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These 3 industries are next in line for sustainable innovation

Being environmentally aware doesn’t have to mean finishing in second place.

By Rebecca Linke  |  October 26, 2017

greencity-article

Why It Matters

Investing in environmental and social issues can be good for your bottom line, but choosing the right issues is key.

To produce one ton of fabric, textile mills use 200 tons of water.

By using sustainable business practices — which MIT Sloan professor Jason Jay defines as “finding ways to align creating business value with creating value for society and the environment” — a program called Clean by Design developed guidelines that saved 33 Chinese mills [PDF] 3 million tons of water, 61,000 tons of coal, and $14.7 million. The mills increased operational efficiency, reduced water and energy use, and decreased waste and emissions.

The key for industries adopting sustainable business practices is to focus on issues strategically important to them.

Take the construction industry. Though many think energy-efficient buildings cost more up front, that is not necessarily true, and lower energy costs can make them less expensive in the long run. People will also pay a premium for green buildings, which command higher rents and have lower turnover rates.

“Research is revealing that when companies take a systematic approach to managing sustainability issues, and they focus narrowly on the most material issues for their sector, they actually do very well from a business perspective,” said Jay, the director of the MIT Sloan Sustainability Initiative.

Here are three industries where Jay expects to see companies using sustainable business practices pull ahead:

Biopharmaceuticals
Biopharmaceutical companies are essentially chemical companies, producing waste that could leach into water, the air, and soil.

Some pharmaceutical companies are making an effort to offset this. Biogen, for example, is completely carbon neutral, and the industry as a whole is becoming more aware of the environmental implications of pharmaceuticals in the environment.

Of course, biopharma is still concerned with its overriding corporate responsibility issues: access to medicine, perceptions of price gouging, and integrity of the scientific process around drugs.

Those problems are paramount, but the biopharmaceutical industry “also has a set of interesting environmental issues,” Jay said, citing antibiotics, which can create antibiotic resistance when introduced into the environment, as one example. Jay said that some companies are creating aggressive targets and investing significantly to meet those challenges.

And, for some, those investments are paying off. In 2015, Biogen and another pharmaceutical company, Allergan, topped Newsweek’s Green Rankings. Recognition like that can help companies recruit top talent in an era when prospective employees look for purpose and positive impact at work, Jay said. Their bottom line stayed strong, also — in the ten years leading up to 2015, both Biogen and Allergan had average annual returns of more than 18 percent.

Information technology
If all our data is moving to the cloud, that must be good for the environment, right?

Not so much. “The cloud is not an amorphous, nonphysical place. It’s a server farm sitting in a building, sucking down tremendous amounts of energy,” Jay said.

If the cloud is one tech issue, e-waste is another. People replace many of their electronic devices every few years — but how many of those people recycle their old phone instead of just throwing it away?

The proliferation of new devices translates into increased mining for raw materials. And with almost 50 million tons of electronic waste expected to be thrown away in 2018, the toxins from the metals used in them can leach into the water and soil.

As is true in biopharma, the issues of tech’s energy consumption and e-waste are “overshadowed by the number one abiding concern in IT, which is about information security, cybersecurity, privacy, and if companies are responsibly managing people’s information,” Jay said.

The IT industry can, however, make progress in both areas. Salesforce director of sustainability, Patrick Flynn, MBA ’12, is championing cloud buyers’ principles for corporations to follow to achieve a cleaner cloud. Also, organizations like the Green Grid are working to help IT reduce its environmental footprint, and people need to be encouraged to recycle their electronic devices, instead of tossing them in the trash.

Companies can help with recycling, also: Apple has a robot, Liam, that disassembles iPhones to reuse the materials inside them — the gold alone recycled from those phones is estimated to save the company $40 million a year.

liam-articleApple's Liam robot disassembles iPhones in order to recycle their components.

Energy
The number one area that really needs to make a change is the energy industry, Jay said.

“The power sector is facing significant pressures from customers, investors, and regulators. There is a big push toward decentralization, digitization, and decarbonization. But it is really unclear how utilities will transform themselves and create a pathway for growth.” he said.

With more than 50 percent of the U.S.’s 6,587 metric tons of greenhouse gas emissions in 2015 coming from electricity production and burning gas and diesel for cars, Jay said it is time for the energy sector to start making changes from within — with help.

To that end, the Sustainability Initiative is working to convene an MIT power summit to help utility leaders figure out business models and policies that will allow energy companies to thrive while producing cleaner energy, Jay said. “The time is ripe for the power sector to step up and proactively lead in the same way we started to get that move in the apparel sector and the construction industry.”