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The pressure from investors and market influencers to begin or enhance reporting on sustainability (a.k.a. corporate social responsibility or CSR) is mounting, particularly for companies with multinational footprints.
Nearly one out of every nine investment dollars under professional management in the United States today – 11 percent of the $25.1 trillion in total assets under management – is devoted to socially responsible investing. This “mainstreaming” of sustainability into investing is expected to continue. According to one recent estimate, socially responsible investing will reach between 15 percent and 20 percent of total assets under management by 2015.
In just the past few weeks, expectations for sustainability reporting have reached an unprecedented high level. Today, we released our latest “Communication Matters” on this topic to summarize the heightened level of awareness and activity.
They certainly were not “too big to fail” like the banks and car companies. But perhaps they could have been considered “too good to fail.” Now, we know there is no such thing.
Earlier this month, The Taylor Companies, a furniture manufacturer in Bedford, Ohio, announced that it is winding down operations and will close after filling its existing orders. The company said it was closing in part due to not receiving an $850,000 tax break for moving its headquarters to a former brownfield site in its hometown. The economic downturn and cheaper goods from Asia were also factors. See this Plain Dealer article.
But this isn’t the typical “another manufacturing company fails” situation. From Taylor’s website: “Established in 1816, Taylor spans seven generations in a single family, positioning it as the 28th oldest family business in the United States. Taylor is also the oldest furniture manufacturer in the United States. Over the years, Taylor has earned an excellent reputation for designing and crafting fine office furniture that reflects progressive design and possesses marked quality.” (Disclosure: The Taylor Companies is not a Dix & Eaton client.)
The company was known for quality products, an engaged and motivated work force, stable executive leadership, engagement with the Bedford community in Northeast Ohio, and commitment to sustainability. Its efforts in land revitalization, conservation of natural resources, zero waste, recycling, etc. have been considered models. And, as reported, one of the primary reasons for their downfall was their decision to stay in Bedford, clean up a brownfield site and locate there – and then not get the tax break they were expecting. In 2011 alone, Taylor Companies received several national awards for sustainable enterprises and green jobs.
By most accounts, The Taylor Companies was indeed “too good to fail.” And, yet, here they are – sustainable for almost 200 years, and, then, going out of business. Some will say it’s just an isolated, extreme sign of the times. Others may see it as proof of sustainability’s failure as a guiding philosophy in business. And, of course, all of the external speculation in the world doesn’t account for any internal, day-to-day struggles.
The bottom line is that the markets, the customers, the economy have spoken – there is a lot of good to be found in sustainability, but even ideas, people and organizations that seem “too good to fail” have their limitations.
The push for renewable energy, clean coal and shale gas in the U.S. has been linked to sustainability, job growth, national security, less dependence on foreign oil, and a number of other agendas and causes.
“Energy dependence” is often seen as the root of the other problems. The solution is to develop the new forms to move toward, and perhaps ultimately become, energy-independent – so goes the rationale of some energy development gurus.
But others say “independent” is the wrong goal – the world is small and highly connected, and the economy is global. For them, “independent” sounds isolationist and naïve. So they argue for “self sufficiency” – which occurs when, domestically, we have what we need, but we also recognize that what we have and do are influenced by the global economy and market dynamics.
I don’t think that goes far enough, however. It seems to me that “interdependence” should get a long look as a possible future state. In energy interdependence, everyone is a potential customer and supplier. This balancing of shared interests could boost sustainability, job growth, national and global security, world peace, and so on. Energy exports will become as important as imports. By necessity, everyone becomes a potential trading partner, and that may open up some political, economic and diplomatic doors that are often assumed to be closed. It already works on a local scale, for example, when a solar- or wind-powered home or business sells some of its energy back to the grid.
Some might say these are just differences in semantics. But perhaps this is really a paradigm-shifting opportunity. Where might “energy interdependence” take us?
The sooner we stop using, and trying to define, terms like “clean energy” and “green energy,” the better off we’ll be.
The terminology is the issue. The technology – including wind, solar, biomass, hydroelectric, cogeneration, fuel cells and so on – may be fine. Most studies have found these energy technologies to be “cleaner” and “greener” than traditional fossil fuels, but they can still have a significant environmental impact and unintended consequences. Even the most ardent supporters of these technologies have to realize that “clean and green” over-promises and under-delivers – it may work in the short term, but, ultimately, hyperbole will get in the way of long-term, full-scale, highly successful deployment.
Energy use = environmental impact. It’s left to the scientific community, policy makers, the private sector and consumers to measure and prioritize the risks and rewards. In some cases, for example, locally produced oil and gas may prove to be one of the most responsible energy sources – to the benefit of all Three Ps of People, Plant and Prosperity.
The more we know alternative energy sources almost always leads to the more we know about the potential downside.
Take wind turbines, for example. Concerns about birds and noise have been around for quite some time. However, a new study out of the University at Albany links large Texas wind farms to higher surface temperature.
The study said the turbines act like fans to pull down warmer air from the atmosphere. The researchers insist that the warming effect is localized and small, and is more of a redistribution of warm air, rather than warming. They say there is no concern about such redistribution contributing to climate change, but with enough turbines in a small area, the local impact could be significant, I suppose.
One environmentalist even suggested that one possible outcome could be extended growing seasons for crops grown near wind turbines. But, careful, it’s a slippery slope.
The pursuit of “cleaner and greener” and “renewables” remains a wonderful thing. Chasing the perfect “clean and green” solutions will almost assuredly end up as a frustrating waste of time and resources.
There are few areas more closely identified with the oil and gas industry than Texas, especially Houston.
And, yet, here comes word that the City of Houston is the nation’s top municipal purchaser of renewable energy. According to a February 7, 2012 article in Transportation Nation, 33 percent of the City’s energy comes from wind farms in West Texas, and the City hopes to increase that to maybe 50 percent over the next year or two. The City of Houston already uses more renewable energy than Starbucks, Hilton or the U.S. Department of Energy.
According to the report, Texas produces 10,000 megawatts of wind energy every year (more than any other state; California is first in solar). As a result, Austin and Dallas are also at the top of the renewable energy users’ list. Only six entities in the country rely on renewable energy more than Houston; Intel uses more than anyone, according to the report.
A lot of traditional oil and gas companies are based in the Houston area, and they too are relying on renewable energy, for their long-term growth and profitability.
The more you learn about renewable energy, the more you realize you don’t even know what you thought you knew. Makes sense?
The sustainability report may go out of style at some point. But sustainability reporting is probably here to stay.
Each year, thousands of companies issue sustainability reports. They can be comprehensive, data-driven labors of love designed to highlight successes, measure progress, engage stakeholders, and respond to skeptics. Unfortunately, many are too long, too complicated, not timely, overwhelming, underwhelming, or whatever. They can be expensive – financially and environmentally – to design, print and ship. All that effort and cost, and many go unused and underappreciated.
The search for the right tool to report on sustainability is ongoing – with the annual report, Web portals, and factsheets and “dashboards” all growing as viable options. One interesting iteration is the new McDonald’s 2011 Global Sustainability Scorecard, a 16-page pamphlet covering Nutrition & Well-Being, Sustainable Supply Chain, Environmental Responsibility, Employee Experience, and Community. Yes, all that in 16 pages, with a QR code for smart phones to link to the sustainability section of AboutMcDonalds.com.
McDonald’s has scrapped the full-fledged printed report in favor of this scorecard format. They say it’s a matter of “less is more,” and I don’t see anything wrong with that. In more ways than one, it sounds like a sustainable solution to me.
I’m not sure what to think or who to believe about the risks and challenges associated with extracting natural gas from shale.
The controversy and the emotions over hydraulic fracturing (“fracking”) are hot and show no signs of cooling off, especially in Ohio and other shale-rich states that are just beginning to explore their natural gas reserves. Even as projects are moving forward, regulators are scrambling and communities are living in the moment, it seems that neither the proponents nor opponents have exactly figured out their “story,” let alone know how to communicate it clearly and consistently.
And the technical folks aren’t much help either. Look at what’s happening at Cornell University in Ithaca, New York. One group of Cornell researchers, led by Professor Robert Howarth, believes that the greenhouse gas footprint of shale gas is “perhaps more than twice as great” as coal over a 20-year timeframe. Their theory is that methane, which can leak at the well, is a more potent greenhouse gas than carbon dioxide (assuming you believe in climate change at all, which, of course, is a totally different discussion).
On the other hand, Professor Larry Cathles is arguing that natural gas is cleaner than coal because it doesn’t produce by-products such as sulfur, mercury, ash and particulates.
This January 19, 2012 Associated Press article summarizes the “house divided” situation at Cornell. Although technically focused, both groups seem to recognize the significance of the public relations and communications challenges associated with their findings, rebuttals and ongoing debate. (Read one of Cathles’ latest rebuttals to check out the tone of the PR battle.) Naturally, the two researchers' funding is coming from opposite sides of the debate.
This may be a fascinating case study in academic inquiry and interest group-sponsored research, but it’s mostly frustrating for the rest of us. Whom do you believe? What’s the real story? What do we do next?
The inbox fills up much faster than just about anyone's ability to keep up with it. A lot of it is junk - I'm sure glad it doesn't come to me in paper form! But some of it is really useful, eye-opening and thought-provoking. Here is some recommended reading from a wide variety of sources since the beginning of the year:
Ohio fracking: A balanced Reuters story (January 13, 2012) about the use of fracking in shale drilling in Ohio. Another good versus evil story – earthquakes and the environment versus jobs and domestic energy production.
Megatrends: Bill Roth, The Triple Pundit guest blogger for January 3, 2012, highlights "five megatrends creating 2012's trillion dollar global sustainable economy." The list consists of energy efficiency, greening of the supply chain, local food, the rise of the "smart" consumer that won't be swayed by greenwashing, and Hispanic green leadership. An unusual grouping, for sure.
News from Apple: Apple has released a list of its major suppliers for the first time and published its supplier responsibility progress report. The January 13, 2012 New York Times article is a complete read on this topic. The transparency is good for Apple, even though some of its suppliers' business practices are going to come under fire. For that reason, the January 17, 2012 “cry for help” follow-up by The Triple Pundit guest blogger Tina Casey is also interesting.
Redefining the triple bottom line: In a January 13, 2012 CSRwire Talkback post, David Wilcox laments only incremental improvements in corporate responsibility. He argues that companies need to do more to scale from "do less harm" to "do more good." He also says they should work toward a "license to grow," not just a "license to operate."
Socially responsible investing: A January 10, 2012 post by Rory Sullivan for London-based Ethical Corporation speaks to the “uncomfortable truths” about socially responsible investing (SRI). In the wake of Henderson Global Investors’ decision to close it its highly regarded socially responsible investing team, Sullivan wonders whether SRI incentives and drivers are really as strong and real as proponents say they are. Or are they just rhetoric?
Walmart’s sustainability blog, The Green Room, is less than a week old. And the conversation is in full swing. The January 3 announcement of the blog drew more than 70 comments – mostly positive, but, as far as I can tell, even the not-so-flattering comments are being accepted and responded to.
Some might say that the creation of the blog and the regular postings by Andrea Thomas, Walmart’s SVP of sustainability, already show leadership. But that’s just the beginning – the outbound communication.
The openness to incoming communication, respond to the comments and eventually act, where appropriate, on the feedback, are, and will be, the bigger issues. Early indications are that this blog is not just about communication, but conversation. And transparency. And ideas that can be put into action. Good luck to The Green Room.
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SustainableBusiness.com reported recently that a record 109 shareholder resolutions were filed during this year’s proxy season to urge U.S. and Canadian companies to address climate change, fossil fuel usage and related sustainability issues. An additional 48 resolutions were withdrawn after the companies made voluntary commitments to address these issues, according to the report on research conducted by the Interfaith Center on Corporate Responsibility.
The most common sustainability-related topics were natural gas fracking, fossil fuel usage for electric power, water scarcity, oil refinery safety, and sustainability reporting (including climate or greenhouse gas reduction strategies).
Among the examples cited in the report was Walden Asset Management re-filing a resolution with Layne Christensen to push the company to issue a sustainability report. Last year’s resolution on the same topic produced a 60.3 percent vote in favor. This year, Layne Christensen of Mission Woods, Kansas, which provides drilling services for water infrastructure, mineral exploitation and energy, recommended a “FOR” vote on Walden’s resolution, which led to a 92.8 percent vote in favor. The company also published its first sustainability report.
Many so-called experts believe the success of such resolutions, and companies’ willingness to at least entertain the possibility of additional sustainability measures, will embolden the activists to be ever more aggressive. But I’m not convinced. I actually think there is an opportunity here for many well-intentioned, communications-savvy companies to get ahead of the activists, who certainly have other, potentially more contentious issues that they are pursuing through shareholder resolutions.
My sense is that even many mid-sized companies are now acknowledging the potential “shared value” (see this Harvard Business Review article for a discussion of this concept) in proactively addressing sustainability issues at the Board and senior management level without being under the high-profile pressure of a pending shareholder resolution or other “hammer.” Implementation will be smoother and the results will be better.