Sustainablog

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

23.2.07

[CSR newsclip] The new metrics of corporate performance: Profit per employee


The new metrics of corporate performance: Profit per employee

Most measurements of performance are geared to the needs of 20th-century manufacturing companies. Times have changed. Metrics must change as well.

Lowell L. Bryan

2007 Number 1

Let's get right to the point: companies focus far too much on measuring returns on invested capital (ROIC) rather than on measuring the contributions made by their talented people. The vast majority of companies still gauge their performance using systems that measure internal financial results—systems based on metrics that don't take sufficient notice of the real engines of wealth creation today: the knowledge, relationships, reputations, and other intangibles created by talented people and represented by investments in such activities as R&D, marketing, and training.

Increasingly, companies create wealth by converting these "raw" intangibles into the institutional skills, patents, brands, software, customer bases, intellectual capital, and networks that raise profit per employee and ROIC. These intangibles are true capital, in the sense of delivering cash returns, even though the sources of those returns are intangible. Indeed, the most valuable capital that companies possess today is precisely intangible rather than financial.1 Companies should redesign their financial-performance metrics for this new age.

Consider a simple approximation of intangible capital: the market value of a company less its invested financial capital. Using book capital as a crude proxy for financial capital, in 2005 the intangible capital of the world's largest 150 companies was $7.5 trillion, versus $800 billion in 1985.

Despite the evidence that intangibles are now the true source of corporate wealth, companies tightly control discretionary spending on them. Advertising, R&D, new-product development, training, knowledge creation, software projects, and so forth are almost always expensed on a "What can we afford?" basis. Why?

One reason is that accounting for intangibles is difficult. In particular, each intangible's specific contribution is hard to assess; how, for example, do you value a brand? Intangibles are embedded in the value chain of production, so it generally isn't clear which intangibles are the sources of profits—or what specific balance of intangible and tangible assets should get the credit (or blame) for results.

The bigger problem is that most companies gear the way they measure their financial performance to the needs of an earlier industrial age, when capital enjoyed pride of place in the minds of strategists and investors. Com-panies fill their annual reports with information about how they use capital but fail to reflect sufficiently on their use of the "thinking-intensive" people who increasingly drive wealth creation in today's digital economy. The development of external financial reports according to generally accepted accounting principles (GAAP) ranks among the principal foundations of our modern global capital marketplace. Financial performance (seen through balance sheets, cash flow reports, and income statements) no doubt is and will remain the principal metric for evaluating a company and its management. But it's time to recognize that financial performance increasingly comes from returns on talent, not on capital.

GAAP accounting currently treats investments in intangibles conservatively, compared with the way it treats capital investments in tangible assests. Intan-gible investments are mostly expensed, not capitalized. This conservatism isn't necessarily bad but does inspire top managers to cut discretionary spending on intangibles in order to deliver quick earnings. That approach may raise short-term profits but can also undermine a company's long-term health.

To boost the potential for wealth creation, strategically minded executives must embrace a radical idea: changing financial-performance metrics to focus on returns on talent rather than returns on capital alone. This shift in perspective would have far-reaching implications—for measuring performance, for evaluating executives, even for the way analysts measure corporate value. Only if executives begin to look at performance in this new way will they change internal measurements of performance and thus motivate managers to make better economic decisions, particularly about spending on intangibles.

Measuring financial performance in the digital age

Before exploring the new metrics needed to achieve these goals, let's reflect upon the way some companies have recently created great wealth by using their thinking-intensive people rather than their capital.

In past articles, my colleagues and I have examined how, from 1995 to 2005, the top 30 of the very largest companies in the world (ranked by market capitalization) have seen their profit per employee rise to $83,000, from $35,000.2 On average, the number of people these companies employ has grown to 198,000, from 92,000, and their ROIC (or book value, in the case of financial institutions) has increased to 23 percent, from 17 percent (Exhibit 1). As a result, the median market cap of this group of companies rose to $168 billion, from $34 billion, with total returns to shareholders (TRS) at 17 percent a year. The driver of this dramatic rise in market cap was a fivefold increase in average profits—an increase brought on in turn by a more than 100 percent jump in profit per employee and a doubling in the number of employees. By comparison, these companies' ROIC increased, over this same period, by only a third.

It is hardly a surprise that growth in profits and market caps should be closely correlated and that a fivefold increase in profits should lead to a similar increase in market caps. But these results do suggest that companies need to take a new approach to measuring financial performance—an approach based on maximizing returns on people. Total profit, after all, is the product of profit per employee and the total number of employees, so maximizing both expressions increases total profit, which drives market capitalization.

Concentrating on this formula (as opposed to returns on capital) offers several advantages. For one, unlike ROIC, profit per employee is a good proxy for earnings on intangibles, partly because the number of people a company employs is easy to obtain. Capital, perhaps surprisingly, is subject to the vagaries of accounting definitions and such corporate-finance decisions as debt-to-equity ratios, dividend policies, and liquidity preferences. As we've noted, and as any executive will testify, talent—not capital—is usually the scarcer resource.

Clearly, then, a new set of metrics could help companies gauge their performance more effectively. Executives should home in, first, on how much profit per employee a company generates. They should make the number of employees a key factor in strategic thinking. And they should keep a clear eye on ROIC, but more as a way of ensuring that the company earns more than the cost of that capital than as an aspiration in its own right. With these metrics, the company can set its goals for the return on intangibles (that is, profit per employee) and growth (the number of employees), as well as its return on capital, which is largely a sanity check. Together, these three metrics squarely highlight—and drive—market caps.

Profit per employee

If a company's capital intensity doesn't increase, profit per employee is a pretty good proxy for the return on intangibles. The hallmark of financial performance in today's digital age is an expanded ability to earn "rents" from intangibles.3 Profit per employee is one measure of these rents. ROIC is another. If a company boosts its profit per employee without increasing its capital intensity, management will increase its rents, just as raising ROIC above the cost of capital would. The difference is that viewing profit per employee as the primary metric puts the emphasis on the return on talent. This approach focuses the minds of managers on increasing profit relative to the number of people a company employs. It suggests that the most valuable use of an organization's talent is the creation and use of intangibles. Fortunately, the opportunities to increase profit per employee are unprecedented in a digital economy, where intangible assets are a rich source of value. Opportunities to improve ROIC to an equal extent are hardly as plentiful.

Another advantage of profit per employee is that it requires no adjustment for accounting conventions. Since companies expense their spending on intangibles but not on capital investments (which are usually depreciated over time), profit per employee is a conservative, output-based measure. And since it is based on accounting conventions, companies can easily benchmark it against the comparable results of competitors and other companies.

Profit per employee therefore focuses companies on intangible-intensive value propositions and, in turn, on talented people—those who, with some investment, can produce valuable intangibles.

Number of employees

One way to improve a company's profit per employee is simply to shed low-profit employees. But if they generate profit greater than the cost of the capital used to support their work, shedding them actually reduces the creation of wealth, unless management adds an offsetting number of workers who produce a higher profit per employee.

The Walton family, remember, consistently sits atop the Forbes annual wealth list. Why? Because Wal-Mart Stores, the company the family controls, not only hires large numbers of employees who generate a relatively low average profit4 but also uses a business model that enables it to handle the complexity involved in managing huge numbers of employees, without incurring offsetting diseconomies.

Real wealth creation therefore comes from increasing either a company's profit per employee (without offsetting reductions in the number of employees or offsetting increases in capital intensity) or the number of employees who earn that level of profit—or both. We can observe this dynamic on a simple grid that illustrates the source of the profit earned by a company and a competitor (Exhibit 2). The grid also shows how total employment can serve as a crude proxy for the internal complexity of any organization, particularly when it is compared with companies in similar industries that have a comparable employment mix. From this vantage point, profit per employee becomes a proxy for how well a company manages that complexity.

A company can, of course, streamline its organization and use tools such as formal networks, talent marketplaces, and knowledge marketplaces5 to mobilize intangibles throughout the enterprise. To the extent that it does so, its profit per employee should increase, even in the absence of profitable new value propositions, if it removes any unproductive complexity.

Returns on capital

A company can also improve its profit per employee by substituting capital for labor costs. Of course, while capital is relatively inexpensive and readily available, it demands a return and for this reason must be used carefully. But if the company uses total employment to drive its growth aspirations, the amount of capital it requires will be a derivative of the capital its employees need for their work, rather than an independent aspiration.

Executives should therefore look at ROIC mainly as a sanity check. So long as the return exceeds the cost, profit per employee is the better metric because it not only represents the scarcest resource but also reflects profit after the expensing of necessary investments. Capital investment, meanwhile, is depreciated or amortized.

Using the total number of employees as a metric also allows companies to avoid subjective accounting judgments.6 Book capital, on the other hand, is—surprisingly—relatively ambiguous, for it is subject to somewhat arbitrary accounting conventions that involve goodwill, depreciation schedules, and the way companies expense stock options, among other things. Calculations of a company's ROIC have their own limitations, particularly for financial institutions, whose assets are mostly financial. Invested capital is not only a meaningless concept for such companies but also requires them to make some heroic assumptions.7

Maximizing market capitalization

The goal of these efforts to reorient financial-performance metrics around talent, of course, is to maximize a company's market cap, perhaps the most important single measure of size and economic relevance. The market cap directly affects a company's ability to control its own strategic destiny and is highly correlated with its total net income; of the top 30 companies by net income from 2002 to 2004, all but 5 were in the top 30 by market value. A company can expose this correlation by displaying its net income as the return on book equity multiplied by book equity and then comparing that relationship with its total market cap disaggregated (in a strategic-control map) into its market-to-book ratio multiplied by book equity (Exhibit 3). The company can also see this same correlation by disaggregating net income, using profit per employee and the total number of employees. Doing so displays the total market cap as a function of the latter and the market cap per employee (Exhibit 4).

 

Net income and market cap can therefore be regarded as functions of the return on either capital or talent. The point is that although the two metrics produce similar results, return on talent is a more powerful model in a competitive environment where the intangible assets that talented employees create provide the greater part of new wealth.

Today's annual reports are filled with information about how companies use capital but offer little about the number of employees, the mix of employees, or the different kinds of employees (beyond a simple expense item on compensation and benefits). Yet it is thinking-intensive talent, not capital, that now drives the creation of wealth and thus deserves to be measured more precisely by strategically minded executives.

About the Author

Lowell Bryan is a director in McKinsey's New York office. This article is adapted from his forthcoming book, Mobilizing Minds: Creating Wealth from Talent in the 21st Century, McGraw-Hill, spring 2007.

Notes

1 Karl Erik Sveiby, The New Organizational Wealth: Managing and Measuring Knowledge-Based Assets, San Francisco: Berrett-Koehler Publishers, 1997.

2 Lowell L. Bryan and Michele Zanini, "Strategy in an era of global giants," The McKinsey Quarterly, 2005 Number 4, pp. 46–59.

3 Economists define rent as the profit earned after a company pays for all of the factor costs of production (labor, raw materials, and so forth), including the cost of capital.

4 In 2004 Wal-Mart employed 1.7 million people, who generated an average profit of $6,200 each.

5 For more information on talent markets, see Lowell L. Bryan, Claudia I. Joyce, and Leigh M. Weiss, "Making a market in talent," The McKinsey Quarterly, 2006 Number 2, pp. 98–109. For more information on knowledge markets, see Lowell L. Bryan, "Making a market in knowledge," The McKinsey Quarterly, 2004 Number 3, pp. 100–11.

6 According to some observers, the many temporary contractual workers that certain large companies use should be counted as employees. I disagree. These workers may depend on the company for work, but they are largely fungible labor and usually don't undertake the intensive intangible work that drives a company's profits. This is exactly why companies choose to rely on contractual labor.

7 See Felix Barber and Rainer Strack, "The surprising economics of a 'people business,'" Harvard Business Review, June 2005, Volume 83, Number 6, pp. 80–90, in which the authors propose using economic profit per employee to gauge the true performance of "people businesses." Economic profit subtracts the cost of capital from profit per employee. Profit per employee is a more practical metric, as it can be taken directly from accounting statements and allows for straightforward comparisons of performance across companies. (Calculating economic profit per employee often requires internal company data.) A related concept, economic contribution per employee, can be a useful internal metric.

[CSR newsclip] Companies Lay Out Global Framework to Fight Climate Change


Companies Lay Out Global Framework to Fight Climate Change

GreenBiz.com, 21 February 2007 - As a significant step toward tackling climate change, an unprecedented group of companies and organizations from around the world have endorsed a bold post-Kyoto framework for affecting change at the levels of policy and industry, particularly in regard to creating sustainable energy systems necessary for achieving economic growth.

Signatories of
statement (PDF) — endorsed by Allianz, Bayer, Citigroup, DuPont, General Electric, Volvo, and many others — calls on governments to set scientifically informed targets for greenhouse gases and carbon dioxide (CO2) emissions. The agreement also urges governments to place a price on carbon emissions and to set forth policies aimed at addressing energy efficiency and de-carbonization in all sectors. Calling climate change "an urgent problem," the statement lays out a proactive framework for global action to mitigate risks and impacts while also meeting the global need for energy, economic growth and sustainable development. It outlines cost-effective technologies that exist today and others that could be developed and deployed to improve energy efficiency and help reduce CO2 emissions and other greenhouse gases in major sectors of the global economy.

"Leaders from key economic sectors and regions of the world have reached a consensus on the path forward to reduce human-made climate change," said Jeffrey D. Sachs, Chair of the Global Roundtable on Climate Change and Director of The Earth Institute at Columbia University. "This initiative points the way to an urgently needed global framework for action. I congratulate the Roundtable signatories, and thank them for their bold leadership and contribution to global progress on this critical issue."

The Climate Change Statement released today has received endorsements from critical stakeholders and independent experts including leading corporations from all economic sectors; smaller firms with very different perspectives and concerns; an array of civil, religious, environmental, research and educational institutions; and a distinguished list of world-leading experts from the fields of climate science, engineering, economics and policy studies.

One key signatory, U.S. Senator Olympia J. Snowe from Maine, plans to present the Joint Statement to Congress as a possible point of action on curbing the country's greenhouse gas emissions. "The Global Roundtable on Climate Change Statement is a vital tool to help all nations shape sound public climate change policy, and, as a participant in the Roundtable, I am acting as a conduit for getting the Joint Statement before the U.S. Congress to assist it in coalescing around and adopting scientifically informed and cost effective targets to reduce U.S. greenhouse gas emissions," said Snowe. "The U.S. must engage with a significant level of commitment so that the world's largest emerging economies will participate in adopting a global strategy."

The ability of so many key stakeholders with such diverse views to agree upon the Joint Statement demonstrates the possibility of fostering a global consensus on a positive, proactive approach to meeting the challenge of global climate change. The signatories include Air France, Alcoa, Allianz, American Electric Power, Bayer, China Renewable Energy Industry Association, Citigroup, DuPont, Electricity Generating Authority of Thailand, ENDESA, Eni, Eskom, FPL Group, General Electric, Iberdrola, ING, Interface, Marsh & McLennan Companies, Munich Re, NRG Energy, Patagonia, Ricoh, Rolls Royce, Stora Enso North America, Suntech Power, Swiss Re, Vattenfall, Volvo, World Council of Churches, World Petroleum Council, and many others.

"Global businesses are assuming their just place as catalysts for action on climate change. But action by business alone is not enough," said Jeffrey Immelt, Chairman and CEO of General Electric. "While we believe that applying technology against problems will create positive business opportunities that can result in positive change, national, state and local governments, academia and other non-governmental organizations must step forward with equal force. The Global Roundtable is an excellent venue focused on such a positive, proactive approach."

Representatives of the global insurance industry have also endorsed the statement, citing climate change as a growing risk to business and society. "The insurance industry has always played a key role in helping business and society understand new risks. We provide an early warning, if you will," said Clement Booth, Executive Board Member of Allianz SE, a global leader in insurance, banking and asset management. "Allianz believes it is already seeing signs that climate change is a serious emerging risk, and we expect it to remain a top-tier issue for the insurance industry for many decades to come. I believe it is our responsibility to address and tackle this risk, making homes and businesses safer and more secure for our clients."

Since 2004, the diverse members of the Global Roundtable on Climate Change, an initiative of The Earth Institute at Columbia University, has convened more than 100 high-level stakeholders and experts twice a year to explore areas of potential consensus regarding core scientific, technological, and economic issues critical to shaping public policies on climate change. The Joint Statement is an outcome of these dialogues, and was built on careful discussion over the past three years.

The statement specifically calls on governments to set scientifically informed targets for global GHG concentrations, including ambitious but achievable interim goals for CO2, and to take immediate action in pursuit of those targets; to develop mechanisms that place a price on carbon emissions that is reasonably consistent internationally and across sectors in order to reward efficiency and emission avoidance and encourage innovation; establish policy initiatives to address energy efficiency and de-carbonization in all sectors; encourage the development and rapid deployment of low-emitting and zero-emitting energy and transportation technologies; and provide incentives to reduce emissions from deforestation and harmful land management practices; as well as other related actions.

Emphasis is placed on taking proactive advantage of existing technologies and accelerating promising development of new ones in order to significantly increase energy efficiency, dramatically expand the use of non-fossil fuel energy sources, and greatly reduce emissions from the fossil fuels likely to remain in use. Companies themselves pledge to take action in their own operations as well, from seeking reductions of their own emissions to working to increase public and industry understanding of both the risks of climate change and potential solutions.

"Of course, addressing climate change involves risks and costs. But much greater is the risk of failing to act," said Alain Belda, Chairman and CEO of Alcoa, the world's leading producer of aluminum. "I am convinced that we can build a global plan of action on climate change in ways that create more economic opportunities than risks. The work of the Global Roundtable on Climate Change is an excellent example of the type of effort needed to extend the climate change issue from one of talk to one of action."

Individuals can also take a step toward combating climate change by adding their name to a growing global call for action at
www.NextGenerationEarth.org . The Web site, launched today, gives people an opportunity to have their voices heard on issues of global well being and environmental sustainability. The climate principles on the Web site are based on elements of the Roundtable's Joint Statement.

[CSR newsclip]

'Waste membrane' could help crops conserve water

SciDev.Net, 20 February 2007 - Scientists have developed a sponge-like membrane that enables plant roots to retain more water and regulate soil temperature — which could help agriculture in parched lands.

The eco-friendly membrane is made from organic waste matter, such as seaweed, fish bones and chicken manure. The development was announced at the annual meeting of the American Association for the Advancement of Science on Sunday (18 February).

Lead scientist Torleiv Bilstad, of the Norway-based University of Stavanger, explained that, in desert soils, no matter how much the land is irrigated, water simply drains away deep into the soil and mostly evaporates.

The membrane helps absorb more of the water around the roots, before it drains away. It comes in the form of a powder that is dissolved in water and then applied to seedlings. After absorption into the soil, the material forms a membrane around plant roots and helps them retain available water.

According to Bilstad, the extent to which the membrane can help reduce water loss varies between different plants and soil types. But in a test performed in Nigeria, the technology cut irrigation needs by 30–50 per cent.

Moreover, adding different pigments into the mixture can help regulate soil temperature by increasing or decreasing reflection of sunlight from the soil surface.

"It's all tailored to specific needs," Bilstad told SciDev.Net. "White pigment — made from eggshell for example — can deflect the sunshine and cool down the soil temperature. Black pigment will do the opposite."

Bilstad said the membrane is applied for one growth season. Farmers spray the mixture on seedlings until the plants grow tall enough to shade the soil themselves.

He added that the membrane could be used alongside fertilizers or pesticides.

The technology is already being promoted in Nigeria, with plans to extend trials to Algeria and western Europe. Bilstad is considering starting a company to expand the use of the membrane globally and develop it for wider applications.

[CSR newsclip] Consumers' revolt: Power to the people -- Consumer militancy erupts as individuals join forces on the internet to fight back against the state and big business


Consumers' revolt: Power to the people
Consumer militancy erupts as individuals join forces on the internet to fight back against the state and big business
Published: 23 February 2007

Banks

A mass revolt has left the high street banks facing thousands of claims from customers seeking to claw back some of the £4.75bn levied annually on charges for overdrafts and bounced cheques. More than one million forms demanding refunds have been downloaded from a number of consumer websites. The banks are settling out of court, often paying £1,000 a time.

Utilities

While average gas and electricity bills approached £1,000 last year, a record 4 million householders have dumped their supplier after an internet-led consumer campaign. British Gas admitted yesterday it lost 1.1m customers in just 12 months, and two weeks ago slashed gas bills by 17 per cent and electricity bills by 11 per cent. Other big suppliers, Powergen and npower, are expected to follow suit.

Road pricing

Plans for road pricing have faced massive public opposition spearheaded by an internet campaign. In just three months 1.8 million people have signed an online petition, linked to a new section of the Downing Street website, launched by a disgruntled motorist from Telford.

Supermarkets

From Devon to Inverness, planning applications for superstores are being thwarted by residents' campaigns orchestrated on the internet. Tesco scrapped a superstore plan in Darlington last year following opposition and this week residents sank a Tesco plan for a £130m retail development in Tolworth, Surrey. Friends of the Earth is co-ordinating the protests across the country.

Air travel

"Green" travellers are boycotting air travel because of climate change. Campaigners have staged sit-ins at airports while hundreds of people have signed up to an online pledge set up by a veteran environmental campaigner. An estimated 3 per cent of people have stopped flying to help the environment, while 10 per cent are cutting back on flights.

Packaging

A campaign launched by The Independent urging supermarkets to reduce excessive packaging has prompted a remarkable response. Supermarkets have had to defend their practices after thousands of readers emailed examples of environmentally damaging packaging. The campaign gained widespread public support - a day of action is planned later this year - and has been backed in an early day motion in the House of Commons.

Football tickets

Football fans fed up with paying £50 a time to watch games have joined forces online to put pressure on clubs to slash prices. Manchester City fans led a boycott of the club's match at Wigan in protest at the cost of tickets. Chelsea have announced a freeze on most ticket prices next year and Bolton promised a 10 per cent cut.

Post Offices

Government proposals to axe 2,500 post offices has prompted an organised revolt from pensioners and consumer groups across Britain. The Federation of Subpostmasters and a number of other organisations have launched online petitions opposing the plan, and a rally was staged in London on Tuesday to increase the pressure on the Government to save the post offices from closure.

[CSR newsclip] Beyond the bottom line -- CSR Report From Friday's Globe and Mail


Beyond the bottom line

STEVE BREARTON , NAEEMA BHYAT , NICOLE FERNANDO , ROB GROSS , NANCY PALARDY and KEVIN RANNEY AND IRENE SOSA

From Friday's Globe and Mail

Related to this article
Follow this writer Follow this writer

Latest Comments Comments

You know what their shares are worth, but are the companies in your portfolio good corporate citizens? In our fourth annual look at corporate social responsibility, we survey five of Canada's biggest industries and rank the leaders—and the stragglers

Who's included
This year, we're focusing on oil and gas, forest products, automobile manufacturing, mining, and pharmaceuticals, with companies selected based on their size and their importance to Canadian investors and consumers.

How the research is done
Once again, we've partnered with Jantzi Research Inc., one of Canada's leading authorities on social investment and corporate social responsibilty (CSR). The firm provides a full range of research and consulting services to institutional clients and financial professionals. Jantzi starts by compiling information from public documents, government and NGO sources, media reports and correspondence with key stakeholders. Each company also receives a questionnaire about its CSR practices.

How multinationals are scored
In the case of international companies whose Canadian operations are closely linked to their corporate parents, such as Toyota and General Motors, our evaluation is based on the parent's performance. For these companies, Jantzi relies on information provided by its partners in the SiRi Network, a group of 11 socially responsible investment research firms in Europe, North America and Australia.

How the scoring works
Companies are evaluated and scored in six key areas: community and society, corporate governance, impact on customers, treatment of employees, the environment, and human rights. Jantzi translates the combined scores into a letter grade that represents the company's overall social and environmental performance. The range of letter grades (from A+ to E- ) reflects the range of practices, from best to worst, among corporations. While the details of best practices vary from industry to industry and the scoring criteria are weighted differently, the letter grades are assigned in a way that allows for comparison across industries. They are intended to answer the question: How well is each company addressing the CSR issues to which it is exposed? Companies in the same sector with the same letter grade are ranked in alphabetical order.

How we scored the companies
Jantzi Research evaluates corporate Environmental, Social and Governance (ESG) performance using a hierarchy of indicators grouped under the following headings: Community and Society; Corporate Governance; Customers; Employees; Environment; and Human Rights. In each area, Jantzi Research assesses management systems, programs and performance outcomes. For each industry, Jantzi created a template containing a subset of all of the indicators. The subset reflected the exposure of the industry to various ESG issues. Weights were then applied to each indicator to reflect its importance for the industry. In some cases, indicators were omitted due to a lack of information. In the chart below (OR WHEREVER), "yes" or "no" indicates which indicators were applied, or not applied, to each of the five industries. Each company received a score for each indicator. The weighted average of the scores at the lowest level in the hierarchy was calculated to produce a score for the next level up—and so on up the hierarchy. Note that some companies have poor disclosure on their ESG performance, which tends to have a negative effect on their scores. In order to facilitate comparison across indicators, Jantzi Research mapped scores onto a letter-grade scheme ranging from A+ to E-, reflecting the full range of ESG practices, from best to worst, in the private sector at large. Each company's final letter grade provides an indication of how well it is performing in relation to best practices, and how well it is addressing the CSR issues that it faces.

Indicators by industry

CSR: Automotive

From Friday's Globe and Mail

AUTOMOTIVE
The gas-guzzling era isn't completely over, but at least it's on the wane. The big players in this sector continue to develop models with higher fuel efficiency and lower emissions, hybrid models that combine gasoline and battery power (the Toyota Prius and the Honda Civic Hybrid, among others). In 2006, sales of Toyota hybrids more than doubled to capture 3% of all the company's sales in Canada—or nearly 6,000 vehicles. Manufacturers such as Ford, GM and Honda are also testing hydrogen fuel-cell vehicles. But while most automakers don't plan to begin large-scale production of greener vehicles any time soon, reg­u­lators are pushing for stricter emis­sion controls. California's state gov­ernment—a traditional leader in auto environmental standards—adopted regulations in 2004 requiring automakers to reduce vehicle emissions by 25% by 2016; these are being challenged in court by all the ranked companies. And although automakers have reduced manufacturing de­fects, and improved performance and safety, many are now moving manufacturing to low-wage nations such as China, India and the Philippines, all of which have limited environmental and health and safety protections.

Honda                            B+
Known for its hybrid and fuel-efficient conventional models, Honda promotes innovative and sustainable manufacturing facilities. The company also reports extensively on its environmental management systems and has initiated an aggressive program to significantly reduce energy consumption at its manufacturing sites. In 2005, Honda's Raymond, Ohio, facility was recognized for eliminating hazardous substances from its production process and reducing emissions, material waste and energy use. The company needs to do more to safeguard labour rights at its operations in countries with poor human rights records, such as China, Pakistan and Mexico.

Toyota                       B
A leader in fuel efficiency and green technology, Toyota accounted for 75% of hybrid sales globally between 1997 and 2005, and is licensing its technology to other manufacturers. Since 2000, the company has reduced the amount of landfill waste generated by its plants to less than 5% of its 1995 levels. Strikes against the company include both its lack of human rights policies and operating procedures overseas, as exemplified by union conflicts at facilities in the Philippines. Toyota also needs to address its environmental critics, who accuse the company of promoting a green image while still investing in the development of larger, less fuel-efficient models such as the RAV4 SUV and Land Cruiser.

Nissan                     B-
In 2007, Nissan will release the Altima Hybrid, which uses technology licensed from Toyota. Its commitment to reducing waste is reflected in the fact that some of its vehicles in Japan are up to 95% recyclable. The company has also focused on reducing both hazardous chemicals used in production and volatile organic compounds released from materials inside vehicles. Like other industry leaders, Nissan lacks strong policies and management systems to safeguard human rights and labour practices abroad and could do more to resolve issues such as harassment claims by pro-union workers at non-union facilities in the United States.

Related to this article
Latest Comments Comments

Mazda                          C+
Mazda has launched several initiatives to reduce the environmental impact of manufacturing, but it's weak in CSR reporting for diversity and human rights.

General Motors                C
Strong employee programs and community initiatives are pluses, and GM is introducing an electric car in 2007, but the company has faced product safety controversies in recent years.

Volkswagen                     C
The company is committed to finding innovative ways to retain jobs and to safeguarding the rights of workers in its supply chain; environmental initiatives are weaker than most peers.

Ford                            D+
A stronger performer in employee and community initiatives, Ford needs to improve fuel efficiency, and its health and safety record is poor relative to peers.

Hyundai                           D+
The company's performance in most areas is mediocre to poor; CSR reporting needs improvement.

DaimlerChrysler                    D
The company earns points for its hybrid buses and fuel-efficient Smart cars, but it could do more to safeguard labour rights at operations overseas.

Critical Issues for Automotive

Supplier monitoring
Manufacturers are working with suppliers to encourage environmental certification, the phasing out of some hazardous chemicals and the improvement of health and safety. A recent example: In 2006, after highly publicized revelations that vehicle manufacturers were using steel linked to Brazilian slave labour, General Motors, Ford, DaimlerChrysler and Honda formed an alliance to work with suppliers to keep slave labour materials out of purchasing networks. Toyota has been criticized for failing to join the multi-stakeholder effort, which included some third-party monitoring, and instead pledged to do the same independently.

Emissions
In 2005, Canadian automakers voluntarily committed to reducing greenhouse gas emissions through a 15% average increase in fuel economy by 2010, making the industry the only one in Canada with specific targets. But American parent companies also warned that further reductions would be costly. A commitment to meet Canada's Kyoto targets would cost automakers at least $3,000 (U.S.) per vehicle.

Green plants
North American manufacturers lag most of their offshore competitors in producing more environmentally friendly automobiles, but have made strides in designing greener production facilities. Ford¹s diesel engine plant in Dagenham, U.K., boasts two wind turbines to generate power; the paint shop at a Ford truck plant in Wayne, Michigan, has a "fumes to fuel" system that produces electricity from paint fumes.

Workers' Rights
As North American car firms and their large suppliers lose market share and money, the rights of workers are taking a direct hit—manufacturers are aiming to limit fixed costs by rewriting contracts to reduce pensions, benefits and the right to strike. In 2006, GM‹supported by the UAW‹won the approval of a U.S. federal judge to carry out $1 billion in cuts to the benefits of retired hourly workers. In other cases, the jobs themselves are being outsourced.

Fuel prices
Last summer, in order to offset the impact of rising oil prices, GM offered a "fuel price protection program" in some U.S. states. The promotion offered rebates to purchasers of Chevrolet Tahoe and Suburban full-sized SUVs, as well as the Hummer H2 and H3, when they paid more than $1.99 (U.S.) per gallon. The program boosted visits to dealerships by 10%.


CSR: Forest Products

Globe and Mail Update

Related to this article
Latest Comments Comments

Forest Products
In the late 1990s, the industry was still digging in its heels in bitter disputes with environmentalists and native communities. Canadian companies were the targets of international boycotts by the Sierra Club, Greenpeace and other activists. Then, in 2001, an agreement between companies, environmentalists, natives and the B.C. provincial government to protect 15.8 million acres of the Great Bear Rainforest heralded a new spirit of co-operation. Two years later, it was followed by the Boreal Forest Conservation Framework, an agreement between producers, natives and environmentalists, which sought to protect at least half of the 1.5-billion-acre forest that stretches across Northern Canada. Disputes remain, however, such as the one between International Forest Products (Interfor) and the Friends of Clayoquot Sound over logging in old-growth forests. And transforming the industry into an environmentally sustainable one remains a challenge. Producing paper and wood products still generates significant air and water pollution, and companies such as Abitibi-Consolidated, Norbord, Tembec and West Fraser Timber have all paid significant fines for violating environmental regulations in recent years. Employee health and safety is also a concern: At least 23 workers among our nine companies and their contractors have died on the job over the past five years.

Catalyst A-

The company is a solid all-round CSR performer and has not been convicted or fined for violating health and safety or environmental regulations during the past five years. In December, 2004, Catalyst joined with Office Depot and PricewaterhouseCoopers to develop a system to track and verify that its paper meets environmental standards through all the production stages, from tree harvesting to manufacturing.

Tembec                    B+
Tembec is the only company in this ranking to commit to Forest Stewardship Council (FSC) certification for all of its harvesting operations. The certification promotes sustainable forestry, and has been endorsed by other producers, environmental groups and retailers such as Home Depot. At the end of 2006, about 90% of Tembec's Canadian forest holdings had been certified. But the company loses marks for the $1.75 million in fines it has paid since December, 2005. In one case, Tembec paid a record $1-million fine to the Quebec government for polluting the Ottawa River. Tembec says its mill-and-factory complex in Temiscaming has been complying with environmental regulations since December, 2004.

Cascades                   B-
The company is an industry leader in developing products with reduced environmental impact. For example, Cascades's Tissue Group has committed to acquiring more than 90% of its virgin pulp from FSC-certified sources by 2007, and its Saint-Jérôme, Quebec, mill is the only facility in North America certified by the Chlorine Free Products Association. Cascades's social and environmental reporting improved in 2005, but it still lags industry leaders.

Norbord                                    B-
Norbord gets top scores in the industry for corporate governance. It leads in environmental reporting as well, providing detailed performance data and reports on non-compliance incidents. But the company's score suffers because of environmental violations in 2003.

Canfor                                       C+
The company has implemented a comprehensive health and safety management system, but its diversity policies and programs lag industry leaders.

TimberWest                           C
TimberWest is an above-average performer in the corporate governance and environmental categories. However, a worker safety report last year in B.C. cited the company for failing to closely supervise one of its contractors.

Abitibi-Consolidated                    C-
A continuing legal dispute with the Grassy Narrows First Nation in Ontario and recent health and safety convictions offset above-average performance in areas such as diversity.

West Fraser Timber                       D+
The company is a below-average performer in most CSR categories for this industry.

Interfor                                              E+
Since 2005, Interfor has twice been found guilty of discriminating against workers on disability leave. Also, 12 workers—some employed by contractors—have died at Interfor operations since 2002.

CRITICAL ISSUES FOR FOREST PRODUCTS

First Nations involvement
The industry continues to lag both oil and gas and mining in consulting and working with First Nations communities. Employment is a bright spot, however.In B.C., direct employment of aboriginals in the forest sector increased by 60% between 1981 and 2001, and timber harvested by First Nations bands or companies involving aboriginals increased from just over 0% to 3% of the provincial allowable annual cut.

Health and safety
In 2005, 43 B.C. forest workers were killed on the job, prompting the United Steelworkers union to organize a "fatality summit" in Vancouver, at which workers, industry executives and government officials discussed solutions.

Greenhouse gases
According to the Forest Products Association of Canada, Canadian pulp and paper mills cut their greenhouse gas emissions per tonne of output by 54% between 1990 and 2004, and their total emissions dropped by 30%. Mills increased their total output by 28% over the same period. The industry has committed to reduce its fossil fuel emissions per tonne of output by another 13% by 2012.

The trouble with global warming
Largely because of recent mild winters and dry summers, the mountain pine beetle population in the B.C. Interior has increased to epidemic levels in some areas, devastating forests of lodgepole pine. If the warming persists, the beetle infestations could spread north to the Jack pine in the boreal forest across Northern Canada.

Sustainable forestry
Most major companies at least try to implement logging practices that minimize environmental damage and renew forests, and are seeking certification for their efforts. The Forest Stewardship Council (FSC) standards are the most rigorous of three voluntary codes in the industry, and companies hope compliance will win them points with investors and translate into greater sales. For some eco-friendly retailers and businesses, the FSC is now a minimum standard.


CSR: Mining

Globe and Mail Update

Related to this article
Latest Comments Comments

Mining
The good news: Most of our 10 mining companies now recognize the need for a "social licence" to operate—a wel­come change given that most have facilities in developing countries and environmentally sensitive regions. Some, especially those operating in Canada and Australia, are partnering with local aboriginal communities to guarantee jobs and training at their op­erations. In Africa, firms such as Barrick Gold are implementing HIV/AIDS education, counselling and drug programs for employees and local communities. (In Tanzania, home to Barrick's Tulawaka mine, almost one in seven adults is infected, according to the United Nations AIDS agency.) And six of our 10 ranked companies now publish comprehensive stand-alone CSR reports. But many still have significant improvements to make, par­­ticularly on the environmental front. Although they're taking steps to prevent spills and ensure the safety of tailings dams, few companies have set targets for reducing greenhouse gas emissions or water consumption. Local communities worldwide are often wary of large-scale mines, and activists are tapping into their concerns wit

Alcan                             A-
Alcan is one of two ranked firms to set company-wide targets for reducing the intensity of greenhouse gas emissions. It's also cutting back on emissions of polycyclic aromatic hydrocarbons (potentially carcinogenic contaminants generated in some older smelters), as well as fluoride. Beginning in 2008, the company will recycle potlining­—the degraded liner in the giant containers used to hold molten aluminum—at a new facility in the Saguenay region of Quebec. But the company loses marks because of its 45% stake in the controversial Utkal project in India, opposed at the local level because it will lead to the displacement of at least 200 families (local activists estimate figures as high as 22,000 people).

Barrick                                B
For the past two years, the world's biggest gold producer has donated more than 2% of average trailing three-year net earnings before taxes to charity, making it an industry leader. As well, the company is a leader in implementing the International Cyanide Management Code, a voluntary standard developed by the United Nations Environment Program to minimize the environmental damage caused by using cyanide to extract gold from ore. But Barrick is involved in controversial projects, including its Pascua Lama mine, plans for which involved moving two glaciers on the border between Chile and Argentina. (Government intervention has since required Barrick to revise its plans.)

Cameco                             B-
The uranium producer has an impressive and long-standing record of consulting with—and providing jobs to—aboriginal communities in Saskatchewan's Athabasca Basin. At the end of 2004, the company had hired more than 250 full- and part-time workers from local native communities such as the Fond du Lac Denesuline First Nation. Cameco's commitment extends to the board level—it has the rare distinction of having an aboriginal director. Its health and safety and environmental management systems are also good, but the company's score suffers due to public concern about radiation and the safe storage of radioactive waste.

Teck Cominco                     B-
Teck Cominco has implemented good local consultation mechanisms, entered into partnerships with aboriginal groups and helped communities in their transition to a post-mining economy. Its environmental management systems are above average, and it operates one of the few smelters in Canada that recycles electronic waste. In the U.S., the company has been involved in controversies over discharges and dust emissions at the Red Dog mine in Alaska.

Inmet Mining                           C+
Inmet's environment, health and safety management systems are generally good and its CSR reporting full and transparent, but concerns have emerged about the environmental effects of its operations in Papua New Guinea (see "Waste and Discharges," right).

Kinross Gold                               C-
While Kinross has a relatively good compliance record on environmental and health and safety matters, its related management systems are average. The firm discloses little information in these areas.

Goldcorp                                        D+
Goldcorp has significantly improved its environmental, health and safety management systems and reporting, but still faces concerns about its mines in Honduras and Guatemala.

HudBay Minerals                               D
HudBay's Flin Flon metallurgical complex is one of Canada's top emitters of sulphur dioxide, arsenic, cadmium, lead and mercury.

Fording Canadian Coal Trust                 E+
Like other income trusts, Fording discloses little about its environmental and health and safety programs or performance.

Sherritt International                                E+
The company shares scant information on CSR issues and has had a poor environmental compliance record at its Moa operation in Cuba. h increasingly sophisticated campaigns that can delay and kill projects—and affect shareholder value.

CRITICAL ISSUES FOR MINING

Community relations
Many companies still have a poor record when it comes to consulting with local communities, and few address the issues that would make consultation effective—giving communities the resources needed to evaluate a project, for example. Upon acquiring Glamis Gold last year, Goldcorp inherited two controversial projects: a mine in Honduras that locals blame for releasing cyanide into their water supply (the firm denies it) and one in Guatemala, where indigenous people in the region voted against the mine in a referendum that the company is still fighting in court.

Land use and biodiversity
Mining associations and companies are adopting wildlife management strategies, but environmental groups still say there should be "no-go" areas for the mining industry. Teck Cominco and Fording have faced strong criticism for developing the Cheviot coal project, located next to Jasper National Park, which critics say could affect the habitats of grizzly bears and migratory birds.

Waste and discharges
Even among firms that are curbing waste and pollution, best practices don't always extend to overseas operations: In Papua New Guinea, Inmet and Barrick are involved in joint ventures that discharge tailings directly into rivers, a practice that is illegal in Canada, though Inmet has committed not to use this waste disposal method in the future. (Barrick inherited the New Guinea mine with the Placer Dome purchase.)

Health and safety
Mining is still a dangerous job, and fatalities are common in Canada and abroad. Despite strong health and safety management systems, Barrick saw 21 fatalities at its operations between 2002 and 2006. Placer Dome's operations had 16 and Teck Cominco had 12 over the same time frame.

Environmental legacy
After Barrick acquired Placer Dome last year, it inherited the controversy over the environmental legacy of the operations of Marcopper Mining Corp. in the Philippines. In Canada, bankrupt mining companies have left a legacy of hundreds of polluted mines. Cleaning them up would be a massive—and costly—venture: Treating arsenic contamination at the abandoned Giant Mine, a gold mine in Yellowknife, for instance, has been pegged at $300 million.


CSR: Oil and Gas

From Friday's Globe and Mail

Related to this article
Latest Comments Comments

OIL AND GAS
The industry has substantially reduced its emissions of carbon dioxide and other greenhouse gases per unit of oil and gas output over the past decade. Some companies have also invested in wind power and other renewable sources of clean energy. Both strategies may help producers cope with declining conventional oil and gas reserves, and with any government limits on greenhouse gas emissions. Several oil sands producers are also trying so-called sequestration of carbon dioxide emissions—injecting the gas underground to permanently capture it. But total emissions of greenhouse gases are still climbing and will continue to do so, largely due to the expansion of the vast oil sands projects in and around Fort McMurray. Those projects also use massive amounts of water, most of it taken from the already-depleted Athabasca River, and virtually none of the land stripped to extract oil has been reclaimed.

Petro-Canada                            A-
Petrocan scores well on employee and social issues such as work/life balance and diversity. The company has expanded parental leave, job sharing, flexible work hours and paid days off for family care, and offers on-site daycare at its Calgary headquarters. In 2005, Petrocan committed itself to providing equal access to employment for First Nations peoples (currently, about 1% of Petrocan's employees are aboriginal). Three of the company's 12 directors are women—the highest proportion of any major producer. The company's governance record is also excellent, as is its CSR reporting.

Suncor Energy                                  A-
Suncor is a world leader in investing in renewable energy, and plans to develop a new wind farm every 12 to 18 months. It now has wind farms in Alberta and Saskatchewan, and another in the works in Ontario. Suncor's aboriginal relations and CSR reporting are both strong. Despite environmental progress, Suncor was the seventh-largest emitter of greenhouse gases in Canada in 2005.

Nexen                                          B+
Nexen has distinguished itself as a CSR pioneer since 1997, when it helped develop the International Code of Ethics for Canadian Business, a set of voluntary standards endorsed by Ottawa and several leading corporations and academics. Nexen has also adopted an aboriginal strategy that includes community business development, cultural awareness training and employment programs. Over the past five years, Nexen has significantly reduced emissions of methane and nitrogen oxide from its Canadian oil and gas operations.

Shell Canada                                     B
Shell is committed to working with aboriginal communities, but its involvement in the proposed Mackenzie Valley gas pipeline has drawn criticism from environmentalists.

Syncrude                                            B-
The company has a strong aboriginal employee development program and scores well on employee health and safety. But it is the largest oil sands producer, and environmental issues abound.

Talisman Energy                                   B-
Talisman is a leader in human rights policies, and wins points for a wind-power project off the coast of Scotland. However, CEO Jim Buckee's compensation is high—he ranked No. 6 in 2005 in Report on Business Magazine's executive pay ranking.

EnCana                                               C+
EnCana's environmental performance is improving, but it's still one of the most penalized firms in our rankings. Its environmental, social and corporate governance reporting is improving.

Imperial Oil                                           C-
Imperial has the best health and safety record among the ranked firms. But it's also the most penalized for environmental infractions, and is not developing renewable or alternative energy.

Husky Energy                                        D+
The company was a pioneer in developing and marketing ethanol-blended fuels, but loses marks for poor environmental reporting.

Canadian Natural Resources                         D
The company is working to improve relations with aboriginal communities. However, its CSR reporting is limited.

Critical Issues for Oil and Gas

Labour
Within three years, oil sands projects will likely require double the number of skilled workers employed today. In 2005, Canadian Natural Resources ran afoul of unions when the Alberta government gave it permission to use non-union labour and foreign workers on its Horizon oil sands project. Last February, the firm announced it would bring about 500 Chinese workers to Horizon.

Water
Producing one barrel of oil from the oil sands requires 2 to 4.5 barrels of water. Water flows in the Athabasca River decreased by about 20% between 1958 and 2003. Downstream ecosystems are threatened.

Greenhouse gases
Syncrude's and Suncor's oil sands operations were two of Canada's seven largest single sources of greenhouse gas emissions in 2005. Oil and gas producers are forecast to generate half of the projected growth of Canada's greenhouse gas emissions between 2003 and 2010. The oil sands producers' average emissions per unit of output have declined by 26% over the past decade, but increased oil and gas output has more than offset that.

Other emissions
Alberta leads all provinces and territories in discharges to the air from industry. Air pollutants such as nitrogen oxides, sulphur dioxide and volatile organic compounds are the most common pollutants released by burning fossil fuels. Extracting oil from the oil sands requires far more processing than does conventional oil and gas production.

Urban Sprawl
In 1996, there were only two active oil sands projects and Fort McMurray's population stood at 34,000. Today, there are eight projects on the go, and the population is about 64,000. At least six more projects are being planned, and the population could reach 100,000 by 2010. In 2006, apartment vacancy rates dipped as low as 0.7%, and the average cost of a single-family

home was $370,000. The health system is overburdened, and homelessness, drug

use and alcoholism are on the rise.


CSR: Pharmaceutical

From Friday's Globe and Mail

Related to this article
Latest Comments Comments

PHARMACEUTICAL
The multinational-dominated pharmaceutical industry has grown signifi­cantly in recent years—global spend­ing on prescription drugs topped $600 billion (U.S.) in 2006—but the sector is mired in a PR slump. Controversies swirl around product safety, questionable marketing practices, the high cost of drugs and patent protection issues that leave one-third of the world's population without regular access to essential medicines. The en­vironmental impact of pharmaceutical companies—which includes chemical waste and toxic emissions— is also worth noting. Some pharma companies, such as Novartis and Pfizer, have increased participation in charitable programs and joint public/private initiatives aimed at treating infectious diseases such as HIV/AIDS, malaria and tuberculosis, and others are lowering prices and extending product licences in developing countries. According to the industry, pharmaceutical companies have created 126 health partnerships that have helped up to 539 million people since 2000. But pharmaceutical companies still fall short in pro

Sanofi Aventis                                 A-
Improving access to medicines in the developing world has been a priority for Sanofi Aventis, which introduced Impact Malaria in 2004, a program to develop and provide affordable new drugs in partnership with local NGOs in affected regions. In 2005, Sanofi signed a partnership with the World Health Organization to sponsor WHO's work treating "neglected" tropical diseases, such as sleeping sickness. The company has also experienced fewer controversies than its peers in areas such as product safety and marketing practices.

Novartis                                             B+
Novartis has worked over the past few years to significantly reduce its carbon dioxide emissions, energy and water consumption, and waste production. The firm exceeded its group target of a 2% increase in energy efficiency for 2004-'06 by 8 percentage points. The firm also requires suppliers to report on health, safety, environment and labour practices and undertakes site visits and audits. Criticisms of the company include the fact that, in 2001, it was among a group of 39 companies that attempted to block a South African law designed to provide low-price HIV drugs.

Novo Nordisk                                        B+
The company has been recognized for its strong and clear corporate reporting on social responsibility issues. Novo Nordisk is also a known leader in diabetes care and, since 2001, has offered human insulin to public health systems in the world's developing nations at prices that are less than 20% of the average cost in North America, Europe and Japan. Like Sanofi Aventis, Novo Nordisk has experienced relatively few dust-ups over product safety or marketing practices.

AstraZeneca                                                B-
The company has a notably strong commitment to transparency around drug testing, but has been criticized for some of its marketing and advertising practices.

GlaxoSmithKline                                              B-
One of the top 10 corporate charitable donors in Canada, Glaxo has been involved in anti-trust lawsuits—several relating to blocking cheaper versions of their drugs.

Johnson & Johnson                                          C+
Its environmental initiatives include renewable-energy and pollution-reduction programs. Concerns include liability lawsuits over products that include Motrin and Tylenol.

Merck                                                               C
Although its donations to developing countries are innovative and generous, the recall of blockbuster drug Vioxx raises questions about research-and-development practices.

Biovail                                                               C-
Energy conservation and waste management are priorities, but the company faces securities investigations into accounting and financial reporting practices.

Roche                                                                 C-
Roche has been accused of responding too slowly to requests to make its own products—especially its HIV/AIDS drugs—more accessible in developing countries.

Pfizer                                                                   D+
Issues cited include antitrust activities, product safety, and allegations of false advertising and of overcharging Medicare and Medicaid. viding widespread and affordable access to drugs, particularly anti-retrovirals for the treatment of HIV.

Critical Issues for Pharmaceutical

Marketing Practices
Big Pharma's marketing efforts—worth an estimated $60 billion (U.S.) annually—have long ignited controversy, consumer boycotts and even criminal charges. With many countries, including Canada, limiting the extent of firms' ability to advertise, drug makers have employed a range of practices—everything from providing inducements to doctors or compensating them for purchasing or promoting drugs to funding consumer health information groups. In 2005, in the wake of aggressive marketing that pumped the sales of the soon-to-be-recalled Vioxx, companies agreed to a voluntary 12-month moratorium on direct-to-consumer advertising for new products.

Product Safety
After taking its painkiller Vioxx off the shelves in the United States in 2004, Merck faced an estimated 27,000 lawsuits, legal action by shareholders and a criminal investigation; analysts have pegged the potential liability at $15 billion (U.S.).

Public Health
During the 2005 avian flu outbreak, Swiss drug firm Roche announced it couldn't meet demand for Tamiflu—a medicine that seemed to provide the best defence for those exposed—yet it wouldn't license the drug to others for manufacture. Increased access to anti-retroviral drugs used to treat AIDS-related illnesses is critical, particularly in developing countries, but most companies are still not adequately responding, despite estimates that nearly 120 million people will die from HIV/AIDS in the next 25 years.

Generics
For pharma, the stakes are high when generic competition moves in. Within three weeks of Apotex releasing a generic version of Plavix, a heart and stroke drug that generated one-third of Bristol Myers Squibb's profits, Apotex owned 75% of the U.S. market. Soon after the 2006 release of the cheaper version, BMS initiated legal proceedings against Apotex for alleged patent infringement. In India, Novartis has filed a lawsuit to protect patents covering some of its cancer drugs from being produced by generic manufacturers that supply the bulk of cheap drugs to most developing countries.

Generics in the marketplace are the most effective way to push down drug prices. In 2000, the lowest cost for a year's worth of one HIV drug cocktail was $10,439 if bought from the original developer compared to $2,767 from a generic competitor. By 2006, the price had dropped to $556, and $132 from a generic provider.

[CSR newsclip] Cool rooms in Asia warming the planet


Cool rooms in Asia warming the planet
By Keith Bradsher
Thursday, February 22, 2007

 

MUMBAI: Until recently, it looked like the depleted ozone layer protecting the Earth from harmful solar rays was on its way to being healed.

But thanks in part to an explosion of demand for air conditioners in hot places like India and southern China — mostly relying on refrigerants already banned in Europe and in the process of being phased out in the United States — the ozone layer is proving very hard to repair.

Four months ago, scientists discovered that the "hole" created by the world's use of ozone depleting gases — in aerosol spray cans, aging refrigerators, and old air conditioners — had expanded again, stretching once more to the record size of 2001.

An unusually cold Antarctic winter, rather than the rise in the use of refrigerants, may have caused the sudden expansion, which covered an area larger than North America.

But it has refocused attention on the ozone layer, which protects people and other animals, as well as vegetation, from the sun's harmful ultraviolet rays.

Now, the world's atmospheric scientists are concerned that the air conditioning mania sweeping across Asia could lead to more serious problems in the future.

As it turns out, the fastest-growing threat to the ozone layer can be traced to people like Geeta Vittal, a resident Mumbai, a hot, thriving metropolis of 18 million, who simply want to be cooler and can afford to make that dream a reality.

When her husband first proposed buying an air conditioner eight years ago, Vittal opposed it as a wasteful luxury. But he bought it anyway, and she liked it so much that when the Vittals moved to a new apartment last year, Vittal insisted that five air conditioners be installed before they moved in.

"All my friends have air conditioners now," she said. "Ten years ago, no one did."

Rising living standards throughout India and China, the world's two most populous countries and the fastest- growing major economies, have given a lot more people the wherewithal to make their homes more comfortable.

The problem is that Vittal's air conditioners — along with most window units currently sold in the United States — use a refrigerant called HCFC- 22, which hurts the ozone.

"The emissions of things like HCFC- 22 — we had thought they were sufficiently in control, that we didn't have to worry about them," said Joe Farman, the British geophysicist who discovered the ozone hole.

A recent technical study by the World Meteorological Organization and the UN Environment Program found that

the so-called ozone "hole" over Antarctica — actually an area of unusually low ozone concentrations — was dissipating more slowly than expected.

Scientists mostly blame chlorofluorocarbons, a chemical used in an early form of refrigerant that they now realize was released into the atmosphere in larger quantities than forecast. As a result, the international agencies now say that injury to the Earth's ozone layer could take a quarter of a century longer to heal than previously expected.

The fastest-growing offending gas that scientists say can be better managed is HCFC-22. Nearly 200 diplomats will gather in Montreal in September to determine how to speed up the timetable for the elimination of certain gases that threaten the ozone layer, in particular how to manage HCFC-22. A deadline for proposals is March 15.

At a meeting in Washington last week, Bush administration officials said for the first time that they were considering four possible proposals for a faster phaseout.

Industrial countries currently must phase out production of HCFC-22 by 2020 and are ahead of schedule, with the United States banning domestic production in 2010. The Environmental Protection Agency is studying whether to ban imports of the gas and the sale of new products using the gas by then as well.

By contrast, the Montreal Protocol, which governs the phaseout of ozone- depleting chemicals, allows developing countries to continue using HCFC-22 through 2040.

China in particular is stepping up exports to the United States of air conditioners using the chemical, often labeled as R22, especially after the European Union finished phasing out the production and import of such air conditioners in 2004.

Pound for pound, HCFC-22 is only 5 percent as harmful to the ozone layer as the chlorofluorocarbons it replaced. But it still inflicts damage, especially when emitted in enormous quantities by China, now the world's dominant producer of window air conditioners, and by India, a fast-growing market and manufacturer.

The latest estimate from technical experts is that the chemical's output in developing countries is rising 20 to 35 percent each year and could continue at that pace for years: slightly over 2 percent of Indian households currently have air conditioners, according to LG of South Korea.

HCFC-22 is cheaper to install than the latest, ozone-safe chemicals, which are harder and more expensive to manufacture. Lambert Kuijpers, one of three co-chairmen of the Technology and Economic Assessment Panel of the Montreal Protocol, said that production of the ozone-damaging gas in the developing world is on track to increase more than fivefold in the current decade.

An accelerated phaseout of HCFC-22 "is the most important" item on the agenda, he said.

But the trend in the developing world is working against an early phaseout. India used to impose a 32 percent luxury tax on air conditioners, but cut the tax in half over the past three years with rising demand by the middle class. Competition also has shaved prices, making air conditioners much more affordable.

"There is a lot of pent-up demand," said Prasanna Pahade, the senior manager for corporate planning at Voltas Limited, the biggest Indian manufacturer of air conditioners.

In China, ownership soared to 87.2 air conditioners per 100 urban households in September, from 24.4 seven years earlier. The countryside, home to two-thirds of the population, is poised for even greater growth.

Developing countries like China and India enjoy exemptions from global environmental standards. The Kyoto Protocol, which governs global warming gas emissions, also is lenient toward them, on the grounds that industrialized countries have released the great bulk of the offending gases and poorer countries should be allowed to catch up economically before taking on additional environmental costs.

But some, like Carrier, are calling for more equal standards. While such calls are expressed in terms of environmental responsibility, Carrier has already invested in the technology to use newer chemicals and could profit from a faster phaseout of HCFC-22, which would impose greater costs on rivals in developing countries.

A multilateral fund under the Montreal Protocol helps developing countries convert to newer chemicals; The United States and Europe must decide if they want to increase their contributions to that fund.

Indian and Chinese refrigerant companies also are eligible for hundreds of millions of dollars a year under a relatively obscure UN program, the Clean Development Mechanism. Manufacturers receive credits for destroying a rare waste gas, produced while making HCFC-22, that is among the most powerful global warming gases known.

In many cases, the payments, aimed at encouraging reduction in gases that contribute to climate change, are actually worth considerably more than the cost of the HCFC-22 being produced.

The manufacture of more modern refrigerants does not qualify countries for global warming credits. So HCFC-22 producers in developing countries have little incentive to switch to making newer refrigerants.

There is some progress in sight. China's State Environmental Protection Administration said last September that it planned to halt all production and consumption of the more damaging chlorofluorocarbons by July this year.

Haier, a Chinese manufacturer of air conditioners, said that it had voluntarily begun shipping to the United States only models that use more advanced refrigerants, which do not damage the ozone layer.

But huge challenges remain. The global auto industry has moved directly from the use of chlorofluorocarbons to gases that do not hurt the ozone layer, although they are powerful global warming gases.

Here in India, car factories now install air-conditioning systems that use these modern refrigerants. But owners of older cars, as well as people who buy new cars without air conditioning and then decide they need it, still go to repair shops to install air conditioners that use the worst of the chlorofluorocarbons.

Nilesh Bothelo, the manager of a repair shop in downtown Mumbai, said that a chlorofluorocarbon-based system was so much simpler and easier to install that he charges just $600 for it. He charges twice as much for a system using the modern refrigerant.

Indian chemical companies are happy to ship as much chlorofluorocarbons as needed, Bothelo said. "If it were something so bad," Bothelo said, "they would not legally sell it."

[CSR newsclip] Renault faces suicides probe: French authorities are investigating working conditions at carmaker Renault following the suicide of three employees in four months at one of its plants near Paris.

Renault faces suicides probe









The workers who committed suicide worked at "The Beehive" where new car designs are developed [AP]







French authorities are investigating working conditions at carmaker Renault following the suicide of three employees in four months at one of its plants near Paris.
One 38-year-old worker hanged himself in his home in the town of Saint-Cyr-l'Ecole west of Paris on Friday after leaving a note in which he complained of problems at work.
All three employees worked in the main building of the complex known as "The Beehive" where new car designs are developed.
Renault management said the latest death "has left us with many questions and each one of us must reflect on our share of responsibility".
Investigators have opened a criminal investigation into work conditions at the Technocentre in Guyancourt, outside Paris where the three employees worked.

Silent march
 
The prosecutor's office in Versailles said they intended to look into offences such as harassment, which may be linked to the death.
 

"Each one of us must reflect on our share of responsibility"

Renault management statement


Three weeks earlier, plant employees held a silent march in memory of two colleagues who had committed suicide in October and January in Guyancourt.
  
One of the employees threw himself from the fifth floor of a building at the plant.
 
Jean Hotebourg, a union official, said that another employee drowned in a nearby pond after leaving his computer screen displaying an account of a bitter exchange with management representatives.
 
Harassment claims
 
Hotebourg accused management officials of "harassing" employees, saying they had been humiliated when their boss criticised them in front of colleagues.
 
Renault said in a statement that "there was no correlation, for the time being, between work conditions" and the three suicides.
 
"We have impassioned engineers who conceive vehicles and it is very difficult to draw a link between the workload and the Renault contracts for 2009," said a management statement.
 
Renault has announced plans to roll out 26 models including 12 new ones by 2009

[CSR newsclip] Coca-Cola to Put Caffeine Content Information on U.S. Labels


Coca-Cola to Put Caffeine Content Information on U.S. Labels

  • Reprints
  • Save
  • Share
    By THE ASSOCIATED PRESS
    Published: February 22, 2007

    ATLANTA, Feb. 21 (AP) — The Coca-Cola Company said Wednesday that it would put caffeine content information on the labels of all of its drink products distributed in the United States that include the ingredient.

    The company said the plan was voluntary and part of an industry initiative.

    On Monday in New York, Simcha Felder, a Democratic city councilman from Brooklyn, said he intended to introduce a nonbinding Council resolution calling for the Food and Drug Administration to require that caffeine content be included in product labels on food and beverages.

    The F.D.A. requires that caffeine be included in ingredient lists when added to soft drinks and caffeinated water, but has not required that caffeine content be labeled, even though it has long advised pregnant women to avoid or limit their intake of caffeine.

    Coca-Cola, based in Atlanta, said it had already included caffeine labeling on its energy drink Full Throttle and its green tea Enviga products and would introduce the new labels on its other brands, starting with cans of Coca-Cola Classic, in May.

    PepsiCo announced plans on Wednesday to introduce a version of Diet Pepsi that includes more caffeine, as well as ginseng, Reuters reported.

    The drink, to be called Diet Pepsi Max, will have about a third more caffeine than the company's popular Diet Mountain Dew and is aimed at consumers aged 25 to 34, a Pepsi spokesman said.

Failing Object Lessons: Design’s Green Limits and our Collective Potential to Make a Difference


Thanks to Susan for this one


From: http://dmi.org/dmi/html/education/seminars/dlseries.htm#mar

Failing Object Lessons: Design's Green Limits and our Collective Potential to Make a Difference
March 6, 1pm EST
Valerie Casey, Executive Creative Director, frog design

 



Because "green" has entered the cultural vernacular, and because its economic benefit has been justified, we are at a critical inflection point. Designers need to evolve approach and expand designs purview: we need to rely more heavily on critical design thinking skills for changing our client's organizational behavior, rather than illustrating solely with marketable products.
 
Discussion will focus on how designers can gauge and motivate client's propensity to embrace principles of sustainability.  
 
In addition, participants will explore a "Kyoto Treaty" for design. What could the core principles and goals of such a treaty be? How would asking for a commitment to sustainability for every product design firm in our community change the landscape of design? We are prepared to ask consumers to buy green and our clients to commit to sustainability – what deliberate actions will we commit to in our own practices?
 
While green products have influenced market and consumer behavior, the impact has been less than we might have hoped. Particular moments in cultural history illustrate how design produces the very system it attempts to critique. We can understand these limitations by analyzing key moments:
  • The displacement of object "aura" due to mechanical reproduction (history)
  • The shifting models of value perception through cultural staging (performance theory)
  • The rise of amateur crowds influence on design  (current technology analysis)
Executive Creative Director of frog design, Valerie Casey leads frog's strategic-creative integration and design research practice globally. In addition, she directs multidisciplinary, cross-studio teams in developing the design vision across product, digital, and brand platforms.  Valerie designs novel concepts and interfaces for consumer electronics, rich experiences for public and home environments, and visual and informational strategies for onscreen and online interactions.  She has also appeared as a regular lecturer at UC Berkeley, NYU Stern School of Business, San Francisco State University, and the California College of the Arts. Valerie has published and lectured on design throughout the international community.


[Energy newsclip] Wild grass could hold key to clean fuels of the future


Wild grass could hold key to clean fuels of the future

AFP, 16 February 2007 - A wild grass found in Asia and Africa could hold the key to dreams of providing an alternative to fossil fuels blamed for global warming, experts said Friday.

Miscanthus, a perennial grass native to subtropical and tropical regions of Africa and southern Asia, was the ideal plant for producing ethanol at a lower cost than corn, currently the most widespread source of the fuel.

The grass, which is used as an ornamental plant in the United States, had produced yields between five and 10 times greater than corn, experts said.

"To make a pound of alfalfa or spinach requires about 600 pounds of water, while to grow a pound of Miscanthus requires only about 200 pounds of water," said Chris Somerville, professor of biological sciences at Stanford University.

Somerville was speaking at the American Association for the Advancement of Science's annual meeting, where climate change and sustainable development are two of the key themes.

Somerville said Miscanthus could help meet ethanol production targets set out last month by President George W. Bush, who wants to reduce the United States' dependence on foreign oil.

Bush wants the United States to increase production of biofuels to 35 billion gallons (133 billion liters) a year by 2017, roughly seven times the present levels of five billion gallons a year, produced by corn-ethanol refineries.

Somerville said Bush's targets were substantial without "providing any insights into what he is going to do to make that happen."

Critics say Bush's goals are unrealistic because it would mean finding an additional 129,000 square miles of farmland -- about the size of Kansas and Iowa combined -- to plant enough corn to meet the demand.

However, Somerville said Miscanthus-derived ethanol, which is distilled from the fermentation of sugars from the entire plant rather than just the grains, results in a higher yield per unit of land.

Miscanthus produces about twice as much biomass per acre without irrigation as other grasses, and reaching Bush's target of 35 billion gallons of biofuels annually would require far fewer acres of land.

Although environmentalists say planting corn for ethanol production will lead to widespread deforestation, Somerville said Miscanthus could be planted on land currently used for food production.

Somerville acknowledged deforestation was already taking place in Asia, where Malaysia, Indonesia and the Philippines were expanding palm oil crops for the production of biodiesel.

"But is it worse for the environment than climate change? That's the question," he said. "Climate change threatens biodiversity more than anything that I know.

"For example, in British Columbia they are losing each year forests the size of Rhode Island because of beetle infestation, because it is not cold enough in the winter to kill the beetles, and they are killing the forest."

[Energy newsclip] Q. How many Australians does it take to change all the light bulbs?


Q. How many Australians does it take to change all the light bulbs?
A. One - Prime Minister John Howard, who banned incandescent light bulbs yesterday, making Australia the first country to take such direct action to stop global warming
By Cahal Milmo
Published: 21 February 2007

After almost a decade as a pariah in the battle against global warming because of its refusal to join the Kyoto Protocol, Australia scored an environmental first yesterday by becoming the only large economy to ban the traditional incandescent lightbulb.

In a move that environmentalists hope will spark a similar move in Britain, the government Down Under said the sale of all incandescent bulbs will be phased out by 2010 and replaced with low-energy versions to cut greenhouse gas emissions.

The enforced switch to new high-efficiency fluorescent bulbs will cut Australia's carbon emissions by four million tons by 2012 and reduce domestic power bills by up to two-thirds, the Environment Minister, Bill Turnbull, claimed. Mr Turnbull, whose right-of-centre government is a recent convert to action on global warming, said: "It's a little thing but it's a massive change. If the whole world switches to these bulbs today we would reduce our consumption of electricity by an amount equal to five times Australia's annual consumption of electricity."

The initiative follows a study by the International Energy Agency last year which found that a global switch to fluorescent bulbs would prevent 16 billion tons of carbon dioxide being pumped into the world's atmosphere over the next 25 years. It would also save £1,300bn in energy costs.

Traditional incandescent bulbs, based on the 19th-century designs of Thomas Edison and Joseph Swan, produce light by passing electricity through a thin wire filament. They are inefficient because up to 90 per cent of the energy is wasted in the form of heat. The new generation of compact fluorescent bulbs are more expensive that the incandescent version but use only 20 per cent of the power to produce the same amount of light. Manufacturers say economies of scale mean they will soon be comparable in price to traditional bulbs and last much longer.

Artificial light accounts for almost 20 per cent of world's electricity consumption, significantly more than the output of all nuclear power stations in the world. Overall, lighting generates 1.9 billion tons of carbon a year, about three-quarters of the amount produced by all cars on the planet.

Australia is the first major economy to ban incandescent bulbs, although the American state of California is also considering a similar move.

But it is not first time a country has made an enforced switch to energy-efficient lighting: Cuba launched a similar scheme two years ago.

In Britain, the Government has yet to move far beyond a symbolic gesture to low-energy lighting by Tony Blair when he ordered the bulb in the lamp outside Number 10 to be changed to a fluorescent one. The Department for Environment, Food and Rural Affairs said it was working within a European Union scheme to promote the use of low-energy products within the home.

The reductions in greenhouse emissions from moving to low-energy bulbs are nonetheless small. The four million tons of CO2 that the Australian government expects to save must be compared with the 565 million tons that it produces annually.

Despite the recent conversion of the Australian Prime Minister, John Howard, to environmental issues, he has refused to ratify the Kyoto Protocol. Mr Howard said the deal would do too much damage to Australia's coal-based energy production.

But campaigners welcomed the ban on incandescent bulbs as one of a number of concrete measures which all countries, including Britain, should be taking as part of their response to global warming.

Friends of the Earth (FoE) said a wholesale conversion to fluorescent bulbs would cut UK electricity consumption by 2 per cent - equivalent to a large power station. Nick Rau, FoE's energy campaigner, said: "We would certainly like to see Britain follow the Australian example. There is no magic bullet for global warming and switching to low-energy bulbs is one significant step among many that we would like to see the Government take."

The failure to achieve a global swap from incandescent to fluorescent bulbs has been a source of frustration and bemusement to experts and campaigners.

The Lighting Industry Federation in Britain estimates that the majority of lights in this country still use inefficient bulbs despite an average reduction of 30 per cent in electricity bills from using low-energy bulbs.

[Energy newsclip] Better air traffic control can reduce GHG emissions – IATA


Better air traffic control can reduce GHG emissions – IATA

Environmental Finance, 15 February 2007 - The International Air Transport Association (IATA) has called for governments to make improvements to air traffic control in order to reduce aviation's impact on the environment.

"Every minute of flying time that we can save reduces fuel consumption by an average of 62 litres and [carbon dioxide (CO2)] emissions by 160kg," Giovanni Bisignani, IATA's director general and CEO, told a Civil Air Navigation Services Organisation conference in Maastricht, The Netherlands on Tuesday. "Governments are quick to make vacations more expensive with new taxes in the name of the environment. But they are slow to improve the infrastructure."

For example, on 1 February, the UK government increased air passenger duty on flights departing the UK, in an attempt to make aviation meet more of its environmental costs. The tax increase has been widely criticised has having little positive impact on the environment.

Bisignani cited work that IATA – which represents around 250 airlines – had done on 350 aircraft routes last year that had saved 6 million tonnes (Mt) of CO2 emissions. "But that is only the tip of the iceberg," he said. "We could save 530,000 minutes of flight time annually. By optimising approach and departure procedures we have a solution. Technology exists [but] it is a matter of political will," he added.

He also called for Europe to establish what he called a 'Single European Sky' for cross-border air traffic control, which he said could save 12Mt CO2 a year. "We still have 34 air traffic control organisations – when all we need is a few. It is Europe's biggest embarrassment," he said.

Flights within the EU are due to join the region's Emissions Trading Scheme in 2011, with all flights to and from the EU included from 2012. By 2020, the European Commission expects the scheme to save 183Mt a year.

Although CO2 emissions from aviation only contribute around 2% of global greenhouse gas emissions, the volume of emissions is growing rapidly. According to a report by NGOs CAN Europe and the European Federation for Transport and Environment last year, CO2 emissions from aviation increased by 83% between 1990, the Kyoto Protocol's base year for GHG emissions, and 2004 (the latest year for which figures are available).

The 2% figure does not take into account aviation's other contributions to GHG emissions, such as vapour trails and nitrogen oxide emissions.

[CSR newsclip] Binding cuts in carbon emissions agreed by EU


Binding cuts in carbon emissions agreed by EU
By Stephen Castle in Brussels
Published: 21 February 2007

Faced with the latest, drastic predictions of the effects of climate change, European countries have agreed to a fresh cut in CO2 emissions of one-fifth and to press for a global reduction of 30 per cent.

Environment ministers yesterday dismissed calls to water down EU objectives and approved a binding set of new targets to be fulfilled by 2020, covering the period after the expiry of the Kyoto protocol in 2012. Cuts of 20 per cent on 1990 levels will be implemented unilaterally by the EU but that figure will rise to 30 per cent if it can be agreed internationally.

Although Poland and Hungary had voiced concerns ahead of yesterday's gathering, neither country stood in the way of a deal. However the detail remains to be worked out and European countries will now negotiate a "burden sharing" regime. This will allow the less developed eastern European nations to catch up economically while their wealthier counterparts compensate by cutting emissions more than the average figure.

The accord was hailed as "an historic decision," by Sigmar Gabriel, Environment Minister of Germany which holds the EU presidency. He said targets could be differentiated depending "on the economic situation in the country".

Germany could, he said, attain a 40 per cent cut in CO2 to help bring average reductions down.

In a key concession, some of the EU's newer members can use different starting points for their calculations. That would permit them to take advantage of the drop in CO2 arising from the disappearance of heavy industry following the collapse of Communism.

Poland, which is allowed to calculate from 1988, says that between then and 2004 emissions dropped by 31.6 per cent, making the new, post-2012 targets easily attainable.

Slovenia will be allowed to use 1986 as a base date while Hungary can calculate emissions from a baseline date of 1985-87.

The overall package agreed yesterday will have to be approved by European heads of government at a summit next month.

Environmental groups gave the deal a mixed reaction, welcoming the fact that targets will be binding but calling on EU countries to implement the 30 per cent reduction irrespective of what other nations around the world agree.

Mahi Sideridou of Greenpeace said: "We happily welcome the 30 per cent emission cut proposed for the EU and for developed countries for 2020. Ministers have listened to the science and made a leap forward in addressing the climate crisis. But to then suggest a meagre 20 per cent unilateral EU emissions cut, while admitting this is inadequate and that a 30 per cent cut will be necessary, is a bizarre discrepancy."

David Miliband, the Environment Secretary, said: "The unilateral commitment to cut EU greenhouse gas emissions by 20 per cent by 2020 - the first of its kind - shows we're willing to take concrete action on an issue that citizens care about.

"Action in the EU alone is not enough. Our commitment to a 30 per cent cut in emissions as part of a global agreement strengthens the EU's ability to lead the debate at the G8 and UN climate change talks and to secure an ambitious outcome."

[CSR newsclip] Wal-Mart lays down the law: "Wal-Mart will end or limit our relationships with law firms who fail to demonstrate a meaningful interest in the importance of diversity"


Wal-Mart lays down the law

By Jonathan Birchall

Published: February 21 2007 02:00 | Last updated: February 21 2007 02:00

From toys to groceries and financial services to pharmaceuticals, Wal-Mart has a record of using its scale to change the way that Americans do business, with a relentless focus on lower prices.

So when the Arkansas-based retailer turned its attention to the legal establishment, the country's leading law firms took notice. When it wrote to its top 100 law firms in June 2005, the letter wasn't about billing.

Instead, Wal-Mart set out to use its market power to support its call for the law firms to pursue increased "diversity" actively - by having more women and ethnic minorities represented at higher levels in their firms.

The letter asked for statistics on hiring and retention of women and ethnic minorities, and said Wal-Mart was serious about encouraging the law firms it worked with to employ more women and ethnic minority attorneys.

"Wal-Mart will end or limit our relationships with law firms who fail to demonstrate a meaningful interest in the importance of diversity," it said.

This month, the American Bar Association gave the company a national award for its efforts to promote diversity - ironically only a week after a federal judge ruled that a class action lawsuit accusing Wal-Mart of systematically discriminating against its own women workers could go forward.

Thomas Mars, Wal-Mart's general counsel, says there is no relationship between the company's diversity efforts and the lawsuit, filed in 2001, although the retailer has been pursuing a broad push to improve its reputation on a range of issues since 2004. Instead, he says that the company's effort to bring about change at its external counsel followed its own internal revolution on ethnic diversity.

When he joined the company in 2002, he says, the legal department had only 56 lawyers and had "no meaningful diversity". That changed, as he was tasked with expanding the department, and was eventually sent by Susan Klooz, one of his deputies, to a meeting of minority lawyers in Chicago. "Almost all the people there were lawyers of colour," he says. "It was an eye-opening experience."

Ms Klooz also introduced him to Roderick Palmore, general counsel of Sara Lee, an African-American lawyer who launched a "Call to Action" in early 2004, which called on companies to take an outside firm's diversity record into account when assigning work.

After his trip, Mr Mars signed Wal-Mart up to the campaign, and began to encourage his subordinates to attend similar events organised by minority law associations, such as the National Bar Association, representing black lawyers, and the Hispanic National Bar Association. That, he says, yielded the talent he needed as he looked to expand his department.

"Without ever planning it, we developed this recruiting pipeline that we so badly needed because we needed to upgrade this legal department by leaps and bounds," he says.

Wal-Mart now has more than 150 corporate lawyers handling "a volume of work and a velocity that is probably unlike anything our colleagues in the US have to deal with". It may also be the most diverse in-house law department in corporate America: more than 40 per cent of Wal-Mart's lawyers are female, and nearly a third are ethnic minorities.

"That we were able to tap into a talent pool and grow this department at a rapid rate and diversity was the result of upgrading the talent. That's not something that everybody in our profession necessarily understands," he says.

But Wal-Mart's efforts also went beyond the company itself, and the June 2005 letter went beyond asking firms for overall statistics on diversity.

After discovering that talented minority and women lawyers were often not getting access to its business, even while a firm's overall diversity profile looked good, Wal-Mart took a look at the way the firms assigned business. It noticed that 82 of the key "relationship partners" who assigned its work in the firms were white males.

As a result, Wal-Mart asked each company to nominate at least three candidates for the job of "relationship partner", and to include at least one woman and one black, Hispanic or Asian lawyer on the list.

Veta Richardson, executive director of the Minority Corporate Counsel Association, describes the move as "monumental", she says. "They decided to look at who is managing the relationship with the firm, and who was handling the distribution of work . . . and they found that this group of people who is doling out the work wasn't diverse at all."

As a result of the review, Wal-Mart made 40 changes and moved $60m of business from white male to minority and female relationship partners, putting them into a position of influence in the firms in an unprecedented move that reflected its influence as one of the biggest legal customers in the US private sector. It also stopped doing business with two firms.

For Mr Palmore, the move gave new teeth to his "call to action" campaign, shaking up the way that firms thought about the issues.

"It has an impact on the way that firms conduct their internal business . . . the potential impact that Wal-Mart may have by taking this step cannot be overstated," says Mr Palmore.

Not surprisingly, the pressure from Wal-Mart and other companies has has provoked some bitter, although mostly anonymous, criticism. Ted Frank, a fellow at the American Enterprise Institute who previously practised at O'Melveny and Myers, described the move as "socially acceptable racism" in Overlawyered.com, his blog, in December.

Mr Palmore says he is not in a position to gauge the level of resistance from firms to pressure, but says that "if there had been suitable progress within the profession, efforts like ours like ours and Wal-Mart's would not have been necessary.

"To me, it became painfully obvious that further steps were necessary. And since these more serious steps were taken, we've been able to make some progress," he says.

Usual excuses not accepted

Wal-Mart's review of the relationship partners at its outside law firms targeted 100 firms that did the most business with the company, with the top firms billing for $10m-$15m annually of Wal-Mart's estimated $200m (£102m) business.

Following the review, which moved $60m of business from white male to female and minority partners in the firms, Thomas Mars, Wal-Mart's general counsel, says all 100 partners involved became more responsive on its diversity issues.

"We saw an uptick in the commitment of the firms to diversity," he says. That included the white male relationship partners who he says "realised the company might not only take the business away from their law firm, but that it might take it away from them and give it to someone else in the firm."

As well as firing two firms for failing to respond to its requirements on diversity, Mr Mars says Wal-Mart has also stopped giving work to a number of other firms. "They either haven't been able to, or I prefer to think they've chosen not to do, the things we asked them to do," he says.

"The usual excuse is that we can't find minorities, or we just can't find women lawyers who are willing to move to . . . and you can fill in the blank. Believe it or not, we've had people say 'we can't find people to move to Chicago'."

That argument, he says, is unconvincing at Wal-Mart: "We haven't had any difficulty getting talented people to come to Bentonville, Arkansas."

The company says it is now launching a similar programme to promote diversity among its main suppliers. "To start with we're going to include our finance division suppliers and some of our key suppliers of food and merchandise," says Mr Mars.

Copyright The Financial Times Limited 2007

[CSR newsclip] Energetic OFT head turns his guns on Big Pharma


Energetic OFT head turns his guns on Big Pharma
By Susie Mesure
Published: 21 February 2007

John Fingleton, the Irish head of the Office of Fair Trading, set himself on a collision course with Big Pharma yesterday after declaring that the National Health Service was being overcharged to the tune of £500m a year for some drugs.

The verdict was reached after an 18-month study that concluded patients are not getting the best value from the billions of pounds the Department of Health spends on branded drugs. The ruling from the competition watchdog is the latest in a series that have championed the interests of the consumer, often to the detriment of large corporations.

Yesterday's hard-hitting report recommended that existing rules on pricing drugs, which allow drug companies to set their own prices within broad profit constraints, should be ripped up in favour of a new scheme based on the therapeutic benefit those drugs bring to patients.

In its report on the Pharmaceutical Price Regulation Scheme (PPRS), the OFT called for the adoption of "value-based pricing" - which, in plain English, would allow companies to charge higher prices for those drugs that delivered the greatest health benefits. The OFT reached this verdict after uncovering examples of one drug costing 500 per cent more than another that delivered almost identical health benefits.

Mr Fingleton admitted that opposition from drug companies, worried that a new pricing regime will leave them with fewer profits to use for research on new drugs, was likely. But he insisted: "Focusing prices on the needs of patients rather than on the costs of drug companies would be good for both patients and for business."

He added: "We focused on looking at this very much from the point of view of the consumer, which in this case was the patient, and giving them better value in terms of the NHS spend on drugs. In the long term we see this as good for industry because it will end up producing a portfolio of drugs that is of higher value."

Competition experts said that yesterday's announcement provided further evidence of the new consumerist course that Mr Fingleton has set for the OFT. He is certainly giving issues popular with consumers a fresh airing. Take the investigation into the hugely controversial issue of penalty charges levied by banks. In a ruling last April about similar fees that are levied by the credit card industry, the OFT said that an unauthorised borrowing fee of more than £12 was almost certain to be illegal. A verdict is expected within weeks.

Or the decision to refer the payment protection insurance industry to the Competition Commission. Or even the decision to open the probe into the grocery sector following intense lobbying from the corner shop brigade.

William Bishop, vice president of CRA International, an economic consultancy that specialises in anti-trust issues, believes the PPRS is exactly the sort of "Pandora's Box" that Mr Fingleton is keen to open because it has such a massive impact on consumers and the economy. Mr Bishop, who knows the OFT boss well, explains: "He [Mr Fingleton] thinks competition law is there because it is intended to make a difference to the way markets function - and they should function to the benefit of consumers."

Mr Bishop believes this is why the watchdog under Mr Fingleton has mainly gone after high-profile causes. "He doesn't want the resources of the OFT to be dissipated in minor disputes between companies with no consumer interest at all. John has a clear idea that the OFT should not be there merely to react to complainants [because that results in] competition law getting perverted because complainants are generally competitors who are suffering, sometimes just because they are lousy competitors who should be under pressure. Merely reacting to complainants turns competition law into something that will do harm to consumers 50 per cent of the time."

For his part, Mr Fingleton insists: "We are not there as someone who's job it is to fight consumers' causes. There are lots of organisations such as Which? or the Citizens Advice Bureau that do that. Our brief is to look at whether markets are working well. If we look at something like the airports [the watchdog is considering referring BAA's near-monopoly of the airports market to the Competition Commission] or the supermarkets it is because we want to ensure they are delivering the best possible outcome for consumers."

As a sign, however, of how important consumers' interests are to the new-look OFT, what was a separate division that dealt with consumer concerns has been integrated into the body of the watchdog. "Consumer policy now runs right through the OFT," Alastair Gorrie, competition partner at the US law firm Orrick, said.

Another competition lawyer described the change of direction under Mr Fingleton as "a clearer articulation of the consumer protection aspect of competition policy enforcement". She added: "There is a strong sense that consumers and issues of general fairness are way up the agenda. That is clear from the spate of retail banking decisions, which have been aimed at ensuring transparency, providing more information and dealing fairly with customers."

An economist by profession, Mr Fingleton made the leap from academia into the anti-trust arena in 2000 when he became executive chairman of Ireland's Competition Authority. He taught economics for most of the 1990s at Trinity College, Dublin, and has also held posts at the London School of Economics, the Université Libre de Bruxelles and the University of Chicago. As Ireland's competition tsar, the fervent free marketeer forced through reforms to liberalise Dublin's taxi market and pharmacy licences. He also argued for the repeal of the country's Grocery Orders, which fixed prices on certain foods but which he claimed cost consumers millions of euros because it blocked below-cost selling and kept prices too high.

"He is a much more overtly aggressive character than his predecessor [Sir John Vickers, also an academic by background who taught the young Mr Fingleton at Oxford] and he is clearly not part of the fabric of Britain, which may have something to do with him being less supine," another competition lawyer said.

Britain's banks will find out how much less supine Mr Fingleton truly is when the OFT hands down its verdict on the issue of illegal bank charges. Consumers fed up of being overcharged should watch this space.

Fingleton's five crusades

20 February 2007

The OFT recommended that the Pharmaceutical Price Regulation Scheme should be reformed, "to deliver better value for money from NHS drug spend and to focus business investment on drugs that have the greatest benefits for patients".

16 February 2007

The OFT submits recommendations "to raise standards of fairness in the way banks treat their personal and businesses customers". John Fingleton said: "Significant change is needed to the banking codes of practice, particularly to address the lack of transparency that pervades the retail banking sector."

7 February 2007

The OFT referred the UK payment protection insurance market to the Competition Commis- sion for further investigation.

12 January 2007

The OFT said it is investigating the purchase of an 18 per cent stake in ITV by Rupert Murdoch's BSkyB because it may be the case that "a relevant merger situation has been created".

12 December 2006

OFT signals its intention to refer BAA airports to the Competition Commission. Mr Fingleton said: "We believe that the current market structure does not deliver best value for air travellers, and that greater competition could bring significant benefits for passengers."

Saeed Shah

[CSR newsclip] Organic food breaks into top 100 brands


Organic food breaks into top 100 brands


Rebecca Smithers, consumer affairs correspondent
Wednesday February 21, 2007

The Guardian
Innocent festive fruits and spices smoothie
Innocent festive fruits and spices smoothie. Photograph: Linda Nylind
 


A survey out today reveals that while the mega-brands representing fizzy drinks, chocolate and crisps remain established at the head of the industry's "top 100" grocery league table, they are for the first time facing serious competition from their nutritionally superior rivals.

The report, compiled by the grocery trade magazine Checkout and the market research company Nielsen, suggests the consumer is beginning to understand the dangers of an unhealthy diet.

Even though Coca-Cola maintains its position as the No...1 brand in Britain, its latest 5% growth in sales has been helped by the launch of Zero, a sugar-free drink targeted at men. Cadbury Dairy Milk remains the best-selling chocolate in Britain - at No 5 - although it has suffered a 2.5% slump following last year's salmonella scare.

Article continues



<a href="http://ads.guardian.co.uk/click.ng/Params.richmedia=yes&amp;spacedesc=mpu&amp;site=Business&amp;navsection=&amp;section=108725&amp;country=can&amp;rand=2846052"> <img src="http://ads.guardian.co.uk/image.ng/Params.richmedia=yes&amp;spacedesc=mpu&amp;site=Business&amp;navsection=&amp;section=108725&amp;country=can&amp;rand=2846052" width="300" height="250" border="0" alt="Advertisement"></a>


The report is based on sales data recorded by Nielsen via checkout scanners at all major grocery chains, representing more than 74,000 stores including Tesco, Asda, Sainsbury's, Morrisons, Waitrose, M&S, Somerfield, and Co-op supermarkets, plus Spar and Londis convenience stores.

Significantly, the fastest-growing brands are Innocent and Danone Bio Activia. The real-fruit smoothie Innocent has entered the top 100 for the first time, at No...63, and is the fastest-growing UK brand with sales up 140% to more than £96m. Danone Bio Activia is the second fastest-growing brand and the highest new entry at No 60, with sales up by 77% to £98m.

Warburtons, the UK's leading independent baker, has cemented its position as the No...2 grocery brand with sales of more than £514m and the highest growth rate of any brand in the top 10 - an increase of 17.7%. The company said strong consumer appetite for healthy lines had aided this growth.

Yeo Valley Organic stands out, buoyed by sales growth of 25% last year. Surprisingly, it is also the first fully organic brand to enter the top 100, at No 88. Even teas are selling well, with Twinings making the top 100 for the first time, growing at 10.9%, thanks to its herbal and fruit ranges.

Fiona Briggs, Checkout editor, said: "The sales patterns we have identified from this year's top 100 grocery brands league clearly show consumers have adopted real lifestyle changes. Brands which have performed really well have largely done so on the back of either development into healthy, wholesome lines or the removal and reduction of nasties such as saturated fats, salt and additives."

Top of the shops

Annual turnover £m, 2005

1 Coca-Cola 942.4

2 Warburtons 514.3

3 Walkers 424

4 Hovis 403.1

5 Cadbury Dairy Milk 361.5

6 Nescafe 331.3

7 Andrex 326.6

8 Lucozade 296.2

9 Kingsmill 282.3

10 Robinson 277.3

11 Tropicana 222.5

30 Volvic 148.2

56 Evian 100.7

60 Danone Bio Activia 98

63 Innocent 96.3

79 Cravendale Milk 77

88 Yeo Valley Organic 71.9

100 Twinings 64.8

[CSR newsclip] Some Employers Are Offering Free Drugs


February 21, 2007
Some Employers Are Offering Free Drugs
By MILT FREUDENHEIM

Correction Appended

For years, employers have been pushing their workers to pay more for health care, raising premiums and out-of-pocket medical expenses in an effort to save money for the company and force workers to seek only the most necessary care.

Now some employers are reversing course, convinced that their pennywise approach does not always reduce long-term costs. In the most radical of various moves, a number of employers are now giving away drugs to help workers manage chronic conditions like diabetes, high blood pressure, asthma and depression.

Major employers like Marriott International, Pitney Bowes, the carpet maker Mohawk Industries and Maine's state government have introduced free drug programs to avoid paying for more expensive treatments down the road.

Companies now recognize that "if you get people's obesity down, cholesterol down, asthma down, you save a lot of money," said Uwe E. Reinhardt, a health economist at Princeton University.

Despite the Bush administration's efforts to promote "consumer directed" health care, many companies are recognizing the limits to shifting too much of the cost of medical care to employees. Experience, Professor Reinhardt said, is contradicting the theory that "patients will be more prudent shoppers for health care if they ache financially when they ache physically."

Another motive for the business world could be to stave off a greater government involvement in health insurance, now that most presidential candidates and other politicians are promoting health care reform.

Big drug makers like Pfizer and Merck, which could benefit politically and financially from the employer drug programs, are also supporting the effort.

Richard T. Clark, the chief executive of Merck, made the political connection in a recent trade journal article. "If we all don't do a better job, the private employer-based market will continue to weaken and the country will move forward toward rationing of care and greater government control, with greater pressure for a single-payer model with price controls," Mr. Clark wrote in the American Journal of Managed Care.

One clear motive is to help workers stay well, averting expensive emergency room care and hospital stays. As health coverage has grown more costly, many people have been skimping on care, and millions of Americans are going without health insurance altogether.

Employers are reacting to a disturbing trend. As most employer-sponsored health plans have raised co-payments sharply for drugs in recent years, employer drug spending has slowed. But total health care spending by employers has nonetheless continued to rise: 7.7 percent last year, or more than double the general inflation rate, according to the Kaiser Family Foundation. The free drug programs are being adopted in hopes of countering the rising costs, taking their place alongside other steps by some employers that have included opening or expanding health clinics in their factories and offices, and offering checkups and medicines at no cost or for a modest co-payment.

Given the millions of Americans who suffer from heart disease, depression, asthma or diabetes — about one in four working-age adults — the movement toward free drugs and preventive care has the potential to help many people, said Craig Dolezal, a health care specialist at Hewitt Associates, a consulting firm.

Co-payments of $10 to $20 a prescription have become typical, while the co-pay for some expensive drugs can be $50 or more for a month's supply. The new employer programs are waiving those fees.

For people with serious health problems, free medicine is an incentive not only to stay with their prescribed regimens, but also to keep in touch with nurses and pharmacists who monitor changes in their weight, blood pressure and other vital signs.

At the Mohawk Industries carpet factory in Dublin, Ga., about 200 of the 750 employees signed up for free blood pressure and heart drugs last summer after the company held meetings to describe the benefits of lowering blood pressure and cholesterol.

Alan Christianson, Mohawk's benefits administrator, said that the company recognized a few years ago that it could eventually face health costs so high that employees could not afford insurance. "We felt we had to do something about it," he said.

Peggy Cauley, 36, who supervises a customer service unit at Mohawk's factory, said she was 30 pounds overweight and had spent $40 a month on blood pressure and heart drugs before she started the program.

Now the drugs are free, and Charles Posey, an independent pharmacist stationed at the plant, monitors her blood pressure and gives advice on "how to maintain my weight," Ms. Cauley said. She has lost 20 pounds, she said, but is "still 10 pounds over my goal."

Eastman Chemical, which is based in Kingsport, Tenn., and has offered free mammograms for its workers and free vaccines for employees' children, now also provides free drugs and supplies for diabetics under its health plan.

The company is trying "to drive value and to target where care is most needed," said David H. Sensibaugh, the director of integrated health.

The state of Maine found that it was spending more than $20 million a year on treatment for about 2,000 diabetes patients in the state's health plan, which covers 40,000 employees, retirees and dependents.

About half the diabetics had at least one additional serious problem like heart disease, said Frank Johnson, the Maine plan's administrator.

Working with Anthem Blue Cross and Blue Shield, a unit of Wellpoint, the state has started offering free drugs and supplies to employees with diabetes who take part in a face-to-face interview with nurse educators and agree to a year of follow-up telephone sessions, Mr. Johnson said.

Benefits executives at dozens of large companies are weighing the initial costs and potential savings of free co-pay programs and other health-plan incentives at seminars, including one last week at the Midwest Business Group on Health in Chicago and another scheduled for next month. There can be perceived drawbacks for employers, according to a recent academic article that was generally favorable toward the programs.

Companies with high rates of worker turnover may believe that they will not get their share of the eventual savings from a free drug program, while smaller employers may fear attracting too many workers with chronic illnesses, according to the article by Michael E. Chernew, a health care policy professor at Harvard, and Dr. Allison B. Rosen and Dr. A. Mark Fendrick, both of the University of Michigan.

Their report was published last month in the online edition of the journal Health Affairs.

Later this year, a Marriott executive is to make a presentation at the University of Michigan, where researchers are analyzing Marriott's move to waive co-payments for generic drugs related to heart disease, diabetes and asthma.

"We can see in the preliminary numbers that employees taking part have improved their compliance," said Jill Berger, the vice president for health and welfare at Marriott, which covers 160,000 hotel and resort workers and dependents.

Active Health Management, a health data technology unit of the Aetna insurance company, has been helping to identify Marriott workers who are eligible to volunteer for the heart, diabetes or asthma programs.

Protecting the privacy of employees is an "enormously important and sensitive issue" in these programs, said Dr. Lonnie Reisman, Active Health's chief executive.

"We don't share the health plan members' data with physicians or anyone else, unless a member explicitly gives permission," Dr. Reisman said. Only "if we see something that is a real health issue, we will call the doctor without getting permission," he said.

Dr. Reisman said his company scans records of millions of drug purchases and refills and other medical claims in search of high-risk patients who are candidates for free drugs and other incentives to get their health priorities in order.

Perhaps the oldest free drug program was started 10 years ago with diabetes drugs for city workers in Ashville, N.C. Since then the city has added free drugs for asthma, blood pressure, cholesterol problems and depression.

Patients in the Asheville program agree to meet regularly with pharmacists who advise and encourage them to take their medicine and adopt healthy habits. The program has been emulated by more than 30 employers nationwide.

Frank Street, 63, a retired employee of the tax collectors office of Polk County in Florida, said he had been getting six free drugs from the county for diabetes and blood pressure for about two years.

"At one point, my blood pressure was so out of whack that they started monitoring it on a daily basis," Mr. Street said. The program's records are managed by Thomson Medstat, a health care information firm.

Now his blood pressure is "down to target level," and he reports once a month to his doctor and Liz Berndt, the program's pharmacist.

Without the county program, his drug co-payments would total $110 a month, Mr. Street said.

As employers grapple with rising health costs "and we become more aggressive about cost-shifting to patients," said Dr. Reisman, the Active Health executive, "it will be important to have this kind of safety net."

Correction: February 22, 2007

Because of an editing error, a front-page article in some copies yesterday about employer efforts to provide free drugs to workers with chronic medical conditions misidentified the state in which one of the employers, Polk County, is located. It is in Florida, not Georgia.

[Energy newsclip] One Billion New Automobiles


One Billion New Automobiles
by Bill Jackson and Vikas Sehgal
 
2/15/07
Three trends that will change the future of the automobile industry.

Imagine how the world would be transformed if the number of people who owned cars doubled in a decade. In fact, as the rate of personal vehicle ownership soars in Asia, a new kind of global automotive manufacturing industry is emerging to capitalize on this new customer base. Automakers (and the financial markets and supply chains that support them) already know their world is going to change; the media are beginning to pay attention to fledgling motor vehicle companies such as Chery (in China) and Mahindra and Mahindra (M&M, in India). But few people realize the full implications. If the auto markets of developing nations evolve on a par with established markets by, say, 2020, that development could upend today's prevailing notions of what a car costs, how it is produced, and how it is used.

The trends that will shape this future — from automobile production to environmental impact to changes in working patterns — are proceeding at different speeds. But they are all interrelated, and their impact will be cumulative. These trends include:

• Social Mobility. In emerging markets, especially if the building of roads and fuel infrastructure continues, individual mobility and job opportunities will increase. This in turn will accelerate both the democratization and the industrialization of China and India.

We can assume that no emerging nation will become an automotive society on the U.S. model, with its suburban sprawl, subsidized fuel, and demand for large cars. Countries like India and China will likely impose strict regulations on vehicle size, fuel economy, emissions, and driving rights — and they will cut back or eliminate their current fuel subsidies. Excise taxes on larger engines and vehicles are also likely. The Shanghai government has already implemented a Singapore-style license-fee system that effectively rations drive time at peak periods in high-congestion areas.

As a result, people in relatively wealthy urban centers — such as Beijing, Guangzhou, Hyderabad, and Bangalore — will continue to rely on public transportation, since daily driving is impractical in dense cities without major highways. Rather than providing mobility during the week, cars in such locales will be used by residents to leave town on weekends, and they will also serve as status symbols.

For rural areas, however, motorization will open new horizons, and not just for car owners. For the first time, residents of remote villages will be able to reach urban centers in a half-day's travel. Economic activity, be it agriculture, industrial production, or retail sales or distribution, will no longer be logistically isolated in rural regions. China's automotive and steel sectors were once geographically segmented, with small clusters of suppliers and manufacturers duplicated in each major region. Now, the new highway system allows major players to consolidate in centralized locations, increasing their scale advantages.

• Environmental Impact. It's still not clear whether emerging-country policymakers will take energy availability and environmental concerns into account as they promote growth. Why should they, since environmental concerns are a secondary issue in most developing countries? To date, many leaders in these nations have argued that they cannot afford the luxury of environmental accountability (particularly for greenhouse gas emissions and their impact on global climate change). This is a source of worry for many experts. China is already second only to the United States as a consumer of energy and producer of greenhouse gases. If driving habits in China, India, and other emerging nations duplicated those in the U.S., the environmental impact could be catastrophic.

But history suggests that rising economic growth leads to greater environmental awareness sooner or later, and this change may already be happening in the East. For example, China has just raised its fuel economy standards, and India's metropolitan governments are beginning to tighten environmental regulations. "The challenge for developing countries," says Dilip Chenoy, director general of the Society of Indian Automobile Manufacturers, "is whether to converge with European standards in the next few years, or just to maintain a one- or two-year gap behind Europe." The latter option, he said, "may allow us to develop indigenous technologies at lower cost, making the cars more affordable but still meeting emission norms."

• An Expanding Lower-End Auto Market. India's best-selling small car is currently the Maruti Alto, which sells for less than 210,000 rupees (about US$4,500), and manufacturers there are aggressively developing automobiles that will sell for about half that amount. The cars that become popular in emerging markets will deliver necessities rather than creature comforts: A typical car manufactured in India or China may have a plastic shell, a rudimentary motor, good brakes, and a stout suspension to handle unpaved roads, but no airbags. In adapting vehicles for the narrow streets of emerging nations, manufacturers could change the world's conception of what a car looks like, down to whether it must even have four wheels. Even today, in countries such as Thailand, it's possible to see a family of seven balanced on the back of a motorbike; to such families, a three-wheeled, three-seated vehicle would seem positively luxurious.

• New Pressures on the Auto Industry. As manufacturers develop in emerging markets to serve the millions of new vehicle owners there, they could follow the path that Japanese and Korean carmakers have paved to bring their products to established markets. The basic vehicle model of the emerging economies could be adapted for other nations, offering fuel efficiency and unprecedented low prices, with a few extra tweaks like the additional safety features that established markets require.

China and India are already exporting cars to the Middle East, Africa, and Eastern Europe; these markets can act as testing grounds for penetration into North America and Western Europe. Eventually, China and India could become the world's leading producers of small cars and of vehicles that use alternative fuels. India's motor vehicle industry may, in particular, surprise the rest of the world. It benefits from access to a large population of skilled engineers, a 60-year history, and the world's fastest-growing major automotive market. Indian manufacturers such as Bajaj and TVS currently produce more two-wheeled vehicles (such as motorcycles and motor scooters) than those of any other nation except Japan. Indian automakers, including M&M, Maruti, Hindustan Motors, and Tata, currently make about 1 million automobiles per year, of which about 80 percent are small, fuel-efficient cars well suited to relatively low-income consumers living in relatively dense urban areas anywhere in the world.

Recent history suggests that many Western automakers will fail to respond effectively. U.S. manufacturers have focused on large cars and trucks, and European car companies have focused on performance. Both groups have thus missed opportunities to develop economical cars with high fuel efficiency and the selling point of reducing dependence on foreign oil.

If all the current automotive trends accelerate, many companies will see their value chains overhauled, not just in the auto industry but in every sector. Nations around the world will suffer the consequences of increased pollution and greater global competition for fuel. And the automobile as a product will be transformed. Those manufacturers and suppliers that start planning now for a new wave of upstart competition will be the most likely to thrive in the next automotive environment.

Author Profiles:


Bill Jackson (jackson_bill@bah.com) is a senior vice president with Booz Allen Hamilton in Chicago. He works on major organizational change programs, including restructurings, post-merger integrations, and growth, for a variety of industrial clients, especially in the global automotive industry.

Vikas Sehgal (sehgal_vikas@bah.com), a principal with Booz Allen Hamilton in Chicago, works with clients on strategies for innovation and emerging markets.

[Energy newsclip] Biofuel to power Indonesia's anti-poverty drive


Biofuel to power Indonesia's anti-poverty drive

AFP, 17 February 2007 - Indonesia is embarking on an ambitious biofuel programme which has already attracted more than 17 billion dollars in foreign and domestic investment and criticism from conservationists worried about the country's forests.

While Indonesia is rich in oil and gas supplies, demand in Southeast Asia's biggest economy is outpacing production and it is seeking alternative energy sources to secure its future.

The government has set a target that 17 percent of the country's energy requirements must be met from renewable sources by 2025 and last year established a National Team for Biofuel Development to develop alternative energy supplies.

For team chief executive Al Hilal Hamdi, crops such as palm oil, cassava, jatropha and sugar cane could hold the answer not only to Indonesia's concerns about energy security, but also unemployment, poverty, the environment and local unrest.

Last month foreign and domestic firms signed agreements totalling 12.4 billion dollars to develop biofuel projects to turn crops such as palm oil and sugar cane into biodiesel and bioethanol.

Chinese state-owned China National Offshore Oil Corp. inked the single biggest deal -- worth 5.5 billion dollars -- with PT SMART, a subsidiary of Indonesia's Sinar Mas Group, and Hong Kong Energy (Holdings) Ltd.

The other investors also included Malaysia's Genting Bhd., Japanese firms Mitsubishi and Mitsui, Brazil's Petrobras and companies from South Korea and Singapore.

"Foreign investment is 12.4 billion US and the domestic investment is about five billion US -- half of that is for the farmers through the Indonesian banks," Hamdi told AFP in an interview.

Over the next eight years, some five million to six million hectares (12.5 million to 15 million acres) will be planted with biofuel crops, he said.

But just where all this land -- an area far larger than Denmark and a bit smaller than Sri Lanka or the US state of West Virginia -- is going to come from is what worries conservation groups concerned about deforestation.

And according to a surprising study by Netherlands-based Wetlands International and Delft Hydraulics, biofuel is often more polluting than fossil fuels.

Drainage of vast peatland areas for oil palm plantations leads to huge emissions of carbon dioxide as drained peat decomposes very rapidly, the study released in December found.

The decomposing peatland can release 70 to 100 tonnes of carbon dioxide per hectare per year and result in emissions 10 times higher than if coal was used instead of biofuel, the study found.

-- Biofuels often more polluting than fossil fuels --

"Production of palm oil in Southeast Asian plantations degrades huge peatland areas. The large amounts of carbon dioxide being emitted due to this degradation makes the use of palm oil many times more polluting than burning oil or coal," Wetlands said.

Hamdi, who attended the UN conference on climate change in November, said: "We in Indonesia have already taken some action to improve or to recover the degradation of the peat land."

While energy security and safeguarding the environment are concerns, he said eradicating poverty and tackling massive unemployment were the main focus of the biofuel programme. About 40 million Indonesians live below the national poverty line of 1.55 dollars a day.

"Actually our concern for the biofuel development programme, number one is to reduce poverty, to create more jobs for the people," the former manpower minister said.

"We would like to cut our unemployment rate from 10.2 percent last year to six percent in 2009-2010. About four million jobs need to be created for the people," he said, but tens of millions more are underemployed. While it sounds ambitious, Hamdi says his goal is achievable.

"Four million jobs is equivalent to five to six million hectares of oil palm, jatropa and cassava and the income for the people is above the minimum wage," he said.

At current crude palm oil prices, two hectares of oil palm would give the owner four million rupiah (about 440 dollars) a month while one hectare of sugar cane for bioethanol could yield an annual net income of 12 million to 14 million rupiah.

"It's a good income for the people in the villages where the minimum (monthly) wage is only 75 dollars," he said.

The introduction of new crop varieties and better cultivation methods with the help of state enterprises would also increase the productivity of small farmers, which was often less than half that of commercial plantations.

"Malaysia has a good experience with that model. They can improve the yield," he said.

And while prices for oil and biofuel fluctuate, Hamdi said Indonesia was studying the flexible approach taken by Brazil, one of the world's leading producers of bioethanol.

"We are learning from Brazil. When the international price of bioethanol is above that of gasoline, they give the commodity for export and import more gasoline. It's an excellent model that we are going to copy in Indonesia," Hamdi said.

While expressing general approval of biofuel, environmental groups fear that Indonesia's massive expansion programme will come at the expense of its forests.

But Hamdi said there was already more than enough land available due to rogue companies that had obtained plantation licences but then just logged the timber.

-- Abandoned, logged land ripe could benefit from biofuel crops --

Satellite data for Central and Eastern Kalimantan on Borneo island revealed about 4.5 million hectares of unproductive or degraded land which had been logged and abandoned, he said.

Hamdi said this land could be improved by growing biofuel crops and provide people with jobs in an area where there were few employment opportunities.

"To reduce poverty is our concern. Otherwise they participate in illegal logging because there is no alternative for the people there," he said.

"We cannot open industry, electronics or textiles in that area. It's difficult with the lack of skills (and) education, so agriculture is more familiar to them because they've been doing it for more than a century," he said.

Tackling unemployment in poor and sometimes restive areas could also have a peace dividend.

"The social conflict mainly comes from the people who don't have access to (opportunities) to improve their lives and then some provocateurs come," he said.

"If they have a job and they're busy with their plantation, they don't have time to bother or disturb their neighbour. It's more peaceful."

Local biofuel power schemes combined with solar or wind energy could also enable thousands of villages and islands which are inaccessible to power transmission lines to become energy self-sufficient. About a third of Indonesians have no access to electricity.

"They have had good results in the southern Philippines empowering the community, reducing the government subsidies for the electricity and we'd like to have this programme work with us in Indonesia," said Hamdi.

While Indonesia has targets for renewable energy, Hamdi stresses that is not the main concern, explaining that 10 percent of the country's energy needs could be met at present just by substituting biodiesel and reducing palm oil exports.

"It's not just a matter of energy, but also poverty alleviation, creating more jobs, increasing purchasing power, improving the environment by utilising unproductive land, by utilising more green energy and of course to secure renewable energy for our Indonesian future," he said.

[Energy newsclip] EU ministers go for flexibility on renewables


EU ministers go for flexibility on renewables

EurActiv.com, 19 February 2007 - Energy ministers agreed to raise biofuels use to a minimum of 10% by 2020 but rejected an EU-wide binding target for renewables, leaving it to member states to decide on specific objectives at national level.

Energy ministers were for the first time debating the Commission's 'energy and climate change package', presented on 10 January 2007. The ministers' conclusions come as a preparation to the forthcoming March summit, which will be urged to reach unanimous agreement on the package, a painstaking process that makes it difficult to reach clear decisions.

The summit will give the Commission a mandate as to the level of ambition it can reasonably expect when it tables formal legislative proposals later in the year.

Once these proposals are on the table, unanimity will no longer be required and decision-making will be easier.

Issues

Ministers avoided painful decisions on energy-market liberalisation and renewable energies at a meeting in Brussels on 15 February, preferring to establish greenhouse- gas emissions reduction targets as a priority.

The Council said it "supports ambitious overall EU targets for reducing greenhouse-gas emissions for 2020" but that this should be done "taking into account national circumstances". As a result, the ministers opted for:

  • A target of 20% for renewable energies in the EU's overall energy consumption by 2020, and;
  • a 10% binding minimum target for the share of biofuels in overall EU transport petrol and diesel consumption by 2020.
The ministers also called for "rapid implementation" of the Commission's energy-efficiency action plan, which, according to Commission calculations, could save Europe some 20% in energy consumption by 2020 and slash its energy bill by more than €100 billion every year.

On energy market liberalisation, the ministers followed France and Germany and "reaffirmed" that the first step should be "full implementation in letter and in spirit" of existing legislation before moving on with additional measures.

The conclusions come as a setback to the Commission and pro-liberalisation states led by the UK who had been pushing for full "ownership unbundling", a move that would have seen large integrated energy groups split up their distribution and production activities.

The move was defended at the meeting by Competition Commissioner Neelie Kroes , who repeated the Commission's view that full unbundling was the clearest way to guarantee fair access to energy networks for new competitors.

However, the Commission's proposal was strongly resisted by France and Germany, which were eager to protect former state monopolies such as EDF and E.ON.

Instead, the Council invited the Commission to ensure "effective separation of supply and production activities from network operations" and "guarantee equal and open access to transport infrastructures" to new energy suppliers.

Positions

French industry minister-delegate François Loos told reporters after the meeting that the Council had reached a "suitable" agreement.

Referring to the unbundling debate, Loos insisted that a distinction be made between the "objectives" and the "means" to reach them, mentioning investments in new network and generation capacity as chief among those.

"What matters are the objectives," Loos insisted, saying that "each country is free" to decide how to meet them. He added that ownership unbundling "might be the solution elsewhere" but that, in France, every network project was able to find sufficient financing without it.

"I do not condemn the system of ownership unbundling in countries other than France," Loos said.

According to Loos, France has also put in place "very strong legislation" which guarantees fair access to the network, managed by RTE, a company controlled by EDF and the French state which has kept an 87% stake in the French utility.

"I support the Commission emphatically in the goal of having more competition and, through that, more favourable prices in Europe," said German Economy Minister Michael Glos ahead of the Council meeting.

But he added that "on the way to meeting that goal, there are the most different of views among the 27 member states". "We will come to an agreement on a middle way," Glos assured.

"Clearly the French and German governments have been long-time champions of their national energy giants," commented MEP Claude Turmes for the Greens in the European Parliament. "However the fact that the UK government is now also swayed by the arguments of these firms, which are active in the UK market, is a serious cause for concern," Turmes said.

EFET , the European federation of energy traders , which includes most large European energy firms and banks among its members, said a "pragmatic approach" was needed on market liberalisation.

Speaking at a press briefing on 16 February, Dr Joerg Spicker, chairman of EFET Deutschland, said there had been "too much focus" in Germany over whether ownership unbundling was good or bad for the country. According to EFET boss Peter Styles, an alternative to ownership unbundling should be put forward to improve the current system for cross-border electricity trade.

This could take the form of "regional system operators" or a system where national- transmission system operators (TSOs) could "transcend" their boundaries to be involved in decisions concerning investments in cross-border transmission capacity. This, Styles admitted, would imply "merging TSOs in many instances".

Global cconservation group WWF said that European energy ministers had made "a positive move" by agreeing on new targets for renewables and biofuels. However, WWF insisted that the objectives be translated into "mandatory targets for different sectors, including electricity, rather than being left to the goodwill of EU member states."

"Only four months ago it seemed impossible to have this goal written in black and white," said Stephan Singer, head of European climate and energy unit at WWF. "It is now essential that these objectives become legally binding," Singer added, saying that "voluntary targets are bound to fail".

Singer also highlighted the "full unbundling of energy grid ownership", coupled with energy liberalisation as "key to allow energy from renewable sources to enter the markets".

These views were echoed by UEAPME , the European small-business association . "The completion of an efficient internal market for energy is a key precondition to reach the European Commission's ambitious goals on energy efficiency, greenhouse gas reduction and renewable sources," the association said.

"As an entrepreneur in an energy-intensive sector, I have seen with my own eyes the negative effects of private monopolies on the performance of companies," said UEAPME President Georg Toifl, terming full unbundling as "badly needed" but "not sufficient".

"Only a strong and independent European regulator will be able to avoid the growth of private network monopolies in the energy sector, and can achieve the goal of a functioning market enhancing cross-border trade," Toifl said.

"National bodies have proven to be weak at best, and excessively obliging towards national champions at worst," he added.

Latest & next steps

  • Ministers called on the Commission to come forward later in the year with a proposal for "a new comprehensive directive on the use of all renewable energy resources" in Europe. The new directive, ministers said, "could contain provisions" on "member states' overall national targets" and "national action plans containing sectoral targets and measures to meet them."
  • 8-9 March 2007 : EU summit to adopt action plan to launch a Common European Energy Policy.
  • 6-8 June 2007 : Energy Council to follow up on energy-climate change package.
Links

EU official documents

EU actors positions

[Energy newsclip] Push for post-2012 climate deal intensifies


Push for post-2012 climate deal intensifies

ENDS Europe Daily, 16 February 2007- Parliamentarians from the G8 group of industrialised countries plus China, Brazil, Mexico and South Africa have urged their leaders to begin negotiations on a post-2012 international climate framework at a key summit in July.

The call was made in a statement issued in Washington on Thursday ahead of the second anniversary of the Kyoto protocol's entry into force. The statement will be presented to world leaders at the G8 summit in Heiligendamm, Germany.

MPs called for agreement to be reached on a new framework by 2009, with "long-term targets" for developed countries and "appropriate targets" for developing economies. Greenhouse gases should be stabilised at a maximum of 550 parts per million of carbon dioxide equivalent, they said.

The statement followed a two-day meeting held by parliamentarian network Globe and the Alliance of communicators for sustainable development. UK climate envoy and Globe member Elliot Morley told the BBC the statement was a "great step forward in building confidence" at the start of a crucial year for global climate policy.

MPs also called for "particular support" for carbon capture and storage techologies, the introduction of a global carbon price and more support for energy efficiency as "the most cost-effective way of cutting emissions".

The meeting was addressed by a succession of American politicians, including presidential hopeful John McCain, who reiterated their support for binding emission reductions. The event has consolidated a gathering shift of political opinion on climate policy in America.

German chancellor Angela Merkel, EU environment commissioner Stavros Dimas, British environment minister David Miliband and world bank president Paul Wolfowitz also attended.

Earlier in the week Mrs Merkel said Germany would hold an international meeting on climate change in May to prepare for the G8 summit. Speaking at a meeting with British prime minister Tony Blair in Berlin on Tuesday, she said the "time has come to […] act together and in concert".

[Energy newsclip] Next-Gen Biofuels Move Beyond Corn and Soy


Next-Gen Biofuels Move Beyond Corn and Soy

GreenBiz.com, 12 February 2007 - The National Wildlife Federation has announced a proposal to help farmers switch to growing a new generation of biofuel crops. The plan would enroll up to five million acres of land to promote the sustainable production of next generation biomass energy.

"Biofuels represent a big part of our energy future, and this proposal represents a groundbreaking new direction," says Julie Sibbing, National Wildlife Federation Senior Program Manager for Agriculture Policy. "Native grasses, trees, and other plants have the potential to double energy yields per acre, with just a fraction of the energy needed to produce corn-based ethanol. As these new technologies come on line, they will be key to our future clean energy production. The use of these fuels will also help stem global warming by decreasing greenhouse gas emissions and storing carbon."

The Biofuels Innovation Program would provide financial and technical assistance to landowners to produce native perennial energy crops and crop mixes in a manner that protects the nation's soil, air, water and wildlife. The growing of these dedicated energy crops would help support the development or expansion of facilities that use the material for biofuels, electricity, heat, or bio-based products. The program could be enacted under the energy title of the Farm Bill of 2007.

"Farmers, hunters, and anglers will reap the benefits of this program," says Spencer Tomb, an associate professor at Kansas State University and a National Wildlife Federation board member. "Our native grasses which are so important to wildlife have been disappearing but this program provides an important incentive to plant mixes of natives that can do double duty for energy and wildlife."

The Biofuels Innovation Program would support a wide variety of feedstocks and technologies. In the true spirit of innovation, while the program would support production of switchgrass for ethanol, it would also support jojoba for biodiesel, mixed prairie grasses for gasification to generate electricity, trees or grasses for "co-generation" of electricity, and other alternative energies. The plants used must be perennials native to the United States, and not have the potential to become invasive.

In order for a facility that uses biomass to be economically viable, the biomass it utilizes must be grown within a relatively concentrated area to ensure manageable transportation costs. Most experts describe this area as being within a 50 to 70 mile radius of the facility. The Biofuels Innovation Program is designed to address this issue by requiring groups of landowners to come together to apply for funding as a project, rather than as individual landowners.

"To avoid the worst impacts of global warming, we need to use energy more efficiently, and use clean energy technologies," says Kurt Zwally, National Wildlife Federation Global Warming Solutions Manager. "The Biofuels Innovation Program provides an incentive to grow our energy future in a way that provides multiple benefits for farmers, wildlife, hunters and anglers and energy users. It's a win-win-win plan."

[Energy newsclip] Cheap and green: biofuels for mobile phone networks


Cheap and green: biofuels for mobile phone networks

SciDev.Net, 16 February 2007 - Mobile phone companies in Nigeria and India aim to boost rural development and expand their mobile networks by using biofuels as a cheap and green way to power networks.

Access to electricity in rural areas is typically poor. By producing biofuel energy from organic matter, rural communities could sell it to the mobile phone companies, powering base stations that receive and transmit wireless signals.

Two pilot schemes are currently underway in Lagos, Nigeria and Pune, India, to try powering GSM networks with biofuels. GSM is a digital standard for mobile phones used by more than two billion people worldwide.

The schemes are receiving sponsorship from the GSM Association Development Fund and mobile phone company Ericsson. Local providers MTN — Nigeria's largest mobile phone provider — and Idea Cellular in India are also involved.

"Apart from our desire to expand our coverage, biofuel produces economic empowerment, because lack of connectivity is directly related to economic impoverishment," said Prashanth Donepudi, project manager of the GSM Association Development Fund in Nigeria.

In Lagos, soy oil biodiesel is being used to power a suburban base station owned by MTN in a six-month trial. The study in Pune will use cotton and the hedge plant jatropha, according to a BBC report.

"We are trying biofuels because we feel it will save us the operational cost of reaching rural areas," said Victor Oduguwa, who heads MTN's Design and Value Engineering section

He said biofuels also offered a form of "social responsibility" because the people are economically empowered in the process.

Using renewable energy for mobile networks is not a new concept to Africa. Namibia will soon be the first country in the world to power mobile networks using wind and solar energy.

The base, owned by mobile phone company MTC Namibia, will serve 1,500 villagers, reported the BBC.

[CSR newsclip] Report uncovers emissions top UK firms keep hidden: Greenhouse gas emissions running into hundreds of millions of tonnes have not been disclosed by Britain's biggest businesses, masking the full extent of the UK's contribution to global warming


Report uncovers emissions top UK firms keep hidden


Simon Bowers
Monday February 19, 2007

The Guardian

Greenhouse gas emissions running into hundreds of millions of tonnes have not been disclosed by Britain's biggest businesses, masking the full extent of the UK's contribution to global warming, according to a report published today by Christian Aid.

Only 16 of Britain's top 100 listed companies are meeting the government's most elementary reporting guidelines on greenhouse gas emissions. As a result, almost 200m tonnes of CO2 is estimated to be missing from the annual reports of FTSE 100 companies. The figure is more than the entire annual emissions of Pakistan and Greece combined.

Article continues



<a href="http://ads.guardian.co.uk/click.ng/Params.richmedia=yes&amp;spacedesc=mpu&amp;site=Business&amp;navsection=&amp;section=108725&amp;country=can&amp;rand=1220052"> <img src="http://ads.guardian.co.uk/image.ng/Params.richmedia=yes&amp;spacedesc=mpu&amp;site=Business&amp;navsection=&amp;section=108725&amp;country=can&amp;rand=1220052" width="300" height="250" border="0" alt="Advertisement"></a>


Andrew Pendleton, the climate change analyst who wrote the report, said: "The calculations we have made relate to basics, like office lighting, but take no account of investment or supply chains, which are much bigger [emissions] areas. The figures that companies currently declare are such a mess that it is impossible to calculate their total emissions."

Basic emissions reporting guidelines - backed by the Department for the Environment, Food and Rural Affairs - have been established for some time, but Christian Aid argues they must be made mandatory if they are to become a useful tool in measuring the impact of industry on global warming.

Last year research by the environmental analysts Trucost estimated Britain's top 100 listed companies - almost all of them with operations around the world - produced between 12% and 15% of the planet's annual greenhouse gas emissions.

Throwing a spotlight on UK plc's carbon footprint is awkward for Tony Blair, who has cast his government as a progressive advocate for greenhouse gas reduction, repeatedly citing Britain's estimated contribution of 2% of global emissions.

Returning from a holiday in the Caribbean recently, he said: "[If] we shut down all of Britain's emissions tomorrow, the growth in China will make up the difference within two years. So we've got to be realistic about how much obligation we've got to put on ourselves."

Christian Aid insists Britain is not assuming anything close to its full obligations. Just taking indirect emissions from five of Britain's largest oil, gas and mining groups - BP, Shell, BHP Billiton, Rio Tinto and Xstrata - accounts for more than 9% of global emissions, the charity claims.

Mr Pendleton's report delivers a stinging attack on ministers, accusing them of "behaving like ostriches" and of "making a mockery" of their "rhetorical leadership" on climate change issues. The most basic direct emissions from FTSE 100 companies, according to the report, should be an estimated 477m tonnes - 67% higher than published figures show.

Standards for the fair allocation, by country and by organisation, of more complex indirect emissions remain the subject of debate - a debate that is likely to become increasingly heated should emissions be treated as financial liabilities.

Approaches vary considerably. For example, Marks & Spencer declares 5m tonnes of CO2 emissions, more than twice as much as its larger rival Tesco. The discrepancy is down to the fact that M&S includes its global supply chain and its customers' journeys when calculating its carbon footprint and Tesco does not.

[CSR newsclip] Organic farming 'no better for the environment'


Organic farming 'no better for the environment'
By Cahal Milmo
Published: 19 February 2007

Organic food may be no better for the environment than conventional produce and in some cases is contributing more to global warming than intensive agriculture, according to a government report.

The first comprehensive study of the environmental impact of food production found there was "insufficient evidence" to say organic produce has fewer ecological side-effects than other farming methods.

The 200-page document will reignite the debate surrounding Britain's £1.6bn organic food industry which experienced a 30 per cent growth in sales last year.

David Miliband, the Environment Secretary, drew a furious response from growers last month when he suggested organic food was a "lifestyle choice" with no conclusive evidence it was nutritionally superior.

Sir David King, the Government's chief scientist, also told The Independent he agreed that organic food was no safer than chemically-treated food.

The report for the Department for Environment, Food and Rural Affairs found "many" organic products had lower ecological impacts than conventional methods using fertilisers and pesticides. But academics at the Manchester Business School (MBS), who conducted the study, said that was counterbalanced by other organic foods - such as milk, tomatoes and chicken - which are significantly less energy efficient and can be more polluting than intensively-farmed equivalents.

Ken Green, professor of environmental management at MBS, who co-wrote the report, said: "You cannot say that all organic food is better for the environment than all food grown conventionally. If you look carefully at the amount of energy required to produce these foods you get a complicated picture. In some cases, the carbon footprint for organics is larger."

The study did not take into account factors such as the increased biodiversity created by organic farming or the improved landscape.

The report said: "There is certainly insufficient evidence available to state that organic agriculture overall would have less of an environmental impact than conventional agriculture.

"In particular, organic agriculture poses its own environmental problems in the production of some foods, either in terms of nutrient release to water or in terms of climate change burdens."

Using data from previous studies, the researchers singled out milk as a particular example of the environmental challenges presented by organic farming. Organic milk requires 80 per cent more land and creates almost double the amount of substances that could lead to acidic soil and "eutrophication" - the pollution of water courses with excess nutrients.

The study found that producing organic milk, which has higher levels of nutrients and lower levels of pesticides, also generates more carbon dioxide than conventional methods - 1.23kg per litre compared to 1.06kg per litre. It concluded: "Organic milk production appears to require less energy input but much more land than conventional production. While eliminating pesticide use, it also gives rise to higher emissions of greenhouse gases and eutrophying substances."

Similar findings were recorded with organic chickens, where the longer growing time means it has a higher impact on all levels, including producing nearly double the amount of potentially polluting by-products and consuming 25 per cent more energy.

Vegetable production was also highlighted as a source of increased use of resources. Organic vine tomatoes require almost 10 times the amount of land needed for conventional tomatoes and nearly double the amount of energy.

Advocates of organic farming said its environmental benefits had long been established, not least by Mr Miliband who has written it is "better for biodiversity than intensive farming". The Soil Association said it recognised that in some areas, such as poultry and growing vegetables out of season, organic was less energy efficient.

But it said that was vastly outweighed by factors which the Defra study had not taken into consideration such as animal welfare, soil condition and water use.

The pitfalls

Tomatoes

* 122sq m of land is needed to produce a tonne of organic vine tomatoes. The figure for conventionally-grown loose tomatoes is 19sq m.

* Energy needed to grow organic tomatoes is 1.9 times that of conventional methods.

* Organic tomatoes grown in heated greenhouses in Britain generate one hundred times the amount of CO2 per kilogram produced by tomatoes in unheated greenhouses in southern Spain.

Milk

* Requires 80 per cent more land to produce per unit than conventional milk.

* Produces nearly 20 per cent more carbon dioxide and almost double the amount of other by-products that can lead to acidification of soil and pollution of water courses.

Chickens

* Organic birds require 25 per cent more energy to rear and grow than conventional methods.

* The amount of CO2 generated per bird is 6.7kg for organic compared to 4.6kg for conventional battery or barn hens.

* Eutrophication, the potential for nutrient-rich by-products to pollute water courses, is measured at 86 for organic compared to 49 for conventional.

* The depletion of natural resources is measured at 99 for organic birds compared to 29 for battery or barn hens.

[CSR newsclip] Tour firm to make carbon offsetting mandatory


Tour firm to make carbon offsetting mandatory
By Karen Attwood
Published: 19 February 2007

The specialist holiday company Holidaybreak is planning to make carbon offsetting against flights compulsory for all its customers and is calling on other major tour operators to follow its lead.

Carl Michel, the chief executive, said it is the "responsibility of tour operators to instigate changes in holidaymakers' behaviour".

The company's adventure holiday division, Explore, currently has an option on its website for customers to choose carbon offsetting when booking their holiday at a cost of around £40 for a long-haul flight. But Mr Michel, who was formerly responsible for marketing and strategy at British Airways, said the intention was to make carbon offsetting a fixed part of the price.

"More and more people are feeling guilty about flying and it is inevitable that this will lead to widespread changes in the way we think of holidays," Mr Michel said. "The idea of a weekend trip to Vienna to go shopping, which was unthinkable twenty years ago due to the cost, will again become a thing of the past. The travel industry is going to have to recognise that there will be more societal changes taking place and they will have to adapt their products accordingly."

Thanks to the rise of the low-cost, no-frills carrier, the rise in the price of a holiday or a weekend break has been out of all proportion to that of other goods over the past five years, he said. "There is a need for rebalancing," he added.

The company directs Explore customers to Climate Care's website, which enables them to donate money to projects which absorb or reduce an equivalent amount of greenhouse gases to those produced by travelling. The money goes to projects such as installing low-energy lighting in low-income households in South Africa and providing efficient stoves for Punjabi schools.

Around 30 per cent of Explore customers click on to the Climate Care site, but it is not known how many actually take up the option to offset their carbon emissions.

Mr Michel believes people will eventually start taking more breaks in the UK or will drive to continental Europe rather than fly.

"Customers are increasingly looking at companies that have a good track record," he said.

Last week, Holidaybreak said it expects to deliver double-digit growth this year, well above the industry norms, due to the popularity of its adventure holidays and its short-breaks business.

[Energy newsclip] Monday view: Cheap solar power poised to undercut oil and gas by half


Monday view: Cheap solar power poised to undercut oil and gas by half

By Ambrose Evans-Pritchard

Last Updated: 11:31pm GMT 18/02/2007

Within five years, solar power will be cheap enough to compete with carbon-generated electricity, even in Britain, Scandinavia or upper Siberia. In a decade, the cost may have fallen so dramatically that solar cells could undercut oil, gas, coal and nuclear power by up to half. Technology is leaping ahead of a stale political debate about fossil fuels.

Anil Sethi, the chief executive of the Swiss start-up company Flisom, says he looks forward to the day - not so far off - when entire cities in America and Europe generate their heating, lighting and air-conditioning needs from solar films on buildings with enough left over to feed a surplus back into the grid.

The secret? Mr Sethi lovingly cradles a piece of dark polymer foil, as thin a sheet of paper. It is 200 times lighter than the normal glass-based solar materials, which require expensive substrates and roof support. Indeed, it is so light it can be stuck to the sides of buildings.

advertisement

Rather than being manufactured laboriously piece by piece, it can be mass-produced in cheap rolls like packaging - in any colour.

The "tipping point" will arrive when the capital cost of solar power falls below $1 (51p) per watt, roughly the cost of carbon power. We are not there yet. The best options today vary from $3 to $4 per watt - down from $100 in the late 1970s.

Mr Sethi believes his product will cut the cost to 80 cents per watt within five years, and 50 cents in a decade.

It is based on a CIGS (CuInGaSe2) semiconductor compound that absorbs light by freeing electrons. This is then embedded on the polymer base. It will be ready commercially in late 2009.

"It'll even work on a cold, grey, cloudy day in England, which still produces 25pc to 30pc of the optimal light level. That is enough, if you cover half the roof," he said.

"We don't need subsidies, we just need governments to get out of the way and do no harm. They've spent $170bn subsidising nuclear power over the last thirty years," he said.

His ultra-light technology, based on a copper indium compound, can power mobile phones and laptop computers with a sliver of foil.

"You won't have to get down on your knees ever again to hunt for plug socket," he said

Michael Rogol, a solar expert at Credit Lyonnais, expects the solar industry to grow from $7bn in 2004 to nearer $40bn by 2010, with operating earnings of $3bn.

The sector is poised to outstrip wind power. It is a remarkable boom for a technology long dismissed by experts as hopelessly unviable.

Mr Rogol said he was struck by the way solar use had increased dramatically in Japan and above all Germany, where Berlin's green energy law passed in 2004 forces the grid to buy surplus electricity from households at a fat premium. (In Britain, utilities may refuse to buy the surplus. They typically pay half the customer price of electricity.)

The change in Germany's law catapulted the share price of the German flagship company SolarWorld from €1.38 (67p) in February 2004 to over €60 by early 2006.

The tipping point in Germany and Japan came once households twigged that they could undercut their unloved utilities. Credit Lyonnais believes the rest of the world will soon join the stampede.

Mike Splinter, chief executive of the US semiconductor group Applied Materials, told me his company is two years away from a solar product that reaches the magic level of $1 a watt.

Cell conversion efficiency and economies of scale are galloping ahead so fast that the cost will be down to 70 US cents by 2010, with a target of 30 or 40 cents in a decade.

"We think solar power can provide 20pc of all the incremental energy needed worldwide by 2040," he said.

"This is a very powerful technology and we're seeing dramatic improvements all the time. It can be used across the entire range from small houses to big buildings and power plants," he said.

"The beauty of this is that you can use it in rural areas of India without having to lay down power lines or truck in fuel."

Villages across Asia and Africa that have never seen electricity may soon leapfrog directly into the solar age, replicating the jump to mobile phones seen in countries that never had a network of fixed lines. As a by-product, India's rural poor will stop blanketing the subcontinent with soot from tens of millions of open stoves.

Applied Materials is betting on both of the two rival solar technologies: thin film panels best used where there is plenty of room and the traditional crystalline (c-Si) wafer-based cells, which are not as cheap but produce a higher yield - better for tight spaces.

Needless to say, electricity utilities are watching the solar revolution with horror. Companies in Japan and Germany have already seen an erosion of profits because of an effect known "peak shaving". In essence, the peak wattage of solar cells overlaps with hours of peak demand and peak prices for electricity in the middle of the day, crunching margins.

As for the oil companies, they are still treating solar power as a fringe curiosity. "There is no silver bullet," said Jeroen Van der Veer, Shell's chief executive.

"We have invested a bit in all forms of renewable energy ourselves and maybe we'll find a winner one day. But the reality is that in twenty years time we'll still be using more oil than now," he said.

Might he be wrong?

The War on Global Warming


Thanks to Toby for forwarding this on... From this month's Corporate Knights