A Framework for Sustainable Business

Sustainability

"The ability to provide for the needs of the world's current population without damaging the ability of future generations to provide for themselves. When a process is sustainable, it can be carried out over and over without negative environmental effects or impossibly high costs to anyone involved."

This definition is nice but how to make it actionable?
A checklist would be nice, but that is probably too simplistic. Rather, there seems to be a few key ideas that lead from this definition that give a framework for answering the question: "Is this sustainable?" in whatever context it might arise. The first question is: sustainable for whom? Which leads to...

Triple Bottom Line (TBL)

""People" (human capital) pertains to fair and beneficial business practices toward labour and the community and region in which a corporation conducts its business. A TBL company conceives a reciprocal social structure in which the well-being of corporate, labour and other stakeholder interests are interdependent."

""Planet" (natural capital) refers to sustainable environmental practices. A TBL company endeavors to benefit the natural order as much as possible or at the least do no harm and curtail environmental impact. "

""Profit" is the economic value created by the organisation after deducting the cost of all inputs, including the cost of the capital tied up."

To understand if something has unacceptable costs to anyone involved, you must first identify all of the stakeholders. The simplest embodiment of this idea is in the triple bottom line: Expanding accountability to the stakeholders rather than just the shareholders. Who are the stakeholders?

• Your people
• Your planet
• Your profit (i.e. the economy in which you live and on which you depend).

Once you begin trying to account for all the stakeholders' costs and benefits you are led naturally to...

Full Cost Accounting (FCA)

1. Accounting for costs rather than outlays
2. Accounting for hidden costs and externalities
3. Accounting for overhead and indirect costs
4. Accounting for past and future outlays
5. Accounting for costs according to lifecycle of the product

FCA requires explicit acknowledgement of costs that are typically ignored in traditional cost / benefit analyses. It requires systems thinking to understand the scope and source of these costs. The points of FCA that seem, to me, to be particularly relevant to sustainability are:

• What does it really cost to obtain, use and replace a resource? Natural resource usage is a good example: prices reflect extraction costs rather than replacement costs (it's not sustainable if I run out with no replacement). So using resource price as the cost of resources is insufficient to account for the impact of using that resource. Oil is cheap to extract but difficult to replace.
• Externalities are acknowledged as costs of business rather than someone else's problem. Passing the cost to someone else does not make the cost go away - it's just theft from that person. A good example is the effect of overworking employees. What is the cost of a crumbling family or of the loss of a parent from workplace induced illness or stress related disease? In traditional accounting, such concerns are not the business' concern so efforts to improve employee well-being are are difficult to justify.
• Future outlays to deal with preventing externalities are also planned for. This encourages reuse and encourages building recycling and collection into the product design and business model. It is good business to have people buy a new cell phone every year, until you have to pay for the safe disposal of every one of those phones or the impact on health and environment loss from improperly disposed phones. Wouldn't it be more economically effective to plan on collecting and reusing the materials?

If you include in the costing the environment as the source of all resources and that a better environment results in more plentiful, higher quality, more productive resources (material and labor), then you reach...

Cradle to Cradle Design

"Cradle to Cradle design perceives the safe and productive processes of nature’s ‘biological metabolism’ as a model for developing a ‘technical metabolism’ flow of industrial materials. Product components can be designed for continuous recovery and reutilization as biological and technical nutrients within these metabolisms."

This is about making the world better with each unit produced rather than just making things "less bad."
While Cradle to Cradle emphasizes product design, to me the idea logically extends to sustainable business processes as well: How do I design a business process that makes my people and customers more fulfilled rather than just "less abused" in pursuit of the company's goals?

• Trust marketing: respect your customers and their interests to build more business.
• Foster and direct intrinsic motivation (Drive... see TED video below) to get the most from employees.

Put another way: sustainability seems to be about approaching business with Aikido in mind (blend and direct) rather than with Taekwondo in mind (block, strike and smash).

Japanese Traditional Building, Sustainability and the Industrial Revolution

I stumbled on an essay written about traditional Japanese building practices by Azby Brown. The author points out some striking parallels to the challenges faced by the world today. Following are some excerpts that I found particularly relevant and reflective of the ideas I blogged about earlier on re-learning lessons about sustainability. These people clearly understood and leveraged the system dynamics of the place in which they lived to make the most of the resources they had.

It is an interesting observation, the same one made by William McDonough & Michael Braungart in Cradle to Cradle, that Azby makes towards the end of his essay: that easy access to large amounts of cheap power brought this need to use leverage to an end. With the loss of that need, so too was (nearly) lost the knowledge of the leverage itself.

"During the Edo period, from the early 17th to the mid 19th centuries, Japan faced environmental problems similar to ours: large population, fuel scarcity, limited arable land, deforestation, a damaged watershed. Through well-thought-out policies that reinforced existing cultural values, and through technical and economic innovation, the nation brought itself back from the brink, and did it in beautiful ways.

 One of the most important lessons is that the primary design response to material and energy shortages of the era was to seek multiform solutions, designs that solved many problems at once. ... the same attitude led to the development of rice paddy irrigation systems, which were almost entirely gravity-fed, acted as cascading filters for the water supply, and could function as solar-heated warm-water tanks for processing hemp and other plant-based textile fibers. The system allowed the paddies themselves to function as wetland habitat for many species in addition to growing food.

The design of the ubiquitous dismantleable Japanese jointed wooden building frame facilitated reusing the posts and beams elsewhere, helping to reduce the stress on forests for lumber supplies.

The constantly refined design of earthen cookstoves minimized fuel use and helped keep fuel consumption well within the available supply, further minimizing the stress on forests.

Forest management was recognized early on as essential for preserving the health of waterways that were vital for transportation and as a food source

 Metal, mainly iron, whose production depended upon a high expenditure of energy in the form of large quantities of charcoal, was an extremely valuable commodity.... The near total absence of metal nails in architectural structures, depending instead on mortises, tenons, pegs and wedges, and the fact that nails were carefully salvaged and reused whenever possible, attests as much to the desire to minimize energy consumption in the form of embodied energy as it does anything else.

 Can this be done without consuming fuel (like weaving)? Can it be made from a rapidly renewed material (bamboo for baskets, or reeds for thatch)? Can it take advantage of recycled material (a broken iron pot becomes a blade)? Is it scalable and able to be customized to suit specific regions, households or individuals (like kimono)? What is the desired degree of durability — is it better to make it last for generations (like cabinetry) or remade every year (like straw boots)? Is there a way to use the material at end-of-life (use the straw as fuel, convert worn cotton fabric to pouches)?

...by and large the intricately interconnected sustainable material production system broke down with the advent of the industrial revolution in Japan in the late 19th century. The widespread introduction of fossil fuels, coal primarily, broke the bond between people and the forests that had supported them..."

If it is true, it will return. Recovering lost knowledge.

If the first Industrial Revolution had a motto, we like to joke, it would have been "If brute force doesn't work, you're not using enough of it."

- William McDonough & Michael Braungart : Cradle to Cradle

That is the world that was built for us and that we grew up in. A world of cheap power and the belief that wielding that power was the "best" answer to everything. From a building perspective, that led us to glass encased, sealed boxes in the desert. As long as you have the cheap power to cool (and heat) them, then things are fine. But when you don't, what do you do?

Turns out that our forebears knew and built differently.
- Verandas to shade large sections of the house.
- Trees and Ivy to shade the walls.
- Natural ventilation to draw cooler air in and push warm air out (double hung windows and high windows with ground floor doors in factories).
- Heavy earthen walls to act as thermal buffers.

When you couldn't count on brute force, you had to build differently.

And now, with the push to put a soft landing on climate change making "cheap power" decidedly not cheap, we're rediscovering that there are better ways to build.

A great example is Passivehaus.
In short: Seal and insulate the house to an extreme. Use passive solar (and appropriate shading), ground source heat and body heat to make the place warm. Use exhaust air heat exchange to keep the warmth inside. Use the most energy efficient fixtures and appliances available to keep electricity usage down.
Here is a recent example of Passivehaus in California!

And there is more to learn from nature itself via biomimetics (e.g. how termites manage to control climate in their mounds).

The truth is out there if we are willing to bend with nature rather than to try to break it.