Making Sense of a Swift and Severe World: What do the new CAFE standards mean for Innovation and Capitalism?

On Tuesday May 19, 2009 President Barack Obama proposed the highest auto fuel efficiency standards ever attempted in the United States. At the height of what might be capitalisms fall from grace and realignment with social needs, one of the worlds premier leaders steps up and proposes a new direction in our relationship with energy. Some of the far reaching goals of President Obama’s proposal include:

- An updated Corporate Average Fuel Economy (CAFE) standard for all new automobiles beginning in model year 2012.

- By 2016 the fleet average requirement would be 35.5 miles per gallon, and increase in fuel economy by 8 mpg from the current CAFE standard of 27.5 mpg for cars and 24 mpg for light trucks.

- The 35.5 mpg standard would be achieved four years earlier than under the current CAFE law, which requires a 35 mpg standard in model year 2020.

- The projected oil savings of this program over the life of this program would be 1.8 billion barrels of oil; and tailpipe emissions would fall by more than 30 percent, according to White House officials.

I'm going to be the naive one, and should know better that to touch this topic; but what do you all think...is industry and government generally in balance? I understand the desire for single national CAFE standards, but wouldn't competitive companies have sought cleaner fuels and autos regardless? In his book World Inc. author Bruce Piasecki writes about social response product development efforts of Toyota in a chapter he titles, “Toyota and the Search for the Superior Car”. In reading the chapter what is surprising is that Toyota spent a decade or more in R&D and beta testing of the Prius and the hybrid-electric power train as they foresaw in many ways, the announcement by President Barack Obama on the 19th of May 2009. They could not predict the exact date, the exact time, or even who the US leader would be to make such a sweeping change in CAFE standards for a new century. But Toyota had the foresight to know that such swift and severe change would arrive and it would be best to position their products and core customers for this day. And now that the day for upgrading auto efficiency standards into the 21st Century has arrive? Toyota again is prepared to address and meet this change in CAFE with its existing product family and core technologies already in mass production. It should not be surprising to think that Toyota is already thinking one or two administrations into the future on social policy changes and the impact of innovation.

Does the policy push the innovation outcome or vice-versa? It seems like a less exciting world if we all wait for the policy mechanisms to be put in place to move technology toward consumer wants/desires. And to me CAFE has been a veil placed between industry and consumers that does not allow for innovation to move at a pace it could move. Perhaps we see this barrier in the utility, healthcare and consumer products industries as well?

Would Thomas Edison have been happy with the pace of innovation on lighting to get where we are with the CFL?

I understand the machinery of industry and government needing to have coalitions that can move markets in a balanced path forward, for competitive reasons. But the pace of policy should not dictate the adoption of innovation from my personal perspective, particularly if the innovation is for the great good of a company or society at large.

Mark C. Coleman
Senior Associate & World Inc. Case Leader, AHC Group, Inc.
Mark@ahcgroup.com

Want to get real about the future of energy, natural resources and capitalism, go to www.ahcgroup.com and www.worldincbook.com to learn more on how leading companies are reinventing the future of business through social response product development and social response capitalism.

A Stimulus for a Better World: Give them Sustainability without Compromise…

Sustainability sounded good when money was flowing in. But now that the economy is broken, business sustainability is taking a back seat to business survival. However, now more than ever, this is a time to advance your business case for sustainability as a top-line and bottom-line strategy for not just survival, but long-term growth and profitability.

The triple bottom line is alive and well in this broken economy. Smart corporations are embracing principles of business sustainability and positioning their business units, products and services for new growth. There are early-adopters, a late-majority and laggards in every distribution of companies that choose to introduce new business strategy and processes to their organizations. In the case of sustainability it is more of a corporate value that needs to be accepted and then injected into the very culture of the corporation for it to become operational and of value. That point is lost on many corporations that simply seek to overlay some sustainability principles onto a few of their facilities or products and wait for positive financial returns. A passive speed-dating approach to corporate sustainability will not work.

To be successful a corporation has to proactively adopt sustainability principles, make them their own, align them across business units, and devise clear goals for operational excellence, corporate responsibility, and product strategy. This can only be accomplished through complete senior level buy-in and support. Additionally the business units have to align themselves with the new corporate value for sustainability, develop their own goals and performance indicators toward the new value, and make it relevant to their employees, customers and stakeholders.

Developing, implementing, monitoring and adjusting corporate sustainability for continuous improvement is not an easy task. Corporate sustainability embodies values, vision, goals, actions and improvements. It is as much a process as it is a tangible product or service. To reap the full benefits of sustainability, companies have to be prepared for a cultural change, a process that takes time, and a new way of doing business that is more complex, but ultimately more profitable.

Survival of the Fittest…Darwin Says Sustainability is Evolution
This all sounds reasonable right. And you are going to tell me that the economy is broken and your company is in survival mode. You don’t have the time, resources or support to think about business sustainability. And this sounds very logical to me; except that you are compromising the future success of your corporation with survival tactics, not with sound business strategy. Darwin’s mantra “survival of the fittest” holds true to business, but it is not just solid financials, or cutting costs, or restructuring in tough markets that lead to survivors. In two decades from now the companies that are still alive and thriving will have evolved. On one hand they have superior products and leaders that know the fundamentals of operating a strong business. On another hand they will have transformed to adopt principles of sustainability that allowed them to evolve their business, products and operations so that they can be fit enough to survive energy price volatility, natural resource and commodity constraints, dynamic and shifting customer preferences for greener products, and new regulatory or market requirements.

What I mean by this is that the financial and business landscape has changed and is transforming. Business as usual may sustain your operations for a few months or years; but ultimately government, business and consumers are asking for more. And the “more” that is being requested is not necessarily more money. It is a smarter, better run, less risky and ultimately more profitable business that views the world through the lens of sustainability. That lens views the world more holistically, with people, planet and profit as a more balanced screen than just profit. Twenty and thirty years ago the screen of sustainability was not only foreign to corporations; it was rejected and defied all principles of capitalism and why businesses existed. Today however, the evolution of business sustainability is brining new life to modern corporations that better understand their relationship with the natural, physical and human world; and knowing that for their survival they need to become more sustainable enterprises. That means reducing waste, reducing water and energy consumption, reducing greenhouse gas emissions, designing better products, minimizing their transportation footprint and doing all this while still making a profit.

For those companies that have embraced business sustainability and proactively pursued sustainable business strategies, the following benefits are most frequently cited (1) lower operating costs; (2) a license to operate; (3) enhanced corporate reputation; (4) more efficient and responsible use of commodities and natural resources; (5) more competitively priced products and higher margins; (6) a re-alignment of products that meet customer expectations for price, performance and quality, but also for addressing specific social needs like clean water, more sustainable transport or cleaner energy; (7) product and service differentiation among competitive landscape; (8) attraction of new customers in competitive markets; (9) gain in market share; (10) new revenue toward top-line growth and greater earnings toward profit and bottom-line growth.

Sustainability without Compromise: Crafty Solutions at Kraft Foods
With revenue topping $37 billion in 2007 Kraft Foods is the US's #1 food company and #2 in the world (behind Nestlé). Its North America unit makes the world's largest cheese brand (Kraft), owns the cookie and cracker business (Nabisco) and is the maker of the childhood favorite, Oreos. The company has more than 103,000 employees worldwide. In addition the company operates 187 manufacturing and processing facilities, including 51 in the US, 13 in Canada, and 123 in 44 other countries. Wal-Mart accounts for some 15% of Kraft's sales. Like all companies, Kraft Foods is feeling the economic crunch. But this market leader is not just looking to survive, they are seeking to thrive. So, Kraft has begun to infuse a culture of sustainability throughout its business units, operations and people. To “make sustainability its own”, Kraft has designated Six Sustainability Focus Areas:

1. Transportation & Distribution
2. Agricultural Commodities
3. Packaging
4. Energy
5. Water
6. Waste

Kraft chose to focus on these six priority areas because they felt that is where they could have the greatest impact on their business. And Kraft’s focus on these six areas is paying off. If fact from a baseline year of 2001 Kraft has monitored performance toward key performance indicators (KPIs) and demonstrated continuous improvement. For example, since 2001 Kraft has decreased its global water consumption by 34%, energy use by 25%, carbon dioxide emissions by 30%, and solid waste by 16%.

Operational Excellence - But performance on KPIs is just one indication of how a sustainability strategy is performing. Kraft has also adopted a triple bottom line business sustainability culture and it is beginning to show in their operations, products and performance. For example, in 2007 Kraft Foods adopted anaerobic digester technology at their Lowville, NY facility that processes cheese. The Kraft facility produces whey as a byproduct waste of cheese processing. The waste whey is consumed by bacteria in the anaerobic digester at the Lowville facility and methane gas is produced during the process. The methane gas is then used by Kraft to offset 25-30% of the on-site energy needs. Kraft’s use of anaerobic digester technology not only reduces the amount of waste they have to either process or transport offsite (whey waste), it produces onsite energy to minimize Kraft’s operational expenditure.

Another example at Kraft Foods is their underground storage facility that is built into a reclaimed limestone mine in Springfield, Missouri. The facility is Kraft’s largest refrigerated warehouse and a strategic distribution center for the company. Because the facility is built into a limestone mine that is 30 meters below ground, a constant temperature of 15.5 degrees Celsius is maintained year round. The constant temperature translates into significant energy savings for Kraft Foods. In fact the company estimates that the Springfield warehouse uses 65 percent less energy than comparable above-ground facilities.

Superior Products and Supply Chains - And, as one of the world’s larger food and beverage companies Kraft Foods is using its market size to influence its suppliers while providing the scale necessary to introduce more sustainable products to market. Case in point is Kraft’s commitment to buy coffee beans certified by the Rainforest Alliance, an independent NGO that that works to conserve biodiversity and ensure sustainable livelihoods by transforming land-use practices, business practices and consumer behavior. Kraft Foods is now the world’s biggest buyer of Rainforest Alliance certified coffees. Kraft’s commitment to the Rainforest Alliance and sustainable agriculture practices in coffee communities has not gone unnoticed. In 2007 McDonalds UK decided to switch 100% of their coffee to Kraft Foods Kenco Brand which is Rainforest Alliance certified. The switch by McDonalds happened in part due to changing customer preferences for more sustainable products. The McDonalds decision to purchase Kraft’s coffee opened an entire new account and added market share to Kraft’s coffee line.

Sustainable Packaging - Recognizing that the shipment of its products from manufacturing facilities has an environmental impact in the form of greenhouse gas emissions, namely CO2, Kraft has made efforts to minimize the amount of packaging materials it uses for shipping and it has redesigned some product packaging so that shipping containers weigh less. For example, Kraft has redesigned some salad dressing bottles so that they use less material, resulting in less waste, and a 19% decrease in unit weight, and less fuel required to transport the product to market.

Social Responsibility - Kraft recognizes that the packaging of its products carries a large ecologic footprint; that is why Kraft has also partnered with TerraCycle Inc. on a packaging-reclamation program for “unrecyclable” items in which the packaging is “upcycled” into new consumer products available at retail stores. TerraCycle Inc. “upcycles” Kraft products like used Capri-Sun drink pouch containers, reclaims, cleans and uses them in new products like tote bags. The TerraCycle Inc. and Kraft Foods partnership is raising awareness about sustainability; product reclamation, reuse and recycle; and using Kraft’s scale and TerraCycle’s creativity to divert waste from landfills. Kraft is working with TerraCycle Inc. on creating a broader national network of collection points, often in partnership with local schools. In fact, Kraft donates two cents to participating schools and other groups for every Capri-Sun pouch collected as incentive for working with TerraCycle in this program.

The Most Fit are Sustainable
During a financial crisis it is reasonable and necessary to go into “survival mode”. But what does that really mean? For some companies survival mode means getting rid of unnecessary expenditures, underperforming business units and people, and tightening cost controls. These are necessary in many cases. But survival is also about adaptation and transformation. We know the financial markets are changing, we see a shift in consumer behavior, and also a new era of reform in government and business. The adoption of sustainability principles into a corporate culture may be, for the right corporations, a necessary tool for survival. Kraft Foods demonstrates one large corporation’s decision to “get more fit” through the adoption of sustainability principles and values into its corporate culture, and ultimately into its products. And, as demonstrated in Kraft’s operational efficiency at its facilities or in accessing new markets with more sustainable product options, those that are “sustainability fit” can thrive.


Mark C. Coleman
Senior Associate & World Inc. Case Leader, AHC Group, Inc.
Mark@ahcgroup.com

Want to get real about the future of energy, natural resources and capitalism, go to www.ahcgroup.com and www.worldincbook.com to learn more on how leading companies are reinventing the future of business through social response product development and social response capitalism.

The Peculiar Disorder of Energy and Environment

Across the globe the race has started. Instead of one whose outcome will be judged by who lands on the moon or proliferates nuclear weaponry first, this race is more peaceful, but just as political and significant as our past technological missions. With a burgeoning population of 6.5 billion people and a global economy that seeks to grow, demand for energy, material and natural resources are at an all time high. We are now seeing price signals in the marketplace that tell us that constraints to our growth include the availability, reliability and dependability of energy and natural resources like water. In 2007 the price per barrel of oil exceeded $100 for the first time in history. Reports of global energy demand brought on by growth in China and Asia Pacific indicated energy demand was higher than supply. In addition the political environment of 2001-2008 marked a shift in debate about global climate change and how humans should think about their carbon footprint. While no particular tipping point can be referenced, a sandwich of influences has been made by government, industry, non government organizations (NGOs), trade associations, intergovernmental coalitions and consumers.

The Peculiar Disorder of Energy and Environment
This is a tale of tragedy, coming of age, adventure and love. A century from now the story of energy and environment might just be the great American story. For now it begins like this…Energy and environment don’t get along. They have been at odds with one another since the moment oil came bubbling out of the ground and someone discovered that black gold could produce energy; lots of energy. Energy and environment have quite a peculiar relationship. One might call it a disorder. Like illnesses that don’t go away, even with the right treatment, rest and care; the energy and environment disorder has plagued global politics, domestic environmental policy, and philosophic debate on environmental economics for greater than a century. This debate began to hum in the late 1960s and early 1970s, subsided some in the early 1980s but is again a hot button corporate and government policy issue on the minds of all Americans and President-elect Barack Obama as he positions himself on the world stage.

Three Decades of Regret
I once heard a senior executive for a prominent State Energy Office tell an audience of college students in Upstate New York that when he got into the energy business in the early 1970s he was full of optimism and focus. His intent he said, was “to dedicate a career in transforming how industry, businesses, government and consumers perceive and use energy in the US”. Thirty years later, with a tone of regret and humbled defeat this senior leader issued a word of caution to his audience, “don’t listen to conventional wisdom…seek out answers to the complex energy and environmental challenges of the day…and find ways to work together”.

The career state energy leader noted that his thirty year career began with a desire to develop new energy technologies, reduce energy demand, promote energy efficiency and deploy renewable energy technologies on a broad scale. Reflecting that the amount of renewable generation in the US continues to be marginal, that the fuel economy of vehicles has stayed roughly the same and other trends in how we use electricity to the size of our homes and increasing energy demand, the senior state energy leader admitted that he had wished his career would have had more of an impact.

The story about the state energy leader is a mirror image for many within industry and government over the past 30 years. I occasionally hear similar sentiments from senior managers at large electric utilities, big chemical, oil and automotive companies. In each case their reflection of the past is rich with reasons why not more change has occurred, but one can tell in listening to them, a new urgency to make good on the last five years of their professional careers, or desire to launch new careers in “retirement” that take advantage of new opportunities for advancing alternative and renewable energy.

At Least We Know Our Devil by Name
In December 2008 Bruce Piasecki, president and founder of AHC Group, Inc., and author of World Inc., corresponded with a former Senior Vice President of External Affairs for a well known oil and gas giant. This oil and gas executive was also a past participant in the AHC Group’s leader-to-leader benchmarking exchange known as the Corporate Affiliate Program. After a brief discussion on recent happenings on the economy and politics, Bruce Piasecki and this retired corporate energy leader found themselves reflecting on the Peculiar Disorder of Energy and Environment. Over the past thirty years, and in the context of looking forward toward new energy challenges and opportunities in this time of what seems to be a geo-transformational shift in how we perceive and use energy, the former oil and gas SVP noted:

“Over the past couple of weeks, I have read a number of articles and comments which seemed to have fully described the history of energy/environmental efforts…there seems to be little question that the media and activists are searching for the energy/environmental holy grail and that there have been many false starts over the past 40 years…Each addition to the energy mix brings its own set of problems and attributes…

- Methanol was thought by GW Bush to be the solution, but we learned that the consequences of its use were unacceptable. MTBE had the same consequences.

- Ethanol was to be the great salvation to the environment, farmers and consumers but we now learn that the consequences of its use are far more damaging than originally advertised.

- Solar was to be a major contributor to the energy mix but it is now reported that the cleaning solution used to cleanse the panels (and chips) is worse than the nation’s largest coal fired power plant.

- Boone insists that wind is the real solution but we cannot store its product and the visual pollution (see Palm Springs) is awful, and on occasion, the wind does not blow. Importantly, wind is thought to exist where people do not reside and the transmission facilities that are required to move Boone’s products to market will cost billions.

- GM is promoting its Volt which they contend will travel at least 40 miles before it uses a hydrocarbon. And, it requires several hours to recharge. Good for the power companies that can keep their alternative fuel power plants operating all night.

- The Hybrids are a very good development but their cost precludes most consumers from making the shift.

- Natural gas vehicles are great fleet vehicles, since they can be returned to the company base each night so that they can be refilled.

..All of the above are honest attempts to move the world away from hydrocarbons to another energy source. In the meantime, activists would cause the world to discontinue its search for more oil, gas and coal and to discontinue the use. As the economy improves, we will again need major additions to our power sources, yet opposition to new coal fired facilities continue to mount. And we have difficulty determining how many wind turbines or solar panels that we will need to construct to substitute for one new coal fired plant.

My primary concern is the need to accurately evaluate what level of energy that the world will require for the next 25 or so years and then determine the sources of energy that will provide that requirement. The US has 250 million or more existing vehicles that will not be converted to any other energy source. Likewise, many cities and businesses will need increased power, on a consistent basis. If we are to discontinue our use of the energy sources on which we have relied in the past, what will we use? If we inhibit the search for historic sources, what will be the consequences if the alternatives that are being discussed do not fill the gap? We know that extended periods of time are required to find and bring to market the historic sources. Once we make the decision to block this search, we will have set in motion the imperative development of substitutes that are not proven to be sufficient. And, the consequences of the use of the replacement of what we now use with the yet to be determined substitute(s), could prove more harmful than the devil that we know."

The former oil and gas SVP’s comments mirror those of the senior state energy official I began with. We are no closer today, than we were thirty years ago, to settling this Peculiar Disorder of Energy and Environment. The oil and gas SVP also artfully points out, that today we know our devil.

Our devil is destructive, powerful and potentially chaotic. But our devil is known. A knee jerk reaction to financial markets and to the ongoing Peculiar Disorder of Energy and Environment by way of an energy strategy that is not fully thought through, may result in us having a new devil, one more deceitful, damaging and devious that the devil we’ve grown up with. As the oil and gas SVP stated, “…we need to accurately evaluate what level of energy that the world will require for the next 25 or so years and then determine the sources of energy that will provide that requirement”. You sense from this past senior leader for a major energy company the tragedy involved with energy and environment.

The world’s population is growing; energy demand is growing; demand for consumer electronics, better healthcare, better transportation and entertainment are all growing. The world’s population will be demanding more energy in the next 25 years, and as the retired oil and gas SVP points out, there are clear limitations to many of our alternative and renewable energy resources. It is not that the limitations cannot be overcome in 25 years. They can with balanced research, technology development and innovation across all segments of the energy value stream. But new devils lurk behind the promise of renewable energy. While we may treat one environmental challenge (e.g., air quality and carbon emissions) we may be creating a generation of new issues (e.g., water contamination, increased hazardous waste stockpiling, land degradation or unknown human health and safety impacts via the use of uncharacterized chemicals).

Did Our Devil Sell Us Fool’s Gold?
So, has our devil been selling us fool’s gold for all these years? Amidst all of the coming to age debates on energy and environment it seems something has changed, at least in developed countries. Price signals in 2007 triggered a global decrease in demand for petroleum fuel. Conservation and energy efficiency are becoming sexy, yet again. A proliferation in new technology based energy companies is trying to stay alive in a rising sea of financial turmoil. And government is putting money where its mouth is on renewable energy and infrastructure.

In 25 years from now it will be interesting to see if the Peculiar Disorder of Energy and Environment has resolved itself, or if the intelligent questions raised in 1970, 1980, 1990 and today are the same we ask ourselves then. Where do we get our energy from? How do we fill the energy demand and supply gap? Is clean energy and a cleaner environment an oxymoron or can we employ cleaner production methods toward new energy manufacturing to eliminate unforeseeable impacts to human health and environment? Let us hope that our devil is not replaced by a more evil and deceptive being.

Mark C. Coleman
Senior Associate & World Inc. Case Leader, AHC Group, Inc.

Mark@ahcgroup.com

Want to get real about the future of energy, natural resources and capitalism, go to www.ahcgroup.com and www.worldincbook.com to learn more on how leading companies are reinventing the future of business through social response product development and social response capitalism.

Building a Foundation for a Stronger Company: Hope, Unity and Purpose

Hope, Unity and Purpose. On January 20th 2009 Barack Obama was sworn into office as the 44th President of the United States speeking these articulate and carefully chosen words to millions of Americans as he defined this pivotal and transformational time in history. In listening to President Obama’s Inaugural Address, and watching the reaction from those that were at the Inauguration, one could only feel a sense of hope, unity and purpose.

The feeling and positive force of change could be felt, like strong and warm spring breezes overshadowing a long winter and sprouting new life. In a speech that was as eloquent as something Lincoln might have delivered, President Obama stated, “On this day, we gather because we have chosen hope over fear, unity of purpose over conflict and discord.”

President Obama went on to state, “For everywhere we look, there is work to be done. The state of the economy calls for action, bold and swift, and we will act — not only to create new jobs, but to lay a new foundation for growth. We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together. We will restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost. We will harness the sun and the winds and the soil to fuel our cars and run our factories. And we will transform our schools and colleges and universities to meet the demands of a new age. All this we can do. All this we will do…Our challenges may be new. The instruments with which we meet them may be new. But those values upon which our success depends — hard work and honesty, courage and fair play, tolerance and curiosity, loyalty and patriotism — these things are old. These things are true. They have been the quiet force of progress throughout our history. What is demanded then is a return to these truths. What is required of us now is a new era of responsibility — a recognition, on the part of every American, that we have duties to ourselves, our nation, and the world, duties that we do not grudgingly accept but rather seize gladly, firm in the knowledge that there is nothing so satisfying to the spirit, so defining of our character, than giving our all to a difficult task.”

The praise and hope President Obama delivered reminded me that we area as a nation and we as a global society are now choosing a new path of prosperity and purpose, one that is rooted in individual responsibility, strong values, and a new foundation for growth that is built upon fair play, tolerance and courage. This is truly an exciting and proud time to be an American, and a global citizen ready for the spring blossoms.

As Corporate Citizens this holds equally true as well. For example, on January 27th-29th 2009 the AHC Group will be hosting more than 60 corporate leaders in Phoenix, Arizona to communicate their sense of hope, unity and purpose in 2009 and beyond. The AHC Group’s January 28th and 29th Corporate Affiliate Workshop agenda features leaders including MASCO, Suncor Energy, DTE Energy, Sterling Planet, StrategGen, SHARP, International Paper, CH2M Hill, ARCADIS, Baxter, Shaw Industries, Agrium, Bayer, Nexen, Aerojet, ESS, Deloitte, OwensCorning and more than forty more corporate leaders that are assembling, amid this time of change and financial constraint, to continue down a path of corporate responsibility. Each of these participants have chosen hope over fear in this challenging financial time. And, each of these companies stand to gain new ground through new sustainable growth as they continue to dialog, benchmark and learn from other leaders through expertly facilitated workshops like those managed by the AHC Group.

One of the great benefits of the AHC Group leader-to-leader workshop format is the ability for participants to learn from those that have managed large businesses through all types of challenges. An example is Dwight Bedsole, an AHC Group Senior Associate and former Director of Corporate Remediation for DuPont whose career there spanned 39 years. Reflecting on his past experience and thinking about the potential of corporate sustainability efforts, Dwight Bedsole recently noted,

“Sustainability has been around for a number of years now and is about where environmental compliance was 5 - 10 years ago…Meaning that 5-10 years ago there were companies that were stuck at environmental compliance and didn't see the value in going beyond, while a large segment of the industry clearly saw the competitive advantage of going beyond compliance. Today, going beyond is required table stakes and companies that don't realize it will not survive. So in the world of Sustainability you have the same transition taking place…there are companies that have gone beyond understanding the terminology and are making things happen and deriving shareholder value from the effort. Then there are others that complain that they don't understand the definition, etc. and are clearly not there yet. Companies that are there [Sustainability Strategy in Place] want to know what their competition is doing. Meaning, they want to benchmark their program initiatives, organizational and business strategy, and performance with similar sized companies, in similar industries and with a similar customer base. They clearly see Sustainability as competitive advantage. For this group they have heard the many stories about energy reduction, recycle, etc. and do not need to be sold on the concept and told how to organize their business units or internal teams. Rather, they want to know what competition is doing...and how they can position and differentiate themselves from their competition to yield greater terrain, reputation, moral and product advantage”

Dwight Bedsole, Senior Associate, AHC Group, Inc.
former Director Corporate Remediation, DuPont

Dwight Bedsole summed up the competitive context and transition most companies have experienced in the past decade and more. From an AHC Group perspective we have seen market leaders evolve not just from superior products and services, but from understanding what their competition is doing, and how that fits into the context of their individual compliance and beyond compliance initiatives. Further, we have seen, for some of the most advanced companies, new growth emerge from what Dwight Bedsole calls “Sustainability as Competitive Advantage”.

Sustainability as competitive advantage is not new, as Dwight Bedsole noted. However, many corporations continue to falter in defining and communicating what sustainability means to their customers, operations, employees, products and shareholders. We are seeing, across numerous industries and corporate organization structures, a need to identify opportunities to save energy, deploy renewable energy, modernize facilities and upgrade infrastructure. We are, simultaneously identifying a need to create corporate sustainability strategy that can tie operational, governance and risk reduction strategies together to deliver performance toward the corporate bottom line while reducing the corporate footprint.

Many companies like SHARP, GE, Whirlpool, OwensCorning and Shaw Industries are developing “eco and green” products that enable customers to achieve their goals toward sustainability and individual responsibility to reduce their footprint on the earth. Due consideration and advances in corporate responsibility toward the supply chain are now being developed by some of the world’s largest firms. These forward thinking companies are acting upon their strong values to help reduce their customers’ footprint. The difficult tasks of purposeful growth, holding true to values and acting on individual responsibility are not just powerful themes spoken at inaugural addresses. They are the foundation by which a new economy is being formed, one that is more robust and transparent that its predecessor; and one that is responsive to the needs of a global society.

Hope, Unity and Purpose. These are the foundational words that the future generations of corporate leaders are using to build better people, better products, better brands and better businesses in a changing world. We commend those leaders that have acted on their personal and corporate responsibility and chose to participate in the AHC Group’s January 27th-29th “Achieving Results” workshops. These select leaders are continuing to strive toward excellence as they navigate an economy and government in transition. Yours in thanks and spirited enthusiasm for the future!

Mark C. Coleman
Senior Associate & World Inc. Case Leader, AHC Group, Inc.
Mark@ahcgroup.com

Want to get real about the future of energy, natural resources and capitalism, go to www.ahcgroup.com and www.worldincbook.com to learn more on how leading companies are reinventing the future of business through social response product development and social response capitalism.

Corporations & Consultants: Together We Are Creating a Culture of Conscious Capitalism

Like a Rainforest that is rich with life, the evolving green economy is full of hope and promise for renewed economic growth and prosperity. However, like a Rainforest, this new economy needs nourishment and space to grow. Finding one’s way through the dense foliage of the Rainforest can be achieved with the spirited gusto of a pioneer; or as many smart explores will employ, with the skillful guidance of an experienced scout.

Consulting organizations are creating change among some of the world’s largest corporations and governments. With business knowledge and market intelligence gathered from dashboards that span multiple sectors, technologies and insight on leading corporate organizational strategies, consultants are helping large enterprises make sense of the evolving green economy.

There is a certain curiosity or fascination among consultants, part of their inherent alertness and awareness to the world. A skill that is honed over time, the best consultants become highly conscious to their habitat (and the habitats of others, like those of corporate and government mansions) as they begin to translate their listening and observation skills into powers of perception, perhaps even prediction.

These skills are a valued commodity in corporate America; especially for those companies navigating their path toward “conscious capitalism” or “social response capitalism”. Social response capitalism is and evolving advanced form of capitalism by which many corporations are scouting their route to a new island of riches through a telescoping lens that includes corporate governance, social responsibility, environment excellence and product innovation as the pillars of financial growth in light of shifting consumer expectation.

There is no existing road, rail line or shipping lane toward social response capitalism. The path is being blazed by companies new and old, domestic and global, small and large, in an attempt to transition toward a stronger and more dynamic economy. Companies including GE, Wal-Mart, Suncor Energy, Green Mountain Coffee Roasters, Boeing, Coca-Cola, IBM, Intel, Baxter and Toyota are each scouting new paths in a dense rainforest of opportunity toward social response capitalism. And, with little light guiding their way along the forest floor of the new rainforest they find themselves in, many companies seek out the council and advisement of leading business strategists and innovators that have experience navigating new trails, cautiously and expeditiously.

As 2009 advances, ask yourself if your company is walking blindly toward its future or charting its course with the help of an adept scout that understands all of the emerging opportunities and risks associated with social response capitalism. The best habitat for some of the best consultants is often in the thicket of uncertainty, searching for an optimal opening to make sense of their surroundings. Another way of summing up the Best Habitat for Consultants is equating it as the levels of a Rainforest:

1. Forest Floor - scouring for food is never easy, but the adept consultant knows that the forest floor is often where best ideas are left behind, overlooked and sometimes altogether forgotten.

2. The Understory - this is the area where emerging breakthrough ideas and concepts emerge. They struggle and compete for attention and life, but the adept consultant can provide nourishment to the right Understory elements to add life. Success grows from passion and compassion in the competitive understory. Success requires continual open probing and articulate research…That reaches for the sun of good and useful findings.

3. The Canopy - here the consultant thrives by having direct access to seeing organizations for their full potential - with access to senior visionary leaders and knowledge of best practices that sustain the organizations Canopy.

4. The Emergent Layer - this is where the consultant's antenna is at full mast and the telescoping lens reaching far and wide. The consultant is best atop the emergent layer, but only after understanding how the forest floor supports the Understory and how the Understory brings new life to sustain the type of vision seen at the Emergent Layer level.

Consultants also thrive when their habitats are:

1. Dynamic - ever changing.

2. Rich with growth potential - it's up to the consultant.

3. Multi-dimensional - there is more than meets the eye.

4. Purposeful - both in monetary promise and with regard to the potential to influence change, otherwise we're wasting time.

5. Friendly - the habitat should be open to mistakes, change and understanding of risk, a non caring habitat does not nurture growth.

As your company studies and ultimately enters the “green economy” rainforest at the forest floor level where it is dark, mysterious and overwhelming in its stature and appearance; consider tapping into one of the numerous consultants that call themselves “conscious capitalists” which can help you navigate your way toward the canopy and emergent layer toward top line business growth. Through sound market diagnostics, insightful organizational knowledge and unique perspective and experience, consultants can serve your organization as skillful scouts and adept advisors, to help your firm position for growth in the green economy.

Mark C. Coleman
Senior Associate & World Inc. Case Leader, AHC Group, Inc.
Mark@ahcgroup.com

Want to get real about the future of energy, natural resources and capitalism, go to www.ahcgroup.com and www.worldincbook.com to learn more on how leading companies are reinventing the future of business through social response product development and social response capitalism.

How to Position and Propel the Corporation Beyond "Random Acts of Greenness"

Developing an Enterprise-Wide Sustainability Strategy through Internal and External Alignment of Corporate Goals is Essential to the Long-Term Performance and Success of Your “Going Green” Efforts

Happy New Year, and welcome to 2009! Green is great, but if it is not aligned within an enterprise wide strategy, green is just a random act. Taking “random acts of greenness” and building enterprise sustainability strategy is not a trivial matter. It requires commitment and alignment from all levels of the corporation.

The year 2008 has left a huge wake on all facets of the economy and in every industrial sector. The housing, credit and financial markets have dramatically impacted many of the corporations. In late 2008 and now into 2009, companies are continuing to cut costs amid financial worries and uncertainties in the marketplace. While the financial crisis continues to impact most corporations, there is still a need to push forward through these trying economic periods. And often, new growth and opportunity is uncovered during times of constraint.

In trying economic times it becomes a priority to optimize efficiency, reduce unnecessary expenditures, and cut non-critical programs. Challenging times are also a time to rebuild strength in operations, brand, products and personnel. There is no doubt that industry is on the cusp of a profound transformation. The “go green” movement of 2008 is continuing to advance into 2009, and President-elect Obama has outlined his key priorities for economic recovery and growth which include, among other initiatives, increasing renewable energy production and rebuilding the nation's highway and education infrastructure.

Market indicators and signals continue to show that consumers are seeking “more green” products and services, albeit at competitive prices and continued high quality and service. Existing and emerging policy and regulatory indicators show that government is advancing clean technologies, renewable energy, and also focusing on “going green” through its own operations and practices. From a corporate perspective we see many companies taking the time to slow-up amid all of these new initiatives to define what “green” and “sustainable” means to them in the context of business strategy and growth. For many companies “going green” remains synonymous with corporate communications and branding.

Communicating corporate sustainability efforts is essential (see December 8, 2008 blog on “Communicating Your Corporate Sustainability Story”) however it needs to be grounded to measureable initiatives that are centered on an enterprise-wide corporate strategy to have the greatest impact on financial performance, and recognition as legitimate claims from the external world. Too often corporations are “going green” so quickly that they don’t fully define their goals and objectives, leading to “random acts of greenness”. These random acts get attention, and sometimes make great headlines and sound bites, but ultimately they are short lived exposure that doesn’t build better brands, stronger reputation or long-term shareholder value. And, in a worse case scenario, random acts of greenness backfire on the corporation as the external world sees through the glitter and buzz only to find a shell of substance and true commitment toward “going green” or business sustainability.

Here are seven questions to ask, and to inform and enhance your organization’s sustainability efforts in the New Year:

1. Do You Have Reactive or Proactive Strategy Development?: Would your characterize your firm’s corporate sustainability efforts as “Random Acts of Greenness?”, superficial “go green” activities caught-up or trapped in the moment, or in reaction to the severity of market conditions, but also not tied to any type of corporate strategy to yield long-term value, reputational enhancement or shareholder value? Proactive strategy development that involves senior leaders and those in charge of profit and loss of business units and line operators is required for moving beyond Random Acts of Greenness toward a comprehensive and unified sustainability strategy. The simultaneous top-down and bottom-up approach yields internal buy-in, elevation of bright ideas, and often uncovers inefficiencies.

2. Does Your Firm Exemplify Strategic Alignment or Turf Warfare?: Who owns sustainability in your firm? Is that an issue? Turf battles over new growth initiatives often emerge and can be the detriment of a well orchestrated strategy. The reality is sustainability is a goal, objective, future state, a journey and a business principle. It is not something that should lend itself to turf disputes within the corporation. Ask yourself; Has your firm established corporate sustainability principles, values and goals? Are your sustainability principles, values and goals communicated and understood at all enterprise levels of the firm? What are the internal and external integration challenges and issues associated with your sustainability principles, values and goals?

3. Do You Have Performance Measurement or Data Collection Jitters?: Are there existing tools to monitor sustainability performance, track performance and report out through the use of corporate sustainability metrics?

4. Are Your Green Efforts Focused on Telling a Story or Storytelling?: No enterprise strategy for sustainable business growth is going to be 100% on the mark right out of the gate. It will require proper conditioning, support from senior management, line operators, suppliers and vendors and customers. Temper the urge to appeal to all stakeholders through storytelling as they will ultimately see through the fiction from the non-fiction. Instead focus on building the story, its characters, its theme and storyline, and then acting it out across time. This will result in the ability to tell your story versus the perception that you are only storytelling via green washing or random acts of greenness. Ask yourself; Has an individual person or team of individuals been established to conduct performance monitoring, tracking and reporting across all facets of the organization? What efforts are used to communicate performance? What tools and processes are in place to ensure continuous improvement occurs over time?

5. Are You Undergoing a Cultural Transformation or in Denial?: Taking on new business principles and values cannot exist superficially. It has to transcend the corporate culture and day-to-day corporate behavior of all employees. As yourself; Has your firm established a mechanism (e.g., use of performance metrics, business unit performance goals, establishment of an executive or operating unit guiding coalition/council, or other means) to facilitate a cultural and operational integration of sustainability principles, values and goals? What can you do to facilitate cultural integration of sustainability principles, values and goals?

6. Is Your Firm Navigating a Course of Action or Afraid to Explore Unchartered Territory?: Any new journey can be overwhelming. And, achieving business sustainability is a journey. Spending the time and necessary resources to properly plan for your journey will enable a safer, perhaps less risky, and more enjoyable experience. Ask yourself; has your firm mapped out its journey with key strategic goals, tactical objectives, and achievable milestones across time? How is this roadmap diffused throughout the organization? Do all essential employees know their role in the journey? Is the roadmap oriented and aligned toward other business goals, or are they divergent?

7. Do You Benefit From Competitive Posturing or Still in the Dark?: Experience tells us that the smartest and most effective companies know the playing field. They benchmark with their peers and accept humility when they are not the leader and pride when they demonstrate strength. This ebb-and-flow of business performance and benchmarking is critical to building a strong sustainability initiative within your firm. Don’t catch yourself in the dark when it comes to what others are doing on business sustainability. Seek out opportunities to learn from other leaders. And don’t be afraid to fully engage as a participate in corporate sustainability benchmarking sessions. What you will find is a room of collegial peers that are experiencing the same thing as you; but also a support group and network that can convey incredible business insight and experience to provide insight to shape the design or improve the execution of, your corporate sustainability strategy. Ask yourself; Has your firm benchmarked your enterprise sustainability strategy with corporate peers to understand what they are doing, how they are doing it, and the value they derive from their efforts?

So, in this New Year take the time to think through your business growth efforts in the context of sustainability and create a strategy, a long-term plan, for instituting green growth initiatives across your enterprise in a tempered and deliberate way. As you do so, begin to communicate internally to foster commitment, support and recognition. Also communicate externally to demonstrate how your efforts are leading to a stronger company whose sustainability efforts will yield consequential business results toward your corporate goals.

Mark C. Coleman
Senior Associate & World Inc. Case Leader, AHC Group, Inc.
Mark@ahcgroup.com

Want to get real about the future of energy, natural resources and capitalism, go to www.ahcgroup.com and www.worldincbook.com to learn more on how leading companies are reinventing the future of business through social response product development and social response capitalism.

Tennessee Gets Something Worse than Coal in Stocking for Christmas

The State of Tennessee Got an Unwanted Stocking Stuffer for Christmas: Mercury, Arsenic and Benzene…following a coal ash sludge spill. The land area impacted by the Tennessee Valley Authority (TVA) coal generation energy facility accident is larger than 1989 Exxon Valdez Oil Spill. Tom Kilgore, CEO of the TVA, the largest public power company in the country and responsible party for the sludge spill, vowed, “This is not a time where TVA holds its head high...But we won't hang our head, either, because that won't get the job done. I'm here to tell you that we will clean it up, and we will clean it up right.”

In this New Year, Let’s Make a Resolution to Stop Doing Stupid Things.
A retaining wall, holding back 80 acres of sludge broke in Tennessee this week spilling one billion gallons over 400 acres, a land area larger than the size of the 1989 Exxon Valdez oil spill. The sludge was a by-product of ash generated from coal combustion at a Tennessee Valley Authority (TVA) power generation facility in Kingston, TN. In some areas of the spill the sludge was more than four-to-six feet deep; and the amount of sludge spilled equates to more than 800 Olympic sized swimming pools.

The full extent of the TVA waste spill including the economic, ecologic and human health impacts is being evaluated. Because fly ash contains concentrated amounts of mercury, arsenic and benzene, it could have long-term ecologic and human health impacts to the surrounding region. And, the environmental containment and cleanup costs of the TVA spill will be enormous.

Tennessee must have been really bad this year to get such a rotten end-of-year gift. It’s worse than getting coal in your stocking. At least Tennessee could have burned the coal. Now they have a mega-contaminated site on their hands going into 2009 and likely requiring site remediation work for a decade if not longer. A root cause analysis of what caused the TVA event will be interesting. Will TVA and government officials identify a slurry of poor waste containment and maintenance decisions? In 2003 and 2006 the TVA’s Kingston site experienced smaller failures in the dike system, at different location than where the retaining wall most recently failed, but repaired them at that time. But still, was 80 acres of sludge to much for that site location? Why so much? Was the retaining wall designed to hold back that much volume and weight? Were the surrounding residents aware of the volume and composition of waste being retained in their backyard? Or will investigators find that an aging infrastructure and natural causes as the two pronged culprit? Much of TVA’s facilities were built in the 1950s and prior.

There is plenty of time for potential blame, however, that game is ultimately futile and wasteful. The situation in Tennessee is a microcosm of the US at large; and one that readily needs focused attention and action. Our infrastructure is aging. We have an enormous environmental waste challenge. We have an enormous energy challenge. These challenges are not mutually exclusive of one another. Instead, they are integrated in how we produce and use energy, how highly dependent our economy is on fossil fuels, and the waste and environmental damages associated with a fossil fuel based energy infrastructure. Even in the absence of the Tennessee coal sludge spill…the TVA (and Tennessee) still had an enormous one billion gallon waste issue on its hands.

No one deserves anything worse than coal for the holiday, particularly an environmental contamination that can potentially have long-term impacts on water, ecology and economy of the 400 acre Kingston, TN site. There are plenty of Superfund and other environmentally contaminated sites across the US that need to be characterized, remedied and cleaned-up. Accidents and unintended consequences of doing business occur all the time; and often we have risk mitigation plans in place for those. But often we see unfortunate events like the TVA and Exxon Valdez spills occur that can be prevented. In 2009 let us make a commitment to reduce the risk of future environmental accidents from occurring and spend time revitalizing our economy by focusing on the health, resilience and vitality of US infrastructure.

Mark C. Coleman
Senior Associate & World Inc. Case Leader, AHC Group, Inc.
Mark@ahcgroup.com

Want to get real about the future of energy, natural resources and capitalism, go to www.ahcgroup.com and www.worldincbook.com to learn more on how leading companies are reinventing the future of business through social response product development and social response capitalism.

The Carbon Game: Regulatory Roulette?

Not all games of chance are created equal. In a carbon constrained world the Carbon Game is increasingly complex and potentially to a fault. The time to influence the design of the game is now. Some questions to ask are “Will the House Win? Who’s the House? And How Much Do You Bet?”

Today the European Union’s 27 members reached a compromise deal to reduce carbon emissions 20% by 2020. The compromise lays out a plan for achieving the 20% reduction, but also remains quite contentious. The costs to industry, unfair burden placed on certain sectors of the economy, and the true ability to achieve environmental goals without adversely affecting economic growth are some of the ongoing debates in the European Union. Also today, it is being reported that the state of California has set an aggressive greenhouse gas emissions plan set forth by the California Air Resources Board (CARB). The new law in California will mandate that the state reduce emissions to 1990 levels by 2020. The law includes measures to create a carbon-credit market and to bring new renewable energy generation on-line.

The EU and CA are two examples of where the regulatory market is heading in the New Year. Like many casinos, the house always wins. In this case the “house” is the planet. The gamblers are corporations. The “pit manager” is the new carbon markets, like the Chicago Climate Exchange or the Regional Greenhouse Gas Initiative (RGGI) which is the first mandatory, market-based effort in the US to reduce greenhouse gas emissions. Through RGGI, ten Northeastern and Mid-Atlantic states will cap and then reduce CO2 emissions from the power sector 10% by 2018. RGGI is enabling regional CO2 auctions, watching the “casino floor”. And, no casino is ready for operation without governing rules and regulations, e.g., states like CA or the EU.

I purposefully use the metaphor of “Regulatory Roulette” - a gamble and game of chance, associated with carbon trading and the emerging carbon game. The current state of the carbon game is very confusing however. It is as if dozens of games, with the same general purpose, have been created. Each game has similar rules, but different strategies can be used to “win” the game. And winning the game is relative because you put your winnings into keeping the game going. It’s like being addicted to gambling when what you really need is direct intervention and to be put on a path to recovery. So, to the extent that the carbon game is only about trading and making money, it is futile and ultimately will run its course. However, to the extent the carbon game is much more complex, and involves strategies that change the course of the game over time (for example California is focusing on demand and supply side measures – focusing on enhancing energy efficiency and conservation while simultaneously incentivizing more renewable generation and implementing a low-carbon fuel standard) then the carbon game can become much more lasting and perhaps worth the gamble.

Like a roulette wheel the carbon game is currently seemingly a game of chance for many companies. If the ball drops into number 21 we win! Right now companies have to play a game of roulette within the rules that are being tightly bound together by pit managers and governing boards. And that is logical, and it works. But for the carbon game to result in a big win for the house “the planet”, the game has to evolve from a game of chance, to one that more rooted in strategy that is tied to the success and reward of the players involved. Gambling for the sake of gambling for a decade or two – to see where the ball will land is a game of chance. Gambling knowing where the ball will eventually land is creating your own destiny. It is not that the existing efforts to create carbon markets are futile, it is that we are putting perhaps to much emphasis on trading schemes that keep players playing, but don’t necessarily lead to a win for the house.

Mark C. Coleman
Senior Associate & World Inc. Case Leader, AHC Group, Inc.
Mark@ahcgroup.com

Want to get real about the future of energy, natural resources and capitalism, go to www.ahcgroup.com and www.worldincbook.com to learn more on how leading companies are reinventing the future of business through social response product development and social response capitalism.

What Lies Beneath…The Financial Crisis?

A legacy of environmental liabilities, buried beneath a century of mechanization and economic prosperity, pose considerable human health and environmental risk to the current and future generation. Shortsighted financial bailouts could potentially lead to unintended consequences for millions of taxpayers today and into the future, not to mention continued and in some cases unknown impacts on our natural resources. Economic stimulus and environmental stimulus should be synonymous with one another as the new administration takes office and begins their journey toward a stronger America.

The vote was 237 to 170. Yesterday, the US House of Representative passed an auto bailout plan that will provide $14 billion to keep GM and Chrysler from going into bankruptcy, at least for now. Many policy makers and politicians talk of an auto industry restructuring as the best solution, and an immediate infusion of cash is only prolonging ultimate collapse. I begin this blog with the auto bailout not because it is timely news, but because the auto industry, the big 3, and their network of thousands of suppliers, is one of the oldest industries in America. The auto industry has, next to big oil and chemical (which have enabled the 20th and 21st century growth of the auto industry), a legacy of environmental liabilities that lay beneath the corporate mansions that have brought us an industrialized world through mechanization, modern machines and assembly lines.

A Tale of Three Knights
The auto industry was front and center in the industrial revolution of the past century, enabling economic prosperity, job growth and resulting in numerous societal benefits as a result. We can not argue that the industrial revolution and its triage of knights, auto, oil and chemical, have not led to some incredible quality of life advancements across the past 100 years. In fact these industries have seeded new advancements in materials science, chemistry, environmental science, energy storage and propulsion technologies and even health sciences. But a century of growth and advancement has not come without a social and environmental cost either.

Environmental liabilities in the form of Brownfield’s, hazardous waste sites, chemical spills, landfills, or contaminated earth with uncharacterized chemicals and materials are the post-industrialization scars that remain to be healed. In some cases environmental liabilities were created deliberately, illegally and many of those companies and the individuals that created those ills, have been prosecuted, fined and sent to prison. In other cases (and in most cases), environmental damages were the result of our modern machines and industrialized culture, growing at a fast clip, and in the absence of corporate-and-government policies and rules that establish requirements on pollution. In addition, advancements in science and technology and greater understanding of the transport and impact of chemicals in the environment and on human health has influenced an entire generation of environmental scientists and new rulemaking on what level of chemical accumulation in our land, water and air is acceptable for human and ecologic health. These advancements, for example, now let us measure chemical attenuation at very low levels, over time, and at specific sites to determine if remediation technologies are having an impact on cleaning up the soil.

The three knights, auto, oil and chemical, have been cleaning up their environmental liabilities through rigorous corporate site remediation programs for decades. And, our knights have made incredible progress. We now have a cleaner and less polluted earth due to the combined efforts of hundreds of multinational and domestic corporations that diligently characterize environmental contamination at their facilities, develop site cleanup plans, and engage with numerous stakeholders from the communities in which they operate, government, academia and environmental engineering to cleanup, redevelop and improve contaminated properties.

But with all the progress industry has made, there remains much more to do. There are thousands of sites on the national Superfund registry and thousands more that need to be assessed, characterized and put on a path of remediation. And, there are still sites being discovered. Take for example the early 2008 discovery of a WWII munitions site in Florida that left a Florida neighborhood wondering how their homes were ever built there. Or the 2007 discovery that vapor intrusion was affecting a Victor, NY neighborhood and trichloroethane and trichloroethene being the prominent chemicals involved. By the way, the US government, through research conducted by the Department of Energy, Department of Defense and NASA has, like industry, created enormous environmental liabilities that are in the process of being cleaned up or are, in some cases, awaiting action. What lies beneath government land is just as ugly, if not uglier than what lies beneath land owned by some of the world’s most prominent brand names.

For many domestic and multinational corporations the number one exposure they have with regard to financial risk is their environmental liabilities and legacy. Automotive, oil and gas, chemical electric utility, railroad, and other industrial machining and manufacturing companies are highly at risk to potential erosion of shareholder value or even their ability to obtain credit due to their environmental liability profile.

Now, many firms don’t want you to know that, and I suppose one cannot blame them, particularly during a time of financial uncertainty like we are in now. So, no corporate names will be mentioned here. However, if you look at the 10-K SEC filings for 30 companies and build into that analysis a cross section of auto, chemical, oil and gas, electric utilities and other manufacturers you will discover that the environmental reserves for these 30 companies total more than $8 billion. And, on average, these 30 companies spend in excess of $1.5 billion per year to manage their environmental liabilities. It is not uncommon for individual companies comprising the three knights, auto, oil and chemical to spend in excess of $200 or $300 million per year on environmental liabilities and have an environmental reserve exceeding $1 billion. According to USEPA’s 2008 Superfund National Accomplishments Summary “EPA secured private party commitments of nearly $1.9 billion in Fiscal Year 2008 to fund cleanup work. Of this amount, potentially responsible parties agreed to conduct $1.575 billion in future response work, and to reimburse EPA for $232 million in past costs.” Site remediation is big business, and it is growing. In addition, existing and new accounting rules from the Financial Accounting Standards Board (FASB) and the U.S. Securities and Exchange Commission (SEC) now require publicly traded companies to disclose their environmental liabilities and estimating the financial costs for those liabilities by what is estimable and probable. As if companies don’t have enough to think about during a financial crisis, management of environmental liabilities, accounting for those liabilities and ensuring there is money to pay for the cleanup of those liabilities is a business enterprise unto itself. So much so that some oil and chemical companies have spun off entirely separate businesses that are billion dollar enterprises that cleanup their environmental contamination.

Healing our Wounds: Stop Doing Stupid Things on Purpose
So, let’s revisit the auto bailout for a moment. In this time of credit and financial crisis, corporate America is hurting. Product is not being sold, jobs are being cut, and some companies are near collapse which could result in a cascading affect on their suppliers and throughout the economy. It is logical that jobs and economic prosperity is the #1 issue among the new administration, policy makers and most Americans. However, let’s not forget what lies beneath the surface of this financial turmoil. A century of environmental scars pose considerable human health and environmental risk to the current and future generation. If our industrial leaders that brought us jobs, economic prosperity and quality of life go under; who pays for their legacy buried beneath our feet?

For better or for worse, we are intrinsically linked to these companies more that we think. It is actually in our best interest to see them revive and survive this financial crisis, reinvent themselves, and continue to cleanup their environmental liabilities. Otherwise hundreds if not thousands of remediation sites, representing billions of dollars will fall into the fiscal responsibility of government and ultimately, taxpayers. So do we pay now, or do we pay later?

This brings me to my final thought on this December morning. As the new administration takes office this January I encourage them and others that influence politics and governing, to make economic stimulus and environmental stimulus one in the same. We can no longer afford to be shortsighted when it comes to creating jobs and economic growth. As one corporate remediation leader once put it to me, “…we [industry and government] need to stop doing stupid things on purpose”. As a society we know too much. We have right the skills, technology and I believe political will to create a better world that ties economic growth with environmental concerns. We must now leverage this financial crisis as an opportunity to avoid unintended consequences, by encouraging economic stimulus that incorporates clean technologies, incentives for environmental restoration and remediation, Brownfield redevelopment and the construction and redevelopment of critical infrastructure that both improves the environment and improves human health and economic prosperity.

So as we weigh economic stimulus packages, like the auto bailout, with jobs and “business as usual” let us also weigh in “what lies beneath” within the context of those decisions. We have to stop doing stupid things on purpose. Let us consider the following options for moving economic stimulus and environmental stimulus plans forward simultaneously:

Greater advocacy for corporate site remediation is needed at all levels of government and within our communities. More awareness to the different and common challenges faced by industry is needed at all levels of government if we are to truly move beyond blame and toward a more economically vibrant and environmentally sound America. In many ways industry needs to come together toward this cause, and make their unique and common needs known. The complexity of site remediation and managing environmental liabilities is known by just a select few. But the impact environmental liabilities have on our urban landscape, the health of our children and environment, affects millions. Industry and government much work together to share ideas on how they remove institutional barriers to cleaning up contaminated properties and develop new models for working together.

More education and research and development for environmental engineering and site remediation will be needed to help America cleanup and rebuild a modern and more vibrant industrial infrastructure. Technology can take us only so far. In recent years the amount of emphasis on environmental engineering programs with a focus on remediation technology innovations has waned. Corporations have made investments in new remedial technologies and educating future practitioners of environmental remediation, however their investment has been constrained. There is a need for more government investment in R&D and remedial remedies to enable government and industry to collaborate on the cleanup of contaminated properties more effectively and efficiently. Working together, industry and government can educate the workforce of the future, deploy a green collar workforce and rebuild a new industrial complex that is cleaner and more efficient than what we are working with today.

The inclusion of sustainability principles into government and corporate efforts to clean up contaminated properties, and in the design of new infrastructure, facilities and products will be required for creating a stronger America. We cannot address contaminated properties without forethought toward why they were created in the first place. We can minimize, or completely eliminate, the creation of future contaminated properties by incorporating elements of sustainable design, operation and use into our modern industrial complex. This is needed in all facets of government and industry. To get us there any future infrastructure and economic stimulus packages need to fully consider the environmental implications of those packages, today and into the future.

The scars of our industrial past can be healed. Poking and prodding these scars for decades on end only leaves wounds unhealed. A holistic approach toward tying economic and environmental stimulus together can be an option for economic growth and environmental protection that reduces the risk of unintended consequences and maximize the hope and promise that is cresting upon America in the form of a new administration.

Mark C. Coleman
Senior Associate & World Inc. Case Leader, AHC Group, Inc.
Mark@ahcgroup.com

Want to get real about the future of energy, natural resources and capitalism, go to www.ahcgroup.com and www.worldincbook.com to learn more on how leading companies are reinventing the future of business through social response product development and social response capitalism.