This blog will cover some news items related to Sustainability: Corporate Social Responsibility, Stewardship, Environmental management, etc.


Absolute Emissions versus Emissions Intensity Backgrounder

Absolute Emissions versus Emissions Intensity Backgrounder
Source: ClimateBiz

The distinction between absolute emissions and emissions intensity is
fairly simple in concept, but may be confusing in practice. “Absolute
emissions” is the common measure of emissions that is used by protocols
and measuring standards. While the actual calculations may be challenging
for a number of reasons (e.g., difficulty in defining boundaries,
quantifying activities that result in emissions, or determining proper
emissions factors), the concept is fairly simple. Emissions are quantified
for some entity, for example a company, university, city, or country, and
reported -- usually in terms of tons of carbon dioxide. For example, if
Ace Manufacturing Company reports that it produced one million tons of CO2
in 2003, it is reporting its absolute emissions.

Whereas absolute emissions quantifies the amount of carbon dioxide and
other greenhouse gases produced, emissions intensity reports the amount of
emissions per some unit of economic output. This can be done for a company
relative to the company’s total profits, or in terms of units of a good
produced. For a country, emissions intensity might be calculated as tons
of carbon dioxide relative to that country’s gross national product.

Using emissions intensity
As a one-time snapshot of emissions from one entity, the difference
between emissions intensity and absolute emissions doesn’t make much
sense. There are two instances, however, in which emissions intensity may
be illustrative. The first is when comparing emissions over time. If in
1990 Ace Manufacturing produced five hundred thousand tons of CO2, and in
2003 it produced one million tons, its absolute emissions doubled.
However, if in that time Ace’s output doubled, then its emissions
intensity stayed the same, even while its emissions doubled. If during
this time Ace’s output quadrupled, then its emissions intensity was cut in
half, showing that the company has become twice as efficient, even though
its emissions have increased.

Comparing emissions intensity may also make sense when comparing the
emissions of two entities of different size. A country whose economy
account for one-sixteenth of the world economy may argue, for example,
that its emissions levels are appropriate as long as they account for only
one-sixteenth of the world’s CO2 emissions. That country’s plan for
addressing emissions may then call for a specific reduction in emissions
intensity, rather than a reduction in absolute emissions.

Many governments and other bodies (e.g., environmental organizations,
protocols) believe that the proper measure of emissions, at least at the
macro level, is in absolute terms. They point out that the build-up of
carbon dioxide in the atmosphere, and its associated impacts, is based on
absolute emissions. In fact, most international legislative and regulatory
efforts, including the Kyoto Protocol, address absolute emissions, not
emissions intensity.

Deutsche Bank: microcredit development fund -- Deutsche Bank has recently reaffirmed microfinance as a cornerstone of its corporate citizenship strategy

Deutsche Bank: microcredit development fund
From the rural villages of Asia to urban centers of the United States,
small loans to emerging entrepreneurs create opportunities for
self-employment and dignified lifestyles for millions. With microcredit,
loans are given to those who need it most - the poor at the grassroots
level. Without microcredit, such loans would not be possible as these
people are unable to meet the requirements of traditional banking
practices, which call for collateral or previous credit experience.
Microcredit, in the form of loans to small businesses and individual
entrepreneurs, fosters self-reliance and community-wide economic
development. It stimulates savings among poor people, allowing them to
build an asset base that is essential to economic activity. Microcredit
institutions can serve large populations and as a means of organizing
communities and they are important vehicles for other positive social
developments, such as better health care, education and training, higher
status for women, smaller family size, and civic awareness.
Microcredit institutions are proving to be a revolutionary force in
enabling families to rise from poverty through the creation of
opportunities for self-employment. Also, in the context of group borrowing
structures, recipients of microcredit are proving to be good credit risks.
Microcredit institutions lending to the poor typically achieve repayment
rates exceeding 97%, with such loans currently reaching nearly 23 million
borrowers with the industry growing rapidly.
Microfinance has established itself in recent years as one of the most
effective weapons in the fight against poverty. By providing unsecured
micro-loans of typically US$100 to the world's poorest, institutions such
as the Grameen Bank in Bangladesh have enabled literally millions to rise
above the poverty line. Moreover, such institutions operate profitably and
often have repayment rates higher than commercial banks. For the past few
years, the Deutsche Bank Microcredit Development Fund has been working to
assist such institutions by providing capital and technical support.
Microcredit institutions can be replicated across boundaries of geography
and culture. They can serve large populations as well as small ones.
However, microcredit experts agree that unless microcredit institutions
achieve mainstream status by becoming profitable businesses, they will
fail to reach the necessary scale to effect true change for the world's
The Deutsche Bank Microcredit Fund was conceived as a vehicle to combine
the interest, abilities, reach, and resources of Deutsche Bank and its
Private Bank clients to support the long-term sustainability of
microcredit institutions.
Deutsche Bank has joined with progressive clients of its Private Bank to
establish the Deutsche Bank Microcredit Development Fund as a unique
financial tool fuelling the growth and reach of Microcredit programs
around the world. The Fund seeks to accomplish this by fostering durable
relationships between Microcredit institutions and local commercial
financial institutions.
The Fund provides loans to nonprofit Microcredit lending institutions or
nonprofits that are evolving into regulated entities.
These loans are intended to provide equity-like debt that will be held by
the Microcredit institution on its balance sheet to assist in capitalizing
loan loss reserves, or to be used as collateral as part of obtaining a
loan from a local financial institution on a leveraged basis. The Fund's
loans are usually made on a non-amortizing basis with very low cost,
usually 1-3% interest, over a 3-8 year term.
A loan from the Deutsche Bank Microcredit Fund of US$75,000 was made to
the Society for Helping and Awakening Rural Poor through Education
(SHARE), who serve very poor skilled and unskilled rural female
entrepreneurs in India. This loan, at 10:1 leverage realizes a US$750,000
increase in lending capacity over the average 11.5-month term (equivalent
to US$780,000 per annum), for a total impact of US$3,900,000 over the
five-year Deutsche Bank Microcredit Fund loan term.
With loans from SHARE, Hafiza Bee, her husband, and their six children are
experiencing newfound hope. Hafiza's relationship with SHARE began in 1988
when she organized four other women to become the first group in their
village to participate in the SHARE loan program. With her first loan of
US$80 (Rs4,000), Hafiza purchased a buffalo. Sales of three litres of milk
a day gave her a sense of achievement as she repaid the loan and also had
funds to cover household expenditures. With the additional income, the
family could begin to save a portion of the earnings from her father's
tailoring business. Additional loan proceeds have resulted in expanded
family enterprises including new sewing machines for her sons, who are now
tailors in the family business. Hafiza began to expand her own
hand-stitching and embroidery business, which resulted in her appointment
as a teacher of a government stitching center in her village and provided
her with a regular monthly salary.
SHARE has tripled its size in the last two years, is operationally
self-sufficient, and has consistently maintained a 100% repayment rate. In
an effort to raise funds from commercial sources and to earn profits,
SHARE is forming a community-owned, for-profit company called SHARE
MICROFIN, which was registered with almost 20,000 shareholders, all of
whom are SHARE borrowers.
Hafiza Bee's positive experience with SHARE is serving as an inspiration
to others in the village, and she has become an unofficial guide for those
who want to enter the program.
Since the inception of fund, as a result of the US$937,500 in loans
Deutsche Bank Microcredit Fund has made to 12 micro-finance institutions
in nine countries, an additional US$19 million is leveraged in private
financing and cumulative lending capacity to the very poorest.
Deutsche Bank has recently reaffirmed microfinance as a cornerstone of its
corporate citizenship strategy. To build on the work of the Microcredit
Development Fund, the Deutsche Bank Microfinance Working Group has been
set up to allow employees to learn more about microfinance as a tool for
helping to alleviate poverty around the world and provide them with an
opportunity to expand Deutsche Bank's role in this important emerging
financial sector.


Guess Your Liability! Activists want companies to list potential environmental liabilities on balance sheets. This is full disclosure gone berserk

Guess Your Liability! Full disclosure gone berserk.
Forbes, 26 July 2004 - Activists want companies to list potential
environmental liabilities on balance sheets. This is full disclosure gone
In these days of corporate scandal, who can argue against full disclosure
on financial statements? But now comes one cockeyed movement that pushes
the concept to extremes. It would require executives to guess potential
liabilities from environmental and social problems that just might affect
their companies, and list them on balance sheets.
I can envision, for instance, that an oil company like Royal Dutch/Shell,
as supplier of fuels that supposedly contribute to global warming, would
have to report the potential environmental liabilities. How much? A ready
estimate can be derived from the movie The Day After Tomorrow. As the film
ends, half the U.S. population lies frozen beneath a gigantic ice sheet.
So let's say $100 billion. Or maybe $10 trillion is a better number.
See how ludicrous this gets? Remarkably, this movement is drawing support
from Wall Street. In June Goldman Sachs and Morgan Stanley endorsed a
report of the United Nations Global Compact that calls upon regulators to
"require a minimum degree of disclosure and accountability on
environmental, social and governance issues from companies, as this will
support financial analysis."
The Rockefeller Family Fund, the Turner Foundation and the United
Steelworkers have also signed on to the balance-sheet responsibility
movement. California Treasurer Phil Angelides wants his state's public
pension funds to push for "accurate corporate environmental accounting."
The Rose Foundation for Communities & the Environment, in Oakland, Calif.,
has already asked the SEC to mandate disclosure of "financially
significant environmental liabilities." These activists aren't trying to
improve the reliability of Moody's bond ratings. They are out to influence
corporate behavior.
Yes, environmental and social liabilities can be huge--witness Superfund,
asbestos and breast-implant costs. In today's world of strict, joint and
several liability, where almost anyone can be assigned fiscal
responsibility for almost anything, conservative accounting would seem to
require the disclosure of all the future damage that could be done by tort
lawyers. The problem is coming up with a number.
A federal judge in California just gave a green light to a class action on
behalf of 1.6 million women who worked at Wal-Mart anytime since December
1998. The plaintiffs accuse the retailer of denying women equal pay and
opportunities for promotion. Should Wal-Mart have anticipated this suit?
Should its 2004 balance sheet have included a liability of, say, $104
million (the amount Home Depot paid in 1997 to settle similar suits) or
maybe $176 million (what Texaco agreed to pay out in 1996 to settle a
race-discrimination class action)? Wal-Mart's bigger, though. How about a
few billion dollars?
Note that American and United Airlines, Boeing and the owners of the World
Trade Center are all being sued (by families who opted out of the
September 11th Victim Compensation Fund) for failing to take measures to
prevent the attacks. Maybe juries will size up damages in the billions.
Should AMR, UAL and Boeing be listing massive conditional liabilities on
their quarterly reports?
There are an infinite number of possible futures and thus an infinite
number of possible asset/liability estimates. Which of the myriad
low-probability (but possibly high-cost) risks should be incorporated on
companies' balance sheets? At what point does the noise introduced by
adding more and more low-accuracy valuations destroy the informational
value of accounting itself? In mandating the disclosure of information
about less-likely risks, don't we run the risk of omitting information
about more-likely risks?
Assets and liabilities that can't be connected to historical transactions
or tradable contracts have no assignable market value. Goodwill is like
that. If it isn't from an arm's-length acquisition, the number you might
put on this asset is entirely arbitrary. So investors are better off if
the asset is not counted. So, too, for liabilities that are to be plucked
from the air. Accounting is not a field in which we want to encourage
fanciful thinking.
Copyright 2004 Forbes, Inc.

Ill winds: Wind farms disfigure the countryside and threaten to cost £1 billion a year. Apart from that, they're great

Ill winds
Jul 29th 2004
From The Economist print edition

Wind farms disfigure the countryside and threaten to cost £1 billion a
year. Apart from that, they're great
FROM sacred cow to white elephant is a short jump. Wind power, once seen
as the eco-friendly cure-all for Britain's energy problems, is attracting
unprecedented criticism. The latest campaign, which unites veteran greens
and the opposition Tories, opposes a proposed installation of 27 wind
turbines next to Romney Marsh in Kent, a noted bird sanctuary and beauty
spot. Hundreds more are planned elsewhere—many in beautiful bits of the
countryside where some of Britain's richest people happen to live. A bunch
of media-savvy local organisations is now lobbying hard to stop them.
The government remains unmoved. It calls wind power “the most proven green
source of electricity generation” and cites Denmark as a role model.
Renewables (mostly wind) account for 20% of electrical generation capacity
there. Renewable energy is needed both to cut CO2 emissions, promised
under the Kyoto treaty, and to reach the government's own target of
generating 10% of British electricity from renewable sources by 2010. The
cost of this to the taxpayer is likely to be £1 billion a year by 2020.

But as well as Tories, toffs and country-lovers, many others think that
wind power is seriously flawed. The first big problem is that it is too
expensive. Although the British Wind Energy Association puts the cost of
electricity from onshore wind farms at 2.5p per kilowatt-hour, only
slightly more costly than other power sources, the Royal Academy of
Engineering claims that on a more realistic view of construction costs it
is much dearer: 3.7p when generated onshore and 5.5p offshore (see chart).

The government has tried to bridge this gap with tradable certificates.
The wind-gatherers gain one of these for each megawatt-hour they generate.
Power distribution companies then buy them as an alternative to paying the
fines levied for failing to buy a set proportion (currently 4.9%) of
renewable energy annually. But a recent House of Lords report noted a big
snag: the nearer the industry gets to meeting the government's targets,
the less the value of the certificates; once the target is passed, their
worth falls abruptly to zero.
So the certificates, which will cost consumers a cool £500m this year and
will be even more expensive next year, cap the supply of renewable energy
instead of encouraging it. In effect, firms will buy only the minimum
amount of renewable energy necessary to comply with the law.
Then there are the engineering problems. Too light a breeze means no
power; too strong a gale and the turbines shut down to prevent damage.
Even the wind-lovers expect that the farms will manage only 30% of their
full capacity on average. Worse, that output can fluctuate rapidly—by up
to 20% of the total national wind capacity in the space of a single hour,
according to Hugh Sharman, an energy consultant, who has studied Denmark's
wind industry. Furthermore, in a typical year like 2002, he says, there
were 54 days when the air was so still that virtually no wind power was
generated at all.
But whereas Denmark can import power from Norway and Germany to keep the
lights on during calm periods, Britain's power grid is not set up for
imports. So conventional coal-, oil- or gas-fired power stations would
have to be kept running, ready to take up the load at short notice. That
sharply raises the real cost of wind energy and means extra CO2 emissions.
Ministers may be right when they argue that wind power is the only
renewable energy source that has even a theoretical chance of meeting the
government's targets. Given the costs and technical uncertainties, perhaps
it would be better to abandon those targets altogether.

UK corporate environmental performance improving, but several sectors lag behind

European News: UK corporate environmental performance improving, but
several sectors lag behind
27 July 2004
Tobias Webb

The construction and water industries have been strongly criticised by the
Environment Agency in its annual report on environmental performance.
Greenhouse gas emissions are increasing, and some major brand names are
still paying tens of thousands of pounds in fines.
In the Environment Agency's sixth annual report, out today, the agency
says that "risk-based regulation" of industry is paying off for the
environment in England and Wales.

According to the report, in 2003 the number of pollution incidents from
industry was down 12% on 2002 and by 43% on 2001.

"Big improvements" were recorded by some sectors, says the agency,
praising the farming and waste management industries for cutting the
number of serious pollution incidents they caused by around 25 per cent in

These, apparently, are the best results for pollution incidents from these
sectors since Environment Agency records began.

The agency also says that in 2003, the chemical industry more than halved
its serious pollution incidents to just 11.

Other sectors were well below par in the agency's assessment. They slated
the construction industry for producing 80 million tonnes of waste per
year, a trend, they said, that could be reversed with "waste minimisation
and readily available clean-up techniques".

The water industry is evidently lagging in its performance, as pollution
incidents in the sector rose by 25 per cent in 2003 alone.

Greenhouse gases from regulated industries are also on the increase by 5%
overall, and emissions of nitrogen oxide by 9%. The agency says this is
largely as a result of increased use of coal in power stations.

Steve Howard, chief executive of the Climate Group, a non-governmental
organisation working with companies on best practice in CO2 and greenhouse
gas emissions, said: "This is very disappointing, and shows that in many
companies, eyes are not on the ball.

"At the same time as you see some major progress from companies like IBM
and BP on environmental efficiences and emissions, other companies are
missing a chance to save money."

The Environment Agency has praised a number of companies for "impressive
reductions in environmental impact". These included Polymerlatex in
Worcestershire and LaFarge's Aberthaw cement works.

BAE Systems Environmental and Whiteley in Pool-in-Wharfedale have also
been highlighted for their work in minimising waste.

The Environment Agency says its system of scoring site-by-site operational
performance shows that standards of environmental management are

"Our risk-based approach - paying more time and attention to high risk,
poor performers and taking a lighter touch with those who demonstrate
responsible environmental management - is paying off for both business and
the environment," said agency chief executive Barbara Young.

In a new turn, this year's report highlights a growing trend of personal
liability for corporate environmental crime. White-collar workers -
including company directors and sole traders - are finding themselves at
increased risk of incurring high personal fines, community punishment
orders and even custodial sentences when breaking environmental law.

"Company directors and sole traders who try to increase profits at the
expense of the environment should take note that a personal fine or a
criminal record could be on the cards," Young said.

The Environment Agency prosecuted 266 companies in 2003, resulting in
total fines of over £2.2 million. The average fine for businesses fell
from £8,622 to £8,412, but was still higher than in 2000 or 2001.

Around 60 firms were fined over £10,000 and seven firms were fined over
£50,000. Companies taking top fines in 2003 included Cleansing Service
Group (at £250,000, the highest ever fine against a waste company for
environmental offences), Eurocare Environmental Services (£100,000),
Henkel (£98,000), Southern Water Services (£73,200), Thames Water
Utilities (£60,000), European Metal Recycling (£50,000) and Reefguild

A number of high-street names known for their corporate responsibility
policies were taken to court, including Ford Motor Company (fined
£42,000); Proctor and Gamble (£28,000); Laurent-Perrier (UK) (£14,000);
Interbrew UK (£15,000) and Rolls Royce (£10,000), and there were repeat
offenders in a number of sectors including water.

Campaign groups welcomed the focus on poor performers, but warned that
fines for environmental breaches are still not severe enough.

"Too many companies are repeatedly breaching environmental regulations -
and with such low fines, it is no wonder. Paying the fine often costs
business less than preventing the problem," said Friends of the Earth's
Corporate Campaigner Brian Shaad.

In a separate report released on 15 July, the Environment Agency and
Trucost said that environment policies in the FTSE All Share index were
seriously lacking in depth and clarity.

In that study Trucost found that 89% of the 570 FTSE All Share companies
surveyed discussed their environmental interaction in their annual reports
and accounts. But only 10% report on all three major impact areas – water,
waste and energy use - and only 24% make any quantitative disclosures.

They also found that only 17% of the FTSE All Share companies refer to
climate change risks in their reporting.

Steve Howard of the Climate Group says climate risk is now a mainstream
business issue and expressed concern at this poor level of disclosure from
major UK companies.

He said: "If companies aren't disclosing their climate change strategies
its clear that they are failing to understand the risks. Carbon now means
money, and some sectors are facing real risks in the medium term, these
companies need to understand this and act on it."

Barclays, Shell in landmark carbon emissions deal

Barclays, Shell in landmark carbon emissions deal

LONDON - Barclays Capital (BARC.L: Quote, Profile, Research) and Shell Trading (RD.AS: Quote, Profile, Research) (SHEL.L: Quote, Profile, Research) have completed the first carbon emissions trade using standard terms set out by the International Swaps and Derivatives Association, the two firms said.

The deal was an important step for the emissions market because the use of standard trading terms, which can be used by all market participants, is crucial to the development of liquidity, they said.

"Standardisation is a key element of achieving a liquid market characterised by market depth, price transparency and narrow bid-offer spreads," said Louis Redshaw, head of environmental markets at Barclays.

Financial details of Tuesday's deal, which was brokered by Evolution Markets, were not disclosed.

Carbon trading is due to start officially in Europe in January when the European Union launches a trading scheme as part of its effort to curb greenhouse gas emissions.

Firms have already started trading in forward contracts covering permits for the first phase of the scheme, which will cap carbon dioxide emissions from industrial plants.