business risk

This post also appears on Greenbiz.com.

This is Part Four of a five-part blog series, Aligning Profit and Environmental Sustainability. Each installment explores solutions to help businesses overcome barriers that prevent them from integrating environmental sustainability into their everyday operations. Look for these posts every Thursday.

David Roberts at Grist, the online environmental news organization, commented on Twitter last week that “people talk about ‘externalities’ like they are just bad vibes or something. But that money is real money. Those costs are real costs.” How real is that money? Dr. Pavan Sukhdev, author of The Economics of Ecosystems and Biodiversity and Corporation 2020, claims that these “externalities”—or costs to society from carbon emissions, water use, pollutants, and other byproducts of business activities—are more than $2 trillion.

Putting a financial value on these environmental costs can help businesses make better informed decisions about how they manage their environmental risk. Not all companies recognize this—and even fewer actually know how to value these externalities correctly. But a few corporations are starting to show us the way.

Today marks the 20th anniversary of the first World Water Day, an international celebration designed to draw attention to the importance of freshwater resources. However, for a large and growing proportion of the world’s population, every day is a World Water Day. Difficult, complex water challenges including drought, groundwater depletion, pollution, and clean drinking water availability are growing in urgency and seriousness all around the world. Some even argue that we should boycott World Water Day – that our water problems are too serious to try and confine to a single day.

Although it’s true that we must keep water in mind during the other 364 days of the year, World Water Day can be useful. It helps raise awareness and serves as an annual reminder of the water problems we must collectively solve. Plus, picking a single theme – this year’s is cooperation – helps break down a very complex topic into more accessible, comprehensible pieces.

In keeping with the theme of helping make complex issues more approachable and understandable, WRI is marking this year’s World Water Day by launching the first in a new series of videos we’re calling “What’s the Big Idea?” These brief videos will feature WRI staff members explaining some of the complex, global challenges we are working to understand and solve. Our first “What’s the Big Idea?” video explains the concept of water risk and the array of challenges it poses. We also highlight a potential solution: WRI’s Aqueduct mapping tool, which helps companies, investors, governments, and others better understand and manage their water risks.

This post also appears on Greenbiz.com

This is Part Two of a five-part blog series, Aligning Profit and Environmental Sustainability. Each installment explores solutions to help businesses overcome barriers that prevent them from integrating environmental sustainability into their everyday operations. Look for these posts every Thursday for the next four weeks.

As companies tackle environmental sustainability initiatives—such as developing a climate change strategy—early steps involve getting the CEO on board and committing to public goals. But the process doesn’t stop there. In fact, that’s only the beginning. Companies also need to find the money to implement projects and make good on the promised goals—all while delivering financial results.

Finding the Money: A Case Study from Johnson & Johnson

Finding the funds for environmental sustainability initiatives can be a tall order, especially since many companies’ sustainability decisions are made separately from its financial ones. Johnson & Johnson experienced this conundrum firsthand. Back in 2004, the company had a public greenhouse gas reduction target, but was not on track to reach it. Although the emission-reduction projects it identified could save energy and operating costs, managers were having difficulty getting approval for the capital they needed. Core business priorities like new product development were competing with the money the company had earmarked for its sustainability efforts.

Managers, therefore, decided to re-think the way the company allocates internal capital. Johnson & Johnson started putting aside $40 million each year for “win-win” projects—greenhouse gas (GHG)-reduction initiatives that also reduce operating expenses, such as solar photovoltaics. Projects like these sometimes require more upfront capital, but benefit from more predictable returns and lower operating costs than conventional energy systems. The strategy reduces the company’s risk exposure over time and lowers its operating budget.

Fast forward to today and this approach has enabled Johnson & Johnson to reduce its GHG emissions by more than 138,000 metric tons through projects that have an average return of 19 percent. This emissions-reduction is equivalent to the electricity use of approximately 21,000 homes. The company met its initial GHG-reduction target in 2010 and renewed its commitment with a new 20 percent absolute reduction target by 2015.

This post also appears on Greenbiz.com.

This is Part One of a five-part blog series, “Aligning Profit and Environmental Sustainability.” Each installment will offer solutions for businesses to better integrate environmental sustainability into their everyday operations. Look for these posts every Thursday for the next four weeks.

Implementing corporate environmental sustainability strategies is increasingly becoming standard practice. For example, more than 300 of the S&P 500 report their greenhouse gas (GHG) inventories each year to the Carbon Disclosure Project, and companies from the Fortune 100 and S&P Global 100 are investing billions of dollars to reach renewable energy procurement targets. Some companies are going further and taking steps to reduce the environmental impact of their products, services, and supply chains.

Despite this encouraging progress, a confluence of global environmental challenges is putting more pressure on corporate environmental sustainability strategies to get to scale quickly. Not enough global businesses have integrated environmental sustainability into their long-term decision making. And, as it stands today, existing practices are not enough to protect the natural resources that society and businesses depend on.

WRI examines this gap between existing corporate sustainability practices and the environmental protection needed for the 21st century in our new report, Aligning Profit and Environmental Sustainability: Stories from Industry. We interviewed sustainability managers from AkzoNobel, Alcoa, Citi, Greif, Johnson & Johnson, Mars, Natura, and Siemens to better understand why strategies that are good for both business and the planet are not getting to scale.

We identified four barriers in these discussions, as well as ways companies can overcome them: