Search

Ethical Performance's SRI editor, Roger Aitken, has been recognised at the 2015 State Street Institutional Press Awards, which recognise “outstanding performance” in institutional financial services reporting.

Aitken, a former FT journalist who writes the monthly SRI column for Ethical Performance, scooped the journalist of the year award in the ‘Regulatory Issues’ category for his articles on regulation of the foreign exchange (FX) market and the rate fixing scandal. 

State Street Corporation, which is one of the world’s leading providers of financial services to institutional investors and operates in over 100 countries, had $27.3 trillion in assets under custody and administration as of September 30, 2015. 

The El Niño phenomenon of 2015-2016 is expected to be rival that of 1997-1998, which caused losses equal to 14.5 percent of Ecaudor's GDP. El Niño causes a weakening of the trade winds, allowing heat to accumulate. The phenomenon shifts global weather, causing flooding in some areas and droughts in others.

Ecuador and Peru are the countries that are most directly affected by El Niño. If predictions are correct, the months ahead could cause debilitating floods, outbreaks of mosquito-borne illnesses, and catastrophic crop and infrastructure damage.

I write from coastal Manabi Province in Ecuador, which experienced the most fatalities in the country during the 1997-1998 event, totaling 104. There is awareness of severe El Niño predictions, but most people I've spoken with in the southern coastal town of Puerto Lopez think it will not be as severe as forecasts.

There have been warnings in past years that haven't come to fruition, leaving many to think the coming months will be uneventful as well. Others are hopeful that an El Niño event could bring rains, ending a severe drought in the region. The current president, Rafael Correa, has significantly augmented the infrastructure in this South American country, leaving some to wonder how it would weather El Niño event.

Preparation

"I do not think we're ready [for El Niño]," says Roque Mendoza, the former coordinator for the Secretariat of Risk Management for Manabi Province. "Lack of training, and people not knowing what to do in an emergency, is what causes tragedies to be magnified."

Although one Puerto Lopez hotel owner I spoke with constructed a flood wall behind his property after El Niño flooding in 2002 and another homeowner is adding fill to raise the elevation of their property, I see few other people taking preventative actions. Recent governmental infrastructure improvements may help the situation, if planned and executed with natural disasters in mind.

In Puerto Lopez, a major beachfront construction project is building bridges over rivers and burying beachfront power lines under a new road, which could help prepare the town for strong storms. Residents, however, are concerned by the fact that the beachfront road is now at a higher elevation than some of the surrounding homes, potentially contributing to flooding. There is also a sense among many residents that this project doesn't address more urgent needs, such as waste water treatment and access to potable water.

The Chamber of Agriculture of Zone II (along Ecuador's southern coast) is urging the government to declare a state of emergency before the arrival of El Niño. They believe the government has not adequately prepared for the phenomenon, by clearing canals and dredging rivers, giving a path for the removal of flood waters.

In contrast, the Peruvian government has already declared a state of emergency in over half of the country's regions. There, the government has been cleaning out coastal riverbeds, building flood walls, and distributing mobile bridges to avoid communities getting cut off if existing bridges fail.

Fisheries

Fishing is one of the primary industries in coastal Ecuador, and an El Niño event could have major consequences.

As many fish species migrate to colder waters and others lose weight from lack of food, the industry could be heavily impacted, resulting in lower yields. This is difficult to prepare for, other than seeking out fish species that are less impacted by a change in ocean temperatures.

There is also concern about 500 square miles of shrimp pools at risk of flooding, causing fear in the shrimp sector.

Agriculture

Drought has plagued many farmers in Ecuador in recent years, disproportionately impacting farmers without access to irrigation or wells. The predicted storms and floods could cause crop damage and landslides.

In other cases, the damage is more indirect. The predicted El Niño flooding could kill snakes, causing a spike in rodent populations that could damage sugarcane, for example. Infrastructure damage could make roads impassible, making it impossible to sell crops and causing income loss.

In Ecuador, many of the farms cultivate a monoculture of just one agricultural product, with thousands of seasonal labors used for the harvest. In the Ecuadorian lowlands, this is most commonly bananas or sugarcane. Large plantations are often less resistant to natural disasters because crop diversity can help mitigate the risk of crop failure. In addition, large plantations may waste a viable harvest because farm workers cannot be brought in for the harvest during a natural disaster.

El Niño rains, however, could break the drought and offer relief along the southern coast of Ecuador. Some of the cropland in Manabi Province is now fallow due to drought, forcing inhabitants to seek out other forms of employment. It does, however, put more pressure on income from fishing and tourism, which would be at risk if the El Niño event does materialize as predicted.

Increased health risk

Increased precipitation can lead to a spike in mosquito-borne illnesses in Ecuador, including malaria, chikungunya and dengue. Damage to sanitation infrastructure combined with an interruption in health services and lack of access to safe drinking water could lead to illness, especially among more vulnerable populations.

There have been public health campaigns in Ecuador to prevent mosquito-borne illnesses. Health professionals have walked around town, hanging posters and talking to business owners. Public service announcements on the topic are also relatively common, but unfortunately so are practices that encourage the breeding of mosquitoes.

At-risk populations

Natural disasters often disproportionately affect certain groups of people more than others. Having savings can serve as a buffer against loss of income and increases the means to evacuate during natural disaster. Owning medical supplies allows people to treat themselves for minor injuries and prevents the development of more major health ailments. Living in durable homes that are not constructed in floodplains mitigates the risk and damage of flooding. Overcrowding of housing and lack of access to safe drinking water that plague developing countries increase illness and the spread of infectious disease.

Environmental degradation

Massive and rapid deforestation has occurred in Ecuador's coastal forests in since the 1950s, where 70 percent of the coastal mangroves have been removed by the commercial shrimp industry.

Deforestation compounds the impact of El Niño. Loss of vegetation increases the occurrence of mudslides, which caused the most fatalities in Ecuador during El Niño event of 1997-1998. Deforestation also contributes to soil erosion, which clogs waterways and causes floods.

"Disasters are not only caused by nature, but also by human hands and lack of prevention," says Roque Mendoza.

Image Credit: 1) Flickr/Sol Robayo 2) Le Minh Vu 3) Flikr/Edward Slipszenko 4) Flickr/CDC Global

By Anum Yoon

Though cycling to work has the potential to reduce your carbon footprint and improve your overall health, you’re probably not doing it. In many communities, bike lanes simply don’t exist, making it difficult or downright dangerous to battle automobile traffic to bike to work.

Cities like Washington, D.C., and New York have installed bike paths for commuters, and the investment has paid off. In D.C., bike commuting has increased by 120 percent, and in New York ridership has doubled, all thanks to offering cyclists appropriate infrastructure. While it’s certainly good news, the sad fact remains that the U.S. still lags far behind European nations when it comes to bicycle commuting.

A tale of two continents

Cities like Copenhagen, Barcelona, Paris and Rome all have major cycling infrastructure, and their ridership figures have increased accordingly. About 40 percent of Germans and Swedes bike to work at least once a week, almost four times the amount of Americans who do so. As of 2013, just 1.21 percent of New Yorkers commuted to work by bicycle, despite the creation of new bike paths.

Why are Americans so slow to adopt bicycle commuting, even when investments are made in bike lanes? Infrastructure is only part of the story.

A culture of commuting

In Europe, there has been a seismic shift in how people view the act of riding a bicycle. Residents of bike-friendly cities like Copenhagen and Barcelona see a bicycle not only as an instrument for recreation, but also – and crucially, more commonly – as a valid form of transportation. It’s not at all unusual to see businessmen in three-piece suits and women in skirts and ballet flats riding their bikes to work. They arrive looking presentable because they pedal at a reasonable pace and ride bikes designed for comfort rather than racing.

In contrast, most Americans see cycling as a purely recreational activity, a sport taken up by weekend warriors and triathletes looking for a new fitness goal. Even in locations where cycling is common, riders tend to be students, and the image of cycling in these locations is dominated by photos of racing bikes carrying surfboards and backpacks full of sporting gear.

Because most Americans view cycling as recreation rather than as an appropriate mode of transit, there has also been a backlash against building new bike lines in some large cities. New Yorkers complain about lost parking spaces and reduced lanes for cars, while Chicagoans feel that pedestrians are put at risk by speeding cyclists.

What the U.S. can learn about bike commuting

In addition to the need for many more bike lanes to encourage commuters to give up their cars and use two wheels instead, the U.S. still has a lot of work to do on promoting a culture of commuting that recognizes bicycles as vehicles rather than toys. To cut down on speeding bicycle messengers and those who would put pedestrians at risk, bike lanes can include traffic lights timed to cyclists’ average safe speed. This works well in Copenhagen, where cyclists are as regulated as motorists.

It’s also important to recognize that bike lanes aren’t the only infrastructure required to make commuting doable for many people. Businesses and communities need to invest in places to store bicycles safely and conveniently, too. After all, if there’s no place to park your bike, you’re never going to ride to work.

In the end, these changes will only happen if people demand them. If you want to ride to work but are missing the tools and support you need to feel safe doing it, start advocating for change through your local political process. Get involved, and you can make a difference in your community that everyone can benefit from.

 

Image credits: 1) Picography 2) Quality Legal

By Zach Bernstein and John O’Neill

If you’ve been following the news recently, you might have noticed there was a slight shakeup in Washington, D.C., with Rep. Paul Ryan (R-Wis.) taking over for the retiring John Boehner as Speaker of the House of Representatives, the third-highest office in the land.

This is significant news, especially if you’ve been wondering when – if ever – the federal government will take on reforming the tax code.

Speaker Ryan is probably as well-positioned for tax reform as any speaker ever. He made a name for himself as chairman of the House Ways and Means Committee, where any potential tax reform legislation would begin the march through Congress. The idea that the stars may be aligning for business-friendly tax reform is something everyone should be excited about.

There’s actually a lot to like with Ryan’s goals. For one, he favors broad reform over piecemeal changes. Moreover, many of his tax-reform goals are laudable: He wants tax reform to create domestic jobs, support American R&D, stop corporate inversions, bring home the $2 trillion in offshore corporate profits, and protect the U.S. corporate tax base.

On some major points, however, Speaker Ryan is off-target – and not taking a business-friendly approach to tax reform.

Putting the money to work

One major problem we face is the more than $2 trillion in corporate profits held overseas. If all of those profits were taxed at a 35 percent rate, total revenues would be about $735 billion -- enough to wipe out the fiscal year 2015 budget deficit, estimated at $468 billion, with hundreds of billions left over for other spending or to begin to pay down the national debt.

In the past, Ryan was enthusiastic about the prospect of taxing corporate profits held overseas to fund major infrastructure repairs. The plan he supported, however, would have ended the current practice of taxing overseas earnings at the U.S. tax rate, and instead institute what’s known as a territorial system. Under that system, profits earned in foreign countries would not be subject to taxes here.

Ryan’s stated goal is to encourage companies not to set up their headquarters overseas, and to end the process of tax inversions, where a company buys a foreign competitor then reincorporates the new merged company in a country where tax rates are lower. (Companies like Burger King and Walgreens made headlines last year when they made plans to invert; while Walgreens ultimately decided against it, Burger King went ahead.)

Unfortunately, a territorial tax system, like the kind Speaker Ryan supports, won’t secure the corporate tax base. When offshore profit is exempted, U.S. multinationals are likely to shift even more of their profits overseas. Most small business owners understand this – and think it’s unfair. That’s why 85 percent oppose a territorial system, according to scientific polling of small business owners.

Take the money and run

A major point of contention in any tax reform effort will ultimately be the corporate tax rate. While the U.S. corporate tax rate is officially 39.1 percent – higher than any other major developed country – that doesn’t tell the whole story. The effective tax rate – what companies pay after various deductions – is closer to the average of all developed countries.

One major reason for that is the use of offshore tax havens. This leads many corporations to officially incorporate in a foreign country, even as it actually operates in the U.S. (That’s how a five-story building in the Cayman Islands can legally be home to nearly 19,000 companies.) Companies can then shift profits to lower-tax countries to avoid paying taxes in the U.S. That brings the effective corporate tax rate down.

The problem with the territorial system that Speaker Ryan favors is that it misses a major point: The $2 trillion our multinationals currently hold offshore can be brought home any time. Corporations would just have to pay taxes on it. What’s more, giving corporations a pass on the taxes of their offshore profits likely won’t help our economy: Experience shows that when they bring that money home, most of it goes into shareholders’ pockets, not into creating new jobs.

Again, small business owners know this system is unfair – indeed, 76 percent of them want a system that limits shifting profits offshore, according to polling.

Betting on reform

Thankfully, there are simple solutions: Stopping the practice of inversions and disallowing the use of offshore tax havens. We could make it illegal for giant companies to continue to use U.S. services like infrastructure, public safety and the legal system without paying the same rate of taxes that smaller companies do.

Everyone can agree that the tax code needs to be reformed. As the new speaker, there’s every reason to think Ryan has a shot. He has allies to work with in the Senate, including the chairman and ranking member of the Finance Committee, who both want broad tax reform.

But a number of his goals won’t help the vast majority of American businesses. Speaker Ryan must recognize that we’re in a period when the goals of some of our largest corporations don’t match the goals of our country, and that any tax reform needs to bring those goals into alignment.

In its current form, the U.S. tax code tends to favors multinational businesses over domestic ones, large businesses over small ones, and established businesses over startups. Tax reform must back entrepreneurs and their efforts to build businesses here at home.

So, congratulations to Paul Ryan on being elected speaker. It’s an important job. Now, for the sake of American businesses, he has some work to do.

Image credit: Gage Skidmore via Wikimedia Commons

Zach Bernstein is Manager of Research and Social Media and John O’Neill is Tax Analyst for the American Sustainable Business Council.

By Joe Verrengia

RAU, Tanzania -- I was keeping my distance.

And so were they.

Eighty orphans watched as I sloshed back and forth across the quagmire of what was becoming their new schoolyard. There weren’t many tools lying around the remote site, and I was trying to make a ladder by stacking rocks, one by one, in the sticky red mud.

This was the big day when Arrow Electronics and its nonprofit partner Close the Gap were deploying the DigiTruck. It’s a sustainable, mobile classroom made from a used cargo container and outfitted with solar panels, LED lighting and refurbished computers.

Months in the making, the DigiTruck was delivered to this hamlet on the south slope of Mount Kilimanjaro to benefit the Tuleeni Orphanage, whose residents were eagerly waiting to use a computer for the first time. Just getting it there was a triumph.

By August, the seasonal rains that lash Tanzania’s landscape were supposed to be long gone. Yet deluges kept washing out the narrow road to the orphanage, which everybody was trying to keep open with shovels and sandbags.

A drive uphill from the city of Moshi that should’ve taken 20 minutes was taking a couple of hours, often sideways.

Kilimanjaro, Africa’s tallest mountain, was flowing. The DigiTruck’s solar panels trickled their green power under plaster-gray skies. The computers needed to be connected. The container’s rough, ribbed walls were streaming water, and the project’s logos were not applied.

A network TV crew from the United States had arrived.

And the kids were still waiting, watching.

Anybody in corporate social responsibility (CSR) wants the chance to leverage their company’s might and make that pivotal, positive difference on the ground. But you may find yourself someplace far away, doing something way beyond what you predicted.

Arrow is the world’s largest refurbisher of electronics. Last year alone, our value recovery business kept 54 million metric tons of e-waste out of landfills and villages not unlike this one.

For a decade, Arrow has worked with Brussels-based Close the Gap to facilitate the donation of about 500,000 refurbished computers to schools and clinics in Africa where they’re used by 1.5 million people.

That’s a big number, but it turns out we’ve only been addressing part of the issue. That’s because more than 600 million people in Africa live off the grid.

Even in cities, electricity is spotty. In Moshi’s best restaurant, I watched the chef prepare our dinner in the glow of a single candle — and it wasn’t because he was setting the mood.

Last year, Close the Gap came to Arrow with an innovation. If we want to bridge the digital divide in emerging economies, we must not only bring the refurbished computers, but we must also bring the electricity.

That’s DigiTruck.

Why Tanzania? In our first deployment, we needed a seaport with a source of cargo containers (Dar es Salaam), a jetport for rapid deliveries (Kilimanjaro) and skilled labor (Arusha).

And we needed a local nonprofit to teach students how to use the computers.

Operated by Neema International, the Tuleeni orphanage is home to children who lost their parents, mostly to AIDS. It’s run by Mandy Stein, a 24-year-old dynamo who has devoted herself here since 2011. This summer, she was joined by Austin Gutwein, 20, who runs Hoops of Hope, a charity that supports African communities with basketball shoot-a-thons. (Austin started his work when he was — get this! — age 9. How did you spend fourth grade?)

Like their neighbors, Tuleeni kids live according to a jumble of 19th- and 21st-century ways. They raise vegetables in a plot next to their dormitory. Pigs crowd a little corral. Meals bubble over an open fire.

Few Tanzanians have Internet access. But the fact that half of all Africans use a mobile phone offers huge openings for technological advancement and social enterprise.

Which way will it go? Two-thirds of Tanzania’s population is younger than 25. Education is compulsory and free. It’s surreal to watch swarms of children emerge at dawn from simple homes wearing a kaleidoscope of school uniforms and tribal dress — all crisp and spotless.

But actual school attendance is less than 60 percent.

By age 14, nearly a quarter of kids go to work — in the fields and on the streets. One-quarter of the girls are having babies.

The Tuleeni kids know how to take a selfie with a phone camera, and they talk with shy pride of the day when they will work as pilots, engineers and doctors.

Yes, they need the basics -- shelter, food, clothing and clean water. But they also need to become the innovators of their own future if they are going to live longer, better lives. The only way they will get there is by using computers — to learn, to connect, to collaborate with people who live beyond walking distance.

That’s why we decided to help bring the computers here. And the electrons.

The execution is not easy, and the outcome is not assured. The rain is washing away my illusions, and the mud threatens to bury our best intentions. I am acutely aware that DigiTruck is just one mobile classroom. One thousand villages and 1 million AIDS orphans in Tanzania need DigiTrucks.

I kept my back turned as I struggled with both my little rock ladder and my emotions. Then a strong voice pierced my personal storm cloud. I looked down to find a little boy with no front teeth at my side.

“What is this DigiTruck?” he demanded.

“It’s a classroom with computers,” I said.

“And who is this Arrow? It is you?”

I looked around, then nodded.

He handed me a rock.

Image courtesy of the author. 

Joe Verrengia is the architect of Arrow’s corporate social responsibility program (CSR), combining targeted charitable investing, sustainability and government relations into a strategic initiative that uniquely establishes Arrow as an innovation catalyst and brings technology concepts to demonstration for humanitarian purposes. Arrow is the 2015 Fortune Most Admired Company in its category, including #1 in CSR. Previously, Joe held senior positions at the National Renewable Energy Laboratory and the Denver Museum of Nature & Science. For two decades he was an international science journalist. He graduated from Columbia University and has held fellowships at MIT, the National Science Foundation and the National Institutes of Health.

To sponsor a DigiTruck, contact Close the Gap

To help the Tuleeni Orphans, contact Neema International

To help Africa projects with a hoop-a-thon, contact Hoops of Hope

Learn more about Arrow’s CSR program

By Alexis Caffrey

Nowadays, incorporating sustainability into your communications plan is a fundamental part of a company’s success. In fact, consumers around the world are more likely to be loyal to a company that incorporates sustainable practices into their business.

Highlighting your company’s sustainability effort, and being transparent to the public, can be profitable for your company. By promoting your company’s green technology, or social and environmental initiatives, your company can benefit by receiving positive PR exposure and connecting with new target markets.

Let’s take a look at how some industries have seamlessly worked sustainability into their communication efforts in order to increase profitability.

A focus on metrics and transparency

Unilever and Heinz are two large brands that have made sustainable living a large piece of their marketing plans and business practices. You’ll even notice on each of their websites that “sustainable living” is a main menu item.

Unilever heavily relies on metrics and reporting to communicate its sustainability efforts to the public. In fact, the packaged goods company's website is filled with updates on its performance in real time. Interactive charts display economic, social and environmental performance data. Stakeholders are given the opportunity to view Unilever’s environmental impacts and data and share information via social media. In fact, stakeholders, including the Unilever Sustainable Living Plan Steering Team, external advisors and consumers, are able to offer feedback about Unilever’s efforts.

Heinz is another company that has emphasizes sustainability on its website. Like Unilever, it focuses on transparency and reporting to convey its sustainability efforts to stakeholders and consumers. According to its website, Heinz's efforts include cutting a ton of energy per ton of product in its manufacturing process, as well as reducing waste to landfill. Its program is so impressive that Heinz has won awards and recognition for being a sustainability leader.

By being completely transparent, and updating reports on an ongoing basis, these companies have been able to reach a broader audience, while capturing the trust of their current stakeholders and consumers. Their sophisticated and interactive websites will set the tone for companies in the future when looking to integrate their sustainable efforts and public facing communications.

Best practice example: Finding a new use for an old product

The gutter protection industry usually advertises that they protect a home from serious and costly damage that is associated with clogged gutters. While this is true, most people are unaware that gutter protection systems help with rainwater reclamation.

By using a micromesh gutter protection system, like Leaf Filter, homeowners can flow fresh rainwater through their rain gutters and downspouts, and into rain barrels. The rainwater can be used for lawn care, gardening, filling swimming pools and, with treatment, brought into the home to fulfill water needs. In return, rainwater harvesting puts less strain on their municipal water supply, and makes it an appealing solution to lessen a homeowner’s water and sewage bills.

Most recently, the gutter protection industry has been able to highlight and promote this benefit across social media and on their websites. By adding green and sustainable communications to their marketing plan, and promoting it on social media and their website, the gutter protection industry has been able to pique a new audience’s attention.

Do your research: Use the right buzzwords

When it comes to communicating your sustainability efforts, incorporating green buzzwords can have real implications on your marketing communication efforts.

The Shelton Group, a leading marketing communications firm focused on energy and environment, tested 11 popular green buzzwords to find out how consumers felt when they saw a certain buzzword associated with sustainability. Interestingly, 67 percent of consumers responded positively to the word “green,” while 63 percent of them noted it was important. “Eco-friendly” and “sustainable” are also buzzwords that resonate with consumers.

The Shelton Group’s research is extremely interesting and helpful when determining what type of green jargon is appropriate to use in a marketing communications plan. We suggest downloading the organization's study to learn more about using appropriate green terms, and conducting your own research with a focus group that is specific to your industry.

Key takeaways

Over time, there will be a greater emphasis and media attention on sustainable corporate practices. We have already seen many successful companies successfully integrate their sustainable efforts into a communication plan through traditional and non-traditional methods.

Undoubtedly, companies that are integrating sustainable efforts – whether it is through lowering emissions, improved energy efficiency or promoting equitable working environments – have a distinct advantage in their industry. Not only will these efforts help companies be more profitable, but their sustainability efforts will also reduce their environment footprint, while increasing their positive social impact.

Image courtesy of Heinz (screenshot) 

Alexis Caffrey is a freelance writer who enjoys writing about all things related to home improvement and sustainability. She welcomes your feedback via email - alexiscaffreywriter@gmail.com.

Around half of employees aware of misconduct do not ‘speak up’ about their concerns, evidence from the IBE Ethics at Work Survey shows. And that’s putting businesses in Europe at risk, it warns.

“Weak speak up arrangements leave companies vulnerable. If boards do not know what is going on, they cannot protect their businesses against crisis,” comments Philippa Foster Back, director of the Institute of Business Ethics (IBE).

The IBE Ethics at Work Survey, which first launched in 2005, helps to discover what employees think about the way corporate values are applied in their workplace in Britain, France, Germany, Italy and Spain.

Results from this latest survey show that while corporate ethics programmes have matured, and now appear to be embedded in many organizations, nearly half of employees (45%) are not willing to raise their concerns about misconduct. And of those that did speak up, the proportion who say that they were not satisfied with the outcome has doubled.

Simon Webley, IBE’s research director adds: “Just over 60% of those who did speak up say they were dissatisfied with what happened next (compared with 30% in 2012). Why this happens needs addressing if organisations wish employees to have confidence that something will be done if they raise concerns of a potentially serious ethical problem.”

Access the full report here.

 

For full analysis of the report, read the December issue of Ethical Performance. Subscribe today!
 

It's time for a fresh look at fast fashion. Trendy, affordable brands like H&M, Uniqlo and Zara are often criticized for perpetuating waste by encouraging consumers to buy clothes to match the trend of the season. Indeed, Americans landfilled 19 million tons of textiles in 2013 (PDF). That's 16 pounds of textile waste for every American. But what if the fibers in those clothes could be separated and repurposed into new garments? If the industry creates a closed loop, the waste problem is lessened substantially.

H&M has made a big splash in the clothing recycling community with its partnership with I:CO. The company's goal is to create a closed loop for fashion. It's a pretty audacious goal -- one the retail clothing giant hasn't quite figured out how to meet -- but it's doing it anyway. Clothing collected from drop bins located in every H&M store is sorted, and items that can't be reused are disassembled down to the basic fibers. These fibers can be rewoven into cloth to sew new clothes. Customers are incentivized to participate with coupons and discounts on their purchases.

I sat down with H&M's global sustainable business expert, Pierre Börjesson, at BSR 2015 to get the lowdown on the program. Börjesson explained that there's a large consumer base that loves fashion and wants to lighten their impact too. The company wants to meet them where they are and give them a better product.

To that end, H&M has committed to collecting used clothing in all of its stores around the world and processing it down to the fiber level to figure out how to reuse it. The company may not have the entire loop fully closed, or even know exactly how it's going to get that way, but it's going to try. It's a moral imperative. As Börjesson explained to me when talking about the steps his competitors are taking: "I can understand how a company may not know how to do this, but that's no excuse for not jumping in."

I asked about the "fashion/impact" nexus -- is there a point at which it's too environmentally intensive to process clothes for reuse? Börjesson reminded me that it would probably always be a lower environmental impact than growing cotton from seed with the pesticides and water needed to produce a high-quality crop and gin it to make it useable in the manufacturing process. Touché.

The challenge

H&M is trying to build a market for fiber processing. As Andrew Morlet, CEO of the Ellen MacArthur Foundation, explained during a BSR panel on the circular economy: "We want clothing to be more like paper – technical, biological fiber that can work in a reusable system."

For H&M, cotton in particular is a challenge. It's the fiber the company buys the most, and it's delicate. The fibers break easily in the recycling process -- making it difficult to use to produce the same high-quality fabric. But that has not stopped H&M. The company has committed to 100 percent sustainable cotton by 2020. This is a big step up from current levels -- 21 percent sustainable cotton in 2014. Fourteen percent of total materials are sustainable overall, and cotton is the biggest share of textiles.

Sustainable cotton includes post-consumer recycled cotton, certified organic cotton and cotton from the Better Cotton Intiative. Recycled cotton and polyester is currently in use -- up to 20 percent of the fibers in the final product. Those numbers will improve over time as processes improve, Börjesson was quick to explain, and I agree with him. Don't believe me? Look at the recycled paper industry. It once wasn't possible to even find 100 percent post-consumer recycled paper, but now it is very high-quality and easy to find at any office supply store.

Another big challenge is mixed materials like cotton-poly blends. While these garments are more difficult to disassemble, the blending improves durability, so we don't want to throw the baby out with the bathwater. Börjesson said: "If we start to design for disassembly [favoring 100 percent cotton or 100 percent polyester over the mix], we reduce durability, so we need to figure out how to disassemble efficiently. [We] want high-quality fibers to reuse."

As Morlet put it: "We need to think about materials as technical flows in a natural system. We make packaging that lasts in recognizable forms for 400 years. It’s a design problem."

Reinventing the system to create a closed loop is a big undertaking, but H&M is approaching it in the correct manner: focusing on customer engagement and education, materials collection, breakdown, and incorporation into new products all at once. Each step must improve, and the company can only improve incrementally, but the entire cycle represents a sea change in the industry.

For example, once the used clothing is collected, all the sorting is quite labor intensive. It must be done manually, which is expensive. I:CO is working with H&M to research and develop mechanical solutions to solve this problem, which will make recycling programs easier to scale.

Becoming a clothing recycler has cost H&M money, but that does not mean that it's a cost center. As Börjesson puts it, this project is an investment in a future opportunity -- to develop the processes that will turn waste into gold and a competitive advantage for the company. There's a lot of room for improvement given that 85 percent of textiles currently end up in a landfill. That's one of the poorest recycling rates of any reusable material.

H&M is really on to something when it says there's no rule in fashion but one: Recycle your clothes.

https://www.youtube.com/watch?v=s4xnyr2mCuI

Image credits: H&M 1; H&M 2

Last Tuesday was an election day in the U.S. This is of course off-election year, and therefore this day could be easily ignored unless your kids go to public school and you had to find an alternate arrangement for them -- or you’re Airbnb.

Yes, Airbnb, one of the leading companies in the sharing economy was involved in a fight over Proposition F in San Francisco: “a measure that would have imposed substantial restrictions on Airbnb rentals in the city,” including a reduction of the number of days that Airbnb hosts in the city can rent their places (from 90 to 75 per year).

So, who won? The measure was voted down 56 percent to 44 percent, and Airbnb as you could imagine was extremely happy about the results. "Tonight, in a decisive victory for the middle class, voters stood up for working families' right to share their homes and opposed an extreme, hotel industry-backed measure," Airbnb said in a statement that could easily be used in November 2016 with some light changes by the Clinton campaign, if it will be able to generate similar results.

But did Airbnb actually win? Even though the measure was voted down, and Airbnb wants to export its campaign strategy against the proposition to other cities around the world where it faces similar challenges, I’m not sure the company really won.

Here are five things to consider when answering this question:

Narrative change No. 1: From David to Goliath

With projected revenues of $850 million this year and estimated valuation of $25 billion, Airbnb is no longer a small company by any measure. However, the company has still managed to maintain a narrative celebrating its struggles as a startup: from the many investors that said no to Airbnb (and are probably very sorry about it), to the “Obama O's, the Cereal of Change,” and “Cap’n McCain's, a Maverick in Every Box” cereal boxes that Brian Chesky and Joe Gebbia designed and sold in an effort to keep the company floating in 2008.

Airbnb’s is indeed a classic against-all-the-odds story. Now, however, the fight over Prop F has changed the narrative that Airbnb has so carefully been building: This is no longer just a company started by co-founders who couldn’t afford to pay the rent, but also a company that invested more than $8 million to defeat Prop F, “dramatically outspending the measure’s backers, who raised $482,000.”

Just to give you perspective: In 2014 the American Beverage Industry spent about $8 million to defeat a soda tax proposition in San Francisco. In other words, this campaign puts Airbnb in one list with behemoths like Pepsi and Coke, shifting its public image from a not-too-long-ago struggling startup to a not-too-far-away-in-the-future Fortune 500 company.

Narrative change No. 2: Not the nice guy anymore

If Uber is the ‘bad boy’ of the sharing economy, Airbnb was always the nice guy, “investing significantly in creating community and a feeling of partnership” (in contrast with Uber, which doesn’t seem to invest so much in the user experience of the 'dude driving the car'). This perception is also a reflection of the person leading the company – Brian Chesky – a very nice guy; Travis Kalanick – well, let’s just say that he’s working on it.

However, this perception has taken a hit during the campaign. First, there was the bizarre choice to put ads on Muni bus shelters, like this one, which reads: "Dear Public Library System, We hope you use some of the $12 million in hotel taxes to keep the library open later. Love, Airbnb."

Dear @Airbnb These passive-aggressive bus kiosk ads are *not cool* No love, the librarians https://t.co/rdo39E7sdz pic.twitter.com/Lf3TCAYYbw

— jessamyn west (@jessamyn) October 21, 2015

I have no idea what Airbnb was hoping to achieve with this campaign, but unsurprisingly it made many residents angry, and the company quickly recognized this campaign won’t compete for a Clio Award and took the ads down, publicly apologizing for displaying poor judgment.

Second, a day before the elections, activists took over Airbnb’s headquarters to protest against its impact on the housing market in San Francisco, chanting "no more displacement," and floating parody with slogans such as "HOMELESSNESS," “ENTITLEMENT” and "EVICTIONS" followed by "Love, Airbnb."

You can agree or disagree with the protestors’ claims, but one thing is clear: It is very rare to see such a Greenpeace guerrilla-style activity against nice guys. In a way, these sorts of activities draw the line between nice guys and not-so-nice guys.

Finally, if you look at the dichotomy that Neal Gorenflo describes in his piece last week between Platform Coop and Death Stars, the way Airbnb handled the campaign against Prop F (the big money, the ads and even the victory announcement) makes it a more integral part of the Death Stars camp, which includes companies mixing “technology, ideology, design, public relations, community organizing and lobbying in a powerful new formulation that’s conquering cities and users around the world.”

Narrative change No. 3: Airbnb has fucked up the culture

Although only three years passed since Peter Thiel told the Airbnb team “don’t fuck up the culture,” it seem like this advice was forgotten. How else could you explain the Airbnb ad campaign? In its apology on Twitter, Airbnb wrote: “We apologize for Wednesday’s SF ads. They displayed poor judgment and do not live up to the values and humanity of our global community.”

“The culture is strong; you can trust everyone to do the right thing," wrote Chesky. If indeed this ad campaign is a sign that something is wrong with Airbnb’s culture, could we trust the company in the future to do the right thing?

Narrative change No. 4: Airbnb struggles with design for complex relationships

Last year at the Aspen Ideas Festival, Brian Chesky described very accurately the challenge Airbnb faces: “When we designed Airbnb, I thought there were two parties in the transaction – there was a guest and there was a host -- and I match these two people together and that was the end of it. And over time I learned there were many other parties of a transaction – there was a guest, there was a host, there was a neighbor, there was a landlord, there was maybe the building owner … there was the city government, there was the hotel industry … then you had local businesses. You started having not two parties to a transaction. You had 10 or 12 parties to a transaction.”

This challenge, in other words, is how to design for complex relationships, and it is a complex challenge, as it requires a very different mindset from the one currently dominating the sharing economy, moving from a narrow peer-to-peer point of view to a broader stakeholder point of view. The fact that Airbnb had to deal with Prop F in the first place, as well as the way it handled it, show it still struggles with this challenge. What’s more, it’s not clear at all to what degree Airbnb has changed its mindset to acknowledge the multiple parties that are part of every Airbnb transaction.

Narrative change No. 5: The (missing) resilience factor

“Over the next year, Airbnb wants to built 100 community guilds in cities around the world," Chris Lehane, Airbnb’s new head of global policy, explained in a press event last Wednesday. "These 'grassroots' organizations would receive tools, training, support and an undisclosed amount of money from Airbnb to help fight unwanted local regulations.”

The problem is that Lehane, a former political strategist to Bill Clinton, thinks in terms of winning political campaigns, while the actual combat field might be very different. I believe that cities around the world will ask themselves more and more whether companies like Airbnb have a positive or negative impact on their resilience. If the answer is the former, they will be willing to legalize these platforms, but if the answer is the latter they won’t do it. Hence, Airbnb needs to think in terms of resilience and figure out how it could help improve the resilience of communities rather than think in terms of political campaigns and how to win them.

If Airbnb learned the wrong lesson from the fight over Prop F, I’m not sure it actually won.

So, what do you think – did Airbnb won or lose the fight over Prop F?

Image credit: Flickr/Open Grid Scheduler

Cities are the 21st-century battleground for mankind’s adoption of sustainability. It is in cities and their surrounding urban areas where 54 percent of the world’s population live, including 270 million Americans.

Cities, rather than farms or factories, are now the largest driver of economic growth. Our top 20 metropolitan areas account for 52 percent of our national GDP. It is inside our cities where we convert most of our consumerism into garbage, emissions and excretions. Most of the pollution we breathe is either sourced inside a city or created to generate electricity for a city. Our daily lives are now tied to the ability of municipal infrastructure to withstand or repair the damaging impacts of storms made more intense by global warming.

The growing weight of human and environmental health impacts is forcing city governments to push aside the legislative luxury of debating whether climate change is real. The health impacts of mass-marketed food porn is forcing mayors and city councils into local actions that attempt to slow an unprecedented increase in obesity and diabetes. Innovation is now the imperative for city mayors, councils, staff and community leaders in search of best practices that will sustain their economies and the health of their citizens. Their combined quest is to enable a community and business environment where adopting green best practices is the default option rather than a “change-order” from the norm.

'Default to green'

Gil Friend is the chief sustainability officer for the city of Palo Alto, California. He exemplifies how city staffs around the world are pushing innovation’s boundaries to discover, and adopt, sustainable solutions. Friend is leading a strategic assessment and stakeholder outreach to surface Palo Alto’s alternative paths for achieving an 80 percent reduction in emissions. It was from Friend that I first heard of the phrase "default to green."

I had the opportunity to talk with Friend at the 2015 Sustainable Brands conference. The following short video is edited to highlight the many innovations achieved by Palo Alto, including:

• 80 percent landfill diversion


• Innovations by the city's municipal utility to achieve carbon-neutral electricity supplies


• The adoption of a new contracting criteria that makes choosing the green supply option the default selection, rather than a change-order, from normal procurement criteria.

https://www.youtube.com/embed/ZsOmMCoKcOg

Indianapolis

Default to green is not a “California thing.” It is now emerging as a global mega-trend in cities around the world. I saw it on the streets of Indianapolis while visiting this progressive town as the keynote speaker at its annual SustainIndy dinner, an annual event that attracts 500 attendees.

Indianapolis, like most cities, is in constant search of economic development that will generate quality jobs and taxes that can sustain the city’s economy and community services. Under Republican Mayor Greg Ballard’s leadership, the city has invested in sidewalks and hundreds of miles of bike paths that has successfully sparked residential development. The walkability and bike-ability of the city has made it a tourist destination.

Around town, I found conveniently located bike-sharing stands and plenty of riders pedaling to charming urban centers hosting an eclectic mix of restaurants, shops and theaters. Corporate America has discovered that Indianapolis’s investment in walkability and bike-ability has made it highly attractive to millennials. Cummins is building a new office building, and Eli Lilly is both a major employer and one of the 10 coolest places to work in Indianapolis. (If a town has a list of “cool” places to work then that is a sure sign it is attractive to the millennial generation.)

Cities pioneering 100 pecent renewable electricity

Aspen, Colorado, Burlington, Vermont, and Greensburg, Kansas, are now running their cities on 100 percent renewable energy. Austin, Texas, has set a target of sourcing the majority of its electricity from renewable energy in 10 years. That city just recently signed a 400-megawatt solar power contract for an unprecedented average price of 4 cents per kilowatt-hour.

While state utility commissions continue to move at a snail’s pace from their entanglement in 100 years of utility regulatory law, it is city governments that are proving that electrical service can be reliable, cost effective, zero emissions and the default-to-green choice.

21st-century trends shape sustainable development

Default to green is now emerging as a 21st-century best practice. Global manufacturing economies of scale in solar, batteries and smart building technologies are positioning zero net energy buildings as the least cost, and lowest emissions, solution to urban pollution. Autonomous electric vehicles will revolutionize how people move about a city while also dramatically reducing the emissions footprint of urban transportation.

It is our urban millennials that are breaking free from mass-marketed food porn by adopting “lose weight, have fun, live more” obesity and diabetes solutions for themselves and their parents.

It is in our cities where the pioneering 21st-century path away from consumerism’s emissions, excretions and waste is being paved with default-to-green innovations that will enhance human health and our economy.

Image credit: Bill Roth