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

I’ve always been clumsy.  There were many broken dishes and glasses in my childhood.  My Mom was always kind about it.  She’d say, “Tears don’t mend broken China.”  She had other similar phrases I remember (e.g., “If you get a load of lemons, it is time to make lemonade!”), but the lesson was always Midwestern positivism.  Don’t sit around moaning about what can’t be fixed—keep moving forward and don’t let your own failures hold you back.

Our recent election broke dishes for those of us in sustainability.  Many of my friends in the field and a number of our clients have asked if US corporate sustainability programs will be put on hold for the next four years.

I’m not as good as my mother was, at mending dishes (or comforting someone who is crying!).  But I do see some reasons for hope:

• Well-run corporations care about profit, reputation, and mission. If their sustainability programs generate a profit, reduce risk, or help them accomplish their longer-range goals, they should continue to pursue them.
• Young folks soon take over. We get requests daily from students around the world who need data for a sustainability study or project.  For every student who majors in CSR there are ten other young people who care passionately about the world’s future.  Unless something dramatically changes how young people view the future, we will continue seeing a generation-driven rise in interest in sustainability.
• US companies trade with the rest of the world—and the rest of the world won’t backtrack on sustainability. If a US company wants to be successful in Europe, Asia, the Middle East, etc. it must adhere to a high standard of ethics, respect indigenous peoples, avoid polluting local water supplies, combat climate change, etc.
• US companies have the same stakeholders they did on November 7. Managers, employees, communities, suppliers, customers, and investors will continue to remind companies about the risks that companies will face if they do not behave responsibly. It will remain important to have a “social license to operate.”
• Momentum matters. Corporations are big ships that turn slowly.  They have put money and time into corporate social responsibility (CSR) programs.  They won’t shift these resources into other things, without good reason and a lengthy analysis process.

What types of changes may occur?  Don’t expect stringent new guidelines from US regulators (e.g., the SEC, the EPA, OSHA, etc.).  Look for more boycotts and “buycotts.”  (Several groups are boycotting Trump-related brands and there seems to be a countervailing push to punish firms that won’t advertise on Breitbart.)  Some companies may offer less-sustainable alternatives in certain product areas.  (E.g., muscle cars, heavily-sugared cereals, and other “retro” products.)  Corporations may put on hold major new green investments until things “settle down.” None of this is long-term stuff.  We can mend these pieces and fix these holes.

We at CSRHub see our data and tools as a way to improve how a company communicates its progress and a means to reduce the cost of and improve the effectiveness of sustainability reporting. My mom once put the lid of a tea pot I’d smashed under my pillow and told me that it would give me sweet dreams.  Let’s remember what we’ve been through and all that we’ve accomplished so far.  Then, let’s move forward and dream again, about a better future.

Photo courtesy of  Ruth Edwards

Bahar Gidwani is CEO and Co-founder of CSRHub.  He has built and run large technology-based businesses for many years. Bahar holds a CFA, worked on Wall Street with Kidder, Peabody, and with McKinsey & Co. Bahar has consulted to a number of major companies and currently serves on the board of several software and Web companies. He has an MBA from Harvard Business School and an undergraduate degree in physics and astronomy. He plays bridge, races sailboats, and is based in New York City.

CSRHub provides access to the world’s largest corporate social responsibility and sustainability ratings and information.  It covers over 16,800 companies from 135 industries in 133 countries. By aggregating and normalizing the information from 500 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 improve corporate sustainability performance.

By: Carol Pierson Holding

How will damage from the Gold King Mine spill of Silverton Colorado be valued? The lawsuits against the EPA for dislodging the toxic yellow sludge into the Animas River and beyond haven’t yet been filed, but injured parties are lining up.

Recognizing imminent danger accident, the EPA tried to allocate Federal funds earmarked for cleaning Superfund sites.  before the accident, the EPA tried to allocate Federal funds earmarked for cleaning Superfund sites. But Silverton is a town that subsists on tourist dollars. And it gets its water from another site. Concerns about upstream water weren’t enough to warrant the tourism-destroying Superfund label.

So the EPA had to do more inspecting to bolster its argument for Superfund designation and accidentally breeched a secret dam built inside the mine to hold back accumulated snowmelt, unleashing three million gallons of poisonous sludge.

Sure enough, as in the BP Deepwater Horizon spill, the tourism industry is the first to call for monetary damages.

Then come livestock owners whose animals might be poisoned. And the vegetable farmers whose produce could be ruined unless they find an alternative source of water.

Then there’s the cost of the clean-up itself.

But even those billions of dollars don’t account for the loss of gorgeous, irreplaceable natural habitat along the now three hundred miles of fouled rivers.

In our monetized, quantified world, we are driven to assign a value to this resource. And economists have a mechanism.  Called “contingent valuation,” the tool is a survey in which subjects are asked their willingness to pay to protect nature.

Intuitively, we know this is not remotely adequate. Economists and policy makers agree. And so scientists have set about trying to develop a better metric.

A study on the neuroeconomics of valuation was just published in the journal PLOS One and summarized in a New York Times article by study authors Paul Glicher and Michael A. Livermore. Previous MRI’s of the brain structures responsible for valuation showed great similarity across a wide variety of decisions, from consumer goods to entertainment to daily activities. But as the authors put it, “The brain did not respond to contingent (environmental) valuation studies the way it did to all other known classes of economic behavior.”

In other words, when subjects tried to “value” nature, their MRIs showed different areas of the brain at work than those areas used to value other decisions.

Could nature be on a different spectrum altogether? Maybe our brains process nature’s value in ways unrelated to money.

Those of us who walk in nature would agree.

As it turns out, many economists agree too.

One of them is Nobel Prize winner Joseph Stiglitz. A 2009 report by the Stiglitz Commission on the Measurement of Economic Performance and Social Progress looked at how economic statistics such as GDP fall short of measuring true economic performance:

“For example, traffic jams may increase GDP as a result of the increased use of gasoline, but obviously not the quality of life. Moreover, if citizens are concerned about the quality of air, and air pollution is increasing, then statistical measures which ignore air pollution will provide an inaccurate estimate of what is happening to citizens’ well-being.”

The Stiglitz Commission goes further, insisting that “The assessment of (environmental) sustainability is complementary to the question of current well-being, and must be examined separately. …Both pieces of information are critical and distinct.”

Another way of saying that even rising public policy metrics such as Gross National Happiness in Bhutan or Subjective Well Being in the UK don’t adequately address the value of the environment.

Nature brings solace and sanity. If you haven’t experienced the succor of nature personally, science has proved its benefits, most recently in a National Academy of Sciences study whose results suggest that “accessible natural areas may be vital for mental health in our rapidly urbanizing world.” Or to put it another way, nature’s true value is priceless.

Photo courtesy of Fishermansdaughter via Flickr CC

Carol Pierson Holding is President and Founder, Holding Associates. Carol serves as Guest Blogger for CSRHub. Her firm has focused on the intersection of brand and social responsibility, working with Cisco Systems, Wilmington Trust, Bankrate.com, the US EPA, Yale University’s School of Environmental Sciences, and various non-profits. Before founding Holding Associates, Carol worked in executive management positions at Siegel & Gale, McCann Erickson, and Citibank. She is a Board Member of AMREF (African Medical and Research Foundation). Carol received her AB from Smith College and her MBA from Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 15,000+ companies from 135 industries in 130 countries. 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

It took just three days after the Canadian oil train explosion for Keystone XL pipeline supporters to shift the news from rail safety to use this tragedy to further their goal. Apparently, the practice of using disasters as promotion is still strong. PR writes itself: “Save lives, build the pipeline!”

On Wednesday, I woke to the Seattle Times headline “Canadian blast revives worries about transporting oil by rail” above a full page story picked up from Bloomberg News. The story was purportedly about unsafe rail tankers, but shifted direction in the very first sentence, blaming the explosion in part on the delay in pipelines such as the TransCanada Keystone XL.

Bloomberg is first and foremost a business news service, so the pro-business angle is understandable. But this story ran in on page 3 of the Seattle Times’ main business section, in the news analysis section called “Close Up.” It was a straight news report.

Isn’t it astonishing that within just three days of the explosion, mainstream press was already blaming the deaths on pipeline delays.

The pipeline delay thread almost threatens to overwhelm the issue of rail safety. The New York Times noted that the tankers were found to be unsafe 20 years ago. They were supposed to have been replaced. Fifty lives could have been saved. Another horrifying tragedy that was preventable had the rules been followed. It happens.

But what stopped me cold was that the New York Times claimed that the explosion came as such a “big surprise.”

And that’s the real point. It’s almost impossible to predict or prepare for the worst case when you’re dealing with a toxic substance. I’m reminded of the 1961 Colorado River disaster caused by flushing out gutters that had accumulated years of insecticides, releasing tons of toxins all at once. Rachel Carson eloquently describes what happened next in her seminal work Silent Spring:

“ …(on Sunday, January 15) dead fish appeared mysteriously in Town Lake in Austin and the Colorado River for a distance of about 5 miles below the Lake. None had been seen the day before. On Monday there were reports of dead fish 50 miles downstream. By this time it was clear that a wave of some poisonous substance was moving down in the river water. By January 21, fish were being killed 100 miles down stream, … and a week later, the chemicals were doing their lethal work 200 miles below Austin.”

When dealing with and especially transporting dangerous, toxic substances, there will always be unintended consequences. With all this press analysis of the oil “surprise,” I wonder why no-one is talking about worst case scenarios for the proposed West Coast coal trains.

Known consequences of coal trains have been much studied. We now have to accept the possibility of the previously unimaginable: a major coal spill into the Salish Sea.

There have already been sixteen coal train derailments this year.  One can now have to envision a spill so extreme that an entire train of 115 cars or more each carrying 115 tons of coal could fall into the Sea.

There is no protection from Federal agencies. As reported in Huffington Post last month, the Army Corps of Engineers withdrew from its planned environmental review of coal ports. Given the oil explosion in Canada, shouldn’t they reconsider? No agency regulates the toxins in raw coal, including arsenic, cadmium, mercury, and bottom ash emissions. A major spill could coat the Sea with a black, toxic film that would kill life beneath it. Where is the EPA?

The most important lesson from the oil tank explosion is not the additional proof that oil tanks are unsafe or whether it’s safer to transport via oil train or pipeline. Both are potentially lethal. The real issue is that when it comes to dangerous, toxic material, the one thing you never thought could happen does happen. It’s one thing to accept those risks when shipping a critical fuel to Americans. The benefits outweigh the risks, at least for now. It’s quite another to accept that risk to ship fuel to Asia – especially when the resulting coal pollution blows right back on us.

Photo courtesy of theslowlane via Flickr CC.

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 7,400 companies worldwide. Carol holds degrees from Smith College and Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 7,400+ companies from 135 industries in 96 countries. By aggregating and normalizing the information from 257 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

In a long-awaited move, the EPA has called in the Army Corps of Engineers to review plans for West Coast coal ports. Finally, alarmed environmentalists and frightened local residents are getting help from the Federal government.

In December, 2010, I first heard about a proposed coal port in Longview, Oregon and was so outraged that I wrote an article for CSRHub.com. It was so shocking, here, in the Pacific Northwest, a place that prides itself on clean energy leadership. Where just months later, amidst great celebration, Washington state announced it will close its last remaining coal plant.

The environmental arguments against the Longview coal terminal seem indisputable: the coal that would have been shipped from Wyoming and Montana was the lowest grade, a grade outlawed in the US because it is so toxic. The trains carrying the coal would go through the Columbia River Gorge and other environmentally sensitive areas, spreading adjacent land and communities with coal dust.

And when the coal finally got to China, the resulting clouds of black soot could have resulted in pollution so thick as to reduce visibility in West Coast communities, a “myth” that I witnessed several years ago in San Francisco.

That Longview port proposal was withdrawn in the face of consumer opposition and a state review. But as I just found out, a new plan was submitted in late 2011 that “dwarfs the size of the original.” The $600 million project would create a port that exports a staggering 44 million tons of coal per year, making it twice as big as the largest coal port on the West Coast, which is located in metro Vancouver.

The strange thing is that even moderate voices in the coal industry question the viability of new coal ports. David Gambrel, coal consultant with many years working in coal companies, cautioned developers in Coal Age to take a lesson from the past. In the 1980s, the Port of Los Angeles responded to the same frenzied level of Asian demand for coal, then from Japan and India. The port hosted a $150-$200 million consortium to build LATX for coal exports and in the early 90s opened a world-class facility. It exceeded environmental requirements. Even tough union problems were overcome.

But several years later, the demand from Asian markets failed to meet LATX’s minimum annual guarantee requirements and the project was shuttered.

The Port of Portland went through a similar saga, investing $25 million in its own export terminal only to find Asian markets to be unstable and unreliable.

And yet, here we are again. This time, coal prices are sky high and many more determined coal port developers are jumping in, including SAA Marine in Cherry Point Washington; the Longview facility which is co-owned by Ambre Energy of Australia and the US Arch Coal; Rail America’s coal terminal at Grays Harbor Washington; and three smaller ports in Oregon, including the Port of Morrow’s proposed development soon to be under review by the Corps of Army Engineers.

Even if Asian demand for coal does stay strong, there are many other uncertainties that make investments risky, including increased competition from Alaska and South America when the Panama Canal widening is complete in 2014, the arrival of larger New Panamax vessels which cut shipping costs but require deeper harbors, and the ability of railways to handle heavy loads and trains longer than 100 cars.

But the most frightening risk of all to the coal port developers is the environmentalists. As David Gambrel writes in Coal Age:

“Finding a site that meets all the physical requirements will be but a small part of the job. Global warming, climate change, and a host of other scare phrases will be used by people who now genuinely believe the Chinese will burn high sulfur coal and send their unclean stack emissions back to us. In many cases their fear is so great they will do everything in their power to stop any new development.”

How right Gambrel turns out to be. It’s those crazy residents and even crazier environmentalists devoted to stopping the coal port developments who pushed the EPA to pull in the Corps of Engineers. It’s amazing what a determined group of people can do, even in the face of the combined forces of coal, railway, and shipping industries. I sure hope they succeed.

Photo published under Creative Commons license. Courtesy of Rainforest Action Network on Flickr.

CSRHub has a Special Issue of Coal Involvement. The 51 companies on this list are involved in the coal industry either via coal mining, production of coal mining-related equipment, coal-based power production, or engineering services. Sources used: Coal Mining Engineer's List, Van Eck Global Coal, Power Shares Global Coal, Source Watch Carbon, U.S. Energy Information Administration Coal Producers, Yahoo! Coal.

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.

 By Carol Pierson Holding

While the EU charges ahead with carbon trading, stricter environmental laws and better enforcement, we here in America hang our heads in shame. Our Federal government is in environmental denial and the media cries Cassandra. Al Gore goes to a highly-publicized meeting with President Obama to lobby for climate change mitigation, while Obama has still not honored his promise to reinstall solar panels on the White House roof. Businesses beg for definitive rulings on issues such as carbon pricing and environmental social governance (ESG) reporting requirements, while the legislature clamors (successfully) “drill baby drill” and accuses environmentalists of favoring spotted owls over jobs. Our leaders’ attitude seems to be climate change has to wait until the economy has turned around.

But civil servants are having remarkable success. In living up to their duty to protect the health and wealth of U.S. citizens, the EPA and the SEC are remarkably focused, even strident, about green. In fact, the EPA has had a number of amazing wins.

Last year, the EPA required that companies report their greenhouse gas emissions  (GHG) data. The reporting deadline has been extended to September 30, 2011, but the agency is clearly going to enforce the requirement. The funny thing was that the US Senate, showing unfettered support for business, attempted to stop the EPA from regulating GHG. But investors, the ultimate owners of the businesses lobbying for Senate action, blocked their efforts. In the end, the issue went to the Supreme Court, where the EPA finally won.

Then the EPA brought transparency to chemicals deemed harmful in more than 100 health and safety studies that industry had claimed were "confidential,” releasing these studies to the public. Another example: the EPA is limiting releases of heavy metals and tightening controls on sulphur, nitrogen oxides and particulate matter emissions from electricity generators.

These are all meaningful changes. But equally important are the SEC’s moves to incorporate CSR factors into financial reports. Fortunately for the environment, capitalism operates through the grace of consumers, whose first priority will always be the health of their families, and investors, who need full information about both return and risk. The SEC’s responsibility is to protect investors by reducing their risk, including environmental risks from potential EPA fines and liability from harm caused.

That’s why last year, the SEC clarified what publicly-traded companies need to disclose to investors in terms of climate-related ‘material’ effects on business operations, both positive and negative. The lack of specific guidance until now has resulted in weak and inconsistent climate-related disclosure by public companies. Leading investors, managers of over $1 trillion in assets, demanded full corporate disclosure, in 2007, 2008 and 2009, and finally got results in 2010.

It’s a wonderfully self-reinforcing cycle between government, business and investors. The EPA institutes regulations at the request of businesses wanting to limit their uncertainty, then measures performance and collects fines to punish any offenders.  The SEC, pushed by investors, recognizes that fines and liability suits that often follow an EPA ruling constitute material risk to investors and requires that financial reports include data on environmental risks. Once the rules are in place, American financial analysts quantify and integrate this into investment analysis. Financial markets then demand clearer targets and better enforcement information.

And where investment leads, policy, even in the U.S. Congress, should follow.

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

 Inset photos courtesy of chucklepix and mccready (CC).