On Saturday night, May 1^st, UMass-Boston celebrated the launch of our new Center for Sustainable Enterprise and Regional Competitiveness (disclosure – I’m the director) and other sustainability initiatives on campus with a gala dinner featuring keynote speaker Gina McCarthy, a graduate of UMass-Boston and currently the EPA’s Assistant Administrator for Air and Radiation. In this capacity, she directs EPA’s policy on climate change.

Gina McCarthy gave a powerful and passionate talk, highlighting the EPA’s achievements on clean air, energy efficiency, and climate change, while pointing to the challenges ahead. She also discussed the important role played by UMass-Boston in her own education and now in training the next generation of environmental leaders. Ms. McCarthy put climate policy in the context of the huge oil spill near New Orleans and federal approval last week for the Cape Wind project. More than two hundred people attended the event in the new Campus Center, which offers stunning views over the Boston harbor.

In order to promote “Green Education for the Next Generation,” UMass Boston also hosted a panel discussion on Friday April 30^th focusing on the prospects for “green jobs,” clean-tech regional competitiveness, the role of “green education” and the value of collaborations among universities, business, and government agencies.

Giving presentations were:

David Cash, Assistant Secretary for Policy in the Massachusetts Executive Office of Energy and Environmental Affairs

Daniel Moon, President and Executive Director of the Environmental Business Council of New England

Kathleen J. Freeman, Director Environmental Affairs, NSTAR Corporation

Robbin Peach, Executive Director of the Collaborative Institute for Oceans, Climate and Security

R. J. Lyman, partner at Goodwin Procter

The event was moderated by Dr. Robert Massie, former director of Ceres and founder of the Global Reporting Initiative. Robbin Peach showed a video about the climate-security connection.

And while we are into shameless self-promotion, here I am on New England Cable News last week for Earth Day, talking about green jobs and green education!

By David L. Levy

Progress toward building a coalition supportive of aggressive action on climate change seems to have become mired in spring mud. In an earlier posting, I discussed the sudden change in climate in the wake of “climategate”, the cold winter in Europe and the US, the defection of BP and other companies from the US Climate Action Partnership, Scott Brown’s upset senate victory in Massachusetts senate, and rise in climate skepticism. Recently the mass media have begun to look at the reasons for the rise in skepticism. Ever aware of their own importance, they have turned the spotlight on the gulf between weather forecasters, who are mostly meteorologists, and climatologists. Even the Colbert Report joined the fun with a “weather forecaster vs. climatologist” confrontation.

A Columbia Journalism Review article on this topic cites an Emory University survey of  TV meteorologists in which 29% of respondents said that global warming was a scam, and only 24% percent believed that humans were responsible for most of the change in climate over the past half century. A more recent piece in the New York Times pointed to a study in the January 2009 newsletter of the American Geophysical Union, which found that while nearly 90% of some 3,000 climatologists who responded agreed that there was evidence of human-driven climate change, only 64% of meteorologists agreed with the statement.

In trying to explain this gap, most of the blame has been placed on the lack of expertise and scientific training of weather forecasters, few of whom have a graduate degree. Joe Romm commented that: “Asking a meteorologist to opine on the climate is like asking your family doctor what the chances are for an avian flu pandemic in the next few years or asking a mid-West sheriff the prospects for nuclear terrorism.” My business school background, however, leads me to ponder explanations that are rooted in some of the more subtle mechanisms of organizations and institutions.   

This divide matters because weather forecasters have far greater media access and influence over the public than climatologists, due to the nature of their professions. Joe Bastardi is an influential meteorologist with AccuWeather who frequently editorializes against climate change on the television channel. Anthony Watts, a retired California weather forecaster, runs the popular climate-skeptic blog Watts up with That?, though he also claims to drive an electric car and have solar panels on his roof. Climatologists, by contrast, are mostly based in universities and research centers, and their highly technical publications in academic journals are difficult for non-specialists to comprehend and receive little press coverage. Anthony Leiserowitz, director of the Yale Project on Climate Change and an author of a June 2008 on public opinion, argued that “Most people are not interested in digging through the scientific literature, and in that situation trust becomes an enormous factor.” And the study showed 66% of people trusted television weather reporters on climate change, but very few knew any climate scientists personally.

My research on the oil and auto industries’ responses to climate change in Europe and the U.S. sparked my interest in the role of scientists in shaping corporate attitudes and strategies (see my academic papers on the oil industry with Prof. Ans Kolk  and the auto industry with Prof. Sandra Rothenberg). We found that American companies, who had been subject to stringent clean air regulation for years, tended to rely on their internal corporate scientists as their primary source of information on climate change. Indeed, they sometimes served as corporate filters for external information, selectively disseminating and commenting on climate science reports. These corporate scientists were frequently experts in atmospheric pollution and smog formation, not climate change, but were seen as the most accessible and reliable sources of information. In Europe, by contrast, the oil and auto companies didn’t have strong internal expertise, so the companies would rely on independent university-affiliated scientists, who usually hewed closely to the mainstream IPCC view.

Almost all the atmospheric scientists with major American companies were climate skeptics, with the notable exception of Ruth Reck at General Motors, who worked tirelessly in the mid-1980s, and against considerable internal resistance, to put climate on the agenda. The tendency for corporate scientists to be climate skeptics is a complex phenomenon. As with the TV weather forecasters, they have expertise in a closely related fields, but not specifically in climatology, perhaps lending them more trust and credence than warranted.  Unlike TV forecasters, many corporate scientists do have doctorates. After many conversations, my impression is that the key issue is not competence but the subtle socialization processes that affect a scientist’s views and very identity. As air quality scientists, part of their job is to interpret the evidence in a way that minimizes impacts on the environment and human health. They are colleagues with business managers who have traditionally seen environmental regulation as a threat to profits, even to the American way of life.

This doesn’t mean that the scientists deliberately distort the science – atmospheric and climate science does have areas of uncertainty and conflicting opinion. People working in fossil-fuel dependent sectors (and not just the scientists) shape their interpretations to fit organizational interests and norms, and to gain acceptance from colleagues. Psychologists have long observed that people are averse to “cognitive dissonance”, holding conflicting ideas simultaneously. Similarly, conflict between our behavior and ideas is uncomfortable. So people who work for a car or oil company can reduce their internal conflict, or dissonance, by embracing climate skepticism. In fact, in our research on the auto industry we found that the scientists and engineers working on advanced energy efficient or all electric vehicles were quick to embrace climate science – they could believe that climate change was a problem because they were working on a solution, and they were part of team who shared these views.

Weather forecasters and climate scientists cannot escape the institutional and social pressures we all face as workers in organizations and participants in wider professions. One doesn’t have to be a climate skeptic to appreciate that there are subtle pressures for conformity, as well as some financial carrots, within the global climate science community. Climategate has not undone the consensus on climate change, but it has cast some interesting light on the politics of science. While climate scientists are mostly employed in universities and research institutes, weather forecasters work in private media corporations, many of which are part of larger news and entertainment conglomerates.

Media companies don’t share the same interests as oil and coal companies, of course, but writers such as Robert McChesney and Ben Bagdikian have argued persuasively that the major media corporations tend to see their interests aligned with business in general, due to their dependency on advertising, ownership links, or directors’ ties, and we know where the US Chamber of Commerce and National Association of Manufacturers stand on climate change, despite a few high profile defections from the former last year. This perception of interests in media firms tends to percolate down to the editorial level. Indeed, weather forecasters are more akin to journalists in their professional orientation than climate scientists, and Max Boykoff has written extensively about journalistic bias and media portrayals of climate change.

Weather forecasters are also predisposed to mistrust climate science because their understanding is rooted in meteorology rather than climatology. As the New York Times article notes, meteorologists know that weather is a chaotic system subject to the proverbial butterfly effect: its evolution is highly dependent on initial conditions. Weather forecasts rely on computer simulations that inherently have limitations on spatial resolution and starting conditions, so that their accuracy rapidly diminishes after five or six days. Meteorologists frequently express skepticism that climate models, which are based on very similar principles, can provide accurate information for the coming century. Yet meteorologists, with their short term orientation, also tend to assume that longer-term climate patterns are stable. These are not just individual biases, however – as meteorology has evolved as an organized profession, these views have become more institutionalized as a shared perspective.

Climatologists are working with phenomena that operate on a different scale, and are more concerned with the prediction of long-term patterns and mean temperatures than whether it will rain in Boston on a particular date in 2090. Climate scientists are quick to acknowledge that the climate system itself is chaotic over millennia, as greenhouse gases interact with longer term shifts in ocean circulation, precipitation, ice and forest cover. But the next few decades for climate scientists are like the next few days for weather forecasters – the short term for which models are useful, if not always accurate.

Dr. Renato J. Orsato is Senior Research Fellow at INSEAD Social Innovation Centre, France. He has been a researcher, educator, and consultant for the past 15 years.

Review by David L. Levy

From time to time I’ll be reviewing books related to business and climate change that might be useful for academics and businesspeople. There are quite a few more general books on environmental management and business sustainability (Stead and Stead’s Management for a Small Planet is a classic, now in its 3^rd edition). However, there are very few books that focus on climate change right now, though this market is likely to take off as climate change goes mainstream in business and colleges offer more courses on the subject.

Dr. Orsato’s Sustainability Strategies: When Does it Pay to be Green? is not about climate change per se, but its focus on business strategy was intriguing and close to my own interests. The frameworks offered are directly applicable to clean energy markets, and there is a chapter on eco-efficiency, with a section on carbon credits, and a chapter with an extended discussion of the auto industry.

Too many writers gush effusively about the profits to be made by being green. While preaching about “win-win” opportunities has served a useful role in creating a positive, even enthusiastic attitude toward clean energy investments among some businesspeople, investors, and policymakers, it does not always make for sharp, critical analysis. Dr. Orsato makes clear in the first chapter of his refreshingly cogent and dispassionate book that it’s not easy being green. There is always some low-lying fruit around, but once the easy picking is gone, the hard task is to craft a longer term sustainable strategy that has both economic and environmental benefits. Orsato observes “the scope for win-win scenarios is narrower than many wish them to be. Out of the vast array of actions taken by firms, only a few will be profitable, generate competitive advantage or create new market spaces.”

Managers have to take strategy seriously if they want to pursue green goals, as it can be difficult to appropriate or “monetize” public benefits, and competition can quickly erode competitive advantages. Orsato illustrates this point with a mini-case on how Tetra Pak tried to increase the recyclability of its retail drinks containers, which contain many thin layers of different materials, from metals to plastics and paper. The problem was that neither its direct customers, large food and drinks companies, nor final consumers are very concerned about recycling issues. Tetra was only able to justify its investment in expensive plasma technology based on the value of the aluminum it could extract and recycle.  

Strategy is about finding, exploiting, and defending sources of competitive advantage. Orsato gives us a brief review of the two major concepts of strategy, Porter’s positioning school and the Resource Based View (RBV). For Porter, competitive advantage (i.e. above normal profits, or economic rents) derives from marketplace positioning, in terms of pricing, branding, and product features. To endure over time, this competitive advantage would have to be protected by market structures such as barriers to entry or economies of scale. From this perspective, a number of firms in the same sector or business cluster can enjoy above normal profits. The RBV, by contrast, sees competitive advantage more as a firm-level package of unique resources and capabilities that take a long time to acquire and are difficult to copy. This perspective emphasizes internal processes and organizational competencies rather than external market structures.

Orsato draws from both schools of strategy to give a framework for thinking about sustainability strategy, a classic business-school 2×2 matrix for competing in existing markets. Orsato also offers a fifth strategy, the Blue Ocean or Sustainable Value Innovation (SVI) boldly go where no business has gone before approach. The book is structured around five chapters that go into more detail for each strategy.

Orsato is wary of the first strategy, eco-efficiency based on lowering costs in internal operations. He notes that efficient management of costs and risks is really a part of operational effectiveness, not strategy. Everyone will soon be doing it, so it becomes a license to operate rather than a longer term source of value. I would point out, however, that companies like Walmart and Toyota have developed long term strategic advantages from their systemic “lean production” approach to reducing costs (and improving logistics, quality). In metals, chemicals, cement, and other industries there is probably room for reducing energy and materials costs based on proprietary technologies and processes.

The chapter on Beyond Compliance strategies delves into how companies can spin their investments in greening internal processes into external reputational advantage. Orsato suggests that businesses can do this by joining Green Clubs, for example, signing up to voluntary industry/NGO standards such as GRI, ISO14000, CDP, or joining a more exclusive club such as Ceres’ BICEP or Pew’s BELC. Firms can reap value in terms of brand and reputation, as well as influencing standards and regulations, though Orsato suggests that the primary value is defensive, in deflecting criticism and antagonistic campaigns, and deterring regulation. For a more detailed view of Green Clubs, I’d recommend The Voluntary Environmentalists by Aseem Prakesh and Matthew Potoski. They discuss, for example, how club joiners might be the dirtiest companies looking to gain a free ride from club membership, or clean companies looking for recognition but without new commitments.

Eco-branding, the third strategy, is based on differentiation in the final product market. The chapter dwells on various types of eco-labels, such as the FSC labels on wood products or carbon labels, though Orsato acknowledges that there are significant methodological problems in developing reliable and meaningful labels, and consumers are confused or indifferent. Stephen Stokes has similarly argued in Sticker Shock that developing these labels can be extremely expensive, add little value for consumers, and not be the best source of process-level information for management to cut costs (back to strategy 1). In general, Stokes points out that it’s hard to build green brands at the product level, aside from notable exceptions such as Toyota’s Prius.

A significant gap in this chapter is that there is little discussion of differentiation strategies for products with obvious green credentials, from hybrid cars to compact fluorescent bulbs to advanced batteries. A123’s recent very successful IPO points to the capital market premium currently available for well differentiated products in the low-carbon space, though the long-term leadership of lithium batteries for storage, and of any particular lithium company, is highly questionable. Tom Konrad has written one of the best analyses of the storage sector one of the best analyses of the storage sector explaining his skepticism. My point here is that serious strategic analysis at the sector or company level requires very detailed consideration of technologies, costs, regulations, commercialization trajectories, and other factors. The strategic frameworks in Orsato’s book are a useful starting point, but are too generic for investors and industry specialists.

The chapter on environmental cost leadership discusses, amongst other examples, how Brazilian biofuels have established a strategic advantage over corn-based ethanol, though their exclusion from the US market by tariff barriers should probably have received more attention as a demonstration of the importance of non-market strategy. Similarly, Boeing and Airbus are competing to provide the lowest operating cost planes to airlines, though contracts are frequently influenced by national political factors.

The most provocative chapter is that on Blue Ocean strategies, or what Orsato terms Sustainable Value Innovation (SVI) in a rare spasm of consultantspeak. The point of SVI is to avoid competition by sailing into clear blue ocean, entirely new market spaces. For Orsato, SVI redefines the boundaries of an industry, often crossing public-private lines. It’s a systems-level strategy that “requires changes in both the nature and technology of products and in the logic by which systems of production and consumption are organized.” Sounds like a very tall order, and indeed it is.

Within the context of a case study of the auto industry, Orsato illustrates the concept by arguing that the three main current paths to low-carbon transportation, small light cars, biofuels, and hybrids, are not SVI. They represent marginal, incremental improvements to products that compete within the same parameters as existing products. Instead, Orsato examines SVI using the examples of Zipcar, Velib cycles, and Shai Agassi’s Better Place project to provide a replaceable battery infrastructure for pure electric vehicles. These companies provide mobility services and leverage government to overcome system level obstacles. For consumers who might balk at the high cost of EV cars, a battery leasing service packaged with a regional information system to assist drivers could represent a market transformation, and one with built in barriers to entry to protect the first mover. While these ventures clearly represent radical restructuring of markets, I suspect that these opportunities are very few, and that blue oceans can be infested with sharks. And where is there really any market space devoid of competition? Consumers will still compare the price and convenience of Velib versus the metro, Zipcar versus car ownership.

Overall, I found the book reasonably well written and accessible, without too much jargon, and the case studies are well chosen. It provides useful frameworks, but is far from a “how to” manual. The grounding in strategy provides a firm basis for the frameworks offered in the book, though I was looking for a deeper and more extended discussion of strategic insights in relation to clean energy. For example, auto companies struggling with the question of how much to invest in hybrids and EVs have to consider not just the marketplace but the extent to which their own “core competencies” lie in vehicle, design, and assembly, and not just a specific drivechain modality. Similarly, the RBV school of strategy suggests that oil companies might find that their core competencies extend better to biofuels than wind or solar, explaining the recent pullback by BP and Shell (see Back to Petroleum?). Nevertheless, there is no clear answer to the question of whether oil companies can, in fact, develop new competencies in clean energy over years of investment and organic growth, or whether they should wait, as Exxon seems to be doing, for technology risk to decline and then seek to acquire clean energy assets in the capital markets. In the meantime, this is one of the best books available on strategic management of sustainability.

Governor Deval Patrick of Massachusetts announced September 1st nearly $1 million in  grants for educational programs that will enhance training for the state’s burgeoning clean energy industry. This is good news for climate change, for Massachusetts, and particularly for me, because a group I’m leading at the University of Massachusetts, Boston was awarded $187,000 for a program entitled Business and Professional Education for the Clean Energy Economy. The project will be coordinated through the Center for Sustainable Enterprise and Regional Competitiveness (SERC) in the College of Management at the University. While other grants focus on vocational training and “green and blue” collar jobs, such as installation and maintenance of renewables and efficiency, our program builds higher education capacity for the rapidly expanding “green and white” collar job opportunities in a low-carbon economy.

The transition to a low carbon economy will entail radical technological and market change that promises to transform entire industries. There is an urgent need for a major education initiative to prepare for and manage the impending transition. Clean energy jobs have been growing at a rate of 9.1% in the US over the past decade, compared with only 3.7% for traditional jobs, according to a report issued this June by The Pew Charitable Trusts. Pew identifies five categories of the clean energy economy: (1) Clean Energy; (2) Energy Efficiency; (3) Environmentally Friendly Production; (4) Conservation and Pollution Mitigation; and (5) Training and Support. Although 65 percent of today’s clean energy economy jobs are in the category of Conservation and Pollution Mitigation (mostly recycling and wastewater treatment) but three other categories – Clean Energy, Energy Efficiency and Environmentally Friendly Production – are growing at a much faster pace.

Some of the sectors, such as windows, insulation, and water treatment, are not exactly what comes to mind when we think about clean tech, more old-economy than high-tech solar. But the growth in green job opportunities will extend well beyond renewables into electronics, software, financial services, and education (see this comprehensive list of reports on green jobs in the US.). Organizations of every type will be seeking “green and white” collar professionals with appropriate expertise. In fact, two new studies on the green labor market argue that an important prerequisite for employees in the new economy is general education in sustainability concepts and climate in particular.

My research with Dr. David Terkla revealed that in the Boston region there are large numbers of software and electronics firms capable of providing the sensors and controls for power management and energy efficiency, for smart buildings or connecting renewables to the grid. Most of these companies don’t currently identify themselves with clean tech. A recent Marketwatch story pointed to energy services and controls, often part of much larger companies, as important beneficiaries of the clean energy economy. Honeywell’s Automation and Control Solutions division, for example, which accounts for 38% of revenue and 32% of operating profits, provides environmental controls for buildings.

The clean energy economy will generate a large number of managerial and administrative jobs in non-energy sectors. A majority of large businesses in the US and Europe already produce annual sustainability and social responsibility reports, and are extending this to the climate issue. The proposed EPA guidelines on mandatory carbon reporting in the US, the advent of carbon trading, and voluntary carbon management and disclosure will affect almost every business. The need to track, manage, and report carbon across the value chain will create new demands on corporate management and open up large new markets for service firms, particularly consulting, legal, software, and accounting. eQuilibrium Solutions Inc., a Boston area software firm specializing in carbon and energy efficiency management software was just bought out by EnerNOC, indicating the buzz of activity in this field. Meanwhile, financial firms are becoming more directly engaged in carbon trading, financing clean energy, and assessing the impact of carbon risk on assets and loan portfolios.

Environmental skills and knowledge are increasingly valued in the employment market. In a recent survey titled “The Engaged Organization: Corporate Employee Environmental Education Survey and Case Study Findings” by the National Environmental Education Foundation, 65% of businesses surveyed said they value environmental and sustainability knowledge in job candidates and 78% said that that value will appreciate as a hiring factor in the next five years. Carbon footprinting, emissions reduction, and energy efficiency were key areas identified. Clean energy-related jobs also have better conditions than those in other sectors. A recent survey of 1200 clean energy professionals indicated that they enjoyed higher salaries and more job security than workers in other sectors.

The employment impact of a transition to a low-carbon economy will reach beyond business to affect government and non-profit organizations. Policymakers and planners will increasingly need to be familiar with market-based and regulatory mechanisms for addressing greenhouse gas emissions from transportation, power, industry, and buildings. Demand is growing rapidly for environmental and climate-related education at all levels and for the teachers with the expertise to deliver these programs. Despite the current budgetary environment, this is one area where our university will be looking to hire in the next few years.

The initiative at the University of Massachusetts, Boston, will provide the workforce with the skills and knowledge needed to play more effective roles as professionals, policymakers, and business managers. The College of Management will collaborate with the Department of Environmental, Earth, and Ocean Sciences to develop new interdisciplinary degree and certificate programs at the graduate and undergraduate levels that build on existing campus strengths in the science, business, politics, economics, and policy dimensions of clean energy and climate change. We will also extend and develop existing programs to bring a sharper focus on clean energy and the workforce skills demanded in a low-carbon energy efficient economy. The core programs are being designed for professionals seeking focused, compact, and low-cost career development, and will be valuable for mid-career professionals as well for degree students seeking a unique qualification.

I’m proud to lead this initiative to UMass-Boston, a public university capable of delivering high quality, accessible, and cost effective education to a wide range of traditional and non-traditional students. The university has a strong commitment to diversity, serving disadvantaged communities, and promoting regional economic development. The certificate programs are part of a broader environmental and clean energy education initiative at UMass-Boston, including the development of a Professional Science Masters program, which will support a cluster of clean energy capabilities in the state that will increase the competitiveness of the region, increasing investment and employment with clean energy firms and related service sectors.