Green Mountain Coffee Roasters is funding a fantastic biochar processing project through the NGOs Radio Lifeline and Black Earth Project in Rwanda. One of the lesser known and most underestimated renewable energy options, biochar is a process that breaks down biomass into a fertilizing substance that sequesters carbon, and that is the stuff that makes the Amazon’s soil so productive.
The project is impressive in the many social objectives it accomplishes; it will help Rwandan coffee farmers to reduce their climate impact while increasing agricultural resilience to climate change, it will reduce waste and improve coffee sustainability, and will provide jobs at the social enterprise in Africa that makes the biochar kilns.
Last week, McDonald’s exhibited bold leadership by agreeing to shift their entire seafood supply-chain to Marine Stewardship Council-approved fish. This assures that fish products from McDonald’s will now be sourced from stocks that are sustainable, well-managed and environmentally sound. This amazing move signifies a leap forward for both the labeling model promoted by the Marine Stewardship Council, and for the McDonald’s brand.
The McDonald’s brand began to show signs of aging when the documentary “Supersize Me” was released in 2004, which showed Morgan Spurlocks’s health and happiness deteriorate due to his experimental consumption of McDonald’s food three meals a day. McDonald’s subsequently became the scapegoat for the obesity crisis just in time for Jamie Oliver to decry its chemical rich “pink slime” liquid beef ingredient on primetime. Then, despite notable global sales and good performance of its stock, Ad Age published a study showing that it was perceived as being low quality compared to other fast food firms. Indeed, the McDonalds brand was a mismatch for a world in which Whole Foods and Trader Joes have proliferated in urban centers, where quinoa is a craze, and Starbucks has come to redefine fast food.
Prince Charles’ think-tank, A4S or “The Prince’s Accounting For Sustainability Project”, recently published an insightful new report called “Future Proofed Decision Making” critiquing the state of CSR. A4S found that firms were not “Future Proofing” rapidly enough – that is to say they were not turning CSR into a principal business activity such as finance, accounting, administration and strategic decision-making processes. A4S is interested in encouraging CSR advocates to better communicate with industry about how to understand the environment’s financial value and role in their business operations.
The report surveyed “board members and senior management” and discovered that senior staff could not articulate specific ways in which sustainability was integrated into managerial decision making. This means investment choices, fiscal analysis, expansion decisions, hiring & firing, etc; the mundane but critical decisions that actually run a business were not considered in the context of CSR. The report goes on to express concern that environmental issues continue to be relegated to a marketing or foundation-related CSR division, which is superfluous and tangential to the firm’s core business.
As a CSR advocate, this was troubling to read but also felt completely correct. CSR seems to have plateaued. More firms than ever have sustainability programs and publish assessments of their impact, but still continue to be operationally destructive with no intention of changing the way they do business. Greenwashing and similar discord is an example of a symptom that CSR not being considered as anything more than PR.
Even with the debt ceiling and fiscal cliff looming, a UN Environmental Program report global suggests that capital markets are vulnerable for another reason- underrated environmental risk. The UN Environmental Program publishes a quarterly “Financial Initiative” brief aimed at the financial sector, often in conjunction with a major banking partner. These briefs are designed to communicate environmental imperatives to analysts. These “Liquidity Reports” warn of threats to the economy presented by water scarcity. October’s issue explains how water supply volatility has not been accurately priced into investments within the extractive industries, primarily mining. The UN’s report highlights great detail on water scarcity, but the financial sector’s failure to recognize environmental risk is much broader than water.
With the exception of a limited number of funds, the financial sector has not accounted for the risk associated with climate change. This is a scary situation because it means that at some point, when climate change becomes irrefutably obvious or regulations force recognition (such as the SEC rules to report ghg output), markets will recognize these risks. The last time the global financial sector realized unappreciated risk was in 2007, resulting in the deepest recession since the 1930’s ( for an excellent dramatization of the market’s moment of realization, see the film Margin Call). The markets will eventually price commodities closer to their actual value (higher) and more accurately accounting for environmental volatility (also high). In this case, inflated prices would be double strength, caused both by accounting for the climate change weather risk, and accounting for the resource scarcity that results.
Every day the U.S. lacks a federal carbon tax is a day Americans ignore a solution to reduce the deficit. That is the finding of a new study by the Congressional Research Service, which showed that the U.S. deficit could be reduced fifty percent in ten years by the adoption of a $20/metric ton carbon tax.
Carbon taxes are an economic silver bullet
In addition to carbon taxes’ potential to rapidly reduce the deficit, they provide countries with a new source of revenue, therefore reducing the pressure on politicians to generate funds through social program cuts and income tax hikes. For example, Australia’s recent carbon market is forecast to generate $4 billion in profits in 2013; the UK will make $1.06 billion in same period. The U.S.’ own Regional Greenhouse Gas Initiative (RGGI) makes about $200 million annually. Though these numbers are modest in the world of national finance, part of the beauty of a carbon tax is that the cost of carbon can be ratcheted higher, which increases governmental revenue while improving the environment.
On its face, PriceWaterhouseCooper’s (PwC) CSR program is perplexing. Why does a firm famous for accounting focus on youth education, diversity, and greenhouse gas emissions in it CSR program? I posed this question to PwC’s CSR Leader Shannon Schuyler. She explained that in the context of risk, these issues do fit their business. She also illustrated PwC’s fourth CSR prong: ‘marketplace’ – an ingenious strategy in which PwC’s CSR campaigns act as a laboratory for CSR best practices it then flips into consulting services. This business model demonstrates one way in which firms’ CSR can be monetized in a fortuitous cycle.
Abe’s Market has experienced a rapid evolution since spring, when it just seemed like digital WholeFoods- not much to write about. But in less than a year, Abe’s Market blossomed into so much more. The companies supplying Abe’s Market appear to have quintupled, and its business concept has morphed from a natural foods website to a healthy lifestyle community. Its business model is designed to launch small retail social entrepreneurs (like Etsy did for crafters), but Abe’s Market adds value by facilitating supplier-customer bonding through company bios. The end result is a customer base with personal affinity for suppliers. Does a deeper personal connection create customers with a higher willingness to pay for “green, natural, eco-friendly” goods? If so, it’s a critical triumph for the retail sustainability industry, whose historical stumbling block has been retaining customers when unable to compete on price.
Google recently invested a million dollars in a futuristic transportation system called Schweeb (possibly named for the sound it makes). Schweeb mixes a user-powered bicycle setup with the old-fashioned pneumatic tube pods- in this case, for people instead of interoffice mail. Users zip around a monorail as their energy spent pedaling is accelerated by the track. Despite testers’ giddy response to the New Zealand prototype, the technology raises a question: why should we care about Schweeb when we can’t even get a high-speed rail in place? Another way- considering how radically we need to rethink transportation to address climate change, is “cool” enough to justify investment?
The most frustrating aspect of writing about corporate social responsibility (CSR) is the lack of leadership. Green building has the US Green Building Council, conservation has the Sierra Club, cleantech has companies like FirstSolar, but CSR lacks a leader. In the vacuum, countless consultancies have ranked company sustainability to guide consumers. JustMeans, a CSR website, adds another by launching the Top 1000, a new ranking of mid-large cap companies based on the GRI standards. Maybe this one will stick.
Has the financial crisis killed retirement? Pension expenses toppled GM. Stock market losses destroyed lifetimes of savings. Retirement plans are disappearing from benefits packages. Social security is attacked in politics and the EU is poised to raise the retirement age to 70. Things are looking bad, but just as retirement needed a superhero it found one in Clif Bar.
Clif Bar owners Gary Erickson and Kit Crawford have launched a program that could invigorate retirement benefits. The program sold 20% of Clif Bar’s $200 million equity to a trust that pays dividends into employee retirement accounts.
Post financial crisis, shareholder resolutions are emerging as an underestimated risk management tool. Mainstream investors are finally waking up to the power they have to influence dangerous firm policies via shareholder action. While shareholder votes are notorious for hypo-participation (getting 5% of shareholders to vote is a feat), activists that focus on deploying proxy votes effectively have produced impressive results.
In the same way ecosystems with high biodiversity have higher survival rates, businesses with high personnel diversity also fare better than those with one variety of employee. Increased diversity of employees results in a wider variety of thinking, more robust solutions to problems, etc. In the same way, it’s not surprising that evidence has emerged that firms do better with women in the ranks. Evidence also surfaced that female fund managers outperform their male counterparts. In short, women and profit go together.
Over dinner a couple years ago, one of the foremost coastal attorneys in the nation ordered poke at a Hawaiian restaurant. “Eat up!” he told me. “Consumable fish will be gone in fifty years.” The National Marine Fisheries Service (NMFS)–an agency housed within the (National Oceanic and Atmospheric Administration (NOAA)–confirmed as much in its sixth annual “Our Living Oceans” report. The report, an annual report on marine life in U.S. waters, concludes that while the conditions of fisheries could be worse, fish populations continue to battle for sustainability in the face of structural and increasing deficits.
Mission statements can be painful exercises for entrepreneurs that have yet to truly define their business–or for people who just hate writing. But they are an important part of your planning, and writing a meaningful one can be a cathartic step in business development. Besides, getting it wrong can land you in court.
Infuse mission statements with meaning
Mission statements, at minimum, are statements of purpose: what is your company going to do? At maximum, they are statements of aspiration: what does your company want to do? In “How to Write a Mission Statement That Doesn’t Suck”, Fast Company’s Dan Heath advocates infusing mission statements with meaning by being specific through concrete wording, and by adding at least one clause regarding the founders’ beliefs the motivated the business in the first place. Triple bottom line businesses have an advantage here; social purpose is part of the business plan, and so it should be easy to state.
Don’t let your mission statement be a liability
Microfinance is feel-good. It’s win-win-win for investors without demanding return requirements. It’s low risk. It helps the poor and empowers an escape from subsistence living. Microfinance is finance we can live with, far from Wall Street’s psychotic derivatives and Madoff-styled sociopaths. Microfinance is lending and investing that’s so ideal that it’s almost cutesy. However, it’s also small-scale, and its small scale reduces its potential to change the world quickly. United Prosperity is a new organization that includes all of the charm of a typical microfinance outfit, but also incorporates more serious, higher impact financial strategy. Ladies and gentlemen: the power of the guarantor.