MBA Research

Trend #37: Sustainability in Business

Sustainable development--meeting the needs of the present without compromising resources for the future--is a topic being grappled with daily by business and industry. Last month’s Action Brief explored shifting factors in energy supply and demand, while this month’s brief dives into how businesses are working to reduce their carbon footprint and what factors impact their progress/willingness to get onboard. As our good friend Kermit says, it’s not easy being green.

Business Implications

Businesses are taking innovative measures to implement renewable energy sources and/or reduce their carbon footprint. Many companies are purchasing carbon offsets and renewable energy credits for this purpose. Other efforts include:

  • Recycling—metals, petroleum products, paper products, plastic
  • Repurposing—furniture, décor, food waste, rain water
  • Reusing—packaging, containers, operating-room instruments
  • Installing—occupancy monitors in HVAC and electrical systems; efficient light sources, fixtures, appliances, and controls; vehicle recharging stations; rooftop solar panels; watering stations to refill reusable water bottles; LEED certified buildings, green roofs
  • Monitoring—suppliers’ sourcing, production, shipping, and transporting activities
  • Reducing—amount of packaging materials used, weight/volume of products, total reliance on nonrenewable energy sources, use of hazardous materials, energy used in production processes, waste going into landfills and water supplies
  • Producing/Selling—environmentally friendly products
  • Partnering—with other entities focused on green energy
  • Utilizing—SMART manufacturing techniques, LEED criteria for building upgrades, Greenhouse Accounting methods to track greenhouse emissions and offsets, renewable energy sources, locally grown foods, natural lighting, local supply chains
  • Encouraging—consumers to re-use hotel sheets and towels; employees to take steps to curb energy consumption; and use of bicycles, shuttles, and public transportation for commuting

 

Green construction is having a positive effect on the economy and will continue to do so as demand grows. Green building programs are largely responsible for the $134 billion annually being taken home by 2.3 million U.S. workers. LEED certified and other green buildings can be costlier to build than traditional construction (some experts estimate a $3-$5 per foot increase or much more, depending on added green features), but the higher initial cost is associated with greater energy and cost savings throughout the life of the building.

The Morgan Processing and Distribution Center (part of the United States Postal Service) in New York City sports a 2.5-acre green roof which cost about $30 per square foot to install-- twice as much as a traditional roof. The roof’s lifespan, however, will be about 50 years (twice as long as the roof it replaced). The green roof, along with other energy saving measures implemented at the center, help save the postal service over $1 million per year.  Cost recovery, in this situation, could likely occur in three to five years.

While the initial costs can still be prohibitive for building or going green, other factors impacting the “greening” of businesses include:

  • Concern about reliability of renewable energy sources
  • Concern that energy efficiency processes might compromise overall business operations and therefore the bottom line
  • A perception that the changes made in one business might not make a difference to the overall environment
  • Inability to pinpoint carbon outputs and track waste streams accurately in order to assess potential effectiveness of efforts to be energy efficient
  • Confusion about environmental claims
  • Costs associated with changing and adjusting production processes
  • Concern about willingness of customers to pay more for green products

 

Greenwashing—the act of marketing a product as more environmentally friendly than it actually is—has become a major concern. In response, the Federal Trade Commission (FTC) developed the Green Guides, designed to help businesses market their products more accurately, but they are not enforceable by law. The FTC can, and does, pursue false or misleading environmental claims made by companies under Section 5 of the FTC Act: 15 (Unfair methods of competition unlawful; prevention). Still, confusion over terms like eco-friendly, recyclable, green, biodegradable, and earth-friendly are rampant. Some consumers are giving up their green efforts completely due to the complexities. In short, businesses need to substantiate the environmental claims that they make about their products or risk consumer--and sometimes legal-- backlash.

Classroom Implications

Understanding the technological, political, and economic systems that drive energy is a life-long learning process. A good place to start is by having students compare various types of renewable energy as explained by the National Renewable Energy Laboratory: http://www.nrel.gov/workingwithus/learning.html

Ask students to discuss carbon neutrality in business operations. They could consider the following:

  • What are the challenges businesses may face in becoming carbon neutral or offsetting carbon   emissions?  Are these challenges different for smaller vs. larger companies?
  • What are some of the ways businesses can move towards carbon neutrality?
  • Is there a moral obligation for businesses to become carbon neutral?

 

How are other countries addressing energy issues both from a business and community perspective?  These two resources will help broaden students’ global perspective on energy use:

 

Is it possible for politics and conflicting business interests to influence energy choices?  See this article about what a group of students ran into as they attempted to make their school more environmentally friendly: http://www.dw.com/en/students-preach-renewable-energy-get-politics-lesson/a-19426179

Ask students to identify local use of environmental marketing and pinpoint potential incidents of greenwashing. This resource will help students better understand greenwashing and some of the enforcement actions taken by the FTC: http://www.greenerpackage.com/green_marketing/ftc_cracks_down_biodegradable_marketing_claims