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On becoming a parent one of the vows I made was to never, ever tell my kids off for ‘showing off’. Growing up, I found being told to ‘stop showing off’ hugely embarrassing. For even if I was ‘showing off’, being told off for it felt utterly horrible. Being shown up for showing off, I guess.

Parenthood these days is strewn with semantic hazards. The latest is a Ban Bossy crusade that urges everyone to ban the term ‘bossy’ when referring to a girl’s behaviour.

The campaign was instigated by the chief operating officer at Facebook, Sheryl Sandberg, and the Girl Scouts movement in the US. It all came about following a study by the Girl Scout Research Institute which found that girls are twice as likely as boys to worry that leadership roles would make them seem bossy. This fear then puts girls off going after such roles. I’m not so sure. Bossy people aren’t usually people you want to follow, are they? Leaders, on the other hand, are inspirational, people you definitely do want to follow.

The Ban Bossy campaign was given a kick start with a slick YouTube video featuring a wealth of famous faces including Condoleezza Rice, Glee actress Jane Lynch and pop superstar Beyoncé, all urging us to support the movement. Beyoncé’s closing remark, together with perfect hair, skin and lipgloss aplenty is: “I’m not bossy. I’m the boss”. Now what does that glib comment add to the whole equality debate? Indeed, gyrate on a stage and call it ‘girl power’ or gyrate on a stage and put women’s rights back hundreds of years? Who gets the balance right?

Coinciding with International Women’s Day last month, Kellogg’s Special K announced a new strategic partnership in Europe with Chime for Change, another Beyoncé backed initiative and a global campaign to raise funds and awareness for girls’ and women’s empowerment.

Peter Soer, vp marketing at Kellogg Cereals Europe and a new member of the Chime for Change Advisory Board, commented: “We are thrilled to join so many other voices helping girls and women to shine and be the best they can be, which is what Kellogg’s Special K is all about. Large brands like ours can use our scale and reach to help make a positive impact on the world by driving awareness, inspiring action and ultimately helping to make change happen”.

The brand says it will help drive the campaign forward with a “25/25/25” commitment, which aims to share the Chime for Change message with 25m households in Europe; inspire 250,000 voices to “chime in” and join the movement; and help improve the lives of 25,000 girls and women around the world through education, health, and justice. Quite a tall order for breakfast cereal wouldn’t you say? Especially as I grew up thinking of Special K as a diet aid rather than the healthy diet choice into which it has evolved.

And it certainly has a job on its hands: an opinion poll carried out for the brand recently revealed that most women believe true equality – equal opportunities in every field from work to education to health – will not be a reality until 2030. Furthermore, 32% believe gender equality will never exist.

 

So how much has food security improved since Romanian horse meat was found in beef ready meals, prompting financial and reputational damage across the food industry? Miranda Ingram reports

 

Mozzarella that is only 50% cheese, prawns that are 80% water and ham that is either poultry dyed pink or “meat emulsion”.

On the anniversary of the horse meat scandal, West Yorkshire trading standards, with their superior laboratory, tested 900 food samples and found that over a third were not what they purported to be.

“We are facing a food adultery crisis,” said Labour’s Baroness Crawley, President of the Trading Standards Institute, addressing the House of Lords last month. “Call me old fashioned but I want fruit juice to be just that and not laced with vegetable oil that is used in flame retardants.”

The Labour peer went on to criticise cutbacks in the Trading Standards budget, pointing out that since 2009 testing is down 26% while food fraud is up 66%.

So how much has food security improved since Romanian horse meat was found in our beef ready meals, prompting financial and reputational damage across the food industry? Not much, according to Adrian Chamberlain, ceo of the global supply chain risk management company, Achilles. He believes that we are sleepwalking our way into another horse meat scandal since a survey commissioned by Achilles and carried out by the independent consultancy IFF last November showed that 82% of food and drinks manufacturers said the horse meat scandal has not affected the way they manage information about their suppliers.

Forty percent have never ‘mapped out’ their entire supply chain to find out who all their suppliers are and only 24% said they were ‘very confident’ that suppliers in emerging markets would continue to adhere to health and safety responsibilities.

“We were very surprised to see that manufacturers had not made changes to the management of supplier information, given the loss of public trust caused by the horse meat scandal,” says Chamberlain.

“Supply chains are becoming increasingly complex and globalised, with manufacturers seeking suppliers from all over the world. What this research shows is that even by the second tier of the supply chain, buyers begin to get hazy about the operations and risk profile of their suppliers. This is particularly concerning, given that recent scandals have involved suppliers deep down within supply chains.

“We are likely to see another scandal because of complacency about risks within the supply chain,” he told Ethical Performance.

There are two issues at stake when talking about food security: safety and fraud. It doesn’t matter how clean the East European dairy is or how good the UK storage facilities if the haulier uses insufficiently refrigerated trucks, the product will be rendered unsafe for human consumption.

Food fraud = food crime
Food fraud, on the other hand, involves deliberately substituting one food for another so that the product being sold is not what it says on the label. This latter, food fraud – or, as he calls it, food crime – is the biggest risk facing Britain today, according to Chris Elliott, professor at the Queen’s Institute for Global Food Security in Belfast and who published his interim report on the horse meat scandal at the end of last year.

“I have been persuaded by the evidence I have collected that food crime already is or has the potential to become serious organised crime,” he says. Although there is nowhere near enough data to put a cost on food crime, with the UK food and drink industry worth an annual £188bn, the profits from criminal behaviour could be substantial, he adds.
Elliott’s final report will be published in June but he has already called for the creation of a food crime unit within the FSA. “Our focus now urgently needs to turn to tackling food crime.”

Both food safety and food crime depend on the security of the supply chain which is itself subject to myriad pressures. Do you know your suppliers? Your suppliers’ suppliers? Their suppliers? Set questions like these against a rapidly changing global market in which traditional suppliers, such as China and Asia, are becoming consumers and emerging countries are joining the supply chain and the enormity of the task of monitoring supply chains becomes clear.

On top of this, consumers are constantly demanding innovative products – a mind-boggling 8,000 new food and drink products are launched in Britain annually according to the Food and Drink Federation – which requires a constant stream of new suppliers.

Clearly sustainability has a big impact on security here. Knowing your suppliers, your suppliers’ suppliers etc., talking to them, investing in them and understanding their problems while explaining your needs, builds an atmosphere of trust. Sharing the risks and rewards that follow goes some way towards avoiding corner-cutting and fraud.
However, there are more steps that could be taken. Achillles’ Adrian Chamberlain is among those calling for retailers to work collaboratively and create some sort of accreditation system for suppliers.

The idea is that two or three leading food manufacturers set the ball rolling by getting together and mapping out their entire supply chains, right down to source, during which process they will probably find they have suppliers in common.

They could then work together towards introducing industry certified standards for suppliers worldwide, creating an accurate, centralised database which would allow retailers to check suppliers’ credentials in all operational areas.
This would save retailers time and money as they would not have to keep carrying out their own audits whilst also giving certified suppliers a shop window to promote their products as well as an incentive to maintain standards in order to retain their certification.

This approach, however, necessitates leading retailers being transparent about their existing supply chains which they are remarkably reluctant to do. When Oxfam was trying to collate information for its Behind the Brands sustainability scorecard last year the charity was frustrated by ‘a lack of transparency within the sector’.

“All ten firms examined were overly secretive about their agricultural supply chains, making their claims of sustainability and social responsibility difficult to verify”, said a statement which prompted industry investors including F&C Asset Management, BNP Paribas Investment Partners and Aviva Investors to join the call for more supply chain transparency.

This assessment of supply chain security makes it clear that Britain needs robust testing in place. So is this the case?
Testing food is the responsibility of local authorities and their trading standards departments but as their budgets have been cut many councils have reduced checks or stopped collecting samples altogether.

Department for Environment, Food and Rural Affairs Minister Lord de Mauley, responding to the Yorkshire findings, told the Lords that the testing carried out by West Yorkshire Trading Standards demonstrates the action being taken by local authorities across the United Kingdom to tackle known problem areas and added “ there were 86,000 food safety composition and authenticity tests during 2012-13” and the Food Standards Agency has increased the funding it provides to support testing to £2.2m this year.

Overall, however, the number of samples taken to test whether food being sold matched what was claimed fell nationally by nearly 7% between 2012 and 2013, and had fallen by over 18% in the year before that.
About 10% of local authorities did no compositional sampling at all last year, according to the consumer watchdog Which?

Huge risk potential
Worryingly, West Yorkshire’s public analyst, Dr Duncan Campbell, believes the problems uncovered in his area are representative of the picture in the country as a whole and adds: “We are routinely finding problems with more than a third of samples, which is disturbing at a time when the budget for food standards inspection and analysis is being cut.”
Horse meat report author Elliott also blames the fragmenting of the responsibilities of the FSA between different bodies. There are, indeed, a bewildering number of organisations concerned with food safety and Elliott is calling for closer working between government departments and a “more robust” FSA as well for a supra-national system of standardised laboratory testing.

“I believe criminal networks have begun to see the potential for huge profits and low risks in this area. The food industry and thus consumers are currently vulnerable. A food supply system which is much more difficult for criminals to operate in is urgently required,” he writes in his interim report, recalling an incident when a supplier told him that a retailer had asked for a “4oz gourmet burger” to be brought in at 30p, a feat that would only be possible, according to the supplier, by using non-EU approved meat, offal and mechanically-recovered meat. 

The most recent quarterly ‘Amity Insight’ report from Ecclesiastical Investment Management, which has been at the forefront of socially responsible ethical investments since 1988, argues that investment in soft commodity trading is “problematic” owing to a “fundamental model that disconnects the raw material from the wider beneficiary - growers and customers.”

The 16-page report titled ‘The Hard Truth About Soft Commodities’ contends it is “beneficial to closely scrutinise companies’ supply chain and better business practices before committing to financial investment.”
Soft commodities, which include coffee, cocoa, palm oil and sugar, represent one of the key components of the global economy. And, while such commodities dominate global trade today - accounting for around 25% of all trade and 65% of global traffic - Ecclesiastical notes that commodity trading “remains opaque and elusive.”

Neville White, Senior Socially Responsible Investment Analyst at Ecclesiastical in London, commenting says: “Criticism of trading companies is not just about their size or lack of transparency. Most have been dogged by charges of poor environmental management, pollution, deforestation, and complicity in human rights violations as a result of their high impact. In particular, traders tend, by their nature, to do business in countries with very poor human rights records.”

The majority of commodities trading is controlled by a handful of giant global companies wielding great power. For example, Vitol Group, a Swiss-based, Dutch-owned private energy and commodity trading company, produced 2012 revenues of $303 billion (bn) surpassing Malaysia’s gross domestic product (GDP) of $300.6bn.
And, Cargill, a private U.S. company that would rank ninth in the Fortune 500 if listed, generated revenues of $136.7bn in 2013 - a figure exceeding Hungary’s GDP.

White noted: “Many of these companies are unlisted and therefore not subject to normal corporate transparency, which means that trading can be highly speculative and potentially manipulative given the lack of regulatory oversight.” Indeed, of the top 20 global players in the sector today eleven are unlisted.

A further issue is the “complex and extensive” commodity supply chains, which put a barrier between the grower and customer. That said, the report remarked that manufacturers are beginning to address this issue by taking more control and buying direct.

Coffee, for instance, has one of the “most complex” supply chains of any commodity. Around 90% of coffee production is in the developing world and grown largely by small farmers, where “labour practices may be poor and poverty remains an issue” according to White. Typically the supply chain here involves producers, middlemen, exporters, importers, roasters and retailers. Green coffee is purchased by importers from exporters, 75% of which is handled from Switzerland, a jurisdiction with a favourable tax regime. Roasters like Nestlé rely on importers holding
large inventories, ‘drizzling’ the commodity into the market to maintain the price.

Sugar, which trades in contract sizes of 50 long tonnes (112,000lbs) and faces enormous competition from synthetic and artificial sweeteners like corn syrup, is labelled in the report as “one of three agricultural commodities most responsible for driving competition for land in developing countries” and blamed by Oxfam for ‘land grabs’.

White points out that: “Ecclesiastical Investment Management would always look to engage with industries to encourage greater transparency over practices and to make investing in this area easier for the ethical investor.”
Ecclesiastical offers eight investment funds including their Amity range of six ethically screened funds. None of the Amity funds are invested in any listed commodity traders.
 

Jeannette Ferran Astorga, vice president of social responsibility at Ann Inc., gives Ethical Performance a glimpse into some of the fashion house’s latest sustainability program fundamentals
 

On International Women’s Day, U.S. specialty retailer Ann Inc., made public a commitment to provide 100,000 women working in its supply chain, financial and health education workshops. It is just the latest endeavor to give back to the communities where it does business. A vertically integrated operation, the New York-based women’s fashion firm operates 1,027 stores under Ann Taylor and LOFT banners in the U.S. and Canada. Its associate base is 94% women and its customers are 100% women, so it pays close attention to their needs and desires.

Can you tell us more about your commitment to women?
We have two signature programs that exemplify that. Our Responsibly Ann corporate social responsibility initiative centers on creating a better world for women through our social and environmental sustainable commitments. While our ANNpower Vital Voices Initiative empowers and invests in the next generation of female leaders across the U.S. Meanwhile ANN Cares has raised nearly $40 million since 2005 for women’s causes including funding breast cancer research grants, and has additionally contributed more than $16 million to St. Jude’s Children’s Hospital. In CSR, we have an opportunity everyday to connect with our clients and drive programs that align with her values.

What is the new 100,000 Women Initiative about?
This is an extension of our Responsibly Ann CSR program. It is intended to empower women by delivering in-factory health and financial literary training over the next five years. In conjunction with this Ann Inc. has become a signatory to the UN Women’s Empowerment Principles, a set of guidelines that aim to advance women in their places of work and communities. We are the first woman’s specialty retailer to commit to these principles. We are devoted to creating a supply chain that supports women. We know that 70% of the workers who make Ann Taylor and LOFT products in our supply chain are women and this gives us a tremendous opportunity to have a positive impact on their lives.

Working conditions in garment factories are frequently under scrutiny. You source from about 133 suppliers from 17 countries. Can you tell us some ways you address safety?
We partner with global suppliers that share our values and follow our guideline standards for positive working conditions. We strongly believe that the quality of our merchandise begins with the treatment of the people who manufacture our products. We have developed a rigorous approach to training, monitoring, auditing and working with suppliers, all geared towards continuous improvement.
On its website, Ann Inc. outlines its guidelines that include providing a safe, healthy and clean workplace, designed to prevent accidents and injuries. Factories must comply with local laws. Suppliers cannot subcontract our products, without written approval. New Supplier Orientation meetings are held to discuss business expectations. If there are concerns about confidentiality, openness or retaliation, it will conduct interviews offsite. And both senior executives of the factory and the middle management are involved.

The company has also been progressive in energy conservation. What is the latest?
In 2013, we achieved a carbon footprint reduction of 20% per square foot, and have set a new goal to reduce our footprint by 30% by 2015. Our stores make up 92% of our overall carbon footprint. We have installed over 50,000 energy efficient LED lights in almost 400 stores. This new lighting is 72% more energy efficient than our previous bulbs. The lights also emit less heat and reduce the burden on our air conditioning systems.
Our ANN Conserves Energy (ACE) program focuses on improving energy efficiency in our stores through associate behavior changes. We provide training to more than 20,000 store associates on how to conserve energy through lighting, temperature control and equipment uses. ACE provides reporting on each store’s progress so that associates can track their performance against historical data and other stores in their division.

What about with your suppliers?
We believe our suppliers can realize numerous business benefits by driving energy efficiency at their facilities. Our Supply Chain Sustainability Program incentivizes our suppliers to perform energy audits and make pledges to reduce their energy use.
The company’s AT CONNECT platform provides suppliers from around the world with opportunities to share best practices. We regularly conduct energy efficiency seminars to help our suppliers understand the actions they can take and to drive sustainability in the business.
Ann Inc. has also prepared a brief reference guide on best practices for energy efficiency. Its starts with the basics – implementing energy reading meters on large machinery and recommends checking to see if any equipment is left running unused for 15 minutes or more – goes on from there.
We were the first women’s specialty retailer to join the Sustainable Apparel Coalition, an industry group that works to reduce the environmental and social impacts of the apparel industry.

Anything you are particularly proud of?
The new 100,000 Women initiative, for if we can make factory jobs better and more responsive to women’s needs and wants, the empowerment benefits will multiply tenfold.
 

By Tom Cumberlege, a consultant at The Carbon Trust
 

It’s time to get your environmental story straight. The signals from the UK government are clear, from October 2013 companies incorporated in the UK and listed on the London Stock Exchange or equivalent in the EEA are now required to report their business’s environmental impact as part of a new structure for narrative reporting. This means that this year a number of businesses will be facing this challenge for the first time, as they come around to producing their latest set of annual reports.

The exercise may seem dull and dry, but developing a vision of a sustainable future is the perfect opportunity to set inspiring targets that deliver both cost and environmental benefits. Having a clear story that staff, business partners and investors understand and relate to helps build trust, reputation and loyalty.

The right vision can give meaning and focus to sustainability efforts and drive change which will not only prepare your business for mandatory carbon reporting which is looming on the horizon, but also deliver cost savings and environmental benefits. Engaging the whole business in the process of calculating and explaining carbon emissions and the rationale behind reducing the environmental impact can give impetus to efficiency schemes which are as good for the bottom-line as they are for the environment.

Forward thinking companies are already experiencing the benefits of creating and embedding a sustainable narrative throughout their organisation.

The Carbon Trust has been working with Nationwide since 2010, which as a mutual building society will not be covered by the pending reporting legislation, but as an organisation with members, was keen to understand the environmental impact of its activities and take its members on the journey. Part of this process involved the creation of a sustainability narrative to help the building society clearly communicate how and why it is changing for the benefit of its 15 million members and the wider community.

Grass roots involvement
The Society has been galvanised by involving every department, from IT to finance and procurement, in examining their activities, helping them see how their departmental decisions affect the overall sustainability of the business. The inclusion of suggestions from grass roots level in the company’s vision, inspired staff and helped them feel that they were being listened to and their ideas taken seriously.

Having collectively produced a clear plan to cut back on carbon emissions and water use, the backing of Nationwide’s Chief Executive and Executive Committee gave each department the mandate to develop policies to help the business reach its goals.

Equally important in these tough economic times, the process has made the business more robust in the face of rising waste and energy costs.

Nationwide committed to invest £1 million a year in capital projects to back its green plan, mainly in energy efficiency and lower-carbon energy sources. The building society expects to recoup that investment in less than three years, with savings of nearly £300,000 in energy costs in its first year alone.

Dealings with suppliers have also improved. The environmental vision has helped suppliers understand what is expected of them and how they can help Nationwide achieve its aims through closer collaboration.

Supplier input
Nationwide’s procurement department, for example, has built sustainability assessment into its buying process ensuring that it works only with companies that reflect its own responsible environmental values. Suppliers must fill in a questionnaire about their own carbon emissions before they can be listed and that has kicked off a number of collaborative projects.

When Nationwide decided it wanted to start a zero waste initiative to stop sending waste to landfill, for example, it rewrote its waste contract to enshrine that aim but ensured the change would be cost neutral. Staff were able to chip in with ideas for new types of bins or ways to cut out waste, that made the deal work for everyone.

Other projects have brought valuable cost savings. The company developed a database of all its equipment, listing when items will need to be replaced. It now also includes an energy efficiency metric via a risk score, which helps to prioritise investment by replacing inefficient items sooner than in the past.

While the financial benefits are easily understood, Nationwide discovered many other strategic benefits in creating an environmental narrative. The Society is owned by its members and the efficiency of the business is important to them; Nationwide is able to show them how its environmental efforts are reducing waste and saving money.

The Society has been growing quickly and this, alongside the implementation of new IT systems, has made reducing carbon emissions a constant challenge. Nationwide’s target is to make sure 2020 emissions are no higher than in 2010.

Using narrative reporting, Nationwide is able to go beyond the bare numbers to explain what mitigation actions it is taking to manage that environmental impact and becoming more efficient.

Nationwide is also extending its inspiring vision out to its members by offering innovative new products for customers looking to make a positive environmental impact at home through energy efficient home improvements, helping them to reduce their bills in the longer term. The Green Additional Borrowing allows existing Nationwide mortgage customers, who are looking to make their home more energy efficient, the chance to borrow at a competitive interest rate.

Brand building
Showing that a business cares about the wider community increases trust and confidence in a company, building a stronger brand. Nationwide found employees felt empowered by roles as ‘green champions’ or ‘recycling ambassadors’ making suggestions to improve the way the company is working and importantly seeing those suggestions affecting changes. Its experience is backed up by a number of surveys which show that staff tend to stay longer and feel happier working for companies which are attempting to ‘do the right thing.’

Nationwide’s experience shows how looking closely on the carbon impact of a company and attempting to explain how that can be mitigated can provide real business benefits both internally and externally.

That’s why it’s important to get a grip on your environmental story. It’s a mechanism to differentiate a business and improve relationships with all stakeholders both now and for the future.  

In the simplest terms, integrated reporting is when a company communicates the full range of factors that contribute to long-term value creation over time. Integrated reporting is an approach to corporate accounting which recognises the interdependence of commercial, social and environmental performance as part of one strategy. It enables businesses to demonstrate that sustainability has been integrated into strategy and long-term decision-making, and indicates that a business is thinking beyond short-term targets or short-lived profits.

Of course, integrated reporting is more than just a new way to produce a report. It reflects a fundamental shift in how value within a business is determined and communicated.

An integrated report is therefore the output of ‘integrated thinking,' the approach that must come before integrated reporting.

Why adopt integrated thinking?

We know from recent conversations with Business in the Community member companies that 9 out of 10 chief executives believe they have a greater social purpose than simply returning profit, and more than 70% of them think too much attention is given to short term business goals. Companies tell us that the majority of investors regard shorter-term financial indicators as the main metric of business success.

An integrated approach will improve decision making and deliver a report that clearly communicates to stakeholders, including these investors, the added value that sustainability delivers, in a language that they understand.

What questions should integrated reporting answer?

An integrated report should be a better report because it enables investors to clearly understand the answers to some key questions:

 

• What does the organisation do and what are the circumstances under which it operates?
• How does the organisation’s governance structure support its ability to create value in the short, medium and long-term?
• What are the specific opportunities and risks that affect the organisation’s ability to create value over the short, medium and long-term and how is the organisation dealing with them?
• Where does the organisation want to go and how does it intend to get there?
• What is the organisation’s business model and to what extent is it resilient?
• What challenges and uncertainties is the organisation likely to encounter in pursuing its strategy, and what are the potential implications for its business model and its future performance?
• To what extent has the organisation achieved its strategic objectives and what are its outcomes in terms of effects on the capitals?

All organisations depend on various forms of interdependent capital for their success.

For example, an organisation’s financial capital is increased when it makes a profit, and the quality of its human capital is improved when employees become better trained or more engaged.

The IIRC framework comprises six capitals: financial, manufactured, intellectual, human, social and relationship and natural. These help businesses to consider a full range of their inputs, how they add value in and through them, and then, how to communicate with their stakeholders on this.

Getting started

The Integrated Reporting Framework has been developed by IIRC, an organisation founded by The Prince’s Accounting for Sustainability Project. Globally, many companies have started to embrace the concept (which is now a legislative requirement in South Africa), and within the UK companies taking part in the IIRC pilot programme come from a range of sectors – from support services and banking, to retail and real estate.

As a first step, we suggest you have conversations at the most senior level to understand how global trends such as population growth and resource scarcity affect you, and what risks and opportunities they present today and in the medium and long-term. This enables the parameters and capitals most relevant to your business to be determined.

Then, the IIRC recommends an integrated report follows these guiding principles:

• Strategic focus and future orientation: Provide insight into the organisation’s strategy, and how that relates to its ability to create value in the short, medium and long term and its use of and effects on the capitals.
• Connectivity of information: Show, as a comprehensive value creation story, the combination, inter-relatedness and dependencies between the components that are material to the organisation’s ability to create value over time.
• Stakeholder responsiveness: Provide insight into the quality of the organisation’s relationships with its key stakeholders and how and to what extent the organisation understands, takes into account and responds to their legitimate needs, interests and expectations.
• Materiality and conciseness: Provide concise information that is material to assessing the organisation’s ability to create value in the short, medium and long-term.
• Reliability and completeness: Include all material matters, both positive and negative, in a balanced way and without material error.
• Consistency and comparability: Present information on a basis that is consistent over time and in a way that enables comparison with other organisations to the extent it is material to your organisation’s own value creation story.

Moving forward

Since conventional forms of CSR reporting on relevant performance and management processes already indicate a strong positive correlation to financial returns , it is clear there is business value in adopting an integrated approach.

We are encouraging businesses to move towards integrated thinking and reporting, and the Integrated Reporting Framework has great potential to enable companies to develop and present a more holistic view of business - and guide more sustainable management and value creation into the future.

To find out more about Integrated Reporting Framework, see here.

*Business in the Community research showed that companies which consistently manage and measure their corporate responsibility outperformed their FTSE 350 peers on total shareholder return in seven out of the last eight years – and they recovered more quickly in 2009 compared with their FTSE350 and FTSE All-Share peers 

Image credit: Adrien WIESENBACH/Unsplash

Submitted by Guest Contributor

By Jim Fruchterman, CEO, Benetech

At the upcoming Social Enterprise Alliance Summit '14, I’ll be advising social entrepreneurs who want to start a new venture about what type of legal structure they should create—a nonprofit, for-profit or hybrid?

It’s not a simple question to answer, especially given the proliferation of legal forms, like the benefit corporation or low-profit limited liability company, that allow entrepreneurs to meet both financial and social bottom lines.

I founded Benetech as a nonprofit technology company that provides software tools and services to address pressing social needs in 1989. Each of its program areas—Global Literacy, Human Rights, the Environment and Benetech Labs—offers the greatest social impact on funds invested.

And as a veteran entrepreneur, I have often wrestled with this question. Three years ago, I even published an article titled, For Love or Lucre, to guide other social entrepreneurs through the issues they need to consider before they determine the legal form of their new venture.

But call me structure agnostic: I believe that for-profit and nonprofit structures can both be good vehicles for improving society. Which is why I argued that before deciding on the legal structure of a new venture, it is necessary to thoroughly explore the social enterprise idea. Once you understand your venture and your motivation, the question about structure should have a straightforward answer.

Not much has changed in the three years since the article's publication. In fact, today’s entrepreneurs and social innovators are grappling with this same question at a time like no other for the social entrepreneurial movement.

We are seeing tremendous innovations in social enterprise, but these are merely part of larger, global changes in the ways in which society organizes itself to create public goods. Digital and mobile communications are changing the rules about social networks, intellectual property and the availability of big data, with an overall blurring of the boundaries between states, for-profits and nonprofits.

As philanthropy wonk Lucy Bernholz writes, these changes add up to a new social economy, where diverse enterprises deploy private resources for the creation and sustenance of public goods.

Let me, then, restate my advice for aspiring social entrepreneurs today. Before looking at what type of legal structure to create, you need to explore four foundational issues:

1. Motivation

If you are going to take on the risks and responsibilities of a new venture, not only do you need to be motivated to succeed, but you must also understand your motivation for starting a new social venture. How fundamental is the social mission to the success of your venture? How will you prioritize the social bottom line if the venture is in peril? What are your personal financial objectives for this venture, and how do you define your organization’s success?

2. Market

Understanding your customers, their environment and their needs is crucial to any social venture. Who are you serving and how to best benefit them? Who or what is the competition, and what is your value proposition? What is the market size and how profitable could you be serving that market? The answers to these questions will shape your decision of how to structure your venture.

3. Capital

How much money do you need to launch your venture, and how much will you need to keep it growing? If you cannot raise or do not have the capital you need, consider the nonprofit structure, or rework your business plan to start more slowly with less money. You should also understand how tax structure affects your business. Being a nonprofit exempt from income and property taxes won’t make a big difference if your venture is unlikely to have much income or property. But if your main source of capital is philanthropy or government funding, then that’s a strong case to organize as a nonprofit.

4. Control

For-profit and nonprofit structures have very different control and governance regimes, so it is important to determine how much control you need to have over your venture. Nonprofit structures are generally less flexible than for-profits, because of the requirements to qualify for nonprofit status. How important is confidentiality to your venture? Will you need to share control with investors or with the public interest?

Once you have explored these four foundational issues, you are ready to think about the type of legal structure that best suits your organization. In my original article, I offered an overview of five basic organizational structures from the United States, but their analogues exist in many other countries. Canadian readers, for example, may be interested to know that my article has been adapted into a version that focuses on the structural options available for social enterprises in Canada.

The new generations of business and social leaders around the world are breaking the molds of traditional legal structures. As a pragmatic idealist I believe the changes they are creating will deliver more benefits for the betterment of society.

Spurred by a state government mandate and surprisingly attractive rates of return, interest in intelligent energy storage systems looks to be surging in California. Aiming to scale installations of its GreenStation demand management-smart battery storage system, Green Charge Networks (GCN) reports that California municipalities, including the cities of Lancaster and Redwood City, are joining national retail chains and industrial businesses in signing GCN Power Efficiency Agreements (PEAs) and deploying the solution.

California is at the leading, some would say bleeding, edge of developing a new energy infrastructure centered on a diversified mix of clean, renewable and distributed energy resources. Boosting energy efficiency figures to play a big role in reducing energy use and carbon and greenhouse gas emissions.

Turning traditional energy economics on its head, companies such as GCN are taking advantage of technological innovation, government incentives and existing utility rate structures and finding ways of boosting energy efficiency by paying people and businesses to use less energy – so-called "negawatt" pricing – hence reducing carbon and greenhouse gas emissions.

A heady mix

A heady mix of state and local incentives, federal government support and public-private development partnerships is enabling innovative energy technology developers and service providers such as GCN to make the transition from pilot to commercial scale quickly. Enabling clients to save big on utility demand charges is driving interest in GCN's GreenStation. GCN points out that utility demand charges have been rising more than 7 percent a year in California and can account for 50 percent or more of commercial, industrial and institutional electric bills.

As GCN senior vice president of sales Steve Kelley explains in a press release,

“Many people speculate on the potential of energy storage but at Green Charge Networks we have signed customers who are installing the GreenStation energy storage today. We’re pleased to enter into this partnership with various cities, retails, and colleges to help the community utilize power more efficiently."

Department of Energy grants funded through the American Recovery and Reinvestment Act (ARRA) and a Smart Grid Demonstration Project public-private partnership with New York's Con Edison initially enabled GCN to develop and hone the sophisticated predictive analytics and intelligent battery storage capabilities at GreenStation's core. Contracts with national chains including 7-Eleven and Walgreens soon followed.

Enactment of California AB2514, which mandates the state's three investor-owned utilities install 200 megawatts (MW) of energy storage capacity to their grids by 2014 and 1.325 gigawatts (GW) by 2020, has created the first power grid storage market in the U.S. Also sparking demand for energy storage solutions is California's Self-Generation Incentive Program (SGIP) and clean, renewable energy and energy efficiency mandates and incentives enacted by local municipalities.

Net zero emissions cities

Lancaster, Calif. was the first U.S. city to mandate the use of residential solar photovoltaic (PV) systems in new homes. It has also set a goal of becoming the first net zero carbon emissions city in the nation.
Looking to reduce the demand charges paid to utilities when the sun sets and energy demand spikes, Lancaster has signed on to deploy a GCN GreenStation at the Lancaster Museum of Art & History (MOAH).

A driving force in enacting these pioneering clean, renewable energy initiatives, Lancaster Mayor R. Rex Parris was quoted as saying:

“The City of Lancaster continues to seek new and innovative ways to foster the use of renewable energy, protect the environment, and create cost savings for our taxpayers in the process. Energy storage is the cutting edge of renewable energy technology and it will propel our city toward becoming America’s first truly Net Zero City. We are proud to partner with Green Charge Networks to implement this technology in our community.”

Added GCN's Kelley:

“Since solar-generated power is now required in new homes in the City of Lancaster, the next evolution will come from intelligent energy storage and power efficiency, which will help offset demand charges.”

Similarly, Redwood City will deploy GreenStations at the Redwood City Libarary and a second at a downtown facility, according to GCN's press release. Contracts with Santa Clara County, the Peralta Community College District and Cal State Fullerton have also been signed.

The first city in the Bay Area to have a GreenStation installed, the 30-kilowatt (kW) system at the Redwood City Library is expected to cut utility demand charges in half every year.

Bottom-line returns

GCN is finding that its intelligent demand response-battery storage platform can provide customers with attractive bottom-line and investment returns without tax credits or government mandates by enabling GreenStation customers to reduce the demand charges they pay utilities.

Ninety percent of the proposals GCN is sending out to prospective customers in California have ROIs, or payback periods, of five years or less, CEO Vic Shao told 3p in an interview. The average is in the 3.5 to four year range. “The returns are absolutely incredible when you factor in all these rebates and tax credits and so forth. Some really super attractive situations have ROIs in the 1.5 to 2.5 year range, about 25 percent of our deal flow,” he elaborated.

*Graphic courtesy Green Charge Networks
** Image courtesy: RGGI (Regional Greenhouse Gas Initiative)

Summer seems so far away, especially if you live in freezing New York like I do, but we’ll get there eventually, and when we do it’s always better be prepared with an air conditioner on your side.

The good news is that, as of this summer, you can have not just a regular AC, but one that “gets smarter over time, learning from users’ schedules, habits, location, weather information and past usage.” Welcome to the age of Aros!

Presented earlier this month, Aros, which is described as a “truly brilliant air conditioner” (I guess “smart” didn’t feel right in this case), is the result of an ongoing collaboration between General Electric and Quirky. What makes Aros interesting is not just the fact that it is the first "brilliant" AC and how it advances the vision of Internet of Things, but also what it means in terms of the relationships between the new collaborative, open economy and the more traditional one.

GE needs no introduction, but if you’re not familiar with Quirky, this is a collaborative innovation platform that was founded by Ben Kaufman in 2009, aiming to make innovation accessible to all.

Here’s how it works: If you have an idea, you sign up for Quirky and submit it for consideration. Ideas are vetted by Quirky’s community, and the favorite ones move on forward to be evaluated by Quirky’s team based on their design, marketability and business viability. The most promising ideas will be developed and refined by Quirky’s designers and engineers, and are eventually offered for sale. Quirky then shares 10 percent of the revenues with the inventor and other community members who took part in the product’s development.

This is the path Dr. Garthen Leslie, the inventor of the Aros, went through. Leslie, former Department of Energy executive, became tired of the need to choose between using a wasteful air conditioner at home and suffering from summer heat as he puts it, and started thinking about developing a better, smart AC.  He came up with an idea and submitted it to Quirky.

"After receiving the submission for this invention, it was clear that this was a product that absolutely needed to exist, but [also] a challenge that most companies would shy away from," Quirky CEO Ben Kaufman said.

Fast-forward through Quirky’s development process and the resulting product of Leslie’s idea is Aros -- a beautifully designed 8,000 BTU air conditioner that can gather information about your budget, location, schedule and usage. “It learns from this data over time to automatically maintain the perfect temperature and maximize savings for your home.” Using Quirky’s Wink app on your mobile device, you can monitor, program and control Aros from anywhere. And it’s even quite affordable -- you can pre-order now it on Amazon for $300.

Now, Quirky didn’t do this by itself. GE also played an important role here – from providing AC engineering know-know, and helping the inventor improve and finish the machine in just a few months, to using its appliances factory in order to lower the unit’s cost.

The collaboration between the companies is not a one-time event, but a continuation of an ongoing partnership between the two, which was expanded last year to co-create a line of smart home devices, co-branded as Wink: Instantly Connected. In addition, GE invested $30 million in Quirky and also granted Quirky access to thousands of its patents.

A few interesting products were already released to the market under the Wink brand, but they were mostly nice-to-have gadgets like the egg minder, a smart egg tray wirelessly connected to your mobile device that tracks the number of eggs you have and tells you when they’re going bad. Aros, on the other hand, provides a smart (and affordable) alternative to a product used by more than 25 million American households, and therefore can be the first Wink product to become widely popular.

This could definitely be a breakthrough moment for GE, which has been looking for sometime to get a foot into the Internet of Things (or Industrial Internet, as it calls it) space. If this will be indeed GE’s “Nest moment,” I’m sure it won’t remain unnoticed that it happened thanks to the collaboration with Quirky and not due to GE’s own R&D efforts, which have been responsible for 80 years of developing new air conditioners.

In any event, Aros already provides an example of effective relationships between a traditional company and a collaborative platform. GE utilizes Quirky to leverage its strengths, including scale, technology expertise and efficient supply chain and overcome its weaknesses, such as (the lack of) speed and openness to new ideas and audiences. Quirky also benefits from this partnership, receiving funding and access to valuable knowledge and resources and gaining the ability to scale up quickly.

Still, looking at the big picture, it’s not clear yet what impact the collaboration between Quirky and GE will have on the innovation capabilities of GE. Will it change them radically or incrementally? It will probably take few more years to figure it out and will depend on many factors, including the market success of the Wink products.

In the meantime what we do know for fact is that GE has managed through the collaboration with Quirky to create an extended arm to its R&D department, one that is edgy, speedy, mastering the art crowdsourcing, and has gave us the opportunity to finally have a truly brilliant air conditioner.

Image credit: Quirky

Raz Godelnik is an Assistant Professor of Strategic Design and Management at Parsons The New School of Design. You can follow Raz on Twitter.

Despite some early March rain in California, and a few storm systems moving in this week, the late season moisture will sadly fall far short of that which is needed to pull the state out of its four-year drought. Attention has consequently turned towards how California will ensure reliable water supplies in years ahead, should precipitation levels remain below average.

One source that will grow in importance is desalination, and it could end up being a pretty big business. Environmental Leader reported earlier this month that the components alone for desalination activity will constitute a $5 billion industry by 2015, and while this spend would not be confined to California, the report, conducted by the McIlvaine Co., describes the state as being at the epicenter of global desalination activity.

According to SFGate, the San Francisco Chronicle's online news outlet, 17 desalination plants are in the planning stages in the state of California, and of these, the largest one in Carlsbad, near San Diego, is two years away from completion. When the plant is switched on, it will be the biggest desalination facility in the Western Hemisphere, taking water from the Pacific Ocean and turning it into around 50 million gallons of potable water daily -- serving 110,000 customers in San Diego County.

To build such a plant, water treatment chemicals, pumps, valves and centrifuges are among the many components that will be required. The process of desalination for the Carlsbad plant involves "reverse osmosis," which entails forcing salty or brackish water through screens to filter out contaminants. The cross-flow membrane equipment involved in the filtration process, according to the McIlvaine Co., constitutes the most costly of all components, which alone constitutes a $3.06 billion market.

But despite this being a big business, desalination is something of a solution of last resort as far as solving the water supply problem goes, because reverse osmosis demands huge amounts of energy and is expensive. As a result, the cost to produce an acre-foot of water runs at about $2,000. An acre-foot is the volume of water needed to cover one acre in one foot of water, and is considered enough to provide water for two families of four for a year.

To put that cost into context, SFGate notes, surface water from reservoirs and mountain runoff during plentiful years can be as cheap as $100 per acre-foot. Desalination, therefore, comes at a significant price premium. But then again, these are not plentiful years. SFGate reports some California farmers may have to acquire water this year on spot markets and will face paying up to $3,500 per acre-foot -- making the economics of desalination more attractive.

But still, cost aside, desalination via reverse osmosis has its critics, who cite environmental concerns. Marine life is threatened, as the desalination plants may suck in fish from the oceans or delta along with water, and CO2 emissions would increase due to the large amounts of energy required to operate the facilities.

One innovation that may help farmers in the central valley however, may be a solution that we can get more excited about. Earlier this month, SFGate reported on a startup called WaterFX operating in the Panoche Water and Drainage District that's testing a solar-thermal desalination plant -- which at the moment is producing a meager 14,000 gallons per day, though the company hopes this will grow by several orders of magnitude in the future.

The solar desalination plant treats irrigation runoff, which has accumulated salt and naturally occurring chemicals rendering it unfit for human consumption or new irrigation. Unlike reverse osmosis, the system uses solar thermal energy to evaporate and distill water at 30 times the efficiency of a standard solar still. WaterFX's product, The Aqua4™, uses advanced absorption technology to dramatically increase production. As water passes through the distillation system, steam is captured and condensed into potable water, while the remaining salt brine is concentrated and separated out in a solid state. The brine coprouducts can be sold as useful resources in their own right. This has the happy side benefit of dealing with the waste stream that you would normally get with traditional desalination methods.

WaterFX is currently trying to raise capital to scale-up, and if successful, the company has plans to expand their operation that would produce 2,200 acre-feet of purified water per year . Best of all, using solar energy avoids the huge energy cost of reverse osmosis and produces clean water at the cost of about $450 per acre-foot.

Of course, this is a discussion on the supply side only. Let's not forget there's a huge opportunity as well for conservation. The California Water Impact Network, which advocates for environmentally sensitive uses of California's water, notes that water recycling is a proven option that can cost as little as $300 per acre-foot, though it can run higher than this.

Either way, scarcity is driving innovation -- and it should continue even if rain is plentiful in seasons to come, because whether or not climate change is exacerbating the current drought, California has a long history of protracted dry periods. With a growing population, a few wetter years are not going to be a long-term fix for the state's water problems.

Image Credit: Don DeBold

Follow me on Twitter: @PhilCovBlog

Editor's Note: This post was updated on April 1, 2014 to clarify technical aspects of The Aqua4™ desalination process.