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

By: Carol Pierson Holding

There has been so much good news about business embracing renewable energy that I almost didn’t give it a second thought when a Harvard Business School report called “America’s Unconventional Energy Opportunity” landed on my desk. Subtitled “A Win-Win Plan for the Economy, the Environment, and a Lower-Carbon, Cleaner-Energy Future,” I assumed it was a plan to transform our energy resources to renewables like wind and solar. States are pushing renewables too: New York State just released its roadmap for getting to 50% renewable power by 2030 by focusing on distributed generation and renewable resources.

The lead author of the HBS report is Professor Michael Porter. He is not only a globally-recognized authority on competitive strategy, he’s also works tirelessly on just causes. He created the “Social Progress Index to look beyond GDP at social and environmental factors.” Porter also co-founded FSG-Social Impact Advisors and co-developed its theory of “Shared Value” to help non-profits work with business to create social value. (Full disclosure: I am an HBS graduate and met with Porter and FSG staff.)

So it was disappointing to read that by “unconventional energy” the authors mean “…shale gas and oil resources …accessed and extracted through the process of hydraulic fracturing.”

Porter and his colleagues at HBS and management consulting firm BCG lay out their motivation:

Unconventional gas and oil resources are perhaps the single largest opportunity to improve the trajectory of the U.S. economy, at a time when the prospects for the average American are weaker than we have experienced in generations. America’s new energy abundance can not only help restore U.S. competitiveness but can also create geopolitical advantages for America. These benefits can be achieved while substantially mitigating local environmental impact and speeding up the transition to a cleaner-energy future that is both practical and affordable.

Their solution is to convert coal and oil based energy to natural gas and, when plants come to their natural end-of-life, we’ll replace natural gas with renewables. In the meantime, we’ll restore our economic supremacy by exporting cheap natural gas while reducing our own carbon emissions and energy costs. By 2060, we’d be generating zero carbon emissions from energy generation.

It’s not an easy sell. The first problem is cost. To develop our natural gas resources will require $900 billion in infrastructure investment, including new interstate pipelines, storage facilities, rail, marine and road upgrades, gathering and processing infrastructure, and export terminals. In other words we’d have to spend even more to transition to natural gas as we will spend to convert to renewables, which the report estimates at $750 billion. In the end, with Porter’s plan, we’d be stuck with all that decaying infrastructure and fracking waste. Why not put that money into renewables infrastructure starting now?

The report also calls for spending on training for higher paying jobs in natural gas. Again, why not spend money on renewable energy training instead of having to retrain workers later on? Porter’s argument is economic competitiveness — the GDP increases we would see if we push natural gas production. You can’t generate exports from wind or solar the way you can from natural gas, and ours is by far the cheapest in the world.

Many of the report’s recommendations read like a fossil fuel producers dream: in addition to some positive proposals such as imposing regulations and increasing transparency, it also advocates ending “outdated” restrictions on oil and gas exports and encouraging industry compliance with industry-led self-enforcement, even after some industry players have been seen to be systemically corrupt.

All that said, the plan has several positives that should not be overlooked. First, shifting from coal to natural gas can take about a quarter of the responsibility for the 15% carbon reduction between 2005 and 2013. It may be the only certain path to achieving the EPA’s Clean Power Plan and eliminating coal plants. Producing just half the greenhouse gases (GHG) as coal (methane aside), natural gas is, as Porter et al say, “a crucial asset in making America’s energy transition both feasible and at a competitive cost across a range of carbon reduction scenarios, at least through 2030.” And that transition is way faster than fossil fuel industry thought leaders like Shell.

As I discussed in a blog for CSRHub, Shell’s most recent future scenarios report advocates a transition to renewables by 2100. Porter’s assumes power grid alterations necessary for renewable energy will take 20-30 years, taking us to 2035-45, at which point renewables will be even more cost competitive than natural gas and will be completely phased out of power production before 2060. Working back from Shell’s prediction of 2100, that looks pretty good.

We’re all tempted to point fingers at a policy recommendation that will delay achieving a zero emissions future while bolstering fossil fuel and power businesses. Isn’t this just business as usual? Maybe, but at least this timeline is much faster than the fossil fuel industry’s. Porter’s report acknowledges that if solar and wind prices continue to fall below oil and gas prices as they have in some places like Austin, Texas, business will drive an even faster transition. It’s all about the money, and in this case, that could be a very good thing.

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 15,000+ companies worldwide. Carol holds degrees from Smith College and Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 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

Regulation can be a great reason to behave well, though industry rarely sees it that way.

After five years of planning, 1.5 million comments, intense lobbying from the oil and gas industry, and innumerable photos of tap faucets on fire, the Bureau of Land Management has finally announced new regulations for fracking.

The promise of the rules is robust: we can continue to reduce carbon in the atmosphere, transition from coal to a cleaner burning fuel, and persist in drastically reducing our dependence on imported energy — while, thanks to the new rules, eliminating ground and water contamination from fracking. Industry is forced to behave well and thereby forestalls its most serious opposition.

The rules only cover Federal and tribal lands, representing just 11 percent of the natural gas the U.S. consumes, with the hope that operators on state and private lands will follow suit. But still, whatever the regulations do cover should be a satisfying start, shouldn’t it?

In fact, the rules satisfy no-one. News reports from both sides of the issue claim the regulations are deeply flawed. As reported in Huffington Post, environmental groups call it “toothless,” faulting the exceptions loophole and inspections that are delayed until 30 days after fracking wells are in place. A Harvard Law School study found that the reporting mechanism stipulated by the regulation called “FracFocus,” a chemicals tracking registry used voluntarily by Exxon Mobil and other drillers, fails as a fracking disclosure tool.

On the other side, the Wall Street Journal reports that that the industry was so outraged that it “filed a lawsuit to block the rules just minutes after they were announced.”

That lawsuit can’t be due to the expense of conforming to the new rules, but that’s their excuse. The government estimates the cost of the new safety procedures at $11,400, or less than 1 percent of the cost of drilling a well. Even so, Barry Russell who runs the Independent Petroleum Association, one of the groups suing over the new regulations, insists in the Journal that “At a time when the oil and natural-gas industry faces incredible cost uncertainties, these so-called baseline standards will threaten America’s economic upturn, while further deterring energy development on federal lands.”

It makes more sense that this most powerful industry would resist anyone telling them what to do.

So who is suffering most from the new fracking rules, environmentalists and the citizens they represent, or the oil and gas industry?

Should be an easy call. Fracking has been linked to dire health problems, smog, and water, landscape and wildlife devastation. Federal half-measures must be painful for everyone who lives within contamination range of a fracking operation.

But for the oil and gas industry, weak fracking regulations might end up being  detrimental too. Consider this: many localities are issuing fracking moratoriums and bans, from cities and counties across Texas, Ohio, California, and New Mexico to New York State, Pennsylvania and Hawaii. Nation-wide fracking bans are in place in countries including France, Germany and most recently Scotland.

Even with a U.S. ban on fracking only a distant possibility, couldn’t strong US regulations eventually prove fracking’s workability as a bridge to a greener future, ensuring it is protected from a ban?

That’s exactly what the sustainability community hoped would happen with new regulation. Many want to support natural gas to reduce atmospheric carbon, but they don’t like the risk associated with ground water contamination. Socially responsible investment managers such as Green Century and Sentinel are demanding companies that frack commit to insuring environmental safety and best practices. Tougher regulations could have gone much further in meeting these investor demands.

Likewise, Corporate Social Responsibility (CSR) sites that guide consumer and institutional behavior such as data aggregator CSRHub (sponsor of this blog) highlight “fracking” as a special issue tag, to identify the sixty one companies involved in fracking.

Weaker rules allow oil and gas companies that frack (and that’s 90 percent of new wells) to continue to contaminate public water and land, while stronger rules could have forced them to behave as good corporate citizens.  Fracking has allowed natural gas companies to become heroes in one sense, offering a cleaner-burning alternative to coal. Loose regulations imply a license to pollute. And that’s got to hurt everyone.

Photo courtesy of Steven Jurvetson via Flickr CC

By Carol Pierson Holding

The Climate Policy Initiative (CPI) just released an analysis of the “Financial Impact of the Coming Low-Carbon Transition,” which computed the potential value lost to stranded assets, or what fossil fuel companies will have to leave in the ground in oil, gas and coal. The CPI estimated the lost value at $1.1 trillion, plus another $1.8 to $4.2 trillion for the transport sector (think oil trains.) This total of $2.9-$5.3 trillion represents up to one quarter of total U.S. stock market value.

While the CPI report was meant to be positive – operating savings (think of the expense of solar panels vs. a coal plant) would offset stranded assets, creating a net positive of $1.8 trillion—it still sounded terrifying. And while the report claims the worst impact will be on Governments, which own 50-70 percent of fossil fuel companies and generate substantial revenue through taxes and royalties, I felt distracted from my central concern about climate change. Could we absorb the coming disruption?

The oil companies offer a painless alternative. Yes, we have to transition to renewable energy, but who better to lead that transition than the energy giants? Their leadership campaign is three-pronged:

First, acknowledge the need to transition away from fossil fuels.

This tactic was first used by Shell Oil. In its 2013 New Lens Scenario, Shell acknowledged that such a transition was necessary and offered a non-disruptive way to achieve 100% renewable energy by 2100: to minimize economic disruption, transition first to natural gas. Even liberals like Amory Lovins endorsed the strategy.

Now, 1½ years later, the entire fossil fuel industry has followed suit. Even the arch-conservative organization Heartland Institute has dropped its terror tactics (recall their 2012 billboard headlined “(The Unibomber) Still Believes in Global Warming. Do You?”). and gone so far as create the Climate Change Awards, which in July 2014 granted up to $50,000 each to ten scientists, economists and activists who support a “free-market approach to climate change” and “speak out against global warming alarmists.”

Second, address consumers directly with messages of safety and continuity.

Oil companies are running network television advertising not that different from the “Morning in America” calm, optimistic commercials that put Ronald Reagan in the White House.

You do get a sense of peace watching BP’s “Committed to America” spot.

Exxon/Mobil’s “Fuel Connections” ad offers gas that “cleans intake valves, helping engines run smoother and reducing emissions” providing “better fuel economy.” Amazing.

Chevron’s “We Agree” campaign advocates natural gas, with the admonition “We’ve got to be smart about this.”

Third, and this might be a fortuitously-timed accident: they lowered gas prices.

According to Thomas Friedman writing in the New York Times, U.S. and Iraqi oil companies have lowered their price per barrel in order to “bankrupt” Russia and Iran. Putting aside whether it’s a smart strategy to destabilize unfriendly, combative countries, the drop in oil prices could also change the economics of electric cars. Low gas prices coupled with messages about gas that gives “better fuel economy” cast doubt on the e-vehicle and hybrid claims are a better value.

And as oil companies align themselves with the U.S. government’s foreign policy, they’ll have better leverage in their quest to open our East Coast to drilling.

Finally, let’s not forget the threat of major economic dislocation. For stockholders, stranded assets add uncertainty to a stock market that’s already roiling. Another reason not to rock the boat by demanding a transition to renewables that’s too fast and disruptive.

Safety is beginning to look pretty good, even to me. You just have to ignore the reality of a dying planet, which over the last week, has been easier to do. Ebola and ISIS dominate the news. An admittedly small sample of media shows a disturbing lack of climate change news. Even the Huffington Post’s reliable “Green” alerts have seemed stretched away from real climate news to include Ebola coverage, like the nurse’s dog story, and lots of news about the climbers who died in Nepal.

It’s a shame how easy it is to distract us.

Photo courtesy of sporst 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 9,300+ companies worldwide. Carol holds degrees from Smith College and Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 9,300+ companies from 135 industries in 106 countries. By aggregating and normalizing the information from 343 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

Remember back in 2005 when General Electric (GE) launched its Ecomagination initiative? Its purpose, as the liberal news site Grist put it at the time, was “to ramp up development of clean technologies and lighten the company’s Goliath-like environmental footprint.” A noble effort indeed.

Many of the products highlighted in the Ecomagination launch were focused on renewable energy, such as wind turbines and solar voltaic panels. GE’s CEO Jeffrey Immelt announced major investments in eco-friendlier technologies, pledging to double GE’s research-and-development for Ecomagination to $1.5 billion in 2010.

World Resources Institute (WR) then-President Jonathan Lash called Immelt “not only a visionary, but in the absence of coherent national policies…just plain gutsy.” Lash even supported Ecomagination’s clean coal technologies: “Five years ago, I had to struggle to suppress my gag response to terms like ‘clean coal,’ but I’ve since faced the sobering reality that every two weeks China opens a new coal-fired power plant. There is huge environmental value in developing ways to mitigate these emissions.”

Despite many environmentalists insistence that there is no such thing as clean coal, Ecomagination believed it had a winner and sent its advertising staff off to promote it. The result was GE’s 2006 TV spot “GE’s Coal Miners.” In it, gorgeous half-clad male and female models with sweaty, soot-covered bodies pretend to toil in a coalmine…while a narrator intones about GE’s clean coal being beautiful.

It’s so shocking I thought it must be a parody (seriously, take a look), but its production values reveal the kind of wildly expensive commercial only a huge company can afford.

Today, climate change has ascended to the “worst problem facing the world today” as Senate Majority Leader Harry Reid said last week and coal’s heavy emissions are acknowledged as the climate’s number one enemy.

Who knew in 2005 that 10 years later, China would be the world’s largest solar market, even shutting down its existing coal plants. “Investments in new coal plants (in 2011) weren't even half the level they were in 2005” Justin Guay of the Sierra Club reported in Huffington Post.

In hindsight, Ecomagination’s focus on clean coal seems more delusional than visionary.

Immelt is still at the helm of GE. And the new Ecomagination is again straining credulity with environmentalists for so profoundly getting it wrong.

At least this time its not clean coal or, God forbid after Fukushima, nuclear power. No, this time Ecomagination is focused on natural gas.

Appropriately, I first saw the announcement of GE’s new Ecomagination initiative on the branding website BrandChannel, which headlined “GE Renews Ecomagination Initiative, Commits $25B to CleanTech R&D by 2020.”

Sounds like 2005 all over again.

It’s not that I begrudge the company for trying to make a buck. What gets me hot is that it’s using natural gas as a panacea for the eco set. Really? What we’ve been reading is that the methane leaked from natural gas drilling is worse – some say 20-100% worse - than the emissions released by burning coal. Fracking to release natural gas may cause earthquakes, taints water (remember the video of the farmer lighting his gas-contaminated tap water on fire?) and kills livestock.

Worst of all, natural gas delays the transition away from fossil fuels and into a survivable future at a critical moment.

But maybe GE’s message is designed for a different audience than environmentalists. Maybe Ecomagination is pure lobbying?

Friday’s New York Times editorial “Natural Gas as a Diplomatic Tool” makes that seem a possibility. The piece encourages the U.S. State Department to respond to the crisis in the Ukraine by opening natural gas exports to Europe, where they’re currently banned. The goal is to reduce Europe and the Ukraine’s dependence on Russian gas. Of course that would require “more facilities to liquefy and ship gas…that would cost billions of dollars.” And guess what business GE is in?

Now that’s amazing timing.

Photo is courtesy of http://bit.ly/1dNZNYH

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 8,900+ companies worldwide. Carol holds degrees from Smith College and Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 8,900+ companies from 135 industries in 103 countries. By aggregating and normalizing the information from 300+ 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

According to Shell’s New Lens Scenarios, we’re headed for a carbon free future, where solar will be the dominant energy source by 2100. The report got pretty universally upbeat press, praised in business and even environmental websites and by Amory Lovins, Chief Scientist of the Rocky Mountain Institute, who seemed to endorse the report: “Shell is the most far-sighted and strategic of the majors, largely because the Scenarios informed the thinking of Shell leadership and many others in the energy ecosystem.”

And Shell gets the highest  social responsiblity rating from CSRHub of any big oil company.

But assuming that the maximum additional carbon the earth can absorb is 565 gigatons of CO2 and that study after study predicts that “carbon emissions will grow by roughly three percent a year… (exceeding the) 565-gigaton allowance in 16 years,” we’ll be facing Armageddon long before we’ve shifted from carbon-producing fuel to Shell’s scenario.

Shell’s future scenario is hardly encouraging.

Up to now, I have been a huge admirer of Shell’s scenario planning. I first heard about its brilliant insight that the Soviet Union would collapse, information it kept secret while snapping up cheap Soviet oil leases. They also predicted the 1970s oil crisis and the end of Apartheid. They have a lot of credibility.

So how can Shell’s prestigious forecasting group predict a carbon free world when its strategy is to “reinforce our position as a leader in the oil and gas industry?” When it sold its solar business in 2006 to SolarWorld once they realized that solar business profits would never match the oil and gas business? Is scenario planning really that separated from corporate communications?

Then there’s the language problem. We all recognize the difference between short term exigencies and long term “unknown unknowns” as the study’s lead Jeremy Bentham, VP Business Environment and Head of Shell Scenarios, calls it, quoting Donald Rumsfeld.  It's the phrase he used when explaining the link between Baghdad and terrorist cells.

Is Shell suggesting that like Rumsfeld, its people are smart enough to get away with a lie of monstrous proportions?

As a recovering capitalist, I tend to be overly cynical, especially when it comes to corporations using socially responsible research as promotion. But here, there is a case to be made.

Shell’s scenarios promote natural gas to ease the transition from fossil fuels. Why? 48% of Shell’s current production is natural gas and the company is spending big to increase its dominance, especially in liquefied natural gas (LNG). In addition to owning the world’s largest gas-to-liquids production plant , the $18 billion Pearl GTL in Qatar, Shell is investing in other liquefied natural gas projects:

• Just three weeks ago, Shell acquired Repsol’s LNG businesses for $6.7 billion.

• Last week, Shell announced it would build two plants, one in Louisiana and one in Ontario, to liquify natural gas for use in transport vehicles.

• Using an undisclosed piece of its $1 billion+ R&D budget, Shell is developing  technology to mine huge deposits of oil shale in Colorado and Wyoming –  as Dan Denning of The Daily Reckoning reported, where “estimated U.S. oil shale reserves total an astonishing 1.5 trillion barrels of oil – or more than five times the stated reserves of Saudi Arabia.”

What Denning, a financial journalist, doesn’t say is what will happen when Shell and others release carbon emissions from another 1.5 trillion barrels of fossil fuel, even if it’s in the form of liquefied natural gas. Because once Shell figures out a way to mine that shale without violating EPA regulations, those reserves won’t sit untapped for much longer.

Shell’s scenarios do come with a caveat: results would be altered by “major geopolitical shifts.”  Ironically, the week after Shell published its scenarios, Yale University released its 2012 report of American attitudes towards climate change: the Alarmed cohort has grown from 10 percent of the American adult population in 2010 to 16 percent in 2012. At the same time, the percentage of those who dismiss climate change have decreased, from 16 percent in 2010 to 8 percent in 2012.

Does a critical mass of outraged citizens qualify as a “major geopolitical shift”? Think of the Vietnam War. Or Apartheid, a truly global protest. We may not be there yet, but as climate change impacts get worse, so will the outrage.

Photo is courtesy of Atli Harðarson

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 nearly 7,000 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 7,000 companies from 135 industries in 82 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.