A study by the Social Investment Research Analysts Network (SIRAN) finds that an increasing number of the largest public companies in the U.S. are reporting on their environmental and social performance. Key findings include:

• Nearly 80% of the companies comprising the S&P 100 Index have special sections of their websites dedicated to sharing information about their social and environmental policies and performance. This is up from about 60% in the prior year.

• Over 40% of S&P 100 Index companies issue annual corporate social responsibility (CSR) reports. A dozen (12) companies became reporters in the past year, while 8 moved to web-based reporting only.

• A third of S&P 100 Index companies base their CSR reports on the Global Reporting Initiatives (GRI) Sustainability Reporting Guidelines.

A summary of the findings can be found at www.siran.org/csr.php.

Greenpeace’s Guide to Greener Electronics is a quarterly ranking of 14 major PC and mobile phone companies. In the December 2006 ranking, Nokia and Dell are at the top of the pack with Apple bringing up the rear. The ranking reflects which of these companies are doing the most to remove toxic chemicals from their products and which companies have good recycling programs. Nokia scores high for its efforts to eliminate toxic chemicals. Apple scored badly on all criteria except recycling. Apparently Apple’s cache with consumers didn’t spill over to the Greenpeace scorecard.

Dell’s recently announced expansion of its recycling program may give its Greenpeace ranking a further boost. Dell’s program features free home pick up of any Dell computer or peripheral and does not require participants to purchase a new product. Pick ups can be scheduled on Dell’s website.

Rapidly growing interest in environmentally friendly “green” computers has resulted in more than 300 computers being registered with EPEAT, the new EPA-funded green computer standard released in July, 2006. Nine manufacturers currently participate in the program.

Organizations are now requiring new computers to be EPEAT registered. On January 24, President Bush signed Executive Order 13423 that mandates federal agencies to buy EPEAT registered products. As a result this trend, the number of EPEAT registered products and participating manufacturers is expected to continue to grow.

Compared to traditional computer equipment, all EPEAT-registered computers have reduced levels of cadmium, lead, and mercury to better protect human health and the environment. They are more energy efficient, which reduces emissions of greenhouse gases. They are also easier to upgrade and recycle. In fact, manufacturers must offer safe recycling options for EPEAT registered products.

EPEAT products are identified as EPEAT-Bronze, EPEAT-Silver, or EPEAT-Gold depending on the number of environmental features incorporated in the product. A list of all EPEAT registered products and additional details is available online at www.epeat.net.

Greening of electronics goes beyond the devices themselves, there are benefits in redesigning the packaging. For example, HP has announced that its redesigned print cartridge packaging for North America will reduce greenhouse gas emissions by an estimated 37 million tons in 2007 – the equivalent of taking 3,600 cars off the road for one year. The emissions savings are the result of smaller, lighter packages that both reduce the total carbon footprint of each cartridge and the truck and freighter transportation traffic required to ship them. Newer packaging also contains more recyclable and recycled content.

Despite growing financial losses in various business sectors from climate change, over half of the nation’s 500 largest publicly traded companies are doing a poor job of disclosing climate change risks to their investors, according to a first-ever report analyzing climate disclosure practices among S&P 500 companies last year.

The Ceres/Calvert report concludes that America’s largest companies still aren’t taking climate change seriously enough. Less than half (47 percent) of the S&P 500 companies responded to a global survey last year by the Carbon Disclosure Project requesting information about their climate risks and strategies, and those that did respond failed to provide much of the information investors are seeking. Nearly a third (30 percent) of the responders, in fact, declined to publicly release their responses, calling them “confidential.”

“Many US companies are still downplaying climate change and its far-reaching business impacts,” said Mindy S. Lubber, president of Ceres, a leading coalition of investors, environmental groups and other public interest organizations. “More-extreme weather events, regulatory changes and growing global demand for climate-friendly technologies are just a few of the ways that climate change will ripple across all sectors of the economy. Yet, many US companies are not addressing these trends and are leaving investors in the dark about their strategies for mitigating those risks.”

Poor survey responses among lower-emitting companies – in particular, retailers, banks and insurers – was especially conspicuous. Many companies in these sectors provide insufficient climate disclosure to investors, even after suffering large financial losses from climate-related events, such as the 2005 hurricanes. Lubber said that all companies should disclose their risks using the three most common disclosure mechanisms: SEC filings, CDP, and sustainability reports using Global Reporting Initiative guidelines.

“All companies have a duty to provide shareholders with more analysis and disclosure on climate risks and their strategies for managing or mitigating those risks,” said Dr. Julie Fox Gorte, vice president and chief social investment strategist at Calvert. “Lower-CO2-emitting sectors and companies also face potential risks from new regulations, physical changes, and other climate-related impacts. Power and oil companies are improving their climate disclosure and it is now time for retailers, banks and telecommunication companies to start doing the same.”

The Ceres/Calvert analysis was based on S&P 500 company responses to a questionnaire distributed last year by the Carbon Disclosure Project (CDP), to obtain more information relating to corporate management of climate change. CDP is a coordinated effort by 225 global investors with total assets of $31 trillion. The report authors used the Global Framework for Climate Risk Disclosure to analyze the quality of responses.

Other key findings from the Ceres/Calvert report include:

• Poor Greenhouse Gas Emissions Management: 80 percent of the 228 companies that responded to the survey (182 companies) addressed the need to reduce greenhouse gas emissions, but only a quarter (59 companies) disclosed measurable emissions reductions targets and specific time frames for reductions.

• Physical Impacts Not on Radar Screen: Nearly 75 percent of the responding companies (171 companies) acknowledged bottom-line risks associated with extreme weather events such as hurricanes, fires and floods. However, very few of the companies surveyed link more-extreme weather to climate change and fewer still—only four percent – disclosed strategies for mitigating and adapting to the growing physical impacts from climate change.

Source: Ecosystem Marketplace

In November 2005 Goldman Sachs surprised many people in the financial sector when it announced an ambitious new environmental policy framework. [PDF] The slew of green measures included commitments to consider the environmental and social impacts of investments, encourage the development of environmental markets, and reduce the investment bank’s overall climate footprint.

Now a little over a year later (and on the back of soaring profits) the investment giant is taking stock of its efforts. On January 21, 2007, it quietly released its year-end environmental report, [PDF] demonstrating that environmental commitments are indeed in line with Goldman’s raison d’etre: making money.

"Goldman Sachs really pushed the envelope with [its] policy framework," says Jon Sohn, a senior associate at the World Resources Institute. "They are sending a message that valuing the environment can go hand in hand with wealth creation."

In particular, Goldman Sachs chose to focus its efforts on the renewable energy sector in 2006, where it thinks profits may just be blowing in the wind. Due to strong demand and opportunity, it exceeded its original pledge to invest $1 billion in alternative energy by 50 percent. In addition to betting on wind, Goldman Sachs kicked in support for companies in the solar, biodiesel and ethanol businesses.

Of course, environmental advocacy groups are quick to point out that upping investment levels in alternative energy addresses just one side of the climate change problem facing the current economy. Sohn argues, for instance, that Goldman’s year-end report did not say enough about the nature and number of transactions it screened when making project investments in environmentally-sensitive industries.

"Investment banks need to carefully evaluate who they’re doing business with, and the environmental and social impacts of the full range of financial services that they provide," says Dana Clark, global finance campaigner for the Rainforest Action Network. "They need to reduce their involvement with the dirtiest industries, and find ways to reduce the carbon intensity of their investments."

Goldman admits that controversies about project finance decisions may become more commonplace in the future, but argues it is difficult to turn down such investments in light of the growing demand for energy, and the current inability of alternative sources to meet it. According to Sonal Shah, vice president of corporate citizenship at Goldman Sachs, investing in alternative energy and technology is not without its own problems. For example, wind farms sometimes face local not-in-my-backyard opposition, and there are still some unresolved questions with regards to the implementation of certain technologies.

So instead of an abrupt shift from fossil-fuel based to alternative energy, Goldman Sachs envisions a phased approach in which different sectors of the economy gradually become less and less dependent on coal and oil. In this context, Shah says Goldman Sachs will continue to make investments in proven alternative energy sources and will help develop the carbon market.

"Money is already flowing to alternative energy sources," says Sohn. "But with this policy, Goldman Sachs recognizes that markets have to be enhanced to significantly increase these flows globally and reduce our reliance on fossil fuels."

Last year, Goldman became a partner of ASSET4, a provider of non-financial data on corporations worldwide that incorporates environmental, social and governance (ESG) data into its investment research. The aim is to understand the relationship between ESG performance and share prices. "We have done a lot of research on this and we feel we will become better investors," says Shah. "We are really trying to get to our clients and the investing audience out there, and demonstrate why these issues are important to think about."

An international mix of businesses and non-governmental organizations (NGO’s) are joining forces to promote global action on climate change. This activism is of more critical importance in light of the recent report by the leading international network of climate scientists that has concluded for the first time that global warming is “unequivocal” and that human activity is the main driver, “very likely” causing most of the rise in temperatures since 1950.

The report by the Intergovernmental Panel on Climate Change is their fourth assessment since 1990 on the causes and consequences of climate change, but it is the first in which the group asserts with near certainty (i.e., more than 90 percent confidence) that carbon dioxide and other greenhouse gases from human activities have been the main causes of warming in the past half century. Striking a hopeful note, the report said warming and its harmful consequences could be substantially blunted by prompt action. Two groups consisting of major global businesses – U.S Climate Action Partnership (USCAP) and Combat Climate Change Initiative (3C Initiative) – are already trying to mobilize businesses to take the lead on climate change.

A diverse group of U.S.-based businesses and leading environmental organizations called on the federal government to quickly enact strong national legislation to achieve significant reductions of greenhouse gas emissions. The group said any delay in action to control emissions increases the risk of unavoidable consequences that could necessitate even steeper reductions in the future.

This alliance, called the U.S. Climate Action Partnership (USCAP), consists of major corporations with a combined market capitalization of more than $750 billion, including Alcoa, BP America, Caterpillar, Duke Energy, DuPont, FPL Group, General Electric, Lehman Brothers, PG&E, and PNM Resources; along with four leading NGO’s with more than one million members – Environmental Defense, Natural Resources Defense Council, Pew Center on Global Climate Change, and World Resources Institute.

USCAP has issued a landmark set of principles and recommendations to underscore the urgent need for a policy framework on climate change. The solutions-based report, titled A Call for Action, lays out a blueprint for a mandatory economy-wide, market-driven approach to climate protection. “The time has come for constructive action that draws strength equally from business, government, and non-governmental stakeholders,” said Jeff Immelt, Chairman and CEO of General Electric. “These recommendations should catalyze legislative action that encourages innovation and fosters economic growth while enhancing energy security and balance of trade, ensuring U.S. leadership on an issue of significance to our country and the world.”

USCAP’s recommendations [visit www.us-cap.org/ClimateReport.pdf ] are based on the following six principles:

• Account for the global dimensions of climate change;
• Recognize the importance of technology;
• Be environmentally effective;
• Create economic opportunity and advantage;
• Be fair to sectors disproportionately impacted; and
• Recognize and encourage early action.

The principles and the recommendations outlined in A Call for Action are the result of a year-long collaboration motivated by the shared goal of slowing, stopping and reversing the growth of greenhouse gas (GHG) emissions over the shortest period of time reasonably achievable.

USCAP urges policy makers to enact a policy framework for mandatory reductions of GHG emissions from major emitting sectors, including large stationary sources and transportation, and energy use in commercial and residential buildings. The cornerstone of this approach would be a cap-and-trade program. The environmental goal is to reduce global atmospheric GHG concentrations to a level that minimizes large-scale adverse impacts to humans and the natural environment. The group recommends Congress provide leadership and establish short- and mid-term emission reduction targets; a national program to accelerate technology research, development and deployment; and approaches to encourage action by other countries, including those in the developing world, as ultimately the solution must be global.

3C - Combat Climate Change - A Business Leaders’ Initiative

The 3C Initiative aims at forming a global opinion group consisting of companies showing leadership by demanding an integration of climate issues into the world of markets and trade facilitated by means of a global framework coming into force in 2013. Many of the companies signing the 3C Initiative also take part in other activities on climate change such as the World Economic Forum’s G8 Climate Change Roundtable and various Trade Associations’ initiatives. Duke Energy and General Electric are part of USCAP as well as 3C signatories. Other signatories include Bayer, PG& E Corporation, and Siemens.

The goal of the 3C Initiative is to underline the need for urgent action by the global community and to influence the post-Kyoto process by demanding a global framework supporting a market based solution to the climate change issue. In essence, 3C’s principles for combating climate change are: 

• A long-term switch-over to lower emissions of greenhouse gases is a necessity.
• A worldwide policy framework is needed to replace the Kyoto Protocol from 2013 and onwards.
• The priority should be to focus on a common, global goal of limiting global warming via a cap on the carbon dioxide equivalent concentration.
• In order to minimize the cost of staying below the cap it is necessary to establish a global price for the emission of greenhouse gases.
• To limit negative effects on global wealth, a global system facilitating emissions trading should be established.
• The global burden should be shared but the richer countries shall pull a larger weight.

For more information visit www.combatclimatechange.org/

The consultancy, SustainAbility, has published its fourth international benchmark of corporate responsibility reporting. Entitled Tomorrow’s Value, the survey asks the question: How far has the value light bulb switched on in corporate brains and boardrooms? Key findings of the survey include:

• Focus on Opportunities. Leading companies are shifting the focus of their sustainability strategy towards a more progressive and entrepreneurial approach for strategic innovation and market building. However, these leaders are still in the minority — most companies still take a risk-focused approach.
• Investor Interest. Sustainability reports are a key component of the portfolio of information available to socially responsible investment funds and, increasingly, to mainstream investors. Financial markets welcome sustainability disclosures and greater corporate transparency.
• Integration of Sustainability into Strategy. Increasingly companies are integrating sustainability-related factors into core decision-making. Materiality is the gauge that determines which risks and opportunities are factors to be considered.
• Weak Link to Public Policy Initiatives. Less than half of corporate reporters sufficiently discuss and connect their sustainability initiatives to their lobbying activities.
• Link to Bigger Picture. Leading companies are connecting their individual goals and activities to broader macro-frameworks, such as the UN’s Millenium Development Goals, to measure their individual contributions.

A survey by The Conference Board finds that companies find potential rewards in corporate citizenship and sustainability but acknowledge they lack an active strategy to develop new business opportunities in connection with corporate responsibility. The survey encompassed 198 medium to large multinational companies. Findings include:

• A mixed perspective exists regarding corporate citizenship and sustainability; 90% of companies say these issues are sources of both business opportunity and business risk.
• Two-thirds say corporate citizenship and sustainability are of growing importance for their businesses.
• Sixty-two percent (62%) have formal programs to manage their corporate citizenship and sustainability practice, however, the majority of companies are not actively developing related business products.
• Key drivers of corporate citizenship programs that were cited as extremely or very important were — Enhancing corporate reputation and brand (92%); Recruiting and retaining talent (78%); Reducing risk (64%).
• External stakeholders cited as having the most influence (i.e., extremely or very important) on corporate citizenship and sustainability issues were local communities (70%), customers/consumers (65%), shareholders (52%), governments (51%), financial institutions and investors (43%). Somewhat surprisingly, non-governmental units were highly ranked in importance by only 37% and the media by 27%.
• A majority of those surveyed (71%) issue public reports on citizenship and sustainability with 52% doing so in reports separate from their financial reports.

In his best-selling book, The Tipping Point, author Malcolm Gladwell describes the tipping point as "that magical moment when an idea, trend or social behavior crosses a threshold, tips, and spreads like wildfire." Business is edging toward such a tipping point, where a new model for business is about to catch on. It’s a model in which sustainability, social responsibility and governance are integral components of business strategy. And corporate performance is measured by more than just financial results.

According to Gladwell, a number of factors converge to cause something to tip and become an epidemic. I believe that is what’s causing companies to embrace sustainability and corporate responsibility. Three areas of growing concern are converging to pressure businesses: 1) Corporate scandals have brought ethics and governance front and center in recent years; 2) Realization that global warming is a serious threat has heightened public concern about the environment; and 3) Escalating turmoil in the Middle East is driving home the perils of our dependence on oil and raising concerns about energy costs and supply.

The media is giving all these issues extensive play and people are starting to pay attention. Businesses cannot avoid the responsibility to do their part to mitigate these risks. But it’s not just about doing the right thing, it’s also about creating corporate value through sustainable business performance. And an increasing number of CEO’s see sustainability as vital to success.

"At Ford Motor Company, we have made sustainability a long-term strategic business priority. The reason is simple: we are a 100-year-old company, and I want us to become a 200-year-old company. Sustainability is about ensuring that our business is innovative, competitive and profitable in a world that is facing major environmental and social changes."   — William Clay Ford, Chairman

Ford Motor Company is an icon of American business but today they are struggling. And they clearly understand that "business as usual" is not an option. But should a company in trouble be thinking about the next 100 years? I think so because I believe that too narrow a focus ultimately leads to failure. The healthiest companies are those that are built to last. A company in trouble cannot ignore its immediate problems, yet to survive it needs to strike a balance between short term goals, such as quarterly earnings, and long term objectives like new product development. A more holistic view of business is in order. That is, to recognize that a business does not exist in a vacuum … a business depends upon the communities in which it operates for customers, for employees, and for infrastructure. Accordingly, it is in the best interest of any business to operate responsibly and sustainably.

That may sound good in theory but the conventional wisdom says we need to establish a quantifiable business case to support it. Reduce the costs and benefits to dollars and cents and prove that a focus on sustainability is the key to success. As a CPA, it may be heresy for me to suggest this, but I think we sometimes spend too much time and effort fiddling with financial models when a little common sense will do. If business and community are linked, then a business is compelled to contribute to the well-being of its community to help ensure its own well-being. As such, it should be the mandate of every corporation to strive for sustainable business performance. Building sustainable businesses will promote sustainable communities and, in the broadest sense, a sustainable world. We all win. Forgive my simplistic view but I think that’s the business case.

So are we at a tipping point? Are we ready to model today’s businesses to serve the interests of all stakeholders, not just shareholders? Will the issues of sustainability, social responsibility, and governance be integrated into core business strategy? Will environmental and social performance be uniformly reported with financial results?

As you know, we’re not there yet. But leading companies and thought leaders are showing the way. Our mission with this blog is to put you on the forefront of new thinking on the subject of sustainable business performance. We’ll provide relevant, practical information that you’ll want to know. After all, it’s going to tip and you want to be ahead of the curve.

The International Organization for Standardization (ISO) is developing an international standard on social responsibility (ISO 26000). The voluntary standard will augment existing public and private initiatives and help organizations address their social responsibilities by: 

• Developing an international consensus on what SR means and the SR issues that organizations need to address,
• Providing guidelines on translating principles into effective actions, and
• Distilling the best practice that has already evolved and disseminating it worldwide for the good of the international community.

ISO and the United Nations Global Compact have signed a memorandum of understanding to cooperate on the development of ISO 26000. The reputation and credibility of ISO could encourage organizations to embrace social responsibility and incorporate it in core business strategies. ISO 26000 is currently targeted for publication in late 2008.

You’ve probably heard of lifestyles of the rich and famous. Here’s one you may not be familiar with – Lifestyles of Health and Sustainability (LOHAS). LOHAS describes a $228.9 billion U.S. marketplace for goods and services focused on health, the environment, social justice, personal development and sustainable living. Sociologist Paul Ray identified LOHAS customers as “cultural creatives,” a group of educated consumers who make conscientious purchasing and investing decisions based on social and cultural values. According to Ray, about 50 million people, or 25% of adult Americans, comprise this group.

Cultural Creatives are a large and growing consumer market for products and services such as, green building, renewable energy, natural and organic products, environmentally friendly electronics, eco-tourism, alternative healthcare solutions, and mind/body/spirit products. We will likely hear more about this consumer market as more companies view sustainability as a source of business opportunity.