Thoughts from the Field

In our 10-year history, sustainserv has played a critical role in fostering public-private partnerships, which are collaborations between the academic, corporate, and public sector to facilitate knowledge exchange and technology transfer for the greater good of society.  One area particularly well-suited to this approach is regional energy management.  As a new member of the sustainserv team, I wanted to share some of my most interesting and relevant past experiences, which may be broadly applicable to your situation, whether you operate in the corporate, institutional, or government sector.

Energy planning and management have increasingly become a challenging task due to concerns over climate change, cost containment, and an over-reliance on politically unstable regions that produce fossil fuels. Renewable energy production can serve to address many of these issues. Locally-generated renewable energy can also add economic value to a region (for example through local residents and businesses selling excess energy generated, supporting local companies which install and maintain the renewable energy equipment, and retaining the revenues locally rather than exporting it), stabilize the electricity grid, and reduce negative impacts on the local and global environment.  However, making such a leap requires a fundamental shift in how energy supply is planned and implemented.  As illustrated by the rapid rise in the number of wind turbines in Denmark, the deployment of renewable energy moves us away from the model of relying on a few large power plants to developing a network of many small and decentralized facilities.

Contrary to common belief, renewable resources are available where most of the energy is needed: in urban areas. Despite first impressions, even densely populated cities have a lot of space available to produce renewable energy. These untapped resources include derelict urban terrain, building roofs and facades, waterways and wastewater, ambient air and exhaust air from buildings, as well as the very ground the city is built upon. Some options which are suitable for the urban environment* are listed below:

• Photovoltaics and solar collectors for hot water may be installed on building roofs and facades.
• Small-scale hydropower can be generated from rivers, canals and pipes.
• Shallow geothermal heat can be tapped with ground source heat pumps.
• Ambient air and exhaust air can easily be exploited to provide supplemental indoor heating for buildings.
• Thermal energy can be extracted from wastewater already in the building, from the public sewer system or from the cleaned wastewater after sewage treatment.
• Biomass, especially biowaste, can be converted into power and heat. Co-generation of heat and power increases the efficiency of the system.

Examples of renewables deployed in urban areas. Left: South-facing building facades can be used for photovoltaics. Right: Derelict urban terrain temporarily used for biomass production.

In order to capitalize on these resources, a well-coordinated energy plan is required. In general, decentralized heat generation should be a higher priority than electricity production (heat cannot be efficiently transported over long distances, therefore the demand has to be met locally). But this doesn’t mean that all roofs should be covered with solar collectors for hot water. If, for example, a certain type of building is suitable for capturing heat from wastewater, the available space on roofs and facades can be used for photovoltaic panels (which also produce the electricity for the heat pumps). This example illustrates that successful energy planning is holistic in its approach, and one way to support this process is by conducting an analysis at the city or regional level.  To optimize energy performance, one must clarify which combination of technologies will provide the right energy at the right place.  Only with a well-coordinated mix of facilities can true energetic potential of an area can be maximized. 

An energy balance, which summarizes the potential for biomass, solar, and/or geothermal heat, is not able to provide this information. A spatial analysis is needed to integrate and map the energy production potential and compare it with local energy demand.  One simple approach is to divide the area into Urban Spatial Types (such as “historic center,” “business districts,” “residential spaces,” etc.), which have typical energy potential profiles and a typical energy demand per square meter (see the reference at the end of the text for more details). Below, a map with the Urban Spatial Types (USTs) of the canton of Basel-Stadt (Switzerland) is shown:

Figure: Energy profile mapping of the canton of Basel-Stadt (Switzerland). Each color shows a different Urban Spatial Type with typical renewable energy production potentials and a typical energy demand per square meter.

For these USTs, the long-term energy demand is assessed over a timeframe of 20-40 years. Thereafter, the corresponding potential to produce renewable energy is determined. Based on this, the ratio of renewable energy produced to energy needed is calculated for both thermal and electric energy sources. Finally, the outcome is visualized by means of a geographical information system (GIS). The resulting map is applied to optimize the renewable energy supply of the city by including existing energy infrastructure and planning additional supply options.*

Energy mapping has been carried out in cities and regions in Germany, Switzerland, Austria and Liechtenstein. If the use of renewables is well planned, cities are able to meet most, if not all, of their energy demand with renewable energy generation in their own area:

Figure: Maximal energy self-sufficiency of investigated cities/regions in Germany, Switzerland, Austria and Liechtenstein. The larger the circle, the higher the population density.

Regions with a lower population density have a higher likelihood of meeting energy demand with their own renewable resources. However, in some cases even densely populated cities like Hamburg (Germany) can actually produce more energy than they need (and export it). Thus, the use of renewables is not only a means to counteract global warming, but it can also provide a substantial economic benefit for a region.   

In closing, whether you are an international company with facilities spread across a given region or the globe, or you are a member of a municipal planning group, you may find that either you or your stakeholders are seeking ways to prioritize and optimize the energy profile your built environment. A simplified approach to energy mapping may be an important process to include in your planning toolkit. 

*Cited from: Dieter Genske, Lars Porsche, Ariane Ruff (2009). Urban Energy Potentials: A Step Towards the Use of 100% Renewable Energies, p.       251-262. Peter Droege (Ed.), 100% Renewable – Energy Autonomy in Action, ISBN: 978-1-84407-718-2.

Map and Figures: Energie-Klima-Plan GmbH, seecon gmbh, University of Applied Sciences Nordhausen, University of Liechtenstein

As companies begin to view their business practices through the lens of sustainability, some of the first questions to arise include:

• Where do we focus our limited time and resources to maximize environmental and social benefits?
• How do we measure the environmental impacts associated with our products?

The variety of approaches to these basic questions is staggering, and can sometimes paralyze your efforts.  For example- should you follow a rating system or seek third-party certification?  Establish an environmental management system? Develop a carbon footprint?

The answer will depend on what your objectives are.  In our experience, focusing on your product line is an excellent place to start your sustainability “data collection,” as it will directly tie your sustainability initiatives to your primary business drivers.   The outcome of such research can lead to innovations in product design and development, operational efficiency and resource conservation, and market positioning through re-branding your product as a smart and “eco-efficient” alternative to your competition.

Starting with your products also means that you are working with what you know best- the processes you use to transform your supplies into a useful and essential good for your customers.  Placing a sustainability spin to your existing processes opens the door for employee involvement.   Corporations who embrace this concept and are willing to engage their staff have demonstrated over and over again that those employees with the most intimate knowledge of daily production processes have a wealth of ideas which lead to cost savings, efficiency improvements, and product transformation.  To see examples of this, check out Dow Chemical’s energy efficiency program, where employee-submitted projects have saved over $500 million and over 4,000 metric tones of CO2 emissions.

So how exactly does one begin to make this transformation?  One strategy which we’ve found to be successful is to conduct a life cycle assessment (LCA) on one of your key products.   LCA, also called “cradle-to-grave” analysis takes a comprehensive view of a given product, to examine environmental impacts from raw materials extraction, through manufacturing, packaging, distribution, use phase, and end-of-life/ disposal:

The LCA field has its roots in the late 1960s and early 1970s when the oil crisis was front-and-center and the tension between population growth and material and energy use was revealed in groundbreaking works such as “Limits to Growth.”   Companies including Coca-Cola began to commission studies to inform manufacturing choices, such as comparing different beverage containers to see which has the least environmental and energy impacts associated with it. 

Since those days, LCA has evolved into a sophisticated science which uses a multitude of data inputs and analyses to identify environmental impacts, scale them, weigh them, and combine them into an overall environmental profile for a given product.  Oftentimes, assumptions must be taken and judgment calls made, since there may be missing information.  Take the example of a laptop computer- do you know how much silicon is in a given circuit board?  How about aluminum? Copper?  Where are these raw materials sourced and how are they made into the integrated components you use in your manufacturing?  Similarly, LCAs offer different weighting schemes to compare across broad categories of environmental impacts.  What is more important- climate change or water resource degradation?  Human exposure to toxins or natural resource depletion?  These underlying assumptions and the flexibility in how an LCA is scoped have led to numerous criticisms of past LCA studies, which question the scientific rigor and balance used in the assessment. 

Companies which want to participate in this arena in a credible way can overcome these potential pitfalls by employing standardized methods (ISCO14040) while balancing the level of effort to obtain meaningful results that can directly influence internal decisions on product design and manufacturing.  In order to do this, one should apply the “80-20 rule” when developing the scope of the LCA.  The 80-20 rule is a rule-of-thumb in business where we tend to see 80% of a given impact attributed to 20% of the causes.  In terms of an LCA, this could be done by surveying the various phases of the life cycle to estimate the greatest impact, and coupling that with working knowledge of sustainability “hot-spots” so that you can identify the materials or processes which incur the highest environmental damages.  From there, one can dive deeper into those pivotal areas of concern and begin to research alternative approaches.  In order to do this properly, we recommend developing a close partnership between internal production and manufacturing staff and scientific advisors who are well-versed in life cycle impact assessment categories and the emerging areas of global environmental concern.  Such a partnership can produce quick and efficient results which will have immediate benefits for your corporate bottom line and dually “stand up” to external criticism by providing a strong scientifically-based foundation. 

In the past few years, we have witnessed a wholesale shift whereby businesses in just about every sector realize that sustainability is a topic that they must engage with in a credible and transparent manner. In many cases, it has become a basic expectation in the marketplace.

With this settled, we are now seeing new frontiers being established, areas where leading companies are pushing the envelope and laying the foundation for the next generation of best-practices in corporate responsibility, accountability and sound management. Nowhere is this more apparent than in the case of sustainable supply chain programs. Just as companies recognize that by paying attention to their own environmental and social responsibility they can realize significant benefits, they are now starting to expect the same level of responsibility from those companies with which they do business. In fact, one can reasonably argue that a seminal event in the wave of corporate responsibility was the supply chain scandals of the 1980's, when Nike was pilloried for substandard working conditions in its supply chain.

But what does this mean for companies now? How are companies implementing sustainable supply chain programs? We present here a few "ingredients" that can help a company start to come to grips with the sustainability of its suppliers.

First off, depending on the particular sector a company is in, there are many different frameworks that have been established to provide guidance for corporate social and environmental responsibility. For example, in the electronics industry, the Electronics Industry Citizenship Coalition (EICC) is a membership organization aimed at increasing environmental, social and governance accountability among its members. Interestingly, to be a member in this organization, a company must pledge to ask its own suppliers to also become members in EICC. Thus the premise of the EICC is to promote supply chain sustainability. So if a company is interested in increasing the sustainability of its supply chain, then it is worthwhile to explore what frameworks already exist that could help structure such an approach.

The next element of a solid approach to increasing the sustainability of your supply chain is to formulate a supply chain code of conduct. This is a formal set of requirements and expected behaviors that a company imposes on its suppliers. The elements of such a code of conduct can vary depending on which issues are most material to your sector. Most codes require compliance with basic human rights principles, while others extend to requirements for environmental and social reporting.

The level of rigor of a supply chain code of conduct can vary significantly. In some cases, companies craft some vague language and then bury the code of conduct into the back pages of a long supplier contract or RFP, never to be seen or discussed again. However in other cases, the supply chain code of conduct has real teeth, including the option for unannounced audits, financial penalties or even contract terminations to ensure compliance. Of course there is the risk that a key supplier may not be able to meet the requirements of a such a code of conduct. Some companies phase-in the requirements of their codes over a period of time, allowing their suppliers, especially key suppliers, time to come into compliance.

The bottom line is that it comes down to risk management. Companies want to manage their risk and understand where in their operations the greatest risks are located. With the inclusion of environmental and social factors in the assessment of a company's overall footprint, it now understood that risks in the supply chain can also come from these factors. The time has come for companies to address these risks directly. 

The practice of greenhouse gas (GHG) accounting has rapidly evolved in recent years as more and more companies recognize and pursue the business benefits gained from managing their carbon footprint. Time and again, smart carbon management has been shown to reap cost savings, risk mitigation, and improved competitive advantage.

However, GHG inventories can be complex and yield unexpected results depending on how they are structured, with few topics presenting as many challenges and surprises as scope 3 emissions.

As defined by the Greenhouse Gas Protocol Corporate Standard, “Scope 3” refers to indirect GHG emissions which are a consequence of your business activities but occur from sources not owned or controlled by your company:

Figure of GHG accounting scopes, with expanded examples of scope 3 (blue arrows) along the corporate value chain.  (GHG Protocol)

As you can see from the figure, scope 3 emissions include emission sources both upstream (purchased goods and services, business travel) and downstream (product transportation and distribution, consumer use) from the company itself.  Scope 3 is often considered a catch-all category for those emissions which may be the furthest from your company’s control, and for this reason, it has been a slippery subject for many companies. 

Addressing scope 3 emissions forces a company to take the leap from measuring data which may be easily available, such as your utility bills and fuel use records, to examining the entire value chain of your operations.  In essence, you need to take a life cycle approach toward your company’s carbon footprint- starting with resource extraction of raw materials and finishing with end-of-life treatment of your sold products. 

In theory this may seem like a straightforward process, but it opens up many questions, most notably, where do you draw the boundaries of your assessment and how accurate are your estimates?  What sources are worth calculating versus those which are high effort / low carbon impact?

Although there are no clear-cut answers to these questions, companies are moving forward with estimating and reporting their scope 3 emissions.  Some of the more notable examples of scope 3 stories include Stonyfield Farm and Dell.

Stonyfield Farm is a company known for its organic yogurt and other dairy products.  When Stonyfield expanded their carbon footprint beyond their production facilities, they came to the startling conclusion that most of their emissions arose not from manufacturing or transporting their products, but from the methane produced by the cows back at their suppliers’ farms! 

Dell, a world-wide name in computing and IT equipment, was harshly criticized a few years ago when the company proclaimed that it had achieved carbon neutrality (net zero GHG emissions), because they failed to include scope 3 emissions such as downstream consumer use of their products (i.e. from the electricity used to run all of the computers, servers, and other equipment they sold).  In my opinion, Dell may have been unfairly targeted as the science of scope 3 accounting was then, and still is, a very new and poorly articulated process, not to mention that scope 3 is considered an “optional” category according to most reporting programs! 

Both of these stories demonstrate that investigating scope 3 emissions must be done in a cautious and structured way, so that stakeholders are correctly informed and to ensure that the company is concentrating on only those scope 3 sources which are most relevant to your business:

-          Large relative to the company’s scope 1 and 2 emissions

-          Contribute to GHG risk exposure

-          Raised as critical issues by stakeholders

-          Can potentially be influenced by company

While accounting for scope 3 emissions can be challenging, we do encourage all companies to at least screen for their highest impact sources.  This will better enable the company to address stakeholder questions, establish plans for further analysis, and find areas for future innovation.  The GHG Protocol is in the final stages of developing its Scope 3: Corporate Value Chain Accounting and Reporting Standard, which will hopefully lend some much needed clarity to the topic.  Interest in scope 3 won’t be waning anytime soon, and in fact, will continue to grow with the sophistication of corporate environmental accounting in general.

In 2010 the International Standards Organization (ISO), the world’s largest and most reputable developer of international standards published ISO 26000, a comprehensive set of guidelines focused on the principles of social responsibility. The document analyzes core subjects relevant to social responsibility and how best to integrate them into an organization effectively. The release of these guidelines adds to the growing focus on social responsibility that continues to emanate from business and industry sectors globally.

In its press release to announce the launching of ISO 26000, ISO’s Social Responsibility Working Group, which was responsible for the development of the guidelines over the last 8 years, stated that “the perception and reality of an organization's performance on social responsibility can influence, among other things, competitive advantage.”

Furthermore, when an organization as important and influential as ISO releases guidelines which actively endorse and intend to provide clarity for the emerging trends such as consensus-based sustainability reporting, then surely social responsibility/sustainability is something that is eventually going to catch the attention of every organization.  It is yet another signal that corporate sustainability is moving toward the mainstream rather than strictly residing among those businesses with a sustainable product, mission, or an innate sensitivity toward environmental and social issues!

Already, energy efficiency and carbon emissions reduction targets are becoming a very effective way for businesses to reduce production and operations costs. So too is active management of material consumption, water use, and waste generation. The ISO 26000 ‘endorsement’ of socially responsible/sustainable practice across the entire production model is likely to result in social responsibility being further recognized as an area for proactive and profitable business management!

ISO 26000 and GRI- Where is the overlap?

ISO 26000 identifies eight general principals of social responsibility which highlight the importance of accountability, transparency, and ethical behavior, as well as respect for stakeholder’s interest, the rule of law, international norms of behavior, and human rights.  The following seven core social responsibility subjects are analyzed in detail:

• Organizational Governance
• Human rights
• Labor practices
• The environment
• Fair operating practices
• Consumer issues
• Community involvement and development

Later the guidelines discuss how to integrate social responsibility/sustainability into an organization and provides recommendations on how to communicate these topics to various stakeholders including employees, managers, customers, suppliers, and other interested parties.

Ironically, the Global Reporting initiative (GRI) has been supporting organizations in this process since the release of its very first set of sustainability reporting guidelines in 2000. According to a recent GRI press release, ‘the 2010 figures indicate an increase of 22 percent in the number of reports worldwide registered on the GRI Reports List, rising from 1491 in 2009 to 1818 in 2010.” As the most widely recognized standard for sustainability reporting, organizations which implement the framework will produce a comprehensive sustainability report designed to be fully transparent and satisfying the needs of stakeholders. A series of GRI profile numbers and performance indicators addressed in the contents of the sustainability report will determine the level of transparency which an organization is reporting at. The more indicators included and correctly addressed, the higher the “application” level of the report.

The ultimate aim of the GRI framework is to improve the transparency of sustainability reportingthrough voluntary disclosure of sustainable activities and performance data. The GRI reporting guidelines identify six categories which all reports should ultimately address:

• Economic
• Environmental
• Product responsibility
• Labor practices
• Human rights
• Society

GRI performance indicators are organized under each of these six categories in ‘Aspects.’ The more indicators the organization reports under each aspect, the greater the level of disclosure attained. Organizations find that, by going through the process of selecting the indicators and gathering the data for the GRI report, they can begin to formulate an overarching corporate sustainability strategy, and in turn, begin tracking and establishing  goals for performance.

So then, what exactly is the relationship between ISO 26000 and the GRI framework?

An examination of the overlap between the six GRI categories and the seven core social responsibility subjects defined in ISO 26000 illustrates the synergy between the topics covered by the two programs:

From the figure above, we can see that there is a one-to-one match for nearly all of the topics covered between ISO 26000 and the GRI framework.  The two exceptions are noted in yellow (where we see that ISO’s “Fair Operating Practices” covers topics which are broken down into four more specific social categories by the GRI), and in red (where we see that GRI includes an explicit “Economic” category, which ISO does not directly address but is implied as influencing all categories of social responsibility).

While ISO 26000 provides a set of topics to consider when developing a corporate sustainability program, the GRI framework takes it a step further by providing companies with specific, quantitative performance indicators to make their sustainability program transparent, comparable, and consistent with emerging performance standards.

As the field of sustainability becomes more sophisticated, there has been a shift in awareness from looking at a company’s immediate environmental footprint, to investigating the often much wider impacts of its global supply chain.

This is particularly true for the world of electronics. Electronic products are now ubiquitous in modern life and business. However, understanding the wider environmental and other sustainability-relevant impacts that electronics have is not so simple. Individual electronics products can contain hundreds of parts, with many of these parts manufactured in developing countries. The supply chains for these products can stretch across tens, hundreds, or even thousands of vendors, presenting numerous risks to the end manufacturer whose name is featured prominently on the label that is seen by the consumer. If any one of these vendors violates laws or operates in a way that is perceived as deleterious to society or the environment, then the reputation of the whole network of suppliers and customers is at risk.

Exploring the web of the electronics supply chain reveals examples of these practices that deeply challenge the pursuit of sustainability:

• Workers subject to unfair labor practices,
• Uncontrolled environmental exposures that endanger people, communities or ecosystems,
• Sourcing of raw materials from regions of the world embroiled in conflict,

How can companies get a handle on these risks? What proactive steps can they take to assess the security and sustainability of their supply chains? This is where external frameworks such as that of the Global Reporting Initiative (GRI), or the Electronic Industry Citizenship Coalition (EICC) are particularly useful. The EICC is a membership-based organization that promotes a common code of conduct aimed at improving working and environmental standards across the industry. It sets standards in:

• Labor,
• Health & Safety,
• Environment, Management Systems, and
• Ethics,

It also encourages its members to actively enlist each of their supply chains in the EICC framework as well. Member companies are subject to rigorous audits to ensure compliance with its strict guidelines, and members then work their own vendors to help them adopt the same standards. Some of the world’s leading electronics, communications, and other technology-focused corporations have joined the EICC and have used this framework to begin making strides toward improving their sustainable performance.

The framework of the EICC and that of the Global Reporting Initiative are highly complementary. The EICC is focused on raising sustainable production standards in the electronic industry, while GRI increases the level of transparency in sustainability reporting across all industries. By finding the synergies between EICC and GRI, companies in this sector can efficiently address risk while positioning themselves at the forefront of sustainable corporate practice.

Whoever is tired of the endless surveys, requests for data, questionnaires and other inquiries regarding sustainability related information please raise your hand.

Corporations (and their sustainability managers) are increasingly being asked by a wide variety of stakeholders, including customers, trade associations, the media, academic institutions, NGO’s and others about how they are addressing the topic of sustainability, their performance data, and their goals for the future. While the intentions behind such inquiries are noble, each request has its own specific nuances requiring individual attention (and time!) to complete.

A well planned, integrated sustainability report can be an efficient means of answering these questions. Indeed, what is a sustainability report? It is a document that provides information about what is most relevant (or “material”) to the organization and it stakeholders. While stakeholders are typically thought of as the shareholders, customers, employees and communities where the business is located, stakeholders are also those groups that have an interest in what the business is doing. The needs of these stakeholders should be considered in the report planning process.

The framework of the Global Reporting Initiative is a great place to start. Designed using a participatory process and updated regularly, it is geared towards covering what most stakeholders want to know from a corporation on its environmental and social performance and is commonly seen as the gold standard for corporate sustainability reporting. However, despite this, it does not cover all of the topics that some would consider part of the sustainability landscape. But there are ways to handle these gaps.

The first step is to perform a “Materiality Assessment”. This is a formal process whereby key individuals within the reporting company, as well as key external stakeholders are asked to assess the relevance of different topics as viewed from the perspective of various stakeholder groups. Through this activity, a set of topics is identified that are most relevant to the company and its own definition of sustainability and thus should be addressed in its sustainability report.

As part of this “Materiality Assessment”, we have found it to be very effective to also ask our clients about which surveys, questionnaires, and data requests they have received in the previous year. This list could include requests from commonly known sustainability data-gathering organizations (such as the Carbon Disclosure Project, TruCost, UN Global Compact, customers (for example, WalMart’s now famous questionnaire), or academic/NGO researchers. In our work, we have heard it is not uncommon for corporate sustainability managers to get several such requests per month. But each request takes time to complete, distracting the sustainability manager from his or her daily duties.

Upon closer examination, one will notice that many of these requests for information have common threads throughout them. Many ask for greenhouse gas data and goals, or human resources related data, or policies regarding supply chains. By examining the different requests, and importantly, cross referencing between them, a master list of commonly asked questions or referenced data can be generated. If these commonly asked questions are then included in a company’s sustainability report, then many of these requests can be fulfilled simply by sending the requestor a copy of the report.

This process will not anticipate ALL questions that a company may receive. However, the process outlined here will anticipate those questions that are most relevant to the most important internal and external stakeholders. With this “80/20” approach, the sustainability report prepared through the process described here will address almost all of the questions, and will still provide the sustainability community with much of the information it needs to advance the global knowledge pool farther along.