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ENVS 669 660 Corporate Sustainability Strategies

Professor: Gary Survis Office: TBD Phone: 973-464-9293 (cell) E-mail: gsurvis@wharton.upenn.edu [preferred contact method] Classes: Mondays, 5:30 pm to 8:10 pm, TBD office Office hours: Mondays, 1-2 pm, by appointment, and Skype (gsurvis)

Course Objectives

1. Understand the role of sustainability in business today, as it relates to corporate strategy, business operations, financial objectives, and social responsibility.

2. Learn how corporations that have made sustainability a core tenant of their strategy are making a significant impact on the environment, independent of government regulation, while driving strong financial results.

3. Gain an appreciation for the trade-offs that are being made daily in business around sustainability issues and understand that there isn’t always a “right answer.”

4. Be exposed to the exciting opportunities that sustainability challenges present for business, entrepreneurs, and people engaged in this sector.

5. Focus on real world topics through case study and current news, enabling exposure to how the issues of business and sustainability are creating opportunity, while still being debated, managed, and evolved very rapidly.

Course Overview Before the year 2000, “environmental management” for a business was typically driven by the need to respond to restrictions imposed by environmental regulation. But, at the dawn of the new millennium, leading businesses began to change their concept of environmental management to look beyond simply meeting governmental dictates. These organizations began to evolve and utilize “environmental strategy” to create new ways of growing their business by bringing sustainability to the core of their business strategy. This seismic shift in view was accompanied by a bottom line emphasis that, in some cases, turned sustainability efforts into profit centers. Sustainability increasingly is not hidden within the silo of environmental, health, and safety departments, but has become much more seamlessly integrated into the operations of corporate functional disciplines. Today, to effectively work in senior management, an executive needs to be knowledgeable not only about his or her specific business function, but also, how his or her business will be impacted by governmental regulations & policies, corporate sustainability initiatives, green marketing regulations, industry guidelines or ‘best practices’, new sustainable technologies, energy planning, environmental performance metrics, and required reporting on the environmental impact of their business unit.

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This course will focus on corporate sustainability strategies within this new paradigm. It is meant to be introductory, yet provide a comprehensive overview of emerging approaches to business and its relationship with the environment. While it will cover academic research and overarching management theories, the class will be integrative and practical in its application of corporate sustainability strategies, management, tactics, and tools. Organization of the Course The course is broken into two distinct pieces which are strongly interconnected. We will begin by learning about the Bases of Corporate Sustainability Strategy. The subject matter in this part of the course will cover a wide range of environmental issues that impact business. We will discuss environmental management systems and strategy, measuring a company’s or product’s environmental footprint, sustainability measurement/metrics, green marketing, and developing approaches to communicating sustainability and managing risk. The central emphasis will be on understanding how managers should incorporate sustainable thinking into their business strategy, planning, and execution. We will then move on to the second major focus which is Sustainable Business Opportunities. Here we will explore the many current opportunities created for business by the environment and sustainability. We will begin by studying the emerging issues in energy policy, renewables, and traditional energy sources, and their relationship to business operations and strategy. We will also examine two emerging opportunities for business at the nexus of energy, food, and water, as well as, big data’s evolving role in sustainability. Our final subject area will be the growing areas of eco-entrepreneurship and cleantech business. The time spent in class will be integral to the learning experience. Each class will begin with a discussion of current environmental news and events. Particular emphasis will be given to topics that deal with sustainable innovations, environmental controversies, and break-through corporate strategies within the sustainability space. As well, lectures will include interactive discussions integrating digital media and online resources. Finally, most classes will include case analyses that complement the lecture topic. Course Plan Meeting Date Focus Area 1/15/14 (Wed) Intro- Business and Sustainability 1/20/14 NO CLASS- MARTIN LUTHER KING DAY Part I: Bases of Corporate Sustainability Strategies 1/27/14 Environmental Strategies and Systems 2/3/14 An Organization’s Environmental Footprint 2/10/14 Environmental Metrics, Benchmarking, and Reporting 2/17/14 Green Marketing & Regulation 2/24/14 The Green Marketing Mix

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3/3/14 Sustainability Communication Strategies and Risk Management 3/10/14 NO CLASS- SPRING BREAK Part II: Sustainable Business Opportunities 3/17/14 Traditional Energy Sources- Outlook and Strategies 3/24/14 Alternative Energy- Outlook and Strategies 3/31/14 The Nexus of Food, Water, and Energy 4/7/14 Sustainability in the Age of Big Data 4/14/14 Eco- Entrepreneurship and Cleantech Business 4/21/14 Project Presentation 4/28/14 Project Presentation Course Requirements Class Participation: The success of our class time is dependent on a vibrant, participatory group. The weighting on your course grade reflects this importance. Emphasis in participation grading will be on consistent, meaningful contribution to the class, not on amount of talking time—it is quality over quantity. As well, on a weekly basis you are asked to contribute to discussions on our Facebook page (www.Facebook.com/whartonenvironment ) and/or participate in online discussion through Blackboard. Readings: It is expected that all required readings and will be completed prior to attending class. Readings that are required will be denoted with an asterisk (*). Additional readings may be listed for a given topic and are not required. They are provided in the hope that they may spark additional exploration and add to the class discussion. Cases: Most topics will have associated cases listed. These cases are provided to bring the subject alive and challenge the students to broaden their understanding of a topic by encountering real world issues with all of their complexity. Some cases will be for individual write-up (3 pages), others will be studied by a group for write-up (10 pages), and a few will be only for class discussion. Guidelines for case write-ups will be provided in a separate document. Final Project: The final project of the course will be a group presentation and paper on how a single business approaches and manages the breadth of sustainability issues covered in the class. The analysis should be comprehensive and include detailed research of CSR reports, news, and primary documents. The goal is to integrate the knowledge learned in class, readings, and cases and present a comprehensive picture of

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a major corporation’s environmental strategies and actions. The papers will be no longer than 15 pages. Full details of the paper requirements will be provided separately. Assessment Weighting Grading Class Participation 25% Group Case Analyses 10% Individual Case Analyses 30% Final Project 35%

A+ 97-100 A 93-96 A- 90-92 B+ 87-89 B 84-86 B- 80-83 C+ 77-79 C 74-76 C- 70-73 Below these scores…let’s talk!

Books for the Class:

Hoffman, Andrew J. Competitive Environmental Strategy: A Guide to the Changing Business Landscape, 2000. (Amazon $42.61 (free shipping Prime))

McDonough, William and Braungart, Michael. Cradle to Cradle: Remaking the Way We Make Things, 2002- (Amazon $16.77 (free shipping Prime), Kindle available $12.99)

Ottman, Jacquelyn. The New Rules of Green Marketing: Strategies, Tools, and Inspiration for Sustainable Branding, 2011 (Amazon $14.02 (free shipping Prime), Kindle available $8.79)

Russo, Michael V. Environmental Management: Readings and Cases, 2nd Edition, 2008. (Amazon $53.40 (free shipping Prime) There is a study.net pack of cases and several readings

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Curriculum and Assignments NOTE: * denotes required reading PART I: BASES OF CORPORATE SUSTAINABILITY STRATEGIES 1/27- Focus Concept I: Environmental Strategies & Systems

Areas of Inquiry

• What is the difference between environmental management and environmental strategy? • What is the role of goals in driving meaningful sustainability initiative results? • What are the differences among the major environmental management systems (EMS)? • How are organizations driving value from their sustainability initiatives? • How do different models for competitive environmental strategies compare?

CASE FOR CLASS DISCUSSION: Cascade’s Environmental Management Model in 2006, At the Crossroads, by Pierre Batellier and Emmanuel Raufflet, Source: Russo pgs 631-646.

*Hoffman, 3-125 *Russo, Chapter 27, Environmental Management Systems and Eco-Control, 417-453 *Russo, Chapter 1, Beyond Greening: Strategies for a Sustainable World, 3-14 *Sustainability Nears a Tipping Point, MIT Sloan Management Review Staff and the Boston Consulting Group, MIT Sloan Management Review, Research Report, Winter 2012. *Green & Competitive: Ending the Stalemate, Michael Porter & Claas Van der Linde, Harvard Business Review, 73/5 (September/October 1995) : 122-133. *Competitive Environmental Strategies : When Does it Pay to be Green? Renato J. Orsato, California Management review, vol. 48, n°2 (Winter 2006) : 127-143 Corporate Greening through ISO 14001: A Rational Myth?, Olivier Boiral, Organization Science, Vol. 18, No. 1, January–February 2007, pp. 127–146

Sustaining America, John C. Dernbach, Environmental Law Institute, The Environmental Forum, Environmental Law Institute, May/June 2012

Environmental management has evolved from simply developing systems to manage environmental risks to encompassing the broader issue of environmental strategy. Organizations are required to study the full spectrum of environmental issues impacting their ability to compete. Many organizations understand that a competitive advantage may be gained by crafting environmental strategies and leveraging them to establish strategic strongholds.

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2/3- Focus Concept II: An Organization’s Environmental Footprint

Areas of Inquiry

• How do the different approaches to measure environmental footprint compare? • What are the key components of a Life Cycle Assessment (LCA)? • How is Life Cycle Management (LCM) deployed in organizations? • How do organizations utilize LCA to drive sustainable strategy? • How can value chains contribute to sustainability strategy? • What is the difference between eco-efficiency and eco-effectiveness? • What is the “cradle-to-cradle” perspective?

INDIVIDUAL CASE WRITE-UP: Cradle-to-Cradle Design at Herman Miller: Moving Toward Environmental Sustainability by Deishin Lee, Lionel Bony, Source: Harvard Business School.

*Mcdonough & Braungart, 3-117 *Russo, Chapter 24, Note on Lifecycle Analysis, 385-394 Life Cycle Management: How business uses it to decrease footprint, create opportunities and make value chains more sustainable, UNEP/SETAC 2009. (Highly Recommended)

Sustainability as a Business Operating System, William Blackburn, Corporate Environmental Strategy, International Journal for Sustainable Business, Vol 12, Issue 2 (February 2005)

Every organization has an environmental footprint. The ability for a business to perform a base line analysis of its impact both “upstream” and “downstream” is critical in developing an environmental strategy. Multiple approaches are available to quantify environmental impact and should be evaluated as tools to deliver meaningful progress against sustainability goals.

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2/11- Focus Concept III: Environmental Metrics, Benchmarks, and Reporting

Areas of Inquiry

• How does ESG (Environmental, Social, and Governance) drive reporting changes? • What is the triple bottom line? • Why is benchmarking sustainability metrics so difficult? • What is the impact of materiality on metrics and reporting? • What are the benefits of the concept of “radical transparency”? • Can environmental accounting provide a meaningful approach for organizations to better value

and report their environmental impact? • What standards exist for measuring and reporting environmental business? • How are calls for integrated reporting shaping the direction of sustainability reporting? • What is the ROI of sustainability?

CASE FOR CLASS DISCUSSION: WalMart's Sustainability Strategy (A) by Erica Plambeck, Lyn Denend, Source: Stanford Graduate School of Business.

*Russo, Chapter 15, Transparency, Openness, and Accountability, 228-242 *Briefing: Sustainability Reporting, Ethical Corporation, September 2012, pg. 11-21 *Russo, Chapter 16, A Primer on the Global Reporting Initiative, 243-261 *Russo, Chapter 4, The Triple Bottom Line: Sustainability’s Accountants, 49-66

How Radical Sustainability Can Save Your Business, Raphael Bemporad AND Jefferey Holander, FastCompany.Com Finding Common Ground on Metrics that Matter, Soyka and Bateman, Feb. 2012 Walmart Sustainability Index, Version 1.0. Russo, Chapter 23, An Intro to Environmental Accounting as a Business Tool, 369-384 The Triple Bottom Line: What Is It and How Does It Work? Timothy F. Slaper, Ph.D, Indiana Business Review, Spring 2011, p4-8

Business lives by numbers. So do organizations that take a strategic view of sustainability. From basic tracking metrics to sophisticated systems for studying customized aspects of a business, the measurement of environmental performance is critical. Yet, this is a relatively new space and there are few agreed upon guidelines or benchmarks. Equally important is how a company determines the best way to report its progress in meeting sustainability goals.

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2/18- Focus Concept IV: Green Marketing and Regulation

Areas of Inquiry • How did green marketing move from niche to mainstream? • What have been the failures of green marketing? • What are some of the different ways to segment the market for green products? • What is the “green gap” and how can we close it? • How do green consumers make purchase decisions? • What are the six sins of “Green Washing”? • What are the FTC Green Guides and how do they impact green marketing? • What is the value of eco-certifications and seals? • What are some international rules for green marketing?

INDIVIDUAL CASE WRITE-UP: StarKist (A) by Richard H.K. Vietor, Forest Reinhardt, Peggy Duxbury, Source: Harvard Business School.

*Ottman, 1-55 *Russo, Chapter 19, Avoiding Green Marketing Myopia, 296-314 *Mainstream Green: Moving sustainability from niche to normal Graceann Bennett & Freya Williams, Ogilvy & Mather: The Red Papers, April 2011. *Environmental Claims: Summary of the Green Guides, Federal Trade Commission, Oct, 2012. *Green Marketing is Over: Let’s Move On, Makower, Joel. Greenbiz.com , 16 May 2011. *The Sins of Greenwashing: Home and Family Edition 2010. Terrachoice Environmental Marketing Inc., 2010 Russo, Chapter 18, Understanding the LOHAS Market Report, 289-295

Whether it has been called green, sustainable, environmental, or ecological marketing, the practice of marketing a product’s environmentally beneficial attributes has evolved over the decades. It is important to understand how green marketing has moved into the mainstream and the reasons why it has both succeeded and failed. The definition of the target green consumer is critical to success in the market. For years, meaningless environmental claims have been made by businesses hoping to position their products as “earth friendly.” Recent FTC actions have made it clear that a thorough understanding of how to promote a product’s green attributes is critical. As well, companies with an international presence face a multitude of additional regulations that areas outside the U.S. have developed to control green marketing.

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2/24- Focus Concept V: The Green Marketing Mix

Areas of Inquiry

• Pricing o What pricing strategies are available for green products? o How much will consumers pay for green products? o How do eco-labels impact green product pricing?

• Product o What is sustainable design? o What is sustainable packaging? o How does life cycle analysis impact product design? o How does sustainable design create competitive advantage?

• Promotion o Why has some green advertising succeeded while others have failed? o How does eco-labeling impact consumer choice? o How are green certifications leveraged to benefit product marketing?

• Place (logistics/distribution) o How does a supply chain impact sustainability? o Does “local” improve environmental claims? o What are the elements of green logistics?

GROUP CASE WRITE-UP: FIJI Water and Corporate Social Responsibility - Green Makeover or "Greenwashing"? by James McMaster, Jan Nowak, Source: Harvard Business School.

*Ottman, 56-87, 107-181

*Greening the Supply Chain: Best Practices & Future Trends, Knowledge@Wharton and IGEL, 2012 Russo, Chapter 14, Environmental Product Differentiation: Implications for Corporate Strategy, 205-224 Going Green to Be Seen: Status, Reputation, and Conspicuous Conservation. Griskevicius, Vladas; Tybur, Joshua M.; Van den Bergh, Bram. Journal of Personality & Social Psychology, Mar2010, Vol. 98 Issue 3, p392-404 Why Sustainability Is Now the Key Driver of Innovation, Ram Nidumolu, C K Prahalad, M R Rangaswam, Harvard Business Review, Sept 2009, Vol. 87, p57-64

Traditional marketing’s four P’s are equally relevant to the study of green marketing. In fact, when analyzing individual environmental product classes or markets, it is critical to understand how each of these elements has contributed to the success or failure of green marketing efforts. While it is important to incorporate green marketing into the overall marketing mix, there is also a need to understand the unique considerations and issues inherent in environmental marketing.

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Framework for Responsible Environmental Marketing Communications, ICC Commission on Marketing and Advertising, January 2010 The paradoxes of green logistics, Rodrigue, Jean-Paul, Brian Slack, and Claude Comtois (2001), in World Conference on Transport Research (WCTR). Seoul.

3/3- Focus Concept VI: Sustainability Communication Strategies & Risk Management

Areas of Inquiry

• What are the best practices in communicating sustainability? • How are businesses leveraging social media and digital marketing in sustainability

communications? • How is CSR utilized in a communications strategy? • How do partnerships within an industry, government, and NGO’s fit into a communications

plan? • What are the strategies for incorporating social media in crisis communications? • How does scenario planning improve decision making about environmental risks? • What are some approaches that business is taking to incorporate climate change into their risk

planning? Case and readings… to be determined. PART II: SUSTAINABLE BUSINESS OPPORTUNITIES 3/17- Focus Concept VII: Traditional Energy Sources- Outlook and Strategies

Areas of Inquiry

• What is the outlook for coal, oil, gas, nuclear, and hydropower? • Why is fracking disruptive to the entire energy market? • What is environmental impact of the extracting gas from the Tar Sands and Marcellus shale? • What strategies are organizations employing to reduce GHG emissions? • Should we be valuing carbon? • What is the impact of the aging power grid on business?

Business is being challenged to determine how best to communicate its sustainability position effectively, yet still meet the evolving standards expected by its audience. Organizations are also finding it critical to develop competencies in communicating during environmental crisis. As a complementary concept, these enterprises are beginning to recognize the criticality of environmental risk management in developing comprehensive corporate strategies.

Traditional energy sources will continue to play an important role in meeting the world’s energy needs for the foreseeable future. With the dramatic changes that low priced gas is having on the energy sector, strategies are quickly evolving to address the “new normal.” There is also a need for organizations to understand the impact the aging electric grid has on the ability of enterprises to power their growth.

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CASE: To Be Determined, additional readings will be added

*How a Broken Energy Policy Hurts Business, Vincent Ryan, CFO.com, September, 2012 Burning Love, Elizabeth Kolbert, New Yorker Magazine, December 5, 2011 Energy and Business, Deloitte Debates,

Aging power grid on overload as U.S. demands more electricity, Ashley Halsey III, Washington Post, 8/1/12 Shale Gas: A Global Perspective, KPMG, Dec, 2011

3/24- Focus Concept VIII: Alternative Energy- Outlook and Strategies

Areas of Inquiry

• What is the outlook for solar, wind, biomass, cogeneration, geothermal, and fuel cells? • How is business leveraging alternative energy to reduce the risk of electricity prices on their

business? • What is demand management and how are businesses utilizing it to reduce their energy costs? • What are the advantages of distributed generation? • What type of financial analysis is necessary to evaluate alternative energy options? • What is the role of the federal government in developing and promoting alternative energy?

INDIVIDUAL CASE WRITE-UP: REI's Solar Energy Program by David W. Hoyt, Stefan Reichelstein, Source: Stanford Graduate School of Business.

ADDITIONAL READINGS TO BE ADDED

*Sustainable Energy for All: The Business Opportunity, United Nations Global Compact/Accenture, 2012 *Federal Incentives/Policies for Renewable Energy and Efficiency, www.desireusa.org *Government Incentives to Promote Renewable Energy, Wang Mingyuan, Temple Journal of Science Technology and Environmental Law. L. 24 (2005): 355.

Alternative energy is no longer an aspirational dream, but has become a practical component of many organizations’ energy planning. Never before has business had more choices in how to power their operations including solar, wind, biomass, cogeneration, geothermal, and fuel cells. But, the choice to utilize an alternative energy source is a financial one that demands rigorous financial analysis to understand the implications of these investments.

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3/31- Focus Concept IX: The Nexus of Food, Water, and Energy

Areas of Inquiry

• How are food, water, and energy interconnected? • What are the trade-offs at the Nexus? • How is climate change impacting the Nexus? • What is the business response to the “stress at the nexus?” • What is the NGO and governmental response to the Nexus? • How are specific industries/companies impacted by the Nexus responding? • How will innovation reduce the impact of the Nexus on business?

Case and readings… to be determined. 4/7- Focus Concept X: Sustainability in the Age of Big Data

Areas of Inquiry

• What is big data and how is it different from the existing large data warehouses? • How is the energy sector leveraging big data to improve results? • Why will the smart grid open up new opportunities in demand management? • How will big data impact the supply chain and transportation? • Can big data help battle climate change? • How will environmental reporting be impacted by big data?

Case and readings… to be determined.

The global middle class will grow by 3 billion people in the next 20 years. The supplies of food, water, and energy will be stretched to provide for this growing segment of the population. This nexus will create incredible challenges, as well as, opportunities for business.

Big data is changing everything…including sustainability. The massive amounts of data around the sustainability space are beginning to be harnessed to deliver meaningful results to organizations’ sustainability initiatives and tackle some of the world’s most pressing environmental issues. The power of data has the capacity to dramatically change business and sustainability initiatives as organizations gain new insights into the many new sources of information.

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4/14- Focus Concept XI: Eco-Entrepreneurship and Cleantech Business

Areas of Inquiry

• What environmental issues have cleantech businesses addressed? • How do government tax incentives support cleantech business? • What is the current venture environment for cleantech businesses? • How does the military invest in cleantech? • What is the role of development banks in funding cleantech business internationally? • What are the challenges of cleantech businesses? • What lessons may be learned from the Solyndra failure?

CASE FOR CLASS DISCUSSION: Aquion Energy by Thomas R. Eisenmann, David Kiron , Source: Harvard Business School.

*Russo, Chapter 17, The Eco-Advantage, pg. 262-288 *Ottman, 88-106 *Cleantech matters: Global cleantech insights and trends report, Ernst & Young, 2012 *Mobilizing for a Resource Revolution, Richard Dobbs, Jeremy Oppenheim, and Fraser Thompson, McKinsey Quarterly, January, 2012 Sustainability Doesn’t Make Money without a Solid Business Plan, FastCompany.com New sources, new uses Raising Cleantech capital in a changing environment, Deloitte, 2012

Eco-entrepreneurship continues to be an engine for uncovering major opportunities to reduce environmental impact. In particular, cleantech businesses have been seen as sources of eco-innovation that are worthy of venture and government funding. While there is great hope for innovation to solve our most pressing issues, there is much to be learned from the many failures in this sector.