CESR 4130 Final

Centralized model of Sustainability

"Guru or department" Sustainability person or department within your org chart on the same level as finance, HR, etc. Pros- Acknowledges sustainability Cons- Isolated, doesn't have inherent authority

Insurance related risks

"economy's financial first responders" Insurance industry has been studying climate change for decades, Weather and climate are core business. 2021 natural catastrophe claims: 105 billion, 4 highest on record, 5-6% increase each yr

Customers issues with sustainability

- 26% high price - 11/7% lack of info, do not trust info - 12/8% lack of variety/lack of alternatives -10%/8% lack of availability, lack an alternative - 10% products are not entirely sustainable

Key issues in retail sustainability

- funding gap - shopper conundrum - tail end of supply chain - ESG not owned by the commercial or operational teams - hard to assess entire operations

Sustainable tourism areas of focus

- protect env and natural resources - conserve cult hertirage - provide long term socioeconimic benefits - create mutual benefit for tourists and host communities - create inclusive and fair opportunities

GSTC certification

- sustainable managememt, socioeconomic impacts, cultural impacts, env impacts for hotels/accomodations, tour operators, destinations and governments

Governments roles in the market

-> policy makers -> major operations -> lead by example

Double materiality

considers both the impact to the company and impact of the company. identifies importance of both issues to stakeholders

Biophilic design

integrates natural element and processes into the built environment, reduces stress & increases productivity/creativity, uses variety of inputs: natural lights, plants, water, can support building climate and reduce inputs

Sustainability in tech sector

Data centers. So energy intensive they are about 100,000 houses of energy,

Benefits of LCA

Data for ESG Reporting, Goal-setting for sustainability, Process and product-design improvement, Procurement decisions, Marketing (differentiation!), Third-party verification or certification, water footprint, social impact, etc.

Materiality

Determination of how important specific issues are to a business

Impact (ESG) materiality

ESG issue is material based on impact of an organization across value chain

Policy makers role

supports "common good", ensure even playing field, support environment, public health, and safety

LCA Processs

LCA Process: 1) goal and scope→←2) life cycle inventory→←3) impact assessment → interpretation

Pillars of sustainable governance

1) design according to sustainability issues not overall 2) give central sustainability team the ability to execute change 3) find the structure that best fits your company & sustainability agenda 4) prioritize governance for sustainability's complexity and dynamic nature-- not just for reporting lines Score of 80 gives you B Corp status, 50 is industry average

Consolidation of reporting standards

600+ rankers and raters in "wild west", which any could get attention and be used. Into ISSB (international sustainability standards board) at COP 26. Formulated by IFRS (intl GAAP). Only released the framework in 2023

B corp

A certification that someone gets for having his or her business organization meet a certain standard. Meet minimum score on the B impact assessment which can take years. Legal framework for Stakeholder governance and transparency requirements

Top reasons ppl are changing to green buildings

-right thing to do then healthier buildings then client demands, then lower operating costs then env regulations

Amazon items expose

130,000 destroyed per facility a week. 50% of items are unopened, and the rest are returned but in good condition. It's more expensive to return and get the item ready for resale than to destroy them. It gets sent to a waste management facility about an hour away (emissions) or landfill for other items. Perfectly usable items, as well.

Causes in food emissions

21 ag production 16 processing 31 packaging 7 pre tail transport 9 retail 4 post retail report 5 commercial food services 7 cooking and storing 31 disposal

Fashion pollution stats

2nd biggest global polluter, 2nd highest user of water, 20% of total waste water, 10% of GHG, 80% of fashion is landfill or burned, 35% of microplastics in ocean is from synthetic textiles

Food waste

39% of food is wasted-> 8 on the farm, 14 is lost between the farm gate and retail, 17 at retail, food service, house holders 800 million people go hungry If food waste was a country it would be behind US then China

Walmart sustainability changes example

4 systems conditions to create a sustainable planet: 1) take care of the people. Social and environmental sustainability are inextricably linked → they switched to renewables, examined supply chain, etc. Use the platform of the company to drive environmental and social sustainability and it pays off over time. Changes from "always low prices" to "save money, live better" after coming under flack and being known for squeezing labor & suppliers.

Carbon pricing

A policy that charges emitters of the waste products that cause climate change for the cost of their pollution, either by a monetary tax on the volume of emissions or the revocation of permits to operate.

Carbon offsets

A system by which you can offset your carbon input in the world with an additional project that cuts carbon somewhere else via a third party investment

Logisitics of transport emissions

Air 1-1.2 kg/km of CO2 Semi .2-.3 kg/km XL semi .1 kg/km Trains .07 kg/km Inland barge .05 kg/km ocean ship .01-.03 kg/km

Proposed SEC Climate Disclosure Rule

All publicly traded companies must disclose climate related risks material to company and scope 1&2 emissions Larger companies must report scope 3 emissions if the emissions are material or they have scope 3 goals (SEC rumored to drop) Required reporting with annual 10K reports and other statements (expected fall 2023..)

Good 360 & Amazon example

Amazon introduced two new Fulfillment by Amazon programs designed to make it easier for businesses selling on Amazon to resell customer-returned items or overstock inventory while giving products a second life. → 300 million products/yr FBA liquidations gives sellers the option to use Amazon's existing wholesale liquidation partners and tech to recoup potential losses on returned/overstock inventory. onate: Good360- close the need gap and open opportunity for all by partnering with socially responsible companies to source highly needed goods, distribution. $1 billion+ products in 2021. Amazon ship in truck fulls to Good 360 warehouses to get sorted. Available to nonprofits for nominal costs. Avoid negative PR, help community, employee engagement, helps hit the zero waste initiative

Food industry

Average American meal travels 1500 miles, 10x fossil energy vs food energy How you transport → huge indication to sustainability and emissions

Scope 3

BEYOND: Everything down or upstream. These emissions are the result of activities that happen throughout the value chain, outside an entity's direct control. Examples include employee commuting, freight, and supplier impacts. Scope 3 emissions are on average 11.4x greater than 1&2

Scope 1 emissions

BURN: direct greenhouse gas emissions from sources owned or controlled by the entity, such as emissions from fossil fuels burned on site

Scope 2 emissions

BUY: (UTILITIES) indirect greenhouse gas emissions associated with the generation of purchased electricity, heating/cooling, or steam off site, through a utility provider for the entity's consumption

Financial materiality

Concerns or business activities are material if it can affect an organization's financial well bein

Embodied carbon examples

Concrete, steel, glass, wood, transport, construction, end of life. Raw material supply, waste procesing, repair

Lead by Example role

Biden 2021 Executive Order: 100% carbon free electricity for federal facilities by 2030, 100% ZEV acquisition by 2035, net-zero emissions from federal procurement by 2050, net zero building emissions profile by 2045 and 50% reduction by 2030, zero emissions from all federal operations by 2050 States have been the incubator for pretty much all of our environmental and energy policy (adopted federally and globally) Top sustainable cities: London, Stockholm, Edinburgh, Singapore, Vienna → biofuels, green architecture, organic/regenerative farming, green transport, reduce transport, renewable policies, etc. LA100: LA Dept Water and Power is nation's biggest municipal utility, converting to 100% RE by 2045 or earlier,

Examples of carbon offsets

Building cookstoves in rural communities that use less wood and burn cleaner, planting trees, improving forest management so trees are left in place longer to sequester carbon, capture landfill methane

Real estate impact

By 2030, global construction output will reach 15.5 trillion, investable real estate will reach $69 trillion, which is up 60% from 2015

Permanence pillar

CO2 reductions are permanent and CO2 cannot be later emitted (ie forest fire). If chance of reversal, then funding reserves provide adequate insurance

Quantifiable Pillar

CO2 reductions can be measured or calculated with a method that is reliable and replicable

No leakage pillar

CO2 reductions from a project do not result in higher emissions elsewhere because the activity shifted to a different phase

Additional Pillar

CO2 reductions from the offset would not plausibly occur without the offset funding

Pros and cons of tourism

Cons: overcrowding, env damage, economic leakage, cultural exploitation Pros: job creation, cult hertitage, $$ to perserve and restore sites/ ecosystem

Reducing food waste high income countries

Issues: food rejected based on aesthetics, making/serving larger meals than are eaten, consumers purchase more than they can use, expiration dates are confusing Solutions: update expiration labeling, discounts/apps for misfits and near expired foods, donate to non profits, convert biogas, innovation tech

EU report conclusions about carbon offsets

Energy related projects-- unlikely to be additional, industrial gas project-- likely additional if not required by policy, methane projects-- likely additinoal, biomass power-- very project specific, efficient lighting-- makes sense anyways, unlikely to be additional, cook stove proejcts- not good track record on $ leading to projects so offsets overestimate emission reductions

Walmart Good 360 example

Every single location is partnered with a local nonprofit, then whatever they cannot use goes to the Good360 warehouse. Saves on costs of reverse

Steps to resilience

Explore hazards -> assess vulnerability and risks -> investigate options -> prioritize & plan -> take action

Pallets example

Facilitate forklift operations for moving and storage, 2 BILLION in use in the Us alone. Weight, reuse, materials all impact sustainability. Plastic v wood?

Major Operations role

Federal: US govt is largest consumer of energy in nation, in many countries national govnm controls utilities Local: buildings and facilities, fleets, municipal utilities (water, waste, electricity), public transport, etc.

2020 Blackrock Letter

Financial materiality Larry Fink to CEOs. Climate risk =investment risk, "purpose of the engine is long term profitability". Followed by vanguard and state street

Product as a service

Focus on customer paying for the service they need vs purchasing equipment

Embodied carbon

GHG emissions from the manufacturing, transportation, installation, maintenance, disposal of building materials Building GHG emissions, 40% globally operational carbon is 2/3 embodied carbon 1/3

Embedded sustainability model

Gold standard. Sustainability is synonomous with mission, CEO/CSO. Driven and permeates from the top. Every job. Pros- embedded with everything Cons- can change with turnover, shareholder pushback

Reducing food waste low income countries

Issues: bad roads, lack of storage and refrigeration Solutions: fix infrastructure, micro loans

Mitigation (esg)

Limit GHG, waste, other pollution. Goal is so reduce global warming and biodiversity loss Ex: zero emissions mobility, responsible consumption

Adaptation (esg)

Modify existing practices, economy, or location. Goal is to reduce impacts of global warming and biodiversity loss on citizens. Ex: hazardous material clean up, water security

Top sustainable approaches to design and construction

Net zero, embodied carbon, prefab/modular. end of life/circ, mass timber

Oversight pillar

Offset details are transparent, subject to third party vertification and CO2 reductions can be registrered and tracked

Split incentives in real estate

Owners: if they pay for energy efficiency, the tenant will reap the rewards w/o paying the costs Tenants: if flat utility rate, no incentive to save energy, If paying actual utilities, don't want to pay to upgrade building they don't own

Climate related investor risks

Physical risks: risks to investments from climate related impacts, disasters and weather events, impacted infrastructur, impacts on business operations Transitional risks: risks from changing markets based on climate change, new regs and policies Financial materiality

Supply chain circularity

Product design is influenced by circularity (with minimum design requirements), engage customers in end of life management & collaborate along the supply chain

Five pillars of carbon offsets

Quantifiable, additional, no leakage, permanence, oversight

Lifecycle

Raw material > suppliers suppliers > direct suppliers > company operations > distribution > customer > disposal

Governments role in fashion

Restrictions on chemical use, labelling to add repairability/recycability, sustainable textile standards (traceability), ban destruction of unsold or returned goods, regulate green claims, tax use of virgin resources, producer responsibility, trade restrictions on human rights

US v EU reporting

SEC finalizing climate disclose is financial materiality EU Developing standards under EU corporate sustainability reporting directive is double materiality

Fashion's deadly sustainability sins

Social: labor conditions, child labor, low wages Env: chemical use, water use, water pollutions, energy use, GHG emissions (1 lb of fabric is generally 23 lb of GHG), microfiber pollution, landfill waste

Supply chain dilemmas

Stakeholders want companies take responsibility for their value chain, only 3% of corps incentivixe procurement related teams for managing climate related issues in supply chain. LOWER TIER SUPPLIERS

Reporting frameworks

Standardize the system for consistently reporting ESG management systems and ESG reporting. Consistently and transparency for company, employees, investors, consumers, regulators, demonstrates progress, CANT MANAGE WHAT YOU CANT MEASURE

Mass timber

Strips of wood joined together for strength, replaces concrete and steel, stronger and lighter than steel, MAYBE as fire proof. Streamlines construction process: no curing, not weather dependent Proponents claim very significant CO2 savings. Wood is a carbon sink still depends on forestry and end of life use of the wood

Integrated model of sustainability

Sustainability council, still have a team but it's made of people from all functions of the business Pros- Involves cross cutting sectors, better able to understand issues, obstacles, and solutions Cons- Sustainability "TEAM" still lacks authority to implement changes, not always at top management level, priorities can conflict with overall business goals

Walmart sustainable strategies

Sustainable buildings, transportation, supply chain, reverse supply chain, circular economy goals.

Reverse logisitics

The series of activities involved in: retrieving a used product from a customer for disposal/reuse. "when you need a product back"

Brooklinen Good 360 example

They don't want to return linens for sanitary reasons so their return label actually directs to the nonprofit. It looks like a normal return label

Sustainable tourism

Tourism that conserves primary tourist resources and supports the livelihoods and culture of local people.

Fast fashion

Ultra-fast supply chain operations that focus on consumer demand of fashion goods.

PaaS example

Washing Machines: customer doesn't want the machine, they want clean clothes, so rather than buying a machine the company provides one then they handle maintenance, repair, replacement and has to deal with end of life. MUCH easier for circularity.

Cap and trade

a method for managing pollution in which a limit is placed on emissions and businesses or countries can buy and sell emissions allowances. Cap is reduced overtime and each company with emissions in the sector receives some allowances. Company with lower emissions can get more money by trading allowances

Life cycle assessment

a tool for quantifying the various costs generated by waste in extraction, production, packaging/transportation, usage, and disposal

Levelized Cost of Energy

all the costs of an energy plant over its life and puts that in terms of $/kilowatt-hr. Capital costs, energy output, debt/cost of money, ongoing expenses

What can insurance do?

as underwriters: promote efforts with policy holders- sustainable and ESG measures, resilience As institutional investors: support new tech, markets, policies to reduce impacts

Green marketing

marketing efforts to produce, promote, and reclaim environmentally sensitive products

Bain facts on retail sustainability

n 2010 there were 14 ESG themed acquisitions and funding rounds in retail and consumer products and 307 in 2021. 1/27 grocers and apparel retailers assessed had a leading approach to ESG- with none emerging as distinctive. Shoppers say they want progress, but most aren't willing to change shopping behavior. To move fast, retailers need to be rigorous in choosing key sustainability themes in their business and prioritizing actions to deliver lasting and rapid impact. Initial scoping exercise can be overwhelming- even though retailers can still be too broad for many companies.

Modular and Prefab construction

off site construction can reduce waste up to 90%, better inventory control, reuse leftovers, incorporate sustainable and efficient materials . Reusable and adaptable, reduces sites disruption, limits construction vehicles/pollutions/noice

Green leasing

tenant and owner negotiate to get energy efficient space ,agree to submetering, pay some upfront costs for eventual savings, passes some of the costs along to tenants and agree to building improvements --> written into lease

Water foot print

the amount of fresh water utilized in the production or supply of the goods and services used by a particular person or group.

Green washing

the exaggerated or false marketing of a product, good, or service as environmentally friendly

Advance auto parts Good 360 example

wasn't a clear model of what the products could be used for- spark plugs, motor oil, etc. Unlike how amazon would use returned clothes to give to shelters. So they create Driving Hope together to teach at risk youth how to become mechanics, and Advance Auto Parts is donating the parts to help people learn. Builds a brand with future customers, great PR, save on hazardous waste disposal, tax savings.