CHAPTER 4

Commerce as a System

The previous chapter examined sustainability as a system in terms of social, environmental, and economic impacts and described how systems thinking could reveal to business leaders opportunities to more efficiently use both human and natural capital. Risks and rewards inherent in issues such as environmental pollution, water use, and unrestrained growth were analyzed (the next few chapters expand further on these rewards and risks). When looking at these issues through a systems lens, managers can design innovative strategies to capitalize on openings for generative, restorative, or risk mitigation services and products.

This chapter will look at commerce as a system, beginning with the extraction/harvesting phase, going through production, distribution, consumption, and disposal. Examples of real-world companies illustrate the points made in each section. While the focus may appear to be on manufacturing, service businesses also significantly impact sustainability issues. Any facilities and operations, including banking and financial services, retail, and other service industries, even if they appear to be mainly administrative in nature, have negative footprints.

The Interdependent Components of Commerce

As with most terms, commerce has a variety of definitions. From the individual to the multinational, and from the sharing of ideas and opinions and, of course, goods and services, commerce denotes an exchange of something between parties. Commerce is usually thought of as a process in which a means is utilized to achieve an end such as enriching oneself, one’s company or state through trade. Examining commercial enterprise more closely, though, much of its benefit occurs during the process rather than as a result of it. There is often engaging and broadening social and cultural interaction between individuals and groups during an exchange. The buyer gets satisfaction from getting a need filled and the seller experiences the same in filling that need through recognition of the value of what is sold or exchanged. Relationships are forged and strengthened.

Beyond the human component, though, commerce can be viewed through a wider systemic lens. Although commerce may be thought of as a unique human activity, exchange is the most fundamental of activities within any living system. Even single-celled organisms exchange gases for the purposes of respiration, trading the carbon dioxide their metabolism produces for oxygen in the air that passes through their membranes; their sub-cellular structures break down carbohydrates and fats for the needed energy.

Economic commerce, echoing this most basic of transactions, is the reflection of a much larger system within which it operates. Materials are extracted, processed, converted, and exchanged. In the larger system, one entity’s waste is another’s resource. Existence is ensured only if certain conditions are met. The materials to be extracted must continue to be available, and without more labor (read expense) than the entity can afford to exert. The processing function must operate adequately and in concert with the entity’s purpose. There must be entities with which or whom to exchange all byproducts, and these entities must be viable enough to accept and afford the exchange. The ecosystem of the entity must be stable enough to support its function, and the functions of its exchanging entities over time.

From an environmental perspective, these ecosystems have developed over hundreds of thousands—in many cases, millions—of years, producing a wide variety of entities that allows the ecosystem to attain a dynamic equilibrium. Gradual change, over thousands or hundreds of thousands of years, allows individual species time to adjust, if conditions support enough of them to maintain a viable population. Sudden change puts intense pressure on ecosystems to adapt or die. Such rapid change may result in conditions that allow some entities to prosper while others wither and disappear if they cannot adapt, but there is always an interdependence of entities upon one another. Just as an ecosystem cannot survive if there are too few adequately functioning entities to allow it to survive, a business must have

• adequate, appropriate, and affordable materials;
• willing and able suppliers;
• effective processes;
• a productive and healthy labor force;
• customers who want and can afford their products;
• viable channels through which to reach their customers for communications and distribution;
• vendors or processes to accept or convert waste and byproducts.

For Service Industries

The phases of commerce as discussed later in this chapter are more applicable to product-oriented firms than to service firms, but sustainability is also needed in the latter. In these industries, the effort is less about environmental impact reduction than attending to their social and governance issues.

A focus on energy, water, and waste is somewhat less material to the operation of service firms than it is to manufacturing firms, although real estate assets and facilities do have significant environmental and social footprints. That’s not to imply that service firms should ignore the environmental leg of the sustainability platform, but that green claims, especially at the expense of social and governance issues, may be perceived by onlookers as naïve and shallow or, worse, manipulative and deceptive. Instead, areas that are more relevant for service firms include

• customer security and privacy;
• customer transparency and fair dealing;
• responsible outsourcing;
• talent recruitment and retention;
• employee compensation and working conditions;
• workforce diversity;
• financial inclusion;
• regulatory compliance;
• anti-corruption efforts;
• fair market competition; and
• justification of government subsidies or bailouts.

There are opportunities for service firms to integrate environmental aspects deeper into their business model than simply attending to their buildings and administration. For example, financial service firms might offer green securities, such as climate bonds or alternative energy investment options, loans that incentivize energy efficiency in residential home and business facilities, and credit services that encourage the purchase of options which are more environmentally sensible. Underwriting standards can be improved to require that businesses, real estate, and markets attend to their environmental (as well as social and governance) practices.

Just as product firms do, service firms can also influence their suppliers to comply with codes of conduct that outline governance, social, and environmental standards.

A Systemic Production Paradigm

Beginning with his book, The Ecology of Commerce, Paul Hawken explored the existing model of capitalism, further elaborated in his work with Amory and Hunter Lovins in Natural Capitalism. They describe the linear approach that industry has used for the last several centuries as “take—make— waste.”¹ The authors observe how exponential global population growth, made possible largely due to industrialization’s tremendous and rapid use of natural resources, has led to a widespread decline in living systems.

One primary assumption that underlies this traditional approach to commerce is that the accumulation of financial capital is the solitary measure of success, thereby excluding other measures and factors from consideration. A second assumption is the continued availability of raw natural capital as the main asset base for the economic engine, which the authors compare to living off the “principal” of natural assets rather than on their “interest.”²

They suggest instead a borrow–use–return approach, which acknowledges the reality of the cyclical nature of natural resource production and replenishment. Rather than reducing waste, this approach seeks to entirely eliminate it, emphasizing a closed-loop production model. Fossil-based energy sources, which are a reservoir of solar energy stored over millions of years of geological processes, are replaced by current solar energy sources such as photovoltaic, wind, wave, and solar thermal sources.

The rates of use of renewable and non-renewable resources do not exceed rates of regeneration or development of these resources, and rates of emissions are held below the rate at which the natural environment can absorb the emissions without a decline in viability. Priority is given to investment in the restoration of natural capital rather than only its continued depletion. The economy shifts, over time, to an emphasis on the provision of services rather than of a greater abundance of cheap products.

The following sections of this chapter offer a glimpse into some of the recent and current disconnects, and reconnects, between commerce and sustainability. These phases represent systemic intervention points for capitalizing on solutions and innovative ways of reworking both the means of commerce and the ends. Figure 4.1 represents the phases of a product as it moves from extraction and production through use and disposal.

Figure 4.1.  Basic production diagram.

In the world of commerce, supplies can come from around the entire globe, outsourcing is common, and short product lifecycles can make easy evaluation of supply chains challenging. An eye-opening example of the complexity of supply chains is offered in Dr. Jane Macfarlane’s detailed operations illustrations for the production of men’s cotton slacks, polyester/cotton bedsheets, and Nylon Supplex parkas in which there are well over 40 process steps.³

The slacks illustration process map begins with the field where the cotton is harvested and travels along a road on which each step of the process is documented, from harvesting through production and ending with display at the store where the consumer can purchase the product. These single-page illustrations, as comprehensive as they are, comprise the process steps that make up only the production phase of the commercial cycle.

Note that while the necklace example examined below utilizes a product in the jewelry industry value chain, service businesses produce collateral materials and other products that follow the basic production path shown in the diagram, for which there are opportunities to improve practices. For the purpose of illustration, this chapter will follow the phases of commerce involved in a necklace of gold chain and turquoise stones, from the extraction of the gold and turquoise to their refinement into chain, clasp, stone shape and condition, to its packaging, distribution, purchase, and disposal. Such a product has an impact on not only the buyers and sellers along the chain, but the environment and the communities in which the raw materials were extracted, where they are processed into usable parts, where the parts are assembled and then distributed, and where they are purchased and ultimately disposed of. Included in this journey is the transportation to get the raw materials and other resources required to make the pieces of the necklace, and the packaging and transportation to get it to the market, all of the labor used in the production, the ultimate purchaser/consumer, and whether it is reused, recycled, or landfilled. Figure 4.2 represents some of the positive and negative aspects of a commercial supply chain, and Figure 4.3 depicts the cycle of commercial phases in more detail.

Figure 4.2.  Interactions of each product in the supply chain with the environment, community, and economy with examples of positive and negative impacts.

Figure 4.3.  Elements included in the production of turquoise necklace.

Extraction and Harvest

Extraction and harvest are the collection and aggregation of raw materials, whether through mining for precious minerals, drilling, and fracking for oil, gas, or water, or harvesting of timber products, plants, and animals for food and other purposes. In the case of the gold and turquoise necklace, some of the environmental impacts include

• land disturbance;
• use of toxic chemicals to extract the stones and gold from the rock;
• air and water impacts from mining operations.

Impacts from materials used in other products may include these and other consequences such as

• air and GHG emissions;
• runoff from fertilizers, herbicides, pesticides, and animal waste;
• toxins in soil;
• loss of habitat and biodiversity;
• impaired water filtration and flow systems;
• and more.

Some of these are regulated to a greater or lesser extent although enforcement is not stringent enough to restrict many incidents of non-compliance. In these instances, policy interventions could affect businesses, such as tighter government enforcement or incentivizing compliance to make it the default choice. In countries where regulations do not provide protection, some forward-thinking firms, especially those from developed countries, have taken matters into their own hands by following consistent protocols that protect the land, water, air, and viability of communities who were living in the extraction area prior to that activity.

Extractive industries have sustainable development potential. They may contribute to employment in remote and depressed areas while also stimulating a country’s economic growth, often as first opportunities for private sector development and foreign investment. Yet, they have also caused or aggravated social inequality, ecological damage, health issues, and political corruption.

The extraction of great resource wealth has bred conflict, which has at times escalated into war. The World Bank has reported that “[m]any resource-rich countries perform worse than resource-poor countries in key aspects of development, including economic, social, and governance.”⁴

Social impacts on communities may appear to be difficult to assess, but examining quality of life before and after extraction begins is one place to start. Access to basic services, education, medical attention, clean air and water, infrastructure, security, and other indicators can be measured. Doing so permits the extraction company to see areas that can be mitigated.

One area that is not well regulated is animal production for food (confined feed operations, slaughterhouses, and processing plants), not to mention treatment of the animals, public awareness of which has risen recently through the efforts of undercover reporting. Some states in the United States are looking to ban efforts to reveal farm animal abuse through legislation.⁵ The working conditions, health issues, and wage levels of workers in these facilities are another consideration.

The International Metals and Mining Council states that in order for mining to be conducted at the highest standard possible, “a deep understanding of mining’s contribution to sustainable development is essential...and requires consideration of both the opportunities and benefits achieved through the extraction, processing, and use of minerals and metals, as well as an assessment of the economic, social and environmental costs and risks of doing so. Importantly, the responsibilities of all stakeholders—government, civil society, communities and companies—must be considered.”⁶ The industry realizes the importance of considering numerous aspects of impact.

Newmont Mining, one of the largest gold and copper mining companies in the world, includes its sustainability commitment in its mission.⁷ Its sustainable objectives include building community relationships, ensuring preservation of non-mineral resources, safety, and promoting sustainable economic development.⁸ This is a public company in which management has realized the value of considering not only profit but also worker safety, stakeholder impacts, and environmental stewardship.

Newmont Mining company has systems in place to ensure its adherence to these principles, including using local suppliers where possible, community training or workers, and waste management. By looking at all of the relationships involved in its mining operations, Newmont has created a system that examines and attempts to mitigate all adverse effects to the environment, the community, and its workforce.

Loss of traditional subsistence living due to mining pollution creates conflict and forces indigenous people into deeper poverty. In the Niger Delta, oil has been extracted since 1958. Fish ponds have been poisoned due to the mining activity causing the fishermen to lose an important food and income source.⁹ These negative externalities are not considered a cost to the oil company, Shell. The stakeholders in this region are adversely affected with little recourse. Although Shell was forced to pay a $15 million dollar fine, the subsistence living of the people in the area will not be replaced. As recently as 2011, a report issued by a division of the United Nations stated that, “natural resource extraction and other major development projects in or near indigenous territories are one of the most significant sources of abuse of the rights of indigenous peoples worldwide.”¹⁰

Some believe that in the building of economies in developing countries allowances should be made, the sacrifice of a few current citizens to benefit the well-being of a greater number of future citizens. They suggest that safety protocols, restorative compensation, and the like are too time consuming and expensive in the race to be better. Whether those whose lives, livelihoods, or well-being are sacrificed would agree, or whether consumers in developed countries reaping the fruits of those sacrifices would still purchase those products knowingly are questions firms might want to ask.

“Conflict minerals” is the term applied to the raw materials that are extracted and sold to finance militias and gangs, armed groups that trade illicitly through smuggling schemes. Diamonds extracted in war zones in trade for arms or to fund insurgencies or invading armies in Angola, Liberia, Sierra Leone, and other African countries have led to international agreements to halt such trade. Gold, tin, tungsten, and other minerals have been sourced in this manner from Congo, acting as the base of the supply chain for large well-known electronics manufacturers. Media attention has brought these issues to light, and they are now being resolved through legislation and supply chain certification programs.¹¹

Long the primary global supplier of rare earth minerals, a collection of elements vital to the production of modern electronics, China holds almost a quarter of the global available quantity. A white paper recently released by the Chinese government reported that two-thirds of the country’s supply of these resources has already been mined and that the balance consists of much poorer quality seams, which would increase the expense of extraction.¹² Ramped up production in the 1980s and 1990s created an oversupply, which drove down prices, and illegal mining then added to the oversupply problem. These mining practices also had damaging environmental and social impacts, flooding, landslides, and deforestation among them. China’s rare earth mining industry is an example of unexamined and unsustainable extraction policies and processes that quickly led to an imploding materials base and the seizing up of this particular engine of economic development.

During extraction and all phases of a product’s lifecycle, resources are often wasted. This could be a behavioral issue like wasting energy by leaving trucks idling or leaving computers on overnight. It may also be an infrastructure issue such as having a building that is not insulated well or has a heating/cooling system that is not properly designed. It could also be a quality control issue such as using too many chemicals to extract a mineral resulting in more downstream pollution or improperly installing or monitoring an oil well, such as BP’s Deepwater Horizon. The result is wasted resources. Clear-cutting a forest illustrates a lack of a systemic understanding of how runoff will impact the ecosystem and surrounding community, and will result in soil loss, removing vital nutrients for the next generation of forest product. Waste is produced in each phase of commerce, an area ripe for cost savings, revenue production, reputational enhancement, and risk mitigation.

Production

When examining production, a systemic perspective considers all of the relationships and interconnections of the process, its effects on workers, the surrounding community, other stakeholders, and the environment. In a simplified version of a manufacturing facility, the inputs to the factory include trucks delivering supplies and taking away the final product, air and water impacts from the factory itself, and ramifications for the members of the community who live and earn a living in the community. This includes traffic and safety considerations for the employees and the larger community, in addition to air quality, noise levels, and infrastructure impacts. Outputs include not only finished products but wastewater and modified air products.

Gold and turquoise must be refined to the proper size and shape in order to produce the gold necklace. The raw materials must be transported to one or more facilities. Refinery, assembly, and packaging plants process gold ore, cast the refined gold into chain, cut and polish the turquoise, assemble the pieces into the necklace, and package and label it for distribution.

As with the extraction phase, workplace health and safety is a major issue in the production phase, so much so that there are a variety of agencies that address these types of problems stemming from commercial activity. The Occupational Safety and Health Administration (OSHA) is the agency responsible for worker protection, the Mine Safety and Health Administration’s mission is to protect mine workers, and the Environmental Protection Agency (EPA) has been instrumental in minimizing exposure of farm workers to pesticides. Yet, there are still widespread problems in ensuring health and safety protection for workers in production.

A few recent examples include the use of some flammable floor finishes and sealers in Massachusetts which resulted in deaths and serious neurological damage. Diacetyl, the butter flavoring used in popcorn, was pinpointed as the cause of disabling lung damage in employees at a food flavoring manufacturing plant in Missouri.¹³ Meat and poultry processing workers still suffer from high rates of injury and illness, while plant sanitation and food quality remain problematic.¹⁴ Quite recently, the apparel industry experienced significant negative press after poor regulation and management at production facilities in Bangladesh, the world’s second largest apparel exporter, resulted in deaths from fires and a building collapse.¹⁵ These are just a small set of incidents regarding workplace safety issues that exist in the production phase of commerce.

Some industries and jobs are simply more perilous than others. Progress has been made in improving working conditions, usually through standards-based practice supported by regulation and legislation. The most effective change has come from a prevention approach, and from reworking processes so that they are safer to start with. These kinds of redesign efforts represent potential areas for future advancement in many types of businesses.

As companies become more aware of how pollution prevention, resource efficiencies, and tighter operations can be profitable, many are assessing sustainability projects to see where new savings can be found. Studies show profitability when implementing sustainability actions.¹⁶ As a manufacturing company with significant air emissions, 3M instituted their Pollution Prevention Pays Plus program in 1975, well before environmental mandates, to create a company culture that would work to clean up its operations.¹⁷ Currently systems are in place that measure, track, and manage environmental compliance, climate change, energy, air quality, waste, water, biodiversity, product lifecycle, and packaging.¹⁸ Not only have their efforts improved air, water, and waste pollution, the culture of the company allows for innovation at all levels to help prevent pollution and rewards employees for their efforts.

Apple, manufacturer of computers, smart phones, tablets, and electronic accessories, measures its environmental performance by each product since 2009.¹⁹ Measurements include lifecycle analyses, energy efficiency, materials used in production, content of toxic substances, and recycling potential. With respect to recent media reports regarding social impacts through some of its suppliers in southeast Asia in 2012, Apple increased their audits 72% over the prior year.²⁰

Sometimes industries receive help from activists. Rainforest Action Network (RAN) has been successful in its work to save the destruction of rainforests for paper and palm oil by leaning on corporations and highlighting travesties occurring in the tropics. In 2011, RAN was successful in partnering with Disney as an ally to stop the production of paper products from indigenous rainforest trees.²¹

The production phase offers a firm a large circle of influence to design and implement change. Small companies may have a limited ability to induce upstream supply chains to alter their processes and practices, yet may still substantially improve their operations. Consumption and disposal phase practices, while historically out of the hands of producers, are changing through design and return/recycle programs. Larger companies have the influence to put pressure on their supply chains to make change. Production has often been the area of focus on the part of media attention and activism in persuading organizations to improve the environmental, social, and economic ramifications of corporate activities.

Distribution

For the purpose of simplification, in this systemic review of commerce the distribution phase has been placed between production and consumption, but in reality, for most finished products, distribution of inputs (and outputs) occurs at many stages through the enterprise cycle. All of these distribution steps incur impacts, and a lifecycle analysis will reveal the significance of those steps. (Lifecycle assessment [LCA] is discussed in more detail in Chapters 6 and 7.)

Distribution requires a significant amount of energy and can in some cases be more energy intensive than producing the product itself. By measuring all of the resources, both human and natural capital, that go into distributing a product companies can determine where most savings can come from, whether it is transport from manufacturing to warehouse, warehousing and storage, packaging, or direct distribution to retailers or consumers.

In the necklace example, the gold necklace is now an assembled product and must be transported to specialty shops that sell jewelry. In the jewelry industry, this process usually involves three steps. These products are usually ordered in small quantities, and the necklaces are delivered to a warehouse where they can be stored and then delivered along with other goods. Sales representatives travel to retailer shows and choose pieces, such as this gold and turquoise necklace, to sell to the stores in their territory. Jewelry ordered then is delivered to specialty retailers or large department stores. The distribution of this product is fairly straightforward. It may need to be repackaged and relabeled but requires no special handling such as temperature control, and it is not perishable, so no express deliveries are necessary. Many products, however, do require special handling.

One small company that has taken sustainability seriously in this respect is New Belgium Brewing, brewer of Fat Tire Ale. The company performed an LCA on a 6-pack of their beer which showed that one-third of the GHG emissions came from the refrigeration of the beer at the retailer—the tail end of the distribution phase. It is harder to require vendors to adopt sustainable practices than suppliers.²² New Belgium’s product must be refrigerated during distribution, as time schedules are important, and therefore requires more forethought in the design of their distribution logistics.

The company recently became 100% employee owned and achieved B corporation certification, allowing the owners flexibility to determine the company’s priorities—they are not directed by profits alone (see Chapter 5 for additional information on the B corporation model). Its sustainable practices include using the methane created by their wastewater treatment as energy, diverting almost 95% of their waste, reducing the amount of water needed to make beer from the industry average of 5.0 units of water to 1.0 unit of beer to 3.5:1 by 2015.²³ New Belgium’s current distribution originates at the sole manufacturing facility in Colorado, though the beer is distributed nationally.

Another example is Nestlé, a food and beverage producer based in Switzerland, with a much wider distribution net. This company distributes over 125,000 metric tons of food and beverage products worldwide. By looking at many metrics including cost per kilo of product, this company is optimizing distribution networks and route planning, reviewing sea and rail in place of road transport, improving driver training in terms of efficiency and safety, phasing out hydrofluorocarbon, a GHG, and implementing energy saving proposals in the warehouses.²⁴ Examining and measuring the systems on both large and small scales has allowed Nestlé to reduce its impact on the environment and in the communities where it produces and sells its products.

UPS and Fed Ex are the largest package distribution companies based in the United States. In 2012, UPS received the highest rating by the Carbon Disclosure Project for transparency.²⁵ Years ago, UPS rerouted its delivery trucks to ensure that drivers only make right turns so as to save time and fuel.²⁶ This small change not only decreased its fuel consumption, but package delivery became more efficient and thus customers have been better served.

In 2012, FedEx had almost reached its 2020 goal of improving fuel efficiency of its aircraft by 20% (from 2005 levels) and then increased that goal to 30%. Vehicle fuel efficiency has increased by 16.6%. It has added electric vans and even electric tricycles in France to decrease its energy use and GHG emissions. The company also initiated a carbon neutral envelope shipping policy by offsetting emissions. These systematic changes (though many people may not even notice) decreased FedEx’s fuel costs and GHG emissions.

Through the encouragement of reusable grocery bags, the Publix supermarket chain now saves over 40 million plastic and paper bags each month and has modified their produce bags to save over 377,000 pounds of plastic annually. The grocer has increased their distribution efficiencies, and decreased their expenses, through adding hybrid and flex-fuel vehicles to their fleet, fitting more into each truck, reducing empty load mileage, and working with truck manufacturers to increase fuel mileage.²⁷

These companies use a systematic method of measuring and analyzing their operations to uncover ways to improve resource efficiency and accountability to stakeholders. This is evident across their operations, not only in distribution, but these examples highlight their distribution strategies. Intervention points can be found across the spectrum of a business. Fuel efficiency can be achieved by upgrading vehicles, optimizing delivery and route selection, and training drivers to hyper-mile (use driving techniques designed to improve fuel efficiency). Examining operations within warehouses by, for example, soliciting employees for input, can often save resources. Improving lighting can save electricity and create more comfortable working conditions. Working with employees and communities surrounding facilities and along routes can produce further savings and sometimes good will within the community.

Consumption

Consumers are not well informed as to choices they can make to drive sustainable production and consumption, nor are they incentivized. Supply chains are too complex to understand in the aisle of a supermarket or clothing store. If it costs more, most people are unwilling or unable to pay the premium.²⁸ A systemic and thorough review of the consumption phase and its connection with the economy, society, and the environment reveals intervention points to decrease negative and increase positive externalities on all three systems.

Currently, the world is accumulating environmental debt, costs associated with restoring ecosystems to their level of functionality before they incurred human-induced environmental impacts. Until restoration occurs, environmental debt rises and is left to future generations, rendering most current consumption levels unsustainable.²⁹

Investors have been increasing their sustainability leverage by supporting actions in proxy voting.³⁰ Although these proposals are not successful in the majority of cases (see Chapter 7 for an example), the trend is clear that investors are paying attention and putting pressure on management to implement social, environmental, and governance practices.

One reason U.S. firms are slow to approach sustainability, unlike many other nations, is that there are currently no federal carbon restrictions. Yet, there is progress: if Walmart is bringing sustainability into its operations, it must be saving money. Its three sustainability goals are “to be powered by 100 percent renewable energy, to be zero waste, and to provide products for its customers that sustain people and the environment.”³¹

Other corporations are also on this track because this makes business sense. The sustainability reports of many firms, whether small or large, whether a separate or integrated report, cover resource management and stakeholder assessment, and the savings that come from implementing these processes are often in the millions of dollars. IBM has been cutting its electricity use and expects reductions of 20% from 2008 to 2013.³²

Every industry is exploring these opportunities. Merck, the pharmaceutical giant, is transparent about its sustainability results.³³ It provides a spreadsheet on its website that shows data from the last 3 years (20092011) that indicates energy and water use data as well as environmental health and safety data, including fines. Merck has reduced water use by 10% from 2010 to 2011. Energy use is down by more than 3%. In 2011, Merck was fined 15 times with penalties over $1.7 million; its transparency concerning this issue is commendable as it informs investors, insurers, and consumers of its safety record.

Sustainability is a core value of Yvon Chouinard, CEO of sportswear brand Patagonia. The Footprint Chronicles detail sourcing of all of Patagonia’s products with maps of where they are produced, the name of the supplier, and number and gender of workers.³⁴ Specific suppliers, such as Gortex, offer additional information. Recently Patagonia updated its protocol to include animal sourcing and treatment in products that include materials derived from them. This empowers consumers to make informed choices. (On the distribution side, in 2011, Patagonia changed its port delivery location from Los Angeles to Oakland, closer to its warehouse in Reno, NV, thereby reducing its carbon footprint by 31%, saving $324,000 in transportation costs.³⁵)

Consumers are in the process of becoming more aware and savvy about the impact of their choices on the marketplace, and how those decisions will drive sustainability. Informed purchasing is already nudging companies to attend to mitigation of their adverse impacts to the environment and stakeholders.

Disposal

At the end of a product’s life, it must be disposed of. Once a product is purchased, it will be used by the consumer until it is no longer wanted or needed or has reached the end of its useful life. Options include reuse or repurposing of the product if it is still functional, recycling, or landfilling. In the case of the gold necklace, unless the chain or clasp breaks or the turquoise stone falls out, the necklace can be reused by someone else. If the chain breaks, the necklace can be repaired, or the gold can be sold for recycling and a new chain purchased. This simple example has no significant waste disposal issues.

In the United States, the 2010 per capita waste generation was 4.43 pounds per day with 1.31 pounds of that being recycled or composted.³⁶ Approximately 54% of our waste stream is discarded, 34% recycled, and 12% burned in waste to energy plants. Metals are recycled 35% of the time, yard waste 58%, newspapers 71%, and glass 33%. A great deal of our waste is discarded in landfills. The decomposition of that waste emits methane, a gas that contributes 20 times more to climate change than carbon dioxide.

As in the earlier phases of commerce, the end of life for a product has its systemic impacts. Economically, waste hauling is an expense. Recycling has the potential to produce a revenue stream because this category of waste can be remanufactured, and most companies could see a cost savings in reuse and recycling over landfilling.

While communities housing landfills usually do receive some financial compensation, impacts include potential safety hazards from large trucks operating in residential or rural neighborhoods, water, air, and soil pollution from landfill contents, and offensive odors from transportation and disposal of the waste. A landfill can be thought of as a system that has inputs (waste) and outputs (methane gas, potential air, water, and soil pollution). Methane gas is a recoverable energy source, a possible revenue producer. Understanding the systemic nature of landfills has resulted in identifying intervention points: prevent leakage from the landfill by lining it and monitoring both downstream water quality and soil quality; implementing waste gas to energy projects to mitigate the methane contamination from the landfill; improving fuel efficiencies of the trucks that are delivering the waste so as to minimize air pollution.

Utilizing ideas from employees for minimizing environmental and social impacts helps improve employee morale (and turnover) and produce sizable gains in efficiencies. Waste Management, employing over 45,000 people, has rebranded itself from a waste disposal company to an environmental solutions company.³⁷ It manages landfills, converts the methane gas to energy at more than 120 sites and claims to be North America’s largest recycler managing more than 8 million tons.

Another intervention point is on the regulatory side. If a carbon tax were levied, even more incentive would be generated as the production of landfill methane gases would be incurred as a cost to the operator, passed along to communities and businesses producing waste. Creation of waste to energy not only mitigates GHG emissions, it would lower cost and increase revenue production.

Some companies like BMW design their products with recycling in mind. Since 1990, BMW has been taking back its old cars for recycling and reprocessing all fluids and solid parts.³⁸ The design includes fewer materials and recyclable synthetics that allow disassembly and recycling.

Subaru, Toyota, General Motors (GM), and Honda have zero waste manufacturing plants in the United States and Ford has pledged to reduce waste on car manufacturing as well.³⁹

By examining all inputs that are used to make a product, a company can find ways to design recyclable or inert components, take back used products, and otherwise mitigate disposal impacts.

Chapter Summary: Key Takeaways

There is significant overlap between extraction, production, distribution, consumption, and disposal. Sustainable products include those that utilize fewer resources both in their manufacture and use, that last longer, that offer improved performance, and that are designed to be recycled or reused instead of landfilled where further impacts (air, water, soil pollution, and the emission of methane gas) can occur. Sustainability in commerce includes integrating such considerations into the design, sourcing, manufacturing, and distribution processes along with practices that reduce negative impacts, enhance positive social, environmental, and economic impacts, or both.

Systemic examination throughout the entire process of commerce reveals opportunities to make more with less. The systems perspective requires that consequences and impacts are determined at each phase— including environmental (air, water, land, and species impacts), social (worker, community, and stakeholder interests), and economic. Tools such as industry process maps have been developed. Simple systems maps can help guide the management team to analyze all impacts, both positive and negative, for each step in the development and delivery of a consumable product or service. Process and system mapping can be accomplished in-house or developed through consultants.