Sustainability in Manufacturing, Part V
Almost two years ago exactly, December 2010, I addressed the different changes in our collective thinking that might usher in a sustainable world. It was argued that this depended to a great extent on folks “getting it” with respect to how people view sustainability and their responsibility (personal and corporate – although I understand some believe corporations are individuals).
I quoted Lester Brown and his observations on this. He compared the change in thinking needed relative to sustainability (and sustainable development, industry, products, etc.) as the realization of the notion that the earth revolves around the sun and not the other way around. Mr. Brown noted that we used to consider the environment as part of the economy but it is really that the economy is part of the environment. Wikipedia quotes his speech in 2008 stating “indirect costs are shaping our future,” and by ignoring these, “we’re doing exactly the same thing as Enron- leaving costs off the books. Consuming today with no concern for tomorrow is not a winning philosophy.”
So, it boils down to, first, accepting the idea that there are indirect costs associated with the environment, second, identifying these indirect costs in a comprehensive way, third, assessing the “ownership” of these costs to the appropriate stakeholders (the “term du jour” for those involved in the process or benefitting/suffering from the outcome; or, according to Merriam-Webster – “one that has a stake in an enterprise or one who is involved in or affected by a course of action”) and, fourth (the tricky bit), getting the stakeholders to accept responsibility, or pay in some cases, for their part of the indirect costs.
In the older article referenced above, I also cited Hawken and Lovins, in “Natural Capitalism” (Little Brown, 1999), commenting that “The best solutions are based not on tradeoffs or ‘balance’ between these objectives [economic, environmental and social policy] but on design integration achieving all of them together – at every level, from technical devices to production systems to companies to economic sectors to entire cities and societies.”
Achieving the economic, environmental and social policy objectives all together across all sectors from producers to consumers.
Great concept. How can we do this?
In Berkeley, I pay for the removal of my waste each week – divided into three containers – compostable waste (i.e. lawn waste and food products), trash (nothing recyclable left – at least recyclable as defined by the City of Berkeley) and recyclable waste – glass, plastic and metal recyclables. Regardless of where the contents of these three containers was generated (at the farm, as packaging for a product I purchased or had sent to me from an on-line retailer, end of life items,etc.) I pay to have them removed from my household. If the producer creates a product with a larger or smaller carbon footprint (or environmental damage) I see no difference in my waste bill. I do pay, probably, more in property taxes, etc. to cover the cost of environmental impacts on my fellow citizens who need special treatment due to air, water or soil problems associated with production, use and disposal of products. On a national level I am sure I am covering this cost for many who rely on the resources of their governments to help them if they are not able to, or don’t have, coverage for such problems. And, to the extent that the manufacturer (if located in the US) or the distributor or local retailer pay fees and taxes and to the extent some of those go to support such services, they are paying something as well.
If I want to impact what I pay for waste/recycling removal my recourse is to consume less, chose manufacturers who package efficiently, use less. And I do. But this is hardly enough.
These costs are not seen on the bottom line of the business as clearly linked to their product or service and its “sustainability.”
In the earlier article I had referred to California’s introduction of “cap and trade” as one possible approach to accommodating these indirect costs. This might be one way to “rethink the structure and reward system of commerce” to bring the external costs firmly into play.
I was thinking about this over this holiday period as part of the preparation for this posting. I am an avid reader of the New Yorker (ok, first the cartoons, then the articles). In the comment section under “The Talk of the Town” (sort of an opinion piece at the beginning of the magazine) in the December 10th issue was a column written by Elizabeth Kolbert, a staff writer for the magazine titled “Paying for it” and dealing with, this issue. If you are not a New Yorker reader bear with me a bit … it is worth it!
Ms. Kolbert’s piece begins with a short review of a work by Arthur Pigou, a British economist, titled “The Economics of Welfare” first published in 1920. In this work, Pigou develops the concept of externalities in some detail and uses their existence as a justification for government intervention. The article starts out relating an example from Pigou about a man in a bar. After ordering a couple of drinks he staggers out drunk. Pigou describes this scenario as follows: the man gets plastered, the bar owner gets the man’s money, and the public will be on the hook for any expenses related to the police finding this drunk in the bushes somewhere and escorting him home or, worse, to an emergency room for treatment. The government may attempt to tax this product (alcohol here) and use some of the money to offset the public cost of such scenarios. In the words of Ms. Kolbert “The idea is to incorporate into the cost of what might seem to be a purely personal choice the expenses it foists on the rest of society.”
In the rest of the article, she reasons that one way to think about global warming (where in general the results of one set of actions of producers, etc., driven to a great extent by another group disconnected from the first set, the consumers, but for which the full costs resulting from the extraction of resources, conversion of resource, distribution of products manufactured from these resources, and consumption of the resources including the “end of life” disposal, is not covered by the consumer but, ultimately the public at large) is like our friend at the bar. She replaces “bar” with “gas station”, “downing a few rounds” with “filling up” our vehicle, and “staggering out” with “driving off.” The gas station and oil company got its money for its product, the consumer got “his tank full” and the public at large got stuck with the carbon it took to refine and distribute the petroleum now in the atmosphere and is now spewing out of the tailpipe of the car when combusted. If this carbon builds up to sufficient levels (and adds to that from other sources of course) the atmosphere warms, sea levels rise and storms get more disastrous and “once again, it’s the public at large that gets left with the bill.”
Ms. Kolbert observes that the “logical, which is to say fair, way to make the driver absorb the cost of his slice of the damage … could be achieved by a new … tax on carbon.” The rest of the article goes on to comment about various political initiatives in DC and elsewhere to address the idea of putting a cost on carbon.
Obviously, the other element here is that, to keep competitive, the companies making and selling the automobiles will try to make them as fuel efficient as possible to offset the additional cost of the carbon from the auto operation. Hmmmm, like hybrids? Or the high efficiency diesels in Europe?
Now, lest you all think I am some sort of closet socialist (my Berkeley connection notwithstanding!), I want to assure you that I consider this healthy thinking and the prominence of such discussions about externalized costs is heartening and, in fact, is more broadly considered than one might think – even by the business community.
Some of it is pure competitiveness. A blog back in August of 2010 addressed some of the issues associated with carbon trading. An article in the New York Times about the recent auction of CO2 allowances and the “new cost of CO2 in California” describes the recent auction of carbon credits in California and another Times article mentions how the basis for a company’s carbon footprint is determined. The article states that, with respect to those worried that this will make the companies less competitive if this additional cost is factored in, ” … such a cost-centric analysis ignores the jobs and economic activity that the law could generate. Emission and efficiency standards for cars, buildings and appliances in California over the last four decades have succeeded in cleaning the air, making residents’ per-capita energy use rate among the lowest in the country and spurring innovations and new industries, like the one that arose around catalytic converters.”
More to be said about this for sure. But, to me at least, including all the costs of a product into the price the consumer pays insures that everyone pays their “fair share” and encourages innovation.
And that’s what engineers do – innovate. What better task than to innovate to create greener manufacturing?
David Dornfeld is the Will C. Hall Family Chair in Engineering in Mechanical Engineering at University of California Berkeley. He leads the Laboratory for Manufacturing and Sustainability (LMAS), and he writes the Green Manufacturing blog. Additionally, the Green Manufacturing Facebook page is constantly updated with tidbits on the topic of green manufacturing, anecdotes, examples and stories of interest.
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