36.2 Business Strategies for Greenhouse Gas Reduction: An Eleven-Year Industry Analysis of Actions and Trends

Patrick Eagan , Engineering Professional Development, University of wisconsin-Madison, Madison, WI
Mark Finster , Engineering Professional Development, University of wisconsin-Madison, Madison, WI
Ron Meissen , Baxter International, Deerfield, IL
Abstract As the global greenhouse gas (GHG) footprint grows to nearly half of humanity's ecological footprint, institutions, regions and nations seek effective strategies and solutions for carbon management. McKinsey, using 2007 IPCC climate data, summarizes many potential societal-level strategies and actions in their 2009 report on Pathways to a Low-Carbon Economy and present macro cost estimates in their global GHG abatement curve that guide regional and global policy. Levers involve buildings, transportation energy efficiency, power, industry, forestry, agriculture and emerging technologies. However, these macro societal perspectives provide insufficient guidance for crafting global business GHG-reduction strategies. While many case studies and sustainability reports describe individual company plans and activities at a given point in time, there is a paucity of insights that inform strategic development and evolution from data-based longitudinal studies across time involving a broad set of global corporations. This research addresses that gap. Multi-national companies operating in countries requiring Kyoto protocols have embarked on both program development and emission reduction strategies. This research uses company data from 1997 to 2007 and a path-analytic approach to describe the evolution of corporate-level organization-wide climate strategies and supporting actions used by multinational climate leaders to strengthen their businesses through reduction of energy-related GHG emissions. Findings provide insights for developing and sequencing strategic actions. The findings provide a data-derived historical framework of greenhouse gas reduction decisions for individual companies, for a cross-sectional examination of a group of companies across an industry at a given point in time, and for the evolution longitudinally both of individual companies and of the industry as a whole over an 11 year time period. Findings describe methodology by which an organization can benchmark its approach for selection, development and progress of strategies against both climate leaders and industry averages. The results also provide a foundation for more detailed climate mitigation planning and actions, and suggest further studies that inform policy and strategy professionals. This research involves an innovative method of analysis that can also be used to study policy and strategy development for other environmental issues, such as water, air pollution, waste management, chemicals, toxins and heavy metals, ozone depletion, oceans and fish depletion, deforestation, biodiversity, desertification and soils. The findings identify well established strategies that have stood the test of time, as well as emerging strategies that are growing in popularity across the industry. The visual depiction of results provides a corporate scorecard or dashboard that indicates both one's own strategic position and rates of diffusion of various activities across an industry. The approach allows for future years of data to be seamlessly integrated into current findings to embed emerging trends into the scorecard. Finally, the analysis presents a framework that allows for correlation analysis with estimates of GHG emissions to study both effectiveness of actions and the time frames required to move from development plans to realized reductions. Large multinational pharmaceutical companies provide an ideal sector for study involving a significant global growth industry with several strong contrasts that provide contextual insights to forces affecting GHG strategy development and evolution. For example, the industry spans three primary geographical regions: Japan, the European Union, and the United States, enabling comparative analysis of regional effects such as regulation and government policy. This research documents publicly reported climate strategies and the GHG emission-reduction activities of 21 large leading multinationals in the pharmaceutical industry during the 11 year timeframe, 1997 to 2007. Data sources involve publicly available information such as Carbon Disclosure Project databases, public environmental reports, websites, and board reports. The data, collected and grouped for each company and year, provide detailed information on strategies, actions, corporate sales, GHG emissions and other related factors. Affinity based content analysis of these sources revealed 20 strategies active within the industry to reduce emissions. Strategies were categorized as either program development or emissions reduction. For example, a common program-development strategy involves an internal management system for GHG emissions, perhaps based on a standard (EMAS, ISO14001). On the other hand, purchase of renewable energy was classified as an emission reduction strategy. Program development strategies involve the establishment of plans, policy, goals and systems for GHG reduction, the evaluation of organizational effectiveness, financial analysis, measurement of emissions, and development of external resources, communicating with stakeholders, partnering with external groups and seeking/receiving external recognition and rewards. Reduction strategies address energy demand reduction actions involving green buildings and energy conservation, power strategies around purchase of renewable power, onsite generation of renewable power, use of methane, high efficiency power generation, and switching boiler fuels. Reduction strategies might also involve participation in cap and trade systems, carbon offset projects and a variety of Kyoto mechanisms. For each strategy, the authors investigated the evolutionary paths each company pursued within this industry. Evolution tracking required formulation of a metric that scored the level of development of each strategy within each company. The metrics helped identify the organizations that achieve deep deployment of a strategy by attaining a strong leadership position with that strategy. This research reveals the depth and prevalence of each strategy across the industry. For example, development of an environmental management system, stands out as the most prevalent strategy with many companies reporting strong sustained development. Several other strategies are also well-established and widely deployed with deep deployment in a significant fraction of the industry. Most well-established strategies relate to program development, with some notable exceptions, such as reduction of energy demand, improvement of energy efficiency, and switching of boiler fuels to either a renewable source or to one with lower carbon intensity. Accounting for both the year at which each strategy was deployed into the industry, the prevalence of deployment, and the depth of deployment, two types of strategies surface: established strategies and emerging strategies. Established strategies tend to be developmental while emerging strategies tend to be emission reduction, with notable exceptions. This industrial analysis charts how the Pharmaceutical sector evolved with regard to GHG reductions. These strategies represent a potential road map for other companies to consider.