Sustainability Dialects 06-11

Sustainability Dialects

In the fourth installment in a series about the next generation of CSR management, Gregory Unruh stresses the value of developing a common language of sustainability within your company.

It doesn’t take much to discover that sustainability means different things to different people. Try engaging on the topic with external stakeholders. Labor advocates see it differently than Greenpeace. Community leaders see it differently than regulators. Who you’re talking to affects what they hear.

Part of the CSR Director’s job is navigating these diverse meanings and communicating effectively across them. And as discussed in earlier posts, these external skills are turned inward by sustainability insurgents.

A business can be viewed in a variety of ways. MBAs tend to see it as an economic entity competing for market share. Lawyers see it as a “nexus of contracts.” Sociologists talk in terms of culture and human relations. None of these views is inherently better than any of the others. The value of any view depends on what you are trying to accomplish.

Sustainability insurgents want to embed sustainability thinking into the decision calculus of their organization. The challenge lies in the fact that the levers and tools needed to implement sustainability are controlled not by the CSR office, but by the functional managers in the HR, operations, finance and other departments. 

What is the best avenue for influencing and persuading functional managers?Successful sustainability insurgents view their organization as a network of conversations and strategically introduce sustainability thinking into ongoing corporate conversations.

Each functional area has its own conversation built on terminology and jargon suited to their specific business concerns. Advertising talks of impressions, click-throughs, eyeballs. Operations discusses inventory, stocks and processes. HR is concerned with on-boarding, compensation and so on.

Insurgents tap into these functional conversations and help managers develop what can be called a sustainability dialect that translates corporate sustainability goals into the local functional discussions and thinking. This is really the end point of the acculturate phase discussed in the previous series' installment. The Goal is to have the functions take on their unique sustainability responsibility voluntarily. Once sustainability is embedded in their conversations — and ultimately their processes — the function owns it and sustainability becomes a normal part of their decision goals and processes.

As an example of how this works, take the Human Resources function. This department has numerous tools that are important for embedding sustainability across the entire employee lifecycle. Sustainability insurgents begin by engaging in conversations around recruiting, an important HR responsibility. By convincing HR managers to include sustainability questions in the interview process and to view it as a new hire issue, insurgents can ensure that new sustainability expertise is constantly being brought into the company.

Next, insurgents can engage in conversations about adding corporate sustainability training into the on-boarding process. This low- to no-cost step can ensure that employees are engaged with sustainability from day one. Conversations about adding sustainability questions into employee attitude surveys can deepen HR and senior management’s understanding of the impact sustainability values have on employee motivation, loyalty and so on. Eventually, conversations can turn to embedding sustainability into employee evaluation and compensation metrics. By this point, HR has been acculturated to sustainability and owns their role in achieving the company’s sustainability goals.

Similar conversations can take place with each of the functional areas to help them develop their own sustainability dialect for their scope of responsibility. By starting with small, low-cost, low-risk actions, sustainability insurgents can minimize resistance as they gradually acculturate functions to their sustainability role in the organization.

Reproduced from MIT Sloan Management Review

Mobilizing the Insurgency 06-02

Mobilizing the Insurgency

The insurgent sustainability director’s goal is to empower allies to link social intelligence with their job responsibilities and the company’s overall sustainability strategy. This begins by encouraging functional managers to “relate” with key constituencies and harvest their own functionally relevant social intelligence.

As this occurs, CSR directors help employees “translate” their gathered intelligence into business insights that are connected to and aligned with the company’s strategy and the functional manager’s responsibilities. The CSR director then helps “incubate” sustainability-informed projects that create value for both the business and the identified constituencies. Finally, CSR directors ensure that the value created becomes core to the business by “acculturating” the organization to the new values and associated management processes.

Relate

“Relate” is the process used to obtain social intelligence and is something that your people already do. The goal of insurgent CSR directors is to inspire employees to identify social intelligence that will enhance the company’s performance and support its CSR goals.

Encouraging community volunteerism is a common way to generate social insights. For instance, Costa Rica-based Florida Ice and Farm Beverage Company (FIFCO) is the region’s largest producer of beer and soft drinks. This makes it a major consumer of fresh water — a demand could potentially pit the company against local communities also dependent on local water supplies. 

To help employees understand these water demands (and the user communities), CSR managers engaged employees in community projects focused on restoring watersheds serving indigenous communities. In one such project, an army of 178 blue-shirted employees waded through the Aqueduct Gavilán Canta river system to ensure the provision of clean water for the indigenous peoples of Talamanca. Florida managers believe this direct interaction between employees, communities and shared resources dramatically enhances social intelligence.

Burt’s Bees, a natural personal-care products company, finds volunteerism so valuable for relating that it has made it mandatory for all employees. Using the euphemism “non-optional,” Burt’s has even shut down production so its 400 or so employees could engage in projects like building playgrounds and affordable homes for local communities. Other projects tie into the company’s production needs, including volunteer efforts to protect eponymous bee populations from colony collapse disorder.

Walmart has taken an alternative approach to helping employees relate. In 2007, the company created the voluntary Personal Sustainability Projects (PSP) program that encourages associates to adopt practices that benefit their communities, their families and themselves. PSPs can be nearly anything, but must be personal and involve the local community. Ranging from commitments to recycle to recruiting family and friends to get out and exercise, the PSP program is employee-led, with associates recruiting and training others.

Programs like these can enhance employees’ natural tendency to relate, but do so in ways that are directly relevant to the company’s social agenda. As employees gain greater social intelligence insurgent CSR directors then help them see their application to their business responsibilities.

Translate

While research has shown that employees value volunteer opportunities offered by their companies, CSR directors want to see the social intelligence accumulated by these relating activities put to work for the organization. They therefore help translate a functional manager’s new social intelligence and align it with the company’s overall CSR efforts. To do so, insurgent sustainability managers have to understand the goals of their colleagues and help them see the benefits of implementing sustainability initiatives in their functional areas.

Translating sustainability into a value proposition that functional managers understand requires command of the local “sustainability dialect” that’s appropriate for different functional areas like finance, sales, logistics and so on. Learning the different sustainability dialects of each functional area requires a general management understanding of the business functions, as well as the local organizational culture specific to each company. It also requires a deep understanding of how sustainability fits into the function’s goals, incentive structures and capabilities.

The next post will explore the sustainability dialects for business functions in more depth. For now, recognize that it is the sustainability insurgent’s responsibility to explain the potential for value creation in terms that a potential ally can understand and link that value to the overall goals of the company.

Incubate

To have an impact, the social intelligence must be applied, so the next task is to incubate sustainability projects within the company. Insurgent sustainability directors do so by turning their office into a “social intrapreneurship” incubator, working with functional mangers to define and secure the required resources needed for a project. As the effort advances, CSR directors monitor the progress and provides support as needed.

One of the most important roles for the sustainability officer is to provide cover for the functional managers. While many sustainability initiatives are well known and proven, they still come with some level of risk. Sustainability directors need to insulate functional managers so that they feel free to innovate and are not paralyzed by the potential consequences of failure. They have to have permission to fail; if not, they’ll never try. Focusing on quick wins can create the confidence needed to move to the next level.

An example of incubation is the leading Spanish bank BBVA’s reliance on workshops to share inspirational examples of innovative CSR initiatives with managers. Enthused participants are then encouraged to apply their social intelligence to their functional responsibilities and develop their own CSR initiative. After the program, participants work to implement their initiatives with the help of the CSR director’s office. In one instance, the workshop motivated sales managers to think about their contracts with retail customers. They soon recognized that complex legal language in banking contracts made it difficult for customers to understand agreement. This social insight inspired the managers to redraft company agreements in plain language so that the mutual commitments would be clear to customers.

Once social intelligence is unleashed, ideas can come from anywhere. Take Darryl Meyers, an associate at a Walmart store in Burlington, NC. Going about his duties, Darryl noticed a constant 24-hour glow emanating from the store break rooms — a light he found coming from soda machines, which were left on permanently. To Darryl, who had been inspired by Walmart’s PSP program, this seemed a waste, so he made the suggestion that the company turn off the lights. This simple suggestion incubated an initiative that resulted in $1M in annual savings to Walmart.

Acculturate

Incubated successes will encourage more applications of social intelligence and the CSR director’s responsibility becomes one of identifying and nurturing ideas wherever they spring from. But there is a larger task at work. Insurgent CSR directors also need to embed sustainability into the company’s core if it is going to stick. I call this final process acculturation, a practice that embeds CSR values into the company’s DNA. There are two key aspects of acculturation: corporate culture and business processes.

The term du jour for CSR is creating “shared value” for the company and society. However, the task for insurgent CSR directors is to move the company from “shared value” to “shared values.” By acculturating the organization to the values inherent in the CSR initiatives, social intelligence becomes an embedded reflex and part of the organizational culture.

The worth of shared organizational values is often underestimated by traditional managers. Much of management theory assumes that employees are inherently lazy and need to be financially incentivized and monitored by superiors. But all great social change is a result of a group of people incentivized, not by financial reward, but by a shared vision about the value of their collective endeavor. Sustainability directors help the company to tap into the strength of shared values.

Shari Arison, owner of the Arison Group of companies in Israel, is actively using values to unify and energize the entire group. A diverse collection of industrial, financial and even non-profit organizations, the Arison Group is joined in a collective effort to succeed financially but also socially. One example is “Good Deeds Day,” which inspires employees and Israelis across the country to volunteer. In collectively fostering shared value, Arison Group’s shared values become an important motivational and unifying driver.

The other part of acculturation is embedding sustainability into the company’s business processes, routines and planning. This takes a different form in each functional area. For the HR function, it maybe the inclusion of sustainability in recruiting and new employee on-boarding. In Finance, it might be enterprise risk management and reporting. For Manufacturing, it could be supply-chain standards and design for environment protocols.

The end game of the CSR insurgency is the acculturation of shared values that ingrains responsibility into the organizational fabric and builds sustainability into the modus operandi of daily business. The insurgency is over when the sustainability function and its leadership are no longer needed.

Courtesy MIT Sloan Management Review 

Leading the Sustainability Insurgency 03-17

Leading the Sustainability Insurgency

If you want to hear a collective groan from a group of CSR directors, just mention filling out a customer CSR survey.

Idealistic MBAs may imagine that being promoted to the post of “director of sustainability” means they will lead a company’s social and environmental agenda and make their business a force for good. Sustainability executives who actually hold the job tell a different story. Most spend their time communicating — cynics might say “selling” — their company’s responsibility story to external constituencies in order to stave off reputational risks. Compiling glossy social responsibility reports and making speeches to the Corporate Social Responsibility (CSR) converted is de rigueur. And then, of course, there are those surveys.

Is it any wonder that sustainability managers are starting to rebel?

The externally focused CSR function has run its course. Driven by need — or frustration — many sustainability managers are taking a new tack. Today’s successful sustainability executive is leading what can best be called a sustainability insurgencyinside their organization. It is an insurgency that breaks the bounds of job description, budget constraints and the limits of “moral influence.” Its goal is simple: to alter the way business is done in every function and unit of the company.

By insurgency, I obviously don’t mean armed insurrection. An insurgency in this instance describes actions that, while not directly authorized by policy, are motivated by shared organizational and societal values.

In my own organizations, and the companies I studied, I find that CSR executives are leading this insurgency by inciting functional managers and line employees to identify their own opportunities to improve corporate social and environmental performance with their range of influence. This drives CSR down to lower organizational levels, embedding it in the company culture and organizational processes, a practice I call acculturation.

The goal is simple, yet revolutionary: to alter the way business is done in every function and unit of the company.

Through acculturation, corporate sustainability moves from “personality-focused” to process driven — and the creation of organizational routines that stick.

The typical chief sustainability officer (CSO) already has a list of literally hundreds of sustainability actions that need implementing in their company. They already know what to do, but it is not getting done because CSO don’t control the management tools — budget, staffing, incentives, etc. — needed to implement the changes. The tools lie in the functional areas of the company: HR, IT, Finance, Operations, Marketing and the like.

The insurgent sustainability director therefore needs a strategy to identify who controls the needed tools and an approach that convinces the tool owner to support the company’s sustainability goals.

Insurgents accomplish their goals by identifying like-minded allies in key functional positions and persuading them that it is in their own interest to take action by demonstrating the value in sustainability. Insurgents help managers find value by incorporating “social intelligence” into their individual business decisions. Social intelligence is an important corporate asset gained through relating with key stakeholder constituencies, a task that has historically been centralized in the CSR and public affairs functions.

But in the next-generation sustainability insurgency, where companies fully embed social and environmental responsibility into the corporate DNA, social intelligence is accessed at all decision making levels. The organizational sustainability function becomes not a data-compiling, glossy-brochure-producing shop, but “Insurgency HQ,” sponsoring what are, in effect, “sustainability cells” throughout the organization.

Social Intelligence as a Business Asset

Since the beginning the CSO/CSR function has been externally focused, with the bulk of manager’s time spent communicating initiatives that burnish the company’s reputation, like grant support for local schools or steps toward reducing the company’s carbon footprint. Today, nearly every company in the Fortune 50 publishes an annual CSR Report, which has become the primary communication vehicle for most CSR departments. While this historic centralization may be efficient, the approach confines sustainability insights and bottles up the company’s accumulating social intelligence.

Social intelligence is a valuable corporate asset. Knowledge of the Millennial Generation’s greater expectations about social responsibility, for instance, can be key in attracting, motivating and retaining the next generation of employees. 

Understanding activist and shareholder demands for transparency in political contributions can avoid damaging revelations about your company’s lobbying policies. Insights into indigenous rights issues when making raw material sourcing decisions can help avoid potential conflicts, supply disruptions or reputational risks.

Social intelligence is gained through relating with influential stakeholders, but most companies prefer to control these engagements by leaving them to the “professionals” in the CSR and corporate relations departments. 

While this sense of “control” in unpredictable social engagements may be comforting, it is a fallacy in the age of Facebook, Twitter and iPhone videos. Insurgent CSR directors recognize that every employee has the power to impact a company’s reputation, an insight that requires them to broaden their approach to sustainability management.

More importantly, however, is the recognition that social intelligence is most valuable when it enhances day-to-day business decision making. This is one of the key insights of insurgent sustainability directors. Inaction on sustainability initiatives often stems, not from a lack of interest among functional managers, but a failure by the CSO’s office to demonstrate the personal and business value of applying social intelligence to decision processes. Implementation often follows quickly after the value is understood.

The Israeli bank Hapoalim, for example, traditionally recognized the standard industry practice of encouraging customers to maximize their home purchase by offering them the largest possible mortgage loan. However, employees and managers in touch with the community understood that big loans put customers at risk if personal or market conditions shifted. Bankruptcy is bad for both customers and business. With this social insight, instead of going straight for the jumbo loan, 

Bank Hapoalim began providing potential borrowers financial literacy advice to help them choose the best suite of financial products, giving them the know-how and tools to manage their financial responsibilities successfully. The end result was financially savvy and loyal customers that offered Hapoalim more and better business on an ongoing basis.

Hapoalim’s insight came through relating with the community and paying attention to the impacts of the company’s decisions on customers and society. In essence, they leveraged the social intelligence of their managers to improve company performance. This application of social intelligence is the goal of insurgent sustainability directors.

Fortunately, it’s not a difficult challenge. As social animals, humans relate naturally in our daily lives. Most of us read the paper or get the latest Internet news feed about current affairs. We also talk with our neighbors, coworkers and the local shopkeepers, sharing our experiences, concerns and hopes for the future. Through this habit we obtain and share social intelligence, which we use to make decisions, like choosing the best neighborhood to live in, what car to drive, what school to attend and who to vote for.

Unfortunately, while business managers are encouraged to use “commercial intelligence” in business decision making, most leave their “social intelligence” behind when they cross the threshold of the corporate headquarters.

CSR insurgents want to see social intelligence inserted into the day-to-day calculus of managers across the organization. Because the list of potential CSR actions social intelligence might spur is limitless, CSR managers must help their fellow insurgents to prioritize. Maximizing the benefits of social intelligence requires that employee actions are not haphazard, but guided by an overarching sustainability vision and strategy. To achieve this, insurgent sustainability leadership is rethinking the role of the CSR Director’s Office.

In the following installments of this series, I will first explain some other approaches that sustainability insurgents are using in corporate offices around the world. I will then lay out a comprehensive framework for developing your own insurgency strategy — including how to identify allies and how to structure your engagement with them. Finally, I will explore the concept of “sustainability dialects” that allow you to speak to allies about sustainability using terminology that resonates with their functional culture.

Reproduced from MITSloan Management Review

Old Industry, New Tech: Domtar’s Focus on Sustainability 10-17

Old Industry, New Tech: Domtar’s Focus on Sustainability

Reproduced from MIT Sloan Management Review

Montréal-based Domtar Corporation brands itself “The Sustainable Paper Company” and is fast becoming a wood fiber innovation engine using sustainability as the foundation of its business transformation. David Struhs, the company’s vice president of sustainability, explains how co-generation, new manufacturing and attention to market niches are some of the ways that vision plays out.

“If you view what sustainability means in an ecosystem, it is ultimately being as efficient as possible with resources and being able to adapt,” says David Struhs, vice president, sustainability for Domtar Corporation  , a Montréal-based pulp, paper and absorbent hygiene products manufacturer. “Our idea is that innovation has to occur within the different, unique ecosystems and economies in which our facilities operate.”

The idea of adapting sustainability goals at each company factory — that is, having ideas adapted to rather than adopted by — is just one part of Domtar’s journey toward broader sustainability practices.

The company is the largest integrated marketer and manufacturer of uncoated freesheet paper in North America. In 2012, it had revenues of $5.5 billion in 2012, and a workforce of 9,500 in North America, Northern Europe and China. Domtar produces 4.3 million metric tons of hardwood, softwood and fluff pulp, the majority of which is consumed internally to manufacture paper and consumer products such as store-brand infant diapers and a full line of branded adult incontinence products.

Struhs helps oversee Domtar’s sustainability efforts, which include setting targets for reductions in greenhouse gas, water and waste. Domtar has also been working to increase its supply of certified fiber through a chain-of-custody certification to recognized third-party standards, including the Forest Stewardship Council and the Programme for the Endorsement of Forest Certification.

Struhs has been at Domtar for about a year and a half. He has had a variety of previous lives, mostly within government: He was an environmental regulator working for the U.S. Environmental Protection Agency; of the Chief of Staff to the Council on Environmental Quality in the Executive Office of the President of the United States; and the environmental commissioner for the state of Massachusetts and then the environmental secretary for the state of Florida. He then moved to International Paper, the Memphis, Tennessee, company “which is, to this day, the largest forest products company in the world,” he says. “During the course of my career in global manufacturing,” Struhs says, “I became convinced that, as important as government is in driving change, ultimately, the most effective solutions are invented and executed in the private sector.”

In a conversation with David Kiron, MIT Sloan Management Review’s executive editor of the Big Ideas Initiative, and Nina Kruschwitz, MIT SMR’s managing editor and special projects manager, Struhs talks about the new manufacturing technologies that are changing the paper industry, the role that co-generation plays in the company’s operation and the market niches that are becoming bigger pieces of the North American paper-manufacturing mix.

What does sustainability look like in Domtar?

Many corporations view sustainability as a special project, an initiative that responds to pressure from the market or NGOs, or a risk-management effort. That’s not to say these cases aren’t legitimate efforts to improve efficiency. Unfortunately, even really, really good companies often view sustainability as an emerging area, apart from the company’s core business.

Domtar’s early sustainability efforts focused on the transparency of its fiber supply chain. The company worked with NGOs and customers to establish a high level of confidence and credibility. Since then, we’ve expanded our view of sustainability to focus on manufacturing excellence and optimizing efficiency. We now think of our company in terms of industrial ecology

Would you say that sustainability is changing your business model?

Absolutely, it is. Sustainability is redefining our business model; it is redefining the way we view and think of ourselves.

I’ll give you an example. I get to deal with young, bright people who are starting careers in our industry. Who would have thought? The very brightest students can write their own ticket and choose what industry they wanted to be a part of — so how do you convince them to come into pulp and paper? These are people in their upper 20s. They have a couple of Masters degrees under their belt. And they’re coming to us, seeking us out, because this is a way to differentiate themselves in the marketplace. They get excited about things like lignin separation technology, which we call BioChoiceTM lignin  . They get excited about things like nanocrystalline technology — something that unlocks the natural strength and characteristics of cellulose at a nanoparticle level.

So, what’s fascinating is that the focus on sustainability, in terms of what we can do to improve our relationship to the environment, makes us more sustainable in the war for talent. It becomes this virtuous circle of sustainability at every compass point.

Can you give us a snapshot of what lignin separation technology is?

Start by thinking about a tree as its basic chemical components. It’s cellulose; it’s hemicellulose, which is a family of different sugars; and it’s lignin, which is the remarkable material that binds the cellulose and hemicellulose together and gives the tree its strength and its stress test. The fourth major component is the volatiles, the turpentines and the tall oils.

If you think about wood as a rich collection of chemicals that can be repurposed and redesigned to create new products, it becomes pretty exciting. Actually, we had an event where we started a new process to remove lignin from wood at our mill in Plymouth, North Carolina. The U.S. Secretary of Agriculture, Tom Vilsack, was scheduled to participate in a ribbon-cutting ceremony at the facility. Unfortunately, the date of the event fell on the day of a tropical storm. Airports were shut down and he couldn’t arrive. But he called us and said he was sorry he missed it and that it’s the kind of thing that he hopes to see more of, and he asked if he could get a private tour and briefing.

I think it’s consistent with where the Administration is trying to go, which is to say if you believe that there’s a manufacturing economy future for the United States, it likely won’t compete in world commodity markets. Now, that doesn’t mean we won’t continue to be a very important supplier of pulp and paper. We will. But our future has to look beyond that. We have to ask, “What’s advanced manufacturing? What are the innovative things that we can do with the same basic material and building blocks to produce new products?”

You used the phrase “virtuous circle of sustainability” in talking about your strategy. That’s a good phrase. Do you see giving younger workers something interesting to do as contributing to their wellbeing?

I think so. I know it’s the case with me. I’m 53 and I’ve done lots of different things in my life, and I still love going to work in the morning. I think one of the reasons is that, at the end of the day, I feel like I’ve actually done something that might make a real positive difference, whether it’s something as simple as collaborating with NGOs and customers to coming up with a way of getting more landowners to certify their fiber supply and adhere to certain good practices for forest management. It can be something even bolder, like reimagining what value we might extract out of something like a tree. I think lots of folks feel the same way.

One of the things that might be unique to our industry — because it’s such an old industry — is we’re able to overcome some of the sins of the past. Let’s be honest, in our lifetime the pulp and paper industry was not a good environmental actor. It did not have the ethos of manufacturing efficiency, and if you look at what they did to rivers and streams, and in some cases forests, it was reprehensible.

But if you look at how the industry has been transformed and the transparency it now exhibits, there’s a positive story to tell. I think people who have spent a long time in this industry feel like they have a new lease on life. Almost as important, they have a new reputation.

So, let’s talk about this new lease on life and how long this life is going to go for. Domtar has a sustainability strategy that goes out to 2020, which is a substantial amount of time.

Well, any number that you put out there as a planning horizon is by definition arbitrary, and we recognize that. There is a certain ring to 2020. But at a more practical level, we felt that it was a reasonable timeframe, given the capital intensity of our industry. We have harvest cycles that extend 40 or more years in some cases. Because of the investments required to build and the operating costs to maintain this very capital-intensive industry, there’s no room for decisions that lack a view of the long horizon.

That doesn’t mean that we aren’t going to hold ourselves accountable on a routine annual basis, reporting progress where it’s good and where it’s bad, but we think it’s important to view it in that longer-term context.

In some ways, what sustainability is serving as a counterweight to the quarterly nature of American capitalism, where everything’s about what’s happened this quarter or what’s going to happen next quarter. If you believe sustainability is a natural counterweight to that phenomenon, then I think it’s actually appropriate to have a 2020 horizon out there.

Give us an idea of some of the big goals of this 2020 strategy.

It starts with the fiber, in our case. When people think about our industry, most often they think first about the responsible utilization of fiber resources. This is also where Domtar began as it started along its sustainability path. So, that’s almost foundational.

Beyond that, it’s looking at the environmental footprint of our operations. This includes the efficiency with which we use energy, water, chemicals and wood. It also includes recovering and recycling what once was considered waste and putting those materials to productive use. And when we’ve run out of those options, the goal is to minimize our footprint as much as we possibly can, and to do it in a way that is somewhat aspirational. It’s more than a lot of lay-ups; we set markers that require us to actually rethink our progress.

Beyond the environmental footprint, it’s the products. I mentioned lignin as one example, but we need to ask whether we can really integrate sustainability into the development of new fiber-based solutions that take advantage of a renewable resource. Can we make products that are lighter, cheaper, faster, better and ultimately renewable — whether they’re fuels, whether they’re plastics, whether they’re substitutes for carbon fiber?

And then finally — and equally as important — we need to consider the communities in which we find ourselves. Ultimately, sustainability is about fitting in, and doing so in a way that creates a net positive benefit in the community in which we operate, whether it’s water, air, employment, taxes, health, or safety. And it’s really just the basics of good corporate citizenship and recognizing that part of what we have to maintain for our sustainability is our license to operate.

You mentioned renewable resources. Is green power — like green steam and green electricity — one of the central pieces?

Yes. If you think about sustainability in the context of energy and climate, I think it’s useful — and this is something we’re doing with some new corporate dashboards that we’re developing — to ask, “what is the economic value that you’re creating per unit of carbon dioxide that you’ve produced?”

It’s kind of a rephrasing of the question. But if, for the foreseeable future, there is going to be some CO2 loading from our operation into the atmosphere, the question becomes, how do you ensure that you’re extracting every possible economic value out of that ton of carbon?

I don’t want to cast aspersions on the utility industry because they’ve got their own set of issues and complicating factors, but if you look at what they do, in most cases they take a fuel and they burn it, and they create steam, they spin the turbine and they sell electrons. The utility typically gets one economic value from that combustion, and that’s the electrons they sell.

That’s not what we do. What we’re providing is really three layers of economic value for that same unit of energy, for the same unit of carbon.

The first thing that we’re getting out of it is the steam. We’re getting the BTU, and we’re using that as a thermal process for our pulp and paper making. But then, we’re recapturing that steam through co-generation, and we’re producing electrons that we either use to power our mills or sell to the grid, so now we’re getting the electricity value out of it in addition to the thermal benefit. The other thing we’re producing is a product that people need and want, pulp and paper, which kind of make modern life possible.

If we can demonstrate the fact that we’re creating a useful product, a green electron and thermal heat that’s being used to create economic value for shareholders, that’s a positive story to tell, especially compared to just burning it once, spinning the turbine and selling the electrons. We think the whole co-gen story, the value creation story, is one that needs to be part of the way people think about carbon utilization and fuel utilization.

The co-generation of fuel, and the way you talk about thermal electron and the products that come out of it, is especially exciting. Do you have any stats on all this?

Of the energy we used last year, 76.3% came from renewable resources. There’s another 3% or 4% on top of that that we actually generated and sold to the grid, creating a greater profit for our shareholders and, probably just as important, green power options for helping utilities meet their renewable portfolio standards.

I can give you another example. I won’t get into the gory details of it, but obviously we’ve got a lot of CO2 emissions. At many of our mills now, we have other companies, private companies, setting up operations on property that we lease to them, tapping into our CO2 emissions and using that CO2 to create carbonic acid, which they use to create what they call precipitated calcium carbonate, or PCC. They then sell that PCC back to us, which we use as a raw material in our pulping process.

This stuff is not rocket science, that’s for sure. Folks at MIT do a lot more interesting things than this. But for us, it’s a pretty great story to tell, that you can take something that is clearly an environmental externality — CO2 — and at least on a limited basis, on site and without having to cart stuff around in trucks, make it better.

I also think these kinds of stories, even if they’re simple ones, encourage people to take more risks and become more innovative and look for the next thing that they can do.

How many mills does Domtar have?

We have 13, nine in the U.S. and four in Canada.

You are, as you put it, an old industry. How old is your newest facility? And how do you go about siting a new facility? Obviously you’d want to be close to your product, your raw material, but how else do you go about choosing a new site?

We probably are operating the newest pulp and paper mill in North America right now, although it depends on how you define “new.” We have the newest greenfield site, for sure. But we also have mills that were essentially rebuilt, and that to us would be new.

I think in North America, it would be hard to imagine anybody going out and building a new greenfield site for pulp and paper. So the question is, where are you going to build the facilities to pursue some of these innovation agendas? I think the answer is found on the sites where these mills already exist. They’re in the wood basket — “the wood basket” is our term —

Like a “watershed”?

Yes. It’s the same idea. There is obviously both an environmental and an economic benefit to moving fiber the shortest possible distance, so if you’re in the wood basket, even if you’re making something other than paper with it, you still want to have those efficiencies. There’s an infrastructure that’s already been established that can handle it.

The other thing, you’ve got communities that are already familiar with and accustomed to this industry, and a lot of these communities are smaller and rural — and in some cases, these communities would be shadows of themselves but for the fact that these industrial facilities actually exist. Unfortunately, a number of these communities have suffered greatly when some of these mills ultimately are shuttered. It’s a community that already knows us and trusts us, and we also, frankly, owe them something, too, which is to reinvest where we’ve been a part of that community.

So you’re bringing this innovative new technology to the old sites — the old mills and the communities that supported them.

Yes. I mentioned that the lignin plant, for example, is in our Plymouth, North Carolina, mill. Our nanocrystalline technology project is at the Windsor mill, which is in Quebec, and there again it’s an old-line commodity mill doing some really exciting things in terms of looking at the molecular structure of crystalline cellulose. Those investments are occurring in the context of the existing old-school environmental footprint.

There are some other things that aren’t quite as futuristic, but I think are just as important. We have a major investment in our Marlboro, South Carolina, mill where we’re focused on making lightweight papers and lightweight papers that are designed for coatings. Even though the overall demand for paper in North America declines annually, there are certain segments where it’s actually growing, and one of them is the need for thermal papers, or very thin-coated papers. That’s actually a good, solid, growing market, and being able to make investments there to make those new grades of paper is pretty important for those communities.

Reproduced from MIT Sloan Management Review