Why understanding the true value of water is smart business

Concerns about water availability are increasing around the world. Water scarcity threatens the ability of companies and communities to operate as they have in the past.

Forward-thinking businesses ought to monetize water risk so it can be factored into investment decisions and considered alongside other business metrics. Companies that quantify their natural capital dependencies will benefit from a more complete picture of the most effective ways to allocate water and other resources.

Read the full article on Greenbiz.com. A blog post I wrote in my role at Trucost.

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Electronic waste (e-waste): Why it’s important and what any organization should do

used-electronicsImage source: Bradsdeals.com

What is important about electronic waste?

Even well-intentioned efforts to recycle electronics can result in equipment being shipped to developing countries, and then unsafely disassembled by workers without proper protective gear, incinerated in open pits, or left to litter the land and waterways. Any of these failures in a recycling chain of custody will expose human health and the environment to avoidable hazards, contaminating people, air, soil and water. Electronic waste (“e-waste”) contains numerous toxic ingredients and their improper disposal would release mercury, lead, cadmium, arsenic, beryllium and other harmful chemicals. It is estimated that 70-80% of electronic products sent for recycling is exported to less developed countries. [Source: Basel Action Network] (You can read more about the worldwide e-waste crisis and the work of the Basel Action Network.)

NatGeo-trash_featureImage source: National Geographic

burning-Ghana_EWaste_2008_32_largeImage source: Lightstalkers

BAN-disassemblyImage source: Basel Action Network

BAN-waste-ghana_2009_142-72spiImage source: Basel Action Network

What should an organization do?

The main goals for an organization’s handling of used electronics should be to:

  1. Fully track and document the equipment’s post-use disposition; and
  2. Ensure it will be reused through donation or safely recycled

To help achieve these goals, the following strategies should be implemented:

  1. Donate functional electronics to charitable organizations and advise recipients on how to safely recycle those products when they are no longer functional.
  2. Track electronic items that are donated or sent for recycling, to clearly account for everything disposed.
  3. Increase the variety of electronic products collected internally.
  4. Use a vendor that does not export electronics for disassembly and recycling, as well as processes equipment using industry best practices.

Certified e-Stewards Recyclers

Critical to this implementation is working with vendors who are Certified e-Stewards® recyclers or manage equipment using similar methods. e-Stewards Certification is the gold standard for safe, domestic recycling. A list of Certified e-Stewards recyclers is available online.

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After an organization starts using certified recyclers, it should commit to safe recycling as an e-Stewards Enterprise and join companies such as Bank of America, Capital One, Wells Fargo, LG, and Samsung.

The Need for Diligence

The most important outcome of these changes by an organization: purposefully not contributing to the global problem of electronic waste.

Research shows that up to 50 million tons of e-waste is produced globally each year. [Source: Wikipedia] Recent estimates for the U.S. show 3.4 million tons of electronic waste generated annually. Of this, only 25% was recycled. [Source: Electronics TakeBack Coalition]

recycling_2000to2011Image source: Electronics TakeBack Coalition and the U.S. EPA

The good news is electronics recycling is increasing, but an organization should be diligent and mindful about how it handles electronic products by:

  • Remembering that e-waste takes many forms, including computers, monitors, tablets, printer cartridges, televisions, stereos, mobile phones, calculators, cables, and even cute talking teddy bears.
  • Organizationally, improving electronics management and taking full responsibility for the products purchased and disposed, to demonstrate ethical leadership and organizational accountability.
  • Personally, safely discarding electronic items in one’s office and household. Help employees recycle their electronics by hosting household collection events and informing them about retailers including Staples (which uses Certified e-Stewards vendors) and Best Buy.

Organizations should handle their e-waste ethically, to be socially responsible and strengthen their reputations. Every organization should make conscientious electronics recycling a principal element of its waste management.

4thbinImage source: OpenIDEO

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Externalities of Organizational Activities and the Need for True Cost Accounting

Call a thing immoral or ugly, soul-destroying or a degradation of man, a peril to the peace of the world or to the wellbeing of future generations; as long as you have not shown it to be ‘uneconomic’ you have not really questioned its right to exist, grow and prosper.” – E. F. Schumacher

Negative Externalities

Years ago, economics courses introduced me to the label of “negative externalities” for the adverse side effects of a transaction or decision that fall on society or the environment, beyond the immediate parties. Since social costs are not priced into an individual’s or organization’s decision-making, more than the optimal amount of the product or service is consumed, creating negative social impacts.

externality_chart2Image source: R. Preston McAfee & Tracy R. Lewis

I must admit the conservationist in me appreciated being able to couch more principles-based reasoning within statements that could appeal to economists, policymakers and businesspeople. It was empowering to focus attention on previously hidden impacts, place prices on social injustice or environmental damage, and factor them into public and private decision-making. People and ecosystems could be considered alongside profits and development. Change the effective (or actual) price facing a decision-maker and change the action he/she takes. Whoop! Whoop! One for our team! Could this lead to a leveler playing ground?

However, pricing people and resources also can have unsettling implications. How do we use a spreadsheet to make sustainability decisions? What is the value of a tree? An ecosystem? Drinking water? Social justice? A person? A life? Although insurance companies, government agencies and business leaders have calculated similar values for years (either indirectly or overtly), that fact doesn’t simplify the task or make it less awkward. How do we price our values and ethics? Are some things simply priceless?

people_over_profitImage source: Vancouver Free Press

Costs vs. Benefits

Of course, many decisions about public and private courses of action come down to costs versus benefits. It’s easy to understand the difficulty of comparing the dispersed, often ill-defined (or even unknown) negative externalities of a potential project against the more tangible, explicit benefits to be achieved by going ahead with the project. For example, comparing the perceived benefits of bulldozing a tropical rainforest to permit cheap grazing of beef cattle against the harder to quantify, broader impacts on climate change, biodiversity, ecosystem services, habitat fragmentation, soil loss, and water quality never has been a clear cut victory for the conservation side (pun fully intended). What is our recourse? What should we do?

cattle_rainforest_clearcutImage source: World Wildlife Fund

Improving Our Pricing of Impacts

Although applying prices to people and the environment challenges our ethics, our understanding of damages to people and ecosystems, and our ability to price those damages, it does not mean we should not try to price negative externalities. After all, sustainability considerations would be completely ignored if we tried to set prices as infinite. We should improve our pricing of impacts in the following ways:

  1. Cast a wider net of externalities to consider. Negative externalities are critical because they are markers of harm and they can be hidden. We shouldn’t leave rocks unturned in identifying impacts of potential actions or decisions.
  2. Evaluate externalities at broader scales. We should try to quantify impacts across multiple scales, from local, to regional, watershed, foodshed, societal, and global. Climate change demonstrates the scale of impacts that our actions can produce.
  3. Improve the measurement of harm to human health and ecosystems. It can be difficult to determine the human health effects of incremental actions or dispersed hazards, but the challenge of measuring these impacts should not prevent us from attempting to quantify them. On the non-human side, advancements are being made in measuring ecosystem services (e.g., bees pollinating our food, wetlands treating our wastewater, trees absorbing carbon dioxide) and pricing those services, beyond their market value as raw materials. Simply because such services have been received for free in the past does not mean they are valueless. We should try to use the best analysis tools available.
  4. Evaluate cumulative and synergistic impacts. The externalities of a new project will be added to the externalities of other projects that have come before. For example, a new building in a community will enhance or degrade that community’s existing quality of life in an additive way. Externalities also can feed off and even exacerbate one another. For example, a project’s climate change impacts could reduce local water availability, in addition to any direct harm to water quality.
  5. Do not overlook non-use value. We should improve our assessment of people’s non-use value for other people and the environment. The value of a resource is not instrumental only (e.g., harm to people should not be measured only by lost wages or productivity), but value also is derived from knowing individuals are healthy and our environment is conserved.
  6. Appraise some things as priceless. We should realize that some things are priceless and not be afraid to value them as such. For example, we do not want to be unwillingly exposed to toxic chemicals in products, toys or food. We cannot live without drinking water.

Actions That Organizations Should Take

The obvious question is: What does all this mean for organizations, their decision-making and operations?

First, since an organization’s decisions create both positive and negative externalities, every organization should identify and measure its impacts. To operate more sustainably and responsibly, an organization must price its hidden impacts and then effectively (or actually) pay for the true costs of its activities. For example, when considering booking an airline flight, which will produce carbon emissions, an individual should decide either to replace the flight with a video-/teleconference or pay for carbon offsets on top of the price of the airline ticket. Either option internalizes the otherwise external costs of flying, producing more optimal results for society and the environment.

Second, an organization has the opportunity to lead by example among its stakeholders. Factoring the external costs of organizational operations into internal decision-making, managers can encourage their colleagues, peer organizations, customers/members, vendors and other groups to do the same.

True Cost Accounting to Internalize Externalities

True cost accounting (or full cost accounting) is a tool to help organizations price the externalities of their actions. By quantifying off-the-spreadsheet social and environmental costs and incorporating them into internal decision-making, an organization can internalize its impacts. The organization then can undertake actions that prevent, reduce or compensate for its negative externalities.

For example, employee volunteering benefits charitable causes and helps pay back the local community for what it gives to the organization. An organization also can improve its recycling of electronics so their disposal does not harm human health or the environment and the organization is taking full, lifecycle responsibility for its products. Purchasing carbon offsets and using renewable energy help decrease global carbon emissions. Accounting for the negative impacts of its actions and making decisions that alleviate harm help an organization operate more sustainably, as well as educate its stakeholders about externality pricing within their own operations.

Every organization should work to measure its far-reaching, often hidden effects on our shared society, environment and economy, and take strides toward creating more beneficial impacts. Only by focusing on the true costs of its activities can organizations begin to achieve more sustainable, optimal outcomes.

Organizations can, and should, lead by example. They should internalize the full costs of their activities and integrate those externalities into their decision-making.

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Recycling’s dirty little secret (…even right under your feet)

Reduce, Reuse, Recycle. We’ve all heard this familiar sustainability mantra before. But what does it really mean? Here are two recycling truths that may surprise you:

  • Recycling is not a panacea. Reduce and reuse are listed first because just moving materials to new uses does not prevent them from one day ending up in a non-recyclable product that eventually will head to a landfill or incinerator.
  • Recycled content is not a panacea. Just because something contains recycled content does not mean it is “green”. Harmful ingredients can be given another life through recycling — recycling vinyl (PVC) is just sending that hazardous chemistry back into circulation where it can do more harm. Also, materials may be recycled using processes that create negative impacts — deinking and whitening used paper with chlorine-based compounds can generate cancer-causing dioxin.

Finding the Secret… Under Your Feet

Let’s take recycled carpeting as an example. A report from the Stockholm Convention on Persistent Organic Pollutants (POPs) identified recycled content in carpet padding (underlay) as containing hazardous chemicals from its previous use. When most carpet manufacturers and salespeople talk about their carpet being “recyclable”, they usually mean they can make it into carpet padding. Unfortunately, since many carpeting contains hazardous ingredients, such as vinyl (PVC) and brominated flame retardants, the recycled material and products made from it also contain hazardous ingredients.

underlayment-small

Image source

There are four problems with some recycled carpeting, which also can be true for other recycled products, depending on the specific ingredients:

1) The original product was not designed to be fully safe for human health. The component materials may contain ingredients that are hazardous to human health and/or the environment during their production, landfilling, incineration or even through recycling.

2) The original product was not designed to be recyclable back into itself, so for some carpet products, “carpet-to-carpet” recycling is not possible. Note: most “recycling” does not bring the product back for the same use, and often to a lower-valued and/or less recyclable use (e.g., office paper into newspaper until the fibers are too short to be recycled; mixed plastics into non-recyclable speed bumps or park benches; plastic grocery bags into plastic-wood composite lumber), so the mantra of “Reduce, Reuse, (then) Recycle” is critical.

3) The new product, if made from recyclate that is hazardous to human health, often will be hazardous itself. You may be getting more than you planned for in the recycled material. Hazardous colorants, coatings, alloy or polymer components, toxic heavy metals, other additives or contaminants may be carried forward during recycling into the new product. In addition, recycled products often are an amalgam of various materials from various sources and their ingredient data can be incomplete at best, if not totally missing. The key is knowing exactly what you are recycling and knowing that it is safe.

4) Mandates from government, industries or customers may require the addition of hazardous substances, even if the ingredients of the base product are safe for human health and fully recyclable. For example, California law has required a high level of flame retardancy within carpeting and office furniture — a level that only could be achieved by adding toxic chemicals. (Just recently, California proposed changing that requirement for the better.)

Cleaning Up “The Dirt”

  • When selecting products, we should be mindful of their ingredients. Are they safe for human health and the environment? Can the products be easily and fully recycled following their use, ideally into new versions of the same product or into other uses that do not reduce the materials’ future recyclability?
  • To ensure that recycled (and virgin) materials are safe, we should be diligent about sourcing. Procurement strategies could include having a vendor document the chain of custody and previous application of a material, identify the ingredient data to the greatest extent possible, and test for the most likely contaminants.
  • We should recover products and materials for recycling and composting to help close material loops. By establishing internal systems for recovery and recycling and partnering with external organizations, we can help ensure that used products are: 1) safely dismantled, 2) recycled, reused or refurbished, and 3) properly disposed.

Sustainability requires us to be responsible in our procurement decisions, post-use disposition of those products, and link the products we buy and recycling systems we use. We can make all the difference in the world by going beyond a single sustainability attribute such as recycled content, stepping back, looking at the larger picture and making improvements across multiple criteria at the same time.

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