David Smukowski, Sensors in Motion

Environmental Innovation Seminar

October 12, 2010

Notes taken by Sandy Oh

Assessing Environmental Issues (and the total economic lifecycle of products/services, of which the environment is a part of)

· If you abandon profitability, sustainability is not going to work. Capitalism is not working perfectly, but at least there are measurements in place.

· Smukowski has tried pushing issues from an environmental standpoint, but has not had success. People listen when he presents issues from a business standpoint.

Past Societies Collapsed

· “Collapse” by Jared Diamond

o Smukowski was particularly struck by the collapse of the Mayan civilization. We want to prevent a similar collapse from happening.

· Collapse to varying degrees of:

o Deforestation and habitat destruction (particularly important on islands),

o Soil problems,

o Water management problems,

o Overhunting,

o Overfishing,

o Effects of introduced species on native species,

o Human population growth, and

o Increased per-capita impact of people.

· Additional problems facing us today:

o Human-caused climate change,

o Buildup of toxic chemicals in the environment,

o Energy shortages,

o Full human utilization of the Earth’s photosynthetic capacity.

What is Sustainability to the Business?

· Pro-active approach to ensure long-term viability and integrity of the business by optimizing resources.

· Start by learning about the many types of capital:

o Intellectual capital (people), financial capital, asset capital, natural capital, social capital.

o Financial units are often incapable or insufficient to accurately measure Natural and Social capital.

· We have to be careful what we measure and how we talk about it. It is easy to talk about intellectual, financial and asset capital because we have learned how to normalize it.

· It is difficult to measure natural and social capital.

How to Start Measuring Sustainability

· Life Cycle Assessment (LCA) – understand and analyze the environmental impact of a given product/service. Until you understand this, you cannot begin to put sustainability in terms of dollars or set policy. The four phases of LCA are:

1. Goal and scope (cradle-to-grave, cradle-to-gate, cradle-to-cradle, gate-to-gate, well-to-wheel).

a. E.g. – Patagonia makes jackets out of recycled plastic bottles, but they do not talk about what happens to the jacket after its useful life is over.

b. Understand your limitations and why you are leaving things out.

2. Life cycle inventory

3. Life cycle impact assessment

4. Interpretation

· Measurement:

o Working with cost as a unit provides designers and companies a good guideline.

o Major disadvantage – lack of hard data concerning environmental costs and profits, difficult to convert environmental impact in dollars.

· Economic assessments:

o Key element of product development process (i.e., Business Plan).

o Economic implications of the environmental impacts should also be assessed using four methods (http://www.epa.gov/oppt/acctg/):

§ Total Cost Accounting – typically focuses on in-company assessments of cleaner production investments (WWT, scrubbers, energy, waste disposal, clean up) with special attention to hidden, less tangible and liability costs, and also includes risks and hidden costs associated with a product or activity.

§ Life-Cycle Costing – product’s entire value chain from a cost perspective (R&D through end of product’s life), product’s costs are committed before the product is in the production phase, product costs post-sale (life-cycle costing focuses on reducing costs throughout a product’s life).

§ Full Cost Accounting – includes an additional category of costs (the social costs related to production, use and disposal, which are not accounted for by any of the other methods). This should be used for topics such as ozone depletion or global warming. The monetization of waste streams and emissions can be measured by “willingness to pay” to avoid negative environmental effects and by policy and liability. It is difficult to estimate the current and future social costs associated with specific products.

§ Environmental Life-Cycle Cost – costs caused by the environmental impact of the product. The most common method is to use standard cost factors (the costs a company has to incur to clean waste water, dispose of waste). This approach is much narrower than the preceding approaches because it only looks at the costs related to environmental aspects (a subset of total costs).

· Issues with Life Cycle Accounting/Costing:

o To do costing, there are four steps but the outcome is a single numerical monetary value.

o Full Cost Accounting is the broadest method, but is it competitive?

o It is very important to note that cost does not equal value. Focusing on “costs” only is limiting.

EXAMPLES of SUCCESS STORIES

Boeing Example

· In 1995, Boeing redesigned their infrastructure to move waste. There were 3.6 billion pounds of waste (scrap, wood, air emissions, wastewater, paper, garbage) while there were 61 million pounds (206 in units) of airplanes. The waste to product ratio was 65:1, and the waste was not necessary to delivering the product.

· In 2006, the infrastructure was eliminated, resulting in a lean and green organization. The waste to product ratio became minimal and light energy was cut 90%.

· The environment benefitted from the move to lean manufacturing.

· It turns out that environmental waste = economic waste. They are both green, both good for the bottom line, and eW=Ew.

ING Headquarters Building Case

· “When 1% of a building’s up front cost is spent, 70% of its lifecycle costs are committed.” -Joseph Romm

· 538,000 square foot bank in the Netherlands – all plants are fed with roof rainwater, every office has natural air and light, HVAC is passive, within 5km of employee’s homes, minimal parking, 92% less energy than comparable buildings >> absenteeism dropped 15%.

Trees

· Paper = 2% of the world trade, 2.5% of industrial production, is a $132B industry in the U.S., 10% are filed and the remainder are discarded or recycled.

· Closing the loop:

o NYC recovered 50,000 wooden pallets/year and saved $500k/disposal.

o Germany: reusable pallets, barcodes, and cooperage.

o Paper recycling fiber: U.S. 47%, Holland 96%, Japan 52%.

o Process: Wisconsin ban paper to landfill > Green Bay Packaging designed a zero discharge paper mill and became the lowest cost producer because they were doing in-house recycling and located their factory away from the river (GB Packaging created an economic advantage after the policy was put in place).

o Hemp and grasses have higher fiber content than wood.

Energy

· 97 quadrillion BTU’s flowed through the U.S. in 2002 and we are heading for a 50% increase.

· There are many system losses:

o Power Plant losses up to 70%; Transmission and distribution losses up to 9%; Motor, drivetrain and pump losses up to 37%; Pipe and throttle losses up to 53%.

o A typical 100-unit input pumping system equals 9.5 units output.

· Solutions include irrigation…

Denmark Wind

· Denmark has 3,115 MW wind power serving 5 M people

· The government promotes wind turbine cooperatives (members/owners live within a certain distance of the site and manage the turbine).

Agriculture

· Agriculture methods have a lot of wastes and inefficiencies (20% of products are unusable before end consumer, distribution over long distances).

· Hothouses are replacing once a season/stocked harvests. Farmers markets and co-ops flatten the supply chain. Solar dryers save energy and reduce bugs. Crop waste to ethanol for oil substitute.

OPPORTUNITIES

· Energy (capital is available)