Josephine V. Yam

New Sustainability Metric: Total Return on Resources

The Boston Consulting Group (BCG)'s recent report stated that, in order to succeed in this new world of sustainability, companies will need to treat "resource management" as essential to their business. To do this, companies must focus on their “total return on resources” in order to optimize their inputs and outputs to maximize profits.

For inputs, companies will need to monitor the payback from natural resources in order to minimize the consumption of scarce supplies. Thus, power companies, for example, put a lot of money in improving the efficiency of their generating plants to reduce how much coal or natural gas they need in order to produce each megawatt of electricity.

For outputs, companies will also need to manage the "putback", which is the effect of their actions on the future supply of natural resources and on the climate so as to limit damage to the larger ecosystem. In such cases, for example, power companies put a lot of money in scrubbers and other processes to reduce the harmful emissions they release into the air.

The BCG report cites many stellar examples of companies focusing on their “total return on resources”. One of them is the Florida Ice & Farm, a Costa Rica-based beverage company. Its highly visionary CEO, Ramón de Mendiola Sánchez proclaimed that 40 percent of the variable portion of executive pay would be dependent on the company’s performance on environmental and social measures. He established a framework of strict measurements and strong managerial focus on environmental metrics, such as solid waste, water use and carbon dioxide emissions. The company set very lofty goals of achieving zero net solid waste by 2011, becoming water neutral by 2012 and carbon neutral by 2017. Thus, it comes as so no surprise that one of its bottling plants has become the most efficient in the world in terms of water usage. At the same time, the company’s revenues and market share have continued to grow through a tough economy. Mendiola firmly believes that this commitment to sustainability is the only way to achieve continued growth and to sustain Florida’s position as one of the most influential and admired companies in Costa Rica.

Indeed, the BCG report notes that, as resource supplies fail to keep up with burgeoning demand, companies will start treating sustainability as a central part of management rather than thrust it to the amorphous office unit of corporate social responsibility. The world as a whole is on the verge of a new wave of innovation in resource management, the report observes. And, as with all innovation, this will create opportunities for companies to teach others how to thrive in a carbon-constrained, resource-constrained world.

U.S. Energy Boom: Miracle or Mirage?

In his New York Times op-ed article, “Is the Energy Boom a Mirage?”, Steve Yetiv remarked that while the U.S. is experiencing a boom in oil and natural gas production, the benefits of the boom may have been exaggerated. For instance, it will neither automatically produce lower oil prices nor bring greater energy security as expected.

Mr. Yetiv set out several reasons why optimism for boom must be tempered. One reason is the growing backlash against hydraulic fracturing, or fracking, which can pollute water systems. While emerging technologies are making fracking safer and less environmentally damaging, the costs involved are currently not financially justifiable.

“To be sure”, he observed, “the American boom has its positives…Use of America’s abundant natural gas can also offset reliance on dirtier coal.” But he cautioned that “a boom in fossil fuels is hardly something to celebrate, given the urgency of climate change.”