Towards a Sustainable Model for Mining Companies

The announcement last week about the Clinton-Guistra Sustainable Growth Initiative got me thinking again about a recurring subject of interest- how to meet the challenge of sustainability in the mining and resource sector. The Clinton-Giustra Sustainable Growth Initiative, a plan to bring together mining companies to provide funds for sustainable third-world development is significant not just in that it has drawn partners such as Newmont and Teck Cominco, who have made commitments to contribute to the initiative, and that Mr. Guistra has pledged $100M plus half his income from the resource sector for the rest of his life towards the endeavor, but that it may be another step in shifting the model for mining enterprises towards adopting sustainable development as a core business objective.

A year-and-a-half ago, I was given an assignment as part of my MBA coursework on defining a sustainability strategy for a company in a challenging sector: Gold Mining. As a resource-based and extractive industry, mining is inherently damaging to the natural environment. Gold, while a key component in electronics, fillings etc., is almost completely driven by the market for gold jewelry, either for investment or cultural/decorative purposes. Furthermore, key areas in gold mining today are places such as South Africa, South America, Indonesia- places which have both endemic socio-economic problems, and where the largely European and North American controlled mining companies do not have a great record in terms of upholding human rights.

It was in looking at one of the most notorious players- Freeport-McMoran, where I got the idea for the solution. F-M was widely criticized in the late 90’s early 00’s for their role in supporting Indonesia’s government under Suharto. The Suharto regime has been recognized for its corruption, and the stories of crimes committed by this government against its people throughout its history of militarism and autocracy are egregious. Essentially, F-M was playing the game that mining companies play in order to operate in areas such as Indonesia- you buy your way in. F-M was giving piles of cash to the government for ’security services’ and other things- as well as making Suharto a ‘partner’ in the endeavor through a loan to purchase shares- which was subsequently forgiven.

While F-M’s operations in Indonesia, one of the most important areas in the world for copper and gold, do not exactly paint a rosy picture even today, things have improved. Suharto is out, and standards of living are increasing. F-M has realized that simply funneling cash into a corrupt government is not a recipe for sustainable business- rather putting this money to work to create infrastructure, education, health care, environmental management capacity, as well as creating local economic development through providing business loans, can align both corporate and sustainable development goals.

I realized through examining this shift that the model for the future is not through looking at mining companies as producing and selling ore, but as providing development services. Essentially, mining companies are leveraging their own capital and knowledge to transform part of a region’s natural capital (in the form of mineral ore) into liquid capital (cash). The goal of such an exercise should be to use this injection of capital to be a catalyst in transforming a third-world subsistence economy to a sustainable developed economy by establishing an economic platform that can support multi-sector and value-added industries. It is therefore incumbent on mining companies to make significant commitments to local communities in return for their license to operate.

The challenge, of course, is how to make this happen in a way that truly serves all stakeholders. Mining companies are often seen as pseudo-empires, and in the case of F-M, have the legacy of colonialism to thank for their license to operate, not a clear mandate from the local public. What type of policies and structures will enable maximum accountability? Joint ownership, profit sharing with local communities? What should be the role of government and NGOs in overseeing this process?

In terms of government oversight, the South-African government has been proactive in encouraging this type of relationship- enforcing minimum domestic ownership levels as well as employment and management quotas for black citizens. However, relying on government to provide regulation which ensures responsible business practices is the pitfall that Freeport-McMoran ran into. Mining companies themselves have to perceive sustainable development as strategically aligned with profit and the economic sustainability of their own enterprises, but do they have the capability to be accountable for those goals to all stakeholders?

Clinton, Guistra, and others are banking on the partnership formula between companies and NGOs as a solution to this problem.  An NGO such as the Clinton Foundation can ensure credibility and some degree of accountability and oversight. The multilateral nature of the initiative establishes a benchmark for sustainable practices and reduces the potential for individual interests clouding the objectives of the whole. While it may be optimistic to think that this could represent a strategic shift for resource companies around the globe, it could signal the beginning of a new mindset that could allow further evolution of sustainable strategy in this sector.

CFLs: Lighting the path to energy efficiency?

Unless you’re a die hard canadian football fanatic, you probably know that CFL stands for Compact Fluorescent Lamp, and you may also know that around the world, governments are banking on this technology making our old incandescent lightbulbs a think of th past. Canada and Australia have both mandated a ban on incandescent light bulbs (by 2010 and 2012 respectively).

The good news is that CFLs are far more efficient (roughly 3 times) than incandescent light bulbs, and can last much longer (varies, but on the order of 10 times longer). I would still like to see a full life cycle analysis of CFLs which take into account energy and materials used in manufacturing (they are much more complex pieces of technology). One of the drawbacks which has had the greatest attention is the fact that CFL bulbs contain mercury, which, if disposed of impoperly, becomes an airborne, easily absorbed toxin which can pass directly into our bodies and into the food we eat, as well as bioaccumulating in the food chain. The need to combine large scale use of CFLs with an extensive recycling program is therefore crucial. Fortunately, the technology to safely recover the mercury from used fluorescent lamps is fairly simple, and will hopefully be adopted through take-back programs by major retailers. However, mercury contamination due to accidental breakage may still be a concern- see Fox News’ piece of, ahem, reporting on the subject (if you can really take anything from Fox News (or the CEI, source of this story) seriously, which I can’t).

For a more enlightened (ouch, bad pun) illustration of the facts associated with CFLs, Clean Nova Scotia has an excellent page here. In particular, treehugger.com provides an insightful response to mercury concerns:

“Ironically, compact fluorescent bulbs are responsible for less mercury contamination than the incandescent bulbs they replaced, even though incandescents don’t contain any mercury. The highest source of mercury in America’s air and water results from the burning of fossil fuels, such as coal, at utilities that supply electricity. Since a compact fluorescent bulb uses 75 percent less energy than an incandescent bulb, and lasts at least six times longer, it is responsible for far less mercury pollution in the long run. A coal-burning power plant will emit four times more mercury to produce the electricity for an incandescent bulb than for a compact fluorescent.”

While I think more policy action needs to be taken to encourage new technologies, I acknowledge that government light bulb bans could be seen as jumping onto a technological bandwagon before all the ramifications are clear (full life-cycle impacts for example, possibility of mercury exposure due to breakage) . However, because of these decisions, we should see a lot more focus on addressing these concerns as well as other possible efficient lighting solutions. Besides CFLs there are other promising technologies such as LED lighting, which will get a needed boost from the light bulb bans (not to mention the world of possibility in natural lighting through good design…).

As a side-note/rant: What I would like to know is how all these right wing, (purported) ‘free-market’ advocates like the CEI (who also generally take the view that technology, rather than behavioural change, will save us from the effects of our own consumption) think new solutions will be found if we persist in clinging to old technologies without providing incentives for new ones to develop? Their answer no doubt will be ‘market forces’ but this simply ignores the facts that existing markets are flawed in that they don’t account for all the externalities they create.

David Suzuki at the Canadian Club of Toronto

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Had the chance to listen to a Canadian environmental icon the other week, Dr. David Suzuki. It was a relatively swanked up affair, at the Sheraton downtown, everyone in suits (except Suzuki). They did serve certified organic salmon, and local vegetables for lunch however, making the event somewhat less incongruous with the theme.

The speech was what some might consider typical environmentalist ‘doom and gloom’. Suzuki made reference to science’s environmental warnings, long unheeded by the popular media and politicians, as well as the dire consequences of inaction. Very little, if any, of this I had not heard before. Moreover, given the huge media surge of given to global warming courtesy of An Inconvenient Truth, most of the audience probably had similar knowledge. Certain criticisms were apt- such as the sorry state of today’s media, which has become largely a vehicle for commercial promotion. Also, fickle nature of political will, and the need for commitment to hard fought, if flawed, agreements such as Kyoto. Some criticisms I felt were a little off-side, such as of the internet, for giving us ‘too much’ information, allowing the most minority viewpoints an audience- this, I would argue is precisely what makes it an effective tool for democratic journalism. An interesting comment was made on the sustainability of cities; while it can be argued that urban populations are on a per-capita basis less environmentally damaging than rural populations, Suzuki’s point is that the socialization of city life tends to disassociate the natural environment from our activities. In this, I believe he is right, and that future urban models must consider the need for connection to natural environment within the urban context.

The primary impact of the speech, however, was the passion with which it was delivered. Becoming angry and emotional at times, David Suzuki embodies a love of the natural world that is often lost in today’s debates on environmental economics and sustainable development. As Suzuki says, “the Earth is our mother”, and the natural environment serves us not only through its utility, but culturally and psychologically. As the debate about ‘what to do about the environment’ becomes increasingly pragmatic, maybe we need a bit of passion injected- this stuff is important, and anyone who understands the significance should be worked up about it.

You can view the webcast of the speech here.

Dion’s Environmental Bull (Market)

I have to admit that hearing a political leader talking about market-based mechanisms for reducing carbon emissions in a way that makes sense gets me.. right.. there.. I start to get all teary and dream of the possibility that this country (or any country for that matter) might actually elect someone who can do something which is truly for the good of their people and the planet.

A lot of people are talking about the environment these days. What I think is significant is that it is finally gaining recognition not simply as an issue, but as THE issue. For anyone who understands the requirements of sustainability, not just in environmental terms, but in economic and social ones as well, it is apparent that this has been left off the agenda too long, and now needs top billing.

But is Stephane Dion going too far by saying “Canada can get rich by going green“? This has been an argument which most economics-savvy environmentalists have brought out when faced with the problematic issue of international competitiveness in light of uneven the adoption of the Kyoto accord and similar policies.

The basis for carbon trading is not “taxing” anybody, and it is not “selling” clean air. It is simply this: If we build in cost to polluting industries, we can use the same market mechanism to reward industries who are pollute less, thereby steering behaviours and consumer purchasing power towards more environmental benign products, technologies and activities. Indeed, as long as this is managed well in the short term, this could be manageable- maintaining a reasonable standard of living, while reducing emissions.

Kyoto attempted to organize this on an international scale, and threw in provisions for developing nations. This has been termed by many as “unfair” and has provided a lot of fodder for debate, though it is probably more of a red herring. The real issue, especially for Canada is the United States. With over 80% of our trade with the US, an uneven policy which increases the cost of Canadian manufacturing relative to the US threatens to greatly imbalance trade and foreign investment.

Dion’s argument, and the one that many of the ‘natural capitalism’ ilk use, is that in order to be competitive, we need to innovate, and to innovate you have to encourage technology development. Thus the creation of a carbon cap-and-trade system would place high economic value on technologies which reduce emissions. By taking an aggressive stand on reducing emissions, Canada could also become a world leader in developing environmentally friendly technologies.

I’ve found that when the issue of ‘technology’ is discussed, it often detracts from the issue of changing behaviours- which I believe is arguably more important. However, this is why the issue of economic cost is often overstated- without cost, there will be no change in behaviours towards cost avoidance. No matter how badly we want to have the best of both worlds, we have to recognize that environmental degradation and our culture of high resource use goes hand in hand.

Nevertheless, I support Dion’s argument. Here is why: International competitiveness is no longer merely an issue of resources- while Canada has benefited greatly from its resources in the past, it has failed to build economic power worldwide. Increasingly, Canadian resource companies are becoming foreign owned, while manufacturers are being threatened by rivals from less developed economies (think Bombardier vs. Embraer). Behind the US, the worlds largest economies are Japan, Germany, the UK, and France. These are not resource rich countries by any means. I would even venture that the economic competitiveness of these countries has something to do with their history of resource scarcity. Japan, has perhaps the lowest natural resources per capita (and while human resources are definitely significant, I think the point still stands), and is poised to take over the US as the world’s automotive manufacturing juggernaut (now if only we could just stop driving the things, we’d all be better off). All these countries faced serious economic and social catastrophe within the last century. Perhaps our worry about our ‘delicate’ economic position is causing us to forego valuable opportunities for development of competitive capacity in areas which are increasingly driving today’s’ more globalized economies: technology and innovation.

In my mind, sustainability is not a choice. Eventually, governments will be forced to reduce resource consumption, either compelled by environmental or economic considerations. If computers and the internet have been the innovation driving economic growth in areas such as silicon valley and south-east Asia, who will capitalize on the potential world markets for efficiency and environmental innovation? Dion’s environmental plan is also the most ambitious and bold economic strategy plan that perhaps the country has ever seen. We have reason to scrutinize such statements very carefully, but we also have reason to listen up.

It’s about risk, stupid

Jon Anda, in a recent article in the Financial Times, proves that climate change action isn’t just for environmentalists anymore. A legislated carbon cap-and-trade system is in my mind the no-brainer of the decade.. I have yet to see an argument convincing enough to persuade me otherwise. While it seems that by now each side should have exhausted their ammunition firing back and forth over the wasted ruins of Kyoto, the fires of debate seem to be able to continuously rage on the issue of carbon trading. One of the reasons for this is that it seems is that nobody is really arguing about the same thing. Debates on action to curb emissions blur into a debate on climate change science. Discussion of mechanisms are defeated because of uncertainties about targets. Mr. Anda’s important contribution to this debate is to put the argument for in terms of financial logic. He makes two very important points- one is that carbon trading arguments should have nothing to do with the argument over the validity of global warming science- If anyone has seen the recent climate change action ads with the train, this is like debating whether or not the train is real, or a fictional construct of your imagination, instead of just stepping out of the way. The other point is that the logic for acting to reduce emissions is not based on certainty of the outcome, it is based on the certainty of risk. Arguments for action have been far too easy to refute by simply demanding proof that such action would in fact achieve its objectives, or that inaction is certain to incur costs. The argument therefore becomes very similar to that employed for hedging. Of course, even after Bay St. is has convinced itself of this idea, the government is likely to maintain its current strategy of inaction. All these arguments do nothing to address the real source of change resistance- interests vested in high-emissions capital. It nevertheless seems perfectly obvious to me that of all the alternatives, employing market mechanisms to assign costs to emissions is the fairest way to go about reducing them. But then again maybe this is why the opposition exists.

Between the Lines: Recognizing the middle ground in the SRI debate

Socially Responsible Investing (SRI), championed by specialized research firms such as Innovest, has been promoted as not only fulfillng an ethical and moral role of contributing to sustainable business practices, but also as a way to realize financial returns above those of more traditional market indices. However, there are many on both sides of the socio-policical spectrum who criticize SRI efforts to date, using a variety of arguments, ranging from the fiduciary irresponsibility of decision making based on SRI concerns to the criticism of screening techniques that may be too ‘porous’ (for example letting extractive industries, tobacco companies through). Bleeding Greens will point to companies in an SRI portfolio and point out that few if any represent truly progressive sustainable business models- more often than not they consist of large, successful firms pursuing what are viewed as ‘incremental’ sustainability measures (A look at the JSF and DJSI brings up players such as RBC, BCE, Alcan, Rogers, CNR, RIM, for example). Few financial analysts would consider these selections poor choices in the view of traditional financial analysis, but few environmentalists would jump to defend their contribution to our global sustainability. So is there any real value here, or does SRI amount to greenwashing in the investment market?

The debate can easily rage on, but progress is often not achieved without compromise. Maybe a better way of putting it besides “who is right, and who is wrong”, is “Is there a middle ground that can be found? An agreed on role for SRI that satisfies financial and environmental interests?” For one thing, while most performance indicators of SRI indexes and funds have pointed to increased returns over more mainstream indices, these either rely on backwards analyses (using the flawed reasoning that past performance is an indication of the future), or the tracking of performance since inception, which is often only a few years at most- not necessarily long enough to adequately gauge risk. These claims need to be taken with the same grain of salt as other investment screening tools. SRI theorists argue that at any rate, sustainable practices are in indication of good management practices, such as efficient management of operations, stakeholder engagement etc. Most people on either end of the spectrum are able to give this assertion the benefit of the doubt, but what about the environmental/social performance of these firms? Analyses of these criteria is mostly based on companies’ claims and initiatives. There is not an extensive auditing establishment for these factors as there is for financial criteria. Until we can establish such measures, it will be difficult for SRI to acheive wide recognition for its contribution to sustainability.

While it is quite easy to point to individual firms in an SRI portfolio and remind us that being less unsustainable is not the same thing as being sustainable, SRI proponents will point to the fact that these companies are merely the best on a comparative basis. This point is important, because one of the barriers to adopting sustainable practices seems to be the tendency to view its goals as idealistic, unattainable, and naive. But while sustainability invokes the idea that we can live in a state of harmony with each other and our environment, sustainability goals must be viewed in terms of what we need to do now in order improve our chances of getting there. While we need leaders both in private and public sector to look beyond incremental measures, we must also recognize that the state of the world as it is now was not built up instantly- it was an incremental process. Evolution is a process of incremental changes, sometimes accelerated by singular dramatic events. What we need are some singular dramatic events (for example, legislating a market-based approach to reducing emissions), and be willing to let the process of rewarding those with an advantage in sustainability while punishing those without. SRI is one way to do this, and should be seen as such, nothing more, and nothing less. In the context of the sustainability endgame, where all measures of the triple-bottom line are truly reconciled, SRI will be a meaningless concept- rather, this scenario envisions a world in which, for businesses, positive social and environmental feedback is a condition of financial viability, and only creation of value in all these areas results in the preservation and growth of firm and equity value.

For those seeking a more informative and meatier discussion of SRI, check out this blog.

Carbon Trading & the Entrepreneurial Spirit

A group of US States have agreed to implement a carbon trading systems despite opposition of such from the federal government. Now Australian states are heading in the same direction by contemplating opening a carbon market, despite outright opposition from prime minister John Howard, who argues that such a system would impact Australia’s coal industry. It would seem that many do not agree with this analysis; that such systems would represent an undue burden to industry. On the contrary, many companies perceive the opportunity to develop a competitive advantage.

Those who argue against carbon trading don’t appear to be able to offer up an alternative that would be as effective in reducing emissions. They make the arguments that such a scheme would impact industries and consumers, mostly through the added cost of energy. The problem with this is that no course of action besides “doing bugger all” will result in zero added cost in the short run (and even that strategy will incur high hidden future costs).Everyone acknowledges that something should be done to reduce pollution- no politician would succeed today on a platform calling for “more fossil fuel combustion! continued liberation of toxins into the air!” (though we have seen at the federal level in Canada and the US a policy of inaction that is basically supporting just that). The alternatives generally touted are technology, and, well, er.. technology. The public seems to be painfully aware of the oil & gas dependence that exists, therefore other energy technologies such as nuclear and “clean” coal are usually discussed. But the added cost argument falls flat given the costs of all the alternatives- clean coal technology reprepsents a costlier technology to implement- adding cost to energy producers and therefore consumers. I have yet to see a profitable private nuclear power producer. In fact, any new “technology” is likely to increase costs to industry in the short term as it is adopted.

Why no talk about technologies such as solar, wind, geothermal, tidal and other energy sources which are not only clean, but renewable? Simply, because these technologies do not yet have an established industrial base with which to influence policy. Conservative politicians who decry carbon-trading as unfair should take a dose of their own erstwhile free-market rhetoric, and the public should be asking itself whose interests these policy makers are really serving.

Long ago, economists realized that a free market is most efficient in terms of allowing the greatest value to be exchanged through trade. This shouldn’t be confused with equitable distribution, and doesn’t necessarily mean that all things should be distributed by way of a free market (basic services and public goods come to mind). But carbon IS a commodity- regardless of the price, the basic utility is the same, and the more you burn the more you can produce, ergo the more you can sell, and the better off you are.To enable a free market, you must have a sufficient quantity of players on both sides. This produces competition, which is essential to technical innovation. If “technology” is going to help us reduce our emissions, how do the carbon trading opponents suppose it is going to be developed? Dr. Hugh Saddler of the Australian company Energy Strategies, recently expressed his views with respect to the Australian government’s opposition:

“It’s really a cynical planning, picking-winners approach. It’s more akin to what used to happen in the old Soviet Union. Instead of letting the market decide which technologies are the best ones, letting consumers decide because they have a price signal, or letting different generators decide they might build a different type of power station, he actually seems to be saying, we’re going to choose the technologies and we’re going to put public money into them, not let the market decide, we’re going to decide as politicians. And then they are going to be the technologies which reduce emissions.

“We need to change the ways we use energy and the sources of energy towards lower emission energy sources and that’s not going to happen in a market economy unless you give all the economic agents a price signal, and a trading scheme is the first step towards giving just that price signal.

Perusing the members of the currently operating Chicago Climate Exchange yields a number of industry leaders such as Dupont, IBM, Ford, etc. who are participating in the trading system through voluntary emissions reductions. Is it all image? or are these companies deriving an advantage from such initiatives? The voluntary state of the carbon market means prices are much lower than with legislated limits. The environmental pages of the companies’ websites make no mention of carbon trading, so PR doesn’t seem to be an objective. Simply put, these are the companies who have the expertise and the means to find innovative ways to reduce emissions and become more efficient. Getting paid for the credits generated is icing on the cake.

But these companies can also gamble- small companies with innovative solutions but high risk exposure are being hurt as they wait in the wings for certainty about the future of emissions regulations. In Canada’s own burgeoning carbon market, the Montreal Climate Exchange (MCeX) has put off launch until after the Federal government unveils its plan (another potential player, the Canadian Climate Exchange (CCE) based in Winnipeg, has been MIA for over a year, and presumed dead).

This stands as just another sign that the world’s “business friendly” conservative governments are doing a disservice to the pursuit of efficient economics- they are seemingly more swayed by the self-interest of the status quo than by the need to encourage innovation and entrepreneurship in a dynamic marketplace.

The corporate and government leaders who recognize that strategy must look ahead and not backwards have begun to take the initiative. With the help of a little entrepreneurial spirit, hopefully in the future the label “green” will stand for both environmental and economic performance.

Lifecycle Analysis Site

The Institute for Lifecycle Environmental Assessment has reviewed and summarized some research papers on lifecycle environmental assessment, and although many of the analyses are dated, and limited by criteria used, there is some interesting reading. For example, foam vs. paper cups vs. reusable cups? Ever wondered about the environmental impact of various packaging materials? How about the energy usage and toxic materials produced during manufacturing and use cycles of automobiles?

The site does not go into a great deal of detail, but does provide a basic summary of the research. This would be a good starting point for anyone doing research on LCA topics.

A Step Backward on Climate Change?

A great article appeared in the Globe and Mail last weekend about a prominent climate change opponent. The text of the article can be found on the author’s website. It is fairly clear to anyone who has read on the topic that the arguments for climate change are made on the basis of science, and have not been refuted by the scientific community. The arguments against climate change have been unable to discredit the science, but have been promoted to the extent that popular perception tends towards uncertainty and confusion on the issue.

As mentioned in the article, it would appear that thanks to our new Conservative leaders, Climate Change has become a bit of a dirty word for the Canadian Government. The federal government’s climate change website (www.climatechange.gc.ca) has apparently been removed. In its place is a notice directing you to two other government web-pages, neither of which appear to have anything to say on the subject.

So why the change? The Conservative government has promised to outline a new plan for managing emissions this fall. Can they really be taken in by the case against climate change (despite overwhelming scientific consensus supporting it)? Are they curbing to oil interests? Or is this an attempt to move the party line closer to that of their conservative counterparts to the south?

Personally, I would be willing to forgive this if it still meant that our federal government was planning on taking swift action towards implementing an effective plan for reducing emissions, creating incentives for not only new technologies, but energy conservation and efficiency. I personally a believe the best way to do this is the establishment of a carbon cap and trade system.

The problem is that this is not going to happen unless the idea can gain support both at the level of the general public and in the circles of industry. The concepts of climate change and the economic and environmental consequences of emissions trading systems are complicated enough for people to understand without casting more confusion into the issues. Industry has alternatives ready for action, but uncertainty about the government’s plans has delayed initiatives. Quietly submerging the visibility of climate change out of the view of the public only serves to perpetuate the confusion and uncertainty that are delaying action on what climate change is only one symptom of: The fact that we are continuing to deplete the natural capital of our planet by turning oil into carbon gas, and perpetuating our reliance on this unsustainable model for our survival.

Wal-Mart as Sustainability Champion?

Back in April, I noticed an article in the Globe and Mail about Wal-Mart stores beginning to practice eco-efficiency, using less packaging, and even installing wind turbines outside stores. At the time, this seemed like a step in the right direction, but too early to tell whether this was the beginning of a sustainable strategy at Wal-Mart, or simply an attempt to improve their image while appealing to niche-market “green” consumers. At any rate, It would appear that Wal-Mart CEO Lee Scott had learned to talk the talk:

“It is good for business- because it creates efficiencies. It is good for our customers – because we invest the savings aback into low prices. But perhaps most importantly- it is good for the environment and for future generations.”

A recent article in Fortune magazine once again featured Wal-Mart in a sustainability showcase, and evidenced that Wal-Mart is taking this stuff seriously after all. For one thing, the goals and commitments are outlined more clearly:

“In a speech broadcast to all of Wal-Mart’s facilities last November, Scott set several ambitious goals: Increase the efficiency of its vehicle fleet by 25% over the next three years, and double efficiency in ten years. Eliminate 30% of the energy used in stores. Reduce solid waste from U.S. stores by 25% in three years.

Wal-Mart says it will invest $500 million in sustainability projects, and the company has done a lot more than draw up targets. It has quickly become, for instance, the biggest seller of organic milk and the biggest buyer of organic cotton in the world. It is working with suppliers to figure out ways to cut down on packaging and energy costs. It has opened two “green” supercenters.”

Comitted move towards sustainability? Or massive greenwashing campaign? Can Wal-Mart really become sustainable? Many people would say no, or at least not without a complete overhaul of its entire business model. As commented in the Fortune article, many see Wal-Mart as “in a race to pave the planet and turn it into a giant emporium of cheap goods built on the back of cheap labor”.

Whenever I’m asked for an example of a company on the leading edge of sustainability strategy, I tend to gravitate towards examples of large, well known companies- DuPont, BP, GE etc. – standards business school case-study stock. Large companies who adopt more intensified environmental management, or realign strategy in terms of sustainability are often compelled to do so by ‘crisis’ events (eg. Shell in Nigeria). These are events where a polished PR campaign is not good enough. People need to see that the company has changed, and is doing something, and the company knows that the penalties for not changing direction are dire.

It makes sense that large companies should adopt these strategies first- they have more resources, and represent a larger potential source for changing behaviours. But can these companies really go far beyond compliance? Can they establish themselves as true leaders in changing behaviours for the better, and helping mold our society into one capable of sustainable development? (The question of whether that is even their responsibility is a topic for another entry)

Does a sustainable future have a place for large companies? It would seem that all the advantages of a large company- the economies of scale, larger buying power, greater distribution network, are all things that result in negative externalities under present business models. For example, the scale and buying power favours the sourcing of the cheapest labour and materials worldwide. The influence of these companies on governments presents problematic human rights issues in many areas. Distribution networks provide cheaper ways for companies to move our goods across the planet before reaching the end user- to environmental detriment.

I am inclined to favour almost any action over inaction at this point- we are still on the uphill slope of the sustainable practice adoption curve- and to some degree we need to see changes in large companies to get the momentum we need to carry over consumer behaviour. However, I am also inclined to believe that a sustainable society must operate more locally, something that is at odds with the procurement and distribution practices of larger companies.

I look forward to your comments.