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One of the most interesting phrases I have heard in business meetings over the last several weeks is in response to a question about how an organization is going to handle additional opportunities and challenges in the new year. The question is often asked as, “So, how are we going to get all of this done? Or “Who’s going to do this?”
The answer I have heard several times from organizations representing various industries and sizes is what’s interesting: “that person doesn’t work here today.” That’s one of the most encouraging statements I’ve heard in a while about potentially accelerating the economic recovery and job growth. Let’s hope it’s sustainable.
Three Ps, the triple bottom line, wishes you a happy and prosperous New Year.
“Good companies” now have their own advertising program. However, for most companies to be able to participate, they would have to revisit and rewrite their corporate governance materials and business strategy.
The ad campaign is focused on reaching approximately 17 million “values-driven consumers” through advertising in sustainable living magazines such as Mother Earth News, Natural Home, Utne Reader, and Care2.com, "the largest online community for healthy and green living, human rights and animal welfare." The ads are also posted online.
The “Better Companies Make Better Products, B Corps are Better Companies” campaign is being organized by B Lab, a nonprofit corporation “dedicated to using the power of business to solve social and environmental problems.” B Lab is working to build a community of Certified B corporations to “make it easier for all of us to tell the difference between ‘good companies’ and just good marketing.” Until recently, the organization has had a relatively low profile.
Currently, 364 corporations with $1.79 billion in revenues have achieved B certification (the B stands for Benefit). Most of the certified companies so far are small organizations – sustainability consulting firms, IT consultants, other service providers, local restaurants, nonprofits, etc. The best-known brands among B Corps are Method Products, Seventh Generation, Numi Organic Tea and New Leaf Paper.
The organization recently conducted research and found that more than 90 percent of values-driven consumers (which, of course, is not the same as all consumers) preferred to buy from a company with a third-party seal of approval, and B Lab aims to be the third party that consumers look for. B Lab hopes the campaign “makes it easier for Americans to find companies worthy of their support.”
According to the organization, to earn certification, B Corporations must achieve a minimum score on the B Impact Rating System, which assesses a company's impact on its work force, suppliers, consumers, community, and the environment, and are legally required to consider the interests of these stakeholders, not just shareholders, when making decisions.
The bold and italics above have been added by me for emphasis. Legally required? Yes, to retain their B Corp status, B Corps must demonstrate ongoing compliance with the B Impact Rating System. The legal framework for B Corps is evolving, and it certainly won’t be attainable for all organizations. Consider B Lab’s Step-by-Step guide for complying with B Corp requirements:
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Amend your governing documents (e.g., Articles of Incorporation, Membership Agreement, Partnership Agreement) to redefine the best interests of the corporation to include the consideration of employees, consumers, the community and the environment
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Obtain board/governing body approval of your amended governing documents
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Obtain shareholder/member/partner approval, requiring a majority/super-majority vote, depending on your state of incorporation/operating agreement
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File your amended articles with the Secretary of State (only for C or S Corporations; unnecessary for LLCs and LLPs)
Some activists and government officials are looking to the B Corp program for guidance on how all companies should behave. Maryland and Vermont already have B Corp laws, and California is among several other states considering legislation that would require corporations to name at least one social or environmental purpose for which they exist and to which they are willing to be held accountable through greater transparency. The B Corp discussion is just beginning and it could become intense.
Do B Corps have an advantage? Could we all learn something from them? Should we all aspire to be like them?
Snack food packaging caught my eye recently. This time, it was health claims made on the packaging (not environmental claims about the packaging) that made me think.
I came across a vending machine with two small packages of Cheez-It® Baked Snack Crackers, each labeled as a one-serving size.
One of the options was the 0.77-ounce, 100 Calorie Right Bites pouch, which touted the benefits of the low calorie count, 100 percent real cheese and 0 grams of transfat. The snack had 230 mg of sodium and cost 75 cents.
In the same machine was a 1.5-ounce, 210-calorie bag of the exact same crackers, made of 100 percent real cheese and 0 grams of transfat. The snack had 320 mg of sodium and cost 50 cents.
Now, let’s examine the data: The first option, the healthier choice according to the packaging, had half the contents of the other bag but was essentially the exact same product (made of 100 percent real cheese and 0 grams of transfat). And, proportionally, the sodium content was actually higher (health scientists, how is that possible?). Furthermore, the cost of the smaller packaging was 50 percent more. And, yet, people were buying the Right Bites package because of the perceived health benefits.
If people had simply bought the 1.5-ounce bag and divided the crackers into two snacks, they would have had two of the same “healthy” snacks for 50 cents (which is three times less than the $1.50 they would spend for the two smaller bags). The threefold difference seems like a ridiculous price to pay for essentially no benefit.
For me, this example shows the strong parallels between misleading health and environmental claims. In the environmental realm, such claims that are irrelevant, vague or misleading are considered greenwashing. So, is this packaging guilty of “health-washing”?
The tables have turned.
Over the last decade or so, the sustainability field has created more than 100 rankings, rating systems and indexes. Companies compete for number one, some are happy just to make a list, and those that come up short often have significant work ahead in managing internal and external expectations.
Now, the rankings, rating systems and indexes have some explaining to do, and they’re not necessarily ready for the scrutiny that they are so good at dishing out.
As I said in my October 18 blog post, "Sustainability Ratings: A New System Every 42 Days,” many of the systems lack the very global acceptance, consistency and transparency that they aim to measure. The latest person to weigh in on this subject is Joel Makower, executive editor of GreenBiz, who spoke out this week about TerraChoice’s new “The Sins of Greenwashing” report. “The report may be as much of a greenwash as the products and companies it is criticizing,” he wrote for GreenBiz.com.
TerraChoice, a North American environmental marketing firm, uses a seven-part screen – the “seven sins of greenwashing” – to judge companies’ product claims, and found that 95 percent the products failed one or more of the tests and was, therefore, labeled a “sinner.” The report, which was also issued in 2007 and 2009, is much anticipated and influential with marketers and product managers.
The problem, says Makower, is that the report itself commits at least three of the same sins:
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The Sin of No Proof for failing to provide independent, third-party validation of its findings
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The Sin of Vagueness for the use of unclear or vague terminology, including the definition of grenwashing
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The Sin of Irrelevance for labeling companies as greenwashers if their claims are factually correct but insufficiently substantiated
You also can’t help but notice that the report and the portal dedicated to the report are highly stylized with dramatic headlines, large numbers, compelling photography, and even a comic book theme. Use of the highly charged “sin” throughout the materials also adds to the hype. In other words, it’s slick marketing.
If you believe this study, almost every company that markets sustainable products is a “sinner.” I, for one, would not expect services organizations such as consulting firms and rankings companies to fare any differently. So TerraChoice is probably just like the rest of us – part of the problem and part of the solution, and trying to get better every day. That sounds more like a winner than a sinner.
Even though they are voluntary, the Federal Trade Commission’s “Guides for the Use of Environmental Marketing Claims” are highly influential with marketers trying to decide how to promote the eco-friendliness of their products and services.
The so-called “Green Guides” were first issued in 1992 and were revised in 1996 and 1998. They’re undergoing revision again, and public comments on the latest revisions are due to the agency by December 10, 2010.
Some of the “Green Guides” updates are noteworthy and could significantly impact marketing, including more specific definitions of certain terms:
Degradable: The “reasonably short period of time” for complete decomposition of a product or package is defined as one year.
Free of: Use of this term may be considered deceptive if (1) the item has substances that pose the same or similar environmental risk as the substance not present; and (2) the substance has never been associated with the product category.
Made with renewable energy: Marketers should not use this term if any part of the product was derived from fossil fuels and they should specify the source of renewable energy.
Carbon offsets: Marketers should disclose if the emissions reductions from the offsets purchased will not occur for two years or longer.
FTC cautions marketers “not to make blanket, general claims” using terms such as “environmentally friendly,” “eco-friendly” or “green" (apparently with a big exception for the name of its own guides).
On the other hand, the agency took no position on the use of “sustainable” or “sustainability” because it “lacks a sufficient basis to provide meaningful guidance.” Maybe retaining the flexibility to use such terms is good. On the other hand, this is “the elephant in the room.” Perhaps a term that is apparently so undefinable may also be unsustainable? Isn’t this how “green” lost its credibility?
To paraphrase comic strip character Pogo, “we have met the enemy and they (may be) us.”
At least that is how many sustainability consultants, ratings organizations and sustainability-devoted companies should be feeling these days. For a field so concerned about global acceptance, consistency and transparency, sustainability has a long way to go. The problem is there are more than 100 CSR/corporate sustainability rating and ranking systems.
According to a new “Rate the Raters” white paper (available as a free download) by SustainAbility, a sustainability think tank and strategy consultancy based in New York, 87 of the 108 rating systems studied have been around less than 10 years, which means a new rating/ranking system has been introduced approximately once every 42 days over the last 10 years. There are now rating systems that rate the ratings ,and some programs create a composite, multi-rating score – it’s like college football’s BCS system, except with a whole lot more at risk for all of us.
Furthermore, the white paper reported that only a handful of ratings provide the sort of disclosure that allows users and companies to understand how the ratings are constructed – in other words, they lack transparency, which is one of the most important things that rating organizations are supposed to be looking at when doing their evaluations.
Under the heading “Responsiveness Trumps Performance,” SustainAbility reported more than 60 percent of the ratings depend wholly or in part on information being submitted directly to ratings organizations, “thereby rewarding companies with the greatest capacity to respond to ratings requests rather than those with the best performance.” It’s no wonder consumers are wary of greenwashing and many well-intentioned companies have no idea how, or if, to join the ratings free-for-all.
The commitment to building a high-performing, sustainable organization takes significant time and money. So do measuring, demonstrating and reporting progress. Industry does not have unlimited resources, or patience. It is incumbent upon the raters and rated to take a hard line toward building a consensus and common-sense standards on sustainability ratings.
Companies are being held to increasingly high standards. Those who want to set the standards need to be willing to do the same. Otherwise, they’re just pay-to-play membership organizations. Until these various systems are sorted out, we’ll all be left to wonder who’s really doing well by doing good. And who’s just good at filling out forms and aligning themselves with like-minded organizations.
What the world needs now is another multi-tiered, comprehensive online resource for helping investors and corporate leaders track and manage sustainability, corporate social responsibility, CSR reporting, and socially responsible investing. I actually don’t know anybody who really believes this. The fact is we already have way too much information, too many sites, too many indexes and ratings – and not nearly enough useful, digestible knowledge.
And, yet, the information databases, Web portals and news aggregators continue to proliferate.
The latest entry is SustainabilityHQ™, founded by the New York-based Governance & Accountability Institute, Inc. This new, subscription-based online platform is designed to track the activities and influence of “watchers” such as market players and influencers. Institute Chairman/CEO Hank Boerner said the platform is designed to “help users ‘watch the watchers’ so that both corporate and investment managers can better understand and participate in” investors’ rising expectations about the sustainability, social responsibility and corporate governance of public companies. SustainabilityHQ, formerly known as INSIGHTS-edge™, offers a free trial demo, after which time a site license fee is charged.
In her October 12, 2010 CSRwire column, contributing writer Elaine Cohen offers some good insight into the new service, which has four sections: ESG & Sustainability, U.S. Public Employee Pension Funds, Sovereign Wealth Funds, and Asset Managers.
I can’t go into detail here about other platforms that offer additional, adjacent or redundant information, but here are some you may want to look at: Social Investment Forum, SocialFunds, AccountAbility, Global Reporting Initiative, Dow Jones Sustainability Index, Carbon Disclosure Project, FTSE KLD 400 Social Index, Global Environmental Management Initiative, CSRwire, Calvert Social Index, and so on. And every one of them offers a wealth of information, usually for a membership or subscription fee.
The bottom line is socially responsible investing is big business: accounting for $2.7 trillion in professionally managed U.S. portfolios. Knowing where to invest and what to look for are major challenges; buyer beware! Socially responsible investing information is also big business. And the “buyers” – the providers and consumers of the information – are rightfully wary, confused, concerned and overwhelmed.
Maybe SustainabilityHQ will prove to be the ultimate full-service, easy-to-use solution. Or could it be just one more gas guzzler on the information superhighway? The proof will be in its own sustainability and attraction power because I’m sure “the next big thing” announcement is due out any day now. And then another. And another…
With Three Ps, sustainability is a win-win-win for people, planet and profit, right? If business leaders and consumers look deep enough, they’ll find that what’s good for the environment and people will help the bottom line, and vice versa, right? Some believe it’s always possible to find the win-win-win. Apparently, none of those people eat snack foods, however.
The Internet, consumer marketing and sustainability worlds are buzzing with discussion about Frito-Lay’s decision to discontinue use of biodegradable packaging for most of its SUNCHIPS® brand Multigrain Snacks. Part of the marketing pitch for the snacks has been that the packaging is biodegradable. The problem is that, as a result, the bag is TOO LOUD. Consumers, many of whom presumably valued the bag’s biodegradability, have complained and the packaging is being changed to more traditional packaging.
Critics are charging that Frito-Lay’s decision is an overreaction; a sign of “supercapitalism,” an emerging, derogatory term coined by former Secretary of Labor Robert Reich. According to Reich, the problem is that organizations and individuals have become obsessed with consumption and profits over all other considerations.
For me, the SUNCHIPS story is a sign of the real world, where sustainability is part of the mix but rarely the deciding factor. In the real world, even with something as trivial as a noisy snack bag, few people will put environmental footprint ahead of all other considerations, which include comfort, convenience, aesthetics, cost, safety and so on. That is exactly what the Shelton Group has found in its EcoPulse studies. Be sure to read Suzanne Shelton’s latest blog post, The poor SUNCHIPS bag: a cautionary tale.
What other examples from everyday life can you think of?
Last Saturday was Give Your Stuff Away Day, which means it was the day for “freecycling” and swapping clothes, furniture, housewares, electronics and other durable goods with friends, neighbors and family members – instead of buying them new. From a store. That employs people. That pays taxes.
The Three Ps of sustainability say you should be able to address the needs of People, Planet and Profit/Prosperity. Can you find the right balance or do they require tradeoffs that don’t quite add up? Proponents say it’s all about balance, and that makes sense to me most of the time. But there should be no denying that there are also some tradeoffs and tough choices.
Look at the current economic situation, which is being driven in a significant way by low consumer confidence. People are trying to save more and spend less. However, as a result, many businesses are still reluctant to expand or hire, and many have been forced to contract or close. Surely, this is not sustainable. And, yet, in some narrow definitions of sustainability, consumption is the enemy of sustainability. Some will say the current lack of consumption is the silver lining in the current downturn.
Take the example set by Colin Beavan, the best-selling author of No Impact Man, the book that chronicles one family’s efforts to make zero impact on the environment for an entire year. It also means no positive impact on the economy for an entire year. Fortunately, you can now buy the book, which at least provides some economic value.
Sustainable materials, products and designs – their purchase and use – are critical to the future of our world. In Cleveland, that’s what we call “Building an Economic Engine to Create a Green City on a Blue Lake.”
On the other hand, a future built on no impact is not much of a future at all. That’s only One P and it’s not sustainable, don’t you agree?
Pollution in China may decrease as a result of a recent environmental decision by the central government. But it sure isn’t being done in the spirit of sustainability, which balances economic growth, and environmental and social responsibility.
Earlier this month, as reported today by USA Today, the Chinese central government ordered 2,087 firms producing steel, coal, cement, aluminum, glass and other materials to close their old and obsolete plants and production capacity by the end of September – or risk having bank loans frozen and power cut off. Authorities in one province have reportedly already cut off electricity to more than 500 factories for a month after they failed to meet emission reduction targets.
Observers say the decision is designed to boost China’s “green” credentials in advance of global climate talks next year in Copenhagen. Some environmentalists will no doubt applaud the announcement and push for more closings and stricter thresholds. (Only in China, I hope.)
For the rest of us, this is another teachable moment. The idea of sustainability’s Three Ps – People, Planet, Profit/Prosperity – is far from universally accepted. And business leaders, no matter where in the world they do business, are among those in the best position to help make the case that sustainability requires economic growth, and environmental and social responsibility. And then go out and prove it – even in China.
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