The week of May 10th was a banner week for sustainability news and discussions, including the two days I spent in Chicago at ASA's Sustainable Manufacturing conference, Procter & Gamble's new sustainability supplier scorecard, the introduction of Kerry-Lieberman's American Power Act, SAP's new interactive sustainability report, an EPA ruling on GHG emissions, and my colleague Simon Ellis' experience on a sustainability panel at Transplace's Shipper Symposium. I'll follow up in another piece
On May 12th, Procter & Gamble (P&G) announced its Supplier Environmental Sustainability Scorecard for its key suppliers, as partof an ongoing effort to acknowledge sustainability extends from end-to-end in the supply chain. The new scorecard will measure energy use, water use, waste disposal, and greenhouse gas (GHG) emissions on a year-to-year basis, with the annual scorecard deadline approaching in July 2010 for participating suppliers. P&G attributes the scorecard to 18 months of work and close collaboration with the organization's Supplier Sustainability Board, which includes more than 20 leading supplier representatives from P&G's global supply chain; the scorecard also includes protocols from the World Resources Institute (WRI), the World Business Council for Sustainable Development (WBCSD), and the Carbon Disclosure Project (CDP) to minimize redundant efforts and build on existing best practices. P&G describes the uses of this scorecard related to not only sustainability metrics but also spend decisions and product design:
- Annual Supplier Sustainability Performance Ratings (corporate)
- Supplier Business Award Decisions (related to spend)
- Improvement Tracking (against goals set by a P&G spend category or P&G corporate)
- Material Production Impact Studies for Product Design
- Total Supply Chain Impact Modeling
One of the statements I appreciated most in the press release was the fact that P&G promoted the scorecard as "open code", in other words as a starting point for the discussions necessary to create a common supply chain evaluation process across all industries. Although the last phrase "across all industries" is a fairly high target, I think it's reasonable to expect that it can be a good starting point for manufacturers. I can think of a number of ongoing efforts that are gathering momentum that will help move companies in the same direction, (including the WRI, WBCSD, CDP, Sustainability Consortium) and not just from a push from supply chain captains (think IBM, HP, and Dell individually and collectively through the EICC code of conduct) or dominant retailers (think Wal-mart). I know many manufacturers and their suppliers would welcome some agreement on sustainability scorecards and metrics.
The Environmental Protection Agency (EPA) finalized its rulings to cut GHG emissions following an earlier proposal to add permitting requirements for new or substantially modified emitting facilities on greenhouse gases (GHG) emissions of 25,000 metric tons or more, though the number in this final ruling has been raised to at least 75,000 metric tons with statements that imply it's unlikely the ruling will be applied to emitters under the 50,000 metric ton threshold. The announcement does add more detail to which stationary sources and modification projects apply and when, with the intention of targeting the largest GHG emission sources first beginning in January 2011. Because the largest stationary sources (over 75,000 metric tons) are at facilities such as power plants and oil refineries, many manufacturers can breathe a sigh of relief, even if it's temporary. My colleague Jill Feblowitz of Energy Insights wrote in her Smart Grid Blog on the IDC Insights Community page that her quick take is "Companies will need to re-examine their engineering and design, document management, and environmental, health and safety (EHS) applications."
Jill also wrote: "Right off the bat, the new rule that further tailors the Clean Air Act will complicate the permitting process. If a company wants to operate a new or expanded facility, it will need to demonstrate that it will be using the best available technology (BART) to curb emissions. Of course, installation of BART emissions control will undoubtedly raise the cost of new coal generation. For all facilities, expect that the permitting process will be lengthened, requiring more documentation back and forth with the permitting authorities. That's where engineering and design and document management applications which also have workflow could come into play in order to reduce the costs of permitting by helping to streamline the process.
In order to maintain the GHG permit, the company will need to report at least twice a year on its GHG emissions from that facility. Power plants for years have used continuous emissions monitoring (CEM) to help comply with Clean Air Act emissions like sulfur and nitrous oxide. Expect CEM now to have capabilities to measure GHG. If the CEM does capture GHG, then the company will need a way to aggregate and produce compliance reports at least, and a way to manage emissions not to exceed thresholds at best. If the facility does not use CEM, it will need to build out its EHS applications to include estimating algorithms that will be acceptable in calculating emissions for the semi-annual reports. But permitting authorities aren't the only places where a company will want to report GHG. Many companies are already reporting on their carbon footprint or emissions to voluntary reporting groups such as the Carbon Disclosure Project."
Also on May 12th, Senators John Kerry and Joe Lieberman introduced new clean energy and climate change legislation - the American Power Act, the follow through of a New York Times opinion piece from Senators Kerry and Lindsey Graham back in October 2009 and the resulting Framework for Climate Action and Energy Independence developed by Senators Kerry, Graham, and Lieberman. (On a side note, the bill would impact much of the EPA's existing Clean Air Act authority.) A statement from the Pew Center on Global Climate Change summed up the general expectations from the bill: "Know that any successful effort in the U.S. Senate will require bi-partisan support". The Pew Center also summarized the major elements of the legislation as:
- A market-based solution to achieve pollution reduction targets regulated - in the short term in the range of 17 percent and in the long term 80 percent below 2005 levels.
- Investments to develop and deploy new clean energy technologies, including nuclear energy, renewable energy, clean coal, and energy efficiency.
- Increased domestic production of oil and natural gas onshore and offshore.
- Transitional support for low- and middle-income families to ease costs and for businesses to ensure compliance and avoid carbon leakage.
- A mechanism to moderate the price of carbon to prevent market volatility and vigilant carbon market oversight.
- Domestic and international offsets.
- A strong, international agreement with real, measurable, verifiable and enforceable actions by all nations, long-term financial assistance to developing countries, and enhanced technology cooperation with intellectual property rights protection.
Although I believe any climate change legislation will face significant challenges (and the BP oil spill isn't going to make any of this easier) most leading manufacturers want some clear guidance on how to move forward, and part of that means creating a way to value carbon or some other sustainability measurement.
And that's probably the most important issue common to all of the news above, from Proctor & Gamble, the EPA, and the American Power Act: with some clarity in the definition of sustainability, carbon, and GHG emissions thresholds, manufacturers can make the right business decisions for financial and environmental sustainability.