In 1981, the United Nations Educational, Scientific and Cultural Organization (UNESCO) designated Australia’s Great Barrier Reef a World Heritage Site. Just 25 years later, however, UNESCO warned that climate change and other anthropogenic causes were threatening the reef’’s existence. In fact, according to a 2012 report by the Australian Institute of Marine Science, the reef has lost over half of its coral in the past quarter-century.
Earlier this year, UNESCO’s World Heritage Committee noted that conservation efforts at the reef were making some progress, but that significant dangers still remained. The committee encouraged the Australian government to submit an updated progress report by early 2015, which the committee would consider when determining whether or not the reef deserves placement on the List of World Heritage in Danger.
Earlier this week, the Australian and Queensland governments released a draft of the Reef 2050 Long-Term Sustainability Report, which they hope will allay UNESCO’s concerns. Critics, however, think bolder action is required.
The quest to hold corporations liable for alleged human rights abuses committed abroad was dealt another blow late last month when a New York District Court judge tossed the last of the apartheid-related cases pending against two American corporations, Ford and IBM.
In a begrudging bow to current precedent, U.S. District Judge Shira Scheindlin, of the Southern District of New York, denied plaintiffs’ motion to amend their complaint because they would be unable to meet the stringent demands of a test announced by the Second Circuit Court of Appeals earlier in the year. More importantly, if the law of the Second Circuit becomes the law of the land, U.S. corporations could be effectively immune from civil liability for violations of international law that are perpetrated exclusively by foreign subsidiaries on foreign soil.
The Alien Tort Statute and a refresher on the Supreme Court’s Kiobel decision
The Alien Tort Statute (ATS) grants jurisdiction to U.S. District Courts “of all causes where an alien sues for a tort only in violation of the law of nation or of a treaty of the United States.” As I described in an earlier piece for TriplePundit, the question of the ATS’ application to corporations is muddy. In the seminal 2013 case, Kiobel v. Royal Dutch Petroleum (Kiobel), the Supreme Court affirmed the dismissal of a suit brought by Nigerian citizens who alleged that Shell and other oil companies aided in the Nigerian government’s violent suppression of resistance to drilling operations in Nigeria. In affirming the holding of the Second Circuit, the majority held that, because all of the alleged human rights abuses occurred abroad, the plaintiffs could not overcome the presumption against the application of U.S. law to conduct occurring outside of the U.S. (aka “extraterritorial” application).
“Touch and concern”
In Kiobel’s most important passage, the Court added that:
[E]ven where [plaintiffs’] claims touch and concern the territory of the United States, they must do so with sufficient force to displace the presumption against extraterritorial application. Corporations are often present in many countries, and it would reach too far to say that mere corporate presence suffices. (my emphasis)
The Supreme Court did not define the all-important phrases, “touch and concern” or “sufficient force,” leading lower courts and pundits to fight about whether or not the opinion completely closed the door to lawsuits against corporations that allegedly violated international law in a country other than the U.S. Further confusing the matter is that the Second Circuit, in its decision in the Kiobel case, held that the ATS “simply does not confer jurisdiction over suits against corporations,” and though the Supreme Court did not appear to go this far, it did affirm the Second Circuit’s holding.
Thus, after Kiobel, whether and/or how a corporation could be held liable under the ATS remains an open question.
A few weeks ago, Class A shares of Warren Buffett’s Berkshire Hathaway topped a staggering $200,000 a share. Berkshire, which came in at No. 4 on the latest Fortune 500 list, has 300,000 employees spread across 59 subsidiaries, and more cash on hand — $55.5 billion — than any other company in America. Its market value is roughly $330 billion, and it is often cited as one of the “most admired” companies in the world. Berkshire has achieved all of this in the fashion of an old-school American conglomerate, refusing to focus on just one sector or industry. As a result, Berkshire’s stock and subsidiary portfolios include such behemoths as American Express; Burlington Northern Santa Fe; Coca-Cola; GEICO; Heinz; IBM; Walmart; and Wells Fargo, to name just a few.
Yet, the company’s growth has slowed: Over the last five years, it underperformed the S&P 500 for the first time in its history — and Berkshire skeptics question whether such a large and tentacular entity can continue to thrive without its Oracle-in-Chief. Lawrence Cunningham, a law professor at George Washington University and author of the thoughtful “Berkshire Beyond Buffett: The Enduring Value of Values” (Columbia Business School Publishing), is betting that it can. While Cunningham’s book works quite well as a testament to Warren Buffett’s unassailable vision and leadership, as well as to what Berkshire embodies and may continue to embody after Buffett, it comes up a bit short as an argument for why Berkshire’s greatness will outlive its leader.
As any regular reader of this site knows, sustainability and beer are two things the TriplePundit community takes very seriously. This is, after all, the place that brought you 2012’s Green Brewhaha, an exhaustive series on the sustainability movement in the brewing industry. So, it goes without saying that when a craft brewer begins packaging its beer in a can made of almost-entirely recycled aluminum, it is big news here; it should also be big news to the rest of the beverage industry.
The Red Hare partnership
In April, Georgia-based craft beer manufacturer, Red Hare Brewing Co., announced that it was partnering with the multinational aluminum producer Novelis, to package its beer in an “almost-entirely recycled” aluminum can. Developed by Novelis in 2013, the “evercan” is the only aluminum can sheet containing at least 90 percent recycled content — nearly double the amount of recycled material in a standard aluminum can. And this is just the beta version. According to Novelis’ chief sustainability officer, the company aims to be at 100 percent recycled content within a few years. Last week, Red Hare began rolling out the new packaging.
When Novelis was searching for evercan buyers, Red Hare seemed a natural partner. For one, Red Hare is small enough for a test run. (Illustrative of the company’s size, despite being a dedicated craft beer drinker I had never before heard of Red Hare and, according to the beer locating website Beer Menus, the nearest Red Hare purveyor is some 400 miles away. So a plea to Red Hare: ship the evercan to New Orleans distributors! We’re a drinking — and caring — city!) For another, Red Hare has been can-only since the company’s inception in 2011. As Novelis described it, Red Hare is a “small company with big ideas.” (Of course, both companies also happen to be headquartered in the Atlanta, Georgia area.)
As oil-rich Azerbaijan prepares to host next year’s inaugural ‘European Games,’ the Azerbaijani government has stepped up its crackdown on activists speaking out against its abysmal human rights record. As of this writing, more than 20 human rights defenders have been detained by the government, including four of the country’s most prominent activists.
Meanwhile, the European Games’ lead organizer has claimed that it is not his job to criticize the host country; denied any knowledge of the government’s oppressive habits; and declared Azerbaijan an “incredibly free society.” Current and future corporate sponsors of the games should take notice and carefully consider their decision to be affiliated with the event.
Criminal justice reform advocates (and hip-hop fans) rejoice: Avowedly apolitical rap mogul Shawn Carter (aka Jay-Z) used the stage at a recent San Francisco concert to throw his support behind California’s Proposition 47 (Prop 47).
Not known for forays into politics, Jay stepped out of his comfort zone just three months before Californians will have a chance to vote on what could be the most important ballot initiative in the state’s history. (No, I haven’t forgotten about Prop 8.)
If approved, Prop 47, known as the Reduced Penalties for Some Crimes Initiative, will reduce the penalty for most nonviolent crimes from a felony to a misdemeanor and direct the money saved from incarcerating fewer individuals — estimated to be between $150 million and $250 million each year — to a Safe Neighborhoods and Schools Fund.
Prop 47’s potential effects
If passed, Prop 47 will have an immediate impact on California’s prisons and the state’s otherwise prison-bound population.
First and foremost, the initiative would reclassify low-level shoplifting and theft, possession of narcotics, and possession of marijuana — all currently felonies — as misdemeanors. In California, three-quarters of those incarcerated are serving time for nonviolent offenses, and roughly one in six is locked up for nothing more than drug possession, so the future impact would be great. In addition to keeping low-level, nonviolent offenders out of prison in the future, the initiative would also allow roughly 10,000 current prisoners to seek re-sentencing.
In another example of the collateral damage caused by the relentless march of economic development, a sacred Cambodian forest and its residents are fighting for their very survival against the Cambodian government and the largest hydropower company in China.
The fight is over a hydroelectric dam being planned for the Cheay Areng region at the base of Cambodia’s Cardamom Mountains, just one piece of a larger government plan to build a network of 17 dams across the country. Four have been built already, all in supposedly unoccupied forests. This project, however, is different, as the valley is home to more than 1,600 mainly indigenous people. If the dam were completed, almost 2,000 hectares of land belonging to the indigenous Khmer Daeum would flood, a territory which includes 500 hectares of sacred land in the Central Cardamom Protected Forest.
The Areng dam project has been fraught from the beginning. The first company on the project, China Southern Power Grid, pulled out due to environmental concerns; next up was China Guodian Corp., which abandoned the project citing questions about its economic viability. Sinohydro, China’s largest hydropower company and the world’s biggest dam producer, took over from there but has thus far been stymied by protests from the local Chong people and some Buddhists from Cambodia’s capital.
It looks like the World Bank is succumbing to budgetary pressures and choosing to neglect its human rights responsibilities as the world’s largest and most influential development bank.
Proposed revisions to the World Bank’s Safeguard Policies and Environment and Social Framework — which are meant to protect people and the environment in the investment projects that the World Bank finances — leaked last week and were immediately and uniformly criticized as potentially devastating to indigenous people, the poor and the environment.
On July 28, 99 non-governmental organizations and civil society networks across Asia, Africa, Latin America, North America and Europe sent a letter to the World Bank’s board, urging it not to adopt the draft. Yet, despite the viscerally negative reaction of rights groups around the world, the draft was cleared by the World Bank Board’s Committee on Development Effectiveness on July 30, and it will now be subject to a period of broad public consultations.
Growing up as a hockey-obsessed kid in a small New York suburb, there was no single event to which I looked forward more than The Day the Lake Froze Over.
For most of my hockey-playing years, I had the great fortune of living across the street from a large lake (Lake Mahopac), and a short drive from a smaller pond (Teakettle Spout), the latter of which attracted a disproportionate amount of pickup hockey talent. I still remember rushing out the front door on Saturday mornings to check the integrity of the ice — “Solid enough to skate on?” — or waiting for the inevitable phone call imploring me to get down to Teakettle because a game about to get underway. None of us who gathered on those lakes and ponds took for granted the free ice-time we were afforded, but I don’t think any of us considered that these opportunities might, some day, disappear.
This same spirit — that of the eager kid entertaining his or her professional hockey playing fantasies on the local lake or pond — animates much of the National Hockey League’s (NHL) first Sustainability Report, which was released last week. The NHL’s report is the first of its kind in major professional sports, and its scope and ambition are impressive. Hopefully, the work the NHL did on its inaugural report will set the tone for the rest of professional sports and encourage the other major leagues — the MLB, NBA and NFL — to follow-suit.
Has there ever been a better time to be a corporation? I doubt it. Corporations might disagree, and we’re all familiar with corporate lamentations regarding the increasingly challenging web of federal regulations (Dodd-Frank; the FCPA) they supposedly struggle to navigate. Yet, it’s hard to dispute that these are good times for big business, and “Exhibit A” could easily be the utter dearth of criminal prosecutions for corporations that are guilty of pollution.
Funding Woes. According to a recent study published by the Crime Report (TCR), criminal prosecutions of corporate polluters are becoming less and less common by the day. One explanation for this phenomenon is the dwindling funding allotted to the government entity responsible for the protecting the environment, the Environmental Protection Agency (EPA).
In case you missed it, Congress has made a recent habit of slashing EPA funding. (Yes, this is the same do nothing Congress that is currently contemplating spending American tax dollars on a lawsuit against the President.) Unsurprisingly, these cuts have come primarily at the hands of Congressional Republicans, whose most recent transgression has been the approval of a 9 percent decrease in EPA funding, but President Obama has done some damage as well (the President’s proposed 2015 budgetlowered EPA funding by some $300 million). And this is not just a 2014 trend. As Congressional Republicans boasted when the federal government nearly imploded (again) in January, they have successfully cut the EPA’s funding by 20 percent since 2010.
One result of these money troubles is a serious lack of manpower. For instance, the Department of Justice’s Environmental Crimes Section is equipped with just 38 prosecutors, and the EPA’s Environmental Crimes Section has just 200 agents. These are the folks who are given primary responsibility for monitoring environmental violations across the country. Yet, with such a pitifully understaffed roster, the federal government’s capacity to pursue America’s worst environmental offenders is seriously hampered.
A group of McDonald’s franchise operators in Puerto Rico is alleging that the fast food giant violated federal law and a Federal Trade Commission (FTC) rule that regulates the behavior of franchisors.
According to the Puerto Rican franchisees (the Plaintiffs), McDonald’s first violated the Franchise Rule when it sold its Latin American franchises — and, consequently, McDonald’s franchise rights in the Puerto Rican market — to the Latin American company, Arcos Dorados, in 2007. Subsequent actions by Arcos Dorados in Puerto Rico have caused additional harm to the Plaintiffs, in further violation of federal law.
Plaintiffs allege the various harms and violations have occurred. Specifically, they claim that McDonald’s “cut off all ties with Puerto Rico operators” after the sale to AD, after which the new owners (Arcos Dorados) began downgrading services to the franchise owners, absent disclosure to the FTC and in violation of FTC Act 5 Section 5 (unfair competition) and the Franchise Rule. Plaintiffs further allege that AD is neglecting to conduct sufficient sales analyses before opening new McDonald’s locations, leading to areas with a glut of McDonald’s restaurants and the resultant supply-and-demand problems for Plaintiffs’ businesses.
More than McDonald’s, though, the real villain in this story is Arcos Dorados (AD), a McDonald’s franchising behemoth.
As the world begins to awaken to the looming food crisis — how we will feed 2 billion more people by the year 2050 — investors are turning to a place not typically associated with its agricultural bounty, but a region that National Geographic Magazine (NatGeo) is calling “The Next Breadbasket”: sub-Saharan Africa. In its July edition, NatGeo’s Joel K. Bourne Jr. (aided by predictably stunning photos from Robin Hammond) points a wide lens at the issues raised by the creation of giant agricultural developments in sub-Saharan Africa, including some of the potential benefits as well as the likely pitfalls.
First, why sub-Saharan Africa? The short answer is that the region has the most potential upside, or what is referred to as “yield gap,” on Earth. This essentially means that Africa is home to an enormous amount of arable land, yet the continent produces “roughly the same yield Roman farmers achieved … in a good year during the rule of Caesar.” Put another way, less than 5 percent of arable land in the sub-Saharan area is currently irrigated, and farms in the region are not reaching anything near their potential output.
This is likely true for a number of obvious reasons, and NatGeo’s Bourne lists the clear culprits: poor infrastructure, limited markets, weak governance and brutal civil wars. The other key ingredient is the amenability of African governments, some of which are willing to overlook (or inadequately safeguard) the property rights of their citizens in favor of influxes of foreign cash and the attendant benefits.
The “why now” is two-fold. On the one hand is the impending food crisis, which is centered on the African continent and which, for most of Africa, is not really impending but has been plaguing the region for years. Second, there’s the real driving force: the potential monetary upside for investors. As Bourne puts it, “Since 2007 the near-record prices of corn, soybeans, wheat, and rice have set off a global land rush by corporate investors eager to lease or buy land in countries where acreage is cheap, governments are amenable, and property rights often ignored.” Large Chinese and Brazilian companies have eyed the “millions of acres of fallow land and plentiful water available for irrigation” and seen the potential for massive profits. It seems only a matter of time before others join the party as well. In fact, Bourne points out that a recent conference in New York for agricultural investors drew some “800 financial leaders from around the globe who manage nearly three trillion dollars in investments.”
Can a corporation pray? Can it attend religious services? Is it free to don religious garb? In other words, can a corporation exercise religion? All of those are questions raised by the Hobby Lobby case (Sebelius v. Hobby Lobby Stores, Inc., and the related case, Conestoga Wood Specialties Corp. v. Sebelius), likely to be decided by the U.S. Supreme Court in the coming days. More specifically, the issue facing the Court is whether a for-profit corporation be exempt from the Affordable Care Act (also called ACA or Obamacare) requirement that all companies cover certain FDA-approved birth control methods and devices as part of the health insurance packages offered to their workers.
This essential question has been percolating in the federal appeals courts for some time and has resulted in what is referred to as a circuit split — three circuit courts have struck down the contraception coverage rule, while two others have upheld it. This means the federal appeals courts (the highest in the land below the Supreme Court) don’t really know what to do with this aspect of the ACA and the Supreme Court should step in and clarify.
The featured challenger in this case, Hobby Lobby Stores, Inc., is a chain of arts and crafts stores owned by the Green family (devout Southern Baptists, apparently), the members of which have committed to run the company according to Christian religious principles. Hobby Lobby doesn’t have a problem offering its employees insurance that covers most forms of birth control, it only objects to the coverage of drugs and/or devices that “end human life after conception.”
By Michael Kourabas
Last week, 20 CEOs of Ethiopian companies gathered at the United Nations Global Compact’s (UNGC) CEO Roundtable on Corporate Sustainability in Ethiopia. The event was part of “Africa: Advancing Partnerships and Responsible Business Leadership,” a week-long conference co-sponsored by the UNGC. Held in Ethiopia’s capital, Addis Ababa, it aims to promote corporate social responsibility (CSR) in Africa and explore partnerships between the U.N. and the public and private sectors to advance sustainable development in the region.
Topics covered in the roundtable included women’s empowerment, “decent work,” education and job creation. The event was touted by the UNGC as evidence of a renewed “commitment” to sustainability among Ethiopian companies and roughly coincided with the release of the UNGC’s new Africa Strategy document, Partners in Change: U.N. Global Compact Advancing Corporate Sustainability in Africa, which will serve as the UNGC’s overarching plan of action in the region.
There’s good reason for the attention on CSR in Africa. First, according to the Africa Strategy document, by 2050 Africa will have the world’s largest workforce and will account for 25 percent of the world’s population, growing at a faster rate than every other region in the world. Second, despite this growth, “only one-quarter of the top 50 African companies in 2012 are or have been Global Compact participants,” leaving ample room for improvement. Third, according to the International Finance Corp., the private sector accounts for roughly 90 percent of employment in Africa. All of these facts, particularly when considered in conjunction with Africa’s persistent governance problems, lead inexorably to the conclusion that private industry in Africa — as opposed to government — holds the key to sustainable development in the region. For its part, the UNGC views its role in Africa as “paramount to creating the bedrock of social norms that move businesses beyond ‘Do no harm’ principles and towards a greater understanding of how the private sector can contribute to sustainable growth through responsible business.”
Can the primary culprits of global warming be held liable for undermining efforts to combat climate change? That may sound like something a heavier, bearded Al Gore might have scribbled on a napkin in the middle of the night, but there’s reason to believe that it may not be so far-fetched. At least, that’s what a trio of high-profile environmental groups are suggesting.
On May 28, Greenpeace, the World Wildlife Fund and the Center for International Environmental Law sent letters to the executives of 35 fossil fuel companies, including ExxonMobil, Conoco and Chevron, asking the question posed above. They also sent letters to those companies’ primary director and officer (D&O) insurers, asking them a series of questions regarding how coverage for D&Os might be affected by evidence that the insured misled regulators, investors and the public as to the safety and/or risks associated with their products. The full list of targeted companies is here. If you’re an energy executive, you should now be very, very scared (and equally interested in the insurance companies’ responses). The notion even has its own hashtag on Twitter: #climateliability.