{"id":13498,"date":"2016-11-04T17:40:54","date_gmt":"2016-11-04T21:40:54","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/corking-climate-change\/"},"modified":"2016-11-04T17:40:54","modified_gmt":"2016-11-04T21:40:54","slug":"corking-climate-change","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/corking-climate-change\/","title":{"rendered":"Corking Climate Change"},"content":{"rendered":"

As climate change alters weather patterns, spawns new regulations, and leads to technological and demand shifts towards materials and processes that are more sustainable, one industry stands to benefit: the cork industry in Portugal, which accounts for about 60% of world trade in cork.[1]<\/a> Within the country, the company Corticeira Amorim is the world\u2019s largest producer, manufacturing more than 3.6 billion wine stoppers every year (the main use for cork).[2]<\/a><\/p>\n

Cork is a sustainable material by design<\/strong><\/p>\n

Cork is the bark of the cork oak endemic to the Iberian Peninsula and Northern Africa. One of its unique attributes is that it is the only tree whose bark regenerates, so it can be harvested every decade without any tree having to be felled. The bark becomes smoother after each harvest, thus increasing in value and quality. Over the course of its lifetime averaging 200 years, each tree may be stripped around 17 times.[3]<\/a><\/p>\n

As concerns about climate change come to the fore, the sustainable characteristics of cork harvesting recommend it as a perfect hedging instrument. The harvested bark is not only fully recyclable and renewable, but it also improves the carbon absorption properties of the tree: harvested cork trees absorb 3-5 more CO2<\/sub> than non-harvested trees.[4]<\/a><\/p>\n

These sustainable features can be monetized through carbon offset programs or emission trading permits, should a carbon tax or cap-and-trade program be enacted in Europe, which is currently at the forefront of greenhouse gas regulation. However, there are other exciting opportunities for Corticeira beyond carbon accounting: cork can be used at a broader scale as insulating material to address rising energy efficiency standards, as well as a renewable fuel in power generation, thus creating energy-saving synergies within multiple industries.<\/p>\n

Energy efficient materials are a growing market<\/strong><\/p>\n

Energy efficiency is one of the easiest and most cost-effective ways to reduce environmental impacts and it is one of EU\u2019s main environmental policy goals. The scale of investment needed to meet EU’s 2020 energy efficiency target is estimated at \u20ac100 billion annually.[5]<\/a><\/p>\n

Cork\u2019s durable and highly insulating properties recommend it as a sustainable material in energy efficient applications, not just in the construction sector, but also in high-tech applications. Corticeira Amorim already has experience in this space as supplier of insulation solutions to NASA (beginning with the Apollo 11 mission) and the European Space Agency.[6]<\/a> Due to the high expected demand for energy efficient materials, the company is well positioned to capture a significant share of the energy efficient investment market.<\/p>\n

Cork can be used to produce renewable energy<\/strong><\/p>\n

The European Union has equally ambitious renewable energy targets \u2013 at least 20% of its total energy must come from renewable resources by 2020. Some of these targets could be met through combustion of cork residue, which has been proven[7]<\/a> to be an efficient fuel for electricity generation. Moreover, by reusing discarded materials, Corticeira can build tighter, more sustainable supply chains with multiple sources of raw material monetization.<\/p>\n

Climate change could still threaten the industry<\/strong><\/p>\n

Even though cork trees are adapted to warm climates and arid soil, they are not immune to stresses caused by climate change, such as drought and high temperatures. Over the past twenty years, cork bark has been reported to be getting thinner.[8]<\/a> Lower yields increase prices, since production is geographically concentrated in Portugal and Spain. Without hedging strategies, this could ultimately lead to a death spiral of reduced demand and depressed revenues, since Corticeira Amorim is not diversified across many geographies and raw materials.<\/p>\n

Recommendations<\/strong><\/p>\n

To address the potential threat of climate change to production, Corticeira Amorim should both attempt to diversify geographically and improve its own agricultural processes. Its current R&D spending of only 1.2% of sales (\u20ac7.5 million per year)[9]<\/a> is insufficient to address the challenge. More research could help improve yields and production quality across the entire geographic footprint of the company.<\/p>\n

Moreover, to take full advantage of the industry synergies described above, the company should diversify its product offerings to anticipate other potential uses and reduce its exposure to demand from the wine industry. The unique renewable qualities of the bark provide numerous expansion opportunities.<\/p>\n

Lastly, Corticeira must improve recycling collection. Even though in 2009 it built the world’s first licensed cork recycling unit, the facility only processes discarded cork stoppers. By not reusing discarded materials from other cork products, the company leaves money on the table.<\/p>\n

Let\u2019s uncork a bottle of wine and toast to the world of opportunities available to Corticeira Amorim!<\/p>\n

(Word Count: 799)<\/p>\n

 <\/p>\n

Citations:<\/p>\n

[1]<\/a> http:\/\/www.nytimes.com\/2013\/01\/24\/business\/energy-environment\/24iht-green24.html<\/p>\n

[2]<\/a> Ibid.<\/p>\n

[3]<\/a> Coritceira Amorim company website, available at http:\/\/www.amorim.com\/en\/why-cork\/what-it-is\/.<\/p>\n

[4]<\/a> 100% Cork Initiative website, available at http:\/\/100percentcork.org\/why-cork\/good-for-the-environment\/.<\/p>\n

[5]<\/a> European Commission, Financing Energy Efficiency, available at https:\/\/ec.europa.eu\/energy\/en\/topics\/energy-efficiency\/financing-energy-efficiency<\/p>\n

[6]<\/a> Corticeira Amorim company website, available at http:\/\/www.amorim.com\/en\/for-your-business\/Aerospace\/39\/.<\/p>\n

[7]<\/a> A. Al-Kassir et. al, Study of Energy Production from Cork Residues: Sawdust, Sandpaper Dust and Triturated Wood<\/em>, Energy, Volume 35, Issue 1, January 2010,<\/p>\n

[8]<\/a> R. Teixera et. al, Comparison of Good- and Bad-Quality Cork: Application of High-Throughput Sequencing of Phellogenic Tissue<\/em>, Journal of Experimental Biology, June 2014.<\/p>\n

[9]<\/a> Corticeira Amorim company documents and Reuters stock data<\/p>\n","protected":false},"excerpt":{"rendered":"

Building materials for climate change adaptation, one cork at a time.<\/p>\n","protected":false},"author":2346,"featured_media":13499,"comment_status":"open","ping_status":"closed","template":"","categories":[1936,130,17],"class_list":["post-13498","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-cork","category-energy-efficiency","category-supply-chain"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/climate-change-challenge-2016\/","yoast_head":"\nCorking Climate Change - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/corking-climate-change\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Corking Climate Change - 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