Sustainability at Navistar:

A Model Distinguished by Sustainable Innovation, Proactive Product

Stewardship, and Sound Science

Thomas W. Hesterberg1,*, William B. Bunn1, Thomas Slavin1, Jason Malcore1, MacKenzie Porter1, Neal C. Grasso2, Christopher M. Long2, and Bruce Harrison3

1 Navistar, Inc., Chicago, Illinois, USA

2 Gradient, Cambridge, Massachusetts, USA

3 EnviroComm, District of Columbia, USA

Prepared for Submission to

Business Strategy and the Environment

August 2011

* Corresponding author address:

Navistar, Inc. 303 E. Wacker Drive, Suite 360

Chicago, IL 60601Telephone: 312-927-2697

Email: Tom.Hesterberg@Navistar.com.

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Abstract [150 word limit; currently at 149 words]

While corporate sustainability is broadly interpreted to mean ensuring success in the present

without compromising the future, a well-accepted workable definition has remained elusive.

Sustainability is often defined using a set of criteria or metrics that address the recognized

environmental, social, and economic pillars of sustainability. However, standard metrics fail to

account for how companies deal with operational challenges to their sustainability and viability.

As a 175-year-old diesel engine manufacturer, Navistar, Inc. has developed a sustainability

model to address not only the three pillars but also its significant business challenges, including

those related to health concerns over its diesel products and environmental and employee

legacies. Featuring a commitment to sustainable innovation and product stewardship and

reliance on sound science, Navistar's sustainability model has evolved in response to its unique

operating environment, illustrating the benefits of designing sustainability strategies to address

specific business challenges rather than a standard set of criteria.

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Introduction [3,000 to 7,000 word limit; currently at 6,921 words- not including references,

figures, tables]

The advent of the modern concept of sustainability is often attributed to the United Nations

World Commission on Environment and Development (UN WCED) publication, Our Common

Future (often referred to as the Brundtland Report, after the commission's chair, Gro Harlem

Brundtland), which defined sustainable development as "[meeting] the needs of the present

without compromising the ability of future generations to meet their own needs” (UN WCED,

1987). The term was more formally defined in the Rio Declaration on Environment and

Development (UN, 1992), and was further developed at the 2002 World Summit on Sustainable

Development where the concept of the "three pillars of sustainable development"–

environmental, social, and economic – was introduced (UN, 2002; Kates et al., 2005; CA Rich

Consultants, 2005).

Despite the UN's interpretations of sustainable development, a well-accepted workable definition

of sustainability has largely remained elusive (Marshall and Toffel, 2005). This is in part due to

sustainable development being an evolving concept that can be adapted, and in effect redefined,

to fit different situations (Kates et al., 2005; Cowan et al., 2010). Today, it can be argued that

sustainability is more clearly defined by the guidelines and metrics that have arisen to evaluate it

than by any formal definition (Cowan et al., 2010; Marshall and Toffel, 2005; Belu, 2009).

Among the more prominent sustainability guidelines are those of the Global Report Initiative

(GRI) that were first issued in 2000 and then updated in 2006 (GRI, 2006, 2010). The GRI

guidelines, which measure corporate sustainability performance with respect to laws, norms,

standards, and voluntary initiatives, provide a consistent and comprehensive framework for

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sustainability reporting that allows companies to evaluate their progress over time and against

other companies. In addition to the GRI guidelines, the Dow Jones Sustainability Index (DJSI)

and the International Organization for Standardization (ISO) environmental management

standards (e.g., the ISO 14001 standards) have also gained usage as sustainability benchmarks.

[might be good to mention ISO 26000 corporate social responsibility standard here]

Cowan et al. (2010) identified four key components that are highly prevalent among large

corporations having comprehensive sustainability programs: (1) empowered leadership with a

commitment to sustainability, (2) standardized reporting, (3) third-party evaluation of

sustainability programs, and (4) ISO 14001 accreditation. Although these components are

common among corporate sustainability programs, Cowan et al. (2010) and others (Harrison,

2009; Marshall and Toffel, 2005; Kates et al., 2005; Belu, 2009; Satterfield et al., 2009) have

emphasized the variety of different paths companies have taken in developing and implementing

corporate sustainability programs in the absence of established rules, regulations, or guidelines

for sustainable business practices. In general, corporations have largely taken it upon themselves

to define their own visions of sustainability and to develop models for reducing overall

environmental and societal impacts while satisfying profit goals and economic growth.

Disparate approaches and models have emerged, with varied results, as companies have

attempted to adopt more sustainable business practices and to balance economic, environmental,

and social dimensions of sustainability (Adams, 2006; see Figure 1 that contrasts the desired

balance of economic, environmental, and social dimensions with reality, where economic

development often outweighs environmental protection and social development). [maybe after

the citation , shorten and say something along the lines of “see Figure 1, where economic

development often outweighs environmental protection and social development.]

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Navistar, formerly known as International Harvester, began more than 175 years ago, well before

the modern concept of sustainability. Like many companies throughout the world, Navistar has

embraced the modern concept of sustainability, developing a sustainability model that addresses

the recognized environmental, social, and economic pillars. Navistar's sustainability model has

also been shaped in response to a unique set of challenges posed by its history and operating

environment, including those related to health concerns about its diesel products, environmental

and employee legacies from its past, and never-ending technical demands to reduce emissions

and increase the energy efficiency of its products.

In this paper, we discuss key components of Navistar's sustainability model, beginning with an

overview of corporate initiatives to address the recognized pillars of environmental, social, and

economic sustainability. The main focus of the paper is on Navistar's sustainability initiatives

that address its unique business challenges, including those related to its products (emission

reduction, energy efficiency and health concerns) and those related to its legacy (environmental

and employee related). Navistar’s record in breakthrough emissions-reduction engineering (e.g.,

a Navistar school bus utilizing green diesel technology was certified as first to achieve

aggressive proposed California and federal standards) is linked to benchmarked leadership

(Harrison 2008). As companies continue to shape their sustainability models and identify

potential model components in the absence of prescriptive governmental regulations and

requirements, the objective of this paper is to describe the Navistar sustainability model and

highlight some of its unique elements. Given its clear contributions to Navistar's business

success, Navistar's sustainability model can offer insights to other companies working to define

and implement corporate sustainability programs.

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Overview of Navistar Initiatives to Address the Three Pillars of Sustainability

Like many companies, Navistar's sustainability model incorporates numerous elements that

address the recognized pillars of environmental, social, and economic sustainability. Several

elements of these pillars have been embedded within the core values of the company for many

years. For example, Navistar was a charter member of the National Safety Council in 1913, and

established industrial safety committees and employee welfare programs more than 100 years

ago and, thus, decades before governmental requirements from agencies such as the U.S.

Occupational Safety and Health Administration (OSHA). In addition, Navistar established a no-

fault worker’s compensation program prior to establishment of state compensation laws in the

early 20th century. As discussed below, in addressing the three pillars, Navistar's sustainability

model contains several elements that are common to many of today's corporate sustainability

programs, including a commitment to environmental accreditation, challenging goals for energy

consumption and greenhouse gas emissions, and other pioneering initiatives, including its

voluntary, incentive-based wellness programs.

Environmental Sustainability

Similar to other corporate sustainability programs, Navistar has pursued environmental

accreditation, namely ISO 14001 certification, as a key effort related to environmental

sustainability. ISO 14001 outlines the standards for an environmental management system

(EMS), providing companies with the methods for developing a systematic approach to

minimizing the impact of their operations on the environment, ensuring their operations comply

with applicable laws and regulations, and forging a process for continuous assessment and

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improvement of these processes (ISO, 2004). In order to become an ISO 14001 certified

location, an organization must obtain "written assurance (the certificate) by an independent

external body that it has audited a management system and verified that it conforms to the

requirements specified in the standard." (ISO, 2010). While certification is not required to

implement an ISO 14001 EMS, certification provides an additional level of credibility to the

management system, and further demonstrates the company's commitment to environmentally

friendly and sustainable business practices. As of 2010, twelve of Navistar's 18 manufacturing

facilities have been certified under ISO 14001 (Navistar, 2010b). The remaining operations are

new acquisitions or currently undergoing structural changes and will pursue certification in the

future. Keys to Navistar's strong EMS program include regular internal audits, adherence to strict

operational control procedures, and compliance with all environmental laws and regulations

(Navistar, 2009a).

Stemming from its commitment to incorporating sound environmental management practices

into its operations, Navistar has made great strides in reducing energy consumption and

greenhouse gas (GHG) emissions. The company has set a corporate-wide goal of reducing

electricity usage during production periods by one percent annually, and during non-production

periods to a level 35 percent of production loads by the year 2013 (Navistar, 2011). For

greenhouse gas emissions, Navistar has established a goal of an absolute 20 percent reduction in

GHG emissions by 2013, compared to 2008 (Navistar, 2011). Navistar has already made

substantial progress towards meeting these goals; for example, GHG emissions in 2010 were 23

percent less compared to the 2008 baseline year (Navistar, 2011). Importantly, efforts have

occurred at all levels of the organization. For example, Navistar's dealerships are remaking their

facilities with state-of-the-art approaches to energy conservation and GHG emissions reductions,

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including one Minnesota dealership that installed a geothermal heating system, along with LED

signs, leading to a projected annual savings of $15,000 (Navistar, 2009a).

Navistar has also implemented an aggressive program to reduce waste generation at its facilities,

with the ultimate goal of creating zero waste facilities. From 2003 to 2010, Navistar decreased

non-hazardous waste generation by more than half from approximately 75 million pounds to less

than 30 million pounds (Navistar, 2011). As shown in Figure 2, Navistar reduced releases of

Toxic Release Inventory (TRI) chemicals at its US facilities by more than 200 tons per year

between 2001 and 2009. In coordination with efforts to reduce waste generation at its facilities,

Navistar has also worked to promote recycling, resulting in an increase in the company's

recycling of non-hazardous materials from 20 million pounds in 2002 to more than 40 million

pounds in 2009 (Navistar, 2011).

Social Sustainability

Navistar has focused on achieving greater social sustainability through a number of prominent

employee and community initiatives, in particular a variety of voluntary, incentive-based

wellness programs. Navistar has long recognized the large cost of health care (e.g., in excess of

2 percent of revenue for several of the past years), as well as the effect of health and wellness on

workforce productivity. Through its multi-faceted "Vital Lives" program that provides a

comprehensive approach to health, safety, and productively management, Navistar seeks to

empower its employees to improve their own individual health and ewllness. This program is

designed to address each of the three stages of prevention and thus both the cost and productivity

aspects of health:

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Primary prevention programs help people maintain a healthy and injury-free status and

reduce smoking, obesity, and other risk factors. As a key part of its efforts, Navistar

offers employees an annual, confidential Health Assessment (HA) to identify ways to

address behaviors that increase the risk of current and potential health issues. "Trucking

Across North America (TANA)," a 13-week competition where employees log in their

weekly exercise miles, encourages exercise and teamwork. “Spring Tune-up” is a six-

week exercise and nutrition program. Flu shots are provided and preventive exams and

screenings are encouraged.

Secondary prevention manages risk to prevent disease or injury among those with risk

factors such as inactivity, high blood pressure, high cholesterol, smoking, obesity, and

stress. A health risk appraisal is offered and a $200 incentive is provided to those who

complete two programs such as TANA, telephonic health coaching, or other programs

targeted at risk factors. Programs are administered by independent third parties to

preserve confidentiality.

Tertiary prevention manages injury and disease to reduce impacts and prevent

progression to catastrophic conditions. Diabetes education and testing, rehabilitation and

return to work programs, and telephonic health coaching are some of the tools used in

this effort.

These programs have been demonstrated to reduce health risks, promote evidence-based care,

and encourage smart healthcare spending. (Navistar, 2009a; Hunnicutt, 2003). In addition to

prevention, Navistar has further addressed cost through competitive pricing in vendor and

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provider network selection and program design that encourages cost effective utilization (e.g.,

copayments, deductibles, generic drug pricing). Overall, as shown in Figure 3, Navistar health

care costs have consistently fallen in recent years as the cost of US health care has risen about

eight to 12 percent.

Navistar's recently added Sustainability PROMISE, standing for Personal Recognition of My

Individual Sustainability Efforts, as an employee-oriented social sustainability initiative. This

program, which was made company-wide in June 2009, encourages employees to engage in safe

and healthy behaviors, to make life choices that save energy and are environmentally friendly,

and to volunteer their time for community-improvement efforts.

Community-related social sustainability initiatives include support for numerous local arts and

development programs, but also include Navistar's efforts to work with resource-constrained

schools to provide students with diesel technician and other industry-related training. While

addressing the trucking industry’s chronic shortage of diesel technicians, these programs have

offered thousands of students a head start toward a meaningful, stable career path. For over a

decade, Navistar has collaborated with the Chicago Vocational Career Academy (CVCA), an

inner-city high school on Chicago’s South Side, on a three-year diesel education program that

has trained hundreds of inner-city youths as qualified diesel truck and engine technicians.

Similar diesel education programs have also been instituted in additional Illinois and Indiana

schools, with plans to expand to South Carolina (Navistar, 2011). In addition, Navistar's South

American engine subsidiary MWM International has run the Formare School program since

1987, introducing disadvantaged 16- to 18-year-olds to manufacturing, engineering, and

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administrative careers. Among other social sustainability initiatives, Navistar has also promoted

greater environmental awareness through such programs as its America's Greenest School

contest, where schoolchildren submit essays on the steps their schools take to protect the earth to

compete for prizes such as a new hybrid school bus.

Economic Sustainability

As a company that has been in business for 175 years through mergers, acquisitions, and periods

of both expansion and contraction, Navistar's longevity provides strong evidence of economic

sustainability. Strategies must change over time to adapt to changes in business needs and

conditions. Factors such as wars, famine, economic depression or growth, and government

policy require strategic readjustments. Navistar currently has three key strategies for economic

sustainability – 1) producing innovative products focused on energy efficiency, emissions

reductions, and hybrid technologies; 2) achieving a competitive cost structure that capitalizes on

savings from reduced energy consumption, improved employee health and safety, and efficient

product distribution; and 3) delivering profitable growth through investments in markets that are

less cyclical in nature, such as defense products, recreational vehicles, parts, global products, and

advanced technologies. Importantly, many of the elements of these key strategies for economic

sustainability also contribute to environmental and social sustainability.

Navistar's focus on sustainable innovation (discussed in detail in the next section) is a driving

force to its economic and environmental sustainability. Through basic scientific research and

technological innovation, Navistar has developed advanced diesel engine and emissions control

technologies, as well as hybrid and all-electric truck technologies. Importantly, its engine and

emissions expertise have become a competitive market advantage. With global reductions in

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diesel emissions regulatory limits, emissions will continue to drive the trucking industry,

allowing Navistar continued opportunities to leverage its emissions expertise and achieve

economic sustainability.

Navistar Sustainability Initiatives to Address Unique Business Challenges

In addition to developing its sustainability model around the three sustainability pillars, Navistar

has also shaped key elements of its model in response to its unique business challenges. In

particular, as a company that designs and manufactures diesel engines, trucks and buses, and

engine parts, Navistar faces public concerns over potential diesel health hazards and a regulatory

environment of increasingly stringent emissions targets that challenge engineering capability.

Sustainability in this context requires product innovation to reduce emissions and improve fuel

efficiency as well as product stewardship using sound science to accurately assess public health

risks and to help inform regulatory decisions. Navistar's sustainability model has also evolved to

address business challenges involving environmental and employee legacies from its 175 year

past. As discussed below, Navistar's experiences illustrate the need to design sustainability

strategies to fit specific business environments rather than a standard set of sustainability criteria.

Sustainable Innovation at Navistar

Sustainable innovation at Navistar encompasses both making existing products better and

developing new products with the dual goal of reduced emissions and higher fuel efficiency.

Since launching its first production diesel engine in 1933, a 50-horsepower four-cylinder engine

for stationary and agricultural applications, Navistar has produced innovative engines for

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agricultural, construction, military, and on-highway applications. Diesel engine technology has

been radically transformed in recent years, with Navistar's efforts helping drive these industry-

changing innovations. In addition, Navistar has actively pursued the development of new

alternative engine technologies, including diesel-electric hybrid and all-electric trucks and buses.

Figure 4 provides a timeline of key accomplishments related to Navistar's recent efforts at

sustainable innovation. As described below, Navistar has constructed a successful model of

sustainable innovation using a combination of different approaches, including internal research

and development, collaborations, and sometimes approaches diverging from the prevailing

industry position.

Development of Cleaner Engines

For decades, the diesel engine has been recognized for its power, durability, and efficiency. In

addition to these beneficial qualities, diesel engine emissions are well-known to consist of a

complex mixture of particulate species, condensable vapors, and gases that includes pollutants

regulated by the US Environmental Protection Agency (US EPA) as criteria air pollutants (e.g.,

particulate matter (PM), nitrogen oxides (NOx), carbon monoxide (CO)) and as hazardous air

pollutants (e.g., formaldehyde, benzene, polycyclic aromatic hydrocarbons). Due to concerns

regarding possible DE health effects, US EPA has implemented increasingly stringent regulatory

standards for on-road heavy-duty diesel engines (HDDEs), beginning with a smoke standard for

the 1970 model year and continuing through the tightened PM and NOx emissions limits for the

2007 and 2010 model years, respectively. As shown in Figure 5, US EPA has now reduced both

PM and NOx emissions requirements for HDDEs by approximately 99 percent compared to pre-

1988 unregulated emissions. Other regulatory bodies, including the European Union (EU) and

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the California Air Resources Board (CARB), have also adopted stringent DE emissions

standards.

With its efforts to develop low-emission, advanced technology diesel engines, Navistar has

played a key role in the emergence of what has been termed New Technology Diesel Exhaust

(NTDE) (Hesterberg et al., 2011). The solution to the 2007 emissions requirements, namely the

integrated, multi-component emissions reduction systems (advanced diesel engines, modern

electronic fuel injection systems, ultra-low-sulfur fuel, special lubricants, and exhaust

aftertreatment devices) is now standard for today's heavy-duty diesel engines.

Although the industry as a whole has adopted similar approaches to meeting the stringent US

EPA PM standards for model year 2007 engines (i.e., aftertreatment configurations featuring c-

DPFs), it is important to note that there are divergences in how diesel engine manufacturers have

elected to meet the stringent NOx standards for model year 2010 engines. New regulatory

requirements sometimes challenge the limits of technology and force manufacturers to choose a

technology path that is not yet fully developed. Navistar has taken a different approach than

most of its competitors, electing to continue to push the design limits of diesel engine

technology, selecting “advanced” exhaust-gas recirculation (EGR) technology rather than

selective-catalytic reduction urea (SCR-Urea) technology to achieve the NOx limits. Advanced

EGR technology is a stand-alone in-cylinder approach that lowers NOx through the recirculation

of large volumes of air (cooled diesel exhaust) through the engine cylinders. SCR-Urea

technology is an aftertreatment approach that converts urea to ammonia that reacts with NOx in

the exhaust stream. Each technology has its advantages and drawbacks. EGR requires a greater

investment in research and development but offers constant NOx control over the entire duty

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cycle. SCR-Urea technology, on the other hand, offers an off-the shelf solution similar to

technology that has been used in Europe for several years but does not work when the exhaust

temperature is below 250°C, which can be a significant portion of driving time for trucks in inner

cities. Navistar has pursued the EGR approach as a more sustainable option that does not require

drivers to carry and maintain a tank of urea and that reduces NOx at all times during vehicle

operation.

Holistic Approach to Diesel Vehicle Energy Efficiency

The fuel efficiency of diesel vehicles can be increased through both improvements to diesel

engine design and aerodynamic product design. Engine design is one key factor, beginning with

a 30 to 40 percent fuel efficiency advantage of diesel engines compared to gasoline engines and

improving engine designs to further fuel economy gains. For example, reduced weight and

improved heavy-duty diesel performance have enabled engines to surpass the fuel efficiency of

prior models by 9 to 13 percent (Navistar, 2008a).

The diesel engine itself is only one piece of the fuel economy puzzle, with aerodynamics and tire

design providing additional opportunities for energy reduction and mileage improvements.

Navistar has pioneered advances in aerodynamic product design, obtaining multiple patents for

design components on tractors that reduce high pressures in front of the tractor and that

streamline air movement along the sides and onto the tractor (Navistar, 2007a, 2007b).

Improved aerodynamics are credited for the improved energy efficiency of the long-haul trucks,

which bettered the fuel economy of the leading competitors in the advanced classic long-haul

category by 20 percent upon its launch in 2008 (Navistar, 2008a). The first aerodynamic-styled

Class 8 truck to gain US EPA certification as a SmartWay truck, an honor that recognizes fuel

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efficiency improvements and reductions in greenhouse gas emissions, was a Navistar truck.

(Navistar, 2008b).

Aerodynamics innovation requires not only in-house expertise in aerodynamic design, but also

creative partnerships and extensive third-party testing. For example, in early 2010, Navistar

partnered with the U.S. DOE's Lawrence Livermore National Laboratory, NASA's Ames

Research Center, the U.S. Air Force, and other industry partners to conduct full-scale wind

tunnel tests with a 53-foot trailer. Testing was performed in the world's largest wind tunnel at

NASA's Ames Research Center to support the development of test drag reduction devices, which

are projected to increase fuel efficiency by up to 12 percent (LLNL, 2010). Prior to this, in

2008, the company was selected by the U.S. Department of Energy to participate in a project

aimed at accelerating the development of advanced aerodynamic trailers for reducing fuel

consumption. Most recently, Navistar was awarded more than $37 million in federal funding to

partner with the U.S. Department of Energy (DOE) in its efforts to develop a SuperTruck with a

fuel efficiency improvement of 50 percent. As part of this project, Navistar will develop and test

technologies to improve truck and trailer aerodynamics, and make advances in combustion

efficiency, waste heat recovery, hybridization, idle reduction, and reduced rolling resistance tires

(Navistar, 2010a).

Advanced Technologies- Hybrids and Electric Vehicles

Navistar's commitment to sustainable innovation is further illustrated by its extensive efforts to

develop and commercialize advanced diesel hybrid and all-electric technologies. As shown in

Figure 4, Navistar has developed alternative transportation technologies, including the

production and delivery of the first hybrid school bus in the United States in 2007, line

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production of the first hybrid commercial truck in 2007, and the 2010 development of the first

medium-duty commercial vehicle to receive US EPA certification as a clean fuel fleet vehicle

and CARB certification as a zero-emissions vehicle. Diesel-hybrid technology offers gains in

environmental sustainability compared to standard diesel technology due to both reduced

emissions and improved fuel economy. For example, Navistar’s diesel hybrid electric truck

emits as much as 33 percent fewer hydrocarbons and 35 percent less NOx than standard diesel

trucks, with fuel savings of 30 to 40 percent (Navistar, 2008a). Moreover, fuel savings can

exceed 60 percent given the engine-shutoff capability of the vehicle that allows for the zero

emissions, battery-powered operation of equipment such as an overhead utility bucket (Navistar,

2007c). With a projected range as high as 100 miles per charge, Navistar's all-electric truck is a

zero-emissions vehicle that, depending on the source of electricity, is estimated to reduce annual

CO2 emissions by as much as 10 tons per vehicle compared to a fossil fuel powered truck with

similar duty cycle (Navistar, 2009b).

Navistar has used collaborative partnerships with both industrial and governmental entities to

help move forward its innovative development of advanced diesel-hybrid technology. For

example, Navistar partnered with Enova Systems, Inc., a developer of hybrid electric vehicle and

electric vehicle drive system technologies, to commercialize the nation’s first hybrid school

buses. By pairing an Enova hybrid-electric powertrain with a Navistar advanced diesel engine,

Navistar's hybrid school bus is estimated to reduce emissions by up to 70 percent while

improving fuel efficiency by up to 70 percent, contributing to estimated fuel savings of 800

gallons of fuel per bus per year (Navistar, 2007a). Through a private-public partnership with

UPS, Eaton Corporation, and US EPA, Navistar developed a hydraulic-hybrid delivery vehicle

that is projected to achieve fuel economy gains of 45 to 50 percent and reductions in CO2

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emissions of 40 percent (Navistar, 2008a). In April 2009, Navistar was selected for participation

in DOE's Plug-In Hybrid Electric Vehicle (PHEV) Technology Acceleration and Deployment

Activity Program, receiving a cost-shared award of up to $10 million to continue the

development of plug-in hybrid bus technology (Navistar, 2009a). In addition, in August 2009,

Navistar was awarded a $39 million federal DOE grant to develop and build all-electric

commercial vehicles (Navistar, 2009a).

Product Stewardship at Navistar

Traditional diesel emissions produce visible soot, helping create a perception of diesel as a dirty

technology. Even today, after advanced engine technology has all but eliminated diesel soot

emissions, public concern remains. Potential health risks from inhalation of diesel exhaust have

been the focus of scientific and regulatory scrutiny, as well as numerous media reports, for

decades. Despite the hundreds to thousands of research studies addressing DE health effects,

there still remain uncertainties in the state of the knowledge regarding the human health risks

posed by real-world DE exposures (US EPA, 2002; Hesterberg et al., 2005, 2006, 2008, 2011).

These uncertainties are due in part to limitations inherent in the different types of observational

and experimental studies conducted to investigate DE health effects, as well as difficulties in

distinguishing environmental DE exposures from many other non-DE sources of the same air

pollutants, including tobacco smoke, gasoline engine exhaust, tire-wear and road debris,

combustion of wood, paper and waste, and meat-cooking fumes. In addition, diesel exhaust is a

highly complex mixture that varies widely depending upon engine type, fuel type, and operating

conditions. The remaining uncertainties in the state of the knowledge regarding DE health

effects underscore the importance of a rigorous product stewardship program for identifying and

evaluating the scientific evidence relevant to the potential public health impacts of diesel engine

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technology, and for acting in a proactive fashion to address any potential issues that may be

identified. As discussed below, Navistar has instituted a formal product stewardship program

aimed at using sound science to understand and limit any potential adverse health effects from its

products, which has become a key component of Navistar's sustainability model.

Critical Assessments of the Diesel Health Effects Evidence

As a central focus of its product stewardship program, Navistar has supported scientific research

into diesel health issues. These efforts have included spearheading critical reviews of the DE

health effects literature for cancer and non-cancer health effects (Hesterberg et al., 2006, 2009,

2010, 2011). There are a number of prior hazard assessments of DE (e.g., IARC, 1989; US EPA,

2002, NIOSH, 1988; CARB, 1988) that have generally relied on historical DE studies (i.e., pre-

2000 studies, predominantly of pre-1988 diesel engines) to conclude that sufficiently high levels

of DE are linked with increased risk of cancer (specifically lung cancer) and non-cancer health

effects. These include the International Agency for Research on Cancer (IARC, 1989)

assessment that classified diesel exhaust as a Group 2A carcinogen (i.e., probably carcinogenic

to humans), and the US EPA (2002) assessment that concluded that the weight of the evidence

supports a "likely" role for DE in the risk of lung cancer. Importantly, US EPA (2002) did not

develop a quantitative estimate of cancer unit risk for DE, citing the large uncertainty of the

available dose-response data from epidemiological studies and laboratory animal studies. US

EPA (2002) also concluded that their health assessment only applied to the exhaust from diesel

engines manufactured before 1995, and that the exhaust from newer engines would need a

separate evaluation.

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The DE health effects literature has continued to evolve since the preparation of these DE hazard

assessments, prompting Navistar to conduct its critical reassessments. Hesterberg et al. (2006)

concluded that the DE epidemiological data remain insufficient for quantitatively linking DE

exposure levels to lung cancer risk. Hesterberg et al. (2006) highlights observations of elevated

lung cancer incidence among truck drivers prior to dieselization, the lack of increased lung

cancer risk among underground miners despite diesel exposures several times higher than those

of railroad workers or truck drivers, the overall lack of dose-response among DE-exposed

populations, and persisting limitations in the exposure data and control of confounding in the DE

epidemiological studies. The real-world implications of findings of short-term lung and systemic

inflammatory responses and cardiovascular health responses in some recent DE human clinical

studies remains uncertain given the use of older diesel engines and DE exposure concentrations

well in excess of typical ambient or even occupational levels (Hesterberg et al., 2009). In

contrast to the widespread public notion of DE health risks, the scientific evidence remains far

from clear.

A more recently emerged concern is for potential health effects of very small particles.

Hesterberg et al. (2010) assessed the health implications of the large numbers of nano-sized

particles (i.e., particles with diameters smaller than 100 nm, also commonly referred to as either

ultrafine particles or nanoparticles) present in DE, concluding that health data from DE human

clinical studies do not support any unique toxicities of nano-sized diesel particles compared to

other small particles. It should be noted that nano-sized particles are not unique to diesel and

indeed are produced in larger numbers by gasoline and CNG engines.

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Hesterberg et al. (2011) examined the emerging body of studies supporting the low human health

hazard potential of NTDE from post-2006 advanced diesel engines. The significant advances to

diesel engine technology and the major changes in the composition of diesel fuel and engine

lubricants required to meet the 2007 and 2010 emissions requirements have resulted in a highly

different type of diesel exhaust. Termed "New Technology Diesel Exhaust," or NTDE

(Hesterberg et al., 2006, 2008, 2011), there is now a substantial body of data showing that it is

strikingly different in chemical and physical properties from DE emitted by pre-1988 (i.e., pre-

regulation) diesel engines (referred to as Traditional Diesel Exhaust, or TDE). For example,

relying upon emissions data from 25 reports on transit buses, school buses, refuse trucks, and

passenger cars, Hesterberg et al. (2008) documented substantial reductions in the levels of PM,

carbon monoxide, total hydrocarbons, non-methane hydrocarbons, formaldehyde, benzene,

acetaldehyde, and polycyclic aromatic hydrocarbons (PAHs) in NTDE. Due in large part to the

high removal efficiencies of the catalyzed diesel particulate filters (c-DPFs) that have gained

widespread usage as integral components of new technology aftertreatment systems, consistent

PM mass reductions of >90% have been observed for post-2006 engines in a number of studies

(Hesterberg et al., 2008, 2011). PAHs are often highlighted as being among the more toxic DE

constituents, but recent data support >90% reductions in emissions of most PAH and nitro-PAH

species (Hesterberg et al., 2008, 2011). As discussed in Hesterberg et al. (2011), there is a

growing body of data showing the greater resemblance of DEP in NTDE to particulate emissions

from compressed natural gas (CNG) or gasoline engines than from TDE. Preliminary

toxicological data are now available indicating that these emissions changes translate into risk

reductions, with both human and animal studies of NTDE exposures reporting an absence of

biological responses previously reported in prior studies of older diesel engine technologies

21

(Hesterberg et al., 2011). Although the available toxicological data is inadequate to conduct a

reliable hazard assessment for NTDE, Hesterberg et al. (2011) concluded that "there is now

sufficient evidence to conclude that health effects studies of pre-2007 TDE likely have little

relevance in assessing the potential health risks of NTDE exposures." As discussed in detail

below, Navistar has been highly active in promoting the need for comprehensive toxicological

studies of NTDE to better understand the changes to its hazard profile.

Development and Support of Proactive Diesel Health Effects Research Initiatives

In addition to evaluating existing data, Navistar has also implemented a proactive approach to

understanding potential diesel health risks that focuses on the formulation of new research

strategies and the reduction of data gaps and uncertainties in the health effects literature. As

prominent examples of this proactive approach, Navistar has worked to develop and sponsor

state-of-the-art research initiatives, including the Advanced Collaborative Emissions Study

(ACES) of the emissions and toxicology of new technology diesel engines meeting the

2007/2010 emissions standards (discussed below) and studies quantifying in-cabin DE exposures

aboard school buses (for more information, see Iverson et al., 2004, 2011; Liu et al., 2010).

As early as 2002, Navistar began working on a proactive research initiative designed to assess

the potential health effects of the new low-emitting diesel engine technologies that it had helped

develop. In 2004, these efforts culminated in the finalization of the comprehensive ACES

research program, which included both emissions characterization and speciation/toxicity studies

of prototype 2007-2010 engine technologies. As an advisor to the Health Effect Institute's (HEI)

ACES Research Committee, Navistar helped develop the research program for the $20 million

study and build consensus among multiple stakeholders (which include US EPA, the Engine

22

Manufacturers Association, the California Air Resources Board, the American Petroleum

Institute, the Department of Energy, and the National Resources Defense Council (NRDC)).

Navistar is a member of the ACES Advisory Committee, providing expert advice and oversight

for this study.

Corporate Environmental Legacies

Navistar has operated numerous manufacturing facilities around the world and, at times, has

employed more than 100,000 employees. For many years, the business model was one of

vertical integration which included coal and iron ore mines, timber tracts, and steel mills. As

business conditions and models changed over time in response to technology, competition and

economic conditions, many operations were consolidated, sold or closed. Some of these

operations have produced significant environmental liabilities, such as from asbestos

remediation. Navistar along with several other companies has also been linked to some third

party sites that have become US EPA Superfund sites.

Navistar’s approach to these environmental legacies has been to actively manage the sites and

prepare them for productive reuse as Brownfield sites, oftentimes working closely and

voluntarily with local communities. For example, approximately 85 percent of the Wisconsin

Steel Works site that was formerly owned by Navistar has now been completely remediated,

with 131 acres of this 176-acre site in southeastern Chicago now being redeveloped into a new

liquid asphalt plant (Navistar, 2011). This plant, which is being built in an environmentally

sustainable manner, is expected to help revitalize this community through job creation.

Navistar's remediation efforts at the former West Pullman Works site in Chicago have

23

culminated in this site having the largest urban solar plant in the US, with generation of enough

clean electricity to power up to 1,500 homes.

It is useful to note that some aspects of current environmental liability were once viewed quite

differently. For example, although sustainability was not a common term during the period of

extensive asbestos use, asbestos insulation was viewed as a sustainable building feature for its

fire protection and heat conservation properties. A sustainable company must be prepared to

adapt to changes in information, and if necessary, to correct mistakes of the past no matter how

well informed and well intentioned at the time.

Employee Legacies

As a result of severe economic challenges in the 1980s, several plants were closed and business

units sold. The employee population dropped from more than 100,000 globally to less than

12,000, mainly in the U.S. However, employee benefit obligations for closed operations and for

many of the sold operations remained with the company. As a result, the number of retirees with

pension and health care benefits exceeded the number of active employees by a factor of four.

As health care costs have continued to rise sharply in the last three decades, the challenge of

managing these retiree costs has increased.

The US accounting rules have changed the way that post-retirement benefit obligations are

treated on balance sheets, requiring recognition of all future commitments as liabilities. As a

result, many companies regard such benefits as non-sustainable and have cut them back or

eliminated them altogether. Some large companies who have reorganized under Chapter 11 of

24

the United States Bankruptcy Code have abandoned retiree health care benefits and transferred

pension obligations to the government-sponsored Pension Benefit Guarantee Corporation, which

administers plans at reduced rates.

Navistar has changed some aspects of its benefit programs for current employees, such as

moving from defined benefit to defined contribution plans which receive more favorable

accounting treatment. However, for its legacy commitments, Navistar has chosen to manage

rather than abandon them. When accounting rule changes threatened to undermine the viability

of the company by creating newly recognized health care liabilities that would have exceeded

total company assets, Navistar developed a creative solution. Navistar initiated a novel legal

proceeding that resulted in the formation of a trust in 1993 to manage health care benefits and

preserve company financial viability. Some change of benefits was necessary, such as

introduction of premiums and copayments to provide incentives for cost control and improved

usage. The trust continues to provide health care, vision, and dental benefits to current and

future retirees who started with the company before 1993. Navistar continues to provide health,

vision and dental benefits for all active employees, including those not part of the trust

agreement.

Summary and Conclusions: Broader Definition of a Sustainability Program

Veltri (1991) defines three stages of management that companies experience in implementing

sustainability programs. The first stage is focused on compliance, where companies are reluctant

go beyond the minimum required to meet any regulatory requirements or societal expectations.

25

In the second stage, companies seek to follow the example of leaders in the field. In the third

stage, companies integrate sustainability into their own unique business cultures, ultimately

using it as a competitive business advantage. By embracing the concept of sustainability in its

broadest sense and approaching it as "a long-term, continuously advancing process that keeps

improving the outcome for us now and for the future" (Navistar, 2008a), Navistar’s evolving

sustainability program seeks to attain this third stage.

Navistar's sustainability model addresses the recognized pillars of environmental, social, and

economic sustainability, sharing some of the emerging commonalities of today's modern

corporate sustainability programs, including senior management positions charged with leading

corporate sustainability efforts, annual sustainability reports that provide standardized reporting

metrics, and third-party accreditation (e.g., ISO 14001). Furthermore, as demonstrated in this

paper, Navistar has also shaped its sustainability model in response to its unique operating

environment and significant business challenges, incorporating sustainable innovation, product

stewardship, and management of legacy issues as core components. Navistar has utilized basic

research and sound science to help these components become keys to both Navistar's

sustainability model and its business success.

With its commitments to sustainable innovation, product stewardship, and management of legacy

issues, Navistar's sustainability model yields a variety of benefits that may not be reflected in

standard sustainability criteria that include energy usage, water usage, waste generation,

recycling, and greenhouse gas emissions. For example, although health care and retirement

benefits are significant economic concerns and would seem to represent important societal

responsibilities, GRI criteria do not include reporting on pension and health care issues.

26

Consumers who purchase and use innovative Navistar products, such as advanced technology

diesel engines that reflect both reduced emissions and improved energy efficiency, are realizing

sustainability gains rather than Navistar. Nevertheless, rather than solely addressing a standard

set of sustainability criteria, Navistar has continued to shape its sustainability model in response

to its unique operating environment and business challenges, achieving consistent business

success in the process.

Although companies should define their own sustainability models based on such business-

specific factors as products or services, business models and cultures, and stakeholder interests,

Navistar's sustainability model provides a blueprint that can be utilized by others looking for

frameworks upon which to construct a successful sustainability model. It demonstrates how

sustainable innovation, product stewardship, and management of legacy issues can contribute to

a successful sustainability model. Moreover, Navistar's sustainability model continues to evolve,

as new targets are continuously established, including increasingly more ambitious energy

reduction and greenhouse gas reduction goals (Ardiente, 2010).

Authors' Disclosure

The authors of this paper are either employed by Navistar or are consultants to Navistar. All

authors declare no other financial interest in the subject matter of this study.

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Figure Captions

Figure 1. The three components of sustainability. As initially envisioned, these components should have equal weight, and where they overlap represents sustainability or sustainable development (UN, 2002). However, all too often, the reality is that they are often not so well balanced (Adams, 2006).

Figure 2. Annual releases for Navistar U.S. facilities reported to US EPA's Toxics Release Inventory (TRI). Shows the amount of chemicals and chemical categories reportable under the Emergency Planning & Community Right-to-Know Act (EPCRA) released or recycled off site from Navistar's U.S. manufacturing locations. From Navistar (2011).

Figure 3. Trends in Navistar health care costs compared to the national average: 1999 to 2010 (estimated).

Figure 4. Timeline of recent Navistar accomplishments related to sustainable innovation (information from Navistar, 2007a, 2008a, 2009a, 2011).

Figure 5. Reductions in the US EPA standards for particulate matter (Panel A) and nitrogen oxide (NOx) (Panel B) emissions from heavy-duty diesel trucks (t) or urban buses (ub), relative to pre-1988 emissions. Reproduced with permission from Hesterberg et al. (2006).

31

Economic Social

Environmental

EconomicSocial

Environmental

The Theory

In Practice

32

33

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

1999-2002 2003 2004 2005 2006 2007 2008 2009 2010

Health Care Cost Trend Per Employee/Retiree

Navistar National Average

34

35

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2001: Becomes first engine manufacturer to gain US EPA-certification for meeting the model year 2007 particulate and hydrocarbon emission standards, six years ahead of schedule

2002: Delivers first diesel school buses to qualify for "lower emission" funding support from the state of California

2006: Introduces International® ProStar® truck, which achieves best-in-class fuel economy in the heavy truck class

2007: ProStar® truck awarded US EPA SmartWay certification recognizing its significantly better environmental and fuel consumption performance compared to traditional tractors and trailers

Delivers first hybrid diesel school bus to Napa Valley Unified School District in California

Becomes first company to enter line production of hybrid commercial trucks, with the International® DuraStar™ Hybrid

2008: Launches International® LoneStar® truck, which becomes first classic-styled Class 8 tractor to receive US EPA SmartWay certification

Selected by US DOE to participate in a $2 million project aimed at accelerating the development of advanced, aerodynamic trailers for reducing fuel consumption

Launches first big-bore MassForce® diesel engines (the MaxxForce 11 and MaxxForce 13) that set new industry standards for heavy-duty diesel performance and fuel efficiency

2009:Becomes first truck and bus manufacturer to receive CARB total hybrid vehicle certification for the International® DuraStar® Hybrid box van, utility truck and IC Bus CE Series hybrid bus product lines

Awarded $39 million federal DOE grant to develop and build all-electric delivery vehicles

Introduces industry’s first four-wheel drive diesel-electric hybrid commercial truck, namely the International® WorkStar® Hybrid 4x4

Selected by US DOE for cost-shared award of up to $10 million to develop and deploy 60 plugin electric hybrid buses to fleets across the nation

2010: Awarded more than $37 million in federal funding and selected as partner in development of DOE high-efficiency "Super Truck

eStar all-electric truck becomes first medium-duty commercial vehicle to receive US EPA certification as a clean fuel fleet vehicle and CARB certification as a zero-emissions vehicle

Gains US EPA emissions certifications for 2010 model year NOx standards as the only U.S.-based equipment manufacturer to use Exhaust Gas Recirculation (EGR) technology to eliminate NOx emissions in cylinder

Panel A

US EPA standards for particulate emissions from heavy duty diesel trucks (t) or urban buses (ub), calculated as grams particulate matter emitted per brake-horsepower-hour (g/b hp-hr) and adjusted relative to pre-1988 unregulated engine emissions. From: US EPA Health Assessment Document for Diesel Engine Exhaust, May 2002. Table 2-4, P. 2-16.

Par

ticul

ates

Em

issi

ons,

g/b

hp-h

r(r

elat

ive

to u

nreg

ulat

ed)

100%

60%

25%

10%5%

1%

Unregulated 1988 t 1991 t 1994 t 1996 ub 2007 t

Fig. 1. Reductions in Diesel Particulate Matter Emissions in the US

Traditional Diesel Transitional Diesel New Technology

Exhaust (TDE) Exhaust Diesel Exhaust (NTDE)

Panel B

NO

x (g

/bhp

-hr)

15

65

4

2

0.2

1977 1990 1991 1998 2004 2010

US EPA standards for NOx emissions from heavy duty diesel engines, calculated as grams NOx emitted per brake-horsepower-hour (g/b hp-hr). From: USEPA Health Assessment Document for Diesel Engine Exhaust, May 2002, Table 2-4, p. 2-16.

Model Year

Fig. 2. Reductions in Diesel Nitrogen Oxide (NOx) Emissions in the US

36