Shrink to Fit

Can a growing company ever be ‘sustainable’? We’ve all read the Brundtland Commission definition, but this applies at global or possibly at national level. It isn’t readily applied to a company.

Yet more companies than ever are talking and thinking about sustainability. Some are simply re-branding all their citizenship and corporate responsibility (CR) credentials as ‘sustainability programmes’. Others are reflecting more deeply on the meaning of the concept. This is no academic exercise.

With fossil fuels, water resources, land, food and many species at or beyond the natural limits of consumption it’s not hard for company executives to see that business as usual cannot continue. What’s surprising, given the obvious bank of intelligence and talent in the corporate sector, is how few people are really raising the red flag. Most are in denial, chasing sort term growth, the holy grail of company existence. Yet growth is the last thing the human race needs if it comes with increased resource consumption.So can a growing company be sustainable?

On the streets of London last week, the ragtag army of G20 protestors united behind an American quilt of causes. The official protest ‘pick-n-mix’ was ‘climate’ and or ‘justice’ and or ‘jobs’. Seems the anarchists and Guardian readers’ powers to understand sustainability are no better than the big corporates they berate. Take jobs. Assume we get the UK and US back on track and unemployment returns to 2007 levels. What kind of ‘justice’ do we envisage for the people of Bangladesh who will be among the first billion to be overwhelmed by rising sea levels as our growing economy emits ever more carbon into the atmosphere? It’s a choice – jobs or climate?

Twice recently I have been in meetings where pressure groups told companies they needed to learn how to shrink. At the time, I thought this was about as helpful as suggesting the board become Scientologists. But now I’ve reflected on their apparently naive remarks and think that actually they were raising the key sustainability point.

What neither the company ‘sustainability managers’ nor the ‘pick-n-mix G20 protesters’ know how to do, is detach economic growth from increasing environmental impact, especially climate impact.

Perhaps we should start with a definition of sustainability fit for a company:
 ‘Business growth that is achieved by reducing environmental impact’.

OK there some social issues missing but let’s keep it simple for now.

If you take an interest in CR you will have noticed how many companies now measure and report their emissions to the environment: carbon dioxide, wastes, water effluent etc. These may be absolute or normalised (divided by a measure of business size eg turnover, floor-space, output). Targets are almost always set in terms of normalised measures. In other words the business will commit to becoming more efficient as it grows, but cannot commit to shrinking its impact. There are some exceptions, but this is commonly true of company carbon emissions which are caused by energy consumption (linked to growth).

Fred Pearce in his Guardian blog – Greenwash: Tesco and its bizarre carbon accountancy – had yet another crack at Tesco for setting normalised targets (per square foot of stores). But is he right?

I’m not sure, it’s complicated. Using our business sustainability definition – growth that is achieved by reducing environmental impact – should help.

Assume Tesco grows at 10% per annum both store space and goods sold. And assume it reduces its normalised carbon emissions by 5% per annum. It won’t require Fred Pearce’s calculator to establish that their total carbon footprint will continue to rise. But what if the new stores Tesco is opening in China, Vietnam and eastern Europe are more carbon efficient than the old underdeveloped retail system they supersede? Quite likely. If Tesco is displacing inefficient carbon intensive shops and distribution then the net impact of its growth could be negative – and sustainable.

The problem though, is that much growth is additional to rather than a displacement of existing impacts. As people get wealthier they want more stuff. Economic growth fuels unsustainable resource use. The twin challenges for society are consumer desire and technology. Desire needs to be moderated and to become more discerning. Consumers must eschew disposable frivolous products in favour of durable resource efficient ones.

I’m not too optimistic about our capacity to moderate desire for ever more stuff. But I was fortunate to discuss this with one of the senior figures in the advertising industry – who has fifty years experience at the top. His view is that consumer behaviour can change and be changed remarkably rapidly. He can readily foresee a day when excessive consumption is frowned upon and wasteful products left on the shelves.

The second challenge is technological. We can have our cake and eat it if science gives us the enjoyment at a fraction of the impact. LED lights for example are more than ten times as efficient as an old fashioned light bulb, are approaching twice the efficiency of low energy bulbs and last hundreds of times longer.  We don’t want electricity, we want light, so in the near future our homes could be lit by LEDs with a tiny fraction of the current carbon footprint.

This is one example but we need thousands more like it. Scientists and product developers have not really been targeted to cut environmental impacts, or we would not have had the energy wasting plasma screen TV revolution – a retrograde step. Who knows what might be achieved if carbon footprint became a major selling point? But time is tight, especially for the climate.

So here are my rules for sustainable companies: ones that create economic growth from reducing environmental impacts.

Rule 1: Growth by displacing a competitor must be accompanied by reduced environmental impact

Rule 2: Growth achieved by creating new sales must use the best available technology to minimise environmental impact

Rule 3: New products must have a lower environmental impact than those they replace.

I’m not confident these are right, but am putting them up for discussion.

Spiralling into a deep and sudden global recession which is damaging the livelihoods of hundreds of millions of people, most would give their left arm for the restoration of economic growth. We just want to get back on the track we were on before – more money, more purchasing, more supportive government, more of everything.

Unless we shrink our impact to fit the planet, like Levi’s do to our buttocks, the return to growth will be disaster.

CR Sage

The Elephant in the Boardroom

Tax. Is it the responsibility of business to pay tax? If so how much?

It’s a characteristic of corporate responsibility (CR) that the simplest questions are actually the most difficult. That’s why very few companies like to talk about tax in their CR reports. If they told you the truth they’d blush, so best not mention it and hope none of their ‘stakeholders’ notices.

The reality is, all large quoted companies must take action to minimise their taxes. If they didn’t, the CEO and CFO would be hauled in front of investors and required to explain why they were wasting so much shareholders’ money. To do this they have a tax ‘strategy’ that involves a number of tax ‘avoidance’ schemes. Avoidance is the term used by finance guys and tax advisors to mean a novel and legal way of paying less tax. This is not to be confused with tax ‘evasion’ which may also be novel but is illegal.

Since tax law is necessarily complex and many loopholes and interpretations of the laws are under continual legal challenge, the boundary between ‘avoidance’ and ‘evasion’ is not as crisp as the tax experts would have you believe. Clearly lying on your tax return is evasion. But dreaming up a complex series of transactions to minimise tax that you believe to be legal, which is eventually found by a court not to be so – that’s a failed avoidance scheme.

Trouble is, to the vast majority of people, there’s no distinction. It’s all cheating and feeds the persecution theory that Leona Helmsley was right when she said “We don’t pay taxes. Only the little people pay taxes”.UK newspaper The Guardian has been running a series under the banner, “tax gap” to expose the avoidance practices of a number of well known companies, all of which would claim to be responsible businesses. The Guardian made a hash of this last year trying to nail Tesco on tax and ended up having to pay compensation to the supermarket because they simply didn’t understand tax well enough. This time, presumably they have hired an expert.

It’s gruesome reading. Big trusted companies on which we all rely, twisting and turning to avoid tax. But let’s get past the rush to judgement. Let’s assume a deal has to be struck between company and state that is equitable. Just how aggressive can a company’s tax strategy be to be socially responsible? And what is the measure of ‘aggression’?

The CR world has shed no light in here at all. They’ve been so busy defining eight categories of cultural diversity (not counting Vietnam veterans) that they somehow missed the biggie. Social responsibility involves contributing to society.Tax is one area where CR and business interest do not coincide. There’s no ‘win win’ here. So what should the company serious about CR – and there are some – do about tax?

I’m no expert, but I’m going to stick my neck out and suggest that there will never be a satisfactory quantitative measure of tax aggression or responsibility. What we could have is judgement and transparency. If company tax planning was undertaken in public, and decisions referred to a committee including non-executives and independent expert stakeholders, then the board would, to some degree, be relieved of the pressure of minimising tax.

 

No doubt the tax experts are falling around laughing. Ok here’s my question to those guys making a living by inventing tax avoidance schemes to sell to corporate clients. They work in large accountancy and management consultancy firms and also some banks and law firms. How do you square what you do with your own firm’s CR policy? Are you sure you are not breaching your own rules every day? And just how well are you getting along with your own CR team selling responsibility services under the same brand?

Sage

Put this week in your diary…

20th November 2008 will go down in history. A political crossing of the Rubicon. For this week Barack Obama confirmed his commitment to the Kyoto Protocol. In fact the Kyoto timeframe is almost over, so President Obama’s commitment will be instrumental in getting agreement to its successor at Copenhagen in 2009.

Much is expected of Obama – too much – but he has quickly signalled that climate change is one area in which there will be no backtracking on election promises:

“We will establish strong annual targets that set us on a course to reduce emissions to their 1990 levels by 2020 and reduce them by an additional 80 percent by 2050″.

He is also backing this long range target with annual step goals, thereby removing the inevitable temptation to leave doing anything until later. This momentous news was pretty much drowned out by the endless self flagellation over the recession, credit crunch and impending mass unemployment.

America’s engagement in tackling climate change, err, changes everything and means there is now a real chance of capping carbon dioxide levels in the atmosphere and limiting the global temperature increase to an average of two degrees celsius, which is what the best advice says we must do. At last governments have a realistic opportunity to agree something meaningful in place of the token gestures which are all that have been possible without America.

Of course many in the US have been working constructively for years. Research institutions, some leading companies, many states, thousands of activists and a handful of actors had already decided their government called this one wrong and needed to be turned round.

But, the foot dragging, science perverting political filibustering of the Bush regime has had a huge impact in slowing progress to a crawl. Here’s just one minor story from my own experience:

As a consultant, I have been banging on about climate change for sixteen years. At the beginning it was just one of a list of environmental issues we were trying to make companies more aware of. In fact the hole in the ozone layer (caused by CFCs in aerosols and refrigerants) was originally a more pressing problem. Many at the time, including a UK environment minister, confused the ozone layer with global warming. Gradually, environmental management became better accepted and one by one companies linked energy consumption to carbon dioxide emissions and began thinking about targets.

About ten years ago we were working with a major quarrying group with operations in Europe and the US. To their credit they were one of the first in their sector to make an inventory of their energy consumption and calculate the consequent carbon footprint. Had they continued down this path of carbon accounting they would today be a world leader. But they did not.

On seeing the first draft of their corporate responsibility report, the CEO of the US operation instructed that all references to ‘climate change’ be deleted from the draft. We could mention energy use but not climate change. The hand of Bush hovered even over our keyboard in London. Soon the US CEO was made group CEO and we resigned the account. We will not green-wash.

I’m sure stories like this have played out in a multitude of companies, government organisations and even universities over the Bush period. No longer. The CEO who says he won’t discuss climate change will be about as fashionable as Pam Ewing’s shoulder pads.

Now the real power of America will be unleashed. Drill baby drill will be replaced by re-skill baby re-skill. Detroit will be saved by hybrids and diesels and electric power. Silicon valley will deliver huge carbon savings with IT controlling all kinds of engineering better making it more efficient. Very few nations still have leading brains and leading manufacturing capacity. The US is uniquely equipped to deliver the carbon revolution so many of us have been hoping for. It has some low hanging fruit to harvest working on its own domestic energy efficiency, which is laughable. There’s going to be so much money made using less oil and selling the machines to use less oil, it’s going to be the new boom. The drill less boom.

I for one am looking forward to this. I wonder if that aggregates CEO is ready to start talking carbon with me – I still have his number and my JR Ewing 80’s suit.

Sage

Considering a career in CR or sustainability?

I’ll never make a life-coach. My career has evolved by empirical experiment, twists and turns prompted by sometimes random experience – on one occasion an Andrex ad changed my life. And yet, I can’t imagine doing anything else, except perhaps one day building wooden boats in a shed by the sea.

I’m lucky, I found my vocation. But CR is becoming much more mainstream and now appeals to a wider group as a potential career. I receive emailed CVs every day and aim to reply to all of them – I did say ‘aim’ – one of CR reporting’s most useful qualifications. Feel free to chase me.

Opportunities are expanding in major companies, business organisations, NGOs and think tanks, socially responsible investors, academia, regulators and political parties and consultancies (us).

But does CR offer the many interested graduates and mid-life changers prospects of a fulfilling and rewarding career? Here’s a test of your aptitude for the majority of CR positions available today…

1) Do you seek to make a rapid impact on society and the environment?

2) Do you want to be rewarded on a par with other professionals such as lawyers, accountants or marketing executives?

3) Would you expect to interact face to face with CEOs and senior politicians?

4) Do you relish managing a large budget for consultancy and agency support?

5) Would you like a glamorous work environment?

6) Would you like to be able to talk about your work at dinner parties?

OK enough – you got it already. Most CR jobs are still a ‘No’ to the above. And yet there is something hugely rewarding about chipping away, year in year out, making the arguments and constructing the business cases for better environmental and social performance. Once in a while quite significant breakthroughs are achieved, and if we look back over five years or so with any of our clients, we can all be proud of how far we have come. At least we don’t have to come home and say ‘hey honey (male or female honey) guess what, we put two points on the market share of [insert brand of room deodoriser] in Lichtenstein in May’.

Here are my tips for spotting the better corporate positions (I won’t attempt all the categories here):

1) Look for a short reporting line to the CEO.

2) Check the CEO’s speeches – any on sustainability?

3) Where does the potential position fit in? Be wary of positions in regions other than where the HQ is located because they often have insufficient influence.

4) Is there a contradiction between the core business and sustainability? Check the annual review as well as the CR report.

5) Are there significant sustainability issues? This is the opposite of the previous point. Problems too big or too small can be equally disempowering.

6) Who does the CR team report to and what is the senior decision making body? Look for clarity, seniority and engagement of the powerful operating functions of the company.

Even if this list is imperfect, just asking these questions at interview will single you out as the smartest candidate on the block. It may also precipitate deep career depression in your potential new boss if he or she is labouring eight rungs from the CEO in a different time zone and reporting to the head of janitorial supplies.

It’s easy to lose sight of the big picture when progress is glacial or even backsliding. At Context we have a secret blackboard on the private side of the kitchen wall. Here, in addition to caricatures of Peter Knight and I, is a list of our clients’ achievements and milestones. Steps, not all memorable in themselves, that collectively amount to a body of evidence that a career in CR is worthwhile and rewarding.

So if you are considering a getting into CR ,or corporate sustainability as we now call it, I encourage you to persevere. It’s a broad and challenging field that will motivate and interest for many many years. One word of caution – if you are seeking a husband, it’s not the right place. 70% of CR professionals are women. On second thoughts, I may have just righted that imbalance.

Sage

Are you feeling ‘materially misled’?

 

I shan’t bore you with my life story. But long ago, as a disillusioned young chemical engineering graduate I looked for work in a consumer protection role and happened to land my first ever proper job at the UK Advertising Standards Authority (ASA).Then as now, the ASA earnestly considers the complaints from members of the public and competitor companies concerning advertising material. If found to be in breach of any one of a multitude of rules, after thorough investigation (my job), the ASA publishes a ruling and the advertiser is commanded not to repeat the advertising. Sounds fine as a system, except the rapid speed of brand advertising campaigns and the glacial pace of the ASA’s case load mean that most rulings are published long after the event.

 

I’m not here to knock the ASA though – I’m still fond of them for employing me and have significant empathy for anyone dealing with complainants. It’s like going home to the wife / husband every morning you enter the office. But compared to another UK regulator Ofcom (responsible for most UK broadcasting and telecommunications), the ASA is a model incisive action like their almost namesakes, the SAS.
On leaving the ASA, I resolved never to complain about anything, ever (except to the wife). And for close on 25 years I held to this maxim.

Then on the 8th March 2007 (note the date) I sat down to watch Channel 4 Television’s documentary on climate change, The Great Global Warming Swindle. This extraordinarily mendacious programme used falsified evidence and misrepresented interviewees to assert that manmade CO2 emissions are not the cause of climate change. One more time – manmade CO2 emissions are not the cause of climate change.

I was appalled. Just when Al Gore was finally getting some traction with An Inconvenient Truth here was a reputable broadcaster casting doubt about the science. What made me furious, and caused the breaking of my ‘never complain’ rule, was that it’s a message we would all dearly like to hear. The wonderful relief we might enjoy if climate change was a scare story cooked up by green activists and leftist politicians to prevent the wealthy from enjoying themselves to the full. Best of all Jeremy Clarkson would be right, fire up the V8, I’m going on a road trip. Friends called me as soon as the programme ended. ‘You’ve got it wrong’ they said. ‘Your career’s a fraud’. And most hurtful of all, ‘I always knew you were a pessimist’.

So after due consultation of the Ofcom broadcasting Code, I drafted my complaint. As I mentioned, I have experience with Codes. One of the Context team sent it to a friend who sent it to someone at an NGO who published my complaint on the web as a template for others. Not at all my intention, but no harm done.

 

Today, one year and four months after broadcast, Ofcom made its ruling. Yes the programme breached the code. It misrepresented interviewees, misplotted graphs and failed to give a balanced view. But no it did not ‘materially mislead’ the viewer. Despite the established fact that my friends and thousands of other people were caused by watching the programme to misunderstand the cause of climate change, they were not materially misled. This enabled Channel 4’s vacuous head of documentaries Hamish Mykura (note that name – it will no doubt appear in future broadcasting misdeeds).

 

 

“Ofcom’s ruling explicitly recognises Channel 4’s right to show the programme and the paramount importance of broadcasters being able to challenge orthodoxies and explore controversial subject matter,”

“This is particularly relevant to Channel 4 with its public remit and commitment to giving airtime to alternative perspectives.”

 

Note, Channel 4’s ‘public remit’. So what would Ofcom regard as a material misclaim? Ah, look a couple of cases down in the same Ofcom bulletin. The case of one viewer against porn channel Sport XXX Girls. Apparently the viewer was aggrieved because the live sex chat he believed he was viewing was a pre-recorded repeat. Now that really would be misleading – even a material waste of his £4 pay per view fee.Ofcom agrees.

 

 

 

Sage

 

 

Spend to Save

 

Dear Blog readers

You are few (I know I check the stats) but I like to think of you as discerning. A minority of people share our deep interest in environmental and social issues and fewer still in the relationship between companies and those subjects. If we are indeed a minority it seems we are a growing one. The question of what happens when sustainability meets consumerism is interesting and beginning to be put to the test. There is an explosion of marketing effort directed at consumers to convince them of the environmental benefits of everything from laptops to smoothies. This is because market research is once again saying that the consumer is motivated by green issues (yes it happened at least twice before). The so called ethical or green shopper is back and this time she or he means business.According to an American Express survey of its most affluent customers, The Centurion Luxury Living Index, high earners are seeking to recreate the classic 70’s TV sitcom The Good Life. (Younger and non-British readers need only know that a husband and wife living in the suburbs had ridicule heaped upon them weekly for growing their own vegetables, fuelling the car with cooking oil and riding bicycles.)

Apparently the wealthy are displaying their conscience in their purchasing habits and life-styles. So can we really spend our way out of the environmental crisis? As I mentioned in my last blog, there are some significant champions of green consumer power. Terry Leahy of Tesco to name one.

I’m less sure. For one thing, the wealthier you are the more environmental impact you tend to have. I reckon that a person’s carbon footprint is roughly proportional to their income (assuming they spend it). The same goes for their waste volume. OK, there comes a point when even the super rich can’t consume any more and are forced to leave it in the bank, but up to that very high point, Sage’s Law, applies. Income and impact are in proportion.

So wealthy customers are buying organic vegetables and talking about allotments. But are we really to believe people too busy to raise their own kids or do their own laundry are about to dematerialise in droves?
Token greenness is easy when you are wealthy. It’s no sacrifice to buy organic, install solar panels or take an eco-break in the Amazon. But it’s the absolute footprint that counts, and the wealthy make a bigger one than the poor. That’s why Al Gore was embarrassed shortly after The Inconvenient Truth was released. His sixteen room mansion consumes a lot of power.

The challenge is to square man’s desire for possessions and experiences, with the physical limits of the planet to supply those. If we make each activity a little less impactful, but continue to demand more, faster, bigger, then the net impact will continue upwards and be unsustainable. Add to this population growth and rapid economic development in heavily populated regions and we have cause to be worried. There is precious little evidence that limits to consumption have been reached, even in the luxury West, only limits to supporting that consumption. Marketing and some instinctive consumption gene, just drives us to get more stuff. Try standing in the middle of Top Shop or Primark on a Saturday morning and thinking about sustainable consumption as hordes of girls grab cheap fashion from the rails and clutch it to them on route to the fitting rooms. I’ve done it – then flashed my credit card for my daughter.

Next week I will be entering one of the high temples of consumerism, the Cannes Lions Advertising Festival, where I have kindly been invited by WPP branding agency G2 to participate in a panel discussion. The main event at the festival is the screening of advertisements (presumably now in all media) to select the award winners in various product categories. Those most effective at shifting products, winning market share and raising brand awareness will be honoured. If I can find evidence of sustainability there, things may truly be changing.

G2 has bravely dedicated its session at the conference to Sustainability and the Shopper. One of the topics we will discuss is: Is sustainability an enduring issue?

You have to think about that one! 

Sage

 

 

Counting carbon part 3 – product carbon footprints

 

 

In my last blog (counting corporate carbon) I tried to give a flavour of the complexities, vagaries even, of calculating a company’s carbon footprint.

Challenging as that task is, it is a trivial pursuit compared to the difficulty of calculating the carbon footprint of each of us as we go about our daily lives, eating, showering, heating, cooling, travelling and of course(since we are good capitalists)purchasing.

 

But this is the aim of a number of influential and well intentioned people. To identify the ‘embedded’ carbon in each and every product and empower the consumer to make low carbon, climate friendly choices.

“We’ll put the Orios back and have the low carbon rich teas instead.”

 
Before I get to the issues here, let’s just deal with the terminology. Whoever labelled the carbon dioxide associated with the manufacture, packaging, distribution and sale of products as ‘embedded’ was either very poor with words or setting out to sow confusion. Because ‘embedded’ it is not.

The carbon dioxide (confusingly often just called ‘carbon’) is of course released to the atmosphere at a multitude of points during the extraction of raw materials, processing, manufacture and transport to retail outlets. The carbon is (mostly) not in the product but in a huge trail of gas wafting behind them as they are created and sold. That’s what makes counting it so hard. If it was indeed embedded in the product, life would be simple – we could just measure it.

 
So how can the ‘wafting trail’ be measured and what would we do with the information? In the UK business leaders are committing to footprint their products under the guidance of The Carbon Trust, a government funded organisation. The carbon Trust has developed a methodology and publishes the footprints on its (rather strange) website.

Most significant among the early movers is UK and international supermarket Tesco. In the words of CEO Terry Leahy:

“Imagine if all those people acted to cut carbon emissions in all they did. This would be true collective action: millions of people who, through their own unique, individual actions, would be working towards a common, shared goal of protecting the environment. The green movement would become a mass movement in green consumption. That’s our goal.”

“As I announced back in January (2007), we’re beginning the search, a worldwide search, for a universally accepted and commonly understood measure of the carbon footprint of every product we sell.

 
This will enable customers to compare their carbon footprints as easily as they can compare their price or nutritional profile. We want to understand how measurement can work in a simple, cost effective way when applied to a wide range of products.” 

Similar work is being undertaken in the US. I’m unsure if this is coordinated by an equivalent to the Carbon Trust, but outdoor clothing company Patagonia is leading the charge.

This is all well intentioned, expensive and hugely encouraging activity. But what will it achieve? Let’s look behind the label…

As I mentioned above, to capture the carbon footprint of a product, you have to measure the ‘wafting trail’ of CO2 at every point of emission all the way ‘down’ the life cycle of a product. Something simple like a potato, for example might involve:

 

- carbon emitted by the seed company,(energy used, packaging manufactured, delivery to farmer) 

- carbon emitted by fertiliser manufacturer

 

- carbon emitted on the farm (water pumping, sowing, harvesting, packaging, delivery to supermarket)

 

- carbon emitted by the supermarket (distribution, refrigeration, lighting, heating).

 

Even this is simplified and remember we are considering a potato. Now try it for a pizza – or a pair of jeans – or, deep breath, a laptop. By the way apologies for any inaccuracies in the growing of potatoes – I’ve never done it.

Undaunted, teams of environmental scientists have been crunching the numbers to bring the consumer the carbon data he or she craves. Now, I confess to a morbid fascination with the numbers below, but I suspect as interests go, it has the social appeal of model railway engineering (visit our office and I’ll show you my Hornbies).

So here are some of the first carbon labels:

Patagonia presents the information very nicely on a micro site. They have footprinted ten products from shirts, to dresses to shoes (see http://www.patagonia.com/usa/footprint/index.jsp)

 

 

For example, Womens Nine Trails shorts:
CO2 1.4kg shorts 0.107 kg, ratio CO2 to product 6.

 

 

Or, Honeydew Shoe:
CO2 22 kg, shoe 0.56 kg, ratio CO2 to product 39.

 

 

It’s shocking and fascinating that between 6 and 39 times the weight of their products is released as CO2 to make them.

Here are some from the UK companies (see http://www.carbon-label.co.uk/product.html) 

 

Tesco Pure Squeezed Orange Juice:
360g CO2 per 250 ml serving: ratio 3:2
 

Tesco King Edwards Potatoes:
160g CO2 per 250g serving: ratio 2:3 

 
Walkers crisps:
75 g CO2 per 35 g crisps – ratio 2:1
 

Innocent Smoothie:
249 g CO2 per 250 g drink – ratio 1:1

 

 

Look behind the label though and the complexity and fluidity of many supply chains becomes apparent. Strawberries in winter are different from summer. Shoes from China different from Vietnam. Spanish oranges different from Californian oranges? To keep labels accurate and current they would require real time updating as product specifications or sourcing alter. Can anyone really imagine this working? What we have with today’s, early labels, is a significant proportion of assumptions and generalisations being used to produce a number. Fine for an indication of the size of the issue, but no good for telling your Orios from your Rich Teas.

Some are suggesting we have a CO2 recommended daily allowance, RDA (like fat or salt). We are told we are each responsible for around ten tonnes of CO2 per year in Europe and 20 tonnes in the US. This of course is spread across all our activities, but I strongly suspect does not include the full ‘wafting trail’. So the RDA would be calculated as 1/365 of whatever our annual carbon allowance becomes.

The idea that we can calculate this for ourselves as we shop is probably unrealistic. But it would be possible with online purchases to provide a carbon statement with the shopping basket – if the numbers were robust.

So where is all this heading? I can’t see Terry Leahy’s vision of consumers voluntarily responding to labels having a significant impact on global warming in the near future. I can imagine governments attaching sales tax rates to carbon footprints like VAT but ‘CAT’ (carbon added tax). Maybe I should trademark that! This way consumers could continue to worry about dollars and pounds and not have to cope with a parallel carbon currency.

Lastly might there be a quota? A what? Not since world war two have we rationed products. Might we each have a carbon footprint to use as we choose – one transatlantic flight or 10,000 Orios? Perhaps the wealthy could buy credits from the poor. Crack for your carbon? On reflection I don’t think we should go there.

CR Sage.

 

Counting (Corporate) Carbon – Part 2

I’ve been intending to write this post for a while. But you have to be in the mood to blog about carbon in the evening after a day’s CR consultancy, as an alternative to say, going for a drink with a friend, or chatting to my kids. I have tried talking to my friends and children about carbon, but so far without success.

This is about carbon emissions, specifically corporate emissions. As most professional CR practitioners know, the Carbon Disclosure Project (a coalition of major investors representing $57 trillion of assets under management) has been asking listed companies(nicely but firmly) to disclose their annual CO₂ emissions on a public website.

The logic being that carbon emissions represent a business risk,and that transparency will drive better risk management. No need for an ecological motive.

We are all going to have to get much more carbon literate, in personal purchases and in how we view companies. So here’s a quiz for CR professionals. Below are ten well known companies, five from the US and five UK. Underneath is CO₂ emissions data for all the companies. All you have to do is match the data to the company – easy right? Answers are at the bottom.

BP

BT

GSK

HSBC

Tesco

UK data million metric tonnes CO₂:

0.63, 4.1, 69.4, 2.2, 0.72

Exxon

Verizon

Pfizer

Citigroup

Wal-Mart

US data million metric tonnes CO₂:

1.4, 7.2, 158.8, 20.4, 1.4

Of course this quiz is not too hard because the companies are all in different sectors. Even so, you end up wondering if a telecoms company or a pharma company is a bigger carbon emitter.

This only illustrates how much we have to learn. But before we can, we need a reliable protocol for calculating carbon emissions. Here unfortunately we’re in wobbly logic land. The accepted methodology is the GHG Protocol of the World Resources Institute (WRI). This well intentioned piece of early thinking is well overdue an upgrade – imagine using Word 1.1 today – and you get the idea.

The subtlety surrounds where you draw the boundary around the emissions for which you are responsible. Should you include the products your company buys? If so what about the services? And what about the products or services you sell? Should you include the CO2 emitted during their lifetime? To answer this, WRI define three ‘Scopes’ (see pic)

 

Unfortunately the logic flaws are all too clear in the diagram. CDP ask companies to report Scope 1&2 emissions.

For a bank for example that means heating fuel, electricity and company owned vehicles but NOT business flights which are in Scope 3.

This would be quite easy to remedy, but the question of how to treat suppliers is much trickier. Suppliers appear in Scope 3 and pressure is mounting on companies to include supply chain emissions. But how far back do you go? Just complete products purchased? Or components for products? Or materials for components for products?

A typical supply chain can commonly have four or five ‘tiers’ in modern manufacturing. And if you are accountable for physical supplies what about services you purchase? Finance for example. How much of your bank’s emissions are your emissions? And if your bank manages funds that happen to invest in your company (a common occurrence) how much of your own emissions owned by your bank, supplied to you as services and finance are you responsible for?

You can see why this issue is tying everybody in knots.

 At lunchtime at Context, we often sit round our big table and discuss whatever comes-up. Our young team are all in favour of companies reporting more comprehensively and trying to include the carbon emissions in their supply chain. I understand their motivation, but don’t think it can work – because it’s complicated and we need simplicity.

I view carbon like value added – we count value added at each stage of the supply chain and tax it – we can do the same with carbon. Each company is responsible for its own ‘carbon added’.

 Ok, so a western brand with outsourced manufacturing gets off lightly, but we need to recognise that emerging economy companies are substantial organisations that must be subject to the same transparency as western companies. We can’t really live with a system where Sony (Japanese)reports and pays taxes for its carbon but LG (Korean) does not.

In any case the balance of commercial power is shifting East. It’s increasingly unrealistic for western brand owners to dictate terms to eastern suppliers. Increasingly the supplier is the stronger company. So the idea that a purchaser can manage the carbon emissions of its suppliers is based on yesterday’s power balance.

 There’s no escaping climate change – whether we are American, European or Chinese or Indian, we must start counting our own carbon and cutting down.

 CR Sage.

Million metric tonnes CO₂
Exxon – 158.8
BP – 69.4
Wal-Mart – 20.4
Verizon – 7.2
Tesco – 4.1
Pfizer – 2.4
GSK – 2.2
Citigroup – 1.4
BT – 0.72
HSBC – 0.63

Counting carbon – part 1

Google today (in the UK) has blacked its screen…. 

The company explains, “We’ve turned the lights out. Now it’s your turn – Earth Hour“. Google explains this is an awareness raising gesture not in itself an effort to save energy (black screens use the same power as white ones). 

What of Google’s efforts to take ownership of its own carbon footprint? The black screen carries a link to an explanatory page detailing research and investment into renewable energy sources. Fair enough. 

But how big is Google’s carbon footprint? The company won’t say, claiming it is commercially sensitive. The data they provide to the Carbon Disclosure Project is not – err disclosed. At the same time Google claims to be carbon neutral, having purchased offsets to balance their (unknown) footprint. 

A scan down the ICT sector data in CDC raises more questions than it answers: 

Dell – 0.38 million tonnes CO2Google – not disclosed but ‘carbon neutral’
HP – 1.6 million tonnes CO2
Intel – 3.9 million tonnes CO2
Microsoft – 0.42 million tonnes CO2
Yahoo – not disclosed but ‘carbon neutral’ 

Should we trust the carbon neutral claims? Both companies say their data is independently audited. Is this enough?

I think not. Even if the data has been properly collected and the offsets rigorously arranged (two huge assumptions) we want to know the size of the problem. The Stern Report estimated that the internet is responsible for approximately the same amount of greenhouse gas emissions as global aviation. This was a revelation to many, who had seen the ‘virtual’ sector as almost impact free.  

So how good an argument is commercial sensitivity? I imagine it would be simple to estimate the number of servers (or total storage) Google and yahoo have from their carbon footprints and that’s why they are so shy about carbon. Googling the question reveals a lot of speculation in geek circles, with estimates between 100,000 and 500,000 servers for Google.

Another tack would be to look at their energy bill which might be assumed to be material to their annual accounts. I haven’t checked – but let me know if it’s there. 

If we accept that there are certain sectors where carbon footprints cannot be disclosed to the public, we need to be thinking about a trusted authority to verify claims. Not individual hired auditors and definitely not carbon offset arrangers. Something analogous to the supervision of disarmament in Northern Ireland where the militarised factions would not reveal their armouries to one another. 

On the whole though, openness should be the rule. Openness would mean we could have more confidence in the data, we could understand the consequences of our own IT use and we could trust the likes of Google and yahoo better. Notice anything strange about the other ICT companies in the list above? How can Microsoft and Dell be under half a million tonnes CO2? That will be the subject of my next blog – but at least their willingness to be open with their data allows us to discuss it. 

CR Sage.

Fashion Victims

Amazing, really the speed with which ignorance can pass to concern and then cynicism. In fact in the case of Peacocks, a second league UK fashion retailer, I’m unsure whether they paused even briefly in the ‘concern’ phase.I was literally stopped in my tracks in one of their stores by a huge poster campaign, “Global Warming – beware”.Pictured in toxic landscapes of orange lakes and dead tree stumps (see web banner above) minor models pranced in the brand’s cheap clothing. 

What, I enquired of the store manager, did “Global Warming- beware” mean?  

“It’s advertising” he said.

Yes thank you, but how does it relate to your clothes? 

“Just advertising” he said. 

Now I’d really like to meet the ad executive who dreamt this one up. What possible thought process led to the slogan, “Global Warming – beware” for a fashion line that has no connection whatsoever with the subject? Perhaps I’m missing a new marketing trend – disaster marketing. I do recall a brand of cigarettes called ‘Death’. Maybe it’s the new consumer aspirational marketing. Nihilism equals sexy.

I have a hunch this may be over-analysing the Peacocks marketing strategy. So are Peacocks clothes low-carbon in some way? Is their ethical sourcing an example for the apparel industry? Judge for yourself – this is the entire information on climate change and ethical sourcing on their website: 

”Our ethical sourcing policy sets out a comprehensive list of requirements, which we expect our business partners and suppliers to adhere to, including how they should deal with their own employees. We recognise that in some countries there are legal and cultural differences, which need to be taken into account but we do insist on all of our partners meeting our own set of requirements.“ Move over Gap!

Perhaps it’s a little unfair singling out Peacocks (despite their vacuous posters) because we all know that CR is mainly the preserve of the really huge S&P100 and FTSE100 companies. The message from the high street is – there’s one hell of a lot more work to do.

Sage