Author Archives: GreenBiz.com

Tom Szaky: How to repackage packaging

This is adapted from "The Future of Packaging: From Linear to Circular,"by Tom Szaky (Berrett-Koehler Publishers, 2019).We Americans often toss packaging in the trash without much thought. As stated previously, even though we are only 4.4 percent of the world’s population, we produce 20 percent of the world’s garbage; much of it is packaging and printed paper (PPP). Proportionally, that’s a lot.Everyone who touches packaging has a role to play in ensuring that its value is captured and that it doesn’t add to the world’s pollution. But who should be first in line to take financial responsibility? Is it the producers who make it, the retailers who sell it, or the cities where all of this takes place? Or is it, perhaps, the consumers who choose to buy it?Despite the global fragmentation of laws and waste management systems, government has a major role in changing consumer and industry behavior when it comes to wasteful packaging. We see that especially when encouraged through a mode we all understand: money — in the form of fines, penalties and incentives. When such levers are put into place, people improve their behavior quickly and dramatically.Businesses are subject to vast amounts of government regulation in the interest of protecting consumers and ensuring a level playing field. Among other things, laws today require that labels and packages provide more facts about the contents inside and aim to preserve our health. In the world of consumer packaged goods, we see this with certified-organic and organic-transitional labeling, specific ingredient bans, fair-trade sourcing conditions and acceptable levels of certain chemicals in products and packaging.But can you think of any laws regulating the end of life of the packaging itself? Many such laws exist around the world, especially in developed countries. In the United States, some mandatory recycling laws exist at the state and local levels, but federally there are none.Challenges to recycling lawsBusiness brings tax revenue and jobs to cities, states and countries, so business interests often drive government regulations. But there are regulations that businesses don’t like, mainly those that cost money and reduce the ability to maximize profits. For most businesses and entrepreneurs, regulations are often viewed as financial and legal barriers to growth, and corporations see it as an obstruction to their desire to maximize return for their shareholders.While their member companies finance recycling and resource management systems throughout the world, trade associations such as the American Institute for Packaging and the Environment and the Grocery Manufacturers Association have opposed legislation in the United States under the philosophy that packaging disposal, recycling and litter cleanup costs should be the responsibility of government.Thus recycling laws get left to the states in the form of bottle bills; the banning of Styrofoam containers, plastic bags and drinking straws; and guidelines for the disposal of e-waste, paint and pharmaceuticals. This means the make-use-dispose linear economy pipeline currently employed around the world becomes only more and more pronounced and entrenched as time goes on. Year after year manufacturers create new products at a fraction of the cost of their predecessors, so more people now own more and more things —things that have a shorter and shorter useful life.Policies like bottle bills tend to get pushback from industry. Although bottle bills provide consistent, high-quality recycled material, industry often argues that such regulations are cumbersome, expensive and a logistical nightmare. As a result, they end up not being passed; in the end governments can regulate only to the point that society is willing to bear.Even with broad availability of recycling programs in much of the United States, the recycling rate for PPP — including traditional curbside recyclables such as aluminum, glass, plastic, paperboard, newspapers, phone books and office paper — has been stagnant for the past decade.Extended producer responsibilityOne solution may be to shift the responsibility from taxpayers and governments to product manufacturers, as they have the distinct ability to choose what package forms they use for their products. With this in mind, should they be the primary responsible party to pay for the proper end-of-life management of their products and packages, even if this cost finds its way to the consumer in the end?Extended producer responsibility (EPR) is the policy concept that extends a manufacturer’s responsibility for reducing upstream product and packaging impacts to the downstream stage, when consumers are done with them. There are more than 110 EPR laws currently in place for over 13 product categories in more than 30 U.S. states. The United States, however, is currently one of only three nations of the 35-member Organization for Economic Co-operation and Development that does not have an EPR system specifically for packaging in place or under development.EPR packaging laws have been in place for up to 30 years in 11 countries in Asia, South America and Africa, as well as in Australia, 34 European nations and five Canadian provinces. While not all EPR programs are alike, the best ones are not voluntary in nature and produce recycling rates far higher than what we have experienced in the United States. British Columbia and Belgium, both of which have EPR packaging laws in place, have attained nearly 80 percent PPP recovery.Voluntary industry-led programs, while laying a foundation for collection and recycling systems, rarely lead to systemic changes that significantly increase the quantity and value of the materials collected, and they do not provide a sustainable funding source across all producers in a certain category. For instance, although voluntary initiatives to collect plastic films at retail outlets have helped reduce contamination of plastic bags in the recycling stream, many U.S. municipalities deem this effort insufficient, resulting in a flurry of bag bans and fees seeking to significantly change consumer behavior and decrease the use of plastic shopping bags.EPR laws that require brand owners to cover the cost of recycling post-consumer PPP provide an incentive to producers to reduce the amount of packaging they use, incorporate environmentally preferable materials into their packaging, and maximize material recovery and quality. In contrast to the fragmented municipal programs currently in place, well-designed EPR systems provide consistency by establishing statewide producer-funded programs that accept the same materials in all cities and towns and convey the same educational messaging.Such policies also help meet the supply needs of industry. Today many brand owners that pledge to incorporate recycled content into their products often cannot procure enough recycled material to meet their needs. With strong EPR laws, producers stand to gain access to greater amounts of post-consumer recycled material. These programs also offer financial incentives that encourage manufacturers to design their packaging to be more recyclable. With strong EPR laws, producers stand to gain access to greater amounts of post-consumer recycled material. EPR packaging laws are spreading globally and growing in viability partly because the recycling or disposal cost is typically paid by manufacturers and their consumers, not taxpayers and government agencies, freeing up millions of dollars for other municipal services. In addition, these programs provide a direct financial incentive for manufacturers to use materials that are less expensive to recycle, increasing their value and opportunity to be brought back into the circular economy.EPR packaging systems are continually evolving. The most innovative are those that charge a fee to manufacturers for each packaging material type based on its cost to recycle or dispose of. One such system charges manufacturers less for producing glass than plastics, as well as less for PET and HDPE containers, compared with films, polystyrene and other plastics that are not easily recycled. This closed-loop recycling system provides a direct financial incentive for manufacturers to choose environmentally preferable (often more highly recyclable) materials in their packaging.To be clear, all of this extra cost does directly end up in the price of the product a consumer pays in the end. But perhaps this cost is better incurred at checkout than in negative externalities — like greenhouse gas emissions, marine debris, resource scarcity, toxicity, and food and drinking-water pollution — and continuing the burden on municipalities and taxpayers to subsidize waste.Let's block ads! (Why?)

Episode 159: Director-investor disconnect, financing the circular economy transition

Week in ReviewTune in around 5:41 for a roundup of news.How Marsh and McLennan, Allianz and other insurers are responding to climate change risksCorporate directors downplay ESG issues, defying directorsBuilt to last: The business case for living buildings in 2019Featured StoriesInside the job of a sustainability professional (19:05)"We never really have the same day twice. Often, we're exploring new opportunities to expand our use of sustainable fuel, low-carbon fuel that's going to power our aircraft in the future, typically using a waste feedstock to power them." And then, there's the job of turning that "story" into a brand differentiator. Introducing the new "What I Do" series, with insights about how corporate sustainability professionals get the job done. This episode features Aaron Robinson, senior manager of environmental strategy and sustainability for United Airlines.How to communicate sustainability as a competitive advantage (25:44)While nearly half of U.S. companies are communicating with investors about sustainability, they are doing so in ways that reinforce the notion that environmental, social and governance strategies are "nice to have" rather than integral to decision-making. Forward-thinking companies are looking at ways to cast it as a competitive advantage. Insights from Kristen Lang, director of company network activities for nonprofit Ceres.The circular economy and sustainable finance (33:17)Nearly 62 percent of U.S. companies are planning to put a circular production in place or already support one. That’s one of the high-level findings of a report released earlier this month by ING, the Dutch-born financial services company. The research represents the views of executives in four sectors: automotive, consumer electronics and telecommunications, food and agriculture, and health care. And it demonstrates a huge shift in thinking over just the past year. We discuss the data with Anne van Riel, head of sustainable finance for the Americas region.What's new at GreenBiz?News, events, webcasts — the list goes on. Keep your finger on the pulse of the latest in sustainability by keeping up with GreenBiz.Do we have a newsletter for you! We produce five weekly newsletters: GreenBuzz by Executive Editor Joel Makower (Monday), Transport Weekly by Senior Writer and Analyst Katie Fehrenbacher (Tuesday), VERGE Weekly by Executive Director Shana Rappaport, Energy Weekly by Editorial Director Heather Clancy (Thursday) and Circular Weekly by Director and Senior Analyst Lauren Phipps  (Friday). You must subscribe to each newsletter in order to receive it. Please visit this page to choose the newsletters you want to receive.Check out our Center Stage podcast, which features the best of live interviews on sustainable business and clean technology, conducted on stage at GreenBiz and VERGE conferences.The GreenBiz Intelligence Panel is the survey body we poll regularly throughout the year on key trends and developments in sustainability. To become part of the panel, click here. Enrolling is free and should take two minutes.Stay connectedTo make sure you don't miss the newest episodes of GreenBiz 350, subscribe on iTunes. Have a question or suggestion for a future segment? E-mail us at [email protected].Let's block ads! (Why?)

Why solving the problem of plastic waste begins at home

Solving the plastic waste issue will require unprecedented levels of investment, novel partnerships and accelerated innovation — the kind that harness free-market forces and scalable solutions as powerful engines of growth. A circular economy for plastics demands new business models and innovation to truly transform consumer packaged goods from "consume and dispose" to "consume and collect."The Ellen MacArthur Foundation has called for three strategies to transform the global plastic packaging market:Fundamental redesign and innovationReusable packagesRecycling with radically improved economics and qualityTo these, I would like to add a critical fourth strategy: the mobilization of consumers.Below, I delve into each of these strategies and explore specific examples of how innovation, new business models and cross-value chain partnerships are hard at work. It’s essential that these examples and others are explored, tested, quantified and — if viable — scaled for rapid adoption.Innovating plastic material: post-consumer polypropyleneThe global polypropylene (PP) market is on track to reach $133.3 billion by 2023, according to Transparency Market research. But PP — used widely in a range of applications, from kitchenware to medical equipment — is one of the least-recycled plastics, at a rate below 1 percent for post-consumer recovery. Until now, the low volume, low quality and relatively high cost of recycled polypropylene have been barriers to its use, and it is usually down-cycled into utilitarian, low-value items.A Procter and Gamble (P&G) scientist has invented a breakthrough technology that removes color, odor and contaminants from used polypropylene, readying it for restoration to ultra-pure recycled resin with no trade-offs. To drive scale, P&G licensed the technology to PureCycle Technologies, which is completing construction of its feedstock evaluation unit and plans to open a production plant in Ohio in 2020. This innovation represents potential for billions of pounds of high-quality recycled polypropylene to replace virgin materials for P&G and many other companies.PureCycle has sold out all of this first plant’s production for the next 20 years. Imagine how much recycled polypropylene could be reused again and again if this technology is scaled up. Source: P&GNew business models for reusable packagingSeveral promising pilots are underway to test the viability of reusable packages and the business models behind them that collect, refill and reuse containers. Imagine if the on-the-go refillable microchipped bottles could be scaled across soda machines and brands. Here’s an out-of-home example: Lisa Foster, sustainable packaging manager at Coca-Cola European Partners, recently described a pilot underway at the University of Reading in the United Kingdom, where they introduced Coca-Cola Freestyle machines. Staff and students can purchase a refillable bottle, microchipped to make it recognizable upon each use. The user can preload the bottle with credit to easily and conveniently refill it with drinks; the credit on the bottle ensures it will be reused. This has the potential to dramatically shift consumer habits, especially if industry can align on technology and incentives to operate across competing brands.Imagine if the on-the-go refillable microchipped bottle schemes could be scaled across soda machines and brands, such that the consumer is rewarded for frequent re-use.A refillable business modelAnother pilot soon to get underway is Loop, an at-home reusable, refillable business model for consumer packaged goods (CPG) that kicked off during the 2019 World Economic Forum Meeting. TerraCycle is working with many of the world’s biggest companies, moving their supply chains — everything from shampoo to ice cream — from disposable to durable packaging.Imagine if the world’s most popular consumer products could be ordered and delivered to your home, and when you’re finished using a product, its package is picked up, cleaned, replenished and returned to you.Creating the marketplaceThe creation of a high-functioning global market of recycled plastics is within reach but will require major cross-industry cooperation. Recycling rates and infrastructure vary significantly across countries, as do the various types of plastic materials and forms getting collected and reclaimed.For decades, many CPG manufacturers have been using recycled PET (polyethylene terephthalate) and HDPE (high-density polyethylene) in their packaging, as most facilities efficiently can sort PET packages, recycle the material and sell it back as PCR (post-consumer recycled material) to make the economics work. But other materials, such as flexible-film plastic, are not widely collected for recycling in all countries.The low weight of flexible packaging means a lot more packs need to be collected to meet current weight-based recycling targets, and many facilities lack the capability to sort and bale the material. Hence, the market for post-recycled flexible films is anemic. Smart and intelligent packaging solutions are opening up a range of opportunities for brands and retailers. Some of the most promising advances toward a step-change in the recyclability of flexible films are happening in Europe via a project called CEFLEX and in the United States with the Materials Recovery for the Future (MRFF) project. CEFLEX is a cross-industry group devoted to creating a sustainable business model for collecting, sorting and reprocessing post-consumer flexible-film packaging — including financially stable end-markets.MRFF has invested in equipment to recover and separate flexible film from curbside collection systems. It will be operational in nearly 300,000 households in Pennsylvania in the summer, testing how to optimize the flexible-film collection and recycling process, as well as the sorting and baling of the material for sale as PCR.Imagine if one day you simply could place all your food and household goods packaging in your recycling bin along with other recyclables — even the lightweight pouches, wrappers and packets — and know that they will be collected and turned into valuable material.Incentivizing consumer participationIt is entirely possible to introduce industry-wide technology that can track a package and effectively reward the consumer for proper post-use collection. Incentivizing behavior change is a must. Packages that contain higher levels of PCR should become irresistible.Smart and intelligent packaging solutions are opening up a range of opportunities for brands and retailers to better meet consumer needs. New technology is also providing solutions, such as NFC (near-field communications), which allow consumers to interact with packaging via their smartphones.Imagine if each package you placed in the recycling bin was tracked to the sorting facility and you were rewarded with points for successfully recycling it?The alliance to end plastic wasteP&G recently took a leadership role along with other companies and partners across the entire value chain to form a new, business-driven, results-oriented initiative that could have a lasting impact to step-change the economics and stop the flow of plastic into the environment.The Alliance to End Plastic Waste will invest $1.5 billion in solutions that cross governments, development finance, NGOs and more, beginning with areas in the Asia-Pacific region where plastic waste is often mismanaged. More importantly, these world-class companies are bringing their top talent — engineers, scientists, researchers — to complement the capital investment and to deliver solutions that will keep plastic in the supply chain and out of our environment.Advancing innovation and infrastructure, and creating end markets, will happen only if there is massive public-private partnership and collaboration across industries. Brands will play a key role in driving consumer demand and desire, while incentivizing participation. No single company is large enough to make significant advances alone, and there must be shared risk, shared commitment and shared investment to truly drive scale and unleash the circular economy of plastics.Let's block ads! (Why?)

What else will batteries unlock?

This article is drawn from the Transport Weekly newsletter from GreenBiz, running Tuesdays.  Low-cost, high-energy batteries are beginning to do some really cool things such as replace gas peaker plants, power mainstream vehicles and kick-start electric aviation. Here’s another application to add to the list: slash electric vehicle (EV) demand charges.Say what? Demand charges are a fee that a utility charges for electricity use, based on the highest rate at which the electricity is drawn during a monthly billing cycle. These are fees beyond just the cost of electricity, and they’re thought of as paying for the overhead of the grid gear.Reports have found that these demand charges have been making public charging stations uneconomic in this early stage of the EV market. If the companies that manage those chargers passed the charges onto EV owners, most would run away screaming and never charge in a public spot again.To get around this problem, some companies are starting to pair batteries with EV chargers (McKinsey dives into this in a report). The idea is that the battery can charge up when electricity rates are low and charge up vehicles when the demand for electricity is high. Yep, it’s peak shaving, similar to what companies such as Stem have been doing for buildings.VW’s Electrify America, which is spending $2 billion on charging infrastructure, last week announced that it will work with Tesla to install over 100 of Tesla’s battery stations at some of its EV chargers. Electrify America Chief Operating Officer Brendan Jones said during an event that the No. 1 cost of EV chargers, outside of the capital investment, is demand charges. The idea is that the battery can charge up when electricity rates are low and charge up vehicles when the demand for electricity is high. Yep, it’s peak shaving. Electrify America and Tesla aren't the only ones adopting this approach. Startup Freewire Technologies has developed a mobile EV battery charger (Mobi), and companies such as Microsoft and LinkedIn have been using Mobis on their corporate campuses, partly to avoid demand charges. Down the road, when more electric vehicles are plugging into public chargers, the demand charges will be more spread out and less of a problem. Companies are also focused on rate reform, and convincing utilities around the United States to change pricing structures.But the interim battery solution is an interesting one. The trend shows how low-cost lithium-ion batteries have emerged as a disruptive tool that can be used for any number of things.The really cool part is we probably haven’t yet envisioned everything that powerful low-cost, high-energy battery technology can do. Energy storage markets have been so underdeveloped for so long.This disruptive effect, of course, is occurring for other enabling technologies such as artificial intelligence, wireless networks and low-cost computing chips. All of them have been changing society and industry in many hard-to-predict ways (and some negative ways, too).But I am eager to see how else these batteries will transform the way we live — and hopefully make energy and transportation more distributed, cleaner and more reliable.  Let's block ads! (Why?)

Furniture as a service — PaaS or fail?

This article is drawn from the Circular Weekly newsletter from GreenBiz, running Fridays.Last week, the Swedish furniture giant of flat-pack and meatball fame added sofa-as-a-service to its lineup of iconic industry offerings. IKEA announced a furniture leasing trial to explore "scalable subscription services" for everything from couches to kitchens.From lighting-as-a-service to the rise of clothing rental, more companies are beginning to catch on to the potential of providing products-as-a-service (PaaS) through rental, leasing, pay-per-use and pay-per-service models for items that traditionally have been purchased outright (and usually landfilled when no longer needed).Yet while some already have dubbed IKEA’s pilot, which will roll out only in Sweden for now, the "Netflix of furniture," the details of access over ownership become increasingly more complicated with physical things than with digital ones.In a new survey on circular economy perceptions and strategies, ING, the Dutch financial institution, asked 300 U.S. executives about the challenges to adopting a PaaS model. It found that managing ongoing product maintenance, adapting sales and distribution models and rethinking product pricing were the three most challenging changes a company would have to make. (The report also found that 62 percent of American companies are planning to move toward circularity, which I found surprising, to say the least. It may speak to the still-evolving definition of "circularity" among companies.)How will IKEA determine when a chair has reached the end of its usable life? How much should two years of a chair’s life cost compared to a lifetime of ownership? IKEA hopes to find out.PaaS models also require companies to consider the financial implications of being paid in smaller increments over time, and the intricacies of holding more assets on the balance sheet.But when companies capitalize on a product’s performance rather than the volume of sales, they are incentivized to invest in durability instead of planning for obsolescence.IKEA’s furniture rental pilot supports its ambitious goal to become a fully circular and climate-positive business by 2030, highlighted by an effort to decouple the use of virgin materials from the company’s growth, according to its 2018 sustainability report (PDF). In addition to piloting a buy-back program for gently used furniture and offering a national mattress recycling program in the United States, IKEA is also considering selling spare hinges, screws and other parts for furniture no longer stocked in stores, so that its customers can fix IKEA products and keep them in use longer.As IKEA dips its corporate toes into new business models, it’s important to remember that not all product-as-a-service innovation offers a circular outcome. I’ve learned to always ask what happens next in a material’s life-cycle. If a product ends up in a landfill rather than being refurbished or deconstructed and cycled back into the value chain, it’s not truly circular, even if it’s a step in the right direction.Let's block ads! (Why?)

Dropping an L-Bomb at work

I wonder how often the L-bomb gets dropped in corporate sales meetings. I’ll guess that the answer is rarely. I haven’t been to any non-Interface sales meetings, but I imagine that most focus on detailing product specifications, goals for increased profit margins, the latest software tools that will make it easier for salespeople to do their job (but likely will make it harder) and a cursory discussion about corporate purpose. "Love" is probably the last word uttered.Interface sales meetings don’t quite go like that. For one, "I love you" gets said a lot, and people always mean it. Also, the company doesn’t really discuss its corporate purpose — it revels in it. My grandfather, Ray Anderson, succeeded in transforming the culture of Interface, and that culture shift is still felt today. Advancing sustainability is not a corporate strategy for Interface, but rather an identity. That fact makes it a lot easier to stay engaged when the conversations turn to products, margins and dreaded software.So it was last month, only more so. For the first time since 1997, Interface hosted a global sales meeting with nearly 1,000 people gathered, representing dozens of countries across the planet. I can’t even imagine the logistical challenges that went into pulling the event off, but the team at Interface tasked with planning the meeting did an amazing job. Everything went so smoothly. I could almost hear Ray Anderson saying, 'Good job. Now let’s get to work leading industry to love the world!' I thought quite a bit about what to share from the meeting that would capture its essence. I could detail some of the sessions, almost as a play-by-play, but that doesn’t seem quite right. I could create an elaborate and tenuous-at-best analogy (my specialty!) that tries to explain the elevated degree of awesomeness of the week, but I’m pretty sure it would fall short of its goal. So forget it, we’ll go with door No. 3.This sales meeting was an echo two decades in the making. Let me explain.Back in 1997, the global sales meeting in Maui was a true turning point in Interface’s reorientation around environmental sustainability. Ray’s epiphany was nearly three years old at the time, and he had been hard at work changing one mind at a time within his company. By coming together collectively to imagine Interface’s future, a whole host of minds and hearts became attuned to Interface’s new purpose — climbing Mount Sustainability and proving to the industrial world what is possible. If Ray’s epiphany was the dropping of a seed in fertile soil, the 1997 sales meeting was when that seed took root (sorry, I know I promised no analogies).And here we are again. Nearly three years ago, Interface announced the next mission that will come after it summits Mount Sustainability. Climate Take Back commits the company to the goal of reversing global warming. In the past three years, Interface has been considering how best to position itself in pursuit of this goal, and this year’s global sales meeting was a compelling call to action for all in attendance to make Climate Take Back their own personal goal.Right before my eyes, I watched Climate Take Back take root in the hearts and minds of the people of Interface.The echo was beautiful. Even more beautiful was seeing the fond remembrances of Ray as the meeting went on. His presence was felt. I could almost hear him saying, "Good job. Now let’s get to work leading industry to love the world!"Reprinted with permission of John Lanier. Subscribe to his blog, Ecocentricity, here.Let's block ads! (Why?)

The Green New Deal meets America's myopia

Over the past few days, nearly everyone within arm’s reach of a keyboard seems to have weighed in on the Green New Deal, an ambitious framework for future congressional legislation. It aims to build a clean economy and eliminate the U.S. carbon footprint, while creating jobs and opportunity across the economic spectrum.And what a response. Thousands of articles that, variously, celebrate the GND’s bold aspirations, criticize it for its lack of specifics, skewer the sheer impractical audaciousness of getting it enacted or analyze each of its myriad components.I’ll spare you from doing the media scan I did over the weekend. It was, in sum, predictable, mildly amusing and frustrating. Progressives and liberals loved the idea, if not all the specifics. Conservatives berated the GND as socialism or worse and seemed to lick their collective chops at the notion of making it part of the political discourse during the 2020 election cycle. Who could have imagined this conversation taking place just three months ago? In The New York Times, op-ed columnist Ross Douthat pointed out that the plan confirmed every Republican suspicion of what global-warming alarm is really all about — "the seizure of the economy’s commanding heights in order to implement the most left-wing possible agenda." The Competitive Enterprise Institute and other right-leaning groups compared the plan to the Fyre Festival, the ill-fated Bahamian "luxury music" event that led to fraud charges for its organizers.Wired magazine rode in with an analysis of the GND’s transportation component — "it won’t work for everyone," it offered, backing up that thesis with a dizzying critique of the inequities of driving, bicycling, even public transit.Even estimable Dave Roberts, who once led the editorial team at Grist but now opines over at Vox, denigrated the "eyebrow-raising doozies" amid the GND's lengthy agenda, such as "guaranteeing a job with a family-sustaining wage, adequate family and disability leave, paid vacations and retirement security to all people of the United States."(My co-author Patrick Doherty proffered a far more constructive critique, explaining how we might actually pull off and pay for a Green New Deal in a way that "does not need Washington to act." Refreshing.)Washington Post satirist Tom Toles put all the naysayers in their place with a wry and withering parody, overlaying today’s political zeitgeist onto John F. Kennedy’s iconic 1961 man-on-the-moon speech, where he committed the United States to that audacious goal within a decade:This is a nice-sounding idea, but it is not fully fleshed out. There are scant details about how Kennedy proposes to actually achieve this, nor is there any evidence of widespread public demand for it. The time frame he outlines — 10 years! — sounds wildly over-optimistic, and arbitrary in any case. Even he admits that it will be expensive, but he doesn’t say exactly how expensive or how we will pay for it.Most of these analyses seemed to miss the bigger point: Suddenly, and seemingly out of nowhere, there’s a national conversation taking place about sustainability, in all its many forms.I mean, could you have imagined this conversation taking place just three months ago?It’s not as if these ideas are new. The notion of a Green New Deal has been bandied about for a dozen years. New York Times columnist Tom Friedman broached the concept in 2007. Activist and commentator Van Jones picked up the thread a year later in his book "The Green Collar Economy." Also in 2008, the U.N. Environment Program executive director Achim Steiner proposed a Global Green New Deal, "a fundamental restructuring of economies weaning away dependence on oil and towards cleaner and more sustainable sources of energy." A Green New Deal was the central plank of Jill Stein's two Green Party presidential platforms, in 2012 and 2016.But timing is everything, in politics as in life. The latest iteration — spearheaded by freshman New York Rep. Alexandria Ocasio-Cortez and veteran Massachusetts Sen. Ed Markey — comes at a time when Americans are both frustrated and sensing the fierce urgency of now, and actually might be ready for some fresh ideas that cut through partisanship, create not just jobs but wealth, distribute opportunity more equitably and tackle the climate crisis at the scale and speed warranted.Moreover, the 2019 edition of the GND folds in another concept that, up to now, had been loitering at the political margins: a "just transition" — a set of principles, processes and practices that build economic and political power amid the shift from a polluting, extractive economy to a clean and regenerative one. While that term had been gaining currency within the environmental and economic justice crowds, it suddenly is becoming part of the national discourse.Like I said, who could have imagined this conversation taking place at this weird American moment?Which is why most of the critiques of the Green New Deal strike me as small-minded and myopic. Yes, it’s a grand vision that’s vague on details. No, it’s not likely to be enacted in its current form. Yes, it can be improved in any number of ways. No, it’s not going away any time soon — both the left and right seem to want to keep it alive, each for its own reasons.It’s a big idea, born of common sense, that potentially empowers and engages all Americans. We haven’t had an adult conversation about America's future in a long, long time. Let’s explore it and figure out how some version of it can come to pass.So, please stop for a second and celebrate the moment. After toiling for years in the veritable backwaters of society and the economy, sustainability — economic, social and environmental — is finally on the national agenda.Then, after your all-too-brief celebration, get back to work. It’s time to dig in. This is our moment.Let's block ads! (Why?)

How agility can help automakers navigate uncertain times

Low gasoline prices mean cars are out and pickup trucks and SUVs are in — for now.Ford is reallocating $7 billion from cars to build more sport utility vehicles (SUVs) and light trucks, while Fiat Chrysler Automobiles is expanding its Jeep SUV brand, and General Motors has closed five plants that produced conventional passenger cars.As the annual North American International Auto Show opened last month in Detroit, car sales account for only one-third of the North American automobile market. SUVs have increased their market share by 11 percent in the past five years and pickup trucks by 3 percent, while sedans have dropped 10 percent. The United States offers an extreme example of the shift away from cars, but it’s happening worldwide as customers trade in their sedans for SUVs and crossovers.So what would happen if gas prices suddenly increased?Our research suggests that 15 to 20 percent of the light truck market — as many as 3.4 million vehicles — might swing back to cars if prices rise high enough. Will consumer tastes change, for instance, when more moderately priced options in electric vehicles become available in the United States over the next few years? Or when fully autonomous vehicles begin to hit the road in earnest sometime in the next decade? The answers are far from a slam-dunk, and automakers need a strategy to deal with the current level of market uncertainty.Huge market uncertaintyU.S. automakers are entering an interim period in which they may have to wait for Americans to catch up with the Chinese and Europeans when it comes to their willingness to consider buying electric vehicles. This means that car companies will require two market strategies: long-term tactics, focused on new technologies such as electrification and autonomy; and short-term tactics, based on remaining flexible and agile to accommodate a fluctuating market for their SUVs, pickup trucks and cars.The transitional environment will favor companies with manufacturing processes and vehicle platforms that — like the consumer — can switch between product lines without missing a beat.Agility is everythingWith so many uncertainties — gas price fluctuations, new Chinese producers, trade conflicts, climate change regulation and new technologies — the only way to avoid stranding investment capital may be to incorporate agility into every phase of production and design as a form of risk management. The transitional environment will favor companies with manufacturing processes and vehicle platforms that can switch between product lines without missing a beat. One of the first things manufacturers can do to gain flexibility is increase the number of shared platforms across vehicle lines. Thanks to the blurring of historical distinctions between cars and light trucks — which now share powertrains widely across segments — that kind of manufacturing convergence is much more doable and more efficient for plants.Modular designsShared platforms, used in various regions, also become a tool to limit the need for imports and exports. Given today’s uncertainty concerning global trade and tariffs, such a strategy could reduce the risks caused by policy changes.Modular design strategies, which help to standardize the vehicle platform, offer the ability to build wider varieties of vehicle sizes and types on the same platform. Modular platforms also can help automakers minimize time-to-market and enable greater global reach across brands and entities within a company.Modules can keep plant investment costs down during new model launches and make manufacturing processes more consistent and streamlined.The 21st-century twist available with modular platforms is that they can serve both light trucks and cars where, in the past, it was one or the other. For instance, Toyota has launched a next-generation, highly modular platform in one of its biggest plants in the United States, which is currently only building cars.Operational elasticityThe most flexible mass-market automakers have worked for years to develop the capability to build different products on the same line and then be able to move the production from line to line and plant to plant successfully and rapidly. This operational elasticity also allows automakers to address sudden customer demand by simply changing over a line. Long an industry leader in flexible manufacturing, Honda can build the Civic, CR-V crossover, and Acura RDX compact and MDX midsize crossovers at its East Liberty, Ohio, plant.While many companies want to strengthen the links between product development and manufacturing, they are frequently vexed by rising complexity, customization and the fickleness of the buying public — a situation exacerbated by today’s shorter product life cycles and product portfolios that can include both traditional vehicles and electric vehicles.In this environment, having manufacturing work together with design and development to overcome challenges will help firms become more agile while increasing quality and minimizing the impact launches have on productivity.Each automaker will respond to risk differently, adopting modular platforms, consolidating product lines, or perhaps delaying action until the last minute. Whichever approach companies take, change is coming, and only those with agility baked into their production, design and organization are likely to win in this uncertain new environment.Let's block ads! (Why?)

How Marsh and McLennan, Allianz and other insurers are responding to climate change risks

Climate change is upon us. While policymakers quibble about what that means for their communities, insurers understand that money is on the line and are acting accordingly to create products to assist businesses in better managing the risks associated with climate change.Those risks are numerous: temperature rise can hurt agriculture, while storm surges and wildfires can destroy property. But insurance is quite literally the business of risk management, and the many insurers GreenBiz spoke to for this article assured us that they are up to the challenge.We know the job of predicting losses gets a little more complicated in a warming world. "When you have two 500-year floods within two years of each other, it’s pretty clear it’s not a 500-year flood," Gov. Roy Cooper of North Carolina stated at a September news conference in response to Hurricane Florence, which dumped almost 36 inches of rain across parts of the state.So how is the insurance industry preparing? In short, by developing new ways of triggering a payout, creating new products to deal with new physical risks and introducing new ways of investing policyholder premiums to deal with so-called "liability risk." We’ll explore all three.New ways of triggering a payoutIn a world where historical data is less reliable than it once was, many insurers are turning to "parametric" insurance to offer clients protection. While more-common indemnity insurance relies on the value of the property combined with historical risk of a qualifying event to determine policy value, parametric insurance turns that model on its head by looking only at the likelihood of an adverse event. The payout is triggered if the adverse event — think certain wind speeds, high or low temperatures or predefined rainfall levels — hits.Parametric insurance policies are emerging in many sectors. They apply in any case where there’s a reliable correlation between a weather event and a loss of revenue.A few examples include: agriculture where farmers face a reliable loss of revenue in droughts; utilities who face likely property damage if wind speeds reach a certain rate; and hoteliers who face a loss of revenue if a big storm passes through. Even transportation providers face risks, too, if they rely on a waterway that may drop like the Rhine did last fall.Tom Markovic, an expert on weather and insurance for Marsh and McLennan, explains: "It’s hard to think of an industry that shouldn’t be paying attention to this."Munich-based Allianz SE, one of the world’s largest insurance companies by revenue, actively offers custom policies to help customers manage weather extremes including sea level rise, rainfall (either too much or not enough), temperature rise and wind surges. While indemnity insurance relies on property value and historical risk to determine policy value, parametric insurance considers the likelihood of an adverse event. "We’re trying to understand client concerns and develop tailored solutions," said Karsten Berlage, managing director of Allianz’s Alternative Risk Transfer unit.He sees increasing applicability of parametric insurance in a warming world as these types of policies gain traction in the market. "In terms of loss solutions," Berlage said, "parametric has the advantage," due to transparency and the speed of payouts. He was also quick to state that customers don’t need to choose between indemnity and parametric custom solutions, as the two easily can be combined for full coverage.While off-the-shelf solutions are still rare, Swiss Re has developed a product, Flow, for European businesses affected by those low water levels in the Rhine and other rivers. It is designed for companies that rely on these waterways for transporting goods and therefore face financial hardships when water levels sink. The parametric insurance provides a quick payment when water levels drop below an agreed-upon level.Custom solutions, such as The Nature Conservancy’s coral reef recovery solution for Quintana Roo, a Mexican state on the Yucatan peninsula, continue to dominate.The conservancy worked with local partners, including the State Government of Quintana Roo, to develop a Coastal Zone Management Trust that will be funded by an existing tax paid by hotels for use of the beach. Funds from the trust will be used for reef and beach maintenance and will soon be used to purchase parametric insurance that will pay out after hurricanes or tropical storm events based on a wind speed trigger.Quintana Roo has a $10 billion tourism industry, and the reef is a key attraction for tourists as well as a protection — research shows that coral reefs can reduce wave energy upwards of 90 percent against flooding during storm surges. "The concept of combining a trust fund with insurance is an interesting new approach to help support and protect the reef," said Mark Way, global coastal risk and resilience director at The Nature Conservancy.The positive news is that while the risk of catastrophe is on the rise, many insurers really are eager to pick up the risk. Numerous insurance industry insiders assured GreenBiz that any business facing any type of property damage from a weather-related outcome should contact their broker to discuss options. A lot of coverage options are available.Managing the risks of renewablesOne rapidly evolving coverage area, for example, centers on protecting against the risks associated with renewable energy projects. Insurance companies have historically had an important role in managing weather-driven risk on demand side for energy companies. For example, a natural gas provider might hedge the risk of a cold winter or hot summer because these would change demand which might change prices for the raw product they burn to create energy."Now that renewables have entered the scene in a big way, the insurance scene has changed dramatically," said Lee Taylor, CEO of REsurety, a renewables risk analytics company. "The fuel is free. There’s no big risk the price will go up 3x next year. But I can turn my natural gas on any time I want to. Wind blows when it blows."The new risk is that a renewable installation won’t deliver the promised electricity volume and project owners — and corporate offtakers — may need to buy energy on the open market to compensate, which can be expensive.Renewable energy project developers such as Enel Green Power, which recently broke ground on the 450-megawatt High Lonesome wind farm, partnered with REsurety and Nephila Advisors to analyze risks associated with the installation, such as how much volatility in wind production the project is likely to face. Allianz then creates proxy revenue swaps, which take into account both volume and price risks. We view doing something to reduce the risk of forest fires as something that’s good for our policyholders, something good for the communities they live in. The proxy revenue swaps provide "additional assurance that the price will be the same and the volume of power delivered will be the same, even if the wind doesn’t blow," said Brenda LeMay, who handles origination for Enel Green Power. As renewable energy continues to expand, so too will proxy revenue swaps because they help distribute risk which allows projects to get off the ground. Transition and liability riskOne of the most unexpected (for this writer at least) areas of business insurance innovation is in "liability risk" — that’s the risk that the bets an insurance company has made with their financial investments will go belly-up because of an unforeseen sea change, such as a large-scale fossil fuel divestment campaign tanking the stock market. Because insurers hold quite large investment portfolios, huge swings in the stock market can have a big impact on the insurer’s ability to pay claims.Some insurance commissioners in the United States take the financial risk of climate change so seriously that they’ve directed insurers in their states to disclose investments in fossil fuels. California’s insurance commissioner, for example, even has directed insurers to voluntarily divest from coal.Some insurers are taking matters into their own hands and broadening their investment portfolios to address the risk of climate change there.For example, CSAA Insurance Group, a AAA Insurer, has invested $1 million in forest resilience bonds. Linc Walworth, vice president of investments, was quick to clarify that this is a small amount in the scope of its whole investment portfolio of about $6.3 billion, but he considers the investment a pilot project worth replicating if returns are delivered as expected.The forest resilience bonds, developed by Blue Forest Conservation, accelerate forest restoration through best practices identified by land managers and the forest services. Investors such as CSAA put up the capital and get a regular pre-defined return and the funds are used to improve forest health.Forest restoration was of particular appeal for CSAA because of the company’s roots in Northern California, where wildfires have had a particularly devastating impact in recent years. Walworth explains: "Many of the homes that burned in 2017 and 2018 were AAA policyholders. We view doing something to reduce the risk of forest fires as something that’s good for our policyholders, something good for the communities they live in. Also good for us because if there are fewer fires, there are fewer claims to pay. We’re part of AAA, and it’s good for AAA members."At the end of the day, while climate change has created many new risks for businesses, the insurance industry is actively offering solutions to help customers manage these risks. It’s one bright spot in the deep existential challenge of managing climate change risk, and there’s much more innovation to come.Let's block ads! (Why?)

Is sustainable agriculture the future, or the past?

The following excerpt is from Michael Foley’s book "Farming for the Long Haul: Resilience and the Lost Art of Agricultural Inventiveness"(Chelsea Green Publishing, February 2019) and is reprinted with permission from the publisher.Successful farming societies — and there have been many of them throughout the history of agriculture — have never been driven by the profit motive, though profit has played a part in some societies, at least where farmers were free and markets significant. Instead, they have been governed by principles of resilience — by the effort, to put it simply, to survive and to do so well under uncertain conditions.Those principles include: a dedication to their own subsistence, above all; sophisticated approaches to management of the natural resources on which farming depends; and dependence upon a vibrant local community as a first line of defense against calamity.Contemporary efforts to teach the latest generation of farmers the business skills necessary to turning a profit fly in the face of this history, just as they ignore the short, sorry history of profit-oriented farming best on display in the United States. Often these efforts are based on a misunderstanding, a subtle morphing of two disparate notions."You can’t farm sustainably," many say, "unless you’re economically sustainable." True enough. But then comes the subtle wrong turn: economic sustainability = profitability. Economic sustainability in the historical record, however, relies more on resilience than on profitability. In fact, the quest for profitability can be the enemy of resilience, as when American farmers cut the woodlot, eliminated the milk cow, the hogs and the chickens, and took down the barn — the better to farm fencerow-to-fencerow in the quest for profits in markets fixed against them.Resilient farmers know the difference between short-term profitability and long-term economic sustainability. Farmers condemned by debt and bad advice to constantly track the bottom line generally do not.Millennia of examplesFarming societies — tribal, peasant, yeoman farmer — have often been prosperous. Why, then, the prejudice that farming is a losing game, peasants forever condemned to misery and ignorance, tribal societies a dead end? No doubt the reasons are many.History remembers disaster better than success, and military prowess over the everyday persistence of ordinary people. Peasants don’t easily raise armies and thus are easily overrun by marauders on horseback, who combine military advantage with terror, slaughtering men, women and children, burning crops in the field, driving off the livestock. And when peasants do raise armies, they are often defeated, if not by their enemies then by the likes of the communist cadres who assumed leadership in 20th-century peasant revolts around the world and who reshaped peasant life and society in the wake of victory. 'You can’t farm sustainably,' many say, 'unless you’re economically sustainable.' True enough. But then comes the subtle wrong turn: economic sustainability = profitability. We also tend to remember the recent conquest and absorption of so-called primitive societies by the West rather than their persistence over hundreds and thousands of years. Tribal societies, for the most part, could not compete with colonial newcomers, neither militarily nor culturally. Traditionalists like Tecumseh or Crazy Horse found themselves fighting losing cultural battles against the majority of their own people enthralled by the stuff the industrial-based intruders had to offer.The success of these societies in getting a subsistence and building a rich culture over millennia came to look, from this perspective, like backwardness.Since the dawn of the republic, moreover, American farmers have been forced to sell on a market manipulated by governments and speculators, railroads and multinational corporations. They are "price-takers," as the economists put it, not price-makers. We remember the revolt of farmers over the terms of that market in the post–Civil War era but not the prosperity of the rural economy that followed, the age that built the lovely towns that dotted our countryside in its aftermath. We see only the ruins of those towns in the wake of the 70-year advance of the industrial model. We remember the struggles of homesteaders unsuited to the task of learning to farm a new terrain or condemned to failure by the attempt to bring traditional farming methods to the arid West. And we know that farm country has grown increasingly deserted over the last 70 years.But we don’t recognize the achievements of the settled agriculture of the 19th and early 20th centuries in many parts of this country, and we ignore the undermining of those achievements through government policy, expert advice and growing monopoly power in the marketplace. Too often, and too persistently, we blame the victim.We have much to learn from the social organization, farming skills, ecological wisdom and political resistance of the farming societies of the past. In place of peasants and farmers, economists and policy makers have elevated the agribusinessman. But agribusiness as we know it is unsustainable even for many agribusinessmen, and certainly for the soil and our food system. Food systems are not just about the production, distribution and processing of foods. They represent distributions of land and power, wealth and poverty, plenty and famine. The few who succeed in that losing game are scarcely models for the agriculture of the future. In 70 years of ruinous farming practice, industrial farming has exhausted our soils, poisoned groundwater and a large portion of the Gulf of Mexico, and provided the basis for a food culture that is making most of our population sick.To go forward we will have to look back and attempt to recover, with the wisdom of hindsight, the lessons that traditional agricultural societies have to teach about subsistence, stewardship, social organization and economic and political resilience.Food systems are not just about the production, distribution and processing of foods. They represent distributions of land and power, wealth and poverty, plenty and famine. As farmers we can buy into the food system we are born to and try to rise to the top in a usually losing game, or we can try to change the system and the practice of farming itself. The contemporary sustainable agriculture movement is an attempt to change one very complex and powerful food system.But we will fight against odds of our own making, and not just those devised by that system, if we accept its premises, if we suppose there are no alternatives to struggling to make it in the market economy. And there is a third option: We can return to the norm of the successful agricultural societies of past centuries that were based on a strategy of subsistence first, resilience in the face of both natural and human-made challenges, and continuing invention, and grounded in the reciprocity and fellow feeling of living communities. Understanding the alternatives that human societies have devised in the past is essential to enlarging our vision of farming for the long haul.Let's block ads! 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