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


Will the fuel cell be a hard or easy sell?

Will the fuel cell be a hard or easy sell?
Newsday, 29 May 2005 - Is the world at the tipping point of saying yea or
nay to a hydrogen economy, at least, for transportation? What trend or
world event will force the tipping point? The crystal ball remains fuzzy.
Ford and General Motors are in dire financial straits. Credit rating
agencies saw the automakers' plights as so desperate they cut their credit
ratings to junk status, which means it is far more expensive for them to
borrow money.
At the same time, both companies are developing hydrogen-powered vehicles,
and spending billions to do so. An insider at one company said there's a
raging debate about whether the automaker should be spending those
billions on technologies that appear to be far in the future. The debate
centers around whether those billions should be cut to save money (and
maybe the future of the company), or reallocate those billions to new
products that will keep the company afloat in the short run.
Dennis Campbell, chief executive of a premier company in developing fuel
cells, Ballard Power Systems Inc., based in Vancouver, British Columbia,
thinks we're approaching the tipping point toward a hydrogen economy.
Campbell was in Detroit recently to talk to the Automotive Press
Association, an organization of automotive media and public relations
people, about the company's progress in developing fuel cells, devices
that use hydrogen to generate electricity to propel vehicles and emit only
water vapor. Most major automakers have active hydrogen fuel-cell
programs; eight of the world's top ones use Ballard's technology.
Campbell sees a perfect storm developing on the world stage. Trends
contributing to that storm include: a rising demand for petroleum, with
significantly higher demands from emerging markets such as China and
India; higher gas prices as a result of increased demand; the expected
hike in the number of vehicles on the planet, especially in emerging
markets; a shaky geopolitical situation in the Middle East; and alarming
indications of global warming reaching a point of no return, as well as
air pollution in general.
Further, Japan, which has to import all of its oil, has a very active
fuel-cell program that will have homes powered by fuel cells. And Japan
has even mandated 50,000 fuel-cell vehicles on its roads by 2010. Honda
and Toyota have substantial fuel-cell programs. China could be the wild
card since it also imports virtually all of its petroleum and is
considering a hydrogen economy.
Experts such as Campbell and Larry Burns, General Motors vice president of
research and development and strategic planning, think China, in fact,
could be the tipping point. China, they note, has shown an inclination to
skip steps of technology. For instance, China went from no phones to cell
phones. The driving force behind a move to a hydrogen economy in China
will not be pollution, which is a major problem there, but economics and
geopolitical forces, Burns says. "There will be events like 9/11, the Iraq
war and the blackouts in the Northeast that will increase the urgency to
find alternatives," he says.
He points out that by 2020, 1.1 billion cars and trucks will be on the
world's roads, up from about 750 million today. "Park them end to end,
they would wrap around the planet 125 times," Burns says.
Copyright 2005 Newsday, Inc.

Airlines set to trade greenhouse gas emissions

Airlines set to trade greenhouse gas emissions
Financial Times, 1 June 2005 - The European Commission said it expected
aviation to be included in Europe's greenhouse gas emissions trading
scheme in 2012 rather than impose a fuel tax or a levy on passengers.
Stavros Dimas, environment commissioner, said this option "appears the
most probable to be approved" of three options for reining in the
industry's carbon dioxide emissions associated with climate change. But
because of likely political and technical obstacles, Mr Dimas expected
aviation emissions to be included in 2012 rather than in 2008 when the
scheme is next revised.
Airlines, commission officials and environmental campaign groups are
meeting today before European Union ministers take a final decision later
this year.
Next month's Group of Eight leading industrialised countries' summit at
Gleneagles, Scotland, is expected to discuss possible aviation tax to
finance African debt relief. In addition, Europeans and the US have been
struggling to agree a joint declaration on climate change at the G8.
Although negotiations with the US were still "difficult", Mr Dimas saw
"some hesitant steps away from the immobile position they had before".
It would be a success if the G8 agreed a text that committed Washington to
act in areas such as energy efficiency, as it was unlikely to drop its
opposition to setting emission reduction targets. Mr Dimas said he hoped
the trading scheme would become global and bring in non-EU countries. More
industries are supposed to be brought within the EU trading scheme in 2008
but officials privately admitted it would be difficult to include, for
example, the chemicals industry in the scheme by that date. In the case of
aviation, the UK government, along with some airlines, has spoken out
strongly in favour of emissions trading.
Peter Gammeltoft, a Commission official, said it would have little effect
on ticket prices: "It does not mean the man in the street will be
prevented from taking his charter holiday."
The scheme imposes a cap on how much carbon dioxide participating
industries can produce but allows companies that produce less to sell
excess permits to others.
Officials point to a big increase in the price of carbon dioxide
allocations - yesterday down 65 cents from Friday's record high of Euros
20.30 (Dollars 25, Pounds 14) - to pronounce the scheme a success. Mr
Dimas said a voluntary agreement with car manufacturers was on track to
bring emissions down to 140mg of carbon dioxide per kilometre by 2008-9.

U.K. Companies Call for Government Leadership on Climate Change

U.K. Companies Call for Government Leadership on Climate Change, 1 June 2005 - Business leaders from 13 major U.K. and
international companies are offering to support the government in
developing new, longer-term policies for tackling climate change. In a
letter addressed to Prime Minister Tony Blair, the companies argue that
there is a need for urgent action to be taken now to avoid the worst
impacts of climate change, and offer to work in partnership with the
government towards strengthening domestic and international progress on
reducing greenhouse gas emissions. They also pledge to engage other
British businesses, the U.K. public and governments and businesses
internationally to back this effort.
The group of CEOs and senior executives has come together under the
auspices of the Prince of Wales's Business and the Environment Program in
response to a challenge issued by the prime minister in his climate change
speech at the program's tenth anniversary in September 2004. In its
letter, it argues that investing in a low-carbon future should be "a
strategic business objective for U.K. plc as a whole." However, it points
out that at present "the private sector and governments are in a 'Catch
22' situation with regard to tackling climate change, in which governments
feel limited in their ability to introduce new climate change policy
because they fear business resistance, while companies are unable to scale
up investment in low-carbon solutions because of the absence of long-term
In the letter, the corporate leaders say that their main concern is about
how they "as business leaders can help bridge the gap between today’s
economy and the radically different low-carbon future that will be needed"
to deliver the government’s stated aim of reducing emissions by 60% by the
year 2050. The business leaders point out that they and other companies
have already made significant investments in low-carbon technologies,
processes and products, but say that “what we have done so far is not
nearly sufficient given the size of the challenge facing us”. They argue
that what is needed is a “step-change in the development of low-carbon
goods and services,” and that delivering this will require a strengthening
of policy mechanisms, with an emphasis on the careful and focused use of
market mechanisms which will minimize impacts on competitiveness. In
particular they argue that the Government should work to extend targets
for emissions trading policies to 2025 to increase market confidence and
reduce the risk of investing in low carbon technology.
The leaders cite the International Energy Agency’s calculations that $16
trillion dollars of energy infrastructure investment will be needed
worldwide over the next 25 years to satisfy the world’s growing energy
needs. They argue that this investment can “set the stage for enormous
commercial opportunities for the U.K. if it is coupled with a shift to a
low carbon economy.” While acknowledging that tackling climate change will
impose some upfront costs on businesses, governments and the public, they
argue that “with the right policy framework in place, these can be
minimized, and the U.K.’s overall competitiveness need not be adversely
The group concludes by offering to work in partnership with the government
Support the development of a world leading climate change policy framework
for the U.K., including by advising on policy design and publicizing its
support for new policies
Influence other businesses, the public, and governments and businesses
internationally, including by working on G8 and EU initiatives that are
seeking to engage India and China on the issues of climate change and
Increase its own investment in the development and application of low
carbon technologies as new policies are introduced, and acting as
champions for such investment by other U.K. businesses
It is expected that the group will meet with the Prime Minister to discuss
its recommendations in the run-up to the G8 Summit in early June.
Welcoming the Corporate Leaders Group’s report, The Prince of Wales said:
“A challenge of the magnitude of climate change requires a coordinated
response, based on actions across every sector of society, and the
business community is going to be critical in achieving this. The role
these companies are offering to play is highly strategic -- essentially
helping to create a political space in which effective policies can be
introduced and global progress can be achieved.”


Alcan Recognized for Sustainable Business Model

Alcan Recognized for Sustainable Business Model, 1 June 2005 - Aluminum products manufacturer Alcan Inc. has
been awarded the 2005 Globe Award for Corporate Competitiveness by the
GLOBE Foundation. The company was recognized for its efforts in
integrating sustainability principles in its approach to business, thereby
contributing to its economic competitiveness, environmental leadership,
and community involvement.
Upon accepting the award, Daniel Gagnier, senior vice president of
corporate and external affairs for Alcan, said: "It is our firm belief
that by working in collaboration with our stakeholders, Alcan increases
its understanding of the economic, environmental and social dimensions of
its business decisions. We are better able to develop strategies that
create value for all those affected by Alcan's choices."
Alcan is translating its sustainability commitments into concrete actions
and applications through the company's Integrated Management System (AIMS)
and its three key components: value-based management, EHS FIRST and
Continuous Improvement. AIMS links these initiatives and reinforces the
focus of managing for value for the entire Company. In addition,
sustainability is an integral part of managing for value - it's a
fundamental way of thinking about Alcan's role in the world and it helps
to guide Alcan's decision-making throughout its operations.
This approach has a direct link to Alcan's economic and commercial
success. For example, the company launched its annual $1 million Alcan
Prize for Sustainability in 2003, to recognize the contributions of the
not-for-profit sector to global sustainability, and to underline the
belief that all sectors of society must work together to achieve
sustainable development.
Speaking at the awards ceremony at the EECO 2005 Environment and Energy
Conference in Toronto, Canada, John Wiebe, president and CEO of the GLOBE
Foundation, said: "This award recognizes Alcan's vision, leadership, and
track record in demonstrating that environmental leadership, social
responsibility, and economic performance are interdependent for business
success. Alcan continues to raise the bar for industry, while
demonstrating that sustainability makes good business sense."

World's top forestry executives gather in Vancouver: It's the largest ever summit of global decision-makers

World's top forestry executives gather in Vancouver: It's the largest ever
summit of global decision-makers
The Vancouver Sun, 1 June 2005 - The leaders of the world's largest forest
companies are gathering in Vancouver today to kick off a three-day
conference that organizers say is the largest-ever summit of global
forestry decision-makers.
International competition has transformed forestry, bringing new
opportunities, but also creating new problems. And while CEOs talk about a
sustainable future inside the meeting rooms of the Westin Bayshore Hotel,
outside environmentalists are expected to rally against what they see as
destruction on a global scale.
The meeting is the first time so many decision-makers have gotten together
in the same place to talk about forestry, says Andrew Casey,
communications vice-present for the Forest Products Association of Canada.
Global competition is forcing companies to look at sustainability, not
only in terms of the economic survival of the company, but environmentally
and socially, for the people and communities that depend on forestry, he
FPAC is co-sponsoring the three-day event with the consulting firm
PricewaterhouseCoopers. PWC is holding a one-day conference called
Delivering the Bottom Line. The two-day FPAC event is called Vision 2015,
and looks at the next 10 years.
"This is the biggest gathering of forest products executives ever in
Vancouver," said PWC's Craig Campbell. "There will be 70 CEOs from 23
countries in attendance."
Mike Walters and Jukka Hahlantera, of the global information technology
company EDS, noted that globalization has changed not only the competition
but the way companies operate.
Hahlantera said a forest company headquartered in Finland is building a
pulp mill in Uruguay, where trees grow to maturity in seven years. The
pulp will be shipped to China, where a low-cost mill converts it to paper,
which can then be sold to markets anywhere in the world.
An ample supply of raw material, production costs, and transportation
costs are the drivers of the global forest industry, said Walters and
Walters, from the U.S., and Hahlantera, from Finland, aren't on the
speaker's list for the conference. Instead, they'll be at the seminars and
receptions meeting clients and doing business.
It's not every day you get so many high-level forestry executives and
policy-makers together in the same place, says Walters.
Over 1,000 people, senior executives, government policy-makers, suppliers
and stakeholders will be in town for the conference. The global forest
industry, which employs 13 million people and is generates sales of $750
billion a year, is in a slump with the exception of the B.C. Interior and
many of the sessions will focus on issues of costs and markets.
In Canada, the industry exports $45 billion worth of products annually and
employs 900,000.
Industry leaders will be exposed to the key issues facing the sector
globally over the next 10 years.
"It's a great opportunity to take stock, to see where the industry is
going and where it needs to go, not only in an economic sense but in a
social and environmental sense as well," says Casey.
The PWC session includes one of the highlights of the conference: a
presidents' panel, where for the first time the CEO of the world's largest
forest company, International Paper, and the CEO of Georgia Pacific
another U.S. giant, will be speaking alongside local industry leaders Jim
Shepherd of Canfor and Henry Ketcham, of West Fraser Timber. Tom Stephens,
former president of MacMillan Bloedel who now heads Boise Cascade, will
also be on the panel.
The size of the conference is also attracting conservationists, some, like
Tzeporah Berman of ForestEthics, who are on the list of speakers, others,
like the Canadian Boreal Initiative, who are sponsoring receptions and
still more who intend to rally outside the hotel.

Banks Go for Green: Green groups have realized that one effective way to halt destructive practices is to take on the institutions that bankroll them

Banks Go for Green
Time Magazine, 30 May 2005 - It's every corporation's nightmare: a throng
of rowdy activists gathers outside company buildings to demonstrate
against alleged environmental and human-rights abuses.
That was the scene in New York City and Chicago last month as dozens of
people in white haz-mat suits converged on the offices of JPMorgan Chase
to protest what they claimed was the bank's underwriting of illegal
logging in Indonesia and human-rights abuses tied to a Chase-funded mining
operation in Peru. Oil companies and industrial giants may be accustomed
to such treatment, but not JPMorgan Chase, the second largest bank in the
U.S. Two weeks later, the company announced that it would introduce
policies to promote sustainable forestry and indigenous people's rights
and would block funding that could be used for illegal logging. It also
promised to reduce its carbon emissions and those of its clients. Chalk up
another victory for environmentally and socially responsible finance.
Ten years ago, big private banks were not featured on environmentalists'
hit lists. Activists focused on large corporate polluters in the oil and
timber industries. Over time, though, green groups have realized that one
effective way to halt destructive practices is to take on the institutions
that bankroll them. "The private financial sector more than any other has
the ability to begin the ecological U-turn modern society so desperately
needs," says Ilyse Hogue, director of the global-finance campaign at
Rainforest Action Network (RAN), which led the fight against JPMorgan
Chase. Yet even as they have publicly confronted big financial
institutions, green groups--many of which belong to a loose collection of
nongovernmental organizations (NGOs) known as BankTrack--have privately
collaborated with banks to jointly tackle environmental and social
The direct action and dialogue are paying off as banks begin to set green
goals. HSBC has promised to cut carbon emissions, while Bank of America
has pledged to shun investments in logging operations in the world's most
sensitive forests. Even more important is the introduction of new industry
standards, such as the Equator Principles, which "promote responsible
environmental stewardship and socially responsible development" by
evaluating the threats that projects pose to forests, natural habitats and
indigenous populations.
Thirty major private banks, including U.S. giants Citigroup, JPMorgan
Chase and Bank of America, and European powerhouses ABN Amro, Barclays,
HSBC and ING, have so far signed on to the principles. The guidelines
cover some 80% of the global-project-financing market, according to Jon
Williams, head of sustainability risk management at HSBC. "Everyone is
interested in the balance between sustainability and economic
development," says Williams. "We believe you can do well and do good."
In terms of overall lending, project financing is a small part of most
banks' operations--from 5% to 10% at HSBC, for example--but lending that
is environmentally and socially sound can have a huge long-term impact.
Underwriters such as Citigroup point to the World Bank--backed pipeline
running from Chad's oil fields through Cameroon to the Atlantic. Extensive
environmental-impact assessments were carried out before the work got the
green light, and oil companies like ExxonMobil have provided compensation
and health care to local people whose lives and livelihoods were
disrupted. A trust fund designed to give all Chadians--not just a
well-connected elite--a share of the profits is another improvement, even
though green groups such as Friends of the Earth say the project hurts the
environment and exacerbates social problems and human-rights abuses.
Veteran green campaigners have been surprised by the speed with which
banks have embraced change. "I think that many activists may have assumed
that bankers were priests of the Church of Greed," says Steve Kretzmann,
director of Oil Change, a Washington group that specializes in tracking
project finance. "But many bank representatives have a sophisticated and
advanced sense of the environmental, social and reputational risks."
Just ask Citigroup. In 2000, U.S. environmental activists from RAN began
campaigning against the bank's funding of old-growth logging projects and
a controversial new oil pipeline through an Ecuadorian ecological
preserve. RAN placed a full-page advertisement in the International Herald
Tribune labeling CEO Sandy Weill an environmental villain. Citigroup
started meeting with RAN and last year announced that it would apply the
Equator Principles to its business. The bank committed to banning
investment in firms that logged primary tropical forests, and it pledged
to invest in renewable-energy projects.
Don't expect the campaigning to stop just yet, though. In a scathing
report published last year, "Principles, Profit or Just PR?", BankTrack
accused many companies of failing to deliver on their lofty principles.
The report highlighted the decision by nine Equator Principles
banks--including ABN Amro, Italy's Banca Intesa and Citigroup--to fund
BP's controversial Baku-Tbilisi-Ceyhan (BTC) pipeline, which will run
through Azerbaijan, Georgia and Turkey to bring Caspian Sea oil to the
West. The project, argued BankTrack, violates the Equator Principles in
key areas, notably in regard to protection of indigenous peoples.
BankTrack suggested the Turkish government might use the new pipeline as
an excuse to crack down on ethnic Kurds living along its route. Banca
Intesa withdrew from the project last December, but both Citigroup and ABN
Amro rejected BankTrack's criticisms and stayed on. "BTC is a complex and
challenging transaction, but we felt on balance that it did meet the
Equator Principles," says Richard Burrett, ABN Amro's managing director
for sustainable development.
Just last month another Equator Principles member, Credit Suisse First
Boston, found itself the target of new global protests for its decision to
underwrite Shell's controversial Sakhalin II pipeline in the northern
Pacific, a project that environmentalists say threatens the endangered
western gray whale. Without adequate transparency and monitoring of
sensitive projects, NGOs fear, the Equator Principles will become
meaningless. "What good is a series of principles like this if you can't
verify that they are being applied on a project-by-project basis?" asks
Oil Change's Kretzmann. "Equator banks are saying to people, 'Trust us,'
but they are not allowing any independent verification. That's a problem."
Despite those differences, banks and NGOs are likely to keep working
together. The reason is simple: socially and environmentally responsible
investment makes good business sense. HSBC, Citigroup and ABN Amro all say
green issues are increasingly important when they consider funding global
projects. "[In the future], the Equator Principles will be seen as a
catalyst for how banks conduct themselves in other areas of their
business," says ABN Amro's Burrett. If that happens, activists in haz-mat
suits will have to find another target.


The biggest contract: By building social issues into strategy, big business can recast the debate about its role, argues Ian Davis

Business and society

The biggest contract
May 26th 2005
From The Economist print edition

By building social issues into strategy, big business can recast the
debate about its role, argues Ian Davis
THE great, long-running debate about business's role in society is
currently caught between two contrasting, and tired, ideological
On one side of the current debate are those who argue that (to borrow
Milton Friedman's phrase) the “business of business is business”. This
belief is most established in Anglo-Saxon economies. On this view, social
issues are peripheral to the challenges of corporate management. The sole
legitimate purpose of business is to create shareholder value.
On the other side are the proponents of “Corporate Social Responsibility”
(CSR), a rapidly growing, rather fuzzy movement encompassing both
companies which claim already to practise CSR and sceptical campaign
groups arguing they need to go further in mitigating their social impacts.
As other regions of the world—parts of continental and central Europe, for
example— move towards the Anglo-Saxon shareholder-value model, debate
between these sides has increasingly taken on global significance.
That is a pity. Both perspectives obscure in different ways the
significance of social issues to business success. They also caricature
unhelpfully the contribution of business to social welfare. It is time for
CEOs of big companies to recast this debate and recapture the intellectual
and moral high ground from their critics.
Large companies need to build social issues into strategy in a way which
reflects their actual business importance. They need to articulate
business's social contribution and define its ultimate purpose in a way
that has more subtlety than “the business of business is business”
worldview and is less defensive than most current CSR approaches. It can
help to view the relationship between big business and society in this
respect as an implicit “social contract”: Rousseau adapted for the
corporate world, you might say. This contract has obligations,
opportunities and mutual advantage for both sides.
To explain the basis for such an approach, however, it may help first to
pinpoint the limitations with the two current ideological poles. Start
with the “business of business is business”. The issue here is not
primarily legal. In many countries, such as Germany, the legal obligation
anyway is to stakeholders, and even in America the legal primacy of
shareholders is open to very broad interpretation.

Ian Davis

The problem with “the business of business” mindset is rather that it can
blind management to two important realities. The first is that social
issues are not so much tangential to the business of business as
fundamental to it. From a defensive point of view, companies that ignore
public sentiment make themselves vulnerable to attack. But social
pressures can also operate as early indicators of factors core to
corporate profitability: for example, the regulations and public-policy
environment in which companies must operate; the appetite of consumers for
certain goods above others; and the motivation (and willingness to be
hired in the first place) of employees.
Companies that treat social issues as either irritating distractions or
simply unjustified vehicles for attack on business are turning a blind eye
to impending forces that have the potential fundamentally to alter their
strategic future. Although the effect of social pressure on these forces
may not be immediate, this is not a reason for companies to delay
preparing for or tackling them. Even from a strict shareholder-value
perspective, most stockmarket value—typically over 80% in American and
western European public markets—depends on expectations of companies'
cashflow beyond the next three years.
Examples abound of the long-term business impact of social issues. These
are growing fast. In the pharmaceuticals sector, a storm of social
pressures over the last decade—stemming from issues such as public
perceptions of excessive prices charged for HIV drugs in developing
countries, for example—are now translating into a general (and sometimes
seemingly indiscriminate) toughening in the regulatory environment. In the
food and restaurant sector, meanwhile, the long-escalating debate about
obesity is now resulting in calls for further controls on the marketing of
unhealthy foods. In the case of big financial institutions, concerns over
conflicts of interest and mis-selling of products have recently led to
changes in core business practices and industry structure. For some big
retailers, public and planning resistance to new stores is constraining
growth opportunities. And all this is to say nothing of how social and
political pressures have reshaped and redefined the tobacco industry, say,
or the oil and mining industries over the decades.
In all such cases, billions of dollars of shareholder value have been put
at stake as the result of social issues that ultimately feed into
fundamental drivers of corporate performance. In many instances, a
“business of business is business” outlook has blinded companies to
outcomes (or shifts in their implicit “social contract”) which often could
have been anticipated.
Just as important, these outcomes have posed not just risks to companies,
but also have generated value-creation opportunities. In the case of the
pharmaceuticals sector, for example, in the growing market for generic
(ie, non-patent-protected) drugs; in the case of fast-food restaurants, in
providing healthier meals; and in the case of the energy industry, in
meeting fast-growing demand (as well as regulatory pressure) for cleaner
fuels such as natural gas. Social pressures often indicate the existence
of unmet social needs or consumer preferences. Businesses can gain
advantage by spotting and supplying these before their competitors.

Value judgments
Paradoxically, the language of shareholder value may hinder companies from
maximising shareholder value in this respect. Practised as an unthinking
mantra, it can lead managers to focus excessively on improving the
short-term performance of their business, neglecting important longer-term
opportunities and issues. The latter would include not just societal
pressures, but also the trust of customers, investment in innovation and
other growth prospects.
The second point that the “business of business is business” outlook
obscures for many companies is related to the first: the need to address
questions around their ethics and legitimacy. For reasons of integrity and
enlightened self-interest, big firms need to tackle such issues, in both
words and actions.
It is neither sufficient nor wise to say that it is up to governments to
set laws, and for companies simply to operate within these rules. Nor is
it enough, even if it is often valid, to point out that many criticisms of
businesses are unmerited, or that those throwing the mud ought also to
examine their own practices and social responsibility. Irrespective of
whether the criticisms are valid or not, their cumulative effect can shape
the strategic context for companies. It is imperative for business to seek
to lead rather than react to these debates.
Moreover, in some parts of the world, particularly in some poor developing
countries, the rule of law as well as provision of basic public services
is notable by its absence. This can render the “business of business is
business” positively unhelpful as a guide for corporate action. If
companies operating in such environments focus too narrowly on ill-defined
local laws or shy from broad debates about their alleged behaviour, they
are likely to face mounting criticism over their activities, and face a
greater risk of becoming embroiled in local political tensions.

Is CSR the answer? If only it were. This is not to criticise the many
laudable CSR initiatives by individual companies, nor to dispute the
obvious need for businesses (as for any other social entity) to be
responsible. It is rather to examine the broad prescriptions set for
companies by groups and activists involved in CSR. These commonly include
“stakeholder dialogue”, “social and environmental reports” and corporate
policies on ethical issues. This approach is too limited, too defensive
and too disconnected from corporate strategy.

The defensive posture of CSR springs from its genesis

The defensive posture of CSR springs from its genesis. Its popularity as a
set of tactics among companies was driven in large part by a series of
anti-corporate campaigns in the late 1990s. These were given impetus in
turn by the anti-globalisation protests around the same time. Since then
companies have been drawn to CSR, attracted by nice-sounding, if vague
notions such as the “triple bottom line” (the idea that companies can
simultaneously serve social and environmental goals as well as profits).
They have seen it as a means to avoid NGO and reputational flak, and to
mitigate the rougher edges and consequences of capitalism.
This defensiveness starts the argument on the wrong foot, certainly as far
as business leaders should be concerned. Big business provides huge and
critical contributions to modern society. These are insufficiently
articulated, acknowledged or understood. Among these are productivity
gains, innovation and research, employment, large-scale investments,
human-capital development and organisation. All of these are, and will be,
essential for future national and global economic welfare. Big business
also provides a vehicle for investment that is likely to be central to the
provision of pensions in the ageing OECD. In poorer developing countries,
meanwhile, the entry of multinational companies (through foreign direct
investment) has often contributed critical capital, technology, skills and
other poverty-reducing economic spillovers. It is no coincidence that
developing countries place such emphasis on attracting big businesses and
the investment it can bring to their economies.

Such a thing as society?
CSR is limited as an agenda for corporate action because it fails to
capture the potential importance of social issues for corporate strategy.
Admittedly companies undertaking “stakeholder dialogue” with NGOs will be
more aware in advance of potential issues. But tracking NGO opinion is
only a part of understanding the range of social pressures which
ultimately can affect core business drivers such as regulations,
consumption patterns and the like.
An obvious next step for companies, having understood the possible
evolution of these broad social pressures, is to map long-term options and
responses to them. This process clearly needs to be rooted in strategic
development. Yet typical CSR initiatives—a new ethical policy here, for
example, or a glossy sustainability report there—are often tangential to
this. It is perfectly possible for a firm to follow many of the
prescriptions of CSR and still to be caught short by seismic shifts in its
socially-driven business environment.
One of the compounding problems is that many companies have chosen to root
their CSR functions too narrowly within their public- or corporate-affairs
departments. Though playing an important tactical role, such departments
are often geared towards rebutting criticism, and tend to operate at a
distance from strategic decision-making within the company.

In the limitations of both CSR and of the “business of business is
business” thinking lie the outlines of a new approach for business (as
relevant for Chinese, Indian and German companies as for American and
British businesses). Three main strands stand out.
The first is a helpfully simple prescription. Businesses need to introduce
explicit processes to make sure that social issues and emerging social
forces are discussed at the highest levels as part of overall strategic
planning. This means executive managers must educate and engage their
boards of directors. It also means they need to develop broad metrics or
summaries that usefully describe the relevant issues, in much the same way
that most firms analyse customer trends today. The risk that
stakeholders—including governments, consumer groups, lawyers and the
media—will mobilise around particular issues can be roughly estimated
based on the known agendas and interests of these groups. For example,
that the obesity debate would rebound before long on the food companies
was partly predictable from the growing spending by governments on
obesity-related health problems, inevitable media focus on the issue, plus
the interest of some lawyers in finding fresh corporate targets for
litigation. By the time business seriously engaged with the issue,
however, it was in a defensive posture, struggling to catch up with the
public debate. In future, companies need to be much better at
understanding and anticipating such issues.

Big, not so easy
The second and third strands both relate to the idea that there is an
implicit contract between big business and society, or indeed between
whole economic sectors and society—the contract that is the subject of
this article. Detractors have often successfully portrayed the contract as
a one-way bargain that benefits business at society's expense. Reality is
much more complex. The activities undertaken by business have clearly
brought social benefits as well as costs. Similarly, however, there are
two sides to a contract—and business must acknowledge that in return for
the ability to function it is subject to rules and constraints. At times
the contract can come under obvious strain. The recent backlash against
big business in America can be seen as society seeking to shift the terms
of the contract, based on popular perceptions that business has abused its
role. Similarly in Germany at present, business is struggling to defend
itself against charges that its contract with society is fundamentally
The second strand requires companies not just to understand their
individual “contracts”, but actively to manage them. To do this they can
choose from a range of potential tactics such as: more transparent
reporting; shifts in R&D or asset reorganisation to capture expected
future opportunities or to shed perceived liabilities; changes in
regulatory approach; and, at an industry level, development and deployment
of voluntary standards of behaviour.
Some companies and sectors are already experimenting with such
approaches—witness General Electric's recent announcement of a doubling of
its research spending on environmentally-friendlier technologies.
Nonetheless, there is scope for much more activity, provided it is aligned
with corporate strategic goals. Reshaping conduct on an industry-wide and
increasingly global basis may be particularly important given that the
perceived misdeeds of one company can rebound on its sector as a whole.
An important point is that companies will have quite different tactical
responses depending on their circumstances, so off-the-shelf, or simply
nice-sounding, solutions may not always be appropriate. Transparency
offers a good example. It is easy, but wrong, to say that there can never
be enough of it. What might be good for a pharmaceutical firm trying to
restore consumers' trust could be damaging for a hedge-fund manager. And a
voluntary code of practice for a retailer naturally would read very
differently from that of a copper-mining company.
This leads me to the third strand of a new approach for business leaders.
They need to shape the debates on social issues much more consciously.
This means establishing ever higher standards of integrity and
transparency within their own companies. It also means becoming much more
actively involved in external debates and in the media on social issues
that shape their business context.
A starting point may be for CEOs to articulate publicly the purpose of
business in less dry terms than shareholder value. Shareholder value
should continue to be seen as the critical measure of business success.
However, it may be more accurate, more motivating—and indeed more
beneficial to shareholder value over the long term—to describe business's
ultimate purpose as the efficient provision of goods and services that
society wants.
This is a hugely valuable, even noble, purpose. It is the fundamental
basis of the contract between business and society, and forms the basis of
most people's real interactions with business. CEOs could point out that
profits should not be seen as an end in themselves, but rather as a signal
from society that their company is succeeding in its mission of providing
something people want—and doing it in a way that uses resources
efficiently relative to other possible uses. From this perspective,
shareholder-value creation or profits are the measure, and the reward, of
success in delivering to society the more fundamental business purpose.
The measures and rewards reflect the predominant values of the relevant
By moving away from a rigid linguistic focus on shareholder value, big
business can also make clear to a broad audience that it understands the
trade-offs that are inherent in its social contract. The debate between
business and society is essentially one over the management of, and
agreement over, those trade-offs.

Debatable issues
What might this mean specifically? There is no shortage of big social
issues today that directly affect many big businesses and that require new
debate. These include: ensuring aid and trade regimes successfully promote
the development of Africa and other poor regions (the economic lift-off of
such regions would present a major potential boon to global markets as
well as international security); promoting a more sophisticated and
sensitive approach from both companies and governments to balancing the
societal risks and rewards from new technologies; spearheading dialogue on
the health-care and pension challenges in many developed countries; and
supporting efforts to resolve regional conflicts.
Obviously the relevant issue needs to be matched to the specific business.
Some companies and business organisations have taken strong public stances
on these and similar issues. But in general high-level, concerted
corporate activism is more notable by its absence.
Business leaders should not fear their greater advocacy of the contract
between business and society. Public receptiveness to active business
leadership on issues such as these may be a lot better than some might be
inclined to think. Despite the poor image and bad press of big business in
recent times, polls suggest that people retain a belief in the ability of
business to provide a positive contribution to society.
More than two centuries ago, Rousseau's social contract helped to seed the
idea among political leaders that they must serve the public good, lest
their own legitimacy be threatened. The CEOs of today's big corporations
should take the opportunity to restate and reinforce their own social
contracts in order to help secure, for the long term, the invested
billions of their shareholders.

Ian Davis is worldwide managing director of McKinsey & Company

ExxonMobil Latest Oil & Gas Firm to Face the Music on Climate Change

ExxonMobil Latest Oil & Gas Firm to Face the Music on Climate Change
BOSTON, Mass., May 23, 2005 - Several leading U.S. and European
institutional investors, representing nearly $400 billion in invested
assets, have announced their support for new shareholder resolutions
requesting greater analysis and disclosure from ExxonMobil Corp. about its
policies and strategies for managing the significant financial risks posed
by global climate change. The resolutions will be voted on at the
company's May 25 annual meeting.

The shareholders, who collectively own more than $3.5 billion of
ExxonMobil stock, include state treasurers and pension fund leaders from
California, Connecticut, London and North Carolina.

Citing the far-reaching impacts that climate change will have on their
investments and the world economy, the investors will be supporting two
resolutions calling for:
Cost projections, compliance timelines and other strategies for complying
with the Kyoto Protocol, an international treaty that requires greenhouse
gas reductions in dozens of countries where ExxonMobil does business.
(This resolution won the support last Friday from Institutional
Shareholder Services (ISS), an influential adviser to institutional

An explanation of the differences between the company's stated position on
climate change and those of the Intergovernmental Panel on Climate Change,
an international body of experts that has concluded that human activity is
contributing to climate change.
Some, but not all of the investors are also supporting a third
climate-related resolution calling for more energy and oil industry
expertise among independent member of the company's board of directors.
The resolution is designed to improve the board's effectiveness in
exploring various energy alternatives for meeting the changing global
energy economy.

The resolutions come as many of ExxonMobil's leading domestic and foreign
competitors are acknowledging the impact of global warming on their bottom
lines and moving more aggressively to assess and disclose their potential
financial exposure and improve their strategic positioning, especially as
Kyoto greenhouse gas reduction requirements are already taking effect.
About 37 percent of Exxon's annual revenues in 2003 came from just five
countries (Canada, Japan, UK, Germany, Italy) that are Kyoto participants.

"ExxonMobil shareholders need to know how the company they own is
responding to challenges that will impact its bottom line and our
environment," said Phil Angelides, California state treasurer and a board
member of the California Public Employees Retirement System (CalPERS) and
the California State Teachers Retirement System (CalSTRS), the nation's
largest and third largest public pension funds with about $311 billion of

Peter Scales, chief executive of the London Pensions Fund Authority, said:
"Investors globally recognize the uncertain environment in which the
companies we invest in operate, but we cannot afford to ignore both risks
and the opportunities arising from climate change that impact the value of
our investments. ExxonMobil needs to join its peers in addressing these
issues positively if they are to retain shareholder support."

In just the past few months, Anadarko Petroleum, Apache, ChevronTexaco and
several other leading U.S. oil and gas companies have agreed to a wide
range of actions to reduce their climate risk exposure, including:
measuring and disclosing greenhouse gas emissions and setting reduction
targets; increasing investments in low- and no-carbon energy technologies,
integrating climate risk and carbon costs into capital allocation decision
making; and assigning boards direct responsibility to oversee climate
change corporate strategies. The actions come in the wake of record-high
voting support last year for shareholder resolutions seeking more climate
risk disclosure from oil and gas companies.

The Amazon's Texan saviour: Can John Cain Carter, an American rancher, save the rainforest?

The Amazon's Texan saviour
May 26th 2005
From The Economist print edition

Can John Cain Carter, an American rancher, save the rainforest?

Get article background
AT THE helm of a second-hand Cessna aircraft, John Cain Carter is as
preoccupied with the Earth below as he is with the clouds ahead. An
expanse of pasture the size of a small principality “used to be all
forest,” he points out, banking right. And the flood plain between the Rio
Araguaia and the Rio das Mortes was once “stirrup-high in water. Today you
can drive a jeep out there in the rainy season,” he concludes, ruefully.
Mr Carter attributes the unnatural dryness to landowners who cut down
trees to make way for pasture, shutting off the supply of moisture from
tree to cloud. Watching it happen “is a nightmare.”
These comments are given extra credibility by the fact that Mr Carter is
himself a rancher, with 8,100 hectares (20,000 acres) on the denuded
eastern edge of the Xingu river basin in Mato Grosso, a vast Amazonian
state. But he is convinced that landowners, now widely reviled as enemies
of the rainforest, could become its saviours. That will require
incentives, which can only come from the increasingly globalised markets
for Brazilian beef and soya, now the main threats to the rainforest. Mr
Carter, an irrepressible Texan, has ambitious plans for encouraging
consumers to provide such incentives and producers to accept them.
His idea is gaining traction. In the year to August 2004, according to
data released this month, 26,130 square kilometres (10,000 square miles)
of Amazon rainforest were destroyed in Brazil, mostly by ranchers, farmers
or speculators who cleared land in anticipation of ranchers and farmers
coming. That is the second-highest level of destruction on record. The law
supposedly limits deforestation to 20% of privately owned rainforest,
while a network of reserves protects some public land. But in practice
frontier law is feeble. So some environmentalists have decided to
co-operate with landowners rather than fight them.
This co-operation began in the logging industry. Furniture-makers who buy
wood that is harvested “sustainably” can now slap the seal of the Forest
Stewardship Council (FSC) on their wares, encouraging sales to
green-minded consumers. There is now a scramble to adapt this approach to
ranching and farming, which do more damage to the rainforest. Last month,
The Nature Conservancy, a non-governmental organisation (NGO), announced
an agreement by which Cargill, a huge American agriculture company, will
buy soya near its export terminal at the confluence of the Amazon and
Tapajós rivers only from farmers who obey the law or are clearly moving
towards doing so.
What is novel about Mr Carter is that he sees things from the point of
view of the producers, and is rooted in ranching—a bigger threat to the
Amazon even than soya. He is the driving force behind Aliança da Terra, a
new NGO that aims to be a “bridge” between producers and
environmentalists, promoting standards of good practice that both sides
can live with. Global worries about foot-and-mouth disease and the like
are already pushing Brazilian producers towards certification. If Mr
Carter has his way, all of Brazil's agricultural output will carry an
FSC-style seal, reflecting health, environmental and social standards.
Would such certification really change much? After all, wood certification
has not yet stopped predatory logging, largely because much of the wood
hauled out of the Amazon is sold in Brazil, where low prices count for
more than green guarantees. In agriculture, certification may face even
bigger obstacles. Brazilians buy most of the beef raised in the Amazon.
Ethically-untroubled China is a huge market for soya. To succeed, the
current profusion of proposals will have to be welded together by
consensus, a process Mr Carter is more likely to influence than lead.
Much will depend on whether that consensus forms around encouraging
producers or punishing them. Many greens think that it is meaningless to
talk of sustainable soya or beef in the Amazon. If anything should be
certified, it is that the stuff is being produced somewhere else, or on
land deforested long ago. The proposed “Basel standards” endorsed by Coop,
a big Swiss supermarket, would not bless soya from newly deforested areas,
for instance. But Mr Carter, like all Amazonian agriculturalists, thinks
that further deforestation is inevitable and that the 20% legal limit
should be raised, at least in areas more fit for farming than
conservation. Why should greens accept this? Because, he says, much could
still be preserved, and without the co-operation of landowners “every tree
is going to be cut down.”

It takes a Texan
Mr Carter is an unlikely bridge builder. As a child in San Antonio he
trapped mink and raccoon, selling their pelts for pocket money. In the
army he dropped behind enemy lines in the first Gulf war. He views himself
as a “pioneer” on a frontier with “so many parallels with the old West.”
Cattle losses to jaguars and rustlers, in this case Xavante Indians, are
line items in the budget of his ranch. He indulges in a bit of Texas
swagger, as if George Bush had not made it the world's least fashionable
His friends are hardly more appealing to greens. The environmental
director of Grupo André Maggi, the world's biggest soya grower, co-founded
Aliança da Terra. One of the firm's owners, Blairo Maggi, is governor of
Mato Grosso, where about half of last year's deforestation took place;
Greenpeace, an NGO, has crowned him the “king of deforestation”. Mr Maggi
worries that as trade barriers fall Brazil's competitors will use such
titles as an excuse to block imports. The answer, he thinks, is to produce
“totally within the law,” as his firm already does. His government has
asked Mr Carter's group to develop criteria for certification.
Yet Mr Carter's allies are not all producers. The Brazilian head of The
Nature Conservancy is on Aliança's board. IPAM, one of the main Amazonian
research institutes, is its scientific partner. They are betting that as
Brazilian agriculture becomes more corporate and internationally oriented
it can be made to behave more responsibly. If not, the Amazon may be

Ten U.S. Corporations Pledge Greenhouse Gas Cuts

Ten U.S. Corporations Pledge Greenhouse Gas Cuts
BERKELEY, Calif., May 12, 2005 - Caterpillar, Frito-Lay, Xerox, Staples,
and the Gap are among ten corporations pledging to reduce greenhouse gas
emissions as part of EPA's Climate Leaders -- a voluntary program that
works with companies to measure greenhouse gas emissions and set
aggressive, long-term emissions reduction goals.

With this announcement, 37 of the 68 companies in Climate Leaders have set
emissions reduction goals. General Motors and Baxter International have
both achieved their 2005 goals more than a year early. EPA estimates that
the 37 Climate Leaders' greenhouse gas reductions will prevent more than 8
million metric tons of carbon emissions equivalent per year. These
reductions are equal to the annual greenhouse gas emissions of five
million cars.

Since its inception in 2002, Climate Leaders has grown to include 68
corporations whose U.S. emissions represent 8% of total U.S. greenhouse
gas emissions.

The following corporations committed to new greenhouse gas reduction
1. Caterpillar Inc. -- Reduce global GHG emissions by 20% per dollar
revenue from 2002 to 2010

2. Frito-Lay -- Reduce U.S. GHG emissions by 14% per pound of
production from 2002 to 2010

3. Green Mountain Energy -- Achieve net zero U.S. GHG emissions by
2005 and maintain that level through 2009

4. Melaver -- Achieve net zero U.S. GHG emissions by 2006 and
maintain that level through 2009

5. Calpine -- Reduce its U.S. GHG emissions by 4% per megawatt hour
from 2003 to 2008

6. Xerox -- Reduce its total global GHG emissions by 10% from 2002 to

7. Staples -- Reduce its U.S. GHG emissions by 7% from 2001 to 2010

8. Gap, Inc. -- Reduce its U.S. GHG emissions by 11% per square foot
from 2003 to 2008

9. Bank of America -- Reduce its total U.S. GHG emissions by 9% from
2004 to 2009

10. Exelon -- Reduce its total U.S. GHG emissions by 8% from 2001 to
In addition, ten new companies have joined as Climate Leaders partners -
EMC Corp. of Hopkinton, Mass.; Entergy Corp. of New Orleans, La.; Green
Mountain Energy Company of Austin, Texas; Mack Trucks, Inc. of Allentown,
Pa.; Marriott International of Washington, D.C.; Melaver, Inc. of
Savannah, Ga.; Quad/Graphics, Inc. of Sussex, Wis.; The Hartford of
Hartford, Conn.; Tyson Foods, Inc. of Springdale, Ark. and Volvo Trucks
North America, Inc. of Greensboro, N.C.

BP Execs See Bright Future for Solar Division

BP Execs See Bright Future for Solar Division
LONDON, May 24, 2005 - In the wake of recording first-ever profits from
subsidiary BP Solar, British Petroleum executives are pondering the role
of renewable energy in future markets.

British Petroleum subsidiary BP Solar is now one of the world's largest
solar power companies with production facilities in the United States,
Spain, India, and Australia, employing a workforce of over 2,000 people
around the world. Over the last five years, BP International invested $500
million in this high-growth but relatively small business segment.

Renewable energies such as solar power must and will play an important
role in the future struggle against climate change, but probably not until
2020, says Steve Westwell, head of BP Solar and Group Vice President in
the International BP Group during a press meeting in Berlin.

Nonetheless, many of the signs are already visible today that "solar power
has an immense growth potential for the future -- due to technological
progress and therefore greater efficiency in transforming the energy
inherent to sunlight. At the same time, prices will fall as the market
penetration increases, demand grows and targeted support is provided by
marketing and legislation."

Westwell explained that in view of the climate change around the world,
human beings will be dependent on expanding alternative energy sources.

"Although all of the renewable energy sources, including solar power,
currently account for just 2.5% of the global demand for energy," he did
emphasize that "they will have to play an important role in the future."

BP believes that there are many signs that indicate just how much of a
mass market solar power will become in the future. The annual industry
growth in 2004 was more than 40% and over 1,000 MW were installed around
the world.

"Every time the solar power industry doubled in size, the prices fell by
20% -- and that happens practically every three years," Westwell said.

The core growth markets in Europe are Spain, Portugal, Italy and Greece,
and particularly Germany.

"The German public sees solar power as being the greenest of all energy
sources", referring to a survey carried out by the Institut Allensbach in
2004. "Three quarters of all Germans voted for solar power as the
preferred source of energy in the future."

At the moment, the demand for solar modules outstrips supply. Westwell is
therefore confident that this enormous growth will continue to stimulate
investment in solar power research and development in Germany and abroad.

Westwell believes that the two core objectives of solar power are to
ensure that the electricity generated by the sun should be independently
competitive and that solar power should make a decisive contribution to
the overall package of measures intended to tackle climate change around
the world. In order to ensure that these goals are met, the production
technology must above all become more efficient.

He believes that there are several approaches to achieve this - for
example a reduction in the numerous and costly stages of work required to
produce solar power cells. He also believes there could be breakthroughs
in research. Both of these aspects could "add 30% in efficiency." In the
last ten years alone, solar power cells have risen in efficiency by over
40%. Other improvements would be brought by cutting the costs of
installation. All in all, he believes that the technology alone has "a lot
of opportunities to develop customer friendly and technically improved
systems at a lower cost."

In terms of political subsidization, Westwell pleads for maintaining the
very successful system of guaranteed feed remuneration, which is planned
to be upheld along with the system of emission trading. Emission trading
helps reduce emissions of carbon dioxide, whereas guaranteed feed
remuneration helps support the development of alternative energy sources.
He believes that the German subsidization of solar power leads the field
in Europe and sees it as "an example for the rest of the European Union".
It "helps speed up growth, allows companies to draw on the commercial
benefits of size and ensures that insight is spread widely."

Success can only be guaranteed in the long term if there is security to
plan investments and also growth in capacities.

"In the race for commercial competitiveness among alternative energy
sources, solar power now has its fixed place. And it is moving rapidly,"
Westwell said.