1. Bren School Corporate Partners Summit – 11 May 2007 Roland Geyer The Donald Bren School of Environmental Science and Management University of California at Santa Barbara From Corporate Environmental Management to Green Business Models

2. Bren School Corporate Partners Summit – 11 May 2007 Is there a relationship between corporate financial performance and corporate environmental performance?

3. Bren School Corporate Partners Summit – 11 May 2007 ExxonMobil reports annual profits of $25bn Business: US oil giant reports annual profits that exceed the GDP of Syria. More business news Global warming 'may kill off polar bears in 20 years' Life: Many Arctic animals could be extinct within 20 years because of global warming, conservationists warn. Special report: climate change Monday January 31 2005Search this site Source: http://www.guardian.co.uk/

4. Bren School Corporate Partners Summit – 11 May 2007 A US company never reported higher profits. For at least 650,000 years, CO2 concentration has never been higher than 300 ppm. There certainly seems to be a relationship between Exxon’s corporate financial and environmental performance

5. Bren School Corporate Partners Summit – 11 May 2007 Who should solve our environmental problems? 1. Companies 2. Consumers 3. Government 4. NGOs

6. Bren School Corporate Partners Summit – 11 May 2007 Ecosphere Anthroposphere Source of: Materials Energy Water Land Sink for: Wastes & Emissions Needs & Wants Services Products Production Industrial production and consumption systems use the environment as source of resources and sink for wastes and emissions We are all part of the way we produce and consume goods and services. We are all equally responsible.

7. Bren School Corporate Partners Summit – 11 May 2007 Ecosphere Anthroposphere Source of: Materials Energy Water Land Sink for: Wastes & Emissions Needs & Wants Services Products Corporations Only about 15% of all businesses are incorporated, Corporations account for nearly 90% of business receipts and 80% of net profits. Corporations just happen to play a crucial role in the production of goods and services

8. Bren School Corporate Partners Summit – 11 May 2007 The Development of Environmental Policy in Europe 1970s - Introduction of environmental regulations (single process, single site and single medium) 1990 - Integrated pollution control (single process, single site, all mediums) 1999 - Integrated pollution prevention and control (whole environmental performance of a plant) 2003 - Integrated product policy (adoption of life cycle perspective) Source: European Commission White Paper COM(203) 302 final

9. Bren School Corporate Partners Summit – 11 May 2007 Production waste and emissions Transport and distribution waste and emissions Use and maintenance waste and emissions End-of-life waste and emissions Raw materials mining Primary materials production Component manufacture Final product assembly Product use and maintenance Product disposal Service Materials Energy Materials Energy Materials Energy Materials Energy Materials Energy Materials Energy Supply Chain Product Life Cycle What is a Life Cycle Perspective?

10. Bren School Corporate Partners Summit – 11 May 2007 Life Cycle Assessment of Products Climate Change Eco- toxicity Photo-chemical Smog Ozone depletion Etc. Production of materials Manufacturing of product Use & Distribution End-of-life management Total life cycle Life cycle stages Environmental impact categories Life cycle assessment aims at quantifying the environmental impacts across all relevant environmental concerns and all relevant life cycle stages.

11. Bren School Corporate Partners Summit – 11 May 2007 Material Transformation Process Air emissions Waste water Solid wastes Products Raw materials & energy It is the material and energy flows in the life cycle of a product that cause the environmental problems

12. Bren School Corporate Partners Summit – 11 May 2007 There are essentially three ways to reduce the environmental impacts of material and energy flows: Increase material and energy efficiency Increase material and energy efficiency Substitute materials and energy sources Substitute materials and energy sources Reuse & recycle materials and energy Reuse & recycle materials and energy If environmental problems are caused by material and energy flows, solving them is also a material and energy issue.

13. Bren School Corporate Partners Summit – 11 May 2007 Examples for increased resource efficiency Advanced High Strength Steels (AHSS) in automotive applications (25% weight reduction) Mass reduction of beverage containers Continuous casting technology in metals production Drip lines instead of sprinklers for irrigation Carsharing businesses Spaceframe design concept Miniaturization in the electronics industry

14. Bren School Corporate Partners Summit – 11 May 2007 Crop-based ethanol instead of gasoline MTBE instead of lead as oxygenate in automotive fuels Steel versus aluminum versus magnesium versus composites in automotive Timber versus steel versus concrete in construction Glass versus aluminum versus PET versus laminated cardboard in packaging Bio-based plastics versus petroleum-based plastics (e.g. polylactic acid) Lead-free solder (e.g. tin silver copper antimony) Examples for substitution of materials and energy sources

15. Bren School Corporate Partners Summit – 11 May 2007 Examples for reuse and recycling of materials and energy Recycling of metals, e.g. steel and aluminum Recycling of paper and cardboard Recycling of carpet and apparel Combined-cycle and combined heat and power (CHP) power generation Remanufacturing of single-use cameras Refurbishment of cell phones Reuse of construction components

16. Bren School Corporate Partners Summit – 11 May 2007 How should companies implement these 3 strategies? 1. Focus only on profits and environmental compliance 2. Retrofit the strategies into a going concern 3. Build them into the business model

17. Bren School Corporate Partners Summit – 11 May 2007 Retrofit example: Ford’s Dearborn Plant 10.4 acres of green, living roof 30,000 bushes, flowers and trees 20,000 honey bees Energy recovery from paint fumes Gold LEED certified Clean Air Excellence Award

18. Bren School Corporate Partners Summit – 11 May 2007 Q: What is a green business model? A: A business model that relates corporate financial performance to corporate environmental performance. Necessary ingredients Meaningful environmental performance measures Meaningful environmental performance measures Environmentally preferred products or services Environmentally preferred products or services A business case for those products and services A business case for those products and services

19. Bren School Corporate Partners Summit – 11 May 2007 Green business model - Example 1: Nucor (kg CO2 eq)(g p-DCB eq)(g ethylene eq)(g SO2 eq)(g PO4 eq) Environmental impacts of making 1 kg of primary (BF/BOF) and secondary (EAF) steel World’s largest steel recycler (19 scrap-based steel mills) First company to produce flat steel products from secondary (EAF) steel Tradition of technological innovation with environmental benefits (e.g. strip casting)

20. Bren School Corporate Partners Summit – 11 May 2007 Green business model - Example 2: Kodak’s Single Use Camera Kodak’s single use cameras were introduced in 1987 as disposable products. Soon they were a target of environmental pressure groups. In 1990/91 Kodak redesigned the cameras to facilitate recycling and re-use of parts. Today, single use cameras are designed so that 77% to 90% (by weight) of the product can be remanufactured. Everything else is recycled. In the U.S., the recycling rate for single use cameras is greater than 75%.

21. Bren School Corporate Partners Summit – 11 May 2007 Green business model - Example 3: InterfaceFLOR and Evergreen Lease InterfaceFLOR is the world’s largest manufacturer of carpet tiles. Interface created the Evergreen Leasing System in 1995 together with the Southern California Gas Company for its Energy Resource Centre in Los Angeles. Interface uses life cycle assessment to evaluate its environmental performance. Interface is the first carpet manufacturer to use fibers from polylactic acid. Interface has very ambitious programs for recycled content and end-of-life recycling. Failure of the leasing scheme to secure a significant market share.

22. Bren School Corporate Partners Summit – 11 May 2007 Summary Corporate Social Responsibility is good (see Ford’s Dearborn plant). The future belongs to corporations with green business models.Corporate Social Responsibility is good (see Ford’s Dearborn plant). The future belongs to corporations with green business models. Green business models require that corporations rethink their products and service (e.g. Exxon vs. BP).Green business models require that corporations rethink their products and service (e.g. Exxon vs. BP). Green business models require meaningful environmental performance measures (e.g. life cycle assessment).Green business models require meaningful environmental performance measures (e.g. life cycle assessment). Successful green business models still require a business case (see Evergreen Leasing System).Successful green business models still require a business case (see Evergreen Leasing System).