Can sustainability reports regulate companies’ conduct?

Browsing articles in the research journal AAAJ the other day, I noticed that my own article, published over a year ago, was on their list of ‘most read in the past 7 days’. This fact made my week. It is more than great when your research matters to the research community, however, sometimes there are learning point for non-academic society too. Rereading the paper, I do think there are points in the paper that could be interesting for non-researchers as well. Hence this blog post.

In recent years, it has become mandatory for large companies to produce a sustainability report each year. In Sweden, it became mandatory because of an EU directive. The idea behind this kind of regulation is that the company’s sustainability report will inform its stakeholders- such as customers, local community, employees and investors- about what the company does in relation to sustainability issues such as climate change, human rights, anti-corruption etc. The stakeholders can then use this information, if they are unhappy with what the company does, to exert pressure on the company. The stakeholders can thus hold the company accountable for its actions. In this way, corporate conduct is regulated; the company will want to change its corporate conduct because of the stakeholder pressure. It is called ‘civil regulation’.

Interestingly, there are a number of cases in the research literature, specifically studying sustainability reporting, where civil regulation does not work as planned. There are cases of stakeholders, for example NGOs, that receive the sustainability reports and read them but do not feel equipped to exert pressure on the company. The company reports and the stakeholders receive it, but there is no civil regulation taking place. The company can continue with business as usual.

Reviewing these cases of ‘failed’ civil regulation, I try to explain why the reported information may not be enough to produce such civil regulation. My article argues that we, in these cases, tend to overestimate the ‘power’ of information and confuse it with knowledge. I use the example of ESG investor analysts, i.e. analysts that focus on how companies handle sustainability issues such as energy consumption, pollution, human rights etc. These investors do attempt to hold companies accountable for their unacceptable sustainability performance, a practice the industry calls ‘company engagement’. In my study I find that when the analysts do so, not all information is alike and the analysts rely on several other types of information, for example from consultants and media, plus many other types of resources such as theories, calculations etc. to show that they know what the company does and how it should change its practices.

Consequently, I argue that we need to carefully distinguish between information and knowledge. Information, such as sustainability reports, may indeed contribute to knowledge but is rarely enough on its own to hold the company accountable. We cannot assume that if someone has information about someone’s actions s/he will be able to hold this person accountable. What kind of information we hold matters: where it comes from, if it contradicts or confirms other accounts. It matters how it is used, together with other resources or to disprove other statements. Moreover, in some cases other resources other than information, for example theories, helped the analysts to hold the company accountable.

This study does not, however, show that sustainability reports are not useful for regulating companies’ conduct. It just illustrates that information in the form of a sustainability report is not enough on its own. If we construct this kind of reporting-based civil regulation, like the EU-directive, we should not overestimate the power of a single source of information. In this context, empirical studies such as the one in AAAJ can inform us about the role the reported sustainability information plays in practice.

Sustainability news of the week

There are so many interesting sustainability-related things happening so this post will summarise some of the ‘sustainability news’ from this week:

Swedish radio started a discussion about researchers’ flying habits. Apparently, Swedish universities (especially Karolinska Institutet, Uppsala and Lund) stand for a large part of the flight related CO2 emissions  from  public  authorities. Students at Lund university have called for professors to practice what they preach i.e. to reduce the climate impact of universities. It was also noted that research funders currently do not encourage environmental friendly travels.

Some positive news: the worlds first 100% recycled nylon stockings was launched today by Swedish Stockings. Previously, the stockings contained a small amount of new material.

Also very promising: Swedish researchers at Chalmers are working on constructing batteries with common and ready available metals such as steel. The switch from fossil fuels to electric batteries will, as batteries are designed today, require lots of rare earth metals. New battery design could make us less dependent on these rare metals. This is a good thing because, as you might know, there are lots of social problems around the mining of some of these rare metals such as cobalt.

Lively discussion of the week: researchers debating the climate impact of meat. A large group of researchers at Swedish University of Agricultural Sciences (SLU) wrote that ruminants, such as cows, have an important role in food production in Sweden and criticized the life-cycle analyses the climate calculations often are based on. Today Chalmers researchers responded. The SLU researchers study animal husbandry, whereas the Chalmers researchers belong to a space, geoscience and environment department at Chalmers. Despite this fact, the engineers accused the agricultural researchers for speaking about things “outside of their expertise” when discussing food and climate impact. The engineer researchers, one of them a former animal rights activist, also called the SLU researchers “animal researchers”. The debate is getting heated.

Swedish sustainability manager of the year was awarded yesterday to Anna Denell at Vasakronan. My researcher colleague Tommy Borglund was part of the jury.

While Tommy was handing out prices, I attended the release of SB Insight report of the Nordic market for circular economy. The report shows some interesting trends, for example that the awareness of what circular economy is is much greater in Finland than in Sweden.

Yet other researchers at Örebro University spend their days studying microplastics in Swedish lakes. There were higher concentrations in the inflows to the lakes, for example in Stockholm and Mälaren, than elsewhere. We often think of microplastics in the sea, however, they are also present in our lakes.

Other water news came from Water aid that released the report “Beneath the surface” highlighting how our imported foods, clothes and other products contribute to water scarcity in other countries.

A third year of no-shopping?

Two years have passed without any clothes shopping on my part and you might wonder if I am embarking on a third year. Truth be told, I am wondering too. I would like to continue another year without shopping, these past two years have been a joy. When shopping is not an option you don’t even enter stores and don’t have to investigate if a potential purchase is a sustainable choice. You don’t need to worry about whether you really will wear that thing as much as desire tells you that you will. Lots of energy, thinking and money saved. Such a relief. And, as a bonus, I have gotten creative with my rarely worn clothes to find combinations and outfits where these things do work after all. So these two no-shopping years have been truly great for me and my wardrobe.

However, less than a month into the new year, I violated the no-shopping rule. I simply had to buy nylon stockings because it would be silly, frankly, to ask somebody to buy them for me just to keep the no-shopping record. As I’ve written about before, to me the purchase or financial transaction is not really the problem, it’s acquiring things you do not need. So, this year, I’m allowed to buy recycled nylon stockings from Swedish Stockings. And, if the urgent need arises, I might be allowed to buy other things too.

This, however, is murky waters and arguably more difficult to navigate. Shortly after buying the Swedish Stockings, I thought I needed to replace an item that is slowly getting worn out. I started googling what to replace it with and, as a result, fashion adds started popping up all over my internet. After not being able to sort out what would be a sustainable replacement, I, annoyed with the adds and fruitless time spent googling, returned to my closet only to find that I did in fact already own something similar enough that a purchase was not really warranted. Surely, I am not the only one who can’t memorise everything that’s in the closet? Now that shopping suddenly is an option again, if there is a need, I imagine there will be several similar situations this year. And how do you decide if there is a wardrobe need anyway? Murky waters.

Entering 2019, I’m proud to say that my mending pile is smaller than it’s ever been. This is a result of the 7h and 14 min I spent mending last year, on average 36min/month. I also spent 4900 SEK during the year at the dry cleaner/mender, ca 400 SEK/month. This is something I could potentially reduce if I got better at sewing buttonholes, hemming and thinking twice before dry cleaning clothes. On the other hand, sometimes it’s worth getting help rather than not gettings things done at all. I also spent 1600 SEK on repair at the shoemaker, an unavoidable cost.

Despite not shopping, my wardrobe experienced an increased in- and outflow during 2018. In total, 29 items entered the wardrobe, mostly things I inherited from family members. Six items I made, either knitted or sewed, for myself. While, as I concluded during last year’s wardrobe audit, I logically don’t need to make any clothes, I have enough as it is, these items still ended up becoming favorites. So while I need to be mindful of making too much or too fast, a little might be ok, I tell myself, as sewing and knitting is also a recreational practice. I do my best to only source sustainable fabric and yarn or, even better, use what’s already in my possession. For example, I sewed two Ogden camis last year, one from fabric scraps and the other from an old Laura Ashley pillow case and I very much love both of these.

As for the outflow, 30 items, I sold a few (which I’ve written about before) and wore out the rest. So not shopping does have a slow accumulative effect where things do get worn more and, eventually, even worn out. Overall though, I’m still in the ‘upper end’ of wardrobe size with 540+ items. And my prediction is that I’ll stay there for quite some time.

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Is globalization to blame for our environmental problems?

Following the debates in the newspapers, it seems globalization is to blame for a lot. It’s often described as the root cause of some of society’s big problems. Globalization causes inequality, financial crises, unregulated multinationals that act freely on a global scale, environmental pollution etc. An assumption in these debates is that globalization exists. However, few of us take the time to define what we really mean when we say globalization.

This however, is not how we do it at the introductory course ‘Companies and society’ which I teach at Örebro University business studies bachelor program. In the course, we review three perspectives on what globalization is and discuss whether it’s a good thing and lastly the students write a report on a company in the food sector as an example of globalization.

Teaching this course has fundamentally changed my view of globalization. While I used to assume that globalization is a fact, I don’t anymore believe we have ever had globalization. In fact, nowadays I concur with the ‘historical perspective’ on globalization i.e. that the economy, mobility and trade has, throughout the history, been highly international but never global. Even today we know of a few tribes who are undoubtedly isolated from the rest of us. Some countries are very interconnected, but not others. So maybe internationalization is a better word, if this is what we really mean?

Unlike me, however, most students agree with one of the other two perspectives on globalization in our course book: that globalization is a fundamentally new phase in recent history or that the term at least captures some critical new aspects of modern times.

Nevertheless, when the students investigate companies and globalization, they capture some of the acute sustainability issues in the food industry today. Thus not only do the students learn about globalization and read quotes from Stiglitz and others, they also get up to date on current sustainability issues in the food sector, such as how the industry calculates climate impact of chicken meat. Chicken is often argued to be a climate smart meat choice, but, as the group thoughtfully discussed, it depends on how you calculate and whether you include the climate impact of the feed (often imported soy). I have written about the fallacy of CO2 calculations on this blog before. It’s often overlooked that there are multiple ways to calculate climate impact of food.

Another group discussed the use of imported palm oil, often from Indonesia, in food products. By now most of us know that palm oil should be avoided or at least certified if we use it. However, this group of students highlighted that palm oil requires less land than other kinds of oils that could replace it and thus that the sustainability consequences are not clearcut. Clearly, we don’t want to use more land than necessary for food production. So there are both positive and negative environmental consequences of palm oil. How do you trade off one environmental consequence against another?

Two other groups discussed fish, a food that is rarely recognized as an environmental problem. One group mentioned how the fish feed used in aquaculture drives overfishing of the seas, something I have written about here before. The other group instead focused on sustainably caught fish, MSC certified fish, but that the company ships it half-way around the world for filleting by hand in China and then back to Scandinavia. While this seems illogical, the group explained that it means more of the fish can be used compared to machine filleting.

Overall, we learned a lot not just about globalization but also about how and why companies act as they do. Some of these behaviors seem unreasonable as an outsider. However, we need to identify not only the consequences of these ‘global’ corporate behaviors but also understand the rationale behind them. There is a reason and context to why the company started doing things as they do. Only when we understand this can we find alternative solutions.

Companies and science: some take aways from the Monsanto trial

US multinational Monsanto has been involved in countless trials for its products and most recently its popular weed killer Roundup. The lateste trial, the Johnson cancer case, concerns a school groundkeeper and was the first to take the weed killer Roundup to trial. The trial got a lot of publicity, especially after Johnson famously won. Supposedly, this ‘win’ opens up for further trials on cancer and Roundup and is thus bad news for Monsanto. It is also bad news for German pharmaceutical company Bayer, that just recently acquired Monsanto. 

Aside from the fact that this widely used weed killer, Roundup, might cause cancer, the case is interesting because it reveals how Monsanto was actively working to shape the science around its product. During the trial, letters were released that revealed many examples of such questionable science-business practices. As one example, Monsanto appears to have been involved in ghost writing i.e. that the company writes text and then asks academics put their name, as authors, on it. As one of the revealed examples, Stanford researcher Mr Henry I. Miller wrote a piece on Forbes’s website in 2015, based on a Monsanto draft and failed to mention any involvement by Monsanto thereby violating Forbes policy for authors. The Forbes piece in question was written in response to the findings of the International Agency for Research on Cancer, a branch of the World Health Organization, that had just labeled glyphosate (ingredient in Roundup) a probable carcinogen. 

Another incident concerns the retraction of research that is unfavorable for the company. In 2013, while he was still editor of the journal ‘Food and Chemical Toxicology’, Mr. Hayes retracted a key study damaging to Monsanto that found that Roundup, and genetically modified corn, could cause cancer and early death in rats. Later, it surfaced that Mr Hayes had had a contractual relationship with Monsanto. This piece in the NYT covers most of the story. This article by science journalist Paul Thacker is also worth while.

What can we learn from this in terms of business and sustainability? Certain companies will inevitably have a strong interest in research, for example to show that their products are safe and effective. In my opinion, the fine line between science, corporate interests and corruption is a key business ethics issue for these companies that the management needs to handle. If not, when such business practices fail, it may show up as cases of unethical business practices, corruption or in the worst case, as for Monsanto, as legal cases. The EU regulation on non-financial reporting requires large companies to report on their anti-corruption and anti-bribery policies and practices. For companies with a large stake in science, how to avoid this kind of unethical incidents should be accounted for in this section.

Moreover, as a take away for us as researchers, we cannot be naive regarding the very strong incentives certain companies may have to meddle with science. While uncovering such cases may feed the publics distrust in science and media, e.g. the fake news debate, not uncovering biased or in worst cases incorrect research may risk the whole scientific system as such.

Regarding questionable retractions of research papers, to my mind full transparency is to not actually retract a paper but to let it remain with proper commentary for example as to why the research findings or methods are questionable. Paper retractions may otherwise, if we are not very careful, become a tool for censorship.

Re-homing: how to give things you don’t want a new home

Re-homing means making sure that the things that leave your home gets a new home and don’t become waste. Post-Christmas is prime re-homing season as gift giving often means that people receive things they don’t need. Interestingly, while minimalism and decluttering has become trendy,  most people still buy gifts for others. It’s as if we feel inadequate if we don’t give to others. Right before Christmas, the Minimalist wardrobe blog even published a series on how to decline Christmas gifts, which caused some controversy.

This past year, I’ve tried and tested quite a few re-homing strategies and here are my thoughts and experiences.

Charity shops. There’s a lively debate around charity shops and whether things donated there do get a new home. What is clear is that we send an increasing amount of clothes to charity (30 ton of textiles per week in the case of Swedish Stadsmissionen). Is there a market for this enormous amount of clothes? The short answer is, no, there is not a market for these amounts of clothes locally so large amounts are instead exported to developing countries and sold there. There is a debate around whether this export of used clothing is good or bad. On the positive side, it is better for the environment that the people in developing countries use used clothing instead of new. However, some African countries argue that the large import of used clothing has harmed their national textile industry and thus tried to imposed tariffs on imported used clothes. As a result of pressure from and dispute with the US, it seems only Rwanda actually introduced the tariff. As I am not currently part of the charity shop market (I don’t shop at all) and it is uncertain if clothes to charity shops do harm or good, I avoid sending clothes there.

Giving to friends and family. This is where a large part of the clothes that enter my wardrobe comes from. However, be prepared that friends and family might give things back eventually. This is not necessarily a bad thing. Sometimes clothes are only right for you in a certain stage of life and then right for someone else. One of my favorites in this category is an old trench coat that my grandmother, mom and I have all worn. I cherish this coat.

Swap days. This is on my to-try-list. It’s as it sounds, you swap some of your clothing for someone else’s. In Sweden, Naturskyddsföreningen arranges a national clothes swap day every year. This year it’s April 6th, mark your calendars!

Reselling online (for example Blocket.se in Sweden, Finn.no in Norway). Usually there is a set price for the add, depending on the site, whereas you decide the price for what you sell although potential buyers might try to bargain. I’ve bought clothes this way (before my shopping ban), for example ski jackets etc. If you buy from someone local you can try clothes on before you buy. Also works well for furniture I find.

Selling on commission.  You get a part of the price and the commission store or site also takes a part. You set the price for the clothes together with the store/site. When selling on commission, you have to find the right outlet for your item. For example, selling clothes from French label Isabel Marant on French site Vestiairecollective.com worked really great but for example Italian brands did not work as well there. Selling a Filippa K dress in the Filippa K second hand store in Stockholm also worked great- it sold fast and I got a good price (and the store is super nice! Couldn’t all brands have their own second hand store?) So for commission, it’s worth considering the audience you will reach and if they are interested in what you’re selling. There are good venues for selling used books on commission too, for example Swedish Bokbörsen or the used books on Amazon. com, I use these a lot.

Auctioning. You set the starting price and the site usually takes a percentage of the final price. I’ve mainly used Swedish e-bay site tradera.se which worked great, for example for selling a pair of Converse Allstars, probably because it’s a rather standardized product where people know their size. Selling clothes has been more difficult, but it still got sold. Tradera is really excellent, however, for buying and selling homeware across the country and things that can easily be shipped. For more expensive things there are also the classical auction sites Bukowskis, Auktionsverket, Barnebys and Blomqvist in Norway etc. I’ve mostly bought furniture and glassware here.

The benefit of the online services is that it’s very easy to search for exactly the brand and size you’re interested in. There is also a bigger market with even international sellers and buyers. And you don’t have to search through a second hand store. The benefit of an actual store or buying from someone local is of course that you can try it on.

However, there are more items on my re-home-list than I have time to re-home. Reselling takes time and effort (finding out where’s the best market for this item- there are so many different reselling channels). So this is a great reminder to not acquire things I am uncertain of.  Eventually re-homing these things will just be work.

When re-homing, you also risk getting rid of something you might need or find useful in the future. There is usually also a loss of financial value when reselling clothes, rarely will you get more than you initially paid. Selling something and later buying it again new is not wise financially. On the other side, wearing something you don’t really like just for the sake of it when someone else might cherish it doesn’t really make sense either.

There is also a bit of a social movement push towards having a small wardrobe, being minimalist and the fact that some of us have less space than we would maybe need. As my non-minimalist sister says, maybe I don’t need less clothes but a bigger wardrobe so it doesn’t feel so crowded!

On the picture: the Filippa K second hand store in Stockholm, an excellent corporate initiative.

Steering businesses towards a circular economy

As I have previously blogged about, the students in my master course ‘measuring sustainability’ at NHH have analysed and proposed indicators that H&M and other fashion companies can use to steer their business towards a circular economy. We are very thankful to H&M and sustainability manager Luisa Book for collaborating with us on this case. The topic is very much of the moment as an increasing number of companies, just like H&M, aim to become circular but then also need appropriate tools to help steer their operations in this direction.

Some of the indicators the students proposed, such as amount of recycled material out of total use of materials, are maybe not new but are crucial when a circular business is the target. Moreover, the number of times a material can be recycled needs to be monitored in order to make sure that recycling is not just a prolonging of a linear path (see Circular Flanders great illustration of this to the left). In an ideal world, materials can be recycled indefinitely.

The students also argued that it is key to keep track of collecting initiatives i.e. when brands collect used or discarded products. How much of what is sold returns to the company for recycling? Moreover, companies need to monitor what happens with collected garments- are they recycled into new garments or in fact only downcycled (used for other less valuable products)?

One reason materials cannot be recycled is because the materials are contaminated for example by chemicals that hinder recycling. The students here proposed to measure the use of such chemicals or substances. By monitoring, the company can also try to minimize such use. To know if the product is made with substances that might hinder recycling, you need proper information about what the garment is made of and how it is made. Here the students proposed that H&M could develop more elaborate tags with information about the item which could help the customer to take care of it and, eventually, facilitate the recycling of the garment.

Another point that is crucial to circular operations is to keep the materials in the processes. In the textile industry, a lot of fabric gets wasted and does not end up in any garment. Consequently, some students suggested to measure the amount of material that ends up in a garments in relation to total amount of materials used. Ideally, all materials used should end up in a garment. Similarly, the students also identified microplastics as a threat because it means that small amounts of plastic fibers continuously leave the circular flow and non-renewable materials are subsequently lost.

Another aspect commonly discussed in the context of circular economy is the slowing of the circle i.e. the prolonging of a product’s life span. Here the students reintroduced the idea of enabling users to repair their clothes, for example by making sure all items come with threads or buttons necessary for repair or providing repair services in stores. The company can track both the use of repair services and number of items that customers could repair themselves.

I hope that H&M and other companies will find the students work helpful. How to measure a circular business is really at the forefront of both practice and research. In fact, two research colleagues and I just last week got financing for a project on circular business practices by Vinnova. That the students managed this task so well and were able to develop these very helpful indicators show, to my mind, that we at University teach students useful and up to date skills. We educate students that can in fact contribute to and improve current business practices.

Three reasons you should choose environmentally friendly skincare products

Last time, I blogged about the Pink Ribbon and how we should discuss hormone-disrupting and carcinogenic substances in personal care products more. To my mind, there are three key reasons why we should consider going green in the cosmetics department.

First, our own personal health. As I mentioned in the blog post, there are many examples of ingredients affecting our health negatively, for example UV-filter in sunscreen may disrupts hormones. Parabens and breast cancer. There are too many examples here too mention in one post but basically, do not suppose that brands with a green image are truly green. To the opposite, brands such as Clinique, Body Shop and Bare Minerals have been shown to include for example PFOS in products. PFOS is a similar compound to PFAS, if you remember my post about the Dupont case. PFOS is also the chemical 3M was sued for using in Scotchgard. You don’t want this on your skin or in your bathroom at all.

The second reason is because of the environment. I recently reread Johan Rockström and co’s Planetary Boundaries (2015) paper and they state in no uncertain terms that chemical pollution is one the nine key planetary boundaries we need to watch out for:

“The risks associated with the introduction of novel entities into the Earth system are exemplified by the release of CFCs (chlorofluorocarbons), which are very useful synthetic chemicals that were thought to be harmless but had unexpected, dramatic impacts on the stratospheric ozone layer. In effect, humanity is repeatedly running such global-scale experiments but not yet applying the insights from previous experience to new applications.”

They also discuss micro plastic pollution, again something commonly found in cosmetics and which I have written about before.  As another example, we know that sunscreen seeps into the water and affects corals reproduction. This is why they have forbidden certain sunscreens in Hawaii. In addition, many chemicals are made out of fossil fuels and thus a non-renewable source with effects on the climate. It is estimated that in 2030 the chemical industry will stand for 30% of the total oil production.

There is, to my mind, a naive belief sometimes among consumers that everything is thoroughly tried and tested before it can be used in products. To the opposite, in the paper the researchers write that we need better methods to find out if a substance is harmful before it becomes widely used.

The third reason to go green is social. There are many chemically sensitive individuals that cannot move freely in public spaces because we are constantly spreading chemicals they react to through our perfumes, fragrances and personal care products. Nail polish, hair spray and other evaporating products are, in fact, a form of significant air pollution, believe it or not. It’s called volatile organic compounds (VOC) and yes it’s in your cosmetics. That scent you smell is basically chemical pollution and for someone nearby it might trigger an asthma attack.

So how do you go green? Maybe the most environmentally friendly approach is DIY. These days there are web shops such as Organic Makers that provide all the basic safe ingredients you need. The Zero Waste Home book provides many basic tricks and recipes. But maybe you don’t want the fuss of making it yourself and maybe you like a nice packaging (although that’s less environmentally friendly). If so, there are tons of organic brands out there. I also use several of these, because sometimes that’s good enough.

Pink ribbon month and carcinogens in products

It’s October and breast cancer awareness month. And every year some of us wish that there would be a discussion about carcinogenic and hormone-disrupting substances in products instead of selling these products under the pink ribbon label. I can’t find a word on the Swedish site about carcinogenic substances. In contrast, I think we need to discuss this issue much more. Such a discussion would benefit the companies that face out harmful substances proactively, before regulation forces them to do so.

Because even in the EU we have carcinogenic and hormone-disrupting substances in products. Sometimes it’s because we just recently found out the substances were harmful, for example parabens in cosmetics involved in breast cancer. And, after we have found out,  regulating them takes several years, as in the case of phtalates. Other times the substances are already forbidden but are still used repeatedly by companies. Yet other substances, such as BPA, are forbidden through REACH regulation but still allowed in food packaging, such as take away cups, because these are not regulated by REACH  but by EFSA.

Overall, EU might do a better job than the US in regulating harmful substances but is still far from perfect. Sometimes the replacements are not necessarily better than the original substance, as these researchers discuss. Interestingly, the researchers found that people eating out are more exposed to the harmful substances because for example restaurants use packaging not allowed for individual customers.

What else can we do? Be careful about personal care products. Avoid packaging when possible. Here I see the zero waste movement as an inspiration. Using refillable mugs, you avoid the BPA in paper cups. Shopping at the farmers market, you get your vegetables in paper bags instead of individually wrapped plastic. And obviously, not buying new stuff, when you don’t really need to, is not only cheap but reduces your chemical exposure too.

The link between circular economy & sustainability- a case with H&M

This morning, I introduced the case we will be working on this autumn on my course at the Norwegian School of Economics (NHH): managing business towards a circular economy and sustainability. The case is in partnership with H&M who is also a partner of the Ellen MacArthur circular economy initiative.

As I’ve written about before, I was not an early adopter of the circular economy. I do, however, teach circular economy as a trend in the sustainability area both at Örebro University and NHH. The more I reflect on the concept, the more of a convert I’ve become. So I thought I’d share some of my aha-moments about the circular economy and sustainability with you here.

First of all, what do we mean with sustainability? The established definition is from the UN Brundtland report (1987):

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs

As Kuhlman & Farrington (2010) (one of our key references in the NHH course) writes, this sustainability definition addresses the tension between mankind’s aspiration towards a better life on the one hand and the limitations imposed by nature on the other hand. This tension between social welfare and natural resources is more often than not ignored in the business debate on sustainability. We often pretend it does not exist. And of course, there are many win-win situations where environmental or social measures also bring down costs and/or increase income.  There are definitely low hanging fruit, efforts that are win-win or at least come at no cost.

However, there are cases where tension between social well-fare and environmental sustainability undoubtedly exists. The pharmaceutical industry is a prime example. The industry argues that it provides tremendous social benefit by saving lives (or at least reducing suffering) but the environmental pollution, especially chemical and water pollution, is high, both at production  and consumption sites. Why do such tensions between social well-fare and natural resources occur?

Operating in a closed system

Some of you might have heard about the Planetary Boundaries. Professor Johan Rockström and co-authors defined nine environmental boundaries we should stay within to ensure a stable living environment (see picture, borrowed from the 2015 article). What this figure tells businesses is that we are operating in a closed system. If we mismanage certain environmental resources, such as biodiversity and chemical pollution, we cannot compensate for these in other ways. If we cross these, there is no functional living environment we can operate within.

 

Why a linear business model does not work in a closed system

Now the problem with a linear business model (which most businesses have and what we often teach students) is that it treats input to businesses (and its outputs) according to the value chain- the business uses certain input and through a number of processes produces some outputs. These inputs, resources, the business uses appear to just exist. The environment is there for us to use and not affected by our use. Likewise, outputs and externalities from our production  just go somewhere. However, as the 1990 chapter on circular economy by Pearce and Turner states, eventually the waste we produce will affect the availability of new resources. And the accumulated waste affects our well-being too. The fact that business operates in a closed system has to be taken into account. Certainly for global businesses.

Now from the planetary boundaries perspective, the best would of course be to minimize consumption and for us to produce less in order to spare the environment and stay within the boundaries. This is in line with the minimalism and anti-consumerism movement. If we consume less, we do not need to produce so much. We can share, mend and repurpose etc. This is admirable and has a place, especially in societies with overconsumption. It is my approach to my own wardrobe situation. However, at this point in the debate, someone will throw in the argument that we cannot deny developing countries the same social benefits we have allowed ourselves. If we have been flying for decades, why shouldn’t they be able to?

Kate Raworth, with a background at Oxfam, illustrated this pedagogically in her ‘Doughnut Economics‘. It is a fact that there are large groups of people that are not getting their basic needs met. And to achieve progress on this point will in many cases require use of natural resources. Here, the tension between the social development and the availability of natural resources the Brundtland report sought to address is very clear.

Consequently, Raworth put those basic social needs into Rockström’s figure, in the middle, to illustrate that we want to maximize the social well-fare of people while at the same time staying within the planetary boundaries. We want to operate, she argues, within the green ‘doughnut’ formation in the figure.

Sustainability is getting the maximum social value while staying within the planetary boundaries

Working along the lines of minimizing and restricting consumption can, at least in some cases, thus deny us social value. Similarly, what many sustainability-minded businesses do is to try to minimize the waste and externalities from production. To reduce the ‘shadow’ of business, make them ‘tread lightly’ on the environment. There are many impressive initiatives with zero waste factories and water reduction regimes. These are all good, no doubt about it. We need these kinds of initiatives. However, the circular economy further adds that ‘waste’ should not simply be removed but could also become a resource for us to use. It’s a fact that we need some amount of production and that it uses resources and that there will be some amount of waste. What can we do with the remaining waste? How can we turn it into resources?

As this post is long enough, I will simply have to write about the challenges with making waste into circular resources in a follow up post. Still, I hope you see, like I do, why there is a case for circular business in a sustainable society. And I’m so excited about our case with H&M and what the students will come up with.