Jon Johnson is a Walton College Professor of Sustainability and is the Founder and Chairman of the Board of The Sustainability Consortium. His areas of expertise include sustainability, environment, climate change, corporate governance, and social networks within and between organizations. He received his BS and MBA at the University of Arkansas and PhD from Indiana University.
Episode Transcript
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00:07 Matt Waller: Hi, I'm Matt Waller, Dean of the Sam M Walton College of Business. Welcome to Be Epic! The podcast where we explore excellence, professionalism, innovation, and collegiality, and what those values mean in business, education, and in your life today. I have with me today Professor Jon Johnson. He is a professor in the Department of Management, and he's also the chair of the board of the Sustainability Consortium. He's not only the chair, he's also the founder of The Sustainability Consortium. Thank you for joining me today.
00:50 Jon Johnson: It's my pleasure.
00:52 Matt Waller: Jon, would you mind just giving a real brief overview of what the Sustainability Consortium is? And then I wanna talk to you a little bit about the history of it, and how you formed it, what you're doing today, and what you see the future of the consortium, but also your vision of the future and sustainability.
01:11 Jon Johnson: Sure. So the brief view of the consortium would be it's a collection of companies, non-profit organizations, of universities and other organizations, like trade associations, and even a couple of government agencies from time to time who've gotten together to try and come up with a measurement reporting system for consumer goods. One of the biggest challenges in the sustainability arena, especially for retailers historically has been getting good information on the environmental and social impacts on products has been really difficult. Especially information that is consistent across multiple categories, across multiple issues, and that kind of thing, and that's branded in science.
01:57 Jon Johnson: So we all got together to develop this measurement reporting system, which is now up and running. It's used by Walmart and some other retailers as well as by some organizations at other points in the supply chain as well. So, that was started in 2009. We developed our system over the course of a few years after that. It rolled out and data is being collected and reported now that we're in our fourth year, I think, of the actual use of the system.
02:29 Matt Waller: I know the Sustainability Consortium offers lots of tools and services to help address product sustainability in a supply chain. And some of them include the category sustainability profiles, key performance indicators, sustainability insights, visualization tools, etcetera. What is meant by a category sustainability profile?
03:00 Jon Johnson: And apologies in advance for using all of these abbreviations I'm gonna be using, the CSPs, as we call them, Category Sustainability Profiles, are snapshots of the most important environmental and social impacts for our product category. And we cover about a 110 or 120 product categories that are now broadly defined, most of what Walmart sells for instance is covered by our system. A Category Sustainability Profile is a short document, a one or two-page documents that a buyer and a supplier can look at and in a relatively short order, understand what the biggest environmental impacts are, what the best practices are, and how some of those practices might be assessed or measure that would be in the form of the KPIs.
03:50 Jon Johnson: The entire philosophy of the consortium was branded in the notion that we had to not only get a lot of complex information collected in a scientific way, as important when we had to make it presentable and understandable to the decision makers in the business community who have a lot of things to do. So, it has taken a tremendous amount of work on the part of our scientists and our other staff members to come up with a way to condense all that information and to understand the reform.
04:24 Matt Waller: On your website, you've got a really good coffee Category Sustainability Profile. I like it. You include questions and response formats to create these key performance indicators. And there's lots of questions that have to be asked doing this kind of analysis. How did you go about coming up with these kinds of questions?
04:50 Jon Johnson: Wow, that's a really complex question and I'm probably not the best person to answer it, but I'll give it a shot. The measurement reporting system itself, and you're gonna hear me use the word science about a million times here, but we evaluate everything against the scientific literature, the published scientific literature at least that we can find. So if someone says for coffee that the highest impact is greenhouse gas impact is in transporting the beans, or roasting the beans, or something like that. Those are reasonable hypotheses, but we don't really know until we vet the scientific literature whether or not those are credible claims. We also don't know whether one or another impact is particularly important for a product category until we evaluate it. So what we try and do is identify what we call the hot spots in a product life cycle.
05:47 Jon Johnson: Then we try and identify best practices that address those hot spots, hot spots being the biggest impacts. And then using that combination of information, we come up with the questions and the question formats. One of the bigger challenges in this work has been coming up with questions, performance indicators that are answerable by companies and supply chain members and that are quantitative. Ideally, you want to be able to measure things with some degree of precision. And what we found in the early going was that kind of information, for most product categories, simply doesn't exist. And so we've had to be very creative in figuring out how to ask questions that get good information, good enough information for those companies that don't have a lot of information, but also give latitude for companies that have a lot of detailed information to present that as well.
06:00 Matt Waller: Would you mind talking a little bit about the origins? How did you come up with this idea? Many people around here view you as a tremendous entrepreneur. Part of the entrepreneur mindset is seeing problems and then taking advantage of them. You saw a problem that many other people saw, but you took initiative to address it by getting different stakeholders involved, which was very complicated. And I was around, I remember when you were doing this and I know it was a difficult process.
07:16 Jon Johnson: It's arduous, yes. I'm a social network theorist, that's my research, kind of methodological foundation. And social network theory is all about identifying individuals and mapping out, either explicitly or implicitly, the network of relationships that ties them all together and what the structure of those networks look like. So I've always had that sort of perspective on life. And I used that full-force when creating the consortium. As you mentioned, many people have identified the problem, which is getting good information on environmental and social impacts on consumer goods throughout their life cycle. From all the way up in the supply chain, down through manufacturing, through distribution, through retail, into the consumer's homes, post-consumer, everything. You really need to understand the entire life cycle and impacts of a product, and that's a lot of information that requires a lot of different people providing inputs.
08:15 Jon Johnson: What the problem was, and we actually had some pretty good ideas about how to go about answering the problem, how to actually create an organization and do it. That was the challenge. In the very early going, there was just sheer stupid luck. I happened to know Walmart's first sustainability vice president, Andy Rubin, he was a friend, still is a friend. And I just happened to know the two key consultants that they hired to help them with sustainability when I met on a river in Siberia. And I just happened to know all of those folks and I kind of invited myself to the party, 'cause I've always had a passion for environmental sustainability. And in putting together a proposal for the University of Arkansas to work with Walmart, we came up with the center called the applied sustainability center that was working on carbon, embedded carbon in supply chains, trying to understand better how they might act against carbon emissions. And in the process of doing that, got a much better sense of what would be entailed in expanding the measurement reporting process to multiple issues, not just carbon, but water and biodiversity, co-toxicity, all those different things, as well, as the multiple product categories, and etcetera.
09:33 Jon Johnson: And so when the idea for the consortium came along, which originated when Matt Kessler was their senior vice president, we started building that network. And I know very little about sustainability science per se, I'm not an industrial ecologist. The value I brought was really in the management theory, and in the organization theory, and how to try and build an organization. So, we partnered with Arizona State University, which is a tremendous school, they have a phenomenal sustainability program there, but two universities working together can be a challenge. And we had to work through that. And then we just went about building the network, and flushing it out, creating a governance system, which was no small thing. Came up with a methodology in real time, using all of these experts that we were recruiting into the consortium. Created the systems in real time, everything was built on the fly, basically.
10:34 Jon Johnson: To go back to the story of Jib Ellison who is still a the consultant to Walmart and is still probably more than anyone else responsible for the vision that Walmart had for sustainability and sort of how that's played out. He is a world-class raft guide, and that's how I met him. It was on a river in Siberia during the Chuya Rally. It was a whitewater race that had been happening in Russia for years in the 80s. Jib, he happened upon him when he was there just touring around the country, one year and thought he would try to put together an International Whitewater race on the Chuya River and he did that, and I was a participant in that. So, I participated in the race, and then I went on a little expedition afterwards and Jib was on that. So when he showed up again, in 15 years later, in Bentonville, Arkansas, I hadn't seen him since then and it blew my mind and it blew his mind as well.
11:32 Matt Waller: It's an amazing story.
11:35 Jon Johnson: It is, yeah.
11:36 Matt Waller: One of the things that I have always appreciated about your methodology and what you're trying to do, other than I'm interested in consumer products is, I of course, look at things through a supply chain lens and logistics. And I know that some of the metrics I've seen up there, I think are erroneous, because they ignore things. So, for example, if a company doesn't own their logistic system for many of these kind of KPIs and metrics, they would get penalized. Yet, they may be more efficient by owning their own logistics... No, some wouldn't, but some would. And I really like the fact that you look completely up and down the supply chain. How did you come to that realization that you needed to do that?
12:31 Jon Johnson: Again, it's not my insight. It's an insight from the industrial ecology community. There's a discipline called industrial ecology. And long ago, they realized that if you really wanted to understand the environmental impact of a product, you couldn't just look at one point in the life cycle of the product. Probably the best example that comes to mind is the difference between an incandescent bulb and an LED bulb. It takes a lot more energy to produce an LED light bulb than it does to produce an incandescent light bulb. So if you look at, so-called cradle-to-gate the footprint, the footprint of a product from its origin, raw material extraction through manufacture, distribution, retail, that's the gate, the retail gate, the LED light bulb would have a much bigger carbon footprint than an incandescent bulb. And if you only made a decision based on that, you'll make a bad decision.
13:33 Jon Johnson: If you look at the full life cycle of both products, obviously, the LED light bulb has a much smaller carbon footprint than an incandescent light bulb, because it's so much more energy efficient, and also it lasts a lot longer. That's true of every product. You can't look at just one point in the life cycle of the product. You have to look across the entire life cycle, identify the hot spots, those biggest impact areas, tally it all up, right? And then you can make a reasonable evaluation. And that I think is absolutely core to the idea of the consortium. You have to look across the spectrum. For food products, oftentimes, it's on farm. For electronics, it's oftentimes in the home, because you're plugging things in. For other products, it's post-consumer waste, because of toxics in the environment. Very few actually... Oddly enough, very few products ' hot spots are in retail. The companies that are oftentimes held responsible for these things, the retailers are often times... Their own activities are a small piece of the impact that the product has on the environment as well.
14:43 Matt Waller: Interesting. Jon, what needs to happen to make all of this work?
14:51 Jon Johnson: It's a really good question. We've built a system. So 10 years ago, when we started all of this, the conventional wisdom was companies weren't doing more on consumer product sustainability than they were, because they didn't have good information, and it was really hard and really expensive to get that information. Well, we've created that system and that information is now available. What needs to happen next is for the decision makers, the gatekeepers, like the retailers to begin to act more aggressively on that information, working to find ways to try and use their influence to drive sustainability up in supply chains. What also needs to happen is consumers need to start using this information in their own choices as well. So if you ask consumers if they care about sustainability, something like 75%, 80% will say yes, they do. You ask that if they're willing to adjust behaviors, and perhaps pay more for it? The majority will say yes, but the reality is, as a consumer, it's very difficult to make those decisions in real time, because you're... Again, people are busy, they're flooded with information and everything else, so we need to continue to find ways to build tools that act on this kind of information, and make it easier, and more convenient for people to shop according to the values that they've got.
16:24 Matt Waller: What are you most optimistic about?
16:26 Jon Johnson: Well, I'm optimistic about several things actually. I tend to be pessimistic about a lot of things, but one of the things I'm optimistic about is there are more and more companies that are taking design very seriously in their products. And I think design is absolute key to building and selling sustainable consumer goods. I think a well-designed product meets the needs of the consumer. We can't not meet the needs to the consumer... That's just a non-starter. But I think a well-designed product does that in a way that is both a joy to use and also, is a more efficient, more effective product. So, I'm very optimistic about what I'm saying around design. I think it's a huge opportunity for the University of Arkansas. If the University of Arkansas is to take its interdisciplinarity seriously, I think that's a huge opportunity. I'm also incredibly optimistic about what's happening in the power generation, in power use world. More and more companies are shuttering coal-fired plants right now than ever before.
17:32 Jon Johnson: Not because of any ideological reason, or anything else, but because the economics just aren't there anymore, and they're replacing it with natural gas, which is a good stepping stone fuel, but especially, with wind and solar. Solar and wind are now economically competitive sources of energy, even without subsidies, in more and more different regions in the country and throughout the world. So we're gonna see, I think, a geometrically increasing rate of power generation from renewable sources over just the next few years. The University of Arkansas just led a concert with a local energy efficiency firm here that is going to save the University of Arkansas a great deal of money, and it's gonna shrink our carbon footprint considerably over the next few years and improve quality of lighting in the environment.
18:34 Matt Waller: Now, I know you founded The Sustainability Consortium, and you built it into the organization it is today. Would you mind saying just a few words about how it's output is being used?
18:49 Matt Waller: It goes back to the question of impact going forward. The way it is used by Walmart right now, Walmart requests that their major suppliers report into a database that's managed by SAP at the moment, against those performance indicators. They take those and generate scores for their suppliers based on their product category performance. So it's not just at the level of the company, this is at the level of the product category. And then they can take those scores, and compare them with the competitors with their other suppliers for conversations environments.
19:33 Jon Johnson: They can also reward their top performers etcetera, using that kind of information. So the performance indicators where Walmart calls it the index, is one way that it can be used to score companies. Other retailers that are members of the consortium like Marks and Spencer don't really care so much about the performance indicators, but they use the CSP, the category sustainability profiles and other information that we've developed from the research that we've done on the products and product categories to inform their own procurement policies and systems. And we have Walgreens and Kroger which use some combination of that information and scores for a smaller category, product category portfolio. So a lot of different ways that it could be used.
20:28 Matt Waller: Jon, there's a lot of organizations doing measurement and reporting in this space. What is unique about The Sustainability Consortium?
20:37 Jon Johnson: It's a really important question for us, of course. Anyone who's in a competitive space, and this is a competitive space needs to ensure that they're doing something unique. The way I describe it, what makes us different is we're multi, multi, multi. We're a multi-issue. So it's not just about carbon, it's not just about biodiversity in wildlife, it's not just about water, it's not just about eco-toxicity. It's about all of those environmental impacts. As well as a few social impacts. So we're multi-issue or multi-sector. There are a few different organizations out there that are sector-specific that are coming up with these kinds of systems.
21:15 Jon Johnson: The best example is the Sustainable Apparel Coalition, which is as the name applies, focused just on the apparel industry, and they've done a fantastic work. We partner with them when we use their research and their knowledge in developing our performance indicators in cooperation with them. Electronics has systems, there are a few other industries that are out there. We're the only organization that I'm aware of that is as broadly multi-sector as we are. So that's our second multi. We're also multinational or international. We have a fantastic partner in Europe, the University of Wageningen which has helped us a great deal in developing systems that can be used by European retailers, and we've got some other partners that are around the world as well. So we are multi-national as well.
22:07 Jon Johnson: No actually, there's a fourth multi if you wanna get really multi about it. We're multi-stakeholder in the sense that we're not just corporations, we're not just universities, we're not just NGOs, we're all of the above. So on our board of directors, we have five corporate members who are elected by the membership. We have three NGOs, World Life Fund, Nature Conservancy, Environmental Defense Fund are on our board of directors, as well as three universities on the board of directors. So that helps bring a lot of balance and integrity I think to the consortium.
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22:41 Matt Waller: Jon, thank you so much for sharing about The Sustainability Consortium.
22:44 Jon Johnson: Always a pleasure to speak with you, Matt.
22:49 Matt Waller: Thanks for listening to today's episode of the BeEpic podcast from the Walton College. You can find us on Google, SoundCloud, iTunes, or look for us wherever you find your podcast. Be sure to subscribe and rate us. You can find current and past episodes by searching BeEpic podcast, one word, that's B-E-E-P-I-C podcast. And now, be epic.
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