Sustainability Management

Lessons from and for New York City, America, and the Planet

Steven Cohen

• Publisher: Columbia University Press
• Year: 2011
• ISBN:
  9780231526371
• Topic: Ciencias biológicas
• Subtopic: Ciencia medioambiental

Can we grow our world economy and create opportunities for the poor while keeping the planet intact? Can we maintain our vibrant, dynamic lifestyles while ensuring the Earth stays productive and viable? Aimed at managers, students, scholars, and policymakers, Sustainability Management answers these questions in the affirmative, arguing it is possible for environmentally sustainable business practices and policies to foster economic and long-term growth.

Written by a former analyst and consultant with the EPA, this book originally combines sustainable efforts in water, agriculture, urban, and power management to achieve—in practice, not just in theory—a sustainable planet and economy. Steven Cohen begins with the technical, financial, managerial, and political challenges of such a project, and then honestly assesses sustainable practices in the manufacturing and service industries. He addresses renewable and carbon-free energy production; water sustainability, especially with regard to energy issues involving filtration, distribution, and changing rainfall patterns; food cultivation and distribution; and ways to maintain the interdependent systems on which we depend to live. Taking examples from New York City, one of the most sustainable and sustainability-minded metropolises in the world, Cohen explains how everything from construction to waste management can be designed to facilitate a sustainable environment, not just for New York but also for the world. He concludes with this macroscopic view, outlining the global efforts necessary to preserve biodiversity and ecosystems, and the impact of war, terrorism, and human conflict on sustainability.

Chapter 1

What Is Sustainability Management?

Sustainability Management Defined

No book about sustainability should begin without reference to the definition of sustainable development that originated at the 1987 Commission on Environment and Development, also known as the Brundtland Commission. That commission defined sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (World Commission on Environment and Development 1987). MIT’s Richard Locke, one of the founders of that university’s terrific Laboratory for Sustainable Business, uses the image of a piece of fabric to define sustainability:

I build on the Brundtland Commission’s definition of sustainability, which focuses on using resources today in a way that ensures there’ll be resources to meet the needs of future generations…. Climate, environment, energy, social standards—they’re all linked. One of the metaphors we’ve used a lot over the last couple of years is to think of sustainability as a fabric. You pull a thread and everything comes together.

(Locke 2009)

Sustainability management is simply the organizational management practices that result in sustainable development. In the modern industrial world, sustainability management is the practice of economic production and consumption that minimizes environmental impact and maximizes resource conservation and reuse.

That is the basic definition. What does it really mean? How can one draw the line between management for sustainability and management that does not lead to sustainability? At the heart of sustainability management is a concern for the future. Most common management practices focus on the present or, at best, a one-year planning cycle that relates to an organization’s budget and fiscal year. As J. Ehrenfeld (2005) has observed: “The problem really stems from management’s failure to see unsustainability as a deep-seated systems failure and to appreciate the extent to which radical thinking and action are required to embark upon a sustainable trajectory.” As performance measurement systems have become ubiquitous within organizations, management has focused on reporting cycles that include quarterly, monthly, weekly, and even daily reports. This focus on the present creates an organizational culture and environment that makes it very difficult for the issue of long-term sustainability to be taken seriously.

Issues of sustainability can be difficult to define and operationalize. According to Ehrenfeld (2005), “managers must evaluate critically the core values and mission of their business in terms of both the unsustainability and the sustainability they create. Reducing unsustainability is not the same as creating sustainability.”

Why wed one complex concept, sustainability, to another complicated concept, organizational management? In part, I do this because my goal is to add the notion of sustainability to the definition of effective management. Organizations seek to maintain themselves. An organization that fails to take into account the long-term sustainability of the planet may survive while everything around them dies, but the odds are against them. I will argue (since I can’t prove it) that healthy organizations depend more than they think on a healthy planet.

This comes down to the issue of waste and the relationship of efficiency to good management. Why wouldn’t an organization strive to maximize the productive benefit of all of the resources that it has access to? As the sustainability scholar Richard Locke has noted:

Efficiency (lower unit costs), quality, reliability—often these “positive” attributes of companies go hand in hand, managers will tell you. Now think about sustainability. If a company is good at developing systems that deal with health and safety, and/or treating waste and water, and/or devising innovative ways to reduce energy consumption, and so forth, they usually have their act together on many other, fundamental, how-they-do-business fronts. In other words, companies that have thought hard about how to establish various management systems that promote more sustainable business practices are also companies that have thought hard about how to be more efficient or innovative or differentiate their products and services in the market.

(Locke 2009)

One way that successful organizations thrive is by keeping the costs of production and service delivery as low as possible without sacrificing quality. If there is a technology that can allow you to use less energy, water, or other materials in production, all things being equal, why wouldn’t you use it? The issue is often one of competing capital investments. The funds for reducing waste are the same funds needed to actually produce the product or service you are selling. Shouldn’t the rate of return for sustainability investments be analyzed the same way you would analyze other investments? Professor John Sterman of MIT expressed this when he observed:

Another big impediment is that there’s a fundamental worse-before-better tradeoff. If you want to redesign your operation to use less energy, use fewer inputs, produce less waste, it’s likely to have a positive return on investment, but like any investment, in the short run performance will suffer. This goes beyond the classical “you have to invest so your cash flow is negative first and then becomes positive later,” although that’s part of it. There’s a much deeper issue there, which is reorganizing, redesigning processes, investing in process improvement. Doing all that work is disruptive in the short run.

(Sterman 2009)

The mania for short-term financial gains can inhibit the implementation of new sustainable energy sources, many of which require large financial investments but do not produce returns until years later. Cheap credit encourages long-term investment, while a high interest rate skews the cost-benefit analysis, makes future returns look less promising, and encourages short-term investment. One study shows that the levelized costs for photovoltaic solar-cell energy reach $215 at a 5 percent discount rate and soar to $333 when a 10 percent discount rate is applied (Renewable Energy Focus 2010). The rate of discount is one of the leading factors in determining which renewable energies will be adopted. The government decides upon the discount rate, which was 3 percent during the Bush administration and is currently .75 percent under Obama. By setting a low discount rate, government endorses investment in the long-term, shifting the focus away from the short-term.

Administrations can provide financial incentives for investment in renewable energy by lowering their discount rates. A study conducted by the Organization for Economic Cooperation and Development finds that low discount rates are associated with investment in low-carbon technologies such as nuclear energy, while high discount rates are associated with investment in coal without carbon capture and gas-fired combined-cycle turbines (OECD 2010). The study concludes, “it is evident that interest rates and hence the discount rates investors use… have a major impact on the absolute and relative costs of investments in power generation” (OECD 2010, 158). In order to make the switch to sustainable energy sources, we have to think in the long run. Therefore, “the future should not be discounted too steeply. Ensuring a stable investment environment with low real interest rates is indeed one of the most effective steps to ensure sustainable development in the electricity sector and beyond” (OECD 2010, 161). Forcing ourselves to keep discount rates low will allow future generations to enjoy the benefit of sustainable energy sources.

In 2008 and 2009, we learned that thinking in the short term can be the enemy of a sound economy. This was clearly articulated by Mindy S. Lubber, the President of Ceres, a U.S. coalition of investors and environmental leaders, in mid-September 2008:

The fiscal crisis on Wall Street is a painful lesson in how entire industries can delude themselves into ignoring the most fundamental issues—in this case, the hidden risks from easy sub-prime mortgages. It also reveals the vast pitfalls of an economic system obsessed with short-term gains and growth at all costs while ignoring essentials such as building long-term shareholder value and protecting the future of the planet. As we confront global climate change—perhaps the biggest challenge mankind has ever faced—business and government leaders have an opportunity to learn from the ongoing Wall Street debacle and get it right.

(Lubber 2009)

It could be that issues such as the safety and well-being of workers and the sustainability of the planet should be subject to a different sort of analysis. While government and nonprofit organizations are designed to facilitate alternative metrics for allocating capital resources, private organizations are not well suited to allow lower rates of return on capital to achieve organizational goals.

Is It Feasible? Can the Impact of These Practices Be Great Enough to Permit True Sustainability?

With the population of the planet growing toward and past seven billion and probably to a peak of ten billion (U.S. Census Bureau 2008), it is reasonable to ask whether sustainability is feasible. Is there enough capacity to produce the food, energy, water, air, and other biological necessities that we require for human life? In addition to the absolute requirements to keep our organism alive, there is also the issue of quality of life. One could imagine a planet that allowed life but with such a high level of disease and discomfort that its quality would be substantially reduced.

While it will not be smooth or simple to build, I believe we are at the start of a sustainable or green economy. My reasoning here is not simply naive optimism but the recognition of necessity. The false wealth of the period ending in 2008 and 2009 focused many of us on the need for a solid, understandable basis for our economy. One part of a solid economy is found in free-market capitalism, where investors risk their wealth to create a valued product or service. The success of this enterprise produces wealth, and some people get rich while others do not. Along with capitalism comes the recognition that a certain amount of income inequality is not only acceptable but also desirable.

The question is: how much inequality should there be? The answer is that the level of inequality cannot be so great that people on the bottom of the ladder cannot live a decent life. Inequality must not be so high that there is hunger, hopelessness, untreated disease, violence, and inadequate access to education. We’ve learned that a large middle class makes societies wealthier and can contribute to political stability. But without public policy to encourage a middle class, the logic of the unregulated market leads to greater and greater inequality. This, in turn, leads to economic and political instability that can threaten the peace and security of the social order. The second part of a solid economy is the creation and maintenance of production and wealth over the long term. A concern for the long term is central to the definition of sustainability.

If a nation achieves wealth by oppressing its people or damaging ecological resources, it eventually pays a price for its misdeeds. In the United States, we paid the price of oppression under slavery with a brutal civil war and its racist aftermath. We have also spent hundreds of billions of dollars to manage and clean the poisons we have released into the environment and still release in the name of industrial production. China has only started to learn the environmental and financial cost of rapid development. In the end, they will pay, and here in the United States, we will continue to pay as well. Short-term gains are often bought at the price of long-term pain. This is a concept that is gaining currency. Landing on a carrier in a pilot’s outfit does not mean you accomplished your mission. Sometimes a fund that pays off the same high return year after year turns out to be an unsustainable Ponzi scheme. On the other hand, an experienced pilot who knows his stuff and is humble and dedicated just might manage to land a jet plane on a river. Most people can distinguish solid from shaky. Sustainable means solid, dependable stuff that is designed to last for the duration.

What do we need to develop a sustainable planet? There are a number of prerequisites:

Reduce the destructive elements of competition among people and nations.

End the growth of the human population, end poverty, and eliminate extreme levels of income inequality.

Develop a renewable economy not based on fossil fuels.

Learn how to reduce the damage we do to our environment.

Peace

With the presence of weapons of mass destruction, we need to develop a system of international law that reduces the probability that these weapons will be used. Our current system of international law, balance of power, and diplomacy has failed from time to time, but it has at least prevented unimaginable disaster from taking place. We need to improve these international institutions. Unfortunately, as destructive technology becomes more lethal and the world’s population more urban, the probability of catastrophe increases. The technology of law enforcement is also improving, but the constant threat of terrorism and the steps needed to combat these threats can reduce freedom and impair quality of life.

Population and Poverty

The human population continues to grow. In 2009, the world’s population grew by about six million. This growth was uneven across the globe. In developed countries that do not encourage immigration, such as Japan, the population has been declining. In 2008, Japan’s population decreased by 150,000 (U.S. Census Bureau 2010). In the developed world, population growth would end if not for immigration. In developing nations, the population is still growing. The reason for these different growth patterns is simple. In the developing world, parents cannot be even partially confident that their child will grow to be an adult, and in the absence of social security, children are the best form of old-age insurance. Moreover, in an agrarian world, children are needed to grow and harvest food. In the developed world, children are typically economic liabilities; they cost a great deal to raise and educate. We love and value our families, but we do not raise children for the economic benefits they bring.

People who study economic development and population talk about something they call a “demographic transition.” This is what happens when a developing country makes the transition to full economic development. Children are no longer perceived to be economic assets but rather economic liabilities, and the population stops growing. The best way to end population growth is to end poverty (Sachs 2005).

Ending poverty also leads to sustainability in two other ways. First, poverty breeds political conflict. Without an ownership stake in society, people have less to lose and may be drawn to conflict. Parents who can provide for their children and realistically hope for a better life for them will favor peace over war (UNDP 2005). Second, some of the best brains that will one day invent a new technology or the cure for cancer may very well be trapped in a life of poverty and will never get the education they need to help us think our way to a sustainable future.

Energy

To reduce damage to the biosphere, global warming, and the cost of energy, we need to transition our economy to renewable, non-fossil fuels. While there are plenty of fossil fuels left on the planet, extracting those fuels will only become more difficult and expensive. Burning fossil fuels will continue to damage our ecology and atmosphere. Renewable energy is the key to the green economy. Without it, such an economy will never be achieved. The Obama administration’s early energy initiative was a critical first step in developing this new energy economy.

The green economy aside, the development of renewable energy is proving necessary to human health, livelihood, and ecology. The 2010 BP oil spill in the Gulf of Mexico is evidence of the danger that dependency on fossil fuels presents and is a tragic indication that in the long run we will not be able to rely on oil for energy. The spill’s economic, political, and ecological costs should convince corporations, public officials, and the public that fossil fuels will need to be replaced by renewable sources.

A few months after the spill, one reporter wrote, “as the catastrophic oil spill in the Gulf of Mexico continues to wreak havoc, renewable energy may never have looked better” (Choi 2010). A poll taken by Stanford University in June 2010 finds that while about three-fourths of the one thousand Americans polled oppose new taxes on gas and electricity, 84 percent polled favor tax breaks on renewable energy sources (Choi 2010). A New York Times/CBS survey reveals that Americans think the nation needs a fundamental overhaul of its energy policy, and most expect alternative forms to replace oil as a major source within twenty-five years, but they do not trust the government to make the necessary changes happen (Broder and Connelly 2010). It is clear that while we understand the high societal costs of a fossil fuel economy, Americans are unsure about how to make the switch to a green energy economy.

Ecological Footprint

The year 2007 was a turning point in world history—for the first time, a majority of the world’s population lived in cities (Moreno and Warah 2006). One of the great paradoxes of modern life is that given the size of the world’s population, it is better for the planet’s ecosystems if people live together in cities than if they are dispersed throughout the countryside. By living in cities, we make it easier to preserve natural environments outside of cities. Densely populated New York City is much more energy efficient than most other places in the United States. Judith Layzer calls Manhattan an “ecotopia.” As we learn to manage our energy, water, and waste more effectively through increasingly sophisticated technology, we can reduce our impact on the planet and gradually transition to sustainability (Layzer 2008). Layzer argues that cities have an important role to play in achieving environmental sustainability but that they can’t do it without the help of national governments.

Can we do it? Can we get from here to there? Let’s put it this way: if we don’t learn to grow our economy while protecting our environment, we may survive, but, to paraphrase Nikita Khrushchev, the living will envy the dead. While the human species has some irrational tendencies, we don’t tend to be suicidal. The opposite of sustainable development is short-term wealth that can’t be maintained. This all sounds a little like Wall Street at the start of the twenty-first century. Still, I like to think we are a teachable species and that sustainability is actually feasible. While I am optimistic, it is an open question. The 2010 BP oil spill was a sustainability management failure of epic proportions. That event calls into question our ability to manage the complexity of...