Global Challenges – Page 11

Walmart Partnering with Patagonia on Sustainable Business Practices

Posted on 01 July 2010 | by Jay Kimball | 2 Comments

A recent article in Forbes describes how Patagonia, one of the early thought-leaders on sustainable business practices, and Walmart, are partnering to help Walmart move up the sustainable business learning curve fast. The article emphasizes the need for not just being sustainable inside the business, but up the supply chain as well.

Highlights of the Forbes article:

Patagonia is working with Walmart to develop a sustainability index for its products
This initiative is being driven by Walmart CEO, Lee Scott, working with Patagonia’s CEO, Yvon Chouinard.
Walmart CEO Lee Scott first articulated a sustainable vision for Walmart in 2005 saying Walmart “must operate in a world that is healthy.“
Walmart is assessing things like how much water is consumed in the manufacturing process of a product, whether pesticides are used, impact on climate change, energy efficiency, etc.
Walmart wants to place a scorecard on its store goods that rate products on eco-friendliness and social impact.
Walmart is evaluating its suppliers and will give preference to those who best comply.
Patagonia has helped others, including Nike, Gap, REI, and North Face.
Nike has gone on to form GreenXchange, a consortium of ten companies (among them, Yahoo) that will trade eco-friendly intellectual property.

Most businesses I talk with want to do the right thing in terms of caring for the planet, but it rarely shows up in their mission statements or operational imperatives. However, if you ask any business person if their business depends on a healthy customer and a healthy supply chain, the answer is an obvious “Yes!”

Sustainable Business Interdependence

When I talk with business about strategies and tactics for sustainable business, we invariably come to this picture:

If a business confines their view of global issues to within their own business, they might think that climate change, water scarcity or high energy costs don’t impact them. They might say “Well, we don’t use much water, so that’s not an issue for us.” But if the view becomes more expansive to include the supply chain and the customer, they find increased risk to “business as usual.” Everyone interdepends on everyone else. Just as the proverbial rising tide lifts all boats, if the tide falls for one, it falls for all.

For example:

Water tables are falling rapidly in China. If a production plant in China, making product for Walmart, depends on water for the production, and the price of water suddenly rises, or access is limited by government edict, that impacts Walmart cost of goods and product flow.
If Walmart customers can’t afford to buy as much because they are spending too much on energy bills and gas expenses because the price of oil is at $120 a barrel, Walmart top line revenue growth declines.

Even if a business isn’t selling directly to “the consumer,” there is risk. If a company has businesses as a customer segment, they must understand how those businesses will be impacted. For example, if Walmart customers choose to spend less money at Walmart because of rising energy prices or fear of losing a job, Walmart will place less orders with their vendors and vendor order volume will fall. So consumer wellbeing matters to vendors all the way up the supply chain.

Walmart is the biggest retailer in the world. They are taking the long view and understand the interdependence of their success with the health of their supply chain and customer base.

Regarding sustainable practices, as a business expands its field of view to include supply chain and customer, there are three key things to examine:

Mitigation – Understanding what impact global issues will have on the business and creating adaptive strategies and tactics to prepare. Shareholder value is protected.
Innovation – As a business understands the global trends and challenges, they can innovate solutions that will have real value for their business, supply chain and customers, and beyond the, open new markets and opportunities. Shareholder value is increased.
Advocacy – Are the steering directions a business gives to representative associations, lobbying firms, chambers of commerce and state and federal representatives in alignment with new found adaptive strategies and tactics?

Thinking like Walmart – What can a business do to ensure a healthy world?

Perhaps we should call it the The New Trickle Around Economy!

More on this in a future post. For now, here are some photos I took while visiting Walmart headquarters, in Bentonville, AK, for a book I am writing on sustainable business strategies. These pictures were taken while touring one of Walmart’s flagship stores in Fayetteville, AR.

Walmart store green steps program, sign at check out — Walmart store Green Steps program, sign at check out, in Fayetteville, AK

Walmart store green steps program, rain water harvesting catchment tanks at back of store

Walmart store green steps program, rain water harvesting description

Walmart store green steps program, wetlands for catching run-off, and purifying it naturally.

Walmart store green steps program, streamlined truck to reduce fuel consumption

Water Scarcity in the US

Posted on 27 June 2010 | by Jay Kimball | 42 Comments

When I talk with groups about water, here are some factoids that usually surprise:

By 2020, California will face a shortfall of fresh water as great as the amount that all of its cities and towns together are consuming today.
By 2025, 1.8 billion  people will live in conditions of absolute  water scarcity, and 65 percent of the worlds population will be water stressed.
To grow a ton of wheat uses 1,000 tons of water. The US is the largest exporter of wheat to the world. When we export a ton of our wheat, we are effectively including 1,000 tons of water in the bargain.
In the US, 21 percent of irrigation is achieved by pumping groundwater at rates that exceed the water supplies ability to recharge.
There are 66 golf courses in Palm Springs. On average, they each consume over a million gallons of water per day.
Lake Meade (the source of 95% of water for Las Vegas) will be dry in the next 4 to 10 years (see picture below).

Water scarcity is a global problem and is not confined to “poor” nations.

Global Water Stress (scource: World Resources Institute)

In the US, we are now seeing headlines about droughts in places like Florida, Georgia, etc. – not your traditional areas of drought. A powerful way to understand the pervasiveness of America’s water scarcity problem is through the following pictures.

This first picture shows areas of the US that are experiencing moderate (yellow), severe (red), and extreme (purple) drought.

Drought_Map_NOAA — US Drought Map (source: NOAA)

The picture above is constantly updated, and now, in fall 2011, Texas is experience unprecedented drought. I was driving through Texas a few weeks ago, and at that time, local radio stations talked about how Austin, as just one example, had experienced 72 days in a row of 100 plus temperatures. Here’s a picture of the current (September 27, 2011) drought situation throughout the US. Note that drought levels in most of Texas are at level D4 – “Exceptional.”

US drought map - September 29, 2011 (source: NOA, NESDIS, NCDC)

These dry conditions have fostered endless fires that are sweeping across Texas and throughout the Southwest. Predictions are that the drought will likely last for years. Planners will need to make sure public policy on water conservation are in line with emerging water scarcity conditions. When does a drought become a desert?

Shifting the lens toward the Southwest, here’s a picture of Lake Meade, boating haven and water source for Las Vegas. Current estimates predict it will be dry in the next 4 to 10 years.

Lake Meade water scarcity — A picture of the fast disappearing Lake Meade taken in 2007

Food production in the “breadbasket” of the US depends on water from the Ogallala Aquifer. The picture below shows where the sharpest declines in water level are occurring.

Ogallala Aquifer water shortage — Ogallala Aquifer (source: USGS)

well-level changes in aquifer - Lamb County, Texas — (source: USGS)

The USGS monitors over 9,000 wells throughout the aquifer. Zeroing in on Texas again, here’s a picture of a typical well in Lamb County, Texas. Monitoring of this well started in about 1950, when irrigation began. This well shows a water table that has fallen steadily, and at current draw rates, this well will be dry in the next decade or so. How will farmers, who depend on a reliable source of water to grow crops and ride through accelerating drought, stay in business? How will the drying of the Ogallala Aquifer effect America’s ability to feed the nation?

A recent article in The Texas Tribune sets out the impact Ogallala water scarcity will have on Texas. This story is not unique and is being played out throughout the 8 state region covered by the Ogallala.

Highlights of the Tribune article:

The Ogalala aquifer stretches across 8 states and accounts for 40 percent of water used in Texas.
The Ogallala’s volume will fall a staggering 52 percent between 2010 and 2060.
The use of big pivot irrigation — the lifeblood of the Panhandle — could be cut back severely in 10 to 20 years.
Texans are probably pumping the Ogallala at about six times the rate of recharge.
Water conservation and regulation policy is difficult to implement because Texas views groundwater as essentially a property right.
T. Boone Pickens business Mesa Water and other companies are buying up water rights, and looking to market water to cities like Dallas. This is creating a variety of court challenges in the struggle to define the line between public and private water rights.

For more information on the critical issues around private and public access to water, read the well-researched Blue Gold by Maude Barlow and Tony Clarke.

China: The Next Superconsumer?

Posted on 27 June 2010 | by Jay Kimball | 3 Comments

There’s a good article in the Guardian that builds on data I presented last week in the article The Real Population Problem. One of the my charts shows the growing per capita income and consumptions patterns in China. As the population has grown, per capita income and consumption have grown. Using GapMinder’s Trendalyzer with energy consumption data from BP’s Statistical Review of World Energy 2010 and income data from the IMF, we can see some powerful trends unfolding (N.B. data presented for 1965 through 2008, 1 year steps, circle area proportional to population size, energy use in tonnes of oil equivalent):

Regional Energy Consumption and Income Trends — As income rises so does consumption – of commodities like energy, as well as retail goods.

Income has flattened in the US and Europe, and people are spending less and saving more. For global retailers, China’s growing per capita income is attracting businesses that cater to the “consumer.”

Highlights of the Guardian article:

The fastest-growing consumer class in China are single women. They have high levels of disposable income and a craving for designer labels.
State planners forecast that half the population will rise to the “middle class” by 2020.
As China’s consumer population rises, 4.5 more earths will be required to feed the need.
Shanghai, the second busiest port in the world, is the beachhead for retail giants like Kentucky Fried Chicken (2,000 outlets in china), McDonald’s, Starbucks, Louis Vuitton, Gucci and Chanel, Wal-Mart, Carrefour, Tesco and Ito Yokado.
Mattel, the world’s biggest toy company, marked the Barbie doll’s 50th birthday by opening the world’s largest Barbie emporium.
China is now seeing a surge in obesity, diabetes and heart disease. Obese children used to be rare in China; now nearly 15% of the population is overweight.
To feed its growing livestock, China imports huge quantities of soya, much of it from Brazil, which has resulted in accelerated clearance of Amazonian forest and Cerrado savanna
In Shanghai, the average carbon dioxide emissions of its residents have already overtaken those in Tokyo, New York and London.

The Guardian article is an edited extract from When A Billion Chinese Jump by Jonathan Watts.

Climate Change May Reduce Protein in Crops

Posted on 21 June 2010 | by Jay Kimball | 7 Comments

The concentration of carbon dioxide in Earth’s atmosphere may double by the end of the 21st century.

In a recent Science Magazine article, scientists at University of California, Davis discovered that increased levels of carbon dioxide in the atmosphere can reduce the protein content of crop plants by as much as 20 percent. Their research shows that high CO2 levels interfere with the ability of plants to convert nitrates into proteins, thus reducing plant productivity and food quality. Increasing nitrogen fertilization might compensate for slower nitrate assimilation, but such fertilization rates might not be economically or environmentally feasible.

Food = Energy

Most crop fertilizers are produced from oil. As oil supply tightens, the price of oil will rise. The price of fertilizer will track that increase.
About 17 percent of fossil fuels are used to produce our food. The most energy intensive activities are:

Fertilizer & pesticide production
Irrigation
Transportation
Processing

Fertilizer and pesticide production accounts for 31 percent of fossil fuel usage in food production.

Business Impact

Big Ag should be concerned about this. They are the heaviest users of fertilizers and pesticides. It’s time for them to think about how to adapt to this. Organic farmers should be in much better shape. They avoid the use of fossil fuel-based fertilizers and pesticides. Organic sources of nitrogen, such as compost and manure, are their soil amendments of choice.

Community Impact

Food cost represents from 16% (developed nations) to over 60% (developing nations) of a family’s budget. As climate change reduces food quality and oil inflation drives up the cost of food production, family’s will struggle – receiving less nutritional value, at greater cost.

Government Impact

Looking at this news through the lens of government, three issues rise to the top:

If you need to feed a lot of people (think India and China), it’s all about efficiency. A 20% drop in protein production is a big problem.
Make sure your Department of Agriculture and extension agents are at the top of their game, developing and disseminating best practices for our climate changing world.
If your state/country produces a lot of food (think California, the grain belt, Canada, Europe and the UK), think about ramping up non-fossil fuel-based sources of nitrogen.

One clever approach to producing organic nitrogen – use farm animal waste to generate biogas for energy production, and use the resultant nitrogen-rich composted manure to amend farmland soil. The benefits?

Less dependency on oil.
Strengthen the local economy through local nitrogen and energy production.
Capture the methane in animal waste before it enters the atmosphere.
Healthier food

To learn more about Climate Change impact on food production, read the US Department of Agriculture’s report The Effects of Climate Change on Agriculture, Land Resources, Water Resources, and Biodiversity. It is an outstanding example of government in action:

Recognizing the fundamental importance of food to a functioning society.
Laying out the impact climate change will have on food production.
Detailed guidelines for farmers – how to mitigate impact and plan for changes to crop strategy as global warming and rainfall patterns shift.

The Real Population Problem

Posted on 21 June 2010 | by Jay Kimball | 20 Comments

Google Trends tells me that starting in 2008 the monthly number of news stories on population doubled. Most of the stories like to talk about how global population will expand by 30%, peaking at about 9.1 billion people by around 2050. Though 2050 is a nice round number, and a convenient mid-century marker, one can be lulled in to feeling like it’s a problem that is 40 years off. Not so. The population problem is here and now. And it’s not just about the number of people on the planet, but how those people consume resources. Let’s take a look at the pertinent trends.

Energy and Population

The rate of population growth has a strong correlation with the effectiveness of the dominant fuel source at any given point in history. As the chart below shows, wood was the dominant fuel until coal came on the scene in the 1600s. The population growth rate increased modestly with the proliferation of coal. But the real exponential growth began with the discovery and exploitation of crude oil. Crude oil production is peaking and the world is in the early stages of a transition from fossil fuels to renewable sources of energy.

China, Brazil and India – Chasing the American Dream

As the population has grown, per capita income and consumption have grown. The most dramatic growth has been in the developing countries of China, Brazil and India. Let’s take a look at the trends in energy use and per capita income relative to some of the leading developed nations. Using GapMinder’s Trendalyzer with energy consumption data from BP’s Statistical Review of World Energy 2010 and income data from the IMF, we can see some powerful trends unfolding (N.B. data presented for 1965 through 2008, 1 year steps, circle area proportional to population size, energy use in tonnes of oil equivalent):

China, Brazil, and India all show steadily increasing per capita income, with China having the biggest change – outperforming India and Brazil more than 2 to 1.
Though US per capita energy consumption is substantially larger than China, Brazil or India, growth has been flat. This comes from conservation initiatives (efficient lighting, insulation, etc.). We must do better.
China, Brazil, and India’s energy consumption is growing quickly as they move toward American patterns of consumption. The trend is strong and steady, with no signs of slowing.

Less Is The New More

Though Americans represent only 5% of the world’s population, we are consuming about 24% of worlds energy. We are similarly voracious consumers of water, food, land, etc. Citizens in developing nations aspire to live the American lifestyle. Fareed Zakaria refers to this as the “rise of the rest” in his book A Post American World. But the world has only so much to give. Much of what we consume is not renewable. We are bumping up against the limits of earth’s ability to provide for us. As the population expands, for developing nations, their historically meager slice of the pie will expand. For developed nations, their slice of the pie must contract.

Our Ecological Footprint

Using ecological footprint data from Global Footprint Network we can see the current state of consumption for North America and the rest of the world (N.B. width of bar proportional to population in associated region).

N.B. Ecological Footprint accounts estimate how many Earths were needed to meet the resource requirements of humanity for each year since 1961, when complete UN statistics became available. Resource demand (Ecological Footprint) for the world as a whole is the product of population times per capita consumption, and reflects both the level of consumption and the efficiency with which resources are turned into consumption products. Resource supply (biocapacity) varies each year with ecosystem management, agricultural practices (such as fertilizer use and irrigation), ecosystem degradation, and weather.   This global assessment shows how the size of the human enterprise compared to the biosphere, and to what extent humanity is in ecological overshoot. Overshoot is possible in the short-term because humanity can liquidate its ecological capital rather than living off annual yields.

Carrying Capacity

The last sentence of the note above is important. The developed nations are already consuming beyond the earths capacity to provide. Carrying Capacity has been exceeded and as it is exceeded, Carrying Capacity declines. While developed nations are making headway improving conservation, there has been little reduction of consumption – we have simply slowed the rate of per capita consumption. Meanwhile developing nations are moving up the consumption curve, aiming for an American-class lifestyle. Depletion of earth’s precious resources accelerates – oil, potable water, wild fish, species, clean air, etc. are all in decline. Earth’s Carrying Capacity is thought to be somewhere between 1 and 3 billion people. We have been operating the planet well beyond that for almost 50 years now.

Even if the population stopped growing today, we are consuming beyond the earth’s capacity to provide. With 6.8 billion people already on the planet, the growth of consumption is the population problem, right now.

Zacharia suggests “As each country rises up, they become more self confident and nationalistic, and less inclined to cooperate in global unity toward a common goal of tackling the pressing problems of this century.”

And quoting Hamlet: “There’s the rub.”

Population has grown beyond the Carrying Capacity of the earth.
Increasing demand for critical resources (energy, water, food, land, …) reduces Carrying Capacity further, and accelerates decline exponentially.
Climate is changing, pollution growing, species extinction accelerating.
And our ability to work cooperatively to meet these challenges is failing.

This is not sustainable.

How do we break the vicious spiral? How can our global economy – grown soft and pudgy during the 20th century’s age of abundance – adapt and function in the lean and mean dog days of the 21st century?

Nobel Laureate Joseph Stiglitz on Sustainability and Growth

Posted on 22 June 2009 | by Jay Kimball | 8 Comments

My wife and I live on an island in the Pacific Northwest. We are in a county that has the lowest working wages in the state. As you can imagine, there is a lot of belt tightening going on as the economy craters.

In a future blog post I’ll talk about how our community is finding ways to innovate in tough times, but for now, what I am thinking about is something Joseph Stiglitz said last year in an interview at the Asia Society in New York City. Stiglitz is a Nobel Laureate and professor of economics at Columbia University.

Toward the end of the interview, talking about GDP, he describes the dramatic negative side-effects a metric like GDP can have on societal well-being. In short, something as simple as a measurement can lift a society up, or crush it.

Here is what Professor Stiglitz said:

What We Measure Affects Our Behavior

Joseph Stiglitz during 2008 Asia Society interview

Accounting frameworks affect behavior. More generally, information affects behavior. What we gather our information about, and how we describe success, affects what we strive for. If GDP is what we think is success, people will strive for growing GDP. Politicians, for example, will then describe how they increased GDP x%, creating a sense of importance to the measure. By doing that though, they focus policies on things that will increase GDP.

We have identified a lot of ways in which GDP is not a good measure of economic performance or societal well-being. So we are working with others to try and focus a global conversation about alternative measures, and also come up with some summary accounting frameworks and statistics that more effectively represent the economic realities on the ground.

Measuring the Middle Class

For example, GDP doesn’t tell you about what happens to the typical citizen. This is an increasing problem because when you have growing inequality in society, you can have GDP going up, as it has in the US, but most people are getting worse off. Not just poverty going up, but the median income – 50% or more of people getting worse off.

We ought to know what’s happening to the median person. It’s very hard to find statistics about that.

Green GDP

There needs to be a focus on what we call “Green GDP” – taking account of environmental degradation and resource depletion. This is particularly important in developing countries that may, for example, be growing by cutting down their forests. But once they cut down the forests, there’s nothing there. And so unless they do something, it’s not sustainable. GDP tells you nothing about sustainability. Another example – the IMF thought Argentina was doing great in the early 1990s. In looking at the data though, in a more fine grained way, we found that their growth was not sustainable. If you only looked at GDP, you would not have realized that.

There are ways that you can adjust for depletion of natural resources and degradation of the environment. If you do that, China’s growth, for example, gets significantly lowered. It’s still doing well, but it is much lower than it otherwise would have been.

Special Interests – The Invisible Hand

Here’s an interesting story about the role of special interests: When we tried to push for this (Green GDP), and people in the Department of Commerce were excited about doing this, the coal industry basically threatened to pass a proviso to take away funding for any research that would support these alternative measures. Because they new that Green GDP would not be good for the coal industry. That reinforced our belief on why it is important to measure these things.

GDP and GNP

Here’s another example… the difference between GDP and GNP. Those of you who are older may remember GNP and around 1990 they switched to GDP. Well, everybody said it’s just a little bit of difference. It turns out that it makes a great deal of difference for many countries. And I am sure somebody is going to write an article about whether there was a political context to the switch. GDP looks at the output within the country. GNP looks at the income of the people, in the country. When you started privatizing a great deal, you had economic activity within the country, but the income from that economic activity more and more was going to people outside the country. So you have a mine, for example, somebody taking [resources] out of the mine, leaving behind environmental degradation, getting royalties in some cases of 1 or 2 percent, so almost none for the income from the mine goes to people in the country. So GDP is going up, but any measure of Green GNP would show the country going down. There are some really dramatic examples like in Papua New Guinea, where this actually is true.

GDP, Prisons and Healthcare

Two dramatic examples – The US has about 10 times as many people per capita in prison as other advanced industrial countries. That contributes to our GDP, because we have to spend money incarcerating them. In some states, we are spending as much on building prisons as we are on universities. That’s good for GDP, but any measure of societal well-being says it’s not good to have so many people in prison. And it’s a symptom of something dysfunctional. We can have a long discussion about what it is that’s dysfunctional, but the point is, it’s not positive.

Another example – We spend more on healthcare than any other country, as a percentage of GDP, yet our health outcomes are much lower than in other advanced industrial countries, and actually, lower than many developing countries. Well, the extra money we spent on healthcare shows up as a contribution to GDP. If we got more efficient our GDP could go down. But that is clearly not… you don’t want to… You’re looking at the wrong thing.

END OF INTERVIEW

You can watch the GDP portion of the interview video here.

For me, what Stiglitz is getting at is: We grow what we measure (GDP), and because we are measuring the wrong stuff, we are growing wrong.

It seems to be in our DNA to want to “grow,” but like a garden, don’t we have a choice about what we grow? Are there ways we can grow our economy that restore abundance rather than consume it? What are the essential things to measure so that we are growing good things?

What do you think? What would you like to see grow? What should we be measuring?