This blog will cover some news items related to Sustainability: Corporate Social Responsibility, Stewardship, Environmental management, etc.


Villages: A Country Without Borders

Villages: A Country Without Borders

Villages have a source of power to fight climate change that has yet to be tapped, and that is their sheer number.  Around the world, there are thousands of villages whose residents are concerned about global warming.  Although villages must obviously be included in any program of climate change action, there has been little attempt to involve their residents. Yet if we aggregate the total population of villages across the globe it is equivalent to a significant country – a 'country without borders'.

A Country Without Borders initiative is harnessing the power of this global community.

An English village is attempting to be the first zero carbon village in the UK. Ashton Hayes, Cheshire, located 162 miles (261kms) from London, is working together as a community to reduce their carbon footprint! In 2009, Zerofootprint's 'Villages without borders project' selected Ashton Hayes to use their advanced web 2.0 software tools that help communities' record, measure and share their carbon emission data.


Valuing social responsibility programs

Valuing social responsibility programs
Most companies see corporate social responsibility programs as a way to fulfill the contract between business and society. But do they create financial value?
July 2009 • Sheila Bonini, Timothy M. Koller, and Philip H. Mirvis

Companies face increasing pressure from governments, competitors, and employees to play a leading role in addressing a wide array of environmental, social, and governance issues—ranging from climate change to obesity to human rights—in a company's supply chain. Over the past 30 years, most of them have responded by developing corporate social responsibility or sustainability initiatives to fulfill their contract with society by addressing such issues.1
Gathering the data needed to justify sustained, strategic investments in such programs can be difficult, but without this information executives and investors often see programs as separate from a company's core business or unrelated to its shareholder value. Some companies have made great progress tracking operational metrics (such as tons of carbon emitted) or social indicators (say, the number of students enrolled in programs) but often have difficulty linking such metrics and indicators to a real financial impact. Others insist that the effects of such programs are either too indirect to value or too deeply embedded in the core business to be measured meaningfully: for example, it can be very hard to separate the financial impact of offering healthier products from the impact of other aspects of the brand, such as quality and price.
Yet many companies are creating real value through their environmental, social, and governance activities—through increased sales, decreased costs, or reduced risks—and some have developed hard data to measure even the long-term and indirect value of environmental, social, and governance programs.2 It's not surprising that the best of them create financial value in ways the market already assesses—growth, return on capital, risk management, and quality of management (Exhibit 1). Programs that don't create value in one of these ways should be reexamined.

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Environmental, social, and governance programs can create value in many other ways that support growth, improve returns on capital, reduce risk, or improve management quality
How environmental, social, and governance programs create value
The most widely known way that environmental, social, and governance programs create value is by enhancing the reputations of companies—their stakeholders' attitudes about their tangible actions—and respondents to a recent McKinsey survey agree.3
Moreover, it has long been clear that financially valuable objectives—such as better regulatory settlements, price premiums, increased sales, a reduced risk of boycotts, and higher retention of talent—may depend, at least in part, on a company's reputation for environmental, social, and governance programs that meet community needs and go beyond regulatory requirements or industry norms.
However, environmental, social, and governance programs can create value in many other ways that support growth, improve returns on capital, reduce risk, or improve management quality. Breaking out the value of these activities enables companies to communicate it to investors and financial professionals.
Our case studies highlighted five areas in which these programs have a demonstrable impact on growth.
New markets. IBM has used environmental, social, and governance programs to establish its presence in new markets. For example, the company uses its Small and Medium Enterprise (SME) Toolkit to develop a track record with local stakeholders, including government officials and nongovernmental organizations (NGOs). In partnership with the World Bank's International Finance Corporation, India's ICICI Bank, Banco Real (Brazil), and Dun & Bradstreet Singapore, IBM is using the service to provide free Web-based resources on business management to small and midsize enterprises in developing economies. Overall, there are 30 SME Toolkit sites, in 16 languages. Helping to build such businesses not only improves IBM's reputation and relationships in new markets but also helps it to develop relationships with companies that could become future customers.
New products. IBM has also developed green data-center products, which help the company grow by offering products that meet customers' environmental concerns. A new collaboration between IBM and the Nature Conservancy, for example, is developing 3D imaging technology to help advance efforts to improve water quality. This project applies IBM's existing capability in sensors that can communicate wirelessly with a central data-management system in order to provide decision makers with summaries that improve water management. At the same time, it also addresses an important environmental need—and creates a new business opportunity for IBM.
New customers. Telefónica has been developing new products and services geared to customers over the age of 60. To help overcome what the company calls a "knowledge barrier," it has collaborated with associations for older people in an effort to introduce retired men and women to the benefits of new technologies—for example, teaching them to communicate with grandchildren living abroad. The company meets a social need by helping this population use modern technologies and services while building a customer base in an underpenetrated market.
Market share. Coca-Cola has shown how a company can use enlightened environmental practices to increase its sales. Its new eKOfreshment coolers, vending machines, and soda fountains are far more environmentally friendly than the ones they replaced: they not only eliminate the use of hydrofluorocarbons (greenhouse gases) as a refrigerant but also have a sophisticated energy-management device that Coca-Cola developed to reduce the energy these machines consume. Together, these innovations increase the equipment's energy efficiency by up to 35 percent. The company highlights the benefits to retailers—especially the financial savings from energy efficiency—and requests prime space in their outlets in return for providing more efficient systems.
Innovation. Dow Chemical has committed itself to achieving, by 2015, at least three breakthroughs in four areas: an affordable and adequate food supply, decent housing, sustainable water supplies, or improved personal health and safety. All have a connection to an existing or planned Dow business. The company has already made progress in its Breakthroughs to World Challenges initiative, for example, by utilizing its understanding of plastics and water purification to supplement its venture capital investment and loan guarantee support to a social entrepreneur in India who has developed an inexpensive community-based water filtration system. The initiative's ultimate goal is a new business model to sell new products at reasonable prices, meeting social needs while contributing to Dow's bottom line.
Returns on capital
We have seen companies generate returns on capital from their environmental, social, and governance programs in several ways—most often through operational efficiency and workforce efficiency.
Operational efficiency. These programs can help companies realize substantial savings by meeting environmental goals—for instance, reducing energy costs through energy efficiency, reducing input costs through packaging initiatives, and improving processes. Such efficiencies often require upfront capital investments to upgrade technologies, systems, and products, but returns can be substantial.
Novo Nordisk's proactive stance on environmental issues, for example, has improved its operational efficiency. In 2006, the company set an ambitious goal: reducing its carbon dioxide emissions by 10 percent in ten years. In partnership with a local energy supplier, Novo Nordisk has identified and realized energy savings at its Danish production sites, which account for 85 percent of the company's global carbon dioxide emissions. It uses the savings to pay the supplier's premium price for wind power. In three years, the effort has eliminated 20,000 tons of carbon dioxide emissions, and by 2014 green electricity will power all of the company's activities in Denmark. In this way, Novo Nordisk is not only reducing its emissions, increasing the energy efficiency of its operations, and cutting its costs but also helping to build Denmark's market for renewable energy.
Workforce efficiency. Best Buy has undertaken a targeted effort to reduce employee turnover, particularly among women. In 2006, it launched the Women's Leadership Forum (WoLF), which shows groups of female employees how they can help the company to innovate by generating ideas, implementing them, and measuring the results. These innovations—which largely involve enhancing the customer experience for women by altering the look and feel of Best Buy stores and modifying their product assortment—have significantly boosted sales to women without decreasing sales to men. Besides fostering innovation, the program helps women to create their own corporate support networks and encourages them to build leadership skills by organizing events that benefit their communities. In the program's first two years, turnover among women decreased by more than 5 percent annually.
Risk management
Companies often see environmental, social, and governance issues as potential risks, and many programs in these areas were originally designed to mitigate them—particularly risks to a company's reputation but also, for example, problems with regulation, gaining the public support needed to do business, and ensuring the sustainability of supply chains. Today, companies manage many of these risks by taking stands on questions ranging from corruption and fraud to data security and labor practices. Creating and complying with such policies is an extremely important part of risk management, though one that isn't likely to be a source of significant differentiation. But leading companies can differentiate themselves by going beyond the basics and taking a proactive role in managing environmental, social, and governance risks. Such an approach can have an important and positive financial impact, since negative environmental, social, and governance events can have significant potential cost.
Regulation. In most geographies, regulatory policy shapes the structure and conduct of industries and can dramatically affect corporate profits, sometimes dwarfing gains from ordinary operational measures.4 It is therefore critically important for companies to manage their regulatory agenda proactively—ideally, by having a seat at the table when regulations for their industries are contemplated and crafted. To build the necessary trust with regulators and to secure a voice in the ongoing discussion, it helps to have solid relationships with stakeholders and a reputation for strong performance on environmental, social, and governance issues.
Verizon, for instance, very actively manages its relationships with stakeholders and strives to establish regular contacts and strong ties with policy makers. To help formulate sound—and favorable—energy and climate policies, the company has also sponsored research on the way information communications technology promotes energy efficiency. They sponsored the research behind the Smart 20205 report, for example, which report explains in detail how this technology, together with broadband Internet connections, can help the United States to reduce carbon emissions by 22 percent and reliance on foreign oil by 36 percent by no later than 2020.
Public support. To operate in a country or business, companies need a modicum of public support, particularly on sensitive issues. Coca-Cola, for example, has been proactive in identifying the risks to its business posed by water access, availability, and quality. In 2003, Coca-Cola began developing a risk-assessment model to measure water risks at the plant level, such as supply reliability, watersheds, social issues, economics, compliance, and efficiency. The model helped Coca-Cola to quantify the potential risks and consequently enabled the company to put sufficient resources into developing and implementing plans to mitigate those risks. It now has a global water strategy in place that includes attention to plant performance, watershed protection, sustainable water for communities, and building global awareness. Their actions help avoid potential backlash over water usage as well as potential operational issues from water shortages.
Supply chains. Some companies have moved beyond focusing on the risks from the day-to-day practices of their suppliers and now consider the suppliers' long-term sustainability as well. Under Nestlé's Creating Shared Value strategy, for instance, a business has to make sense for all its stakeholders. As an example, Nestlé works directly with the farmers and agricultural communities that supply about 40 percent of its milk and 10 percent of its coffee. To ensure its direct and privileged access to these communities, Nestlé promotes their development by building infrastructure, training farmers, and paying fair market prices directly to producers rather than middlemen. In return, the company receives higher-quality agricultural ingredients for its products. These strong relationships also give Nestlé's factories a reliable source of supply, even when the overall market runs short. When the price of milk powder soared in 2007, for example, Nestlé's direct links to farmers mitigated its supply and price risks in certain parts of the world and protected the interests of all stakeholders—from farmers to consumers.
Management quality
CFOs and professional investors often see high-performing environmental, social, and governance programs as a proxy for the effectiveness of a company's management. They may be onto something. In our observation, these programs can have a strong impact in all three areas that investors typically consider important: leadership strength and development, both at the top and through the ranks; the overall adaptability of a business; and the balance between short-term priorities and a long-term strategic view.
Leadership development. IBM's Corporate Service Corps sends top-ranked rising leaders to work pro bono with NGOs, entrepreneurs, and government agencies in strategic emerging markets. The program has already improved the leadership skills of its participants in a statistically significant way; raised their cultural intelligence, global awareness, and commitment to IBM; and given the company new knowledge and skills. In a recent evaluation, nearly all participants indicated that their involvement with the corps increased the likelihood that they would stay at IBM.
Adaptability. Companies flexible enough to meet unforeseen challenges—for instance, by remaining in countries or communities during times of crisis or conflict—often reap long-term benefits, such as strong relationships and credibility with local communities. Environmental, social, and governance programs are one way to boost this kind of resiliency. Cargill, for example, is currently maintaining its presence and operations in Zimbabwe under difficult conditions; instead of paying its local employees in the country's very unstable currency, it compensates them with food parcels and fuel vouchers. The company makes similar long-term investments in local communities in the other 66 countries where it operates.
A long-term strategic view. Companies that take a long-term view use environmental, social, and governance activities to anticipate risks from emerging issues and to turn those risks into opportunities. Novo Nordisk, for instance, manages itself according to principles of a triple bottom line—an economically viable, environmentally sound, and socially responsible approach to business. The company, for example, has not only made investments to prevent, diagnose, and treat diabetes and to build up the related health care infrastructure but has also used these investments to strengthen its position in mature markets and to develop its business in new ones.
Assessing value
Although many executives and investors believe that much of the impact of environmental, social, and governance programs is long term and indirect—and thus nearly impossible to measure—our research suggests otherwise. Companies can directly value the financial effects of many such programs, even in the short term; the impact of environmental programs, for example, can often be measured quickly with traditional business metrics such as cost efficiency. Companies that understand the pathways to value and identify the short- and long-term effects of environmental, social, and governance programs will succeed in defining a few targeted metrics to assess them (Exhibit 2).

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One such company, Telefónica, having found that its customers' purchasing decisions and loyalty are driven in part by perceptions of its environmental, social, and governance activities, decided to integrate the results of an annual reputation survey into its business strategy. Since then, Telefónica has identified its reputation shortfalls, aligned its business strategy with efforts to close them, created action plans to improve its reputation (for instance, by developing new products and services or adapting existing ones), and monitored any improvement. This approach has helped the company to improve its reputation, and the corresponding sales, in a significant way. An internal study shows that in 2006 and 2007, 11 percent of the change in the financial performance of the company reflected changes in its reputation.
UnitedHealth is another company that has assessed the impact of its environmental, social, and governance work. Its social responsibility dashboard includes metrics for workplace engagement, ethics, and integrity; supplier diversity; environmental impact; employee–community involvement; stakeholders' perspectives on social responsibility; and community giving. All of these metrics track the company's progress in meeting its social mission: helping people live healthier lives. Currently, UnitedHealth's board and senior executives use the dashboard to measure the company's performance and to guide discussions on future priorities, programs, resources, and results. In the future, the dashboard will be made available to customers and other public audiences to demonstrate the company's environmental, social, and governance commitments and progress.
Companies need broad legitimacy in the societies where they operate if they are to sustain their long-term ability to create shareholder value. Equally important, society depends upon big business to provide critical economic and other benefits. This relationship forms the basis of an overarching contract between business and society. Over the past few years, responses to the social, environmental, and governance concerns of politicians, regulators, lawyers, and consumers have reshaped the core businesses of major companies in many sectors: agribusiness, chemicals, fast food, mining, oil, pharmaceuticals, and tobacco, to name just a few. As the social contract has come under more and more pressure, companies are realizing that they just can't ignore environmental, social, and governance issues. 

About the Authors
Sheila Bonini is a consultant in McKinsey's Silicon Valley office, and Tim Koller is a principal in the New York office; Philip Mirvis is a senior research fellow at Boston College's Center for Corporate Citizenship.

The authors wish to thank Noémie Brun, Thomas Herbig, and Michelle Rosenthal for their contributions to this research.

This article has been adapted from "Valuing corporate social responsibility and sustainability," a white paper published by the Boston College Center for Corporate Citizenship, March 2009.
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1We have chosen to use the term "environmental, social, and governance" because more common terms, such as "corporate social responsibility" and "sustainability," have a narrower connotation. The term environmental, social, and governance is also increasingly used by investors to refer to a broader set of programs that we observed in the companies mentioned in this report.
2To better understand the relationship between environmental, social, and governance activities and value creation, we surveyed 238 CFOs, investment professionals, and finance executives from a full range of industries and regions. The survey was conducted in conjunction with a survey of 127 corporate social responsibility and sustainability professionals and self-described socially responsible institutional investors that were reached through the Boston College Center for Corporate Citizenship. Both surveys were in the field in December of 2008. To get a bottom-up view, we also constructed case studies of 20 companies with leading environmental, social, and governance programs in a number of industries.
3See "Valuing corporate social responsibility: McKinsey Global Survey Results,", February 2009.
4See Scott C. Beardsley, Luis Enriquez, and Robin Nuttall, "Managing regulation in a new era,", December 2008.
5See SMART 2020: Enabling the Low Carbon Economy in the Information Age, The Climate Group and the Global eSustainability Initiative (GeSI), 2008.

© Copyright 1992-2009 McKinsey & Company


Building a Smarter Planet: City by City
Building a Smarter Planet: City by City

Speech by Samuel J. Palmisano, IBM Chairman, President and Chief Executive Officer, at the SmarterCities Event - Berlin, Germany (23 June 2009)

"Thanks to technology shifts, our world is getting smarter," said IBM Chairman, President and Chief Executive Officer Samuel J. Palmisano during his keynote address at the SmarterCities Event in Berlin, Germany.

When we think about what it will take to make our cities smarter, I think it is clear that the issues we need to tackle reach far beyond any city's walls... or its suburbs—issues such as energy, transportation and water... the flow of commerce and of knowledge... of money and electrons. These and many other issues that come together in our cities are not truly local... or regional... or even national. They are global.

Of course, people have talked about "world cities" for many years. But it has only been fairly recently that we have come to truly appreciate what that means.

I would argue that the first decade of the 21st century has been a series of wake-up calls, with a single subject: the reality of global integration.

In business, global integration has changed the corporate model and the nature of work itself.

But we now see that the movement of information, work and capital across nations—as profound as those are—constitute just one aspect of global integration.

  • In the last few years, our eyes have been opened to global climate change, and to the environmental and geopolitical issues surrounding energy.
  • We have been made aware of the vulnerabilities of global supply chains for food and medicine.
  • We entered the new century with the shock to our sense of security delivered by the attacks on 9/11.
  • And, of course, we are now in the midst of a global financial crisis.

These collective realizations have reminded us that we are all now connected—economically, technically and socially.

But we're also learning that being connected is not enough.

Yes, the world continues to get "flatter." And yes, it is getting smaller and more interconnected. But something is happening that holds even greater potential. In a word, our planet is becoming smarter.

This isn't just a metaphor. New intelligence is being infused into the way the world literally works—the systems and processes that enable physical goods to be developed, manufactured, bought and sold... services to be delivered... everything from people and money to oil, water and electrons to move... and billions of people to work and live.

First, our world is becoming instrumented:

The transistor, invented 60 years ago, is the basic building block of the digital age. Today, there are nearly a billion transistors per human, each one costing one ten-millionth of a cent. There are 4 billion mobile phone subscribers, and 30 billion Radio Frequency Identification tags produced globally.

Because of their increasing sophistication and low cost, these chips, sensors and devices give us, for the first time ever, real-time instrumentation of a wide range of the world's systems—natural and man-made... business and societal.

Second, our world is becoming interconnected:

Very soon there will be 2 billion people on the Internet. But that's just the beginning. In an instrumented world, systems and objects can now "speak" to one another, too.

Think about the prospect of a trillion connected and instrumented things—cars, appliances, cameras, roadways, pipelines... even pharmaceuticals and livestock.

And then think about the amount of information produced by the interaction of all those things. It will be unprecedented.

Third, all things are becoming intelligent:

New computing models can handle the proliferation of end-user devices, sensors and actuators and connect them with powerful back-end systems.

Combined with advanced analytics, such supercomputers—and new computing models like "clouds"—can turn mountains of data into intelligence.

And that intelligence can be translated into action, making our systems, processes and infrastructures more efficient, more productive and responsive—in a word, smarter.

As I mentioned, IBM is creating multiple new Analytics Solution Centers—the first of them here in Berlin... focused on bringing this new level of value to clients.

Another way to describe these shifts is to say that the digital and physical infrastructures of the world are converging.

Computational power is being put into things we wouldn't recognize as computers. Indeed, almost anything—any person, any object, any process or any service, for any organization, large or small—can become digitally aware and networked.

Thanks to these technology shifts, our world is getting smarter.

You can see this in how companies and institutions are rethinking their systems and applying technology in new ways.

  • The island-nation of Malta is building the world's first national smart grid, which will also monitor the country's water systems. IBM is working on 50 smart grid projects in places like Italy, Netherlands, Denmark, California and Texas, and seven of the top ten meter management projects globally.
  • Buildings are becoming smarter—and greener. GIB-Services in Switzerland is using excess heat from its datacenter to heat a local public swimming pool. A mining company in Canada is using its excess datacenter heat to warm its warehouses during the cold Canadian winters. IBM's own green datacenter in Boulder, Colorado, has replaced energy-greedy air-conditioning with cooling from the air outside, which can be used for up to 75% of the year, contributing up to 50% in annual energy savings.
  • Smart traffic systems are being built in cities from Stockholm to London to Brisbane to Singapore—with many more being planned.
  • In the global race for competitiveness, our schools are becoming smarter. In China, the Ministry of Education is expanding access and improving knowledge-sharing through its open-source, "Blue Sky" e-learning platform, which has been used by more than 780,000 Chinese students and teachers since July 2006. And here in Germany, the state of Brandenburg is harnessing Web-based tools that help teachers and other education experts across a widely dispersed region connect systematically for the first time.
  • We can even tackle perennial problems like public safety. New York City's Real Time Crime Center system queries millions of pieces of information to uncover previously unknown data relationships—leading to a 27% drop in crime since 2001. New York is now ranked as the safest large city in the United States.

This list goes on—a smart bay in Ireland, smarter oil exploration in Norway, smarter social security in Belgium. And the opportunity for such solutions is growing fast. All around the world, economic stimulus is being injected by governments... much of it aimed at smart grids, healthcare data integration, water management and smarter transportation.

All of this comes together in the city. Consider some of the key systems that are essential to the functioning of a city today:

  • Consider transportation. A number of estimates suggest that congestion costs—in developed and in developing cities—are between 1% and 3% of GDP. In emerging market cities, car ownership rates are currently a fraction of the 75-90% percent of OECD countries. As car ownership grows from less than 1 in 10 people to one in three or higher in emerging markets, even greater strain will be placed on the transport infrastructure.
  • There are similar issues for energy, utilities and water—Cities generate the vast bulk of CO2 emissions, and they account for 60% of all water allocated for domestic human use. As urbanization levels increase, city leaders must simultaneously supply citizens' and businesses' immediate demands for water and energy, and promote the sustainable use and governance of these resources within the city and across surrounding regions.
  • Cities also face significant healthcare challenges, ranging from infant mortality to the HIV/AIDS pandemic. With growing populations, the fiscal sustainability of cities' health systems will be pushed to the limit. In America, the costs of healthcare are not only rising dramatically—approaching 20% of GDP—but are also very unevenly distributed, with some cities achieving significantly lower costs than others for similar levels of care.
  • In education, we need to integrate the collection of cottage industries that make up today's education "systems"—and I put that in quotes. There are more than 15,000 local school districts in the United States delivering K-12 programs, with separate operating systems, measurements and management processes, wasting precious resources. Developed countries, on average, spend nearly 4% of their GDP on education, and costs are rising—up 42% between 1995 and 2004, according to an OECD study. And the situation is similar no matter where you look. In China, there are nearly 500,000 primary and middle schools, each managing its own infrastructure.
  • When it comes to public safety, eight of the world's top 10 safest cities in 2008 were here in Europe—so we all have something to learn from you. Keeping citizens safe is crucial to cities' quality of life—and to the global opportunities for work, investment and talent. Which is why smarter public safety isn't just a responsibility of the state, it's also a priority for business, communities and civil society at large.
  • Finally, smarter government services are crucial for both citizens and businesses. Cities depend on their business systems for their prosperity. For instance, inefficient administrative systems can cost as much as 6.8% of GDP in some economies. And a 25% reduction in administrative costs—e.g., cutting the time spent in filling out forms—could yield savings of up to 1.5% of GDP.

In just a moment my colleague Ginni Rometty will tell you about some of the work we have done with forward-thinking cities around the world to make these systems smarter. And tomorrow we will explore these further with experts from those sectors.

But first, I think it's important to step back and look at the city as a whole. In other words... look at it from the point of view of the mayor—the leader who is responsible for the integration of all these systems. Beyond that, it's the mayor who is held accountable for the city's brand image and reputation... and the relationships among its many different communities and across all its important constituencies.

I have sympathy for this position—because it's very much like my own. A corporation, like a city, is a system of systems. And the CEO is responsible not just for making those systems work together efficiently and effectively, but for the consequences of that integration:

  • the innovation it generates
  • the growth it produces
  • the people it employs
  • the values it embodies
  • the progress it achieves.

The key is leadership. If we are really going to drive meaningful change, we need to get smarter about how we work together.

Three things are crucial, I believe.

First, we will have to be far more collaborative. This is not just the familiar "public and private sector" formula. It's multi-directional, multi-stakeholder, truly global.

Think about it—none of the systems I've mentioned is the responsibility of any one entity or decision maker. They all involve business, government, communities... all of civil society.

This will require new ways of leading. Our traditional idea of a leader is someone with superhuman vision and will... someone who sees the future and charges ahead—either compelling or inspiring others to follow.

But given the complex reality of a global system of systems, this model no longer seems appropriate.

Much more, we will have to lead by listening—by attending to what these complex systems are telling us. We need to influence, not dictate. A reality as dynamic and complex as this must be approached with humility, and with an intent to serve, rather than to dominate.

Frankly, I believe that business has a lot to learn from government and NGOs when it comes to this kind of sophisticated, mature, multi-stakeholder collaboration. It's an art, not a science. Indeed, some call it "the art of the possible."

It's also known as politics—but in the best, original sense of the word. It's about being politic... about opening your mind... about developing management systems architected for inclusion, access and transparency.

Second, we need standards. Of course, the importance of standards is widely understood—not just technology standards, but new, global rules of the road for trade policy, intellectual property and more.

Of course, from a systems standpoint, when we talk about the importance of standards, we are talking about interfaces. In systems, interfaces matter, compatibility matters. Just because you throw things together doesn't make a system. To build a true system, you need much more than hand-offs.

We need standardized interfaces between the transport system and the energy system... between the education system and the healthcare system... and among water, traffic, commerce, public safety and government services, for example.

To be sure, there are limits to the standardization possible in any system—technical, social or natural. And that's especially true when it comes to systems where the key components are human beings. But if we're going to have effective global systems, rather than global system breakdowns, we will need a greater level of interface standardization than we have had heretofore.

Finally, we also need to ensure that our regulations, policies and institutions encourage greater openness and innovation, not hinder it.

This is important. We have a choice to make now. I believe it would be a grave error to retreat into our shells, or adopt protectionist policies. That would be to race toward the past, not toward an interconnected, intelligent future.

And, as I think is clear by now, it would be a fundamental error in systems thinking. Its result would be to increase our vulnerability to global system crises (both man-made and natural), rather than to reduce it.

The urbanization of Planet Earth is one of those developments—arguably, the central one—that is big enough to "see from space." And all those bright city lights, shining back at the stars, signal more than the simple movement of electrons.

It's in our cities, I believe, that we can see the most promising opportunity for shaping how the world works and how we live.

That opportunity is urgently before us in this moment. The importance of this moment, I believe, is that the key precondition for real change now exists: People want it.

But this moment will not last forever. And in hindsight, when the circumstances that cry out for change are gone, when things have returned to "normal"—don't we always wish we had been bolder, more ambitious, gone faster, gone further?

That's why a period of discontinuity is, for those with courage and vision, a period of opportunity.

Over the next couple of years, there will be winners, and there will be losers. And though it may not be easy to see now, I believe we will see new leaders emerge who win not by surviving the storm, but by changing the game.

This is not a matter of political ideology. Indeed, building a smarter planet is refreshingly non-ideological. Of course, debates will continue to rage on issues inherent in all the systems by which our world and our cities work.

  • Should healthcare be delivered by private firms, by the state or by some combination?
  • Should environmental considerations be pursued by market-based approaches, or mandates?
  • Is water a public good, like air, or a commodity, like food?
  • What should we do about the geopolitics of energy?
  • What is the balance between public safety and security, on the one hand, and personal liberty and privacy, on the other?

There are serious and worthy perspectives on all sides of such controversies. But no matter which viewpoint one shares, or which ultimately prevails, the system that results will need to be smarter—more transparent, more efficient, more accessible, more equitable, more resilient.

The world will continue to become smaller, flatter... and smarter. We are moving into the age of the globally integrated and intelligent economy, society and planet. The question is, what will we do with that?

The future now beckoning us is one of enormous promise. And I believe it is one that we can build—if we open our minds and let ourselves think about all that a smarter planet... a planet of smarter cities... could be.

Thank you very much.


(Water Management) Groups Lobby for ‘Water Footprint’ on Food/Bev Items: Defra is concerned by the high level of UK water dependency both for future UK food security and because of the pressure caused by UK imports on the water resources of other countries

Groups Lobby for 'Water Footprint' on Food/Bev Items
water-droplet2Food and beverage items deserve a special label that indicates their "water footprint," two food and health groups in the UK say.
The Food Ethics Council and Sustain have released a joint report that lobbies the UK government for action on creating such a label.
A water footprint label would not delve specifically into the amount of water used to create the product, the groups say. Instead, the label would be a sort of stamp of approval for good water stewardship practices by the manufacturer,reports The Guardian UK.
The report refers to the "embedded" value of water in a product. For instance, to make a cup of coffee, about 140 liters of water are used in various growing and processing actions.
The report makes a distinction between water intensive foods like fruits, vegetables and meats, versus lower water-use foods like grains.
An upcoming UK government report on food security will touch on the level of water dependency in the island nation.
The report from Food Ethics Council and Sustain notes the government's interest in the issue, stating, "Defra is concerned by the high level of UK water dependency both for future UK food security and because of the pressure caused by UK imports on the water resources of other countries."
The Food Ethics Council and Sustain suggest that a water footprint label could be administered along the same lines as the carbon label from the Carbon Trust

Green newsclips for 20 July 2009: Amsterdam is a smart city, CO2 caps in India, the US and the UK, and Samsung's green R&D announcement

IBM and Cisco to Help Amsterdam Become a 'Smart City'
By GreenBiz Staff
Published July 14, 2009

AMSTERDAM, NL -- IBM and Cisco will help the City of Amsterdam in its quest to become the European Union's first "smart city." 

Smart City pilot project will serve as a testing ground to prove that smart grid technologies can better manage energy use and transmission while also reducing electricity outages and congestion. A slew of small-scale projects target four areas: working, living, mobility and public space. 

Amsterdam's pilot program is one of a string of announcements from technology companies jumping into the smart grid fray. Google, for instance, has 
partnered with GE to lobby the government to push for smart grid support, while also teaming with utilities to bring energy monitoring to businesses and residences. 

Cisco has also staked its claim in the smart grid development arena on the assumption that the smart grid will 
dwarf the Internet. The company has unveiled anew line of smart grid technologies and is working with Duke Energy to speed smart grid development for the utility's 11 million customers while also helping GE and the City of Miami tackle a $200 million smart grid initiative

Amsterdam, the largest city in The Netherlands, has set a goal of reducing its greenhouse gas emissions 40 percent below 1990 levels by 2025. It hopes through the pilot project with Cisco and IBM will help residents reduce energy costs and greenhouse gas emissions by 14 percent or more.  

Cisco and IBM will help develop an energy management system using 500 smart meters installed in participating households, giving each a glimpse of their individual energy consumption. IBM will establish the smart energy network, while Cisco will oversee the IP-based communications infrastructure that will enable the energy system to securely communicate with household appliances in real-time. Nuon, an Amsterdam-based energy company, will also take part by creating applications for the system. 

Consulting firm Accenture 
joined the project last month, and will transform its Amsterdam office into a smart building by using technology that will collect, monitor and analyze utility data. Other projects underway include connecting docked river cruisers and commercial sea vessels to the electric grid and the creation of a "climate street" that connects tram stops and street and store lighting with smart meters to help store owners and municipal workers manage energy use along a busy shopping route.

CC licensed by Flickr user 

CO2 caps central to climate fight: UK
Mon Jul 20, 2009 9:44am EDT

By Nina Chestney

LONDON (Reuters) - A dual system of both national emissions caps and carbon trading schemes should play a central role in cutting global greenhouse gas emissions, a report commissioned by the British government said on Monday.

At the government level, national caps on emissions should ensure countries take responsibility for limiting their own greenhouse gases. At the individual emitter level, trading schemes should cap emissions and allow trade in carbon permits, the report said.

"The current framework for international carbon trading needs reform," said Mark Lazarowicz, the Prime Minister's representative for global carbon trading.

A single global emissions trading scheme would reduce governments' autonomy over their domestic policies and be difficult to put into place, the report said.

A dual system, however, would cover all emissions sectors, respect governments' wish to choose their own tools for reducing domestic emissions and maximize cost effectiveness.

"If well-designed, a dual-level system of global carbon trading could reduce the costs of emissions by up to 70 percent," Lazarowicz said.


Market experts say linking the EU's emissions trading scheme (EU ETS) with the United States is a crucial first step toward a global carbon market, which will help achieve real emissions cuts in planet warming greenhouse gases.

The United States plans to introduce a domestic cap-and-trade scheme but the Senate still has to approve it.

Linking the EU ETS with a federal U.S. system by 2015 was "ambitious" but should be a priority, the report said.

A linked system would increase the liquidity and stability of both schemes, cover between 13-27 percent of global emissions and reduce costs across both schemes by 30-50 percent.

It would also provide momentum for an eventual OECD-wide trading scheme, the report said.

To achieve real emissions cuts, the United Nation's Clean Development Mechanism (CDM) needs to be "reformed and streamlined," the report said.

The CDM allows industrialized countries to meet mandatory carbon dioxide cuts by buying offsets generated from clean energy projects in countries such as India and China.

Instead, the report favors a sectoral trading approach, whereby a government would be responsible for meeting an emissions target specific to a particular sector of the economy using an emissions trading scheme, taxation, regulation and/or subsidies.

Under the Kyoto Protocol climate change pact, nations below their emissions targets can sell excess rights, called Assigned Amount Units (AAUs), to other governments that emit above their targets.

The system is expected to result in an AAU surplus of 7-10 gigatonnes tonnes in the period 2008-12. To deal with this problem, developed countries should cancel a substantial proportion of their excess AAUs, the report proposed.

The UK government has decided to cancel surplus AAUs equivalent to the difference between its Kyoto and domestic emissions cut targets, the report said.

(Reporting by Nina Chestney; Editing by Keiron Henderson)

India rebuffs Clinton call on low-carbon future
By James Lamont in New Delhi, James Fontanella-Khan in,Mumbai and Daniel Dombey in Washington
Published: July 20 2009 03:00 | Last updated: July 20 2009 03:00

India last night rebuffed an appeal by Hillary Clinton, US secretary of state, to embrace a low-carbon future in which the two countries would join to devise new ways of consuming and producing energy.
Mrs Clinton, on a five-day visit to the country, said low-carbon emissions would not jeopardise India's high economic growth rates and its goal of lifting millions of people out of poverty. She offered a technological partnership to secure the fast- growing nation's energy supplies and help boost the livelihoods of its farmers.
"There is simply no case for the pressure that we, who have been among the lowest emissions per capita, face to actually reduce emissions," Jairam Ramesh, India's environment min-ister, told Mrs Clinton. "And as if this pressure was not enough, we also face the threat of carbon tariffs on our exports to countries such as yours.
"We look upon you suspiciously because you have not fulfilled what [developed countries] pledged to fulfil," added Mr Ramesh, who described the dem-ands by the developed world as a "crisis of credibility."
In spite of the two countries' battles in global trade talks and fears of India's slipping down the US's priority list, Mrs Clinton vowed that Washington would not do "anything" to stand in the way of the world's largest democracy's economic progress.
Speaking in Delhi yesterday, Mrs Clinton said: "We believe that economic progress in India is in everyone's interest and not just in the interest of Indians.
"There is a way to eradicate poverty and develop sustainably that will lower significantly the carbon footprint of the energy that is produced and consumed to fuel that growth."
Her comments come as global leaders try to agree a course of action to combat climate change and to break a deadlock over the Doha round of trade talks at the World Trade Organisation. New Delhi has sided with Beijing to oppose binding caps on its carbon emissions.
They argue that developed nations should take responsibility for global warming. India has also clashed with the US over the terms of the global trade deal. The Indian government welcomed the US's partnership but refused to agree to emissions caps.
Mrs Clinton is the most senior official of the Obama administration to visit India since his election last year.
Some Indian officials fear that a Democrat administration may turn to more protectionist measures in an economic downturn and also revisit attempts in the presidency of Bill Clinton to find a settlement for disputed Kashmir.
Mrs Clinton, who meets Manmohan Singh, prime minister, today, has done her best to reflect a fast-improving relationship that promises to yield co-operation in defence, nuclear power and regional relations. In a symbolic act of solidarity, she began her visit in Mumbai, staying at the Taj Hotel, one of the targets of the terror attacks on India's financial capital last November.
"The visit takes place amid a pervasive sense of unease in India that the Obama administration is less enthusiastic about the bilateral relationship than its predecessor," said Seema Desai, an analyst at the Eurasia Group.
Editorial Comment, Page 12

Samsung Elec to invest $4.3 billion in green R&D
Mon Jul 20, 2009 2:59am EDT

By Cho Meeyoung and Rhee So-eui

SEOUL (Reuters) - Samsung Electronics said on Monday it would invest 5.4 trillion won ($4.3 billion) in green research and development and facilities to make the world's largest memory chip maker a leading eco-friendly company by 2013.

Of the total, 3.1 trillion won will be spent to develop products which cause less damage to the environment, and the remainder on energy-saving technologies and the environmental improvement of manufacturing facilities, the company said in a statement.

Samsung Electronics did not detail how it would finance the initiatives but had around 5.3 trillion won in cash and cash equivalent at end-March.

"This eco-management initiative will encompass all of our global operations, supply chain, and the complete lifecycle of Samsung products, and by achieving these goals we aim to lead the way in tackling the environmental problems that are facing our planet," Samsung Electronics' vice chairman and CEO Yoon-woo Lee said.

Samsung's plan includes reducing greenhouse gas emissions from manufacturing facilities by 50 percent, cutting total indirect greenhouse gas emissions from all products by 84 million tons through 2013, and ensuring all of its products are more environmentally friendly by increasing energy efficiency through measures such as cutting standby power consumption.

Samsung's chip and LCD businesses, major sources of greenhouse gas emissions, will invest "significant" sums to reduce pollution, it said.

Shares in Samsung rose 3 percent on Monday, in line with a 2.7 percent rise in the KOSPI index


South Korea has made a major push on environmentally friendly investment in recent weeks.

Earlier this month, the South Korean government said it would invest 107 trillion won, or 2 percent of its annual GDP, in environment-related industries over the next five years. It also separately said that it aimed to raise 2 trillion won for so-called "green industries" from the private sector.

HSBC estimates that of Asian government's stimulus packages against the recent credit crunch, spending on green-related investments will account for 20 percent, or $272 billion. That means more than double the amount earmarked for green projects in the Americas and five times bigger than Europe's.

A survey last week showed over 80 percent of 105 South Korean CEOs at major companies plan to invest in environmental technologies and see them as a major business in the long-term.

By 2020, Samsung's competitor LG Electronics Inc is also aiming to lower its greenhouse gas emission from the production process by 150,000 tons compared with its 2008 emission levels, and it will cut the gas emission caused by using LG Electronics' products down by 30 million tons per year.

Hyundai Motor Co, South Korea's top carmaker and the world's No.5 carmaker along with affiliate Kia Motors Corp, in early July launched its first hybrid car in the domestic market to satisfy a growing appetite for fuel-saving vehicles and to improve its technology image.