Energy-Water Nexus Clip #5 from Solar One on Vimeo.
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Meet the Change Makers: The New Pepsi Challenge | OnEarth
Bringing sustainability to the soda and snack food aisles
Editor’s note: This is the first in a series of OnEarth Q&As with business leaders who are transforming their industries.
Since the days when Pepsi challenged Coke to a long-running public taste-off, the cola wars have receded to a quaint memory. PepsiCo has since grown to nearly twice the size of Coke, selling a more diverse line of products. The company based in Purchase, New York, posted sales of $57.8 billion in 2010, but just half of its revenue comes from beverages: Pepsi Cola, Mountain Dew, and Gatorade are its top-sellers. The rest? Those salty snack foods common at picnics and lunch tables, including Lay’s potato chips, Doritos tortilla chips, and Fritos corn chips.
In recent years, PepsiCo has also worked to distinguish itself from its archrival with a more prominent focus on corporate sustainability. Under CEO Indra K. Nooyi, the company has defined its five-year mission, dubbed Performance with Purpose, as “delivering sustainable growth by investing in a healthier future for people and our planet.” On the ground, this has translated into investments in renewable energy, packaging reductions, and company-wide efforts to cut the use of energy, food commodities, and water. Those initiatives have already saved nearly 20 billion liters of water since 2006, according to PepsiCo’s most recent assessment. Pumping and treating less water has helped trim energy use substantially, too, because moving less water means using less electricity and fuel to power factories. While PepsiCo won’t reveal a dollar value on these savings, they run into the hundreds of millions.
The successes haven’t insulated PepsiCo from environmental controversy, however. The trash flow from billions of plastic bottles and the private sale of public water resources ignited public ire a few years ago and continues today. In March, PepsiCo unveiled the first fully recyclable disposable beverage bottle made from plant-based materials that don’t compete with food crops. The news won praise from green groups, including NRDC. It came just a few months after the company’s Aquafina brand was given a “D” for transparency by the Environmental Working Group in its Bottled Water Scorecard.
OnEarth contributor Adam Aston recently spoke to Dan Bena, senior director of sustainable development at PepsiCo. A 27-year veteran of the company, he is active in international water issues, having worked with the United Nations CEO Water Mandate and the World Economic Forum, among others, to chart a course toward worldwide water sustainability and security. He opened up about the environmental challenges the snack food giant faces.
You’re trying to curb water use across the company. How is PepsiCo changing the way it operates to meet that goal?
In 2009 PepsiCo became one of the first large companies to publish public guidelines recognizing water as a human right. This was just before the United Nations General Assembly did likewise. We’ve gotten a lot of positive feedback, even from non-governmental organizations that wouldn’t have had much time for PepsiCo before then, praising that step as an important line in the sand to draw.
The challenge we face now is to embed those values in our day-to-day operations, and to push them out to our suppliers and customers. To do so, we set out a few specific goals focused on water. Within our own beverage and food factories, we aim to improve our water-use efficiency by 20 percent by 2015, from a 2006 baseline. In fact, we’re already at 19 percent, so we hope to hit that goal very soon, four years early.
Second, we’re aiming to have positive water balance in water-distressed areas. Last month during World Water Week, an annual global summit of water experts in Stockholm, we published a joint report with The Nature Conservancy assessing the benefits of watershed preservation and restoration in five global communities, to help us and others learn better practices for protecting watersheds.
Lastly, we set a goal to provide three million people in water-distressed areas with access to safe water, also by 2015.
How do you define and improve “water-use efficiency?”
It’s a measure of the total water used to make a single unit of our product. For example, as a rough global average, it takes PepsiCo about 2.5 liters of water to produce a liter of beverage. It’s really variable though. At our best plants, it’s probably half that, and a few facilities use twice that amount. That’s the opportunity we face: to lower water use at our least efficient plants.
We track our internal water use for drinks by liters per liter of beverage, or for snacks as liters per kilogram of food. Using an analytical method we developed in house, called Resource Conservation, or ReCon for short, our plants around the world have gone through and meticulously mapped streams of water use.
When you do this, you see how water costs add up. Incoming fresh water is expensive to bring into a factory. On top of that, every liter that enters a factory must be treated, processed, and discharged. Each of these steps carries costs. So by reducing the amount of water entering a plant, you reduce those extra steps, too, and the savings compound. Factory managers used to the idea that “water is cheap” suddenly start paying attention. There’s no better way to get their attention than saying: “This can save you money.”
Since its launch in 2009, ReCon water has prevented the use of 2.2 billion liters of water, with a corresponding cost savings of nearly $2.7 million. We’ve also begun extending ReCon water-saving practices to our key suppliers. So far, those partners have scored a collective 22 percent improvement in water-use efficiency, compared with a 2007 baseline.
What else is water used for in the factories other than the actual beverages and food?
Believe it or not, in a beverage plant, one of the largest users of water is the room where the water is filtered. There, frequent backwashing of filters and advanced membranes consume really high volumes of water. Another of the biggest users is what we call “clean in place” or “sanitize in place,” where water is used to douse conveyers, equipment, floors, and rooms, ensuring they’re sanitary before producing beverage. Sometimes, it’s even used as a lubricant to keep conveyor belts flowing.
Are similar water-saving steps underway at PepsiCo’s food plants?
Yes. Few people realize this but producing food is also highly water-intensive. Making potato chips uses as much water as making beverages. There’s a lot of rinsing as potatoes are processed: to remove dirt when they’re peeled; to take off an outer layer of starch so they fry better. Companies talk about taking factories or buildings off the electric grid, but no one talks about taking plants off the water grid. That’s something we’re exploring at our Walkers potato chip plants in the United Kingdom.
As they arrive from the farm, potatoes are 80 percent water. Frying drives out most of that moisture as steam. The Walkers team is developing a process to capture that steam before it goes out a stack and bring it back into the process. It’s enough water, we think, that the plant could operate without taking fresh water from public supplies.
These efficiencies improve PepsiCo’s internal water usage. But what steps are you taking to help the communities you operate in where water is scarce?
I mentioned before that we’re aiming to achieve a “positive water balance” in water-stressed regions. An example can help explain our approach. One of the easiest areas in which to achieve big water savings is agriculture. Globally, farming accounts for about three-quarters of water use. In India, it’s more — about 85 percent. We make a variety of beverages there, and water supplies are widely at risk. To help lower farms’ water use, PepsiCo developed and patented a relatively simple piece of equipment that automates the direct seeding of rice.
Conventionally, rice is planted in a flooded field, where young shoots sit in three or four inches of water for up to six months. Direct seeding shortens this period and cuts water use by about one-third. We estimate that developing and promoting direct seeding lets us give back 5.5 billion liters of fresh water each year that would have otherwise been drawn from wells or surface streams and lakes.
Critics have cried foul over the idea of selling bottled water in low-income countries. You’ve argued that they’re missing the point — that water is sold anyhow, often at unfair rates in those markets.
There’s a misconception that poor people cannot and should not pay for water. The reality is that in many cases they do pay for water: the trouble is they often pay high prices for poor-quality water. Delivering safe, clean water at a fair price is something that can help close the health and poverty gap between consumers at the “base of the pyramid” — the poorest half of the world’s population — and the developed world.
This relates to PepsiCo’s third goal I mentioned: improving access to fresh water for three million people by 2015. To hit this goal, we’re working with Columbia University’s Earth Institute and Water.org — which is the merger of Water Partners International and Matt Damon’s H2OAfrica.
The PepsiCo Foundation provides funding to assist a variety of Water.org projects. Under the WaterCredit Program, the money is distributed in microloans, on the order of $120 per loan, and used to build household sanitary facilities or to improve access to fresh water. The loans go almost entirely to women, and repayment has been close to 100 percent. Any global bank would be envious of those kinds of returns.
Earlier this year, we became the first private sector donor to the Inter-American Development Bank’s Aquafund. With our $5 million donation, the plan is to “lift and shift” the WaterCredit model from India to Latin America, and to deliver safe water to 500,000 people there by 2015.
Our third partner is the Safe Water Network, a not-for-profit that PepsiCo founded with Paul Newman’s charity and others who saw the need to bring people safe water. This work is focused on Ghana, India, and Kenya.
Some argue that the nature of the water crisis — its very scale and stubbornness — make it a poor match for corporate efforts. How do you reconcile PepsiCo’s reach with the scope of the challenge?
It’s true that water crises are enormous — so much so that no single entity can solve them alone. That’s why all the key players — governments, NGOs, academia, individuals and, yes, industry — must collaborate on the solutions. Recognition is the start of a long journey to help improve the situation. Commitments are the next step.
At PepsiCo our challenge now is to formalize those efforts, test their success and nurture the best of those practices across our business units around the world. It is a daunting process. But our efforts together with those of others — I think of it as a divide-and-conquer approach — can help achieve steady, small steps.
So, do companies have a role in protecting water? Not just a role, but an absolute obligation.
Sidebar: TRUTH SQUAD
Checking industry claims with NRDC’s sustainability experts
PepsiCo has been in the middle of more environmental and health controversies over the past decade than at any time in the century since it patented the recipe for Pepsi-Cola. In recent years, its Aquafina brand of bottled water came under fire. Today, the waste caused by the beverage industry, as well as questions about the commoditization of a public resource, persist as lighting-rod issues. Health is another knotty challenge. Concerns continue to mount over the role of sugary drinks as childhood obesity and diabetes rates skyrocket.
While some companies have shied away from acknowledging such problems, PepsiCo has responded with a range of industry-leading efforts. “Does one praise a company making an unsustainable product such as bottled water? I don’t know,” says Jonathan Kaplan, an NRDC senior policy specialist in San Francisco. “But there’s no question that they’re forward thinking on these issues relative to their competitors.”
For example, in 2009, the company conducted a life-cycle assessment to gauge the environmental impact of its Tropicana orange juice line and published the results in the New York Times. “Many companies spend time doing LCAs, but they rarely make the findings public,” says Kaplan. Likewise, its public focus on developing plant-based plastic bottles, recycling, and greener operations boost the pressure on its competitors to follow suit, Kaplan adds.
Water use is another area where PepsiCo is leading its peers, Kaplan says. “Food manufacturers, in general, are closer to recognizing that we’re headed toward a future with finite resources, where water, grain, and other inputs are less available and more expensive.” By this measure, the company’s efforts to curb water use at its plants gives it an edge — and just might drive competitors to do likewise. “Companies that figure out how to become part of the solution will have an advantage.” — Adam Aston
URL for the original story: http://www.onearth.org/article/change-makers-new-pepsi-challenge
Carbon War Room Aims to Cut the Barriers to Building Energy Retrofits | GreenBiz
The Carbon War Room today launched a new consortium that aims to cut through the Gordian knot of barriers that has made it tough to finance commercial building retrofits. In the process, the groups involved hope to pick off billions of dollars worth of the lowest-hanging fruit of building energy efficiency.The Carbon War Room’s approach opens the door to zero-upfront-cost deals for mid- and small-scale retrofits, where in the past only a limited group of larger projects could land financing for such deals.
To turn this trick, the new plan upgrades an existing financing model known as PACE. It also relies on private capital, rather than public subsidies.
“This is game changing. It has the potential to solve the problem of the commercial retrofit market that has lingered for 35 years,” said Jigar Shah, CEO of The Carbon War Room at the BusinessClimate 2011 event today in New York City.
Across the country, older buildings are ripe with some of our economy’s largest concentrations of energy waste, and thus offer some of the least-costly fixes. Improving the world’s building stock offers the opportunity to save 5 gigatonnes of greenhouse gas emissions per year, and amounts to a $2.5 trillion investment opportunity, said Shah.
Dubbed PACE Commercial Consortium, or PCC, the approach brings into alignment the interests of a series of players that in the past have failed to find the right profit motives, risk levels, or technologies to get beyond one-off, complex deals to finance major green commercial retrofits.
For commercial building owners, the PCC offers a turnkey model that delivers financing, the building upgrade and deal insurance, all paid through a increased tax assessment that is more than offset by reduced energy costs.
The players debuting today with the PCC’s first round of deals are:
• Lockheed Martin (Bethesda, Md.) will provide building technology and services to audit, install and authenticate efficiency gains.
• Energi (Peabody, Mass.) insures the deals, using proprietary energy engineering underwriting standards, to help guarantee the savings promised by Lockheed. As a reinsurer, Hannover Re will back Energi’s policies.
• Barclays Capital will raise the capital to finance these deals and Ygrene Energy Fund (Santa Rosa, Calif.) will administer the financing.
The new program builds on an older model of retrofit financing known as the property-assessed clean energy program, or PACE. As pioneered in California in 2008, PACE legislation enables property owners to accept a voluntary tax assessment as a means of repaying upfront financing of energy efficiency and renewable energy improvements. Twenty-six states in the United States have enacted legislation enabling the secure and scalable financing PACE structure.
Because they are repaid alongside tax assessments, PACE assessments are already considered a very low risk financing option. The PCC goes further in a number of ways, according to Murat Armbruster, a senior advisor who led the Carbon War Room’s involvement.
First, PCC lowers the risk of retrofit deals by having Energi insure the energy savings contracts that Lockheed signs with building owners. With reduced risk on the payment stream derived from these energy savings deals, Barclays Capital and Ygrene Energy Fund can offer lower-cost funding by bundling a number of these deals into an investable asset sought out by pension funds and institutional investors.
How do the players make money in this complex relationship? Here, I’ll crib from the New York Times, which has the best explanation of this process I could track down. (There’s also a graphic from Ygrene at the bottom of this post showing the process graphically.)
Ygrene and its partners will gain exclusive rights for five years to offer this type of energy upgrade to businesses in a particular community. They will market the plan aggressively, helping property owners figure out what kinds of upgrades make sense for them. Lockheed Martin is expected to do the engineering work on many larger projects.
The retrofits might include new windows and doors, insulation, and more efficient lights and mechanical systems. In some cases, solar panels or other renewable power might be included. For factories, the retrofits might include new motors or other gear.
Short-term loans provided by Barclays Capital will be used to pay for the upgrades. Contractors will offer a warranty that the utility savings they have promised will actually materialize, and an insurance underwriter, Energi, of Peabody, Mass., will back up that warranty. Those insurance contracts, in turn, will be backed by Hannover Re, one of the world’s largest reinsurance companies.
As projects are completed, the upgrade loans, typically carrying interest rates of 7 percent, will be bundled into long-term bonds resembling those routinely issued by governmental taxing districts. Barclays will market the bonds. Retirement funds have expressed interest in buying these bonds, which will be repaid by tax surcharges on each property that undergoes a retrofit.
At a time when public funding for green retrofits is drying up, tapping private capital pools holds great allure. “These investments are 100 percent private capital. There is no government debt or cost involved. The markets can supply this financing because the economics are sound, engineering performance is insured, the security is strong, and clean energy capital assets are profitable,” said Brian McCarthy, CEO of Energi Insurance Services in a prepared statement.
In the deal announced today, the Carbon War Room unveiled details about the size and location of the first round of investments to be place: $650 million in PCC deals will be focused on two commercial markets.
First, Miami-Dade County, Fla., a market estimated to have $550 million in retrofit funding potential. This funding can, in turn, generate up to $1.8 billion in economic activity in the Miami-Dade region.
The second site the consortium is focusing on in this first round is the city of Sacramento, Calif. where there’s an estimated $100 million market and another $530 million in potential economic activity.
As a side note, least year, the Federal Housing Financing Agency (FHFA) — which oversees Fannie Mae and Freddie Mac — issued a letter that all but froze PACE financing for residential mortgages.
However, because they are not backed by the housing agency, commercial PACE deals were not impaired by the ruling. That said, the ruling has had a broad chilling effect on PACE backed business models. In the meanwhile, court challenges to FHFA’s ruling are proceeding in California and elsewhere.
Top photo courtesy of Serious Materials; chart courtesy of Ygrene.
Pink Hats Build a Gold Tower: Inside Avon’s New LEED Gold HQ | GreenBiz
In fitting out its new U.S. headquarters in midtown Manhattan, Avon Products Inc. required that contractors — from electricians to wall board hangers — hire as many women workers as possible.In the process, the 125-year old cosmetics company set a record for New York City, with a 17 percent female-crew ratio for the duration of the project. “We were proud this project was built by so many women, from the cabinet makers to the electricians,” said Louise Matthews, Avon’s Vice President, Global Real Estate at a press introduction to the building.
On site, women’s construction hats were pink, the color Avon has transformed into a global symbol of its long-running effort to boost awareness of and research funding to beat breast cancer.
The results of those pink-hatted laborers were unveiled today at 777 3rd Avenue, Avon‘s new US headquarters.
At its 275,000 square-foot quarters, occupying the bulk of a 38-story, early ’60s modernist tower, Avon retrofitted its new home to hit the Gold standard for commercial interiors under the U.S. Green Building Council‘s Leadership in Energy and Environmental Design (LEED) rating system. The designation will be granted once LEED has reviewed the project’s scorecard.
Eighteen months in the making, the project’s design and construction was led by HOK, a St. Louis-based architecture firm that specializes in sustainable design. HOK collaborated with Avon’s internal design committee to help select a light color palate for a somewhat feminine, timeless feel to the interior, said Doug West, an HOK architect. The firm worked to keep the green features and technology systems behind the scenes, he added.
In making a move from its recently vacated former headquarters, just a few blocks to the west, Avon focused on saving energy and water, while improving the work environment for its staff:
Lighting. To save power, the headquarters turned to high efficiency lighting, which cut energy use by 22 percent compared with a conventional system. Motion sensors in private offices and meeting rooms shut off lights. To maximize the use of natural daylight, work-station dividers are low, permitting light to penetrate deep into the floor plate. Some 96 percent of working positions have views to the outside.
Water. In bathrooms and pantry areas, high efficiency fixtures are the norm, saving about a third of water compared with regular designs.
Waste. During construction, 84 percent of waste was recycled, minimizing landfill demand.
Sustainable materials. Consistent with LEED goals, HOK sourced local building materials wherever possible. New York-area manufacturers produced the offices’ wood flooring, glass-paned office fronts, and ceiling panels, for example. Over 91 percent of the wood used throughout the project is certified as sustainably harvested by the Forest Stewardship Council.
Transport. Avon negotiated with the building owner to include bike racks and showers in the basement to spur bicycle commuters. The building is just a few blocks north of the Grand Central Station rail and subway nexus, as well.
Energy. Avon committed to buy electrify for its headquarters produced from 100 percent renewable sources.
The U.S. headquarters joins a growing portfolio of green buildings in Avon’s network. Earlier this year, the company launched its “Avon Green Building Promise,” a worldwide commitment to achieve at least a “certified green” level in every major new construction or significant renovation project, and to seek a higher level, such as Gold or Platinum (or local equivalent), where possible.
Towards this goal, Avon has also built or converted five other notable sites:
- Medellin, Columbia: Avon’s Ecobranch Distribution Center is the first building to achieve LEED Gold certification in all of Colombia.
- Cabreuva, Brazil and Zanesville, Ohio: Distribution centers both earned LEED Gold certification.
- Shanghai, China: Avon’s R&D Center achieved LEED Platinum certification
- Northampton, U.K.: Avon’s administrative headquarters achieved a “Very Good” rating under the UK’s version of LEED, known as BREEAM, short for Building Research Establishment Environmental Assessment Method.
Avon’s green building spree is likely to continue. “Our Green Building Promise ensures that we continually work to minimize the impact of our buildings worldwide,” Matthews said. “We hope this will serve as an inspiration to other companies in New York City and around the globe.”
Is it fair for RAND to ask whether biomass co-firing can beat CCS on cost? | Global CCS Institute
I came across a tidbit in a recent RAND technical report, Near-Term Opportunities for Integrating Biomass into the U.S. Electricity Supply. While the focus of the bulk of the 187-page report, commissioned by the US Department of Energy, is biomass, RAND makes an intriguing, all-too-brief comparison with carbon capture and sequestration.
Its conclusion is that wood biomass, if sourced locally, is less costly than CCS – at least for the first 5 percent of reduced fossil fuel input!. Here’s the nub of the report’s CCS assessment:
“Biomass cofiring is an alternative… [to CCS]. In CCS, the CO2 is captured from the flue gas and compressed for pipeline transport and permanent storage (NETL, 2010)…. [The] current estimated cost per ton abated for subcritical PC plants employing CCS, $94 per metric ton CO2e (NETL, 2010). We see that, for our three supply scenarios, our most likely cost of abating GHGs never rises above this estimate…. This result implies that, in a carbon-constrained world, cofiring would be an attractive option for reducing GHG emissions when compared with CCS at today’s costs. This result holds for the relatively expensive biomass–pellets transported over long distances, except at the high end of the cost estimates. Although the cost per ton of reducing GHG emissions is more attractive with cofiring than with CCS, the total number of tons of GHG emissions avoided is relatively small. Systems for CCS typically remove 80 to 90 percent of CO2 from flue-gas streams, reducing lifecycle GHG emissions by a similar percentage…. [C]ofiring subbituminous coal and wood chips at 10 percent results in GHG reductions of 8.7 percent because so much of the electricity is still generated by coal.”
For those interested in deeper details on cofiring, check out the 70-plus page report by clicking here. Regrettably, however, RAND makes no further mention of CCS, leading to more questions than answers.
- Topping that list, as my colleague Christopher Short pointed out in our discussions of this report: why is CCS the bad guy here, posited as a high cost alternative? Any number of low-carbon technologies can make electricity, most of which are more expensive than co-firing a small amount of biomass with coal, but none of which address the compelling need to find a fix for greenhouse gas emissions from the installed base of fossil-fuelled power plants.
- The findings are surprising given that some have claimed that biomass would lead to little—if any—net reductions of emissions over its lifecycle. If so, RAND’s exercise may ultimately be a moot point. In this camp is Resources For the Future’s Roger Sedjo, who has written that this conflict is in part due to varying time lines being assessed. In the long run, he argues, “biomass carbon is a zero sum game.” But for short periods and individual sites, he writes, the question is more complex.
- The study’s conclusions are predicated on the coal substitute being “locally sourced wood biomass.” The study gives detailed cost comparison metrics about biomass costs and transportation’s factor. All the same, the cost question opens a Pandora’s box of follow on questions one of which is what about the majority of markets where supplies of woody biomass are scant or distant? That’s especially a concern for populated, built-up areas where power demand is typically greatest and biomass transport would be most costly.
Finally, however carbon-neutral or cost-effective it may, decarbonizing coal based energy systems through co-firing with biomass ultimately still requires the development of CCS to abate all the emissions. A less well known expectation is that to meet the stabilisation target of 450ppm of CO2-eq, CCS with biomass co-firing is a technology requirement for many of the energy-climate models used to explore mitigation pathways.
Patagonia Takes Fashion Week as a Time to Say: ‘Buy Less, Buy Used | GreenBiz
In a novel bid to lower the environmental impact of its products, outdoor-gear maker Patagonia is telling its customers to “Buy less, buy used.” To make it easier for them to do so, the Ventura, Calif.–based outfitter set up an online marketplace in collaboration with eBay.The tie-up marks a first for eBay, as the auction site’s first-ever venture where its listings are available via another company’s web presence. Used goods can be listed on either site show up at both.
An auction function may not sound revolutionary in the retail world, but Patagonia’s broader agenda here is an unorthodox, perhaps even radical, act for the fashion industry.
Indeed, unveiled in New York last night, against the backdrop of fashion week — that annual blitzkrieg of “toss those togs from last season, here’s what to buy now” — Patagonia’s program points in the opposite direction.
“This program first asks customers to not buy something if they don’t need it,” said Yvon Chouinard, Patagonia’s founder and owner, in a prepared statement. “If they do need it, we ask that they buy what will last a long time — and to repair what breaks, reuse or resell whatever they don’t wear any more. And, finally, recycle whatever’s truly worn out.”
As anyone who has looked on in awe at the long lines of customers snaking through H&M to snap up $11 bikinis or $8 tops, the norm elsewhere in the fashion world has been towards clothes as low-cost, disposable commodities.
To take part in the auctions, customers are asked to take a formal pledge, “to be partners in the effort to reduce consumption and keep products out of the landfill or incinerator,” Chouninard said.
The move entails risks for Patagonia, to be sure. It makes no money on the used transactions, though eBay earns standard commissions. The program has the potential to cannibalize sales of new gear, as buyers postpone purchases of new goods, or look for used alternatives.
Yet with sales of $400 million in 2010, and likely to grow by 25% this year, according to the Wall Street Journal, Patagonia has leeway to try. It’s a move that few listed companies could have entertained. Talking to the Wall Street Journal‘s Stu Wu, Chouinard acknowledged that, as a private company, Patagonia is uniquely situated to experiment. “[Chouinard] doesn’t have any shareholders or other interests to please… ‘I’m in business for different reasons,’ he says. ‘I’ve made all the money I could possibly need.'”
Talk of reducing sales is a sure way to get your run-of-the-mill CEO fired. Yet Patagonia has been pursuing an agenda of the three Rs of waste reduction — reduce, reuse, and recycle — for many years. “Reuse” and “recycle” have proved to be doable. The company has been repairing gear since its beginning — it increased its repair staff to reduce turnaround times, in advance of this announcement — and annually recycles many tons of Patagonia gear from around the world.
The “reduce” goal has proved more elusive, though. At the New York event, Rick Ridgeway, Patagonia’s vice president of environmental programs and communication remarked for companies, “[Reduce] is thorniest one of all.”
He continued: “If we aim to reduce our impact, we have to reduce the amount of stuff Patagonia sells. We have to tell customers to buy stuff only when you really need it. This is an experiment. We’ll see how it goes.”
It’s no small issue. As a reminder of the stakes, Patagonia invited Annie Leonard to the New York event for her take on the conundrum facing companies and individuals trying to do less environmental harm.
Leonard is best known as the creator and narrator of The Story of Stuff, a riveting animated documentary about the lifecycle of material goods. If you haven’t seen it, take the time to do so.
Leonard’s work is unarguably critical of unsustainable mass production and high-volume consumption. Understandably, few companies would be comfortable giving her center stage to remind us why we should consume less. She offered this reminder of the paradox of consumption:
We have built our material economy on a one-way, really fast consumer frenzy, turning stuff into waste. We use too much stuff, and we use too toxic stuff. And people aren’t really talking about this. It’s easier to talk about using less toxic stuff. We shouldn’t have neurotoxins in our lipstick and carcinogens in our children’s toys — that’s a no brainer. We’re not there yet solving that, but at least its acceptable to discuss.It’s a lot harder to talk about the too much stuff problem. We’re getting to the core of some of the fundamental flaws of our growth driven, consumer-mania economy. We start to get to really sensitive places about our relationship to stuff, and how we look to stuff to find meaning, identify or status in life. So it gets tricky to talk about reducing our consumption of stuff.
So when Patagonia called I wondered, “Are you nuts? You’re actually going to tell people to don’t buy a coat unless they need it? You’re going to encourage used stuff to go back to the market?”… [The Common Threads Initiative] is an example of the kind of new paradigm business we need to have, that meets our needs without trashing the planet.
If Patagonia’s move seems controversial, keep in mind that both companies are likely to benefit from increased exposure and reputational gains, attracting new customers interested in the pledge, and cementing the loyalty of existing buyers.
What’s more, I wonder if sales may not be dented as much as it may seem. By formalizing of a secondary market for Patagonia gear, the company will capture the long-tail of demand from tentative, first-time buyers unfamiliar with of shy of the initially high prices for the company’s high quality gear.
For Patagonia, the Common Threads Initiative is an effort to reframe and broaden the scope of its cradle-to-grave focus approach to manufacturing, and integrates with Patagonia’s existing sustainability efforts such as Footprint Chronicles, where the company documents the life cycle of many of its products. Since 1985, Patagonia has donated 1 percent of gross sales to environmental conservation programs.
For eBay, the partnership is another step on ongoing efforts to extend and highlight the company’s Green Team sustainability efforts. In 2010, the company launched eBay Box to make it easier for customers to reuse packaging. The auction house also rolled out eBay Instant Sale to give customers an easier way to sell or recycle used electronics.
Green Pinstripes: Wharton School of Business Dean Thomas Robertson Talks About Sustainability | OnEarth
Stroll through practically any business school in the country — or any of the fast-multiplying U.S.-style B-schools overseas — and there can be little doubt that an MBA remains a hot commodity. With the start of classes now upon us, business schools are prepping for another near-record year. During this recession, as in past downturns, applications have surged, with candidates looking to use the slowdown to upgrade their credentials.
Just a couple of years ago, this bumper crop might have seemed unlikely. In 2009 the financial meltdown exposed the outsize role played by financial MBAs and math-whiz PhDs in crafting the house-of-cards investment vehicles that all but crashed Wall Street.
Critics pointed to another, deeper cause: a culture of profit at all cost that had been incubated in business schools. “The really grim news for the MBA…is about more than short-term trends,” wrote Matthew Stewart in Slate back in March 2009. “The economic crisis has exposed long-standing flaws…in the very idea of business education.”
If the recession hasn’t dimmed the prospects of B-schools, the crisis of confidence has spurred a flurry of curriculum makeovers at top institutions. Ethics, of course, have come into greater focus. In parallel, there’s been a rising appetite on the part of students and faculty alike to study more sustainable approaches to business. The number of programs emphasizing social, environmental, and ethical issues has been rising steadily in recent years, according to Beyond Grey Pinstripes, an independent, biennial survey of business schools managed by the Aspen Institute.
For a look at how sustainability and post-crash ethics are evolving at an elite business school, there’s no better laboratory than the University of Pennsylvania’s Wharton School of Business, one of the nation’s oldest and largest B-schools and an important nursery for Wall Street talent.
Thomas Robertson took over as dean of the school in August 2007. As the dust from the financial crisis has settled, he has worked to boost the profile of sustainability in Wharton’s curriculum and among its staff. To be sure, Wharton remains strongly focused on finance, even as highly ranked competitors such as Michigan’s Ross School or Berkeley’s Haas School have made sustainability a core commitment. Notably, none of the nation’s top three B-schools — Chicago’s Booth, Harvard Business School, and Wharton, according to Bloomberg Businessweek’s latest rankings — appear in Beyond Grey Pinstripes.
Robertson says Wharton is hoping to change this. Adam Aston, a freelance writer and former energy and environment editor for BusinessWeek, spoke recently with him about sustainability and the greening of Wharton at his office on the school’s leafy campus near downtown Philadelphia.
Sustainability as a business strategy is still the exception, and there haven’t been many successful, mass-market “green” brands. Why do you think that is?
Green business is still quite young. Yet even in that fairly short time, there are some serious questions about whether you can brand green any longer, because the public is so suspicious. To some extent it has reason to be. It’s easier to recall fallen green champions who have failed terribly than it is to come up with green success stories. BP is a poster child for this. The company emphasized for years how green it was, even as the environmental concerns about its operations were mounting, and then the problem spiraled out of control with the Gulf oil spill. Companies have to be careful. They should first ask, do green claims really differentiate our product, and should we be emphasizing that? If so, are those claims credible? Will consumers believe us? There’s a lot that can go wrong, so it’s no surprise that companies remain shy.
Are you hesitant to brand Wharton as a greener business school? You don’t appear in the Beyond Grey Pinstripes rankings, for example.
Wharton has had a funny love/hate relationship with rankings in general. A predecessor of mine, along with the deans at Harvard and a few other institutions, decided some years ago to stop participating. But the ranking services rate us regardless, using information from outside sources. Beyond Grey Pinstripes is among the most demanding, because it requires that we survey the content of individual courses to identify which ones have green content. However now we’re cooperating again for the first time in a long while, and we have full-time people substantially dedicated to answering these requests. The Aspen Institute is probably the most reputable place out there ranking green initiatives in schools. It’s a good place for us to be, whether someday we come in first or thirtieth.
Did you pick up any shift toward greener goals since the financial crisis?
The aftermath of the crisis has reinforced one of the longest-standing strategic pillars of the curriculum at Wharton: social impact. From environment to labor and other social dimensions of business, there’s very much a belief here that business schools must be a force for good in the world. Even so, this is the biggest school in the country. We have 4,900 graduate students plus a few hundred undergrads. And some of our alumni do still go astray.
Do you have any star faculty members working on green issues?
One is our vice dean of social impact, Len Lodish, who also leads Wharton’s Global Consulting Practicum. Among other things, this sends groups of MBAs overseas to apply business skills to solving social and environmental problems. One team recently went to Botswana, for example, to help develop a sustainable funding model for a health partnership. I’d also mention Eric Orts, the director of Wharton’s Initiative for Global Environmental Leadership. Eric is a lawyer and tends to come at these issues from that perspective. He argues that business as usual is quite likely to lead to major environmental catastrophes, and he’s pushing for Wharton to get ahead of the curve on these issues. It’s clear that sustainability is here to stay. I think it has come into its own as a business priority. We all realize that we’re going to destroy the planet if we don’t get on board.
In many business schools, the interest in sustainability is coming from the bottom up, from the students.
It’s true. A lot of student efforts are bubbling up here. Emily Schiller graduated with an MBA from Wharton in 2009 and chose to stay here to become the school’s first associate director of sustainability and environmental leadership.That role grew out of her involvement, when she was a student, as co-chair of Net Impact’s North America Conference, one of the nation’s largest nonprofit events focused on sustainability. She also works with our Student Sustainability Advisory Board, which takes student suggestions and so far has turned them into real savings of more than $100,000. One of their ideas now is to switch to natural cooling of our data center in winter, rather than using air-conditioning. If it’s cold outside, why not take advantage of that?
Sidebar: NRDC FOCUS — Peter Malik, Director of NRDC’s Center for Market Innovation
If business schools could choose one thing to enhance their focus on sustainability, what would it be?
Mortgages. The housing market has to be one of the drivers of economic recovery, but it’s still under severe pressure. Unsound lending practices were partly responsible for the mess, and we need to scale down the role of government-sponsored enterprises like Fannie Mae and Freddie Mac in underwriting private-borrower risk. Banks should also incorporate sustainability criteria into mortgage scoring and pricing. Live in a mansion and drive a Hummer, and you’ll pay more. Live in an energy-efficient apartment and walk to work, and you’ll pay less.Learn more about Location Efficient Mortgages.
Are We Entering Cleantech’s Dark Ages? | GreenBiz
The budget brinksmanship that, amazingly, lasted all the way into the first days of August pushed me over the edge. Whether a willful choice, or some kind of subliminal denial, I opted for a partial mental vacation in recent weeks, trying to tune out from the mostly dismal news about elections, energy and environment.But all vacations must end, and as distasteful as the political process has been for the last few weeks, the late-summer news cycle holds potentially big impacts for the world of cleantech.
From policies enacted and planned to electoral and financial developments, all signs suggest we’re moving from relative boom times for cleantech into what will almost certainly be dark days.
Cleantech’s “Age of Austerity”
Let’s start with the fallout from budget deal, known officially as the Budget Control Act (BCA) of 2011. Scanning a few weeks’ worth of news releases from Bloomberg New Energy Finance (BNEF), the prospects for cleantech finance are nothing short of grim.
“For the clean energy sector, the Act heralds an era of austerity in which current subsidy programmes may not be extended beyond their current funding,” wrote Stephen Munro, a policy analyst at BNEF, in a research note on Aug 5 titled “An age of austerity for clean energy?”
The BCA agreement requires cuts of $917 billion in discretionary spending. Clean energy programs aren’t named specifically, but they fall under the discretionary spending portion of the budget, Munro points out.
Programs are likely to become vulnerable as they come up for renewal. First up is the Treasury Department’s “1603” cash grant program for early-stage project investment, which expires at the end of this year.
For solar and wind developers formerly dependent on tax equity finance — which evaporated as a result of the mortgage-backed security crisis — these 1063 grants, which can cover 30 percent of a project’s upfront costs, have been a lifesaver. Last December, the Solar Energy Industry Association estimated that the grant program had made possible more than 1,100 solar projects in 42 states, with a total investment value $18 billion.
Similarly, the 100 percent bonus depreciation incentive for new equipment and property purchased for renewable energy projects sunsets soon. Known by the unwieldy acronym MACRS (short for Modified Accelerated Cost-Recovery System), the federal program allows businesses to accelerate deductions for the capital investments to five years, or just one, for certain bonus projects.
Renewal looks “unlikely” for either of these programs.
There’s some stirring that the tax-equity market — which the 1603 cash grants were established to replace — will rise again. ClimateWire’s Joel Kirkland recently wrote that a return to tax equity financing may be nigh (via the NYT). Given that corporate America is sitting on mountains of cash, it follows that they’ll seek higher returns than are available through Treasury bills.
Kirkland’s central example is Google, which has made seven green energy investments totaling $700 million over the past few years. Although it would be encouraging if those investments marked the start of a rush to market, that’s not the sense I’m getting from my review.
Further out, the bipartisan committee of 12 created as part of the BCA boondoggle is required to come up with another $1.5 trillion in cuts over the next decade. For wind, solar and geothermal projects, tax credits end as early next year, and deadlines continue through 2016.
What’s more, the fisticuffs aren’t over. The Act doesn’t make adjustments to the overall budgets for the Energy Dept. or Environmental Protection Agency or any of their sub-programs, such as ARPA-E. Yet these budgets, Munro points out, will be among the first to be addressed when lawmakers return from their summer recess on Sept. 5. Given the bludgeoning GOP presidential aspirants have lately been administering to the EPA, it’s likely the EPA and DOE budgets could be especially tortured in the next couple of weeks.
“The debt agreement, which is focused on cuts only and not revenue increases, makes it more likely that this infant sector gets strangled before it matures,” said Daniel Weiss, a senior fellow at the Center for American Progress, a Washington policy group that advises Democrats, in an interview with Bloomberg Government.
Subsidies for renewable energy are expected to decline beginning this year, and will fall 77 percent by 2016 from their peak in 2010, according to Bloomberg News, citing data from the White House Office of Management and Budget.
Cleantech VC Investment Ebbs
Well maybe the private sector will step up and fill the gap — maybe Google’s investments are a sign of things to come, right? Probably not.
Second-quarter venture investment in early-stage cleantech startups decelerated, according to the Cleantech Group’s preliminary data for the quarter, released in early June.
Global funding hit $1.83 billion, a 33 percent retreat from the prior quarter ($2.75 billion) and 10 percent down on 2010 ($2.03 billion). Quarter to quarter VC numbers are notoriously volatile, but behind these numbers are other signals that the U.S. cleantech ecosystem is not generating a lot of new companies: Most of the deals — 66 percent by deal number, and 87 percent by value — were B-series or later stages. Funding retreated more sharply in the U.S. than Europe or Asia-Pacific.
A Dearth of IPOs
A close cousin of cleantech venture capital funding is the rate of initial public offerings of shares by young, fast growing companies. By this measure too, the climate in the U.S. is growing more anemic by the week, just when it should be offering a vigorous exit path for smart, small companies.
While the Cleantech Group data reflected a “robust” global IPO market through June, the bulk of the listings have come in China. Here in the U.S., the swooning stock market is reinforcing a sense that much-anticipated listings are likely to hold back. At GigaOm.com, Ucilia Wang captured this snapshot:
“…companies that have filed papers for IPOs (but not yet traded) include solar equipment developer Enphase Energy, smart grid tech companySilver Spring Networks, biodiesel producer Renewable Energy Group, and solar power plant developer BrightSource Energy. VentureWire reported that electric car company Fisker Automotive, and biofuel company Genomatica had also hired bankers to investigate the IPO process. But it’s seemed apparent to some of these companies that the IPO window has been slowly closing.”
Oil Prices Falling
With the economy teetering between neutral and reverse, oil prices are falling. West Texas Intermediate (WTI, the U.S. benchmark) fell to around $80 per barrel early in the month, presaging a fall of 40 cents per gallon at the pumps, if the price signal follows through.
Lower fuel prices are salve to an ailing economy, of course. But they’re trouble for companies looking to sell innovative transportation technologies, whether they’re century old automakers pushing advanced EVs or algal biofuel startups targeting their production price for $100 oil. More broadly, low energy prices dilute public urgency on energy efficiency and alternative energy.
In its Aug. 8 research note, Bank of America’s Global Energy Weekly pointed to threat of a double dip recession. By its models, a mild recession would draw Brent Crude (Europe’s North Sea reference blend) to $80 per barrel, and (more importantly to U.S. buyers), WTI to $50-60 per barrel.
While these two blends typically trade within a dollar of one another, in recent weeks their prices have diverged to record levels, with Brent trading at over $25 per barrel more than WTI. The gap reflects unprecedented levels of uncertainty with Europe’s fiscal outlook and worries the U.S. is about to tip back into recession.
Is It Darkest Before the Dawn?
If all these harbingers from the political and economic arenas weren’t enough, we’ve also had one of the most extreme and disaster-filled weather years ever — with 2011 already bringing more billion-dollar catastrophes than in any other year, according to NOAA.
And to top it all off comes news from the Energy Information Administration that U.S. carbon emissions rebounded by more than 3.9 percent last year, the sharpest uptick in more than 20 years, as industrial activity, power generation and travel volumes returned to norms depressed by the Great Recession.
It’s enough to make anyone want to go back on vacation, at least until Labor Day, or maybe Groundhog Day, or … anytime after November 6, 2012.
But perhaps I’m overly pessimistic — I’d love to know if you’re seeing anything out there in the world that offers some hope for a resurgence of cleantech’s potential?
Photo CC-licensed by Samuel Stocker.
Check out the original here: http://www.greenbiz.com/blog/2011/08/24/are-we-entering-cleantechs-dark-ages
Can Skyonic combine chemical production and pollution mitigation to transform carbon capture into a profitable business? | Global CCS Institute
I recently caught up with Skyonic, an Austin (Tex.)-based carbon capture startup that is expanding a demonstration unit into a production-scale facility at a cement plant in San Antonio, Tex. Due to come on line in 2012, Skyonic’s new deployment is designed to snare 75,000 metric tons of CO2 per year from the cement kilns’ exhaust and convert it into saleable materials.
Founded in 2005, Skyonic has attracted plenty of buzz for its SkyMine process which transforms the CO2 in smokestack exhaust into a buffet of industrial chemicals – including chlorine, hydrogen, magnesium carbonates, sodium bicarbonates, and sodium carbonates – at lower costs than today’s commodity chemical manufacturing methods, according to Joe Jones, Skyonic’s CEO and founder.
Versatile as its technology promises to be, Skyonic’s business model could prove to be as important. That is, if Jones can get the finances to work. With a solution that promises to generate revenue from both pollution reduction services and chemical production, Jones argues that Skyonic is on track to deliver carbon capture services cost effectively without the need for a regulatory price on carbon.
Notably, Skyonic’s recipe also pulls SOx and NOx and heavy metals such as mercury from flue gases. This scrubbing process is, of course, one that big power plants have used for many years. Jones says Skyonic’s SkyMine process can remove these pollutants more cheaply and at smaller scales than today’s methods.
The Environmental Protection Agency has been ratcheting up pressure for power plants to cut emissions of criteria pollutants, which is in turn driving demand for treatment technologies. Last May, the EPA officially recognized the SkyMine process as a “multi-pollutant control” to help power plants comply with the tougher new rules for hazardous air pollutants (known by the acronym, NESHAP, or also as the “utility air toxics rule”).
Jones ran through the numbers for SkyMine for me when we spoke. According to the company’s Jan. 2011 announcement: Current wet-limestone and SCR scrubbing is only scalable for large (400 megawatt or greater) facilities and costs US$400–650 per kilowatt of generating capacity. The SkyMine process can operate down to the 10 megawatt equivalent level and costs less per kilowatt. Additionally, Jones said, current scrubbing technologies release CO2 as they capture acid gases; SkyMine does not.
Skyonic’s technology impressed Department of Energy researchers sufficiently that in July last year, the company was awarded $25 million – the lion’s share of a $106 million tranche of DOE funds distributed to a half dozen U.S. companies all focused on productizing CO2 .
The DOE monies are the second dollop that Skyonic scored from Washington, coming on top of a $3 million grant at an earlier stage of the technology’s development.
“If carbon capture and sequestration policy is going sideways right now,” Jones told me, “demand for technologies that cut conventional pollutants is moving forward.” Their appeal is they can offer a market viable way to develop technology that can in time be focused on CO2 capture, should a cap and trade program emerge. “This is a neat little key that fits into the public policy hole right now.”
Writing in GreenTechMedia.com last December, Eric Wesoff rightly points out that that the chief question mark hanging over Skyonic’s ambitious claims is whether the technology will be truly economic and CO2 negative at an industrial scale.
Jones believes SkyMine bests CCS because of his technology’s superior economics. “Mineralization is the way to get rid of CO2. You don’t have to do open-heart surgery with the plant.” Since Skyonic’s approach is a post-combustion process, existing facilities can be retrofitted relatively easily, he said. Nor does the process require pipeline transport or geological storage and may therefore be more saleable to policy makers and the public.
Putting some numbers on his claims, Jones told GreenTechMedia that Skyonic’s current “carbon penalty” is 43 per cent, less than what he estimates is the range for CCS, if one includes the full energy toll posed by CO2 capture, compression, transportation and injection. Jones added: “The DOE’s assessment of our process is the most important and the DOE says the process has a negative carbon footprint. It consumes CO2 . Period.”
Jones told the Austin Statesman that the construction of Skyonic’s pilot facility is slated to conclude in 2012 with a total project cost in the neighborhood of $135 million. Funding in addition to the government’s share has come from venture investors.
Turning carbon capture into a profitable business, rather than a costly regulatory hurdle, seems like a smart path here in the U.S., especially as the budgetary outlook continues to darken for continued, let alone heightened, research subsidies for carbon capture and other clean technologies.
Enhanced oil recovery, which I wrote about last month, looks to be one of the biggest potential markets for carbon capture and use. And in coming posts I aim to profile the other companies pursuing carbon capture and use technologies backed by the DOE in its July 2010 funding announcement. In addition to Skyonic, these include Alcoa, Calera, Novomer, Phycal and Touchstone Research Laboratory.
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Cisco Quietly Shuts Down Building Energy Management Program | GreenBiz
Another one bites the dust. At the end of June, the names Google PowerMeter and Microsoft Hohm were chiseled on the grave marker of casualties in the race to build smart grid-linked software and gizmos. To this list of famous fallen, Cisco Systems adds its name, with an announcement yesterday that it will exit building management software services while also retreating from the home energy management market.You could be forgiven if you missed the announcement. The news was tucked into Cisco’s fiscal fourth quarter earnings call. Amidst the perilous rollercoaster-ing of the markets of the past few days, Cisco showed signs of recovering from recent missteps, solidly beating expectations — a performance rewarded by antsy investors with a 17 percent stock price runup.
Almost lost in the din was the news that Cisco is unwinding its investment in the energy management market. Cisco entered this market almost two years ago to the day, with an ambitious announcement of a new product, dubbed Mediator, that would tap into Cisco’s deep networking skills to hook up the many and disparate software networks used to heat, cool, and otherwise operate big commercial buildings.
The precise fate of these business lines remains to be seen, but prospects look dim. At her Cisco blog site, Laura Ipsen, senior vice president of global policy and government affairs, expanded on Cisco’s thinking in a company blog post, although the jargon is tough going. She writes:
“Over the past two years the home and building energy management markets have evolved in such a way that we believe we can provide more value to our customers and the industry by enabling interoperability through our core networking products and solutions (for example, EnergyWise) as part of our integrated architecture within the broader smart grid effort.”
Based on this rationale, it appears that Cisco will likely sell its building management software suite, Mediator. Ipsen writes: “For building energy management, this means we are actively pursuing several strategic options for Cisco’s Network Building Mediator and Mediator Manager product line, with an emphasis on minimizing the impact on current customers, partners and employees.”
The outlook for home energy management systems is less clear — the jargon reaches fever pitch here — but it looks like Cisco is simply going to pull the plug on household offerings, instead focusing on utility and other B2B markets: “For energy management in the home, we will transition our focus from creating premise energy management devices to using the network as the platform for supporting innovative applications and architectures that will improve our customers’ value proposition in the consumer energy management market.”
For close watchers of the smart grid space, the retreat comes as no surprise. At Greentech Media, Michael Kanellos predicted Cisco would retreat last week, pointing out that the company’s earlier success tempted it to overreach into unknown markets, even as its core networking technologies were under intense competitive pressure.
A harbinger of Cisco’s exit was the early-retirement of Ed Richards, an original developer of the software behind Mediator, a system which Cisco acquired in the acquisition of Richards-Zeta back in 2009.
As Google and Microsoft found in their forays into energy management, Cisco’s market expectations went unmet. The market has been slow to develop, utilities have proven hard customers to develop, and consumers have been all but indifferent to the hype around home energy management software, points out Katie Fehrenbacher at GigaOm.
Cisco’s been riding through a winnowing reorganization in recent quarters. In July, the company shed 9 percent — or 6,500 employees — of its staff, part of a plan to lower costs by $1 billion. And in April, the company killed off its consumer business, including the Flip video camera, which it had bought just two years earlier.
Photo CC-licensed by John Brennan.