Beyond survival

• By Paul F. Hudak, PhD
• Mar 01, 1999

Bottom-line basic resources from the experts How can the environment sustain a growing population and also allow for improved standards of living? How can we ensure world economic growth continues to support future generations? Business must lead the effort through responsible and forward-looking practices and environmental policies. Environmental professionals need to provide upper management with the big picture. Their expertise should include profit-making information about the economic, social and growth benefits of environmental responsibility to business. Environmental responsibility goes much farther than environmental, health and safety (EH&S) efforts to meet federal and state requirements. Of course, without compliance, companies must face fines and possible restrictions on the right to operate, with concurrent loss of customer loyalty. But voluntarily minimizing pollutants and other environmentally sound, proactive policies are the first steps toward company survival. Life, growth and a profitable future depend upon it. Make a business case Sustainable development initiatives are one way companies are rising to the challenge. "To act in accordance with sustainability criteria is ultimately to act in enlightened self-interest," said Dr. Klaus M. Leisinger, executive director of the Novartis Foundation for Sustainable Development. The foundation is a global organization dedicated to sustainable development. As a non-profit arm of Novartis, a multinational pharmaceuticals and life sciences company based in Switzerland, it is charged with improving the quality of life for people in developing countries. Leisinger points out that environmentally responsible companies help their industries avoid over-regulation. Sustainable development process improvements and activities are insurance against the cost of stringent governmental regulations to correct irresponsible business policies. The interconnectedness of the global economy, moreover, ensures that no company is immune to this responsibility if it is to remain profitable and provide stakeholder value. Sustainable development initiatives must take place before environmental law and social legislation force the company's hand. The big picture The Novartis Foundation promotes a companywide awareness of sustainable development. There is a strong business case for ensuring a healthy ecosystem in the future, since by doing so, a company is protecting and improving the lives of future customers. Environmental managers must educate themselves about their company's business goals and then educate management about how environmental initiatives can help meet their business goals. There are practical ways to get there. For example, the Novartis Pharmaceuticals production plant in Ringaskiddy, Ireland, has registered with the annual Self Audit and Statement of Energy Accounts Scheme, a plan administered by the government's Irish Energy Centre. The plan is designed to encourage voluntary energy saving and to facilitate benchmarking among Irish industries. Through this program, Novartis has been using fewer resources while avoiding concomitant waste management costs and risks - all prime indicators of sustainability. The company has reduced operating costs and its external environmental impact by the voluntary review of energy-use targets, which also helps with future capacity planning. Thus, a good-will gesture expands to ensure profitability in the future. Another entity that promotes the policy of sustainable development is the Global Environmental Management Initiative (GEMI), a nonprofit organization comprised of large corporations such as Novartis, the Occidental Petroleum Corp. and the Dow Chemical Co. Through the collaborative efforts of its members, GEMI attempts to foster excellent EH&S management practices and sustainable development on a world-wide basis. As GEMI outlines in its primer Environment: Value to Business, and as the Ringaskiddy case shows, there are a great many ways to achieve the value-add quotient of sustainability. Among them are identification of value-creating opportunities. For example, in Ringaskiddy, capacity planning capabilities were developed as a by-product of its program. The primer urges "thinking beyond regulatory impact to avoid raw materials costs and risks, and reduce external environmental impacts and operating costs." Voluntary partnerships with international and local regulatory agencies, such as the Energy Centre in Ireland, can add value to the manufacturing function of nearly every company. 2BTM to the rescue Usually an ally in new business development, banks lend money to build profitable facilities. According to the World Watch Institute's State of the World Report 1998, credit for facilities expansion is more readily available to eco-friendly companies. A United Nations initiative that will link the state of global corporations with the state of the world provides companies with an environmental opportunity. Two billion people to the marketplace by 2020 (2BTM) allows business to take a leadership role in world sustainable development. Both the world economy and the world ecosystem are looking to international corporations to take a leadership role. "The greatest source of new customers will be the people who live in poverty today. Ensuring their growth and economic viability through sustainability practices ensures the future of business," said Andrei Marceu, U.N. director of the proposed 2BTM program. Government cannot do it alone, nor can it enact last-ditch efforts in regulation that ultimately put a stranglehold on both developing and "overdeveloped" global industry. Leaders in the sustainable development effort will win public support for their brands and larger segments of the marketplace. They will also beat the careless polluter in profit. As the greening of the world's attitude toward the irresponsible behavior of polluters continues, marketplace sanctions will result. Green funds, such as the Scudder-Storebrand Environmental Value Fund (EVF), invest in best-in-class companies across global industries that are leading in environmental efficiency. Early results indicate that capital markets reward companies that enact positive sustainable development programs. Companies are responding to the call. The Novartis Foundation for Sustainable Development's primary purpose is funding sustainable development projects around the world. Many other companies are also paying attention to the long-term view of their industrial practices and the life cycle impacts of their products. Emissions reduction and waste and wastewater treatment are important focus areas for industry efforts. Sustainability in these areas requires new technologies to eliminate waste at the source, rather than with end-of-pipe treatments. Philanthropic efforts abroad will also help identify the environmental needs of developing countries. The triple bottom line Industrial growth also depends upon acquiring the credit to build and expand existing sites. Increasingly, banks will lend only to those companies that meet environmental guidelines, such as the protection of water quality or preserving endangered species and indigenous cultures. Access to credit and capital, then, is directly related to how well a company follows environmental mandates in its profit-building activities. Investors and consumers expect corporations to be accountable for their impact on society, the environment and financial performance. This "triple bottom line" engages environmental professionals as the logical link to management for sustainability programs, and for communicating their value to stakeholders. Thus, after many successes in improving environmental performance, companies are now addressing the societal impacts of their activities. Further progress in these areas will benefit the firms, society and the environment. Corporate foundations can also provide services in resource management on a project-by-project basis. Not only is it "the right thing to do," but corporate environmental stewardship is compatible with business goals as well. Sustainable development initiatives offer less risk, open access to new markets and promote cost reductions that build profit. The GEMI report indicates that largely due to the widespread use of value-to-cost ratios, environmental management is linked to profit building. Every dollar spent on EH&S yields two dollars in revenue. These ratios provide evidence that resources spent on the environment, and more broadly, sustainability, pay for themselves. To save money, start asking questions like: Where can pollution be prevented at the source? How can we reduce waste by redesigning product development processes? "We can now justify our existence," said Robin Tollett, Proctor and Gamble's global environment section head. These activities also reduce the likelihood that business may ultimately be put out of business by global environmental decline - the deadly by-product of waiting too long.

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Bottom-line basic resources from the experts There are many organizations devoted to sustainable development that are good sources of additional information. Global Environmental Management Initiative (GEMI) is a non-profit organization of leading companies in the field. For more information, see www.gemi.org. The World Watch Institute releases information from its State of the World reports on the big-picture problems all businesses need to beat. Find them at www. worldwatch.com. The World Resources Institute, an independent center for policy research and technical assistance on global environmental and developmental issues, can be found on the Web at www.wri.org. The institute publishes The Next Bottom Line by Matthew B. Arnold and Robert M. Day, which includes charts, graphs and solid sustainability initiatives that can be developed at any company. The Novartis Foundation for Sustainable Development is at www.foundation.novartis.com. The World Business Council for Sustainable Development is a coalition of 125 international companies united by a shared commitment to the environment and to the principles of economic growth and sustainable development. Its website, www.wbcsd.ch, includes case studies and definitions, as well as a catalog of links to similar sites.

This article originally appeared in the 03/01/1999 issue of Environmental Protection.