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Green Business: Investors Stepping Up for Sustainability Requirements

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.

 

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Green Business: Fake It Till You Make It Green

Greenwashing is good.

Hunter Lovins said that? Hunter Lovins, as in Natural Capitalist Solutions Lovins?

Yes. And she also said this.

Via marketplace.org:

Greenwashing is a Gateway Drug

[O]nce you hold yourself up as ‘green(er)’, increased scrutiny follows. Plus, no one likes to be a hypocrite. Once you say you’re doing it, there’s a tendency to start doing it. In GE’s case, Lovins points out that once GE saw their ‘eco’ products had twice the sales volume of the regular products, “all of a sudden a company without a green bone in its body has one–attached to its wallet.”

Lying as a specific approach? Encouraging superficial actions? Took me a minute to come around. But then I got it.

You don’t throw a non-dancer into the swing of things. You dance with them a little bit at the edge. Let them see how good is.

Get their feet moving. Confidence up.

Before they know it, their friends are watching. Maybe admiringly.

And suddenly they’re dancing. Next thing you know they’ve enrolled in a tango class.

They’re hooked but good.

Classic case of fake it till you make it.

This came to mind when I read that a majority of Fortune 500 companies reported on their sustainability programs, actions and results in 2011. More than doubled from 2010.

Via triplepundit.com:

Record Number of U.S. Companies Issuing Sustainability Reports

G&A Institute states that 53 percent of the 500 companies indexed by Standard and Poor’s issued sustainability reports in 2011, a drastic increase from 2010, when only around 19 percent of the companies reported.

Moreover, this report found that companies that issued sustainability reports enjoyed higher financial returns than their non-reporting competitors.

Does this mean that all these companies have good sustainability metrics? Is there a healthy amount of greenwashing going on? Do the numbers lack context? Are they disconnected from the company’s material pursuits?

Sure. But who cares. They’re in it.

For those who are already on the people-planet-profits bandwagon, these numbers show momentum.

For those new to the party, still mired in short-term shareholder value thinking, this shows a business case.

So I’m seeing the wisdom of bringing everyone to the sustainability conversation. Most of all the skeptics, wallflowers, and foot starers.

Hear that music?

Let’s dance.

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Green Business: Frank Talk from Business Leaders on Climate Change

Shall we blame it on the rain?

Or maybe point at melting icecaps, rising ocean levels, tornadoes, tsunamis, and blistering drought?

Whatever the catalyst, many of the world’s biggest businesses are wide awake and moving on the climate change challenge.

They get that the world needs to slow down greenhouse gas emissions–pronto–or there won’t be nearly as nice a world for anyone who wants to run a business.

Not to mention live happily or raise kids.

That’s what I heard over and over yesterday from business leaders around the globe on Carbon Disclosure Project’s (CDP) web conference.

CDP is a worldwide non-profit independent coalition of businesses committed to reporting and reducing greenhouse gas emissions and sustainable water use.

The call was timed to coincide with CDP’s latest climate change report on its S&P 500 members:  “Accelerating Change to a Lower Carbon Future”.

Everyone on this web conference is fully on board that Sustainability progress is explicitly linked to business success.  So no surprises there. But what did surprise me was the candor with which they spoke about everything else.

There was frank talk about U.S. consumption patterns and foot-dragging on energy initiatives, the need for developing countries to be able to grow, and sobering data about how close we are to the 2-degrees point of no return.

One question really caught my attention was this: How do we enroll leaders for change at companies who don’t stand to benefit in the short term? (The question didn’t get any answers on the call, but I’m not sure there is one other than a combination of incentive carrots and regulatory sticks from government.)

A highlights video of the 2-hour call hasn’t been made available yet, but in the meantime, he’s an excellent write-up by BusinessWeek senior editor and content chief Diane Brady. She also ably moderated the call.

Via businessweek.com:

Climate Change Becomes a Business Reality

The takeaway from the discussions today with a mix of business leaders and investors at the CDP Global Climate Change Forum, which I moderated from New York, is that growing private-sector efforts to reduce greenhouse gases simply can’t move the needle on its own.What’s needed is government action to curb emissions through everything from taxes, carbon caps, and credits that can be traded, as well as incentives to invest in projects and products that may not pay off for years.

Businesses understand that climate change is real, that it is irrevocably changing our planet, and that they hold significant responsibility to make it better. Fewer emissions. Less water. Decreased pollution. Restored ecosystems. Healthier workplaces and homes.

Now that it’s a becoming reality for the business world, we need to ensure that the U.S. government is on board as well. And in serious action.

That’s where we all come in as citizens.

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Green Business: Matching Messages & Money on Sustainability

Follow the money.

That’s not only good journalism. It’s also a good way to uncover inconsistencies between what companies say and what they do.

An updated May 2012 report from the Union of Concerned Scientists, A Climate of Corporate Control, investigates how 28 U.S. companies talk about their sustainability actions with one hand, and where they spend money with the other.

Sometimes, like in the case of Nike, all the messages match. Other times, such as with energy companies, they don’t.

It’s an interesting read about how the money U.S. companies spend to support or discount  Climate Change science influences public opinion and shapes  policy decisions.

Via Union of Concerned Scientists website:

The 2012 UCS report, A Climate of Corporate Control, looks at statements and actions on climate science and policy by 28 U.S. companies, shows how these contributions can be problematic, and suggests steps that Congress, the public, the media, and companies themselves can take to address the problem.

In other words, a major corporation may be saying one thing in its Sustainability Report, but saying something different or spending money to influence another point of view elsewhere.

Like this:

Some corporations are contradictory in their actions, expressing concern about the threat of climate change in some venues—such as company websites, Security and Exchange Commission (SEC) filings, annual reports, or statements to Congress—while working to weaken policy responses to climate change in others.

As customers, shareholders, and business owners, we hold power to encourage more transparent, factual conversations with the companies we do business with, invest in, and support with our loyalty.

It’s up to us to start them.

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Green Business: More U.S. Companies Issuing Sustainability Reports

You can’t manage what you don’t measure, right?

Cardinal rule of running an efficient, profitable business.

That means the rise of sustainability reporting among U.S. companies is good news for a cleaner, healthier world.

A sustainability report is like the company’s Annual Report, only it covers economic, environmental, social and governance performance instead of financial performance.

Most major U.S. brands issue sustainability reports, like Kraft for example.

(Increasingly, these two reports are combined to give investors a full picture of the company’s activities, like Pepsico does. That’s called integrated reporting.)

Via CRSwire.com:

Telling the Story of Your Sustainability Journey Through a CSR Report

The publication of corporate sustainability (or responsibility) reports by U.S. corporations (and U.S.-based subsidiaries of non-U.S. companies) is on the increase.  Our analysis for reports published in 2011 — include reports published in calendar year 2011 — is at 345 – and we’re half way through 2012 and expect many more reports to be added to our count for 2011.

It’s about time too, since the U.S. lags in reporting behind the rest of the world.

Via KPMG.com:

KPMG Corporate Sustainability study

Ninety-five percent of the 250 largest companies in the world (G250 companies) now report on their corporate responsibility (CR) activities, two-thirds of non-reporters are based in the U.S.

What’s driving sustainability reporting by U.S. companies?

I attended an EnvironmentalLeader.com webinar yesterday and this very question came up. Marjella Alma from GRI (Global Reporting Institute) gave the following explanations.

Sustainability reporting among U.S. companies is on the rise because of:

  1. Increasing stakeholder demand for this data
  2. Preparing for potential regulatory developments that will mandate reporting
  3. Growing positive interest from investor community
  4. Recognition that reporting Sustainability activities is a competitive advantage with sustainability-minded customers
  5. Opportunity to better identify risks and opportunities
  6. Reduced operating costs.

In other words, sustainability reporting is less about managing risk and more about taking a strategic position.

It’s coming down to the simple fact that running a business that’s good for the planet and people, is also good for business.

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Green Business: Shareholders Push Environmental Resolutions

Shareholders talk, board of directors listen.

Via EnvironmentalLeader.com:

Apple, Colgate Among Companies Agreeing to 44 Shareholder Resolutions

Apple, Intel, Colgate, Smucker’s, Crocs, and Garmin are among the companies whose investors successfully used shareholder resolutions to spur corporate action on climate change, hydraulic fracturing, supply chain and water availability risks, among other sustainability issues, during the 2012 proxy voting season.

Advocacy group Ceres says of the some 110 resolutions is tracked in 2012, 44 proposals resulted in US companies making commitments to confront environmental and social risks in their operations and supply chains.

It’s important to note, however, that these shareholders are not individuals. More often, these resolutions are driven by powerful investment groups charged with managing public and institutional funds, such as:

The New York State Comptroller’s Office secured agreements from Apple, Dell, HP and Intel — firms representing more than 50 percent of the personal computer market, according to Gartner analysts — to encourage or require their major suppliers to issue sustainability reports that address environmental issues, Ceres says.

Also in 2012, Calvert Investments and the comptroller’s office won commitments from Colgate and Smucker’s, respectively, to source 100 percent certified sustainable palm oil for their products. Additionally, 37 percent of shareholders of Yum! Brands, the parent company of Taco Bell, KFC and Pizza Hut, voted in favor of a shareholder resolution filed by Trillium Asset Management, requesting that the company source 100 percent certified sustainable palm oil.

These resolutions will require corporations to take positive action on climate change, fracking, supply chain and natural resource availability risks.

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Green Blueprint: Follow Ford

What does front-and-center Sustainability look like?

Ford.

Via Greenbiz.com:

New Ford focus? Automaker says sustainability is Job One

The company’s global director of sustainability and vehicle environmental matters, John Viera, tells GreenBiz the issue of sustainability “has moved from the periphery to the center of our strategy for succeeding in the marketplace and helping to address global challenges.We understand that business practices focused on energy efficiency, sustainable materials, human rights and consumer safety are the key to the continued growth of our company and quality of life worldwide.”

This bold declaration for the future embraces a today-and-tomorrow strategy by making traditional fuel engines more efficient while also innovating new  electric technologies.

I’ll be following closely to see how pronouncements match up with reality.

 

 

 

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Green Business: Talking to the CFO

What’s In It for Me?

That’s generally what people want to know. Building relationships is all about agreeing on common goals and mutual benefit.

Like, say, with a company’s CFO.

BSR offers a short and sweet summary of how Sustainable Business practices directly map to six key business drivers.

  1. Business Model
  2. Markets
  3. Teams
  4. Resources
  5. Risk
  6. Revenue and Profit

Via BSR.org:

CFO and the CSO: Six Areas for a Lasting Friendship

“Beyond the dense words and pretty pictures, every business plan or annual report addresses a set of core issues that each company must face. The more CSR programs support these issues, the more concrete support they’ll likely receive from the CFO.”

Sustainability is not the driver: good business is.

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Green Blueprint: 3 Ways Unilever Does Sustainability Right

Conserving the world’s natural resources is good for business.

Global good conglomerate Unilever is the name behind household consumer brands like Lipton, Skippy, Ragu, Bertolli, Hellmann’s, Suave, Dove, Ben & Jerry’s and Breyers.

One year after announcing its Sustainability plan, Unilever reports reports positive progress on materials sourcing, waste reduction and energy efficiency.

Read Unilever’s April2 012 Sustainable Living Plan

How positive?

Via Greenbiz.com:

Since launching its ambitious Sustainable Living Plan in 2010, Unilever is buying more sustainable palm oil and cage-free eggs, putting less salt and fat in its tomato sauces and spreads, selling water purifiers to poor people in the global south and rolling out climate-friendly freezers for its ice cream.

Some highlights:

*24 percent of the company’s agricultural raw materials, including palm oil, soy beans and soy oil, paper and wood, tea, fruits and vegetables, were sustainable sourced last year.
*48 million people in poor countries were reached with Lifebuoy soap’s handwashing program aimed at curbing disease.
*100 percent of the electricity that Unilever buys in Europe comes from renewable sources.
*Pure-it, a water-purification technology, is expanding from India, where it already has reached 35 million people, to Bangladesh, Mexico and Brazil.

I see three key Sustainability elements that Unilever is getting right:

1. Visionary leadership in the person of CEO Paul Polman. As the Greenbiz.com article cites, ““We are showcasing a different business model that shows how you give to society and the environment rather than just taking from them.”

2. Accounting and planning for Climate Change costs (estimated at €200 million annually)

3. Taking responsibility for environmental degradation, with plans to build a $100 million palm-oil plant in Indonesia so that the company can ensure its palm oil comes from certified sustainable sources.  (Palm oil is in everything from soap to soup. The way you get a palm oil plantation is to cut down a forest. )

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Green Business: Make it About the Money

In the eyes of non-profit corporate sustainability group Ceres, environmental and social sustainability issues are material “balance sheet” issues.

Think about that for a second. This mindset calls for a full accounting of everything that goes into a business’ profit and loss statement. I’m talking about the real one, with the numbers. Not just the sidebar Corporate Responsibility brochure.

Via Ceres.com:

For businesses in all sectors of the economy, sustainability is a strategy for building long-term shareholder value, managing environmental and social risks, and improving competitiveness. Environmental and social sustainability issues are material “balance sheet” issues. They pose risks and present opportunities that will drive the success of corporations.

And if this is case, the logical conclusion is to link compensation with sustainability results.

Ceres Vice President Andrea Moffett lays out the case for this in her Apr. 24 blog post: It’s Time to Link Compensation With Sustainability

Good ideas.

 


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