September 2010

HP’s green evangelist

September 29, 2010

Recycling electronics at HP

Hewlett Packard, the world’s biggest technology company, ships 3.5 products per second.* That’s a lot of printers, cartridges, computers, servers, handheld devices, etc. No tech company–not even Google–is more important to the health of the planet.

Fortunately, HP takes sustainability seriously. HP topped Newsweek’s environmental ranking of 500 big U.S. companies, as well as a similar (but less credible) list assembled by Corporate Responsibility magazine. It has set tough goals for itself around greenhouse gas emissions, energy efficiency of its products and recyling.

“It’s in our company’s DNA,” says Engelina Jaspers, HP’s vice president of environmental sustainability. “This has been underway for decades.”

Engelina Jaspers

Engelina has been the steward of HP’s environmental efforts for just about a year; she has been with HP for 12 years and before than worked for about 15 year at Eastman Kodak, mostly in sales and marketing.  We had lunch today in Washington to talk a bit about where the company has come from, where it’s going and how an executive who commands just a handful of executives can help move a company that generated $115 billion in revenues last year.

She’s right about the company’s DNA. Despite some big-time stumbles in recent years–the embarrassing tenure of CEO Carly Fiorina and the even more embarrassing exit of CEO Mark Hurd–HP has been a model of corporate responsibility since it was started after World War II by Bill Hewlett and Dave Packard. Their path-breaking “HP Way” corporate philosophy says, among other things, that companies need to be about something bigger than generating short-term profits. As a Stanford magazine profile put it:

“I think many people assume, wrongly, that a company exists simply to make money,” Packard told an HP management training session in 1960. “While this is an important result of a company’s existence, we have to go deeper to find our real reason for being . . . . A group of people get together and exist as an institution that we call a company . . . to do something worthwhile — they make a contribution to society . . . . The real reason for our existence is that we provide something which is unique.”

HP, for example,  was a pioneer in electronics. It built a  recycling facility in Roseville, CA, (pictured above) in the mid-1990s, long before the rest of the electronics industry took recycling seriously. (See my 2007 FORTUNE story, The End of Garbage.)  There, HP disassembles old computers and printers, and extracts valuable metals that, at least in theory, pay for the operation. “Things come in as e-waste,” Jaspers says. “They go out as commodities.” Even before that, HP recycled ink cartridges. Today, at a plant near Montreal operated with a partner called the Lavergne Group, HP is using a closed-loop plastic recycling system that incorporates post-consumer recycled plastics – from sources such as water bottles and ink cartridges – into the manufacture of new inkjet cartridges. Of course, as HP takes responsibility for its products at the end of their life, the company increasingly designs them in a way that makes it easier for products to be reused or recycled. HP has said it will use a total of 100 million pounds, cumulatively from 2007, of recycled plastic in HP printing products.

A target like that sound good, but it’s hard to know how meaningful it is, without context; it would be better for HP to commit to recycling a percentage (increasing annually) of all the electronics that it sells.

Other HP goals, fortunately, are more clear cut. The company says it will:

Reduce the energy consumption and associated GHG emissions of all our products to 40 percent below 2005 levels by the end of 2011.

Reduce  GHG emissions from HP-owned and HP-leased facilities 20 percent under 2005 levels by 2013 on an absolute basis.

Meeting the greenhouse gas goal will be challenge, Jaspers told me, because it requires sharply reducing emissions even as the company keeps growing. Among other things, HP has installed solar panels on a facility in San Diego (through a deal with SunPower) and it built a super-efficient data center in Wynward in the UK. (See the video below for more.)

So how does Jaspers “manage” all this, along with the research into sustainability at HP Labs, the greening of HP’s supply chain, environmental reporting and marketing?

Actually, she doesn’t. She’s got a staff of just about 12 people and mostly operates by coordinating and cheerleading others in the HP ecosystem. A big goal for the year ahead, she told me, is “embedding sustainability even further into our organization, especially with the companies we’ve acquired.” In recent years, HP has bought 3Com, Palm and EDS. She’s bringing in outside environmental experts to talk to the top brass, among other things.

When I asked whether any of the top execs at HP has a special passion for sustainability, Jaspers told me, in effect, that it doesn’t really matter to her whether an executive loves to hike or has a personal commitment to green issues. Better, she said, to focus on the business case, on the way that sustainability can drive revenues, reduce costs or spark innovation.

“I want to be a business person first, who brings in sustainability as key tool,” she said.

“It’s not about getting your CEO passionate about sustainability,” she went on. “It’s about connecting sustainability to your CEO’s passion.”

Speaking of the CEO, HP’s environmental efforts conspicuously lacked visible  support from the top when Hurd was in charge. IBM, Google and GE have all done a better job talking publicly about why sustainability matters. When HP gets a new CEO, it will be interesting to see if the company’s marketing around sustainability can become as good as its practices.

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*Not literally, of course–who would want 0.5 of a printer or computer?

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P&G: A bold green vision but…

September 27, 2010

Procter & Gamble, the world’s largest consumer products company, today unveiled a bold new sustainability vision.

Don’t start the cheering yet.

Yes, the company eventually aims to power of all its operations with 100% renewable energy, to use 100% recyclable or renewable materials in all its products and to have no waste from the manufacturing or use of its products end up in landfills.

The vision is unimpeachable.

But the path to get there is not so clear.

And the reason to withhold applause? In the next decade or so, if P&G continues to grow, its environmental impact is more likely to get worse that it is to get better.

This is a fundamental conundrum for consumer goods companies with traditional business models and even the best of intentions: The more stuff they sell (and of course they want to sell more stuff), the more they pollute.

What P&G does matters, a lot. It’s an $80 billion company (annual revenues, for the year ended June 30). Its brands include Tide, Pampers, Crest, Gillette, Bounty, Cascade, Oral-B, Pepto Bismol, Ivory, etc.  It reaches 4 billion–4 billion!–consumers around the world and aims to reach 5 billion in the next five years. And like General Electric, P&G is an executive training machine; many ex-P&Gers (Meg Whitman, Steve Ballmer, Steve Case, many more) have gone on to do big things.

You can read a straightforward account of the P&G sustainability plan here at Greenbiz and a thoughtful (and favorable) analysis from my friend Joel Makower here. This is the latest iteration of P&G’s sustainability commitment, and the company has some meaningful accomplishments, as Joel reports. Just the past six months, P&G has:

introduced to the U.S. its Future Friendly campaign, born in Europe, a multi-brand and multi-platform effort to raise awareness about greener products and greener practices;

created a high-profile panel of sustainability experts to advise on its Future Friendly efforts;

launched a supplier scorecard to measure their environmental impacts;

reformulated a bestselling shampooto reduce toxins;

announced concentrated versions of powder laundry detergentsthat significantly reduce packaging and energy use; and

introduced sugarcane packaging to three of its shampoo and makeup brands.

Another good sign: P&G’s chairman and chief executive, Bob McDonald, joined a conference call with Len Sauers, P&G’s sustainability chief, to announce the new vision. Having the CEO put his stamp on the message tells everyone at P&G that sustainability matters to the company.

So why not cheer?

First, these are all visionary long-term goals. No target dates are attached to them.

Second, P&G has been slow to develop this vision–which is strikingly similar to the the one laid out by Walmart in 2005. Indeed, while comparisons are inevitably imperfect, my impression is that when you measure P&G against Walmart, the world’s biggest retailer, or GE, the world’s most admired industrial company, or IBM, whose Smart Planet work is path-breaking, P&G is moving more slowly and timidly than any of those iconic FORTUNE 500 firms. It’s also trailing innovative competitors like Method (See Revolution in the laundry room) and Seventh Generation. More evidence that P&G is following, not leading? P&G’s Tide, the market leader, trailed Unilever’s All in the race to shrink laundry detergent packaging.

Third, and most important, P&G is mostly talking about eco-efficiency, as Sauers, to his credit, acknowledges. To pick just one example, P&G’s interim goals for 2020 include a commitment to reduce “packaging by 20 percent per consumer use.” This won’t be easy, I’m sure, and it’s admirable. But….let’s assume that P&G grows by a not-unreasonable 25% over the next 10 years. The company will then be producing more packaging, not less, than it does today.

P&G also tends to measure its reductions of  greenhouse gas emissions and water usage on a per-unit, rather than absolute basis. Strictly from a business standpoint,  this makes sense because as the company buys and sells businesses, it needs a consistent metric against which to define progress. But, as I wrote back in 2008 at Fortune.com with respect to P&G (See Buy Toilet Paper, Save the Planet):

Relative efficiency doesn’t matter to the planet. What matters is how many tons of greenhouse gases are emitted, and most scientists say those numbers need to first stabilize and then go down, dramatically.

Like most companies, P&G is still wrestling with the challenge of how to grow revenues and limit its footprint at the same time.

Given that, let’s hope that P&G’s talent for innovation will be focused on making consumption more sustainable. This page on P&G’s website offers a few examples, some impressive, most not so. If P&G can persuade more consumers to use Tide Coldwater or, in Europe, Ariel Cool Clean, both of which eliminate the need to heat water for laundry, we’ll all be better off. Opportunities around sustainability also lie in emerging markets, from which much of P&G’s growth will come.

As Len Sauers told Joel & Greenbiz:

I have a firm belief that all issues of sustainability will be solved by innovation. And at P&G, one of our core strengths is innovation, so as we go down this path to tackle these issues that the world is facing, I believe it’ll be our innovative solutions that are very helpful there. I see this as business opportunity for the company.
At least P&G understands that eco-efficiency, by itself, will not get us where we need to go.

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Why 3M is unique

September 26, 2010

What kind of company is 3M? Yes, I know that 3M is a 108-year-old manufacturing company, based in St. Paul, Minnesota, which brought in $23 billion in revenues last year from  a range of products including abrasives, adhesives and, famously, Post-it notes. Remarkably, 3M makes 55,000 different products.

But what’s the core business of the company? What is its unique advantage? What is its purpose?

When I visited 3M last month to prepare a story for FORTUNE, George Buckley, the CEO, waxed enthusiastic about the firm, as you would expect a chief executive to do. “There is no company like it in America,” he told me. “There is no company like it in the world.”

That sounds like hype, but I think he’s right. 3M is not a conglomerate like GE or United Technologies, which own a variety of industrial businesses that operate, for the most part, on their own. Nor, like Apple or Sony, is it a technology company that focuses on a single industry or two, i.e., consumer electronics and entertainment. Instead, 3M — a supplier to all of those companies– is a set of businesses organized around a big, busy and intellectually productive R&D lab which researches new technologies and processes and then develops them into products. The company’s purpose, as best as I can tell, is to invent useful new things. Its unique competitive advantage is a culture that fosters innovation.

My story, 3M’s Innovation Revival, is in the current issue of FORTUNE. Here’s how it begins:

3M is everywhere. That’s the point George Buckley, the chairman and CEO of 3M, is trying to make as he talks about his favorite subject, inventing things. Last year, he says, “even in the worst economic times in memory, we released over 1,000 new products.”

As if on cue, Buckley’s new iPhone rings, showing a photo of his daughter. “Daddy’s in a meeting,” he says, and hangs up.

“I’m told there’s some 3M inside that phone,” I say. Buckley replies, “There’s lots of 3M inside.” He can’t say exactly what 3M (MMM, Fortune 500) gadget is in the iPhone; Apple’s skittish about such things. But point well made: 3M is everywhere.

Apple–and many other companies–couldn’t do what they do without 3M. The St. Paul company produces a mind-bending 55,000 products. Some of them you know — Post-it notes, Scotch tape, Dobie scouring pads, Ace bandages, Thinsulate insulation. But most you don’t, because they’re embedded in other products and places: autos, factories, hospitals, homes, and offices. Scientific Anglers fly-fishing rods? Nutri-Dog chews? They also come from 3M.

The story goes on to argue that 3M’s ability to innovate slipped some under its prior CEO, Jim McNerney, who came from GE and went on to Boeing. McNerney is, by all accounts, a great leader and he brought needed discipline and cost controls to 3M. But Buckley, an British-born engineer, better grasped the 3M culture and its importance, and the company has become more inventive since he was hired at the end of 2005. [click to continue…]

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How electric cars will save you money

September 23, 2010

If you are someone who watches your dollars and cents, you probably don’t own a plug-in hybrid. Sure, they deliver good gas mileage but it’s not good enough to offset the higher sticker price needed to cover the costs of the battery. (That’s why I own a Honda Fit.) Cars like the Toyota Prius and Honda Insight are expensive ways to say, ‘I’m green.’

Nissan Leaf

Electric cars are another story, and that’s why the arrival of the Nissan Leaf and the Chevy Volt in just a few months could become a watershed moment for the auto industry, as well as for the environmental movement. Unlike the Prius, the Leaf and Volt are not aimed at the early-adopter, eco-conscious, well-to-do niche buyers on the coasts and in places like Amherst, Ma., and Ann Arbor, Mi. They are being built for the mass market.

The economics make all the difference.

That, at least, is my takeaway from a discussion about electric cars held earlier today at a Washington Post Live event called Energy Now. (Video will be posted on the site, the newspaper says.) The panel was stacked with electric-car enthusiasts–Tony Posawatz from Chevy, Carlos Tavares of Nissan, David Crane of NRG Energy, David Vieau of battery-maker A123 Systems and a lone skeptic, Alan Crane of the National Research Council. But with the exception of Alan Crane, they all argued that electric cars will be not only fun to drive, not only convenient (because you don’t need to drive to a gas station to refuel) and not only good for the climate and for U.S. energy security, but also cheaper to own over the life of the car.

Chevy Volt

That’s essentially because (1) electric car engines are more efficient than internal-combustion engines and (2) generating electricity from a big coal, natural gas or nuclear plant is more efficient than burning gasoline in millions of cars.

This isn’t a new argument. I’ve heard it from people like David Sokol of Berkshire Hathaway and BYD, and from Shai Agassi (See Electric cars: all systems go) but David Crane’s explanation today laid out the math in clear terms.

Describing NRG’s plans in Houston (see Why the Petro Metro wants electric cars), Crane said the NRG-owned utility company, Reliant Energy, is working with Nissan and plans to offer Leaf owners an all-you-can-eat model for buying electricity to power the car. Here’s the selling proposition:

First, NRG would buy and install a Level 2 car charger for the home. Those are worth $1,500 to $2,000, Crane said, and they can fully charge a Leaf, which has a range of about 100 miles, in four to eight hours. “You come home from work, you plug it in, and in the morning it’s ready to go again,” he said. Second, NRG will build a network of charging stations around the city of Houston. “At no point will you be more than five miles away from a fast charge,” he said. )The business model for sustaining the stations remains uncertain.)  Third, NRG will offer  unlimited mileage for three years at a price still to be determined, but estimated at $70 to $80 a month, added to the utility bill. After the three years, the price would drop because by then NRG will have recouped the cost of the charging station and would only need to pay for the electricity.

So how does the math look? At $80 a month, fuel costs for the Leaf would be $960 a year. By comparison, assume that you drive a conventional car 15,000 miles a year and get 20 mpg. You’ll buy 750 gallons of gas. At $2.58 per gallon, the current average price on the Gulf Coast, you’ll pay just under $2,000 a year.

You can challenge my assumptions, but that $1,000 a year in fuel savings will over time offset the upfront cost of the Leaf, which is roughly $25,000 after a federal rebate in most places and $20,000 in California which offers a state rebate as well. If gas prices rise, the deal looks sweeter. It looks better yet if, as seems likely, the costs of batteries (and the sticker price) falls.

Then there are the psychic benefits. A123′s Vieau said the company has already hired 300 people at the battery-making plant it just opened in Livonia, Mi., and expects to hire many more. “We’re shifting dollars spent on oil overseas to create jobs at home,” Vieau said.

People who care about the environment, meanwhile, can take pride in the fact that they are driving cleaner cars.

“American’s want to make a difference if they can,” NRG’s Crane said. “Look at the organic food business.”

Now, a couple of caveats: Today’s electric car business is heavily subsidized, it must be noted. Buyers get tax breaks. Battery maker A123 got a $249-million stimulus grant, a federal loan guarantee and state subsidies and Nissan was given a $1.4 billion energy department loan guarantee to retool a plant in Smyrna, Tennessee. GM, of course, got bailed out.

The second caveat is that it will take years for electric cars to have a major impact. The Chevy Volt will be available in only seven states at first, Posawatz told me that Chevy will make only “thousands” of the cars in the first model year, and “tens of thousands” after that. “If the demand is there, we’ll keep building more,” he said.

Nissan will make about 60,000 Leafs in  Japan during 2011, for the world market. Nissan had been taking pre-orders for the Leaf on its U.S. website, but stopped today because 20,000 have been ordered. The company will be able to build more starting late in 2012 when it opens the Smyrna plant, which has a capacity of 150,000 units a year.

To put that in context, there are more than 250 million cars on the road today in the U.S.

Still, I received an interesting 62-page report earlier today from HSBC Research called Sizing the Climate Economy. (If you Google it, you can download a PDF.) Its best guess is that the market for low-carbon vehicles — essentially, electric cars — will grow to $473 billion worldwide by 2020, making low-carbon transport business a bigger investment opportunity than low-carbon energy.

Electric cars, in other words, are going to be a very big deal.

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Global tourism: Saving the planet?

September 20, 2010

Richard Branson

Can the travel and tourism industry help solve the world’s problems? Or is it, itself, a big problem?

Yes and yes.

Obviously, tourism when done right can be a force for economic growth and global understanding. But hotels can be blights on the landscape (ever been to Cancun?) and air travel is a significant contributor to global warming, with no short-term clean fuels in sight.

Today, the Conde Nast Traveler magazine brought together executives in the hotel, airline and travel industries to explore those questions, at an event known, immodestly, as the World Savers Congress. (I half expected to see people in Superman and Batman costumes  appear at the august Council on Foreign Relations in New York.) The half-day of conversation revolved around issues big (tourism as a force for peace in the Middle East!) and small (why do hotels put shampoo in millions of little plastic bottles?).

Conde Nast showcased some big names. Richard Branson–surely the leading environmentalist in the travel industry, as the founder of Virgin Atlantic and Virgin America–talked about his efforts to “green” jet fuel and took a few shots at the U.S. airline industry, while Tony Blair made a pitch for the travel industry to invest more in Israel and Palestine, to help provide an economic platform upon which peace can be built. [click to continue…]

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CEO Dan Hesse: Sprinting towards sustainability

September 19, 2010

“People just want a cell phone,” Dan Hesse, the CEO of Sprint, told me. “They don’t care how green it is.”

“But we think they will over time.”

Is that sufficient reason to try to sell “green” phones, aggressively promote recycling and buy renewable energy?

“People want to do business with good companies,” Hesse says. “I want us to be thought of as a very good company.”

I met with Hesse last week in Washington to talk about Sprint’s environmental practices. They’re impressive.

You probably recognize Hesse. The 56-year-old chief executive has been starring in Sprint commercials for the past couple of years, touting the company’s “Simply Everything” plan which offers unlimited calling, text and email for one price. Sprint’s subscriber numbers have perked up a bit this year, but the company remains the No. 3 player in the cell phone industry (far behind Verizon and AT&T), with about 48 million subscribers and $32.3 billion in revenues. Its stock price is down by nearly 40 percent in the past two years, trailing rivals and the S&P500.

So Hesse, who has been CEO since the end of 2007, could be forgiven if he had shoved environmental concerns off the agenda.

To his credit, he hasn’t.

Sprint offers not one, but three environmentally-friendly phones–the Samsung Restore, which is partly made from post-consumer recycled plastics, the Samsung Reclaim, whose casing is made in part from bioplastics sourced from corn and the LG Remarq, which also uses post-consumer recyled plastic. Their chargers meet the EPA’s Energy Star standards and they all contain “low levels” of potentially hazardous chemicals (PVCs, BFRs, Phthaltes and Beryllim.).

Because of its aggressive promotion of recycling, Sprint’s collection rate for recycling and reuse of phones has climbed from 22% in 2007 to 34% in 2008 to 42% in 2009–about twice the industry average, according to Hesse. Like some electronics companies, Sprint now offers free recycling, not just to its own customers, but to anyone who has wireless phones, batteries, accessories and data cards that they no longer use, as part of a program called Sprint Project Connect. Proceeds, if any, go to charity. Better yet, a program called Sprint Buyback pays Sprint customers for their old devices, which are then either recycled or, more often, refurbished and reused. The company’s long term goal (2017) is to collect nine phones for every 10 that it sells. [click to continue…]

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A super light prize-winning car

September 16, 2010

The Edison2 Very Light Car

Here’s a surprise: The biggest winner in the $10-million Progressive Insurance Automotive X PRIZE competition, which is designed to inspire a new generation of low-polluting cars, is not an electric car, but a car that weighs less than 1,000 pounds and is powered by an internal combustion engine.

The car is known, fittingly, as the Very Light Car #98, and it won the $5 million prize in the “mainstream” category, which required cars to seat four people, run on four wheels and have a driving range of at least 200 miles. The Very Light Car runs on E85, a blend of ethanol and gasoline, and it was built by a team known as Edison2, led by a German-born entrepreneur named Oliver Kuttner and based in Charlottesville, Va.

The Edison2 Very Light Car bested 111 competing teams and 136 cars from around the world. All sought to build practical safe and super fuel-efficient vehicles capable of achieving 100 miles per gallon or the energy equivalent—a threshold that the Very Light Car just managed to achieve, performing at 100.3 MPGe.

The team that developed the Very Light Car, which includes race car drivers who have won at  Le Mans, Daytona, and Sebring winners, decided to stick with an internal combustion engine because batteries add weight, as well as cost. While praising electric cars as “here to stay” on its blog, Edison2 says:

Currently, however, electrics cars have real issues. Batteries are heavy, big and costly. With electric drives cars get heavier, performance suffers and costs go up.

Kuttner, a race car driver, said the car, which is made of low-cost and recycleable materials, could potentially go on sale for $20,000 – if it reaches the market. There are no current plans for mass production, but Kuttner said he’s talked with several big companies, including General Motors, which tested the Edison2 in its wind tunnels. One obvious hurdle to be overcome is safety–the car isn’t equipped with air bags or other standard safety features and, presumably, it would come out on the losing end in a crash with a much heavier car or truck.

Li-Ion Wave II

Two battery-powered cars each won $2.5 million each in prize money. Li-ion Motors Corp.’s Wave II, built by a startup based in Charlotte, N.C., won in the “alternative side-by-side” category with a car that delivered 187 MPGe. This category included two-seaters where the driver and passenger sit side by side.

A car known as the E-Tracer 79, built by a Swiss company called X-Tracer and created by Arnold Wagner, a former SwissAir jumbo jet pilot and aircraft designer, won in the “alternative tandem class.” This category also includes cars that seat two people, but one can sit behind the other. While the E-Tracer may look more like a motorcycle than a car (see below), it has two additional wheels that fold into the car; they drop down at slower speeds to provide stability.

The E-Tracer was the efficiency king of the competition, registering an eye-popping 205.3 MPGe. (Results were verified by experts including U.S. Department of Energy labs.) It looks like the E-Tracer could be fun to drive, too!

X-Tracer's E-TracerThis morning, I attended the X-Prize awards ceremony, which was held outdoors in Washington and, oddly, featured a bunch of dignitaries, including House Speaker Pelosi, long-winded Congressman Ed Markey, and a DOE official, most of whom had little or nothing to do with the prize.

The contrast was unintended but hard to miss—between a national government that is paralyzed when it comes to climate and energy, and the inventiveness, creativity and energy of startups, engineers and entrepreneurs unleashed by a mere $10 million prize, which amounts to chump change in the federal budget.

Offer the right incentives, in other words, and human ingenuity can do wonders.

“We’re living in a day and time where literally anything is possible,” said Peter Diamandis, the X PRIZE Foundation Chairman and CEO. “A man or woman can go out and build a spaceship or a 100 mile per gallon car. This is only the beginning.”

Not to belabor the point, but neither of the government-backed automakers, GM or Chrysler, got into the contest.

Then again, the winners are in no sense amateurs or garage mechanics. The aerodynamic steel frame of the Edison2 car, for example, was designed by Barnaby Wainfan, a Northrop Grumman aerodynamics fellow, while the head designer for the team was Ron Mathis, who worked on the R10 for Audi Sport North America. The X-Prize judges said of the car:

More like an airplane than a car, Edison2 uses a highly innovative light-weight, low mass hub-mounted suspension for its aerodynamically flared four wheels. Its low total mass of 830 pounds – nearly a quarter of the average car weight- is a tribute of engineering strength and packaging utility.

Let’s hope Diamandis is right that this is just a beginning. The X-Prize’s first prize, for personal space transportation, gives reason for hope: It was awarded in 2004, and has since inspired an industry. Just today, Boeing said it has plans to fly tourists into space.

Below are a couple of snapshots I took at the X-Prize ceremonies. If you are reading this on Thursday, you can watch a one-hour documentary called “X PRIZE Cars: Accelerating The Future” tonight (September 16) at 9PM ET/6PM PT on the National Geographic Channel.

The Edison2 Very Light Car

E-Trace

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The man who would save chocolate

September 15, 2010

Imagine a world without M&M’s. Or Snickers. Or chocolate pudding, ice cream or mousse.

Scary, isn’t it?

As the global director of plant science for Mars, Howard-Yana Shapiro is paid to worry about such things. Threats to cacao trees, the source of world’s chocolate supply, are serious business for the world’s biggest candy company. “This is a crop we depend on. It’s the heart and soul of our business,” Shapiro says. More than candy is at stake: About 6.5 million small-scale farmers, most in west Africa, depend on cacao trees for their livelihood.

So a little more than two years ago, Shapiro persuaded executives at Mars to commit $10 million to a five-year project to decode the cacao genome, in an effort to develop trees that resist drought and disease, as well as more productive trees. Today, three years ahead of schedule, Mars and an array of partners released the “Theobroma cacao Matina1-6″ genome sequence at the Cacao Genome Project website. A rival group organized by chocolate-maker Hershey and Penn State says that it, too, has decoded the genome, according to The New York Times, and will make its data available after peer review.

I met the other day with Howard, who’s a fascinating character, to talk about the Mars-backed genome project. He lavished credit on his partners, which include IBM’s Thomas J. Watson Research Center (“They have more computer power than God”), researchers at at Indiana, Clemson and Washington State universities (“They’re all at the top of their game”) and the officials at the USDA’s Agricultural Research Service in Miami who study subtropical plants. While no cacao is grown in the U.S., the government wants to assure a steady supply of chocolate to the $17 billion U.S. chocolate industry. Besides, lots of U.S. farmers grow peanuts and without chocolate, demand for their crops would fall off.

There’s reason to worry about the future of chocolate because cacao trees have been shown to be susceptible to disease. Most notably, a fungus knon as witches’ broom devastated the industry in Brazil, a top exporter of cacao, about 20 years ago. “In 24 months, Brazil became an importer,” he said.

Yet cacao is known as an orphan crop because the countries that now produce most of the world’s cacao–Ghana, Ivory Coast and Indonesia–can’t afford to do expensive research. Nor can the growers, even working together, because the typical grower earns less than $5,000 a year. “They’re on the margins,” he said.

Thanks to Shapiro, Mars has adopted this “orphan crop.” Twice a Fulbright Scholar, twice a Ford Foundation Fellow, Shapiro, who is in his early 60s, has been an organic farmer, a university professor and an author of books about gardening as well as the co-editor and co-author of the definitive book about chocolate, a 1,064-page tome called Chocolate: History, Culture and Heritage. He was vice president of agriculture for the organic seed and food company Seeds of Change when it was acquired by Mars in 1997, and joined the McLean, Va.-based firm soon after.

Decoding the genome, Shapiro told me, was “the dream of a lifetime for a plant breeder,” as well as for a lover of dark chocolate who enjoys discovering small producers in countries of origin. “That said, Dove Dark is as good as it gets,” he added.

Mars has chosen to make the research results free and accessible through the Public Intellectual Property Resource for Agriculture, a nonprofit group. This is in contrast for agribusiness giants, notably Monsanto, who have sought to control intellectual property around plant breeding, arguing that they need to make a return on the investments they plow into research.

The open-source approach will speed progress, Shapiro said: “Our goal is to take the information of the genome, and explode the productivity of cacao farmers.” As better trees are bred, they will be distributed to farmers by ministries of agriculture in countries where cacao is grown.

The goal of the effort is “a more perfect tree,” he told me, which can mean several things. Trees can become better able to resist disease. They can become more efficient in the way they use nutrients and water, a big issue as climate change has impacts on Africa. They can become more productive. “Right now, about 30% of the trees produce 70% of the cacao,” he said. Breeding can also lead to chocolate with better flavor or even more nutritious.

If the trees, in fact, get stronger and more productive, Mars will eventually enjoy a healthy return on its $10 million investment. Cacao prices have been rising sharply since 2007, as this chart from the International Cocoa Organization shows. Demand for chocolate is rising, too, and it could explode if the Chinese take a more of a liking to chocolate. (Mars’ Dove bar is the top-selling chocolate bar in China.) So more supply will be needed if chocolate is to remain an affordable luxury.

Says Shapiro: “Mars, as an agricultural company, can either be a leader, or you can put your fate in the hands of other people.”

Cacao pods on a tree

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E-commerce: Good for the planet?

September 13, 2010

I’m not much of a shopper, but when I buy stuff, I prefer to do it online. I don’t like shopping malls, driving in traffic, crowded stores or dealing with “customer service” people. I do enjoy getting packages at home.

Now, it turns out, there may be another reason to shop online: E-commerce is a way to help  fight climate change.

So, at least, says eBay and a carbon-footprint consulting firm called Cooler, in a report due out today. (I’ll post a link to the report when it goes public.)  In particular, the report argues, eBay’s business of enabling peer-to-peer selling and small retailers generates significant environmental value. You’d expect eBay to say that, of course, but there’s logic behind the claim. The report says:

By minimizing infrastructure, reducing the need for warehousing, and maximizing transportation efficiency, small online retailers
have created a climate-friendly way to buy and sell. All-electronic, with no need for everything from mannequins to signage to giant rooftop air conditioning units, they have dematerialized considerable parts of the retail process.

John Donahoe

This morning, I’ll be moderating a discussion about the study at the National Press Club with John Donahoe, eBay’s president and CEO; Michel Gelobter, the founder of Cooler and author of the white paper; and Eileen Claussen, president of the Pew Center on Global Climate Change. [Disclosure: eBay is paying me to host the event.] This Washington showcase for Donahoe, to which environmental leaders have been invited, is the latest effort by eBay’s  to position itself as an environmentally-friendly company, largely because it sells used products. [See my blogpost Why eBay is a green giant and this Greenbiz interview with Donahoe.] To its credit, eBay is also a founding member of BICEP, a coalition of companies pushing for climate change regulation.

I have to admit that I was skeptical about eBay’s claim that e-commerce is climate-friendly when I heard about it from Amy Skoczlas Cole, who leads eBay’s Green Team. After all, aren’t big retailers like Wal-Mart renowned for their efficiency, their logistics, their fine-tuned global supply chains? The economies of scale and all that? Well, yes, but peer-to-peer retailers–the small businesses supported by eBay–tend to be pretty efficient, too, because they have to be. (The last time I bought a book online from a small store, it came in a previously-used box.) These small e-tailers operate out of their own homes and garages. They don’t need big parking lots of warehouses. They ship by delivery services like UPS, FedEx and the post office which move goods around a lot more efficiently than suburban shoppers do when they drive to and from a big-box store.

They’re also a force in the economy. In 2009, the report says, peer-to-peer online sales operations generated more than $31 billion in sales and despite the recession, their revenues grew, as did their market share of all online sales, to about 20.9%.  Using admittedly rough estimates, the report says:

Compared to a single big box retail store grossing $100 million per year, the day-to-day operations of $100 million in sales through Web-based peer-to-peer marketplaces generate approximately 1,400 tons fewer CO2-equivalent emissions per year.

Three types are savings are significant, the report argues:

1. Without the need for stores, or chains of them, peer-to-peer retailing saves everything from the carbon cost of making bricks and cements to the everyday costs of heating and lighting retail spaces, not to mention the giant neon signs outside big box stores.

2. Warehousing in garages and spare rooms can eliminate big warehouses that eat up land and consume energy

3. Home deliver is more efficient than people driving mostly empty cars around.

I’ll be interested to learn more during today’s discussion. Did Cooler take the energy costs of operating the data centers than run the Internet, as well as individual home computers into account? How much of eBay’s business comes from the mom-and-pop retailers, and how much from big companies that operate warehouses and manage global supply chains? And, while the big box model has its obvious problems, shouldn’t “green” consumers at least consider supporting retailers like Walmart and Best Buy that use their clout to promote environmentally-friendly practices. (See Walmart, bully for good and Best Buy wants your electronic junk at fortune.com.) Will peer-to-peer sellers recycle phones as Sprint does, or support sustainable forestry practices as Staples does?

None of this is simple. I love the fact that eBay sells used stuff–that’s almost surely better than buying new–and I’ll remain a fan of Internet shopping. But let’s not forget that when it comes to saving the planet, the best buying decision we can make is not to buy at all.

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Gee whiz, algae!

September 12, 2010

Big institutions can make mistakes, as we’ve learned, painfully, lately. (See BP, Lehman Brothers, Merrill Lynch, etc.) But when big corporations like Unilever, Chevron and Bunge  invest in a algae company that is also in business with the U.S. Navy, well, that’s a good reason to take notice.

The algae company is called Solazyme and, if nothing else, it’s notable for the range of products that its algae are able to produce: They include jet fuel, diesel fuel, super-healthy vegetable oils and other algal oils that become ingredients in soap, lotions, ice cream, cookies and mayonnaise.

Jonathan Wolfson, with algaeIn March, I met Jonathan Wolfson, Solazyme’s CEO, and came away impressed with his passion and smarts. (See Solazyme’s Amazing Algae.) So I called him again last week to talk a bit about the company’s latest round of investment and its backers. Besides Unilever, Bunge and Chevron, Sir Richard Branson and a big Japanese food-ingredient company called San-Ei Gen also invested.

“What you’re seeing with these investors is a very diversified set of partners,” Jonathan told me. “You start to see blue-chip investors who are validating the breadth of our technology platform.”

Solazyme raised about $60 million in its latest round of investment, Series D. It has raised about $150 million in equity, which is substantial but not as much as some competitors. Last year, for example, ExxonMobil said it was investing about $300 million in Synthetic Genomics, a startup led by scientist Craig Venter. Bill Gates has invested in Sapphire Energy, another algae startup.

But no algae company has put together as impressive a list of backers as Solazyme.  The Wall Street Journal reported that Unilever spent months testing Solazyme’s algal oil as a possible substitute for palm oil, which is controversial, in such products as Lux soap. It concluded that Solazyme can product algal oil at sufficient scale to become a viable supplier, the Journal said:

“This isn’t just a niche application,” says Phil Giesler, director of innovation for a Unilever unit that invests in new technologies. “This is something which we believe has tremendous capability.”

Bunge, meanwhile, is a huge agricultural firm,  a major producer of sugar cane and a distributor of vegetable oils. Solazyme’s algae can turn sugar cane into vegetable oils. “We’ve already produced oils using bagasse,” Wolfson said. (Bagasse is residue that remains after sugar is extracted from sugarcane stalks.)

For its part, Chevron invested in Solazyme last year, and put it more money this summer, presumably because it likes what it sees. Chevron wants to understand if algae can be an efficient way to produce transporation fuels, such as diesel and jet fuel.

Based in South San Francisco, Solazyme was founded in 2003 by Wolfson and Hamilton Dillon, a college friend. Its technology differs from most algae startups. Instead of growing algae in ponds using sunlight as an input, the company feeds cheap sources of biomass such as sugar cane or switchgrass to its algae and grows them in big tanks, most of them in a rented facility in rural Pennsylvania.

The company is getting substantial government as well as private-sector backing. The U.S. Department of Energy has given Solazyme a $22 million grant to expand production, and the Navy awarded the company an $8.5 million contract buy marine fuel.

Solazyme may have more news this week, Jonathan told me. If so, I’ll update this post or add a new one. This company is worth watching.

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