Reinventing the economy to be more in harmony with nature, in this generation, is one of our greatest challenges. Fortunately, we are experiencing a sustainability revolution, according to Gil Friend, a leading business consultant on sustainability strategies. For over twenty years, Friend has been working closely with major companies including Coca Cola, eBay, Green Mountain Coffee Roasters, Hewlett Packard, Levi Strauss & Co, Nike, Odwalla, Pacific Gas & Electric, and Raytheon. Here's what I learned from Friend during a recent interview.
Doing the right thing ecologically can also increase profit, build brand, and reduce risk. The assumption that "This good stuff costs money" is disproven daily by data of companies from Odwalla to Ford.
Companies can learn from nature's open source playbook how to be more effective, efficient, resilient, adaptive, and productive. The R&D is done and is available as a template for industrial re-invention.
Nature doesn't have waste. One animal's "waste" is another's food. We can invent zero-waste companies. From a business and an environmental point of view, waste makes no sense. Companies pay for raw materials, technology and labor to process those materials: some are used, the rest go out a smokestack, pipe, or landfill. Friend says on average the ratio for the U.S. economy of productive use to waste is 6 percent: 94 percent. That's stunning and costly. We can achieve zero waste by selling or finding productive use for everything we make.
Friend cites the example of the late Ray Anderson and his carpet company, Interface. The old model was to extract petroleum, turn it into nylon, make it into carpet, use the carpet for 6 years, then dump it as waste in a landfill for thousands of years. Anderson reinvented a system without sewer pipes in production, and nothing going to landfill. Interface added $450 million to its bottom line, about equivalent to its total profit in a 12 year period. Other carpet companies are now competing to be more green.
We need to expand our sense of what's possible. Examine the flow of materials in the business. Understand that waste points to inefficiencies. Identify where value is leaking by going to a landfill or smokestack instead of into product. Learn from what other companies have done, knowing as Eleanor Roosevelt said, "If it exists, it's possible."
Friend points to two major developments in 2005 that accelerated the sustainable business revolution. First, General Electric started its eco-imagination program. CEO Jeffrey Immelt understood "Green is green," meaning that being environmental is profitable. They have been rippling sustainable design throughout the hundreds of businesses they run, generating tens of billions dollars in new revenue.
Secondly, Walmart announced its sustainability program, telling 60,000 suppliers (now 100,000 suppliers), "We've set three aspirational sustainability goals: To be supplied 100 percent by renewable energy, to create zero waste, [and] to sell products that sustain people and the environment." Friend's company, Natural Logic, received calls from their suppliers asking, "What does sustainable products mean? Our shelf space in the largest retailer in the world depends on us making them." With one decision, one company had more impact in board rooms around the world than any action EPA ever took.
The Department of Defense considers sustainability a strategic national security priority; defense contractor Raytheon is training its engineers in sustainable design because its main customer wants it.
Looking ahead, a top priority is to get the prices right, or true costing, where what we pay for something includes its environmental costs. To get there, we need to shift accounting, tax and finance tools to more accurately reflect real costs. We can expose and change the enormous hidden subsidies in our economy. The government gives industry benefits, like the oil depletion allowance or inexpensive rights to mine on federal lands. There are also "externalities" like pollution and the military cost to keep oil lanes open in the Middle East amounting to an estimated $500 billion to $1 trillion per year. These subsidies distort the market in favor of fossil fuels and should be stopped. Once we're paying the true cost of resources, good environmental choices become economical choices.
Cities and states are major players in this sustainability revolution. In California as of 2020, all new homes will be required to be zero net energy, run themselves on solar and wind and other renewable resources, without drawing any energy from the grid. Integral Group has built 43 zero net energy projects, including homes, most at no additional cost over conventional projects. Sunlight and intelligent building design and controls replace fans and fuel.
You'd think this progress would undermine the utilities selling electricity. But decades ago, the three investor-owned utilities in California -- Pacific Gas & Electric, Southern California Edison, San Diego Gas & Electric -- teamed up with state agencies and the National Resources Defense Council to redesign the regulatory system for California utilities. In the old model, the utility was guaranteed a specified rate of profit per dollar of capital invested. This encouraged the power company to sell more electricity and create demand for new power plants. The new model incentivizes for efficiency, not production. So PG&E can pay for home insulation and make money. The customer pays a lower energy bill, and the utility makes money from increased efficiency.
More cities and states are buying green, such as LEED certified buildings, hybrid vehicles, and recycled content products. That demand creates a market, which creates business opportunities and jobs for local people. It also helps make solar and other green technologies less expensive.
The City of Palo Alto, California recently hired Friend as its Chief Sustainability Officer, challenging him to make it the greenest city in America. "It's a great opportunity to use the city as a laboratory to both improve quality of life locally and to discover what one small, innovative city can contribute to the sustainability revolution," says Friend. You can listen to the interview on Progressive Radio Network, and follow his work on Twitter @PaloAltoCSO.