Polluters, permits and profits

The Financial Times recently reported that “loopholes” in climate change regulations are allowing Chinese factories to profit from installing scrubbers on local chemical plants (see “Chinese plants and carbon traders exploit loophole,” 1/18/07).

Personally, I thought this was actually the point of the regulations, and represented a welcome evolution from command-and-control regulations. In fact, this is essentially what I wrote my undergraduate thesis on, though I discussed the SO2 market rather than the CO2 market.

The idea of tradable pollution permits is that imposing uniform standards on all producers is disproportionately expensive for some of them. So they'll fight the policy, rightfully arguing that it would put them out of business - and policymakers respond by watering down the regulations, leading to less total abatement.

An alternative that economists tend to favor is to set the total amount of pollution that you "want" (i.e., can stand) - generally at less than its current level. Then you allocate "rights" to it, and those companies that can reduce their pollution with the lowest cost do so in order to trade their rights for money. Companies that find abatement more expensive buy these rights. The net result is that you get the amount of abatement you originally wanted, and the polluters work out among themselves who can physically accomplish it at the lowest cost - which is the economically efficient thing to do.

So, the article says that Chinese companies are installing scrubbers, and making a huge profit from cheaply reducing their pollution that way. So what? If the total amount of CO2 reduction doesn't seem like enough, it should have been set differently at the beginning. But this is exactly the sort of behavior that the system is designed to encourage.

Two neat research sites for CSR and BBOP

I've just discovered a very rough beta-version of "csr-literature.net" - which promises to be a wonderful resource of CSR-related academic papers. It seems to be affiliated with "csr-news.net/" - another great resource, but more useful if you speak German.

Also, Harvard Business School's Baker Library staff has consolidated (and in some cases summarized) a great volume of research on private-sector involvement in poverty alleviation - with the memorable acronym "BBOP" (for "Business at the Base of the Pyramid"). Those outside the Harvard intranet won't necessarily be able to link to Harvard-owned articles, but can at least know what papers and other resources to look up elsewhere.

NEWS SUMMARY -- 1/16-1/21

It seems that everyone took a couple of weeks to wake up from their holidays, but now the world wide web is overflowing with interesting CSR news. Here is a start on some of the most interesting issues and articles:

• As the United Nations makes the transition to new leadership under Sec-Gen Bank Ki-Moon, it will be just as focused on CSR (“United Nations Underlines Supports for Corporate Social Responsibility” CSRwire 1/17). In fact, the UN will even be expanding the Global Compact to include schools who pledge to make CSR part of their curricula (see “A degree of ethical leadership” Financial Express 1/18).
• In the wake of the Fortune survey of workplace satisfaction, the week’s news had a distinct bent toward employees. The most relevant of the magazine’s special section may be “Best employers, great returns” (Fortune 1/18); also, another survey shows that “In the War for Talent, Good Companies Finish First” (CSRwire 1/22). Finally, Diversity Inc's January issue examines “Workplace Diversity: How Do Companies Handle It Abroad?"
  
• Supermarkets are caught between conflicting causes. On the one hand, in the UK they are making great progress in helping consumers reduce their carbon impact (see “Tesco follows M&S with climate change move” (The Independent 1/16) and “Sustainable supermarkets” (Ethical Corporation 1/12), but shifting to local production can have a detrimental effect on African economic welfare (see “Africa’s supermarkets and the poor” Ethical Corporation 1/12).
• BP’s safety practices were lambasted by a panel led by James Baker, former US secretary of state but still “BP denies that it put profit over plant safety” (Financial Times 1/17).
  
• The very concept of CSR is being examined and debated heavily, particularly in the UK as the Labour and Conservative parties embrace different philosophies (see “Carrots and sticks needed for business, say Tories” Financial Times 1/16; “Private squalor, public affluence” MP Cheryl Gillian 1/16; and “I caught a glimpse of the Cameron future: alarm bells rang”; Sunday Telegraph 1/21).
• In the US, the major issue seems to be whether voluntary initiatives can ever be enough, as a Harvard study claims that “The Problem with Voluntary Corporate Initiatives Is -- Well, They Are Voluntary” (SocialFunds 1/16) and in the meantime a new voluntary partnerships and initiatives are touted in the press (see “Six power groups back bill to curb emissions” Financial Times 1/18 and “Beyond The Green Corporation” BusinessWeek 1/29).

Recycline - truly obsessive, but kinda cool

The other day I went out to dinner with some Net Impact folks, and one of them showed up with a stack of toothbrushes for us. For some reason, he thought it was funny when I assumed he was a dentist.

Anyway, it turns out that he works for Recyline, purveyor of several obsessively-environmental products, including toothbrushes. The handle is made entirely of old yogurt containers. The paper in the packaging is 100% recycled (50% post-consumer). The plastic in the packaging is touted as a re-usable carrying case (with ventilation holes!). When you're done with the toothbrush, you can send it in a pre-paid envelope back to the company, where it eventually joins other used recycline toothbrushes to become a park bench. They've truly thought of everything.

Even though I'm making it sound pretty dorky, I'm actually quite taken with the idea. Recycline is wisely founded on the belief that recycling only works if there's a market for the materials we put in those blue bins. Every trash day, I wonder if the carefully-washed tubs and milk bottles really go anywhere other than a landfill. Recycline has given me a little more faith that it does.

The company doesn't have many products yet - just dental care, razors, and disposable (I mean recyclable!) tableware. But they expect to expand the product line soon.

The Wal-Mart Conundrum

Today's post will be devoted exclusively to that behemoth of modern capitalism: Wal-Mart. Is it good or evil? Both or neither? And what can we do to steer it right?

In his aptly-named book, The Wal-Mart Effect, author Charles Fishman writes:

"Wal-Mart isn't just a store, or a huge company, or a phenomenon anymore. Wal-Mart shapes where we shop, the products we by, and the prices we pay -- even for people who never shop there.... Wal-Mart reaches around the globe, shaping the work and the lives of people who make toys in China, or raise salmon in Chile, or sew shirts in Bangladesh, even though they may never visit a Wal-Mart store in their lives."

He's right -- Wal-Mart is more than just a store now. It's a force of capitalism. And that inevitably leads people to ask whether its influence is good or bad.

Recently, a colleague at 1bloc wrote an article entitled "A Reason To Like Wal-Mart?" in which she described the company's recent efforts to open low-fee banking institutions both in the U.S. and worldwide, arguing that such operations would provide many of the benefits of microfinance to communities who often lack access to formal banking. But what struck me was the title -- "A Reason...." I think there are many reasons to like Wal-Mart. There are also many reasons to despise Wal-Mart. Here's a quick overview of the company's recent pro's and con's:

Pro's:

1. recently introduced sustainable fishing practices
2. introducing more organic foods and making them affordable
3. developing hybrid trucks for its fleet
4. convincing consumers to buy energy-efficient bulbs
5. providing many commonly-prescribed drugs for only $4
6. ongoing pressure on suppliers to reduce packaging
7. low prices can help poor consumers buy things they need

[Actually, when I search on that last one, all I find are reference to the high cost of low prices!]

Con's:

1. infamously low wages and benefits
2. union-busting (except in China, where the union doesn't represent workers much anyway)
3. using its heft to re-zone property that disallows big-box stores
4. creating cultural homogenization but putting mom & pop stores out of business
5. encouraging needless consumerism (link is a parody... or is it?)
6. recent fake-blogging (i.e., "flogging") debacle
7. generally replacing aspects of American life that we've sort of grown to like

[For a great discussion of several of these issues, see "One Two Three Four We Don't Want Your Superstore" by PBS.]

When I first started hearing about Wal-Mart (it's been a very slow infiltration here in New England), I decided to boycott it - a major step for me because it was the only store I was boycotting. Then again, it wasn't as if I had a Wal-Mart anywhere nearby anyway... so this was more personally symbolic than anything else. But I told myself if I was ever in a Wal-Mart, I wouldn't buy anything. A year later, visiting Texas, I finally had the opportunity to not buy some very tempting 16-cent avocados.

In 2005, I noticed that Wal-Mart was finally paying attention to the negative attention it was receiving, and seemed to be trying to change. CEO Lee Scott was making speeches about going green. I'm sure this was financially-motivated, but that's alright by me. Most of business is financially-motivated, and I just want to do my part to align the financial and social motivations. Based on the company's changed behavior, I decided to end my mainly-hypothetical boycott, and eventually bought a set of cheap luggage from a Wal-Mart in New Hampshire.

Now, as we enter 2007, I am again re-thinking my Wal-Mart policy. The company seems to be doing a number of good things, but that will never change the fact that its purpose in life is to be a competitive big-box retailer. And I don't happen to like big-box retailers. They depress me, and their low prices don't seem to make up for their low wages. No matter how many efficient light bulbs they sell, I don't really want to live in a world of big-box retailers.

So what do I do? Buy at Wal-Mart to signal that I support the changes they're implementing? After all, if they have to exist, I'd rather they try to be socially and environmentally conscious. Or do I boycott once more, in the hopes that they will just go away and leave the planet alone?

Decisions about where to buy a few avocados and $35 worth of luggage are not enough to make a big impact - but I like to know where I stand.

NEWS SUMMARY - 1/9-1/16

Global regulation took center stage last week:

• The recently-appointed UN Sec-Gen Ban Ki-Moon addressed business leaders in New York (“Business Community and UN Must Carry On Partnership”; UN News Center; 01/10/07)
  
• The United Nations Development Program announced an eight-country responsible-business project in Europe (“EC, UNDP Promote Responsible Business”; UNDP Newsroom; 01/11/07).
  
• Ethical Corporation takes a step back to examine the usefulness of international law in CSR implementation (“Ultimate Governance”; 01/11/07)
• Several major multinational retailers have voluntarily agreed to cooperate on supply-chain labor standards worldwide (“Big Retailers Join Forces”; Financial Times; 01/11/07).

In socially-responsible investing...

• Domini charts new territory by creating two new funds focused outside the traditional investment geography; they are the “PacAsia” and “EuroPacific” Social Equity Funds (“New Domini Funds Invest in the World”; SocialFunds.com; 01/11/07)

In company news...

• Bill and Melinda Gates had a busy week, as their Foundation prepares to engage in a wholesale review of investments following accusations that it funds the very social ills it seeks to repair (“Gates Foundation May Shift Billions”; The Guardian; 01/12/07); meanwhile, back at the office, Bill Gates is promoting Dell’s new tree-planting program (“Dell Unveils ‘Plant a Tree for Me’”) and encouraging other computer manufacturers to follow his lead in offering free recycling (“Dell Says Plant a Tree, Help the Envirnoment"; New York Times; 01/09/07)
• Wal-Mart is also maintaining a steady stream of positive press, despite the recent fake blog scandal: a new set of TV ads touts the feel-good values of “Sam’s Dream” (Adweek, 01/09/07), and the Financial Times discusses the retailer’s recent efforts to develop a more fuel-efficient fleet (“Wal-Mart to Develop Hybrid Truck Venture”). Meanwhile, the conservative Townhall.com has the retailer in its sights for being too engaged in socially responsible practices (“Shining the Light…”; Townhall.com; 01/13/06).
• General Motors seems to be leaping into the market for alternative-fuel vehicles with its development-stage Volt, an electric car that will contain both a battery and an on-board generator (“GM Looks To Electric Car To Spark Revival”; The Guardian; 01/08/07).

Finally, in academic news...

• The Stanford Social Innovation Review contains an in-depth article, co-authored by social enterprise guru Jim Austin, on the trend toward blending the private and social sectors (“Capitalizing on Convergence”) - a trend also noted recently by my college at 1Bloc ("Sector Blending"; 01/02/07).
• Knowledge@Wharton examines whether and when corporate philanthropy increases profits ("Corporate Philanthropy Inspires Trust; Does it Also Prompt Higher Profits?"; 01/10/07), with attention paid to the differences between 1) industries that are more competitive versus more oligopolistic/monopolistic, and 2) industries that rely more or less on marketing to drive their profits.
  

Green Buildings Are All The Rage

The sustainability movement has been paired with construction practices to create a "green building" boom. Essentially, green buildings may: 1) make more sustainable use of natural resources for building materials, 2) be more are energy-efficient, 3) incorporate renewable energy sources such as solar panels, 4) be aesthetically integrated with the environment, and/or 5) feature "natural" aesthetics such as sunlight or running water indoors. Advantages can include lower environmental impacts, lower operations cost, and happier/healthier/more productive inhabitants. In the U.S., the generally-accepted certification for green buildings is the LEED Green Building Rating System™, where LEED stands for Leadership in Energy and Environmental Design.

I was only vaguely aware of this movement until I attended Andy Savitz's book launch at the new Boston Headquarters of Genzyme, which is considered a model of green building practices in a commercial office building. After that, I noticed that a fellow 1Bloc writer chose to explore the idea of Green Affordable Housing for her recent article.

Then, it was just everywhere. Was I just more attuned, or was this phenomenon really passing some sort of tipping point? I can't be sure, but in late December I learned that Boston planned to amend building codes to require all large-scale private construction to meet "green" standards, and that several other cities are making similar changes in legislation.

Around the same time, the business magazine Barron's quite appropriately announced that green buildings were going mainstream (see "As Green as the Grass Outside" from the 12/25/06 issue). The article reports that, according to The Green Building Council (which runs LEED), 5% of all new U.S. commercial from 2006 construction will be LEED-certified, if the certifiers can ever dig themselves out of their vast backlog of requests.

Finally, a couple of days ago, I received an email about a new website called Rate It Green (www.rateitgreen.com) which allows individuals and professionals to share ideas about green building practices and products.

What a huge surge of news about one topic! I'm sure there's plenty more, but that should provide an introduction if you're not familiar with the topic, and some useful links if you need to know more.

Base of the Pyramid book

A quick note to regular readers: I just discovered that my blog setting was not automatically approving comments anymore, and I had quite a backlog! My apologies. I have no desire to censor any of them. Just a glitch.

Today I'd like to announce a new book that a friend of mine worked on extensively (go Brooke!), called Business Solutions for the Global Poor: Creating Social and Economic Value.

It is an edited compilation of papers and case studies presented at a Havard Business School conference in 2005. Each relates somehow to the private sector's role in poverty alleviation. Generally speaking, they are in the spirit of C.K. Prahalad's Fortune at the Bottom of the Pyramid; in fact Prahalad was a speaker at the conference.

The book is a bit pricey, but all royalties are being donated to the International Committee of the Red Cross.

I hope to read it soon and post a review - or to hear from blog readers who have read it. I swear, your comments will be posted this time!

NEWS SUMMARIES (belated)

Happy New Year! And apologies for my long lapse. No, it is not a sign that the blog is dying – just that I had a busy holiday travel schedule. I’ll be blogging onward into 2007, but first let me provide some belated news tidbits:

Swiss Re Offers Employee Rebate to Reduce Carbon Footprint
(GreenBiz.com, 5 January 2006)
The company is offering to reimburse workers for half the money they spend on carbon offsets for their mobility, heating, and energy use.

An Ousted Chief’s Going-Away Pay Is Seen by Many as Typically Excessive
(New York Times, 4 January 2006)
Gadflies Get Respect, and Not Just at Home Depot
(New York Times, 5 January 2007)
The biggest corporate scandal right now is the “resignation” (a.k.a. firing) of Bob Nardelli, formerly the overpaid and under-performing CEO of Home Depot, who received a $210 million severance package for his trouble. This story is rapidly becoming an example of both successful shareholder activism (which forced the resignation) and of rampantly excessive executive compensation.

Top Corporate Social Responsibility News of 2006
(CSRwire, 4 January 2007)
Top Five Socially Responsible Investing News Stories of 2006
(SocialFunds.com, 5 January 2007)
No point in summarizing the summaries – just follow the links for a lighting-fast review of the top issues in CSR and SRI from the past year.

Independence from the Corporate Global Economy
(Yes! Magazine, Winter 2007 Issue)
A veritable manifesto on how to live without big corporations, through buying local, recognizing non-financial “economies” such as gifts and cooperation, and mobilizing for greater awareness of these types of alternatives.

Big Dig: Mongolia Is Roiled By Miner's Huge Plans
(The Wall Street Journal, 4 January 2007)
A businessman plans to operate one of the world’s biggest copper and gold mines in the poor and land-locked country of Mongolia, and expected local residents to welcome the boost to GDP – in fact, the project might double the national income. However, as developing nations worldwide have struggled with foreign mining companies that deplete their ecosystems and engage in human rights abuses, Mongolian activists are protesting the mine and Parliament is considering withholding permission for it to operate.

Fighting Over Gold In the Land of Dracula
(The New York Times, 3 January 2007)
A poor small-time farmer in the Transylvania province of Romania is fighting a multinational mining corporation that wants his land – and attracting support from a host of celebrities and activist organizations worldwide.

Be It Ever So Homespun, There's Nothing Like Spin
(The New York Times, 3 January 2007)
Companies are waking up to the fact that a growing segment of food-shoppers are leaning toward natural, environmentally-friendly and socially-conscious purchases. However, rather than simply spurring an increase in responsible sourcing, much of this shift is fueling a change in packaging design to evoke the feeling of healthy and earth-friendly foods. The greenwashing can sometimes be difficult to discern from the real thing.

Wal-Mart Puts Some Muscle Behind Power-Sipping Bulbs
(The New York Times, 2 January 2007)
The big-box retailer is throwing its impressive weight behind efforts to switch consumers from traditional incandescent bulbs to the more energy-efficient florescent bulbs. As part of the effort, it is also leaning on suppliers to find ways to accomplish the shift. If it succeeds in its goals, Americans stand to save $3 billion in energy costs by 2008.

When 'Refurbished' Takes On an Earth-Friendly Vibe
(The New York Times, 31 December 2006)
If you’re reading this, chances are you both, 1) care about the environment, and 2) use a computer. So how about applying your environmental values next time you buy a computer? This article discusses the eco-benefits of buying a “refurbished” computer, and also a new EPA-funded rating standard called Epeat, short for “Electronic Product Environmental Assessment Tool,” which considers factors such as energy efficiency and the levels of various hazardous chemicals. Finally, it may be worth waiting a bit to purchase, as more eco-friendly models are expected to be out in 2008, as manufacturers find ways to meet Europe’s new and stricter standards.

Gentlemen, Start Your Plug-Ins
(The Wall Street Journal, 30 December 2006)
A former head of Central Intelligence wants to convince you to strive for replacements to Middle-East oil, and his favorite substitute seems to be electricity, since there would be very little new infrastructure needed. In the long run, he sets great store by new genetically modified biocatalysts that enable ethanol to be produced from a wide variety of plants – a much more efficient strategy than corn-based ethanol production.

Launch of Three New Clean Tech Indexes Culminates Banner Year for Green Investing
(SocialFunds.com, 29 December 2006)
In what some are calling the "year of green investing," 2006 ended with New York City-based investment bank Jefferies Global Clean Technology Indexes introducing three new green indexes. Altogether, the number of these indexes more than doubled last year, from five at the start of 2006 five to eleven at the close of the year.

UN Global Compact to Delist Additional 203 "Inactive" Companies
(Press Release from United Nations Global Compact, 28 December 2006)
An early criticism of the Global Compact was that it required very little of its members, but recently the UN-run organization has shown an increasing willingness to boot those companies who don’t abide by its guidelines. Those who have failed to report their efforts via the Communication on Progress framework have been dismissed – 335 of them last October, and an additional 203 as of January 1, 2007.

Illegal Power Plants, Coal Mines In China Pose Challenge for Beijing
(The Wall Street Journal, 27 December 2006)
As the Chinese economy grows by leaps and bounds, higher energy demands have spawned illegal coal-fired power plants, which it turn have spawned illegal coal mines. These add to the country’s environmental woes, and tend to lack safety standards. A power plant in the province of Inner Mongolia was discovered recently when part of it collapsed, killing six workers. Last year, most of China’s nearly 6,000 coal-mining deaths occurred in illegal mines. Sometimes the central government is unaware that these operations exist, but in some cases officials are turning a blind eye; a recent investigation found that over 4,000 Chinese officials held financial stakes in illegal mines.

As Green as the Grass Outside
(Barron's, 25 December 2006)
It looks like “green buildings” are going mainstream. The U.S. Green Building Council, which offers the Leadership in Energy and Environmental Design (LEED) certification, has a backlog of nearly 5,000 buildings to certify, and an estimated 5% of all new 2006 commercial construction will be LEED-certified once the agency can squeeze it all in. Why? Not only is it trendy and cool, but there are financial benefits too. Genzyme’s new Boston headquarters, for example, uses 42% less energy and 34% less water than other buildings its size. Plus, studies show that ecologically-designed workplaces make employees healthier, happier, and more productive. So, why only 5%?!

New Certification Standard Proposed for Climate Offset Products
(GreenBiz.com, 21 December 2006)
The Center for Resource Solutions, along with Green-e GHG Advisory Group, is proposing a new standard for carbon offsets, to ensure that providers are really offsetting the amounts they claim. The groups hope the new standard will ensure credibility and increase transparency, thereby encouraging more individuals and businesses to engage in carbon-offset practices. The draft standard, available online, will be out for comment until the end of January 2007, and a stakeholder conference call will be held in late January. For more information, contact Alex Pennock at alex@resource-solutions.org.

U.S. Companies Show Progress in Role of 'Good Corporate Citizens'
(The Chronicle of Philanthropy, 20 December 2006)
A report by the PR firm GolinHarris explores the latest trends in public perception of corporate responsibility. Dozens of companies are ranked, with high marks going to Ben & Jerry’s, Target, and Patagonia, and low marks going to Exxon, Philip-Morris, and Shell. Survey participants also ranked the factors that are most important to them in assessing a company’s goodwill: top priorities were treatment of employees and ethical business practices, and less-important was corporate philanthropy. Two-thirds said that companies should focus more on social responsibility, and nearly half believe that business today is moving in the wrong direction.

A corroded culture? How accidents in Alaska forced BP on to the defensive
(Financial Times, 18 December 2006)
British Petroleum may have re-branded itself as “Beyond Petroleum” is now struggling to maintain its reputation for enlightenment and responsibility (at least relative to its peers). After several industrial accidents and pipeline leaks over the past few years, observers are starting to claim that BP isn’t just unlucky – it has systematic problems creating a safe workplace and maintaining its operations. This investigative report pieces together the personal stories of injured workers and questions the general safety culture – or lack thereof.

How Suite It Isn’t: A Dearth of Female Bosses
(New York Times, 17 December 2006)
Since the feminist movement of the 1970s, women have been graduating from top colleges and MBA programs in ever-larger numbers – so why aren’t they taking boardrooms equally by storm? In the Fortune 500, only 16% of corporate officers and less than 2% of CEOs are women. This article explores possible reasons that women aren’t reaching the top, and what might be done to change that.
Note: for similar coverage of the same issue in the UK, see the Financial Times article of 5 January 2007: “Size of gender gap in top jobs 'woeful'” which is based on a report by the Equal Opportunities Commission.