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The Economics of Sustainability | Geoff Norby | TEDxErasmusUniversityRotterdam

The Economics of Sustainability | Geoff Norby | TEDxErasmusUniversityRotterdam
so everyone wants to be sustainable but nobody wants to pay for it now admittedly that's a really aggressive statement it's extreme everyone and no one but I stand by it let me give a little bit of background so when I think about everyone I mean when we think about tomorrow we don't want things to fall apart we want to at least maintain if not improve our current standard of living and I think I'm on pretty safe ground by saying that everybody wants that and then as far as nobody wants to pay for it if I asked for raising hands and said all of your purchases are going to go up tomorrow how many of you guys want to do that I didn't see any ants so nobody wants to pay for what I want to do today is raise awareness that when we don't intentionally pay for

sustainability

we pay for it in unintentional ways and I want to give you an example from the plastics industry and what I put it on the screen is a ideal cycle of plastic production usage and I do a world we would produce plastic and then we would use it and we would reuse it and then when it breaks we would repair it and when we can't repair it anymore we would recycle it and start the cycle over again we would only produce plastic if we needed more in the chain unfortunately this is not what happens the World Economic Forum the Ellen MacArthur Foundation and McKinsey & Company did that study and they published it a few years ago and in this diagram you see a circle and what they did is they...
the economics of sustainability geoff norby tedxerasmusuniversityrotterdam
said how much plastic is made in the world just for packaging and they said on an annual basis we produce us as a society 78 million tons of plastic for packaging every year now if you follow that loop around the top and if we just go clockwise for a minute you see that 2% of it makes it its way all the way back around 2% makes its way in a closed-loop recycling that means that closed loop recycling that's basically a bottle starts as a bottle and then after I've used it and I've recycled it and I've produced something else again with it it's a bottle again so it stayed in the same quality now some things were captured for recycling but they were downgraded or cascaded recycling this means that we started with the bottle but when we finished the cycle we actually made a carpet or some other lower quality item that we're probably not going to recycle back up to a bottle now if you do the math on that that was only 10% that that's really even getting recycled if we take it a little bit further though what happens to the rest 4% of it was lost in the recycling effort you see that at the top now if you go a little bit further down we took 14 percent of it and incinerated it that means that we burned it to produce energy and you can imagine what that did for our carbon footprint now it gets worse because 40% is land filled every year that means 40% of the plastic that we made for packaging we end up digging a hole we put it all in there and then we...
the economics of sustainability geoff norby tedxerasmusuniversityrotterdam
cover it over the dirt and hope to forget about it but it gets worse because at the end we have 32 percent that is leakage 32 percent of the plastic that we make every year for packaging leaks into our environment that means it goes into our oceans or rivers our streams or parks it ends up in the environment that we live in that's pretty ugly in fact if you take the math a little bit further on that right our track record on plastic packaging is 90% waste that means 90% of all the product that we make every year for packaging which is only used probably for one short time at the very beginning of its lifecycle it was then wasted thrown away leaked into the environment Bern's put it a different way that means that we got 10% right could you imagine going home to your mom and dad in grade school and saying I got 10% on my math test today that's an F in fact that's not an F that's a super F that's that's bad news and in it if you're not familiar with the letter grading that some schools use F is a failure that's really really poor and that's what's happening with us in the plastics so lifecycle right now for packaging we are failing if you want to put it into financial terms it's about a hundred billion dollars a year who would be satisfied with spending a hundred billion dollars and then throwing it away every year but that's what we do and we shouldn't be satisfied we can't be satisfied with numbers like that so then...
the economics of sustainability geoff norby tedxerasmusuniversityrotterdam
the next question is why are we using plastic at all can't be get rid of plastic well it's a little bit harder than that when you look at plastic it's actually quite useful and let me just put put together the story for plastic a little bit it's durable we know it's sturdy if I drop it on the ground it's not likely to break as opposed to my glass jar it's resistant to chemicals I can put all sorts of things in my plastic bottle but I probably can't do that with my metal bottle it can handle high and low temperatures for example I put my food when I'm done with it into a plastic container then I take that container and I stick it in my freezer at below freezing temperatures then I pull it out of that container or out of the freezer and I stick it in my microwave and Jack the temperature back up plastic can handle those swings and temperatures it's a really great substance it's also lightweight when I think about plastic I'm a finance guy so when I think about it in terms of shipping costs if I'm putting something in in a very lightweight container and shipping it around I'm paying a lot less fuel I'm also having a lot smaller carbon footprint because of all the fuel costs of trying to move things around it's versatile plastic can take any shape any form just about any color and it's recyclable we know we're not good at it 10% good is not good yet but I believe we're gonna get better and it's...
affordable it's cheaper than wood it's cheaper than metal it's cheaper than glass so when it comes down to it why do companies why do we still use plastic there's a number of reasons so then is there anything that we can do to fix the problems of plastic then well when I look at the problems of plastic I see two two main problems the first problem is that it's made from oil at the beginning of its lifecycle we're taking a limited resource on this earth and we're using it all up to create something that we just throw away the second problem was plastic and we've already talked about it is at the end of its lifecycle we'll throw it away it's wasted it pollutes our environment is there any way that we can improve that and there's actually a lot of ways that we can improve that there are a number of companies out there a number of technologies that people are trying to work on and improve this these two issues one I'm just gonna mention tonight is bio plastics and when you throw by with the beginning of a term it sounds really exciting but what does it really mean so let's define what about plastic is it's one of two things it's either bio-based means it was made from something that can be grown over going over we didn't make it out of oil which is a limited resource made it from sugar or corn or something that we can make over and over and over an example out there is actually by ope so there's a plastic...
that's bio-based or if it's in the bio plastics realm it could also be biodegradable that means at the end of its life cycle we throw it away it'll actually break down and become food for microorganisms think a tree that falls over in the forest it breaks down and becomes food for other things and there's an example of that ppat there's also a plastic that's pretty exciting called PLA that's both biodegradable and BIOS or s-- so there's a plastic out there that could solve both of our problems it's environmentally friendly on the front end and it's it's a good for the environment on the back end this is this is great news so you're probably asking yourself three questions and if you're not I hope you are I'm gonna point out the three questions right now one why haven't I heard about PLA - why haven't all plastics been converted to PLA and three why is a finance guy giving us this tecnique this presentation on a new technology okay it's fair those three questions I'm gonna ask you to hold onto her for just a minute and I want to talk to you about how decisions are made economists for years have been talking to us about self-interest they said that whenever we make a decision we make it based on our own self-interest we want to know what's in it for me with them what's in it for me when I make a decision when I make an investment I'll make my personal finances I want to know what's in it for...
me a lot of times we unfortunately break this down to just money we think what's in it for me I'm gonna get rich but there's a lot of other things that could be in it for you for example if we go back to that plastics example if you take your plastic bottle you have a choice you could throw it away in the black bent and it just goes to landfill or maybe incineration or you could take that plastic bottle and you can stick it in the blue bin for recycling maybe you put it in the blue bin because it just makes you feel good you feel like you're making a difference in the world that's what's in it for you sometimes it's not just all about money now if we as individuals are looking at our own self-interests and our self-interest is broader than just money I would propose the corporations act in their own self-interest as well and it's not always just about money in fact corporate boards are made up of individuals just like you and me and I want to talk to you about decisions that are made in boardrooms and my experience in boardrooms is the people that are in those rooms are trying to figure out what's in it for them but there are also good people that are trying to make a difference in the world they're trying to improve the world around them but boards have a lot of decisions they've got to make us they've got to boil the decisions down quickly into a matter that they can do something with and they might look at criteria like...
intangibles you know what's going to be the PR impact you know what's going to be the impact on the environment what's gonna be the impact on our employees do our customers care about this and how do we best meet the needs of our customers they might also look at an internal rate of return or what's my return on this investment if I invest have this money am I gonna get 10 percent back I'm gonna get the 2% back you know what what what's my return they might also look at a payback period what is the amount of time that it's going to take for me to recoup the costs and I put in originally from the investment they also look at a net present value what's by Adam all the amount that I'm gonna get for the investment and then I subtract from that all the costs that I have to put into the investment that's a net present value so when you look at these you're probably looking at thinking well those last three are all very very money heavy they're finance heavy and and yeah they are because the boards have to make quick decisions and this is important I want you guys to remember this that the amount of money available is always smaller than the number of ideas to invest in so every board out there might have 50 ideas that they can invest in but they've got to or maybe they only have money to invest into so you've got to boil it down quickly and sometimes the financial metrics are the ones that that that drive some of the decisions...
with that in mind though now that we understand how boards might be making decisions I want to talk about other groups that might be thinking about this with indecision specifically around plastic if I'm thinking about plastic and I heard about this new technology PLA what might I be doing about it well if you're a PLA producer and full disclosure I work for a company that makes peel it so we'll I'll tell you what we talked about in our boardroom is how much can we sell how much can we make and if we make it what can we sell it out what are people willing to pay and and what are our costs gonna be can we even make money on this because if we make the bad decision our company will not be in business in a year if we make the wrong decisions our company is not sustainable so

sustainability

is important in the boardroom to other groups that might be thinking about this or plastic users so if I think about plastic user people that buy plastic they're wondering if I buy this new technology PLA and I turn around in and sell it to my customers can i recoup the costs that I put into it all my customers willing to pay for and maybe even more importantly if I don't offer PLA or my customers gotta go elsewhere well I lose business out of this another group that's thinking about this decision is consumers and we're all consumers the way that we address this question is am I willing to pay a premium for a plastic that is actually good for the environment am...
I willing to vote with my dollars for a better environment in the future and ultimately which companies am I willing to reward with my purchasing power because when you make a decision with your dollars or Euros or your Lindy's whatever whatever currency you're using you're making a statement to other companies and saying this is what I want more of I want you to make more of this because this is what I'm willing to buy other people that are involved in this decision they're struggling with this decision be recyclers and remember recyclers they do the dirty work right they're the ones who have to take all of our trash separate it and then try to create something that's going to be a value because they need to be sustainable as well they need to make enough profit to keep them in business to pay their employees and finally governments are involved too governments are trying to decide what behaviors they want to encourage and which ones they want to discourage ultimately what do their constituents reward with their votes so with that in mind we have a lot of people that are struggling with this decision I want to come back to those three questions I asked you to hold on to so why haven't I heard about PLA one of the main reasons is it's a relatively new technology it's only been around for a few years now and quite frankly it's gonna take time for something like this to build up in the consciousness of the consumer it's gonna take...
time for people who make things out of plastic to realize its benefits and to put them into practice the second question is why haven't all plastics been converted to PLA well if you think about it there's only a few companies right now that currently make PLA their total production is less than 0.1 percent of the annual plastic production in the world it's going to take time for those companies to build up their capabilities to be able to convert more of our plastic but the great news is there are people that are out there that are trying to make a difference now the biggest question here and you guys got a good laugh out of earlier why is the finance guy telling us about this new technology I want to tell you a little bit about my evolution on

sustainability

for me

sustainability

I remember hearing about early in my career and I would see it as a line item in somebody's budget and think what are we spending this on I don't understand this initiative and I remember having conversations with my colleagues where we would say why are we spending on this we can't afford this when were we had 50 other projects that we're trying to invest in why is this one bubbling to the top that was my initial exposure after a period of time though I've had a paradigm shift a period of time where I've actually received some education and a better understanding to things that come out of it one I've realized that our customers actually want us to do good...
things for the environment and they'll reward us if we do the right thing as a company - I've also realized that we as business leaders in any case when we're talking about our costs we can actually reduce our costs improve our bottom line when we'd use and initiate green projects things that are good for the environment when you think about your windmills your solar panels your LED lights that are actually bottom line benefits for doing these green initiatives and what I've seen in myself and in my peers is that that evolution has led to the CFO to be coming now the champion of

sustainability

in their companies rather than saying at the beginning stop doing green I can't afford it the CFOs are now saying bring me more green initiatives we can't afford not to do it so with that in mind I really want to get to the heart of my message today and I have to two different things two different groups I want to speak to first I want to speak to business men and women people who are in the mix right now trying to do something to make a difference three thoughts for you one are we creating businesses that can survive not just the quarter not just the year not just the next long-term plan cycle but for the long haul are we creating sustainable businesses and in conjunction with that are we creating an environment where our employees our customers our families actually can thrive and survive the future and finally from the business community I want to make...
sure that we understand the people are not going to choose a sustainable solution if it doesn't compete with a non sustainable solution it's at least got to be in the mix it's got to be competitive on cost it's got to be competitive on the technological benefits we need to make sure that we're bringing forth ideas that I actually make this world better so that was my first group that I wanted to talk to you I wanted to talk to business men and women but now let me talk to all of us all of us when it comes to

sustainability

and the real question here is are we willing to put in the work and effort to come up alert the evolution curve on

sustainability

what are we willing to do to make a difference realizing that when we buy something we're making a vote when we say that we want a certain kind of product and we let it be known we're making a vote we have a lot of power as consumers and let's make sure that we use that power let's get educated on what's in it for us because everyone wants to be sustainable and we can't afford not to be thank you you