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New figures from accountancy giant Grant Thornton show that business leaders in emerging markets are more focused on the sustainability of their operations than their peers in developed markets.

This is the key finding from its International Business Report, Sustainability: changing the debate in emerging markets, which reveals a keen appetite in emerging markets for clean energy technology, with business leaders reporting that the cost, reliability and sustainability of energy is a priority for their expansion.

Over three-quarters (76%) of African business leaders, 72% in Latin America and 67% in Southeast Asia say that the cost of energy is important to their growth strategy over the next 12 months; this compares with just over half in Europe and North America. Reliability of the energy supply is also vital, with businesses in Africa (71%), Eastern Europe (71%) and Latin America (65%) most likely to cite supply as important to their growth strategy.

Nathan Goode, global leader for energy and cleantech at Grant Thornton, said: “These results highlight the fact that we need to change the narrative of the sustainability debate. Sustainability has traditionally been seen as a cost to business; the burden of supporting the common good. However our recent research shows that business leaders are increasingly motivated by the cost management benefits of moving towards more socially and environmentally sustainable practices[1]. We need to start talking in language that resonates with businesses, stressing the benefits of action and the costs of inaction.

"Even without a global agreement on lowering carbon emissions, it is encouraging to see businesses promoting sustainability. The political leaders of major emerging economies continue to affirm that their number one priority is the eradication of poverty. However the growth of these economies increasingly relies on how they manage access to scarce resources such as water. There is no choice to be made on whether to focus on sustainability or poverty; the two are mutually dependent. Businesses in these markets are telling us that the cost, availability and sustainability of energy and raw materials are vital to their growth prospects. Their voices need to be heard."

The report also finds that the emerging markets most concerned with the cost and supply of raw materials are also the most focused on looking for sustainable sources; Latin America (64%), Africa (51%) and southeast Asia (49%) recognise the long-term importance of greener energy sources to their businesses. On a country-specific level, India (83%), Mexico (74%) and Botswana (72%) topped the list for green focus.

Nathan Goode added: "The focus on sustainability in emerging economies is driven by a number of factors including the resource-intensity of their growth and the impact climate change is already having on their local environment. Businesses in these economies clearly have a keen appetite for investment in green technologies which have moved on rapidly as the supply of more traditional energy sources has become more volatile. The opportunity in emerging markets is huge; the debate should now focus on how - not whether - these technologies are deployed."

You can download the report, Sustainability: changing the debate in emerging markets, here.

 

Picture credit: © Omidii | Dreamstime.com - Green Energy Photo

 

 

The Co-operative Bank is aiming to restore trust in its brand and to remind customers what it stands for with a major new advertising campaign.

The ‘All the right reasons’ campaign precedes the bank’s introduction of an expanded Ethical Policy due later this year.
The TV ad, to be first aired tonight, features a man so moved by the bank’s commitment to upholding its Ethical Policy that he is driven to have the words ‘Ethics & Values’ tattooed on his back, while telling the audience: “I belong to an organisation that does things a little differently”.

Niall Booker, chief executive of the Co-operative Bank said: “The advertising campaign we are launching today is the start of reinvesting in the brand and what makes us different.

“These values and ethics are about how we run our business and go back to our heritage of hard-hitting campaigns on issues where a bank can make a difference in the world. It also shows our commitment to the values and ethics that remain key to why customers choose to bank with us.”

The campaign re-launches the Bank following its poll in June where over 74,000 customers, colleagues and wider stakeholders shared their views on what should be included in the Bank’s Ethical Policy in the future. Customers stated overwhelmingly that the Bank must retain its existing pledges which ensure that customers’ money does not finance companies and organisations whose activities conflict with the Bank’s Ethical Policy.

You can view the new advertising campaign, here.

 

Japan’s Asahi Shimbun, one of the country’s leading newspapers and a bastion defending liberal values, has withdrawn misleading articles on controversial subjects published over a number of years and admitted faking an interview with a business leader.

In a statement in its September 4th edition, the Asahi said that a story published in June 2012 that appeared to be an interview with the president of Nintendo, the world’s largest video game maker, had in fact been compiled from material on the company’s website when the president refused the interview. The Asahi apologised after a weekly magazine published details of the incident.

Only a few days later, on September 11th, Tadakazu Kimura, the Asahi’s president, announced that the newspaper was withdrawing a controversial article about the 2011 Fukushima nuclear disaster that appeared on May 20, 2014. It reported that workers had fled the disaster site, disregarding orders to stay put. The story, based on leaked testimony by the late manager of the Fukushima No. 1 power plant, proved untrue.

The September apologies came after one on 5 August when the Asahi apologized for factual errors in articles it has published since 1982 on the “comfort women” issue. The issue relates to the role of the Japanese government in the forced prostitution of women from Korea and other countries during WWII to service the Japanese army. The issue remains controversial to this day, especially in South Korea, since conservative politicians in Japan claim such events never took place.

People were surprised but tolerant over the Asahi’s apology for the stories on comfort women. After all, it was over 30 years since the first was published.

However, they have been less tolerant over the more recent deceptions. For example, a Nippon TV opinion poll showed that, when asked whether they appreciated the Asahi’s correction and apology, only 6.4% said “yes,” while 23.3% said “no.” Almost two thirds said they appreciated the correction and apology, but thought they were “too late.”

In the same poll, when asked whether Mr. Kimura’s formal apology could help regain trust in the Asahi Shimbun, only 21.5% said “yes,” while more than 60% responded negatively.

Honesty in admitting past mistakes was appreciated but has not restored credibility.

There is disappointment that the Asahi Shimbun has joined the ranks of companies that have betrayed public trust and sadness that its ability to defend liberal values is now impaired. 

 

Picture credit: © Aarstudio | Dreamstime.com - Trust Photo

Transparency is a step beyond regular Corporate Social Responsibility - it means not just behaving ethically but showing how you’re doing it. Miranda Ingram reports

 

We’ve had Sustainability and now the buzzword is Transparency which, with consumers, investors and employees increasingly interested in companies’ social and environmental performance, is fast becoming a corporate necessity.
Think of transparency as your personal reputation. It is a step beyond Corporate Social Responsibility – it means not just behaving ethically but showing how you’re doing it.

Or, as Sally Uren, ceo of Forum for the Future, puts it: “When I talk about transparency, I mean full disclosure of all material, societal, environmental and economic risks and how a company is dealing with them.”
Which sounds so simple, but with lots of great Transparency statements on lots of great websites but how do consumers and other stakeholders sort the real thing form the PR blurbs?

Uren laughs. “I want to understand the degree to which the company is taking Transparency seriously,” she says, “which means a good description of what is going on in the supply chain and evidence that the company understands the sourcing of their primary ingredients, coupled with a willingness to give an honest appraisal of where they are at with their sustainability.”

Supply chains, as Uren points out, are not easy so it is essential that a company shows that it has a clear grip of the complexities. It is also important that they focus on their key material issues. “I’m not interested in how many fewer plastic bags a retailer, for example, uses compared to where they source they products.”

A great example of a company which has taken the step from sustainability to full-blown transparency is worldwide parcel delivery service UPS. Short of delivering parcels by donkey, UPS is bound to have a carbon footprint and might be expected to shy away from talking about it. Instead, the company has won a clutch of awards for its sustainability initiatives and goals which are both rigorous and convincing.

They include the introduction of a proprietary IT system which provides drivers with optimal route advice which last year saved over 1.5m gallons of fuel and avoided 14,000 metric tons of CO2, the continued expansion of alternative fuel and advanced technology vehicles and active encouragement to customers to reduce their packaging.

Then last year UPS became one of the first US companies to sign up to the Global Reporting Initiative (GRI) G4 framework and report at a “Comprehensive” level, the most rigorous option available.

But even with sustainability software packages such comprehensive reporting is expensive and time-consuming, admits UPS Head of Sustainability for Europe, Middle East and Africa Peter Harris. So why go the extra mile?

“We asked ourselves: what is the end game? and the answer is to become more sustainable over the long term,” says Harris. “Transparency helps us achieve this in three ways. Firstly, it’s essential that you can measure your sustainability in order to manage it. Secondly, being open about how we are doing encourages us to do even more. And, thirdly, we recognise that we can’t do this on our own - we need to bring our stakeholders with us on the journey and we can only do this by being thoroughly transparent.”

On top of this, says Harris, being transparent is also a way of encouraging others to do the same. “Even if UPS were to be 100% sustainable, if the global environment is not sustainable, our contribution would be worthless. There is little point being sustainable in an unsustainable world.”

Transparency needs to engage at three levels: employees, investors and customers. The enthusiasm of UPS employees, carefully nurtured by staff roadshows, surveys and competitions, proves the validity of a recent US survey by marketing consultants Interbrand which showed that two thirds of all US workers are happier in their jobs knowing that their employers are helping to protect the environment and that nearly six in 10 actively seek out employers who share their ethical standards.

But while investor demand is a factor driving the shift towards transparency, there is work to be done in helping investors understand the key issues, says Uren. “Often, they do not have a clear understanding of material and ethical risks so they are dealing with known unknowns when we talk about the scarcity of water and resources, climate and environmental issues. Companies can be nervous of being too transparent if investors don’t know what to do with this information.”

The final challenge is customers. While all of us, individuals and companies as well as the planet, stand to benefit from more ethical companies the impetus, likewise, needs to come from all of us which means that ethical companies need to engage with customers so that customers can respond to company behaviour.

“At least we are moving away from niche green brands which is good as this gives the impression that green behaviour is a niche issue,” says Uren. “But when it comes to driving demand for ethical behaviour, customers are still ambivalent.”
In this challenge, Uren sees a big role for brands. “There is a limit to what you can put on your packaging and website information is often confusing.” The way ahead, Uren believes, is for companies to integrate their ethical message into their core messaging.

One example is H&M’s much trumpeted “Conscious Collection”, a 2011 line of separates made from organic cotton and recycled polyester. In trumpeting its sustainability aspirations into its brand the company, which frequently surveys its clients, is showing confidence that customers are interested in the ethics of fashion.

H&M then went further to position the brand as an industry leader in sustainability by committing to sourcing all of its cotton from more sustainable sources by 2020 and taking a lead in sustainability reporting - transparency - by becoming one of the first and largest companies in the world to make its supplier factory list public.

“Now we are taking this even further by expanding the list to include all of our first tier supplier factories – covering 100% of our production volume,” says H&M’s Ulrika Isaksson. “We believe that a transparent supply chain can be a catalyst for positive change and hope that this will continue to promote transparency in our industry in general.”

H&M’s transparent sustainability strategy is widely praised but there are critics who point to the company’s leading role in creating today’s fashion industry’s high-turnover, cheap-throwaway culture.

Transparency must, crucially, be whole hearted and comprehensive. Otherwise, says Uren, don’t bother – unconvincing transparency is counterproductive. “You will communicate to your customers that you are not serious and then there is a danger of cynicism developing towards the whole concept,’”she says.

UPS’ Peter Harris agrees. “If I were giving advice to companies considering adopting transparency initiatives I would say, first, think it through very carefully and do it correctly, not on a whim.”

There are four key points to bear in mind, says Harris. “Firstly, be comprehensive: make sure there are no holes in your policy because if there are they will quickly be spotted and be detrimental to the entire undertaking.

“Secondly, be comparable: as far as possible follow a global framework so that your Transparency can be compared to others’. Third, be credible, which means, ideally, getting a third party organisation to monitor your achievements so you know they are really working, not just working for you.”

Finally, says Harris, think materiality. “Focus on the important issues – too much unnecessary or useless information is difficult for others to follow and stops your message getting out.”

“Those who take a step towards transparency find that their stakeholders like it and that gives them the confidence to do it more.” says Uren. Nevertheless, many business leaders still fear that greater public disclosure will leave them vulnerable to criticism.

“Be afraid at your peril,” says Uren. “Radical transparency is coming and if you think you can hide under a stone you are kidding yourself. We live in a hyper-connected world with GPS and crowd sourcing data and we can shine a spotlight anywhere so it is better to engage now.

“But above all, be positive. See transparency as an opportunity and use your customers for their invaluable input.” 

Bonuses and champagne were lavished on staff at the UK bank Lloyds for selling complicated but risky interest rate swaps with small business loans, a whistleblower has claimed in sworn testimony to a national newspaper.

He maintained many business customers did not understand the swaps, and Lloyds side-stepped the safeguards intended to prevent mis-selling.

He said the swaps – financial devices aimed at limiting exposure to interest rate fluctuations – protected businesses when rates increased but trapped them in expensive contracts when percentages fell to record lows and imposed crippling break penalties for switching to cheaper deals.

The whistleblower, James Ducker, a Lloyds employee from 2004, recalled that salespeople who brought back individual contracts generating £100,000 ($163,000, €€126,000) profits could receive bonuses doubling their pay and were given bottles of champagne. He reported that, by contrast, those who failed feared dismissal.

Ducker said the emphasis was on profits and “rarely, if at all, on ensuring the customers’ interests were properly protected”.

Consequently, Lloyds has had to earmark £580m to compensate small business victims of mis-selling. The UK banks collectively have set aside billions for this purpose.

Ducker made his statements in 2011 during a legal fight over the issue initiated by the property investment company Wingate Associates. Lloyds settled out of court, paying Wingate’s £8m break penalty and £1.5m for the contract but imposing a gagging order.

Wingate breached the order on the grounds that the selling was related to Lloyds’ Libor irregularities involving fraud and the agreement was therefore invalid.

The company is now claiming an additional £8m-plus for “consequential losses”, including legal fees not covered by the Lloyds settlement.

Lloyds said: “We do not recognise these alleged practices in our business.”

A Wingate company has already received an out-of-court payment from Barclays over swaps mis-selling and is threatening to sue Lloyds if it refuses to pay the second £8m.

Lloyds has now followed up its own Libor investigation by dismissing eight staff and cancelling the total £3m they would have received as bonuses. The bank said other bonuses could be affected.

Group chairman Lord Blackwell said the actions of those responsible for the Libor manipulation were “completely unacceptable”.

In July Mark Carney, governor of the Bank of England, warned the Libor culprits could face criminal charges.
Another big UK bank has been fined £14.5m by the finance regulator for “serious failings” in selling mortgages without suitable advice.

The Financial Conduct Authority (FCA) ruled that Royal Bank of Scotland and its NatWest business had failed to assess customers’ budgets when making recommendations, had given inadequate debt consolidation guidance, and had not advised applicants appropriately on mortgage length.

In one review of 164 sales the FCA found only two transactions met required standards.

The lenders are now contacting about 30,000 customers who received mortgage advice from 1 June 2011 and 31 March 2013.

RBS chief executive Ross McEwan admitted the failings were “unacceptable and should never have happened”. Staff have since been given extra training. The lenders point out, however, that only 1,200 of the 30,000 may have suffered financially.

RBS has already been fined £390m for its part in Libor rate fixing and has allocated £3.2bn to pay compensation for mis-sold insurance.
 

Since the recession, businesses have been faced with an increasingly cynical public who are more concerned than ever about the ethics of the brands they choose to engage with.

Working at the Charities Aid Foundation (CAF) with some of the most recognisable businesses and brands in the UK on their corporate responsibility programmes, I’ve definitely seen this shift for myself over the last five years.

Corporate responsibility is increasingly defined by what a company “does,” not what it “gives”. Businesses are increasingly concerned with demonstrating that they uphold and nurture principles and values, which align to areas of social and environmental need.

To achieve this, they are dedicating larger budgets to tackling key social issues to deliver positive impact; not just to better connect with their consumers but to demonstrate that they can play a critical role in tackling critical problems with the use of their intellectual resources and physicals assets.

Companies are no longer able to outsource good deeds via charitable efforts, but have to focus on ensuring that everyday business practices “do no harm”. Therefore, we see them approach this work in many new ways, rather than considering it merely as a financial transaction.

We see telecommunications companies applying mobile technology to solve development issues whilst others are harnessing new financial mechanisms, such as social investment, to encourage sustainable practices amongst charities.

The thought of philanthropy being purely a transactional currency is being debunked with the realisation that it has the power to drive transformational change, which places companies at the centre of solving some of the fundamental issues that effect us now and in the future.

Figures from a recent CAF report, which looks at the corporate philanthropy of the FTSE 100 over the past six years, prove that this is overwhelmingly true, at least for the nation’s leading companies.

The amount they have donated to charity – including cash, in-kind donations and the value of volunteered hours – has almost doubled since 2007, rising by £1.2bn.

Despite consumers spending less and budgets being squeezed during the difficult economic conditions of these years, businesses have still managed to grow their charitable work.

High consumer standards
However, despite this clear increase in philanthropy and an evident desire to meet higher consumer standards when it comes to reputation and demonstrating a desire to contribute positively, this shift in attitude and behaviour is not being registered by the public. Our report revealed a worrying disparity between the amount of charitable work being done by companies and the public understanding of it.

Whilst people think a third of FTSE 100 companies make donations to charity every year, in fact nearly all of them do.
At least 98% of companies reported giving in any given year of the survey – and in 2012 all 100 said they made a donation.

The generosity of each of the different sectors and how they compare is also widely unknown. Whilst people think the top two business areas in terms of giving to charity are consumer services and consumer goods, these are actually fifth and sixth on the list. Healthcare businesses give away the most by far, donating 1.56% of their revenue over the six years covered by the report. This is followed by basic materials – made up of companies involved in the extraction of raw materials, including mining – financials and telecommunications.

Lack of transparency
So corporate philanthropy is thriving – but it is failing to capture the hearts and minds of the public. Some of this certainly comes from a lack of transparency and an inconsistency in the recording of this kind of activity. The very process of compiling our report was enough to realise this.

But the problem is even more fundamental. Businesses need to take a step back and re-examine their philanthropy and how they can make it more relevant both to their own organisation, their employees and the people who engage with their business. They also need to think about what narrative they want to be telling through this work and, most importantly, find better ways to communicate it.

The Thomson Reuters Foundation has a very compelling narrative. They use the key skills their organisation is founded upon to eradicate problems all over the world.

They stand for free independent journalism, expose corruption and provide media and journalism training – incorporating their core abilities as a business into the mission of their philanthropy. This is the approach most likely to resonate with the public – particularly those who engage with your brand to begin with.
But it’s not just about what you do – it’s the way you do it.

Kenco have recently launched the campaign Coffee vs Gangs, providing training for young Hondurans as coffee farmers and giving them an opportunity of a life away from the gangs that are a real threat for young men in the area. They dedicated an advert to the issue, which focuses on the story of one of these farmers.

Not only is it great to see an organisation’s philanthropy take such a spotlight, but it’s been very intelligently orchestrated. The human angle, the focus on universally recognised issues – not just gangs but the vulnerability of younger people and their career prospects, which are certainly at play here in the UK: it very successfully reaches out to its audience and inspires empathy.

What we see in both of these examples are organisations not just handing over money to charities, but incorporating philanthropy into their core work and organisational missions.

This is where you can really begin to build a convincing story and reach a wide number of people with your charity work.
Businesses should be more conscious than ever of their greater social purpose and impact.

It’s not enough anymore to sign a cheque for a good cause in order to be seen to be doing good. It’s about working closely with the communities you operate in and making sure you’re doing no harm as our planet becomes ever more fragile.

It’s about thinking about the key skills and assets you have at your disposal that could be used to drive social action. It’s about going above and beyond, inspiring your customers, and others, to get involved in the causes you’re supporting and using your influence to spread the word about those in need.

If corporate philanthropy could be approached and communicated in this way then public awareness would shoot up and, inevitably, brand reputation and profit would follow soon afterwards – if those considerations are still what’s really important here. 

This video is part of our ongoing coverage of SOCAP14.  To see the rest please visit our SOCAP 14 page here.

Plum Organics is a certified B Corp and benefit corporation that makes nutritious, organic baby food.  About a year ago, Plum was acquired by Campbell's Soup Co., joining a long list of sustainably-minded companies who have been acquired by larger, publicly-traded corporations.

The level of transparency and commitment to sustainability that being structured as a benefit corporation entails is difficult to translate to a publicly-traded company -- regardless of that company's own commitments.  But according to Plum and Campbell's, the acquisition is going well and will ultimately enhance the sustainability of both companies.

I sat down with Plum's co-founder, Neil Grimmer and Campbell's VP of CSR and Sustainability, Dave Stangis at SOCAP14 a few weeks back to discuss...

This is the eighth in a weekly series of excerpts from the upcoming book "The B Corp Handbook: How to Use Business as a Force for Good"(Berrett-Koehler Publishers, October 13, 2014). Click here to read the rest of the series.

By Ryan Honeyman

Ahh--the perennial debate: will becoming a Certified B Corp help or hurt my ability to raise capital?

Like most things in life, it's not a 100% black or white answer. It depends on where (and from whom) you are trying to raise capital. In my opinion, however, it is starting to look pretty good for B Corps (just ask CircleUp, which recently partnered with Collaborative Fund to invest $4 million exclusively in Certified B Corporations).

While researching and writing "The B Corp Handbook," I found that B Corp certification can help you attract: mission-driven or impact investors who consider social, environmental and financial criteria in their investment decisions; mainstream investors who are primarily interested in strong financial returns; and larger companies interested in acquiring a cutting-edge and innovative brand.

For example, Plum Organics, a fast-growing organic baby food company, was sold to and is now a wholly owned subsidiary of the Campbell Soup Co. Rather than viewing Plum Organic’s B Corp certification as an impediment, Campbell’s saw the B Corp certification as a valuable asset that could help Plum retain the trust of its most loyal customers after the sale. To show its support, Campbell’s helped Plum Organics register as one Delaware’s first benefit corporations when the law came into effect in August 2013.

Method’s recent merger followed a similar path. Method, the quirky, B Corp–certified maker of home cleaning products, was acquired in 2013 by Ecover, a leading European cleaning company. Ecover also supported Method in registering as a Delaware benefit corporation, and now Ecover itself is considering whether to become a founding European Certified B Corporation.

As mentioned, becoming a B Corp can help a company raise capital from a wide variety of investors. For example, mainstream venture capitalists such as Kleiner Perkins Caufield & Byers, New Enterprise Associates, and Tiger Asset Management are investing in Certified B Corporations because they have found that B Corps can be great financial investments. Union Square Ventures, a venture capital firm that invested in Etsy (and has also invested in Twitter, Zynga and Foursquare), says B Corps are appealing because the companies that produce the most stakeholder value over the next decade will also produce the best financial returns.

"Our shareholders knew about and supported our B Corp certification. Harvest Power is focused on profitability as a business, and I don’t think becoming a B Corporation contradicts that."  -- Paul Sellew, Founder and Chairman, Harvest Power

Another benefit of becoming a B Corp is that all Certified B Corps receive a free Global Impact Investment Rating System rating and a free listing on B Analytics, an investor-facing platform designed by B Lab. This can help your company raise money, because a large number of investors with billions of dollars of assets under management—from global financial institutions such as JPMorgan, Prudential and UBS to leading impact investors such as Good Capital, Renewal Funds and RSF Social Finance — prefer to invest in GIIRS-rated companies (and Certified B Corps) because they trust the rigorous, comparable, and verified social and environmental performance metrics.

In addition, B Lab can also help you raise money by making direct introductions to the many Certified B Corps in the financial services industry (including commercial banks, venture funds, asset managers, wealth advisors and investment banks) as well as to the wide variety of funds and institutional investors that use B Lab’s B Analytics platform. For example, B Lab introduced United By Blue, a B Corp–certified apparel company based in Philadelphia, to Investors’ Circle, a group of local impact investors. After several meetings, Investors’ Circle decided to make the largest investment in the organization’s history, helping United By Blue expand its wholesale business into retail.

"It’s been very helpful to be able to point to our B Corp certification—and inviting potential investors to look into the B Corp methodology—as a “one-stop shop” to show how we measure our social and environmental impact."  -- Ben Sandzer-Bell, CEO, CO2 Bambu

Finally, check out this classic TriplePundit article on Direct Public Offerings. A Direct Public Offering allows companies to raise money from a wide variety of people in the community and offer them investment opportunities such as stock, notes, and revenue sharing agreements.

Ryan Honeyman is a sustainability consultant, executive coach, keynote speaker, and author of The B Corp Handbook: How to Use Business as a Force for Good. Ryan helps businesses save money, improve employee satisfaction, and increase brand value by helping them maximize the value of their sustainability efforts, including helping companies certify and thrive as B Corps. His clients include Ben & Jerry’s, Klean Kanteen, Nutiva, McEvoy Ranch, Opticos Design, CleanWell, Exygy, and the Filene Research Institute.

To get exclusive updates and free resources that can help you learn more about B Corporations, sign up for Ryan’s monthly newsletter. You can also visit honeymanconsulting.com or follow Ryan on Twitter:@honeymanconsult.

Like it or not, most decisions today are based on economics. It’s the way our system is put together and it has been, in many ways, successful in generating innovation and prosperity, for many if not for all. That fact is not one that is likely to change easily, though the system’s shortfalls are beginning to show up like cracks in a once impenetrable façade. Prominent questions that arise, for anyone when pondering a choice, whether it’s an individual or a large company, tend to fall along the lines of:

• Can I afford it?


• Is it a good investment?


• Will taking this action lead to more prosperity?

When we talk about large-scale change, we can talk about two kinds of change — one that works within this paradigm, or one that challenges it. I’m not here today to argue the respective benefits of each, but instead to acknowledge the fact that working within the system, if possible, has distinct advantages, given the deep interdependencies between the financial world and the world at large.

So, within this context, looking at an issue like climate change and the large-scale actions required to adequately address it, the question of whether these actions can have an economic upside is critical. If we had to rely strictly on a sense of civic duty and social responsibility, that would surely be a harder road.

With that in mind, the CDP S&P 500 Climate Change Report 2014, from the Carbon Disclosure Project (CDP) is good news.

CDP was engaged by a group of 767 major investors representing an enormous amount of money, some $92 trillion, to assess all the companies in the S&P 500 Index based on two things:

• Their level of disclosure regarding carbon emissions


• Their performance in responding to the need for action.

If you think that’s a lot of money, you’re right. In fact, if there is no double-counting here, $92 trillion represents over 38 percent of all the money in the world. So if the group of people and institutions representing 38 percent of the world’s wealth want to know, as investors, what the companies in the S&P 500 are doing about climate change, that ought to give some people pause as to how truly important this is.

So what did they find out? After looking at these metrics and correlating them with the financial metrics of the companies that participated, CDP made the following statement.

“We find that U.S. corporate leaders on climate change management, as measured by S&P 500 peer-relative CDP disclosure and performance, have generated superior return on equity, more resilient earnings, and stronger dividend growth than their peers. At a minimum, CDP data suggests that there is no penalty to corporate profitability for establishing climate change reporting, governance and management systems and taking action on climate change.”

In other words, those companies that provided the highest levels of disclosure and took the most aggressive action addressing their climate impacts, demonstrated financial performance that was, in each and every case, equal to or superior than their less responsive peers.

In fact, overall, the 174 companies in the top half of the list for both disclosure and performance had a return on equity (ROE) of 25.1 percent, while those in the bottom half had an ROE of 20.6 percent. Even those in the bottom half fared better than the 152 companies who did not respond at all. Those companies had a collective ROE of 15.4 percent. Those are significant differences. That is why the authors were able to write, “In this report, we answer the No. 1 question U.S. investors ask CDP about climate change data -- ‘is there evidence of a link to financial performance?’ — with a resounding yes.”

Now, we all know that correlation does not prove causality, but it seems clear from these results “that climate change leadership is another strong reflection of superior management quality.”

These management teams that top the list, are clearly looking ahead, are strategic in their thinking and responsive to those factors that will likely impact their businesses down the road.

Both disclosure and performance scores were based on the same factors with different weightings. These were:

• Emissions methodology and Scope 1 and 2 data


• Opportunities


• Risks


• Governance, strategy and communications


• Scope 3


• Emissions performance and trading


• Targets and initiatives


• Scope 1 and 2 verification

The report’s results have shown dramatic improvements across the board over the past several years, with 48 percent showing “high performance” this year, compared with only 30 percent back in 2011. Another interesting finding was that the largest companies (by market capitalization), such as Apple, Microsoft, J&J, Walmart and Chevron, received among the highest scores. These companies also generated higher net income and dividends than their lower climate-ranked peers.

These are significant results that should put to rest the notion that taking action on climate change is bad for companies -- or bad for the economy. Of course, major changes are involved that will impact different players differently, but the overall direction of the impact on the economy should be clear from this report. Yes, there will be expenditures. Yes, some prices will go up. Some businesses will falter. That has happened throughout history as the result of changes that we called progress at the time. But, this is one of those times that not taking action will cost far more in the long run.

Image credits: NY Stock Exchange: Balon Greyjoy: Wikimedia Commons

Infographic courtesy of Carbon Disclosure Project

RP Siegel, PE, is an author, inventor and consultant. He has written for numerous publications ranging from Huffington Post to Mechanical Engineering. He and Roger Saillant co-wrote the successful eco-thriller Vapor Trails. RP, who is a regular contributor to Triple Pundit and Justmeans, sees it as his mission to help articulate and clarify the problems and challenges confronting our planet at this time, as well as the steadily emerging list of proposed solutions. His uniquely combined engineering and humanities background help to bring both global perspective and analytical detail to bear on the questions at hand.

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The Sierra Club's “Beyond Coal” campaign recently scored a big victory in Indiana. The Indiana chapter of Beyond Coal was a central player in putting together the coalition of grassroots groups that managed to prod Indiana Power & Light to stop burning coal at its Harding Street power plant -- the only coal-fired power plant remaining within the limits of a major Midwestern city. The campaign isn't stopping there.

On Sept. 26, the Sierra Club announced it was joining with Ratepayer and Community Intervenors to file a lawsuit in the New York Supreme Court that challenges a Public Service Commission ruling that would levy a $140 million subsidy on state residents' electricity bills to upgrade and expand the Dunkirk coal-fired power plant in Chautauqua County. The plaintiffs are being represented by Earthjustice.

Deeming it a “bailout” at ratepayers' expense, the upgrade and expansion plan “would result in a plant three times larger than necessary to maintain reliable operation of the region's power grid,” Sierra states in a news release. Moreover, at a time when the EPA is readying President Barack Obama's Clean Power Plan, the plant – though it would be able to burn both coal and natural gas – would add greenhouse gases and air pollution in the region, contributing to climate change, the environmental NGO highlights.

Repowering Dunkirk

New York Gov. Andrew Cuomo announced the agreement to repower the Dunkirk power plant so it can burn both coal and natural gas in December. As per the agreement's terms, National Grid and NRG Energy subsidiary Dunkirk Power LLC “will refuel three coal units at the facility to add the capability to generate 435 megawatts using natural gas,” NGI's Daily Gas Price Index reported.

Currently, just one 75 MW unit at the Dunkirk plant in Chautauqua County is operating on coal. The New York Public Service Commission's approval of the $140 million plan will assure plant operations for 10 years “with added capability to generate 435 MW of electrical power by burning natural gas ... The refueling allows NRG to switch to natural gas and provide critical local system reliability benefits for National Grid customers,” the commission stated.

Commenting on the plan's approval, Public Service Commission (PSC) Chair Audrey Zibelman said:

"The agreement will result in a cleaner power plant at Dunkirk that will meet reliability needs, reduce costs for consumers, create jobs and stabilize the local property tax base. Repowering Dunkirk will produce significant benefits in terms of enhanced system reliability, congestion relief, and emissions reductions. Our decision to allow National Grid to recover the costs of its agreement with Dunkirk is in the public interest and it meets our obligation to ensure safe and adequate service. Further, it will help spur economic growth and opportunity.”

NY Supreme Court challenge

Besides challenging PSC's approval, utility and PSC watchdogs are concerned that the unnecessarily large upgrade and expansion plan “could start a cascade of similarly expensive proposals from other coal plants” in New York state that are facing economic challenges. 

Gov. Cuomo got the PSC to consider and approve the plan. In 2012, NRG Energy requested authorization from the PSC to shutter the facility because it was no longer economic to operate. It was granted a Reliability Support Services Agreement (RSSA) – a temporary, ratepayer-funded subsidy – to operate Dunkirk through June 1, 2015, according to NGI's Natural Gas Price Index report.

Gov. Cuomo then urged the PSC “to approve additional ratepayer subsidies to reopen the other three units and allow them to burn both coal and gas,” Sierra Club recounts. This despite National Grid having shown that “a much smaller fix would solve the issue."

“The PSC,” Sierra continues, “under direction from the governor, improperly accepted the expensive, oversized plan. They failed to stand up for the families and businesses that will be forced to foot the bill for a dirty energy plant that's much larger than necessary.”

The governor's part in getting PSC to consider and approve the plan stands out in contrast to his efforts in promoting adoption of renewable energy in New York and making the state a hub for solar and renewable energy science, technology and business.

"We can’t afford more dangerous fossil fuel pollution or the higher bills that come with it. We need Governor Cuomo to support our communities and workers in a responsible transition away from coal and gas and toward truly renewable energy sources,” said Carol Chock, legislator from Tompkins County and president of Ratepayer and Community Intervenors.

Added Lisa Dix, senior New York representative for Sierra Club Beyond Coal: “It’s not fair to make our families pay for more dirty fuels when there are better solutions available. Governor Cuomo should be helping communities and workers in the transition away from coal, not allowing companies to continue burning coal indefinitely at the expense of our families’ health.”

Beyond Coal's mobile smog alert text service

Sierra Club's Beyond Coal is a nationwide campaign. On Sept. 18, Beyond Coal launched a mobile phone text-alert service that notifies subscribers when air pollution reaches dangerous levels within a 50-mile radius.” 

Available in Spanish and English, the “Mobile Air Alerts” service “was created to give communities the most up-to-date information for lung health based on the recommendations of scientists and healthcare professionals.”

In explaining why it launched the mobile text-alert service, Beyond Coal pointed out that the EPA has concluded that current “safe” levels of smog pollution “are actually not strong enough to protect our communities, our kids and the air we breathe.”

So-called “moderate” air days are in fact “bad” air days, according to Sierra's Beyond Coal. Days when air quality is rated “bad” means breathing air is unsafe.

Coal-fired power plants are one of the biggest contributors to smog pollution in the U.S., “contributing to the 40 percent of Americans living in areas with unhealthy levels of air pollution,” Beyond Coal notes. “Doctors liken inhaling smog to getting sunburn on your lungs, exacerbating conditions like bronchitis, emphysema and asthma. Ongoing problmes with these illnesses can lead to permanent lung damage and even premature death.”

Commenting on the launch of the smog text-alert service, Beyond Coal Campaign Director Mary Anne Hitt said:

“We hope that this new text-alert system will not only help families stay informed, but will also raise general awareness about the hazards of ground-level smog caused by coal-fired power plants, which sends thousands to the emergency room each year and is an economic drain on communities.”

*Images credit: 1) NY Dept. of Environmental Conservation; 2) Sierra Club; 3) American Lung Association