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

A recent New York Daily News cartoon features the dilemma faced by New York’s Governor, Andrew Cuomo.

http://www.nydailynews.com/opinion/bramhall-cartoons-february-2013-gallery-1.1252690

Governor Cuomo had been barreling towards a late February deadline to decide whether or not to allow fracking in large parts of New York.   His decision was highly anticipated and was expected to influence the decision process in other states (and communities in other parts of the world). Fracking is a method of mining in which cracks are created in shale in order to obtain gas, oil, or other substances that are inside it.

It seems that the Governor has now decided to postpone his decision, yet again.  Once more unusual pressures may have been ads run in Iowa by anti-fracking activists.  The authors of this campaign suspect that the Governor is considering running for President in 2016.  Fracking is controversial in farm-oriented Iowa.  Their ads created the threat that a pro-fracking decision by Cuomo would lead to an initially unfavorable impression of him, among Iowan Democrats.

CSRHub tracks 57 companies in our system, who have been identified as having an involvement in fracking.  It will be interesting to see how this ongoing controversy affects these companies and how their sustainability performance is perceived.

Bahar Gidwani is a Cofounder and CEO of CSRHub. Formerly, he was the CEO of New York-based Index Stock Imagery, Inc, from 1991 through its sale in 2006. He has built and run large technology-based businesses and has experience building a multi-million visitor Web site. Bahar holds a CFA, was a partner at Kidder, Peabody & Co., and worked at McKinsey & Co. Bahar has consulted to both large companies such as Citibank, GE, and Acxiom and a number of smaller software and Web-based companies. He has an MBA (Baker Scholar) from Harvard Business School and a BS in Astronomy and Physics (magna cum laude) from Amherst College. Bahar races sailboats, plays competitive bridge, and is based in New York City.

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.

By Carol Pierson Holding

New Year’s Day 2012 greeted us with headlines that a Shell oil drilling rig had run aground in the Gulf of Alaska. The gravest concerns were for personnel aboard the rig and tugs and the 150,000 gallons of diesel oil and 12,000 gallons of lubricant that the rig contained in its core.

As the top Democrat on the Natural Resources Committee, U.S. Rep. Ed Markey, D-Mass said that day, “Oil companies keep saying they can conquer the Arctic, but the Arctic keeps disagreeing with the oil companies.”

Shell had a different take. Posted after disaster was averted earlier this week, Shell announced on the home page of its web site that, “For hundreds of years, explorers have battled the Arctic.
 Today, we’re finally winning".

The question is, does Shell have any chance of winning?

The Shell oil rig Kulluk had been held in place with ropes tied to two tow ships until swells as high as 35 feet and winds gusting up to 70 miles an hour forced the crews to drag the vessel 10 miles so it could be grounded on the rocks of Sitkalidak Island.

[csrhubwidget company="Royal-Dutch-Shell" size="650x100" hash="c9c0f7"]
The Kulluk was being moved from Dutch Harbor, Alaska to Seattle for maintenance when the storm hit. And the problems started piling up:

• Engines on one tug failed because of poor fuel quality.
• A towline on another tow snapped because it didn’t have a proper release.
• A Coast Guard cutter attempted to secure the drifting oil rig but got the line wrapped around its propellers.
• The Kulluk, now unsecured, was pitching and rolling so violently that Shell asked the Coast Guard to airlift its personnel so safety. The Rescue efforts involved multiple cutters, ships and aircraft.
• The second tug was ordered to separate from the Kulluk for its own safety.

And on and on, day after day. As Thomas Ostebo, Commander, 17th District Coast Guard, said in a statement, “I applaud the efforts of all the vessels on scene and their courage in the face of almost impossible odds.”

Shell doesn’t seem to have anticipated even possible odds. According to a US government report, the beached Kulluk was built to withstand wave heights when disconnected (ie, not drilling) of 40 feet, assuming a storm duration of 24 hours. The storm currently trapping the rig has reached at least 35 feet and was wailing for at least four days.

This is crazy when you realize that this storm was far from the worst possible scenario. This was the fourth major storm this winter and it wasn’t even hurricane-strength. Just around the Kenai Peninsula in Anchorage, a weather station has measured wind speeds of up to 85 mph and higher.

Shell seems to have problems with every foray into Arctic drilling. As Fuel Fix reminds us:

“Other high-profile mishaps included the drifting of Shell’s contracted drillship Noble Discoverer near Dutch Harbor, Alaska last summer. Later, Shell’s first-of-its-kind spill containment barge was damaged during certification tests. Finally, weeks after drilling was done for the year, a fire broke out on the Discoverer’s rig stack, and safety and pollution-control system deficiencies were discovered on the ship in November.”

With the Kulluk, Shell is reminded that the worst environmental damage from oil spills happens while transporting the oil, as when the Exxon Valdez dumped 11 million gallons of oil in Prince William Sound, ironically not far from the current oil rig mishap.

Remember what caused the Valdez to fail? The captain was drunk.

Human errors can’t be anticipated. But Shell seems also to be sloppy, in matters both big and small. There is the lack of adequate margin in its vessel specifications. Then there’s the vessel’s name, Kulluk. Who would spend nearly $300 million to update a vessel and not change from a name that means “thumb” in Inuit…and “ashtray" in Turkish?

British Columbia is waking to the dangers of allowing oil to be transported so close to its shores. Native tribes, whose salmon rivers will be destroyed if the Kulluk leaks oil, were out in force. One has to wonder, how can Shell continue to claim victory in the face of such appalling failures? As Shell continues to pile insult on injury, our outrage grows.

Photo is courtesy of Alana Sise via Flickr CC

By Carol Pierson Holding

Last week, at Seattle’s Newground Social Investment holiday party, the firm’s Founder Bruce Herbert, a leader in SRI, gave a toast in which he applauded Bill McKibben’s leadership in fossil fuel divestiture. Herbert asked the crowd to support McKibben’s efforts, both in attending events (Herbert attended McKibben’s “Do The Math” divestiture launch) and in our investment practices.

At first, I was thrilled. I wondered if the Do The Math campaign had already spread beyond college campuses to the broader SRI investment community. If so, the movement was spreading even faster than I could have hoped.

Four days later in Newtown Connecticut, a 20-year-old gunman trained a semi-automatic gun on a 2^nd grade classroom, killing 20 small children and 6 adults. In the midst of writing about fossil fuel divestiture, I realized there was something bigger going on: despite all the successes the SRI industry can claim, it has been a failure when it comes to products that kill.

SRI was first practiced by religious groups who refused to invest their money in companies whose products were harmful to their congregations, mostly alcohol, tobacco and gambling. These “sin” screens have been in place for at least sixty years. Later, other screens were commonly added for harmful industries such as pornography, weapons and the military. But none of these industries has been seriously affected by SRI.

This is not to undercut the work that SRI has done. Over the years, it has played an important role in anti-war, anti-nuclear, environmental movements, civil rights and economic justice, including most famously apartheid.

But as Robert Zevin, an early SRI advocate, says in a blog for Huffington Post, SRI’s original moral purpose has been subsumed to profit:

“Many of us are now embarrassed to say that our religious or moral or political views should and do affect our investment selections. We know the gatekeepers don't want to hear it; and they know that many of their institutional clients definitely don't want to hear it.”

And investors have even less influence when they simply refuse to invest. The old guard of SRI would hold stocks just to give them a seat at the table – or rather, at the annual corporate meeting. Now, even investors as socially minded as the Gates Foundation are interested in only one thing: returns. That Foundation may do worlds of good for global health, but its biggest investments after Berkshire Hathaway are in McDonald’s and Coca Cola, two companies most at odds with children’s health.

At least sixty years of investors boycotting the gun trade has yielded zero result. In fact, SRI activism works best when rewarding companies that care about being good, whose products sustain life rather than take it. For example, CSRHub, the social responsibility data aggregator, created a special issue called “NRA Anti-Gun List” so that CSR executives can support companies that take a stand against guns, rather than providing a list of gun manufacturers and dealers to boycott.

Only new regulations prompted by consumer outrage will restrict guns. I fear the same is true for climate change. Noble a thought as it is – and as much as we all love having an outlet for our outrage ‑ the truth is, divestiture itself will have as little effect as investment screens for guns. But the moral outrage that the campaign is sparking, like the moral outrage sparked by the massacre in Newtown, is a different story. I look forward to restrictions and even bans being enacted at all levels of government on both guns and fossil fuels. Investors and consumers can take care of keeping the responsible companies in line. I am thankful we have other means to handcuff the really bad businesses.
Photo is courtesy of Patrick Feller via Flickr CC.

By Carol Pierson Holding

In the past two weeks, there has been a lot of press about Chevron’s announcement that that it will sell all four of its US coal mines by the end of the year. The company says it is getting out of coal because the technology for converting coal to liquid won’t be available for another 10-15 years, and that even then technology might not be viable, and that the company will focus on “other operations.” In other words, it’s purely a business decision.

Chevron cites concern about its profits, which is a good thing, right? And its profits have been terrific, with 5-year returns over double those of its leading competitors. But what puzzled me is that I could not find a single story that even mentioned how Chevron’s coal mine sale supports its successful pro-environment platform.

After all, Chevron has committed to renewables and spent millions advertising this fact.  And even though Chevron’s business is only 13% renewables now, the company bravely re-branded itself several years ago with the aspirational tag “The Power of Human Energy: Finding Newer, Cleaner Ways to Power the Earth.” And its CSR ratings are among the highest in its industry, according to CSRHub.

So, thinking the media had simply left out the environmental piece, I went to Chevron’s web site to find its official press release about its decision to exit coal. To my surprise, there was none. Nothing at all.  Instead, I found two other remarkable tidbits. First, Chevron reported stunning profits for this quarter of $5.3 billion, an increase of 70% over last year’s Q4. The company credits higher prices for crude, which we knew. We all notice the higher prices at the pump. So how is it investing these profits and those it will make selling coal mines?

The second notable press release was about its $4 billion investment in another deep water drilling project in the Gulf of Mexico. The gist (which I gleaned from Oil and Gas Financial Journal, as this press release had been taken down since the first time I looked) is that Chevron’s unfortunately named Big Foot deep water drilling project, its sixth facility in the Gulf, will be located approximately 225 miles south of New Orleans, Louisiana.

Now I have to admit: I am truly a naif in the oil and gas extraction industry. But this seems a bit like a shell game to me, albeit a sophisticated one.

Rather than toot it’s own horn for getting out of the dirtiest of its businesses, coal, Chevron exits quietly, while in an equally soft voice, the company invests $4 billion in deep water drilling off the coast of New Orleans, site of a deep water oil spill that has been called the largest environmental disaster in US history. In the meantime, Chevron crows to the public not about its exit from coal but about its focus on renewables.

 And this is one of the best of the big oil lot?

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

Image courtesy of Flickr user Iguanasan.

Recently, I met Jeni Krencicki Bareclos and Jennifer Marlow, co-founders of Three Degrees Warmer, a University of Washington-based project that provides legal protections for the victims of climate change. One of their inspirations is a legal case that the Native Alaskan Village of Kivalina brought against some of the nation’s largest producers of oil, gas, and electric power. Kivalina’s 400 members and 107 buildings have to be moved because the permafrost on which the community is built is melting. The plaintiff’s case argues that the damage, estimated at $95-400 million in relocation costs, should be paid by the oil and gas companies who are responsible.

Kivalina is basing its case on the same argument that was used successfully against the tobacco companies, where big tobacco was convicted of conspiring to suppress information about the health hazards from cigarette smoking. In this case, one argument is that the oil and gas companies conspired to create false “scientific” information that created questions about what would have otherwise been accepted as incontrovertable, that human action is responsible for global warming. The argument follows that these companies created enough doubt to delay serious efforts to limit or reverse climate change, thereby exacerbating the climate change that destroyed the Kivalina’s community habitat.

The case was dismissed in U.S. District Court and is currently on appeal to the Ninth Circuit Court. But whether or not Kivalina is successful, the fact that the argument has been heard in at least one court is validation that the key issues in corporate social responsibility are inextricably linked. This case proves the case for environmental justice, linking climate change to a devastating social injustice. If the case is truly the result of conspiracy and fraud as the plaintiffs claim  — and they say that records exist that will prove their argument in discovery — then good governance is a part of this as well.

All of which argues that you can’t have one CSR factor — or measurement — without factoring in the others as well.

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