Monetizing Nature Is a Fool’s Errand

By: Carol Pierson Holding

 

How will damage from the Gold King Mine spill of Silverton Colorado be valued? The lawsuits against the EPA for dislodging the toxic yellow sludge into the Animas River and beyond haven’t yet been filed, but injured parties are lining up.

 

FrozenRiverRecognizing imminent danger accident, the EPA tried to allocate Federal funds earmarked for cleaning Superfund sites.  before the accident, the EPA tried to allocate Federal funds earmarked for cleaning Superfund sites. But Silverton is a town that subsists on tourist dollars. And it gets its water from another site. Concerns about upstream water weren’t enough to warrant the tourism-destroying Superfund label.

 

 

So the EPA had to do more inspecting to bolster its argument for Superfund designation and accidentally breeched a secret dam built inside the mine to hold back accumulated snowmelt, unleashing three million gallons of poisonous sludge.

 

Sure enough, as in the BP Deepwater Horizon spill, the tourism industry is the first to call for monetary damages.

 

Then come livestock owners whose animals might be poisoned. And the vegetable farmers whose produce could be ruined unless they find an alternative source of water.

 

Then there’s the cost of the clean-up itself.

 

But even those billions of dollars don’t account for the loss of gorgeous, irreplaceable natural habitat along the now three hundred miles of fouled rivers.

 

In our monetized, quantified world, we are driven to assign a value to this resource. And economists have a mechanism.  Called “contingent valuation,” the tool is a survey in which subjects are asked their willingness to pay to protect nature.

 

Intuitively, we know this is not remotely adequate. Economists and policy makers agree. And so scientists have set about trying to develop a better metric.

 

A study on the neuroeconomics of valuation was just published in the journal PLOS One and summarized in a New York Times article by study authors Paul Glicher and Michael A. Livermore. Previous MRI’s of the brain structures responsible for valuation showed great similarity across a wide variety of decisions, from consumer goods to entertainment to daily activities. But as the authors put it, “The brain did not respond to contingent (environmental) valuation studies the way it did to all other known classes of economic behavior.”

 

In other words, when subjects tried to “value” nature, their MRIs showed different areas of the brain at work than those areas used to value other decisions.

 

Could nature be on a different spectrum altogether? Maybe our brains process nature’s value in ways unrelated to money.

 

Those of us who walk in nature would agree.

 

As it turns out, many economists agree too.

 

One of them is Nobel Prize winner Joseph Stiglitz. A 2009 report by the Stiglitz Commission on the Measurement of Economic Performance and Social Progress looked at how economic statistics such as GDP fall short of measuring true economic performance:

 

“For example, traffic jams may increase GDP as a result of the increased use of gasoline, but obviously not the quality of life. Moreover, if citizens are concerned about the quality of air, and air pollution is increasing, then statistical measures which ignore air pollution will provide an inaccurate estimate of what is happening to citizens’ well-being.”

 

The Stiglitz Commission goes further, insisting that “The assessment of (environmental) sustainability is complementary to the question of current well-being, and must be examined separately. …Both pieces of information are critical and distinct.”

 

Another way of saying that even rising public policy metrics such as Gross National Happiness in Bhutan or Subjective Well Being in the UK don’t adequately address the value of the environment.

 

Nature brings solace and sanity. If you haven’t experienced the succor of nature personally, science has proved its benefits, most recently in a National Academy of Sciences study whose results suggest that “accessible natural areas may be vital for mental health in our rapidly urbanizing world.” Or to put it another way, nature’s true value is priceless.

 

Photo courtesy of Fishermansdaughter via Flickr CC

 


 

Carol2Carol Pierson Holding is President and Founder, Holding Associates. Carol serves as Guest Blogger for CSRHub. Her firm has focused on the intersection of brand and social responsibility, working with Cisco Systems, Wilmington Trust, Bankrate.com, the US EPA, Yale University’s School of Environmental Sciences, and various non-profits. Before founding Holding Associates, Carol worked in executive management positions at Siegel & Gale, McCann Erickson, and Citibank. She is a Board Member of AMREF (African Medical and Research Foundation). Carol received her AB from Smith College and her MBA from Harvard University.

 

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 15,000+ companies from 135 industries in 130 countries. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

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Capitalism Rallies to Fight Climate Change

By: Carol Pierson Holding

 

Capitalism

In his op-ed piece “Two Cheers for Capitalism,” conservative columnist David Brooks quotes fellow New York Times writer Anand Giridharadas about why capitalism isn’t working:

 

“The rich are to be praised for the good they do with their philanthropy, but they are never to be challenged for the harm they do in their businesses. … Sometimes I wonder whether these various forms of giving back have become to our era what the papal indulgence was to the Middle Ages: a relatively inexpensive way of getting oneself seemingly on the right side of justice, without having to alter the fundamentals of one’s life.”

 

I wonder why Brooks considers this statement “courageous” and “provocative” rather than stating the obvious.

 

Indeed, in 2014, World Bank Economist Apurva Sanghi made the same argument for business and its own form of Papal indulgence: “CSR (corporate social responsibility) is about companies ‘giving back’ … How can companies that produce products that are polluting the environment have a strong reputation for social and environmental responsibility?’”

 

Sanghi slams some CSR as just another form of the “’guilt complex’ – charity as a means of managing a potential backlash.” And surely that happens, as he points out, with oil companies and big tobacco. But when a company makes an operational decision that’s good for society, you can bet it’s also good for the business.

 

And when businesses band together with competitors to address a societal ill, it’s because the very heart of capitalism is threatened, as it is with climate change.

 

Will capitalists step up to climate change for their own survival?

 

The evidence seems to say yes.

 

We’ve all heard about climate-caused business disruptions – think Hurricane Sandy in New York and rising sea levels along the East Coast. But climate change affects both  operations and consumer confidence.

 

The latest Yale/Gallup/Clearvision poll found 62% of Americans are convinced that “global warming is an urgent threat requiring immediate and drastic action,” indicating widespread fear.

 

Recall the stock market crash of 2008: when consumers are afraid, they don’t buy products and they don’t invest. As the impact of climate change gets worse, consumers may just stop spending. As temperature extremes worsen, they might just stay home.

 

And consumers are rewarding climate friendly companies by buying their products and their stocks.

 

The rest of business is jumping into action too.

 

Just a few days ago, the Huffington Post reported that eleven environmentally responsible corporations including Bank of America, Goldman Sachs, Walmart, and Apple joined Obama in “American Business Act on Climate Pledge.” The purpose of the climate pledge? To support a “strong outcome” at the climate negotiations in Paris and commit to renewable energy, emissions reduction, responsible water use and halting deforestation.

 

Last year, even without the President’s backing, over 100 companies joined a coalition called We Mean Business to advocate bold action on climate change. Those companies were already climate leaders in their products (think electric cars and green investment funds) and operations.

 

We Mean Business now represents $2.19 trillion in members’ revenue and $7.4 trillion of investment.

 

Capitalism as practiced in 2015 America is a flawed system, distorted by years of legislation removing essential safeguards. But when it comes to climate change, capitalism might just be the most effective solution. Regardless of how weak you believe the connection is between profit and social responsibility, the connection between profit and public opinion has never been stronger.

 

Add to that the economic opportunities presented in the course of addressing climate change in both operations and consumer loyalty — opportunities such as Ikea discovering a solar gold mine in its massive flat roofs and the UK’s Marks & Spencer’s impressive gains in reducing carbon emissions while successfully relaunching its brand as the sustainable retailer — and you’re seeing capitalism at its finest.

 

Photo courtesy of Alessio via Flickr CC

 


 

Carol2Carol Pierson Holding is President and Founder, Holding Associates. Carol serves as Guest Blogger for CSRHub. Her firm has focused on the intersection of brand and social responsibility, working with Cisco Systems, Wilmington Trust, Bankrate.com, the US EPA, Yale University’s School of Environmental Sciences, and various non-profits. Before founding Holding Associates, Carol worked in executive management positions at Siegel & Gale, McCann Erickson, and Citibank. She is a Board Member of AMREF (African Medical and Research Foundation). Carol received her AB from Smith College and her MBA from Harvard University.

 

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 15,000+ companies from 135 industries in 130 countries. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

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When Climate Change Gets Personal

By: Carol Pierson Holding

 

Rancho_SantaFe

Steve Yuhas, a resident of wealthy California enclave Rancho Santa Fe, has become famous for his reaction to drought-imposed water restrictions. His post reads: “(People) should not be forced to live on property with brown lawns, golf on brown courses or apologize for wanting their gardens to be beautiful.” In a follow-on interview with the Washington Post, he added, “We pay significant property taxes based on where we live. And, no, we’re not all equal when it comes to water.” Clearly, public shaming is not going to work on this guy.

 

And we’ve all heard about how Tom Selleck stealing water by the tanker-load from a fire hydrant. Selleck argues it was only illegally diverted, not stolen, but he’s still breaking the law to keep his ranch going.

 

On the other end of the economic spectrum are agricultural workers in San Joaquin Valley, trying to survive on water that has arsenic levels double the level considered safe. Even bathing can result in poisoning. Impoverished residents are buying bottled water just to survive.

 

I’ve been reading similar stories about the personal impact of climate change for at least twenty years. They range from the ridiculous to the tragic. But this year is the first time it’s struck me personally.

 

I live in Seattle, historically one of the top five rainiest U.S. cities with the least amount of annual sunlight. Average temperatures are mild on either end, ranging from 47 in December and January to 75 in July and August.

 

Dried Grass

I spend as much of my summer as I can on one of the islands north of Seattle, a verdant paradise of fir and giant maple forests reaching down to rock beaches. It gets dry and hot in August – sometimes as high as 90 degrees – and the lawn can go brown in spots, but the paths through the forest show wet spots all year round.

 

Except this year. Rainfall was lower than usual in the winter, and May-June was the driest ever. June was exceptionally hot, with average temperatures nine degrees higher than normal. That very hot, dry weather has continued through July.

 

For the first time, I am suffering because of rising temperatures that, like California’s drought, are most likely the result of climate change.

 

I get heat headaches that can grow into migraines. My nervous system shorts and my extremities grow numb. I can’t think clearly and typing is difficult.

 

Climate change is suddenly personal.

 

And that changes everything.

 

I don’t have the energy to be outraged anymore. I’m just trying to stay focused on getting through my day without taking a toxic amount of Advil to reduce the pounding in my head until the heat of the day dissipates into a blessedly cool evening.

 

But the sea temperature is going up too, so we don’t know how long that evening cooling will last.

 

Since I moved here six years ago, I’ve looked with satisfaction at climate maps where the Pacific Northwest appears as a blue crescent against the punitive reds and oranges of the rest of the United States. We’ve been self-righteous about our environmental ways that seemingly rewarded us with cool temps and blessed rain, renewable hydro-power and abundant wild seafood.

 

Now we’re suffering with the rest of the world.

 

I’ve gone from indignation that everybody else is using up resources and contributing to climate change, to fighting just to feel normal.

 

Though I’d hate to align myself with the likes of Tom Selleck and Steve Yuhas, they share more than they’d like with me and with the farm workers of the San Joaquin Valley: we’re all experiencing the pain of losing a piece of life that we once took for granted. It feels very different than an ideological violation. It’s visceral.

 

Despite our very different experiences, every one of us is compromised by the effects of climate change. At some point won’t we all see that we’re aligned in a common cause? Using water illegally addresses personal pain with a short-term solution. So does buying bottled water. Or hiding out in a dark air-conditioned room as I did last week. On the other hand, working together to mitigate climate change and insisting that our leaders do the same could give us back the lush, fertile land in Rancho Santa Fe, the San Joaquin Valley, Seattle — and all over the world for that matter. We’ll all be better off.

Photo courtesy of Stewart Long via Flickr CC

Photo courtesy of Carol Pierson Holding

 


 

Carol2Carol Pierson Holding is President and Founder, Holding Associates. Carol serves as Guest Blogger for CSRHub. Her firm has focused on the intersection of brand and social responsibility, working with Cisco Systems, Wilmington Trust, Bankrate.com, the US EPA, Yale University’s School of Environmental Sciences, and various non-profits. Before founding Holding Associates, Carol worked in executive management positions at Siegel & Gale, McCann Erickson, and Citibank. She is a Board Member of AMREF (African Medical and Research Foundation). Carol received her AB from Smith College and her MBA from Harvard University.

 

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 15,000+ companies from 135 industries in 130 countries. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

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Harvard Business School’s Plan for a Carbon Free Future

By: Carol Pierson Holding

 

Sunset_There has been so much good news about business embracing renewable energy that I almost didn’t give it a second thought when a Harvard Business School report called “America’s Unconventional Energy Opportunity” landed on my desk. Subtitled “A Win-Win Plan for the Economy, the Environment, and a Lower-Carbon, Cleaner-Energy Future,” I assumed it was a plan to transform our energy resources to renewables like wind and solar. States are pushing renewables too: New York State just released its roadmap for getting to 50% renewable power by 2030 by focusing on distributed generation and renewable resources.

 

The lead author of the HBS report is Professor Michael Porter. He is not only a globally-recognized authority on competitive strategy, he’s also works tirelessly on just causes. He created the “Social Progress Index to look beyond GDP at social and environmental factors.” Porter also co-founded FSG-Social Impact Advisors and co-developed its theory of “Shared Value” to help non-profits work with business to create social value. (Full disclosure: I am an HBS graduate and met with Porter and FSG staff.)

 

So it was disappointing to read that by “unconventional energy” the authors mean “…shale gas and oil resources …accessed and extracted through the process of hydraulic fracturing.”

 

Porter and his colleagues at HBS and management consulting firm BCG lay out their motivation:

 

Unconventional gas and oil resources are perhaps the single largest opportunity to improve the trajectory of the U.S. economy, at a time when the prospects for the average American are weaker than we have experienced in generations. America’s new energy abundance can not only help restore U.S. competitiveness but can also create geopolitical advantages for America. These benefits can be achieved while substantially mitigating local environmental impact and speeding up the transition to a cleaner-energy future that is both practical and affordable.

 

Their solution is to convert coal and oil based energy to natural gas and, when plants come to their natural end-of-life, we’ll replace natural gas with renewables. In the meantime, we’ll restore our economic supremacy by exporting cheap natural gas while reducing our own carbon emissions and energy costs. By 2060, we’d be generating zero carbon emissions from energy generation.

 

It’s not an easy sell. The first problem is cost. To develop our natural gas resources will require $900 billion in infrastructure investment, including new interstate pipelines, storage facilities, rail, marine and road upgrades, gathering and processing infrastructure, and export terminals. In other words we’d have to spend even more to transition to natural gas as we will spend to convert to renewables, which the report estimates at $750 billion. In the end, with Porter’s plan, we’d be stuck with all that decaying infrastructure and fracking waste. Why not put that money into renewables infrastructure starting now?

 

The report also calls for spending on training for higher paying jobs in natural gas. Again, why not spend money on renewable energy training instead of having to retrain workers later on? Porter’s argument is economic competitiveness — the GDP increases we would see if we push natural gas production. You can’t generate exports from wind or solar the way you can from natural gas, and ours is by far the cheapest in the world.

 

Many of the report’s recommendations read like a fossil fuel producers dream: in addition to some positive proposals such as imposing regulations and increasing transparency, it also advocates ending “outdated” restrictions on oil and gas exports and encouraging industry compliance with industry-led self-enforcement, even after some industry players have been seen to be systemically corrupt.

 

All that said, the plan has several positives that should not be overlooked. First, shifting from coal to natural gas can take about a quarter of the responsibility for the 15% carbon reduction between 2005 and 2013. It may be the only certain path to achieving the EPA’s Clean Power Plan and eliminating coal plants. Producing just half the greenhouse gases (GHG) as coal (methane aside), natural gas is, as Porter et al say, “a crucial asset in making America’s energy transition both feasible and at a competitive cost across a range of carbon reduction scenarios, at least through 2030.” And that transition is way faster than fossil fuel industry thought leaders like Shell.

 

As I discussed in a blog for CSRHub, Shell’s most recent future scenarios report advocates a transition to renewables by 2100. Porter’s assumes power grid alterations necessary for renewable energy will take 20-30 years, taking us to 2035-45, at which point renewables will be even more cost competitive than natural gas and will be completely phased out of power production before 2060. Working back from Shell’s prediction of 2100, that looks pretty good.

 

We’re all tempted to point fingers at a policy recommendation that will delay achieving a zero emissions future while bolstering fossil fuel and power businesses. Isn’t this just business as usual? Maybe, but at least this timeline is much faster than the fossil fuel industry’s. Porter’s report acknowledges that if solar and wind prices continue to fall below oil and gas prices as they have in some places like Austin, Texas, business will drive an even faster transition. It’s all about the money, and in this case, that could be a very good thing.

 

 


 

Carol2Carol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council’s Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 15,000+ companies worldwide. Carol holds degrees from Smith College and Harvard University.

 

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 15,000+ companies from 135 industries in 130 countries. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

 

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Why Mandatory Reporting is the Key to Better Benchmarking

Guest Author: Adriana Salazar

 

 

A well-known quote from 19th century American writer Mark Twain says “Comparison is the death of joy”, but if you’re a company wanting to create a sustainability strategy that makes business sense, what if I tell you there’s a lot to be happy about in comparing yourself with others?

 

And what if I tell you mandatory reporting is instrumental in helping you make these comparisons?

 

By others, of course, I mean your industry peers. Peer benchmarking is the process designed to assist companies in comparing themselves with each other (on specific metrics or processes for instance) in order to grow and make better strategic decisions. If we focus on sustainability benchmarking, the process naturally closes in on sustainability-relevant metrics.

 

So why benchmark? Companies that grasp the importance of a solid sustainability strategy (and view it as an asset rather than a hindrance) know investors increasingly value this forward-thinking approach. In addition, knowing where you stand against your competitors and identifying strengths and weaknesses for improved strategic decision-making can help your corporation drive innovation and increase bottom line benefits. But for all its benefits (if you follow the blog, you’ll know we’ve discussed this before), the benchmarking process also has its challenges. To name one, sustainability benchmarking is only as good as the data it’s based on.

 

If you’re a company wanting to benchmark your sustainability data against your peers, you’ll likely want to use third party tools and services offering a good range of data and allowing you to run quick and reliable comparisons on a variety of indicators. But if you think about it, the only reason your company will even have access to this type of data in the first place, is because your industry peers and competitors have made their sustainability data publicly available.

 

In short, data (always) matters. Good quality and publicly available metrics are at the core of sustainability benchmarking. And this is where the question of mandatory reporting comes in. The next time you hear someone complain about compulsory sustainability reporting, there’s at least one solid argument you can give them: Although voluntary reporting is fairly extended, it’s the mandatory disclosure of key (and sometimes sensitive!) data that’s going to take sustainability benchmarking to the next level. For a corporation to obtain a truly reality-based snapshot of where it stands against its peers, both industry leaders and laggards need to have previously measured and released the ‘metrics that matter’, including those they would rather not report about.

 

While it’s true that regulatory instruments remain largely voluntary at the global level, mandatory sustainability reporting standards and legislation are increasingly present at the national level. According to GRI’s 2013 ‘Carrots & Sticks’ publication, which analyzed the increasing number of national and international reporting policies from around the world, in 2006, 58 percent of policies were mandatory, while 7 years later, over two thirds (72 percent) of the 180 policies in the 45 reviewed countries were compulsory.

 

In 2013 (see image below), GRI already highlighted that sustainability reporting requirements and recommendations were on the rise in the EU. More recently, due to the December 2014 EU Directive on the Disclosure of non-financial and Diversity Information by Certain Large Undertakings and Groups, by the end of 2017 an estimated 6,000 public interest companies with over 500 employees, across 28 Member States, will be required to disclose relevant and material environmental and social information in their annual reports.

 

 

2015-07-03_16h55_24

 

In addition, increased mandatory reporting (contributing to improve and expand the quality and availability of data for sustainability benchmarking), also means the days of greenwashing are over. Highlighting a few obscure and supposedly ‘green’ KPIs in your next sustainability report is probably not going to convince anyone. Fortunately, globally and in the past few years, sustainability reporting has taken the opposite direction (towards increased disclosure, transparency, visibility, dialogue…), and that’s something we should all be very grateful for.

 

There are a number of user-friendly solutions to help you benchmark. At Enablon Publisher, we partnered with CSRHub to create a benchmarking tool allowing any corporation to quickly and efficiently measure environmental, social, governance and community performance against industry peers. From a user perspective, all you have to do is enter the name of your company, select your competitors, and start benchmarking!

 

If the idea intrigues you, visit us at: http://publisher.enablon.com/templates/benchmark/

 

 

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