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

By: Carol Pierson Holding

In his op-ed piece “Two Cheers for Capitalism,” conservative columnist David Brooks quotes fellow New York Times writer Anand Giridharadas about why capitalism isn’t working:

“The rich are to be praised for the good they do with their philanthropy, but they are never to be challenged for the harm they do in their businesses. … Sometimes I wonder whether these various forms of giving back have become to our era what the papal indulgence was to the Middle Ages: a relatively inexpensive way of getting oneself seemingly on the right side of justice, without having to alter the fundamentals of one’s life.”

I wonder why Brooks considers this statement “courageous” and “provocative” rather than stating the obvious.

Indeed, in 2014, World Bank Economist Apurva Sanghi made the same argument for business and its own form of Papal indulgence: “CSR (corporate social responsibility) is about companies ‘giving back’ … How can companies that produce products that are polluting the environment have a strong reputation for social and environmental responsibility?’”

Sanghi slams some CSR as just another form of the “’guilt complex’ - charity as a means of managing a potential backlash.” And surely that happens, as he points out, with oil companies and big tobacco. But when a company makes an operational decision that’s good for society, you can bet it’s also good for the business.

And when businesses band together with competitors to address a societal ill, it’s because the very heart of capitalism is threatened, as it is with climate change.

Will capitalists step up to climate change for their own survival?

The evidence seems to say yes.

We’ve all heard about climate-caused business disruptions – think Hurricane Sandy in New York and rising sea levels along the East Coast. But climate change affects both  operations and consumer confidence.

The latest Yale/Gallup/Clearvision poll found 62% of Americans are convinced that “global warming is an urgent threat requiring immediate and drastic action,” indicating widespread fear.

Recall the stock market crash of 2008: when consumers are afraid, they don’t buy products and they don’t invest. As the impact of climate change gets worse, consumers may just stop spending. As temperature extremes worsen, they might just stay home.

And consumers are rewarding climate friendly companies by buying their products and their stocks.

The rest of business is jumping into action too.

Just a few days ago, the Huffington Post reported that eleven environmentally responsible corporations including Bank of America, Goldman Sachs, Walmart, and Apple joined Obama in "American Business Act on Climate Pledge." The purpose of the climate pledge? To support a "strong outcome" at the climate negotiations in Paris and commit to renewable energy, emissions reduction, responsible water use and halting deforestation.

Last year, even without the President’s backing, over 100 companies joined a coalition called We Mean Business to advocate bold action on climate change. Those companies were already climate leaders in their products (think electric cars and green investment funds) and operations.

We Mean Business now represents $2.19 trillion in members’ revenue and $7.4 trillion of investment.

Capitalism as practiced in 2015 America is a flawed system, distorted by years of legislation removing essential safeguards. But when it comes to climate change, capitalism might just be the most effective solution. Regardless of how weak you believe the connection is between profit and social responsibility, the connection between profit and public opinion has never been stronger.

Add to that the economic opportunities presented in the course of addressing climate change in both operations and consumer loyalty — opportunities such as Ikea discovering a solar gold mine in its massive flat roofs and the UK’s Marks & Spencer’s impressive gains in reducing carbon emissions while successfully relaunching its brand as the sustainable retailer — and you’re seeing capitalism at its finest.

Photo courtesy of Alessio 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

Ikea’s announcement that it would sell solar panel solutions in its UK stores was startling for any number of reasons. Ikea may be a leader in renewable energy for its own operations, with over half a million solar panels installed on its store and factory roofs and a fleet of its own wind turbines. But solar power for its customers?

From a business perspective, it makes little sense. Margins on solar panels are very thin, especially at Ikea’s prices. And this year, with China suppliers awash in panel inventory, wholesale panel prices have been extraordinarily low.

Ikea’s one year pilot project at its Lakeside UK store near London sold “one photovoltaic (PV) system almost every day.” They’re not running out the door, despite generous government incentives in the UK.

PV systems require a new business model for Ikea, requiring installation and maintenance services. Ikea’s panel supplier is Hanergy Holding Group Ltd, a privately-held Chinese company whose panels may be subject to “quality, environmental, after- sale service and product warranty concerns.” One wonders how quickly other franchise owners will take on the reputational risk of the solar panel business.

If Ikea decides to roll out its solar panel program in the U.S., it will face competition from stores experienced in home installations such as Lowes and Home Depot, which has been advertising and installing solar panels since 2005 through its partnership with BP.

There are plenty of potential problems with Ikea’s solar panel business. But from a branding perspective, it makes total sense. As early as 2003, culture watchers, environmentalists and even designers have found fault with the underlying ethic of Ikea’s approach. In a short piece on ethics in graphic design, Ikea is charged with designing its products with planned obsolescence in mind. In 2009, Salon reviewed Cheap: The High Cost of Discount Culture, Ellen Ruppel Shell’s criticism of our cycle of consumption that is destroying the environment and harming labor as well. Focused on discount chains like Wal-Mart and Target, Shell “gently damns” Ikea for its cheap, disposable products that are as bad for the environment as Wal-Mart’s. The environmental blog along the trail aptly called Ikea “consumerism on steroids.”

[csrhubwidget company="IKEA-group" size="650x100" hash="c9c0f7"]

A recent glance at Ikea’s U.S. consumer web site reinforces this idea: most of the site’s new offerings are doo-dads and children’s toys.

Now, with its solar offerings, negative impressions associated with Ikea’s disposable “stuff” could be tempered by solar panels in the stores. The company’s 2012 Yearly Summary launched its campaign of “People & Planet Positive.” But the greenwashing of the last two decades has put consumers on alert to eco claims that are mere promotion. Ikea’s success with solar panels to generate energy for its own use has been much ballyhooed. Solar for consumers is its next big chance to reinforce its good guy mantle.

Not a moment too soon. A new study by BBMG, GlobeScan and SustainAbility found that—

“…the sustainability proposition has changed from being the ‘right thing to do’ to being the ‘cool thing to do’.  …For decades, green marketers have been speaking to the wrong consumers, assuming that by engaging the most committed ‘advocates’ we would create significant business growth, cultural relevance and change at scale. What makes Aspirationals so compelling is that they combine an authentic commitment to sustainability with a love of shopping, design and social status, aligning economic, cultural and social forces to shift the way we shop.”

For consumers, Ikea’s long-admired design sensibility is intertwined with its sustainability. The chain’s commitment to affordability doesn’t have to fight with perceptions of sustainability. But Ikea must tread very carefully to preserve all three. A potential money-loser like solar panels could boost its environmental reputation and enhance its brand’s coolness. After all, the announcement about its UK stores carrying solar panels was carried widely across U.S. consumer, environmental and business media. So far, it looks like a branding home run.

Photo courtesy of lydia_shiningbrightly 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 8,300+ companies worldwide. Carol holds degrees from Smith College and Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 8,300+ companies from 135 industries in 104 countries. By aggregating and normalizing the information from 270+ 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.

CSRHub CEO and Co-founder Bahar Gidwani will be speaking at CSE’s Certified Sustainability (CSR) Practitioner Training on October 11, 2012 in Brussels, Belgium.

CSE is a leading global sustainability (CSR) consulting, coaching, and training firm. CSE is offering a two day Certified Sustainability (CSR) Practitioner Training. This IEMA Approved challenging 2-day course enables participants to acquire the skills and competencies required to become qualified CSR practitioners. Over the past three years, executives from Fortune 500 companies, Local Governments and Universities have participated in CSE’s Global Certified trainings, including Supervalu, Unilever, ABM, Lockheed Martin, Baker Hughes, Noble Energy, United Airlines, Coca Cola, ITW, Stanford University, Walmart and Chevron.

CSE has been approved by IEMA (Institute of Environmental Management and Assessment), a leading not for profit global institute offering certified trainings for CSOs, CSR Managers, Communication Directors, HSE Managers and other executives. At the end of the trainings, professionals have the opportunity to complete a Final Assignment, which allows them to qualify for certification and earn the recognized CSR-P Certification (CSR-P Seal).

CSE is also offering Certified Sustainability (CSR) Practitioner Training at the following locations:

Vancouver, BC, Canada, November 1 - 2.
Atlanta, GA, November 29 - 30.
Chicago, IL, December 4 - 5.

If you haven’t already, register to attend one of CSE’s Certified Sustainability (CSR) Practitioner Trainings today!

The first 10 people to register for a CSE’s training and let us know will receive a 25% discount on a subscription to CSRHub. Contact sales@csrhub.com for the discount link.

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 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

In his keynote to the Democratic National Convention, Julian Castro likened progress not to a sprint or a marathon, but a relay race going from one generation to the next.  As seen through environmentalist eyes, you can’t help but feel saddened. Future generations will be the ones to suffer for our failure to address climate change. Surely upcoming cohorts will be even more motivated than older generations to act.

But as a reader pointed out to me and as study after study has shown, the reality is that the current generation refuses to have much to do with “climate change.” The latest research from Jon Miller of University of Michigan shows that fewer than one-quarter of his GenX participants – young adults aged 37-40 — said they were “very concerned” about climate change.

And their interest in environmentalism is dropping: in 2009, only 22 percent of those GenX adults said they followed climate change very or moderately closely. In 2011, the number dropped to 16 percent.

Why should they care about climate change? They didn’t create the problem, their predecessors did. They have to deal with issues that are shorter-term and more immediate, like jobs and children.

Professor Miller also blames the arcane science behind climate change — it’s just too complicated.

But GenX has not been silent. They understand consumer power writ large by brands. They know how to force companies to be socially responsible by threatening their positive image, their brand power, and push the responsibility on those benefitting from consumerism. To preserve their goodwill with GenX, big companies like WalMart have to be green, and then coerce their suppliers to be green as well.

GenX discovered how to advance environmentalism in its own way, while shopping for the family.

Now the next generation, known as GenY or The Millennials, is taking up the baton. And GenY is also changing behavior in ways previous generations never dreamed.

Priscilla Long, author of the “Science Friction” blog for The American Scholar, calls reducing emissions from cars “the most effective single action we can take.” She gives prescriptions for doing so: buy a more fuel-efficient car. Drive less. Keep your tires inflated.

Older generations will take this advice, as much to save money as to save the environment. But guess what’s happening with GenY? They’re doing us one better: they’re not buying cars at all. They’re eliminating emissions.

A new J.D. Power report confirms it: teens and twenty-somethings no longer want to own a car.

Technology had the unintended consequence of causing behaviors that are more environmentally friendly. Apple may get mediocre ratings from CSRHub for its environmental performance. But its iPhone enables more virtual social interaction without the need for travel. Or cars.

[csrhubwidget company="Apple-Inc" size="650x100" hash="c9c0f7"]

Detroit is at its wit’s end, hiring social media wizards and youth marketing specialists to figure out how to turn the tide. But according to the Atlantic,  “The Cheapest Generation” turns to Facebook and Twitter for their identity, not their automobiles.

This may be more than just an issue of self-image. GenY is facing high unemployment and a mountain of student loans, so they’re broke too. But for whatever combination of factors, new data from the Federal Highway Administration suggests that total vehicle travel in the US has fallen back to where it was in mid-2004.

Lower car ownership is driving other less-expected results as well. Condos in downtown Portland are being built with fewer parking spaces – or none at all – reducing building costs and lowering the price of apartment rentals.  Bike lanes are popping up all over the country, even New York City. Downtown streets are being closed to cars.

And GenY s‘ experience with car sharing has led to a change in preferences from ownership to collaboration. Enthusiasm for sharing everything from cars to couches to clothes is not what the green movement envisioned. But it achieves the same end.

This is not old style environmentalism, where consumers change their behavior to be morally correct while denying themselves basic comforts. And it’s certainly not capitalism as we know it. It’s adaptation, where environment and capitalism come together.

Corporations and their brands are adapting to this new reality, morphing into what they should be, servants of consumers, rather than drivers of behavior. When an iPhone reduces demand for cars, business calls it disruptive innovation. At heart, it’s all adaptation. Who can guess what the next generation will come up with!

Photo courtesy of Ed Yourdon on Flickr (cc).

By Bahar Gidwani

The folks at BigRoom have worked for a couple of years on a side project (their main goal is to launch an  .ECO suffix for the Internet).  They are trying to capture, document, and categorize the various green, eco, and sustainability-oriented certification programs.  So far, they’ve found more than 300.

Some are pretty well known.  For instance, the Department of Energy and the EPA combined in 1992 to launch their Energy Star ratings.  They now put Energy Star ratings on appliances, building supplies, and homes.  Underwriters Laboratories—which is famous for its hugely-respected safety ratings—also offers UL Environment (ULE) certificates.  The Forest Stewardship Council has gotten a lot of wood and paper manufacturers to make the changes needed to earn its FSC certificate.  And buildings that conform to the US Building Council’s LEED standard get a lot of attention both from their owners and from those who work in the buildings—and seem to enjoy them.

Certification is also becoming part of supply chain management.  Manufacturers (like Procter & Gamble and Seventh Generation) want to ensure that their suppliers are well-behaved.  Retailers (like WalMart and Home Depot) need to be sure that the products they sell are socially responsible.  These companies are sending out surveys and asking for data on carbon use, chemical emissions, and labor practices.  Suppliers are hoping that getting approved in one program will turn into a credential they can use to get passes from other programs.

Of course, it is hard to know how far to trust certificates.  How can a consumer know whether or not the wood in a chair really came from a sustainably harvested tree?  How can we know that the chair wasn’t made using child labor or that the varnish on it didn’t pollute the water in the community where it was made?  How do we know that the drivers who transported our chair were properly trained and that their pensions and health care are adequate?  Can we be sure that the store we bought the chair in didn’t just stick a fake certificate on it?

The fact that most certification programs rely on self-reported data can make things worse.  Some suggest that a third party, like a consultant or an accounting firm, verify this data.  But there is obvious pressure on these third parties to give favorable rulings.  In most certification programs, there is no central repository of the data that has been collected.  Thus, there is no easy way to cross check the data, either at a top level or in detail.

There are a few independent organizations that  do their own testing and rating of products.  For instance, the Eco Index is tracking 377 eco labels in 211 countries and trying to put together a supply-side view of product sustainability.  ULE is working on an ambitious plan to integrate rigorous third party review of sustainability information into a standard called ULE880.  We are also seeing people use our ratings as a high-level way to test whether or not a company is likely to be telling the truth, when it claims to be performing responsibly and sustainably. 

In the end, certification systems need the same kind of independent audit process that financial statements receive—plus the same external review and criticism that financial statements are supposed to get from investors and analysts.  We hope that our CSRHUB ratings may eventually become part of this feedback loop.

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.

Photo inset: Creative Commons licensed by joiseeshowaa.