Climate Change Archives

April 22, 2008

Do You Need to "Believe" in Climate Change?

[originally posted on huffingtonpost here]

Another Earth Day is here (and gone). It's probably trite to say, "Hey, every day is Earth Day, but I'll give it a go. Yes, we need to worry about Earth stuff every day, but not just because the planet is in peril — which is a pretty good reason. Think of it this way: the Earth is often metaphorically compared to our home and, as a fairly recent homeowner, I can tell you that your home needs care and feeding much, much more than once a year (my small lawn of non-pesticide laden, eco-cared-for grass and natural weeds grows really fast). It's a constant battle to keep a house running smoothly and providing for you and your family.

But let's take a business perspective. Minding your costs, taking care of your assets, figuring out and fulfilling customer needs — all part of green value creation — are best done consistently and aggressively, not just in big flashy moments of marketing excitement. The days of "plant a tree" Earth Day celebrations being the only thing companies do are over. But many execs still see green as a checkbox exercise, not a corporate mandate and core strategy — do a few things such as retrofitting a facility or putting together a CSR report and move on.

But the environmental work we have ahead of us will be hard and ongoing. Luckily, it should get easier over time. Like the "flywheel" analogy from the bestseller Good to Great, you keep pushing away, and you start to get some real momentum.

All this relates to a question I've been struggling with lately: Does it matter if a company or its execs believe in climate change and other environmental imperatives? What got me started on this weeks ago was GM Vice Chairman Bob Lutz' comment that "global warming is a crock of s***." And at nearly every talk I give on green business, people at all levels in companies from CEOs down inform me that climate change is not real.

My approach in these moments has generally been to stay quiet or point out that it doesn't really matter whether you believe it or not, as long as you buy that going green is good for business. If you're still pursuing green value through, say, eco-efficiency or product innovation, then who cares what you believe. This is basically what Lutz went on to say after his more colorful remarks ("My thoughts on what has or hasn't been the cause of climate change have nothing to do with the decisions I make to advance the cause of General Motors"). This general idea that you don't really need the first half of the Green Wave (made up of natural forces/pressures and stakeholders), is a key point my co-author and I make in our book Green to Gold.

But I'm beginning to wonder.

Yes, in the short run, you can go down a profitable green path with the conviction that if enough of your stakeholders care, it's good for business. But what about in the longer-run, as the excitement that's swept the business world quiets down and we have to make this new green way of doing business work?

Innovation is hard. Creating new products and services and finding new markets for them is hard. Handling what may be a permanent rise in the cost of all commodities and thus the cost of doing business is extremely hard. Won't all these pursuits go a lot easier if there's a bit more on the line than "well, we just have to do this because our competitors are doing it and customers are asking for it"? Won't employees drive harder if they and their bosses believe the underpinnings of why it's good for business? When Shell CEO Jeroen van der Veer said recently that dealing with climate change "will be hard work and there is little time," I believe his employees appreciated the blunt honesty and could set their nose to the flywheel/grindstone.

So does belief matter? I don't have the answer, but I have my suspicions. The now oft-told green business success story of the Toyota Prius still speaks volumes — the company set out to make an environmental car. It wasn't just an efficiency pursuit, but a real belief that the 21st century needed a form of transportation that reduced environmental burden. Going forward, GM may have trouble matching Toyota's innovations if attitudes remain so different.

In the end, doesn't it hurt morale, creativity, and productivity to hear your boss say one of the biggest drivers for action is a crock?

June 21, 2008

Free Market Double-Talk

[First published on Huffington Post]

The U.S. Senate's latest attempt at tackling climate change, the Warner-Lieberman bill, went down this month...again. The complaints of the opponents ranged from fear of higher energy prices to concerns about how the government will use the money collected when permits to emit carbon are sold. But the biggest concern seemed to be the bill's scale and supposed lack of forethought about how it will affect the economy.

Granted, enacting a giant government initiative with no real planning and no consideration for those hurt by it isn't just for invading countries. But how much of an intrusion on the economy is cap-and-trade? It's a fair question and vital to answer since even most critics admit that we will pass something under the next President (given statements made by both Senators McCain and Obama).

If we don't understand the concerns of the few, strong voices that helped sink the bill, we'll never make 60 Senators happy and get a good piece of legislation passed. The usual suspects - the conservative media (often the Wall Street Journal on this topic) and Republican Senators - have focused on the trauma the bill would cause Americans.

Let's look at their attack points.

First, energy prices will likely rise, a regressive impact. The loony Senator Inhofe - who claims global warming is a "hoax" without explaining why thousands of scientists would be in on the big con - is now lamenting a "tax on the poor" (it's nice to see the Senator worrying about those living paycheck to paycheck). The GAO did estimate that gas prices would rise 52 2030. Two cents more per year, compared to the price increases we're already seeing from normal market forces and oil supply constraints, is not very impressive. Of course for many people, even that much is financially challenging, which is why lawmakers wanted billions sent to those hurt the most. Confusingly, the critics decried this plan as well.

So, the second line of attack. Dripping with sarcasm, the conservative press decried the hundreds of billions that will go to relief for the poor, payments to fossil-fuel industries, investments in alternative energy, and international aid. If pricing carbon causes some pain, then getting money into the hands of the people most affected, helping carbon-dependent industries "transition," and investing in alternative energy makes political and economic sense. The last, foreign aid, is about rich countries helping poorer countries adapt to the effects of treating the atmosphere as a dumping ground for carbon for decades. These spending priorities are dead on and actually answer some of criticisms as soon as they're out of skeptics' mouths.

Finally, the third major line of attack: the larger concern about messing with the economy. The whole point of cap-and-trade is to fix the largest market failure the world's ever seen - the current pricing of carbon and its impacts at zero. So of course it's an intrusion, but it uses free market forces to solve the problem. Free markets are wonderful, but there is no such thing as a large-scale market with nobody minding the store. Would the stock market work without the SEC, FASB, and some governing rules? To be fair, there's a better way to deal with the externality of carbon - tax it. But just imagine what conservative critics would say about a new tax. So cap-and-trade is the next best thing. We set the total amount of pollution, step back, and let companies compete to get rid of carbon - the cheapest, most innovative solutions win. Isn't that free enterprise at its best?

The critics are also upset that the government will auction off some of the permits instead of giving them all away. This complaint confuses me: selling the permits is much more hands-off than the government picking segments of the economy that "deserve" to pollute. In fact, not auctioning the permits penalizes the companies that already cut carbon (like DuPont, which has reduced emissions 75%). Punishing the most forward-thinking, innovative, and leanest businesses in our economy is a horrible idea. And it certainly doesn't help our national competitiveness any either.

In total, all of the opposition smacks of being ticked off about losing the "debate" on the science of climate change. Aside from ignoring that we're running out of options, they're suggesting that the shift we need will only cause harm, disregarding the companies that will make billions selling solutions to our problems (like GE or Johnson Controls) and ignoring the strong research and analysis from non-partisan sources like Lord Nicholas Stern from the London School of Economics. The Stern Review concluded that taking action on climate change is much less expensive than the damage to world economies from not taking action.

Cap-and-trade is a great way to start. But it seems that critics don't actually love, or understand, free markets as much as they say they do.

October 14, 2008

Do "Quality" Carbon Offsets Exist?

Everybody wants to reduce their carbon footprint these days. But many companies have looked to the quick fix of buying carbon offsets. While this practice may slow down as the recession continues, the debate will continue to rage about what makes a quality offset, and there's the rub.

Ideally, you want something that is measurable and legitimately reduces the amount of carbon going into the atmosphere (especially during tough times -- why spend money on something that may not accomplish what you hoped?). A number of problems crop up, though, particularly "additionality," which boils down to whether that project -- saving some land, building a wind farm, capturing methane from a pig farm, and so on -- would have happened anyway. You don't want to pay people for things they're already doing.

A group of NGOs has recently formed the Offset Quality Initiative to tackle this thorny question - that answer is still in the works. Environmental Defense Fund (EDF) went a step further and just launched a new resource for companies or individuals looking for high quality projects to invest in today. Their Carbon Offset Project List is fascinating. They've selected only 12 projects, far less than other respectable lists, such as the "Gold Standard Registry," backed by the World Wildlife Fund and the UNDP, which lists 200 projects around the world. So EDF must have narrower criteria.

So what's really interesting is what projects they do have. Except for one project, all are focused on methane capture, and 10 of the 12 are landfill projects (the lone holdout is a truck stop electrification project so truckers don't have to idle - very cool). Many common options are not on the list - wind, solar, retrofit projects (basically changing lightbulbs), planting trees, and so on.

I asked EDF why the methane obsession. In short, they were a) looking at the longest-standing projects with solid track records and and b) focusing on measurable and verifiable proof of reductions. They felt that "grid-connected" projects such as wind power represented a different category of renewable projects, not offsets exactly.

All of this debate demonstrates how hard it is to really define an offset...which makes claiming credit for it and declaring yourself "carbon-neutral" very dicey. Reducing carbon to "zero" is the ultimate goal here, but there are no shortcuts.

Companies can tackle this problem with a basic hierarchy of priorities. Much like the "reduce, reuse, recycle" mantra for waste, we need a simple plan for addressing carbon in business. First, cut emissions directly through efficiency and smart redesign of processes and products (and this will reduce costs directly, a good thing in tight times). Second, buy renewable directly for your facilities, including solar, wind, geothermal and, yes, local landfill gas - whatever works in your region and climate. Then, as a last resort, look for quality offsets.

Some companies are following this prescription already. Dell recently announced that it hit its carbon-neutrality target (for its offices and employee travel). The company reduced emissions, bought direct renewable energy for its headquarters from a Waste Management landfill project, then made some investments in renewables elsewhere to offset the rest.

I'm searching for a catchy three-word slogan for this path. How about Eliminate energy waste, generate your own Electrons from renewables, and Equalize your emissions with offsets? Or Bring down energy use, Build your own, Buy offsets? (Clearly, it's not easy to come up with a Tom Friedman-esque shorthand for something...send me ideas...)

In the meantime, at least the information on what makes for a quality offset is getting better. Very smart people are exploring the problem, which will only get more acute as more carbon markets spring into being. When there's a price on a reduction, you can bet someone will want to define it. Nonetheless, start now by bringing your own emissions down and building your own renewables; these are cleaner options.

Because not creating carbon to begin with is the highest quality "offset" around.

This post first appeared at Harvard Business Online and at Huffington Post.

April 27, 2009

Is Bjorn Lomborg Dangerous or Helpful?

The beginning of this post is here, the rest is on Huffington Post here...

This weekend, the New York Times gave Bjorn Lomborg -- the self-proclaimed "skeptical environmentalist" -- more air time. Lomborg wrote an op-ed that railed against those who want to cut greenhouse gas emissions dramatically. He offered his opinion on a better solution: "make low-carbon alternatives like solar and wind energy competitive with old carbon sources."

As usual, Lomborg sets up a false straw-man to knock down. He says "we are often told that...we must cut emissions immediately and drastically." Then he worries that people just don't get that we actually need to make renewables cheaper. Really? So none of the major environmental NGOs, or country delegations to global climate negotiations, have thought of that? So to tackle obesity we shouldn't just talk about weight, but also about exercising more and eating right? So insightful...

Lomborg has a long habit of tilting at windmills that he mostly imagines. His most famous argument is that we shouldn't prioritize climate change over other pressing social priorities like poverty alleviation -- as if they're all separate. The poorest people in the world are energy poor and don't have access to clean water -- the two biggest environmental challenges of our time. He's always setting up false tradeoffs to establish his more "reaonsable" middleground.

I will say that one overarching aspect of his arguments is important. Of course we should constantly ask ourselves, "What's the cheapest way to solve that problem, and where should we allocate scarce resources?"...

More on HuffPo -- please go there to comment...

May 20, 2009

Why Business Leaders Need to Get Over Al Gore

[A new post on my Harvard Business column -- some interesting commentary there]

I saw an interesting piece by Michael Graham Richard on treehugger titled, "Let's Put This Meme to Rest: Global Warming — Al Gore" (thanks to Will Sarni for tweeting it to me). It seems like a perfectly obvious point, but one that I agree needs to be repeated. And it's a point that I've been making in subtle, and not-so-subtle ways, everywhere I can in recent months.

I speak to business people from a very wide range of sectors and quite often to groups that are self-identified as conservative. I find myself facing real skepticism on climate change (and real dislike of Mr. Gore). I don't really spend time debating or presenting the science, though. I just try to impress on business people to accept one irrefutable point: climate change is now a political and business reality, regardless of what you think about the scientific merits. (By the way, it is actually a reality reality also — see this unheralded story about some of the first climate refugees but never mind.)

Unfortunately, in the United States in particular, the discussion on climate change has gotten wrapped up in political affiliation. And that's due in large part to the role Al Gore has played. He's done more than anybody on the planet to raise awareness of this serious issue. But for many Americans who don't like Gore or his political party, his role as the unofficial spokesperson for climate change has tainted the discussion. It's something I understand, but wish people could get past. Why are we unable to separate the medium from the message? After all, Attila the Hun could give the Gore's Inconvenient Truth presentation and the information presented would still be true.

But at any rate, from a strategy perspective, none of this really matters — and that's what I'm consistently trying to convey to business people

See the rest of this column here

September 21, 2009

Why the Military Is Going Green

[This post originally appeared on Harvard Business Online here]

In recent months, which radical, tree-hugging group has upped the volume on pushing for action on climate change? I bet you wouldn't have guessed American military leaders. Apparently, the people standing on the proverbial (and actual) walls defending our freedoms are very concerned about the dangers our soldiers face in an uncertain, physically changing world. It's something that businesses need to pay attention to, since the military's top strategists are now getting involved in developing solutions that may well be useful to — or even critical to — individual companies' success.

Generals and admirals are now making the case that climate change is a threat to our national security. Changing regional climates, more natural disasters, and displaced peoples will force us to put troops in harm's way more frequently — and the military must be prepared.

For the leading thinking on climate and security, look no further than CNA Corporation, a think tank funded by the Pentagon, which has, in the words of the New York Times, spoken "ominously of climate change as a 'threat multiplier' that could lead to wide conflict over resources."

I recently spoke at an event in DC and sat at lunch with retired Vice Admiral Lee Gunn, the President of both CNA's Institute for Public Research and the American Security Project (ASP). In his powerful keynote address, Vice Admiral Gunn spoke about the risks global climate change presents to America. His view on the science was simple: "Some are still not convinced about the science on human-induced climate change — I am."

The Admiral laid out three large shifts in military practice and strategy that climate change will bring about:

1. Why the U.S. fights, gives aid, and responds to disasters: Natural disasters, water shortages, and the weakening of some states mean "we will deploy more often to more places."

2. How logistics patterns will change: One of our primary military bases in the Middle East, Diego Garcia in the Indian Ocean, is only a few feet above sea level. The physical shifts and the changes in force structure related to #1 and #2 will all be expensive.

3. What will happen to international relations: The loss of sea ice is changing commercial and military sea patterns. The Arctic represents a new area of resources for countries to potentially compete over (remember Russia planting a flag last year on the North Pole sea bed?).

[Please see the rest of the post here]

November 2, 2009

The U.S. Chamber of Commerce Is Hurting U.S. Competitiveness

What do Exelon, Pacific Gas & Electric, PNM Resources, Apple, and Nike all have in common? In the last month they all dropped out of the U.S. Chamber of Commerce over the group's stance on climate-change legislation.

Sadly, the Chamber's COO told the Wall Street Journal that these defections will not change the Chamber's misguided positions, including constant carping about the potential costs (almost always overstated) of climate change and calling for a mock "trial" on the science of climate change.

Here's why the Chamber is out to lunch. First, tackling climate change is good for business and improves the competitiveness of our industries and the country as a whole. And, oh, on a related note, the Chamber is increasingly out of step with its own members — because they do see how going green will help their businesses.

As so many companies already know, climate legislation will help our nation's businesses stay competitive on the global stage. But don't listen to me, listen to mega-venture capitalist John Doerr and GE's Jeff Immelt. The two staunch capitalists wrote a powerful op-ed in the Washington Post that laid out the series of crises we face: economic, climate, energy security, and now a "competitiveness crisis." As they put it, "this crisis is particularly evident in America's worldwide standing in the next great global industry, green technology."

Their evidence: One in ten of the world's biggest solar and wind companies are based in the U.S. We're falling behind China, Germany, and others fast. Their solution, in part: "Send a long-term signal that low-carbon energy is valuable. We must put a price on carbon and a cap on carbon emissions." With the right price signals, we invest, innovate, and move off of fossil fuels (and stop sending $700 billion every year in oil payments to countries that don't like us — but that's a separate story).

And with the right policy in place around the world, according to HSBC, climate change-related products and services will be a $2 trillion market by 2020. That's a big pie to compete for. But without the right price signals here in the U.S., we can't compete. It's as simple as that.

[See the rest of this post, and the always interesting comments whenever climate change comes up, here on Harvard Business Online]

November 5, 2009

Missing the SuperFreaking Point (and Ignoring the Business Case for Green)

Stephen Dubner and Steven Levitt's SuperFreakonomics has certainly gotten a lot of people worked up in short order. The point of contention is a chapter about global warming which makes the case that Al Gore and others are too worried about the climate problem because the only way to solve it is to convince people to "put aside their self interest and do the right thing even if it's personally costly."

The authors go on to explain their solution -- geoengineering -- which purportedly isn't going to require us to cut back on our energy use or rethink the way we do business. But what they have completely failed to address -- and what the (ahem) lively discussions on the topic have missed as well -- is what the benefits of tackling climate change might be, instead of just the costs.

The authors have missed a major economic issue: the process of shifting to a low-carbon economy has enormous upsides completely aside from the benefits to climate balance.

I'm not going to try and take apart their arguments or judge the soundness of their climate science as a whole; there are some others who are already doing a detailed job of that. If you like your climate discussions hot and sarcastic (which can be entertaining), see Joe Romm's posts on his Climate Progress blog. Or if you like the cool, dispassionate analysis, I'd recommend the Union of Concerned Scientists or the well-respected journalist Eric Pooley's take on how the authors -- who he says are friends of his -- "flunk" the science.

There's also been a fascinating back and forth which includes the authors and Nobel laureate economist Paul Krugman. In short, Krugman is not pleased and he lays out some devastating concerns about the mental exercise the authors have undertaken ("We're not talking about the ethics of sumo wrestling here; we're talking, quite possibly, about the fate of civilization. It's not a place to play snarky, contrarian games").

The brouhaha is truly unfortunate on many levels. It's not that having a discussion of geo-engineering is a bad thing -- we should explore and assess many options. But the real problem is that the authors of SuperFreakonomics -- and even the big critics who have gotten sucked into it -- seem to have taken too narrow a view of the problem. Although the authors clearly believe that there is too much climate-change hype, they seem to agree that there's a warming problem (or why propose a solution -- the main point of the chapter -- at all?). But the focus of the discussion is entirely on a way to counteract the effects of greenhouse gases, as if there are no other issues related to our reliance on fossil fuels.

Instead, let's just think about the business benefits of changing our products and processes to reduce carbon emissions, regardless of the atmospheric benefits. How will changing to a lower-carbon economy help companies? Well, there's real money involved here -- energy and other resources are getting fundamentally more expensive over time as demand around the world rises and supply gets harder to find. Oddly, the SuperFreakonomics authors acknowledge this Econ 101 supply problem in passing with the statement: "In just a few centuries, we will have burned up most of the fossil fuel that took 300 million make." So why wouldn't we want to move away from a declining resource?

Put really simply, it saves money to reduce greenhouse emissions. It makes businesses more competitive to use less energy and to help customers do the same. It also creates jobs in a wide range of industries that help build a low-carbon economy -- from the obvious solar panel builders and installers to the less sexy home weatherizers, electric vehicle manufacturers and mechanics, and building efficiency consultants and experts.

The countries and companies that decouple themselves from fossil fuels will slash their costs and increase profits mightily. In fact, as Robert Kennedy, Jr. pointed out in a speech recently, the countries that have already reduced their reliance on fossil fuels -- such as Iceland, with its geothermal energy, and Sweden, with a carbon tax driving down energy use as the country grew -- have made their economies richer and more stable. (Yes, Iceland then bet its wealth on bad investments at the heart of the financial crisis in 2008 and bankrupted itself, but that's another story.)

As many have repeatedly argued, we also place ourselves at great risk globally by continuing to pour money into oil markets. We send hundreds of billions of dollars a year to parts of the world that tend to include our enemies (and is a waste of money no matter whom it goes to). And we place ourselves at personal risk -- the National Academy of Sciences just estimated, conservatively, that fossil fuels cost $120 billion per year in health costs and cause 20,000 premature deaths (that's more than six 9/11s if you're counting).

So while we find new ways to pour attention on "contrarians" and have a debate that most of the rest of the world has already stopped having, we risk our health, fall further and further behind the countries we compete with (China and Germany, for example, in renewables), and become more indebted to countries that may not be friends.

Solving climate change is not really about asking people to hold hands and sing "Kumbaya," but about political will and making it easier for business to create the low-carbon solutions we all need. Regardless of the climate science, the benefits of action and the costs of inaction for business are astronomical -- and worth superfreaking out about.

[This post first appeared on Harvard Business Online and on HuffPo -- see the comments...]

November 25, 2009

It Certainly is an Impressive Hoax: Making the World's Glaciers Melt

The anger and energy of the climate skeptics is at a fever pitch lately. The breaking story that the Wall Street Journal loves so much is about one climate research center in the UK that may have been unwelcoming to contrary opinions. So the conspiracy theorists are all over this and are making the case that there's a global scientific hoax. I can't stomach diving into whether one research center in the entire world acted somewhat inappropriately to shut out opposing, angry views.

But I do always find the "debate" on warming totally surreal since you don't have to buy the complicated climate models to just look out the window (proverbially). Glaciers all over the world are melting, noticeably, and quickly.

See this little video and discussion of the decline in Himalyan ice (a water source supplying over a billion people) on Climate Progress here.

I'm unclear on what people think is going on. If you put a glass of ice water outside and the ice melts, you know it's warm out there. It's really not much more complicated than that.

And yet the anger at people who want to do something about this serious problem, and even (gasp) profit from the shift, continues to rise (I've even received hate mail for fairly innocuous commentary on how good it will be for business and national competitiveness to wean ourselves off of oil and carbon).

I prefer to think that the level of animosity is a sign that the debate really is fundamentally over. This is the death throes of an outdated perspective. Let's hope it dies quickly. Let the angry, bizarre commentary begin...

December 10, 2009

News Flash From Bjorn Lomborg and the WSJ: We Should Help Poor People

For some reason I can't understand, Mr. Skeptical Environmentalist Bjorn Lomborg keeps getting space in places like the Wall Street Journal and Time to peddle his drivel. The Journal has given Lomborg a weekly op-ed for about 6 weeks to talk about how we shouldn't really tackle climate change.

Here's how each of these weekly missives work. Lomborg picks out one person in a country to talk to and asks them how much they care about climate change. Yesterday, he told us that a very poor person living near Mt. Kilimanjaro doesn't care so much about melting glaciers, but cares more about education about HIV. Last week we learned that a very poor person living near Himalayan glaciers that are melting, which will create vast water and food shortages, also cares more about pressing daily issues of local poverty. Earlier, a very poor person living in Africa told Lomborg we should tackle malaria directly rather than take on climate change. Wow, these are real surprises.

Lomborg's sole purpose in life seems to be creating false arguments that nobody is really making and then knocking them down. In the malaria article, he makes it sound like all the government, NGO, and business work to battle climate change is intended solely to stop the spread of malaria (which may become more prevalent as warmer weather makes things more hospitable to mosquitoes at higher latitudes). So, he says, the potential investment of trillions of dollars to create cleaner, more efficient economies is an expensive solution for malaria. Treated bed-nets are much cheaper.

Well, yeah, no kidding, Bjorn.

As if anyone is saying that reducing carbon is just about malaria, or water supplies in Asia, or only any one of the many specific issues Lomborg splits up into little targets and compares to the whole (inflated) price tag. And, by the way, who said that tackling climate change is separate from helping the poorest among us? The issues are all integrally related and the poorest are being hit hardest by climate changes already. Lomborg always seems to be arguing against some phantom Birkenstock-wearing Greenpeace activist chained to the bulldozer of the 1970s.

The logic and arguments for decoupling our economies from carbon have evolved tremendously and include national competitiveness and job creation, healthier air, eliminating reliance on fuels from parts of the world that fund terror, and reducing dependence on volatilely-priced, and declining, resources that will raise the cost of doing business over time. This is why many important capitalists such as Jeff Immelt at GE (but not the US Chamber of Commerce of course) are making the business case for climate action.

You'll notice that none of these other reasons actually depend on believing fully in the science. And they make for more prosperous economies, which can help the poor the most. And guess what, we have to walk and chew gum at the same time -- we have to think holistically and tackle issues in a synchronized way.

But overall, what I really love is Bjorn Lomborg taking his argument for helping the poor to the skeptics of the world and going through the Wall Street Journal -- as if this is the crowd lining up to send development money to countries for food, water, and bed nets. Who is he speaking to?

Perhaps the real question here is this: What the heck is wrong with the Wall Street Journal? Today, they pick up Lomborg's arguments hook-line-and-sinker and offer an assemblage of greatest hits on not taking action. But yesterday was really hilarious.

They printed one op-ed -- in a series of daily, relentless lamenting about climate science -- laying out how climate skeptic bloggers (who almost all have no climatology or geology or any -ology background) have dismantled the idea that the actual measured data show an increase in GHG gases (the famous "hockey stick" chart) or any warming at all. Yet, in the same issue of the paper, the WSJ printed a truly helpful, excellent article looking at the main arguments/myths from the skeptics and comparing them to what the scientific community is really saying. The very first comparison is this one...

WHAT THE SKEPTICS SAY: The Earth isn't warming -- at least not to any extent that could actually be called a "crisis." And some data even suggest that the Earth is getting colder. The planet may have grown warmer over the course of the 20th century. But that warming stopped more than 10 years ago, and since 1998 the trend shows less warming or even cooling...

THE RESPONSE: It's true: By most measures, average temperatures this decade seem to have plateaued. But this isn't evidence of a cooling planet. Partly, it's a result of picking an exceptionally hot year -- 1998 -- as a starting point..the long-term trend since the mid-1970s shows warming per decade of about 0.18 degree Celsius (about 0.32 degree Fahrenheit)...The '00s still have been exceptionally warm: The 12 years from 1997 through 2008 were among the 15 warmest on record, and the decade itself was hotter than any previous 10-year period. While 2008 was the coolest year since 2000 -- a result of the cooling counterpart of El Niño -- it was still the 11th-warmest year on record. And 2009 is on track to be among the five warmest.

The Journal is as schizophrenic as the population I suppose, but the op-ed pages are totally out to lunch. We need good reporting now about what we know, and what we don't -- not ideological blustering. And we need to stop creating false tradeoffs between helping the poor and helping the planet, as if the poor -- and all of us -- don't live and breathe on that planet.

This first appeared on Huffington Post.

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December 14, 2009

Copenhagen and Beyond: 4 Scenarios for Business

Just a quick link to my monthly e-letter. This one is a bit different. I look at four (of many possible) scenarios for business after the big climate talks in Copenhagen. For each I give a quick rundown of what the world will look like and how business might need to respond.

Also, a note on my last post. I think many of you did not receive it as I changed the name of the RSS feed and didn't realize it would mess up delivery. I've changed it back until I figure out a better way to migrate the name. To sign up for my blog via email, click here.

So here's the link to my last post on some of the absurdity in the climate discussions lately.


January 22, 2010

Top 10 Green Business Stories of 2009

Happy New Year all (ok, I'm a bit delayed, but I entered the new year and promptly got really sick -- lost over a week in there). So let's start fresh now!

Anyway, I took a bit of time at the end of 2009 and early 2010, with a couple weeks' perspective, to think about the stories that really grabbed me in 2009. The top 10 is below, but see my brief write-ups and logic on each at my e-letter site here.

1) Copenhagen fails or does it?
2) The debate over climate science rages on (in the U.S. at least)
3) The EPA steps in
4) Wal-Mart keeps the pressure up (and saves the rainforest?)
5) Domino's employees deliver a new kind of openness.
6) IBM starts building a "smarter planet"
7) GM goes bankrupt
8) Some of our biggest capitalists get serious about carbon
9) China emerges as a green tech leader and the world's biggest emitter
10) The bottom of the pyramid becomes a source of innovation

And the bonus, theater of the absurd, wacky story...
10 1/2) Forbes names Exxon green company of the year

February 2, 2010

Adapting to a Warming World

[A post from December from Harvard Business that i forgot to post here...but it's still timely!]

No matter what happens in Copenhagen, or in the follow up meetings in Mexico and elsewhere, the world is warming. It's happening today, and even the majority of skeptics seem to agree on that point (often the debate is whether humans are behind it and how much money we should invest in "fixing" the problem). But the very real changes we're already seeing are prompting many in the climate-watching world to talk about not just reductions in emissions but "adaptation."

What used to be seen as a dirty and defeatist word is now a central discussion point, even in Copenhagen. The G77 (the developing world) is demanding significant aid from the rich countries not to help them combat climate change, but to help them adapt to it. Just a couple weeks ago, President Obama said he sensed some consensus around mobilizing "$10 billion a year by 2012 to support adaptation and mitigation in developing countries."

Given the cold reality of a warming planet, adaptation is now a strategic issue for countries and companies alike (whether or not they realize it). The changing climate can mean many things, but includes, according to an important report from the state of California, threats to ocean and coastal resources and land, water management challenges, major changes to agriculture, and stress on transportation and energy infrastructure. In California alone, $2.5 trillion of assets will be exposed to extreme weather and wildfires, costing many billions a year.

For companies the same basic issues apply. Specific industries, such as agriculture, face massive change. But all companies will find impacts up and down their value chains from weather, changing water availability, and temperature shifts. But just laying out doom scenarios and risks doesn't help much. So let's look at a couple of excellent (and short) reports on adaptation and business.

Some big institutional investors, with the guidance of the consultant Acclimatise, recently released "Managing the Unavoidable" (register for free to download it here or get the similar 2008 report on similar topic here). A few key findings struck me as dead on and important:

1. Climate change adaptation is starting to receive more management attention but management systems and processes are much less developed than those for climate change mitigation. Basically, most companies are not thinking about this, with a few exceptions — Coke comes to mind since it's been mapping water availability for years. But they are in the minority.

2. There appear to be significant weaknesses in companies' risk assessment processes. They say that "incremental changes are being under-emphasized" (we all focus on extreme weather events rather than 'creeping' changes) and "indirect impacts on business models are being neglected" (we focus on risks to our own fixed assets and haven't looked at supply chain disruptions). Meaning, even if you don't think you rely on water in an arid region, someone in your supply chain might.

3. Companies are more concerned about risks than opportunities. While it may seem cold to talk about how to profit from a warming planet, it's a reality that there will be winners in this. More importantly, we actually need companies to pursue solutions to greatly reduce human misery. And, yes, there will be profits.

And this brings me to the second report that's worth a look. "The New Adaptation Marketplace" from global NGO Oxfam lays out some helpful categories and sample companies that stand to profit from the changes to come. These include, water management (Pentair, Siemens), energy supply (GE), insurance (Swiss Re), climate change information and consulting services (ICF International), and of course agriculture projects (CH2M Hill).

On the last one, consider one of my clients, Bayer, which has a sizable crop sciences business. In its last annual report, Bayer identified drought-tolerant plants as a major investment opportunity. Clearly, the world needs to keep food volumes growing, even on a dryer, warmer planet. The companies that can solve this kind of problem will grow and win share.

Or think of the more extreme needs that might arise and the entrepreneurial opportunities. As some smart people have pointed out, cutting carbon won't be enough — we'll need to drag it out of the sky. Imagine what new technologies we'll need to do that.

From my conversations with Oxfam, clients, and other corporations, I can tell you that most organizations — including ones that already have products that will help with adaptation — are not yet thinking clearly about the risks and opportunities from climate change. Are you?

February 8, 2010

Failure at Copenhagen Doesn't Mean Businesses are Off the Hook

It's been a couple months since the global climate negotiations in Copenhagen. Whether you're a fan of a global cap on carbon emissions or not, it's important to think about what COP15's failure means (that a global agreement is going to be unlikely in the near term) and what it doesn't mean for business (that companies will be off the hook for tackling carbon emissions).

The climate negotiations brought together committed activists and world leaders, but led almost nowhere; instead, the gathering only highlighted and revealed some major structural hurdles getting in the way of a multinational agreement.

So it might seem that near-term regulatory or policy pressure on companies is unlikely. But actually there are some significant sub-national initiatives affecting business as usual that every company should know about. The pressure to measure, be transparent about, and reduce carbon is still on.

First, even without a global carbon trading system, other major multinational cap-and-trade systems are in place or in the works, including the EU's trading program, which has already been running for a few years. In North America, three separate carbon trading programs are in the process of setting regional caps covering states that include half the U.S. population (and provinces with three-quarters of Canada's). And city-level initiatives like the Mayors' Climate Protection Agreement are driving new local rules and fomenting competition among municipalities to cut emissions.

Second, within the U.S., the Environmental Protection Agency is not sitting idly by either. The series of climate-related rules that the powerful EPA has announced in the last year began with the National Climate Reporting Plan, which forces the largest 10,000 facilities in the country to measure and report their carbon emissions. This new system has much in common with the Toxics Release Inventory (TRI), a very public, and mandatory, database of toxic pollution by facility mandated by the federal government in the 1980s. TRI raised awareness within companies about their own footprints and drove aggressive efforts to reduce toxic pollution (along with cost and risk) that continue to this day. The same awakening about the carbon pollution companies cause -- and the financial costs of this form of waste -- even without an agreement from Copenhagen..

Going well beyond the regulated transparency of the reporting plan, the EPA recently declared greenhouse gases a public health threat. After a 2007 Supreme Court ruling that basically said CO2 could be regulated, the EPA's "endangerment finding" was no surprise. What's still unknown is what it will mean for business.

So far, virtually all the action -- from the regional trading schemes to new EPA rules -- has been aimed mainly at utilities and the biggest factories. What does all this activity mean for the average company?

The caps and efforts to reduce utility emissions could result in higher energy prices. Any business that, well, uses electricity will be affected. And the EPA's intentions for the longer term, while up in the air, are getting clearer. There is almost no chance that forced transparency for the big guys is the end of what the EPA will do. One glimmer of what will come: rules newly proposed in 2009 (in conjunction with the Department of Transportation) to reduce emissions from light-duty vehicles.

The bottom line is that business must still plan for rising restrictions on greenhouse gases by legislative means or by regulation. Despite the confounded state of international climate policy negotiations, companies will continue to face new mandates to measure, report, and reduce their carbon emissions.

[This post originally appeared on Harvard Business Review]

February 11, 2010

I'm Cold Today...So There's No Global Warming

What do you call a group that uses large snowstorms to deride the scientific evidence for climate change? Fox News I guess.

The absurdity of pointing out that there's snow in the winter -- in one part of the world mind you -- and using that to say that climate change is a hoax is breathtaking.

Especially when, at the same time, Vancouver is shipping in snow for the see, some places get more snow, some get less. That's weather, not climate.

Anyway, if you don't laugh, you cry. Only comedy can do justice to this insane line of logic.

The Daily Show points out that it's hot in Australia...

...and Colbert make the logical extension that when it's dark, the sun must have been destroyed.

March 10, 2010

Extreme Denial - My Karmic Purgatory Tonight

I must have done something wrong to someone today because I feel like I'm in some kind of surreal dream. The day started well with a great event hosted by Xerox in Dallas, talking sustainability with some leaders in the field. Then I ended up in two bizarre conversations during my travels home. This post is my personal therapy session to work it out.

First scene: In a car to the airport with a senior exec from IBM who basically leads the company's very successful "Smarter Planet" projects with customers (helping companies and cities with traffic flow, water management, carbon reduction, etc, etc).

The car service had provided us Ford Excursion -- from a sustainability event -- so that should've been my first tip on something being awry in the universe. Anyway, my colleague and I are talking about green, climate, the inexplicable vitriol and anger of climate deniers, Al Gore, etc. And the driver looks in the rear-view mirror and intiaties this conversation.

Driver: (Laughing): You guys don't believe this climate hoax do you?
Me: (Also laughing) Are you kidding? You're kidding right?
Driver: No, you know, it's a hoax
Me: (Not laughing) Why do you think that?
Driver: There's no evidence.
Me: Actually there's massive evidence, decades of it in fact [see a cool video on the basics of the incontrovertible science and physics of it all here...]
Driver: (Arrogantly) What about those climate emails? Those didn't happen?
Me: Yes, they happened, but they didn't disprove the decades of science.
Driver: They falsified records
Me: Actually they didn't. You should read some of the emails — they didn't falsify records at all.

End scene.

I really had to wonder what kind of small, tiny bubble of friends and media consumption you have to live in to find it astonishing to meet people who believe the 95% of scientists that see climate change as a real problem. Disagreeing with that view is one thing, but laughing at people like they're aliens is another and shows me just how divided we've become where we can surround ourselves with echo chambers...

On to conversation #2

I'm minding my own business on my flight home and right when we're getting ready to land (I almost made it), my seat-mate decides to strike up a conversation (it's always dangerous when they make you turn off electronics — so much silence to fill). Here's conversation #2.

Guy on Plane (I'll shorten that to GOP): What do you do?
Me: Work with companies on environmental issues, speak, write, consult, helping them with green business strategy (ya da ya da)
GOP: You mean recycling? (my first clue this was not going to go well most likely)
Me: No, a whole range of things from product development and innovation to c-level strategy to executive education and training what do you do?
GOP: I'm in the energy business. Private equity investments.
Me: Oh, what kind?
GOP: Oil, gas, coal — really diversified
Me: No renewables investments?
GOP: No, we don't invest in things that need government subsidies. Wind and solar and such are so uneconomic. [here's where I want to point to an article I just saw today about governments spending $500 billion on fossil fuel subsidies]
Me: Huh.
GOP: We do some work educating. We have a site, plantsneedCO2. We educate government people on what CO2 is. [It's here where I discovered that at 10pm after a long day I didn't even have the energy to ask, "oh, what does CO2 do?" — but check out the site. It's real and informs us that we need MORE CO2 not less.]

The conversation went on, but that's about all I can stomach to convey. I seem to have run out of steam to have a discussion with people who are this far gone. Bring on legitimate debate about what to do about the challenges we all face, or about the right policies and government action (or whether government or markets alone should do it). But people like this cannot have a real conversation. I just wonder what I did to deserve running into two in short order.

Thanks for listening. Deep breaths.

March 26, 2010

The Coming Policy Debate Even Uglier Than Health Care

We are coming out of our long, national nightmare. One of the dirtiest political fights in memory is over (sort of). But if you think the health care debate got rough, wait until President Obama and Congress turn to energy and climate -- which they're most definitely going to do.

You see, the worst claims about health care -- that it's a huge expansion of government power or, okay, let's say it, a plot to kill Grandma -- were never based in reality. What we've ended up with is actually a fairly mild bill, including access to coverage for millions more people and restrictions on the harshest practices of insurance companies. But it's not remotely a government program. The so-called "public option" did not even end up in the bill. There is no new giant government health care program beyond the existing giant government health care programs that people seem to love (like Medicare).

But putting a price on carbon and changing our energy mix over the next generation? That kind of law will be a large program by definition. To tackle an economic externality -- those pesky costs to society that are not currently priced into markets -- you do have to get muddy, and it most likely will entail an awful lot of mud-slinging.

So many of the complaints about a cap-and-trade law that we will hear over the coming months will be different from the health care claims in one very important aspect: they will actually have some basis in reality. A cap will affect the cost of all energy and thus all aspects of our lives. It will, for some, raise the cost of doing business. There will be winners and very definable losers in a new energy and carbon regime. When it comes right down to it, there will be blood.

Those who produce mainly fossil fuels could be in trouble. Businesses that operate inefficiently will see their costs rise -- fast -- compared to the competition's. Companies that stick with a portfolio of less sustainable, more energy-intensive products -- anywhere in their value chain -- will face life-threatening challenges (think GM in 2008 when oil hit $145 a barrel).

I believe strongly that decoupling our economy from carbon will benefit us greatly (regardless of the debate on climate change). The benefits include...

  • lowering our costs and increasing our profitability and resilience
  • costing much less than inaction on climate (see the famous Stern Report for the macro-economics on this)
  • reducing our reliance on fuels from parts of the world that fund our enemies
  • making us healthier as we reduce air pollutants
  • making us more competitive globally in the great race to multi-trillion-dollar environmental technology markets

Those impacts will not be felt equally across all aspects of the global economy. As we invest in efficiency, the sector that provides our energy will not fare well if it doesn't adapt. But the general position of organizations like the U.S. Chamber of Commerce that climate action is bad for business is absurd; these groups are placing the interests of one sector -- albeit a large and powerful one -- against the interests of all the others that will benefit from higher efficiency and lower operating costs.

So, in the place of death panels killing grandma, we'll have stories of how high energy prices will make heating homes in winter expensive... and, you guessed it, kill grandma. These arguments will ignore the countervailing levers of energy efficiency, retrofits, and weatherizing that will lower energy costs overall. And instead, we will hear (mostly made up) stories of businesses that will go under from new carbon laws.

But in this case, unlike with health care scare tactics, there will be some gems of truth hidden in the argument. So, yes, it will get ugly, but I have hope today that the forces of reason -- and the voices of the companies representing literally trillions in revenue that want climate action and more regulatory and market certainty -- can win out.

[This post originally appeared on Harvard Business Online]

April 1, 2010

Can Anyone Explain This Offshore Drilling Decision?

On the heels of one of the most active weeks in Presidential history, President Obama has confounded his supporters on the green side of the spectrum and opened up major areas of the U.S. coastline to offshore oil drilling.

The reaction to the decision has been in some cases predictable, but often surprising -- the New York Times came out in favor today. Of course key environmental leaders are dismayed (see this helpful, quality debate on the Times blog featuring varying perspectives from leading thinkers).

But I've been scratching my head and I'll admit that I'm completely confused by this decision, or at least by its timing. I can only come up with a few plausible reasons the President would support this, but none make real sense to me. Please comment and offer other reasons. Here are some lines of logic that some may support...

Answer One: President Obama, like all politicians, is 'in the pocket' of big oil and big industry.

This is way too easy an answer and is just part of the 'a pox on both your houses' attitude that's growing in the country. Yes, all politicians are beholden in different ways to different donor groups, but I don't think anybody can say with a straight face that Obama has tried to do just what some industries and donors want.

Answer Two: This is a political maneuver to buy Republican (and energy-state Dems) to the coming climate and energy bill debate.

This answer has the most currency right now. But I have two problems with its logic. First, the timing is odd. Why announce you're giving up one of your better negotiating positions before the real climate debate heats up? Why not hold that in reserve to get those votes you need? Or -- if can go out on a naive imaginary limb here -- why not hold it over the oil companies' heads to get some concessions -- like much higher fees for access, reduced subsidies elsewhere for fossil fuels, or demanding that they stop spending money on undermining climate science.

The timing just seems oddly nonstrategic, but, as environmental strategist Will Sarni pointed out (via a mini Facebook debate amongst my colleagues), it's just like the public option in health care -- Obama gave it up early on.

Second, and this should be obvious given the way health care went, Obama is not going to get any Republican votes on anything -- Senator McCain made that pretty clear by stating recently, "There will be no cooperation for the rest of the year." So maybe Obama is looking to shore up weak support for cap-and-trade in the Democratic ranks -- that makes some sense.

(As a funny side note on politics, has anyone noticed that he's opened up drilling pretty much around Republican stronghold red states? It's as if he's saying, "ok, you want a world of 'drill, baby, drill'? Then you can have it on your coastlines.")

Answer Three: The President and his Interior Secretary Ken Salazar actually believe this is a good decision and will help us achieve a measure of energy independence.

This answer actually seems the most believable to me, but it seems even more odd. I'm going to vastly oversimplify the economics and market structure of fuels here, but isn't oil fundamentally a fungible, global commodity? Meaning, even if we dig off our own shores, it's not exactly like it comes only to us. We're not operating a state-run oil company. If ExxonMobil digs up the oil, it basically enters the global market, continuing our addiction to oil and propping up what Thomas Friedman calls the "petro-dictators" around the world.

And even if the oil only came to our refineries and cars, there's nowhere near enough oil out there to make us independent anyway. True energy independence -- if that's even a worthy goal -- is only feasible through distributed generation, meaning a solar panel on every roof and wind turbine in every neighborhood. That's the energy shift we need to be moving toward as fast as possible, so I hope we use the rights and tax revenue to help support renewable energy.

In the end, I suppose this decision came from a bit of all three (and mostly the latter two). I welcome your comments on other plausible reasons, and please let me know if my Econ 101 assessment of global oil markets is fundamentally off-base.

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April 23, 2010

"There is No Planet B" and Other Things I Heard on Earth Day

Earth Day week is filled with announcements, events, and parties -- way too much for any one person to follow. I spent the week in DC, speaking at the EPA, moderating a plenary session at the Creating Climate Wealth event (from the Carbon War Room), and then ending my time with a White House reception for Earth Day -- which was awe-inspiring, frankly, as I had never been to the White House and that whole "leader of the free world thing" is fairly impressive.

I wanted to share some random snippets of interesting things I heard along the way...

- In preparing for the EPA speech, I read EPA Administrator Lisa Jackson's speech from last month at the National Press Club. Please read it. It's about innovation and a new kind of regulatory approach. Key quote: "I'm done with the false choice between the economy and the environment."

At the Creating Climate Wealth Conference...
- Kathleen Rogers, President of Earth Day Network: "the theme of the 40th anniversary of Earth Day is green business"

- Jigar Shah, CEO of the Carbon War Room: "Energy waste and illogical decision-making are huge wealth-creating opportunities", "Climate change is not a's not like the 70s where we ask, 'what are we willing to pay for clean water', but it's now 'What are we willing to do as a species [to build a better world] for our children and grandchildren?'"

The panel I moderated included Sir Richard Branson, former Costa Rican President Jose Maria Figueres, Waste Management CEO Dave Steiner, Pegasus Capital founder Craig Cogut, and Sara Greenstein, a top exec from Underwriters' Laboratories...

- Sir Branson: "Protecting natural resources and reducing carbon emissions are the greatest entrepreneurial opportunity in history"; "We can't rely on 'the end is nigh''s not nigh if we all work together to scale up low-carbon solutions"

- President Figueres: "There is no planet B!". In politics, he said, "The long-term perspective is the next election. The short-term is the next poll." In Costa Rica, he had a single term, by law, so he was able to pass a carbon tax in the 1990s! And on land-based carbon assets..."As long as the price of a tree standing is less than the price of a tree cut for timber, we won't save the forests."

- Dave Steiner described the 4.5 lbs of waste we each produce...every day. He said it's all carbon really as it breaks down into methane. Waste Management now powers 1 million homes with methane gas.

- Craig Cogut described one seemingly 'boring' business he's invested in that replaces shipping pallets with more sustainable alternatives. Some of the biggest food companies and retailers are signed on.

- Sara Greenstein explained the role UL plays in setting standards around the world (every U.S. home has 100+ UL labels on products). The company began by setting a standard for how light bulbs should work at the World's Fair they were introduced at (in the 1890s). In essence, it's going to be hard to launch and scale new technologies -- like a smart grid -- without some agreement on standards and certifications to ensure the whole system works

At the evening event at the conference, Branson spoke again, but we also heard from the former President of Ireland, Mary Robinson, about climate justice, as well as speeches from the founder of Earth Day, Dennis Hayes, and the Secretary of Commerce, Gary Locke. A couple gems...

- Dennis Hayes told us that a National Academy of Sciences study said there was enough evidence of climate change to start working on constraining CO2 1979. Sigh.

- Secretary Locke: "The Chinese are spending $9B a month on the clean economy...the longer we wait, the further behind we fall to China, Spain, Germany."

Another panel on the 2nd day of the conference featured Reed Hundt, former head of the FCC; Reid Detchon, VP of Energy and Climate at the UN Foundation; and Sunil Paul, a leading cleantech venture capitalist and founder of Spring Ventures. Some very interesting stats from them...

- Reed Hundt talked about the investment in and creation of mobile and data networks. Between 1997 and 2007, the private sector -- without any government money -- spend nearly $1 trillion. Hundt said that "if we spent the same amount in the same time period [on clean energy], we'd have a 100% clean grid." He also talked about the need for long-term low-cost financing (this is where govt can help) and his Coalition for Green Capital.

- Reid Detchon, talked about California's holding flat the energy use/person over years vs. the constant rise everywhere else in the country. The 'wedge' between those two trends "is expense and cost."

- Sunil Paul had a bunch of great stats on scale of the challenge to take billions of tons of carbon out of the atmosphere (and he launched the Gigaton Throwdown to tackle the problem). By his calculation, we need about $8.4 trillion investment in the next 10 years to reach the climate stabilization goals scientists tells us we need. And the capital has to come from the private sector which has $125 trillion in assets (vs. $300 billion in philanthropy and $18 trillion in government). And finally, from Sunil, a thought on making new technologies easy and scalable..."saving the world should be mundane."

Overall, Creating Climate Wealth, and much of the discussion I heard around Earth Day in D.C. was about business and growth. Clearly Earth Day has expanded its reach from being a personal protest mission for millions of Americans to being a chance to step back and think and talk about what kind of world we want. Let's hope the conversation continues.

April 26, 2010

What Does Sen. Graham's Recent Move Mean for Climate Legislation?

In case you missed it, Senator Lindsay Graham, who has been a lone voice of reason on climate from the right side of the aisle, has threatened to derail the climate discussion and the bill that's supposedly coming out this week (some elements of the bill, as described by Senator Kerry, here). His problem is the Democrats' sudden interest in putting immigration issues in the forefront.

So, is he brave because he's saying, "Enough delay on climate, let's get going on legislation"? Or is he being an arse (in nicer British terms) by putting his feelings/agenda first and threatening an entire legislative discussion that the world is depending on?

As my colleague Will Sarni says, Graham's "brave to balk, an arse to withdraw."
I tend to agree -- it's a bit of both. But I'm (naively and optimistically) leaning toward brave. The fact is, I sort of agree. The administration has put health care, financial reform, jobs, nuclear disarmament, and a few other things ahead of pushing through an energy and climate bill. Those other priorities are all important, but we missed the international deadline in December which derailed the Copenhagen meetings. It's time to act now before the 2010 election.

Who knows what all this maneuvering means for business. I think most companies are still expecting climate regulations in the coming years, but the timing and specifics continue to be up in the air.

Your thoughts?

May 12, 2010

Oil Spill, CO2 Spill

Al Gore wrote an article in the New Republic this week making an interesting connection between the oil spill and the continuing polluting of our atmosphere with carbon dioxide (thanks to Jason Scott for sending me the link).

I suggest everyone read this piece. It's an important wake-up call. Here are a couple of the most cogent quotes. First, comparing the spill to the CO2 "spill" into the atmosphere...

The continuing undersea gusher of oil 50 miles off the shores of Louisiana is not the only source of dangerous uncontrolled pollution spewing into the environment. Worldwide, the amount of man-made CO2 being spilled every three seconds into the thin shell of atmosphere surrounding the planet equals the highest current estimate of the amount of oil spilling from the Macondo well every day. Indeed, the average American coal-fired power generating plant gushes more than three times as much global-warming pollution into the atmosphere each day—and there are over 1,400 of them.

Second, the reason we have so much trouble understanding the climate issue...

One important difference between the oil spill and the CO2 spill is that petroleum is visible on the surface of the sea and carries a distinctive odor now filling the nostrils of people on shore. Carbon dioxide, on the other hand, is invisible, odorless, tasteless, and has no price tag. It is all too easily put “out of sight and out of mind.” Because the impacts of global warming are distributed globally, they often masquerade as an abstraction. And because the length of time between causes and consequences is longer than we are used to dealing with, we are vulnerable to the illusion that we have the luxury of time before we begin to respond.

I also read last night the first chapter of Bill McKibben's very important new book, Eaarth. It's a long look at what's happening to the planet today. As McKibben says, climate change is not a future threat, or a threat of any's reality. We're living on a new planet, he says, and it's not one we're used to. I can't do justice to all the facts he throws into the ring, so I'll just say, please read this book. I'll likely come back to this when I finish the whole thing (which I sure hope will get more positive).

We all need to get more educated on the nature of the challenge and look facts in the eye...

May 26, 2010

Greening Pepsi, from Fertilizer to Bottles

[This appeared first on my Harvard Business Review blog]

Pepsi recently demonstrated its commitment to reducing its environmental impacts up and down the value chain with two rapid-fire announcements about new initiatives. The old-school approach to greening is to focus on operations within the proverbial "four walls." But Pepsi, like other leaders, is approaching sustainability more holistically, with much greater impact.

I recently spoke with Tim Carey, Pepsi's Director of Sustainability for Beverages in the Americas, about two big initiatives in which he's playing a key role.

First, on the downstream side, Pepsi looked for ways to raise the recycling rate of beverage containers from a relatively paltry 34% to 50% or higher. Working with GreenOps, a division of Waste Management, Pepsi launched a new program called "Dream Machine." These "reverse" vending machines, now being placed in high-traffic areas such as gas stations and stadiums, take back those often-abandoned and often-unrecycled empty bottles and give users points toward rewards from sponsors or local merchants.

But Pepsi has gone beyond those relatively minor incentives to add on a social mission. The program will also help fund Pepsi's donation to a group called Entrepreneurship Bootcamp for Veterans with Disabilities (EBV), which trains vets at business schools around the country. Pepsi expects that the combined immediate points and larger mission will drive new, greener customer behaviors — and help solve one of the beverage industry's most intractable value chain problems.

Second, Pepsi has embarked on a very unusual supply chain effort to reduce the carbon emissions associated with its Tropicana orange juice. After conducting a full life-cycle analysis of the product line, the company was relatively surprised to find that the biggest portion of the carbon footprint was found not in manufacturing, or distribution, but actually back in the agriculture stage — primarily the result of the heavily natural-gas dependent process of making fertilizer (see chart).


The analysis showed Pepsi execs where the largest impacts were, and thus where they'd get the biggest bang for their buck on carbon reductions. The company started working with suppliers and farmers to find new ways to make and apply fertilizer. For example, instead of using natural gas from as far away as Russia (which then requires shipping heavy fertilizer across the world), Pepsi is using biomass from closer to home. Wood waste and agricultural by-products are two sources, but execs are hopeful they can also use the large number of their own orange rinds left over in manufacturing, which would fully close the loop.

The company is also working with scientists on the root chemistry of orange trees, applying fungi and bacteria to increase the uptake of nutrients. All that techno-speak means that the trees will need less fertilizer in total, which means less manufacturing and shipping of that fertilizer and, voila, a smaller footprint.

A 100-acre test run of these new methods of working with new, low-carbon fertilizer is underway. A few years from now, Pepsi and its suppliers will know what's working and what isn't.

But here's the best part: the cost of these changes to consumers and growers will be about zero. And it had to be. Let's face it, this kind of carbon reduction isn't easy to convey to consumers, so the market benefit may be small for now. So the sustainability team needed to find ways to lower the fertilizer footprint without causing any additional cost to suppliers or farmers. How did they do it?

By focusing its efforts on the real footprint — identified through a solid lifecycle analysis and good data — Pepsi found the approach with the highest payback. As sustainability exec Tim Carey put it, "It's not unusual to spend tens of millions of dollars removing some carbon from a manufacturing process at returns that can be 10% or less...or we can take 15% of total carbon out in the fertilizer step without costing anything."

The impacts of these tests — and future rollout — will not be small; Pepsi buys a fairly shocking one-third of the Florida orange harvest. And the recycling work could shift millions of bottles out of landfills. Pepsi's full value chain view on sustainability is deep green stuff — this is how you implement green thinking.

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June 16, 2010

Obama's Speech: An Enormous Wasted Opportunity

I'm really not one to pile on the President for perceived failings. God knows he has a tough job. And after all, let's remember what the alternative to Obama could be, or what came before.

But tonight's speech on the oil spill was a real disappointment for those who believe a clean energy future is perhaps the only path to job growth, public health, national greatness, and freedom (from dependence on a ecologically and economically destructive fossil fuels).

The President showed that he gets how big a mess the Gulf is and he's changing leadership at the agency that oversees the industry. That's all well and good.

But when it came to reducing the future risk of these kinds of catastrophes, the prescriptions were in short supply. Obama called for accelerating the transition to a clean economy. That's fantastic. But how can we possibly move fast without a price on carbon? (Uber-capitalists John Doerr (Kleiner Perkins) and Jeff Immelt (GE) said it best in "Falling Behind in Green Tech")

How could Obama not use this opportunity to call on us to do some hard things? Imagine if he had asked us to use less oil, accept higher prices for fossil fuels, support legislators that make the hard calls (raising people's gas prices is about the hardest thing a politician can do).

After 9/11, it's been said many times, President Bush only asked us to shop...and nothing else. Obama seems to be making the same mistake.

He did suggest we need a moon shot to get to clean energy and get off the oil. And he harkened back to America's ability to build tanks and planes in WWII. But those examples of American success are 40 and 70 years ago.

What's scary about the speech tonight is that it almost could've been any President in the last four decades. They've all sat in the Oval Office and said 'never again' and 'we're going to find a new energy future.' And yet, here we are, using more fossil fuels than ever.

In the end, the President suggested we all "pray" for courage and the people of the Gulf.

It's truly a shame that that's the only thing he asked us to do.

August 6, 2010

Why What you Drive Affects the Price of Bread

Russia is in the middle of the worst heat wave in its recorded history. The droughts have destroyed millions of acres of wheat. Russian farmers will harvest about 70 million metric tons of grain this year, down an astonishing 27 million tons. Yesterday, as the New York Times reported, Russia banned all exports of wheat.

According to the Times, Russian exports represent 17 percent of the global grain trade. Wheat prices have already leapt 90 percent since June, and this sudden restriction in supply won't help.

When I think about the forces making the pursuit of sustainability unavoidable, I often try to categorize or separate them to get a handle on what's going on. I think about climate change, water issues, natural resource constraints, greening the supply chain, and on and on, as problems in and of themselves. But this story from Russia shows how they're all inextricably linked.

The United States has been unable to pass a climate bill and factions of this country are in deep denial about the reality of climate change and how it will impact business, society, and our day-to-day lives. These real-life impacts in Russia are a stark reminder that nature, and the physics and chemistry of planetary change, don't care about our political battles.

But how do we draw these connections for everyone? The environmental movement, and even the growing business lobby that's behind climate legislation and action, have not done a great job showing people how our prosperity is threatened by inaction.

I know it's difficult for the average person to believe, but how we use energy and what we drive actually connects directly to the price of bread. And it doesn't really take that many "degrees of Kevin Bacon" to connect the dots.

We drive energy-inefficient vehicles which spew carbon dioxide...which captures heat in the atmosphere...which greatly increases the odds of record droughts and heat waves...which destroys crops and reduces grain supply...which raises the price of wheat and thus bread.

Part of the problem with the discussion on climate change is that it doesn't feel as tangible as other environmental challenges such as water and air pollution. It feels remote and not part of our daily lives. Somehow we need to make these seemingly bizarre connections between what we drive to the store and what's available once we get there.

If we don't start seeing the systematic challenges and tackling them, the system will come crashing down on us.

August 25, 2010

It's not Environment vs. Economy: Green is the Path to Prosperity

The day after the climate bill failed in the U.S. Senate, the New York Times' conservative columnist Ross Douthat gave his take on "The Right and Climate" in a piece that on the surface sounded reasonable. Maybe it was best that the bill didn't pass, he says. While he displays some bravery in calling out the climate change deniers, who remain almost entirely on the right, for "making a spectacle of their ignorance," he nevertheless himself betrays a much greater ignorance about what climate change means for us and our economy. Douthat espouses the dangerous idea that doing nothing to combat climate change is the best course for business and for the world.

In doing so he relies on a set of arguments against the pursuit of a clean economy that have little basis in fact and mainly defend the untenable status quo. The overall pitch has two main parts: (a) promoting a clean economy through the use of market mechanisms like cap-and-trade is a perversion of free markets, since the renewable energy industry shouldn't need tax subsidies if it's a real business; (b) going green will cost jobs and hurt the economy. Let's look at both ideas.

First, the notion that fossil fuels do not rely on subsidies is absurd. A new analysis from Bloomberg New Energy Finance compares the roughly $45 billion of global government subsidies for renewable energy (mostly tax breaks) to the $557 billion of subsidies for fossil fuels in 2008 alone. That 12-to-1 ratio of dirty-to-clean subsidies is surely understated. Let's just say that the International Energy Agency, which calculated that larger number, is not a liberal think tank, and it is measuring only the most literal subsidies. In reality, the market for energy is not currently "free" at all. So if putting a price on carbon helps us support new industries of the future, drive innovation and, say, preserve the ability of the planet to support our species, it seems like a good deal.

Second, this general notion that green will hurt the economy is simply the easiest defense of doing nothing. This concept — that that there's some tradeoff between economic development and what he calls a "growth-slowing regulatory regime" — is the heart of Douthat's argument. This idea is so very dangerous since it keeps us tied to the past, and abdicates leadership to other countries that are pursuing the real growth and prosperity agenda.

The most thorough studies — such as the well-regarded Stern Review on the Economics of Climate Change — tell us that the cost of ignoring climate change (including the possible devastation to our species) will be far higher than addressing it. Using less energy and material, or switching to electric vehicles and renewable energy, will help everyone from homeowners to businesses save money. As one CEO said to me, "I don't know about climate change, but it seems pretty clear that producing less carbon is better than producing more."

And the flashy side of this "kill the economy" argument remains the odd notion that a green agenda will kill jobs. Of course it will destroy some old-school jobs, but clearly the move to a clean economy will create jobs as well — millions of them. Installing insulation and solar panels, building wind turbines, and managing buildings for energy efficiency are just some of the obvious ones. Every industry that makes components for these new sectors will also have new markets and customers.

So what part of the economy is actually hurt by the race to clean economy? Which companies will lose jobs? In essence, only one sector, oil and gas, will truly get hit. If everyone uses less in general, and switches from fossil fuels overall, then of course those companies that only provide fossil fuels will shrink-unless they decide to play a role in the new energy economy).

But the big mistake is that protecting these particular jobs, and keeping us pinned to the status quo, does not represent a path to growth. Consider this: at the macro level, the world produces roughly 85 million barrels of oil per day. Nobody reputable seems to think that the number will rise much if at all; in fact, "peak oil" theories have gone quickly from fringe to mainstream (even Kuwaiti scientists recently predicted a global peak in the next five years).

My point is that even with optimistic numbers, fossil fuels are not a growth industry, and not a job creator. Relying on that sector is not a path to prosperity for the world or for the United States. Creating new technologies and products, building greener buildings and businesses, and just plain using less energy to do it all: those actions will make almost all companies more profitable — just not the ones providing only fossil fuels.

Our current path, and commitment to doing nothing, is in effect protecting one sector at the expense of all the others...and risking our planet and economy as well.

(This post first appeared at Harvard Business Online.)

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September 16, 2010

The Competing Black Swans of Climate Change

According the metaphorical story that opens Nassim Nicholas Taleb's The Black Swan, until the discovery of Australia, everyone in the Old World knew that all swans were white. Years of empirical evidence proved it — nobody had ever seen anything but a white swan.

It came as a shock then when the sighting of a single black swan destroyed such a simple theory. All it took was one example to overthrow the status quo.

The world faces some big shocks in the realms of sustainability and climate change, and the ways of thinking about the future described in Taleb's book will come in handy. In Taleb's view, a Black Swan event...

  • Lies way outside the realm of regular expectations — it's an outlier
  • Carries extreme impact
  • Seems explainable after the fact

The event that perfectly fits this bill, and the reason Taleb's book is so vital today, is the financial meltdown of 2008. It fits all three definitions.

The subprime mortgage market was predicated on the idea that housing prices nationally would continue to go up; after all, they always had. This conclusion represents one of the logical fallacies Taleb shows we all fall into where we "preselect segments of the seen and generalize from it to the unseen: the error of confirmation." Falling housing prices and subprime mortgage defaults certainly lived up to the "extreme impact" test, since they brought down the world economy. In retrospect, many pundits and analysts provide some explanations for the mass delusion that swept the financial world, the government, and homebuyers (see Michael Lewis' amazing The Big Short for a look at the few people who saw the collapse coming).

When I think about the challenges of sustainability, I see Taleb's principles and dynamics all over the place. From this point forward, two Black Swans will shape our world. First, we face an extreme outlier with unimaginable impact in the reality of climate change — it's the ultimate Black Swan. But we will require the appearance of another Black Swan to get us out of the hole we've dug.

Black Swan 1: Climate change itself. What really makes for a Black Swan is the fact that massive numbers of people are sure it can't be true. Even in the face of overwhelming evidence of climate change and resource constraints — the two heavy-hitter forces driving sustainability — many people struggle with believing any of it.

And it's not a big surprise that it's hard to believe. In our entire human history since the last Ice Age, our climate has not changed enough to threaten the viability of the species. So we make the error of confirmation and assume that it won't change that much going forward. We also make another of the logical errors that create problems: the narrative fallacy. We look for a story that makes sense of the facts in front of us. Look at this from a skeptic's point of view. The resource-constraint doomsayers throughout history, such as Thomas Malthus in the late 1700s and many in the modern environmental movement, have, it seems, been wrong. So the predictions of devastation will be wrong again, right?

Unfortunately, we're feeling the effects of the climate change Black Swan today. Russia burns, Pakistan and Nashville flood, and 2010 is the hottest year in recorded history. (Every climate scientist would, at this point, give the caveat that no single weather event can be ascribed to climate change, but the pattern is bad. Personally, I'm getting tired of the caveat, since it's useless — of course long-range climate models don't predict the weather, but the climate is changing before our eyes.)

So what will get us out of this mess?

Black Swan 2: Worldwide action. We'll need to change so much about the way the world works as to make it nearly unrecognizable. Imagine companies creating radically new energy supplies, entirely electric transportation systems, and non-toxic and completely recyclable products. Picture massive increases in resource efficiency, waterless manufacturing and agriculture, and everyone engaging in tough, heretical conversations about our consumption and what it means to live a good quality life.

The kind of collective will and action we'll need to create not only new markets and products, but also new lifestyles, is unprecedented. In human history, when has any group faced limits and made the changes necessary to survive and thrive? I'd be happy to hear an example, but if you follow to the work of Jared Diamond of Guns, Germs, and Steel and Collapse fame, the answer is basically never (think Easter Island).

Taleb addresses climate change in the second edition of his book and answers those who want to use his theories to do nothing: "The skepticism about models I propose does not lead to the conclusion endorsed by anti-environmentalists and pro-market fundamentalists. Quite the contrary: we need to be hyper-conservationists ecologically, since we do not know what we are harming with now. That's the sound policy under conditions of ignorance and epistemic opacity." That's his fancy way of saying that the Black Swan of climate change has so much downside, we need to be very careful. But to handle this challenge, we'll need to do something we've never done and it thus seems impossible as well. That's the second Black Swan here.

In that sense, though, Taleb's work gives me hope — the unexpected not only can happen, he says, it's really the only thing that ever changes history. Which Black Swan will hit first? Will it be climate devastation and resource shortages ... or collective action to create more profitable, healthy, and sustainable companies, communities, and countries?

The first Swan has left the gate and we have some catching up to do, but I'm betting on the second.

(This post first appeared at Harvard Business Online.)

October 5, 2010

The Military Understands Why Getting Off Oil Pays. Why Don't We?

The New York Times reported today that the U.S. Military is aggressively pursuing "Less Dependence on Fossil Fuels." Why does the military care about going green? Because the cost in money, resources, and lives to bring fuel to Afghanistan and Iraq is just too great. A few of the mind-blowing statistics in this article:

  • Fossil fuel is the number one thing the military imports into Afghanistan (30 to 80 percent of convoy loads)
  • The military spends $1 per gallon of gas, but can then spend up to $400 more per gallon to get it to forward operating bases
  • For every 24 fuel convoys, one soldier or civilian working on transport was killed

This last fact is truly tragic. The Times got this number from an amazing analysis by the Army Environmental Policy Institute. According to this chilling report, in 2007 alone, 170 people lost their lives on fuel caravans (and another 68 on water transport). The study then goes on to provide hope in the form of calculations on how many lives can be saved by investing in thin-film solar to complement generators in forward bases.

The military has realized over recent years that our reliance on fossil fuels is a direct threat to our military in operation, but is also a larger national security threat. The contrast with our political failings to tackle climate and energy holistically could not be more stark. As the Times put it,

Even as Congress has struggled unsuccessfully to pass an energy bill and many states have put renewable energy on hold because of the recession, the military this year has pushed rapidly forward. After a decade of waging wars in remote corners of the globe where fuel is not readily available, senior commanders have come to see overdependence on fossil fuel as a big liability, and renewable technologies — which have become more reliable and less expensive over the past few years — as providing a potential answer.

The military is seeing how much of a liability oil really is to our war efforts. It's not a big leap to say that reliance on fossil fuels is a liability to our health and economy as well. But you'd think the security argument would be enough.

Military leaders at think tanks like CNA and very well-respected security experts such former CIA head Jim Woolsey (see his recent WSJ op-ed) have been making the case for years that we need to get off of fossil fuels (in particular oil, which props up dictators and funds terror).

I wish I understood why the security argument has not united our politicians on both sides of the aisle to create comprehensive legislation which puts a price for carbon and provides incentives to promote new technologies and support entrepreneurs (the stimulus money is a very good start, but is not in place for the long term).

Luckily for our soldiers, the military is not waiting for us to get our act together on a political or industiral level and is just pushing forward to find new energy solutions. Bravo.

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November 10, 2010

Reality is Overrated as a Motivator

Right before the big election last week, I found myself thinking about beliefs and what people are absolutely sure they know, regardless of the facts. Two stories that appeared on the front page of the New York Times on the same day, demonstrated Americans' remarkable ability to kid ourselves.

- First, a story about how virtually everyone in America — and especially the anti-tax advocates — thinks their taxes have gone up or stayed flat under President Obama. They don't realize that taxes actually went down for, as the article says, "95% of working families." That cut to nearly everyone's withholding tax was a pivotal part of the stimulus bill.

- Second, a story titled, "In Kansas, Climate Skeptics Embrace Cleaner Energy," about a Midwestern non-profit, the Climate and Energy Project, that has gotten people to reduce energy use and not mentioning climate at all.

The first story is a microcosm of every accomplishment the Democrats managed to keep hidden from the American public, but I'll leave real comment on that phenomenon to the politicians and economists.

But the second story is right up my alley — it's about how to motivate people to pursue the societal and economic benefits of going green. The Climate and Energy Project is cleverly avoiding the climate debate and thus any discussion at all that triggers arguments about the really bad misinformation out there (the article, for example, points out the shocking statistic that only 48% of people in the Midwest agree that there is actually warming going on — whether you think it's human-caused or not, temperature measurements are clear on this point).

Instead, Nancy Jackson, Chairman of the Climate and Energy Project, has hit on three alternative arguments to going green: personal thrift, the benefit to the community of promoting green jobs, and a religious appeal to "creation care." The program has targeted everything from home weatherization to getting the community to lobby Siemens to build a wind plant in the region. They've also gotten towns to compete with each other to save energy.

Their success has been remarkable; according to the Times, "energy use in the towns declined as much as 5 percent relative to other areas — a giant step in the world of energy conservation, where a program that yields a 1.5 percent decline is considered successful."

This group's work goes to the heart of a critical debate moving through the climate policy world. I recently took part in a meeting of green thought leaders to discuss why the climate bill in the U.S. failed this summer and what we can learn. We all asked ourselves, what's the right messaging to reach Americans? The only real divide in the room was over the question of whether to talk directly about climate change.

On the one hand were respected thinkers who said, "You can't solve climate without talking climate." On the other side came the argument that talking about saving money, jobs, the economy, and other drivers of action would do the job. Although I think that we probably have to talk climate change to policy makers, when it comes to reaching everyday Americans, I tend to fall into the latter group (see "8 Reasons You Should Cut Carbon (Aside from Climate Change)").

The lesson in Kansas is clear to me: it does not really matter if you believe in climate change. The logic of decoupling our country, our businesses, our communities, and even our homes from carbon, and from oil in particular, remains incredibly strong. At the macro level it's about national competitiveness, national security, and not relying on declining, ever-more-expensive resources.

But this applies on the personal level as well. Who doesn't want to save money and use less energy? Who wouldn't want their town to depend on locally-created, free energy?

For businesses wondering how to promote their green initiatives and products, I see lessons in how to talk to both consumers and employees. For employees, the best motivators are proven cost savings, good data, and competition. The Kansas program used all of these to great effect.

When talking to consumers, the lesson seems to be to use whatever combination of these works, plus throw in some values and religious mores, if that fits the audience. A call to save mother earth for purely environmental reasons might work well in Berkeley, but in Kansas make the subtle shift to talk about creation care, or don't go down that road at all.

So even though I titled this piece a bit sarcastically, the Kansas program works so well because it IS based in reality -- the savings you can yield, the jobs you can attract to your town, and the connection to religious values you can feel are all real. It's just not the reality of climate change.

The end result is the same — people are saving money and energy and starting to build a new economy. And if we move down the path to a cleaner world, who really cares how?

(This post first appeared at Harvard Business Online.)

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December 2, 2010

Why Climate Negotiations Keep Failing

The world is meeting in Cancun this week to talk climate change. Is there any hope of a large-scale agreement on capping emissions around the world? Most pundits would say no.

Why can't we agree to do something? The answers are varied and all contain some truth. There are, for example...

* The inherent challenges of tackling a problem so diffuse and long-term with responsibility laying with all 7 billion of us
* Psychological barriers to change
* A media that paints all issues as having two equal sides even if it's 99 to 1
* Powerful, vested interests in the old, fossil-fuel-based economy
* The fact that the U.S. has no federal climate policy, which makes global negotiations nearly impossible. (And with the recent U.S. election bringing to power more climate deniers, we're moving further away from ever having a federal policy.)

All of these problems, and many more, contribute to the repeated failure of global climate summits. But the hurdle that keeps coming up year after year and is perhaps the hardest to get over is the radical difference in perspective between the developed world and the up-and-coming powerhouses of China, India, and Brazil.

I spoke at a meeting of corporate execs in Beijing a couple of weeks ago and got a glimpse of these different viewpoints. Before my talk, a Chinese academic gave an overview of climate science and policy. He spoke in Chinese, so I understood little (ok, none) of the language, but the charts he put up were crystal clear...carbon dioxide levels over time, commitments for greenhouse gas (GHG) reductions by country, and so on.

But first he set the stage with a chart that gets to the core of the issue. It's data that we rarely discuss in the West, but seems to be pretty important over there. I'm talking about the cumulative CO2 emissions, by country, since the industrial revolution.

In his version, China was responsible for a tiny sliver. I looked up the numbers myself and created the pie chart below - it may not be perfect, but it's close enough. China is responsible for about 8% of the historical emissions from 1850 to 2002, but clearly the developed world is primarily responsible for the climate problem to date.


This historical responsibility is irrefutable. But at the same time, the projections for emissions growth show that the new economic powers will be contributing the lion's share going forward. According to the International Energy Agency, China will be responsible for over one-third of the worldwide growth in energy demand over the next 25 years (full pdf report here).

This reality about future responsibility has been very convenient for those who want to drag their feet on climate action; it was one of the main reasons President Bush used to avoid climate negotiations. Why should we join the Kyoto Protocol, he'd say, if China and India don't have responsibilities?

This is not a new debate, especially to anyone who has watched the climate policy world at all. But I still found it useful to be reminded of the historical figures. It's sort of surprising to see it in hard numbers...and it explains so much.

Here's the crux of the problem: When the West/North says, "you will be the largest emitter going forward, so you have to cut back" and the East/South says, "you created the problem, so you should go first," they're both right. Can you think of a tougher situation for negotiation than when both parties are absolutely correct and yet their positions are so far apart?

But the reality is that Nature doesn't care who started this. When you find yourself in a boat that's leaking and sinking, you start bailing. You can't spend too much time worrying about who poked the hole. So while I believe the developing world's moral position is unimpeachable, it doesn't matter. The science will win, and the data tells us that putting any more carbon in the air is incredibly dangerous for our species. So everyone has to change.

I'd like to think that the world is moving away from these old debates, but they're still seething not too far from the surface. China's negotiating position in Cancun, according to the New York Times, is that the West should cut emissions, pay for the shift to a cleaner economy, and provide technologies to developing countries. Again, this is sort of hard to argue with - everyone must bail out the boat, but the responsible parties can pay for buckets. But given the fiscal and political realities in the developed world, us paying more for anything seems remarkably unlikely.

So my hope is what it always is: the business community will take the lead from the governments of the world and continue investing in and implementing clean technologies, regardless of the success or failure of the global negotiations.

Given how deeply felt the convictions are on every side - and the fact that they're all based in reality and truth - hoping for the business world to lap the policy world may be the only reasonable hope we have.

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December 15, 2010

Celebrating Green Business Accomplishments in Cancun

At this year's climate summit in Cancun, Mexico, policy negotiators from all over the world gathered for two weeks to try and salvage global climate negotiations. In short, there were some successes, but mostly in the realm of funding adaptation, rather than actually cutting emissions, which is a bit like funding life boats on the Titanic (as I wrote about a couple weeks ago, there are many important reasons why climate negotiations have failed to accomplish what we need them to for so long).

But, anyway, in parallel to what must have been incredibly frustrating policy meetings, the business community gathered at the same time. I believe that business may be succeeding where policy is failing.

I attended one of the new entrants into the green business event game, the World Climate Summit. A quick background on the players: the Summit was thrown by a new organization dedicated to green business leadership, with events aided mightily by friend and colleague, the uber-connected Aimee Christensen.

I was there mainly to help out with the Gigaton Awards, an event modeled as a mini-Oscars for green business (Note: I was asked to emcee the affair, but I'm not officially linked with any of the organizations behind it). The force behind the Awards was originally Sunil Paul, a clean tech investor and entrepreneur. Sunil created the Gigaton Throwdown, a challenge to the world to find solutions to reducing carbon emissions at the scale of a billion tons (for context, the world emits 48 gigatons, and scientists say we need to cut at least 14 gigatons from business as usual scenarios by 2020 to have a 50/50 shot at keeping temperatures stable). According to Sunil's team, this level of cuts should be the new measure of success for industries and countries alike.

The Awards were an offshoot of Sunil's initiative, but were thrown in conjunction with the Carbon War Room (CWR), an organization founded by Sir Richard Branson and led by solar entrepreneur Jigar Shah. CWR's goal is also to find large-scale technologies and strategies for tackling climate change.

The point of the Awards was to heap praise on companies that are actually cutting emissions in order to inspire others. I won't go into detail on how the companies were nominated and winners selected, but in short it was based at first on concrete emissions reductions.

Not surprisingly for the first year of a green business award show, the nominees were a who's who of green leaders. In the end, Nike, 3M, Suzlon, Vodafone, Reckitt Benckiser Group, and GDF Suez took down prizes for their respective sectors. And 3M, which has been doing pollution prevention for 35 years now, took the end-of-night Gigaton Award for Best in Class.

Frankly, given the challenges of climate change and the policy failures of recent years, it was nice to celebrate business and the work it's doing. This is hard work and many of the executives representing their companies are in fairly thankless positions.

All that said, it's clear that these Awards were just a beginning. We're not at gigaton scale by any stretch. The winners have made cuts on the millions of tons at most. Gigatons have to happen at the industry and value-chain level, and that is the work that the CWR is doing.

There was one industry announcement in Cancun that demonstrated what real scale looks like. Coke's CEO Muhtar Kent, representing the Consumer Goods Forum and its Board of 50 CEOs, announced some monumental goals for the sector. These include...

(1) no net deforestation around the world (think sugar and palm oil plantations)
(2) a phase out of hydrofluorocarbon (HFC) refrigerants which contribute greatly to global warming.

Combined, these goals are in the gigaton scale range.

So when companies get together across value chains, they can think very big. The Awards were about individual achievement, but the whole day at the Summit was geared toward bringing companies together.

And at the end of a long day of meetings, it was great to add a dash of fun and style. The honorary Award winner, Ted Turner, had the best speech of the night. He established that this battle to green the economy and society is in fact a battle. He said that people who are working hard on what they know is right will always beat the people who know in their hearts that what they're doing is wrong. He ended with this rallying cry:

"We're right. They're wrong. We're going to win...BIG...and SOON!"

How refreshing to come out with fighting words so simply. You know, business is nothing if not pragmatic. Driving change and convincing people that green is good for business requires logic, facts, examples...but also passion, emotion, and yes, cheerleading. What's wrong with celebrating every now and then?

(This post first appeared at Harvard Business Online.)

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December 23, 2010

The Top 10 Green Business Stories of 2010

Here's my attempt to capture the most important stories that affected the greening of business in 2010. To keep this to blog length, it's going to be quick, so see the links for more on these stories.


The first five are macro-level issues that affect the context for business:

1. The climate bill dies in the U.S. Senate. Any hope for a national approach to tackling the largest challenge facing humanity petered out pathetically this year (see the complete, sad tale in a Pulitzer-worthy New Yorker article). Unfortunately for every other country, this is a global story. When the U.S. can't get its act together, the world can't create global policies, and thus the Cancun meeting last week resulted in some nice agreements to raise funds for adaptation -- arranging the deck chairs on the Titanic, anyone? -- but no binding targets on carbon.

2. Nature strikes back/Climate change is real. Ironically, given the rising debate in the U.S. on the science, the world got hotter, a lot hotter, this decade and this year. Russia saw its worst drought in 1,000 years (video), and Pakistan was overcome by flooding (video). Scientists will always give the caveat that you cannot blame climate change for any single weather event, but let's get real - this is what devastating climate change looks like on the ground. These weather events also directly affect resource availability, bringing me to my next point...

3. Resources get very tight. The drought in Russia destroyed 40% of its wheat crop, so Putin pulled wheat -- 1/6 of the global trade in the crop -- off the global market, driving up wheat prices. The floods in Pakistan helped double the price of cotton. And I could write a book on the topic of rare earth metals, those precious elements that make nearly every green technology possible and go into every iPhone. China mines 95% of these metals, and it needs them all now, making the U.S. "vulnerable to rare earth shortages." We're also vulnerable on fossil fuels. We learned from the massive spill in the Gulf of Mexico that readily accessible oil is a thing of the past -- we don't dig one mile under the ocean for the heck of it. So most natural resources are getting more scarce, from oil to metals to crops. Smart companies like Hitachi are trying to find solutions, such as its new plan to develop rare earth recycling technologies.

4. China, China, China. Did I mention rare earth metals? Or the rise of the world's largest solar producer from a manufacturing base of nearly nothing a few years ago? Or how about China's unparalleled (and some would say illegal) support for its renewables companies, which has the World Trade Organization fretting about trade barriers? China is very serious about its green ambitions, with support from the very top, and the business community is taking note.

5. Renewables are for real and moving fast. Ok, there's some good news. The market for renewables is growing fast. About 45% of Portugal's electricity comes from renewables, and this is up from 18% in just five years. Germany, not really the sunniest country in the world, added 1% of its electric needs in solar in 2010 alone (it took 10 years to get the first 1% online, and just 8 months for the second 1%). No wonder HSBC says the market for clean tech and climate change solutions will top $2.2 trillion by 2020.

Now for the company-level stories:

6. Supply chain pressure continues to rise (a.k.a., Wal-Mart doesn't slow down). Even coming out of the recession, this was a big year for green supply chain announcements. In February, Wal-Mart said it would eliminate 20 million metric tons of GHG emissions from its supply chain. Then in October, the retail giant announced it would double the amount of locally-grown produce on its shelves (and former sustainability exec Matt Kistler indicated this year that products getting higher scores in its Sustainability Index would get more shelf space). We also saw big announcements from P&G and Kaiser Permanente on supplier scorecards, IBM greatly increasing its demands on suppliers, and Pepsi using detailed carbon lifecycle data to make suppliers rethink how they grow Tropicana oranges.

7. Zero is the new black. Companies seem to be tripping over themselves on the path to "zero waste." GM announced that 62 of its plants now send zero waste to landfill, and UK retailer Marks & Spencer reached a 92% diversion rate on the way to its zero goals. And Sony one-upped everyone by setting a goal of zero environmental impact across its operations by 2050.

8. Big goals were back. Recession-schmecession. Sony wasn't the only one setting aggressive targets. Panasonic said it wanted its GHG emissions to peak by 2018 and it would greatly increase sales of eco-products. Unilever has probably gone the furthest, announcing it would double sales by 2020, but halve total environmental impact (among other big goals). Unilever's leaders are serious about driving these plans into the operations of the whole company.

9. Electric vehicles storm the market. The Nissan LEAF was just named 2011 European Car of the Year, and GE announced it would buy 25,000 electric cars. Since the auto industry is one of the biggest in the world, there will be ripples from this movement. Enough said.

10. Small guys can do it too. It's easy to get caught up in the tales of giant companies. So one of my favorite stories of the year is a simple example of eco-efficiency and savings from 10-employee Bowman Design with just 2,000 square feet of office space in Southern California (where else?). See founder Tom Bowman's description of his company's path to a 65% reduction in GHG emissions and $9,000 savings annually (ok, I'll admit that I didn't mind that Tom name-checked my book Green to Gold in his article, but I don't know him).

11. (Bonus!) The Military gets serious about green. Honorable mention to the government and military, which is technically not "green business". But they're not kidding around, from plans to greatly reduce reliance on oil and diesel in Army operations, to Navy sustainability plans and test flights of planes running on biofuels. Go military green!

Looking Forward to 2011

No list would be complete without utterly over-confident predictions of the future. It's obvious that the pressures/themes above will continue to get stronger in the coming year. In particular, and in addition...

  • Supply chain pressure will evolve and get more sophisticated (such as retailers who said in August they would not buy fuel from Canadian oil sands). This shift will be partly driven by...
  • A data explosion around green is brewing. Companies will know more than ever about their impacts up and down the value chain.
  • Water will become a very big topic for business (it began this year, but there will be some great stories in my 2011 wrap up a year from now). My first couple of blogs of the New Year will look at water strategy.
  • Biomimicry, the design principle that suggests looking to nature for great ideas, will gain currency
  • Energy innovation will be the order of the day (e.g., the Paris metro station that captures body heat to warm a nearby building)
  • But here's my final, shocking prediction: climate change policy won't matter (much). Even though the failure of the bill was my #1 above, #2 through 10 tells me that for business, the logic of green does not depend on believing in climate change, or in having a law in place. The natural resource, supply chain, innovation, and profit drivers are just too strong.

    Business will be getting a lot greener in every sense of the word, no matter what political battles are waging. We're going to stop debating climate in the business community and just focus on the larger case for prosperity, for companies and countries alike.

    I'm sure I missed many, many great stories. Please share your favorites here, and have a merry green new year!

    (This post first appeared at Harvard Business Online.)

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January 13, 2011

2010 Tied for Hottest Year Ever

The official analysis from NASA and the National Oceanic and Atmospheric Administration (NOAA) is in. The global average surface temperature for 2010 tied the record set in 2005.

Climate%20temp%2C%202011%2C%2013climate-graphic-popup.gif New York Times Graphic

You'd think this hard data might slow some of the most pernicious rumors from the climate denial crowd, particularly the canard about it not getting hotter since 1998 (the previous warmest year). But unfortnately for the discussion in this country, 2010 was not particularly hot HERE. In the contiguous U.S., it was the 4th hottest summer and 23rd hottest year.

It's easy for people to get confused when they hear these numbers or feel some cold winter temperatures in their area. But, to put this in perspective, the 48 states take up about 3.0 million square miles, compared to 57.5 million sq.mi. of global land area and 197 million sq.mi. of total surface area. What i'm saying is that it wasn't a particularly hot year for less than 2% of the area of the globe...but an area that has enormous influence over the global debate.

And the skeptics will still latch onto 1998, even though 9 of the 10 hottest years on record have come since 2001. But the facts will win out...

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April 21, 2011

How Can We Build a Culture of Disruptive, Heretical Innovation?

The forces driving the business world toward sustainability are vast, powerful, systematic…and growing. In recent months, we’ve witnessed massive climate disruptions everywhere from Russia and Pakistan to Brazil and Nashville. Resource constraints are a reality, with serious discussions about peak oil, peak coal, peak coffee, and, well, peak everything. Technology-driven transparency is creating a mad rush to capture product and company sustainability data, and companies continue to push new demands aggressively up their supply chains.


And the mega-force to beat all – the relentless rise of population and living standards in the developing world – continues unabated. So how will we provide a good quality of life to what will be 9 billion people on a resource-constrained planet?

In short, we need some very large changes to “business as usual,” requiring radically new ways of thinking.

Over the past couple of years, I’ve written frequently (in my last book Green Recovery in particular) about the need for “heretical” innovation – that is, asking very hard questions that challenge the very nature of a business or product. I wrote recently about two companies, Waste Management and Xerox, in the middle of deep transitions. From hauling waste and getting paid by the ton, to managing recycling streams and helping customers achieve zero waste goals. Or from selling as many printers as possible to helping customers reduce the number of devices and do less printing over all. Asking customers to use less of their core products – that’s heretical.

Some will point out that this is similar to the concept of “servicizing”, and of course it is. But I believe there’s a deeper heresy at work than just turning a product into a service. After all, Xerox could offer outsourced printing services and try to print as many pages as possible. It’s the combination of service and talking openly to customers about using less in total that makes it novel.

So I have a paradoxical task in mind: figuring out how to systematically and logically ask illogical, wacky, heretical, leapfrog questions. I’m looking for ideas from the assembled knowledge and experience of the sustainability leaders reading this.

My three main questions are:
1) How do we cultivate a culture of heretical innovation (how do we make it ok to ask wacky questions)?
2) How do we identify and support the true innovators, intrapreneurs, and heretics in even the largest organizations?
3) Is sustainability-driven innovation fundamentally different than ‘regular’ disruptive innovation, and how?

On the first question at least, I have a few broad ideas. Here’s a starting list for budding corporate heretics:

Start with value-chain data to identify big risks and opportunities. With solid data, managers can focus limited resources on tackling the real footprint and drive toward new ideas and questions. For example, Pepsi’s Tropicana brand is experimenting with low-carbon fertilizer after discovering that growing oranges was the biggest part of its GHG footprint. And more famously, P&G launched Tide Coldwater to address the largest (by far) portion of detergent lifecyle emissions, washing clothes in hot water.

Use open innovation. The hottest concept in innovation today is inviting people in to solve your problems. P&G has opened up its innovation pipeline to anyone with a good product idea. A few companies are sharing some of their best ideas (and patents) with the world – as Nike and others do with GreenXChange – and then hoping for reciprocal karma.

Try “co-creation” (the second hottest concept in innovation and a subset of open innovation perhaps). IBM has had great success in recent years with “Innovation Jams” that allow all employees and customers to throw ideas into the mix. Cross-fertilizing people from radically different disciplines, and from outside the organization as well, can lead to some novel questions.

Show personal leadership (walk the talk). Have senior execs take part in jams and brainstorms. Let them publicly generate wacky ideas and support pilot projects to explore them.

Systematize innovation. 3M and Google famously set aside a portion of everyone’s time for whatever strikes their fancy. More companies should emulate this practice, but also make a point of focusing specifically on sustainability pressures.

Award the wackiest ideas, even the ones that don’t pan out. Some public pats on the back and recognition for employees who show bravery and try new things can go a long way.

Create competition. Sharing data on sustainability performance internally can drive real competition and learning across divisions or products. Or utilize public prizes, like the famous X Prize or the $1 million Netflix Prize.

All of these paths can help us regularly ask the toughest, most interesting questions. Only then can we match the scale of innovation to the scale of the sustainability challenge.

These are just a few ideas (after all, this is a blog, not a book). There are many more. So please send me your thoughts on how to drive breakthrough innovation and how to find the heretics in the organization. Finally, any examples of heretical questions within your organizations are very welcome. (

(This post first appeared on Corporate Eco-Forum's site.)

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April 27, 2011

Birther, Climate Denier...Same Difference

Well, the great national nightmare is over. President Obama released his long-form birth certificate on Thursday. This settles the issue...again. I could go on about how depressing it is that it all came to this.

But my point in this quick blog is just to say that the vigorous discussion about how the media covered this topic sounded eerily familiar to me. For example, here's ABC's Jake Tapper quoted in a Huffington Post story...

“One of the biggest problems is how many reporters have treated this as if it’s a subject for debate and not just a lie,” Tapper said in an interview.

“Instead of covering this the same way you would cover someone saying that the earth is flat -- just a demonstrable untruth -- too many reporters and anchors have allowed this to become ‘critics say X,’” Tapper continued.

Just imagine if Tapper were discussing how the media covers climate change? Wouldn't it ring true? Granted, global climate models are infinitely more complicated than, say, a Certificate of Live Birth. But doesn't that make clarity from the press about how solid the data is -- and how broad the scientific consensus is -- even more important. When the media "debates" whether it's actually getting hotter over the last century -- a fact -- it really makes it hard to discuss more complicated topics.

And when they place thousands of scientists on one side and equate their views with basically a paid spokesperson for a think tank or particular industry on the other, they propagate a lie.

It was good to see a bit of media gut-checking going on today. We do have serious problems (and no, the budget isn't the only one), and we need focus and fact-based discussions. Sustainability is hard enough without false equivalence and lazy journalism mucking up the works.

In my work, I always say it doesn't matter whether you believe in climate change or not. The things businesses and our country would do to tackle carbon are things they should do anyway for both profitability and competitiveness. But not debating climate science all the time doesn't mean we have to accept falsehoods either.

May 26, 2011

The Growing Divide: Climate Adaptation vs. Denial

I recently attended my home association’s annual meeting, a gentle community affair that focused on reviewing our budget. Only one line item was way up this year – after a record winter in Connecticut, snow removal fees rose 30%. No big surprise.

But I was shocked to learn from the association president that the snow levels and fees would be “back down to normal next year.” Apparently all climate changes would be remedied by December of this year. Phew.

I considered chiming in on the true uncertainty about climate “weirding” and how we could get no snow next winter…or a lot more. But since it’s a relatively small part of our budget, I figured I’d just let the chips fall where they may.

In this case, the level of denial about where we’re really headed as a planet is of little consequence. But what happens when large cities or countries make investment and planning decisions based on either science or denial?

The New York Times just reported on Chicago’s impressive plans for climate adaptation. I spoke last year at an event in Chicago and a climate expert from the Union of Concerned Scientists showed one of the more powerful slides I’ve ever seen on climate impacts (see below). Over time, Illinois will find itself feeling more like the 2010 version of east Texas. As the Times pointed out, models indicate that Chicago will see 70 or more days per year over 90 degrees (vs. 15 each year over the last century).

Source: Union of Concerned Scientists -- see report here

The Times article is a fascinating look at how one city is grappling with this possible scenario. The city is shifting to more permeable pavement and planting hardier species of trees (over the last 30 years, they’ve already shifted about one growing zone).

In comparison, witness the sad display of lack of leadership from Texas Governor Rick Perry last month. Facing record droughts, the Governor suggested everyone pray for rain. Faith is fine, but not to the exclusion of actual preparedness.

This divide is starting to play out on the national and global scale. As I’ve written about many times, the U.S. is falling behind on clean economy spending and investment versus China, Germany, Britian, and many others. As Yale 360 (a wonderful publication) reported recently, the U.S. ranks 17th on clean tech spending as a percentage of GDP (Denmark is #1).

The global levels are hard to compare of course, but preparedness in our communities? That’s easy to imagine and the differences are tangible. The unprepared will be struggling with heat, floods, water shortages, and much more. Over time, the gap between states and cities that are ready and areas that are in denial could make the country’s current blue/red divide seem quaint.

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June 6, 2011

As Predicted, Weather Weirding Has Begun


In a powerful essay in The New Yorker that's mainly about President Obama's dismal record on tackling climate change, Elizabeth Kolbert -- one of the best writers on climate science around -- lays out in stark terms what's gone on with the weather of late.

This is the best round-up I've seen. It seemed worth a quick 'check this out' blog. Here's the passage...

"In mid-May, the President met with Memphis residents who had been left homeless by the flooding of the Mississippi River, and, not long before that, he toured sections of Tuscaloosa, Alabama, that had also been flattened by a tornado. Meanwhile, even as the President was consoling the bereaved in Joplin, residents in Vermont were bailing out from record-high water levels around Lake Champlain; Texas was suffering from a near-record drought that could cost the state more than four billion dollars in agricultural losses; and officials at the National Oceanic and Atmospheric Administration were forecasting that the 2011 Atlantic hurricane season, which formally began on June 1st, would once again be “above normal.” (The 2010 season was tied for the third most active on record.) The news from abroad was, if anything, more worrisome. Last week, the Chinese government estimated that more than four million people were having trouble finding drinking water, owing to a drought along the Yangtze River. The French agricultural minister warned that an exceptionally hot, dry spring would reduce that country’s wheat harvest. And in Colombia more than two million acres of land have been submerged after almost a year of nearly continuous rain. “Over the past ten months, we have registered five or six times more rainfall than usual,” the director of Colombia’s meteorological agency, Ricardo Lozano, said."

Just to repeat, that's 5 TIMES more rainfall, not, say, 5% more.
Anyway, for the rest of Kolbert's piece, please go to the New Yorker site here...

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July 6, 2011

A Swedish Burger Chain Says "Minimize Me"

Last week I wrote about how eating less meat was the best way to reduce your food's carbon footprint. But what do you do if you want to be a responsible corporate citizen and you sell fast food? Well, I think your company would look a lot like Max Burgers, based in Sweden.


I recently spoke to Richard Bergfors, the CEO (and son of the founders) of this unusual 44-year-old "fast" food chain. With 3000 employees and about $200 million in revenue, Max Burgers is a great example of how a midsize company can carve out a profitable niche through a focus on sustainability — even in an unexpected sector.

In 2000, the company set a new strategy focused on the word "fresh." The leaders looked closely at every ingredient and reduced fat, salt, and sugar, and eliminated genetically modified organisms (GMOs) and trans fats. The menu got healthier, with multiple side options besides fries, 10 drinks with no added sugar, and a selection of darker, healthier breads. The company now sources 100% of its beef and chicken — and 90% of all its product — locally.

To explore its broader climate impact, the firm started working with Swedish thought leaders Natural Step, which, not surprisingly, identified beef as the biggest problem for the company (80 to 85 percent of the footprint). Bergfors acknowledges that industry-wide climate-friendly beef is still a long way off, so Max Burgers plants trees in Africa to offset its carbon footprint. New stores also use solar panels for 15 to 20 percent of electric needs.

But perhaps the most surprising thing this company does is try to influence its customers to buy less meat. Quick reminder: the chain is called Max Burgers. This counterintuitive strategy is the kind of heresy I love — asking customers to use less of your core product. Max Burgers accomplishes this by adding more non-meat items to the menu, prominently displaying climate footprint data in store (there's transparency for you), and suggesting customers buy chicken, fish, or veggie sandwiches periodically (a là Meatless Mondays).

In 2004, a golden marketing opportunity came along with the launch of the documentary Supersize Me, which followed director Morgan Spurlock as he ate only McDonald's food for 30 days. Max Burgers decided to launch a tongue-in-cheek "Minimize Me" campaign. A customer, much like Subway's famous Jared, ate only Max Burgers for 90 days and lost 77 pounds. Two years later, the company re-ran the promotion with multiple people competing on the Max-only diet.

The result of all these efforts is a more sustainable burger chain that's telling everyone to eat less meat, and doing so profitably. The mix of non-beef products is 30% higher than it used to be. But the profit margins are very high.

Bergfors reports that his stores are averaging 11 to 15 percent profit margins versus 2 to 5 percent at the big name competitors. He says Max Burgers is the most profitable, fastest growing chain in Sweden, expanding at 20% per year (and 5% same store sales growth) in a flat market. Granted, higher-end niche brands generally do have higher margins, but this is not an overly small company, and it doesn't seem to be sacrificing anything with its "minimize me" strategy — quite the contrary.

Of course a family run company always has more leeway to act on values (see Patagonia, the prime example). As Bergfors told me, "we've always done things a bit differently — the goal is greater than to just maximize profit." But it's still a business, and in the next breath he said, "we're profit driven and like to make a profit like everyone else...but we don't put profit first...we don't have to maximize profit and we can care for people and the planet we're living on."

But given Max Burgers' profit levels, it seems that maximizing all value, not just profits, can be darn good business.

(This post first appeared at Harvard Business Online.)

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July 26, 2011

Innovators, Meet Your Old Friend: Government Regulation

In the midst of the debt ceiling debacle, the House recently found the time to vote on (and fail to pass) a bill that would've repealed the so-called "light bulb law" that raised energy efficiency standards for lighting. The mandate was considered by authors of the repeal attempt — and apparently by 233 House representatives — as a "government intrusion."

Hear, hear! I'm tired of all these higher government standards. I want to retain the "freedom" to buy a refrigerator that uses as much energy as possible (and runs on coal you can shovel into the front), buy clothes and furniture as flammable as possible, purchase food without any safety standards and take my own darn risk of e.coli. Oh, and I want drive my car without that annoying life-saving seatbelt.

Kidding aside, this vote was absurd. If the bill hadn't been brought to the floor under some arcane two-thirds majority rule, it would've passed. The House has continued its attack by trying to defund enforcement of the bill. This is a really bad idea.

It may seem heretical in today's anti-government mindset, but I'll say it: many regulations and standards are very good for business. Here are a few reasons that the continued attack on the light bulb bill makes no sense, and in fact, why we should be passing a lot more laws like it:

1. Government standards, and particularly energy efficiency standards, are, well, standard.

Quick history: President Bush, who I think was a Republican, signed an energy bill in 2008 which raises efficiency standards for all new light bulbs starting in 2012. And the anti-freedom Congressman who put those standards into the bill: Rep. Fred Upton, also a Republican (he has now, as the Times put it, "reversed his position on the standards he authored").

In short, before recent hyper-political times, this country passed bipartisan safety and energy standards for decades on everything from boilers to cars and trucks to heating and cooling systems.

Critics claimed this particular law was the end of the incandescent bulb. But the bill does not pick technologies; it says how much energy the bulbs can use. It's the classic and most effective use of government mandates: set the standards and let the market decide how to meet them.

2. Efficiency standards drive innovation and save lots of money.

To be fair to critics, the standard did effectively rule out most incandescent bulbs at the time it passed. But then something totally expected happened: companies got creative. As the New York Times reported on July 5, "Incandescent Bulbs Return to the Cutting Edge." Apparently, some people didn't get the message that regular bulbs were dead. Instead, companies like Philips — while innovating around the new CFL and LED technologies — took the 100+ year-old bulb and made it 30% more efficient and last three times longer.

This pattern in common in industries affected by efficiency standards. Look no further than the dramatic innovation in refrigerators. Art Rosenfeld, the godfather of California's energy efficiency movement, likes to show the powerful chart shown here (from NRDC's David Goldstein). Due in large part to aggressive efficiency standards, the energy use and price of new refrigerators has plummeted — all while the size more than doubled. The innovation has saved consumers many billions of dollars.

(Note: Rosenfeld's work has been at the core of California's amazing record of holding per capita energy use flat for 40 years while the rest of us increased energy use 50%).

3. The companies most affected by these standards aren't complaining that much anymore. (Hint: higher product quality and efficiency makes companies more competitive)

One of the biggest battles over efficiency is often waged around automobile miles per gallon targets. The creativity of the auto industry over the last decade or two has been driven (sorry) by higher oil prices at times. But high standards on vehicle miles per gallon around the world have been even more effective (see page 18 of this UN report for chart comparing EU, Japan, China, and the trailing US on mpg standards).


The U.S. is in this game also — the Obama administration is proposing a new rule that would force automakers to raise their fleet average to 56.2 mpg by 2025. The Washington Post reports that this rule could save us 4.7 billion barrels of oil and $705 billion over the next 20 years. Even with these benefits, we'd normally see the auto companies fight hard, and there's always haggling. But this time it's a bit different. GM has broken from the pack and indicated that it would figure out a way to meet the standard. As GM's North America President, Mark Reuss put it recently:

It's our job to [figure out] what it takes to do it. The auto industry does not get easier. It always gets tougher. That's the challenge and that's what our jobs are. If even-stricter guidelines require billions more in investment, so be it. It's not an either/or thing. It's how we get there with cars and trucks that consumers really want to buy at a [price] that doesn't put unreasonable cost on them.

GM, after lagging for many years on product efficiency — a strategy that basically killed the company in 2008 when oil prices spiked — seems to get it now. As Reuss indicates, high standards push companies toward what consumers will demand. And in a world of expensive energy and tight resource supplies, they'll want cars that sip fuel.

In short, those who complain that higher expectations on energy efficiency will "kill jobs" or be destructive to industry aren't giving our business leaders much credit. Companies can and will innovate. It's in their best interest for many reasons, including the fact that the rest of the world continues to raise the bar. Multinational companies need to keep up to stay competitive.

And it's in our vital national interest to continue getting more efficient as quickly as possible. While energy efficiency standards may not be a complete solution, they have represented a rare bright spot in the nearly defunct national energy and climate policy realm. So let's stop the silly votes, move forward, save everyone some money, and help drive innovation.

(This post first appeared at Harvard Business Online.)

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September 13, 2011

Climate Reality

I believe in science and facing facts or, to borrow words from an important awareness-building event today, I believe in “climate reality.” I'm donating my Twitter feed and this blog space to point people to the Climate Reality Project , Vice President Gore's latest attempt to light a fire under everyone about our climate.

In my work, I try to convey the benefits of going green to executives around the world. I generally avoid talking about climate change, at least in the U.S. where it's such a political hot potato. So instead I demonstrate how profitable it is to reduce your footprint (including carbon), regardless of the science on climate change.

My basic logic is this: decoupling our companies and economy from fossil fuels, and oil in particular, is just good business. By reducing energy use and carbon pollution, companies save money, reduce the risk that comes from relying on volatilely-priced fuels, and reap the benefits of taking part in the clean economy, which will drive innovation and generate vast wealth. But it's also a matter of national security (which is why the U.S. Navy is greening itself faster than any company I know). So, no, it doesn't matter if you "believe" in climate change.

But every now and then, I have to state clearly what I believe. Saying "it doesn't matter" is true, but it's not leveling with everyone about the depth of the challenge.

So here's my belief: The scientific evidence that the earth is warming and humans are the primary cause is vast, overwhelming, and very convincing. We are destabilizing our one home, and it's endangering our economies, communities, and even our species. The fundamental change in how the planet works – which has begun already with record droughts, floods, heat waves, and storms – is larger than we realize..

I think a lot about what a "real" approach on climate would mean for business, which will play a pivotal role in finding and spreading solutions to our energy and climate challenges. While many companies have begun the hard work, they need to step up their game.

On the day-to-day level, that means setting much more aggressive carbon reduction goals (80 to 100% reduction by mid-century or sooner). A few leaders, such as Wal-Mart, P&G, and Sony have set 100% renewables (and/or "zero impact") as goals. The rest of the business world needs to follow, and truly lay out a path to get there.

On the larger level, companies need to pursue what I call "heretical" innovation that rethinks business models and provides goods and services with dramatically reduced environmental footprint (see my blogs on this, here and here).

I see a deep parallel in all of this with one of strategy guru Jim Collins' major principles in Good to Great: "Confront the brutal facts." Collins makes a compelling case that businesses won’t succeed if they don’t tell themselves the truth.

The same logic applies to each of us as individuals, and to all of us collectively as a country and planet. It's time to confront our brutal facts -- our climate reality -- and get moving.

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December 22, 2011

Top 10 Green Business Stories of 2011

Yes, it's December again somehow: time to look back on what we've learned and oversimplify into a handy list. Here's my take on the 10 big stories in sustainability and green business this year:


1. The usual sustainability drivers got stronger
Ok, this one is cheating a bit, but on a fundamental level, the top themes in green business haven't actually changed too much (see the 2010 list). So, rather than take up valuable list real estate with these perennial favorites and big-picture drivers, I'll quickly list them in one big bucket of mega-trends:

  • The rise of the consumer around the world, related to...
  • China, China, and China. From relentless demand for resources to bamboo-like 9% growth to vicious competition for the technologies and industries of the future, China will be the big story for a long time.
  • The greening of the supply chain. Big organizations keep asking more of their suppliers.
  • Increased demand for transparency and its close partners, (a) the quest to define and develop useful sustainability metrics and (b) the growing sustainability data explosion.
  • The military continues to lead the way on energy and climate.
  • The ongoing failure of policy at a global level (with the important exceptions of some successes/workarounds such as new mileage targets for cars and trucks and a carbon tax in Australia).

These drivers underpin a number of stories from 2011, but a few new themes came out as well. Here's the rest of my top 10 stories, with callouts for companies and examples that typify the trend.

2. Malthus strikes back: Coca-Cola takes an $800 million hit on commodity costs
Coca-Cola was not alone in facing increasing costs in 2011; one of my clients, Kimberly-Clark, took an earnings hit from record pulp prices. These companies are notable victims of a new reality: resources are constrained and input prices are fundamentally rising.

For over 200 years, from Thomas Malthus to the Limits to Growth gang, many people have made the case that it won't be long before we'll run out of food, energy, materials, and on and on. It's an idea that has enthralled many, but has seemed to be wrong. But this year, something felt different as we hit 7 billion hungry, striving humans on the planet. While "running out" isn't really the right phrase, it's clear that delivering many commodities to market is getting harder and more expensive (we don't dig for oil a mile under the ocean for the heck of it). And the dangerous mix of supply crunch and rising demand is only increasing, across nearly all commodities.

In January, China "seized" its rare earth metals (meaning it wouldn't export them anymore). In June, the New York Times declared a warming world hostile to food production. The best analysis of the resource scarcity mega-trend came from asset manager Jeremy Grantham. His analysis of commodity availability on a finite planet is compelling, thorough, and absolutely fascinating. Here's the gist: after 100+ years of fundamentally declining resource prices, the data show a rising trend for nearly every input into our society. Business as usual is no more.

3. Climate Change Arrives: Texas weather triumphs over (some) ignorance
Climate change is here. The list of "once-in-a-century" storms, floods, and droughts this year is too long to list. I know, I know — no single storm or season "proves" climate change. Was a year like 2011 possible in a world without climate change? Of course. But please. Was a year like 2011 likely? Not at all. In the words of climate scientist Jim Hansen, we've loaded the dice in favor of extreme weather events.

From Thailand to Pakistan to Texas, some areas are deluged with water, while others have absolutely none. Please look at the numbers for how dry and hot Texas was this summer (I'll wait). The data speaks for itself: Texas' heat was literally off the charts this year. What was once temporary drought is looking more like permanent change. For another angle on a changing "normal," read Jeff Goodell's piece in Rolling Stone on "Climate Change and the End of Australia." Finally, if the immediacy of the "look out the window" method of gauging climate change didn't work for some, at least one major climate skeptic changed his tune based on longer-term data. Richard Muller ran the models himself and discovered that, surprise, the thousands of scientists before him had gotten it right. It's probably wishful thinking, but I believe the climate debate is actually over (and a solid majority of Americans agree).

4. High-profile "failures" shake up clean tech: Solyndra has its day in the, um, sun
What can one say about the failure of solar company Solyndra? It certainly has become a media darling for clean tech skeptics. Soon after this quasi-fiasco, a few other stories seemed to indicate that corporate America was backing off of green tech. Google stopped its high-profile pursuit of cheaper-than-fossil-fuel renewables, and California utility PG&E quietly pulled the plug on its carbon offset program. In my view, none of this is all that distressing. So one technology and company failed miserably (and perhaps the government made a bad investment choice). And some initiatives didn't work out as planned. So what. Whether it's government money, venture capital, or corporate initiatives, you gotta place lots of bets to get some winners. These were all experiments, and you always learn from what doesn't work. But the real reason I'm not too worried is that...

5. ...clean tech is rising fast: Renewable investment tops fossil fuels for first time
Markets have a remarkable way of sorting the wheat from the chaff. While the overall carbon emissions news is not good, the renewable energy market is growing very fast. The sector is larger than most people realize, with clean tech investment hovering around $200 billion globally. Total investment in new power generation is a good indication of where we're headed, and for the first time renewables beat fossil fuels globally. Right now, the U.S. and China are entering a trade battle over solar subsidies, which tells me it's a real market now. They wouldn't be arguing if the prize were not very large.

5b. Nuclear on the outs

Following the nuclear meltdown in Fukushima, Japan, the once-resurgent nuclear industry is flatlining: generation actually fell globally in 2011, with Germany alone shutting down 8 gigawatts' worth. In September, Siemens, one of the world's largest nuclear power plant suppliers, exited the business. CEO Peter Loscher declared Germany's plans to move aggressively toward renewables "the project of the century."

6. Water rising — both literally and as a serious issue for business: Honda's supply chain gets slammed, Levi's gets creative
A list of floods that devastated lives, homes, and countries this year would be tragically long. So it's no wonder that business started to wake up to the serious danger that storms and shortages present to their operations, both from direct damage to property and from massive production interruptions (i.e., "business continuity"). Think back to the January floods in Australia which covered an area larger than France and Germany combined. The extreme weather seriously disrupted coal production, one of the most important economic engines in the country. At the microeconomic level, consider what Thailand's floods have done to the market for disk drives, or to supply chains for Honda and Toyota (which are dealing with a double flood hit from the tsunami as well).

On the use side of the water issue, companies with products that depend on water in production (beverages) or in use (shampoo, apparel) are also seeing the writing on the wall and getting creative. Levi's announced a low-water jeans production method, Unilever started asking customers to shorten showers, and beverage companies are working with farmers and NGOs to drive water use down throughout the value chain (see my last blog, co-written with Andy Wales from SABMiller). In 2011, the phrase "water footprint" became a lot more common.

7. Value chain and transparency partnerships growing: The apparel industry bands together
One of my favorite new partnerships is the new Sustainable Apparel Coalition, an impressive mix of powerful retailers, apparel manufacturers, and NGOs. The group is leveraging extensive data from Nike and the Outdoor Industry Association on supplier sustainability performance (energy, water, toxicity, etc.) for "every manufacturer, component, and process in apparel production." The goal: to reduce negative environmental and social impacts of the $1.4 trillion market for clothes and shoes.

The larger trend here is the continued growth of "open" — open data and open innovation, including new value-chain business partnerships and cattle-call contests inviting in any and all ideas. The movement has been building for years, from P&G opening up its product development pipeline early in the 2000s to the launch of the GreenXchange for sharing green patents early in 2010. But the trend accelerated this year, with GE's expanded Ecomagination Challenge and other coalitions and open competitions.

8. Valuing and internalizing the externalities: Puma Calculates its Environmental P&L
A few very cutting edge companies are starting to ask some deeper questions about the value they create and destroy in the world. Puma, in a surprise leap to the front of the sustainability leadership pack, commissioned TruCost and PwC (full disclosure: I have a partnership with PwC) to assess the value of its total environmental impacts from operations and supply chain, including carbon pollution, water use, land use, and waste generated. The total: 145 million euros. In a similar vein, Dow Chemical launched a 5-year, $10 million partnership with The Nature Conservancy to "value nature" (so called "ecosystem services") as an input into their businesses. It's unclear what companies can do with these numbers since externalities are by their nature, well, external to the regular P&L. But it's the beginning of something very important — companies are starting to understand the real value and costs of their businesses, to themselves and to society. Watch this space.

9. The people speak: Keystone and OWS
Speaking of getting companies and governments to think longer term about value and costs to society: against all odds and expectation, the protests against the Keystone XL pipeline from Canada — led most prominently by uber-environmentalist Bill McKibben — were successful (for now). And what can one say about Occupy Wall Street? The movement is, in part, about this larger question of value and values. Do we value the right things (equity, fairness, justice) or just promote growth and profit above all? Currently, our businesses are driven entirely by quarterly profits. Pursuing the short-term payback can cause a firm to deviate wildly from actual, long-term, sustainable profitability. This disconnect was bound to stir some passions eventually. Whatever your politics, ignoring or dismissing this movement is a big mistake. The concerns underpinning the anger out there stem from concern about what's good for the long-term, and what's truly sustainable. None of these questions are going away.

10. A path to sustainable consumption begins to emerge: Patagonia asks us to buy only what we need
Perhaps the most heartening business story of the year came from perennial thought (and action) leader, Patagonia. Its Common Threads campaign/business model questions consumption at its core. The company announced that it would take back its clothing and refurbish, resell, reuse, re-whatever. The website proposes a grand bargain - we make clothes that last, and you don't buy what you don't need. A holiday ad got more specific and demanded we "Don't buy this jacket." Patagonia is testing new ground and it's not a gimmick — it's a sign of the future.

Looking Forward to 2012 and beyond: New business models coming
Patagonia has always been at the leading edge; it was one of first companies to buy organic cotton or to turn recycled plastic into fleece. Now it's showing the way to new business models. I've written about this kind of heresy before, but the few examples out there are generally B-to-B (Waste Management, Xerox). Patagonia's move is a warning shot over the bow that the consumer-facing consumption question is coming. The near future will hold more questions about how businesses can and should operate in a resource-constrained, hotter, drier (or wetter) world. And companies will increasingly question the wisdom of focusing on quarterly profits. It won't all come to fruition in 2012, but it's on its way.

As usual, I'm sure I'm missing many great stories in my list. I look forward to your suggestions. Happy holidays and Happy New Year!

(This post first appeared at Harvard Business Online.)

(Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @GreenAdvantage)

May 14, 2012

Microsoft Taxes Itself

This week, Microsoft is announcing an unusual initiative that it hopes will change how the company operates: an internal fee on carbon.

Starting July 1st — the beginning of the company's fiscal year 2013 — the software giant will charge all of its 100-plus global offices and datacenters a fee for every ton of carbon they produce (mostly from plugging into the electric grid, so-called "indirect" emissions). The money collected will go to purchase Renewable Energy Certificates (RECs) and carbon offsets, allowing Microsoft to declare itself carbon neutral.


Although carbon neutrality is a claim that's gotten less credible over the last few years, Microsoft seems well aware of the challenge and is handling it well. Here's the problem with asserting neutrality: it's hard to ensure that any carbon reductions you're paying for — from, say, capturing methane from a landfill or replacing inefficient cook stoves in Africa — would not have happened anyway (this is the problem of "additionality").

So to navigate this tricky terrain and make the most of its efforts, Microsoft is working with a handful of NGOs and a well-respected partner, Sterling Planet, which will buy the RECs and offsets.

Interestingly, however, carbon neutrality doesn't seem to be the real point of Microsoft's initiative. From my conversations with the company, I take away four major reasons they're doing this:

  1. Behavior change. Microsoft seems more interested in lowering overall carbon emissions and energy use, not just neutrality in and of itself. This focus on actual emissions and outcomes is the right way to go. The offsets become a tool, a last resort to be avoided, and both energy efficiency and using renewable energy (onsite or directly purchased) become the paths of least resistance and cost. As Rob Bernard, Microsoft's Chief Environmental Strategist says, "If you run one of our offices, and you choose to use carbon-based power, we'll charge you more for your energy." And this charge will, in theory, move managers to make greener choices. So the point of this fee, like all "taxes," is to change behavior, discouraging some pathways by making them less palatable.

  2. Accountability throughout the organization. Each division is going to own this issue. Let's say NGOs or customers are asking questions about what kind of energy Microsoft uses to power its datacenters. The executives running that facility, not just centrally located sustainability professionals, will be empowered to address any concerns, drive for greater efficiency, and choose greener power. Pricing carbon is an excellent way to raise awareness internally before the external pressure builds.

  3. Risk reduction. Bernard and his colleague who's running the program, TJ DiCaprio, have encouraged the organization to better understand its profound energy-related risks. As Microsoft takes on more of its customers' operations through cloud-based services, reliance on the utility grid creates real operational and price risk (from outages and volatile prices). Cloud service providers are increasingly proxies for utilities — they require 100% uptime, significant quantities of their own power, and predictable variable cost (which for renewables is nearly zero).

  4. Sales/Becoming the Vendor of Choice. The company knows that its customers are increasingly looking for providers that can offer reliable service at low cost — and low carbon emissions. Driving the organization to use more alternative energy helps land large customers concerned about their value-chain footprint.

So how will Microsoft make this initiative a reality? The execution plan has some interesting elements (see a pithy white paper on the full carbon neutrality plan here). The company will measure carbon footprint in different operational buckets such as plug load (electricity used) and business travel, and then offset each category "like for like" (i.e., buying RECs for electricity and offsets for travel). The fees will vary as well; for example, the company will charge employees for all air travel on a per-mile basis, which raises awareness at the individual level.

The program is smart, but I'm left with one major concern: Will the fees be high enough to change behavior? Right now, the market price of carbon is very low, so Microsoft is charging a small amount per ton. Even so, they will collect north of $10 million, which is enough to buy offsets. Over time, by my calculations, given the growth in cloud services the company is banking on, these carbon fees could rise to a more noticeable $50 million by 2020. But let's be honest, these numbers are clearly rounding errors to a company that netted $23 billion last year.

To be fair, as the behavioral psychology gurus (from books like Nudge) will tell you, sometimes just making people aware of a cost is enough to foment change. So the minor nudge here may be good enough. But in the longer run, the price on carbon needs to be more of a sledgehammer than a nudge. It should reflect the full cost to society of health impacts, national security risks, and price volatility, all of which add up to tens of dollars per ton or more.

Pricing carbon on your own, without a real market in place, is hard, which is why there are so few examples of companies doing it. Going back over a decade, BP put in place an internal carbon trading system that used a "shadow" price to encourage divisions to find the cheapest reduction opportunities (others like Shell have also used this tactic). But executives weren't charged real money. And more recently, athletic apparel company Puma (working with my colleagues at PwC and the UK's TruCost) produced an "environmental P&L" which measured the "real" cost of carbon and other environmental inputs like water. The company is exploring how to include the "price" in operations and give ownership to line managers; it currently says the metrics will "inform operational decisions."

So even with important experiments like these that have gone before, Microsoft's program is perhaps the first actual internal fee at this scale (my research isn't turning up anything exactly like this — please send me examples if you have them!). It's innovative and committed, but it also points to a massive global failure of leadership on climate policy. We should put a price on carbon across the entire economy. But as Bernard says, "While governments have an important role to play, we hope there's a benefit in us moving faster than the policy world."

He's absolutely right. Companies cannot wait for the government wheels to turn to price and manage carbon — the cost saving, risk reduction, and brand benefits of leading are too high.

(This post first appeared at Harvard Business Online.)

(Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter@GreenAdvantage)

May 24, 2012

3M's Sustainability Innovation Machine

Planes are now held together by tape, not bolts. It's really, really strong tape, but still. Who knew the maker of Post-It Notes could help keep aircraft aloft?

This somewhat frightening factoid is just one of the fascinating things I learned in a recent visit to the St. Paul, MN, headquarters of the perennial innovation leader, 3M. During my daylong visit, I observed a quiet, longtime sustainability leader plugging away, creating new products that will help the world save energy, water, waste...and lots of money.


For good reason, the $30-billion company has long been held up as a role model of how to manage innovation. In the sustainability realm, 3M pioneered what now seems like an obvious idea: avoiding pollution before having to clean it up. The company's simply named Pollution Prevention Pays (3P) program has saved many billions of dollars over 36 years.

The environmental results of its near obsession with eco-efficiency are frankly astonishing. In the last two decades, 3M has slashed toxic releases by 99% and greenhouse gas emissions by 72%. It's the only company that has won the EPA's Energy Star Award every year the honor has been bestowed.

3M's sustainability leadership has come mainly from its eco-efficiency success, but these practices are increasingly the norm in business. So I was happy to observe abundant evidence of the company pivoting to make sustainability a driver of business growth as well.

Before my presentation at an employee event, I listened as CEO Inge Thulin and senior execs from each of the major divisions laid out their strategies. Thulin spoke about sustainability being " our new vision" of growth and innovation. Other execs bragged about the high percentage of their division's sales coming from sustainability and "energy preservation."

But most importantly, I heard about some great new products and technologies. When you're describing a company that launches an average of 20 new products every week, it's hard to pick favorites. But here are a few examples of what sustainability innovation looks like:

  • The world's highest reflectivity mirror film, which can take sunlight from a roof and carry it deep into a building — the length of a football field, in fact — all while losing less than half of the light. I saw this technology paired seamlessly with some regular fluorescent lighting and working well in an interior conference room. As one exec said, somewhat heretically, "Why build solar panels to convert sun to electricity to then turn on lights if you can do this?" (Note: I'd do both!)

  • Pipe linings: Every year, due in large part to 250,000 water main breaks, our cities lose 1.7 trillion gallons of treated water (equal to the total water use of the 10 largest cities). To help solve this problem, 3M launched a product that sends a machine down into pipes to apply a fast-setting lining which structurally reinforces them, without having to go to the significant expense of digging them up first.

  • An industrial paint application product/service that reduces toxic solvent use by 70% and is saving customers, mostly auto repair shops, $2 billion from simpler paint operations and reduced waste. It's also a sizable business for 3M.

  • 3M's Novec Fluids, which provide cleaning, coating, cooling, and fire suppression for the electronics industry (chip manufacturing, datacenters, and so on) in a non-flammable, non-ozone-depleting way. It's also remarkably safe for users and technology — you can safely dip an iPhone in the stuff.

3M is a refreshingly humble company: every estimate or "boast" is carefully and conservatively calculated to not overstate the case. For 36 years, the company has used only first-year savings to tally the benefits of pollution prevention projects — that's an effective discount rate of, well, infinity. And with the water-pipe-lining technology, the payback calculation for customers includes only labor savings and overall construction efficiency. A more thorough accounting would add in the significant water and energy savings, as well as reduced impacts on local economies (traffic and business disruption).

But there are signs of a feistier attitude brewing. The new CEO is making sustainability, growth, and innovation a powerful trifecta. With Novec Fluids, the team is not only working with key customers and early adopters, but it's also pushing the market toward greener options by advocating for tougher government standards and regulations. This kind of pro-environment lobbying is an advanced sustainability strategy that only real leaders can pull off.

Finally, I toured the company's relatively new innovation demonstration center. It's a customers-only, hands-on science museum that proudly demonstrates all that 3M can do through cool combinations of its 46 base technologies.

Bottom line: sustainability is deeply integrated in 3M's innovation pipeline, which is the engine of the company. The company's core new product development process includes key sustainability questions and criteria for designers to address.

Many companies start talking about sustainability efforts before they've really made significant changes to the company or its products. Although 3M may have the opposite problem — getting too little brand and marketing value out of its efforts — it is usually smarter to execute first, and then tell your story. In 3M's case, it's nice to see the engineers at this quiet company just out there doing it.

(This post first appeared at Harvard Business Online.)

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September 9, 2012

Politicians Who Deny Climate Change Cannot Be "Pro-Business"

It finally seems to be dawning on many Americans that there's something to this climate change thing. The historic drought has been hard to ignore. While belief in a long-term trend because it's hot out right now is a bit ridiculous, it's a start.

You can see a shift in how the media covers weather. The statement "because of climate change..." is often stated clearly without caveats such as, "what some scientists think may be a warming planet." You see it in the UN calling for action to help the hungry cope with rising food prices "in an age of increasing population, demand and climate change."

And you see it in the growing number of mega-corporations — including America's Alcoa, Coca-Cola, Cisco, HP, J&J, Nike, and P&G — signing on to the "2 Degree Challenge Communiqué," a call for the world's governments to take strong action to slow greenhouse gas emissions.


Climate change is basically accepted as fact the world over. But you wouldn't know it watching our political conventions (or at least one of them). So while the world seems to be waking up to a fundamental, existential threat to our species (and not to "the planet," which will be fine with or without us), the US policy debate remains mostly deaf, dumb, and blind.

Climate change has become a political "third rail," harder to talk about than changing Social Security or Medicare. We didn't hear any mention of it at the GOP convention, except as a punchline, and we didn't hear much at the DNC convention...except for one quick, but important, remark from President Obama. Former President Clinton mentioned energy efficiency and Vice President Biden said the words "clean energy" once. But then President Obama, after duly noting the chance to create more natural gas jobs, spoke about building wind turbines and reducing dependence on foreign oil. Finally, he stepped firmly on the third rail: "Climate change is not a hoax. More droughts and floods and wildfires are not a joke; they are a threat to our children's future."

This is great, but let's not get too excited. One line does not a policy make.

Still, Obama's admission that climate change is real (a low bar for showing leadership these days) is light years from Governor Romney's dismissive attitude. His convention speech mocked President Obama for his earlier promise to "begin to slow the rise of the oceans." Romney offered instead to "help you and your family" — as if the health and state of our entire planet has nothing to do with the health of our families.

Here's what makes the general silence on climate and the mocking from the self-identified pro-business party so absurd: tackling climate change is the smartest thing we can do for both our public health and our private sector. Reducing carbon emissions from our power plants, cars, and factories cleans the air and saves a lot of money. At the macro level, the burning of coal alone costs the U.S. about $350 billion per year in health (asthma, heart attacks, and so on) and pollution costs. At the micro level, from companies down to households, the opportunities to get lean and save money are vast.

But more strategically, tackling carbon is an immense economic opportunity. Here's billionaire and entrepreneur Richard Branson on the upside potential:

"I've described increasing levels of greenhouse gases in the atmosphere as one of the greatest threats to the ongoing prosperity and sustainability of life on the planet. The good news is that creating businesses that will power our growth, and reduce our carbon output while protecting resources, is also the greatest wealth-generating opportunity of our generation. [There is no] choice between growth and reducing our carbon output."

This quest will drive innovation and create millions of jobs for some lucky companies and countries. Is this multi-trillion-dollar opportunity something we really want to miss out on? The other major economies are not sitting this one out. Germany is quickly moving its electric grid to renewables. China is committing hundreds of billions of dollars to energy efficiency and much more to the clean economy in general.

But let's say you don't buy the argument that fighting climate change keeps us competitive globally, saves trillions of dollars, and generates new wealth. Then how about the overwhelming national security rationale? Using less oil, for example, reduces funding to petro-dictators around the world. The former head of the CIA, James Woolsey, puts is very bluntly: "Your gas money funds terrorism."

On this score the difference between the parties is stark. The DNC's platform includes the words "climate change" at least 18 times and lists it as an "Emerging Threat" along with cybersecurity, biological weapons, and transnational crime. While "emerging" may not be the word I'd choose, it's leaps and bounds beyond the GOP' s party platform, which mentions climate change just once...and again, only to mock it. Their platform complains that the Obama administration has elevated "climate change" (with the sarcastic quotation marks) to the level of a severe threat to our security.

But let's be clear: it's not the Democrats or even President Obama specifically that declared climate change a national security threat. That would be the Pentagon in its Quadrennial Defense Reviewtwo years ago.

A strong plan to tackle climate change through government policy, business innovation, and citizen action is not just something that's not optional; it's preferable. Moving away from carbon to a cleaner economy makes us healthier, more profitable, and more secure.

My work is not political — I try to help companies create business value from sustainability and green thinking, so I normally avoid these kinds of discussions. But the discrepancy in party positions on this most critical issue has become too extreme to ignore.

There's blame on both sides, but let's not pretend the two parties neglect climate change equally. Yes, it's a shame that most Democrats will not stand up and proudly stand behind many of the positions in their own platform. But the GOP's denial of climate science, and all the risks and opportunities it presents, is surreal.

Their views and policies on climate won't help our businesses deal with, and profit from, the largest market shift we've ever seen. And they won't help prepare our country for the hard realities of life in the 21st century.

(This post first appeared at Harvard Business Online and on Bloomberg - see the active commentary on either.)

(Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter@GreenAdvantage)

November 2, 2012

Hurricane Sandy=Climate Change? Some big names are believing it.

[Note: With power out and limited connectivity, I've gotten behind on re-posting blogs that I've written elsewhere like HBR ...I'll put a few in a row up over the next few business days.]

This is just a quick blog to recognize that the devastation from Hurricane Sandy has had one important silver lining -- many mainstream voices, especially in the business community, seem to be waking up to the connection between extreme weather and climate change. (My take on this is on my Harvard Business Review Blog here, and I'll post it here next week.)


Two news items have given me real hope.

1) Businessweek blares on its cover, "It's Global Warming, Stupid"
After the required caveat that no single storm is "caused" by something as long-term as climate change, the business magazine declares, "Clarity, however, is not beyond reach" and explores how scientists are increasingly willing to draw the connection. Bravo Businessweek.

2) Mayor Bloomberg's titles his endorsement of President Obama, "A Vote for a President to Lead on Climate Change."

In his own words, "The devastation that Hurricane Sandy brought to New York City and much of the Northeast -- in lost lives, lost homes and lost business -- brought the stakes of Tuesday’s presidential election into sharp relief...Our climate is changing. And while the increase in extreme weather we have experienced in New York City and around the world may or may not be the result of it, the risk that it might be -- given this week’s devastation -- should compel all elected leaders to take immediate action."

Bloomberg then cites Obama's work on fuel-efficiency and increased controls on mercury emissions which restricts coal burning...and highlights how Romney has reversed himself on climate change since his days as Governor.

This is clearly noteworthy that a well-respected moderate has made climate change the deciding factor in his vote for President, especially since the topic did not come up in the debates for the first time since 1984.

The media, the business world, politicians...all are waking up to the deep connections that today's events have to longer-term trends and the actions we all take. I have hope that we will mobilize fast enough now.

(Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @GreenAdvantage)

November 5, 2012

Should Companies Care If Hurricane Sandy Was "Caused" By Climate Change?

(Catching up on re-posting pre-storm and storm week posts...happy voting day)

Hurricane Sandy has killed more than 100 people in the U.S. and the Caribbean, and caused billions of dollars in damage. The scene around my Connecticut home is not pretty, with downed trees and power lines everywhere. It's a serious time, and a time for some serious questions. Why did this happen? And from a business (or any) perspective, does it matter whether this megastorm was caused by climate change? I'd say no... and yes.


First, the "no" part...

Regardless of the cause, the cost to society of extreme weather has been rising for decades. The insurance giant Munich Re recently released a new report on the rapid increase in weather-related losses. In North America, the number of severe events has quintupled over the last 30 years. And while the report does indeed make the climate change connection directly, on some level it doesn't really matter for business. The problems and costs of extreme weather are the same either way.

Take the example of one of my clients, a Fortune 200 consumer products company. As the VP of global risk management told me, the most expensive events in company history in every weather category (flood, earthquake, hail, wind, etc.) occurred in the last few years. After making $50 million in insurance claims in 2011 alone, the company's insurance rates will certainly rise. But that's a side issue; the real problem is the constant threat to business continuity. At one of its large manufacturing plants in Asia, a drought stopped production for 3 weeks.

This kind of disruption is only going to grow. In the Thailand floods of November 2011, both the hard-drive industry and the automotive sector experienced serious supply chain problems. As Edmunds reported, car production dropped by 600,000 units and, in particular, "only a few critical Thai-built parts laid Honda low."

In a deeply unpredictable world, the challenge for multinational businesses is how to build resilient, flexible enterprises that rely on natural resources a great deal less than today (meaning fewer fossil fuels, less water, reduced waste, closed loops on key resources, and so on).

Smart companies will be examining supply chains and operations very closely for risks associated with water shortages, floods, storms, and resource constraints. Risk assessment is going to get much sexier and much more important to global organizations. Their leaders will also seize the opportunity to offer products and services that help other companies and society deal with a world of weird weather. Think drought-resistant crops, new insurance products, distributed energy systems (so homeowners won't care if the power goes out), and perhaps boats for getting around Wall Street.

OK, now on to the "yes" part of the discussion.

First, the necessary disclaimer: Scientists say that no single storm can be tied to something as large-scale and long-term as climate change (see the active debate going on here). But in the words of NASA scientist James Hansen, we're "loading the dice" and increasing the odds of extreme events by heating the oceans and putting more moisture into the atmosphere. The devastation around New York City is exactly what was predicted to happen more frequently.

But let's get real about business impacts. If you're going to really assess risk to your operations now and in the future, you have to understand how climate change will increase the likelihood of severe events and what it will mean for your value chain. Not doing so would be costly, stupid, and irresponsible to your shareholders.

Companies are waking up to the immediate impacts. The most recent report from the Carbon Disclosure Project (CDP), compiled with the help of PwC (full disclosure: my consulting firm has a partnership with the U.S. arm of PwC), shows that most global companies acknolwedge climate-driven risks. Fully 37% of those reporting to the CDP — most of the world's largest companies — say that climate change is already creating business risk (up from 10% in just two years). Another 43% see risk to the business within the next 10 years.

So as companies wake up to this challenge, they are starting to talk about adaptation and the expense of getting ready for a hotter, dryer or wetter (depending on the location), more resource-constrained world. But adapting is just not good enough.

We really have to stop kidding ourselves that we can ride this out. We have to adapt, of course, but we also need to get going on a low-carbon agenda very quickly to mitigate the risk as much as possible. If you really listen to the scientists, the "business as usual" emissions path were facing over the coming decades could seriously destabilize the planet, which, I hate to state the obvious, supports our economy and way of life. The normal curve of expected possible outcomes is starting to include real risk to our species.

If you bring this level of threat down to the industry or company level, it causes you to rethink your business. As one tech executive said to me recently, "nobody's really going to care what operating system they have if they don't have food." Meaning, we better reduce the odds of disaster or our businesses won't matter much.

To those of you who fear that the cost of going low carbon will be too high, I have to ask: how expensive are storms like Sandy to business and society? In reality, tackling climate change is not an expense, but a very smart investment. It's a multitrillion-dollar business opportunity, or what Richard Branson calls "the greatest wealth-generating opportunity of our generation."

In short, this debate is about direction and speed. In terms of what direction your company should head to prepare for a riskier future of extreme weather, it doesn't really matter whether Sandy was caused by climate change or not. But how do we determine how fast we need to move in that direction? To answer that question, climate change does truly matter. It matters a lot.

(This post first appeared at Harvard Business Online.)

(Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

November 16, 2012

The Challenge of Climate Math

A nerd hasn't been this popular since, well, ever. Nate Silver, the creator of the election poll statistical hub FiveThirtyEight was declared the clear winner in the Presidential election. And on Fox News, election math was at the center of one of the most bizarre on-air moments in memory.


The numbers discussion then seeped over from polls to other politically charged topics such as climate change. David Frum, President George W. Bush's speechwriter, tweeted this gem: "Horrible possibility: if the geeks are right about Ohio, might they also be right about climate?"

This awakening about the math (and physics) of climate change has coincided with climate activist Bill McKibben's "Do the Math" tour, an awareness-raising series of events criss-crossing the country this month. The tour was inspired by McKibben's incredible essay in Rolling Stone magazine, "Global Warming's Terrifying New Math."

In this article, McKibben lays out 3 fundamental climate numbers: to stay below (1) 2°C of warming(the limit the world's scientists have said might help us avoid the worst of climate change), we can only burn (2) 565 more gigatons (a billion tons) of carbon dioxide, which will force a battle with the fossil fuel industry since it has (3) 2,795 gigatons in reserve. These are important numbers to wrap your head around, but what do they really mean for countries and companies? How fast do we have to change?

To answer these tough questions, we can turn to two of the world's best number crunchers, McKinsey and PwC (full disclosure: I have a consulting partnership arrangement with PwC US). Last week PwC released its Low Carbon Economy Index 2012 report, which calculated one simple, powerful number: In order to meet the 2°C warming target, we will need to reduce the global carbon intensity (how much carbon it takes to produce every unit of energy or GDP) by 5.1% every year until 2050. For perspective, in 2011 carbon intensity improved just 0.8%.

This number provided another view on some similar math from McKinsey, which concluded that the ratio of global GDP per ton of CO2 would need to rise tenfold by 2050.

OK, so the math is not pretty, but it is what it is. And it's not like the world is ignoring the challenge entirely. Here are some numbers that make me feel better:

  • $2.2 trillion: The size of the "climate economy" by 2020 according to the bank HSBC
  • $372 billion: China's budget for energy conservation and anti-pollution measures over the next few years
  • $260 billion: Global clean energy investment in 2011
  • $109 billion: Saudi Arabia's planned investment in its solar industry over 20 years
  • 50%: the portion of Germany's entire electric demand satisfied by solar energy during one sunny day in May, a world record
  • These are great macro stats. But the brutal logic of the McKibben, PwC, and McKinsey numbers applies at the microeconomic level as well. Meaning, I believe, companies need to acknowledge the math and shoot for a 5% reduction in carbon per year.

    It's not so crazy. The early leaders have a good start. Dow Chemical has reduced energy costs $9 billion since 1994. Walmart has improved the fuel efficiency of its distribution fleet by 69% since 2005. A large consumer products company — which tells me it will be going public with this story very soon — has already cut carbon in its own operations by 80%.

    Of course, the entire private sector will not achieve these results on its own. We will need strong global policies and a price on carbon. But given how profitable many organizations are finding the low carbon quest to be, they shouldn't wait.

    While it's a myth that companies make all decisions on ROI calculations (what was the exact return on that Super Bowl ad?), we do claim to love hard-nosed numbers. Let's not let politics or fear of the size of the task ahead get in the way of today's climate math.

    Climate data has trumped politics in the past. According to Sunday's op-ed by Cass Sunstein, the Harvard professor and co-author of the great book Nudge, Ronald Reagan embraced aggressive action to solve the problem of ozone depletion because he believed the cost-benefit analysis. Basically, it was cheaper to act than not to. Similarly, the math on climate action is getting better every day as the costs of inaction rise. As Sunstein points out, Hurricane Sandy will likely cost the country $50 billion (New York's Governor Cuomo has already asked for $35 billion in federal aid).

    Climate math is simply a constraint on the imaginary formula that is business as usual. But constraints drive innovation. We in the business community respect numbers and the best companies love challenges. Let's prove it.

    (This post first appeared on Harvard Business Online.)

    (Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter@AndrewWinston)

    December 22, 2012

    Top 10 Sustainable Business Stories of 2012

    It's time once again to try and summarize the last 12 months in a handy list. But before I dive in, some quick thoughts.

    It was an odd year for green business, and it began with some mixed signals about how far companies were coming on sustainability. A GreenBiz report indicated that progress had slowed or even regressed, but MIT and BCG also declared that sustainability had reached a "tipping point" with more companies putting sustainability "on the management agenda."

    In reality, both views were right. Corporate sustainability lost some of its sexiness from previous years, as it grew more entrenched in day-to-day business. Some parts of the agenda — eco-efficiency and resource conservation for example — are widely accepted now, and it's rare to find a big-company CEO who doesn't have sustainability on his or her radar.

    The mega forces driving sustainability deep into business — such as climate change, resource constraints, and transparency — are getting stronger. We may not be keeping pace with these pressures, but leading companies continue to evolve more sustainable strategies and tactics. Let's look at some top macro- and company-level stories.

    Macro Trends

    1. Historic drought and Hurricane Sandy sweep away (some) climate denial
    For many people this year, climate change moved from theoretical to painfully real. Mega weather took many lives and cost over $120 billion in the U.S. alone ($50 billion for the drought, $71 billion for Sandy). After Sandy raged across the eastern coast, Businessweek blared on its cover "It's Global Warming, Stupid." New York Mayor Bloomberg, a Republican, endorsed President Obama in the election, titling his open letter, "A Vote for a President to Lead on Climate Change."

    As bad as Sandy was, the relentless drought across the middle of the country may prove more convincing in the long run. Corn yields per acre fell 19%, food prices rose, and water disappeared —the Mississippi River may soon struggle to support commerce. Individual companies are feeling the bite: analysts at Morningstar estimate that input costs at Tyson Foods will rise by $700 million — more than its 2012 net income.

    Over one-third of the world's largest companies surveyed by the Carbon Disclosure Project arealready seeing the impacts of climate change on their business. So with life-and-death consequences and vast costs, we must have moved quickly to tackle climate change, right? Sort of...

    The year ended with the failure, yet again, of the international community to come to some agreement on climate change. But country-level and regional policy moved forward: Australia passed a carbon tax, South Korea approved carbon trading, and California just began its own trading experiment.

    Many countries also committed serious funds to build a clean economy: Saudi Arabia pledged $109 billion for solar, Japan declared that a $628 billion green energy industry would be central to its 2020 strategy, and China targeted $372 billion to cut energy use and pollution.

    In the U.S., a backdoor approach to climate policy took over. The Obama administration issued new standards to double the fuel economy of cars and trucks, and the National Resources Defense Council (an NGO) proposed using the Clean Air Act to reduce emissions from power plants by 25%.

    2. The math and physics of a planetary constraints get clearer
    Arithmetic had a big year: Nate Silver's nearly perfect predictions of the election gave him the oxymoronic status of rock-star statistician. The math and physics of sustainability got some serious attention as well.

    Writer and activist Bill McKibben wrote a widely-read piece in Rolling Stone about climate math — how much more carbon emissions the planet can take — and followed it up with a national awareness-building tour. Based on similar numbers, both McKinsey and PwC UK calculated how fast we must reduce the carbon intensity of the global economy (PwC's number is 5% per year until 2050).

    And on the resource constraint front, Jeremy Grantham, co-founder of the asset management firm GMO ($100 billion invested), continued his relentless numbers-based assault on the fallacy of infinite resources. In his November newsletter, he demonstrated exactly how much of a drag on the U.S. economy commodity prices have become.

    Nobody can really deny that, in principle, exponential growth must stop someday. Grantham, McKibben, and many others are making the case that someday has arrived.

    3. The clean economy continues to explode
    The rapid growth of natural gas production (the biggest energy story of the year) and the high-profile failure of one solar manufacturer (Solyndra) have confused people about the prospects for clean tech. In reality, the clean economy is winning. The share of U.S. electricity coming from non-hydro renewables doubled to 6% in the last 4 years. On May 26, Germany set a world record when it produced 50% of its electricity needs from solar power alone. In a mini political tipping point, six Republican senators publicly supported an extension to the wind production tax credit in the U.S. (which will expire in days), and got an earful from a Wall Street Journal editorial.

    It wasn't just energy. One auto analyst declared 2012 the "Year of the Green Car," with more high-MPG models, 500,000 hybrid sales in the U.S., and plug-in sales up 228%. To cap the year, the pure electric Tesla Model S was selected as the Motor Trend Car of the Year.

    Company Stories

    This year, there were countless eco-efficiency stories about companies saving millions of dollarsand developing new tools to make buildings, fleets (Staples and UPS, for example), and manufacturing much leaner. Aside from that overall theme, the following stories grabbed me because of their connection to larger trends.

    4. The green supply chain gets some teeth: Walmart changes incentives for buyers
    This year, Walmart finally added a key element to its impressive green supply chain efforts. The retail giant's powerful buyers, or merchants, now have a sustainability goal in their performance targets and reviews. For example, the laptop PC buyer set a goal that, by Christmas, all of the laptops Walmart sells would come pre-installed with advanced energy-saving settings. It was by no means a hiccup-free year on sustainability issues for Walmart, with deep concerns about corruption in its Mexican operations. But the subtle change in buyer incentives is a big deal.

    5. Transparency and tragedy raise awareness about worker conditions
    Early in 2012, Apple took some serious heat for the working conditions at Foxconn, the giant company that assembles a huge percentage of our electronics. Later in the year, tragedy struck Dhaka, Bangladesh when a fire at the Tazreen Fashion factory killed or injured hundreds of people. The company that owns the factory serves Walmart, Carrefour, IKEA, and many others (but in fact,some companies didn't even know that Tazreen was a supplier). It's unclear if any of these human and PR disasters will affect the companies downstream, but transparency and knowledge about the lives of the people who make our products will continue to rise.

    6. Data gets bigger and faster: PepsiCo and Columbia speed up lifecycle assessments
    The rise of Big Data was an important theme in business in general this year, but especially in sustainability. And nowhere is good data needed more than in the onerous and expensive task of calculating a product's lifecycle footprint. PepsiCo has had great success with the method, finding ways to reduce cost and risk for key brands, but execs wanted to apply the tool across thousands of products. To make the exercise feasible and affordable, they turned to Columbia University, which developed a new algorithm for fast carbon footprinting. This isn't just a wonky exercise: As PepsiCo exec Al Halvorsen told me, "the real reason you do an LCA is improve the business, to put more efficient processes in place, and innovate in the supply chain."

    7. Sustainability innovation opens up: Unilever, Heineken, and EMC ask the world for help
    This new world of social media, where everyone has a voice, can be tough on companies. Consumers can gather around a green issue and pressure companies to change their behavior. Some notable campaigns this year challenged Universal Pictures (about its green messaging around The Lorax), Crayola (recycling markers), and Dunkin' Donuts (Styrofoam cups). But companies can also use "open" innovation tools to generate new ideas and invite the world to solve problems together.

    Unilever, which has my vote for leader in corporate sustainability right now, held an online discussion or "jam." Then the company posted a list of "Challenges and wants" and asked for ideas on solving big issues such as how to bring safe drinking water to the world's poorest regions.Unilever has received over 1,000 ideas and is "pursuing 6 to 7 percent of these with internal teams." Other notable open innovation models this year included Heineken's $10,000 sustainable packaging contest (which yielded some very fun ideas like a roving tap truck) and EMC's eco-challenge with InnoCentive on e-waste.

    8. The economy gets a bit more circular: M&S, H&M, and Puma experiment with closing loops
    On the heels of Patagonia's "Don't Buy This Jacket" campaign (one of my top 10 stories from last year), British retailer M&S began a program called "Schwop" that asked customers to bring back old clothes every time they bought new ones. This month, H&M also rolled out a global clothing collection and recycling effort.

    Puma, after making last year's list with it's Environmental P&L, kept the momentum going andannounced a new "InCycle" collection with biodegradable sneakers and shirts, and recyclable jackets and backpacks. Remanufacturing has been around a long time, but closing loops is getting more popular every year.

    9. Dematerialization gets sexier: Nike's knitted shoe shows off sustainable style
    Keeping the apparel theme, um, running, check out Nike's new shoe with FlyKnit technology. The upper part of the shoe is constructed from a single strand, which greatly reduces waste and lightens the shoe dramatically. It's a great thing when a more sustainable design also coincides perfectly with customer needs. Enough said.

    10. Zero becomes more the norm: DuPont, GM, and John Elkington show the way
    The idea that organizations should send zero waste to landfill was once a niche idea, but it's quickly becoming the ante to enter the waste management game. Announcements on waste may not be exciting, but they demonstrate how companies can turn a cost center into a source of profit. DuPont's Building Innovation Products business reduced its landfill waste from 81 million pounds to zero in three years. GM announced that it would ramp up its already extensive waste reuse and recycling efforts, which are now generating $1 billion a year. And a plug for a fellow writer: In a new book, sustainability thought leader John Elkington made the case that the future would belong to the "Zeronauts," the "new breed of innovators determined to drive problems such as carbon, waste, toxics, and poverty to zero."

    Five Questions For 2013

    Some other promising stories are in the "too early to tell" stage, but bring up some key questions:

    1. Can we standardize sustainability, which some smart folks began to do around rankings (GISR) and accounting (Sustainability Accounting Standards Board)?

    2. Will we find a way to value externalities like ecosystem services and internalized, intangible benefits? (A focus of some of my work as an advisor to PwC US). For example, Microsoft launched an internal carbon tax and some major companies (Coca-Cola, Nike, Kimberly-Clark, etc.) pledged to value natural capital at Rio+20.

    3. Will government get in the way or help, like when the U.S. Senate allowed the military to keep investing in biofuels?

    4. Hertz and B&Q (Kingfisher) have delved into collaborative consumption (see WWF's Green Game-Changers report), but will the sharing economy make a dent on sustainability issues?

    5. Finally, how much will we challenge the nature of capitalism, and what will that mean for how companies operate? (This is the focus of my next project.)

    So many stories, so little time... on to 2013. Happy holidays and have a safe and wonderful New Year!

    (This post first appeared at Harvard Business Online.)

    (Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    February 24, 2013

    The Inside Story of Diageo's Stunning Carbon Achievement

    This is the exclusive, short story of how Diageo North America, with creativity and guts, both in operations and in the senior ranks, achieved the holy grail of carbon emissions reductions. They did it without using carbon offsets — and about 38 years earlier than they had to.


    Here's what scientists are telling us: the world must cut carbon emissions by at least 80 percent from 1990 levels by 2050 to (we hope) avoid the worst of climate change. This level of change seemed like a pipe dream to many, including me... until I spoke last fall to Roberta Barbieri, the global manager for environmental sustainability for Diageo, the $17 billion spirits company. Imagine my shock, as we talked about setting aggressive goals on carbon emissions, when she casually mentioned that Diageo's North American division — a group with $5.58 billion in sales and 14 production and manufacturing facilities — had already cut emissions 80 percent.

    The first thing I said was, "Excuse me?!," followed quickly by, "when can I come and talk to you?"

    It all started in 2008, she told me later, when top Diageo execs had their minds set on doing something big. First, for perspective, they ran the numbers on what it might cost to go entirely carbon free. The back-of-the-envelope calculation was daunting (hundreds of millions of dollars) and included ideas like building bioenergy plants to power some of their largest distilleries — an option that would achieve large reductions, but was in no way cheap. They settled on a still-aggressive goal of 50%, made it public, and, remarkably, crossed their fingers.

    At about this time, Richard Dunne, an environmental exec, entered the picture and took responsibility for meeting the target in North America. He had a strong suspicion that building an expensive bioenergy plant was not the only way to get there. His team implemented a rigorous process of collecting ideas for emissions cuts and estimating the costs. Then they sorted the results on a massive spreadsheet, ranking ideas by net gain on environmental improvement and then by financial investment. By looking at the largest carbon reduction options first, they could group ideas into three big buckets: 1) low/no cost (the no-brainers); 2) some operating expense increase; and 3) more significant capital expenditures (like the bioenergy plant).

    Executives initially thought that only major capital projects would reduce emissions significantly. But Dunne's process revealed a surprising number of no-brainers. As a result, Diageo North America achieved a 50% carbon reduction by 2012, mainly with a mix of no- and low-cost initiatives. These project range from easy efficiency efforts like lighting retrofits, boiler upgrades, and installing variable speed drives; to larger, but still economical, changes, such as switching fuels (from oil to natural gas) and cutting back from two boilers to one in a small distillery.

    Reaching the 50% reduction in North America years ahead of schedule was a pleasant surprise. But Diageo still needed to go further: the economics on reductions in other regions were not nearly as good, so North America needed to close the gap to help the global organization reach its 50% goal by 2015. But even with the expensive bioenergy plant beckoning as a solution, something even more unusual happened at a Canadian distillery, one of the company's largest.

    Gene Ruminski, Diageo's North American sustainability manager, proposed that the Canadian distillery contract with its utility to supply natural gas harvested from a landfill - a net zero carbon solution that would reduce the carbon footprint for North America by another whopping 30%. But there was a big catch: energy costs would go up more than $1 million per year. This expense was more than the single plant could justify.

    But then a senior exec, the president of Global Supply and Procurement, got wind of the idea (important point here: this exec sits on the company's internal sustainability council). With his global perspective, he realized that even though the landfill gas solution would increase operating costs for this one plant, it was actually a relatively cheap way to deliver a large reduction in emissions. So he gave the go-ahead and some financial leeway to the plant manager who had to take the annual million-plus hit to his bottom line. As it turns out, the plant's ongoing cost-cutting initiatives had already identified many millions of savings, so Diageo reduced the plant's target for total cost savings to allow for this massive carbon-reducing project.

    This is an amazing story, with a few important lessons:

    1) Companies still have much more room to cut energy, water, and waste than they realize. Even a well-run company can find enormous savings from easy, low-cost stuff.

    2) Big goals force you to look for big ideas, meaning you can, as Diageo's Roberta Barbieri says, "do more than just turning off the lights."

    3) Leadership matters. With a more strategic attitude, you can invest in longer-term value, both tangible and intangible. Flexibility is crucial, as the top exec had to give the plant manager leeway on his savings targets to meet the environmental goal.

    This last point is really critical. Shifting subtly away from an attitude of "maximize profits this quarter at all costs" does not mean you leap right from capitalism to communism; it just means you take into account a broader definition of value to the organization and community. Flexible thinking about value frees you up to find unique solutions. As a clean tech and impact investor Charles Ewald said to me recently, "the gap between 'capitalism' and so-called 'philanthropy' leaves a lot of room for creativity."

    I congratulate Diageo for getting creative, finding that chasm, and driving a spirits truck right through it.

    (This post first appeared at Harvard Business Online.)

    (Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    March 19, 2013

    The Fallacy of the China Defense

    [Note: I'm taking a small blog hiatus for a couple months to work on my next book. More on that later.]

    For anyone who doesn't want to reduce carbon emissions, China seems like a great scapegoat. The defenders of the status quo argue that U.S. companies will be at a disadvantage if we tax carbon or invest in clean energy because "China's not doing anything."

    (Beijing pollution)

    U.S. Senator Marco Rubio recently offered up a perfect example of this idea: "There are other countries that are polluting in the atmosphere much greater than we are — China, India, all these countries that are still growing. They're not going to stop doing what they're doing." And New York Times op-ed writer Joe Nocera used the China Defense last week in his latest pro-fossil-fuels piece: "the Chinese are far more concerned with economic growth than climate change."

    But there are three little problems with this logic:

    1) It's not true.

    China recently demolished this fallacy when leaders announced they would implement a carbon tax. And when the new Premier spoke on Sunday, he belied Nocera's assertion with a speech that, in the Times words, "laid out a vision of a more equitable society in which environmental protection trumps unbridled growth." These policy shifts are a very big deal for all 7 billion of us sharing the climate. And it's just the latest in a series of Chinese commitments, which include the following:

    • July 2010: 5 trillion yuan, or $800 billion, alternative energy plan over 10 years (this is like the part of the U.S. stimulus plan that funded clean tech, but times 10).
    • August 2012: $372 billion to cut pollution and energy use.
    • August 2012: 40% increase in solar target (21 gigawatts by 2015).

    Is China still growing and emitting more carbon? Of course. Is it planning to build another 363 coal plants? Yes. So the world is not black and white. But even with lots of coal and oil investment, there's no way you can say China is doing nothing on clean tech.

    2) Science doesn't care.

    The math and physics of climate change are getting clearer by the day. As those tree-huggers at McKinsey and PwC UK have calculated, we need to decarbonize at a rapid rate — about 5 percent less carbon per dollar of GDP every year until 2050. This has to happen no matter who goes "first," and is basically the argument put forth by Grist writer David Roberts recently. We have to try, no matter what anyone else is doing. And, by the way, the impacts of doing nothing will keep growing — Hurricane Sandy and the ongoing drought in the Midwest are just the beginning. The costs of inaction are rising, which brings me to...

    3) We should want to go clean anyway.

    One of Sen. Rubio's other comments, the most common specious argument against acting on climate change, was that restricting carbon would "devastate" the economy. This is, to borrow a phrase, malarkey.

    Even putting aside the literally trillions available through energy efficiency, there's a vast upside from creating new industries. According to the bank HSBC, the clean economy will be a multi-trillion dollar market soon. After all, we're reinventing the world's largest industries: energy, transportation, and buildings. Most other major economies get this and are investing heavily in the clean economy. But no country has gone as fast as China, which has grown its share of solar manufacturing to 50% in avery short time (with nearly as impressive a performance in wind).

    I could keep going with counterarguments — like shouldn't we lead because we're, well, leaders? But even if science doesn't care and the whole "China isn't doing it" argument is a lie, I'm partial to number 3: We make money doing it and it's good for us. That's enough for me.

    (The majority of this post first appeared at Harvard Business Online.)

    (Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    October 29, 2013

    Two Critical Questions About Carbon Budgets

    A few weeks ago, the Intergovernmental Panel on Climate Change(IPCC) put out its Summary for Policymakers, the latest, best estimate of our climate problem.


    It's not a pretty picture. The IPCC is brutally honest about where it can't provide certainty, such as the exact extent of specific kinds of extreme weather in the future. But the report expresses "near certainty" that humans are causing climate change – that's science-speak for "we know this" – and that we're heading for devastating consequences.

    The IPCC provides some guidance on what we need to do, broadly speaking. The key idea is the carbon budget (which Climate Centralrecently summarised nicely). In short, we humans can "safely" put only so much carbon into the environment and maintain decent odds of holding warming to 2 degrees. I credit activist Bill McKibben for making this idea mainstream by writing a powerful piece in Rolling Stone last year.

    The latest budget numbers this month are not good news. Here's the crucial paragraph with data on how many gigatons of carbon (GtC) we have left:

    "Limiting the warming caused by anthropogenic CO2 emissions alone with a probability of >33%, >50%, and >66% to less than 2°C… will require cumulative CO2 emissions from all anthropogenic sources to stay [below] 1,560 GtC, 1,210 GtC, and 1,000 GtC [respectively]. An amount of 531 GtC was already emitted by 2011."

    So to boil this down, if we want a 66% probability, we have about 469 GtC left. And the budget is even smaller if you also consider what IPCC calls "non-CO2 forcings" which Michael Mann – he of The Hockey Stickfame – described to me as "other human-produced greenhouse gases, including methane from agriculture/livestock and potentially now from leaks during [gas] fracking."

    McKinsey and PwC have both taken previous IPCC estimates and translated them into annual targets. Basically, we need to improve our carbon intensity – the carbon we emit per dollar of GDP – by about 5% per year. These new IPCC numbers imply we have to go even faster.

    All these numbers raise many questions, but let me pose two important ones:

    1. Why aren't we trying to limit warming with a probability of 90%?

    For a two-thirds chance of staying below the 2 degree threshold, we only have 469 GtC left. So how small would the budget be if we wanted a much higher probability? The next paragraph in the IPCC report provides some guidance: "A higher likelihood of remaining below a specific warming target, will require lower cumulative CO2 emissions."

    What I suspect – and this is scary – is that there is no realistic number that gets us to a 90% or 95% chance of holding to 2 degrees. Meaning, we've already emitted enough to lock in substantial warming. The report backs up my suspicion by declaring, "a large fraction of anthropogenic climate change resulting from CO2 emissions is reversible on a multi-century to millennial timescale."

    So we're rolling the dice here and only have a two-thirds shot, even with aggressive reductions.

    2. How should companies think about the carbon budget concept?

    We have to break down the global budget into smaller bites. The reasonable starting point is for every organisation to set a goal of moving at the required pace, which means reducing emissions intensity by roughly 5% per year.

    Of course it's much more complicated to set equitable targets by sector or company, and it's a fair question to wonder if companies can take this on given their short-term focus. Meaning, why should a company do more on carbon than it can easily justify with regular investment hurdle rates?

    It's a very tough issue to reconcile. The short answer is that companies should accept the budget logic because, as many have said, business can't succeed in a world that fails. Climate change threatens society, of which business is a subsidiary.

    But the macro logic is hard for companies to act on in a quarter-driven economy. So we need to slash carbon in ways that pay off in traditional terms with one major caveat – we should expand our thinking about what payoff means and include all the business value that we can create from clean economy strategies, value that we don't currently measure well (like reduced risk and brand value).

    But will voluntary efforts get us there? Unlikely. We'll need an actual mechanism for driving carbon emissions out of our economy fast enough. And that means government help. So companies are also going to have to get off the sidelines, pivot from the normal "all regulations are bad" attitude, and then actually lobby for carbon pricing and limits.

    Logic and survival instinct dictate that we work backwards from the budget scientists give us. Our current path – cutting emissions where we can do it cheaply – is not much better than doing nothing. When 5% a year is the best estimate of what's required, holding carbon emissions flat or cutting a little is nice; but it's like taking one pill in a 10-day course of antibiotics.

    It'll seem cheaper and easier at first, but you won't actually solve the problem or feel much better.

    Note: This post has been corrected for one error related to carbon budget math -- see following blog.

    (This post first appeared at Guardian Sustainable Business.)

    (Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    November 3, 2013

    Correction: Fixing an Error in my Last Blog on Carbon Budgets

    Hi all. I goofed a bit in my last blog about carbon budgets and made one erroneous comparison. First, thanks to reader James Newberry for catching this.

    The problem came when I said the following about the remaining carbon budget globally:

    "So to boil this down, if we want a 66% probability, we have about 469 GtC left, which is much less than the 565 GtC McKibben outlined last year."

    The 469 GtC number is accurate based on the latest IPCC report, but by comparing it to Bill McKibben's 565, I erred. His number was referring to gigatons of carbon dioxide, NOT carbon, which is how the IPCC calculates budget (for the chemically inclined CO2 is 3.67 times as heavy as Carbon alone). Also, Bill's 565 GtCO2 was the budget until mid-century, 2050. The IPCC numbers are calculated as what we have remaining until the year 2100. Thus I was comparing apples and oranges.

    But, I've been talking to both Carbon Tracker -- the smart guys behind McKibben's analysis -- and my colleagues at PWC UK to check my math. They've been recalculating the budgets based on the new IPCC numbers and came to the same conclusion I tried to when comparing 469 to 565 -- our budget is getting smaller. So the point is the same, but I used the wrong number to show it.

    Anyway, PwC just released in the last couple of days their latest Low Carbon Economy Index. This year, they calculate that we need to decarbonize at a rate of 6% per year until 2100, which is a significant increase from their estimate last year of 5.1% per year. The higher decarbonization rate is due to a reduced underlying budget.

    For additional numbers, please see Carbon Tracker's latest calculations. Their site makes the budget issue as clear as you can.

    As you can tell, the numbers can get a bit complicated with you are talking about a variety of scenarios that play with probability of holding our global temperature increase to 2 degrees Celsius, and work with different endpoints in the calendar. But the conclusion is the same. We have to move much, much faster than we are.

    January 21, 2014

    If We Don't Tackle Climate Change, Our Other Problems Will Be Moot

    When Bill de Blasio took the oath of office as mayor of New York City on 1 January, his inauguration address focused heavily on inequality. In a speech four weeks earlier, President Obama made reducing economic inequality a core mission, saying: "For the rest of my presidency, that's where you should expect my administration to focus all our efforts." Inequality is a critical issue globally. A society where the gains of economic growth go only to the already wealthy is not stable. That said, I believe that when we look back on the priorities set by presidents and mayors at this time in history, people will be astonished at what our leaders didn't prioritise. We should focus our energies on building general societal resilience (of which efforts to address inequality are a part), but more specifically, the first priority needs to be fighting and preparing for climate change.

    The latest analyses on the likely outcomes of our continuing use of the atmosphere as a carbon dumping ground are not optimistic. A study published in Nature has suggested we're heading towards a 4C (7.2F) increase by 2100. This would not just be inconvenient: it could make the world uninhabitable for humans. The majority of scientists are not painting a picture this extreme, but the message is clear from those the Nation calls "thoughtful outliers".

    Imagine a probability curve of possible outcomes from our planet-baking experiment. According to some sane, smart people, now showing up a few standard deviations out on the curve is the possibility of humanity's demise.

    I know the doom-and-gloom approach doesn't work well. But this isn't really about extreme scenarios and fear, but about logic and prudence. You can treat something as if it's serious and stay calm, and even remain optimistic. We buy insurance on our homes and our lives, even though the odds of the worst-case scenarios happening are low.

    And yet, when it comes to making the pitch for action on climate, particularly with the business community, we tend to focus on the upside. It's good for business, we say. Or we point out that there are trillion-dollar markets in play for the companies that can help the world make the transition.

    All true, but it's absurd to completely avoid the subject of how serious the situation is, or how fast we need to go to deal with it. It's like convincing people to join a bucket brigade to put out the fire consuming your house by telling them how much exercise they'll get. Can't something be good for you and also be an emergency? When people have near-fatal heart attacks, they often stop smoking, change their diet, and exercise more. Those actions make their lives richer and more resilient and tackle a life-threatening problem.

    But to be clear on one thing: climate and all "green" priorities do not need to trump all social issues. I care deeply about inequality and many topics on the social sustainability agenda, for example supply-chain conditions – it should be a moral absolute that nobody ever dies making a T-shirt. But two points matter on this question of priorities.

    First, the divide between environmental and social is mostly artificial, and that's especially true with climate change. Our changing planet is the ultimate social issue, since those with the fewest resources are least able to adapt. Remember the Titanic? When the ship went down, the people in steerage were hit hardest. In climate terms, the increase in flooding and sea-level rise will have the greatest impact on many of the poorest regions, such as Bangladesh. And the outcomes from a changing climate, including droughts that destroy crops and raise food prices, are hardest on those who can least afford it.

    Second, we need to walk and chew gum. We can pivot and make operating in a way that drastically reduces carbon, which mitigates and prepares for climate change, the core focus of our institutions and address critical issues like income inequality. Many of the things we need to do address both issues anyway.

    On the demand side, energy and resource efficiency saves money. And those who spend a high percentage of their income on energy will benefit the most. Huge public-private investments in clean technologies, which raise production levels dramatically and bring down costs, make clean energy cheaper. That helps the developed world make the transition and helps solve energy poverty around the world.

    OK, so I've reverted back to "it's good for you" to make the argument. I can't help it – it does pay. But that doesn't make the situation any less serious. Nor does it make it any less pressing to put climate change at the top of our personal, business and societal priorities.

    (This post first appeared on the Guardian Sustainable Business blog network.)

    (Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    February 1, 2014

    The Largest Risk (and Opportunity) Investors Are Ignoring

    Tackling climate change — and thus keeping the world inhabitable — is an achievable goal, but it will become prohibitively expensive if we wait to act. This is the key message from a leaked United Nations study that The New York Times reported on last week. Journalist Justin Gillis wrote about the risk of “severe economic disruption” and “wildly expensive” solutions — ones that may not even exist — if we don’t leverage existing technologies to shift the global economy away from carbon over the next 15 years.


    Talk of potential risk to humanity is not new. And we’ve seen more recently the actual devastation of record weather events like Hurricane Sandy and Typhoon Haiyan. But neither the scientific warnings nor the extreme storms have prompted enough action. However, now the risk we’re talking about is financial, which, along with the enormous economic upside of taking action, may finally get the investment community moving.

    The day before the stark story in the Times appeared, I attended a related conference, the Investor Summit on Climate Risk, held at the UN and run by the NGO Ceres. Hundreds of financial executives gathered, including some heavy-hitters, from state comptrollers to executives from large pension funds to former U.S. treasury secretary Robert Rubin, who declared, “climate change is an existential risk.”

    The conferencewas focused on the release of Ceres’ new report, “Investing in the Clean Trillion.” Created in conjunction with Carbon Tracker, the study lays out a plan for mobilizing much more capital toward building the clean economy. The trillion-dollar number is not random: TheInternational Energy Agency (IEA) has estimated that the world needs to pour $36 trillion of investment into the clean economy between now and 2050 in order to keep the planet below the critical warming threshold of 3.6 degrees Fahrenheit (2oC). That’s $1 trillion per year.

    A key target for Ceres’ work, and the main audience at the conference, is the group of institutional investors who manage tens of trillions of dollars in assets for long-term performance. The core argument to compel institutional investors to change how they influence companies and where they invest their money is simple: as the world pivots away from carbon-based energy to avoid devastating climate change, fossil fuel assets, like coal plants or off-shore oil rigs, will be “stranded” — a wonky term for “worthless.” The value of the companies owning and managing those assets, the logic goes, will plummet. As Nick Robins from the bank HSBC described to the audience, in a scenario of global peak fossil fuel use by 2020 “implies a 44% reduction in discounted cash flow value of fossil fuel companies” — or in simpler terms, a decline in share price of 40 to 60 percent.

    In another Ceres meeting last fall on this topic of stranded assets, Craig Mackenzie from the Scottish Widows Investment Partnership ($200 billion in assets) spoke about the “wake-up call” investors had gotten from recent shifts in the U.S. coal market. The 20% drop in coal demand was driven mainly by the incredible increase in natural gas production due to fracking technology, not from any concern over greenhouse gases. But the rapid shift demonstrated to Mackenzie and his firm the dangers of overexposure to a class of assets. So, he says, the fund “reduced exposure to pure play coal companies to nearly zero.”

    It’s easy to point out a big flaw with the stranded assets discussion: uncertainty. I spoke with executives at a few big banks who said the big question for them is when will the assets be stranded. Nobody wants to leave profitable investments too early that gets you fired. But trying to time a bubble bursting is a dangerous game. How many investors got the timing right on the implosion of mortgage-backed security assets in 2008? Nearly none, and that systemic failure of vision contributed mightily to a global financial collapse.

    Given what’s at stake now — not just financial system stability, but planetary, human-supporting system stability – it’s more than prudent to avoid the game of timing the market perfectly. The investment community should be much more proactive about using its weight to a) pressure fossil fuel companies to quickly migrate their own portfolios to new forms of energy; and b) dedicate significant funds to investing directly in new technologies.

    With the chilling, “it’s going to be very costly” message of Gillis’ article, and the warnings of trillions of stranded assets in the Ceres report, it’s easy to miss the very big silver lining running underneath all the dire warnings: we have the technologies today to make the shift and do it profitably.

    The Clean Trillion report cites the uplifting flip side of the IEA’s calculations — the $36 trillion of investment we need will yield $100 trillion in fuel savings between now and 2050. That’s a lot of money to leave on the table, and a very good investment.

    (This post first appeared on the Harvard Business Review blog network.)

    (Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    February 12, 2014

    How Exactly Will We Move Away from Fossil Fuels?

    Investors who have significant money tied up in the fossil fuel industry — every pension and market fund, essentially — are facing a massive risk. The logic, according to the International Energy Agency (IEA) and banks like HSBC, is this: as the world migrates away from carbon-based fuels, trillions of barrels of oil and billions of tons of coal — the assets sitting on the books of energy companies — will become “stranded,” or worthless.


    It’s a compelling argument, but only if we can answer a key question: How exactly will those assets become stranded? That is, what will prompt a fast enough migration from fossil fuels to cause their value to plummet? I see a few plausible paths: government regulation, straight economics (when cleaner energy crowds out fossil fuel investment because the returns are better), or a social movement that propels voluntary action. Let’s quickly look at each.

    1. The Stick: Regulation

    The organizations talking about stranded assets seem to assume that governments will price carbon at some point. As a recent report on the subject from the NGO Ceres said, “According to the IEA, more than two-thirds of the world’s proven reserves of fossil fuels will be unusable prior to 2050 if necessary carbon regulations are enacted [emphasis added].”

    That’s a mighty big “if.” While some regions are experimenting with carbon taxes, and Clean Air Act regulations in the U.S. are making coal plants more expensive, regulation is not truly impeding global fossil fuel use.

    Ultimately, the political will for fundamental change is lacking. In the State of the Union speech last Tuesday, President Obama said that climate change was a fact and touted the growth of solar energy in America. But he also bragged about increased production of natural gas and oil. Very few politicians will take on those powerful lobbies, so a price on carbon is likely a fantasy in the U.S. for now. And partly because of America’s intransigence, 19 years of global negotiations on binding limits on carbon have led nearly nowhere.

    2. The Carrot: Money

    On this path, we choose renewables because they’re cheaper, which is far more plausible every day. In significant swaths of the world, wind or solar power is more than competitive with fossil fuels. About half of the new energy capacity put on the grid globally is now renewables, and the picture going forward is even better. Bloomberg New Energy Finance has estimated that between now and 2030, around 70% of the power generation the world will add will be renewables.

    This level of investment is happening because the economics work. But it doesn’t mean we’ll be stranding many assets any time soon – the installed base of carbon-based energy systems is really large. Renewable energy does provide 21% of electricity globally, but modern renewables (like solar and wind, not hydro), which would really displace coal and natural gas, only provide 5%. Renewables are a long way from dominating electricity enough to make fossil fuel energy a bad investment.

    And when you look at mobile energy use (that is, cars), the story is even clearer. To strand oil assets, we’d need to drive mostly electric vehicles or use a lot more public transportation. And while the new electrified vehicles market is growing fast, it’ll be many years until those technologies dominate.

    3. The Guilt or Enlightenment: Moral Suasion

    We could, in theory, see a vast voluntary movement toward clean energy by companies and individuals — even faster than what they’re purchasing already where the economics do work. But it is tough for public companies in particular to spend money when they think it doesn’t pay back in traditional ROI terms.

    That said, organizations could recognize that the additional benefits from a larger, quicker move to onsite renewables — including having a hedge on fuel prices, inspiring employees and customers, and building resilience to extreme weather and grid outages — adds up to real value, even if it’s hard to measure. Companies and consumers could also decide it’s cool to use clean power. The Toyota Prius sold millions of units not because it saved money on fuel, but because of what detractors noticed was a certain smugness or pride in driving it (I’m guilty as charged).

    We could also see moral pressure to move away from fossil fuels. The growing divestment movement, led by the NGO, is an attempt to make investing in fossil fuel companies morally equivalent to investing in South Africa during the anti-apartheid movement. The next generation — the students leading the campaign now — may never work for or buy from the old energy industry.

    But moral campaigns are highly unpredictable and we can’t count on this path to get us there.

    Ultimately, the second path is clearly the most likely, and the clean economy will dominate over time on purely economic terms — a variable cost of basically zero for renewable energy will win out. But will it be fast enough to turn fossil fuels into stranded assets any time soon? I doubt it, since companies and countries aren’t even doing all the clean energy projects that pay back quickly, or don’t require any money down. It’s not just about economics.

    That’s why we need all of these efforts to work in conjunction — movement on any one of them will give momentum and credibility to the others. The social and government pressures will accelerate investment and thus improve the economics. And in return, if companies start buying a lot more renewable energy, they will help build the market, improve the economics, and give cover to politicians to take action.

    In short, all three paths are valid and tough, but together, they should do the trick. They’d better.

    (This post first appeared on the Harvard Business Review blog network.)

    (Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    June 23, 2014

    It's Time Climate Change Believers in Business Came Out of the Closet

    [Still catching up a bit on articles I've posted at different places over the last few months. Here's one that appeared on The Guardian. To lend even more momentum to the shift I'm describing here, see the NY Times op-ed just a couple days ago from former Treasury Secretary Hank Paulson.]


    "I think climate change is one of the greatest hoaxes ever perpetrated on man." So said a colleague at a recent meeting of tech executives I spoke at. It was hardly the first time I've heard such a statement. But what happened next was a first in my 13 years of working in the intersection of business and environment. Another executive, someone in the insurance industry (but not coming from an environmental role), actually mocked the climate denier and laughed in his face. "Are you kidding?" he said. "Something like six of the most expensive insurance years in history happened in the last eight years."

    We may be seeing a change in cultural norms in business, where it's less acceptable to espouse dated views on some big topics. Take the issue of gay rights in the US. In Arizona a few weeks ago, governor Jan Brewer vetoed a law that would have allowed a bakery, for example, to refuse to make a cake for a gay wedding. But I doubt Brewer had a moral epiphany. In reality, she felt pressure from a business community that feared real economic consequences if the law passed. A range of companies made their displeasure known publicly and the National Football League made a not-so-veiled threat that it might move the 2015 Super Bowl away from Phoenix. In a separate case, Mozilla's CEO, Brendan Eich, resigned under pressureshortly after it emerged he had donated $1,000 in support of Proposition 8, which would have prevented equal marriage in California.

    Is the same kind of attitude shift happening on climate change? In addition to watching the late-night mocking of an ill-informed colleague, I recently had another surprising experience with the top 10 executives from a large consumer products company. I polled them with an admittedly leading question:

    "Robert Rubin, the former US treasury secretary, said recently that climate change is 'an existential threat' to our species. On a scale of 1 to 5, do you think that …

    5 – Yes, it is an existential threat to humanity.
    4 – Climate change is a serious challenge, but we can adapt and/or it's not imminent.
    3 – Climate change may be a problem, but it may be natural variation.
    2 – There may be mild problems from climate change.
    1 – It could be a hoax or there is no problem.

    The anonymous voting actually shocked me. Every executive in this conservative, careful company chose 4 or 5 in anonymous voting.

    My examples of a business awakening are anecdotal, but there is some quantitative evidence of a priority shift in the works. In the latest World Economic Forum Global Risks survey, which polls CEOs and world leaders, the top 10 risks identified by respondents were in essence variations on a couple of themes: economic uncertainty or climate and resource-related issues ("water crises", "failure of climate change mitigation and adaptation", "greater incidence of extreme weather events", and "food crises").

    This dawning realisation of the extent of the climate problem is welcome news. But the real question is whether we're acting on a newfound conviction with the urgency required. If more executives believe this is a "5" issue, an existential threat, what does that imply?

    Let's imagine for a moment a similar scenario in personal health. Let's say that 97 out of 100 doctors tell you that you have an imminently life-threatening level of, say, obesity and diabetes. If asked how serious it was, you might say "5", which would demonstrate a conviction that drastic changes in diet and exercise are now the top priority in your life. With a "4" vote, you'd be saying that you might consider some tweaks to your lifestyle, but only if it's not too inconvenient or expensive. If you select "3", you're saying you're not sure the doctors are right (maybe it's just holiday weight you put on) and you'd adopt a wait-and-see attitude. And a "1" or "2" shows disdain for both the diagnosis and the doctors and a belief that you can eat whatever the heck you want.

    The equivalent of a "5" vote on climate should be dramatic changes in our energy diet – a decarbonisation of industry and society at 6% per year from now on (as calculated by PwC). The list of what that pace of change would require of business leaders includes the following: dramatically increasing energy efficiency and use of renewable energy, supporting government policies to make the change more economic (a carbon price would be extremely helpful), pushing back on investors obsessed with quarterly results at the expense of investments in longer-term health, and deeper conversations both with suppliers and customers about how to cut impacts. These are some of the elements of a profound shift in "business as usual" that I'm calling "the big pivot".

    Very few companies are acting on all these fronts with urgency. It's time for business leaders to get more vocal, come out of the closet of denial and talk openly about climate change as a serious challenge and opportunity. As self-help programmes have taught us, the first step is admitting you have a problem. At least on this front, both anecdotally and by survey, there seems to be real progress.

    (Andrew's new book, The Big Pivot, is out! Get your copy here. Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    June 25, 2014

    The EPA's Carbon Plan Won’t Hurt Corporate America

    [This was an op-ed I recently posted at]

    President Obama has said that fighting climate change is one of his top priorities. He finally made good on that promise when he announced federal regulations that will force states and power plants to reduce carbon emissions by 30% by 2030 (from a baseline of 2005 emissions). As widely reported, the regulatory mechanism is meant to be flexible, with four main options now open to the states – states can choose from energy efficiency, shifting from coal to natural gas, investing in renewable energy and discounts to encouraging consumers to move to off-peak hours.


    It all sounds wonky and focused only on the power sector, but these new rules could bring deep change for all businesses and all citizens. Those fighting progress are of course crying foul and shouting about economic devastation from burdensome regulations – the U.S. Chamber of Commerce put out an absurd “analysis” of the regulations before they were released. There will obviously be a cost for utilities to comply, but industry generally overestimates – often by an order of magnitude – the expense to meet tougher standards.

    And to say, as the Chamber does, that these regulations are the prime source of uncertainty for utilities, is an exaggeration at best. The utilities were already at a point of no return even without regulations, and investors have begun to figure it out. Barclays bank recently downgraded the corporate debt of the entire U.S. utility sector to an “underweight” rating in its portfolio. The bank declared that an industry that was once “seen by many investors as a sturdy and defensive subset of the investment grade universe” was now risky because of the threat of cheap solar power. Clean tech innovation is already well under way and deeply impacting older industries. The new regulations will only accelerate the move.

    Regulating power plants and utilities is going to propel innovation across many sectors – not just power technology, but anything that improves energy efficiency, including new technologies for buildings, agriculture, electronics, and even water (we use 13% of our electricity to move, heat, and treat water). So, yes, dirtier power will get more expensive – and that’s part of the point – but we will innovate. We will drive total energy use down and use of clean energy up.

    There will be other ripple effects making the carbon reductions from these regulations greater than they seem. Electricity, as some critics point out, is “only” 32% of U.S. emissions, but that’s only part of the story. Transportation makes up another 28% of our carbon pollution. As we make power generation cleaner, plugging a Tesla into the grid will kill two very big birds with one electric stone.

    So all of that said, what should a company that isn’t in the business of generating power do to prepare for what’s coming? I’d suggest moving to renewable energy as fast as possible, if only to avoid uncertainty. Will utilities be able to pass along whatever costs they incur? That is, will our energy costs rise? Who knows, but it does seem likely that traditional, dirty energy will be getting more expensive. It’s very simple in theory – the less energy you use in total, and the more clean energy you use, the less vulnerable your business (or home) is.

    Consider the organizations – mainly retailers and big tech companies – that have been moving aggressively to renewable energy already. IKEA will make 70% of its own power by 2015 (and over 100% of its needs in the U.S.). Wal-Mart gets 24% of its electricity from renewables (granted, two-thirds of that comes from the green power their utilities are already generating, but it’s still a lot of clean power onsite or near to stores). Apple gets about 100% of its power for its data centers from the wind, sun, and fuel cells.

    I could go on, but the key question is this: How much do these companies care about these new rules and the cost of dirty power? Well, I’m guessing IKEA cares about 70% to 100% less than some of its lagging peers. As a homeowner making over 50% of my own power from the sun, I know I’ve got less directly at stake in this debate.

    Regulations and laws aren’t fun. They’re not sexy. The battles over these laws will be bloody, so why not avoid the war? It’s time for companies to actively seek ways to dramatically reduce their energy use and shift their supply.

    For utilities – and all companies really – the writing is not just on the wall, it’s now on the books.

    (Andrew's new book, The Big Pivot, is out! Get your copy here. Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    July 7, 2014

    What Momentum on Climate Change Means for Business

    Climate change is real — as in actual, factual, and tangible. And it’s really expensive. This is the clear message from “Risky Business,” a new report issued by former U.S. treasury Secretaries such as Robert Rubin and Hank Paulson and other bigwigs like Michael Bloomberg.


    Their report is just one of many drumbeats for action on climate — drumbeats that have gotten much louder in recent weeks. Four former EPA chiefs, all Republicans, went to Congress to ask their party peers to take action, for example. And Hank Paulson, George W. Bush’s Treasury Secretary, recently wrote an op-ed called “The Coming Climate Crash” as a prelude to the Risky Business report. He likened the growing climate crisis to the fiscal crisis of 2008, a mess he had to deal with firsthand. This Republican and former Goldman Sachs exec actually called for a tax on carbon. Let that sink in for a moment.

    The story coming from these unusual messengers is not subtle about how expensive climate change is and will continue to be. We’re taking out an “interest-only loan,” the report says, with cumulative interest that will burden future generations. In a neat metaphor, “Risky Business” calculates that there’s a 1 in 20 chance — equal to the chances of “an American developing colon cancer” — that more than $730 billion of coastal assets will be at high risk in the coming years. And whole swaths of the country will face extreme heat — months of days above 95 degrees, which could seriously impact agricultural and labor productivity (imagine construction and other outdoor work in dangerous heat).

    These long-term numbers are just for scale and to, well, scare us into action. But the real message of the report is that there are serious economic impacts today. Extreme weather from climate change is, they say, “already costing local economies billions of dollars.”

    So finally, real bipartisan pressure and consensus are building. What does that mean for business?

    First, questioning whether climate change is even happening is moving fast to the far fringe. The discussion is shifting, thankfully, from if we should tackle it to how — as one CEO I work with said recently, “I know this is a problem… I just don’t know what to do about it.” Over the coming months and years, it will become even less acceptable — to employees, customers, and investors — for business people to stick their heads in the increasingly hot sand on this issue. Investors in particular are starting to notice the massive risk to business and acting accordingly — see Barclays’ downgrading the bonds of U.S. utilities because of growing competition from solar and distributed energy generation. Business leaders who want to take action and show their investors and customers that they “get it” should step forward now.

    Second, there will be more regulation on carbon around the world. The recent coal rules the Obama administration issued are just the beginning. (The 30% reduction from utilities demanded by 2030 is not even particularly aggressive. Ten states have already hit the goal.) It’s not just the U.S. — the day after Obama’s announcement, China said it would cap CO2 emissions starting in 2016.

    Third, and most important, business needs to change how it operates fundamentally. When you dig past all the political wrangling and theater around climate change, you reach a very serious challenge. Asking government to act, as many new voices are doing, is a great start. But we need business to lead in the areas it excels at — driving deep, heretical innovation in products, services, and business models; connecting with and inspiring customers to change their behavior; allocating capital to the best ideas, and much more.

    But we’re going to have to redefine “business as usual,” a shift I’ve called the big pivot. Companies will need to think about the longer term — at least more than a quarter at a time — if they want to plan for multi-year and multi-decade risks and opportunities. They’ll need to set goals based on science and make investment decisions with a broader sense of return on investment than they normally use, to include benefits like risk reduction, business resilience, relevance in society, and attracting and retaining the best talent. And we’re going to see new, unusual partnerships across normal party and competitive lines. All of these pivots are underway, but they need to move much faster.

    Luckily, we have most of the solutions we need now. Renewable energy is reaching scale quickly and companies are coming together along value chains to work on big challenges — for example, Coca-Cola, Pepsi, Unilever, and others have been working for years on changing technologies for refrigerating drinks, something that relies on high global warming HFC gases today.

    But even if the options for building low-carbon lifestyles and businesses are growing, transformation can be hard. Who knows what gets people over a hump to see the need for real change. Hearing from unlikely sources, like Treasury Secretaries, might do the trick. Certainly the growing economic costs are getting clearer. It’s time for business leaders to make climate action a — if not the — core priority for business.

    (This post first appeared on the Harvard Business Review blog network.)

    (Andrew's new book, The Big Pivot, is out! Get your copy here. Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    July 15, 2014

    The 5 Key Elements of a Resilience Strategy (and Why You Need One Now)

    This past winter was a rough one for big swaths of the United States, with both unusual cold snaps and disruptive snowstorms. General Mills’ CEO recently blamed the winter for less-than-expected earnings, saying that “severe winter weather…disrupted plant operations and logistics…We lost 62 days of production…which hasn’t happened in decades. That would be the result of people not being able to get into work safely or not having inputs arrive.”

    It wasn’t just one company, though; the whole economy was slowed by the extremes and volatility we faced.


    The disruption to operations and supply chains is real and costly, and all signs point to increasing threats as weather gets more volatile, driven in large part by climate change. The science is getting clearer that we’ll see more extreme hurricanes, droughts, floods, and even snowstorms – more moisture in the atmosphere means bigger downfalls of all kinds.

    A couple important recent reports confirm that these issues are not some theoretical model to debate, but reality today. The Risky Business report from former Treasury Secretaries and Mayor Mike Bloomberg is incredibly blunt about the hundreds of billions of coastal property and business assets at risk. A few weeks earlier, the quadrennial U.S. National Climate Assessment, a 840-page tome, did not bury the lede and declared in the first sentence, “Climate change, once considered an issue for a distant future, has moved firmly into the present.”

    Of course, all weather isn’t necessarily tied directly to climate change – like with the recent tornadoes that swept through the American Midwest – but no matter what you believe the cause, extreme weather will play an increasing role in our lives and economies. Nobody can predict exactly what might go wrong, but we can say with near 100% confidence that something will.

    So let’s consider what a company can do in a world that’s volatile, uncertain, complex, and ambiguous – that’s “VUCA” for short, a military term that’s been adopted by business. Here’s a review of the five core components of resilient systems, which I pulled together for my new book,The Big Pivot, based in part on two other important works: Nassim Taleb’s Antifragile: Things That Gain from Disorder and Resilience: Why Things Bounce Back, by Andrew Zolli and Ann Marie Healy.

    1. Diversity. A company is clearly more at risk if it has just one major product, service, technology, key supplier, or other core element. In the 2011 Thailand floods, both hard drive makers and auto giants realized that having a sole key component made in one place made for a fragile system (Toyota took a $1.5 billion hit to earnings). While companies don’t often share the details of their supply chain strategy publicly, you can bet these companies have built more diverse options for sourcing key inputs.

    2. Redundancy and buffers. Taleb uses the natural world as a model for this principle: “Layers of redundancy are the central risk management property of natural systems,” he writes, pointing out how many of our biological systems have doubles (like lungs) or backups. Our business systems need leeway for extremes as well. A few days ago, for example, the Obama Administration announced a plan to stockpile a million barrels of gasoline in the northeast specifically to avoid the shortages that plagued New England after Hurricane Sandy.

    This is all smart strategy, but the challenge for business specifically is that companies don’t like keeping two of anything – that’s not lean or (seemingly) efficient. It’s a fine line for sure, but having multiple pathways to get key inputs, for example, might have saved General Mills – and the hard drive and car companies – lots of money. It might have actually generated increased revenue as well, if it meant operating while competitors couldn’t. As Taleb says, “redundancy seems like a waste if nothing unusual happens. Except that something unusual happens – usually.”

    3. A love/hate relationship with risk. It’s a paradoxical idea, but one way to build resilience, or antifragility, is to keep the vast majority of the business as safe as possible, but then take big risks – ones that may pay off 10-fold or more – with a smaller part of the business.

    Think of the famous idea from Clayton Christensen of trying to disrupt or cannibalize your own business before someone else does. Imagine setting up a skunk works to identify major risks to the business stemming from resource constraints or climate change – and then lean into those risks and come up with products and services that avoid them and challenge the core business (for example, a car company investing in car sharing programs which consumers use to save money, but also reduce material and energy use dramatically).

    4. Fast feedback and failure. If you’re going to take some risks to, ironically, make us less risky, you need to drop what isn’t working quickly. To be more responsive, companies need better data on resource use and climate risks up and down the value chain. So invest in capturing information and building real-time systems.

    5. Modular and distributed design. If some part of a system fails, it would be great if it didn’t bring down the rest of it. A tree branch hit a power line in Ohio in August 2003, causing cascading failures across a highly connected U.S. grid, and 50 million people in the northeast lost power (including me, my wife, and our 11 day-old child in Connecticut – we were not in a resilient mood).

    These principles alone may not make for resilience in a hotter, scarcer, more open world, but they go a long way. And they point toward one key pathway for managing – and even thriving – in a VUCA world: renewables.

    Companies (and homes) that generate their own onsite energy will be able to literally weather storms better than competitors. Not all the technologies we need to do this well are in place – like building-scale energy storage at a reasonable cost – but we’re getting there. And during the day, companies with their own solar panels can operate after the storm has passed, even if the grid is down.

    Nobody can prepare for every possible outcome. Randomness, of course, is a prime element of our new business reality. But we can build systems that are better prepared than they are now. And, sure, it’s a challenge to value resilience: How much is your business damaged by a breakdown in your supply chain, or a threat to your ability to operate? How much will it cost all of us if we let the drivers of deep volatility, like climate change, go unchecked?

    It’s not easy to say, but let’s avoid finding out.

    [A version of this piece appeared first at Harvard Business Online. See also my HBR magazine cover story from April, "Resilience in a Hotter World."]

    (Andrew's new book, The Big Pivot, is out! Get your copy here. Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    September 23, 2014

    Climate Change and ISIS -- Fighting Multiple Existential Threats

    World leaders and CEOs of multinational companies are meeting at the United Nations this morning to discuss climate change. Some skeptical people may wonder why our leaders should focus on this seemingly long-range problem (even after 400,000 people marched to raise awareness) when there's so much else going on. If you watch the news, you'd be forgiven for thinking the only threat in the world is ISIS.

    When powerful, radical Islamic pseudo-states take over parts of the Middle East, capturing oil and weapons, we absolutely should be concerned. But it's also more than a bit troubling when the world faces 100-year droughts and wildfires in the West threatening food supplies, or tries to manage record-setting catastrophic floods from Arizona to India.

    The reality is we don't have the luxury of dealing with everything in succession - as a society, we have to tackle multiple threats simultaneously. The dilemma of the urgent versus the important has always been tough - and what if more than one thing is urgent?
    Photo: Flickr, Jessica Lamirand

    Climate change has seemed like a long-range "important" problem, but is moving into the "urgent" category quickly (which tends to happen to important problems left to fester). Earlier this summer, former U.S. Treasury Secretaries Hank Paulson and Robert Rubin, along with former New York Mayor Michael Bloomberg, issued a report they called Risky Business, which told us that climate change is "already costing billions." It will cost many hundreds of billions more, and even threaten the stability of our society, without prompt action.

    It can seem daunting to find the resources and focus to tackle multiple large issues. But perhaps the answer is perspective. As President Eisenhower reportedly said (and energy expert Amory Lovins likes to quote when talking about environmental challenges), "If you can't solve a problem, enlarge it." It's a powerful insight. Our existential crises are connected.

    Former CIA head James Woolsey often points out that what he calls the "malevolent" threat of radical, fundamentalist Islam and the "malignant" threat of climate change can easily be linked - our oil addiction sends money to countries (primarily Saudi Arabia) which fund radical schools around the world. As Woolsey has memorably said numerous times since 9-11, this may be the first time in history that one country has funded both sides of a war. So tackling climate change and fighting fundamentalism are connected (although one problem is easier to get agreement on - nobody is saying they think ISIS is a hoax).

    Becoming independent of foreign oil by producing our own fossil fuels does not truly solve the problem. Resources, and oil in particular, are global commodities, so until we make fossil fuels irrelevant to the economy, we're propping up petro-oligarchies and dictatorships from the Middle East to Russia. And that list now includes ISIS, which has captured some oil producing regions.

    We need a major shift in how our economies and companies operate - what I'm calling the big pivot - to bring on the clean economy as fast as possible. A combination of innovation, smart policy, and focused investment can get us there. Putting a price on carbon and eliminating the estimated $600 billion in fossil fuel subsidies are two critical steps forward at the macro level. Companies, for their part, need to demand much more renewable energy and support clean energy policies like these.

    While many fear that shifting to clean energy will be expensive or limit growth, the numbers don't support that argument. The price of solar panels, for example, has dropped 70% in five years. And a new study, the New Climate Economy report, calculates that when you factor in the savings from a healthier, non-fossil-fuel based world - actual lives saved from lower pollution - the clean economy saves money. Throw in the savings in military lives and treasure that we waste keeping oil reserves secure, and the calculus gets even clearer.

    The best news is that we probably don't need new capital: the report also notes that the world will spend as much as $90 trillion on infrastructure in the next 15 years - why not shift that investment to solar, wind, electrification of vehicles, public transportation, efficiency, and much more?

    We can't fight groups like ISIS directly with an electric car - the coalition President Obama has gathered will have to fight with real weapons and troops. But we at home can work to build a world that drains support from radical groups like ISIS. We have multiple, connected existential threats. ISIS must be stopped. So must climate change. We can do both.

    (Andrew's new book, The Big Pivot, is out! Get your copy here. Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    October 27, 2014

    A Lifecycle Question: Hybrids vs. Electrics

    A friend asked me a seemingly simple question:
    "I assume there's a known answer to this - which has a smaller carbon
    footprint, a hybrid or an electric car?"

    (Photo: Flickr, Duncan Rawlinson)

    Here's what I said, but I'm looking for other perspectives. Thoughts, dear readers?

    "Any studies I've seen compare some form of electrics (All EV, plug-in hybrid, hybrid) to non-electrics -- not hybrid vs. electric.

    The 'it depends' in all of this is because there's a footprint in production of electrics that isn't small, and then the big issue is what grid are you plugged into. If it's coal-heavy, the benefits of electrics are less (but NOT eliminated -- it's still more efficient to burn energy at a large plant for a million cars vs. a million internal combustion engines, and batteries convert energy to wheel power, or torque I think, much more efficiently than an engine that produces waste heat). Outside of the carbon question, people also worry about the toxic elements of batteries, but it's a separate issue.

    All that said, I'd still feel pretty comfortable asserting that the all electric is better than the hybrid for all the same reasons that electric is better than combustion. As the grid gets cleaner -- and it is most definitely getting cleaner (e.g., 40%+ of new capacity this year has been renewable, and another 40%+ natural gas, which is cleaner than coal, so long as the natural gas production process isn't leaking too much methane) -- the benefits of electric cars keep rising."

    (Andrew's new book, The Big Pivot, is out! Get your copy here. Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    December 30, 2014

    The 10 Most Important Sustainable Business Stories of 2014

    Happy holidays and (almost) New Year.

    For the 6th year now, I've taken a shot at summarizing the biggest themes in sustainable business over the last 12 months -- that is, stories about the biggest environmental and social challenges and how companies are navigating them. This year, given the incredible amount of activity on climate change, I devoted the first five themes to the biggest challenge of all -- the science, the costs and benefits (mostly the latter) of dealing with it, the deep impacts on energy and utility businesses, and so on.


    For the skimmers out there, here are the top 10 "headlines" I created...
    1. The bad news — climate change is now.
    2. The good news — tackling climate change is getting much cheaper.
    3. The utility and energy businesses are changing fundamentally (well, some of them are).
    4. Serious legislation like a carbon tax — even in the U.S. — is seeming possible again.
    5. A powerful social movement on climate takes shape.
    6. Strategy and mission start to gain the upper hand on short-termism.
    7. Rivals embrace radical collaboration.
    8. The absurd amount of food we waste gets more attention.
    9. A teenager pressures Cola-Cola and Pepsi – and wins.
    10. The fight against inequality finds new business allies.

    The full article appears as usual on Harvard Business Review online, and began like this...

    It’s been an amazing 12 months in the world of sustainable business. From climate change to inequality, the scope of humanity’s biggest environmental and social challenges came into much sharper focus this year — as did the scale and range of opportunities to do something about them. And citizens, using new social media tools and old-fashioned marches, rose up to drive change. Both in response and pre-emptively, the world’s leading companies continued to aggressively pivot their businesses toward more sustainable and innovative ways of operating.

    To make sense of all of this activity, I made a list of the year’s big themes, looking for the bigger story across multiple examples. But I also ran across a few specific company stories that were just really compelling or cool. So here is my admittedly subjective look at the top 10 sustainability stories and themes of the year, with sustainability broadly defined as encompassing people, planet, and profits:

    1. The bad news — climate change is now.
    The subtitle of this year’s summary could be “reports, reports, reports,” with important and fascinating (no, really) studies from economists, government agencies, scientific bodies, and business coalitions — all making a compelling case for action on climate change.

    Over the last two years, the Intergovernmental Panel on Climate Change issued its fifth, multi-thousand-page assessment of global climate science. But some new, more layman-friendly voices are telling the science story and explaining how costly to business a hotter world already is. The American Association for the Advancement of Science (AAAS) issued the clearest document from scientists I’ve ever seen, a pithy report telling us that “What We Know” is the following: (1) “Climate change is happening here and now,” (2) the risks of irreversible, highly damaging impacts are high, and (3) the sooner we act, the lower the cost. Another report, the U.S. National Climate Assessment, led with the statement that climate change “has moved firmly into the present.”

    Adding a business perspective, a group of heavy hitters, including billionaire Michael Bloomberg and former U.S. Treasury Secretaries Hank Paulson and Robert Rubin, issued the persuasive Risky Business Report. This short paper outlines how climate is “already costing local economies billions” and describes how hundreds of billions of property are at risk...

    To see the rest of the discussion, the 50 or so links to interesting stories, and my 5 themes to watch out for in 2015, check it out here...

    Have a great New Year!

    (Andrew's new book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot. Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    April 14, 2015

    The U.S.-China Climate Goals Should be More Aggressive

    I’m catching up a bit on re-posting some blogs.

    Back in November, President Obama and China’s President Xi Jinping announced an important agreement on carbon emissions. At the time, I wrote about the importance of the agreement, but laid out the math on how the US target is not aggressive enough to match what science is telling us (and not as fast as what leading companies are committing to). The blog began…

    The U.S. and China, the two largest emitters of greenhouse gases, have announced new sizable targets for reductions in emissions. President Obama is committing the U.S. to cut emissions 26 to 28 percent from 2005 levels, while Chinese President Xi Jinping announced China’s first cap on emissions by 2030. These are impressive improvements from what came before, and there are many reasons to celebrate. But unfortunately, a little basic math shows they may be too little, too late.

    If we want to increase our odds of holding warming to the globally agreed-upon limit of 2 degrees Celsius (or 3.6 Fahrenheit) – a goal that many scientists begrudgingly accept as the most that was politically feasible, but not necessarily enough to avoid some serious environmental challenges – there is only so much carbon the world can still emit.

    (See the rest).

    More recently, the Obama Administration revealed and submitted the plan more formally to the UN as part of the global negotiations leading to Paris meetings later this year. As promised, the President committed the U.S. to a 26 to 28% cut in greenhouse gas emissions from 2005 levels by 2025.

    As my previous blog described, we need a cut of more like 40% to match the latest science. And a recent analysis from my colleagues at PwC shows graphically the shortfall of the US and EU targets. But that said, nobody in business should think the plan is weak or that it won’t have broad impacts across the economy. The administration is using the power of the EPA, the courts, executive orders, and government purchasing power to continue or expand a range of initiatives.

    There will continue to be pressure on power plant emissions; new emissions and efficiency standards for equipment, vehicles, and buildings; and initiatives to address non-CO2 gases like methane (cows) and HFCs (refrigerants).

    The other announcement that came out recently was an aggressive plan to cut the government’s own emissions, not by 28% cut, but by 40%. So they do understand the science. Unfortunately, the country-level target must be more about what seemed feasible politically or wouldn’t upset energy interests too much, not about what’s necessary.

    But it’s a real plan and should help the world drive toward a global agreement in Paris later this year. Let’s keep our fingers crossed.

    (Andrew's new book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot. Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    July 8, 2015

    The Best Quotes (and Key Themes) from the Pope's Environmental Manifesto (Part I)

    I doubt you missed last month’s release of Pope Francis’ powerful “encyclical” on the environment. It’s sure to be considered a very important document in the history of sustainability – perhaps a turning point in the debate on climate change.

    I highly recommend reading the whole thing. But it is a 180-page pdf (albeit with smallish pages and large font), and contains nearly 40,000 words (part of the reason this blog is a few weeks late). My goal here was to pull some critical and fascinating quotes, perhaps cutting the reading by 80 to 90% for you. But first, a few key takeaways and what I see as his big themes.

    My takeaways

    The Pope is trying to appeal to everyone. I can’t say I read a lot of papal proclamations, so maybe this isn’t unusual, but the language here is extremely accessible and fairly secular (or at least Judeo-Christian). Here’s a word cloud of the top 50 words in the document. Yes, “God” appears frequently (with a third of the mentions tucked into the final chapter), but “human” is the top word. Other biggies include world, all, life, nature, environment, and social. And Jesus doesn’t make the top 50.


    The essay is not remotely only about climate. Leading up to the release, much of the news coverage talked about an upcoming “climate declaration.” Yes, this is a core part of the discussion, but the Pope is clearly concerned with environmental conditions overall, including biodiversity and the sanctity of life in all its forms. And, importantly, he spends a great deal of time discussing the poor and issues of inequity.

    It’s a sustainability manifesto, but without using the word. Ok, he says “sustainable” a handful of times, but only uses “sustainability” once, and that’s in quoting someone else. There’s a fascinating mix of modern views on our mega-challenges, with a serious theme of systems thinking (again without calling it that), and a bit of a dated view on the consumption side (everyone can just change their habits in the everyday choices).

    In total, the big themes of the encyclical come out very clearly. Here are some of the largest of the Pope’s views with a bit of my perspective on how it comes across.

    The Pope’s messages

    Climate change science and impacts are clear. The Pope obviously believes that we know more than enough about the science (climate change is happening and humans are responsible) to act, and he calls out people for their denial (see section 59 below). This will be one of the most lasting impacts of his call to action – putting to rest the idea that there’s any real uncertainty on the major aspects of climate change. We may move quicker past debating the existence of the problem (at least in the U.S.) and start talking about solutions. Some pundits (and presidential candidates) have suggested the Pope should not wade into scientific debates, but that’s ridiculous given (a) his role, for 1 billion Catholics, as a spirit guide on how people should lead their lives and (b) the fact that the man holds a graduate degree in Chemistry.

    We have serious equity problems. In keeping with the Pope’s core mission in his tenure thus far, he focuses like a laser on the challenges of the poor, and makes it clear that the environmental and social challenges are deeply intertwined. We must deal with them all as a system.

    A modern technological society has some important drawbacks. Some critics have decried the encyclical as being anti-progress and technology. I have some quibbles in some places (such as his dislike for cities and contention that they are resource hogs), but overall the Pope does not really call for an end to progress. He’s asking us to reimagine of what we mean by progress, and suggests we take into account the health of the planet and of all its inhabitants in our investment and consumption decisions. This is another way of saying we need to value more than just short-term profit maximization.

    The root of most of these environmental and social challenges is consumption, greed, and desire for stuff. Again, people may be uncomfortable with what sounds like an anti-progress, anti-modernity message, but it’s more balanced than that. And most of the language around this theme (mostly in the last chapter) fits the self-help, Oprah-like messages of simplicity, enjoying what you have and finding joy in the people and experiences in your life, living in the now, and so on. It’s clearly a message for those who have the basics (and then some) in life already, and it doesn’t sound radical.

    We’re all connected (including nature and animals), which has profound implications for how we live our lives and build our economy and society. At core, this essay is about the interconnection between our big environmental and social issues, as well as their deep connection to our economy and ability to thrive. It’s about the systems thinking we need in our lives and policies. It’s really about the common good, which the Pope notably extends to “future generations.” He uses this interconnectedness theme to criticize modern economics and its element of selfishness, so this not-so-subtle call for “distributive justice” may make many readers uncomfortable. He’s launching a frontal attack on the powerful trend, especially in the U.S., of an “every man for himself” or “pull yourself up by your bootstraps” view of the world.

    Saving the environment is good economics, but it’s about morals. The Pope tackles the contentious religious issue of humanity’s “dominion” over nature head on and makes it very clear that it’s core to spirituality and Catholicism to care for the environment. But for me, the bottom line of the essay is a quote that’s almost a throwaway line buried deep in the 5th chapter (of 6). Talking about the potential expense of bringing the clean economy to fruition, particularly in the developing world, the Pope throws this out there (in section 172):

    “The costs of this would be low, compared to the risks of climate change. In any event, these are primarily ethical decisions, rooted in solidarity between all peoples.”

    In other words, yes, we can do this all economically and it makes sense in terms of both risk reduction and prosperity. But in the end, we need to act because it’s the right thing to do for the common good.

    In general, I found the Pope’s essay to be profound and on target. I don’t agree with every statement, and I certainly believe we need the scale of modernity and business to tackle our challenges, but I’m not going to have the audacity to pick apart the Pope’s essay line by line. Overall, this manifesto syncs well with my thinking in The Big Pivot. The topline logic is clear: we have some mega challenges – such as climate change, resource constraints, and inequity – and we need new thinking and life/business models to tackle them (such as circular, inclusive economies). So I for one – an American raised (mildly) Jewish – am thrilled to see this important, historic addition to the sustainability quest.

    The remainder of what will be a very long blog (with 1 or 2 more to come over the next few days) will be mainly quotes. I’ve tried to put them into big themes (many of which the Pope established in the structure of the piece), and provided some thoughts in a few places. Each excerpt includes the paragraph number the encyclical uses (from 1 to 246). Enjoy.




    23. A very solid scientific consensus indicates that we are presently witnessing a disturbing warming of the climatic system. In recent decades this warming has been accompanied by a constant rise in the sea level and, it would appear, by an increase of extreme weather events, even if a scientifically determinable cause cannot be assigned to each particular phenomenon… a number of scientific studies indicate that most global warming in recent decades is due to the great concentration of greenhouse gases…released mainly as a result of human activity.

    25. Climate change is a global problem with grave implications: environmental, social, economic, political and for the distribution of goods. It represents one of the principal challenges facing humanity in our day. Its worst impact will probably be felt by developing countries in coming decades.

    59. ...we are tempted to think that what is happening is not entirely clear. Superficially, apart from a few obvious signs of pollution and deterioration, things do not look that serious, and the planet could continue as it is for some time. Such evasiveness serves as a licence to carrying on with our present lifestyles and models of production and consumption. This is the way human beings contrive to feed their self-destructive vices: trying not to see them, trying not to acknowledge them, delaying the important decisions and pretending that nothing will happen.

    161. Doomsday predictions can no longer be met with irony or disdain. We may well be leaving to coming generations debris, desolation and filth. The pace of consumption, waste and environmental change has so stretched the planet’s capacity that our contemporary lifestyle, unsustainable as it is, can only precipitate catastrophes, such as those which even now periodically occur in different areas of the world.

    163. …the profoundly human causes of environmental degradation.


    188. …the Church does not presume to settle scientific questions or to replace politics. But I am concerned to encourage an honest and open debate so that particular interests or ideologies will not prejudice the common good.

    199. It cannot be maintained that empirical science provides a complete explanation of life, the interplay of all creatures and the whole of reality.

    200. Any technical solution which science claims to offer will be powerless to solve the serious problems of our world if humanity loses its compass, if we lose sight of the great motivations which make it possible for us to live in harmony, to make sacrifices and to treat others well.


    Nature and human impacts

    1. …our common home is like a sister with whom we share our life and a beautiful mother.

    2. …the harm we have inflicted on her by our irresponsible use and abuse of the goods with which God has endowed her…the earth herself, burdened and laid waste, is among the most abandoned and maltreated of our poor.

    5. Saint John Paul II…warned that human beings frequently seem “to see no other meaning in their natural environment than what serves for immediate use and consumption”.

    21. The earth, our home, is beginning to look more and more like an immense pile of filth.

    Natural resources, waste

    27. Other indicators of the present situation have to do with the depletion of natural resources. We all know that it is not possible to sustain the present level of consumption in developed countries and wealthier sectors of society, where the habit of wasting and discarding has reached unprecedented levels. The exploitation of the planet has already exceeded acceptable limits and we still have not solved the problem of poverty.

    106. …easy to accept the idea of infinite or unlimited growth, which proves so attractive to economists, financiers and experts in technology. It is based on the lie that there is an infinite supply of the earth’s goods, and this leads to the planet being squeezed dry beyond every limit.

    50. …we know that approximately a third of all food produced is discarded, and “whenever food is thrown out it is as if it were stolen from the table of the poor”.


    28. Fresh drinking water is an issue of primary importance

    30. access to safe drinkable water is a basic and universal human right, since it is essential to human survival and, as such, is a condition for the exercise of other human rights [italics in original]

    185. …we know that water is a scarce and indispensable resource and a fundamental right which conditions the exercise of other human rights. This indisputable fact overrides any other assessment of environmental impact on a region.

    Biodiversity and inherent value of nature

    AW comment: This strikes me as a kind of 50-plus-year bookend to Silent Spring. The Pope could drive a jump in consciousness on these issues like the historic book in 1962.

    32-3. The loss of forests and woodlands entails the loss of species which may constitute extremely important resources in the future, not only for food but also for curing disease and other uses… It is not enough, however, to think of different species merely as potential “resources” to be exploited, while overlooking the fact that they have value in themselves…The great majority become extinct for reasons related to human activity…We have no such right.

    34. …many birds and insects which disappear due to synthetic agrotoxins are helpful for agriculture: their disappearance will have to be compensated for by yet other techniques which may well prove harmful.

    39. The replacement of virgin forest with plantations of trees, usually monocultures, is rarely adequately analyzed. Yet this can seriously compromise a biodiversity…

    Oceans and coral reefs

    40. Oceans not only contain the bulk of our planet’s water supply, but also most of the immense variety of living creatures…

    41. Many of the world’s coral reefs are already barren or in a state of constant decline.

    174. The growing problem of marine waste and the protection of the open seas represent particular challenges. What is needed, in effect, is an agreement on systems of governance for the whole range of so-called “global commons”.



    32. The earth’s resources are also being plundered because of short-sighted approaches to the economy, commerce and production.

    36. Caring for ecosystems demands far-sightedness, since no one looking for quick and easy profit is truly interested in their preservation

    178. A politics concerned with immediate results, supported by consumerist sectors of the population, is driven to produce short-term growth.

    181. Results take time and demand immediate outlays which may not produce tangible effects within any one government’s term…politicians will inevitably clash with the mindset of short-term gain and results which dominates present-day economics and politics.

    Consumer/Throwaway culture and self-centered culture

    22. These problems are closely linked to a throwaway culture which affects the excluded just as it quickly reduces things to rubbish.

    55. People may well have a growing ecological sensitivity but it has not succeeded in changing their harmful habits of consumption which, rather than decreasing, appear to be growing all the more.

    90. We fail to see that some are mired in desperate and degrading poverty, with no way out, while others have not the faintest idea of what to do with their possessions, vainly showing off their supposed superiority and leaving behind them so much waste which, if it were the case everywhere, would destroy the planet.

    162. Men and women of our postmodern world run the risk of rampant individualism, and many problems of society are connected with today’s self-centred culture of instant gratification

    230. In the end, a world of exacerbated consumption is at the same time a world which mistreats life in all its forms.

    Progress, Power, and Ethics – The Good and Bad

    AW Comment: I have some disagreement here. The Pope celebrates progress, but mostly worries about it’s impacts, which is fair. But saying that science/tech progress is not progress of humanity (113), or completely irresponsible (165), is not quite accurate. We have brought billions of people out of poverty with modern life. Yes, our mode of living and doing business must change, but we have seen immense improvement in quality of life.

    102. We are the beneficiaries of two centuries of enormous waves of change: steam engines, railways, the telegraph, electricity, automobiles, aeroplanes, chemical industries, modern medicine, information technology and, more recently, the digital revolution, robotics, biotechnologies and nanotechnologies. It is right to rejoice in these advances and to be excited by the immense possibilities which they continue to open up before us, for “science and technology are wonderful products of a God-given human creativity.”

    103-4. Technoscience, when well directed, can produce important means of improving the quality of human life… Yet it must also be recognized that nuclear energy, biotechnology, information technology, knowledge of our DNA, and many other abilities which we have acquired, have given us tremendous power. More precisely, they have given those with the knowledge, and especially the economic resources to use them, an impressive dominance over the whole of humanity and the entire world… In whose hands does all this power lie, or will it eventually end up? It is extremely risky for a small part of humanity to have it.

    105. …as if reality, goodness and truth automatically flow from technological and economic power as such. The fact is that “contemporary man has not been trained to use power well”,[84] because our immense technological development has not been accompanied by a development in human responsibility, values and conscience…we cannot claim to have…clear-minded self-restraint.

    106. We have to accept that technological products are not neutral…Decisions which may seem purely instrumental are in reality decisions about the kind of society we want to build.

    109. The economy accepts every advance in technology with a view to profit, without concern for its potentially negative impact on human beings. Finance overwhelms the real economy. The lessons of the global financial crisis have not been assimilated, and we are learning all too slowly the lessons of environmental deterioration.

    113. …scientific and technological progress cannot be equated with the progress of humanity and history

    114. Nobody is suggesting a return to the Stone Age, but we do need to slow down and look at reality in a different way…

    136. …technology severed from ethics will not easily be able to limit its own power.

    165. …the post-industrial period may well be remembered as one of the most irresponsible in history, nonetheless there is reason to hope that humanity at the dawn of the twenty-first century will be remembered for having generously shouldered its grave responsibilities.

    Value of people and work in modern society
    128. …the orientation of the economy has favoured a kind of technological progress in which the costs of production are reduced by laying off workers and replacing them with machines…to stop investing in people, in order to gain greater short-term financial gain, is bad business for society.

    129. Business is a noble vocation, directed to producing wealth and improving our world. It can be a fruitful source of prosperity for the areas in which it operates, especially if it sees the creation of jobs as an essential part of its service to the common good.

    159. The notion of the common good also extends to future generations. The global economic crises have made painfully obvious the detrimental effects of disregarding our common destiny, which cannot exclude those who come after us. We can no longer speak of sustainable development apart from intergenerational solidarity…[which is] not optional, but rather a basic question of justice, since the world we have received also belongs to those who will follow us…“The environment is part of a logic of receptivity. It is on loan to each generation, which must then hand it on to the next”. An integral ecology is marked by this broader vision. [italics added]

    Scale of modern society (population, cities, agriculture, etc.)

    AW comment: This is an area where I mainly disagree. The Pope is not a fan of cities and sees them as a cause of our environmental challenges. But cities usually are, and certainly can be, very efficient on a per person basis. We share infrastructure – in many cities people don’t need cars at all, for example. And it’s not clear that small-scale food production alone will be enough. We can do sustainable agriculture at scale, and given the Pope’s commitment to avoid population control of any kind, we’ll need to.

    44. the disproportionate and unruly growth of many cities, which have become unhealthy to live in, not only because of pollution caused by toxic emissions but also as a result of urban chaos, poor transportation, and visual pollution and noise. Many cities are huge, inefficient structures, excessively wasteful of energy and water.

    149. In the unstable neighbourhoods of mega-cities, the daily experience of overcrowding and social anonymity can create a sense of uprootedness which spawns antisocial behaviour and violence.

    129. …there is a great variety of small-scale food production systems which feed the greater part of the world’s peoples, using a modest amount of land and producing less waste, be it in small agricultural parcels…civil authorities have the right and duty to adopt clear and firm measures in support of small producers and differentiated production.


    Tomorrow I'll post excerpts about the moral argument, the connection of environmentalism to Christianity, the Pope on the common good and inequity, and the solutions he suggests.

    (Andrew's new book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot. Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    July 30, 2015

    Taking Action on Climate is the Ultimate No-Brainer Business Strategy

    [Just some summer catch up on re-posting things I've written in other places. I posted this on The Guardian's site a few months ago. It's one of those "going green is a win-win" stories that I wish were not necessary anymore. For the knowledgeable sustainability folks, this is a 'duh'...and I could've written this in almost the same way years ago -- except for the part of the story about the precipitous drop in the cost of renewable energy. So I expected more pushback from readers on 'we've heard this before', but I got almost entirely positive feedback on how I'm making the case (again). The larger point is that we do need to tell this story over and over -- the misperception remains that if it's green, it must cost more. Let's put a stake through that.]

    (Photo: Flickr by h080)

    Recently, as I finished speaking to a group of fund managers, I was asked two questions that have become increasingly common. The first was: “What if scientists are wrong and the climate thing doesn’t turn out to be so bad?” The second was: “Will companies regret doing something about it?”

    On the bright side, these questions are a big improvement over the one I kept getting asked a year or two ago – namely, whether climate change was happening at all. While climate change is more than reason enough for a deep reconsideration of how we do business, I suppose it’s not an unfair question to ask if going green has other benefits. The short answer is yes.

    To get a feel for how tackling climate change can benefit a business, it helps to look at the four major categories of corporate action that fall under the banner of “doing something” about carbon:

    • Eco-efficiency in all its forms: slashing energy and material use in production, packaging, distribution and business operations, as well as redesigning products and encouraging customers to reduce their energy draw
    • Using renewable energy: either investing in energy-generating assets or signing long-term power purchasing agreements for renewable electricity
    • Ensuring the supply chain is working on eco-efficiency and renewable energy
    • Lobbying for a tax on carbon or encouraging other policies that would help drive all of the above

    No regrets

    It’s hard to see which of these actions might be regrettable. The first category, eco-efficiency, saves money and makes companies less dependent on resources that can disappear or get more expensive. Most companies looking at these investments tie themselves to an arbitrary two-year hurdle rate, but even if a company went further down the payback list, what would the regret be? Lowered operating costs after payback?

    The second point, renewables, has often been a harder sell. Renewable energy has been the poster child for the most expensive – and, presumably, anti-profit-maximizing – way to go green. But this view is incredibly outdated: solar and wind prices have dropped 60-80% over the last five years, and “grid parity” – the point at which unsubsidized renewables are as inexpensive as fossil fuels – is quickly approaching in most countries.

    Because of these trends, more companies are now able to sign power purchasing agreements to buy renewables for the same price or less than they’ve been paying for non-renewables. Financing options also mean they don’t have to start off with any capital investment, which further eases the transition.

    Of course, it’s possible that these companies will regret locking in a price if energy costs plummet. But that contingency seems unlikely: recent oil price drops aside, basic commodity prices have been trending upward since the beginning of the century. In fact, even at recent lows, oil costs twice what it did in 2000.

    More importantly, energy prices are incredibly volatile, so locking in prices brings stability, risk reduction and increased resilience. All of these benefits are real, even if we don’t put numbers on them.

    But what about those companies that buy their own power-generating equipment – like solar panels – and face a longer payback than the normal hurdle rates? Even in this case, there isn’t much to regret: getting a significant portion of energy at zero variable cost holds zero risk.

    The same logic broadly applies to pressing the supply chain to reduce carbon. Driving suppliers to lower operating costs and increase reliability and resilience is good for their businesses.

    As for the final point, putting a price on carbon accelerates the benefits of all of the other actions. The only regret might be if we go too fast for the economy to adjust to rising prices for dirty fuels. Then again, I wouldn’t bet on global policy action moving too fast any time soon.

    The big picture

    Moving beyond the corporate level to the macro perspective, these benefits multiply. Cutting carbon means cutting overall pollution, not to mention the serious and expensive health consequences of burning fossil fuels. Perhaps most importantly, it makes us more energy independent. After all, nobody can raise the price of sunlight and wind – or cut off the supply.

    This isn’t to say that there won’t be any losers in a clean economy. The entrenched technologies and the workers in those sectors – like coal miners – will be hurt. But we can, as a business community and society, work to ease that transition rather than deny the overall benefits that will come from doing so.

    Looking at the situation as a whole, asking about the regrets that we might face if we slash carbon emissions is a bit like asking what would happen if smoking wasn’t as bad for our lungs as doctors say. Would we regret avoiding all the other problems like increased risk of heart disease and stroke? Would we regret eliminating the $10 per pack expense from our lives?

    The question about whether we’ll regret moving to a clean economy is usually put in terms meant to sound careful and risk averse. The truth, however, is that not going clean is riskier. After all, a key part of risk management lies in considering the “tails” of the curve of probable outcomes. In other words, if you’re asking what happens if science is overstating the problem, then you have to ask what happens if they’ve understated the problem. And, given the consistent trend of headlines like this, this side of spectrum seems far more likely.

    How much will a company – and all of us – regret not taking action if the outcomes are much worse? Given the day-to-day benefits of moving to a clean economy, corporate action on climate is the ultimate no-brainer.

    (This post first appeared on The Guardian online.)

    (Andrew's new book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot. Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    October 14, 2015

    The Democratic Debate: A Climate Change Report Card

    What a welcome surprise. Leaders running for the most powerful job in the world actually prioritizing the greatest threat and opportunity facing America and humanity in the 21st century – climate change.


    As a whole last night, the Democrats running for President made a strong showing on climate. When the evening began, I wondered how long it would take to mention our biggest challenge – I figured it might be an hour or two into the proceedings, and it would have been the case if left up to CNN. But less than 2 minutes in, the candidates’ opening statements included prominent mentions of climate. And when the discussion turned to our greatest security threats, there was climate again (reminder: the idea that climate change is “an immediate threat to national security does not come from the Democrats but from the Pentagon.)

    Much later, CNN let a voter ask the question, “What would you do about climate change?” The range of answers was telling.

    · Governor O’Malley started very strong with a call for 100% renewable energy on our grid by 2050, and suggested we should lead and innovate.

    · Senator Webb fell back on the lame “all of the above” energy strategy, and the outdated “we can’t act alone without China and India” excuse, which in total amounted to practically a non-answer. But he does support alternative energy.

    · Senator Sanders gave a broad answer about the scale of the threat and working with China and India, but had said multiple times in the debate that this was a top issue for him.

    · Senator Clinton, in a quasi-odd turn, went back to her work with President Obama at the Copenhagen global climate meeting in 2009. She described how they got China to the table, which was true and important. But it did ignore that China announced a couple weeks ago that it would implement a cap and trade system, thus leapfrogging over our efforts.

    · And as for Governor Chaffee, I honestly can’t remember what he said about the topic specifically (he was mostly a non-entity in the debate)

    So the answers were not all fully developed, but it’s notable that there were answers. In the second Republican debate, all Senator Rubio could say was that tackling climate would “destroy the economy.” This is of course dead wrong – in fact, all the major arguments against building the clean economy are crumbling, as I recently laid out in an interview with HuffPo’s Jo Confino.

    But back to the Dem candidates who made, by and large, a strong showing. The weakest participant? The media as a whole and CNN in particular. Credit to CNN for even asking about climate, but in total it took 5+ hours of Republican debate time (7+ if you count the ‘kids table’ debates) to get to climate and energy, and over 2 hours in the Dem debate.

    So here’s my unscientific scoring on how everyone handled climate, with a combination of urgency, sense of scale of the challenge, and specifics on how to fight it…

    · Clinton: B-

    · Sanders: B+

    · O’Malley: A

    · Webb: C-

    · Chaffee: B

    · The Media: D-

    We can quibble over the quality of the discussion on it, or the fact that the vast benefits (to our public and economic health) of pursuing a clean economy strategy are generally under-represented in these discussions. But in total, climate got more focus on a national political stage than ever before, and it was clearly a top tier issue for the candidates. Bravo.

    (Andrew's new book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot. Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    October 23, 2015

    The Arguments Against Climate Action Are Crumbling Fast

    [There's been incredible movement on climate change in the last few months. I wrote up 7 big myths that you hear for why we shouldn't take action on climate or build the clean economy and described how those arguments are crumbling. A version of this was posted as a Q&A with me with some helpful additional context by HuffPo's Jo Confino -- of course the comments section is where the climate denial comes out...

    But the good news is, we're winning this argument in a big way. Here's my original piece...]


    It’s getting very hard for the “go slow” crowd on climate and the clean economy. All of the best talking points are completely falling apart. Here are 7 core arguments about why the U.S. acting on climate change, or building a clean economy, are bad ideas…and some recent news that obliterates each one.

    1. It’s expensive and/or “destroys the economy”

    The best estimates on what climate change will cost the world – versus the investment costs of acting to avoid the worst of it – have for years pointed away from this fallacy. From the Stern Review in 2006, to the more recent New Climate Economy and Risky Business reports, the numbers show clearly that not acting on a changing climate is a horrible fiscal choice. The most recent analysis, the powerful Energy Darwinism report from Citi, puts some absurd numbers out there: between now and the middle of the century, unchecked climate change could cost the world up to $72 trillion. Citi also calculates what the world should spend on fuel and capital expenditures (on energy and transportation infrastructure) to create a clean energy future: $190 trillion. That sounds like bad news until you compare it to Citi’s estimate for the business-as-usual, fossil-fuel-heavy scenario: $192 trillion.

    So, we’re going to invest huge sums of money in energy either way, and we may as well spend $2 trillion less to avoid tens of trillions of economic (and human) damage. And we’ve done it for years – OEC countries grew 16 percent over the last decade while cutting greenhouse gas emissions more than 6 percent. In short, we can increasingly decouple growth from fossil fuels, so acting on climate is a big win-win.

    2. China’s not doing anything, so why should we?

    Besides missing the point that building the clean economy is good for us no matter what anyone else does, this favorite nugget has been untrue for years. China built the world’s largest solar and wind industries in less than a decade, driving down the cost of those technologies for all of us. The shift is already over there. There’s more wind energy in China than nuclear and the country built more solar in the first quarter of this year than exists in France in total. And what about all that coal? It’s still a problem, but China reduced coal imports by 42% in the first quarter as well. But this persistent myth about China’s inaction was truly destroyed 2 weeks ago when President Xi Jingping committed his country committed to launch a national cap and trade system to control carbon pollution in 2017. Yes, the market-based solution that American conservative economists and politicians basically created back in 1990 to fight air pollution – but then stopped supporting when President Obama tried to enact it to tackle climate change – will be launched in communist China.

    3. Business doesn’t want this

    Well, that’s partially true – for a coal company, tackling climate change is an existential threat. And oil and gas companies also have some challenges in the long (for awhile though, the natural gas business wins as coal declines). But for everybody else, the clean economy is a great deal, and a growing number of the world’s largest companies are realizing this. A new batch of multinationals recently joined RE100, a group committed to using 100% renewable energy (disclosure: I’m on the initiative’s steering committee). The new signatories include Walmart, P&G, J&J, Starbucks, Nike, Salesforce, and Goldman Sachs…and they joined current members like IKEA, Swiss Re, Nestle, Philips, Unilever, and SAP. Adding to the momentum, six major banks – Bank of America, Citi, Goldman Sachs, JPMorgan Chase, Morgan Stanley & Wells Fargo – announced their support for global and national policies that fight climate change.

    4. Investors won’t support the clean economy

    The six banks pledging support for policy also specifically pledged “significant resources toward financing climate solutions.” That’s the ‘carrot’ of clean economy finance. On the ‘stick’ side, the fossil fuel divestment movement has gained significant steam. Just a few fringe universities had signed on a year ago, but now Bloomberg reports that “portfolio managers have pledged to steer $2.6 trillion in investments away from fossil fuels.” The largest addition to the movement is likely the state of California, which will get out of coal investments.

    5. God gave us dominion over nature to do whatever we want

    The Pope begs to differ. The spiritual leader of a billion Catholics came to the U.S. in part to reinforce the messages in his powerful encyclical, Laudato Si. In this 40,000 word manifesto, the Pope makes it clear that, among other things, he finds the science of human-caused climate change compelling and that any interpretation of the Bible that lets humans run roughshod all over creation is dead wrong. In his words: “we Christians have at times incorrectly interpreted the Scriptures, nowadays we must forcefully reject the notion that our being…given dominion over the earth justifies absolute domination over other creatures..."keeping" means caring, protecting, overseeing and preserving.”

    6. Republicans at the national level will never support action on climate

    This one was true until a couple weeks ago and the US Republican party is the only major conservative party in the developed, democratic world to challenge climate science. Then 11 Congressional GOP-ers put forward a bill acknowledging climate change and promoting action (that the leader of this little insurrection is Catholic is not random). Yes, it’s less than a dozen, but it’s 11 more Republicans than we’ve seen come forward in years.

    7. Renewables can’t power a modern society and/or there’s no feasible plan to get us there.

    There’s so much evidence to the contrary, it’s hard to narrow it down. The costs for solar and wind have dropped from 70 to 80 percent over the last five years, with “fossil fuels losing their cost advantage” over the renewables. Deutsche Bank now predicts that most of the world experience “grid parity" – the point when renewables without subsidies are cheaper than the older technologies – within a couple of years. And the idea that renewables can’t power a modern society is mostly a myth – yes, we need advances in storage technology for when the wind isn’t blowing or sun is down, but those are coming fast also. Multiple studies suggest 100 percent renewable energy is possible by 2050 (or sooner), at least on the grid. And in transportation, does anyone think Tesla-style vehicles are a pipe dream anymore?

    In short, the arguments against a clean economy are imploding and sounding weaker every day. In the words of the CEO of We Mean Business, a group of organizations pursuing the clean economy, “the shift to a low-carbon economy is inevitable, irreversible, and irresistible.”

    So let’s get going.

    (Photo: Flickr, 4 Seasons Hotel Implosion, Ian)

    December 18, 2015

    On Climate Change, Skepticism is Getting Old...Optimism is Warranted


    Is the Paris Climate Agreement good enough? Can the world build a low-carbon economy fast enough?

    These are critical questions for the future of humanity, so it’s important to consider them carefully. But too many people in the press and in the business world are unnecessarily dour about the whole thing.

    Consider two important voices that spoke up at the start of the Paris COP 21 climate conference. First, David Brooks, the quasi-self-appointed “reasonable” voice of moderate U.S. conservatism, penned a skeptical op-ed about the prospects for global change. Although he gave his arguments a veneer of tech optimism, he mainly focused on how hard will be to reduce carbon emissions. Brooks lamented, “the pain in reducing carbon emissions is individual but the good is only achieved collectively. You’re asking people to impose costs on themselves today for some future benefit they will never see.”

    Second, listen to Alan Murray. He’s the editor of Fortune magazine, a publication that has covered the greening of business fairly extensively and positively for a decade, going back to an important cover story, “Green Machine,” which was accompanied by the cover line “Wal-mart Saves the Planet.” But Murray personally is clearly wary of a large-scale move to a clean economy, tweeting, “Sadly, U.S. is split between those who deny climate change and those who embrace wildly unrealistic solutions.”


    He goes on to say the quest for a low-carbon world could “destroy the economy.”

    These views on the cost and feasibility of building a low-carbon world are not uncommon in the business world. But they are dated, damaging and dead wrong. We need a broad coalition of business, government and citizens to tackle a problem as large and complex as climate change. Telling people it’s not possible is worse than unhelpful. Luckily, most of the world is now ignoring the naysayers.

    A Serious Response to a Serious Problem

    Before addressing their biggest concerns, let’s stipulate something. Fossil fuels brought billions of people out of poverty. Society has invested for 150 years in infrastructure to power modern life. So of course it’s daunting to contemplate moving the world away from what we know. And many fossil fuel companies and petro-dictatorships are fighting the transition with their immense influence and power.

    Nobody said it would be easy.

    But throwing up our hands and saying “this is all too hard” is not much of a response to a serious problem. And, more important, the reasons for optimism are now bountiful.

    Let’s look at Brooks’ commentary more closely. He says there are costs, which is a deceptive (or perhaps uneducated) way of referring to smart investments: All business or government expenses are choices about where to put capital. But the weirdest and most dated part of his statement is saying we’ll “never see” the benefits of a clean economy. Quite literally, China will see clearer air by reducing coal use and traffic in Beijing and other megacities. And for business, there’s an enormous range of initiatives that slash costs quickly — such as lighting and building retrofits, efficiency, and now even renewables. Companies like Walmart, Google and Apple are cutting carbon, buying tremendous quantities of renewable energy and saving money doing it. So when is this “never” that Brooks speaks of?

    The idea that it’s just too expensive to go low carbon is one of thebig myths that are crumbling right now. If anything, the best economic analyses show that not moving away from fossil fuels will be devastating to humanity and our economies — a possible US$72 trillion expense over the next 40 years, according to a report from Citi. The bill for inaction is already starting to come due. Look at the costs of droughts like the one in California, or the immense human and economic toll of the “once-in-a-century” rains and floods in Chennai, India. Ford, BMW and many other multinationals have factories there. Lost production is expensive.

    Citi’s study also suggests that we can take the trillions of dollars we will be spending on infrastructure and fuel in the coming years and point it toward renewables instead of old, dirty technologies. The total bill will be the same or less, just without the carbon and climate risk. So, far from destroying the economy, the low-carbon world will save it.

    It’s true that it is a big job to turn over the world’s energy systems. But the need to cut carbon fast is not driven by love of polar bears. It’s about keeping the planet livable and productive for humans and our businesses and economies.

    The continuing good news is that the new technologies are getting much cheaper all the time. Solar and wind costs have plummeted around 70 to 80 percent in the past five years, and a number of analyses tell us that, as the International Energy Agency and Bloomberg noted, “fossil fuels [are] losing cost advantage over solar, wind.” The world seems to have noticed this economic shift: More than half the new energy built today is renewable.

    Murray has his concern about wildly unrealistic expectations, but I have a practical point. It’s true that it is a big job to turn over the world’s energy systems. But the need to cut carbon fast is not driven by love of polar bears. It’s about keeping the planet livable and productive for humans and our businesses and economies. We’ll do what’s required because we have to, based on physicsand economics.

    It’s a strangely defeatist attitude to declare visionary thinking as unrealistic. Imagine rewinding the clock 25 years, when some were likely predicting a cellphone in every hand or magical portable computers that would give everyone access to the world’s knowledge. I’m sure many said it was impossible, but most in business probably eagerly embraced the massive multi-trillion-dollar build-out of the mobile industry in the 1990s and 2000s. So why not get excited about the trillions moving us toward a more resilient, distributed-energy, renewable-based world?

    Predictions From Optimists

    I prefer to get my predictions from optimists — people like Tesla’s Elon Musk who are painting a world of electric cars and renewable energy and moving forward to build it. And now we have the biggest source of optimism to date: In what is perhaps a first in human history, representatives from nearly 200 nations agreed in Paris to cut emissions over the next 10 to 15 years.

    Yes, the deal has huge flaws. It has limited repercussions for countries not meeting targets, the tracking and transparency could be stricter, and even if we meet the current targets, we come up far short of slowing warming to 2 °C.

    Companies are coming off the sidelines now for real, committing to serious reductions in carbon and massive investments in renewables.

    But these are all problems we can deal with if everyone is on board. And, most importantly, the deal tells business and the markets that governments are serious. Investing in building the low-carbon economy just got even more rational. Why, then, is the carping from the sidelines usually couched as the more reasonable, sober position versus pie-in-the-sky or naïve activists wanting a renewable-powered world?

    It’s easy to be depressed about the situation we’re in. Corralling close to 200 countries to act in collective best interest is obviously hard. And the science is not helping, because the climate problem is moving fast (I’m sick of seeing headlines like “The Arctic is melting faster than scientists thought”).

    But the reasons for hope are now plentiful: from rapidly improving economics, to serious action in the business community, to global citizen and political will-building. Those denying we have a problem are being sidelined within nearly all governments (except the U.S. Congress) and increasingly, I find, within executive suites and boardrooms. Companies are coming off the sidelines now for real, committing to serious reductions in carbon and massive investments in renewables.

    Globally, we’ve finally achieved a consensus that there is a serious problem. We’re nearing consensus that it’s in our economic and moral interest to do something about it. So it’s time for everyone to join the parade, criticize only when it’s productive and suggest real solutions that help us build a thriving world.

    (This post first appeared at Ensia online.)

    (Andrew's new book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot. Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    December 28, 2015

    10 Sustainable Business Stories that Shaped 2015...and Some Questions for 2016

    (I published the below, my annual list of the top 10 stories in sustainable business, last week in HBR. One change this year: I won't call evidence of climate change a "story." So consider the extreme weather that has devastated lives and businesses in Chennai, India. That’s not fodder for a top 10 list. It's unfortunately just part of the harsh reality of living life and doing business in the 21st century. It should be obvious that climate change is here and, as Citi calculated recently, will cost the world unfathomable amounts of money if it goes unchecked. And it's increasingly obvious that building the clean economy is good for business. So here it goes...)

    The year 2015 was a pivotal time when humanity turned more decisively toward building a thriving and sustainable world. On our largest shared challenge, climate change, most of the major hurdles to action — both imagined and real – started to crumble. And an unlikely group of new voices joined the fight. From the Pope to global CEOs to almost all the world’s political leaders, the most powerful people got on board.

    It was a year of amazing progress — mostly. Here are eight cross-cutting themes and stories from 2015 that are driving us toward a sustainable world (and two that are doing the opposite):


    1. The Pope reminds us that we’re all connected. The Pope’s encyclical, Laudito Si, is a manifesto asking that we reconsider how we treat each other in a threatened and divided world. He challenged the current form of capitalism and made a powerful case for tackling climate change and inequality on moral and economic grounds (I’ve summarized his paperhere and here).

    The Pope is, at least nominally, the moral leader of 1.2 billion Roman Catholics around the world. His voice carries enormous heft with all leaders. By adding a weighty moral dimension to the discussions of climate and equity, and for linking them effectively, I believe his manifesto and continued vocal support for the issues make this the top story of the year.

    Ideas can affect the world more deeply than even historic treaties or agreements. Consider that other power brokers, such as Jim Yong Kim, President of the World Bank, echoed themes similar to those the Pope raised. Kim said in September, “we have no hope of ending extreme poverty unless we tackle climate change.”

    2. In Paris, all countries say with one voice, “We will tackle climate change.” The deal reached on December 12 might be one of the first times in history that representatives of every human being on earth agreed on, well, anything. It’s big news and a very good start, but the deal has a major flaw: the commitments will not keep the world from warming 1.5 degrees Celsius, or even 2 degrees (the stated long-term goals). That said, with 187 countries pledging collective action to cut carbon emissions, the deal will have vast repercussions for business, particularly as governments put into place policies to remake our energy, transportation, and building systems.

    The lead-up to Paris gave us a taste of what’s to come. For example, China committed to implement a carbon cap and trade system, Britain said it would phase out coal plants by 2025, and President Obama vetoed the Keystone pipeline. Besides possibly saving humanity, the deal has another big upside — it signals to financial markets and businesses that the low carbon economy is worth investing in. Multi-trillion-dollar markets are in play and there will be many more winners than losers.

    3. Companies line up like never before for climate action. One of the reasons the Paris talks succeeded was the clear support of the business community. CEOs from some of the world’s largest companies put out public statements backing a strong climate deal. Sectors calling for action included banking (Bank of America, Citi, Goldman, JPMorgan, Morgan Stanley, Wells Fargo), the apparel industry (including Levi, Gap, Adidas, VF), and the World Economic Forum, which brought 79 CEOs together to urge action. Even oil giants from Europe (including BP, Eni, Shell, Statoil, Total) advocated for a price on carbon.

    Some big names went even further than this nudging and took direct action to lower their carbon emissions and costs by buying large amounts of renewable energy. The giants contracting for hundreds of megawatts of wind and solar included Apple, HP, Kaiser Permanente, Google, Dow, Amazon, as well as GM and Owens Corning. Many of these companies are also shooting to use only renewables.

    4. Companies and global governing bodies set visionary global goals. Goals matter. Big, aggressive targets drive organizations (like the ones above) and countries forward. And we’ve seen a lot of them this year.

    To start, the UN, in a parallel with the climate negotiations, released in September the ambitious Sustainable Development Goals. Also called the Global Goals, these 17 statements (and 169 targets) create a vision and destination for building a thriving world — no poverty, zero hunger, health and well-being, equity and equality, and action on climate change, just to name a few.

    Many companies also set visionary goals this year, often based on science — and some achieved big targets like Coca-Cola’s 100% water replenishment goal. A few examples:

    This all leads to a huge breakthrough:

    5. The vision of an all-renewable energy system comes into focus. In November, two professors from Stanford and the University of California at Davis mapped out how 139 countries could rely entirely on renewable energy by 2050. As the progress countries and companies are making shows, this isn’t just science mixed with wishful thinking. The world has already begun the shift — and the numbers bear it out.

    Of all the new power generation built globally over the past two years, renewable sources accounted for over half. In the U.S., in the first six months of 2015, 70% was renewable. This is in part because every clean energy technology is rapidly getting cheaper. As Bloomberg reported in August, for example, “fossil fuels [are] losing cost advantage over solar, wind.” This means that solar will reach the point where it costs the same as traditional options — what’s called “grid parity” — in 80% of the world by 2017. To keep the renewable sector humming along toward that economic watershed mark here in the U.S., the congress passed tax credits for solar and wind at the last minute this year.

    6. Wall Street wakes up. For years, asset owners with longer-term horizons, like pension or sovereign wealth funds, have pressed companies to better manage environmental and social issues. This year, the shorter-term investors (shorthand: “Wall Street”) started to join in.

    Blackrock, with $4.7 trillion in assets, has been pushing the investment community to get serious on climate. Larry Fink, Blackrock’s CEO, also sent a letter in April to S&P 500 CEOs suggesting that they invest more for the long-term and stop putting so much money into stock buybacks and dividends (a $1 trillion boondoggle for investors this year). And at Morgan Stanley (in what I believe was a first), an analyst raised the stock price target for companies — in this case three apparel giants (Nike, Hanesbrands, and VF) — based on how well they manage environmental, social, and governance (ESG) issues.

    In other investor news, the fossil fuel divestment movement grew quickly, gathering together universities, cities, and other institutions that have more than $3 trillion in assets. And Bill Gates gathered some friends to create the largest clean energy fund in history to invest in R&D. So-called “impact investing” is moving out of the niche world and into the mainstream. Blackrock, again, created a new ESG-friendly mutual fund.

    7. Consumers (finally) show interest in sustainable products. Blackrock’s new fund was specifically aimed at Millennials, the group of workers and consumers that are demanding more environmental and socially sound products. A Morgan Stanley report found that Millennials are twice as likely to buy from brands with good management of environmental and social issues, and twice as likely to check product packaging for sustainability performance. For packaged goods and food in particular, it’s the era of what many call the “clean label.” It’s a sweeping change in expectations, as people want to know how everything is sourced, made, and delivered.

    There’s real money here for the good actors. Mega-retailer Target, for example, assesses thousands of products it sells and scores them on sustainability performance. For a segment of the highest-ranked products, sold under the “Made to Matter” banner, sales at Target are growing much faster than regular products (and will total $1 billion this year). And Walmart took a fascinating step, trying to help choosy customers by labeling thousands of more sustainable products online as “Made by a Sustainability Leader.”

    8. Companies challenged, and were challenged by, their supply chains. For many sectors, supply chains are becoming both a major source of risk and also an opportunity for positive change. The food business is an important case study. At a UN event I moderated in Paris, the CEO of Kellogg’s talked about the risk to the company’s supply chain from climate change. It’s one reason that the food giant set a new carbon reduction goal for its whole value chainas did competitor General Mills.

    Why? The previously mentioned clean label movement is a key part of what the New York Times called “a seismic shift in how people eat.” This shift in consumer demand is rippling up through supply chains as food giants race to change the food system. This year McDonalds experimented with organic beef, Subway committed to buying antibiotic-free meat (following many others in the sector as well as Perdue and Tyson), General Mills said it will drop artificial flavors and colors from cereals, as will Kraft with its mac and cheese. The list goes on, and the trend won’t stop at food and personal care products.

    In addition to these steps forward, 2015, like all years, included some steps back.

    9. Commodities continue their relentless plunge in price. During the 20th century, the price of nearly everything that goes into making our society – energy, metals, food, and so on – dropped steadily. Then from 2000 to 2014, everything got wildly more expensive, doubling and tripling at least. But since the end of last year, the prices of most commodities have plummeted. Oil is nearing a 14 year low.

    This massive shift has many fathers, from overproduction and over-investment in capacity to a general slowdown in China’s economy. And it’s worth noting that lower costs are good for most businesses (except commodity producers) in the short-term. But the rising cost of doing business was a core driver of the move to a more circular, sustainable economy. The logic of tight resources has not vanished, and investments in renewables have not slowed as much as lower fossil fuel energy prices would’ve suggested. But making investments in dematerializing value chains, or in designing products for end-of-life, is harder to justify right now. That’s unfortunate in the long run.

    10. VW cheats and Exxon’s true colors. Warren Buffet once said, “It takes 20 years to build a reputation and five minutes to ruin it.” VW quickly learned this this harsh truth when it came out that the company had cheated on emissions tests to make its diesel cars seem cleaner burning. Credit Suisse says VW’s actions could cost the company $86 billion, andsales in November in the U.S. dropped 25%.

    But this story does not call into question every sustainable product claim out there. No, this was about fraud. But it does perhaps make diesel less compelling as a clean transportation technology. VW found it was difficult to achieve high fuel efficiency, power/torque, and low emissions … but not impossible. It turns out, by the way, you can get all three: just look at Tesla.

    And as for Exxon, it was the least surprising “scandal” of the year that the company knew about climate change for decades and spent millions of dollars calling the science into question. At least the exposure of VW’s and Exxon’s misdeeds demonstrates that transparency is a powerful tool coming for everyone.

    Looking Back — and Forward

    This year will likely go down as the time we began, in earnest, to make some important and deep changes in “business as usual.” Climate change is becoming an accepted reality to address; renewable energy is starting to outcompete fossil fuels; the private sector is taking the lead in building more sustainable products and pleasing ever-more demanding customers and workers; and investors are following the money toward a cleaner economy.

    The coming year will be filled with more companies facing global challenges and considering tough questions about their purpose and role in society. But of course many predictions will go out the window as reality intrudes. Some questions that we can only answer with time:

    · Will commodity prices stay low or skyrocket again?

    · What companies will take advantage of, or get tripped up by, the increasing demands for more information and transparency?

    · Will another storm like Hurricane Sandy hit the U.S. and elevate climate to a top tier issue for the 2016 election?

    · As Millennials become a larger part of the economy (half the global workforce by 2020), what will they demand?

    · How will technology, big data, and sharing economies drive change in business and help make the world more sustainable?

    I look forward to a fascinating and more sustainable year to come. Happy holidays and best wished for a wonderful 2016!

    (This post first appeared at Harvard Business Review online.)

    (Andrew's new book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot. Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    February 12, 2016

    Which of Today's Business Practices Will Seem Barbaric in the Future?

    My family and I recently visited the Jefferson Memorial in Washington, DC. Surrounding the giant statue of the man himself are four quotes in foot-high letters. They all, remarkably, still resonate today, but one in particular struck me hard:


    [As] the human mind becomes more developed, more enlightened, as new discoveries are made, new truths discovered and manners and opinions change...institutions must advance also to keep pace with the times. We might as well require a man to wear still the coat which fitted him when a boy as a civilized society to remain ever under the regimen of their barbarous ancestors.

    What a profound level of self-reflection. Jefferson knew what the world considered acceptable in his time -- such as advocating individual liberties while owning slaves -- could become intolerable in the future. So he suggested that rules and institutions remain flexible to allow for changes of hearts and minds.

    Jefferson was speaking mainly about keeping governments in particular up-to-date. But we should apply this thinking to all institutions, including business. In previous eras, businesses relied on many horrific practices. Slavery and indentured servitude propped up the pre-industrial age. And child labor, 7-day workweeks, and unchecked monopolies were the norm into the 20th century.

    Sadly, many of these practices continue in some form today, including even what'seffectively slavery in a range of industries and countries. But mainstream business finds the practice abhorrent and the prevalence is greatly reduced.

    But what about ways of doing business that are perfectly common now? What will our descendants consider unseemly, unacceptable, or just plain stupid? I reached out to the Twittersphere to ask for opinions on this question and combined their thoughts with my own list. Here are 10 business practices that we are already challenging, and a few that we need to question:

    1. Paying women less than men for the same job.

    2. Overall levels of inequity, including absurd ratios of executive pay to average salary.

    3. Emitting gases that change the climate without paying for them. Climate change is intergenerational oppression. More simply, a few tweeters pointed out that using energy from fossil fuels would be quaint someday.

    4. Not putting a value or price on all that the natural world provides (free clean air and water, a stable climate, materials, flood prevention, and more). As consultant Sanjay Kapoor put it, we can't continue to "boost economic capital while depleting natural capital."

    5. Linear business models that take in materials, produce products mainly for quick consumption, use them, and then throw them out. As we build circular models, we will see our current model as incredibly wasteful and expensive.

    6. Letting short-term investors and stock price gyrations dictate our actions. Investor Dan Saccardi tweeted that it will be anachronistic that sustainability considerations (or "ESG") are an "afterthought/niche rather than baked into every investor's calculus."

    7. Running businesses as groups of financial assets, not as groups of people making and doing things for other people (i.e., a common lack of humanism in business).

    8. Seeing the role of business as purely financial rather than serving some need and purpose in the world. Millennials in particular want to work for companies that share values and have purpose.

    9. Focusing solely on competitive advantage versus more collaborative practices that enlarge the pie for all. Kimberly-Clark sustainability exec Peggy Ward suggested that "not working collaboratively will be unacceptable."

    10. Keeping hidden almost anything about your product, ingredients, supply chain, compensation, investors/backers, employees, and so on. Transparency will be expected.

    All that said, we should still acknowledge what some of our dated practices accomplished, even as we look to move beyond them...

    • Fossil fuels were not immoral -- we needed them to build a modern society. But we now know what they're doing to our health and the planet. And, most importantly, we have alternatives.

    • Linear models get things done -- Henry Ford and Frederick Taylor helped the world produce orders of magnitude more than ever before. But now it's time for new levels of innovation to close loops and treat physical capital as precious.

    • Investor-led capitalism was a reasonable experiment, but it may be time to take what works -- such as efficiently matching human and financial capital with needs and investments -- and improve upon it, infusing more humanity into the process.

    Change is not easy. Moving to less barbaric modes of operation will require (at least) three things: flexible structures of governance (Jefferson's main point), a change of mindset (easily the hardest part), and innovation and technologies that enable the shift.

    Picturing and bringing about a better future is not an academic exercise that only applies to some imagined great grandchildren. Given the longer lifespans and the radically increased rate of change, arguably we'll be around to experience the ramifications of our own choices. We're our own ancestors.

    As we look forward into this new year and consider where we want to be in 52 weeks -- and 520 or 5200 weeks -- how can we avoid being barbarous ancestors? Or to flip the script, how can we be kind to our descendants and ourselves?

    (This post first appeared on Huffington Post.)

    (Andrew's new book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.

    If you enjoyed this blog, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    March 30, 2016

    What Difference Does One Make?

    My family eats a mostly vegetarian diet. Some kids at school were making fun of my 9-year-old son, telling him how great meat tastes. Before diving into the challenge of dealing with childhood peers, I asked him if he knew why we’re vegetarian. When it was clear he didn’t (that’s on me), I started to tell him about the environmental impacts of meat as it’s currently produced, health benefits, and animal welfare.

    Then he asked the big question: “But there’s only 4 of us, so what difference does it make if we’re vegetarian?” Before I get to my answer, let me say that I’ve faced similar questions many times, and at all scales:

    · 1 person: What difference does it make if I buy green cleaning products (or take the bus, get a hybrid car, put up solar, etc)? I’m just one person.

    · 1 company: Does it really matter if we ask our suppliers to eliminate a chemical or if we go to mostly renewable energy? We’re just one company.

    · 1 country: Why should the U.S. do something on carbon emissions? We’re only one country.

    This last one is shockingly common and one of the big, crumbling myths on tackling climate change. Before leaving the presidential race, Senator Rubio said the U.S. shouldn’t reduce carbon emissions because China and India will still pollute. And, he added, "America is not a planet. It's a country."

    Even without the dated views on what other countries are doing (China spends way more than we do on clean energy), we can dismiss the country-level question because it’s, well, ridiculous…especially for the U.S. When you use or produce 25 to 50% of anything – be it carbon emissions, food, weapons, or rubber duckies – what you do matters.

    The company-level question is only marginally better. For small companies, it’s a concern. But I hear this questions from people at mostly very large companies. And what they do in their own operations, or what they ask of suppliers, does in fact matter very much (and creates real value for the business anyway). But that said, it is true that, in order to tackle systemic problems, even the largest companies need to collaborate (sometimes radically and pre-competitively as I wrote about last week). Still, one large company can drive enormous change.

    So the real challenge here is the question about individuals.

    With more than 7 billion people on the planet, of course each choice we make – about what to do with our time, our money, our consumption, and our vote – doesn’t technically matter. It’s a drop in the ocean. But at the same time, of course each choice matters – it’s the only thing that does. (*Cue the the Margaret Mead or Dalai Lama quotes on changing the world).

    Bottom line: If your choices don’t have an impact, do you? Why even get out of bed?

    So I told my 9-year-old son that yes, we’re only 4 people making the best choices we can…but along with millions of our friends, our choices make a very real difference. My son said, “But we don’t have millions of friends.”

    Yes, I told him, yes we do.


    *Quotes on change:

    Margaret Mead: “Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.”

    Dalai Lama: “If you think you are too small to make a difference, try sleeping with a mosquito.”

    Bob Moawad: “You can't make footprints in the sands of time by sitting on your butt. And who wants to leave buttprints in the sands of time?”


    (Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.

    If you enjoyed this blog, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    April 20, 2016

    The Data Says Climate Change Could Cost Investors Trillions

    [Last week, on HBR online, I posted the article below on an important new study that estimates the risk climate change poses to global financial assets. Yesterday I did a streaming interview with HBR on Facebook Live (on HBR's page -- sorry about the bad audio). An interesting new outlet for getting ideas out -- 25,000 views and counting for a spur of the moment video. Fyi, I'm also appearing on Bloomberg Friday at 11:45am to discuss this topic.]


    The Data Says Climate Change Could Cost Investors Trillions

    An important new study, published in the journal Nature Climate Change, says that climate change will be expensive. Extremely expensive. It turns out that if you mess with the planet’s thermostat, it’s not great for the economy or investments. Forget the polar bears; your pension and retirement funds are in trouble.

    It’s not the first time economists have warned us about the costs of a changing climate. Some past studies on climate economics, like the famous Stern Report a decade ago, assessed the macro-level risk to GDP as a whole. Others have drilled down to explore what worldwide action to control carbon would mean for fossil fuel investments specifically. But this new report, by estimating the risk to all financial assets and portfolios, finds a powerful middle ground that should get investor attention.

    If we stay on the current emissions path, the study predicts, the value at risk in global portfolios could range from about $2 trillion to $25 trillion. In a bit of understatement, Simon Dietz of the London School of Economics, the lead author of the report, told The Guardian, “long-term investors…would be better off in a low-carbon world.”

    Estimates of climate risk in the trillions are unfortunately getting more common. Last year,Citi produced a powerful study of the costs and benefits of shifting the energy system toward low-carbon technologies. Unchecked climate change, Citi said, could cost the world $72 trillion by the middle of the century. But the big surprise in Citi’s report was the cost of building the low-carbon economy: the world can spend $2 trillion less in total on energy infrastructure and ongoing fuel costs than it would in the business-as-usual scenario. So we save $2 trillion and avoid losing up to $72 trillion in economic activity.

    As compelling as that sounds, the numbers in the Citi study may be too macro to get the attention of investors. When investors look at climate risk – if they do at all – they’ve focused mainly on what worldwide action to reduce carbon will do to the fossil fuel industry. Holding global warming to 2-degrees Celsius will require keeping huge quantities of fossil fuels in the ground. These so-called “stranded assets,” sitting on petro-company balance sheets, are essentially worthless. And thus those companies are massively overvalued.

    The stranded assets argument sounds (financially) scary, but it hasn’t been quite enough to truly shift capital flows toward the clean economy. Dietz’s new research, by saying that climate change is a threat to all assets, could get a much broader coalition of investors moving. Some longer-term investors, mainly pension and sovereign funds, are already very concerned and taking action. Norway’s $900 billion fund divested from coal last year, for example. These funds need to think decades ahead, which is well within the time horizon of some very real – and frightening — climate impacts.

    Consider another recent scientific study with enormous ramifications for anyone living in, or investing in, coastal property. Some eminent scientists concluded that the sea level rise that they thought would occur over centuries is now likely to happen in just decades. The obvious implication is that any investment tied to physical, coastal assets could be at real risk. These time frames are not theoretical for long-term asset owners. A 20-something teacher contributing to her state pension today will expect a payout 50 years from now… around the time that huge areas of Boston, New York, Miami, and New Orleans could be unlivable.

    But it’s not just the investment community that should rethink where its capital goes. Any large company needs to take a hard look as well. A couple of key questions to ponder:

    • Do you, or your suppliers, have significant coastal assets? And what is the risk of devaluation? In other words, does it really make sense for a hospitality or real estate company to build a new hotel, apartment, or office complex right on the coast in Miami? Or should any company build a factory with significant water needs in a water-stressed area? Will that asset be operational or retain its value over the normal depreciation period?
    • Where are your financial assets invested and in what classes? Do you have significant exposure to coal or fossil fuels in your holdings? What about your employees’ 401Ks or pensions? If you ignored warnings a few years ago about the imminent demise of the coal industry, you may be losing your shirt now.
    • On the upside, what opportunities might arise from a popping carbon bubble? There will be winners and losers, so where will those winners be?

    There aren’t easy answers to these questions, but I know very few companies that are even considering them. Thinking about systemic risk playing out over decades is out of the realm of normal business experience, particularly in today’s climate of short-termism. We have no practice dealing with issues like this.

    Putting a value on the risk or opportunity is an important first step to make it all understandable to business. And the numbers these banks and academics are coming up with certainly help stir the souls (or wallets) of the investor community. But on some level they’re absurd. When you get into the tens of trillions, you might as well say infinite. The scale of the downside is so large, it’s worth significant effort and investment to avoid it. Let’s hope business leaders and policymakers heed the warning and seize the opportunity to build a more profitable and resilient low-carbon world.

    (This post first appeared at HBR online.)

    (Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.

    If you enjoyed this blog, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    May 16, 2016

    Business Is Taking Action on LGBT Rights. Will Climate Change Be Next?

    After North Carolina passed a bizarre transgender bathroom law with sweeping implications (one that, according to the Justice Department, is probably illegal), an impressive list of big companies made their displeasure known. The CEOs of dozens of corporate giants — including Alcoa, Apple, Bank of America, Citibank, Facebook, Google, IBM, Kellogg, Marriott, PwC, and Starbucks — sent an open letter to the governor to defend “protections for LGBT people.” PayPal canceled plans for an operations center in the state, and Deutsche Bank announced it would freeze the addition of 250 employees in the state because of the law.

    The floodgates of business proactively influencing societal norms and public policy are finally opening. And while some people may get nervous about this use of corporate power, I believe that businesses can have an enormous impact for good. Many other issues could, and should, follow.

    At the same time, it’s worth asking why is this happening now — and what are the implications?

    The facile answer, at least to the first question, is that societal norms have changed and business is just following customers. But the reality is more nuanced.

    In 2006 55% of Americans opposed same-sex marriage and 35% supported it. And yet by that same year over half of the Fortune 500 offered domestic partner benefits. In the last decade the percentage of these large companies that prohibited discrimination based on gender identity skyrocketed from 16% to 66%, well ahead of mainstream acceptance of transgender rights. Many business sectors started marketing to and hiring talented members of the gay community years ago.

    Equality efforts in the corporate world have not been perfect, but stepping back, it’s clear that there’s a dual logic for companies to jump into public policy: the moral imperative of a workplace without discrimination is intertwined with the reality of running a business catering to diverse customers and employees. So business has often acted years ahead of public sentiment.

    And while societal shifts like this bring out enormous emotion and backlash — in some cases, it’s two steps forward (the Supreme Court legalizes gay marriage) and one step back (states try to squelch LGBT rights) — the language of the corporate rebuke to the North Carolina law shows that big businesses are now willing to step up in a very public way and challenge legislation directly on economic grounds. As the open letter puts it, “…such laws are bad for our employees and bad for business. This is not a direction in which states move when they are seeking to provide successful, thriving hubs for business and economic development.”

    In theory, then, any moral issue that moves us away from thriving economically is also a business problem — so why stop at LGBT rights? A large number of issues could fall under the same dual logic: avoiding brand-damaging human-rights issues in the supply chain, fighting income and opportunity inequality (including supporting minimum wages), and, of course, tackling big environmental issues such as climate change.

    There has been some corporate movement on the latter. Before the 175-country signing of the Paris Agreement on April 22, a group of 100 large U.S. companies, assembled by the NGOs Ceres and WWF, publicly supported the move. And tech giants Apple, Google, Amazon, and Microsoft took an unusual step recently, filing an amicus brief to support the Obama administration’s Clean Power Plan(one of the lynchpins in the U.S. commitment to the Paris Agreement).

    But the current track record of pro-climate lobbying in particular, though growing, is still spotty and lacks the passion behind the moves to support LGBT rights. Let’s go back a few years to another state rule, also in North Carolina and also ridiculous. While writing a new law covering coastal development, the state legislature pointedly ignored a science panel’s estimates on sea level rise. The story flew around the web as a meme that North Carolina made talking about sea level rise illegal. Not 100% accurate, but close enough.

    So shouldn’t companies pounce on that kind of law, with its shocking level of ignorance and poor strategy, as “bad for business”? After all, rising seas will have a real impact on business and economic development. But the business reaction to the sea level law was nearly nonexistent.

    Compare that to the scale and speed of the reaction on the anti-LGBT law. The business community has acted in a visceral way. Big companies are saying, “We may not bring our business to North Carolina if you don’t get your act together.”

    In short, talk is cheap. Signing a public declaration is one thing. Taking your business elsewhere, or threatening to do so, is quite another. At this point companies almost never shift their business based on the environmental performance of their suppliers or the climate laws in the regions they operate in.

    We’ll only see local, regional, and federal support for laws that move the needle on climate change — a carbon tax, public-private investment in renewables, auto and appliance efficiency laws, and so on — when companies make it clear they only want to do business in places and with partners that have pro-climate rules in place.

    Of course, comparing business’s action on LGBT issues with its action on climate change isn’t exactly comparing apples to apples. However, it allows us to more closely examine what might cause companies to take a stand on an issue that’s important to humanity but that would traditionally be considered the domain of society and government rather than business (a line that’s getting blurrier by the day).

    So what’s missing when it comes to climate change? A lack of understanding by business about the economic and moral arguments, though that gap is closing. On the economic side, tackling climate change has reached the tipping point, entering no-brainer territory. A shifting climate is on track to cost investors and the global economy many trillions of dollars.

    The human toll of extreme weather is hard to ignore as well. And big voices are making the moral case. In his amazing encyclical last year and in his speeches for the U.S. Congress and UN General Assembly, Pope Francis made the connection between climate change and human rights very clear. Major development organizations such as the World Bank are singing from the same hymnal. A new, systemic view of our challenges should help light a fire under companies to take a stronger stand.

    What businesses will tolerate in society — and vice versa, what society considers acceptable business practice — is changing fast. I believe that business leaders will continue to get more comfortable leaning in on big environmental and social issues, including climate change. Their pressure may be our only path to real change.

    [After I posted this last week on HBR, it occurred to me that there was another example of a local climate/energy related law that companies should be fighting. In Nevada the government and the Public Utility Commission took a huge step backward on renewables. The recent moves to slash payments for solar power that customers generate (on their homes and buildings) have made solar drastically more expensive in the state (and decimated the solar installation business). Big business should be fighting this kind of law aggressively.]

    (This post first appeared at Harvard Business Review online.)

    (Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.

    If you enjoyed this blog, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    June 8, 2016

    A New Report on How General Mills and Kellogg are Tackling Climate Change

    In the global effort to limit climate change and reduce greenhouse gas emissions (GHGs), the energy and transportation sectors are the most obvious targets, but perhaps not the biggest. Consider the food business. Agriculture alone – not including the sizable food processing industry — produces up to 35% of the world’s greenhouse gas emissions (and uses70% of the water).

    By some estimates, humanity may need to produce as much food in the next 40 years as it did in the last 8,000. And that can’t happen if we don’t get the carbon and water footprint of agriculture under control. With the stakes so high, it’s welcome news that food giants are getting serious about emissions.

    Two big companies in particular, General Mills and Kellogg, have set new, aggressive goals. Their targets are important and different than what came before in two key ways: 1) they’re explicitly based on science; and 2) they cover emissions from agricultural suppliers. This latter point is a big deal — General Mills estimates that agriculture is responsible for more than 40% of its lifecycle GHG emissions (and uses 82% of the water).

    The companies’ goals as stated, are fairly straightforward:

    • General Mills will cut absolute GHGs by 28% by 2025 “across the entire value chain.” By 2050 it will slash emissions up to 72%, with the exact number TBD, but at a pace that will keep them “in line with scientific consensus.”
    • Kellogg’s 2050 target is to cut its own and supplier emissions by 65% and 50% respectively.

    But the reality of reaching targets like these is much less simple.

    First, emissions from food and agriculture stem from a diverse and complicated mixed bag of sources, including clearing land for grazing or crops (often burning trees and releasing the CO2), direct energy use on farms, fertilizer production, and methane from rice fields and from animals (mostly burps).

    Second, even if you get the sources right, the state of data collection on farms is mostly nascent. The industry and partner NGOs are building tools and programs to get farms measuring emissions, but the current state of the art is surprisingly simplistic: take your total yield of a crop and multiply it by an estimate of emissions for that crop (taken, most likely, from an academic study of some plot of land or in a lab). It’s a blunt tool since clearly that kind of estimate does not reflect differences in growing region or farming methods.

    So given the inherent difficulty of this whole endeavor, it’s important to ask how prepared General Mills and Kellogg are to navigate this tricky terrain. Answering that question was a core reason my firm, at the request of Oxfam International, authored a new report, Evaluation of General Mills’ and Kellogg’s GHG Emissions Targets and Plans.

    We were not trying to judge the companies and their goals on outcomes, but rather to assess how their goals line with credible science-based target methodologies, and whether their action plans are robust enough to make achieving the goals likely.

    I won’t rehash the whole report – you can check it out here – but in short, the outlook for both companies, for both areas of assessment, is positive. Their goals are clearly connected to science-based methods (leveraging work by NGOs like the World Resources Institute and CDP and working with advisors like BSR). And they both have multi-faceted plans to get there.

    Written with my colleague Jeff Gowdy, sustainability consultant and adjunct professor at Vanderbilt’s Owen Graduate School of Business, the assessment suggests five areas to consider carefully in crafting an operational plan to reach science-based carbon reductions:

    • Build good governance around the process to ensure internal accountability
    • Develop robust plans to engage suppliers (and provide human and financial capital if necessary) to identify and spread best practices and technologies
    • Invest in the development of solid measurement and metrics
    • Establish interim goals and adjustments to the targets as climate science evolves
    • Be transparent and open about progress

    In essence, we’re saying companies should ask themselves: who’s in charge, how will we spread best practices, how will we know if we’re making progress, how well will we adjust to changing science, and how open are we being with the world?

    Given the built-in uncertainty surrounding agricultural emissions, locking down a plan with these elements is important. But it’s only good enough in the short-run. Some additional big gaps need to be closed for the food value chain to slash emissions dramatically. Companies will need much better data at the farm level, expanded industry-wide research and best practice collaborations, and some investment funds to spread technologies.

    But thinking even more expansively, the leading companies need to start imagining goingbeyond science-based targets. Climate math is brutal — we only have so much carbon left to emit to keep the planet stable. Thus science-based targets are the minimum — like how much water you need to put out a fire. Leaders should consider setting goals that are even more aggressive to provide some buffer if some best practices fail to live up to their promise, and to help make up for the laggards in an industry. The goal, ultimately, is to prevent the fire in the first place.

    Going big is also an opportunity to explore truly cutting edge techniques in what some call “regenerative agriculture”: techniques to use farms and ranches to actually capture more carbon from the air than they produce. The leaders in this exciting new space (often, ironically, using ancient practices) are employing a range of techniques, including grazing animals differently and managing soil smarter so both processes sequester carbon. It’s possible that agriculture could move from being a third of the carbon problem to being the ultimate solution.

    For now, though, companies like General Mills and Kellogg are on the right path. Even without completely reimagining food production, these companies are taking a big leap of faith — they’re setting goals without knowing exactly how they’ll get there. But the science of climate change demands that we move quickly and these goals and plans are a very good start.

    (This post first appeared at Harvard Business Review online.)

    (Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.

    If you enjoyed this blog, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    June 22, 2016

    It's Time for Companies to be Strategic About Energy (A New Report)

    Last year, networking giant Cisco Systems worked with one of its contract manufacturers in Malaysia to deploy 1,500 energy and temperature sensors on its manufacturing equipment. These more “intelligent assets” read performance data, giving Cisco a detailed view of energy consumption — one that had not been available before.

    Last week, at an internal Cisco meeting, the company’s VP of Supply Chain, John Kern, proudly reported that the project had identified ways to cut energy use by approximately 30%, which will likely save $1 million per year. (Disclosure: I was at the meeting as a paid speaker on sustainability strategy.)

    When Cisco rolls out the sensors globally, these savings will add up. But to me, the most fascinating thing about the whole initiative is the organizational mindset shift it’s creating: a realization about the value of getting smarter about how — and where — operations use energy. As Kern put it, “We always manage costs so closely, but we weren’t really measuring energy — we didn’t know how much we spent! Through digitization initiatives such as this, we now have a way to measure, monitor, and manage energy…this is huge since energy is typically a factory’s largest variable cost.”


    In many of the most sophisticated companies with top tier operational practices, energy has mostly been treated as a cost line item, watched only by mid-level managers or execs, if at all. This black box approach can’t last. It’s time to move energy into the C-suite so executives can manage this critical component of operational performance in a more strategic way.

    In addition, with the global climate accords signed now by 175 countries, the world is clearly turning attention to carbon emissions. How a company manages its carbon footprint and approach to energy in general is becoming a top-tier operational issue — and a big deal to regulators, customers, employees, and investors.

    Some sectors have woken up already. In the tech world, for example, energy is now the largest component of variable costs for running a datacenter. Logically then, many of the companies investing most heavily in renewables are tech giants like Google, Apple, Microsoft, and Facebook. Heavy industry is also diving in, and companies like 3M, Dow, and Owens-Corning have bought many megawatts of renewable energy and found billions of dollars in energy savings. In agriculture, carbon emissions and energy use throughout the value chain are increasingly a core operational issue as well.

    Every sector should be taking energy this seriously. Even if it’s not a large cost or risk issue in direct operations, it certainly is somewhere else in the value chain. The importance of energy to the global economy, to geopolitics, and to corporate bottom lines — plus the pressing need to tackle carbon emissions to ensure a stable planet and global wellbeing — all combine to make a powerful case for managing energy much more strategically at all levels, from facilities to total operations to strategy.

    This basic argument, and its repercussions, are laid out in a new strategy guide that I co-authored with PwC’s George Favaloro and Tim Healy, the CEO of EnerNOC, a leader in energy intelligence software. For our paper, Energy Strategy for the C-Suite, we analyzed research and data on energy use at hundreds of companies, and included perspectives from an advisory council that included corporate energy executives and government and academic thought leaders (I also sit on that advisory group).

    Aside from describing the mega-trends coming to bear on companies — such as climate change; new expectations of increased transparency about business operations; tech breakthroughs like big data and the internet of things; and dramatic shifts in how energy markets work and how to source energy — we identified 15 emerging best practices that can help companies create more value.

    Here are a few examples of what we recommend in this new framework:

    • Develop a global energy strategy with C-suite and cross-functional accountability. We believe energy could be viewed in many organizations as a “keystone metric” — i.e., a primary indicator that aligns the whole organization around the pursuit of operational excellence. Optimizing energy and slashing carbon can drive overall operational improvements.
    • Set ambitious, science-based goals for energy and carbon. Dozens of leaders, from many sectors have set goals to cut carbon 40 to 100% in line with climate science (Cisco, Disney, Alcoa, Sony, J&J, EMC, and many more).
    • Track energy data at all levels, from the enterprise down to the product, using new tools to understand better how energy connects to overall business performance and metrics (like cost of goods sold). For example, Saint Gobain’s Ohio factory produces 30,000 different products, each with its own energy demands. Much finer energy intelligence data has helped the company understand its true cost per product line. It has adjusted its product prices accordingly, improving margins or just finding a more competitive price point in the marketplace
    • Use advanced financing mechanisms to expand energy project options. In addition to power purchasing agreements (PPAs) for corporate renewables, companies are increasingly able to buy energy as a service, not a product. Consider McCormick & Co, a Fortune 1000 spice manufacturer. When the company needed to replace old air conditioning units, it contracted with Constellation Energy Group to build a brand new chiller plant. Constellation owns the chiller and charges McCormick for cold air, freeing up McCormick’s capital to invest in other operational improvements and the business itself, not in energy infrastructure.

    In total, energy is one of the largest components of company cost structure, and it’s a complicated operational issue. But it’s rarely seen as something that can provide deeper strategic insight. With new tools in a much more connected world, executive can better manage this most basic of inputs into the economy. Energy is just too important to be managed as a line item.

    (This post first appeared at Harvard Business Review online.)

    (Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.

    If you enjoyed this blog, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    August 10, 2016

    6 Ways the North American Clean Economy Agreement Will Affect Business

    (Happy summer all. I'm a little slow on the reposts. This is from a month ago, following up another post on my analysis on the North America clean economy agreement. In short, it's aggressive, but do-able. I also did an interview for SeaChange Radio on this piece. There was some discussion -- and some debate in the comments section of the radio program -- about whether we need nuclear to meet the 50% renewable target. My point was that while nukes are incredibly expensive, especially to build new plants, the question is whether we should shut down existing nuclear assets while building the clean economy future. I think it could be unwise given the very short time frame to get global emissions under control. We need a bit more time to get storage up to scale also.)

    Within a week, two continents embarked on widely divergent paths. Europe’s union took a potentially fatal blow, while North America committed to a deeper relationship: Canada, the U.S., and Mexico issued a joint commitment to building a clean economy. It’s a big step forward for cross-border cooperation, and the ramifications for energy producers and users (that is, everyone) could be enormous.

    The North American Climate, Clean Energy, and Environment Partnership covers a lot of ground. The biggest commitments are:

    • Generating 50% clean power by 2025
    • Reducing methane emissions from the oil and gas sector by 40% to 45% by 2025
    • Aligning appliance, equipment, and vehicle fuel efficiency standards
    • Further integrating the electric grid across borders to build resilience and security
    • Implementing policies that support the historic Paris climate accords — i.e., limiting global temperature rise to 2 degrees celsius, and perhaps even holding it to 1.5 degrees celsius
    • Phasing out fossil fuel subsidies by 2025, and calling on G-20 to do the same

    The agreement touches on a range of other issues that could impact many industries. But just looking at these big commitments, they’ll clearly reverberate through governments and business in six key ways.


    The U.S. must lead on renewables. The 50% clean power target initially made the biggest splash, and for good reason. Let’s unpack what it means for the energy system. The goal sounds aggressive, but the continent is closer than you’d think. The definition of “renewable” here includes not just the obvious (wind, solar, and geothermal), but also the more controversial sources of hydropower and nuclear. By that broad definition, North America is already at about 38%. So the goal is tough, but achievable.

    But make no mistake: according to my model, reaching the goal is almost entirely on the shoulders of the United States for two big reasons. First, the U.S. generates 82% of the energy on the continent. Second, Canada is already well beyond the 50% mark (with 59% from hydro alone). So even if Mexico hits its aggressive target of going from 22% to 35% renewable, the U.S. will have to go from 33% to 46%.

    It’s a big move. In a simplistic scenario where the U.S. only built more wind power, we would need to add 3 times as much as we did over the last decade. If only solar, we would need to average eight times the amount built in 2015, every year, through 2025. The growth in renewables is phenomenal, so the sector could be up to the task. But there’s a problem in another part of the equation, nukes, which could shift attitudes toward that source of power.

    I spoke with Cristin Lyon, the Partner and Practice Lead for Grid Transformation for management consulting firm Scott Madden. She pointed out that states and utilities are currently planning to close some nuclear plants. “To the extent that we continue to take nuclear plants offline,” Lyon said, “we’re going in the wrong direction.”

    No matter what your view on nuclear power, the math gets harder if we close those down during this critical decade in the climate fight. But, even so, the economics of renewable energy continue to get better fast. And the growth of corporate renewables is accelerating. Big guys like Google, Apple, Dow, Owens Corning, Microsoft, Cisco bought 3.4 Gigawatts of wind and solar last year.

    There will be increased pressure on utilities and energy giants. A deep shift in energy markets, including the agreement’s goals on making the grid more flexible and resilient, will change how utilities and energy companies need to operate. It’s continuing the bad news for coal — but that’s already priced into those companies’ valuations, which have dropped more that 90% in the last 5 years.

    Utilities, too, will face more regulations and pressure to increase the percentage of renewable energy on their grids. To aid in this, the U.S. government will need to lean into the Clean Power Plan, which pressures energy providers to cut carbon (that is, assuming the eight Supreme Court justices leave the law standing after temporarily freezing it while challenges move through the lower courts).

    The natural gas industry will have to face its “leakage” problem. The new partnership’s methane goal is particularly fascinating. A bit of history: As the fracking boom took off, carbon emissions in the U.S. actually went down…in theory. Measured at the power plant, natural gas burns much cleaner, so the numbers initially looked good.

    But methane leakage at fracking sites, in long distance gas pipelines, and in transportation — really everywhere in the value chain — goes largely unmeasured. It’s a huge problem. Since raw, unburned methane can trap 100 times more heat than CO2, many studies suggest that the natural gas business is actually worse for the climate than coal. But the industry doesn’t really know for sure. This commitment should put pressure on gas producers to get their house in order, measure emissions better, and stop the leakage.

    The three countries individually, or the continent as a whole, will have to put a price on carbon. As citizens and policymakers consider how to limit global warming to the level agreed to in Paris, a whole range of aggressive policies will need to be on the table. We certainly can’t hold the world to 1.5 degrees, or probably even 2, without increasing the price on carbon and incentivizing faster investment in clean energy. Luckily, North America has some significant climate policies to build on. The Western Climate Initiative, a carbon-trading program, already covers 7 U.S. states and 4 Canadian provinces. Whatever form a carbon price takes — either direct taxation or this kind of cap-and-trade scheme – it will deeply impact industries reliant on fossil fuels, like chemicals. And it would affect energy spending for all companies.

    Clean tech will win big. These governments will continue to direct spending toward cleaner technologies. That helps drive costs down for everyone buying efficiency products and renewable energy. Rising standards for appliance and vehicle efficiency raises the prospects for those companies who can meet the challenge. Clean tech companies making all of these technologies will see fast-rising demand. In short, it’s all good news for the clean economy providers, as well as the millions of people working in those industries.

    Corporate targets for clean energy and GHG reduction will have to be rethought.This is a smaller point, but if the agreement does result in a grid that’s much greener, there’s an interesting ramification for how high businesses set their sights. A large and growing number of companies — over half of the world’s largest businesses — have set energy and greenhouse gas goals (and a growing list of global leaders are setting ambitious, science-based targets).

    These companies — which often don’t know exactly how they’ll, say, cut carbon in half by 2025 — may find their task a lot easier. Since a big part of a most companies’ carbon footprint comes from the grid-based energy they use, as the grid itself gets greener, the companies decarbonize without technically doing anything. This is great news for companies seeking carbon reductions, but a greening grid should encourage more aggressive goal setting.

    But all of the above assumes some continuity of government. All bets are off if Donald Trump wins the Presidency. He’s said many times that climate change isa hoax and denied that California is in a drought. His recent energy speech in North Dakota pushed for more fossil fuel production. For her part, Hillary Clinton laid out an ambitious climate plan (albeit one without a price on carbon). So if the polls hold out, President Clinton will likely continue this impressive legacy of cross-border cooperation.

    The U.S., Canada, and Mexico have put their foot to the pedal to accelerate the move to the clean economy in North America. The business of making, using, measuring, or conserving energy will likely never be the same.

    (This post first appeared at Harvard Business Review online.)

    (Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.

    If you enjoyed this blog, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    November 2, 2016

    General Mills' CEO is Serious about Climate

    Climate change has been nearly absent in the presidential election. But it's front and center in business. We’ve left the era of climate denial and CEOs are talking more openly about what a changing climate means for business. Exhibit A is General Mills, which is, like its competitor Kellogg, sounding alarms about the climate...and for good reason.


    Ken Powell, General Mills’ Chairman and CEO, opened the Business for Social Responsibility conference yesterday in New York and laid out some compelling reasons why climate and sustainability were core issues for the company. One reason he gave was something I don't hear often. As CEO, he said, he is directly "accountable for enterprise risk management"

    Powell said that he is expected – by investors, I presume – to have plans in place to avoid disruptions to the business. Issues range from facility safety (making sure a factory isn't wiped out by an earthquake or storm) to fraud and cybersecurity. He used these risks as examples to make an important point: climate change is now firmly on the list of issues he has to manage. And putting any uncertainty to rest, he said, “clearly, there’s a strong scientific consensus that climate is a risk.”

    Powell provided another big reason that General Mills is pursuing sustainability aggressively: pressure from key stakeholders, particularly employees, consumers, and retailers.

    Employees, he said, care deeply about two things: food security (helping those who don’t have enough) and sustainability. And they let him know it. Consumer expectations "have never been higher,” with rising demand for simpler, less processed, less artificial food. Many executives, Powell included, say that this “clean label” movement is the most dramatic change in the food industry that they’ve ever seen. It’s part of larger shift in expectations. All of us, he said, “want to know that the company that makes your food shares your values.” Finally, Powell talked about pressure to improve environmental and social performance coming from big retailers like Walmart.

    But in the end, Powell’s interest in sustainability and climate change is even more fundamental than stakeholder pressures. As he put it, “Sustainability is an important business imperative for us. To feed a growing population, we need clean water, healthy soil, strong ecosystems, a stable climate, and thriving farm communities.” In short, you can't grow food without healthy farms operating in a good climate.

    Clearly Powell understands that tackling climate change, as well as ensuring the basic health of the planet, is core to the success of his business. To make that connection clear, last year he set aggressive carbon goals for the company’s own operations and its agricultural suppliers (my firm wrote a report for Oxfam that assessed General Mills’ and Kellogg’s value chain GHG goals).

    Watching the CEO of a traditional, old-school company – nearly 150 years old – talking fluently about megatrends and climate change was wonderful to see. It's a great sign that companies are getting focused on climate, even as the country debates everything else.

    PS, On a lighter note, Powell did provide one fun factoid. Apparently, Lucky Charms, which most would guess is targeted at kids is mostly consumed by adults. It’s the #1 cereal on college campuses.

    (Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.

    If you enjoyed this blog, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    November 9, 2016

    Trump Can't Stop the Clean Economy

    If there’s any force greater than whatever propelled Donald Trump into the Presidency, it’s economics. Nobody, not even a President Trump, can stop all movement toward the clean economy. The reason is simple: it’s now cheaper to cut carbon and use renewable energy than to keep the status quo.

    Don’t get me wrong. Today is a very hard day for many Americans. I know I am fearful about our democracy and threats to human rights of all kinds. I also believe some critical structural problems in our system badly need to change (like the electoral college, profit and clicks-driven news media, and money in politics). 

    But part of my coping mechanism is to focus on one key area of my work and life — tackling the world’s biggest challenge, climate change, by building a clean economy. And even though I believe electing a climate denier in 2016 is lunacy, I have hope.

    Yes, if Trump follows through on what he said he would do on energy and climate — lots of support for fossil fuels on the former, nothing or worse on the latter — it could have a devastating impact on global political progress on climate change. The U.S. may pull out of the Paris accords, leaving the rest of the world holding the bag.

    But even if that happens, it won’t stop the clean economy for two big reasons. First, other countries, including China, are not going to stop their own investments in clean energy and technologies. And, second, neither will the business community. Why? The short answer is it’s more beneficial to bottom lines, health, and economic growth to keep going on the clean economy. It’s flat out more profitable.

    To understand why I’m confident about this economic reality, bear with me as I get a bit wonky. I’ve spent a lot of time diving into detailed analyses of energy economics. Clean energy skeptics will tell you that renewables are more expensive than fossil fuels. That’s not true. Let me repeat — it’s really not true anymore.

    The bankers at Lazard have been building models of what it costs to build and operate different forms of energy. Their numbers-dense report shows very clearly how fast the cost of wind and solar has dropped (60 to 80% in the last 6 years). Now, compare those unsubsidized costs — yes, that means without any government incentives — to the retail price of energy around the country. The newest renewable energy projects cost less than the average industrial and commercial energy prices in at least 45 states.

    Because of this economic reality, a large majority of the new energy being put on the grid is now renewable and big companies are buying gigawatts of clean energy directly to reduce their emissions, build stability and resilience into their energy supply, and save money.

    In other words, renewable energy has already won.

    On the geopolitical side, other countries will keep going. We’ve moved way past the “no, you go first” phase of global climate negotiations. They’re not waiting for the U.S. anymore, and thank god. Consider China. The country isn’t investing hundreds of billions of dollars in clean technology because of global accords like the Paris agreement. It’s the other way around — they came to the table to agree to global carbon cuts because they want to invest in the clean economy. Part of the reason is staring us all in the face: people can’t breathe in the cities (this is true in India as well). They need a transition to cleaner tech for their own very tangible well-being, and to hold onto power — people could easily rebel if their kids are choking. But more importantly, again, it’s cheaper.

    For those of us who believe climate change is an existential threat, this is a tough morning. But we will move forward with or without national-level leadership from the U.S. Only a few forces are strong enough to fight ignorance (like climate denial), isolationism, and fear. Those may include a measure of righteous anger, mixed with hope, forgiveness, and love. 

    But they definitely include economics. So follow the money and fight on.

    (This post first appeared at Huffington Post online.)

    (Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.

    If you enjoyed this blog, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    November 13, 2016

    Make A Trump Presidency Like Y2K

    Conservative commentator David Frum has seemingly been as worried about a Trump presidency as any liberal. He tweeted something important a few days ago...


    This idea reminds me of Y2K. For my younger Millennial friends out there who may be hazy on the details, a quick refresher. A quirk in programming made it possible that computer systems all over the world would glitch -- perhaps disastrously -- when the date switched to Jan 1, 2000.

    After the ball dropped, the grid didn't go down and planes didn't drop from the sky. Phew. Many people said, in essence, "see, there was nothing to worry about." That was a deep misunderstanding of reality. Multinational companies and governments, with the help of thousands of programmers, had fixed the date tracking in computer systems globally.

    While it's possible the fears were overblown, a huge reason nothing went wrong was that a lot of people worked really hard on it.

    For those 60 million of us who are very concerned about Trump's world view, beliefs, and lack of qualifications for the world's hardest, most powerful job, we may end up surprised. What if racial and income inequality don't get worse, global action on climate change continues, US emissions drop, companies continue to buy lots of renewable energy, and many more positive things happen?

    There are plenty of reasons it could happen. Perhaps the economy and markets continue to progress toward a low-carbon world (i.e., Trump can't stop the clean economy). Or, as so many of us hope -- and many Trump voters i've heard seem to believe -- his positions in the campaign were mostly bluster (let's skip over the logic that the best case scenario then is that he was lying constantly). Or a 70-year-old narcissist under incredible stress has a change of heart.

    All of that is possible I suppose.

    But even if we end up doing ok, it does not mean that, as Frum says, "the danger was imagined." No, it's far more likely that we citizens will save the day, again.

    If you enjoyed this blog, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    January 1, 2017

    My 2017 Resolutions for Building a Just, Honest, Thriving World

    Happy New Years all.
    In a couple of days, I'll be posting my 2016 list of most important sustainable business stories. But today is a time of reflection, so I got to thinking about my resolutions for 2017, given all that happened in 2016. We need to think differently and reach across divides, all while vigorously defending decency, rights, and truth.

    I've posted my thoughts on the path forward (for me at least) on medium. Please check out the full piece, but here's the short version of the 5 resolutions I'm making:

    1. Spread truth. Facts matter...
    2. Defend decency and truth (the “Billy Bush” rule). Call out lies and vileness.
    3. Ask questions and listen…but don’t be afraid to “block” someone. Endeavor to understand each other, but don't accept base and offensive ideas, or the people who spread them.
    4. Fact-check before forwarding/spreading a story. Fight fake news, do my own research, and demand media do the same.
    5. Don’t just kvetch — share the positive and get moving. Venting is good and needed, but just complaining is soul-sucking.

    There will be some big battles coming this year. So let's work together and bring along everyone we can to build a better world.

    May your 2017 be more sane and just than 2016.

    If you enjoyed this article, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    (Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.

    January 4, 2017

    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 trillionworth 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.

    (This post first appeared at Harvard Business Review online.)

    If you enjoyed this article, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    (Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.

    January 17, 2017

    On Second Thought...There's Wyoming

    In the few days after the election -- which maybe we should call "The Election" from now on -- I wrote some optimistic articles about sustainable business and the clean economy, including...

    - Trump Can't Stop the Clean Economy
    - Sustainable Business Will Move Ahead With or Without Trump’s Support

    I spoke too soon. I'm still generally optimistic about mega trends and economics driving change. But I have to admit I had a lack of imagination about what leaders could do to attack the clean economy. I didn't really think anyone could assemble a cabinet full of climate deniers. When the CEO of Exxon -- which has spent decades and many millions of dollars making climate science seem uncertain -- is the most reasonable voice on climate, you know there's a problem.

    But I got better at imagining. Since the election, with many colleagues, I've mused about what legislators could do to, say, prop up coal. We discussed how you could subsidize fossil fuels or create a "coal portfolio standard," a bizzaro-world twist on existing state rules that mandate a certain percentage of electricity come from renewables. Most chuckled at the idea.

    Then Wyoming got a bright idea.

    Some state senators and reps have put forward a bill to effectively ban large-scale wind and solar production. The state would ban utilities from providing customers with renewable energy. Rooftop solar would still be ok (freedom of the individual and all that), and companies could still produce wind power, but only for people out of state. But still, this is a clear attempt to prop up a dying source of energy. As the bill sponsors say, this climate change thing is unsettled and "coal=jobs" (don't all forms of energy = jobs?).

    Wyoming is tiny, but is an outsized player in energy (and in electors per citizen), and somehow I doubt this will be an isolated event. I've heard from knowledgeable sources that the new administration has plans to significantly increase coal use. This is a horrible idea.

    It's strange to have to say this, but climate change is the most serious threat to humanity (sure, many say nukes and extremism are, but if that's the bar for considering something an existential threat, um, ok...and I've heard Mayor Mike Bloomberg talk about how he thinks climate is actually even bigger).

    It all makes sense on some level. Coal has been an important economic engine in some parts of the country so they will defend it. Telling them that there are many jobs created for every job they lose -- but elsewhere -- is not much help. But nobody can block progress like this for long. They're just delaying the tough work needed to help a community find another path to prosperity.

    Wyoming's actions are a bad sign. We all need to get better at imagining the worst, and the best, possible paths forward. A battle of competing visions for the future is being waged and starts in earnest on Friday. Let's get to work.

    (This post also appears on medium.)

    If you enjoyed this article, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    (Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.

    January 31, 2017

    An Inside View of How LVMH Makes Luxury More Sustainable

    (Note: It can feel odd right now to talk about nearly anything except what's going on in the U.S. An increasing percentage of my time is spent on activism. But the realm of my core work -- sustainable business -- is perhaps more critical than ever.

    A few months before the election I did some research and interviews with executives at the large luxury company LVMH. I was doing something I hadn't done in a while -- focusing on what a single company was doing to improve its environmental and social impacts. It took me months to carve out time to write it up. I posted this at a few weeks ago.

    I received some pushback and commentary from a few people who felt the company is not doing enough. That's always true. I may be a touch rosy in this piece, but I've never felt that highlighting what a company is doing right confers a blanket endorsement...or indicates that the organization has conquered sustainability. If I only wrote about fully sustainable companies, I wouldn't have much to write about. That said, I'm more interested in the macro question for a company like LVMH -- can it ever be "sustainable"? See what you think...)

    The LVMH Sustainability Story

    The companies that are most vocal about environmental and social issues tend to be big, mass-market brands — well-known retailers, consumer products giants, and tech firms that are telling a new story to consumers who increasingly care about sustainability. It might seem that luxury goods companies would not feel the same pressure, but the high-end brands face important questions about the way their businesses impact the world. These companies can’t ignore sustainability.


    One luxury leader, LVMH, provides a great example of how to build a robust sustainability program. The company is a €36 billion decentralized collection of valuable brands — which they call houses (or maisons) — covering fashion, wine and spirits, cosmetics, and jewelry. To understand its sustainability journey better, I spoke with the company’s head of environment, Sylvie Benard, and the CEOs of two of its wine and spirits brands.

    The center of the corporate program is a framework it calls LIFE (LVMH Initiatives for the Environment), a “strategic backbone” for programs that address nine environmental challenges. LIFE focuses attention on the full life cycle of products, from supply chain to production excellence to designing longer-lasting and repairable products. Each brand’s strategic business plans now include a LIFE plan, with actions and targets laid out for the next five years.

    Looking at LVMH’s efforts, I’ll highlight three areas where I see great impact and innovation: managing carbon and energy, building a connection with customers around brand purpose, and working closely with suppliers. I’ll then discuss some of LVMH’s challenges.

    Managing Carbon and Energy

    Since 2001 LVMH has studied its life cycle carbon footprint, focusing on both the obvious energy hogs — its stores and distribution — and brand-specific issues, such as packaging in spirits and personal care. The company has aggressively reduced its own energy demand and ramped up the use of clean energy. By the end of this year, 100% of the electricity for LVMH facilities in France will be renewable.

    Belvedere Vodka, a brand with sales in 120 countries, has pursued many large-scale projects to reduce its CO2 footprint. Belvedere’s distillery in Poland shifted from oil to gas for energy generation and added heat recovery systems to capture wasted energy. Charles Gibb, Belvedere’s CEO, says it made a strategic choice to invest in this project, even though it had a longer payback period than normal. It was part of a larger overhaul that included automating some distillery operations, which gave it better data and helped slash energy and water use. As a result, Belvedere’s greenhouse gas emissions have dropped by 40%.

    The most innovative part of LVMH’s carbon strategy is the use of an internal carbon fund. Dozens of the world’s largest companies use “shadow prices” to model how a carbon tax would affect their investment decisions. But only a few big companies actually collect real money from their divisions or brands (Disney and Microsoft were early leaders). LVMH’s approach is somewhat unique. Where others have collected funds internally to create a central pool of money for carbon-reducing projects, LVMH instead requires every maison to spend €15 for every ton of carbon emissions (either on-site or from grid-based electricity) on efficiency and energy reduction, clean energy, or research to understand that brand’s greenhouse gas emissions better. Like its carbon-taxing peers, LVMH has created a powerful virtuous circle of emissions reductions. In total, LVMH has invested about €6 million in the first year of the program.

    Brand-Building and Customer Connection

    The LVMH leaders I spoke with believe strongly that Millennials, more so than previous generations, care about sustainability. As Gibb puts it, “Until recently, marketing would focus mainly on product and brand image. But now people look for whether you’re both socially and environmentally responsible. People look at brands and ask what they do for the world. If you don’t do this stuff, you’re not a modern brand.”

    One of the ways the company is telling a more sustainable story to customers is through the use of the “Butterfly Mark,” a symbol — a first in the luxury industry — that “at a glance helps people identify brands committed to social and environmental sustainability.” (Disclosure: I’m an unpaid advisor to Positive Luxury, the company behind the mark.) The Butterfly Mark will soon appear on Krug’s Champagne. Krug also uses a fun, innovative tracking system to share information with consumers. Every bottle has a unique six-digit number, which you can input on its website to get that bottle’s story.

    Supply Chain Partnerships

    Maggie Henriquez, CEO of Krug Champagne, says that its focus on environmental and social impacts, and the story the company tells about it, stems from looking inward at its own history. Like many luxury brands, Krug was struggling after the 2008 financial crisis. Henriquez says there was a deeper problem than just economic conditions: It had lost its connection to the founder’s 19th-century ideals about craftsmanship, humility, and quality.

    A critical part of going back to its roots, Henriquez says, required connecting in a deeper way to growers. The quality of the crops, and the care of the growers, are key to the success of the business. Henriquez started a program to work with growers on sustainability and quality, going plot by plot to review harvest times and implement modern best practices. Together they reduce waste and agricultural inputs (such as fertilizer and water) to get better yields, which reduces the overall footprint. Some of LVMH’s other businesses, such as jewelry brand Bulgari, have also implemented supply chain tracing programs for critical inputs with potentially troubled histories (like some metals and diamonds).

    In one sense, none of this is surprising or cutting edge. Most large companies with agricultural supply chains, like Kellogg and General Mills, have developed elaborate, robust supplier programs to improve yields and cut water use and greenhouse gas emissions. And on the jewelry side, companies like Tiffany employ extensive tracking programs to avoid conflict minerals and blood diamonds.

    But LVMH does some unusual things. Henriquez decided that growers were so important to the Krug story that she wanted them engaged in a deeper way. Henriquez, growers, and the winemaking team enjoy product tastings together, allowing growers to enjoy the end results of their work and their crops. It sounds so simple, but Henriquez says, “It’s not normal in our business, and it’s such a moment of connection.”

    The Challenges

    The sustainability and operating execs at LVMH talk openly about some of the challenges they face. As usual, short-term pressures on financial performance are a concern, and change takes time. Environmental exec Sylvie Benard comments that changing behavior can take a few years, and you have to keep hammering home the message and “find the right moment” to act.

    However, it’s a bit easier for the brand CEOs to stay focused on the long term when some of the maisons are three centuries old. They have to plant trees today, for example, to have the right wood for casks 150 years from now. As Gibb puts it, “If you’re not thinking about the brand over a 10-year period, you’re not doing your job.”

    Perhaps the biggest hurdle is more existential: Can luxury goods ever be sustainable? On one level, probably not, since these products almost by definition are not an inherent human need. But while it would be easy for sustainability people to assert that “none of these products should exist,” that’s more than just unrealistic — it’s probably counterproductive. Everyone has different definitions of what makes for a thriving life; for many, it can easily include some wants, or things that provide fun and beauty.

    The challenge, then, is to make sure sustainability and beauty are inseparable. LVMH is on the right track, talking about sustainability as core to excellence, quality, and brand image — and central to how the company operates. As Sylvie Benard says, when “the marketing director, financial director, logistics director, and so on take the environment into account when making a decision, then life will be beautiful.”

    (This post first appeared at Harvard Business Review online.)

    If you enjoyed this article, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    (Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.

    March 23, 2017

    Rolling Back Fuel Efficiency Standards Is Bad for Everyone -- Including Automakers

    (I posted this last week on I've seen many other articles with similar perspectives, including a great piece in the NY Times today about how regulations can drive innovation, particularly in autos and EVs. That larger point here is that rolling back fuel efficiency is incredibly short-sighted and self-defeating.)

    The CEO of a large industrial company recently described the Trump administration as “the most pro-business since the Founding Fathers.” It’s a popular perception in the business community, with or without the hyperbole, and the stock market is reacting accordingly. While some might be enthused by the potential for corporate tax reform or a (promised) $1 trillion infrastructure investment plan, it’s more likely they’re referring to the historic rollback of regulations in the works across many sectors, from fossil fuels to mining, guns, and finance. It’s taken as an article of faith that this is good for business. But slashing our health, environmental, and societal protections is only “pro-business” in the narrowest of terms, and only in the short run.

    Sure, regulations can be excessive and unwieldy. In many areas of business, they’ve grown and metastasized. They do cost real money and can slow innovation. But they’re generally there for a critical reason. Well-designed guidelines for business protect our shared resources and people (and ecosystems) who can’t defend themselves.

    The idea that these protections are anti-business stems from a huge misperception that business operates outside of a world that needs clean air and water or a stable climate to function. Or that it can thrive without a healthy, educated population, with access to safe food and drugs. William Ruckelhaus, the former head of the EPA under GOP presidents Nixon and Reagan recently pointed out that “a strong and credible regulatory regime is essential to the smooth functioning of our economy.”

    Let’s explore the impacts of one of the most prominent examples of regulatory retrenchment in the works: the rollback of auto fuel efficiency standards. In a speech in Detroit on Wednesday, President Trump indicated he would – as the automakers had asked – have the EPA and U.S. Department of Transportation review the previously agreed-to fuel efficiency marks. The process will take some time, but it’s clear that they will weaken the rule that automakers’ fleets hit a target of 54.5 miles per gallon by 2025. As Trump put it, “the assault on the American auto industry is over.”

    (Do we really want to go back to this? It didn't work out well for Detroit the first time.)

    A weakening of efficiency standards may save the automakers some money in the short-run***, and the press is certainly calling it a “victory” for the auto giants. But it likely won’t be in the long run. Specifically, it will diminish their competitiveness, as the rest of the world has continued to raise its standards — China, Japan, and the EU all have equivalent or higher targets. As the majority of the world’s car markets continue to demand more efficient vehicles, how does it help U.S. automakers to slow down their progress?

    It’s also a bad deal for everybody else. What about the suppliers that make parts for more efficient or electric vehicles? And industries beyond the auto value chain, where most companies want to see continued advancement in fuel efficiency? Logistics giants like FedEx and UPS spend literally billions of dollars on fuel, so they care deeply about using new technologies and improving fleet efficiency. In fact, the entire economy depends on increasingly efficient movement of goods and people. CEOs from some of the biggest food businesses have spoken out about threats to their supply chains from volatile energy prices and a changing climate (brought on, in part, by auto emissions). And when it comes to consumers, they spend less on gas in more efficient vehicles, saving money while also living better with good air quality. All told, EPA analysis pegs the net benefits to society of the higher standards at $100 billion.

    Ultimately, the current emissions standards, which the automakers publicly signed onto several years ago, would produce the single largest reduction in greenhouse gases in history. This matters to all businesses, including carmakers, and for reasons they may not fully realize at the moment. To be blunt: People living in places that are regularly flooded may not buy a lot of cars. If climate change destabilizes the world, the economy and business will sink with it.

    (***Important side note on the costs to the industry. The Auto Alliance cites EPA estimates of "$200 billion between 2012 and 2025 to comply." That sounds scary. But, a few things are worth noting.
    1. The costs to comply with regulations have very often turned out to be grossly exaggerated as companies innovate.
    2. The Alliance says part of that cost is because "manufacturers will have to rely on much more expensive electrified technologies." But those techs are dropping in price extremely fast -- battery prices are down 50% since 2014.
    3. Even if the cost is $200 billion, why would that be borne entirely by the industry? How much gets passed to consumers depends on many factors, including elasticities of demand (to get on economically wonky on you).
    4. And even if it were all on industry, $200 billion is not as much as it sounds. This is a $2 trillion/year industry. That $200 billion is less than 1% of revenue over the 13 years.
    5. And if some costs are passed on to consumers, they also SAVE from higher fuel efficiency. Thus the EPA's NET estimate of a benefit to society.)

    (This post first appeared in Harvard Business Review.)

    If you enjoyed this article, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.

    April 7, 2017

    Mobilizing Business to Support the Climate March on April 29th

    Over the last few months, I've been collaborating with a group of people working in business and sustainability organizations. We've met and spoken regularly about keeping business moving on the clean economy and climate in the face of headwinds from the Trump administration.

    One idea we've had is to help make the upcoming people's climate march in DC bigger. We want companies to support the event and show our elected leaders that business wants climate action and policy.


    I posted a longer piece on Medium that includes a list of ways companies can get engaged for the April 29th event, and some key stats on why tackling climate change is good for business, the economy, national security, and the world.

    I'll just list here the actions we suggest, in short form, but please check out the full article and spread the word.


    - Show your company’s support on social media
    - Sign onto public statements of support such as
    - Encourage employees to post to social media too
    - Create an online or actual petition of employees in support of climate action and send to the President and your Members of Congress in districts with your offices and facilities.
    - Change the corporate website for a day (possibly to a color like green or orange) or post a “badge” to show solidarity for smart climate action.
    - Add mentions of the march to all corporate Earth Day events and communications.
    - Connect with other companies in your area to coordinate activity, particularly clean economy companies (e.g., do you have a solar provider?).
    - Organize employee trips to the march (or sister marches around the country)
    - Make a bold new commitment or goal around carbon emissions
    - Ask your government relations/affairs to take part in a business lobbying day after the march (May 1 & 2)

    Actions for the CEO and C-suite specifically

    - Send email to all employees to encourage support for/attendance at marches.
    - Write an internal blog (a la GE’s CEO Jeff Immelt)
    - Co-author a statement with a mayor or governor in a region with major business operations
    - Phone a friend (peer CEO) to encourage involvement.
    - Speak at and take part in events around the march.
    - Go to the march and bring your family.

    Please spread the word.

    (Photo by Monica Lovdahl /

    (This full version of this post appeared on Medium)

    If you enjoyed this article, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

    Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.

    April 28, 2017

    The Straw Man Arguments of Climate Deniers

    (I published this on Medium yesterday.)

    For some unknown reason, the New York Times decided that in 2017, it needed to hire a known climate denier away from the Wall Street Journal. The new op-ed writer, Bret Stephens, wasted no time diving into the fray, decrying the certainty of people who want action on climate change. His article is fantastic example of how to make straw man arguments.


    Here’s the critical passage from his climate hit piece:

    Claiming total certainty about the science traduces the spirit of science and creates openings for doubt whenever a climate claim proves wrong. Demanding abrupt and expensive changes in public policy raises fair questions about ideological intentions.

    He makes two fundamental claims:

    (1) Everyone who is seriously concerned about climate change (which, I would note, includes basically every major scientific association in the world) is TOO certain about the science.

    (2) Solving the problem will be “abrupt and expensive.”

    On the first one, the only thing to say is that’s bullshit. It’s not that the climate-concerned know with 100% certainty how it will all play out — of course we don’t, and nobody serious is really claiming that we do. The science is filled with probability assessments.

    No, the certainty is around the case for action, which is different than the science itself. In that, I’m 100% sure, given both the probabilities of continued emissions changing our climate AND the dire consequences if the warming continues unabated. It’s basically an expected value calculation, and the risk-reward assessment is clear.

    The second claim has been the go-to for deniers for many years. It’s nearly the official position of the entire GOP establishment in DC, especially the president. They talk about fighting climate change as if it’s some giant liberal boondoggle to spend money. There are two big problems with this argument. First, it’s quite logical feat to decry climate hawks for certainty, and then declare with utter confidence that doing anything about climate will be too expensive.

    But second, and more importantly, the argument that reducing carbon is going to drag the economy down is wrong, increasingly absurd, and actually backwards.

    If we do nothing, unabated climate change and weather extremes will cost the world tens of trillions of dollars (that’s analysis from Citi and other banks, not Greenpeace). Reducing carbon — through innovation in energy, buildings, transportation, and other sectors — is an enormous opportunity to improve health and generate wealth. As in many trillions of dollars. Thus rolling back action on climate, as Trump’s executive order did a month ago, will hurt the economy and our competitiveness.

    I could point to endless evidence of both the science and the cost-benefit logic of action. But what’s the point really? Many people will not be convinced of the reality that action on climate is justified by the science and but also by every interpretation of risk management. They will keep their ears plugged and eyes covered forever.

    By encouraging everyone to go slow, the deniers risk everything, but unfortunately not just for themselves — we’re all in this together, which is why Stephens and his ilk are so dangerous. On the alter of making a point and sounding smart, they're sacrificing our collective well-being.

    Alas, we’ll never convince those like him, even as we build a healthier, better, cleaner economy. Onward.

    If you enjoyed this article, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston

    Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.

    June 2, 2017

    U.S. Business Leaders Want to Stay in the Paris Climate Accord

    (2 days ago I wrote the below for HBR about Trump's impending decision to exit the global climate accord. The whole point is that he would be ignoring business leaders if he did so. Well, he did. The news is moving fast these days. The response from business and other leaders was swift and strong. I'll post a 2nd article summarizing that in a bit.)

    According to reports, President Trump is expected to pull the U.S. out of the Paris climate agreement. This is a horrible decision for business, the United States, and humanity.

    In this moment, running through the details of the agreement itself, which commits nearly every country in the world to significant energy and carbon reductions, is not vital. Nor is what we could analyze — from what will actually change in how the U.S. uses energy or emits carbon if the agreement is abandoned (it’s not a straightforward discussion by any means) to what states, cities, and citizens can do as a result.

    But the key point I want to make here is that the business community does not want to leave the Paris climate agreement. Let me repeat: Even though Trump and his team keep telling everyone that climate action is somehow bad for the economy, most companies don’t agree with that assessment.

    On May 10, in an attempt to influence the president’s thinking, 30 CEOs wrote an open letter to Trump, taking out a full-page ad in the Wall Street Journal. The opening reads, “We are writing to express our strong support for the U.S. remaining in the Paris Climate Agreement.” I won’t reprint the whole letter here, but please read it.

    It is, however, worth taking a moment to look at the companies whose CEOs made their views known:

    3M Company
    Allianz SE
    Bank of America Corp.
    BROAD Group
    Campbell Soup Company
    Cargill Inc.
    Citigroup Inc.
    The Coca-Cola Company
    Corning Incorporated
    Cummins Inc.
    Dana Incorporated
    The Dow Chemical Company
    E.I. DuPont de Nemours & Company
    General Electric
    The Goldman Sachs Group, Inc.
    Harris Corporation
    Johnson & Johnson
    JP Morgan Chase
    Morgan Stanley
    Newell Brands Inc.
    Pacific Gas and Electric Company
    Procter & Gamble Company
    Royal DSM
    Tesla Inc.
    Virgin Group
    The Walt Disney Company

    This is not a tree-hugger group. And it’s not a list of usual suspects from consumer-facing brands that may want to impress consumers or seem like they don’t have a huge carbon footprint. Nor is it a list that makes you think the money men want out of Paris. Heavy industrials are here. The biggest banks are here, and in other communications, too — see the letter to G7 leaders from hundreds of institutional investors, representing $17 trillion in assets.

    Finally, I can say confidently, the list does not even remotely cover all the companies that feel this way. The CEO of Dow corralled fellow CEOs over just a couple of days to get these signatories. Many more agree but couldn’t move that fast on the letter, and many other executives have made their feelings known through back channels to Trump and his team. Public statements of support for the Paris agreement have even come in from the CEO of Exxon. Yes, Exxon. And just look at the hundreds of companies that have already committed to science-based carbon reduction goals and 100% renewable energy.

    And yet the president seems to be ignoring this clear message coming from our titans of industry. He has claimed for a long time that he wants to put America first. But by withdrawing we would join a short list of UN member states that have not signed the agreement: Nicaragua and Syria. That’s it.

    The U.S. cannot lead the world in any dimension if it abdicates responsibility and leadership for the greatest challenge facing humanity.

    (This post first appeared at Harvard Business Review online.)

    If you enjoyed this article, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston

    Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.

    June 2, 2017

    Cities, States, and Business: Our True Climate Leaders

    (Part II of the Trump Paris decision -- the aftermath with reactions from governors, mayors, and CEOs.)

    After Trump’s historic blunder in pulling the U.S. out of the Paris climate accords, regional leaders, CEOs, and the rest of the world sent a clear message: We’re moving on climate change. And this is why I still have hope.

    A couple of days ago, assuming Trump would do exactly what he did yesterday, I wrote an article for HBR about how “U.S. Business Leaders Want to Stay in the Paris Climate Accord.”

    Then Trump, true to form, made one of the most economically, scientifically, and morally bankrupt decisions in modern U.S. history. Leaders around the world were ready. They spoke loudly.

    Here are just some of the tweets.


    (These included messages from, as WIRED editor Nicholas Thompson pointed out, the “five most valuable companies on earth)…


    See, in particular, Jeff Immelt’s statement that “Industry must now lead.” Absolutely.

    And two high-profile business leaders took Trump’s decision as a sign that their input was useless, so they left his CEO advisory boards.


    (Many commentators have pointed out that they should’ve been disgusted with Trump for many other things before this (misogyny, racism, etc.). That’s true, but I believe they genuinely thought they could influence him at least from the inside…but that’s clearly useless with someone like Trump.)

    The Weather Channel in particular made their displeasure known…



    Governors and Mayors acted fast, lighting monuments in green…


    Trump made a particular point in his speech about how he represents Pittsburgh, not Paris. Well, not so much.

    The Governors of CA, NY, and WA were ready to go with a new alliance to show state-level commitment to Paris. Welcome to the world, United States Climate Alliance.



    I couldn’t remotely capture all that happened on the international front, but two messages in particular stuck out…


    The 3-minute video from French President Emmanuel Macron, in English, is historic-level trolling. He invites all scientists, engineers, entrepreneurs, and anyone else interested in building a clean economy, to come to France. And he ends with “Make the Planet Great Again.” Just watch it.

    And Canadian Prime Minister Justin Trudeau chooses his words carefully, saying the “United States federal government” has withdrawn — meaning, we can assume, he’ll be happy to work with states and cities.

    These reactions are just the immediate responses within hours. Trump has ensured that the U.S., as a federal entity, is a pariah on the world’s stage as the rest of the planet acts on its biggest challenge.

    But our cities, states, and businesses will move forward despite his mythic blunder. And the rest of the world, luckily for us, will welcome the chance to work closely with our true leaders.

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    Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.

    September 18, 2017

    The Questions Business Leaders Should Ask Themselves After Harvey and Irma

    Hurricane Katrina changed business forever. Will today's extreme weather do the same?


    Twelve years ago, Hurricane Katrina ravaged New Orleans. Eleven years ago, Walmart launched its sustainability initiative, deeply affecting how business has been done since then. It wasn’t a coincidence.

    During the hurricane and immediate recovery, the government at all levels was overwhelmed by the human and economic needs. It couldn’t deliver basic services like water. But large companies, with their extensive resources and logistics expertise, stepped up. Walmart discovered what it was capable of.

    An important shift in how the retail giant approached its business began with then-CEO Lee Scott’s epiphany, penned in a manifesto titled “Twenty First Century Leadership.” Scott realized that the company had a much bigger role to play in society than just delivering everyday products at a low cost and providing jobs. Over the next decade Walmart saved billions of dollars by aggressively cutting its energy use, doubling the efficiency of its fleet, and becoming one of the world’s largest private-sector buyers of renewable energy. But most important, Walmart compelled suppliers to improve their environmental performance.

    A climate-changed world is not a theoretical discussion anymore. It’s reality, and the impact on business is significant.

    Many can debate how well Walmart has followed through, or whether its environmental gains are lessened by how it has handled other aspects of long-term business sustainability, such as labor and wages. But Walmart’s impacts on other companies, and on the general debate about the role of business in society, are undeniable. The giant created ripples of action.

    The storms around the world right now — from Hurricanes Harvey and Irma to the devastating monsoons in Mumbai — are bigger, more devastating, and extreme than even Katrina. Climate chaos is upon us. Will it change the face of business again?

    For smart companies it will, and immediately. They’ll be asking themselves several questions, loosely categorized below, or expanding on work they’ve already started.

    • Rising seas and extreme weather (assets and operations): Do we — or our major suppliers or customers — have important assets in low-lying areas around the world? How much operational and financial risk do we face, throughout our value chain, from rising seas and mega-storms, or from droughts and water-quality issues?
    • Rising expectations: What do our major stakeholders — employees, customers, communities, and even investors — expect from us in terms of action on climate change?
    • Rising sun: Are our goals for carbon reduction or renewable energy aggressive enough? Are these targets in line with the ever-tightening science on how much carbon the world can afford to emit?
    • Changing political realities: Are we taking a public position and influencing policy (in the U.S. and elsewhere) to keep the world moving on climate action? Sitting this one out is not an option anymore. For example, many of the world’s biggest brands lobbied President Trump to stay in the Paris climate accord, running a full-page ad in the Wall Street Journal. And then, after Trump pulled the U.S. out of the agreement, hundreds of companies made a public declaration that “We Are Still In.”
    • Helping out: What can our business do to help in these extreme situations? Do we have special expertise in logistics, or can we shift some production and operations temporarily? Witness how Anheuser-Busch sometimes shifts production at a Georgia facility to put drinking water in cans for emergencieslike Harvey. As Walmart discovered 12 years ago, companies have the scale to help in dire situations.
    • Rising revenues: How might our business benefit? It’s OK to ask this — it isn’t taking advantage of a horrible situation. We also need businesses to help prepare for extremes and to aid in recovery afterward. For example, in the immediate aftermath, clean-up is important, and there will be increased sales of replacement furniture, cars, and much more. In the longer run, the construction sector could do well, as will providers of emergency services like portable energy. There are also amazing opportunities to rebuild smarter, more resilient, more sustainable communities. Governments and companies can invest in so-called green infrastructure like natural wetlands to dampen storm surges (versus “gray,” traditional infrastructure like dams and levees) and many more porous roads and surfaces to control flooding.

    The bottom line is that a climate-changed world is not a theoretical discussion anymore. It’s reality, and the impact on business is significant. This is blindingly obvious but needs to be said: Cities and regions under water, demolished, or with dispersed or evacuated populations don’t make for healthy economies.

    If we don’t see a dramatic shift in how business operates and the kinds of products and services they provide — or how governments and civil society work at all levels — the world will become too unstable for any business, or anyone at all, to thrive. Things have gotten very real. It’s time for businesses to step up.

    This post first appeared at Harvard Business Review online.

    (Photo credit: Rick Wilson, Reuters)

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    December 31, 2017

    The Top 10 Sustainable Business Stories of 2017

    (I recently published my 9th annual roundup of top themes/stories impacting how business navigates environmental and social issues. See original at HBR. I've reposted it here with a couple smaller "honorable mention" stories at the end that got edited out of the HBR version. A few social media comments pointed out my list is perhaps too U.S. focused -- fair enough, I am U.S. based. And one big thing I definitely should've included here was Brexit. I was probably too focused on our own dysfunction in the U.S. Oops. But overall, readers have said they thought I was balanced and, surprisingly, fairly optimistic. See what you think and enjoy the New Year!)

    The year 2017 has been a long, strange trip. The definition of sustainability in business evolved quickly — the topic in executive suites now covers a wide range of issues that address how a company navigates environmental and social challenges. From carbon footprint to taking a stand on human rights or immigration, companies need a position and strategy on all of this and more.

    We saw big leaps both backward and forward this year, some of which weren’t especially surprising. In my year-end wrap up for 2016, for instance, I predicted that “the context for sustainable business in 2017 may center on the competition between two stories, the election of Donald Trump and significant action on climate change.” That’s pretty much what happened. Trump pulled the U.S. out of the Paris climate accord, the hard-won global agreement to tackle the greatest threat to humanity and the economy, becoming the only country in the world on the sidelines.

    But the Newtonian equal-and-opposite reaction from business, states, and cities was nothing short of amazing. Their pushback on policy decisions is my #1 story of 2017. Here’s more on that, plus nine additional developments business leaders need to pay attention to.

    Climate, Clean Tech, and the Environment

    1. U.S. leaders from the public and private sectors rejected Trump’s decision on the Paris accord and committed to climate action.
    On the day of the president’s announcement about the Paris climate accord, 25 multinationals — including Apple, Facebook, Google, HPE, Ingersoll Rand, Intel, Microsoft, PG&E, Tiffany, and Unilever — ran a full page ad in the Wall Street Journal asking Trump to stay committed to the agreement. By that weekend, dozens of big companies declared, We Are Still In. This public statement includes thousands of signatories — not just companies, but states, cities, and universities.

    On the governmental side, the states of California, Washington, New York, and others representing a third of the U.S. population and GDP announced the formation of the U.S. Climate Alliance. California Governor Jerry Brown emerged as the de facto climate leader for the United States, holding his own meetings in China and headlining a delegation to the global climate talks in Bonn. A growing list of 385 local leaders have joined the U.S. Climate Mayors pact as well. A group of high -profile business leaders offered their thoughts on the sustainability agenda right here at HBR (I am also an adviser to that effort). In total, the message to the rest of the world has been clear: “sub-national” support for climate action is very strong in the United States.

    2. The deadly costs of climate change became even more obvious.
    This year, the science got clearer about the connection between extreme weather and human-caused climate change. And that extreme weather was horrifying. Record-setting storms, floods, and drought-driven fires wreaked havoc around the world. Flooding in South Asia killed more than 1,200 people. Asia also experienced shocking heat, including a day in Pakistan that hit nearly 130 degrees Fahrenheit. Hurricane Harvey hit Houston hard (the before-and-after flooding pictures are mind-boggling), and the national weather service added colors to flood maps to reflect the record 30 inches of rain that fell. Hurricane Irma demolished Caribbean islands, and Hurricane Maria created an economic and humanitarian disaster in Puerto Rico. As of this writing, months after the storm, a third of the island is still without power, and 10% of these U.S. citizens have no water. On the U.S. mainland, unprecedented wildfires ripped through Napa and central California, as well as Los Angeles County.

    These extreme weather events are primarily human tragedies, but they’re economic and business disasters as well. When entire regions are under water or lose power for months, it’s not good for local and national economies. In fact, the economic cost of extreme weather is vast and rising. In the 1980s, 27 weather events cost the U.S. more than $1 billion each (in today’s dollars). A little more than halfway through the current decade, we’ve already experienced 89 billion-dollar events, and they’re much, much larger. Hurricane Sandy in 2012 and the big trio of Hurricanes Harvey, Irma, and Maria this year are all $50 billion to $100 billion storms.

    3. The Trump administration started dismantling environmental protections.
    In the U.S., the new administration’s policy goes beyond pulling out of Paris. We’re seeing an all-out assault on our air, water, climate, and land. The EPA head, Scott Pruitt, spent years suing the agency and essentially intends on dismantling it. Pruitt and Trump, with assists from Interior Secretary Ryan Zinke and Energy Secretary Rick Perry, are working to, for example:

    Bi-partisan groups of former energy commissioners and EPA heads have spoken out against every move. And while many companies may hope to save money in the short run with fewer regulatory hurdles, it’s also clear that an unhealthier environment is not great for businesses, its customers, its communities, or its employees in the long term.

    4. Investors woke up about climate risk and benefits of sustainability.
    I know, I know, Wall Street only cares about short-term earnings performance. And yet there’s something brewing among big institutional players, the economy’s risk assessors, and even some Wall Street types. For example, Larry Fink, the CEO of BlackRock (with $6 trillion in assets under its management) asked business leaders to focus on “long-term value creation” in his third annual letterto S&P 500 CEOs. BlackRock also said its “engagement priorities” for talking to CEOs would include climate risk and boardroom diversity.

    Shareholder resolutions on climate disclosure and strategies succeeded for the first time at Occidental Petroleum and ExxonMobil as well. Fund giant Vanguard, which led the charge at Exxon, also declared climate risk and gender diversity “defining themes” of its investment strategy. Institutional investors continued to drive climate action also, with hundreds signing a statement of support for the Paris agreement. And Norway’s $1 trillion Wealth Fund is forcing banks to disclose the carbon footprint of loans and will divest from fossil fuels. In late-breaking news, the World Bank will stop financing upstream oil and gas projects after 2019.

    Finally, a few big developing stories could create long-term ripples. First, the Financial Stability Board (FSB) Task Force on Climate-related Financial Disclosures (or TCFD) — chaired and led by financial giant and former New York City mayor Michael Bloomberg — issued a critical set of guidelines for investors and insurers to understand climate risks. On the heels of TCFD, a group of 225 global investors with $26 trillion under management launched “Climate Action 100+” to “engage” with large emitters on their management and disclosure of climate risks. And in fascinatings new on the debt financing front, Moody’s told cities to address climate risks or face downgrades on their bonds. Could shifting rates on company debt be far behind?

    5. China accelerated its clean tech advantage.
    On the fifth day of 2017, China announced it would spend $360 billion on renewable energy by 2020. The rest of the year brought even more leadership: China cancelled 103 coal plants, committed to cut coal by 30%, made big moves in electric vehicles (see #9, below), erected the world’s largest land-basedand floating solar farms (becoming the world’s largest solar producer in the process), and – in one of the most fun stories of the year — built a solar farm in the shape of a giant panda just for the heck of it. Essentially, in 2017, China took over the role of global climate leader and then, to top it off, committed nearly a trillion dollars in infrastructure spending to connect China to the rest of the world.

    6. Clean tech continued its relentless march (and coal continued to die).
    As a whole, the economics of every major green technology got radically better. (Morgan Stanley predicted an “inflection point” in 2020, when renewables become the cheapest energy source globally.) But to focus on two intertwined areas, look at what happened with electric vehicles (EVs) and battery storage.

    On the former, some large economies, including France, India, Britain, Norway, and China, committed to ban diesel and gas vehicles. Automakers moved quickly as well, with GM and Ford announcing major investments in EVs and Volvo phasing out conventional engines starting as soon as 2019. A group of multinationals with big logistics operations launched EV100, an initiative to speed up the switch to EVs. One big city, Shenzhen, China, moved its entire bus fleet to EV. In total, EV sales were up 63% globally.

    The economics of batteries (needed for EVs and, critically, the grid so we can store clean energy) continued to get much better—50% cheaper since 2014. Tesla built grid-scale storage for Southern California and quickly erected the world’s largest lithium ion battery storage in Australia. The end result is going to be the end of coal, bolstered by commitments from states like Michigan to go coal-free—and the entire EU, which will build no new coal plants after 2020.

    The Role of Business in Society

    7. Famous CEOs took moral stands.
    One group of business leaders faced a tough decision this year: stay in the president’s CEO advisory councils or protest his policies by pulling out. A few, like Tesla’s Elon Musk and Disney’s Robert Iger, left in the spring after the Paris climate decision. But most stayed on — that is, until the Charlottesville, Virginia white nationalist marches. When the president said there were “some very fine people” among the white supremacists, the CEO Advisory Councils disbanded quickly, with the leaders of Pepsi, IBM, GM, BCG, Merck, 3M, and others walking away (a few wanted to stay, but the momentum was clear).

    One CEO in particular, Apple’s Tim Cook (who was not formally on the councils) denounced the “moral equivalence” of white supremacists and human rights protesters, but he also went on to say something more important about business: “We have a moral responsibility to help grow the economy, to help grow jobs, to contribute to this country and to other countries that we do business in.” In essence, Cook made a blended argument for sustainability that isn’t about philanthropy and the polar bears, but about the core business and its role in society. And yet, Apple had its own challenges. Proving that no company’s actions are black and white, the world discovered that Apple has stashed a quarter of a trillion dollars in cash outside the U.S. to avoid taxes. Yes, it’s legal, but is it right? Given Cook’s own argument, it’s an uncomfortable disconnect.

    8. Companies went to court.
    This year large companies dove into legal battles on social hot-button issues to an unusual degree. Tech companies big and small filed an “amicus brief” to fight the president’s first executive order on immigration (biotech firms spoke out as well). Fifty big companies asked a New York federal appeals court to fight discrimination based on sexual orientation. Companies also lobbied for pro-environmental and social policies. Companies went local as well, with seven big guns — Procter & Gamble, Walmart, Unilever, General Mills, Target, General Motors, and Nestle — pushing the state of Missouri to pass a bill to make it easier for them to buy renewable energy.

    9. The super bowl of sustainability advertising was… the actual Super Bowl.
    A surprising number of big brands used the most expensive, most viewed advertising time in the world to do something different this year: Instead of pitching products the old-fashioned way, focusing on how great it tastes or will make you feel, they chose to say something about an important aspect of social sustainability. And they took risky stands, in often not-so-veiled ways, against the policies of the new U.S. president.

    Budweiser’s ad told the story of their founder and proudly pointed out his immigrant status. Little-known 84 Lumber went viral with a five-minute video about the journey of a family from central America. Coca-Cola focused on diversity and inclusion with its multi-lingual ad. And Audi’s ad “Daughter” lamented the lack of pay equity for women (though Audi then took heat for its own record on pay and women in leadership, showing that sustainability-focused ads can be risky).

    10. Unilever fights off a hostile takeover bid.
    Unilever is the consensus corporate leader on managing sustainability for business and societal value. That’s why I consider the attempted takeover of Unilever by Kraft Heinz and 3G Capital an important sustainability story.

    It is unlikely that a firm like 3G would continue supporting the sustainability strategy at the heart of Unilever, even though the strategy has been wildly successful (the company’s market cap was at an all-time high — and then went up another 20% after the takeover attempt). As Unilever’s CEO, Paul Polman told the Financial Times, it was “clearly a clash between a long-term, sustainable business model for multiple stakeholders and a model that is entirely focused on shareholder primacy.” Everyone interested in seeing companies lead the charge to a thriving world breathed a sigh of relief. (Full disclosure: I’ve been an advisor to Unilever North America, but I had zero involvement on this issue.)

    Honorable mentions
    - Big new sustainability goals. Kudos to Mars, Inc. for committing $1 billion toward becoming “sustainable in a generation” and to HPE and H&M for setting science-based and carbon neutral goals for their suppliers.
    - More transparency and accountability. New technologies (hello, blockchain) are capturing more information about products. Transparency is increasing. Panera went 100% “clean label”, Target and Walmart leaned into chemical management, and Unilever set a for transparency on fragrances.
    - Citizen action on a grand scale. The women’s march and #metoo revealed a lot of pent up frustration with the world’s businesses and institutions (and with men).

    So what’s next?

    It’s risky to say anything definitive about the future. But I do believe that some mega-trends have too much inertia for any one stakeholder to completely disrupt. So some light predictions for 2018:

  • The climate will continue to get more volatile. Any remaining business leaders who don’t understand climate as a systemic risk and opportunity will have to get on board.

  • Millennials and Gen Z will continue to push for purpose and meaning in work and life.

  • AI, big data, blockchain, and other tech will change how we understand companies, products, and services, leading even more to embrace “clean labels”.

  • To meet ever-rising expectations, and drive business value, companies will set more and more aggressive sustainability goals.

  • Clean tech will be under attack by the U.S. administration, but it will continue to prevail globally.

  • Finally, the #metoo movement against sexual harassment, which is sweeping through politics and media, will hit big business. We may see some senior Fortune 500 execs fall.
  • Onward to 2018. Have a happy, healthy, and sustainable New Year!


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    May 14, 2018

    Using AI to Help the World Thrive

    (I've gotten behind on re-posting my articles! I'll try to catch up in the next couple of weeks. As part of my new column in MIT Sloan Management Review, I've been diving into the world of new technologies and how they enhance or interact with the sustainability agenda. This is an article about AI, with a focus on Microsoft's efforts. More tech to come soon...)


    What is the purpose of artificial intelligence?

    The hype about AI, with its massive potential to disrupt business and society, is likely true. AI could make business radically more efficient and answer questions we didn’t even know we had. Of course, it may also destroy millions of jobs as machines get better than humans at everything from driving trucks to analyzing CT scans.

    But focusing for the moment on the upside, it’s worth asking: Could AI help humanity solve its biggest problems?

    Consider the challenges in front of humankind. We need to build a thriving economy and world for what the United Nations predicts will be 9.8 billion people by 2050. And we must do it without overwhelming our natural resources or making our climate uninhabitable. We’ll need dramatic changes in how the world works — deep shifts in energy, transportation, buildings, manufacturing, food and agriculture, and much more. We need to answer questions such as:

    • What’s the best, most economic path to a low-carbon economy?
    • How do we feed 9 billion or 10 billion people on a planet with a fixed amount of arable land?
    • How can we best move billions of people around crowded cities to keep those cities functioning, while using the least fuel possible?
    • How do we manage an electric grid with huge amounts of intermittent renewable power and billions of smart devices and electric vehicles plugged in?
    • How can our economic and political systems enhance well-being for all and reduce inequality?

    We may need some serious help answering these kinds of questions. It’s quite possible that we’ve created complex, systemic problems that exceed our human capacity to solve them. In other words, AI may not just be nice to have; we may need it.

    Some companies, particularly the tech giants, are recognizing this reality. They’re looking to AI as a tool for solving environmental and social problems.

    For example, Google asked its DeepMind AI to examine the “complex, nonlinear” problem of how it uses energy in Google’s data centers (and this is no small issue: just in the United States, the tech sector’s data centers use 70 billion kilowatt hours of electricity at a cost of $7 billion per year). Google’s AI was able to slash energy use for cooling by an impressive 40%, saving significant money and carbon emissions.

    In 2014, IBM launched a 10-year, $100 million project to use its Watson cognitive computing system to help Africa solve business and social challenges. The company is also leveraging AI to forecast solar and wind availability for power generation.

    Enter Microsoft’s $50 Million “AI for Earth” Program

    But perhaps most intriguing is the initiative that Microsoft recently launched — its own big play for leadership in the realm of “using AI to save the world.” In December, the company announced an expanded commitment of $50 million to, as Microsoft President Brad Smith wrote in a blog post, “put artificial intelligence technology in the hands of individuals and organizations who are working to protect our planet.” Smith pointed out that humanity is collecting a vast amount of data on the state of the planet. We need help, he wrote, to “convert it into actionable intelligence.”

    The program, dubbed AI for Earth, is finding and funding innovators who are making progress in four critical areas — climate change, water, agriculture, and biodiversity. Microsoft’s first grantees, 35 teams from around the world, are impressive. The AI pioneers include a group in Italy using images of snow in mountains to better predict snow melt and thus water availability; the Jane Goodall Institute, which is helping “identify chimpanzee habitat connectivity and conservation priorities in Africa”; teams at Yale and Cornell using AI and data to understand crop health and improve yields; and a crowdsourced program, iNaturalist, that combines both “citizen-scientist” data with trained scientist input on biodiversity.

    Microsoft will accelerate progress by providing seed money, intellectual support (in the form of a multifunctional team of AI and sustainability experts), and technology aid through its cloud computing resources. The AI for Earth program will also identify the initiatives that have the most promise and offer even more aid.

    But the goal is more than creating some isolated success stories — it’s about being a catalyst for greater change. The stated mission of Microsoft’s AI efforts is “to empower every person and organization to thrive in a resource-constrained world.”

    Rob Bernard, Microsoft’s chief environmental strategist, tells me that with AI for Earth, “we want to light up the ecosystem — we want the market to explode.” He imagines that once a team has created tools for, say, developing high-resolution maps of farmland from satellite imagery, other teams can build on it. They might ask different questions than the initial group, focusing on a different crop. Or look at a completely different problem outside of agriculture that could benefit from the same AI approach.

    It’s a great idea. But a critical component of this “explosion of ideas” plan is making some capabilities part of a publicly available platform. So I have to wonder, what’s in it for Microsoft?

    Business Payoffs for Being a Leader in Solving the World’s Problems

    I see a few primary business benefits.

    First, the initiative may help Microsoft attract and retain the best people. The competition for AI talent is intense and the tech giants are paying big bucks. Bernard says that when Microsoft posted some AI for Earth positions, some of the company’s top AI people jumped at the opportunity. There’s a clear trend, especially among millennials, for people to want more purpose in their jobs. Working on big, global environmental challenges is meaningful.

    Second, the company can drive revenues for its cloud services. Digitizing the world, which we seem committed to doing, will require lots of data, servers, and software. Putting Microsoft in the middle of that whirlwind is good for business.

    Third, the company could yield some related, but harder to measure, intangible benefits. Working on big issues and connecting to cool startups raises the company’s profile and keeps the 40-plus-year-old brand (I know, hard to believe) relevant and modern.

    So, this whole movement will be good for humanity and benefit Microsoft (and other tech companies). And that’s more than OK. In fact, it’s critical to the success of the program. We need a large flow of ideas, capital, and talent to solve the world’s biggest challenges. Making it profitable to use AI in the service of humanity will attract more resources to the cause. Again, it’s likely that we need AI. Let’s just hope AI continues to need us.

    (This post first appeared in MIT Sloan Management Review here.)

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    June 11, 2018

    Inside UPS’s Electric Vehicle Strategy

    (Continuing to catch up on re-posting some articles I wrote over the last few months. ICYMI, UPS announced a milestone in electric vehicles -- cost parity for a delivery truck. It's clearly good news, but I suggest here that, when you consider all the ways EVs pay off for the company, the "breakeven" point was likely earlier. Companies can miss great investment opportunities with too narrow a definition of return on investment.)


    Passenger electric cars get all the press, especially when someone launches one into space. But something important is going on in the world of commercial vehicles as well. Last year Tesla announced it would produce an electric long-haul big rig. PepsiCo, Walmart, and UPS promptly committed to buying a few hundred. More recently, UPS made an important announcement about its plans to roll out 50 new midsize electric delivery trucks in Atlanta, Dallas, and Los Angeles.

    The headline is that, for the first time, the electric trucks are expected to cost the company no more than regular diesel vehicles. Up-front price is no longer a barrier.

    But there’s a second part of the story that’s not being touted enough. These new trucks will create significant additional value for the business in ongoing operational savings, improved routing efficiency, and brand building. In short, the electric vehicles (EVs) are much better than just a break-even proposition. Before explaining how this will play out, some context.

    These aren’t the first “alternative” vehicles in the delivery space. FedEx got there early in the U.S., in 2010, and has a couple thousand hybrids or EVs on the road now. DHL is putting 150 Ford-made EV trucks into service as well. And at UPS, about 9,000 of its roughly 112,000 vehicles already have some environmental advantage (most are powered by natural gas, but 1,000 are electric hybrids or pure electric).

    But until now, companies have spent more up front in order to test EVs out. Electric trucks were generally considered unworkable, both economically and in terms of the power needed to haul big loads. What happened to change the situation? Broadly, the cost of electric batteries has plummeted 80% in just six years, due to innovation and enormous investments in production capacity, largely in China. And new composite materials are allowing for lighter vehicles, which extend the range of batteries.

    In the case of these new trucks, UPS worked closely with a supplier, Workhorse, to redesign the trucks “from the ground up,” says Scott Phillippi, UPS’s senior director of maintenance and engineering. Phillippi believes that the new design will reduce the truck’s weight by approximately 1,000 pounds, compared with a diesel or gas-powered vehicle. That plus better batteries will give the truck an electric range of around 100 miles, enough for most routes in and around cities. To show how serious UPS is about EVs, it also announced an interesting investment in EV infrastructure (in London) to allow more vehicles to recharge simultaneously.

    The return on investment is even better than it appears. These new EVs will cost less to run, use better technology to increase efficiency, and build intangible brand value for the company. How?

    First, the total cost of ownership will be lower. The EVs will use much less energy. Comparing “fuel efficiency” of diesel trucks to a vehicle that uses no fuel is difficult, but the EV will get the equivalent of around 52 miles per gallon (about five times the MPG of the gas truck). And, yes, an EV running off an electric grid with fossil fuels is still cleaner, no matter where in the U.S. you plug in. The maintenance costs will also be lower, since EVs have fewer parts and fluids. Phillippi expects total operating costs to be roughly 20% lower. Over a working life of 20 to 25 years, these savings will add up.

    Second, the higher-tech vehicles will operate more efficiently. An electric motor has “tremendous torque,” as Phillippi describes it, so “going zero to 30 in less time creates more efficiency in delivery.” Adding digital controls to the electric propulsion — a kind of internet-of-things technology play — will yield more precision in driving. Phillippi explained this by posing a question: “What if I built a vehicle that didn’t allow you to do things that are inefficient or unsafe?”

    Additional data will also help enhance the company’s long-standing efforts to squeeze miles out through smart routing. CEO David Abney, speaking to investors recently at an event I attended, said simply, “The greenest mile we ever drive is the one we don’t drive.” UPS, he says, has saved $400 million in recent years from its routing system.

    Third, there are brand benefits to this kind of innovation. Electric vehicles from UPS (and other fleets) will sail quietly through streets while emitting no pollution. Also, cool new technologies used in the service of sustainability engage and excite employees. “Millennials want to know that they’re working for a company with a greater purpose,” Abney said.

    In total, on every dimension, the EVs are a better deal. And yet I’ll bet some companies, when deciding whether to invest in commercial EVs or other clean technologies, are waiting until the price is even with that of the traditional choices. I’d argue that this is a mistake.

    Let’s imagine you’re looking at an investment in a cleaner technology that costs 10% more in up-front cash. What if it has lower lifetime cost of ownership and helps the company innovate and build brand value? Wouldn’t the additional outlay up front be worth it? It’s also worth rethinking the ROI calculation for any clean techs that seem expensive now. If you wait for the simple cash return tipping point, you may be leaving money on the table, sacrificing profit and value.

    No doubt, the acceleration to EVs and other clean is worth celebrating. But if companies got a little more creative about how they make their investment decisions, this important shift to sustainable technologies would be moving even faster.

    (This post first appeared in Harvard Business Review)

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    January 11, 2019

    The Story of Sustainability in 2018: “We Have About 12 Years Left”

    (Hi to my blog readers. Happy new year. Below is my annual year-end review of sustainability that was posted at right after Christmas. I'm believe it's the most viewed piece I've ever written for them (hundreds of thousands of views). Part of the reason may be the title, which attracted some heated exchanges. So let me clarify it a bit. The idea that there are "12 years left" on climate change comes from the big IPCC 1.5 degree report from October. As I say below, what it means is that humanity has until 2030 to dramatically cut emissions (in half) to avoid some of the worst of a changing climate...nobody is saying the world will end in 2030. But time is very short. This piece seems to be a kind of Rorschach test for readers -- some people emailed me about how pessimistic it was, others about the optimism. I'm curious what you all think.)


    Every year, I look for important themes in sustainability that will have lasting impact on society, from glaring evidence of global megatrends to inspiring stories of corporate action. The year 2018 brought extreme change — in weather and environmental ecosystems, in political winds and power, and in the expectations of business. It also brought incredible clarity about the scale of our challenges and opportunities.

    So let’s start with the big picture before moving to some corporate success stories.

    The world’s scientists sound a final alarm on climate

    We have about 12 years left. That’s the clear message from a monumental studyfrom the Intergovernmental Panel on Climate Change (IPCC). To avoid some of the most devastating impacts of climate change, the world must slash carbon emissions by 45% by 2030, and completely decarbonize by 2050 (while, in the meantime, emissions are still rising).

    The IPCC looked at the difference between the world “only” warming two degrees Celsius (3.8°F) — the agreed upon goal at global climate summits in Copenhagen and Paris — or holding warming to just 1.5 degrees. Even the latter, they say, will require a monumental effort “unprecedented in terms of scale.” We face serious problems either way, but every half degree matters a great deal in human, planetary, and economic losses.

    It wasn’t just the IPCC that told a stark story. Thirteen U.S. government agencies issued the U.S. National Climate Assessment, which concluded that climate change could knock at least 10% off of GDP. Other studies tell us that sea level rise is going to be worse than we thought, Antarctica is melting three times fasterthan a decade ago, and Greenland is losing ice quickly as well. If both those ice sheets go, sea level rise could reach 200-plus feet, resulting in utter devastation, including the loss of the entire Atlantic seaboard (Boston, New York, D.C., etc.), all of Florida, London, Stockholm, Denmark, Uruguay and Paraguay, and land now inhabited by more than 1 billion Asians.

    All of this suggests that business must dramatically change how it operates: companies will need to push well past their comfort zones from areas like politics and policy to engaging consumers to how they make investment decisions.

    Entire towns are wiped off the map by extreme weather

    This year the weather devastation around the world got, in the words of one colleague, “biblical.” The town of Paradise, California, was effectively eliminated by wildfires (that, yes, are made worse by climate change), killing at least 85 people. Most houses in Mexico Beach, Florida, were destroyed by Hurricane Michael. Unprecedented rains and damage from Hurricane Florence slammed North Carolina and temporarily turned a major highway into a river. Typhoon Mangkhut ravaged the Philippines and parts of China, killing dozens of people. Incredible heat blanketed four continents this summer, with records falling across Europe and Asia. Venezuela’s last glacier is disappearing. Finally, Capetown, South Africa, is essentially out of water due in part to drought — the city nearly shut off all the taps this year, but has held off “Day Zero” through ongoing restrictions and aggressive citizen action.

    The consequences of these extremes are not theoretical. What is the economic cost to an area with no water, or one that’s under water, or burned to the ground? In the U.S. alone, it was $306 billion in 2017, shattering records.

    Coral is dying, insects are disappearing, and the fate of major ecosystems looks dim

    The world’s top coral expert confirms that at 2 degrees of warming, all coral will die. This will destroy a critical part of an ocean system that provides protein to hundreds of millions of people, helps blunt coastal storm surges, and supports the livelihoods of people working in fishing and tourism.

    And it’s not just coral: there’s the death of pacific kelp forests, radical declines in insect populations, and continuing population drops in all mammals and bees.

    How does this all connect to business? For some sectors, it’s obvious: the food and agriculture industry will have trouble feeding us without pollinators, and tourism takes a big hit without coral and other wildlife. But more broadly, society will not thrive in a world where entire pillars of planetary support are collapsing. And if society can’t thrive, neither can business.

    The U.S. environmental protection system continues being dismantled … from within

    The EPA and Department of Interior are reversing years of protections for air, water, and land. In 2018, the Trump administration has opened up offshore waters and rolled back safety rules for drilling, greatly weakened the voice of science in policy, reduced focus on children’s health, and moved to make it easier to build dirty coal plants.

    The big question now is whether businesses will push back and go down a cleaner path on their own. It’s easy to see why multinationals might as they face pressure from sub-national regions — California Gov. Jerry Brown held a Global Climate Action Summit which produced many aggressive climate goals from cities and state, for example. Gov. Brown also signed aggressive new laws committing to carbon-free electricity statewide by 2045 and requiring solar on all new homes. So even if U.S. action sputters, governors and mayors who influence local and regional business conditions will be pushing the clean economy and pro-climate agendas.

    In pointed contrast to the U.S., the EU backed a proposal to strike no new trade deals with countries not in the Paris climate accord (i.e., only the U.S.), France will shut coal plants by 2021, India just cancelled plans for big coal plants, and China banned 500 inefficient models of cars.

    A prominent leader retires, but new leaders step up

    For nearly a decade, no business leader has done more to bring sustainability into the business mainstream than Paul Polman, Unilever’s outgoing CEO (Full disclosure: I’ve worked with Unilever). His depth of understanding of our biggest global, social, and environmental challenges, and his commitment to use business as a way to tackle them, has been unparalleled. But it wasn’t just talk. The company also grew throughout Polman’s tenure and the stock outperformed peers and the FTSE index. Luckily, there are other corporate leaders who are stepping up, including Danone’s Emmanuel Faber (see below for more).

    But climate isn’t the only area where we’re seeing bold stances. Societal issues more broadly made headlines, too. The New York Times declared 2018 year that “CEO activism has become the new normal,” with prominent voices like Salesforce’s Marc Benioff leading the way. Other notable moments include Nike making Colin Kaepernick — the man who led NFL player protests about police violence against African Americans — the face of its 30th anniversary “Just Do It” campaign (sales rose quickly). Under pressure from survivors of school mass shootings, Dick’s Sporting Goods stopped selling assault weapons, and other companies cut ties to the powerful National Rifle Association. Kroger celebrated a year of its “End Hunger” initiative. Unilever threatened to pull its substantial ad dollars from Facebook and Google if they didn’t police “fake news and toxic content.” One hundred U.S. CEOs urged action on controversial immigration issues. And more than 100 U.S. companies gave employees time off to vote.

    Danone North America becomes the world’s largest B Corporation

    A “B Corp” certification requires answering an intensive set of questions on environmental, social, and governance issues. But most importantly, it commits a company to create value for all stakeholders (customers, employees, communities, and so on), not just shareholders.

    French consumer products giant Danone has now put 30% of its brands and businesses through the certification process and says that “companies are fundamentally challenged as to whose interests they really serve.” Becoming a B Corp is arguably is a direct statement about whose interests it values most, and it’s and fascinating frontal attack on the dominance of shareholder capitalism.

    More investors are viewing climate and sustainability as core value issues

    Something is shifting in finance. Vanguard wants CEOs to be a force for good. Mark Carney, Governor of the Bank of England, said that “70% of [UK] banks, who normally have a shorter horizon, are viewing climate as a financial risk—not a CSR one.” Larry Fink, CEO of Blackrock, the world’s largest asset owner, encouraged longer-term thinking about environmental, social, and governance issues in a strongly-worded letter to large-company CEOs.

    Anecdotally, I’ve talked to leaders at big banks who are now thinking differently about purpose and systemic risk. And in a quieter move, a major real estate investor in Miami began pulling money out of coastal assets to avoid risk of sea level rise. Watch this space.

    The clean technology explosion continues and accelerates

    Three big clean tech themes wowed me this year.

    1) Renewables keep getting cheaper. According to Lazard’s annual analysis of the cost of building new power plants, renewables are now the cheapest. And another global analysis showed that new wind and solar are cheaper than one-third of the coal already on the grid — and will be cheaper than 96% of existing plants by 2030.

    2) Corporate buying of clean energy keeps rising. By the end of just the first half of 2018, businesses bought more clean energy than they did in 2017. Companies like Owens Corning (disclosure: a client of mine) are buying enough green energy to pitch their products as cleanly manufactured (which they started doing in late 2017).

    3) Electric vehicle sales are exploding, and it’s not just small vehicles: even container ships are going electric. UPS bought its first EV delivery vehicles at price parity to combustion engines, and China is adding nearly 10,000 electric buses to the roads — equal to the size of London’s entire bus fleet – every five weeks.

    China rejects the world’s trash

    For years, the U.S. had a great deal: When container ships arrived from China with goods, we sent them back filled with our recyclable paper and glass. But starting January 1, 2018, China stopped accepting our trash. The ripples of this move are unpredictable and still moving through the system, but in some regions, materials piled up and prices for recycled content plummeted. In a business world trying to go “circular” (i.e., find a use for everything and eliminate waste), it was a wake-up call about how much waste we still produce.

    The battle against single-use plastic heats up, starting (somewhat oddly) with straws

    Sometimes weird things hit a tipping point. For a combination of reasons, including a viral video showing a turtle with a straw stuck in its nose, companies waged war on straws this year. Marriott, McDonald’s, Starbucks, Burger King, and the city of Seattle, among others, all banned or are phasing out straws. It was a very small part of a larger conversation about “single-use plastics,” most notably plastic bags, which IKEA and Taiwan are banning as well.

    Raising the bar for suppliers

    The greening of the supply chain is a perennial story, but there are some noteworthy recent actions. Apple created a $300 million fund to help suppliers in China build more solar, and also partnered with Alcoa and Rio Tinto to develop a better smelting process to make carbon-free aluminum. On the labor side of the supply chain equation, PepsiCo and Nestle cut ties with a palm oil supplier over human rights abuses and Coca-Cola said it would work with the U.S. State Department to use blockchain to fight forced labor.

    Meatless options grow plentiful

    Given the way most cattle is currently raised, one of the most effective things an individual can do to reduce her carbon footprint is eat less meat. The options to do so are growing, and the rise of products made from non-animal proteins has been remarkable. The Impossible Burger, Beyond Meat, and other brands have made believers out of skeptics (they taste great) and are, as the Wall Street Journal put it, “overrunning grocery meat cases.” In another fascinating move, tech company WeWork went meat-free in its offices and even stopped reimbursing employees on business trips for meat meals.

    What comes next…

    I’m sure I missed many stories, especially globally (my view is from the U.S.). Predictions are hard, but I’m safe in assuming 2019 will be a bumpy ride again. Ultimately, today’s global political situation is, at best, unpredictable. Brazil now has a strongman-style leader who talks about cutting down the Amazon, but the U.S. just swung its House of Representatives back the other way, giving power to Democrats who want more focus on climate change, inequality, and other sustainability agenda items. No matter what happens politically, it seems clear that companies will continue to feel pressure, internally and externally, to do more on social and environmental issues. While the problems face we are extremely serious, I remain optimistic that companies will be doing more in 2019 than ever before.

    (This post first appeared at Harvard Business Review online )

    If you enjoyed this article, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston

    Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.