CSRHub Blog Research on ESG metrics and comments on sustainability best practice

By Guest Blogger, Kevin Hagen

The Hagen-Wilhelm Change Matrix

Phase IV is getting to some rarified space.  While there are groups or divisions within companies who are demonstrating phase IV behavior and results, there are few complete companies at this level.  To get a sense of how many, I turned to CSRHub.  This powerful on-line resource distills some 291 sources of data into a 100-point scoring system.  Using CSRHub score as an indicator of where a company is on the change matrix can give an idea of the distribution of companies on the journey.  Out of hundreds of thousands of companies worldwide, about 8,500 have been identified and analyzed for their sustainable business efforts.  Fewer than 2000 score above a 56 and no company scores above an 80.  That suggests that less than 1% of companies are possibly operating at stage IV.  With so little real world experience it becomes clearer why there is little understanding of this definition of “sustainability”.  It also says that companies just getting started are not too late.

An objective score is helpful, but it’s very difficult to use a single snapshot to understand where a company really is.  Remember, companies are just collections of people, each one has to make their own shift to sustainable business thinking. So what are other indicators of Stage IV?  One is when sustainable business skills, competencies and education are required to be successful at “ordinary” roles.  At REI it was pretty much required to understand sustainable forestry and the FSC system in order to be a paper buyer.  USGBC LEED accreditation was becoming a necessary credential to work in store development and real estate.  Competency with the Sustainable Apparel Coalition’s HiGG Index and other Life Cycle Assessment tools was becoming required to be a Product Designer.  And an understanding of social tools like those from the Fair Factories Clearinghouse is needed to be in sourcing.

Another indicator is to look at how “sustainability” projects are being managed. Is there a special project office running unique efforts, or are sustainable business criteria helping to drive priority and resources to projects across the organization.  How about collaboration?  Do good ideas have to climb a whole chain of command and then back down the other side in order to get permission to proceed, or are people at all hierarchy levels empowered to reach across silos to get things done?

More clues come from looking at business results. In stage IV negative environmental and social impacts (the brown line) are understood, measured and being aggressively addressed holistically.  In fact, through game-changing innovations, negative impacts have been disconnected from company growth and are being reduced in absolute terms without unintended consequences.  In other words, the brown line is going down while the business prospers.  Beyond success at “doing less bad”, the company has started to identify ways in which it can use the power of enterprise to create value and measurably make things better.  The Green Line is on the rise.

A good example happened at Gildan, a multibillion-dollar textile company based in Montreal, Canada.  At first they successfully improved energy efficiency in their mills in Central America (less fuel, less pollution, less cost = less bad).  Not satisfied, they radically redesigned the steam plant that runs their factory, switching from barges of imported bunker fuel oil to biofuels provided by local agricultural waste and secondary crops.  They not only eliminated carbon emissions and eliminated a potential spill hazard; they broke their financial dependence on external fossil fuel and replaced it with a stable local energy supply that also provides an economic engine for their community.  They used their business to create environment and social benefits while driving down operating costs and insulating themselves from risks.  That’s an example of the green line rising – Stage IV results.

Keys to the game: 

In previous articles I offered ways to anticipate what's coming and set the stage for successful next steps.  The problem this time: No one has reached Stage V, so we're not sure what the keys to the game are.  But I can offer an educated guess.

Radical Collaboration: As I talked about in an earlier article; Sustainability is a description of a system, not an individual entity or business.  Without a forest eco-system not even a tree is sustainable.  So in order for business to achieve sustainability we’ll have to do it together.  The capabilities for business people to engage with organizations outside their four walls will be critical.  While we’re used to working with customers and suppliers, the idea of radical collaboration is effective engagement with organizations in a more complex web - beyond buy/sell relationships. A great example is the Sustainable Apparel Coalition.  This is a group of well over 100 Brands, factories, NGOs, academics and others working to make the textile industry more transparent, accountable and profitable by tackling social and environmental challenges.  Learning the skills needed to be successful in these kinds of collaborations will certainly be a key in Phase V.

In the final post in the series, we’ll dive deeper into the illusive Phase V.

See Kevin's post introducing The Roadmap Series.
See The Roadmap Series: We all start at Stage I
See The Roadmap Series Phase II: The First Big Step
See The Roadmap Series, Phase III: From Personality to Process

Kevin Hagen is a sustainable business advocate. For over a decade he has helped business be more successful by making the shift to more sustainable thinking. As a leader inside medium to large companies or as an external advisor Kevin helped design and implement successful sustainability strategies and programs. Most recently, Kevin lead Corporate Social Responsibility (CSR) strategy and implementation at REI, a leading outdoor retailer and the U.S.'s largest consumer co-op. Kevin's team delivered great results, received a lot of recognition and showed that a mission based company with nearly $2B in sales can reduce it's environmental footprint while growing profitably. See Kevin's blog where he shares ideas, news and offer resources and organizations that he thinks can help companies make progress toward sustainability while delivering bottom line benefits at the same time.

By Carol Pierson Holding

Last week’s Presidential debate was supposed to showcase the differences between President Obama and his challenger, Mitt Romney. But between Romney’s radical move to the center and Obama’s lackluster performance, the two seemed to agree more than they disagreed.

Both answered Jim Lehrer’s first question “How would you create new jobs?” with the same priorities: job training and creating energy independence. In fact, both agreed to boost oil and gas production. But Obama added a plug for his alternative energy policies. “We've got to look at the energy sources of the future, like wind and solar and biofuels, and make those investments,” he said, referring to his largely successful subsidies for alternatives to fossil fuels.

From that point on, Romney turned oil and gas into a symbol of patriotism and the path to prosperity, using the word “energy” three times more than Obama and positioning new energy sources as expensive failures.

Obama failed to cite the reason his policies are so desperately needed, that climate change may in fact be the greatest threat to our national security. Instead, Obama looked like a spendthrift or worse, out of touch with American middle-class concerns. Even though, according to Bloomberg, 70% of Americans now believe in climate change. Even though, according to CSRHub ratings, safeguarding the environment is increasingly a priority for business.

Romney called out gas prices that have doubled and the rise in electricity prices, citing the crushing burden on middle-class families.

Ignoring the facts, Romney criticized Obama for not opening Federal lands for exploration. He promised to double the number of permits and open coasts and Alaska to fossil fuel companies.

Obama mentioned solar, wind and geothermal only once. Without bringing up climate change, and without a rebuttal, Romney pressed on.

Romney promised to “bring that pipeline in from Canada“ and to help “people in the coal industry…crushed by (Obama’s) policies.”

As if thumbing his nose at environmental science, he smiled right into the camera and said, “I like coal.”

His rationale for these policies? “I want to get America and North America energy independent so we can create those jobs.”

So when Obama brought up cutting the $4 billion in “corporate welfare” that the US pays every year to behemoths like ExxonMobil, he sounded like a spoilsport.

Romney argued that Obama’s facts were wrong – the oil subsides are actually $2.8 billion – and that those subsidies are inviolate. “That's been in place for a hundred years,” he said, as though oil subsidies were deeply entrenched in our Democracy.

But what really stuck in my mind was Romney’s brilliant repositioning of the new energy subsidies. By comparing a $2.8 billion cut to oil and gas against the $90 billion in “breaks for the green energy world,” he made support for alternative energy sources seem hugely expensive and frivolous in comparison to far cheaper oil subsidies. He repeated twice that green energy investment is “about 50 years' worth of what oil and gas receives.”

Still not satisfied, Romney linked the $90 billion to Solyndra and the other “50%” of green investments that had failed. In fact, those investments have lost just $3 billion, or 3%, but Obama said nothing, so it stood as fact.

But the real shame is that Obama lost the opportunity to pull out numbers that make everything else pale in comparison. NOAA reports that 2011 saw a record 14 extreme climate disasters that cost over $1 billion each for total losses of $55.3 billion and 660 lives. Future projections are even grimmer: US News cites projections of 100 million deaths globally from climate change in just 18 years. In the US, 2% of America’s annual GDP, or some $300 billion, will evaporate.

Yet Romney plans to eviscerate the EPA and a number of other programs aimed at reducing the effects of climate change. He’s a believer that climate change is real, yet will do nothing to mitigate the effects. A New York Times article cites Romney’s intent to take a weed whacker to environmental regulations going back 40 years – taking down even those declared “unambiguously correct” by the Supreme Court.

Climate change may not be popular, but people do want to hear about clean tech and green jobs. These are exciting, entrepreneurial opportunities for job creation. Where were they in Obama’s debate?

At heart, climate change is a moral issue. The hardest hit will be our future generations. And yet Romney stole that argument too. Using the word “moral” three times, Romney pointed to the deficit: “(It’s) not moral for my generation to keep spending massively more than we take in, knowing those burdens are going to be passed on to the next generation.” Shouldn’t that be Obama’s argument for addressing climate change?

Photo courtesy of marcn via Flickr.

Carol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council's Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 5,000 companies worldwide. Carol holds degrees from Smith College and Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on nearly 5,000 companies from 135 industries in 65 countries. By aggregating and normalizing the information from over 170 data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

By Carol Pierson Holding

 “Airlines won final approval from a U.S.-based technical-standards group to power their planes with a blend made from traditional kerosene and biofuels derived from inedible plants and organic waste.”

- Air Aviation News, July 2, 2011

I’ve heard a lot about biofuel for aviation tests, but they always sounded suspiciously like airline ‘greenwashing’ PR to me. Richard Branson’s $3 billion bet on an aviation biofuel company went bankrupt. Successful tests turned out to be only fractionally biofuel. Journalists joked about the smell of french fries filling the air. Is biofuel for aviation anything more than good promotion? I posed this question to Steve Verhes, Executive Director of Cascadia Carbon Institute, a Washington state biofuel expert and advocate. Steve’s answer: It’s complicated.

First, there is the food-to-fuel issue – a very real concern, especially with food price increases accelerating this year. But the aviation standards group in charge of the approval took care of that, mandating that aerospace biofuels be derived only from inedible plants.

Then there is the issue of converting even more land to agriculture—another bogey, especially in Steve’s hyper-environmental region, Washington state, where 700,000 acres of timberland were lost between 1978 and 2001.

The answer: Biofuel from inedible canola seed. Not only is canola not a food source, it requires no new land for cultivation in the Northwest. Canola is also an excellent rotation crop, re-invigorating soil that’s been depleted producing wheat or other crops, without requiring new land.

Best of all, canola can grow in areas too dry for most crops. Land that the Department of Agriculture is currently paying farmers not to farm in order to conserve soil. Without careful soil preservation techniques, giant dust storms can easily develop, wreaking havoc on local citizens and blowing away topsoil. Without topsoil, farmland becomes agriculturally unusable. Planting canola would not only hold down valuable topsoil, but it would produce a profit for struggling farmers.

The idea was so enticing that Imperium Renewables built the biggest biofuel processing plant in the world in Gray’s Harbor, Washington. The plant was capable of producing 100 million gallons of biodiesel – enough to power 2% of the state’s needs. There would have been no shortage of demand either, as the plant was located in the heart of the U.S. aviation industry and Boeing, already highly rated for environmental performance, had publicly committed to transitioning to biofuel.

But problems arose. Canola farming just didn’t catch on, so there wasn’t enough canola seed to keep the plant running. Imperium got its initial $214 million from investors before analysts started spotting holes in their projections: Actual production never came close to 100 million gallons due to the canola shortage. An IPO failed in January 2008; the company laid off staff, lost contracts and even shut down after an explosion in 2009; and Washington State has not yet mandated biodiesel production or subsidized its use, so Imperium has to ship its biodiesel to Oregon and British Columbia, which do have mandates.

All of which is depressing, but not devastating. Biofuel demand has picked up. Canola production is up this year and Imperium’s plants are running again. Ethanol could lose its subsidies, making canola more economically attractive.

Best of all is the news at the top: Just last week, the ASTM Emerging Fuels Taskforce, co-led by Boeing, a company with significantly higher environmental ratings than its industry, and the Federal Aviation Administration, approved biofuel for use in commercial jets.

But then my biofuel expert dropped the bombshell: A Boeing 747 uses one gallon per second when it’s cruising. One gallon per second. If Imperium had trouble filling its 100 million gallon plant capacity with canola seed, think of the staggering quantity of feedstock that would be required for aviation.

Oh well. Innovation takes time. The good news is that it looks like the players, from airlines to regulators to the formerly disappointed biofuel procesors - are sticking with biofuels for aviation.  In September KLM will launch more than 200 flights operated on biokerosene. Airlines in the Virgin Group are collaborating to see if they could develop biofuels at Los Angeles International airport. And even U.S. airlines are coming to the party: A major group, that includes American and United, is negotiating an agreement to buy biofuel derived from recycled waste for use at San Francisco Bay Area airports. And whether they’re motivated by promotion or profits or mandates and subsidies doesn’t matter, if it gets us to a cleaner future.

Carol Pierson Holding is a writer and an environmentalist; her articles on CSR can be found on her website.

Inset photo courtesy of puddy_uk (CC).