The Business Case for Sustainability

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1. Clean Up or Close Up The Business Case for Sustainability 2. Clean Up or Close Up The World Wakes Up to Costs of Carbon 150 USD Oil <ul><li>Diesel and gas…
  • 1. Clean Up or Close Up The Business Case for Sustainability
  • 2. Clean Up or Close Up The World Wakes Up to Costs of Carbon 150 USD Oil <ul><li>Diesel and gas inflation brought calls for change that drowning polar bears could not </li></ul><ul><li>Pressure on governments to regulation and subsidize solutions </li></ul><ul><li>Pressure on industry to change - to reduce waste and increase efficiency </li></ul><ul><li>Pressure on consumers to change habits – public transport, bicycles, and even walking! </li></ul>Treehuggers and yuppies unite! Global Warming <ul><li>Al Gore (and his drowning polar bears) catalyze global awareness </li></ul><ul><li>Inconvenient Truth and 11 th hour become award winning movies </li></ul><ul><li>Citizens begin learning about “carbon footprint”/ Schools begin teaching environmentalism </li></ul><ul><li>TV Shows on CNN & Discovery highlight human impact on the environment while CNBC covers investment opportunities </li></ul><ul><li>Children tell their parents to save the word </li></ul>Cleantech Investment <ul><li>Investment in clean technology </li></ul><ul><ul><li>Renewable energy (wind and solar) and alternative fuel enter consumer investor portfolio </li></ul></ul><ul><ul><li>Vernacular/ technology are enter mainstream conversations on television </li></ul></ul><ul><ul><li>Cleantech investment books become best sellers </li></ul></ul><ul><ul><li>Economics of and focus on cleantech firms improves with each dollar rise in oil </li></ul></ul><ul><ul><li>Even John McCain is a fan of clean tech… Drill baby drill! </li></ul></ul>
  • 3. Clean Up or Close Up The Past is the Past Until the summer of 2007 <ul><ul><li>Hungry China </li></ul></ul><ul><ul><li>To Get Rich is Glorious </li></ul></ul><ul><ul><li>Any FDI was good FDI </li></ul></ul><ul><ul><li>Lots of Money </li></ul></ul><ul><ul><li>Fragmented China </li></ul></ul><ul><li>Complacent China </li></ul><ul><li>Government manages civil society </li></ul><ul><li>People willing to “eat bitterness” </li></ul><ul><li>High tipping points </li></ul><ul><ul><ul><li>Differences in resources </li></ul></ul></ul><ul><ul><ul><li>Uneven Investment </li></ul></ul></ul><ul><ul><ul><li>Spotty enforcement </li></ul></ul></ul>The Three Facets of China’s Hyper-development <ul><li>Uneven China </li></ul><ul><li>Imbalance of prosperity </li></ul><ul><li>Gender, age, and income gaps </li></ul><ul><li>Raw Material Shortage </li></ul><ul><li>Dirty </li></ul><ul><li>Degradation in air, water, and soil </li></ul><ul><li>Poor labor conditions in regions/ industries </li></ul><ul><li>Widespread graft and corruption </li></ul>The Downside of Growth… <ul><li>Prosperous China </li></ul><ul><li>East coast develops </li></ul><ul><li>International attention </li></ul><ul><li>Explosion in middle class </li></ul>had little impact on the majority because of
  • 4. Clean Up or Close Up Events Change China Labor Scandal <ul><li>Immediate Impact </li></ul><ul><li>Domestic and International press coverage </li></ul><ul><li>45,000 investigators sent to Shanxi </li></ul><ul><li>Public acknowledgement of system failure and call for change by party </li></ul>Product Recalls <ul><li>International witch hunt and tit-for-tat </li></ul><ul><li>Economic impact to Chinese manufacturers </li></ul><ul><li>Questions at home about products surface </li></ul>Immediate Impact <ul><li>Immediate Impact </li></ul><ul><li>Environmental awareness took a quantum leap </li></ul><ul><ul><li>Domestic / International press coverage </li></ul></ul><ul><ul><li>National support and sympathy for affected </li></ul></ul>Taihu Lake 5.12 Earthquake <ul><li>Immediate Impact </li></ul><ul><li>24/ 7 news coverage – with citizen journalists first to report (twitter) </li></ul><ul><li>Intense corporate pressure to donate and manage messaging carefully </li></ul><ul><li>First time many firms experienced the “mass” media </li></ul><ul><li>24/7 Full press coverage on TV, newspaper, blogs, &twitter </li></ul><ul><li>Public awareness of problems with food industry, and call for changes </li></ul><ul><li>Ongoing investigative reporting into other areas / other companies </li></ul>Immediate Impact Milk Scandal
  • 5. Clean Up or Close Up Change From the Top <ul><li>The limits of China’s hyper-development have been tested </li></ul><ul><li>10% + growth for 15 years requires lots of resources at exponential levels </li></ul><ul><li>Export Growth model resulted in one way infrastructure – Containers East </li></ul><ul><li>Imbalances resulted/ infrastructure failed </li></ul><ul><ul><li>Energy, water, and resource shortages </li></ul></ul><ul><ul><li>Labor shortages, Gender imbalances, income gaps </li></ul></ul><ul><ul><li>Inability of agencies to cope – safety failure, pricing policy, enforcement </li></ul></ul><ul><ul><li>And on and on…. </li></ul></ul>China Leads From a Need : Clean Air, Clean Water, Clean Food <ul><li>The government acts. </li></ul><ul><li>Regulation: </li></ul><ul><ul><li>Labor Law, Circular Economy, Plastic bags & Packaging, SEPA </li></ul></ul><ul><li>Enforcement: </li></ul><ul><ul><li>EVA applications, Green GDP Scorecard, NGO empowerment </li></ul></ul><ul><li>Investments: </li></ul><ul><ul><li>Renewable energy, mass transit, clean cars, water technologies, recycling </li></ul></ul><ul><li>Emergency Actions: </li></ul><ul><ul><li>Factory shutdown, Water Diversion, and Car Schedules </li></ul></ul>
  • 6. <ul><li>The Door was open for change… </li></ul><ul><ul><li>Consumers were becoming citizens </li></ul></ul><ul><ul><li>Citizens were become activists </li></ul></ul><ul><ul><li>Governments were responding </li></ul></ul>The Business Case For Sustainability was being made… Clean Up or Close Up Change Happens
  • 7. <ul><li>At the national government level </li></ul><ul><ul><li>Local leaders were warned that they must abide by national policies </li></ul></ul><ul><ul><li>SEPA and NRDC were given more power and support </li></ul></ul><ul><ul><li>National level “audits” of projects with potential for negative environmental impact </li></ul></ul><ul><ul><li>Encouraging investment in transportation, energy, new materials, and environmental protection </li></ul></ul><ul><li>At the local government level </li></ul><ul><ul><li>Shutting down of factories considered low hanging fruit </li></ul></ul><ul><ul><li>Immediate tightening of all investment regulations occurred and turning away investments </li></ul></ul><ul><ul><li>An open recognition that the old days were gone/ cannot ignore environmental impact </li></ul></ul><ul><li>On the ground </li></ul><ul><ul><li>Immediate change in attitude in the trust and support of NGO </li></ul></ul><ul><ul><ul><li>SEPA recognition that NGOs have assisted them in protecting the environment </li></ul></ul></ul><ul><ul><li>Consumer awareness at all time high </li></ul></ul><ul><ul><li>Consumer activism at all time high - NIMBY </li></ul></ul><ul><ul><ul><li>Recent Maglev rallies in Shanghai </li></ul></ul></ul><ul><ul><ul><li>Xiamen, Chengdu, and Taizhou citizen strolls opposing chemical investments </li></ul></ul></ul>Clean Up or Close Up China’s Actors
  • 8. Breaking Barriers, Changing Habits, & Encouraging Change Clean Up or Close Up Leading By Example <ul><li>2008 Wal-Mart Home Entertainment Design Challenge </li></ul><ul><ul><li>Great design that attracts consumers. </li></ul></ul><ul><ul><li>Product innovation that reduces the environmental impact for its product category. </li></ul></ul><ul><ul><li>Packaging design that facilitates reuse and recycling, reduces waste, and reduces or eliminates the use of toxic materials. </li></ul></ul><ul><ul><li>HP Reduces wins – reduces packaging 97% </li></ul></ul>The Elephant in the Room: Wal-Mart <ul><li>October 2008 Announce Sustainability Revolution </li></ul><ul><ul><li>Comprehensive effort across supply chain and stores </li></ul></ul><ul><ul><li>Alternative Energy, Transportation, Packaging, Recycling </li></ul></ul><ul><li>Not spontaneous. It was planned for years. Wal-Mart is Serious </li></ul><ul><li>Over 200 Associates who will: </li></ul><ul><li>monitor factories, educates suppliers and buyers, and works with others in our industry to implement effective ethical sourcing programs. </li></ul><ul><li>Others will be forced to follow </li></ul>
  • 9. Case Study: Starbucks <ul><li>Traditionally did very well </li></ul><ul><li>Community Bulletin Boards/ Culture </li></ul><ul><li>CSR Report focused on fair trade coffee and supporting bean farmer </li></ul><ul><li>Strong messaging through website and press </li></ul><ul><li>Translated into loyal customer following and positive brand image ratings </li></ul>? <ul><li>2007: Forbidden City Store </li></ul><ul><li>Opened 2000 </li></ul><ul><li>Rui Chengang (CCTV) </li></ul><ul><li>10,000+ comments on blog </li></ul><ul><li>SBUX CEO addressed personally </li></ul><ul><li>Store closed </li></ul>Recently have struggled <ul><li>2008: Water Waste </li></ul><ul><li>Single Blogger calculated 23 million gallons of water waste per day </li></ul><ul><li>Heavy traffic on blogs and twitter </li></ul><ul><li>New policy mandating water taps </li></ul>
  • 10. <ul><li>Traditionally did very well </li></ul><ul><li>Community Bulletin Boards/ Culture </li></ul><ul><li>CSR Report focused on fair trade coffee and supporting bean farmer </li></ul><ul><li>Strong messaging through website and press </li></ul><ul><li>Translated into loyal customer following and positive brand image ratings </li></ul>Recently have struggled
  • 11. <ul><li>Key Takeaways: </li></ul><ul><li>Operations in China, and Global Supply Chains, Must Change… Will Change </li></ul><ul><ul><li>Environmental, labor, raw materials, water, and energy constraints have all changed </li></ul></ul><ul><ul><li>Oil, metals, plastics, and other materials will test highs again </li></ul></ul><ul><li>Consumers Have Changed – and So Have Their Expectations </li></ul><ul><ul><li>Consumers are becoming citizens, and citizens are becoming active </li></ul></ul><ul><ul><li>Consumer pressure on industry will only grow stronger </li></ul></ul><ul><li>Solutions Exist, Cost Savings Exist, and Options are Readily Available </li></ul><ul><ul><li>Technology gains are growing – energy, transportation, etc </li></ul></ul><ul><ul><li>Commoditization of parts, components, and technologies reduces cost of investment </li></ul></ul><ul><li>Collaboration is Increasing - Innovation Will Follow </li></ul><ul><ul><li>Retailers – logistics – packaging – design partners working together to develop better products, and reduce inefficiencies within closed systems. </li></ul></ul><ul><ul><li>Process must start with design and avoid the landfill </li></ul></ul><ul><li>5) The people in this room have power to change, and will ultimately bear the responsibility </li></ul>Clean Up or Close Up The Business Case for Sustainability is Made
  • 12. <ul><ul><li>Learn More – Get Engaged: </li></ul></ul><ul><ul><li>All Roads Lead to China – </li></ul></ul><ul><ul><li>China at the Crossroads – </li></ul></ul><ul><ul><li>Cleaner Greener China – </li></ul></ul><ul><ul><li>Contact Information: </li></ul></ul><ul><ul><li>508 Zhaohua Road, building 508, Suite 607 </li></ul></ul><ul><ul><li>Shanghai, 200050 </li></ul></ul><ul><ul><li>Tel: (8621) 6225 5220 </li></ul></ul><ul><ul><li>Fax: (8621) 6225 5229 </li></ul></ul><ul><ul><li>[email_address] </li></ul></ul>
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