the desirable outcome of managing indoor temperatures to outside solar rays.   

EVOLUTIONS OF CORPORATE SUSTAINABILITY

This leads us to how companies can go about working towards sustainable outcomes.  We call it the Evolution of Corporate Sustainability.  Most existing companies were established without a primacy on sustainable operation.  An evolution means that organizations have identified the need to transform from one state to another through a process of change. The impacts from climate change both direct (e.g., material costs, human productivity, brand reputation) and indirect (e.g., cost of energy, extreme weather disruptions to supply chain and economies) are compelling catalysts for business transformation.  Evolution also implies a process of learning, measuring, analyzing, refining and re-applying a more refined set of metrics within a company’s totality of operations – whether owned or influenced – that reinforce the end goal of net-zero emissions.  Every company starts somewhere.

CSR-FOCUSED SUSTAINABILITY

Often it’s at the Corporate Social Responsibility level where a company knows it should value and support the community in which it resides and make a positive impact on those constituents, often through fund-raising, community give-back and engagement programs, and specifically-aimed investments through corporate foundations.  These activities while positive and impactful, fall outside the scope of a company’s core operations and are not aligned with a business’ strategic long-term goals.  Ecosystem impacts from business operations and that of its most direct key stakeholders – employees – are not fundamentally addressed. In terms of measuring corporate CSR activities, the metrics include the number of volunteer hours dedicated to CSR work, financial dollars invested, and percent of human engagement from the company’s workforce, to name a few.  What is absent are metrics involving carbon emission contributions.  Any company can pursue a CSR strategy.  Reporting the results from it are non-uniform, non-comparable within sectors and across industries, and can be both arbitrary and rose-tinted.

STAKEHOLDER-COMMITTED SUSTAINABILITY

Filing and operating as a benefit corporation or registering as a certified B (“B” for Benefit) Corporation with B Lab are nice-to-haves but not altogether necessary.  A case can be made that the filing and reporting requirements of each create redundant work internally for a corporate sustainability team.  Both designations should be seen as a type of market “warranty”, a status that is pursued voluntarily by a business to signal to both internal and external stakeholders alike, that yes, in fact, it desires to pursue environmental stewardship and social equity alongside profit.  Registering (or re-registering) as a Benefit Corporation cannot be completed in all states.  Thirty-four states (including the District of Columbia) have ratified legislation while six more are reviewing language around the business designation. 

The only “requirement” of becoming a state-registered benefit corporation is that the company commits to self-assess its positive impacts both environmentally and socially.  Companies are suggested to follow third-party standards and guidelines from one of four third-party entities including B Lab, Benefit Corporations for Good, Green America, and The Global Reporting Initiative (GRI).  If a company decides to certify as a B Corporation, then it must submit to the organization’s third-party sustainable verification process – a B Impact Assessment (BIA) which is a standardized form that allows B Lab to rank the quality and level of a company’s commitment to environmental and social issues.  Out of the two stakeholder-committed designations, registering as a Certified B Corporation is the stronger commitment to business sustainability practices.  The verification process is standardized, third-party assessed and is published within the public domain.

STANDARDIZED SUSTAINABILITY REPORTING

Companies that seek to standardize, benchmark, and increasingly commit – strategically, financially and both material and human resources – to the development of their sustainability measures across their business operations, often seek the gold standard in voluntary sustainability reporting.   That standard (or set of industry standards) is The Global Reporting Initiative (GRI), where nearly 70 percent of all sustainability reports uploaded into the GRI database globally, cite GRI or are GRI-standard compliant. Using a global reporting standard is the sine qua non in sustainability.  Eighty-five percent of companies in the S&P 500 Index published sustainability or corporate responsibility reports in 2017, and that number increases a couple percentage points each year.  Businesses that seek to benchmark their sustainability measures to their competitors and across industry use GRI Reporting.  Adopting sustainability standards to quantify and disclose material impacts of a company’s business operations allows for goal-setting, measurement, transparent communication while incenting continuous improvement.  Most importantly, committing to a standard reporting tool that is globally recognized, effectively demonstrates that a company is starting down the process of linking its strategic business objectives to sustainable practices in a forward-thinking, prioritized way. 

COMMITTED & MEASURABLE SUSTAINABILITY

Businesses of all types – large and small; local, regional and multi-national; public or private – must keep the key aim of corporate sustainability in mind:  to reduce their carbon footprint to something as close to net-zero emissions as possible.  This goal applies to both a company’s place of business(es) as well as to the entirety of its value chain, owned or influenced.  As companies gain a sophistication around their sustainability disclosures and continue to renew their focus on identifying, remediating and quantifying their successes, they have an opportunity to formally commit to globally-recognized carbon emission targets set by the Paris Climate Accord of 2015.  The Carbon Disclosure Project (CDP) supports businesses in this deep commitment to corporate sustainability by helping to develop the necessary carbon reduction performance metrics and supporting a standardized system of global disclosures.  This data, voluntarily reported and shared, supports strategic decision-making across a diverse set of ecosystem stakeholders including financial investors, businesses, and state and national policymakers.  Businesses that decide to disclose their carbon emissions to the CDP do so knowing that what is measured, gets met; what is reported, gets shared; and that one actor makes a collective many.  These forward-thinking companies intuitively understand that meeting the Paris Climate Accord Targets globally necessitates individual corporate commitments to actionable climate change mitigation replicated on a grand scale.   

STRATEGICALLY-EMBEDDED SUSTAINABLIITY

Strategically-embedded sustainability means that companies operate always with a sustainability mindset.  Strategic, long-term, prioritized decisions are filtered through a sustainability lens.  It also means that a business is or has transformed itself and operates differently from historical precedent:  always and ever towards a circular mode of designing, sourcing, manufacturing, selling, marketing, post-consumer product collecting, and material revalorizing. 

Strategically-embedded sustainability is the full monty of corporate sustainability:  a company has recognized its contribution to climate change; understands that global warming must be reversed; actions towards its immediate mitigation and reversal are imperative; and targets to reach a global carbon reduction goal are required.  There must be hand-raising leaders in the sustainability endeavor to pull, tug and persuade the laggards in industry of their mutual interest and responsibility.  Open, shared disclosures can have broad-reaching impacts. 

For companies that consistently strive to strategically-embed sustainability into the totality of their business operations (think:  Signify, Unilever), access to sustainably-minded capital and like-minded investors supportive of their business models drive a virtuous cycle of sustainable action and prioritization of climate change mitigation. 

Sustainability is a business imperative.  Full stop; no caveats.

Investors increasingly recognize that self-sustaining business practices that minimize or eliminate impacts to the environment and more broadly support social justice and equity, human wealth and health across global supply chains have long-term viability and are inherently more resilient to the current and future impacts of climate change.  So too, millennials and post-millennials refuse to work for or support businesses that pursue non-sustainable practices or produce environmentally-damaging products.  No doubt, the voices of GenY and Z will be heard and known across the broad social media universe.  Brand risk mitigation among consumer-centric companies should be top-of-mind. 

Sustainability makes smart business sense. 

SASB Reporting

Companies that use Sustainability Accounting Standards Board (SASB) reporting standards are seeking a standardized means of communicating financially-material sustainability information to the market and investors, present or desired.  SASB is fast becoming the U.S. financial reporting standard on material sustainability for U.S. public companies that are required to file with the Security and Exchange Commission (SEC).  The only caveat presently is that the financial markets continue to express frustration that U.S. companies are not disclosing sustainability measures sufficiently.  SASB states in its 2017 report that “by and large, companies continue to take a minimally compliant approach to sustainability disclosure, providing the market with information that is inadequate for making investment decisions”.

DJSI Submission

An effective argument can be made that submitting to the Dow Jones Sustainable Indices (DJSI), a partnership with RobecoSAM, and being selection to the top 10% by sector of companies submitting to its review, is a strong signal to the global capital markets, that 1) DJSI selected companies take their sustainability measures seriously and 2) the companies are good targets for fund investments with a social-environmental impact slant and/or commitment to climate change mitigation.  DJSI requires corporations to disclose their sustainability measures and provable sustainability performance on a detailed level.   The outcomes for a company’s submission to and selection by DJSI are manifold including:

• Greater company visibility to investors
• Better access to the capital markets
• An increased corporate market price
• Expected higher return for investors
• More assured corporate longevity

CIRCLING BACK: CORPORATE SUSTAINABILITY’S BOTTOM LINE

A company’s approach to sustainability must be sincere, methodical, strategic, prioritized, measurable and meet real-world, global targets of climate change mitigation.  That should be (and is) the goal of pursuing sustainability in business:  reaching net-zero carbon emissions.  Having a neutral impact on the environment and a net positive impact on human communities.  Full stop.

And it’s worth stating.  Let’s throw-away the guilt and indecision and just plain get started on the journey of corporate sustainability.  Its time has come.

TripleWin Advisory develops sustainable business cases and supports strategic decision-making for companies. In so doing, it provides businesses with continued profitability, relevancy, and longevity in the market. Learn more.        

[1] Net-zero emissions means reducing carbon dioxide and other greenhouse gas (GHG) emissions into the atmosphere from business operations to zero percent, through efficiency measures, renewable energy use, GHG offset strategies and carbon capture technologies. 

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Creating Respect in a Commoditized World

Kipp at Fishpeople Seafood (a.k.a. fishpeople) doesn’t feel fish gets the respect it deserves.  Fish is a globally-supplied, commoditized product mostly sold in the U.S. market without much distinction to how it is sourced, its level of freshness or differentiation in the type of species caught and sold.  And therein lies the challenge and opportunity fishpeople is pursuing with its fledgling consumer product goods company that embeds a sustainability mind-set into every part of its supply chain. 

Transparency Builds Inherent Value

The seven-year old, $6 million in revenue company wants to assign the same level of value and discernment to fish as end-consumers apply to their choice of chocolate, wine and coffee. But what does that mean exactly?  Kipp gives the example of how coffee went from a highly commoditized, low-cost, little differentiated product (think:  Folgers) to one deeply diversified by price and quality.  What was the catalyst for coffee and its derivative, coffee beans, to acquire value where there was none before?  The answer:  Starbucks.  The company shown a bright light into the formerly opaque and unknown processes of where coffee beans were sourced, picked, ripened, milled and roasted.  It was in this deliberate act of disseminating knowledge of the origins of coffee beans and the farmers that planted and tended the crops that we as consumers began to care about the people, the places and the processes that drove our value in the product.  Valuable products are perceived to have higher quality.  And with quality differentiation, product prices can be assigned accordingly.

Learned Lessons in Coffee, Chocolate and Wine

Humans have consumed chocolate for 2,000 years and wine for more than double that time.  And we know a lot about both.  Artisanal chocolate commands a hefty premium to that of say, a Hersey’s bar.  It does so because consumers have been actively educated in the importance of where cacao beans are sourced, which countries around the globe have better growing seasons and soils, what type of tasting notes are imbued in the chocolate from specific regions, how the chocolate batches are blended, conched and tempered.  The process by which cacao beans become a tasty chocolate bar are articulated with loving prose to consumers in a persuasive campaign to convince customers that high quality chocolate deserves a higher price tag.  A once commodity product becomes a decidedly artisanal one.  Knowledge dissemination is the mechanism. 

Premium wine follows a similar arc to that of coffee and chocolate.  The educated consumer knows more than just a thing or two about which regions of the world produce quality wines.  Quality is dependent on the types of grapes grown, the age of the vines, a region’s terrior, the historical expertise of the family growers, and the like.  You get the point.  With knowledge comes a commitment to upholding value.  And bingo, a once commoditized product is differentiated by perceived value and quality and price segmented accordingly.

Traceability Opens the Supply Chain Kimono

At fishpeople, the mechanism to build consumer knowledge of the fish industry – how fish is sourced, where the fish come from, what species are harvested, and whether those species are protected or sustainably raised – is through the use of traceability tags.  These “tags” are seven-digit codes on the packaging of all fishpeople products, that allow a consumer to learn details about how that product was made.  Details about the fishermen, the species of fish, where the fish was caught and the attributes of a particular species (e.g., river or ocean-dweller, fatty or lean, wild or fresh, anti-biotic free or not).  Fishpeople provides its customers with an education and not solely to justify higher prices for its products. Knowledge drives value.  Particularly, people’s value for the worth of fish.   For fishpeople, that knowledge supports its broader sustainability ideals:  to deliver fresh, quality fish from sustainable fisheries that support marine coastal communities and living wage incomes. 

Sustainability at Every Point in the Supply Chain

Fish protein is a necessary form of nutrition and health for billions across the globe.  Unfortunately, most ocean fisheries are woefully over-fished.   Sustainable management of both ocean and freshwater fisheries are critically important today.  How fish is sourced is important, which means:  who is sourcing it, from which oceans and freshwater systems, how quickly does the fish get to market to be sold and consumed, and is the fish you see in your local grocer a species that is endangered or in abundance?  We often possess little knowledge of the above questions.  And trying to find out some of the more basic questions (e.g. species, freshness, sustainably-caught) that can inform our decision-making can be both confusing and inconsistent.  With all this unnecessary obfuscation, how can we accurately value the prices assigned to fish sold in markets?  Kipp believes we can’t without the fore-knowledge of how fish is raised and handled, and we won’t without broader adoption of supply-chain traceability in the fishing industry.   

The Path to ‘Value-Added Quality Economics’

Most of us don’t really know how many species there are in a fish category and even more crucial, which are of higher quality (i.e., tastier and more nutritious).  Kip believes this last point is important.  He calls it “lazy” to reference a piece of fish, salmon or tuna.  Lazy in that there are seven species of Pacific and one Atlantic salmon. For tuna, there are more than a dozen species worldwide.  For fishpeople, this is the challenge it seeks to confront and defeat with its twin strategy of holding steadfast to its principles of providing transparency (i.e., everything it does is in service of sustainability) and traceability (i.e., shining a clear light on the company’s supply chain) to how its fish is sourced, raised, handled, packaged, and brought to market.  In Kipp’s words, he wants “to move the industry from commodity to premium value-added quality economics”.  And by de-commoditizing its fish products and that of the broader fish food market, fishpeople’s end goals are to a) responsibly source sustainable fish species, b) produce fish meals that are simply-made, nutritious and delicious, and c) provide fishermen living wages and marine communities with stable economies.  Kipp trusts that people will see the value in this strategy and they will speak with their wallets.  For fishpeople, knowledge is the key that bridges its mission to a fully-realized vision.    

TripleWin Advisory develops sustainable business cases and supports strategic decision-making for companies. In so doing, it provides businesses with continued profitability, relevancy, and longevity in the market. Learn more.        

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We have all seen or experienced innovations based on the science of blending biology with technology.  Two of the best-known examples of the science of studying nature to make more effective products for man’s use include:

• Speedo’s sharkskin swimwear or full-body LZR suit:  proudly displayed on the svelte bodies of 2008 Olympic swimmers.  Speedo’s designers studied the performance properties of the “dermal denticles” of the outer surface of sharks, that were found to create a low-pressure zone when sharks were in motion, effectively pulling the shark forward while reducing water drag.  And guess what, it worked.  Speedo reported that 98 percent of the medals won in that Olympics were from swimmers wearing their LZR (pronounced Laser) swimsuits.

• Japanese bullet trains designed from Kingfisher birds’ beaks:  engineers faced a problem with their upgraded high-speed bullet trains as they entered tunnels to pick-up passengers on the waiting platforms:  shock waves known as “tunnel boom” were extremely loud but more critically, caused structural damage.  Looking to the Kingfisher bird’s beak, engineers gave the bullet trains a more aerodynamic, streamlined nose that allowed the trains to reach higher speeds, consume less energy, and most importantly, avoid the disruptive sonic splash. 

What is Biomimicry ?

The study of nature to guide the designs of human invention is called Biomimicry.  The idea behind biomimetics has been around for centuries but the term biomimicry was coined and popularized a little over 20 years ago by the scientist and author, Janine Benyus.  She defined biomimicry as a “new science that studies nature’s models and then imitates or takes inspiration from these designs and processes to solve human problems.” 

The Usefulness of Biomimicry

Looking back upon the two examples of biomimicry design above, we can say that the products developed did indeed solve timely problems, one more consequential than the other.  It is arguable whether human invention is needed to catalyze elite swimmers to swim faster.  And in fact, Speedo’s LZR suits were banned from use after the 2008 Olympics. 

The newly engineered bullet trains solved a problem needing a functional fix:  transporting tens of millions of daily commuters to and from work smoothly and without catastrophic disruption.  All good and yet, the question arises:  can the concept and application of biomimicry do more than design high-performing products and machines?  Can it solve industrial problems with sustainable solutions?  And the answer may very well be at the tip of our fingertips, or better said, held between our thumb and pointer-fingers like that of a dandelion flower, waiting for us to give it the proverbial blow so that it’s seeds whisk off in all directions to populate in distant corners and opportune fields. 

Bolt Threads: A BioTechnology Company Using Biomimicry at Scale

Biomimicry has come a long way from its first inception to be a tool to make things more sustainable.  The Biomimicry Institute offers a more refined definition to the one first proffered by Benyus.  The institute defines biomimicry as “an approach to innovation that seeks sustainable solutions to human challenges by emulating nature’s time-tested patterns and strategies.”  Many industries can and have benefitted from this study of nature-as-solution approach including buildings, wind turbine manufacturers, hospitals and healthcare, and agriculture.  One company that is applying learnings from biomimicry in textile manufacturing is Bolt Threads.

Bolt Threads is in its ninth year of making synthetic spider silk in a lab, with the application of the silk to be the raw source material for making textile goods.  Think:  hats, scarves, neckties, and shirts. The company’s co-founder and CEO, Dan Widmaier, who holds his doctorate in Chemistry and Chemical Biology, began secreting spider silk proteins in a university lab in an effort to create synthetic material from the process.  Bolt Threads was born from this initial work.  Bolt Threads “brews” synthetic silk in a lab using DNA sequences (or proteins) from spiders.  Those protein sequences are put into a proprietary yeast brew, that is fed to grow at a fast rate (as yeast is want to do) in steel tanks.  From there, the silk mixture is centrifuged, purified into a powder, mixed with a solvent and made into a gooey liquid of silk similar in texture to glue.  From there it is extruded through a pipe with holes to make strands of synthetic silk that is then woven into a raw fiber, ultimately to be used to make apparel products.  Bolt Threads has named its biomimicry source fiber, MicroSilk, which is a combined reference to both biology and nature.

Bolt Threads has been working hard to refine its technology, stabilize the process of making its lab silk, and commercialize its textile products. Respectable strides have been made over the last year.  The company acquired Best Made Co. in 2017 in a bid to allow it to scale its production and directly reach a consumer audience for outdoor apparel products. That same year, 100 beanies made with 40% Microsilk and 50 limited-edition neckties from 100% silk were sold to the masses. Both products were extremely limited-edition.  Bolt Threads also has a strategic relationship with Stella McCartney, who provides the coolness factor to products made from synthetic silk. McCartney is expected to incorporate Microsilk into her 2019 high-end women’s clothing line, however, the number of product types and quantities have yet to be identified.  The company’s strategic partnership with Patagonia has languished to date, mainly due to the outdoor company’s volume requirements to meet its retail market needs.  Scale is the challenge Bolt Threads has yet to conquer.

Infusing a Market-Driven Industry with Scalable Sustainability

The promise of Bolt Threads is undeniable.  The company’s ability to shift the textile market away from its reliance on man-made petroleum-based fibers is both exciting and desperately needed. Synthetic silk[i], made from proteins and a mix of water, sugar and yeast, can be absorbed back into nature.  It is recyclable by design because its design is based on nature, even though its production takes place in a lab. The same cannot be said about polyester in all its various iterations.  Use of polyester in textiles exceeds that of cotton, making up more than 50 percent of fibers used in textile manufacturing globally.   And that volume is expected to grow another 10% by 2025.  Polyester, a polymer made from coal and petroleum, is incapable of bio-degrading.  It fills our landfills and finds its way into our oceans.  The opportunity Bolt Threads presents is the ability to scale the production and use of synthetic silk:  products made from it do not pollute the environment and more promising, could easily be remanufactured into “new” pieces of clothing and accessories or soft good items for the home. 

Amplifying Innovative Sustainability Solutions Through Open-Source Technology Sharing

Widmaier sees a way forward and away from a manufacturing model where inputs become waste after use.  He expresses the hope “that companies like…Bolt Threads will be seen as making sustainability more mainstream…”  Mainstreaming an idea, an innovation, and a process that solves human challenges with sustainable solutions requires scale, a broad scope, mass adoption, and affordable pricing.  Why are we necessarily relying on one company, Bolt Threads, to struggle tirelessly and somewhat slowly (at least in terms of market penetration) to bring a revolutionary product to market?  Why aren’t stalwart companies that are brand-forward, customer-centric, and richly endowed with untouchable R&D budgets, partnering with Bolt Threads in a strategic effort to help support and build this technology for a more rapid deployment in various sectors of the textile industry.  I am thinking here about the Nike’s, Adidas’ and Under Armour’s of the world who dominate performance athletic apparel worldwide.  How about companies such as The Gap, H&M, and Polo Ralph Lauren who hold sway over the spectrum of clothing from the discount to haute couture.  And think about all the carpeting that’s sold in the U.S. alone.  Wouldn’t a commercialized synthetic silk fiber be seen as a potentially enviable market opportunity for carpet manufacturers such as Shaw Industries, Mohawk Industries and Beaulieu of America?

The big idea here is to change the ‘business as usual’ way of approaching new innovation.  In the well-established, multi-national firms you have a “develop in secret” mentality; keep new technologies hidden behind closed-doors until its perfected and ready to wow the world.  But when we think about leading in a sustainable world, the industry of making products and the manufacturers within, of all sizes and strengths, must embrace the new philosophy of our times.  These we know:  the internet of things, the shared/sharing economy, open sourcing, the Cloud, and Blockchain to name the biggies.  In this new market paradigm, where the old is bumping up and seeking to embrace the new, companies must shed their proprietary methods toward creating innovation, and instead, take the leap of trust into the bath of open knowledge, shared incentives, leap-frogs in understanding, and parallel paths to mainstreaming innovative and sustainably-minded ideas.  This is how we get Bolt Threads and its recycle-by-design synthetic silk commercially-scaled and embedded into diverse sectors of industry that are just begging for its arrival, whether they know it consciously or not.        

TripleWin Advisory develops sustainable business cases and supports strategic decision-making for companies.  In so doing, it provides businesses with continued profitability, relevancy, and longevity in the market.  Learn more.

[i] The hope and goal of synthetic silk production is that it can be imbued with greater qualities than its natural counterpart, such as the ability for it to be easily washed, dyed, and convey UV protection.   

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A key function of a company’s Board of Directors is to assess the future direction and set the long-term strategy of an organization. Any leadership structure should include positive, goal-oriented, and progressive voices to reach the critical business objectives of maintaining healthy profits and ensuring the longevity of a business entity. These goals are best supported by the adoption of strategic corporate innovations that are sustainable in nature and optimize financial performance in an ever more uncertain and chaotic market environment.

Why Inclusion of External Stakeholders is Critical

Members of a corporate Board should ideally be external stakeholders: independent non-executive directors. This brings objectivity and non-emotional decision making to the Board. Board Directors should also be representative knowledge experts in their chosen fields and be able to apply system thinking to the complex global marketplace in which businesses operate today.

Creating Value for Your Business…and Society

One of the most important objectives of any for-profit company is to make money and maintain a certain rate of cash flow to fund its ongoing business and to build financial reserves for future investment and growth. What was true 40 years ago remains true with increasing urgency, “the underlying general objective of any corporation must be to create value for both society and the corporation.” That sentiment has often been viewed as quaint over the last four decades but it is increasingly relevant in today’s world of climate change impacts that disrupt business operations and render local and regional economies in-operable for days and weeks at a time.

Thinking Strategically about Corporate Sustainability is a Must, Not a Nice-to-Have

It is no longer good enough, sufficiently strategic or financially attractive to run a business with one primary goal in mind:  increasing stockholder wealth. It is critical that a company’s diverse set of stakeholder (both inside and outside of a company) objectives be identified, prioritized, and strategically developed.

Harvard Business Review  makes it clear a company must develop its own strategic philosophy, usually in coordination with an organization’s Board, CEO, and key stakeholders. “Strategy formulation is tough, demanding, and often unpopular work.”  And let’s be clear:  that business strategy must embed a sustainability mindset. Developing a corporate sustainability business case that weighs the pros and cons of pursuing three parallel objectives –  profitability, social equity, and mitigation of environmental impact – is challenging and complicated.  Yet, the urgent need for a sustainability strategy is clear; the payoff, tangible.  The formulation of a sustainable strategy provides manifold benefits to all sizes of organizations including greater access to capital, higher level of risk mitigation, and increased brand performance.

Developing High-Level Sustainable Business Strategies

“If a company lacks a strategy expressed in part in philosophical terms, its projection of the business’s future is not a strategic plan…only a financial forecast…” The quintessential role of the Board is to “fund strategies – not projects.” If your company isn’t creating strategies that address long-term challenges, it won’t survive the inevitable uncertainties it faces in a globalized, climate change-impacted marketplace.

Two Key Takeaways for C-Suite Executives

There are two main takeaways on which to digest and then act.  First, if your Board is not discussing how sustainability measures can be embedded into your organization’s products, business processes, codes of conduct, financial decision-making, and strategic leadership, they lack the necessary vision to guide a company.  Installing a non-executive director who is a sustainability knowledge expert on a corporate Board is a smart and advantageous next step.  Vision drives strategy.  Second, if your company has approached sustainability piece-meal with ad hoc projects and assigned oversight to entry-level managers, your corporate sustainability efforts to date, are woefully inadequate and wholly incomplete.  Development of a comprehensive business case that embeds corporate sustainability into a company’s long-term business goals ensures the required mix of executive buy-in, appropriately allocated resources and funds, and measureable targets to be defined.  A good strategy determines a successful plan.

TripleWin Advisory develops sustainable business plans to be embedded into the long-term strategic decision-making of a company.  In so doing, it provides businesses with continued profitability, relevancy, and longevity in the market.  Learn more.

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