The role of “sustainability” service providers: Is Veolia a good example?
Role of the mediator
“May you live in interesting times” goes a Chinese saying that is ironically used as a curse. Despite the disbelief of a significant number of people in global warming, the emergence of dedicated efforts by both the private and public sectors around the globe to battle this phenomenon gives me hope. Following the announcement of companies liable to pay the carbon price floor in the UK, whereby companies have to pay a minimum price to emit CO2, many have adopted sustainability programs to reduce emissions.
But what about the companies that provide sustainability services, acting as mediators that bring real solutions to the market? Indeed, a KPMG report1 identified the UK as having a strong system to tax emissions, while lagging behind in incentivizing low carbon investment.
Veolia is a company that operates in this space, describing itself as “innovators committed to focusing on carbon reduction by preventing pollution, preserving natural resources, protecting biodiversity, combating climate change and raising environmental awareness.2” In other words, it primarily acts as a sustainability service provider to different industries, governments, and even residents.
Historically, Veolia was founded in France as a water company, called Compagnie Générale des Eaux. . Following a series of acquisitions, it went public in 1998. Today, Veolia primarily provides services such as helping companies manage energy demands, low carbon solutions and waste services from recycling to incineration. It primarily operates in Europe (67%).3
Circular Economy
In addition to providing its main services, and following the increase in demand for sustainable solutions by large companies under the IPCC and other environmental regulators’ watch, Veolia became one of the leading promoters of the “circular economy”.4
In a circular economy, instead of throwing things away when they’ve served their purpose, things are re-used, recycled or converted into energy. Under this initiative, Veolia embarked on multiple case studies that fell outside its traditional set of services, placing innovation at its heart. This resulted in Veolia investing over £50 million a year5 researching and developing some of the world’s most efficient resource technologies.
Identifying each case study as a “loop,” it’s most recent report identifies sixteen specific case studies whereby new innovations were used to enhance sustainability. For example, under loop 7, Veolia partnered with Sanofi, a large pharmaceutical firm, on platinum recovery from its drugs. Sanofi manufactures a range of drugs used in the treatment of cancer that contain high platinum. As with all pharmaceutical products, the drug has a limited shelf life and after a certain period must be destroyed. This recovered platinum was then used in jewelry and other products. This recovery process is a great example of reducing medical waste, which otherwise is likely to be incinerated.4
As another example, Veolia harvests ammonia from landfills by using leachate. Leachate, which is a liquid recovered from landfills, requires specialist treatment to remove both ammonia and herbicides from waste. Once removed, ammonia is stripped, condensed and concentrated for industrial use. Veolia uses this ammonia to reduce its nitrogen oxide emissions, a major cause of industrial GHG emissions.4
Is Veolia contradicting itself?
Despite acting as one of the leading providers of sustainable solutions, Veolia relies heavily on using high temperature incineration (HTI) for destroying many types hazardous waste and confidential material. While Veolia claims that it abides by all regulatory standards, HTI incinerators, despite being cleaner than incinerators of the past, still emit mercury, lead, dioxins and other toxic substances. Many environmental groups oppose them, including Friends of Earth (FoE)6 and the UK Without Incineration Network (UKWIN)7.
Looking at the numbers, Veolia accepted an extra ~300k tonnes of waste for incineration in 2012 compared to 2010 in the UK alone.6 When Veolia opened its incineration plant in Newhaven in 2012, a group of protesters held signs “What human rights?” and “This is the end of Newhaven,” and the town’s mayor boycotted the plant.9
Given its claims of being one of the most innovative companies in the sustainability world, Veolia should make a part of its central strategy to both reduce incineration waste and innovate alternative solutions. For instance, confidential material, in my opinion, does not need to be burnt at 1200°C, but can rather be wiped or recycled. Similarly, efforts to cap the amount of waste sent to incinerators, by perhaps increasing the carbon price floor for incineration or limiting the amount of incineration per company could help reduce emissions, all the while hoping that an environmentally friendly alternative will become available in the near future.
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References:
[1] KPMG report (article in Telegraph): http://www.telegraph.co.uk/finance/newsbysector/energy/7896510/KPMG-says-nuclear-power-wont-happen.html
[2] Veolia: http://www.veolia.co.uk/about-us/about-us/veolia-uk
[3] Veolia history: http://www.veolia.co.uk/our-history
[4] Veolia circular economy: http://www.veolia.co.uk/sites/g/files/dvc636/f/assets/documents/2015/01/4188_Brochure_Final.pdf
[5] Veolia circular economy case studies: http://www.veolia.co.uk/media/media/circular-economy-case-studies
[6] Friends of Earth: https://www.foeeurope.org/incineration
[7] UKWIN: http://ukwin.org.uk/
[8] Veolia annual review: http://www.veolia.co.uk/sites/g/files/dvc636/f/assets/documents/2014/09/2012-ANNUAL-REVIEW.pdf
Fascinating article here–thanks for this. I think you reveal the central tension in many sustainability enterprises. When a company performs an action to move one metric of sustainability, there’s often a corresponding non-sustainable impact. My favorite example is ethanol-based fuels, which are great at replacing petroleum-based fuels–except that lots of petroleum-based fuel is used in the manufacture of the ethanol! Similarly, in this case, you re-use materials–while at the same time emitting incinerated waste.
I’m not sure how to compare the environmental impacts of different types of interventions. Is there one metric or one standard that allows us to compare these impacts? Or is it all Apples and Oranges?
Until now, I was unaware of sustainability service providers. From what you have shared, it seems the net impact is positive with having Veolia operating as it does. I would rather have a Veolia in place attempting to recycle, reuse, and reduce materials than nothing at all. Yes, some of Veolia’s practices contradict their attempt in reducing carbon emissions; however, I think Veolia practices lead to innovation such as platinum recovery.
I think that integrated solution, such as incineration at a large scale is also a way to reduce overall energy consumption and generate less waste per quantity of material treated. In this case, just by expanding the incineration scale potentially improves energy utilization, although it’s better to reuse and recycle more.
Veolia is indeed a big player the market, especially in Europe where the regulatory environment is one of the strictest in the world when it comes to sustainability. Therefore, I am left wondering if Veolia’s projects in developing markets are as “eco friendly” as in Europe? Does the company limit itself to implement only the local regulations or does it go further and implement some of the best practices taught in Europe? For me, that is the difference between a company that is trying to change the world and a company that is just doing marketing.
Veolia is one of my clients before HBS. Thanks for sharing your view. However, I have to point out there is a difference between climate change and environmental protection, despite somewhat overlap between the two. Climate change is more concerned about activities resulting in rising volume of CO2. Technologies by Veolia, such as municipal water services and waste management, can be either. You may want to expand a little bit on how you see their core services help mitigate climate change effect.
Thanks for the post! I have always wanted to know that how consultants could provide a more sustainable strategy recommendations for their clients to improve the overall sustainability in the private sector. This post definitely provided an interesting view to see how a solution providers might support its clients and what kind of difficulties they were facing. However, I was quite surprised that they also had the problems of emitting pollution particles. To better maintain its reputation and gain trust from other peer organizations, Veolia, and maybe most of the relevant players, should really be careful on this part. Thanks again for sharing!
As you illustrated in your article with the incineration example, companies that make a business of sustainability walk a fine line between turning a profit and the public’s perception of their practices. I would be fascinated to know how much impact platinum prices have on Veolia’s willingness to extract platinum from recycled pharmaceuticals. Certainly Veolia is willing to invest in the extraction process when prices are high, but would it be willing to take a loss when prices drop below a point that makes it economical? If Veolia decided to forgo investing in the platinum extraction process when prices were too low, would it suffer reputation risk? Would it be willing to invest in the extraction unprofitably in order to avoid reputation risk? These article raised some fascinating questions for me.
Great example of a company involved in the sustainability space, and interesting points about the circular economy. One question to think about – is this scalable? Specifically, is it scalable in the absence of environments where no carbon trade exists? Will there be a decrease in margins for this sort of model if more players enter the space? And if so, where will the supply/demand equilibrium lie? (i.e. will there be overall economic/environmental dead weight losses that occur because of this regulatory enablement?)
Thanks for the article, very interesting. Veolia actually plans to invest 750 million pounds in recycling. Please, see the article below:
http://uk.reuters.com/article/uk-veolia-britain-idUKKCN11827B
I fully agree with you that they recycling seems to be a good solution.