New Bottom Line Volume 14.4 – Sustainable products, sustainable companies

Monday, May 30, 2005

It’s Memorial Day weekend in the United States. Originally instituted to pay tribute to war dead, it has taken on — like most American holidays — a decidedly secular cast with picnics, sports events, and bargain shopping.

Coincidentally, I’ve encountered a timely confluence of thoughts and events regarding measuring and rating “sustainability” of both products and companies.

1. Product metrics

Natural Logic is hearing increasingly from companies who are concerned about sustainability product metrics. Most of their efforts to date – some very sophisticated – have focused on process metrics — the efficiency by which they turn resources into value, the effectiveness by which they minimize the harm created while creating value.

Many are now focusing more on the challenge of product — since in many industries the life cycle impact of the product will be far greater than the production impact. They’re looking for the leverage points: how do you design products that deliver greater value — to both customers and shareholders — with smaller ecological footprint? What do you measure to both guide your designers and gauge your progress?

One point of emphasis is “materials of concern” — developing black lists and grey lists of materials to be eliminated immediately or gradually. The lists can be set by regulators, customers or socio-ecological principles. There’s a strategic confluence possible here of course. The CEO of an innovative clean tech company reports that when they decided not to use a particular component, due to environmental concerns, despite uncertain impacts on price, their supply chain came up with better alternative — safer, cleaner, better performing, less expensive. Win-win-win-win.

(I’ve been railing in recent speeches at the pervasive, deeply held and utterly wrong-headed assumption, shared by most business, government AND environmental people — who disagree with each other on so many things, yet agree about this — that environmental quality costs money. Examples like this are an important reminder than innovation is key. (It’s increasingly hard-headed management, not wooly-headed environmentalism, to attend to physical reality rather than try to dismiss it as an “externality.”)

Another point of emphasis is the life cycle impact — the upstream and downstream impacts. Product performance efficiency can be key here; the life cycle greenhouse gas impact of a computer product in use during its lifetime, according to an analysis we’ve conducted, could be five to ten times the impact of its manufacture.

Some companies use Life Cycle Analysis tools (like Pre, GABI and others) help companies through complex evaluation of potentially massive bills of materials, and tackle the difficult — some would say impossible — task of comparing the relative merits of competing materials to find the least bad solution. Others emphasize “life cycle thinking” to drive a less precise but arguably more powerful class based approach to materials of concern.

2. Cradle to Cradle

Still others reject the fine tuning approach with a much more aggressive stance. Michael Braungart of McDonough-Braungart Design Chemistry asserts that “Instead of designing cradle-to-grave products, dumped in landfills at the end of their ‘life,’ MBDC transforms industry by creating products for cradle-to-cradle cycles, whose materials are perpetually circulated in closed loops.” In other words, work from the goal: guide design by the conditions of satisfaction that define healthy living systems, rather than the gradual removal of the threats to health that characterize modern industrial systems. Braungart will offer a two-day course in Cradle to Cradle design in Silicon Valley next week. (I don’t see design metrics on the agenda; I’ll be there, and plan to raise these issues.)

3. The nature of measure (prelude to a forthcoming essay)

Measuring all this is a challenge — in part because of the complexity of industrial systems, in part because of insufficient completeness and comparability of data resources, but in part because nature itself (our model for sustainability, right?) doesn’t measure. Nature communicates and couples, and “measures” only fitness. Fortunately, nature’s evolutionary, trial and error processes without long term consequences like industrial society’s innovation of persistent, bioaccumulative toxic material. (Yes, heavy metals are “natural,” but they are largely isolated from biological cycles — hence the model for RoHS deeming them unfit for economic cycles as well.)

Measurement is an abstraction. At the physical level humans work exactly like any other living system — with direct coupling, not abstract measure: molecular keys fitting into molecular locks, nutrients passing through membranes or being disassembled by the particular, organisms attacked and eaten by organisms and molecules evolved to fit that function. At the social level — which is where the human economy lives — we are quite different, since we deal substantially through symbolic, representational communication, not direct coupling.

Money is an abstraction too. This is a problem of another order, and a discussion for another time — in my forthcoming book. (Though I’m reminded of my friend Jan Hanhart’s observation, in his wonderful monograph, “EcoFeedback,” that living systems exhibit the quality of “satiation,” while economic systems do not. THERE’s a challenge for sustainable product designs and sustainable company leaders to consider.)

4. Finally, a word on sustainable companies.

There are dozens of “green product” rating systems in the world — 67 last time I counted, and no doubt many, many more. But we have heard an increasing clamor from leaders and purchasing agents of companies and government agencies with environmentally preferable purchasing (EPP) policies that they need more: “We’re buying better products that are more supportive of our value, but what about the companies that provide those products? How do they rate?”

There are a growing number of company rating schemes, each tailored to a particular industry: green hotels, restaurants, marinas and even golf course. But few address industrial companies, and none that we’ve been able to find have presented a universal, rigorous set of rating criteria, applicable and comparable across the board.

The Global Reporting Initiative is comprehensive, but is a reporting system, not a rating system. The LEED rating system is, well, a rating system, but applies only to the built environment. What’s needed, it would seem, is something that blends the best of both. That’s what we’re now building.

“We” in this case is StopWaste.Org, the sponsoring agency, Natural Logic and What’s Working, with the support of the new California Sustainable Business Council. We’ve been working for more than a year at this daunting challenge, have begun a stakeholder vetting process, and will discuss the Sustainable Business Rating System at a World Environment Day even this week.

The core mission of the Sustainable Business Rating System (SBRS) is to provide a unified, market-based, broadly applicable, and transparent approach to assessing a company’s environmental and social practices and performance, and to fuel market demand for leadership companies. The system will enable the comparison of companies consistently regardless of their size, sector, or geography. The SBRS will serve as both a tool for companies to help them understand and improve their sustainability performance, as well as a rating system that will enable interested parties to assess the full measure of a company’s sustainability performance: their operations, products and services, and relationships with a range of stakeholders…. SBRS’s mission is to help grow markets for sustainable business practices by creating a widely accepted standard for what constitutes a “sustainable business.” Like LEED did for green buildings, SBRS will create a level playing field — a unified calculus for companies that will help them — and their customers, investors, regulators, suppliers, and others — answer the challenging question: “How good is ‘good enough’?”

(c) 2005 Gil Friend. All rights reserved.

New Bottom Line is published periodically by Natural Logic, offering decision support software and strategic consulting that help companies and communities prosper by embedding the laws of nature at the heart of enterprise.

Gil Friend, systems ecologist and business strategist, is President and CEO of Natural Logic, Inc.

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