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Harvard Business School’s Plan for a Carbon Free Future

[fa icon="calendar'] Jul 20, 2015 8:51:43 AM / by Carol Pierson Holding

By: Carol Pierson Holding

Sunset_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.


Carol2Carol 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.

 

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[fa icon="comment"] 1 Comment posted in America’s Unconventional Energy Opportunity, energy infrastructure, Entergy, Harvard Business School, natural gas, Shell, Uncategorized, Shared Value, Anadarko, BCG, Carol Pierson Holding, CSRHub, Michael Porter, renewable energy, Social Progress Index, tracking

Shared Value: CSR Re-branded?

[fa icon="calendar'] Jan 17, 2011 10:31:41 PM / by Carol Pierson Holding

By Carol Pierson Holding

 

Harvard Business Review’s cover story this month, “Creating Shared Value,” should be a celebration of how far CSR (Corporate Social Responsibility) has taken us. Just look at how much closer we are to accepting CSR as a core competitive strategy. As fans of authors Michael Porter and Mark Kramer know, these two have been proponents of CSR for years, pushing the field forward with new ideas like “Strategic Philanthropy” and now, “Shared Value.” Most impressive about their latest article is its place on the cover of this conservative business journal.

 

Two years after Harvard Business School ran an alumni conference on the future of capitalism (which eerily coincided with Lehman’s collapse and market’s 900+ point drop), that institution’s journal leads with this article, subtitled “How to reinvent capitalism — and unleash a wave of innovation and growth.” Finally, the argument about whether CSR is key to our future or just window dressing seems to be put to rest.

 

I applaud the authors. But why, aside from promoting their consulting business, would they insist that CSR is discredited and should be replaced by Shared Value? They misstate CSR’s mission as “doing good” when in fact it is “doing well by doing good,” which is the same as their concept of Shared Value. In fact, until recently, they were huge supporters of CSR. In their 2006 article, “Strategy and Society: The Link Between Competitive Strategy and Corporate Social Responsibility,” they pointed out flaws in CSR but weighed in heavily in its support.

 

Whether you call it Shared Value, CSR, ESG, or Corporate Citizenship, or Sustainability, or Corporate Responsibility, or Triple Bottom Line or any of the other terms people use, we are all pushing the same agenda—to do well by doing good. And the term “CSR” is well known and accepted in business.

 

It has been written about extensively in the business press. Most controversially, it has appeared twice on the cover of The Economist. First, to dismiss it per Milton Friedman’s “The business of business is business,” then a second time, in support of the concept. CSR has a set of metrics in place through the 20+ year old SRI ratings, a self-reporting structure in GRI, and a requirement in many companies’ RFP’s for a CSR report. Insurance, risk assessment, accounting bodies including FASB and many other industries and institutions all have “CSR” or “Sustainability” efforts underway. Porter/Kramer do a great service in lifting the issue to the front page of business, but why would we want to abandon all the progress made under the CSR rubric?

 

With CSR finally accepted as a core business strategy, Porter/Kramer now jump into the fray not with ideas of how to move more companies into the “Doing well to do good” camp, but with arguments about why their new name and model is better than CSR. Worse, even though they have several branding pros on the staff of their consulting firm, they dismiss the value of communications in support of CSR as mere promotion, ignoring the importance of communication in changing consumer behavior. Many of the companies Porter/Kramer cite as examples of Shared Value have used their brand to change consumer behavior for the better (think ads and promotion for GE Energy Smart CFL light bulbs). Yet Porter/Kramer fail to mention this.

 

Watching TV last week, I came across a great example of CSR communications’ power to increase sales while saving the planet.  The EPA confirms that in many cities, “The personal automobile is the single greatest polluter.” A key component to reducing these emissions will be the Electric Vehicle. Current ads for the Chevy Volt, the leading American-made Electric Vehicle (EV), are clearly good for Chevy’s brand reputation. But dismissing the ads as mere promotion misses the more important story: the advertising reduces fear of the EV by showing how easy it is to recharge, thereby persuading more consumers to buy EVs.  If this is CSR, I’ll take it over Shared Value any day.

 


 

Carol Pierson Holding is a writer and an environmentalist; her articles on CSR can be found on her website at  http://www.holding.com/Index%20links/articles.html.

 

 

 

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[fa icon="comment"] 9 Comments posted in capitalism, corporate social responsibility, CSR, Electric vehicle, ERI, Harvard Business Review, Harvard Business School, strategic philanthropy, Uncategorized, Milton Friedman, sustainability, The Economist, Mark Kramer, Shared Value, Triple Bottom Line, Carol Pierson Holding, corporate citizenship, CSRHub, Michael Porter, Nissan Volt

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