Sustainablog

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

31.3.06

Spending on environmental technology seen reaching $210 billion/year


Spending on environmental technology seen reaching $210 billion/year

Environmental Finance, 23 March 2006 - Capital expenditure on environmental products is likely to average $210 billion/year over the next decade, according to The McIlvaine Company, a specialist industry consultancy. Asia is expected to account for more demand for such products than either the Americas or Europe/Africa.

Air pollution controls systems will be the biggest single product category, McIlvaine predicts, particularly for use with coal-fired boilers and in the cement, pulp and paper, and steel industries. Average annual expenditure on this type of equipment is forecast to be $32 billion in Asia; $26 billion in the Americas; and $22 billion in Europe and Africa.

Water-related systems will be the second biggest category of expenditure, the company says, due to a lack of investment in the past and the anticipated migration of 500 million people from the countryside to urban centres. Average annual expenditure on water pollution control systems is estimated to be $27 billion in Asia; $23 billion in the Americas; and $20 billion in Europe and Africa.

Full details are available here

Wasteful Farming Leaves Little for Drinking


Wasteful Farming Leaves Little for Drinking

Inter Press Service, 22 March 2006 - Agriculture poses the biggest threat to the world's freshwater resources, while over-fishing threatens the oceans, according to the first global assessment of fresh and salt water resources.

Human pressures on water are weakening aquatic ecosystems, which is having a negative impact on human health and sustainable development, the United Nations Environment Programme (UNEP) Global International Waters Assessment warned on World Water Day, Mar.. 22.

Freshwater shortages are likely to trigger increased environmental damage and social unrest over the next 15 years, concluded the review, which was compiled by 1,500 experts. The Global International Waters Assessment (GIWA) is the final synthesis report of detailed studies of the current and future trends in the freshwater and coastal waters of some 66 transboundary water areas, mainly linked with developing countries.

"Irrigated agriculture accounts for 70 percent of freshwater used globally, with only 30 percent of this returned to the environment," said Nick Nuttall, a UNEP spokesperson.

The report notes that more than 90 percent of the water in Namibia's Eastern National Water Carrier canal is lost through evaporation, Nuttall told IPS.

"The huge waste of water in agriculture can be dramatically improved with simple technologies like drip irrigation," he said.

Agriculture is also responsible for the biggest transboundary pollution problems in terms of sediment and fertiliser run-off into lakes and seas, particularly in Latin America, Southeast Asia and Sub-Saharan Africa. Such pollution is creating vast dead zones -- oxygen-depleted waters where little can live -- in many coastal areas, and harming fisheries, the report notes.

Between 1960 and 2001, the global amount of farmland doubled but the cost in terms of damage to aquatic ecosystems has been high, writes Sandra Postel of the Global Water Policy Project and an expert on international freshwater issues.

Converting existing forests, grasslands and wetlands into more farmland is no longer an option because that will further damage the ecosystems that provide essential services such as clean air and water. Damaged ecosystems and overuse is already reducing water availability in many parts of the world. Nearly 25 percent of India's wells that pumped groundwater for irrigation are now dry.

With 1.7 billion more mouths to feed by 2030, the only way to grow the additional food is by doubling agriculture's water efficiency, says Postel. If it can be done at all, it will take major improvements in irrigation efficiency, higher yields from rain-fed crops and significant reduction in meat consumption. It takes 20 times more water to supply 500 calories from beef than rice.

"We're heading for a fundamental conflict between water for food and water for other uses," says Peter Gleick, president of the Pacific Institute, an environmental NGO based in California.

That conflict can't be resolved without growing food using a lot less water, Gleick said in an interview. "And that won't be achieved if everyone wants to eat as much meat as North Americans," he added.

China's rising meat consumption is cause for concern, he says, and the problem is made worse by the fact that China has badly damaged its aquatic ecosystems and polluted its freshwater limiting how much food it can grow.

That's why it is now importing large amounts of grain, pushing up world grain prices, he says, calling it "a disturbing trend for developing countries".

Gleick advocates a fundamental shift to growing food, living our lives and running our economies on as little water as possible. Most importantly "we need more action and less talk about water".

Water is commonly underpriced and undervalued, especially in agriculture, and that is at the root of much of the waste problem and lack of investment efficiency, the GIWA report noted.

"There are many important messages emerging from this pioneering study," said Klaus Toepfer, UNEP's executive director.

"One that rings loud and clear is the economic one -- that our collective failure to value the goods and services provided by international waters, and to narrowly price the benefits in terms of the few rather than the many, is impoverishing us all," Toepfer said in a statement.

Among the most egregious examples is blast fishing, where a one-dollar investment in dynamite can generate an immediate 200-fold return for local fisherman -- but leaves a coral reef devastated for the next 50 years, the report observed.

Over-fishing has severely depleted fish stocks and damaged habitats in many of the world's coastal regions. Fisheries in Southeast Asia and South America are particularly wasteful and destructive, with 90 percent of the catch taken by shrimp trawlers thrown away.

Overexploitation of fish is expected to worsen the world over by 2020, with some exceptions such as Northeast Asia and Central America as more sustainable fisheries practices are adopted, the report notes.

Overshadowing this global snapshot of the world's water is the spectre of climate change, says Nuttall. "Climate change will be a major, major threat," he explained.

It is already a threat with the ongoing drought in the Horn of Africa is being made worse by climate change, he said. Major reductions in greenhouse gas emissions are needed, along with helping developing countries adapt.

"But with climate change it's even more important to preserve forests and wetlands and to improve water management to help buffer us from extreme weather events," Nuttall said.

Despite the worrisome news, many governments and other stakeholders are taking heed. The Fourth World Water Forum in Mexico City, which ended Wednesday, drew 11,000 people from 130 nations, including representatives of government agencies, non-governmental organisations and the private sector, to address the growing strains on the world's clean water supply.

FORTUNE Highlights Corporate Green-Building Achievements


FORTUNE Highlights Corporate Green-Building Achievements

GreenBiz.com, 21 March 2006 - FORTUNE magazine's March 20 issue, currently on newsstands and viewable online, includes a special advertising feature outlining how green building practices are proving an important component of improved corporate performance. Titled "Building a Greener Future" the article details the green-building efforts of major companies, from manufacturing giants such as Ford and GM to financial powerhouses such as Bank of America to technology superstars such as Adobe.

"We're finding strong traction in the owner community -- both public and private -- because of the pure financial gains that accompany a decision to build a green building," says Rick Fedrizzi, president, CEO and founding chairman of the U.S. Green Building Council, who spearheaded the section. "Green buildings provide operational performance, environmental sensitivity and improved health for their occupants. It's a triple bottom line great companies can relate to."

"We can safely say that green buildings are no longer a fad, but rather an increasingly important new way of doing business," said Harvey Bernstein, Vice President, Industry Analytics and Alliances, for McGraw Hill Construction. The McGraw-Hill Smart Market report, released in November 2005, noted that green buildings comprise about 2% of the new nonresidential construction market, and that by 2010 that figure will rise to between 5% and 10%.

Driving that growth are the 8%-9% decrease in overall building operating costs, increase in building values of about 7.5%, occupancy ratios that are about 3.5% higher, rent ratios that are anticipated to be about 3% higher, and an overall ROI improvement of about 6.6%. Today more than a half-billion square feet of commercial space has been certified as green through the USGBC's LEED (Leadership in Energy and Environmental Design) Green Building Rating System, a voluntary third-party rating system where building projects earn credits for satisfying specified green building criteria.

The special advertising feature in FORTUNE, the second in 18 months, is one of the many ways the U.S. Green Building Council is aggressively seeking to educate the broader market about the importance of green building practices. As the nation’s leading coalition of corporations, builders, universities, federal and local agencies, and nonprofit organizations working together to promote high-performance green buildings, the organization is enjoying tremendous momentum.

Part of the reason is the consensus-based rating system it developed six years ago, and that has become the de facto standard for judging a building’s "greenness." To obtain LEED certification, projects are evaluated within five environmental categories: Sustainable Sites, Water Efficiency, Energy and Atmosphere, Materials and Resources, and Indoor Environmental Quality. Certified, Silver, Gold, and Platinum levels of green building certification are awarded based on the total credits earned. The LEED standard has been adopted nationwide by Federal agencies, state and local governments, and interested private companies as the industry standard of measurement for green building.

Another key program is its annual Greenbuild International Conference and Expo, which attracts thousands annually who are interested in learning about green buildings through a rich series of educational tracks, and who are interested in seeing the latest in green building products and services on the expo floor. Greenbuild 2006 will be held November 15-17 in Denver, Color.

"Green building isn’t the wave of the future," said Fedrizzi. "It’s the reality of the present. The question is no longer why build green; the question is why wouldn’t you?"

Businesses should take lead in 'green' technology: forum (IBM GIO)


Businesses should take lead in 'green' technology: forum

AFP, 23 March 2006 - Businesses should take a leading role in making "green" technology available to the average consumer, or governments will step in with heavy-handed environmental policies, experts said at a business and technology forum.

Executives from major firms packed an auditorium in the San Francisco Museum of Art, where academics and technology veterans brainstormed solutions to pollution and transportation woes.

"Business has a key role to play," said Bjorn Stigson, president of the World Business Council for Sustainable Development. "It is up to us to create a sustainable path in the world. If we don't, I don't like where we are going."

When Stigson asked how many people in the room believed in the "green consumer," a person willing to pay more for eco-sensitive products such as electric cars or organic produce, only one hand was raised.

"Perhaps I'm naive, but I don't think the green consumer will be the answer," Patrick Atkins, director of energy innovation at aluminum company Alcoa, said during the Global Innovation Outlook forum led by IBM Corporation on Wednesday.

"You can't tell poor, struggling people to just pay more," said Hugh Aldridge of the Cambridge-MIT Institute. "If you price things out of reach for people you don't have stability, you have rebellion."

If business does not step in to fix the quality-of-life ills in major urban areas, heavy-handed governments will, predicted Aldridge.

Technology being "seriously discussed" in Britain would remotely redirect cars and stop them to ease traffic congestion, Aldridge said.

"Governments are thinking in authoritarian ways to deal with these problems because they don't think market forces will do it," Aldridge said. "That, to me, is a huge danger and we need to come up with innovation to stop it."

It would be misguided to expect business alone to solve environmental problems, but shifting costs to the wallets of consumers is a doomed strategy and waiting for government regulation foolish, pundits said.

IBM will create a databank of "eco-patents" that will be free to legitimate users of the technology, said Nicholas Donofrio, vice president of Innovation and Technology at the company.

"The oil clock is ticking," panelist Lee Schipper of the World Resources Institute said. "The greenhouse clock is ticking. And, we can't even clarify the problems."

Blair wants successor to Kyoto Protocol but based on technology


Blair wants successor to Kyoto Protocol but based on technology

EurActiv.com, 29 March 2006 - One day after his government presented a new climate change plan, admitting it will not reach its own 20% reduction targets by 2010, UK Prime Minister Tony Blair called for a new global consensus as a follow up to the Kyoto Protocol.

Speaking in New Zealand, Mr Blair promised to work for a new international framework agreement to succeed the Kyoto Protocol when it expires on 2012. The new agreement has to include China, India and the United States by placing more emphasis on the development of new technologies to combat climate change, according to the British Prime Minister. "We need a "technological revolution comparable to the internet", said Mr Blair.

His comments came one day after the UK government presented plans for a new climate change programme and new targets for its national emission trading scheme. The Department for the Environment, Food and Regional Affairs (DEFRA) wants stricter emissions caps from industry, more measures for biofuels in transport, tighter building regulations and special actions to improve household efficiency.

The UK industry lobby CBI criticised the UK plans. Industry"cannot keep shouldering most of the burden. Of all the reductions in emissions achieved in the UK since 1990 business has been responsible for delivering 80 per cent of them".

By underlining the need to go for technological solutions to climate change, Tony Blair seems to get into line with the position of the US administration, which dropped out of the Kyoto agreement and is unwilling to undertake major cuts of its greenhouse gas emissions for fear of undermining its economy.

On the other hand, several states and cities in the US are taking a more pro-active approach on the climate change issue and have taken policy measures to cut emissions. The influential magazine Time presented last week a special issue on the climate change topic with the alarming title: "Global Warming. Be worried. Be very worried."

IBM think-tank calls on businesses to save the world while making money


IBM think-tank calls on businesses to save the world while making money


While Hollywood celebrities and Silicon Valley executives have the cash to pay for trendy earth-friendly lifestyles, ordinary people don't, a US think-tank warned.
The onus was on businesses worldwide to lead a "green" revolution by sharing technology and costs before authoritarian governments slapped them and citizens with life-altering regulations, according to panel members.

"Perhaps I'm naive, but I don't think the green consumer will be the answer," Patrick Atkins, director of energy innovation at Alcoa aluminum company, said during a Global Innovation Outlook forum led by IBM Corporation.

"People need to reach a tipping point at which it clearly effects their lives, and then they will address the problem and galvanize the innovation of the world."

Executives from major firms such as Halliburton and Intuit packed an auditorium in the San Francisco Museum of Art, where academics and technology veterans brainstormed solutions to pollution and transportation woes.

"Business has a key role to play," said Bjorn Stigson, president of the World Business Council for Sustainable Development.

"Here we are. It is up to us to create a sustainable path in the world. If we don't, I don't like where we are going."

When Stigson asked how many people in the room believed in the "green consumer," a person willing to pay more for eco-sensitive products such as electric cars or organic produce, only one hand was raised.

"You can't tell poor, struggling people to just pay more," Hugh Aldridge of the Cambridge-MIT Institute warned. "If you price things out of reach for people you don't have stability, you have rebellion."

If business doesn't step in to fix the quality-of-life ills in major urban areas, heavy-handed governments will, predicted Aldridge.

Technology being "seriously discussed" in England would remotely redirect cars and stop them to lessen traffic congestion, Aldridge said.

"Governments are thinking in authoritarian ways to deal with these problems because they don't think market forces will do it," Aldridge said. "That, to me, is a huge danger and we need to come up with innovation to stop it."

It would be misguided to expect business alone to solve environmental problems, but shifting costs to the wallets of consumers was a doomed strategy and waiting for government regulation foolish, pundits said.

IBM will create a databank of "eco-patents" that will be free to legitimate users of the technology, said Nicholas Donofrio, vice president of Innovation and Technology at the company.

'The oil clock is ticking," panelist Lee Schipper of the World Resources Institute said, gesturing as if holding up a watch. "The greenhouse clock is ticking. And, we can't even clarify the problems."

People should not expect technology to be a panacea, Lee said.

"There is always a fool smart enough to violate a foolproof system," he quipped.

© 2006 AFP

Reputation - The high tax of low trust


Reputation - The high tax of low trust


Trust can be developed as a skill and competency, says a renowned leadership consultant
Stephen M.R. Covey, son of “The Seven Habits of Highly Effective People” author Stephen Covey, has followed in his fathers footsteps and advises aspiring entrepreneurs on many aspects of becoming successful business leaders. And when he evangelises on “the speed of trust” the effect on his audience is almost tangible.

Trust, Covey says during a conference call to promote a workshop on the subject, acts “faster than anything we know … when you have it you can accomplish amazing things with incredible speed”.

Covey illustrates his point with the story of Warren Buffett’s Berkshire Hathaway acquiring a $23 billion dollar company from Wal-Mart after one two-hour meeting and in just 29 days with no due diligence. Buffett, Covey says, “knew everything would be exactly as Wal-Mart said it would be – and it was”.

Trust, he advises, always affects two measurable outcomes: speed and cost. Instead of the normal 6-12 months and tens of millions of dollars usually spent on corporate acquisitions, Buffett trusted and acted with trust, saving time and money, Covey says.

“When trust goes down, speed goes down and cost goes up,” he says. “This is a tax. When trust goes up, speed goes up and cost comes down – and that’s a dividend.”

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Learning to instil trust

Covey believes that trust is something people can learn to develop, extend and, if need be, restore.

“A lot of people think of trust as something you either have or you don’t,” he says. “I disagree completely. You can become good at establishing trust with all of your different stakeholders.”

Covey calls the ability to establish, grow, extend and restore trust “the key leadership competency of the new global economy” – because the new economy is “all about interdependence, partnering and relationships – which are all about trust”.

The opposite of trust, Covey says, is suspicion. “When I don’t trust someone, I’m suspicious of their motives, agenda, competence or character,” he explains.

And although he says ethics is a vital component of trust, it is not the only element. There are two dimensions of trust – character and competence, he says. Ethics is a character component, but to establish true credibility, Covey says, one must demonstrate an ability to deliver results.

“Getting results is vital to building trust,” he says. “I don’t approach trust as a soft, intangible, unquantifiable, nice-to-have measure. I argue it’s indispensable; it’s an economic factor.”

The business case for trust


Covey says trust “changes the trajectory of everything that is going on in a company: strategy, execution, innovation and relationships with customers, suppliers, distributors and shareholders”. He insists trust is tangible, quantifiable and measurable.

“You can show and quantify that this is real,” he explains. “When trust is low, the bottom line is you’re getting taxed. That’s costing you; you can quantify it.

“You can get your arms around trust and improve it – get better at it. You can learn how to get the dividend instead of pay the tax.”

Leadership, Covey says, is “all about getting results in a way that inspires trust”. And with that trust, he says, leaders can get results “again and again and again” with increasing speed and decreasing cost.

“If you get results but destroy trust, the next time you try to get results it will take you longer and cost you more,” he says.

And when trust is broken, Covey says, “you get lots of little rules, regulations, procedures and processes”. He says the Sarbanes-Oxley act – rules on corporate governance developed in the wake of financial scandals including the collapse Enron – is a good example of the eventual result of violations of trust.

“There was a lack of trust in public markets – and speed went down and cost went up, but they needed to restore trust,” he says.

Covey identifies seven “low-trust sinkholes”, where he says the “taxes” of low trust are “siphoned off”. The sinkholes include reduced employee engagement, high employee turnover and bureaucracy.

And he teaches 13 behaviours he says are common to highly trusted leaders around the world, including “talking straight”, “creating transparency” and “listening to understand”.

These behaviours, he says, create five interdependent “waves” of trust: self trust, relationship trust, organisational trust, market trust and societal trust.

Perhaps most importantly, Covey says, trust can be rebuilt. But he believes that “you can’t talk yourself out of a problem you behaved yourself into”.

“Confront it, right wrongs and deliver results,” he says. “Restoring trust is possible, but you have to behave yourself out of it.”

According to global consulting firm Watson Wyatt:


• Only 39% of workers trust their senior managers
• Only 45% have confidence in their management’s abilities
• In the US, Europe and Japan, fewer than 30% of opinion leaders say that chief executives and finance chiefs are credible sources of information
• Organisations with high trust outperform organisations with low trust by nearly three times

www.leadingauthorities.com/23784/Stephen_M_R_Covey.htm

Nestlé 2005 Management Report Pack: CSR reporting

Thanks to Luba for the links...


----- Forwarded by Luba Labunka/Armonk/IBM on 03/16/2006 09:54 AM -----

Nestlé S.A.

Published: 08:41 16.03.2006 GMT+1 /HUGIN /Source: Nestlé S.A. /SWX: NESN /ISIN: CH0012056047

Nestlé 2005 Management Report Pack




We have posted the Nestlé 2005 Management Report Pack, which contains the following documents:
- 2005 Management Report
- Corporate Governance Report 2005
- The Nestlé concept of corporate social responsibility as implemented in Latin America
- 2005 Financial Statements

You will find these reports in the section Management Reports 2005 of www.ir.nestle.com


http://www.ir.nestle.com/Stock_Financials/Management_Reports/2005/2005+Management+Report.htm




Nestlé S.A. Investor Relations Vevey, Switzerland


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Nestlé S.A.

Published: 17:13 17.03.2006 GMT+1 /HUGIN /Source: Nestlé S.A. /SWX: NESN /ISIN: CH0012056047

Nestlé SRI Forum 2006 - Presentation and Webcasts




Following the SRI Forums held on March 7 & 16 on Shared Value Creation - The Nestlé Concept of Corporate Social Responsibility as implemented in Latin America, we have posted all the material (report, presentation and webcasts). They are available through on our website www.ir.nestle.com   Events > Archived Events > March 16, 2006
 
http://www.ir.nestle.com/News_Events/Events/Events/Nestlé+SRI+Forum+2006.htm?EVENT_ARCHIVE=1




Nestlé S.A. Investor Relations Vevey, Switzerland


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A two way benefit? - What businesses learn, gain from NGO partnerships


A two way benefit? - What businesses learn, gain from NGO partnerships
EC Newsdesk
28 Mar 06

Partnerships used to be seen as risky
Partnerships used to be seen as risky


Blair Coursey looks into the benefits of corporate partnerships with non-governmental organisations
Business-NGO partnerships designed to tackle a whole host of social and environmental problems have become increasingly common in recent years.

It’s natural to question why these relationships are formed and what each side gains from such affiliations.

When it comes to NGOs, the answer seems clear-cut: by having a strategic relationship with a company, an NGO receives funding and has easier access to promote further change toward sustainability.

Deciphering what benefits come to the business side of a partnership, however, is perhaps more difficult. When a business partners with a NGO, the obvious advantage is the credibility that comes along with such an association.

But according to some companies, business-NGO partnerships aren’t always just about reputation.

Kellogg’s and ‘specialised expertise’


At Kellogg’s UK, CSR manager Bruce Learner insists that without the specialised expertise of NGO partners, the company’s sponsored breakfast clubs and health promotion programs couldn’t exist.

Partnerships with the Amateur Swimming Association, the Walking the way to Health Initiative and ContinYou, a community education organization, have made Kellogg’s sponsored programs credible, according to Learner.

The Walking the Way to Health Initiative, in conjunction with the British Heart Foundation, aims to get more people walking for the improvement of physical well – being. The Amateur Swimming Association has similar goals.

School breakfast clubs established with the help of ContinYou, says Learner, would be less efficient had corporates lacking in knowledge of the UK school system attempted to set them up alone.

For the development of the breakfast clubs, ContinYou advised Kellogg’s on education system logistics, such as whether or not school kitchen employees would be able to staff the morning programs or if outside volunteers would be needed instead.

Learner says that working with NGOs has exposed him to different organisational structures, experience of which has helped the company to be more inventive when trying to find ways to serve customers.

Learner argues that his company’s partnerships don’t solely exist to make the Kellogg’s name credible. Instead, with the help of NGOs, Kellogg’s is able to provide its customers with the most accurate information possible, he said.

He acknowledges that at times the public can be skeptical when it comes to the motivations behind business-NGO partnerships, but is adamant that Kellogg’s isn’t simply hiding “behind a badge.” Credible partnerships, according to Learner, are about “doing more than you need to.”

Oxfam and Unilever in Indonesia


When it comes to a company “doing more than it needs to” some people might place letting an NGO analyze and criticize confidential company information or values at the top of the list. But Unilever chose to do it with Oxfam, and both parties claim to have gained a great deal of insight from the close-knit relationship.

Most recently, the partnership produced a study of Unilever’s impact on poverty in Indonesia. Because the research looked at Unilever’s entire product chain in a very constricted locale, Oxfam Indonesia’s expertise of the area (Oxfam Great Britain was also involved in the project) was imperative to the research.

A Unilever statement in the report said that Oxfam’s specialised focus on the position of individuals living in poverty allowed the company, which both works with and sells to poor individuals, improve its poverty-reduction thinking.

According to the 2006 report, Oxfam advised Unilever Indonesia on its general policies and practices in regard to poverty reduction. For example, the NGO alerted Unilever Indonesia that its contract employees, especially female workers who risked losing their jobs because of illness or pregnancy, needed special attention.

The study produced by the partnership gives both Oxfam and Unilever Indonesia access to information on Unilever Indonesia’s impact on smaller businesses in the area, taxes, local employment and the consumption of raw material, according to the pair.

The recent report said that Unilever will continue to work with various NGOs on similar projects, and the company acknowledges the importance of working with organisations like Oxfam on such undertakings.

British American Tobacco and NGO engagement


While the successful partnerships at Kellogg’s and Unilever have been long-term relationships between the company and one or more NGOs, Adrian Payne, head of CSR at British American Tobacco, says that simply having a dialogue with an NGO can be beneficial.

Though British American Tobacco is involved in two partnerships, the company also has other, less structured relationships with various NGOs.

Partnerships, according to Payne, require a great amount of trust and confidence from all sides involved, while less formal communication can bring ideas to the table without making a big commitment to an organisation (and also can lead to a future, more structured partnership).

BAT is involved with the British American Biodiversity Partnership, which aims to contribute to the conservation of global biodiversity through projects that aim to protect wildlife, natural resources and the like, and the Eliminating Child Labor in Tobacco Foundation.

Both partnerships, Payne said, have been well received by the public because they “are about action, not words”. Working with the NGOs, which according to Payne have in-depth knowledge of biodiversity and child labour, has taught BAT how to reflect on the quality of its policies and practices.

Payne laments the fact that certain NGOs refuse to work with businesses altogether.

British American Tobacco, Payne said, shares concerns with many NGOs. But communication between organisations must begin before any action can be taken.

In correlation with the company’s interest in harm reduction and the development of lower-risk products, BAT is currently trying to build relationships with public health NGOs. Payne admits it won’t be easy, but said that issues can be best addressed if both sides work together and have “mature discussions, and not shout from the sidelines.”

An external perspective


But the inherent differences between NGO and corporate structures can delay the building process of a strategic relationship, says Melanie Rein.

Rein is a senior associate at the Partnering Initiative, a collaboration of the International Business Leaders Forum and the University of Cambridge Programme for Industry that focuses on the promotion of cross sector partnerships for sustainable development.

She believes that the complexity of multinational company structures is one of the biggest obstacles to overcome in the creation of a successful partnership.

The bureaucratic nature of corporations, according to Rein, can sometimes make things difficult for individual employees who want to branch out and work with NGOs, though of late companies have become more understanding of NGO positions and have begun to recognise the importance of taking advantage of their specialised knowledge.

Additionally, Rein notes that NGOs provide companies with an informed external perspective, which can prove useful if taken seriously.

Seeing through the eyes of others


This is something George Jaksch, director of Corporate Responsibility and Public Affairs at Chiquita, says is one of the most useful outcomes of his company’s partnership with the Rainforest Alliance.

Chiquita began a relationship with the Rainforest Alliance in 1992 through its involvement in the Better Banana Project, which certifies farms based on strict environmental and social standards.

According to Jaksch, Chiquita’s partnership with the Rainforest Alliance has been successful because the NGO is very consistent in its methodical approach, and Chiquita is committed to a long-term effort to uphold high standards.

While the partnership has been ongoing for quite some time, Jaksch says it is important for both parties to maintain an arms length relationship so as not to jeopardise the notion of true external perspective.

To meet certification, Chiquita farms must adhere to environmental, social and agricultural requirements established by the Rainforest Alliance and other Latin American NGOs.

Jaksch says that not only are Chiquita’s employees now routinely exposed to the concepts of sustainable and responsible banana production, but that production as a whole is continuously improved because of the external, constructively-critical influence of the Rainforest Alliance.

These examples of business/NGO partnerships illustrate that while businesses sometimes gain a heightened public reputation through a partnership with an NGO, the company often benefits internally as well.

Strategic NGO engagement can provide companies with external analyses that not only help them steer toward sustainability, but can improve operations in the working environment.

Risk management benefits


For example, Daniel King, sustainability communications manager at Danish multinational Danisco, says that NGOs point out operational risks that the company otherwise wouldn’t have noticed, especially in regard to issues such as corruption and bribery.

Although business/NGO partnerships vary in depth of engagement by individual cases, both parties bring knowledge away from all relationships – even those that fail.

Some of these have taught companies the most about how to come back next time. Consider the case of APRIL, the Indonesian timber company, and WWF.

After falling out spectacularly a few years ago, with WWF embarking on a public campaign against the firm, the two are now working together again in a much more serious way to conserve parts of what remains of Indonesia’s original forests.

As former US secretary of state Colin Powell has aptly put it “There are no secrets to success. It is the result of preparation, hard work, and learning from failure.”

www.batbiodiversity.org
www.wwf.org
www.thepartneringinitiative.org
www.ethicalcorp.com/londonpartnership/report.shtml

N.B. Ethical Corporation's business/NGO partnerships London conference takes place today and tomorrow at the Regent's Park Marriott Hotel:
www.ethicalcorp.com/londonpartnership

A free research report on partnerships is available from:
www.ethicalcorp.com/londonpartnership/report.shtml.

EU launches corporate responsibility alliance


EU launches corporate responsibility alliance

Environment DAILY, 22 March 2006 - A business-led alliance for corporate social responsibility (CSR) launched by the European commission on Wednesday will help reconcile Europe's economic and environmental ambitions, according to EU enterprise commissioner Günter Verheugen.

In an accompanying communication, the commission called on EU businesses to "move up a gear" and go beyond minimum legal obligations in order to make Europe a "pole of excellence" in CSR.

Speaking at the launch, Etienne Davignon, chair of business network CSR Europe, said that "voluntary does not mean absent". EU companies are carrying out many initiatives in areas like sustainable supply chain management, diversity practices and carbon dioxide emission reductions, he said.

Firms are starting to regard corporate responsibility as a business issue, a CSR Europe spokeswoman told Environment Daily. "They clearly see the reputational value of running a sustainable business for the future," she said. "These initiatives are successfully taking place in a voluntary framework."

Also present at the event, Epson Europe chief executive Ramon Ollé described CSR as "an important component of competitiveness and job creation". Mr Ollé argued that committing to environmental improvement should become a standard business practice. "Business should aim to continually develop more energy efficient products, he said.

The Epson chief is currently working with a number of universities in Europe to devise learning materials on the issue. "[CSR] ought to be taught widely throughout universities so that our future employees and managers are aware of its importance well before entering the corporate sector", he said.

Other members of the alliance include Volkswagen, Microsoft, BASF, Arcelor, BP, Intel, Toyota Europe and EU business associations Unice and Ueapme.

Environmentalists criticised the initiative, arguing that it excludes non-business stakeholders (ED 14/03/06). Mr Verheugen insisted on Wednesday that the commission continued to see multi-stakeholders dialogue as very important. CSR will not flourish without the support and "constructive criticism" of NGOs, he said.

The CSR alliance will promote a series of actions including awareness raising campaigns and best practice exchange, education and the integration of CSR into EU policies.

Revenue transparency - One more for EITI: Kazakhstan becomes the latest country to implement the UK-led anti-corruption scheme


Revenue transparency - One more for EITI
Ben Schiller in London
28 Mar 06

Azerbaijan is one of the nations reporting on oil payments
Azerbaijan is one of the nations reporting on oil payments


Kazakhstan becomes the latest country to implement the UK-led anti-corruption scheme
The Kazakhstan government says it will shortly publish its first report under the Extractive Industries Transparency Initiative (EITI), a worldwide anti-corruption scheme that asks countries to publish details of payments from extractive companies in an effort to improve governance practices.

Nigeria, the Kyrgyz Republic, Azerbaijan and Gabon have so far published reports detailing payments by companies.

Overall some 20 countries have committed to implementing EITI reporting. In recent years pressure has grown from donor governments and campaigners on developing nation governments to improve their accountability. EITI is seen as one of the more successful inter-government/business initiatives to drive progress on this to date.

EITI aims to increase transparency in resource-rich countries by having extractive industry companies and governments simultaneously disclose their payments and receipts.

Filing reports soon

Speaking at the recent Kazakhstan Investment Summit, in London on March 15th, Bolat Akchulakov, deputy energy minister for energy and mineral resources, said the government and participating companies will file reports for 2004 and 2005 in May.

An independent auditor will then have the job of scrutinising the numbers, with the final, reconciled, report due for publication in July.

Kazakhstan began implementing EITI in April 2005, and formally signed up to the scheme last October.

So far, 24 companies have said they will provide figures, while a further 14 have agreed to do so in the future.

In a statement, a coalition of 50 Kazakh NGOs commended the government for “moving forward” with EITI. But it cautions that it will only be effective if more companies participate, disclosures contain greater detail, and companies also reveal their “social payments” to local budgets.

The NGOs are unhappy that the government plans only to release “aggregated” information, rather than figures for individual companies.

Oil and gas ahead


According to the government, there are between 200-300 extractive companies operating in the country - mostly smaller domestic firms. Among foreign companies, oil and gas firms have so far participated in greater numbers than mining outfits.

The Kazakhstan government has managed to implement EITI at breakneck speed – with the result that some companies think the first report will have plenty of gaps.

“The first report will not be good quality,” said Alain Langlois, Total’s representative in Kazakhstan. “I suspect it’s going to be one big mess.”

Erlan Idrissov, Kazakhstan’s UK ambassador countered that the process was “a work in progress”. While it was not perfect, he said, it nonetheless showed the government was committed to improving transparency standards.

Jean Lemierre, president of the European Bank for Reconstruction and Development (EBRD), said transparency was crucial if Kazakhstan is to use its huge natural resource wealth to fund its economic development.

“There can be no sustainability without transparency. Some people may disagree. I don’t care,” he said.

Lemierre said it was important that companies saw rewards for being involved. Eventually that could mean the EBRD refusing to finance companies that were not making an effort, he said. “I don’t see how we can use taxpayer’s money to reward people who do not support transparency.”

During the 1990s, the Kazakh government was accused of accepting large bribes from foreign oil companies seeking concessions in the country.

James Giffen, Nazarbaev’s so-called “go-between” with the foreign oil companies, faces trial in New York this April under the US Foreign Corrupt Practices Act (he also accused of money laundering and tax evasion). US authorities say he facilitated payments totaling more than $1 billion for the Nazarbaev regime.

In all, foreign investors have ploughed about $26 billion into Kazakhstan’s oil, gas and minerals since 1993, according to government figures.

With investment increasing every year, it can only be hoped that more cash reaches public budgets than previously.

Raging thirst for water gives Mexicans that sinking feeling


Raging thirst for water gives Mexicans that sinking feeling

Financial Times, 16 March 2006 - Mexico City is sinking. The overexploitation of subterranean water reserves has landed the city - which today hosts the World Water Forum, a ministerial conference aimed at raising consciousness about water as a valuable commodity - with a battle against subsidence and an increase in flooding.

Santiago Cortez knows all about the problem. In 1985 he and his wife began building their house in Molinos, a poor neighbourhood on the south-eastern outskirts of the city. The modest two-storey construction had three large steps leading up to the front door.

Within a few years of completion friends and relatives started asking if it was ÂÂstable. "I would stand back, take a good look, scratch my head and reply 'I'm not sure'," he remembers.

Today, there is no doubt. The steps have sunk into the ground. So has half the door. Mr Cortez's ground floor is part-flooded with brackish water and he has had to secure the furniture on the second floor to stop it from sliding.

He is not alone: Molinos is sinking at the rate of more than a millimetre a day. According to Marcos Adrian Ortega at the National Autonomous University of Mexico (Unam), the area of Chalco, which includes Molinos, has sunk about 10m in the past 30 years. The rest of the city, which is home to about 20m people, is going in the same direction, albeit at varying rates.

The city's water authorities accept that their policies are to blame. More than 70 per cent of Mexico City's consumption comes from a huge reservoir several hundred metres underground. The problem is that most of the city is built on what in Aztec times used to be a lake: as water is extracted from the reservoir the clay bed of the lake sags, pulling the city down with it.

According to the National Water Commission (CNA), a federal body that oversees Mexico's water systems, extraction of water from the underground reserve in the metropolitan area is more than double the rate of replenishment.

"It is simple: we are overexploiting the reservoir," says Jesus Campos of the CNA.

Mass urbanisation, particularly since the 1950s, has exacerbated the problem. The city is still growing by 200,000 inhabitants a year, and extra demand for water, as well as the weight of the new buildings, vehicles and roads, has quickened the pace of subsidence in many areas.

The fact that the authorities treat only 10 per cent of the city's waste water - the rest is pumped out of sight into neighbouring valleys - has meant having to extract even more water.

Signs of the subsidence are even visible in the city's centre: years ago the monument to independence, one of its best-known landmarks, was anchored to the bedrock to prevent it from sinking or keeling over. The result is that the monument now sits on a grassy knoll several metres higher than the surrounding land.

The intensive extraction of water from the subsoil has also brought other risks. German Martinez Santoyo, the director-general of Water Systems of Mexico City, the city government's water company, says that until now the reservoir acted as a shock absorber in times of seismic activity. The city is now more exposed to structural damage from earthquakes, he says.

Mr Ortega, of Unam, says an increasing number of the city's residents live under the threat of flooding. The Chalco valley has subsided so quickly that surface water has accumulated to form a lake of six square kiloÂÂmetres.

The lake has become a dumping ground for much of the area's waste water, separated from the densely populated valley only by a dyke.

In addition, many of the heavily contaminated rivers that run off the lake run through the populated areas, and the authorities have had to build up their banks to keep them from flooding surrounding neighbourhoods. The Company River, a pestilent open sewer that flows through Molinos, is now almost 10m higher inside its banks than the streets and houses either side.

Mr Martinez, of the city's water company, admits that the situation is not sustainable. "Of course it isn't," he says.

He and his team are working to protect areas where precipitation is helping to refill the underground reservoir; to funnel rainwater back into the ground; and to develop an idea to inject treated water into the subterranean reservoir.

Mr Campos says the price of water must rise to force consumers to rationalise their use of water. Authorities spend about 10 pesos to treat and supply a cubic metre of water but charge just over two pesos, he says. They also lose about 40 per cent - about double the international average - of their water through cracked pipes and broken tubes.

Yet Mr Martinez says pushing up prices is not the answer; getting people to pay at all is the problem. More than half of Water Systems' customers never pay.

"Most people in Mexico City believe water is theirs by right and that they shouldn't have to pay for it," he says.

This article is reproduced with kind permission of The Financial Times
For more news and articles visit the
Financial Times website.

Big global greenhouse gas cuts "affordable"


Big global greenhouse gas cuts "affordable"

Environment DAILY, 21 March 2006 - World greenhouse gas emissions could be halved by 2050 at a cost of just 1% of global gross domestic product, according to an analysis unveiled by the German environment agency last Thursday. Without action to restrain emissions, the cost of global warming-linked weather changes could cut 10% of world GDP, it warns.

To achieve a massive cut in emissions, worldwide investment in green technologies would need to be stepped up quickly, particularly in the energy sector. "Previous calculations have often underestimated cost reductions derived from technological advance," the agency commented.

Compiled for the agency by a climate change institute in Potsdam, the study starts from an objective of limiting growth in world temperatures to two degrees Celcius. Average per capita emissions will have to be reduced to below two tonnes per year, it comments. In comparison, Germany's emissions currently average 11 tonnes per head and America's 21 tonnes, the agency noted in a statement.

Europe "facing unsustainable transport trends"


Europe "facing unsustainable transport trends"

Environment DAILY, 29 March 2006 - European freight transport continues to grow along with gross domestic product with no clear signs of decoupling between them, the European environment agency (EEA) warned on Tuesday.

Relative decoupling has emerged recently in passenger transport, but absolute volumes are still increasing, it said in a major review of transport and environment issues. The EEA warns that these persistent unsustainable trends are undermining undermine progress towards Kyoto targets.

Aviation is the most problematic area, with air passenger transport up by 96% between 1990 and 2002. In comparison, all passenger transport grew by 30% over the same period and all freight transport by 34%.

The report argues that areas affecting transport demand, such as spatial planning, industrial development and agriculture, must include demand reduction policies. “We are locked into patterns that are not easily changed in the short term”, said EEA executive director Jacqueline McGlade. “Long-term policy initiatives are needed to encourage people to change their habits.”

The "Term" report is the agency’s sixth annual environmental assessment of transport in Europe. Most of the data comes from the period 1999-2002 though for some issues it reports trends up to 2003.

Greenhouse gas emissions from transport in Europe increased by 22 % from 1990 to 2003 while decreasing in other sectors, the EEA reports. Ireland posted a spectacular 130% increase in emissions over the same period. At the other extreme, in Germany the increase was only 5%.

The report explores transport's contribution to poor air quality and forecasts that many European cities will continue to fail EU limits. Limits set for ozone in 2010 are widely exceeded, the agency points out, and many member states including the Netherlands are struggling to meet fine particulates standards (ED 28/03/06).

Although data on passenger transport is patchy, there is no evidence of a shift from road to rail, it says. Cars have declining occupancy rates, while average loads of lorries in countries like the UK, the Netherlands and Denmark either remain stable or are declining.

Wood industry - Stewarding sustainable forestry in Bolivia


Wood industry - Stewarding sustainable forestry in Bolivia
Oliver Balch, Latin America Editor
28 Mar 06

Forest sustainability is one of the world's major challenges
Forest sustainability is one of the world's major challenges


With over two million hectares of forests certified under Forest Stewardship Council rules, Bolivia has emerged as Latin America’s leading sustainable timber producer. Its regional neighbours should look and learn
Asked to name a South American country with joined-up government, commercial innovation and conservation, few would come up with Bolivia. But the beleaguered land-locked nation is spearheading the region’s drive towards sustainable forestry.

For once, both environmentalists and business representatives agree why: certification. Working closely with the US Agency for International Development, Bolivia’s forestry administration began introducing basic certification techniques to both private and public sector operators in the mid-1990s.

Now more than five million acres – over a quarter of the country’s forest coverage – is certified according to basic environmental and social standards.

“One of the key successes of Bolivia was the willingness of the government, private sector and non-profit groups to work together to establish a system-wide arrangement that would in turn create the preconditions for sustainable forest management,” says Daniel Arancibia, Latin American representative of the Forest Stewardship Council, a business-backed group specialising in sustainable forest certification.


The approach was helped by a new forestry law in Bolivia in 1996, which contained incentives for responsible forest management. Timber companies that meet the FSC’s standards, for example, are exempt from otherwise costly monitoring requirements by government officials.

Under the revised legislation, private timber companies are granted concessions to develop national forests commercially, but only under strict social and environmental conditions.

The groundwork for Bolivia’s certification programme was laid by Bolfor, a joint project between Bolivia’s environment ministry and the US Agency for international Development. The project is now entering a second stage, focusing on the consolidation of forest regulations, the promotion of local capacities and the conservation of forest biodiversity.

Timber companies are increasingly looking to the FSC for a benchmark standard. Today, 16 forest operations in Bolivia are certified according to the FSC’s rules, which cover issues such as the protection of water and other natural resources, respect for indigenous rights and the economic well-being of forest workers and local communities.

Supply and demand


Yet supply is only one side of the equation of Bolivia’s success. Equally important is promoting demand. Under the guise of the Bolfor project, Bolivia’s forestry sector is trying to promote the “Bolivia certified” label in its overseas markets. The Tropical Forest Trust, a UK-based membership organisation, is working to promote Bolivia’s FSC timber with European importers. Bolfor’s partners are doing the same in the US.

Bolivian FSC-certified forest products are now sold everywhere from France and Spain to Hong Kong and Singapore. Being a tropical hardwood, most ends up being sold as doors, furniture, floorboards, chairs, and sawn timber. Exports hit £9.1 million last year.

One of the main importers is the UK retailer B&Q. The home-improvement specialist has a commitment to ensuring all its wood and paper products come either from proven, well-managed forests or recycled material. In 2004, B&Q sourced 1,700 cubic metres of roundwood, mostly for use in its garden furniture range.

“We want to offer our customers a choice of sustainable products at affordable prices and our timber buying policy is aimed at achieving this,” explains George Padelopoulos, B&Q’s social responsibility adviser.

Natural forests cover almost half (47%) of Latin America. That proportion is dropping. Every year, an estimated 58 million hectares of forest are lost to unsustainable and, all too often, illegal logging. If the trend is to turn around, more countries need to follow Bolivia’s lead.

www.fsc.org
www.fsc.org/en/whats_new/news/news/54

FTSE4Good Semi-Annual Review Boots 16 US Companies on Environmental Criteria:


FTSE4Good Semi-Annual Review Boots 16 US Companies on Environmental Criteria

SocialFunds.com, 15 March 2006 - FTSE4Good, the UK-based socially responsible investing (SRI) global index provider, just finished its semi-annual review of constituents, resulting in 19 deletions and more than twice as many (40) additions. The FTSE4Good philosophy is to set the bar for corporate social and environmental responsibility at an achievable level, then ratchet it up incrementally to promote progress toward sustainability.

"The FTSE4Good index is a driving force in encouraging companies globally to be more aware of criteria used for socially responsible investment," said Mark Makepeace, Chief Executive of FTSE Group. "We are committed to working with investors, companies and other interested parties to develop and encourage corporate responsible behavior, which enhances shareholder value."

The lion's share (18) of the deletions are due to the environmental criteria (which FTSE4Good beefed up in 2002), with only a single deletion of Canada-based nickel producer Inco (ticker: N) due to human rights criteria (which FTSE4Good strengthened in 2003). Almost all (16) of the environmental deletions are US-based companies, a conspicuous geographic correlation. The US-based environmental deletions also cluster in three sectors.

FTSE4Good booted four US travel and leisure companies--namely Cendant (CD), Darden Restaurants (DRI), Hilton Hotels (HLT), and Starwood Hotels and Resorts (HOT). FTSE4Good also dumped five US retailers--Dollar General (DG), Federated Department Stores (FD), Lowe's (LOW), Nordstrom (JWN), and RadioShack (RSH). The same number of US finance companies have also been censured--Ambac Financial (ABK), Bear Stearns (BSC), Janus (JNS), Northern Trust (NTRS), and Washington Mutual (WM).

SRI ratings can be said to exhibit the Rashomon Effect, a term coined after the 1950 Akira Kurosawa film Rashomon that presents the same event in radically different interpretations, suggesting the highly subjective nature of human perception. In this instance, FTSE4Good just deleted Bear Stearns, while the Dow Jones Sustainability Indexes (DJSI) just added the company in September 2005.

FTSE4Good sources its SRI research from UK-based Ethical Investment Research Service (EIRIS), while Switzerland-based Sustainable Asset Management (SAM) Group provides the SRI research for DJSI. The two index providers have different approaches to their analysis. DJSI takes a best-in-class approach that rewards best practice on sustainability across all sectors, while FTSE4Good screens certain sectors altogether. However, the difference in the evaluation of Bear Stearns decision is unclear based on this distinction.

The geographic concentration of deletions may significantly impact the FTSE4Good US Select Index, the underlying benchmark of the Vanguard FTSE Social Index Fund (VFTSX)--which just last year switched from tracking the Calvert Social Index (CALVIN).

Interestingly, FTSE4Good additions span a broad geographic range of 10 countries, with the highest concentration being the UK (13) and Japan (8), followed by the US (6) and Australia (4). The additions also span a broad range of sectors.

One decision displaying consistency (or the opposite of the Rashomon Effect) between FTSE4Good and DJSI is the recent addition of Goldman Sachs (GS) by both indexes.

Controversy will always accompany decisions to add certain companies to SRI indexes, and FTSE4Good's new additions are no exception. For example, the list of additions includes Bridgestone (5108.T), the defendant in a November 2005 Alien Tort Claims Act (ATCA) case alleging "forced labor, the modern equivalent of slavery" on the Firestone Plantation in Harbel, Liberia.

It also includes Smithfield Foods (SFD), a former defendant in three lawsuits alleging violation of environmental laws by allowing hog waste to contaminate North Carolina rivers and streams. Smithfield settled two of these suits in January 2006 through an agreement with the Waterkeeper Alliance to improve environmental management of its hog farms. This follows up on the company's 2005 achievement of ISO 14001 environmental certification of its environmental management system (EMS) for all its US hog production facilities and all pork and beef processing facilities (except for recent acquisitions.) These developments no doubt factored in to FTSE4Good's inclusion decision.

Study: BHP Billiton, Alcan Lead Their Sectors in Sustainability Reporting.


Study: BHP Billiton, Alcan Lead Their Sectors in Sustainability Reporting.

GreenBiz.com, 16 March 2006 - The Roberts Environmental Center has released its 2006 analysis of environmental and sustainability reporting in the metals, mining, and crude-oil sectors.

Of the 30 companies studied, BHP Billiton had by far the best environmental and sustainability reporting based on the center's Pacific Sustainability Index. BHP Billiton is broadly diversified across these sectors so its reporting reflects environmental and social issues of every company in the sectors. Alcan (Canada), the second highest scorer confines its activities to aluminum, and Corus (Britain) to aluminum and steel. The highest scoring American company, Alcoa, ranked sixth, also confines its activities to aluminum. The lowest scores, a result of failure to post more than a minimal amount of company-specific environmental or social information on their Web sites, went to US Steel and AK Steel in the struggling American steel sector.

There is a small positive relationship between company size and quality of reporting, largely resulting from the low scores of the smallest American companies in our sample. But almost the full range of scores was seen in firms with revenues between $9 billion and $16 billion. By far the largest firm in the sample, Pemex (Mexico), scored just above the middle of the pack and prevented the regression of score on revenue from being considerably more positive. There is no relationship between PSI score and net income or net profit margin.

All materials were scored using the center's Pacific Sustainability Index which also provides scores for six subcategories of reporting. The highest scores for these went to BHP Billiton for expressed environmental intent, Corus for environmental reporting transparency, Corus for quantitative environmental performance, BHP Billiton for expressed social intent, Arcelor (Luxembourg) for social reporting transparency, and BHP Billiton for quantitative social performance.

In these sectors the most reported environmental variables were environmental costs and investments, greenhouse gas emissions, and energy utilization. The most reported social information was compliance with code of business conduct, community education, and business ethics.

These findings are based on the information available on the Web sites of the largest 30 companies in the metals, mining, and crude-oil sectors of the 2005 Fortune Global 500 and Fortune 1000 lists as of Sept. 6, 2005. The Fortune 1000 includes only American firms, so all of the smallest firms in this sample are American.

Study: BHP Billiton, Alcan Lead Their Sectors in Sustainability Reporting


Study: BHP Billiton, Alcan Lead Their Sectors in Sustainability Reporting
Source:
GreenBiz.com

CLAREMONT, Calif., March 16, 2006 - The Roberts Environmental Center has released its 2006 analysis of environmental and sustainability reporting in the metals, mining, and crude-oil sectors.

Of the 30 companies studied, BHP Billiton had by far the best environmental and sustainability reporting based on the center's Pacific Sustainability Index. BHP Billiton is broadly diversified across these sectors so its reporting reflects environmental and social issues of every company in the sectors. Alcan (Canada), the second highest scorer confines its activities to aluminum, and Corus (Britain) to aluminum and steel. The highest scoring American company, Alcoa, ranked sixth, also confines its activities to aluminum. The lowest scores, a result of failure to post more than a minimal amount of company-specific environmental or social information on their Web sites, went to US Steel and AK Steel in the struggling American steel sector.

There is a small positive relationship between company size and quality of reporting, largely resulting from the low scores of the smallest American companies in our sample. But almost the full range of scores was seen in firms with revenues between $9 billion and $16 billion. By far the largest firm in the sample, Pemex (Mexico), scored just above the middle of the pack and prevented the regression of score on revenue from being considerably more positive. There is no relationship between PSI score and net income or net profit margin.

All materials were scored using the center's Pacific Sustainability Index which also provides scores for six subcategories of reporting. The highest scores for these went to BHP Billiton for expressed environmental intent, Corus for environmental reporting transparency, Corus for quantitative environmental performance, BHP Billiton for expressed social intent, Arcelor (Luxembourg) for social reporting transparency, and BHP Billiton for quantitative social performance.

In these sectors the most reported environmental variables were environmental costs and investments, greenhouse gas emissions, and energy utilization. The most reported social information was compliance with code of business conduct, community education, and business ethics.

These findings are based on the information available on the Web sites of the largest 30 companies in the metals, mining, and crude-oil sectors of the 2005 Fortune Global 500 and Fortune 1000 lists as of Sept. 6, 2005. The Fortune 1000 includes only American firms, so all of the smallest firms in this sample are American.

30.3.06

Ceres Releases First-Ever Ranking of 100 Global Companies on Climate Change Strategy


Ceres Releases First-Ever Ranking of 100 Global Companies on Climate Change Strategy

GreenBiz.com, 22 March 2006 - A growing number of leading U.S. companies are confronting the business challenges from global warming, recognizing that greenhouse gas limits are inevitable and that they cannot risk falling behind their international competitors in developing climate-friendly technologies. Some U.S. companies, such as General Electric, are catching up and joining DuPont and Alcoa in leading their industries. But many others are still largely ignoring the climate issue with "business as usual" strategies that may be putting their companies and shareholders at risk.

These are among the key findings of a first-ever report issued today by the Ceres investor coalition that analyzes how 100 leading companies are addressing the growing financial risks and opportunities from climate change -- whether from expanding greenhouse gas regulations, direct physical impacts or surging demand for climate-friendly technologies. Altogether, 76 U.S. companies and 24 non-U.S. companies in 10 business sectors are profiled in the report.

"More U.S. companies realize that climate change is an enormous business issue that they need to manage immediately," said Mindy S. Lubber, president at Ceres, which published the report Corporate Governance and Climate Change: Making the Connection. "Investor pressure, expanding greenhouse gas limits and surging global demand for clean-energy products are compelling U.S. businesses to act, although many others still fail to recognize the enormity of this issue. Ultimately, management and board members at all 100 of these companies need to make climate a top governance priority."

The report uses a "Climate Governance Checklist" to evaluate how major industrial corporations are addressing climate change in five broad areas: board oversight, management performance, public disclosure, greenhouse gas emissions accounting and strategic planning. The report took nine months to complete and uses data from securities filings, company reports, company websites, third-party questionnaires and direct company communications.

Using a 100-point scoring system, the report ranked the largest companies in the oil/gas, electric power, auto, chemical, industrial equipment, mining/metals, coal, food products, forest products and air transportation sectors, with operations in the United States. The scoring system gave most credit to companies with a sustained commitment to controlling greenhouse gas emissions, disclosing data and strategies, supporting regulatory actions, and taking practical, near-term steps to find lasting solutions to climate change. (Company scores, profiles and the summary report are available online.)

Among the industry sector leaders and laggards:

  • Sector: Oil/ Gas, Leader: BP(90 points*), Laggard: ExxonMobil(35)
  • Sector: Chemical, Leader: DuPont(85**), Laggard: PPG(21)
  • Sector: Metals/Mining, Leader: Alcan(77) & Alcoa(74), Laggard: Newmont(24)
  • Sector: Electric Power, Leader: AEP & Cinergy(both73), Laggard: Sempra Energy(24)
  • Sector: Auto, Leader: Toyota(65), Laggard: Nissan(33)
* Top score among the 100 companies **Top score among 76 U.S. companies

Over two-dozen institutional investors requested the Ceres report, prepared by the Investor Responsibility Research Center, as part of an action plan announced at the Institutional Investor Summit on Climate Risk last May at the United Nations. The investors are part of the Investor Network on Climate Risk (INCR), an alliance of U.S. institutional investors coordinated by Ceres that collectively manage about $3 trillion in assets.

"This report is extremely valuable because it provides investors with an unprecedented window into how companies most affected by climate risk are responding at the board level, through CEO leadership, and in strategic planning," said Connecticut State Treasurer Denise L. Nappier, whose $22 billion investment fund is among 50 institutional investors in INCR. "While strong climate governance practices are not yet the norm at U.S. companies, this report plainly illustrates that there are industry leaders showing the way."

Foreign companies such as BP, Toyota, Alcan, Unilever and Rio Tinto had the highest scores in five of the nine sectors that included both U.S. and non-U.S. firms. American companies -- DuPont, General Electric, International Paper and United Parcel Service -- led in the other four sectors. (In the electric power sector, only American companies were analyzed.)

The report's overall results are encouraging. In 2003, Ceres released a report on 20 companies showing that major U.S. businesses were doing little to address climate challenge. By contrast, this report shows that leading companies in many key industries are now tackling the issue at the highest level, with boards conducting strategic assessments and management setting performance goals for reducing greenhouse gas emissions and developing new climate-friendly products.

DuPont, the leading scorer among U.S. firms has reduced its GHG emissions 72 percent since 1990 and developed forward-thinking commercial products such as energy-efficient building materials, components for solar, wind and fuel cell systems and next-generation refrigerants with low global warming potential.

The report also shows, however, that dozens of U.S. businesses in various climate vulnerable sectors -- including leading electric power and oil companies -- are still largely dismissing the issue or failing to articulate clear strategies to meet the challenge. Low climate governance scores also were prevalent among entire sectors, including: coal companies, which are especially vulnerable to greenhouse gas regulations; food and forest product companies, which are vulnerable to natural resource impacts from climate change; and airlines, one of the fastest growing sources of CO2 emissions.

"I commend the companies that have willingly accepted the risks and opportunities that climate change presents. America must be a leader in climate friendly technologies," said California State Treasurer Phil Angelides, a co-founder of INCR and board member at two of the nation's largest public pension funds, CalPERS and CalSTRS, which collectively manage more than $300 billion in assets. "These findings -- that a growing number of leading U.S. businesses are focusing on global warming -- should be a wake up call to investors: we need to continue to press poor-performing companies to clean up their act."

Douglas Cogan, principal author of today's report and the 2003 report, says he sees important progress by U.S. companies that are beginning to build climate change into their governance practices and strategic planning. In the past two years, Cogan cited such as examples as:

  • General Electric's launch of "ecoimagination," a plan to double investments in climate-friendly technologies and reach $20 billion in annual sales by 2010.
  • Ford Motor’s announcement that it will boost production of hybrid vehicles tenfold by 2010.
  • Chevron’s decision to add renewable technologies into its energy portfolio and set targets to cut its greenhouse gas emissions.
  • American Electric Power’s decision to build the nation’s first commercial-scale coal gasification power plant, a "clean coal" technology that is says is the "right investment" given foreseeable greenhouse gas regulations in the U.S.
  • These companies join others, like DuPont and Alcoa that have had climate change governance strategies in place for more than a decade.
Lubber, of Ceres, also cited BP, the top-scoring company overall, which has set long-term greenhouse gas reduction targets and is planning to invest $8 billion in solar, wind, hydrogen and other clean-energy technologies in the next decade. "BP understands and is promoting the fact that all companies must work to reduce their carbon footprint, starting with fossil fuels," she said.

Still, Cogan acknowledges that the challenge ahead for all companies, including BP and other leaders, is enormous, given that greenhouse gas emissions must be reduced substantially below current levels to stop rising global temperatures. Businesses that are most successful in implementing climate change strategies, Cogan said, will be those that look beyond short-term thinking and the gridlock that currently grips Washington on this issue.

"Typically, CEOs and boards look out only three to five years when making investment decisions -- about as long as they serve in their leadership roles," Cogan said. "But the assets they put into place last much longer. Building a new conventional coal plant or a new engine factory for SUVs might make sense under 'business as usual’ thinking, but what will happen to these facilities in five or 10 years, when they’re still not fully depreciated but facing carbon emission constraints?"

Big global greenhouse gas cuts "affordable"


Big global greenhouse gas cuts "affordable"

Environment DAILY, 21 March 2006 - World greenhouse gas emissions could be halved by 2050 at a cost of just 1% of global gross domestic product, according to an analysis unveiled by the German environment agency last Thursday. Without action to restrain emissions, the cost of global warming-linked weather changes could cut 10% of world GDP, it warns.

To achieve a massive cut in emissions, worldwide investment in green technologies would need to be stepped up quickly, particularly in the energy sector. "Previous calculations have often underestimated cost reductions derived from technological advance," the agency commented.

Compiled for the agency by a climate change institute in Potsdam, the study starts from an objective of limiting growth in world temperatures to two degrees Celcius. Average per capita emissions will have to be reduced to below two tonnes per year, it comments. In comparison, Germany's emissions currently average 11 tonnes per head and America's 21 tonnes, the agency noted in a statement.

Clean energy for development: Address by Paul Wolfowitz, President, The World Bank Group, at the occasion of the Energy Week 2006


Clean energy for development

Address by Paul Wolfowitz, President, The World Bank Group, at the occasion of the Energy Week 2006 (Washington D.C, 6 March 2006)

It is a pleasure for me to be able to welcome all of you to Energy Week 2006 and to the World Bank headquarters.

I am very pleased to have this chance to talk to you about a topic that is so essential to development.

The demand for energy, as I’m sure everyone here knows, is expanding more rapidly than ever, and I think the whole world knows, energy prices are high and volatile.

It has brought many issues of energy security, access, investment, and environmental sustainability back to the center of the international debate.

In the development community, this has meant more attention to the interaction of energy, the environment, and even, specifically poverty.

Lack of energy holds back growth that can create new opportunities for the poor and poor energy choices can damage the natural environment, and that, too, deprives people and particularly poor people of a healthy ecosystem and economic opportunity.

By some estimates, when the use of both traditional and modern energy damages the environment, the resulting costs in health care, and resource depletion, and the impact of such things as acid rain on crops can pull down gross domestic product by as much as 2 to 6 percent... enormous impact.

Growing Demand—and Challenge

Today, the challenge facing the global community is to meet the energy needs that are essential for economic growth and fighting poverty, while at the same time producing if possible the environmental footprint.

The International Energy Agency has projected that world primary energy demand will increase by nearly 60 percent between 2002 and 2030 an equivalent of adding 16.5 billion tons of oil consumption per year.

And two-thirds of that increase is projected to come from developing countries where 1.6 billion people, huge numbers when you repeat it, 1.6 billion people, mostly living in rural areas of Africa and South Asia, still have no access to electricity grids.

In countries like Burundi, Guinea, Malawi, and Rwanda, no more than 5 percent of households have electricity in their homes.

Energy for Growth

Surveys we’ve done of the business climate and the investment climate have consistently found the lack of electricity services is a “major and frequently a severe obstacle to doing business” for as much as 25 percent of firms in Latin America, for 38 percent of firms in South Asia and nearly half, 44 percent of all firms in sub Saharan Africa.

I had a remarkable experience in my first month as World Bank president of visiting Rwanda (and we’re joined here by the Minister of Energy from Rwanda. It’s good to have you with us). One of the things that was so amazing to me was to see the progress that the country has made in 11 years since, I guess it’s fair to say, the worst genocide since World War II, where 950,000 people were murdered. It has been great progress.

I had the privilege of meeting a Rwandan business woman, in fact a graduate of the World Bank. She worked here for a few years. She then started a successful business in the United States. She went back to Rwanda to rebuild her country. In fact, she said to me, “I came here to grow beautiful roses on the ashes of genocide.” She had created a flower farm. She was employing 200, mostly women, from rural villages who had no income before. It’s fantastic work. They’re exporting successfully to Europe.

I asked her, “What’s your biggest challenge?” she said electricity. She said, “I lose 5 percent of my crop to power outages that cause the refrigeration to go down. Five percent is a lot, but for firms that are working on the margin and she’s got huge challenges just to get her flowers to Europe, that 5 percent can be the difference between a business succeeding and a business going under.

So when, firms in developing countries report, as they do, that they lose, like she does, about 5 percent of their annual sales due to power outages, that’s an average that doesn’t account for the people that lose much more and it doesn’t account for the people who can’t go into business or were forced out of business because they needed reliable power.

Businesses like hers in developing countries have to have more energy if they are going to expand and create jobs.

And those jobs are ultimately bringing livelihoods to people who need them desperately.

Energy and Education

Lack of energy isn’t just affecting the bottom line at businesses, in other words, it is affecting the basic human needs like the education of children or the prevention of malaria.

When modern energy service is unavailable, it’s frequently children, and particularly girls, who are asked to collect fuel, and are unable to go to school.

In Nicaragua, 72 percent of children living in a household with electricity attend school. Those who live in households without electricity have a school attendance rate of only 50 percent. It is a big difference.

Energy and Health

But poor people in developing countries need not only more access to energy, but also a shift from inefficient energy sources, like fuel wood or raw coal, to more modern, more efficient and cleaner technologies.

Currently, some 2.6 billion people rely on traditional biomass fuels for cooking because they lack access to modern fuels and that’s a health problem.

It’s hard to estimate exactly what the damage is, but by one estimate from the World Health Organization, as many as 1.6 million people die each year, 1.6 million deaths possibly attributed to indoor smoke from solid fuels. And more than half of those are children under the age of five who are particularly vulnerable to pulmonary infections and other illnesses.

Technology Challenges

So, we share a global responsibility to address these and other health consequences of energy use.

Rich and poor countries alike need to apply energy-efficient technology to cut future greenhouse gas emissions and to meet the energy needs of the developing world. OECD countries are scheduled to replace over a third of their existing power plants by the year 2030, including nearly all coal-fired plants. This represents, potentially, a great opportunity to do better, to producing energy more efficiently and in a way that does less damage to the climate.

The IEA (International Energy Agency) has estimated that developing and transitioning countries will need to invest about $300 billion dollars annually, from today until 2030, to meet their energy requirements.

It is important that these investments be directed toward more efficient and lower carbon sources of energy especially in the larger economies. Estimates of the costs to move to a lower carbon scenario vary widely, but $40 billion dollars a year is considered a reasonable figure. It’s a big number, but on an investment of $300 billion dollars, it looks smaller.

Coordinating International Efforts: Investment Framework for Clean Energy

Today, the global community is working to achieve a potential “double dividend” —to meet the energy needs that are essential to fuel growth and to fight poverty on the one hand while preserving the environment on the other. Indeed these are not conflicting goals. It’s very hard to fight poverty if you then, in the process, destroy the environment. What we’re after, in fact, is sustainable growth.

The decisions we make today on energy policies and technology will have major consequences for the sustainability of growth, and for the health of our environment.

The World Bank Group is working with the international community to see how all of us can tackle these issues at a larger scale and with innovative solutions.

At the Summit of G8 countries in Gleneagles in Scotland last July, the leaders of the G-8 asked the World Bank Group to take a leadership role, as they put it, “in creating a new framework for clean energy and development, including investment and financing.”

During the past year, we have been holding consultations with the reinsurance industry, with investment banks, with cutting-edge technology companies and with the governments of some of the big new energy consumers like Brazil, India, China, Mexico and South Africa.

In the first phase we will make proposals to accelerate investment in clean energy so that developing countries can meet energy demand for growth and for poverty alleviation in an environmentally sustainable way.

The second phase, which will have a longer time horizon, is aimed at generating new knowledge on technology options and on the impact of climate change, as well as programs of action for selected countries.

At the end of this month, we will presenting to the Board of the World Bank Group a proposal for a new Clean Energy Financing Vehicle that would blend grants and carbon finance to support the use of clean energy technologies.

The World Bank Group’s Investments in Energy Sector

To sharpen our focus on the transition toward cleaner and more efficient energy sources, the World Bank Group has set an initial target to increase portfolio commitments for new renewable energy and energy efficiency by 20 percent annually over the five year period from FY05–FY09.

We are on track to achieve this goal. In FY05, Bank Group commitments for renewable energy and energy efficiency were $748 million in forty projects in 28 countries. That’s more than double our commitments in the previous year.

Let me cite just a few examples of our work in this sector.

Through the China Renewable Energy Scale-Up Program (CRESP), which there is an exhibit outside, we are supporting China in its effort to increase the share of renewable energy in China from 7 to 15 percent by 2020.

In countries such as Romania, India, and Brazil, we have helped governments improve regulations in the energy sector so they are more objective, transparent, and nondiscriminatory.

In Serbia and Belgrade, I had the opportunity to visit an energy efficient project at a health complex which, has up until now, relied on 19 polluting oil-fired boilers. The goal of this World Bank-financed project is to help the hospital meet EU environmental standards by shifting to cleaner energy like natural gas.

The project has already cut fuel requirements by about 30 percent and heating costs by about half. It will pay for itself in a relatively short period of time. As well as having a marvelous, positive environmental impact.

The World Bank in Africa

We face a particular challenge—and I think an opportunity—in Africa.

Access to the electricity grid in Sub-Saharan Africa has slowly increased, from 9 percent of the population in 1970 to 23 percent in 2005. But 23 percent is nowhere near enough. About 500 million people are still living without electricity.

But, Africa has substantial hydropower and other resources that can be harnessed to produce energy needed for economic growth and fighting poverty.

The estimates are that less than 20 percent of Sub-Saharan Africa’s exploitable hydropower has so far been tapped and in Ethiopia, less than 5 percent, to pick one important example.

The Bank will work with other partners to scale up investments, which would be designed to match the individual circumstances of each country in terms of local resources, demography, and location.

And we will also increase support to integrate power systems at the regional level in order to pool resources and save costs.

Increasing the focus on Sector Governance

Like other areas, the energy sector is vulnerable to corrupt practices, perhaps more so to some extent because it is capital-intensive, because it frequently relies on necessary monopolies and it is vulnerable to the discretionary power of policy makers and regulators.

The cost of corruption, however, is impossible to calculate when we consider the loss of potential revenues—like the investors who are discouraged or the consultants and contractors who are deterred from bidding on key projects. Just the delays alone from those kinds of practices are very costly.

In some countries, it is estimated that corruption increases the value of contracts by more than 20 percent. And on top of that, commercial losses in the system can fall in the 15-20 percent range.

The World Bank Group has already made progress in fighting corruption in a number of countries in the energy sector.

For example, we have helped countries in Eastern Europe and the former Soviet Union improve their billing and cash management systems and power trade. We’ve supported Indonesia’s reform of procurement practices and we’ve helped India and Bangladesh reduce electricity theft.

Conclusion

In conclusion, we share a responsibility together to ensure that the global community can meet the energy needs of the poor and at the same time reap the double dividend of robust growth and a healthy planet. Your discussions over the next three days, your consensus building over the next three days, will be key to advancing this agenda.

As energy policy makers, as representatives of donors, representatives of financial institutions, NGOs, and Bank staff, you have assembled a wealth of experience here in implementing energy projects and policies.

The current forecasts are that in 30 years there will still be 1.4 billion people without electricity and there will be many businesses that lack sufficient and reliable energy services that could be providing jobs for the poor. That’s just not satisfactory. We have to do better.

We’re looking to you for insights on how we can.

I want to thank you all for your time and your thoughts and for contributing to this conference and I very much look forward to the results. Thank you very much.

WMO sees rise in greenhouse gases to record levels


WMO sees rise in greenhouse gases to record levels

AFP, 14 March 2006 - The concentration of greenhouse gases in the atmosphere reached record levels in 2004, the World Meteorological Organization (WMO) in Geneva said Tuesday.

The concentration of carbon dioxide (CO2), which accounts for 62 percent of greenhouse gases found in the earth's atmosphere, rose by 0.47 percent compared with 2003, the WMO said in its first annual update on greenhouse gases.

Levels of carbon dioxide were 35 percent higher than in 1750, before the Industrial Revolution, said the UN agency, which based its observations on a worldwide monitoring network.

"Levels of carbon dioxide continue to increase steadily and show no sign of levelling off," it said.

"Given that the lifetime of carbon dioxide in the atmosphere is 50 to 200 years, depending on how you calculate it, ... it doesn't take a nuclear scientist to state that we're going to have this problem for a long time," Len Barrie, head of the WMO's environment division, told the media.

"If we stop CO2 emissions to the atmosphere now, it would take 50 to 100 years before we start to see approaches to pre-industrial levels."

In contrast, the concentration of methane, which accounts for 20 percent of greenhouse gases, stabilised in 2004 after increasing by 155 percent over the previous 250 years.

The concentration of nitrous oxide, which represents six percent of greenhouse gases, went up 0.22 percent in 2004 and by 18 percent since 1750.

Link between fierce storms, industrial emissions overstated, expert says

Link between fierce storms, industrial emissions overstated, expert says

Greenwire, 16 March 2006 - Scientists and policymakers have overstated the link between global warming and the frequency and intensity of natural disasters, an expert in historical storm damage said yesterday.

"We haven't seen the greenhouse gas signal in the disaster record" that would indicate human emissions are driving recent severe weather events, such as hurricanes Katrina and Rita, said Roger Pielke Jr., the director of the University of Colorado-Boulder's Center for Science and Technology Policy Research.

The latest report from the Intergovernmental Panel on Climate Change, for example, found little evidence that weather patterns are changing, he said, though poor data quality and uncertainty in current climate models may be masking any trend due to human contributions to global warming.

But despite that lack of evidence, "you don't hear too much about disasters before very quickly the talk turns to global warming and climate change," he told scientists and policymakers gathered for the National Academy of Sciences' annual Roger Revelle Lecture on ocean science in Washington.

Such talk overshadows what he said are the real trends driving up economic losses and other damage from storms -- increasing populations, rapid urbanization and development along coastlines and in other vulnerable areas.

Damages from hurricanes increased in the 1970s and '80s, for example, even as hurricane activity fell compared with previous decades.

Pielke attributed the higher damages to a rise in coastal development. And while 2005 saw a record number of Atlantic hurricanes -- including Katrina, Rita and Wilma -- when economic losses over the last century are adjusted for inflation, the most destructive storm is the Great Miami Hurricane of 1926. That hurricane caused about $129 billion -- in 2005 dollars -- in damage.

"Disaster policy has to focus first on social vulnerabilities," Pielke said. "We shouldn't pretend or assume that reducing greenhouse gases will result in disaster mitigation."

Perhaps the clearest illustration of the effects of social conditions on disaster losses occurred in the Dominican Republic and Haiti during the 2004 Atlantic hurricane season, he said. Though two nations occupy the relatively small island of Hispaniola, they experienced remarkably different amounts of damage during the hurricane season. In the Dominican Republic, where the government has built hurricane shelters and developed evacuation networks, fewer than 10 people died.

Meanwhile, citizens of the less-prepared Haiti were 100 times more likely to die during natural disasters, according to the U.N. Development Program.

  • Go to E&ETV to watch today's OnPoint with Roger Pielke Jr. as he discusses the rising cost of natural disasters.

Cost of Clean Energy Decreases to Compete with Its Dirtier Counterparts, According to Report


Cost of Clean Energy Decreases to Compete with Its Dirtier Counterparts, According to Report

SocialFunds.com, 21 March 2006 - The drive toward "peak" oil production and climate change is fueling the emergence of clean energy as an economically viable and environmentally necessary alternative to oil addiction, according to the Clean Energy Trends 2006 report from Clean Edge. The report tracks the growth of the four primary clean energy sectors (wind, solar, biofuels, and hydrogen) as well as that of venture capital (VC) investment in clean energy. The report also maps five trends shaping the future of clean energy, complete with profiles of specific companies, top headlines from 2005, and organizations to contact for more information.

"For the first time in modern history, clean-energy technologies are becoming cost-competitive with their 'dirtier' counterparts," state report authors Joel Makower, Ron Pernick, and Clint Wilder of Clean Edge, a research and publishing firm covering clean technologies. "That's the result of prices for oil and natural gas increasing from global supply and demand dynamics, and clean-energy costs falling due to market growth, economies of scale, and technology advances."

"Suddenly, so-called 'alternative' energy technologies are looking pretty mainstream," states the report.

The report documents significant growth to date for clean energy, and projects even more significant growth in the future. For example, global solar markets rose 55 percent from 2004 to reach $11.2 billion in 2005, and global wind markets rose 47 percent to reach $11.8 billion in 2005. Going forward, Clean Edge predicts that the solar market will reach $51.1 billion in 2015, with projections for wind only slightly flatter at $48.5 billion. While biofuels (both ethanol and biodiesel) rose only 15 percent from 2004 to reach $15.7 billion in 2005, the report forecasts a $52.5 billion market a decade from now.

"In total, we project these four clean-energy technologies, which equaled $40 billion in 2005, to grow fourfold to $167 billion within the coming decade," states the report.

Constraining growth for wind right now is the rising cost of steel, and hampering prospects for solar is the global shortage of polysilicon, the primary raw ingredient of solar cells (which is projected to surpass semiconductors as the main consumers of raw silicon by 2008.)

"We believe many such obstacles are surmountable through a combination of incremental and breakthrough technology developments, the continued scale-up of manufacturing, and smart investments by corporations, investors, and governments," write the authors.

The report covers the investment angle on clean energy, noting that a number of clean energy stocks are trading at or near their 52-week highs. As of March 3, 2006, four companies were trading at about twice what they were a year ago. Energy Conversion Devices (ticker: ENER) was trading at $46.91 (down slightly from its 52-week high of $57.84); Evergreen Solar (ESLR) at $16.20, just seven cents off its one-year high; Itron (ITRI) at $60.55 ($62.75); and Spire Corp. (SPIR) at $9.75 ($13.37).

Rodrigo Prudencio, principal of energy-tech venture firm and Clean Edge sponsor Nth Power, reports on VC activity in the clean energy market, noting an investment increase of 28 percent, from $716 million in 2004 to $917 million in 80 private companies in 2005.

"These investments, primarily in distributed energy, energy intelligence, power reliability, advanced materials and nanotechnology and related services, represented more than 4 percent of the $21.7 billion US venture capital market, up from 3.3 percent in 2004," wrote Mr. Prudencio in the report. "The Silicon Valley venture firms that financed the Internet and wireless telecom revolutions--among them Draper Fisher Jurvetson; Kleiner Perkins Caufield & Byers; Mohr, Davidow Ventures; and VantagePoint Venture Partners--have begun placing increasingly bigger bets on clean-energy."

As with the recent solar report from Piper Jaffray (PJC), this Clean Edge report highlights the short-term shortage of polysilicon feedstock impacting the solar market as one of five major clean energy trends. In addition to spotlighting Evergreen Solar's "string ribbon" process, which yields twice as many solar cells per pound of silicon than conventional methods, the report also notes a number of firms developing thin-film solar technologies that replace silicon altogether with copper, gallium, indium, and selenium, amongst other materials. These companies include Miasolé, HelioVolt, Nanosolar, and even Honda (HMC).

"It's far from a sure thing: thin film has yet to match the efficiency, reliability, or durability of silicon-based cells," the report notes.

The four other trends the report covers include clean energy as a US security issue; renewables crossing the cost-efficiency tipping point; and the emergence of flex-fuel vehicles (FFVs) using biodiesel and ethanol; and the influence of China and India. The report devotes a short section to each trend, including a profile of a company exemplifying the trend. In the case of silicon shortages impacting solar, it spotlights former Dow Corning subsidiary Hemlock Semiconductor, which is acting to reverse polysilicon shortage problems by investing $400 million to increase capacity from 8,000 to 14,500 tons per year.

"Hemlock got burned in 1998 by ramping up production just ahead of a severe economic downturn in Japan, but that's not likely to happen this time," states the profile. "Talk about pent-up demand: global solar giants like BP, Kyocera, and Sharp can't wait to crank out more solar products for voracious markets in California, China, and Germany--not to mention the fast-ramping demand in the rest of the world."

"The faster that Hemlock and other silicon suppliers can meet that demand, the better," it adds.

How Brazil can grow


How Brazil can grow

Social and economic policies can help the country overcome entrenched barriers to increased productivity.

Heinz-Peter Elstrodt, Jorge A. Fergie, and Martha A. Laboissière

2006 Number 2


The lackluster performance of Brazil's economy over the past decade, when GDP per capita grew just 1.5 percent a year, has allowed the gap between developed economies such as the United States and Brazil to widen and provided an opportunity for fast-growing competitors such as China and India to gain ground (Exhibit 1). A study finds that the root cause of Brazil's weak growth is a relatively slow increase in labor productivity—the primary determinant of a nation's GDP per capita. Brazil's labor productivity was 23 percent of the US level in 1995 and fell to 21 percent in 2004.

Chart: Comparative economics

To encourage a public debate among Brazil's leaders on how to boost economic development, we mapped the barriers to productivity growth in eight sectors—agriculture, automotive, food retailing, government, residential construction, retail banking, steel, and telecommunications—that together make up 46 percent of the country's economy.1

We found that about a third of Brazil's productivity gap with the United States is caused by two structural barriers. The first is the country's modest per capita income, which makes consumers favor lower-priced products and services. One illustration of the population's lower purchasing power: Brazil's automotive industry primarily produces small, inexpensive cars and relies on imports for higher-value-added vehicles. The second hurdle (labor is relatively cheaper than capital) discourages the use of machinery that would improve productivity. These structural limitations will fade if Brazil can achieve strong, sustained economic growth. But first the government must tackle the nonstructural barriers responsible for the remaining two-thirds of the productivity gap. All of these problems can be resolved through social and economic policies (Exhibit 2).

Chart: Barriers to productivity growth

The most important barrier—responsible for some 45 percent of the nonstructural gap—is Brazil's huge informal economy, which represents about 40 percent of the gross national income.2 By avoiding taxes, ignoring quality and safety regulations, or infringing on copyrights, "gray-market" companies gain cost advantages that allow them to compete successfully against more efficient, law-abiding businesses. Honest companies lose profits and market share, and thus make less money to invest in technology and other productivity-enhancing measures.3

The second obstacle—macroeconomic instability—is reflected in the high degree of uncertainty among Brazilian executives about future exchange and interest rates and in the difficulties of forecasting demand for products and services. Executives are left with little choice but to focus on short-term financial management at the expense of growth and operating efficiency. Instability also discourages long-term investment (to automate operations, for instance), as companies and investors demand higher returns to compensate for macroeconomic risks. The result is that Brazil's interest rates are high—8 percent, compared with just 2.7 percent in the United States—and the market for long-term debt is virtually nonexistent.

Regulations that limit productivity—such as labor and tax laws, price controls, product regulations, trade barriers, and subsidies—are equally problematic. Constraints on laying off workers (which add to employment costs) and restrictions on hiring temporary workers prevent businesses from adjusting their workforce to meet fluctuations in demand. Brazil's high sales tax (around 30 percent on a new car, compared with 7 percent in the United States) also hampers productivity growth, by reducing the demand for cars and reinforcing the industry's focus on producing low-value-added vehicles, for example.

Inefficient public services are another hindrance. One-quarter of the population receives no secondary schooling; almost 12 percent of adults—some 15 million people—cannot read or write.4 In the agricultural sector, which employs some 20 percent of the workforce, this educational deficit impedes the adoption and effective use of modern seeds, fertilizers, pesticides, and planting techniques. Modern farms in Brazil do use such techniques, but, even there, farm workers often lack the basic education needed to apply them most effectively.

Finally, infrastructure limitations—including inadequate highways, ports, railroads, and power generation and storage facilities—cause problems, particularly in the agricultural sector. Up to 12 percent of all grain produced in Brazil spoils before reaching ports or consumers, for instance.

The impact of these key barriers—informality, macroeconomic instability, regulation, the provision of public services, and the country's infrastructure—varies across sectors (Exhibit 3). Informality is the biggest obstacle to productivity growth in labor-intensive domestic sectors, while macroeconomic instability is the prevalent factor in capital-intensive export sectors.

Chart: Variable impact

Our experience suggests that once a country has identified its productivity barriers, it can tackle them through structural reforms and approaches tailored to each sector.5 Brazil's government should establish conditions for fair competition in domestic sectors and enhance international competitiveness of the economy as a whole to benefit its export businesses.6

About the Authors

Heinz-Peter Elstrodt and Jorge Fergie are directors in McKinsey's São Paulo office, and Martha Laboissière is a consultant at the McKinsey Global Institute.

Notes

1The study, "Brazilian economic program—Phase 1: Mapping barriers to growth in the Brazilian economy," was conducted in 2005 by McKinsey's São Paulo office in collaboration with the McKinsey Global Institute (MGI). The project benefited from a previous McKinsey study on Brazilian productivity— see Martin N. Baily, Heinz-Peter Elstrodt, William Bebb Jones Jr., William W. Lewis, Vincent Palmade, Norbert Sack, and Eric Zitzewitz, "Will Brazil seize its future?" The McKinsey Quarterly, 1998 Number 3, pp. 74-83—and from similar MGI-sponsored studies in 16 countries. The methodology combines detailed analysis of labor productivity in different industries with a set of transverse analyses of the economy as a whole.

2According to the World Bank.

3Joe Capp, Heinz-Peter Elstrodt, and William B. Jones Jr., "Reining in Brazil's informal economy," The McKinsey Quarterly, Web exclusive, January 2005.

4 Education Trends in Perspective: Analysis of the World Education Indicators, Unesco Institute for Statistics and the Organisation for Economic Co-operation and Development, 2005.

5Didem Dincer Baser, Diana Farrell, and David E. Meen, "Turkey's quest for stable growth," The McKinsey Quarterly, 2003 special edition: Global directions, pp. 74-86.

6Phase 2 of the study will examine specific measures that the government should take in these areas.