Thursday, January 14, 2010

Calgreen, take me away

California issued stringent building regulations for new commercial and residential construction today, the San Francisco Chronicle reports.  Christened "Calgreen", the program seeks to integrate green construction practices into the building code, a vital undertaking in a state that seeks a 33% renewable energy requirement for its utilities and a 80% reduction in its overall greenhouse gas emissions by 2050.  California appears to recognize the enormous challenge it faces, and is rightly undertaking aggressive early action by pulling as many policy levers as possible to build out an infrastructure that accomodates human needs and market trends, while also curtailing energy and other natural resource demands.  The name of the game is "sustainability" and California is proving to be a leading player.

There a number of remarkable aspects to this story.  Calgreen continues the state's long-standing environmental leadership that has achieved memorable milestones such as special treatment for state environmental standards under the Federal Clean Air Act, and the state's remarkable constraint of per capita energy consumption since the 1970s--during a period when house have increased by 50% in size, and air conditioning has become almost universally wide-spread. The program draws broad-based support from government, realty, construction and consumer groups.  And, quoting the Chronicle, "[i]ndustry officials said that it would increase construction costs only slightly.' (ed: Emphasis added.)

While Calgreen seems to be that elusive beast on the Savannah of government regulation--a program that garners public-private support and doesn't raise costs--one Lion was conspicuously absent from the broader roar of support.  The US Green Building Counsel--sponsors of the nation's de facto green building standard, LEED (Leadership in Energy and Environmental Design)--not only demurred, but actually oppose the new standards.  USGBC claims that Calgreen will lead to "confusion", implying that a standard which, for the first time codifies a state-level mandate for green building, is somehow a bad thing. Setting aside for a moment the question of whether such confusion would actually result (and if it did, whether that is too high a price to pay for a program that makes great and measureable strides against GHG emissions), it is probably instructive to peel back the PR veneer of USGBC's opposition in order to ask: is it possible that there exists any other motitivation?

In doing so, it is important to note that the Counsel generates huge revenues from its de facto monopoly on green building certification: builders pay large fees for certification review and ratification, while building and design professionals (over 20,000 member companies and over 100,000 indvidual members at current count) engage in testing, training and certification themselves, on a pay-to-play basis.  The USGBC is thuse a multi-million dollar enterprise, and it recognizes Calgreen for what it is: competition.

Why is Calgreen a threat to the USGBC franchise?  If a builder has to meet a standard that either exceeds or is not materially different from that established by the USGBC, where is the incentive to seek LEED status as a Silver, Gold or Platinum building--and to pay the very susbstantial fees required to earn such certification?  Worse yet, what happens when California's standards spread eastward, making the USGBC effectively obsolete in other states?

For developers and other environmental professionals, Calgreen is a welcome first step on a longer road of emancipation from that started out with promise, but eventually created the same results that most monopolies do--unncessarily high costs, limited choices and inefficient execution.  Calgreen proves California is serious about the question of Global Warming.  Sadly, and as COP 15 proved, great challenges remain to a coordinated effort among nations.  In most cases, sovereign resistance boils down to economics.  The situation today in California appears to be a microcosm of that global intransigence.  While the state has clearly staked out ground to support the greater good, special interests seek to undermine these efforts, grubbing selfishly for dollars instead of solutions.

Wednesday, January 6, 2010

Q: What do you call 4 million autos in the junkyard?

A: A good start.

The Earth Policy Institute reported today that the domestic car fleet shrank from a record 250 million cars to 246 million.  From an environmental sustainability standpoint, this is a small step but an important one: it represents the first time since World War II that the nation has experienced a year-over-year contraction in the number of vehicles on the road. Since car usage is a substantial source of the greenhouse gas emissions suspected of accelerating Global Warming, a reduction in the number cars on the road (assuming a constant rate of miles driven per vehicle) translates into GHG emissions reductions.
The title is not meant as a jab at Detroit, the UAW or what appear to be doomed "investments" by Uncle Sam in our failed domestic auto-makers.  There have been many casualties from decades of poor management, bad planning and unsustainable union contracts, and the human toll of that misery stands as a compelling argument in favor of Corporate sustainability.  How?  At all three levels of "the triple bottom line", because better long-term planning and operational management would have paid dividends to people, planet and profit.

People.  An American transportation sector (as distinct from an American automobile "industry") that creates a suite of useful, well-designed products that appeal to both market demands (quality cars, not just SUVs on truck frames) and geo-political and environmental realities (trains that run on electricity sourced from renewable fuels) would be a source of sustainable, well-paying jobs.  Instead, we get inferior products and bloated union contracts and medical plans that have no possible way of ever being paid.

Planet.  Migrating transportation from fossil-intensive fuels to renewables reduces demands on a spectrum of environmental resources--the extractive aspect of petroleum production is energy intensive and higly polluting, as are both refining and transportation.  In addition, private auto ownership and use is COMPLETELY unsustainable, based on both the current product mix and its low-level of fuel "economy."  The current American pattern of car use represents not only a savage misappropriation of natural resources (and national treasure, required to secure far-flung oil reserves in hostile lands), but also a disconnect between domestic planning and reality. Suburbs--and the highways and mall-structures required to serve them in a car-driven economy--are a dispiriting misallocation of land and fossil fuel.

Profit. A transportation sector that builds products people want, and does so in balance with responsibly negotiated labor contracts can guarantee a solid, reliable revenue stream. It then becomes incumbent upon management to take a sustainable view: run the company to create long-term shareholder (as opposed to short-term exective) value. Companies like Interface and Toyota do it. Detroit, in concert with the railroads, has an opportunity to apply these paradigms in a way that can re-shape both our domestic transportation system, but do so in a way that redefines industrial economics in the context of sustainability.

Transportation is a massively important issue in the broader sustainability dialog.  Mobile sources account for roughly 29% of all GHG emissions in the United States (and over 40% in such vehicle-intensive hot-spots as California--source: California Energy Commission, 2005 IPER report).  While stunning, this statistic is somewhat misleading.  To the downside.
Why?  Because it does not embed either the direct emissions costs of such activities as steel manufacturing (and transportation), vehicle assembly (and transportation), oil extraction and refining (and transportation).  Or the indirect emissions from such collateral activities as military training and deployment required to maintain supply lines in hostile and unstable regions.
As a result, the type of vehicles we choose to build (and how we build them) as well as the broader structural accomodation of what James Kunstler calls "the happy motorin' society", beceome critical underpinnings of the sustainability dialog.  This matters to the enterprise for a variety of reasons.  Two, however, top the list: how firms conduct their supply chain and delivery activities (including vehicle and fuel programs for the sales force), and how they interact with their employees.  In the latter case, everything from the siting of facilities to support for employee use of mass transit and ride-sharing, to scheduled telecommuting and flex-schedules impacts how the enterprise engages transportation services.

Sunday, January 3, 2010

Thinking different, and differently

Sustainability is an intellectual frontier, or maybe akin to 16th maritime exploration.  Most of what it will involve is currently unknown, and will occur largely beyond the horizon line of our current perception.  It will play out on uncharted waters and wild lands that also are un-mapped, filled with uncertainty (and no small amount of peril) and great opportunity.  Many enterprises will die.  But others will richly profit.  Extending the metaphor, some will be dashed on the reefs and shoals of these new seas, while others will reap great fortunes--both as competition dies off, and as new resources and innovations are utilized.

Admittedly, this is a perverse comparison, because the sustainability ethic is so firmly rooted in practices that emphasize less exploitation and less extraction.  Which is why this discussion resides in the intellectual realm: sustainability is not about using more/different natural resources.  It is about optimizing the single greatest resource any of us (or collectively, all of us) has: the human capacity for innovation.  Ram Nidumolu, C.K. Prahalad, and M.R. Rangaswami have written smartly about the correlation between Sustainability and innovation in the Harvard Business Review, and their paper is well worth the 30 minutes it will take to read it.  At the same time, thinking about the Sustainability/innovation link in more day-to-day terms is equally helpful. 

Innovation is often an organic process--it happens with or without intention or planning.  But innovation is only successful when it moves off the drawing board, out of the laboratory and moves into practice.  As a result, one of the lessons to apply in developing any sustainability initiative is to properly assess and then prepare to overcome the entrenched bias you will face.  Why? Because face them you will. The effective Sustainability program necessitates migrating people away from very safe, very comfortable, very familiar and--as measured in current dollars--very cheap ways of doing business. They won't want to do it, so you will have to persuade them.

If Sustainability requires innovative thinking in business operations, it requires an equal measure in how you market it to internal stakeholders.  Your first challenge: the general lack of understanding of sustainability--especially how industrial inputs (including extractive activities for raw materials, including fossil fuels) and waste outputs drive Global Warming. This reality will force you, in effect, to master two new languages: not just that of sustainability, but also that of stakeholders who control the decision chains that can improve your firm's utilization practices. The key: developing sufficient fluency in both languages that you are able to translate on the fly. You must be able to speak comfortably, easily and authoritatively in order to be effective.

We are still on the Sustainability frontier; settling wild lands requires both conviction and hard labor. Instead of clearing hardscrabble land for a homestead farming, Sustainability experts are moving aside the rocks of resistance that are borne of status quo. Your tools are not a crow bar and horse-sled. Instead, you have to deploy the communications tools of the sales/marketing/lobbying/outreach advocate, because you are going to be in a position of migrating people away from very safe, very comfortable, very familiar and--as measured in current dollars--very cheap ways of doing business. They won't want to do it, so you will have to persuade them. If you haven't internalized this material to the point where you can translate your messaging in a split second into the way others view the world, you mission becomes geometrically harder.

You must understand that you are fighting against entrenched interests.  There are many dollars at stake, and probably careers, reputations and no small amount of the particular brand of comfort that complacency breds.  Innovation and the competition of a marketplace of ideas creates losers among established firms, corporate officers and industry opinion leaders.  People will not surrender these positions easily. But the charts to success are out there; you just need to become a master navigator. Good luck.