Wednesday, August 12, 2009

Sustainability: Corporate Duty or Government Domain?

What does sustainability mean to corporate America? How much influence should the government have?

A simplified definition for sustainability draws a visual of building a bridge between the present and future, striving to find ways to meet current demand in a way that leaves ample resources for other generations.

While that may serve as a sound springboard for theoretical debate, it does very little to demonstrate precisely what conservation means to businesses. It fails to illuminate the steps companies are taking to improve the environment, find efficiencies, and rely less heavily on limited resources.

A forum hosted by the Charlotte 2010 Evening program at Wake Forest University’s Schools of Business sought answers, hosting representatives from different industries. The roundtable was the brainchild of a team within the program, which is closing in on the halfway point of their MBA curriculum.

Duke Energy represented a service provider that relies on energy consumption to make money. Profits clearly get pinched when the company revs up investment in renewable energy, or when customers made efforts to lower their energy use. External challenges are aplenty, particularly when it comes to groups upset over the impact that fossil fuels have on the environment.

Goodrich Corp. is closely linked to the aerospace industry, producing components for clients such as Boeing and Lockheed Martin. The company views sustainability efforts as a boon to profits. By producing more-efficient parts, they have the ability to help clients operate more competitively.

Throughout their presentations, representatives from both companies talked about the many challenges to promoting sustainability. Another chord that resonated from their remarks is that sustainability thrives in an environment where companies, and not the government, presses for improvement.

The debate over regulation is not new, although it has regained prominence as the Obama administration and Congress grapple over whether more intervention is needed in the financial services industry. To some intervention advocates, it unfortunately takes a dropped ball before the government realizes that it needs to pay closer attention to the juggler.

Tuesday night’s speakers presented the counterargument that companies are better motivated by their clients and a need to be more nimble and distinctive from their competitors. Another motivation for internal boundaries is to keep government out.

Harry Arnold, a vice president for enterprise technology at Goodrich, said one reason his company embraces sustainability efforts to avoid political pressure. “I’ll be blunt about that,” he told 50 attendees. (Another reason is that it helps the company recruit forward looking engineers.)

“We have been a self-regulated industry for the last 50 years,” Arnold said. “During that time new planes are 20% more efficient than the ones that they have replaced. And they’re quieter and more efficient. We want to be in a world without government mandates.”

Globally, governments are taking a harder line. Europe for instance is evaluating REACH (Registration, Evaluation, Authorization, and Restriction of Chemical substances), which in part would take a closer look at chemical importation. That would include oversight on materials such as cadmium and chrome, which for now are essential components of products that Goodrich makes.

Arnold said that the bigger motivation to reduce and eliminate such chemicals comes from clients. “We have customers asking for the chemical makeup of our products,” he said. “We are working to get rid of the bad actors in our products … but they have to first pass a safety grade.”

Gregory Efthimiou, a communications manager at Duke, used his time to tout programs the company has espoused. “We are trying to balance reliability, affordability, and clean as we move to more sustainable system,” he said.

Duke created a Web site – – that discusses the causes of climate change. The company is looking at distributed generation, which involves installing solar panels on clients’ roofs. Duke is also getting approval for the states it operates in make money when it helps customers use less energy via the Save-A-Watt program.

The company is also investing in carbon capture, albeit a tiny amount (roughly $17 million) compared to the $1 billion it is spending on wind energy. Efthimiou also expressed trepidation investing in nuclear power but said the company is evaluation ways to increase spending there as well.

“Duke has a huge bull's eye on our chest and we painted most of the circle,” Efthimiou conceded. There's no "silver bullet" to solve climate change, he added. "It will take everything we have to make the bridge to low-carbon future."

What do you think? Is more government involvement required to promote sustainability, or can companies self regulate themselves in a way that will improve circumstances for future generations?

Fun fact: The average airplane taxis 500,000 to 700,000 miles during its lifespan.

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