At Dell, the sustainability team, working with suppliers and recyclers, has developed new compostable packaging materials made from bamboo and mushrooms. As John Pflueger, Principal Environmental Strategist, says, “It’s absolutely amazing.”
Sustainability as a domain is moving in the direction of "materiality" — information that is relevant or "material" from the point of view of stakeholders and investors. And Dell, the computer and technology company, is working to make itself well-positioned to make the link between its initiatives and outcomes.
"We report into the global marketing organization," says John Pflueger, principal environmental strategist for Dell. "That may sound weird to some people, but I actually think it's a fantastic place for a sustainability organization to sit."
Prior to his current role, Pflueger, who graduated from MIT with a Ph.D. in mechanical engineering, was Dell's subject-matter expert on data center energy efficiency and power consumption. In his current role, he has umbrella oversight over a wide range of environmental issues, including energy efficiency, energy consumption, greenhouse gas emissions, material selection use, issues around waste and recycling and product take-back, and water and water use and management. (Follow Pflueger on Twitter at @JCPAtDell)
In a conversation with Nina Kruschwitz, editor and special projects manager for MIT Sloan Management Review, Pflueger talks about how Dell is organized for sustainability, how sustainability initiatives have encouraged collaboration and innovation and how the company came up with cool new packaging materials in the process.
So let's talk about packaging. Dell has been an innovator there.
Yeah, we've got a great subject-matter expert who runs our packaging group and he's very interested in sustainability-related topics, very personally motivated. So he started looking for different alternatives for packaging, and he found a company in China that was interested in seeing if you could use bamboo fibers in the same way you use paper fibers today for cardboard packaging. Bamboo is native to China and it's one of the fastest growing plants in the world. It's a very renewable resource.
They experimented with the material, and they actually found a way to use bamboo as a raw material for manufacturing packaging. Now, I don't think we use it on any of our big systems, but right now, 70 percent of notebooks ship in bamboo. Its structural strength makes it great for shipping our high-tech products.
This followed a few high-level principles that we wanted to put into place. One, he wanted packaging material to be sourced near the point of use because he didn't want to spend a lot of time and effort or fuel moving cardboard or some other packaging material across the world. Two, he wanted a material that was easy to replace. And three, he wants something that's recyclable and compostable.
Were there any internal innovations involved, or innovations as a response to that particular bamboo challenge?
Well, some of the problems were, well, gee, pandas eat bamboo. Are we destroying panda habitat? We have a pretty strong relationship with the Forest Stewardship Council. And so we worked with FSC to make sure that the bamboo forests from which we were sourcing the raw material were not panda habitats. We even walked the supply chain.
We collaborated with this new supplier, this experimental supplier, to develop the technology and prove the technology out and solve some of these really practical business-level problems. But they solved them, and now we have FSC-certified bamboo. It's been a success for the supplier too — many products coming out of China are now wrapped in this stuff. You can throw it into your compost and it's recyclable with your paper products.
We have also worked with recyclers in the United States to make them aware of the material, and to make sure that they consider it recyclable because it's a material that they may not be familiar with.
You might think that packaging seems like this mundane, boring topic, but it really addresses a recurring pain point with a lot of our customers. So Oliver Campbell, our subject matter expert, continues to say, "Well, what's the next thing I can do?'
That's really interesting. What other kinds of packaging ideas is he coming up with?
One of the things he's been experimenting with is this notion of finding a material that's local to where the factories are, that's renewable, or would otherwise be considered waste in and of itself, and something that's compostable. So now, they're looking at something called "mushroom packaging." They take agricultural waste, in this case cotton hull, and they put the cotton hull into a form shaped like the packaging they want with mushroom spores, and then the mushroom spores feed on the hull and grow into the form. When they reach the proper size and have filled up the form, they kill off the mushroom spores and you're left with a piece of compostable packaging material.
It's absolutely amazing. The fungal mycelium, which are essentially mushroom roots, act like a glue and we don't let them grow long enough to produce mushrooms. So, we don't have to worry about having them trigger mushroom-based allergies. Rumor has it that Oliver actually ripped off a tiny piece of these things and chewed it. Just to make sure. It apparently could use some soy sauce.
Packaging made from mushroom spores! That is amazing. How do you find more people like Oliver Campbell who can come up with these things?
Well, one of the ways is to make people aware of what you're trying to do. Then you want to find them and kind of incubate them to where they start taking the lead and being innovators in their areas. You can try to identify these people on a one-to-one basis, or you can spread your message out to the hundred thousand people who work for Dell and have them come to you.
I think the latter, in the long run, is a more effective strategy. I don't think we have the solution yet for this, but we're looking for ways in which we can really internally engage on a greater level with the entire employee base at Dell.
So what will you do next?
I think instead of having individual goals that arise organically from the interplay between our subject-matter experts and sustainability team, we will be taking a more top-level approach.
It's fair to say that the last set of goals we set and then tracked were somewhat siloed. They arose from an individual organizational basis. The next set of goals are going to be ones that are going to be created holistically with the business in mind. Asking what type of goals are appropriate for a company with these particular values could yield some interesting answers — but it's too early to talk about what they might be.
Let's step back a moment. How is sustainability structured at Dell?
We have a hub and spoke model within Dell for managing sustainability-related issues. We have a fairly small core team and a large number of other individuals throughout the company who are subject-matter experts in particular areas, working in their functional domains. Prior to coming into this role, I was one of Dell's subject-matter experts on data center energy efficiency and power consumption.
Right now there are four of us who report into the executive director for sustainability. I handle all of our environmental strategy; another person handles all of our social strategy, including labor issues, issues around conflict minerals and working with our procurement team around sustainable supply chain; the third member of our organization works on our operational strategies: What's our reporting strategy? He looks at data collection within the company, how we work with our customers and how we gather insight into what we're seeing from our customers with regard to sustainability-related requests. The newest member of our team is working directly with our services organization to identify opportunities where sustainability initiatives help our performance and bottom line.
And who does your team report up to?
Ultimately, we report into the global marketing organization, which may sound a little weird to some, but I actually think it's a fantastic place for a sustainability organization to sit.
Because it gives us the ability to get a lot of insight into issues of materiality, or relevance. Investigations of materiality have long been common in the accounting world, but that's relatively new in the sustainability domain.
Well you know, the roots of the environmental movement go back to the 60s and 70s, when it was kind individually and environmentally focused. That's when Limits to Growth was published, and the public was waking up to the energy crisis, to pollution via Love Canal, et cetera. Then you could say the 80s saw the rise of public policy; that's when the EPA became prominent. The 90s could be characterized as the beginning of multi-nationalism around sustainability, where we first saw countries working together to solve problems, for instance with the Rio Earth Summit in 1992 and the Kyoto Treaty in the late 90s. In the 2000s, the decade that just ended, we really saw the rise of environmentalism and sustainability moving into the corporate space with a rise of interest in corporate responsibility and sustainability.
So ten years ago you could kind of fiat some initiatives. You could say "We need to do this because it's the right thing to do." And occasionally that would work. But now, as businesses learn more about sustainability, some of the questions that are being asked are: What are the impacts of the business from a positive point of view? What are the costs associated with these? So, the relevance or the materiality of working on sustainability issues has become very important.
Companies want to link between what they do within a sustainability initiative and the results, the benefits, that accrue back to the business as a result of working on the initiative. In what way is the initiative material to the growth or success of the business?
And reporting to the chief marketing officer gives you special insight into the answers to these kinds of questions?
There are two main characteristics that make our placement under the CMO valuable. One is that the CMO heads up a global organization. So, the chief marketing officer has responsibilities across the entire globe, which give us reach geographically.
And second, since it is a marketing organization, it has a lot of functions that are valuable that we can leverage, and it's broad in reach from a functional point of view in terms of ease of access or our ease of working with different stakeholders within the broader industry.
We can develop a better understanding of the connection between sustainability-related issues and initiatives and brand value and brand equity. In addition, we have access to better tools and more access to information that helps us understand what we can do that our customers need, as well as connections into the analyst and stakeholder community.
In my experience, shepherding sustainability efforts is harder if you are part of a diversity organization or if you are part of a compliance organization or if you are part of a legal organization.
What kinds of goals have you set, and how have you met them?
We've actually been very successful at completing a number of sustainability goals. We set a goal a few years back to reduce power consumption by laptops and desktops by 40%, and we met that. We set a goal around packaging. We call it our three C's: We want to reduce the size of the package, which we call the cube; we want to the materials we use more sustainable, which is the content; and we want the materials to be recyclable or compostable, which is to curb.
Would it be fair to characterize the goals you've already met as "low-hanging fruit"?
Yes and no. I also think that as a company we are conservative and we are risk-averse. That's kind of the nature of Dell. And by the way, that's been a very successful strategy as we've been changing from a company that's been predominantly hardware focused to a company that's services- and solutions-focused.
That approach governs and guides our Sustainability program. We like having a view of how we're going to get to a sustainability goal, though we will have some goals where we don't necessarily know how to get there today. Moore's law, the rise of the data center and society's increasing interest in energy efficiency provide a strong foundation and direction for our work. But, they don't tell us everything. We have to craft goals that leverage these and make sense in the context of today's and tomorrow's sustainability issues.
People often talk about the innovation that stretch goals invoke. Is that something you expect or hope to have happen?
We've found that we frequently meet our sustainability goals ahead of schedule. And that's not because people were sandbagging, but because even if the goal is out there and it's something you think, "We're going to hit this," it's still a public goal and it still inspires innovation. Having it be public gives people a reason to come up with some new ideas. It motivates folks who naturally have tendencies to want to make a difference in this space anyway.
How does your team contribute to setting goals?
Our team is kind of the advance guard with regards to sustainability-related issues. It's our responsibility to know what some of the emerging issues are, to know how important these issues are, who considers these important, how we really make sure that Dell is focusing on what it needs to focus on in the realm of corporate responsibility.
This is particularly important when a given topic might affect or span multiple organizations within Dell because our procurement team is going to work with our supply chain. Or our facilities organization is going to work with our buildings team and understanding resource consumption within Dell's four walls. When you look at an issue like water use and management, which actually has both an aspect to it of Dell's own internal consumption, but also requires us to know what's going on within our supply chain, you need somebody who can kind of bridge between both of those groups and pull the effort together.
We announced back in November of last year that one of our goals for this upcoming fiscal year is to work on Dell policy guidelines around water use and management for the company. So, that's an example of one where it crosses organizational boundaries. It's an issue that, while today it somewhat affects Dell, but it could become much more notable two, three, four, five years out.
How about climate change, and carbon emissions?
One of our realizations over the past year or two was that our greenhouse gas emissions impact within our four walls, our Scope 1 and 2 impacts, are not huge. They're not insignificant, but they're not huge. When you compare them with the indirect impacts resulting from making stuff for us, our supply chain, and the emissions resulting from the use of our products, the stuff upstream and downstream of us swamps out our direct footprint.
Dell's Scope 1 are greenhouse gas emissions that result from anything that we burn or any refrigerant emissions. So, if we have a bonfire in our parking lot to celebrate Texas Independence Day, then those emissions are Scope 1 greenhouse gas emissions. If we run the diesel generators for our data centers, which we have to do every so often just to test them out and make sure that they work in case we lose our connection to the grid, the emissions coming from those diesel generators are part of our Scope 1 greenhouse gas emissions. They're emissions that we directly cause.
Scope 2 are any greenhouse gas emissions that result from our purchase of electricity. So, for example, we buy electricity from Austin Energy. We buy electricity from TXU. Austin Energy runs natural gas plants and coal plants. Those generate emissions, so our Scope 2 emissions come from our utility suppliers' burning of fossil fuels.
Scope 3 is vague and hard to pin down; it's everything else that's indirect.
And there are currently 15 different categories of Scope 3 emissions. Some of the ones that are most notable for Dell are category 1, which are the emissions generated by our supply chain. And category 11, which are the emissions resulting from the use of our products out in the field. And we have millions of servers out in the field, and we have tens of millions of laptops and tens of millions of desktops that are running.
And so more and more we are seeing companies start to analyze, investigate, measure and report on Scope 3 emissions in these 15 different categories. And so one of our questions is: What are we going to have to do in the future? Whether it's reporting as a consequence of regulation through some regions in the world or some country that starts to require it, or whether it's our customers because just like we care about what our suppliers are doing, our customers care what their suppliers are doing.
Our product group, for example, may not have insight into all relevant supply chain issues. Our procurement team may not deal with business travel, which is another category. Our operations team calculating business travel emissions may not be familiar with product issues. And so one of the things we're doing now is we're starting to investigate this and really incubating that activity to build some competence in the organization around estimating these, make the assessment of: How ready are we, and what is going to be expected of us and, once again, how do we make sure we're in the right place at the right time?
And so our job is to identify these and shine the flashlight. And we may decide where we shine the flashlight and how focused the spotlight is and how bright it is, but it's the business's decision as to what it does about what we are exposing. Ultimately, they have the profit and loss responsibilities for their work. It's actually a very good and functional way of doing things.