At first glance, these might appear to be the observations of a modern-day head of state. But they were in fact contained in an address given half a century ago by the then US President Lyndon Johnson. His warning, delivered to a sceptical US Congress and business community, was perhaps one of the first official acknowledgements of humanity’s impact on the planet.
Much harm has come to the natural world since. In fact, the best available research shows that ecological degradation continues to gather pace. Two statistics are particularly troubling: 2015 is set to be the hottest year on record and the world’s global thermostat is – climatologists have recently found – less than two degrees Celsius below danger level.
So, 50 years on from that landmark speech, the overwhelming impression is that the world’s business leaders have – at best – only paid lip service to the warnings given by America’s 34th president.
To the casual observer, sustainable business has always been a contradiction in terms in any case. Company executives, hounded at every turn by demanding shareholders, cannot realistically be expected to put protecting the planet on a par with profit growth.
Yet the notion that big business can never become a guardian of the environment is in need of revision. On a number of fronts, the corporate world is beginning to respond to President Johnson’s battle cry.
People power
One catalyst for change in business behaviour is public opinion. Discontent with pollution and environmental damage is building. Surveys such as National Geographic’s Greendex poll reveal that people are increasingly fearful of the impact changes in the environment will have on their lives. Other studies consistently show that consumers are more likely to buy goods and services from companies that have strong environmental credentials and shun those that don’t.
What is more, such concerns are no longer confined to the developed world – they are also spreading to the aspirational populations within emerging markets.
There is probably no clearer testimony to this than the global social phenomenon Under the Dome, the online documentary that laid bare the suffocating levels of pollution across China’s cities. Within two days of its release, the film had registered a staggering 200 million viewings.
The ensuing media storm prompted Chinese Premier Li Keqiang to publicly – and candidly – concede that the government needed to do more to combat pollution.
Legislators tighten their grip
Li’s response is a manifestation of a second trend that promises to make corporations better stewards of the environment – an ever more muscular approach from policymakers.
“Climate change continues to be a prime concern for legislators worldwide,” says Graham Stuart, chairman of GLOBE International, a research body that monitors environmental legislation. “Practically all [countries] have some form of climate change legislation. Around half of them have explicit targets.”
Indeed, for all the consternation caused by Under the Dome, it would be unfair to accuse China of ignoring its pollution problem. The country has a pretty ambitious blueprint for a sustainable economy. It aims to reduce the amount of carbon emissions per unit of GDP by 17 per cent by the year 2020, and wants non-fossil fuels to account for 15 per cent of its energy mix by then, up from about 9 per cent today. As part of the plan, it will set energy efficiency targets for more than 1000 of the country’s most power-hungry companies, threatening those that fall behind with fines.
In Europe, meanwhile, governments have committed to cutting greenhouse gas (GHG) emissions to levels 40 per cent below those of 1990 over the next 15 years; serial polluters such as energy and industrial companies have been warned to expect far greater scrutiny.
And in the US, the world’s biggest generator of GHGs per head of population, the Obama administration has unveiled proposals to reduce emissions by a third over the next 15 years from levels surpassed a decade ago. It also expects to increase the amount of power it generates from renewable forms of energy to 28 per cent by 2030 from the current 13 per cent.
GLOBE’s data show that, since 1997, the number of environmental protection laws and policies enacted worldwide – covering areas such as car emissions, energy efficiency and renewable energy – has risen from 54 to 804. The figure has doubled every five years.
Corporations warm to sustainability
Alert to the challenges thrown up by society’s heightened concern for the environment, companies are taking action. A growing number are embracing what has become known as the “circular” model of sustainable business. Under this approach, firms are dispensing with “take, make and dispose” modes of production, replacing them with processes that minimise waste, boost recycling and make more efficient use of land, raw materials and energy.
The execution of such plans has generally been impressive.
Coca-Cola Enterprises (CCE), for example, has put in place processes designed to reduce its use of water. Clearly, water is the main ingredient in its famous beverage but less obvious is the fact that huge volumes of water are required to clean and maintain its manufacturing plants. So far, CCE has managed to reduce its water use level to 1.4 litres for every litre of Coca-Cola, the lowest rate yet. It aims to cut this to just 1.2 litres by 2020.
Dutch giant Philips and French auto maker Renault, meanwhile, have both established policies under which they recondition parts – or entire products – that have reached the end of their useful lives so that they can be re-used or re-sold. Renault says its auto remanufacturing plant at Choisy-le-Roi uses 80 per cent less energy and 92 per cent less chemical products than its traditional sites.
These are not isolated examples.
According to the International Organisation for Standardisation (ISO), the body responsible for setting environmental benchmarks for corporations across the world, the number of firms achieving the required standards for sustainability has risen tenfold since the end of the last decade. Worldwide, there are now more than 350,000 companies that have received the ISO 14001 sustainable business certification.
“The growing number of organisations worldwide certified to ISO 14001 suggests an increased awareness of environmental responsibilities and a growing concern from companies – both big and small – to reduce their impact on the environment,” says Kevin McKinley, acting ISO Secretary-General.
Innovation gives rise to a new environment industry
President Johnson’s 1965 Congressional address was prescient in more than one way. Not only did he deliver an eloquent diagnosis of the problems engulfing the planet’s ecosystems, he also offered a viable solution. Reversing the damaging effects of unchecked economic expansion, he said, would require a “creative conservation of innovation.”
The President did not live to see the technological progress he envisaged.
But he might have been encouraged by what has unfolded over the past 10 years or so. In that time, thanks to a sustained burst of innovation, a new industry of environmental products and services has begun to take shape.
With governments squeezing the fossil fuel industry and corporations under pressure to embrace sustainable business models, investment has flowed into energy-saving and recycling technologies, renewable power and pollution control.
After all, corporations are more likely to shift to more sustainable business models if the technology exists to help them do it.
Evidence of this innovation can be seen in the sharp rise in the number of patents filed for environmental products over the past decade. Figures from the World Intellectual Property Organisation (WIPO) show that patent filings for environmental technologies are running at an annual rate of 14,000 worldwide, more than double the number 10 years ago. The increase has been most pronounced in China, which accounts for about a quarter of total filings.
Patent activity within biofuels, solar thermal, solar and wind energy has increased significantly in recent years, a WIPO official says. The volume of patents filed in these areas over the last five to six years for which comprehensive data is available exceeds the volume of patents filed in these areas in the previous 30 years.
Energy efficiency is one industry that has reached critical mass thanks to technological innovation. The environmental benefits from using energy more efficiently are considerable. Currently, only about a third of the world’s primary energy – energy before it is subjected to any conversion or transformation process – reaches the point of use. Two thirds is lost along the way in generation and distribution.
These startling figures have served as a spur for heavy investment in the sector. Energy-efficient technologies are becoming ubiquitous as a result. In building construction, for instance, smart sensors are being deployed to manage heating, lighting and air conditioning. The resulting energy saving can be considerable. New York’s Empire State Building has managed to cut some USD11 million from its annual energy bill. In heavy industry, meanwhile, energy use is being reduced by replacing traditional electric motors – which account for up to 70 per cent of a manufacturer’s energy use – with smarter versions. It is estimated that every USD1 spent on a new electric motor can result in a USD30 saving in electricity costs over the device’s lifetime. Energy-efficient technologies are proving popular in the auto and data storage industries too.
Also prominent among the sustainable tech pioneers are those that constitute the dematerialised economy. This is the label given to a growing band of companies whose technologies help manufacturers cut consumption of raw materials but simultaneously maintain – or even raise – output.
Such firms specialise in activities such as computer-aided design, product life cycle management, advanced simulation software and devices that form part of the ‘Internet of Things’. Their expertise has a broad range of applications.
In agriculture, for instance, farm owners now use various sophisticated software programmes to develop more efficient irrigation and fertilisation techniques. In the water industry, meanwhile, pioneering fluid dynamics computer modelling has vastly improved both the quality and efficiency of wastewater recycling.
Sustainability can grow the top and bottom line
A culture of ‘creative restoration and innovation’
When President Johnson spoke of the dangers of environmental change in 1965, he probably knew he’d have a hard time convincing his audience.
To critics of corporate culture such as Joel Bakan, producer of the documentary The Corporation, the President’s words were always going to fall on deaf ears. As the law professor writes in the book that accompanied the film, it is misguided to think that corporate responsibility drives can ever solve the world’s big problems.
“Corporations,” he argues, “are required by law to elevate their own interests above those of others, making them prone to prey upon and exploit others without regard for legal rules or moral limits. Corporate responsibility most often serves to mask the corporation’s true character not to change it.”
Still, events are conspiring to challenge that notion. The public and legislators want to see a material change in corporate behaviour. In response, companies are getting serious about the environment.
And that’s not just because they realise it is the right thing to do, says Craig Smith, chair in Ethics and Social Responsibility at the INSEAD Business School. It is also because they have discovered that sustainability can have positive effects on both the top and bottom line. “Sustainability offers opportunities to increase revenues through greentech products (while) environmental policies may reduce costs,” he says. Is this the “creative conservation of restoration and innovation” President Johnson foresaw? Perhaps.
