On Sustainability

October 22nd, 2009

KFC UNThinking at the UN

Posted by James Farrar @ 8:03 pm

Categories: Uncategorized

Tags: Sustainability, Yum! Brands, John Ruggie, Human Rights, KFC Corp., UN Global Compact, Corporate Social Responsibility, Carbon Trust, Compassion in World Farming, James Farrar

Honestly, the professional PR brigade never cease to amaze me with some of the nuttiest ideas for brand enhancement that all too often turn out to be just the opposite.

My ZDNet colleague Jason Perlow was spammed today by a top PR agency with this nonsense: a product placement stunt at the UN with KFC’s iconic Colonel Saunders fronting up with a letter for the UN Secretary General demanding a seat in the UN General Assembly for ’Grill Nation’. If that wasn’t zany enough KFC were also giving away free chicken to UN employees today and, counter intuitively, they have declared this coming Monday UNFryday. I can hardly contain myself with excitement.

Its all part of a big PR campaign to get the UN, and I guess everyone else, to ‘UNTHINK their typical lunchtime routine’. Unfortunately most of the UNThinking was happening at Yum! Brands and at the offices of their high profile PR firm.

Udate: In his letter to UN Secretary General Ban Ki-moon, KFC CEO Roger Eaton pledges:

As Secretary-General, you have pledged to build a “stronger United Nations for a better world.” We at KFC are confident that recognizing Grilled Nation will strengthen your organization and satisfy the stomachs of your many Member States.

So besides chicken snacks what are the hot issues for business at the UN these days? With only 44 days left before the UN climate negotiations get under way in Copenhagen I suspect Ban Ki-moon is rather more looking to businesses to help ’seal the deal’ than he is ’unthinking’ with clowning brand mascots for the sake of a free fast food lunch.

The stunt at the UN unnecessarily opened up Yum! brands for criticism of its sustainability record from the likes of Inner City press who reported:

Ironically, just next to the Security Council in the UN’s briefing room, the UN’s expert on transnational corporation and Human Rights John Ruggie explained his mandate to the Press. ………. KFC, whose Col. Sanders as one wag joked bitterly may have killed, through heart congestion and attacks, as many people as some of those indicted by the International Criminal Court, despite not being a military and therefore not a war criminal despite the Colonel in his name. The wag imagined a sign board or campaign, “Send KFC to the ICC.”

A shame really especially since with a cursory read through Yum! Brand’s sustainability report and one discovers that the company is doing some cool things including:

• Yum! Brand’s restaurants will become the first in the US to publish calorie information on menus
• Score 20% better than the national average for lost time injuries - a leading indicator for employee morale and occupational safety
• Removed all trans fats from its food products since 2007
• In the UK KFC is partnering with Compassion in World Farming to address animal rights issues and with Carbon Trust to set a 2012 goal of a 10% CO2 cut.

My advice to Yum! Brands and KFC that they didn’t get from their PR firm? The UN General Assembly is an assembly of nations and it has no place for KFC or its ‘grill nation’. Instead Yum! Brands might take up the challenge to commit itself to the UN Global Compact’s10 principles for corporate sustainability:

Businesses should support and respect the protection of internationally proclaimed human rights within their sphere of influence; and

make sure they are not complicit in human rights abuses.

Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.

Businesses should uphold the elimination of all forms of forced and compulsory labour.

Businesses should uphold the effective abolition of child labour.

Businesses should uphold the elimination of discrimination in respect of employment and occupation.

Businesses should support a precautionary approach to environmental challenges.

Businesses should undertake initiatives to promote greater environmental responsibility.

Businesses should encourage the development and diffusion of environmentally friendly technologies.

Businesses should work against corruption in all its forms, including extortion and bribery.

So after UNFryday will Yum! Brands take up the challenge of UN Global Compact Tuesday? If they are up for it the registration forms can be found here. Here’s hoping.

October 7th, 2009

Apple deletes the US Chamber

Posted by James Farrar @ 2:01 pm

Categories: Uncategorized

Tags: Greenpeace, Apple Inc., Climate Change, US Chamber, Dell, Sustainability, Corporate Social Responsibility, Intel, HP, James Farrar

Is this man the only climate ally left for the US Chamber?

Back in May I wrote about how the US Chamber was losing friends fast with its ‘head in sand’ position on climate change. Since then things have seriously  started to descend into farce. In fact, its now almost a PR badge of honour for members to publicly upbraid the hapless Chamber and its CEO John Donohue on climate change.

Apple is the latest to join the melee dropping its membership with immediate effect. Cathy Novelli, Apple’s Head of Government Affairs ripped into Donohue with this public letter which you can see in full here:

As a company we are working hard to reduce our greenhouse gas emissions by relying on renewable energy at our facilities and designing more energy efficient products for our customers. We have undertaken this unilaterally and without government mandate, because we believe it is the right thing to do. For those companies who cannot or will not do the same, Apple supports regulating greenhouse gas emissions, and it is frustrating to find the Chamber at odds with us in this effort. … We would prefer that the Chamber take a more progressive stance and play a constructive role in addressing the climate crisis.

Donohue immediately shot back in a letter to Steve Jobs (and not Novelli) reported in today’s Wall Steet Journal:

It is unfortunate that your company didn’t take the time to understand the Chamber’s position on climate and forfeited the opportunity to advance a 21st century approach to climate change

And the gloves are also off over in Cupertino when it comes to environmental positioning relative to the competition. This from Apple’s recently released environmental report:

Companies such as Dell and HP primarily report on their facilities as a gauge of their environmental impact. But switching off lights and recycling office waste aren’t enough.

This showdown with the Chamber won’t do Apple any harm at all when it comes to the Greenpeace Cool IT index. Apple has gone from zero to hero with Greenpeace and I’m guessing Apple fans care rather more about what Greenpeace thinks than they do about the fusty Chamber.  Also, I have to wonder if the recent arrival at Apple from Intel of General Counsel Bruce Sewell has anything to do with this new found activism. Bruce’s old job at Intel encompassed corporate sustainability and Intel has been pretty good at being on the right side of the big issues for some time.

Meanwhile over at the NRDC they are keeping a tally of the corporate friends lost by US Chamber CEO John Donohue:

• Quit US Chamber: Exelon, PNM Resources, PG&E, Apple
• Quit US Chamber Board: Nike
• Says Chamber doesn’t represent their views on climate: Johnson&Johnson, General Electric, San Jose Chamber of Commerce

It might be fun to run an office wager on which blue chip will become the next environmental hero by slapping the Chamber on climate change.

October 2nd, 2009

Intel to Ireland: Vote Yes to Europe or else?

Posted by James Farrar @ 7:04 pm

Categories: Uncategorized

Tags: Ireland, Intel Corp., Microsoft, Dell, Corporate Citizenship, Corporate Social Responsibility, Sustainability, Lisbon Treaty, James Farrar

Irishness is not primarily a question of birth or blood or language; it is the condition of being involved in the Irish situation, and usually of being mauled by it.

Still, Intel has waded manfully into the thicket of Irish politics and nailed its colours firmly to its corporate social responsibility mast in backing the ‘Yes’ campaign in today’s national referendum on the EU Lisbon treaty. There is a lot at stake in today’s vote both for the people of Ireland and Intel and not least because it is the single biggest employer in the country. Together with Microsoft and Dell, Intel contributes a whopping 20% of Ireland’s GDP. So is what is good for Intel also good for Ireland?

This will be Ireland’s second go around on the Lisbon treaty with a ‘no’ vote recorded only last year. Intel fears yet another ‘no’ vote would isolate its European operations based in Ireland from an open market in an increasingly bound and unified Europe. Intel’s Ireland boss Jim O’Hara makes no bones about it:

Why did Intel come to Ireland? It came to Ireland because of its low corporation tax, its educated workforce, its competitive cost structures and the fact that, as part of the EU, it was a gateway into Europe. Intel made those choices in full belief that investment in Ireland was an investment in Europe.

Such words resonate powerfully in Ireland especially in the context of Dell’s decision earlier this year to move its European operations centre out of Ireland to a lower cost base in Poland at the cost of 2400 jobs.

As it goes I think Intel is on the right side of the argument but as a US multinational operating in Ireland, its political campaigning is not universally welcomed. One letter to the Irish Times summed up the concerns of the ‘no’ campaign:

It is disconcerting that companies such as Ryanair and Intel can spend vast sums of money in support of the Lisbon Treaty referendum with no questions asked. Why is it that companies like these are not subject to the Standards in Public Offices Commission rules? It’s questionable as to why these companies are getting involved and the Irish people are entitled to know what is behind their newly discovered philanthropy.

Both companies were recently the subject of EU Commission investigations and Intel was recently fined €1.06 billion by the European Commission (currently being appealed by Intel) for breaches of competition and consumer law. Intel was found guilty of “harming millions of European consumers” though its anti-competitive practices.

Intel has made an important contribution to the Irish economy and it is disappointing that it has chosen to pour a vast sum of money into the campaign in favour of Lisbon thereby radically distorting the debate.

My take: while I think Intel is on the right side of the issue I can’t help but feel a bit uneasy about the precedent set here. With the genie out of the bottle,  in future Intel may find it increasingly difficult to draw boundaries of the role it should and should not play in the political life of the many countries that host its operational interests.

June 25th, 2009

Death of the Principle of Voluntarism?

Posted by James Farrar @ 12:59 pm

Categories: Uncategorized

Tags: Kimberly Process, Corporate Social Responsibility, Sustainability, Blood Diamonds, UN Global Compact, Global Compact Critics, Ian Smillie, ISO26000, James Farrar

Much of the corporate sustainability and responsibility agenda has been propelled since the ’90s by the idea that voluntary action on the part of corporations is more effective than regulation. It has been a celebration of market dynamism over moribund regulation, the latter of which would provide only for the lowest common denominator. At any rate, liberalization of markets outpaced our ability to develop an effective governance model to tackle issues such as climate change in a joined up way so many were happy to go a long with an approach that at least delivered incremental improvements.  

Now there are signs that the principle of voluntarism is under pressure. There are two striking examples this week.

First, the UN Global Compact, the world’s largest corporate citizenship initiative dedicated to 10 voluntary principles, withdrew its support for the ISO26000 standard for corporate social responsibility now in the latter stages of development. This was announced in a terse letter from the UN Global Compact to ISO last week, since leaked by Global Compact Critics:

We are disappointed that neither in the body of the standard nor in the annex is there any recognition of the world’s foremost social responsibility initiative, and have concluded that the current reference to the UN Global Compact does provide the UNGC with the prominence it deserves.

It appears the UN GC is upset that its voluntary code is not more prominently embedded into the emerging ISO26000 standard as best practice. Incidentally, Intel announced that it has just this month signed up to the UN Global Compact principles. For the record, the UN Global Compact is a great initiative for what it is - a general voluntary CSR code based on an honour system of voluntary compliance. The only obligation is for members to submit annually a ‘communication on progress’ report. The danger is to expect perhaps too much more than that of it.

The second example is more tragic. The Independent reports today that Ian Smillie, the original architect of the Kimberly Process, a certification scheme to guarantee that diamonds associated with conflict are kept out of trade, has withdrawn his support. The Kimberly Process is a UN backed multi stakeholder initiative which aims to end the ‘blood diamond’ trade which has blighted the development of countries such as Angola, Liberia & Sierra Leone. I say tragic because there is a real danger of apathy becoming a self fulfilling prophecy. As the Independent reports on the Kimberly Process:

….if the process loses credibility, experts say criminals will re-enter the trade with conflict diamonds quickly reappearing in shops in London, Paris and New York.

Says Smillie:

 It isn’t regulating the rough diamond trade. It is in danger of becoming irrelevant and it’s letting all manner of crooks off the hook.

Its a cruel irony that just as the technology for effective traceability is coming to maturity confidence in voluntary schemes such as Kimberly seems to be weakening.

The credit crisis, collapse of the auto industry and the recession has shaken the confidence of activists stakeholders that the market can come good on corporate social responsibility. It hasn’t helped that the private sector has tended to drink just a little too much of its own Kool Aid on sustainability performance. As Aron Cramer, BSR CEO commented recently on his impressions of the World Business Summit on Climate Change held last month in Copenhagen:

There continues to be altogether too much pride taken in small initiatives taken by individual companies, and the opening plenary featured lots of credit taking for initiatives that are not exactly game changers. And when Adam Werbach of Saatchi & Saatchi Ssuggested that some CEOs might not match their words with actions (a very reasonable claim, in my view), Martin Sorrell of WPP fired back a blistering response that led me (and many I spoke with) to think Sir Martin doth protest too much…

Certainly the voluntary principle is down but by no means is it out not least because we still have the same serious governance gaps out there that continue to require a pragmatic approach & solidarity across stakeholder groups. That said, maybe a correction at this time is perfectly in order. Voluntary actions of corporate citizenship need to be held to closer public account if they are themselves to be sustainable.

June 22nd, 2009

What Corporate Sustainability can learn from twitter, Robert Scoble & Iran

Posted by James Farrar @ 7:31 pm

Categories: Uncategorized

Tags: Sustainability, Intel, Twitter, Friend Feed, Sun Microsystems, Robert Scoble, The CRO, CNN, McDonalds, James Farrar

Amanpour: A little more Davos & Friend Feed, a little less Damascus & live feed?

The celebrated celebrity blogger, Robert Scoble, is ticked off with CNN over its weak coverage of the Iran election and aftermath. In his most recent blog post -‘The day Twitter kicked CNN’s behind & @ev bought me a whisky’,  Robert argues that twitter (yes twitter, the fire hose twitter), is handily beating out CNN and most other US media sources in the news game.  In fact, he was holding court on this very topic so passionately one night recently at the Ritz that he caught the attention of Mr. Twitter himself (@ev), Evan Williams who was so chuffed with his new found status as newsman he bought whiskeys all round!

So there you have it Christiane Amanpour - pack up your fatigues, come home from the battlefield, get yourself a webcam and come meet your new boss over a cocktail or two at the Ritz for this is the new age of citizen journalism. Seriously, I love twitter but I’m sticking with Robert Fisk of the Independent for context and insight on the Middle East rather than Robert Scoble’s friend feed room which is pulling up gems like this one:

A brilliant guy at my gym, a BU professor, refuses to work out to CNN, insists we change the channel.

 

And this is where social media will help transform things on the corporate sustainability front much closer to home sooner or later. For years now, larger corporations have opened little windows of public accountability by issuing corporate sustainability reports. They do so to be seen as good corporate citizens as these disclosures and stakeholder engagements are entirely voluntary. Companies like McDonalds, SAP*, Intel & Sun have even opened up social media channels to engage and allow stakeholders to publicly sound off. But it seems we rather need the corporate equivalent of a ‘get out the vote’ drive such has been the generally lack lustre citizen response.

Take for example, CSR blogger Marcy Scott Lynn at Sun Microsystems. Marcy this year wrote a thoughtful, honest and tough critique of the Corporate Responsibility Officer annual ranking. (I had a rant on this same subject last year but The CRO’s unstable methodology is still an issue). Sun CEO Jonathan Schwartz even took the time to enter the fray on line and challenged The CRO to respond openly to issues raised. Did they bother to do so even when the CEO of a constituent of their flawed index asks them to? Nope.

Such apathy won’t pervade much longer. This is a pivotal year for sustainability with a climate agreement to be molded into shape by the UN before year’s end and as we clear up the wreckage of the credit crisis. The private sector is being asked to weigh in heavily on the policy debate but who exactly is calling the shots? Ordinary people are starting to realize that business holds the key to climate stability as much as policy makers and that responsible business models can mean the difference between boom or bust. Not lease, Iran has given activists the world over a crash course in on line activism even if less so in on line journalism.

There is a vulnerability to corporate power in the public sphere: corporate entities lack the civic legitimacy of citizens and they are extremely sensitive to margin shifts & adverse PR. This opens considerable advantage to web citizen activists and even journalists who are willing to engage corporations on sustainability. In the long run, this is a good thing for business and society especially if it helps spur the private sector on to meet the climate challenge and tackle business models that lead to adverse public outcomes such as that of the credit crisis.

* see my disclosure

June 17th, 2009

Ireland: Shell's new Nigeria?

Posted by James Farrar @ 3:26 pm

Categories: Uncategorized

Tags: Sustainability, Human Rights, Marathon, Statoil, Eamon Ryan, Royal Dutch Shell, Shell to Sea, Corrib, CSR, James Farrar

Just as Shell brings to a close a difficult chapter in its troubled relationship with the Ogoni people in Nigeria, its relationship with community groups in the west of Ireland appears to be reaching new lows. Shell is the senior partner with Statoil and Marathon in an effort to bring off shore natural gas reserves on to the national grid in Ireland. Unfortunately for Shell, the project has run into fairly determined resistance from a range of activists who variously raise objections on the grounds of safety, unfair compensation for compulsory purchase orders, an unfair deal with the Irish government and over the environmental toll of the project.  

In the public furore that followed after five farmers were jailed in 2005 for contempt of court for refusing to allow Shell access their lands it seemed as if things had finally reached a turning point for the better. This from Shell’s 2005 sustainability report:

Regrettably, in June 2005, five local people were jailed after illegally blocking project work. Shortly afterwards, work was suspended to allow an independent safety review of the onshore pipeline and further dialogue with the community. With hindsight, we underestimated the intensity of opposition and its impact on this close-knit community. By focusing on obeying the law and following the permitting process, we paid too little attention to the community’s concerns, to communicating the project’s safety features and to finding ways for the community to benefit. We are committed to learning from these mistakes and to building a more effective local partnership. We welcome the draft report of the 2005 independent safety review and will follow all its recommendations, including lowering the maximum operating pressure of the onshore pipeline. We continue to support the independent mediation process.

But then last month one of the five, Willie Corduff, alleges he was assaulted by members of the private security service protecting Shell’s operations after disrupting the construction of fences near where the gas pipeline is planned to make landfall. The exact circumstances of what happened are in dispute but Nobel Peace Prize winner Archbishop Desmond Tutu has released a particularly strong statement:

A peaceful protester, Goldman International Environmental Award Winner Mr. Willie Corduff has been physically attacked, under cover of darkness, by the agents of a multinational corporation, resulting in his being hospitalised and left severely hurt and traumatised.

I am aware that the conflict centres around attempts by a consortium comprised of Shell, Statoil and Marathon to bring raw gas ashore in Erris, by means of a high-pressure pipeline running through the community, to a processing plant at Ballinaboy. 

This is opposed by local people, particularly in the parish of Kilcommon where the project is based, because of fears for their health and safety (including possible contamination of their drinking water). A compromise proposed by three members of the Catholic clergy and supported by a majority of people in the locality, would have seen an onshore processing plant located in an unpopulated area away from the community’s water supply, eliminating the need for high pressure pipelines. 

This proposed compromise has, unfortunately, been rejected by Shell and the lrish government. The strength of feeling in the community regarding this issue is illustrated by the fact that five people, who became known as the Rossport 5, spent 94 days in prison for their non-violent opposition to the project going ahead in its current form. Mr. Corduff, one of the Rossport 5, went on to win the prestigious Goldman international environmental award, known as the Green Nobel Prize, in 2005.

It is in regard to the attack on Mr. Corduff that I particularly wish to make my concerns known. Mr. Corduff is a small farmer who has lived all his life and raised his family in this area. His only interest and motivation is the protection of his family and the welfare of his community. His opposition to the gas project has always been entirety peacefuI and non-violent.

Then last week local fishing rights activist Pat O’Donnell, claimed armed ‘mercenaries’ came aboard his fishing trawler, the Iona Isle, and forcibly scuttled it before leaving on an inflatable. This incident led Shell to take the extraordinary step of issuing a press release to deny they had anything to do with the sinking of the Iona Isle:

Shell E&P Ireland Limited emphatically rejects the allegation that people employed on the Corrib Gas project were involved in any way in the incident, which led to the sinking of the Iona Isle fishing vessel in Broadhaven Bay early this morning. …. A number of malicious allegations have been made against SEPIL and its security contractors in recent weeks. These claims are designed to cast doubt on the integrity of the project and the personnel working on it, but have no basis in fact.

It is reported that O’Donell has laid 800 crab pots along the intended route of the pipeline and he is one of the few local fishermen not to accept the €30,000 offered by Shell as compensation for disruption.

My Take: With claim for counter claim its hard to source the truth of these events but its very clear the relationship has broken down and things have taken a sinister turn.

The rush for energy resources can leave local communities at the point of extraction feeling like they bear much environmental cost and enjoy few of the economic benefits. The perceived sense of marginalisation can lead to much anger and this can be quickly brought to bear on the extraction company with the host government perhaps taking a convenient back seat to the problem.

Shell itself identified the problem in their 2005 report – simply ‘obeying the law and following the permitting process’ thereby ‘underestimating the intensity of opposition’ and the ‘impact on close knit communities’ can lead swiftly to project failure. It is surprising that Shell had not more fully institutionalized this learning from their Nigeria experience where the divergence between the national permitting process and the permission of the local community is surely likely to be much greater than it ever would be in Ireland. But recognizing the concerns of the community is one half of the stakeholder engagement problem. Being ready, willing and able to respond is the other half. It will always be difficult for a private sector actor to square that circle so corporate social responsibility cannot be a substitute for governmental social responsibility.

To be fair to Shell, they appear to be left in a no win situation due to a failure of national and local public governance. If energy independence is so important to Ireland then the politicians ought to step up and account fully for the policy trade off decision. Public protest & direct action at the point of operation is proof that the political process failed. The Irish government minister for Energy & Natural Resources now responsible for the project, Eamon Ryan, previously opposed it as a member of the Green Party then in opposition to the government. He even joined in public protest events back in 2005. In 2002 he said:

The real question which must be asked about this gas field project is this — is the Royal Dutch Shell deal a good deal for Mayo, and a good deal for the Irish taxpayer?

Indeed.

June 15th, 2009

Greenpeace guest post: Time for real IT Leadership in tackling Climate Change

Posted by James Farrar @ 2:59 am

Categories: Uncategorized

Tags: Greenpeace, Apple, Nokia, Dell, Sony Ericsson, Philips, IBM, Sony, Sustainability, James Farrar

Tom Dowdall, Greenpeace

Guest post from Tom Dowdall, Greener Electronics Campaign Co-ordinator, Greenpeace

When Greenpeace first started campaigning on the electronics sector in 2005 we wanted to see companies change the way that products were made, used and disposed of to tackle the massive amounts of toxic e-waste being dumped in developing countries.

We knew an innovative, fast-moving and competitive global industry could rise to the challenge of removing toxic chemicals from their products’ design and recycling their old products for free where ever they are sold. Since then, we’ve seen many of the major market leaders dramatically change their business polices and practices to improve the environmental performance of both the products and of the companies themselves. Their progress is clearly charted throughout the editions of our quarterly Guide to Greener Electronics.

Better products

Companies like Apple, Nokia and Sony Ericsson have removed the worst toxic chemicals from their products. Philips, Sony and Dell have massively improved their recycling schemes. Since introducing criteria on climate and energy, we’ve also seen many companies set or improve their emissions reduction targets, boost renewable energy use and improve energy efficiency across their product range.

There’s been remarkable progress from the industry on addressing environmental concerns both due to internal company change and external pressure from customers, campaigners, politicians and media. There’s still more work to do before we see truly green products on the market, but now there’s an even bigger challenge on the table for the industry - fulfilling IT’s potential to cut 15 per cent or more of greenhouse gas emissions by 2020.

Crunch time for the climate

Time is fast running out if the planet is to avoid catastrophic climate change. It’s the biggest and most challenging problem facing us all. 2009 is a crunch year when world leaders will either adopt strong global emissions reduction targets or go for a weak compromise that puts short-term interests ahead of the future of the planet.

The scale of the challenge requires a new style of leadership from the business world and from the businesses that stand to gain in a low-carbon economy - IT companies could be some of the potential biggest winners. However, during the negotiations currently taking place in Bonn, the head of the UN climate process, Yvo de Boer, summed up the situation:

The problem I have is that when we all get back home – it’s the potential losers that have the ear of the politicians and not the potential winners.

The days when signing a general declaration or joining a corporate club that states global warming is important and global carbon emissions should be regulated have passed. This is a battle for the future of the planet. Companies staying silent in the debate are allowing the high-carbon lobby to delay and weaken any potential global deal.

Be bold

So far, of all the companies we’ve asked, only Sun Microsystems shows clear support for the specific cuts in the US that are necessary to reach the global target - 40 per cent cuts by 2020 - that leading scientists say is required. Taking this bold stance is, of course, not going to be easy. It requires a company to defy the position of many current business customers, and it requires a company to also back this up by cutting its own emissions.

On one level it’s a moral challenge - as the scale of the problem becomes even starker many more people will demand companies to take a clear position based on science. But, it’s also a business challenge – if companies want to win business to reduce emissions in other sectors they have to show how their solutions actually reduce emissions and back true solutions, not just slightly more efficient oil drilling.

We already see the industry moving towards more sustainable products and practices and we’ll continue to push for more change from some of the biggest electronics companies via the Guide to Greener Electronics. Eliminating toxics chemicals, extending lifespan, improving reuse, recycling and renewable energy use are all important foundations for building IT climate solutions that will be vital to reducing global carbon emissions.

James’s previous ZDNet post rightly pointed out that the Cool IT Challenge should include more diverse types of companies from more countries. We are looking for more companies to show leadership and compete for top spot. Greener Computing called it ‘simplistic’. I say preventing catastrophic global warming is complex but needs simple prioritised action – getting global emissions down as quickly as possible and speaking out to help ensuring the biggest polluters make the biggest cuts.

To be clear, this is not about “agreeing with Greenpeace”. It’s about which companies are showing the new, decisive style of corporate leadership needed and which companies are best placed to provide cutting edge climate solutions. Without both, the chances of achieving a planet-saving deal in Copenhagen are looking a lot worse.

Tom Dowdall
Greenpeace International
Amsterdam

June 9th, 2009

Airlines on Climate: Don't blame us blame the Banks

Posted by James Farrar @ 4:11 am

Categories: Uncategorized

Tags: The Climate Group, UN FCC, Carbon, Sustainability, HSBC, IATA, ATA, Richard Branson, Virgin Atlantic, James Farrar

I’ve posted before in these pages about how the business lobby, under pressure to respond to climate change, is starting to fracture. There was another dramatic example of this yesterday in Kuala Lumpur at the annual general meeting of the International Air Transport Association (IATA) when the CEO, Giovanni Bisignani, took an extraordinary swipe at the UK government and the banking industry.

In the run up to the Copenhagen climate talks IATA has belatedly offered up a pledge on behalf of its member airlines to pay to offset growth in aviation greenhouse gas emissions to 2020. But in return, Bisignami is calling for a normalization of existing environmental tax regimes so the industry only pays once. The UK Air Passenger Duty (APD) is a particularly sore point, its been around for years and was set up by the UK government to collect funds to nominally compensate for the environmental costs of aviation. Unsurprisingly, the duties collected have long been inhaled into the UK Treasury with little or no investment in infrastructure that might help improve industry performance, for example alternative fuels or improved air traffic control efficiency. Says Bisignami:

It is unacceptable that money collected from our responsible industry in the name of the environment is being used by an irresponsible government to pay inflated MP expense claims or bail out banks.

Ouch! In fairness important to note that HSBC, to my mind the banking sector leader leader on the issue of climate change, has refused bailout money from the government though it has taken a severe hit from the credit crisis.

What is really interesting about this pledge is the compensation for growth angle. If you look carefully through the IATA ranks you won’t find among them the low cost carriers such as Ryan Air, Easyjet or Southwest. Obviously these carriers, more recently characterized by a high growth curve, will carry more pain than full service airlines who have already established full scale.

I say the pledge comes from IATA belatedly because readers will know from my previous post, it was the pioneering work of London based NGO, The Climate Group, that forged a deal allowing the more progressive airlines to break away from industry associations such as IATA and the Air Transport Association (ATA) which been until now in stalemate with the industry negotiating body, ICAO. The Climate Group has convened a group of airlines, the Aviation Global Deal (AGD),ready to step aside from their industry affiliations and recommend a deal directly to the UN climate negotiators.

Back in April The Climate Group launched AGD together with Air France KLM, British Airways, Virgin Atlantic & Cathay Pacific. In contrast to the IATA position, AGD called on the UN to place a cap on global aviation emissions but to do so globally and so set a level playing field. Aviation will be brought under the terms of the EU emissions trading scheme from 2012 so admittedly European carriers do have something of an additional motivation to see a global deal. Since its launch Finn Air, Qatar and Virgin Blue have also joined the The Climate Group/AGD neogotiating platform.

Today the AGD group goes before the UN Climate change negotiators in Bonn to provide more detail on their previously announced commitment. They will propose a range of three scenarios that represent a wider and perhaps more balanced offering than IATA is currently putting on the table:

The AGD Group has considered a ‘carbon neutral growth’ target, a 5% reduction and a 20% reduction in emissions through to 2020, using a 2005 base-year and estimated future carbon prices.  ………   Under all scenarios, the airlines would be active participants in international carbon markets in order meet their emission targets most cost effectively.   
 
Based on the scenarios assessed, auction revenues of up to USD$5 billion per annum could be generated to support activities such as climate adaptation programmes and initiatives to combat tropical deforestation, a major source of greenhouse gas emissions.  AGD members highlighted the critical role these auction revenues could play in delivering a fair and equitable deal in Copenhagen. 

Richard Branson, Virgin Group supremo spelled out the dilemma for carriers such as Virgin Atlantic & Virgin Blue who want to see the industry reduce its impact but don’t fancy ending up as road kill in the process: 

We are looking at every single way of tackling climate change. All airline companies must support their governments in making sure we get a treaty to reduce carbon output dramatically. …. There is a price to pay and, as long as other airlines pay, we are happy to pay it.’

My Take:

There will be many more high profile and dramatic skirmishes both within and cross industrial sectors in the run up to a climate deal this December in Copenhagen. Most industries have long ago abandoned the obfuscation of debating the science of climate change and have moved now to adapting their business model to the new reality and to ensure their businesses achieve the best strategic positioning. But in order to create confidence in an effective global trading system to make all this work there are a few serious considerations. We need market based instruments such as cap & trade to function well across the global economy and funds raised should be fairly managed and invested in new technologies and in the protection of forest carbon sink assets. To make this system stick a robust system of measurement, reporting and verification across the board becomes the real linchpin.   

To quote the UN Framework Convention on Climate Change working group paper from March this year: 

Ambitious mitigation actions by all Parties, in accordance with their respective responsibilities and capabilities, and ambitious financial and technological support for actions by developing countries will be at the core of an agreed outcome that enables the full, effective and sustained implementation of the Convention. Robust measurement, reporting and verification of both actions and support will contribute to building confidence among Parties and thus to their willingness to scale up their level of ambition. The level of global ambition to mitigate climate change will, in its turn, determine the scale of the adaptation challenge and the need for finance and technology to cope with that challenge. The negotiations under the Bali Action Plan must focus on achieving political clarity on these core points as a basis for action by COP 15.

June 5th, 2009

Sustainability: More Capitalist Than Jack Welch?

Posted by James Farrar @ 2:54 am

Categories: Uncategorized

Tags: Sustainability, Jack Welch, Suzy Welch, CSR, Ecomagination, GE, Toyota, IBM, Marks & Spencer, Whole Foods, James Farrar

Let me explain. Here is a value curve from IBM illustrating the simple concept - un-integrated CSR destroys value but integrating to the business can create significant value.

OK nothing earth shattering here from IBM - this point is well understood by most by now. According to a McKinsey survey on philanthropy last year of global senior executives:

In addition to social goals, the vast majority of companies—nearly 90 percent—now seek business benefits from their philanthropy programs as well.

And in identifying best practice McKinsey say:

It is notable, however, that some 30 percent of the responses to the question asking about business goals indicate that some companies are trying to reach very concrete goals, such as building knowledge about potential new markets and informing areas of innovation. Respondents from companies with these goals are likelier than others to say business concerns should play a role in determining funding for philanthropic programs. Also, their philanthropic programs are much more likely to address at least some of the social and political issues relevant to their businesses; nearly two-thirds say they currently do, compared with just under half of all respondents.

Now Enter Jack & Suzy Welch with some handy advice for managers in how to guide CSR strategy in tough economic times:

You can sprinkle the money evenly, giving a little money to a lot of causes, or you can prune your list and give somewhat more to fewer organizations. Neither choice is bad, in our view, but we favor the latter only because it tends to have a greater impact.

Brilliant! Why is Jack Welch, father of the modern shareholder value movement, advocating the throwing off of corporate cash without much more than a fuzzy strategic connection? What on earth would Milton Friedman say?  I’m being only half snarky, yes by all means concentrate efforts for impact. But frankly, I’d prefer to see €1 invested in an idea that could be integrated into the business model & scaled either to improve sustainability performance of enterprise wide processes or better distributed to society in the form of improved products and services than ’sprinkle’ around €100 - a la Welch, that is making decisions about social intervention - ’straight from the gut’ but not straight from strategy.

So what about product innovation and CSR as a core business strategy? The Welch view:

companies can put CSR into their product and service strategies, focusing on green initiatives, for instance, or factoring environmental concerns into their manufacturing processes……. And then there’s CSR as a strategy. Look, when gas costs $4 a gallon, a hybrid Toyota Prius is an attractive value proposition. With gas under $2.50, not so much. When most consumers have good, secure jobs, expecting them to pay more for an enviro-friendly product makes sense. With bank accounts drained, it’s a tough sell. Our point: The bar for strategic CSR is now higher than ever. Consumers are increasingly unable (or unwilling) to pay more for something simply because it makes them feel good inside. Today, it has to make them feel good in the wallet, too. That doesn’t mean the era of “socially responsible” products is over. It just means increasingly intense cost pressures on the companies selling them, and any manager who ignores that fact is ignoring an oncoming locomotive of competition.

Just imagine what the global economy would look like if we only ever consumed for functional and practical reasons and never because it made us feel good inside. In one foul swoop Jack & Suzy have just wiped out maybe 80% of our global market systems and kicked capitalism as we know it to the long grass.

At any rate I think consumer interest in sustainability is much more deep seated than that. Ask Wal Mart or Whole Foods or Marks & Spencer. And yes, Jack, ask GE about Ecomagination. But more than that, the commentary betrays an attitude that green productization is something of a joke, a consumer gimmick that is easily bolted on and just easily bolted off. It assumes that such products have a weak competitive footing and will quickly wilt in tough economic times. Maybe some will and some won’t  - like all competitive offerings in the market right now. Nobody expects a free pass. But I’m quite sure Toyota & GE have a better strategic handle on the economic sensitivity of green consumer choice and would not have built their business strategy on assumptions so flaky.

The other elephant in the living room that Jack & Suzy barely get into is sustainability as a strategy to help reduce cost and risk across the enterprise and the extended value chain. For example, reducing energy & resource inputs, uncovering social risk in the supply chain, recyling of materials - this all creates real value for the business without ever making a dedicated green consumer offering. But if Jack really believes Corporate Social Responsibility adds cost and reduces competitiveness does he also believe corporate social irresponsibility has the opposite affect?

There is a new reality here and I dare to suggest the Welch’s fail to keep up and are, perhaps, blinded by their own ideology when a more practical approach to strategy is needed. The day has arrived where we look back with nostalgia at the idea of business apart from society, where we could pursue profit in a market system eneveloped in a vacuum. It will be as quaint as white picket fences to think of the luxury of simplicty managers had in not having to think about the sustainability constraints nor seek opportunity & innovation in dealing with them. To the extent that modern corporate managers are adapting their strategy to the challenge of sustainability they are, ironically, proving to be even more capitalist than Jack & Suzy Welch.

In my native Ireland there is a recognised phenomenon through the ages that the country eventually conquers all through assimilation. Wave after wave of battling marauders came but after a generation or two they became assimilated and took the idea of ’Ireland’ forward. They became ‘more Irish than the Irish themselves’. The same may now be true for sustainability in the marketplace. Once a corporate ideological outrider, it is becoming so well flexed to create real market value that it is starting to nudge aside the more rigid ideology of, at times, self defeating market fundamentalism. Whilst Jack Welch might be surprised by this, I have a sneaky feeling Milton Friedman might not have been so much.

June 3rd, 2009

Hearing the Call: A Promethean Encounter in Copenhagen?

Posted by James Farrar @ 6:50 pm

Categories: Uncategorized

Tags: Greenhouse Gas, Copenhagen Climate Council, Climate Change, Deforestation, World Business Summit on Climate Change, Sustainability, James Farrar, Cate Blanchett

Cate Blanchett: A Promethean Encounter with CEOs in Copenhagen?

The great and the good of global business got together in Copenhagen last week to try to reach consensus on what the private sector message should be to the UN led climate change negotiators who will agree a post Kyoto framework this December. Even Cate Blanchett was on hand to charm and cajole the suits into action:

What can be achieved here in Copenhagen over these days and most importantly in December this year will represent a watershed in human civilization as important in its way as the Promethean encounter itself.

No pressure then lads and lasses.

Today, summit organizer, the Copenhagen Climate Council released the summit report which is quaintly framed as the so called ‘Copenhagen Call’. You can read it and judge for yourself how well our esteemed CEOs measured up to Cate’s rhetoric. It outlines a six point plan for policy makers which, if implemented, can secure our common economic and environmental security.

•  Agreement on a science-based greenhouse gas stabilization path with 2020 and 2050 emissions reduction targets that will achieve it

The message here from business is that governments have to get their act own act together and reach a clear international agreement on how to stabilize the climate & at what levels of CO2 atmospheric concentration. There must be a clear policy signal with agreed milestones for implementation. This higher order of clarity sets the stage for a planned response from the private sector.

• Effective measurement, reporting and verification of emissions performance by business

The Greenhouse Gas Protocol provides a great foundation for an international accounting standard but there is far from certainty on basic issues such as boundary settings, methods of calculation & target setting. The uncertainty discourages disclosure & adds complexity since firms are unsure about comparability and how the data could be used in benchmarking. As you start to roll all this up at the macro level, dysfunctional accounting standards can seriously inhibit the evolution of a buoyant global carbon market. It also stands in the way of overall policy goals set at previous climate talks in Bali to improve measurement, reporting and verification (MRV). The group also paid special attention to focusing abatement not only within the bounds of the firm but looking too at opportunities to optimize along the whole length of the value chain.

• Incentives for a dramatic increase in financing low emissions technologies

This is really where the group have to stretch to defy market forces. The problem is that capital must flow faster into new technologies given the tight window for action. Interestingly, the group believe there is a perception problem: investors believe risks are higher than they really are. I’m not sure if we need beter risk analysts or better marketers.

• Deployment of existing low-emissions technologies and the development of new ones

 At issue here is how quickly technologies can be developed and made widely available to reach necessary scale. On the one end rigid intellectual property laws can slow down the pipeline and at the other end the lack of capacity to absorb new methods, especially in developing markets, could be a significant obstacle.  

• Funds to make communities more resilient and able to adapt to the effects of climate change

Perhaps the most depressing agenda item. Its a recognition that climate change, already underway, is biting down on some of the worlds most poor and vulnerable working mainly in the agricultural sector. The business group is calling for better scientific impact modeling and innovative microfinance models to help spur economic relief and re growth.

• Means to finance forest protection

This is an awkward one and probably does not get enough air time. The UN frameworks assume that 50% of the necessary CO2 reduction will come from land use changes and the forestry sector. Deforestation is an obvious threat but developing economies depend more than most on agriculture and logging for jobs and growth. Carbon markets could go a long way to provide financing to protect forests but at issue is the old chestnut MRV - monitoring, reporting & verification. Carbon markets will need to assurance that carbon savings are real before sinking their money into distant forests.

So there you have it - a six point plan to save the world. Its the Copenhagen Call. Is anyone listening?