By Diane Osgood, Vice President, CSR Strategy
One clear message coming out of the BSR Conference 2009: Innovation is required. "Green is no longer a hobby. It is a necessity, and a driver for innovation and new business models," said Ben Verwaayen, CEO of Alcatel-Lucent, in the closing plenary presentation on Friday.
This theme was heard over and over again during the three-day event that was attended by nearly 1,000 people from 40 countries. Calls for innovation extended well beyond technological breakthroughs: We require innovation in our incentive systems, in how we create and capture value, and in how we experience satisfaction.
Zhang Yue, Chairman & CEO, BROAD Air Conditioning, colorfully captured the latter point: “How to we get away from bigger is best and the imperative for always having more?” This provocative question is deceptively simple. It demands disruption of our current incentive systems, which in turn requires innovation and thus yields incredible potential and opportunities.
The good news is that innovation is the lifeblood of companies, even as the nature of innovation is changing. Hannah Jones, Vice President of Corporate Responsibility at Nike, called for open source innovation, encouraging us to share what we can to speed up the transition but hold close to the chest true value creation. Nike is walking the talk by making available their sustainability index so that other companies can benefit from their research on materials. Yet they remain confident that no one else has the design pizzazz to threaten their market share.
Throughout the three days of the BSR Conference, we discussed the tension many of us feel, knowing that significant change is required even if it brings disruption and uncertainty. We know that carbon is the "unstoppable steamroller" that heralds the end of the industrial era. But we don’t know what’s next, and tomorrow isn’t here yet. We still lack the operational business models that reward companies for selling less or utilizing "expensive" low carbon technologies. And change is never smooth.
But in the end, companies that can do the equivalent of rubbing their tummies while patting their heads—innovating products, services, and business models for tomorrow while excelling in the current choppy environment—will be the nimble winners.
Monday, October 26, 2009
Tuesday, October 20, 2009
BSR Conference 2009 Kicks Off
By Diane Osgood, Vice President, CSR Strategy
Nearly 1,000 sustainability leaders from 40 countries have gathered in San Francisco for the BSR Conference 2009. Keep up to date on insights and breaking news from the event at GreenBiz.com, our official bloggers.
Summaries of all Conference sessions will be posted on BSR.org on Tuesday October 27.
Nearly 1,000 sustainability leaders from 40 countries have gathered in San Francisco for the BSR Conference 2009. Keep up to date on insights and breaking news from the event at GreenBiz.com, our official bloggers.
Summaries of all Conference sessions will be posted on BSR.org on Tuesday October 27.
Thursday, October 15, 2009
Corporate Complicity in Human Rights Violations: Conflicting Decisions in U.S. Courts
By Faris Natour, Director, Research & Innovation
The question of when a company can be considered complicit in human rights violations that are perpetrated by government has always been a difficult one. Now, a new ruling by the U.S. Court of Appeals for the Second Circuit further muddies the picture.
The decision affirms a lower court’s dismissal of a case brought against Talisman Energy under the U.S. Alien Tort Statute, a law that allows foreign citizens to initiate lawsuits in U.S. courts for alleged human rights violations abroad. In the decision, the court ruled that in order for a company to be considered complicit, the firm’s support would have to have been "purposeful," meaning plaintiffs must prove that the company’s intent was to harm civilians. This contradicts an earlier decision by the U.S. Ninth Circuit Court, which held that a company’s mere knowledge and "substantial contribution" were enough to establish complicity.
This decision raises two important issues: First, the lack of clarity on the standard for corporate complicity in government’s human rights violations is difficult for all sides. The U.S. courts’ contradictory decisions have created confusion about which standard will be applied, making it even more difficult for companies to implement appropriate safeguards to avoid complicity. To address this issue, the U.S. Supreme Court should establish a clear standard for complicity for cases under the Alien Tort Statute.
Second, there is a general need for more effective remedies, both judicial and non-judicial, for victims of human rights abuse. It has long been clear that governments in countries where many of the Alien Tort cases originate must strengthen the rule of law and access to judicial remedies. In addition, business should establish more effective non-judicial remedies, such as mediation, ethics hotlines, ombudsmen, and meaningful community engagement.
While these processes are no substitute for a functioning judicial system (victims of human rights abuse should always have their day in court), they can provide a more effective alternative in cases of less severe human rights impacts. In addition, non-judicial remedies can serve as an early-warning mechanism to identify and mitigate human rights impacts before they become more severe.
The question of when a company can be considered complicit in human rights violations that are perpetrated by government has always been a difficult one. Now, a new ruling by the U.S. Court of Appeals for the Second Circuit further muddies the picture.
The decision affirms a lower court’s dismissal of a case brought against Talisman Energy under the U.S. Alien Tort Statute, a law that allows foreign citizens to initiate lawsuits in U.S. courts for alleged human rights violations abroad. In the decision, the court ruled that in order for a company to be considered complicit, the firm’s support would have to have been "purposeful," meaning plaintiffs must prove that the company’s intent was to harm civilians. This contradicts an earlier decision by the U.S. Ninth Circuit Court, which held that a company’s mere knowledge and "substantial contribution" were enough to establish complicity.
This decision raises two important issues: First, the lack of clarity on the standard for corporate complicity in government’s human rights violations is difficult for all sides. The U.S. courts’ contradictory decisions have created confusion about which standard will be applied, making it even more difficult for companies to implement appropriate safeguards to avoid complicity. To address this issue, the U.S. Supreme Court should establish a clear standard for complicity for cases under the Alien Tort Statute.
Second, there is a general need for more effective remedies, both judicial and non-judicial, for victims of human rights abuse. It has long been clear that governments in countries where many of the Alien Tort cases originate must strengthen the rule of law and access to judicial remedies. In addition, business should establish more effective non-judicial remedies, such as mediation, ethics hotlines, ombudsmen, and meaningful community engagement.
While these processes are no substitute for a functioning judicial system (victims of human rights abuse should always have their day in court), they can provide a more effective alternative in cases of less severe human rights impacts. In addition, non-judicial remedies can serve as an early-warning mechanism to identify and mitigate human rights impacts before they become more severe.
Monday, October 12, 2009
ESG in the Mainstream
By Laura Commike Gitman, Director, Advisory Services
With Bloomberg launching a new environmental, social, and governance (ESG) data service for its stock data service subscribers, ESG data are becoming increasingly visible and available to mainstream investors and analysts, even if they’re not specifically looking for it. We believe that this is indicative of a larger trend, where mainstream investors are beginning to use ESG criteria in a variety of ways to inform their investment decisions. No longer just the realm of the socially responsible investment (SRI) community, ESG data can provide better metrics for risk, good quality management, or just a more long-term perspective on a company.
This development, which BSR describes in its new report “ESG in the Mainstream: The Role for Companies and Investors in Environmental, Social, and Governance Integration,” is what is known as “ESG integration,” which refers to the incorporation of ESG criteria into investment analysis based on the belief that ESG issues are a driver of financial returns.
While this trend has a long way to go before the use of ESG criteria becomes standard practice in any traditional financial valuation, we are seeing much greater use by certain types of investors, such as pension funds, and with specific products or funds.
This increase in investor interest will have major implications for public companies as well. Currently, companies complain that analysts aren’t interested in ESG issues, and investors argue that companies sideline the issues rather than integrate them into the business. Companies will need to enhance their sustainability strategies and ensure that they focus on the issues most material to their business, and they’ll need to communicate those efforts and results to the investment community—something that is not yet happening.
With Bloomberg launching a new environmental, social, and governance (ESG) data service for its stock data service subscribers, ESG data are becoming increasingly visible and available to mainstream investors and analysts, even if they’re not specifically looking for it. We believe that this is indicative of a larger trend, where mainstream investors are beginning to use ESG criteria in a variety of ways to inform their investment decisions. No longer just the realm of the socially responsible investment (SRI) community, ESG data can provide better metrics for risk, good quality management, or just a more long-term perspective on a company.
This development, which BSR describes in its new report “ESG in the Mainstream: The Role for Companies and Investors in Environmental, Social, and Governance Integration,” is what is known as “ESG integration,” which refers to the incorporation of ESG criteria into investment analysis based on the belief that ESG issues are a driver of financial returns.
While this trend has a long way to go before the use of ESG criteria becomes standard practice in any traditional financial valuation, we are seeing much greater use by certain types of investors, such as pension funds, and with specific products or funds.
This increase in investor interest will have major implications for public companies as well. Currently, companies complain that analysts aren’t interested in ESG issues, and investors argue that companies sideline the issues rather than integrate them into the business. Companies will need to enhance their sustainability strategies and ensure that they focus on the issues most material to their business, and they’ll need to communicate those efforts and results to the investment community—something that is not yet happening.
Monday, October 5, 2009
The Debate over the Accuracy of GHG Footprinting
By Marshall Chase, Associate, Advisory Services
A recent Wall Street Journal article highlights concerns about greenhouse gas (GHG) footprinting: “The results have the appearance of precision. But … measuring carbon footprints is inexact. It is clouded by varying methodologies and definitions—not to mention guesses.” While this is true, the article gets bogged down in a discussion of uncertainties and competing standards, and loses sight of a few important points.
First, as long as GHG measurements are rigorous and done the same way, then product comparisons can generally be made. Regardless of whether the comparison is made using the PAS 2050 standard or ISO LCA methodology cited in the article, the numbers should be accurate enough to determine whether one product has a larger GHG footprint than another. If two widely accepted methods result in different conclusions about which product emits more GHGs, then the difference is probably too small to matter for companies and consumers.
Second, companies and consumers can use these comparisons to inform their actions. As the article points out, there is agreement that the biggest source of emissions in dairy supply chains is methane from cows, even though there isn’t agreement on the exact GHG footprint of a gallon of milk. Given that, methane emissions can become a focus of GHG-reduction efforts.
Similarly, companies and individuals can make purchasing decisions based on product GHG data to help reduce their own GHG footprint (if they so choose). This holds true whether they are buying milk from Dairy A vs. Dairy B, or considering whether to have cheese or peanut butter on their lunchtime sandwich.
Finally, both precision and demand for GHG footprinting will grow with time. Governments and buyers increasingly encourage—and in some cases require—product GHG footprints. As more products disclose their footprints and standards evolve, increasingly detailed comparisons among products can be made. As a result, companies that currently dismiss footprinting as “complex and imprecise” may find themselves at a competitive disadvantage in the future.
A recent Wall Street Journal article highlights concerns about greenhouse gas (GHG) footprinting: “The results have the appearance of precision. But … measuring carbon footprints is inexact. It is clouded by varying methodologies and definitions—not to mention guesses.” While this is true, the article gets bogged down in a discussion of uncertainties and competing standards, and loses sight of a few important points.
First, as long as GHG measurements are rigorous and done the same way, then product comparisons can generally be made. Regardless of whether the comparison is made using the PAS 2050 standard or ISO LCA methodology cited in the article, the numbers should be accurate enough to determine whether one product has a larger GHG footprint than another. If two widely accepted methods result in different conclusions about which product emits more GHGs, then the difference is probably too small to matter for companies and consumers.
Second, companies and consumers can use these comparisons to inform their actions. As the article points out, there is agreement that the biggest source of emissions in dairy supply chains is methane from cows, even though there isn’t agreement on the exact GHG footprint of a gallon of milk. Given that, methane emissions can become a focus of GHG-reduction efforts.
Similarly, companies and individuals can make purchasing decisions based on product GHG data to help reduce their own GHG footprint (if they so choose). This holds true whether they are buying milk from Dairy A vs. Dairy B, or considering whether to have cheese or peanut butter on their lunchtime sandwich.
Finally, both precision and demand for GHG footprinting will grow with time. Governments and buyers increasingly encourage—and in some cases require—product GHG footprints. As more products disclose their footprints and standards evolve, increasingly detailed comparisons among products can be made. As a result, companies that currently dismiss footprinting as “complex and imprecise” may find themselves at a competitive disadvantage in the future.
Thursday, October 1, 2009
A Systems Approach for the Planet
By Linda Hwang, Manager, Environmental Research & Innovation
Last week, the journal Nature presented the ongoing research being conducted at the Stockholm Resilience Centre on Planetary Boundaries, a new approach to sustainable development that attempts to identify and quantify a set of nine planetary boundaries. The researchers contend that if we move beyond any of the boundaries, we will be unable to avoid "unacceptable global environmental change." While this work is laudable, I agree with the Smithsonian Natural History Museum’s director, who proposed that "a boundary that estimates the likelihood of families disappearing over time" might be a more accurate measure of our future here on Earth.
Some may consider this a dramatic statement, but I appreciate the underlying sentiment: As humans, our very survival is dependent on complex ecological systems that provide us with many things we take for granted, like productive soil, clean water, and the natural resources that go into all of our consumer products. Once those disappear, well, it’s possible we will, too. One of the real strengths of the planetary boundaries science is that it forces us to think about much larger, much more complex systems that we might otherwise be unaware of.
I also appreciate that we’re moving away from thinking about specific events like climate change, biodiversity loss, or water scarcity in a disparate manner, and instead beginning to see overall structures, patterns, and cycles. This is systems thinking writ large.
It’s also a theme we’ll be taking up at the BSR Conference later this month, in a session on global land-use policies. As the demands of our food and industrial systems place increasing stress on natural resources around the world, companies relying on these systems face pressure to find solutions to both the supply and the demand sides of the challenges. We'll explore various approaches companies in different industries are taking to address these challenges, and I suspect the solutions we’ll discuss will take into account the long view: What unintended consequences might occur? What will be the trade-offs among the stocks and flows of natural resources, given business activities? How will business leaders incorporate this information into their decision-making processes? If the planetary boundaries science is sound, what will that mean for business?
Last week, the journal Nature presented the ongoing research being conducted at the Stockholm Resilience Centre on Planetary Boundaries, a new approach to sustainable development that attempts to identify and quantify a set of nine planetary boundaries. The researchers contend that if we move beyond any of the boundaries, we will be unable to avoid "unacceptable global environmental change." While this work is laudable, I agree with the Smithsonian Natural History Museum’s director, who proposed that "a boundary that estimates the likelihood of families disappearing over time" might be a more accurate measure of our future here on Earth.
Some may consider this a dramatic statement, but I appreciate the underlying sentiment: As humans, our very survival is dependent on complex ecological systems that provide us with many things we take for granted, like productive soil, clean water, and the natural resources that go into all of our consumer products. Once those disappear, well, it’s possible we will, too. One of the real strengths of the planetary boundaries science is that it forces us to think about much larger, much more complex systems that we might otherwise be unaware of.
I also appreciate that we’re moving away from thinking about specific events like climate change, biodiversity loss, or water scarcity in a disparate manner, and instead beginning to see overall structures, patterns, and cycles. This is systems thinking writ large.
It’s also a theme we’ll be taking up at the BSR Conference later this month, in a session on global land-use policies. As the demands of our food and industrial systems place increasing stress on natural resources around the world, companies relying on these systems face pressure to find solutions to both the supply and the demand sides of the challenges. We'll explore various approaches companies in different industries are taking to address these challenges, and I suspect the solutions we’ll discuss will take into account the long view: What unintended consequences might occur? What will be the trade-offs among the stocks and flows of natural resources, given business activities? How will business leaders incorporate this information into their decision-making processes? If the planetary boundaries science is sound, what will that mean for business?
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