Writing for a Bluer, Greener World
Header image

Green Business: Ideology, Meet Reality

21
May
2013

Catastrophic weather events are bad for business.

Everyone agrees.

Which prompts New York Times economics reportor Eduardo Porter to ask:

If there were one American industry that would be particularly worried about climate change it would have to be insurance, right?

And if insurers are worried, then the reinsurers–the people who back up primary insurers–have reason to worry too.

The whole article is interesting, but I struck by the potential for alliance-building across politicized lines.

Here it is:  For Insurers, No Doubt on Climate Change

But take a look at how the headline is slightly different in the browser bar and link:

Insurers Stray from Conservative Line on Climate Change

See that? This alternate headline zeros in on the point in the article that there are growing interests on the Conservative side of American politics for dealing with climate change. People who think, like I do, that human-caused climate change is the top issue for humanity. And business.

Now, this is still the “Money” argument for climate change action. “It’s in our best interests financially to do something about it, sooner than later.”

My preference is for the “Morals” perspective. “Let’s work together on climate change because it’s the right thing to do for humanity and the species we share Earth with.”

But honestly, I don’t care how we get to climate change common ground.

It’s a pretty good idea, actually to have people in the room who know how to assess, calculate and monetize risk.

Bring on the bankers and insurance professionals and let’s work together.

Posted by Claire Sommer in Green Business - (0 Comments)

, , , ,

Green Business: “Because It’s the Right Thing to Do”

10
May
2013

If you don’t ask, the answer’s always no.

But when you do, sometimes, it’s a surprising yes.

That’s what I thought when I read the results from the First Annual Survey of New Jersey Business Sustainability survey. A group of state researchers  asked New Jersey business owners about their Sustainability practices.

The survey also asked, by keying in on motivations, whether business owners give a darn and more importantly, why.

The answer: yes. And more surprisingly, not for self-interested reasons.

The survey’s key finding is that NJ business owners are incorporating Sustainability practices into their business because it’s the right thing to do.

Via the wonderful earthpeopleco.com, authored by Matt Polsky:

What the First Annual Survey of New Jersey Business Sustainability Tells Us

The two strongest reported sustainability motives were a belief that it is the right thing to do and potential cost savings, with over 85% reporting at least a moderate amount of, and over 61% a great extent of influence. Other strong sustainability motives for which over 75% of respondents reported at least a moderate extent of influence included satisfying customers’ interests, potential to improve image and reputation, fostering a healthy society, and satisfying regulatory demands.

Doing well by doing good isn’t something new

It’s our heritage as Americans. As New Jerseyans.

We pull our weight, and then some. Always have, always will.

Trenton Makes, The World Takes.

So when it comes to doing the right thing in business, I’m not surprised that the state’s business owners have the bigger picture in mind.

With better information about what business leaders are doing today, and why, we have a baseline from which to launch meaningful, relevant education, support and resource programs.

All we had to do was ask.

Posted by Claire Sommer in Green Business - (0 Comments)

, , , ,

Green Business: Report from the Apr. 23 CSR Investing Summit

25
April
2013

Between Two Rear Ends of a Horse

That’s the title I choose for this report from the Apr. 23 CSR Investing Summit: Measuring Responsible Leadership in New York City.

Topline: CSR Investing offers opportunities for long-term, sustainable value creation. But we won’t find them unless we stop siloing ESG factors mainly in terms of risks and negative screens and start applying ESG factors as value drivers. This holds true not in spite of, but because of, our increasingly unstable and unpredictable world.

*  * *

The past was about how ESG helped companies demonstrate their virtue by aligning a company’s actions with its values. The future of Responsible Investing builds on this by also creating value. That’s how Stephen Davis, Associate Director and Senior Fellow – Harvard Law School Programs on Corporate Governance and Institutional Investors, framed the CSR Investing landscape with the first presentation of the day.

Today, we’re somewhere in the middle, according to Davis. We’re searching for the tools, technologies and culture changes that will allow institutional investors to calculate the full impact of extra-financial—but highly material—ESG factors into their portfolio decisions. He cited three converging trends that are transforming the Capital Markets:

  • A growing awareness of potential risks and impacts from extra-financial material factors, such as environmental disasters and social issues.
  • A surge in measurement and reporting frameworks to help corporations and shareholders measure risks and how to better manage them, such as GRI, SASB, IIRC and S-Networks.
  • And thirdly, the rise in what Davis called “shareholder ownership with authority.” Institutional Investors are using the first two trends to take a far more assertive role in how companies are run.

Davis then contrasted these trends with a description of how today’s legacy culture and obsolete infrastructure are unprepared and unsuited to manage these new financial market realities. His analysis is that the Capital Markets are currently stuck between the status quo of “we’ve always done it this way” and the changes bearing down on them.

Thus putting us for the moment, he said metaphorically, “between the two rear ends of a horse.”

He went on to explain that this expression springs from the curious fact that the United State standard railroad gauge is precisely 4 feet, 8.5 inches. A historical review of how we build roads, so the story goes, leads all the way back to the original specification for an Imperial Roman war chariot. So in essence, our railroads are designed to accommodate the back ends of two war horses rather than the key performance needs of a modern transportation system.

While this story paints a vivid picture of how the status quo suffocates innovation, and it pains me to disagree with Professor Davis, the conclusion—modern rail gauge follows Roman road construction—is false. While U.S. rail gauge is exactly 4 feet, 8.5 inches, a strangely precise number, this is a case of convergent evolution rather than direct descent. (The full debunking can be found in this delightfully named 2001 U.S. Department of Defense journal article: “Roman Chariot, Railroad Tracks, MilSpecs and Urban Legends.”)

Said another way, the problem is that we’re hamstringing our future performance by replaying the moves that got us past results. Business-as-usual will not suffice for coming systematic disruptions in how Capital Markets work and the increasingly climatically unstable world in which they seek to operate, according to Davis.  We need better ways of looking forward.

Davis’ recommendations for where Responsible Investing needs to head include a vastly better educated and engaged citizen investor community, broad access to transparent ESG reporting tools, and political will.

Much of the rest of the day built on this foundation, with discussions of Board and Director fiduciary duty and performance, calculating ESG valuation, acknowledging supply chain risks and impacts that happen “outside the factory walls,” and integrating ESG factors into the investment process.

I’d like to direct readers to some of the reports and research mentioned during the day:

With the exception of Koehler’s presentation, the day’s presentations were mostly silent on the explicit risks of climate change disruptions as outlined by the World Bank’s Nov. 2012 report “Turn Down the Heat.” I was encouraged to hear about admirable progress being made by committed professionals to change hugely complex, interconnected financial systems for the better. And yet, I came away with a feeling of creeping around the edges.

I support a bolder stance by sustainable business and finance leaders to go beyond relative improvement goals based on past performance, to science-based absolute goals based on planetary limits.

So this is the challenge facing the Responsible Investing community: to champion the technology and business changes that allow ESG factors to carry their full weight in investment considerations. And then to make business and investment decisions that accurately reflect the risks and realistically embrace the opportunities that lie ahead.

I’m hopeful for a time when we will no longer need to identify externalities, and measure them, because we will have successfully learned how to responsibly claim them as a natural part of successful, sustainable business.

When this happens, we’ll no longer be behind the horses. We’ll be out in front.

 

Posted by Claire Sommer in Green Business - (1 Comments)

, , , ,

Green Business: Investors Stepping Up for Sustainability Requirements

12
April
2013

Climate change is looking realer by the minute.

And with a growing recognition of the risks that climate change poses to the global economy, investor communities are taking steps to understand and manage those risks.

So in big news, an investor group announced April 8 of the first steps to set across-the-board sustainability listing standards for all stock exchanges worldwide.

This means that companies would be required to report on eight specific issues: climate change, diversity, employee relations, environmental impact, government relations, human rights, product impact and safety, and supply chain.

If it works, this will dramatically raise investor awareness about environmental, social and governance issues as need-to-know information.

Essentially, this reporting will shine a light on not only what and how much a company makes, but how they do it, and where, by whom, and their impact on the earth as a whole.

Via ceres.org:

Investors Announce Proposal for Sustainability Listing Standard for Global Stock Exchanges

A group of investors today announced a Consultation Paper with recommendations for integrating sustainability disclosure requirements into listing rules for U.S. and global stock exchanges.

The draft recommendations were developed by nearly a dozen investors who are part of the Ceres-led Investor Network on Climate Risk (INCR). BlackRock, British Columbia Investment Management Corporation, and the AFL-CIO Office of Investment are among those who participated on the INCR Listing Standards Drafting Committee.

The initiative is part of a growing effort by investors and stock exchanges, including NASDAQ OMX, to make environmental, social and governance (ESG) disclosure a consistent requirement for corporate listings on stock exchanges. While several exchanges have adopted their own sustainability listing requirements and guidance, INCR members and NASDAQ OMX have set out to develop a uniform standard that all stock exchanges can use.

Bloomberg’s coverage of this story includes some helpful background as well.

Via bloomberg.com:

Investors Propose Requiring Sustainability Data Disclosure
Investors Propose Data Disclosure Standard For Listing Companies

A global sustainability listing standard would allow investors to compare companies on their environmental, social, and governance performance.

The proposed listing standard would require companies to discuss how they determine which environmental and social issues are material to the company, to provide a link in their annual financial filings to a list of sustainability data, and to disclose information on eight specific sustainability issues or explain why they do not.The eight specific issues on which companies would be required to disclose information are climate change, diversity, employee relations, environmental impact, government relations, human rights, product impact and safety, and supply chain.

Some stock exchanges have already adopted sustainability listing requirements. Companies listed on the Johannesburg stock exchange must disclose sustainability information or explain why they do not.

Sweden requires all state-owned companies to report on corporate responsibility activities, and Denmark requires all listed companies to report on sustainability performance. Companies listed on the London Stock Exchange are required to report their annual emissions data as of April.

 

Posted by Claire Sommer in Green Business - (0 Comments)

, , ,

Green Business: Less Bad is Not Good Enough–Addressing Context in Sustainability Reporting

11
April
2013

Less bad is not sustainable.

First, a shot across the bow.

This excerpt from the forthcoming book Flourishing: A Frank Conversation About Sustainability by authors John R. Ehrenfeld and Andrew J. Hoffman wastes no time on niceties.

Less bad is not sustainability. It’s still bad. And anything that’s bad, by definition, isn’t sustainable.

Via Greenbiz.com:

The Wrong-Headed Solutions of Corporate Sustainability
No matter how many times someone talks about what they are doing for sustainability — using green, sustainable or sustainability to describe a new product or new program to inform their customers — they are still in the world of Business (Almost) As Usual. It’s different from Business As Usual, but it is not the kind of paradigmatic or transformational shift that is necessary to address health, well-being, community building, interconnectedness and all the other parts of the vision of sustainability-as-flourishing.

At this moment in time, almost everything being done in the name of sustainability entails attempts to reduce unsustainability. But reducing unsustainability, although critical, does not and will not create sustainability.

What’s missing?

Context. Context. Context.

Our actions as companies and businesses have to be measured–and moderated–within the larger communities in which we work. Meaning, the entire world outside our factory’s walls. The impact of our business on the cities and counties we belong to. The oceans we share. The air we all breathe.

Here’s a simple example. Say, for instance, that a company reports that it has used 50% less water than the year before out of a lake next to the factory.

That’s progress. Less bad. But if the company is depleting the lake faster than the aquifer can replenish, the less-bad amount is still not good.

No amount of less bad can make up for the fact that, at some point, all the water will be gone. And then what?

These concepts are simple enough for a child to grasp, but somehow get lost in life’s complexities.

That’s why we need better ways to get our arms around it. The business world is starting to grapple with these issues, by incorporating this bigger picture.

Two important reads via Guardian.co.uk:

Closing the context gap: sustainability reporting is failing us: Sustainability reporting has only shown which companies are “less bad” when what we really need is a minimum standard(Ralph Thurm)

Development of real-world ecological budgets mean investors must consider companies’ environmental and social impact (Mark McElroy, Bill Baue, Cary Krosinsky)

And via CSRwire.com, an excellent synthesis by Elaine Cohen:

Getting the right knobs in place: closing the gap between reducing impacts and achieving sustainability

Dealing with our changing climate is about facing reality. We need to change how we use the world’s resources.  The future is about operating within a fair and reasonable competitive arena that ensures ongoing prosperity and opportunity for more of us.

Posted by Claire Sommer in Green Business - (0 Comments)

Green Business: 33 Leading U.S. Companies Declare It’s Time for Climate Action

11
April
2013

If you want something done right, do it yourself.

That seems to be exactly what 33 leading U.S. companies intend to do about about taking action on Climate Change.

Read the Climate Declaration.

Yesterday, in coordination with Ceres and  its Business for Innovative Climate and Energy Policy (BICEP) coalition,business leaders from dozens of  profitable, responsible, highly regarded companies issued a call to action.

The Climate Declaration is framed around a single statement of economic opportunity:

“Tackling climate change is one of America’s greatest economic opportunities of the 21st century.”

(and it’s simply the right thing to do.)

Hear that?

The Declaration isn’t about how mitigating climate change impacts will be easy. Or required by federal regulators (although that might be coming later.)
No, because it’s hard. And in that hardness lies opportunity and the potential to make a whole lot of customers happy.
All while ensuring that there will be a planet on which to have happy customers a few generations from now.  That’s where the right thing to do part comes in.)

Here’s IKEA US President Mike Ward on how his company is taking steps to lighten their global footprint. And how there is a right connection between those actions and bottom-line, profit-reaping, employee-growing results:To Fix the Climate, Think Like a Business

According to the Ceres’ announcement, the inaugural signatories “provide approximately 475,000 U.S. jobs and generate a combined annual revenue of approximately $450 billion.”
I signed on yesterday for my small business. I hope millions of others will too.
Posted by Claire Sommer in Green Business - (0 Comments)

, , ,

Green Business: So tell me. Do investors care about CSR issues?

14
March
2013

Do investors care about CSR issues? 

Thanks to Capital Link for hosting their first annual CSR Forum called “CSR & IR – Maximizing Shareholder Value” yesterday in NYC at the astonishingly gilded Metropolitan Club.

I attended to hear first-hand from the investor community about how they make decisions, and whether CSR issues carry weight.

The answer, writ large? No.

What I heard is that Sustainability, CSR, resilience, whatever you want to call it, is still, still, not front and center.

It’s something that’s on the list, but not at the core of the decision-making process.

Maximizing shareholder value. That’s the core.

As one panelist put it, “When my CEO talks to investors, ESG factors aren’t part of the conversation.”

There’s a U.S. bias, too. Another shared that, “When my CEO talketo U.S. investors, I move the SRI slides to the back of the deck.”

The status quo. It’s powerful.

The highlight of the day for me was hearing Bennett Freeman from Calvert Investments finally mention Climate Change.

He, along with representatives from the Socially Responsible Investment world, were a welcome counterpoint to the traditional investor community perspective.

The status quo. It’s powerful.

For a flavor of the day, read what I and others tweeted live:

Tweet Story: March 13, 2013 Capital Link CSR Forum

Posted by Claire Sommer in Green Business - (0 Comments)

, , , ,

Green Business: More on Measuring Whether Investors Care

12
March
2013

Investors aren’t buying it.

Sustainability, that is.

Even though Sustainability-driven companies can compete and even perform their competitors and return value to their shareholders.

Here’s how BrownFlynn senior consultant Christopher Thomas put it in Greenbiz.com

“The vast majority of investment capital is still directed to assets judged best to deliver risk-adjusted appreciation rapidly with little direct concern for the environmental and social impacts core to the CDP and other ESG disclosures. “

Allow me to translate.

Most investment money gets placed on bets that deliver short-term monetary gains. Without concern for how a company hurts the planet or people.

That’s a problem. Because we need the investor community to start pouring money–on a global scale–into Sustainability-minded companies so that environmental and energy solutions get to scale.

Here’s the full article via Greenbiz.com:

Do investors care about companies’ climate change disclosure?

Taken at face value, more evidence surfaced this month supporting a close relationship between company market performance and the disclosure of environmental, social and governance criteria. Less clear is when more investors will reward ESG disclosure and inspire nondisclosing companies to get on board.

The sky’s not entirely bleak, though. I see breaks in the clouds from maturing and incipient reporting structures (CDP & GRI & SASB), disclosure requirements and shareholder involvement.

A few to check out:

Deloitte: Finding the Value in Environmental, Social, and Governance Performance

Carbon Disclosure Project: A third of the world’s invested capital calls for corporate environmental data through the Carbon Disclosure Project

ProxyPreview: Helping Shareholders Vote Their Values

Ceres: 2013 Shareholder Resolutions

I believe that the investor community can be encouraged to shift the status quo of short-term gains towards a longer-term Sustainability-driven approach. I take heart from the growing evidence that pressure–positive or otherwise–from shareholder resolutions concerned with climate change and energy gets results.

I just hope the shift happens soon enough to make a difference.

Posted by Claire Sommer in Green Business - (0 Comments)

, , , , , ,

Green Business: How do we get investors on board with Sustainability?

8
March
2013

Getting Sustainability solutions to scale is going to take a lot of money.

But at present, the investor community is not placing their bets on Sustainability-driven companies.

That’s a disconnect to me, because the business case for doing so is solid. Research  shows that businesses that make Environmental, Social and Governance (commonly known as ESG) factors part of their strategy do just as well in the marketplace. Sometimes even better.

The research borne this out in 2011, and it’s still true today.

Via Harvard Business School http://www.hbs.edu:

The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance

Finally, we provide evidence that High Sustainability companies significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance. The outperformance is stronger in sectors where the customers are individual consumers instead of companies, companies compete on the basis of brands and reputations, and products significantly depend upon extracting large amounts of natural resources.

So why isn’t the investor community on board?

Cary Krosinsky’s work is all about understanding and bridging this gap between investors and sustainability. And, approaches for getting money flowing towards positive sustainability investments.

I heard Cary and Steve Viederman speak Mar. 4 on Getting Investors Engaged in Sustainability at the Bard MBA Sustainable Business Series.

Cary is Executive Director of the Network for Sustainable Financial Markets, and teaches Sustainability & Investing at Columbia University and University of Maryland.  Previously, he was senior vice president for Trucost, a company that helps organizations measure their environmental impacts. He’s also an author of Evolutions in Sustainable Investing: Strategies, Funds and Thought Leadership (Wiley Finance).

First, the bad news.

Status quo is strong.  The people who make investment decisions have deeply entrenched beliefs and behaviors about how to make money.  Monolithicly so. Cary’s company, the Network for Sustainable Financial Markets, just released research that finds only 1% of global assets under management overall are managed by investors looking at sustainability.

Via sustainablefinancialmarkets.net:

NSFM White Paper – The State of Ownership (the real size of SRI Assets + the Systemic Nature of Equity Ownership)

1%.

So at least we know where we stand. Now on to changing it.

Cary suggested a positive investing mindset to work with the status quo rather than against it. This means focusing on adding Sustainability-minded assets to a portfolio–what’s possible–rather than focusing on what we shouldn’t buy.   As an example, he mentioned Bill McKibben’s 350.org college endowment fossil fuel divestment campaign. Instead of lobbying to cull  fossil fuel-related investments from university endowments, a positive approach would be to add a percentage of Sustainability-focused investments to a university’s investment portfolio.

I’m really taken with this concept because it has significant potential to create change from the top-down. It’s really the simplest idea in the world. Put our energies towards finding sustainable solutions instead of stamping out fires. It takes more time and energy to say, “What should we do?” instead of “Stop that,” true, but these are conversations worth having. Taking the time it takes, takes less time.

I’m all in for the “and also” top-down, bottom-up, sideways innovating systemic solutions that keep us away from the brink of a 2 degrees-hotter planet. I believe in the scientific consensus about our world becoming fundamentally less hospitable to human life if we don’t.

Putting all issues of money aside, as climate change realities become the new normal (resource scarcities, extreme drought, rising sea levels), business and investors have real skin in fixing things.  If we don’t come up with cures for our environmental and energy problems, there’s not going to be a world in which to invest money.

Many thanks to the Bard MBA program for the chance to hear about Cary’s research and contributions to the Sustainable Investing field.

Posted by Claire Sommer in Green Business | Green Shift - (0 Comments)

, , , , , ,

Hello Greenbiz Forum

19
February
2013

Thanks for stopping by. 

Follow me at kayakmediatweet.

Let’s connect on LinkedIn.

But best of all, I hope we get to meet in person.

 

Posted by Claire Sommer in Green Business - (0 Comments)