SUSTAINABILITY DISCUSSION PAPER

The term “sustainability” elicits a myriad of gut responses in people, depending on how they define it, or believe it is defined.  Clearly, sustainability has become a buzzword for an array of social and environmental agendas.  But, how do business leaders view sustainability?  Is it something of value that should be pursued, or is it merely a fad or another avenue to impose regulations?

This paper will first present a brief overview of the major challenges facing industry today to set the context for a discussion of sustainability and how it could help businesses address these challenges.  Next, the paper will look at how sustainability is being defined by various interests and how business has responded with its own definition and its own approach.  Finally, look at current NWFPA programs and how they are helping address sustainability issues.

Challenges Facing Business

Climate Change and Energy

The challenge that should be on every company’s radar screen is climate change.  “Climate change is shaping up to be the biggest environmental strategy issue the business world has ever faced.  The potential effects are broad and substantial.  The need to rethink strategy with an eye on climate change impacts and regulatory constraints is fast becoming a corporate imperative.”¹

Regardless of your belief about the cause of climate change, the incontrovertible fact is that policies, legislation and regulations to reduce greenhouse gas (GHG) emissions levels are being developed and adopted which can significantly impact your business.  Carbon dioxide is the most prevalent GHG and the majority of CO2 comes from the burning of fossil fuels such as coal, gasoline, diesel and natural gas.²  The Table below shows the major sources of GHG emissions, which will be targets of reduction efforts.  Hoffman and Woody advise that “These new rules will affect energy pricing and availability, creating a ripple effect throughout your entire value chain.”  They will affect supplier relations, raw material procurement, shipping and transportation costs and the ultimate pricing of goods and services.

Major Sources of GHG Emissions

Both Washington and Oregon have established Renewable Portfolio Standards mandating that 15 and 25 percent of the electricity generated by their utilities be produced by renewable sources no later than 2020 and 2025, respectively.  Long-term contracts for electricity produced from coal are prohibited. The mandates will drive up energy costs.  The Western Climate Initiative released its design recommendations for a regional market-based cap-and-trade system to reduce greenhouse gases, which will put a cap on emissions and set a price for carbon.³ Oregon and Washington have agreed to pass legislation in 2009 to implement a cap-and trade-system.  However, preliminary results of an Electric Power Research Institute study indicate that a CO2 market in the West will significantly increase electricity prices with little reduction in GHG emissions levels.⁴  It will also impact the competitiveness of industries in states that adopt the cap-and-trade vis-à-vis those in non-adopting states.

In addition to climate change impacts on energy prices, energy demand is continuing to rise (especially in China and India) which will put further upward pressure on the price of oil, natural gas and coal.

Water 

Water is a critical input to agriculture and to food processing.  Water and wastewater discharge are ongoing challenges for the food processing industry. Many of the larger food processors use over 1 million gallons of water each day. Water supply and availability east of the Cascade Range in Oregon and Washington and in Idaho are becoming significant concerns.  Industrial wastewater is considered a major environmental concern and all disposal methods are regulated and include stringent conditions, permit fees, and penalties for noncompliance.

Waste Management

Solid waste is also considered a major environmental concern.  The cost of disposal is increasing as the fees for disposal rise and companies must transport their waste greater distances to disposal sites.  In addition, many states are adopting recycling requirements or take-back regulations which require companies to pay the cost of disposal of their product or packaging.

Accountability and Communications Technology

Society’s expectations for companies are changing and greater accountability is expected.⁵  There is a broad based set of players that are exerting pressure on industry:  government, non-governmental organizations (NGOs), customers, employees, banks and insurance companies.  Regulators, politicians and local communities can raise significant barriers for companies that overstep expected bounds.  Businesses that are not good neighbors risk losing their license (literally and figuratively) to operate and grow within the community.  Wal-Mart’s expansion efforts have hit roadblocks in many communities because of social and environmental impacts and its lack of employee benefits have resulted in state mandated for health care payments.  Coca-Cola’s experience over the last five years is another example of how these pressures affect business operations.  Its plant in India was shut down for two years due to protests of its water use; it stopped using ozone-depleting refrigerants; and, withdrew Dasani bottled water from the British market when Dasani failed to meet EU quality standards.⁶  

Customer pressure represents one of the fastest emerging and most powerful forces in the long list of players.”  Proof of environmental responsibility has become a requirement for obtaining major contracts.  Wal-Mart’s sustainability demands are a key example of this trend as well as the requirements of Tesco, Sysco and Whole Foods.  A Food Marketing Institute study found 92% of consumers agree with the statement that it is important for the food industry, both manufacturers and supermarkets, to be more proactive about addressing environmental concerns.⁷

Communications technology advances have increased the risks to businesses of not meeting expectations.  In this internet era, anything that goes wrong in a plant’s operations or those of its supplier hits the web almost instantly.  Recent food product recalls and alerts (e coli, salmonella, and melamine) and immigration raids received widespread and immediate publication.  Warren Buffet has said “It takes 20 years to build a reputation and five minutes to ruin it.  If you think about that, you’ll do things differently.”⁸

Sustainability Defined

In response to world-wide issues of stagnant development and environmental degradation, the United Nations established the World Commission on Environment and Development  Bruntland Commission) in 1983.  In a 1987 report, it defined sustainable development:

“Sustainable development seeks to meet the needs and aspirations of the present without compromising the ability to meet the needs of the future.”⁹

The Commission indicated it was not anti-growth growth, but rather was calling for significant economic growth to meet the needs of the current world population.

“Sustainable development” evolved into “sustainability” as the term “development” was dropped from many definitions.  It has been suggested that environmental groups did not like the concept of development in the definition.¹⁰  

A national effort to standardize sustainability practices defines “Sustainable Agricultural Practices” as “Agricultural production and product handling activities that result in the production and delivery of products in a manner that is economically viable, ecologically sound and socially responsible.”¹¹   While the definition speaks of economic viability, a closer reading of the standard reveals that economic viability translates as “wages. “  Further, the standard sets organic practices as the baseline.

As many environmental and social activists sought mandates for their causes under the umbrella of sustainability, for many people, sustainability came to be associated with pro-organics, anti-biotechnology and genetically-modified foods, locally-grown, and labor issues.  Further, the approach by some in this “sustainability movement” has been toward regulations and mandates, believing that industry won’t voluntarily manage itself in a socially or environmentally responsible manner. ¹² Sustainability has become a very controversial topic.