Sustainable development

• Jan 01, 2000

Sustainable development is a very broad concept affecting most aspects of our lives. The term was first defined by the Brundtland Commission's Our Common Future, a 1987 report of the World Commission on Environment and Development. According to the report, "sustainable development meets the needs of the present without compromising the ability of future generations to meet their own needs." Sustainable development consists of economic prosperity, environmental protection and social well being.

The inherent problem is in defining "development." One interpretation is allowing the free market system to operate, with sustainable development occurring on its own. Others believe it is defined as scaling back industrialized society. According to the U.S. Environmental Protection Agency (EPA), when a country exploits its natural resources beyond their renewable limit, it will experience growth, but not development.

Despite these different approaches to defining development, a holistic approach exists that integrates the ideals of economic development, social equality and ecological integrity. The question is how to implement an effective integrated system that works in the world as a whole. One step in reaching sustainable development is corporate social responsibility, in which both large multinationals and small companies play a role in achieving sustainability. Businesses must lead the effort through responsible and forward-looking practices and environmental policies. By doing so, businesses can gain a competitive advantage over other companies that have not employed efforts in achieving sustainability.

Contributions businesses can make for sustainability
Sustainable development initiatives are one way companies can rise to the challenge of improving the environment, and in doing so, increase their economic interests in today's competitive market. Companies are developing methods of analysis that look at the total environmental impact of their products. Some examples are finding renewable energy sources, continuing good environmental management, continuing good natural resource stewardship and maintaining a responsible attitude toward employees. According to Dr. Klaus M. Leisinger, executive director of the Novartis Foundation for Sustainable Development, "To act in accordance with sustainability criteria is ultimately to act in enlightened self-interest."

Businesses do face challenges in reaching sustainability. In the long term, the finite nature of our resources is the ultimate challenge. In addition, the local impact of a company's operations and its products, combined with the contributions of emissions to potential global climate change, poses a tremendous challenge. However, community initiatives, environmentally responsible products, and the generation of wealth and employment will all benefit society.

In the short term, businesses must reach eco-efficiency, an increased efficiency with continuous reductions in environmental impacts. In the long term, companies must implement clean production approaches. Currently, many industries are developing alternatives to finite resources. These alternatives are attractive, since they are not price-prohibitive. Real eco-efficiency and cleaner production can be reached through the ISO 14000 standard, an environmental management system that enables a company to recognize the potential impact of its operations on the environment. ISO 14000 integrates corporate environmental awareness into all of the business's activities, products and services, enabling the company to determine to what extent impacts can be controlled. It also helps the business allocate its resources where they are most needed to protect the environment, and suggests opportunities for ventures grounded in sustainability.

Additionally, companies on the cutting edge are developing intranets -computer networks contained within companies or organizations - with an environmental, health and safety (EH&S) component. These intranet components include interactive modules with links to source documents and tools. The intranet allows employees to quickly access and to understand how to integrate EH&S considerations into their operations at the facility level. These sites also contain tools for hazardous waste tracking, chemical inventories and online training. One company's annual environmental business plan reports an $18.5 million savings in cost avoidance solely due to its EH&S intranet site.

In addition to internal information sources, many U.S. companies are going public by educating local communities about the potential effects of environmental accidents, what can be done to prevent them and emergency response procedures in the unlikely event of an accident.²

For example, Modine Manufacturing Company of Racine, Wis., has developed a public relations plan with the primary goal of developing a relationship of trust with the community through employee training and public meetings. Companies like Modine Manufacturing are breaking the mold of the typical conservative public relations plan, and are gaining a competitive advantage with local communities.

Sustainable development also has become a major objective for many of Royal Dutch/Shell Group's companies, an example for other multinational corporations to follow. Special challenges for Shell companies and the fossil fuel industry are the finite nature of the resources, the local impacts from operations and from the use of their products, and the contribution of emissions to potential global climate change. In the short term, Shell is focusing on discovering fossil fuels, producing them, and using them with increasing efficiency and continuous reductions in environmental impacts. In the longer term, alternative energy sources will become attractive for the Shell companies, accompanied by innovative ways of using energy more efficiently to satisfy human needs.

To reach these goals, the Shell companies are improving the EH&S aspects of their operations and products, contributing to the debate on sustainability, and participating in the government policy-making process. This approach allows Shell to avoid unnecessary financial risks associated with investments that might not meet the sustainability criteria of certain communities. Shell understands that sustainable development presents difficult challenges to each of its businesses, but equally, "it will present opportunities both on the supply side, such as energy sources, materials and chemicals, as well as on the demand side with improved efficiency of use, dematerialisation, recycling and others."

For more information about Shell's sustainable development policy, visit its Web site at www.shell.com.

Business leadership for smart growth
One specific area U.S. businesses can lead efforts in advancing sustainable development, while gaining a competitive advantage, is suburban sprawl, a major concern for many communities. According to New Jersey Governor Christine Todd Whitman, "Suburban sprawl is eating up open space, creating mind-boggling traffic jams, bestowing on us endless strip malls and housing developments, and consuming an ever-increasing share of our resources." ³

Business leaders are beginning to recognize that sprawl threatens the quality of life in many communities, as well as the economic health of city centers. Business leaders nationwide are starting to engage in smart growth partnerships and initiatives that seek to promote economic development while preserving the quality of life of their communities. Inner cities provide unique potential competitive advantages that companies can leverage in order to turn a profit while also curbing unsustainable development. ⁴

According to a report cosponsored by Bank of America and the Greenbelt Alliance, a San Francisco-based land conservation organization, some of the adverse effects of sprawl on businesses include decreased employee productivity due to increased commuter travel time, the inability of many skilled workers to compete in the job market because transportation alternatives do not provide access to remote job locations, and the costs of new infrastructure and of mitigating transportation and environmental problems, which are passed on to businesses. ⁵

Business leaders around the country are realizing the economic efficiency of redeveloping areas with established infrastructure, rather than building the new infrastructure required to develop in new locations. Inner-city locations offer potential advantages for businesses that benefit from proximity to downtown business districts, logistical infrastructure, entertainment and tourist destinations, and concentrations of companies. ⁶

The National Association of Local Government Environmental Professionals (NALGEP) Smart Growth Advisory Council recommends that business leaders from all sectors take the following actions to address the challenges of sprawl and smart growth:

(1) Increase awareness within the business of the economic impacts of sprawl;

(2) Participate in studies and analysis of sprawl and smart growth;

(3) Foster business-to-business education on the issues of sprawl, smart growth and better development practices;

(4) Get involved in land use and transportation and planning activities at the local and metropolitan level;

(5) Support downtown revitalization initiatives, including upgrades to existing infrastructure;

(6) Support the redevelopment of brownfields - abandoned industrial sites stigmatized by real or perceived contamination - and other smart growth development practices;

(7) Promote alternatives to automobile-dependent commuting for employees; and

(8) Publicize smart growth practices and success stories.

Several companies have demonstrated that smart growth can lead to a better environment coupled with their own economic success. Hugh L. McColl Jr., Bank of America chairman and CEO, exemplified the importance of business leadership when he said, "If we're going to change our country's landscape as much in the next hundred years as we have in the past hundred years - and development patterns suggest an increase in growth - we would be wise to think long and hard about how we can achieve that growth while building strong communities and protecting our environment at the same time." ⁷ Bank of America is aggressively pursuing smart growth practices across the country through lending for brownfields redevelopment, infill projects and mixed-use development.

The Commercial Club of Chicago, a membership organization of more than 400 businesses and civic leaders, has already raised $4 million to launch Chicago Metropolis 2020, which is dedicated to enhancing public transit, protection of open space, an increase in the range of housing opportunities and a regional coordinating council to issue bonds for regional projects. The club is comprised of Chicago business leaders, including the Tribune Co., Ameritech Corp., Schwarz Paper Co. and the McDonald's Corp.

Entities helping businesses reach sustainable development
The EPA announced on Sept. 8, 1999, in its report Aiming for Excellence: Actions to Encourage Stewardship and Accelerate Environmental Progress, ⁸ that it will set up a new system to reward businesses and other organizations that excel in environmental management. According to EPA Administrator Carol M. Browner, "This is the next step for EPA in Vice President Gore's efforts to reinvent government to make environmental protection work better and more cost-effectively for all Americans." This is the first move by EPA to provide rewards for organizations that do more than required to manage their operations. In addition, the new program offers incentives that could encourage improvements in environmental performance. The report also demonstrates the agency's efforts in increasing its activities to work with regulated facilities.

In addition, on July 8, 1999, EPA and the Chemical Manufacturers Association (CMA) released the EPA/CMA Root Cause Analysis Pilot Project Report, which examines the underlying causes of environmental violations in 47 federal civil enforcement cases between 1990 and 1995.8 Among the leading causes for non-compliance were individual responsibility and lack of awareness of regulatory requirements. This report highlights the role environmental management systems (EMSs) can play in promoting sustainable development, as they control and minimize the environmental effects of a company's activities. EMSs call upon companies to improve their overall EH&S performance in a manner responsive to the public.

Another entity that helps companies promote the policy of sustainable development is the Global Environmental Management Initiative (GEMI), a nonprofit organization comprised of large corporations, that strives to achieve EH&S excellence combined with economic success. ⁹

According to a GEMI report released on March 11, 1999, "The use of incentives can be used in tandem with traditional "command and control" regulation to obtain better environmental results." GEMI's efforts in bringing together federal, state, environmental and private sector representatives help businesses foster environmental excellence. GEMI delivers financial benefits of long-term investment and raises the bar for environmental performance.

Furthermore, a coalition of investors, environmental groups and social policy advocates has unveiled guidelines for corporate reporting on sustainability. Reports that conform to guidelines allow investors and other members of the public to track a company's performance year to year and allow comparisons among businesses. These guidelines are designed to provide a uniform method of comparing companies' performance using economic, environmental and social criteria, according to the Coalition for Environmentally Responsible Economics (CERES). ¹⁰

The guidelines on sustainability reporting were drawn up by the Global Reporting Initiative (GRI), an effort that included CERES, the World Resources Institute, Polaroid, British Petroleum, PricewaterhouseCoopers LLP, Arthur D. Little and others. The guidelines are designed to encourage both accountability and learning. ¹¹ According to Robert Massie, executive director of CERES, "Increased public disclosure will lead to increased accountability, resulting in greater motivation for companies to improve their performance." ¹²

One hurdle companies have to face is the difficulty in international regulations, since the value of a resource in one geographical area may be totally different than in another. It is difficult to develop consistent guidelines that can be applied across national borders. However, many businesses are engaging in eco-labeling, which enables consumers to look at the life-cycle assessment of a product. Today, all companies are expected to know the value-adding, life-cycle chain of their products. ¹³ Eco-labeling is an important marketing tool that provides a way of communicating the "soft" aspects that are not otherwise readily available or apparent to the buying party. In addition, eco-labeling is crucial in communicating environmental aspects of products, both national and international.

Conclusion
To reach sustainable development, there must be interaction among community, government, business and societal goals. Companies must continue to pursue environmental optimization, which involves meeting society's needs with the least burden to the environment. Sustainability presents opportunities to businesses, both on the supply and the demand sides, with improved efficiency of use. It ultimately involves a price system that will discipline both consumers and industry at all stages of its processes.

Notes

¹Ankers, Ray H. "Beyond Survival." Environmental Protection. March, 1999.

²Engelgau, Donna. "Nightmares on the Net" Resources. October, 1998.

³"Profiles of Business Leadership on Smart Growth." National Association of Local Government Professionals. 1999.

⁴Porter, Michael E. "The Rise of the Urban Entrepreneur." State of Small Businesses. 1995.

⁵"Profiles of Business Leadership on Smart Growth." National Association of Local Government Professionals. 1999.

⁶Porter, Michael E. "The Rise of the Urban Entrepreneur." State of Small Businesses. 1995.

⁷"Profiles of Business Leadership on Smart Growth." National Association of Local Government Professionals. 1999.

⁸The EPA report titled "Aiming for Excellence: Actions to Encourage Stewardship and Accelerate Environmental Progress" is located at www.epa.gov/reinvent.

⁹"The Root Cause Analysis Pilot Project Report is located at < href="http://www.epa.gov/oeca/ccsmd" target="_blank">www.epa.gov/oeca/ccsmd.

¹⁰ The Global Environmental Management Initiative Strategic Plan is located at www.gemi.org.

¹¹Hogue, Cheryl. "Draft Guidelines Would Allow Comparison of Corporate Reports on Sustainability." Daily Environment Report. March 4, 1999.

¹²The GRI guidelines may be obtained from the interim GRI Secretariat Judith Kuszewski at (617) 247-0700.

¹³Hogue, Cheryl. "Draft Guidelines Would Allow Comparison of Corporate Reports on Sustainability." Daily Environment Report. March 4, 1999.

¹⁴Hedblom, Mats-Olov. Environment, For Better or Worse. www.ericsson.com.

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This article originally appeared in the 01/01/2000 issue of Environmental Protection.