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Posts by Ramon Arratia

Time to look at product portfolios from the sustainability perspective?

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More and more companies are measuring the environmental impact of their products holistically, through life cycle analysis, and as a result many are making significant changes to the products they sell. There is also a movement towards measuring natural capital in order to have the full account of companies and products. These are great steps in the right direction towards product sustainability. But it’s one thing to make more socially and environmentally friendly products and services available; quite another to get customers to buy these instead of less sustainable options that are often cheaper or more familiar.

What’s the point in a company developing a AAA-rated eco-product that only sells in small quantities while its far more environmentally damaging B-rated product is still on the market and sells 50 times as many units?

It’s often been argued that as long as companies give consumers a choice, then it’s down to the consumers to make the ‘right’ decision. But experience tells us that we can’t rely on consumers to do this. Survey after survey demonstrates that consumers habitually claim they will take social and environmental issues into account when buying goods and services, but sales figures show that these good intentions are often forgotten by the time they get to the checkout.

The ‘ethical consumer’ does exist, but only in small numbers.

product portfolio from the sustainability perspective

This is why governments are increasingly stepping in to edit the choices that consumers are given, by creating rules of the game that favour a transition towards more sustainable products. Often this means cutting out the worst offenders in the market either by directly banning certain products or by setting a minimum standard – as with European measures on incandescent light bulbs or the REACH regulations on chemicals. However, such initiatives only cut out the end tail of the curve.

Governments can also facilitate the adoption of the best products, for example by committing to buy them in their public purchasing programmes. That increases the length of the tail at the other end. Even more interesting is when governments try to push the whole curve towards the right, for example by setting up tax incentives and penalties designed to promote the sale of more sustainable products. The bonus-malus tax on cars in France and the company car taxation scheme in the UK are examples of this. But sometimes just the creation of a legal requirement for labelling of the sustainability performance of products can do the trick. The EU labelling laws on white goods have been successfully pushing consumers towards AAA rated products for a long time.

We should not always, however, be waiting on governments to show the way.

It’s up to companies as well. Businesses that want to push the sustainability agenda cannot be content to delegate leadership to the government or consumers. After all, the ultimate sustainability brief of a company is to drive its entire portfolio towards its most sustainable products. The first step towards doing this is to introduce more sustainable products into a company’s portfolio, which can be a significant feat in itself for some types of products. But the next step is to manage that portfolio by editing consumer choice. That means removing more damaging products and services from the market while progressively convincing customers to buy the more sustainable ones. Unfortunately this idea of companies managing their entire portfolio is hardly heard in the current sustainability debate.

Who can push for portfolio management?

The most obvious actors who can push for portfolio management are the companies manufacturing and supplying products and services, and the retailers who sell them. Either party can lead the way. If retailers show little interest in changing what they sell, then supply companies can force them into it by default by managing their own portfolios and therefore changing what they are offering for sale. But if supply companies are dragging their heels, then retailers can galvanise them into action by refusing to stock certain products. Ideally both parties will take an active role in sustainable portfolio management, with retailers finding that companies are increasingly providing them only with products that have lower impacts, and retailers increasingly deciding to inform companies that they will not stock certain higher impact items.

Corporate portfolio management

If a company is serious about reducing its life cycle impacts, firstly it has to create products with lower impacts and secondly it needs to sell more of those products and less of those with a higher impact. Put simply, it must sell more of the good stuff and less of the bad. Sometimes the damaging effects of a product are clear and immediate. For example, a number of chemical companies, including Henkel, have adopted a socially responsible stance by removing ingredients such as toluene from adhesive products that can be misused by solvent abusers. And of course they then don’t then leave the ‘bad stuff’ on the market – that would defeat the purpose.

Taking such affirmative action usually protects a company’s reputation, prepares it for future legislation and can give them a commercial advantage in some markets. Of course it’s good if a company starts, in this way, to sell more sustainable products. But we need to understand how a business’s entire portfolio behaves. Even if sales of good products do very well, it’s no good if sales of bad products are continuing to increase at the same time.

A popular eco-products story has been GE’s ecoimagination – the drive to increase GE’s portfolio on technologies for sustainability, such as wind turbines or efficiency solutions for buildings. GE announced revenue goals for these technologies when it launched ecoimagination. But it also had goals for advancing the sales of other, less desirable technologies – such as piping materials for the oil and gas industries. So it’s not clear whether the average footprint of GE’s entire portfolio will decrease over time.

Another high profile eco-products story has been Philips’ Ecovision, under which they have set themselves a 2015 target of a 50% energy efficiency improvement for their average total product portfolio compared to 2009. This is a much better approach. Showing improvements in sustainability performance of the whole portfolio in this way will be a must for companies in the future. And it won’t be as difficult to achieve as at fist it might sound. At Interface Europe we managed to cut our average product carbon footprint by 27% in just four years from 2008 to 2012.

Retailer portfolio management

Any life cycle analysis carried out by a retailer will reveal that the biggest impacts of its activities are not in its own operations – the running of its stores – but in the embedded footprint of the goods and services it sells. A supermarket can make its lighting and its refrigeration as energy efficient as possible, but it’s the stuff that it puts on the shelves that makes the real difference. This means that to make any significant difference to environmental impacts, retailers must take on some accountability for what they are selling – by making sure they don’t sell the really bad stuff, by pushing their suppliers to give them more sustainable products, and by encouraging customers to buy them. The pre-requisite for this kind of portfolio management – or ‘choice editing’ – is for retailers to demand Environmental Product Declarations (EPDs) from their suppliers for each product they sell.

Because these EPDs are based on life cycle analyses, they allow products to be compared in a meaningful way. But you don’t need full EPDs to see the bigger picture. After all, it’s no good fiddling about at the margins to produce small gains when you can make much more significant progress at the core. According to Tesco, for instance, the carbon footprint of a class 1 carrot is 80g CO2 per 100g of serving, while the impact of a Scottish carrot is 84g. Who cares about that difference when the footprint of a 100g serving of beef is a massive 1,000g CO2? Surely Tesco should be trying to encourage people to eat less beef and more carrots?. And for that matter, shouldn’t they be helping us to shift from high fat, high sugar diets to healthier options? Those shifts should, arguably, should be at the core of a supermarket’s environmental and social responsibilities.

Choice editing can be easy

It’s actually very simple for retailers to begin choice editing. The UK do-it-yourself retailer B&Q has seen this, and it has already begun to edit its product portfolio on sustainability grounds. For example, after life cycle analyses showed the extreme energy inefficiency of patio heaters, it simply took the decision not to sell them any longer. It may have lost some short–term income by withdrawing patio heaters, but it also gained many plaudits. However, in the words of the UK Sustainable Development Council, choice editing is not just about cutting out unnecessarily damaging products; it’s also about ‘getting real sustainable choices on the shelves’.

Providing such choices doesn’t have to be about bringing completely new products to the customer – it can be about making sure the best products are the only ones available. A number of UK supermarkets now stock 100% fairtrade bananas, so customers who want to buy bananas have no choice but to buy fairtrade. The same happened over a number of years with FSC-certified wood, to the point where it has now it’s become European law to stock only such material.

There are plenty of other areas where retailers can show strong, positive leadership. What excuse is there, for instance, for a retailer to be selling anything other than electrical appliances with A+++ energy efficiency ratings? If Walmart decided only to stock the most energy efficient A+++ appliances tomorrow, imagine what difference that would make to the thinking of manufacturers who are its suppliers – and to Walmart’s overall footprint. It would also make it easier for governments to ban all rating categories but the most efficient ones.

But portfolio management is also about what you don’t yet sell. If supermarkets have expanded to adjacent markets such as mobile phone contracts or motor insurance, then surely they can expand into products that are solutions to social or environmental challenges? IKEA, for instance, has just become the first large retail chain to start selling solar panels – with the express purpose of trying to transform consumers’ attitudes to energy (as well as making money). With the same aims in mind, Sainsbury’s is providing loft and cavity wall insulation to customers, as well as solar panel installations.

Asset portfolio management

Portfolio management isn’t just about products and retailers; they are just the most obvious examples. A similar model can be applied to services, and indeed investment and asset management. Many asset managers already edit their investment portfolios by avoiding controversial investments in companies that manufacture cluster munitions, for example. Apart from specific ethical investors, the list of ‘no go’ areas remains pretty limited for most mainstream investors, but this model could be extended to a less black and white approach, actively promoting more sustainable investments and choosing not to invest in less sustainable activities. For assets such as property, for instance, the environmental options are very clear.

Where do we go from here?

None of this is rocket science – we just need the willpower. But it does mean changing mindsets: moving away from measuring performance at corporate level to measuring the company’s entire portfolio on a life cycle analysis basis. And it means shifting from the idea of producing a few high-profile green products designed to catch the public’s eye and towards mainstreaming of those green products. It also means taking on the moral responsibility of trying to influence the behaviour of consumers.

To help us on our way, we must remember that this kind of portfolio management already goes on all the time. Companies change their product ranges continually; they drop old models and bring in new ones. Department stores choose to put 15 different types of kettle on sale, not the full range of 515 available to them. So the only radical thing about sustainability portfolio management is the ‘sustainability’ part. That’s what we need to get to grips with, and the quicker we do so, the more dramatic will be the results.

Of course there are some potential pitfalls, but these are not insurmountable. If retailers or manufacturers are earning lots of money by selling or making higher impact products, then they need to be careful about how they make the switch. When Iceland, the UK frozen food retailer, tried to move overnight to selling organic food, large numbers of its customers walked away – and it had to reverse its decision. But the lesson here is not that portfolio management doesn’t work – it’s that it has to be carefully managed. Companies and retailers should know their customers and introduce changes over a period of time, helping to educate them about what they’re doing and using all the marketing resources at their disposal.

Key to all this will be transparency of environmental performance, which will help consumers choose products on sustainability factors. People used to buy light bulbs based on wattage; now, increasingly, they are buying them on energy performance. That switch has been achieved by good labelling and by good education. Some of changes will be driven by regulation, others by B2B demand, some by companies and retailers themselves, competing against each other. But the sustainability movement as a whole needs to push in that direction. It provides fertile ground on which to compete, and that is what companies love.

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Sustainability without the Fluff – Event Invitation

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Ramón Arratia invites you to the Event: Sustainability Without the Fluff

Monday August 1st from 12:30 to 2 pm at our Showroom in London. (lunch at 1230, discussion starts at 1pm sharp)

Join the discussion on:

* How to embed sustainability into your company

* Why a business case is more interesting when it goes beyond reputation, brand and internal engagement

* How to achieve higher margins, expand to adjacent markets and set barriers to entry

* Why product redesign can have a positive impact on the environment

* Different ways to extract value from sustainability

* How achieving a 98% carbon reduction is possible

* The circular economy in practice: what works and what is fluff.

RSVP: showroom@interface.com | 020 7490 3960

Ramon Arratia_05

Ramon Arratia is a sustainability director with 17 years of practical experience in corporate positions at multinational companies such as Interface, Vodafone and Ericsson. He was named by The Guardian newspaper as one of the world’s top sustainable business tweeters. He is a strong advocate of product sustainability through his popular blog (interfacecutthefluff) and gives 50 speeches a year on the subject. He campaigns for stronger and more efficient European regulation based on product standards, for revisiting corporate sustainability reporting and for many years he led the ‘Cut the Fluff’ campaign against labels, certificates, partial truths, marketing claims and all the components of the old sustainability beauty contest.

Ramon has an MBA from Warwick Business School, a MSC in Quality and Environment from Spain and a degree in chemistry. This mixture of business and technical education has given him a privileged perspective to understand both the geeks (LCA practitioners, academics, engineers) and the geezers (marketing, PR, sales, sustainability consultants).

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Interface Global reduces its own GHG emissions by 92% (98% in Europe)

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I am very proud to present the following numbers:

At Interface Global we have reduced our own GHG emissions by 92% (98% in Europe) by a combination of halving our energy use (45% globally, 54% in Europe) and then using renewable electricity and renewable gas. Today getting to 100% renewable electricity is possible, access to biogas a bit more challenging but all serious companies should aim at 100% green energy. That’s why we have joined the RE 100. Yes, they don’t focus on gas yet but there are an increasing number of companies switching to 100% renewable electricity.

One of the indicators Im very fond of is achieving 50% of all our raw materials from recycled and bio sources. This includes making yarn from discarded fishing nets ormaking latex from recycled PVB from car windscreens. For every raw material there is an alternative which is recycled or low impact biobased. Our goal is to scavenge waste foremother industries and treat it as food for our products. We are now investing in flexile manufacturing, that is lines that are flexible enough to handle different recycled or bio sources. We hope we can get much closer to 100% by 2020. A big challenge.

That brings me to the idea of taking ownership of the embodied carbon from our products. Companies should not only decrease their own emissions but also decrease the emissions of their products’ carbon. In our case, it’s mostly embodied carbon from all the supply chain processes. In only 7 years, we have been able to decrease that entire chain embodied carbon by 31% globally (39% in Europe). Product design is the key in doing this. The same you can design a car so that it’s more efficient in the use phase, you can design a kg of cement or a m2 of carpet so that it’s more embodied carbon efficient.

2015 Global EcoMetrics Highlights

  • GHG emissions per unit of production is down 92 % since 1996
  • Energy use per unit of production is down 45 % since 1996
  • Renewable energy is 84 % of total energy use at manufacturing sites
  • Recycled and biobased materials now make up 50 % of total raw materials use
  • Water intake per unit of production is down 87 % since 1996
  • GHG emissions of entire supply chain and own production of our carpet is down 31 % on average since 2008

2015 European EcoMetrics Highlights

  • GHG emissions per unit of production is down 98 % since 1996
  • Energy use per unit of production is down 54 % since 1996
  • Renewable energy is 95 % of total energy use at manufacturing sites
  • Recycled and biobased materials now make up 50 % of total raw materials use
  • Water intake per unit of production is down 98 % since 1996 
  • No waste to landfill
  • GHG emissions of entire supply chain and own production of our carpet is down 39 % on average since 2008

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Germany’s success on renewable energy

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Last year, European renewable energy production was ahead of nuclear power at 29% vs 27%  and 26% of coal. Electricity generation from renewable energy sources had grown substantially between 2010 and 2013, growth between 2014 and 2015 was moderate according to the Agora Energiewende policy institute.

Germany, world’s 4th largest economy has generated 90% of its power needs from renewable energy last Sunday, May 8th. That’s huge. According to Agora Energiewend ‘ graphic, a German think-tank and policy laboratory, at 11 am local time the total output of German’s renewable power, wind, solar, hydropower and biomass has reached 55 gigawatts. 

jeremygraph1-740x327

Considering that Germany is Europe’s biggest economical power, this demonstrates that wind and solar energy can keep the pace with the demands of this society. But also, we cannot forget that Germany is not exactly the king in sun. Other countries have much more capacity to produce, yet still not until long ago Germany was world’s leader on solar energy.

jeremy3-740x572

The secret to Gemany’s success in renewable energy are the individuals. Smart policies have pushed people and businesses to the renewable market, and in 2012 individuals owned more that a 3rd of Germany’s renewable energy capacity. 

Still, Germany gets most of its power from fossil fuels. On average, renewables supply a 30% of it’s needs. Sunday’s peak resulted from a combination of reduced demand, abundance of wind and sunshine. But this does not make it less important. It still is a huge proportion generated. 

The European Union has resolved to reduce greenhouse gas emissions by a minimum of 40% below the 1990 levels and raise the renewables share in final energy consumption up to 27%. To reach these targets, the share of renewable energy sources in the electricity sector must rise significantly in the next few years and we must reduce / decline coal-based power substantially. 

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How to regulate plastics

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I had a very inspiring meeting organised by Globe EU (http://www.globe-eu.org) at the EU parliament, hosted by MEP Sirpa Pietikäinen.

Ocean Plastic20 million tonnes of plastics end up in landfill and 4 m tonnes in energy recovery  while only 7 million go for recycling. But only are recycled 4 million of those 7 and they are normally downcycled. It was great to learn all these figures from Suez, including that China imports 9m of plastics and that 50% of the UK plastics go to China.

The issue of plastics will grow exponentially and in emerging markets the growth is becoming mind-blowing.

I fully support the EU commission that we need to change paradigm and think about product design first (instead of waste policies like in the past). Product design related policies were at the heart of the EU’s End of Pipe emissions for vehicles strategy and it has worked. In fact, it worked so well that some car markers were cheating it.

Here are some thoughts for future policies:

Incentivise high recycled content in products with lower taxes e.g.. get exempt VAT for a while

Use of green public procurement to buy more products with high recycled content

Much more aggressive policies to end landfill and massively decrease WTE for many waste streams (the market would react and create technologies to recycle)

Standardisation of packaging waste with good practice and standard materials

Helping develop voluntary standards that incentivise recycled content eg. in the construction industry standards such as LEED or BREEAM favour recycled content

Tax carbon (recycled content has lower footprint than virgin)

Dedicate more research to understand what incentives and knowledge are needed for product manufacturers to design better dissasemblable products

Dedicate more research to understand what are current and future recycling technologies and how these link to market barriers for the processed waste streams

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Economic growth is decoupled from carbon again this year

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For second year running, the economy grew while decreasing its carbon footprint, according to analysis of preliminary data for 2015 released by the International Energy Agency (IAE).

CO%22 The two largest emitters, China and the United States, registered a decline in energy-related CO2 in 2015.

The emissions in China declined by 1,5%due to the restructuring of its industry towards less energy-intensive industries and the government’s efforts to decarbonize electricity generation, which pushed down the coal use. Therefore in 2015 in China less than 70% of the entry was coal generated, 10% less than in 2010. This energy was substituted by hydropower, solar and wind generated energy.

Meanwhile, in the United States the emissions declined by a 2% as a large switch from coal to natural gas use in electricity generation took place.

In OECD economies, recent efforts to promote more sustainable growth – including greater energy efficiency and more renewable energy – are producing the desired effect of decoupling economic growth from greenhouse gas emissions. In Europe theres is still a moderate increase.

This decline observed in the two major emitters was offset by the increasing emissions in most other Asian developing economies.

Finally, all those Economic ministers / Treasuries that thought this was imposible now they have their proof.

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Is energy storage the real killer?

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A new report from The Carbon Trust says energy storage could save £2.4bn every year in the UK electricity system if some market barriers are removed. Some of the key identified barriers are: policy risks, failure to recognize externality benefits to society, revenue cannibalisation risks, distorted markets price signals, among others.

The analysis, backed by UK department DECC, estimates that around £7bn could be saved annually if energy storage technologies are integrated effectively into the grid system.

Please see the full new report from the Carbon trust.

Recently, the US department for Energy announced good news about breakthrough energy storage technologies, especially for large scale storage.

Please see the full article from the Guardian

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European Business coalition are calling on EU leaders to act on the Paris Agreement on Climate policies.

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On Tuesday in Brussels a major coalition of top European businesses, trade unions and NGOs got together in an unprecedented gathering in Brussels to influence Heads of State and Ministers to act on the Paris Agreement and ensure that EU climate policies are coherent with its goals ahead of the 4 March Environment Council and the 17-18th March European Council .

After all the fanfare of Paris, not much has been going on. The EU should again take the leadership position and update our climate goals. The Chinese will surely do.

As a company we have seen how we could achieve a 98% carbon cuts with more than 50% efficiency gains and stay profitable. Why the EU as a whole could not?

We will hear the traditional business lobbies telling the old story again. Interface has proved their arguments wrong.

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Our yarn supplier Aquafil implements a symbiotic relationship with an Aquapark next door

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Our main supplier Aquafil has started a symbiotic project where their excess thermal energy in their Econyl plant in Slovenia is then used by an Aquapark nearby.

Regardless of how different the two businesses are, their location has permitted them to start an incredible project where the excess of thermal energy is transferred to Atlantis Aquapark to provide it’s 100% requirements of thermal energy.

This actually translates into an expected reduction of CO2 emissions on more than 2.000.000. This is the equivalent of 1100 cars driving 35km!

This is what happens when companies think differently and not selfishly. The great irony is that Aquafil uses excess warm water for their thermal needs from the electricity station nearby. Pass it on!

Read the full article here.

Atlantis & Aquafil

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16 built environment companies commit to Zero carbon buildings

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Proud that Interface is there pushing again the rest of the industry, along 15 other companies that have taken a new energy efficiency commitment today for the buildings supply chain, to help drive delivery of ‘nearly zero energy buildings’ (nZEB) for new build by 2020, and refurbished buildings by 2030.

The pledge includes:

  • Driving down energy intensity across corporate property estates;
  • Committing to the 2020 goals of nZEB for new buildings and further action on renovation by 2030 as well as transparently reporting on progress against this;
  • Collaborating across the supply chain to set sector specific targets and goals; and
  • Continuing to engage with policymakers on policy, progress, reporting and performance towards zero energy goals.

Press release

http://bit.ly/1Ozpejl

 

Commitment

http://bit.ly/1XJmdNH

www_corporateleadersgroup_com_resources_pdfs_eu-industry-commitment_pdf