[MUSIC] We started out looking at sustainable business practices. We then became more specific about different issues such as consumer behavior and product design. Now we broaden out again and tried to get our arms around the challenges that relate to sustainability and what it means for sustainable business practices. Let us look at Walmart again. There is the whole context behind its road to sustainability. This was the context when Walmart was in the 90s and in 2005, Hurricane Katrina occurred. These are the initiatives Walmart started in 2005. Rightly or wrongly, I did feel that after Katrina, companies will pay greater attention to sustainability. Years later, I learned that Walmart was actually triggered by this calamity. They examined a number of different issues including savings for the customer and keeping costs low for Walmart. Lee Scott, the CEO of Walmart, brought in a company to examine the sustainable related issues. Tell me why I should care about endangered mouse is what he asked at that time. From there, they made a lot of progress bringing in organization from the outside, looking at the whole system, meeting with the environmentalists and so on. Removing a few reverts will not crash an airplane until you remove too much, and the same applies to the ecosystem. So Walmart allowed access to organizations from the outside, and you can see some of the players here. This is an arena where you have to talk to every different players and stakeholders. Walmart started with low-hanging fruit. They looked at two lines of laptops, one in Europe and one in the US. But Europe had stricter environmental regulations and both laptops cost the same. So they said, why not do this for the US as well? So you have to look for opportunities and it may not be directly about the impact, but it's a way to get started and understand issues. Walmart formed sustainability value networks where they did a number of different things like getting organizations together to tackle the problems related to sustainability. Allowing organizations to ask tough questions about how to increase sustainability and so on. There assigned specialist to look at the entire value chain and their network to suppliers, transportation and outside networks to transform practices to cut down on supply chain cost. So we have to thing broadly and look at the entire context of our business. Now, you see a bottle of water, but you also see that it takes water for the process to make the plastic bottle, and it takes oil to make it as well. And below there, do you see where the plastic bottles end up? And you also see the large patches and how huge they are in the Pacific Ocean where these kinds of things end up. This is a good example of the broader notion of sustainability and about thinking about where products come from and where they end up. So thinking in a cyclical way, what happens to the product after it is used and not just what happens in making the product. Here are some more images. This is a disappearing Lake Chad. This is actually a map of the estimated deaths caused due to climate change. And of how climate change effects countries in poverty when compared to other countries. Once again, problems affect the impoverished people first and the most seriously as well. This is Shanghai in 1990 and this is Shanghai in 2010. It is amazing to see the kind of unprecedented poverty alleviation in the urban China. But this is also Shanghai in terms of pollution. There is so much wealth creation, but we have to breathe in order to enjoy life. So this is the dilemma. Growth is a given as many people come out of poverty. So businesses have to understand how they're going to grow. This is Mumbai or Bombay, where I spent the first eight years of my life. And these are different images from the same city. Now study each of the upcoming images and write down what businesses can do about these issues. Jot down your thoughts as you go along. These are waterways in a number of different countries. [MUSIC] So this is both a developing and a developed world issue. You can look at this issue-by-issue or industry-by-industry. And you see a variety of problems like ewaste and sea level rise. This is a graph about the world population. I was born in 1962, when the population of the world was about 3 billion. On October 31, 2012, my 50th birthday, the population officially reached 7 billion. And if I give myself a fairly generous lifespan, it is going to be 9 or 9.5 billion when my life ends, that's in one lifespan. And population growth also means being born poor trying to get out of poverty. And this is going to increase consumption as well. Now we can look at this issue-by-issue. For example, here is a graph of global water consumption. Or you can look at energy. If you break it down by issues, this is a concrete way to understand sustainability and get at arms around the problems. Here is some data on energy consumption of the United States by source. You can see the proportions of renewable and non-renewable sources. You can also see the world energy demand and how it is being satisfied by different sources. Here is an image of soil erosion. Now how do we comprehend the current system? We could look at it from the point of view of a number of different flows. Here is an image of US energy flows in terms of efficiency and wastage. Here, is a food system flow. And it shows the amount of feed that's used for livestock and how much is used for humans and so on. No matter what issue we look at, as you can see in these images, everything is off the charts in the last few decades. Whether it's carbon emission or it's temperature or population, everything is off the charts in the last 60 years. Yes, there has been tremendous growth in terms of GDP and progress on a variety of fronts, but it is coming at a huge cost in a variety different ways. This is temperature change, and you see this trend in the last 50 to 60 years. Now we want growth and a number of things associated with it as people come out of poverty. And this has been amazing in the last 60 years. But along with growth, we also have a lot of different ways in which the environment is being harmed in the last 50 to 60 years. So this timeframe is highly associated, both in terms of the good things that have happened with growth and the bad things. I'm going to give you the opportunity of a lifetime. I'm going to solve the world's food problem right here, right now. But I'm going to ask you to do one thing for me. I need you to become a vegetarian. I will stipulate for you that all of the ill effects of becoming a vegetarian will be solved by me. So what problems do you foresee? Are you willing to change? And if you're not willing to change, in order to solve the world's food problems, I want you to tell me why. Jot down your thoughts. Now, there are many reasons you'll have come up with. And as I said, I'm going to stipulate that I'm going to solve all of them. But one of the reasons you may come up with is that being a vegetarian is not the way you grow up. Now what I'm talking about is not about vegetarianism, it's to bring out a different point. So as full disclosure, I should tell you I'm a vegetarian, but I'm not trying to make that point. I'm trying to make a slightly different point. The fact that you grew up a certain way is about your culture. And that is something to keep in mind as we think about sustainability and sustainable technology. Culture doesn't just mean that others are different from us, it means that we are different from others as well. And we cannot think about sustainability problems, just in terms of the technology we have to think about culture as well. I have a friend who designs solar ovens for developing countries. The government in one of the countries asked him to not come back. Why? Because wives cooked using the solar oven when the sun was out. And husband showed up late at night when the food was cold. And this led to domestic abuse. So these are some of the things that happen in terms of the mix between technology and culture. We cannot just discuss sustainability problems in a board room or a lab. We have to understand the cultural differences of the people we are developing solutions for. Or our solutions will simply not be used. So our solutions have to be based on bottom-up understanding. And also, when we say you have to be sustainable to someone who has one meal a day and has a very low footprint, we have to be very careful about trying to understand cultural aspects as well. Take a look at the next few slides on obesity in the US and think about what it means for sustainable business practices. When you think about sustainability and how big these challenges are when compared to previous time in history, it is very difficult to compare across time. But there are some unique aspects. The detrimental effects have played out over a long time and any corrective actions will take a long time to take effect. And so in one sense, this problem is diametrically opposite to what we focus on in the short-term. We have become the most sophisticated society ever in terms of meeting our short-term needs. And this is not meant to be a negative statement. Sometimes it's short-term gratification, sometimes it's emergencies. If I want to order a meal right now while I'm checking something out on the web, I can do all of that instantaneously. We are indeed the most sophisticated society in addressing the immediate short-term needs. If I have a health emergency, if a family member has a health emergency, I'm going to put all my resources to use to try to solve them. But this is not the mentality or the mindset that's going to help solve the long-term problem of sustainability. Taking a quick history lesson, the Industrial Age involved the use of natural resources and extraction and the production of goods. In the last five to six decades, along with production, what has grown tremendously is consumption as well. Now what does this mean for environmental sustainability? Whether it is in terms of clean air or drinkable water or fertile soil and so on? And what does this mean for social sustainability? In terms of health and security, and social harmony? The industrial era led to so many advances in science and technology, but in some ways it was at odds with nature. One way to think about this is that everything is part of the economy. But another way to think about it is that the economy's happening in the context of society and the environment. So in a sense, the economy has used society and the environment to grow. But what we need to understand is that ultimately the economy grows within a social context and society happens within the environment. Economists have a way of saying that there's no free lunch. But actually, we've been kind of winking and nodding and behaving as if there is a free lunch. And that free lunch is called nature. And nature is telling us, finally that the lunch is not free. The problem is, I'm having the free lunch and the next generation is paying for it. What we are finding out is that was not a free lunch after all. Particularly in terms of who's going to pay for some of the consequences. Knowing this and not doing something about it is unconscionable, and we have known this for sometime now. This is part of the challenge for us from the standpoint of sustainability. The coming generations are going to be paying for the consequences of not taking care of the environment. As in doing another thing, we need to figure out where to start? For example, in your own household, what is the first thing you will do to minimize your usage of energy and your impact on the environment? If you were to do an audit, it may surprise you. Perhaps it's that switch on your refrigerator where you control the temperature. Moving from the bottom up, Walmart and Ford and all the companies we've talked about have to figure out what the first lever is. Walmart has focused on the supply chain. Ford focused on the plant that it used to make cars. We need to figure out the best lever. In the case of Ford, perhaps the best lever is the hybrid automobile or the environmentally sustainable automobile itself. The sustainability value framework is one tool that can be used by a business to analyze where they are and where they'd like go. On the vertical axis, you have time, either today or down the road tomorrow. And on the horizontal axis, it's a dimension of internal versus external analysis. At the lower left quadrant, some of the drivers for internal analysis today are pollution, material consumption and waste. Some of the strategies could be pollution prevention, minimizing waste and emissions. And the payoff is immediate in terms of cost and risk reduction. In the lower right quadrant, the analysis is still about today or the current situation, but the focus is external. On drivers like the civil society, transparency and connectivity. Here, the strategy could be product stewardship, integrating stakeholder views in the business processes. And the payoff is in terms of reputation and legitimacy. Looking to the future, in the upper-left quadrant an internal analysis, some of the drivers are clean technology and the footprint of the company leaves. The strategy could be clean technology or developing sustainable competencies of the future. And the payoff is in terms of innovation and repositioning. In the upper-right quadrant, the drivers are climate change and resource depletion and poverty. And so here, a sustainability vision could create a shared roadmap for meeting unmet needs. And the payoff is in terms of sustainable growth and the trajectory that the company takes. Now this framework is applied to the situation that Dupont is in purely for illustrative purposes. In terms of internal analysis today, the focus can be on reducing water consumption and air carcinogens and reducing greenhouse emissions. In terms of external analysis today, the focus could be on partnerships with NGOs and partnerships with governments. In terms of internal analysis in the future, the drive could be for a renewable energy and greater safety and security, as well as increased food production. And in terms of external analysis in the future, the drive could be toward growing annual revenues from green products and doubling revenues from non-depletable resources. Here are the five stages in a business's response to issues about the environment. It begins with non-compliance. The next stage is being reactive. It's just complying with regulatory demands. It's complying with public pressure. But then we can think beyond compliance, maybe looking for efficiencies. Maybe trying to be proactive in getting ahead of the regulations. And one could even think of an integrated strategy between business opportunities and finding ways to manage risk. Finally, at the highest level, one could think about the company's mission in aligning its core values with the environment and with sustainability. There are an increasing number of businesses who have incorporated sustainability at the highest levels. [SOUND]
