June 25th, 2009
Death of the Principle of Voluntarism?
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Kimberly Process, a certification scheme to guarantee that diamonds associated with conflict are kept out of trade, has withdrawn his support.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
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:
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?
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:
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:
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
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 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
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:
June 5th, 2009
Sustainability: More Capitalist Than Jack Welch?
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?
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?
June 1st, 2009
IBM on Sustainability: Time For Real Time
Its hard not to be impressed with the strength of focus coming from IBM these days on sustainability. I’m ususally pretty sceptical about sustainability marketing efforts and IBM have a high hurdle to jump to reach a point of public credibility. But on the other hand technology companies, more than most sectors, are obliged to lead from the front in raising awareness of how sustainability is impacting the business and by offering real solutions to mitigate the effect and create new value whilst doing so. Just ask Greenpeace about this. Its a risky marcom exercise but IBM is succeeding with its idea of a smart planet because its not just a vacuous sloganeering platform. In fact, IBM is backing up the marketing schtick with serious intellectual effort both, in thought leadership to shake things up, and putting capital at risk to develop solutions that can move industry business models to a more sustainable footing.
Today IBM released the results of their latest global CSR survey of more than 200 senior executives. The findings are sobering but also somewhat encouraging. And if you thought all of this talk of sustainability would wash away in the toughening economy then think again. In fact, the opposite appears to be true:
The new economic reality has more rapidly advanced the logic of corporate sustainability management. The pennies are dropping at once and all over: integrate sustainability to make it sustainable and profitable or carry a token CSR programme that incurs incremental cost, creates no new business value and whose PR value too is rapidly commoditizing. Its a no brainer. But its a big brainer to implement.
You see, the dirty little secret of corporate social responsibility is, as we have all known for years, the trade off and optimization analysis required to drive serious decisions such as for carbon, recycling & packaging performance is complex. But rather than throw the problem to the Operations Research department; it has instead been parked for too long with the PR group who busied themselves writing attractive CSR reports and thinking about crisis preparedness and reputation management. Much less creative thought has gone into operations planning for sustainability and now IBM exposes the woeful state of the information gap for sustainability optimization planning amongst its surveyed group:
Relative to their CSR ambitions, the businesses surveyed are ill prepared with the management information essential to managing their strategic sustainability goals. In turn, we in society risk not seeing the improvements that we need to rapidly realize in order, for example, to arrest climate change. Depressing? No. To get this issue out on the table now is more than halfway towards solving it. I only wish we were having this discourse more widely ten years ago.
There are two very serious issue at hand to address - the need for sustainability information from across the business network and the need to have it in real time. Carbon is a great case in point and looking only inside the factory gates may fail to optimize the firms position or that of the environment. Looking upstream, collaboration with suppliers and partners can yield operating and environmental performance improvements. Looking downstream, customers may highly value having the total embedded production CO2 emissions data available as a product label at point of sale. We need to have a much more dynamic handle on this level of complexity if we are to seriously to take CO2 out of the business network. Adding it up in excel at the end of the year won’t cut it.
……implementing sustainability strategies requires a sound understanding of trade-offs related to areas like quality and customer service, as well as costs and environmental impact. In many cases, these factors must be evaluated for their impact across the full supply chain and life cycle. …………
And yet the following illustrations show that supply chain management is mainly focused on sensitive reputation issues like supply chain labor standards which are managed mostly on a compliance basis. Scant attention is paid to issues that, moving beyond compliance, can lead to cost improvement and process innovation. Carbon, water and energy are such issues that reside at the bottom of the heap. This is not an argument for de-prioritizing human rights in the supply chain but rather to point out the missed opportunity better resources & environmental impact management.
One of the great advantages of the new information era is the availability of real time data. Yet too often, the information that is being collected is stale. Nearly sixty percent of organizations are not collecting information about key operations and sustainability objectives on a frequent basis. Even in the high-profile area of carbon management, for example, 8 out of 10 are not. They may be able to use the information they have for an annual CSR report, but since they aren’t evaluating the ongoing impact of actions on their carbon footprint, it’s unlikely they can use it to make their operations more sustainable.
The tone of this new survey report is more sober and less exuberant than the last time out. It maybe a sign of the times but I think its a more realistic approach. Gone is the more fanciful talk of ‘ubiquitous connectivity’ of the anti corporate masses on the horizon nor is there any more talk of ‘NGO footsoldiers’ at the ready to manage compliance on the cheap for global multinationals. Rather, IBM does seem to have snapped back from previous but it comes at a cost of some clarity. IBM is now somewhat more vague about the exact nature of the relationship between civil society and business and how corporate governance models might adapt:
Stakeholders require a lot of information but their information demands can’t be your only focus. Are you collecting information that helps you meet your business objectives and are you communicating those objectives to stakeholders?
Its important to make progress on this puzzle or firms risk endlessly reacting to commentary at the cost of embedding strategy. We need durable but elastic models to effectively include stakeholders in the game.
But for all that the report has a very sensible and practical focus on two burning issues of corporate sustainability - how to become more efficient and how to find new pathways to sustainable and profitable growth. Bravo.
May 28th, 2009
Greenpeace Cool IT: But does GP miss the point?
Greenpeace upped the ante on the IT sector by switching focus from reporting on the environmental performance of consumer electronics to looking at how the industry as a whole is performing on climate change. Yesterday they launched their inaugural Cool IT ranking of the top 12 IT firms performing on climate change. The ranking is weighted as follows: 50% for solutions provided to enable the economy to reduce emissions, 35% for political support of emissions reduction and 15% for corporate performance.
And here is the ‘Leader Board’ for the current Greenpeace Cool IT review:
I agree wholeheartedly with Greenpeace’s focus on solutions and as readers will know from this previous post, I also believe leadership in the public policy arena is important. But we should not under estimate the difficulty the industry faces in confronting some of its best customers across the political lobby:
The IT industry must, therefore, push back against the lobbying of powerful industry sectors such as coal and transport who are heavily lobbying for a weak deal.
None the less, such corporate activism may very well be the mark of a new breed of corporate sustainability leadership with corporations increasingly taking strong political positions, even across industry sectoral lines, to support sustainability public policy.
But there are some troubling aspects of the GP methodology and assumptions made:
We first looked at the biggest global IT and technology companies, then, because we are looking for the most progressive leaders, we focused on those who have already made environmental or climate leadership promises. We then selected a majority of companies from Japan and the US because both countries need to improve their current 2020 greenhouse gas emission reduction targets and their overall negotiating positions in the Kyoto talks.
Fine to select the biggest companies but to focus on companies that are based in the US and Japan only because of the current weakness in domestic environmental legislation is a nonsense. Does the ‘Leader Board’ reflect a rating of industry performance or a prioritization of Greenpeace campaigning activity? It suggests that GP’s main focus here is less on enouraging IT innovation and more on leveraging the political influence of these firms in the short run. Such a narrow tactical aim could very well back fire on Greenpeace and undermine the veracity of this index in time.
And what of the contribution of the IT industry in Europe, India & China? The contribution IT can make particularly in developing economies is immense. Such markets have the dual problem of needing to grow fast to lift people out of poverty whilst facing great political pressure from the West to curb CO2 emissions. They operate at fairly low levels of resource efficiency so IT enablement of rapid improvement can help ease political pressures and deliver global reductions in CO2 more quickly.
And when it comes to industry prioritization, unfortunately, Greenpeace seems to send conflicting messages. On the one hand:
Because of the range of solutions that companies are or could be involved in we also ensured we chose a range of companies to cover all parts (hardware, software and services), and those that make components that other companies and industries use for climate solution technology.
But on the other hand, the list of firms GP actually reviewed and ranked largely ignores the enterprise software market and instead focuses on consumer brand names, services, hardware and devices. Nor is the role of systems integrators considered. It is this limited focus that slightly jars with Greenpeace’s own vision of what IT should enable:
IT solutions provide a key element of the solutions the world needs as outlined in our Energy Revolution blueprint. For example, to have a large increase in renewable energy use new smart grids are needed in developed countries and need to be built in developing countries. IT is vital for smart power grids. To achieve large energy efficiency gains the production, transportation and building will need to be made drastically more efficient, all of which can be achieved with the help of IT solutions.
Lofty IT goals indeed but its hard to see how they can be realised without the engagement of major enterprise software players.
On the whole, I am thrilled to see Greenpeace start down this road. The landscape is cluttered with faux industry rankings mostly rolled out as a marketing gimmick. With this index, even if imperfect, the direction and motivation is spot on.
Update: Response from Greenpeace (thanks Tom):
Hi James,
Here’s a short response from Greenpeace. We started this project with a group of companies who had already claimed to be leading on climate change issues. As our work moves forward we will be looking at additional companies who have the potential to show leadership in this area measured against our criteria.
The challenge is open to all large players in this field and we aim to identify further leading companies in upcoming editions from different types of companies and also in different areas.
For example we are also starting this work in India:
http://www.greenpeace.org/india/press/releases/ict-sector-slow-climate-leadership
Tom Dowdall
Greenpeace International
May 24th, 2009
Sun & Symantec: A New Breed of Sustainability Leadership?
The passage of the Waxman Markey Bill through the US House of Representatives Energy and Commerce Committee this week has left behind it some hard feelings and a split in the business lobby. The US Chamber of Commerce came under severe pressure for lobbying against the bill whilst many of its members were pulling the other way.
The main business initiatives in support of regulation are the US Climate Action Partnership (US CAP) and the CERES led Business for Innovative Climate and Energy Policy (BICEP). In contrast, the US Chamber has been an ardent opponent eventhough both coalitions include prominent US Chamber board members such as Nike, Dow Chemical, Duke Energy, Caterpillar and Alcoa. The opprobrium got to such a pitch last month that Johnson & Johnson felt compelled to write to the Chamber CEO Thomas Donohue (original copy here):
We would appreciate if statements made by the Chamber would reflect the full range of views, especially those of Chamber members advocating for congressional action.
Now while US CAP is composed mostly of the usual suspects of energy and heavy industry companies, the BICEP initiative is an altogether more exotic species. BICEP, including Nike, Gap, Sun, Symantec, Timberland, Starbucks, eBay and others, is dedicated to the following objectives:
But can we take any of this at face value? You might ask what is really at stake for Sun, Symantec or their shareholders whether or not we end up having more coal fired power generation? What’s at stake for Silicon Valley, whose firms are well below threshold, whether the US government immediately auctions all greenhouse gas trading permits or just gives them all away? I’ll come back to this later
And why is it that the US Chamber is emboldened to row in the opposite direction of some of its most powerful member expressed interests? When it comes to dissonance in the US Chamber, Marc Gunther, one of America’s most respected journalists in the field of business and sustainability, smells a rat:
I have to disagree with Marc here. Sure there is bound to be some level of duplicity going on but, in the main, I think the global business lobby is much more fundamentally and ideologically split. It is divided between those whose world view and business model is fixed to the status quo and those who are ready to go forward to take first mover advantage in the emerging low carbon economy. (There are also plenty sitting on the fence to see how this shakes out before taking a stand.)
Writing in the Harvard Green Advantage Blog, Green to Gold co author Andrew Winston provides one explanation for some of this seemingly irrational behaviour:
More evidence of an ideological split can be seen in Jack Welch’s tweets about the World Business Summit on Climate Change underway this weekend in Copenhagen:
And so who exactly are these alarmists attending the business summit repressing the voice of the ’other side’ of the climate change issue? Well, errr…………Pepsico, Duke Energy, Unilever, BP, SAP, Intel, State Street, Vattenfall .. and so on. Hardly the loony fringe and a tad difficult to dismiss in the way Welch would like us to.
Need more evidence of an ideological divide within the business community? Then how about this? On Friday last the Wall Street Journal wheeled out no less than Bjorn Lomborg to pen an Op Ed entitled ‘The Climate Industrial Complex’. (Important to note that Lomborg, a Danish academic with no training in climatology, was censured by the Danish Committee on Scientific Dishonesty (DSDC) after the publication of his treatise, ‘The Skeptical Environmentalist’. To be fair, the DSDC’s ruling & the process undertaken has been the subject of bitter debate for years now from all quarters. One thing is clear though, Lomborg’s thesis is in serious question and he is a deeply polarizing figure. ) In the WSJ piece Lomborg pours scorn on companies looking to benefit from the transitional process to a low carbon economy:
The world’s largest wind-turbine manufacturer, Copenhagen Climate Council member Vestas, urges governments to invest heavily in the wind market. It sponsors CNN’s “Climate in Peril” segment, increasing support for policies that would increase Vestas’s earnings……..American electricity utility Duke Energy, a member of the Copenhagen Climate Council, has long promoted a U.S. cap-and-trade scheme. Yet the company bitterly opposed the Warner-Lieberman bill in the U.S. Senate that would have created such a scheme because it did not include European-style handouts to coal companies. The Waxman-Markey bill in the House of Representatives promises to bring back the free lunch.
Well fancy that, businesses lobbying the government for their own selfish interest? Hardly. Now Lomborg has a fair point, some will inevitably be out to game the process, but surely its the end result that matters more than the political process marred by compromise. There will be runners and riders, winners and losers. Should we think ill of Vestas for their ambition to be a player in wind energy plant? Should we dismiss Duke Energy if they lobby for concessions on permit trading even if they accept and support an emissions cap? Lomborg is a divisive character and there are plenty who think he was deliberately done in by his academic brethern. Regardless, for the Wall Street Journal to publish his conspiratorial ideas of a ‘climate industrial complex’ in the interregnum period after the passage of the Waxman/Markey Bill through its first committee hearings and before the World Business Summit on Climate Change is just another sign of the bitter divisions.
The current snafu at the Chamber is not the first time a business lobby has been split over differences of opinion on environmental issues. The UK equivalent, the Confederation of British Industry (CBI), recently had its positive stance on the expansion of Heathrow airport challenged when Kingfisher, Carphone Warehouse, Credit Suisse, J Sainsbury & Rupert Murdoch’s News Corp similarly all broke ranks. Which brings me back to my earlier question: why do Sun & Symantec back the anti coal provisions of BICEP when it is of little significance to their immediate business model? For that matter, why is Rupert Murdoch worried about expansion at Heathtrow? What does Sainsbury’s CEO Justin King mean exactly by his idea of ‘responsible citizenship’?
The laissez faire set may bridle at this but in these times it is proving both, possible and necessary, to take the invisible hand out from behind the veil and steer our economic base to safer shores. It is possible for the business community to act, truly as if a community, to rebuild the structures of the global economy. This means looking not only to, but also far beyond, the pursuit of a few incremental stimulus dollars, towards building a whole new economic future. These new leaders are capable of working confidently with policy makers to charter a fairer economic system in preference to surrendering our destiny to be determined alone by market forces. This is what may just explain the recent actions of Sun or Symantec or J Sainsbury and represent the green shoots of a new type of corporate sustainability leadership. Such leaders believe we can reset our economy, not because we reject market ideology, but precisely because we so faithfully believe in the innovative power of the markets to help get us where we need to be.
We may well already have entered a post globalization era where, no longer paralyzed by an inevitability of a race to the bottom and in full recognition of our global & sectoral economic interdependence, a new breed of leaders can finally emerge. To really make a difference, Silicon Valley needs to do much more to pick up the modest gauntlet thrown down by Symantec & Sun as outriders on climate change policy. Oracle has done well to find itself in a position to inherit the sustainability leadership instincts of the latter.
UPDATE
Jack Welch provided almost immediate feedback on twitter. I’d like to interpret his comments as full agreement but, at the very least, we can be sure he is gracious and a good sport. Thanks Jack.
James has more than 15 years of experience working on corporate sustainability issues from both the corporate and NGO campaigning perspective. Follow James on twitter. See his full profile and disclosure of his industry affiliations.
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