Dec 21, 2016

9 Sustainable Business Stories That Shaped 2016

In 2015, the world pivoted in a historic way toward sustainability. Debates about climate change melted away. Every country committed to action in the form of the Paris Agreement. Even the Pope spoke to the issue, reminding us that we’re all connected. It was a productive 12 months, to say the least.

Then came 2016. Every year, I find big themes or specific company stories that I feel are impressive, important, or indicative of where the world is going. In 2016, two dwarf the rest: the election of Donald Trump and significant action on climate change. The context for sustainable business in 2017 may center on the competition between these two stories; that is, how will Trump and his team impact or impede progress on climate and other sustainability issues? So let’s focus on these two first, and then run quickly through seven other interesting stories.


1. Trump Shocked the World

It’s not yet clear what Trump’s election means for issues that impact companies’ efforts to manage environmental and social issues. Climate change, building a clean economy, reducing inequality and raising wages, providing health care to support general wellbeing — all are big unknowns now. The early signs from the Trump team are not promising, in my view. He wants to appoint as head of the EPA a man who denies climate change and led legal battles against the EPA. His pick for Labor Secretary is staunchly opposed to covering overtime pay or increasing minimum wages (something many leading companies have been doing on their own since 2014. His choice for Secretary of State is the CEO of ExxonMobil, a company that has, for decades, attacked climate science when it knew better. A leaked memo from the Trump transition team shows an intention to move away from the Paris agreement and almost all climate and clean economy action.
In response to Trump’s election and his statements doubting climate change, many countries that signed the Paris climate accords in 2015 made it clear they would power on (China in particular — see story number three, below). Former French president Nicolas Sarkozy even proposed taxing U.S. goods if the country pulled out the Paris agreement. And throwing his weight in, former New York Mayor Michael Bloomberg publicly declared that cities would fight on, with or without Trump. Finally, hundreds of companies signed the latest declaration from Ceres showing their support for Paris. This is all promising. For this and many other reasons, the sustainability journey in business will continue.
But given Trump’s likely stance, any global progress on climate will happen in spite of headwinds from the U.S. federal government. In the U.S., the action will have to move to states, cities, and the private sector. Businesses in particular will need to lead in a way they never have before — and they will.


2. Public and Private Sector Action on Climate Change Increased

For most of 2016, the world moved quickly on climate. I’ve already mentioned the historic Paris agreement, but there are more positive steps worth noting. With the support of chemical companies, more than 170 countries also agreed to phase out HFCs, the high global-warming-potential chemicals used in air-conditioners and refrigerators everywhere. The UN also agreed to slash emissions from the airline industry. Norway banned deforestation and both Norway and Germany moved toward banning fossil-fuel-powered cars. This week, Canada announced it would tax carbon nationally by 2018.
In the U.S., the Obama administration started to incorporate the “social cost of carbon” in decision-making and the Pentagon made climate change a military priority. President Obama, with his counterparts in Canada and Mexico, agreed to some aggressive regional targets on renewable energy and efficiency. At the state level, New Jersey passed a big new gas tax, and Oregon, Illinois, and California developed robust energy and climate policies. All of this will affect companies of all stripes.
Business itself wasn’t quiet on the climate front either. Many invested heavily in renewable energy (see number five on this list), and some big companies dove into policy debates this year. More than 100 companies called for action on the Clean Power Plan (Obama’s big move to reduce power sector emissions), with tech giants Apple, Google, Amazon, and Microsoft even filing a legal brief in support of the policy. Nine big brands with operations in Ohio publicly pressed the state to reinstate energy efficiency and renewable energy portfolio standards. Many previously quiet companies, like food giant General Mills, spoke out about how important it was to their business to tackle climate change.
Why all this progress? First, evidence of a radically altered climate system has become crystal clear. After 2015 shattered climate records, 2016 got even hotter and more extreme, creating weather events that brought physical destruction, massive economic costs, and loss of life. Second, the financial world is getting better at evaluating what’s at stake. The World Bank estimates that $158 trillion worth of assets are at risk from increased natural disasters. The London School of Economics tells us trillions of financial assets are also vulnerable. And in the U.S. alone, floods in Louisiana and North Carolina caused $10 to $20 billion in damage. 


3. China Stepped Up

While many countries accelerated their climate and clean economy work this year, China is a special case. Early in the year, China said it would halt new coal mine approvals, close 1,000 mines, increase wind and solar by 21% in 2016, and even eat less meat to control carbon emissions. But last month the country also indicated coal use would rise until 2020 (albeit at a slower rate than the growth of renewables). So it’s not totally clear where China’s emissions will head. But the country clearly wants to lead the world in the clean economy transition. Speaking from this year’s UN global climate meeting – which happened to coincide with the U.S. election — Chinese ministers sent a message to Trump that climate change is no hoax. Then China’s President Xi said he’ll be attending the annual bigwig gathering in Davos for the first time, with reports of China’s interest in filling trade gaps left by Brexit and possible leadership gaps on climate left by Trump.


4. Renewables Kept Growing and Getting Cheaper

Renewables have been trouncing fossil fuels for a few years as the costs of the newer technologies have dropped remarkably fast. The world record for cheapest solar plant was set in Mexico… and then broken within weeks in Dubai with a bid of 2.99 cents per kilowatt-hour. Countries with big investments in renewables are reaping the rewards. For four days in May, Portugal was 100% powered by renewables, and on a single windy day Denmark’s windfarms gave the country 140% of what it needed. The U.S. finally got into offshore wind near Rhode Island. In a subtle tipping point, the total global generating capacity from renewables passed coal this year.
As prices dropped, companies noticed, and corporate purchases and commitments to clean energy grew. Walmart set a 50% renewable target for 2025. In the last few weeks, Microsoft and Avery Dennison announced big purchases of clean power, and GM and Google said they’d target 100% renewable energy within a year. A growing number of companies signed the RE100 commitment to go for 100%. And in Nevada, both MGM and Caesars filed papers to stop purchasing power from their utility, NV Energy, because it doesn’t support renewables. New capital is still flowing to the clean tech — Bill Gates, Jeff Bezos, and some other business leaders just announced a $1 billion fund to invest in “next generation energy technologies.” All of this activity convinces me that Trump can’t stop the clean economy. 


5. Investors Focused on Climate, Sustainability, and Short-Termism

Larry Fink, the CEO of Blackrock — the world’s largest asset owner — followed up his 2015 letter to S&P 500 CEOs with another treatise against short-term focus. He disparaged the “quarterly earnings hysteria” and asked companies to submit long-term strategy plans and address environmental, social, and governance (ESG) issues. BlackRock also issued a “climate change warning,” telling investors to adapt their portfolios to fight global warming. Many banks heeded the advice, pulling funding from coal. The London School of Economics also estimated that climate change could slash trillions from financial asset values. Because of this economic and systemic risk, a high-powered task force from the G20’s Financial Stability Board issued important guidelines for companies to make climate-related disclosures. To help investors evaluate their holdings, Morningstar launched sustainability ratings for 20,000 funds, and 21 stock exchanges introduced sustainability reporting standards. Finally, to educate the next generation of analysts, the CFA exam will now include a focus on ESG issues.


6. Business Defended Employees’ and Customers’ Human Rights

Companies are getting more vocal on human rights issues for many reasons. For some, it’s about the commercial opportunity to appeal to a new or growing market of rights-focused consumers. Others want to attract and retain diverse talent. But in general, society is expecting companies to broaden their mission. In one survey, 78% of Americans agreed that “companies should take action to address important issues facing society.” Millennials feel even stronger. A global survey this year showed that 87% of Millennials around the world believe that “the success of business should be measured in terms of more than just its financial performance.” This generation — which will be 50% of the workforce by 2020 — seeks employers that share their values.
And so, after a divisive U.S. election, many CEOs felt the need to email employees, restating their commitment to diversity and inclusion. Earlier in the year, when Gov. Pat McCrory of North Carolina passed a bizarre law to control which bathroom transgender people use, many companies spoke up. The CEOs of dozens of big brands — including Alcoa, Apple, Bank of America, Citibank, IBM, Kellogg, Marriott, PwC, and Starbucks — signed an open letter to defend “protections for LGBT people.” Paypal and Deutsche Bank canceled plans to expand and hire in the state, and the NCAA actually relocated some championship events. (In an important side note, after costing the state $600 million in business, the law is widely credited for losing McCrory his reelection bid.)

 
7. More Evidence Emerged That Economies Can Grow Without Increasing Carbon Emissions

So far this century, more than 20 large countries, as well as 33 U.S. states, have “decoupled” GDP growth from GHGs. One energy hog, the IT sector, has managed to level off energy use in data centers. There’s serious talk again about “peak oil” — not of supply, but of demand.
We’re seeing a fundamental shift in our relationship with energy for many reasons, including the improving economics of efficiency and clean tech (see #5). But companies are also getting more systematic, strategic, and fun — yes fun — in slashing energy. More organizations are using some old tools like “treasure hunts” and reimagining them as “energy marathons” (26.2 days of innovation). Others are competing to slash energy use — see Hilton and Whole Foods energy teams go head-to-head in a streaming reality show.


8. Levi’s Shared What It Knows about Water

Big themes are great, but periodically a specific example of leadership seems worthy of extra attention. In this case, Levi’s had spent a decade identifying great ways to cut water use in the apparel value chain. Realizing that water issues are too big to tackle alone, Levi’s celebrated World Water Day this year by open sourcing its best practices in water management. In essence, the company decided to promote system change and even invited competitors to its innovation lab for the first time in its history.


9. The Circular Economy Inched Closer

With a growing population and ever-rising demand for resources, it’s becoming necessary to find ways to eliminate waste and reuse valuable materials endlessly. We’re seeing some interesting innovation in policy and business practice. Sweden is planning to offer tax breaks for fixing things instead of throwing them away, and six EU countries started a four-year project to help small and medium-size enterprises move to circular models.
A number of companies also made moves into this space. A supermarket opened in the UK filled with only food that would’ve been thrown out. IKEA is expanding its circular offerings like reselling used furniture and creating new products from leftover textiles. More than 25 companies in Minnesota, including 3M, Aveda, and Target, launched a circular initiative to share expertise. The Ellen MacArthur Foundation and Kering both created curricula in circular thinking for fashion and design students. And finally, the Closed Loop Fund, which invests in recycling infrastructure (using funds from some large retail and CPG brands), reported on substantial progress, including launching single stream recycling across Memphis.


What’s in Store for 2017?

Given how far off pundits and prognosticators were this year, I have to proceed with caution. Who really knows what a Trump presidency will bring to the U.S. and the world, or what the corporate sustainability agenda will look like with so much uncertainty?
I do believe companies will expand their horizons, looking more at systems, not just their operations and value chains. They will increasingly partner to tackle big global targets like the UN’s Sustainable Development goals. Demands for more transparency about how everything is made — from consumers, employees, investors, and other stakeholders — are unlikely to slow down. The food and agriculture sectors in particular will feel even more pressure to cut carbon and food waste and simplify ingredients.
And no matter who’s in charge politically, macro trends are hard to stop — a changing climate; increasing challenges around water and other resources; higher expectations of companies; rising concern about inequality and wages; and technological disruption from AI, machine learning, and autonomous everything. These trends will continue and companies will need to adapt — fast.

Source: https://hbr.org/2016/12/9-sustainable-business-stories-that-shaped-2016


Andrew Winston is the author, most recently, of The Big Pivot. He is also the co-author of the best-seller Green to Gold and the author of Green Recovery. He advises some of the world’s leading companies on how they can navigate and profit from environmental and social challenges. Follow him on Twitter @AndrewWinston.

Feb 1, 2016

G.E. to Phase Out CFL Bulbs

Just a few years ago, the compact fluorescent light was the go-to choice for customers seeking an inexpensive, energy-efficient replacement for the standard incandescent bulb. But, as the light quality of LEDs improved and their cost plummeted, manufacturers and retailers began shifting their efforts in that direction.
Now, the industrial giant General Electric is saying farewell to the compact fluorescent light, or CFL. The company said Monday that it would stop making and selling the bulbs in the United States by the end of the year.
“Now is the right time to transition from CFL to LED,” said John Strainic, chief operating officer of consumer and conventional lighting at GE Lighting. “There are so many choices that a consumer has for one socket in their home that it’s overwhelming. This will help simplify that.”
Compact fluorescents were the first big energy-saving alternative to standard incandescents, which no longer meet government standards for energy efficiency in the United States and many places abroad. But consumers complained about the harsh quality of light of the early models. They can also be slow to warm up and difficult to dim, and they contain trace amounts of mercury.
LEDs were more expensive, with bulbs often running $30, but the technology found fans who said they offered better light quality. Prices dropped steadily, falling well below $5 for a basic bulb last year, in part because of government regulations making it easier for them to qualify for generous discounts.
As a result, customers have been migrating toward LEDs. In 2014, LEDs made up about 5 percent of the American market, Mr. Strainic said. According to the National Electrical Manufacturers Association, LEDs reached 15 percent of bulb shipments in the third quarter of last year, a jump of more than 237 percent over the same quarter in 2014. Halogen dominates standard bulb shipments, the association reported, representing almost half of the total, followed by CFLs at about 27 percent, a share that is on the decline.
Retailers have also been moving away from CFLs, which will have a harder time qualifying for the Energy Star rating under regulations proposed for next year, Mr. Strainic said. Those include giants like Sam’s Club and Walmart, which have fewer CFL options on shelves, he said. Ikea abandoned CFLs and started carrying only LEDs last year.
For now, the General Electric move applies only in the United States. There has been wider acceptance of CFLs elsewhere, especially in Europe, Mexico and other parts of Latin America.

Source: http://www.nytimes.com/2016/02/02/business/energy-environment/ge-to-phase-out-cfl-light-bulbs.html?partner=rss&emc=rss&_r=0

Jan 3, 2016

Wind Power Spreads Through Turbines for Lease

TULLY, N.Y. — Three years ago, Ed Doody and his brothers, Kevin and Rich, installed a wind turbine at the dairy farm they operate here, looking to cut electric bills. They were so happy with the results that each got a turbine for his home, visible from the farm, which overlooks rolling hills and orchards.

“They are just the runningest little things you ever did see,” Kevin Doody said last month of the home turbines, standing near the red-and-white barns that house their 350 Holsteins. Since installing the turbine about a year ago, he said, his electric bill has essentially “gone to zero.”

The Doody brothers are but a few of the small-business owners and rural residents around the country who are beginning to turn to wind in their efforts to save money and embrace renewable energy. Although rooftop solar systems have spread rapidly throughout the country over the last eight years — spurred by providers offering home systems free — wind energy has generally remained the province of industrial-scale operations providing power to utilities and big businesses.
Photo
The Doody farm, with 350 Holsteins, is among the small businesses and rural residents turning to wind. Credit Shane Lavalette for The New York Times
But now, a start-up called United Wind is applying the rooftop solar model to wind, installing and maintaining systems at little to no upfront cost to the customer. As with the solar systems from companies like SolarCity and Sunrun, customers sign long-term agreements to buy the electricity the systems produce at prices set below those from their local utility. Most of the company’s customers, including the Doodys, are in rural areas like central and western New York, but the firm is rapidly expanding its reach.

The company, which was formed in 2013 in New York through the combination of a leading distributor of small turbines and a digital site-assessment business, has raised about $40 million in project financing — including $13.5 million announced in October from the NY Green Bank, a state-sponsored investment fund, and U.S. Bank — and signed about 125 leases. Executives said they were in talks for a significantly larger investment that would allow United Wind to develop about 1,000 more projects in the Midwest.

“The small-wind market was small — it hadn’t really taken off the way solar had,” said Russell Tencer, the chief executive, who founded the site-assessment company, Wind Analytics, in 2009. “What we realized was that with that intelligence and software we could offer that same type of one-stop-shop solution that solar has packaged to finance solar.”

Distributors have sold small and medium-size wind turbines for the last three decades. Their spread has been slow, although there are signs that may be changing. According to a report this year from Navigant Research, worldwide revenue from the turbines — defined as anything under 500 kilowatts — will grow to nearly $2.4 billion in 2023 from $1 billion in 2015, in part spurred by the development of the lease model. Still, the United States is expected to remain far behind leaders like Britain, China and Italy, with only $216 million in revenue by 2023.

Over the decades, the American market has waxed and waned, said Jennifer Jenkins, executive director of the Distributed Wind Energy Association, a trade group that focuses on wind energy that is generated and used on site. But the market has grown from something originally aimed at remote, off-grid and island communities to something that the group hopes can reach 30 gigawatts worth of installations by 2030, up from 906 megawatts, reflecting 74,000 turbines installed across the 50 states by the end of 2014, according to the Department of Energy.
Photo
Small-business owners and rural residents around the country are turning to wind in their efforts to save money and embrace renewable energy. Credit Shane Lavalette for The New York Times
Having recognizable companies like Honda, Walmart and Anheuser-Busch install wind turbines at highly visible facilities helps, making distributed wind a more mainstream symbol of green energy, Ms. Jenkins said. Turbines are also sprouting up on office buildings and at locations as diverse as Logan Airport in Boston, Lincoln Financial Field in Philadelphia and even at the Eiffel Tower, where two turbines are nestled.
But United Wind’s leasing approach is also a big part of reaching that goal. “I think they’re going to transform the market, and we’re going to be able to get to these potential numbers that we’ve been forecasting for a long time,” she said.
The finance community is beginning to see it the same way. New York’s Green Bank is supporting the company’s efforts with a $4 million loan to help finance construction because the business model seems viable.
“We only want to support those transaction types where we think there is a bridge to somewhere rather than a bridge to nowhere,” said Alfred Griffin, the bank’s president.
Toward that end, United Wind is going after a specific band of the market. The company has installed 10- to 100-kilowatt machines and focuses on rural farms, homes and small businesses with enough wind, space and demand for electricity to make the economics make sense, but where the likelihood of community opposition is low.
Photo
A wind turbine has cut the cost to run Ed Doody’s swimming pool and almost made a wood-burning boiler system unnecessary. Credit Shane Lavalette for The New York Times
The turbines are much smaller and, often mounted on open-lattice towers, can appear lighter than the behemoths typically used on large wind farms. Still, they can be noisy and create a visual intrusion on a landscape. The Doody brothers said they had heard little objection.
“We want to focus on these rural areas where it fits perfectly into the setting, and it’s not going to be like this suburban housing development where people can complain,” Mr. Tencer said.
Customers typically see savings of at least 10 percent over power provided by a public utility and, as with solar leases, can save even more if they prepay all or part of their contract to avoid the annual rate increases, 1.9 percent in United Wind’s contracts. In all, a typical homeowner will save $20,000 and a typical farm $200,000 over the life of the lease, generally 20 years.
The Doodys, who did not want to offer specifics on their savings, said the installations had proved successful, covering two-thirds of the power needed to run their twice-daily milking operation and producing even more electricity than anticipated for the farm and their homes. Rather than send the excess back to the utility for a small fee — the Doodys say they earn about 4 cents per kilowatt-hour but pay 14 cents to buy power — Kevin Doody recently installed on-demand hot water to use it up. “I just didn’t like the thought of giving it back to them,” he said.
And the home turbine has cut the cost of running Ed Doody’s swimming pool and practically eliminated the need for his wood-burning boiler system.
“I’m getting older every year, and it just gets tougher” to cut wood and feed the machine, he said. “It’s dirty and messy, and you have to maintain it — every six or eight hours you have to go throw more wood in the thing. So that’s been an unseen advantage.”


Source: http://www.nytimes.com/2015/12/19/business/energy-environment/wind-power-spreads-through-turbines-for-lease.html?ref=energy-environment