WSJ: Sustainability Works!

In a brief, but noteworthy article on the Wall Street Journal website (“Sustainable Success”), Prof. Lutz Kaufmann of the Otto Beisheim School of Management in Vallendar/Germany and his research team argue the case for corporate responsibility in the developing world:

A commitment to improving social and environmental conditions in the developing countries where a company operates is the key to maximizing the profits and growth of those operations.

That’s the conclusion we drew after studying more than 200 companies. As a group, the companies most engaged in social and environmental sustainability are also the most profitable.

This may not come as news to those in the CR/Sustainability field that have been making the case for years. But it stands in stark contrast to recent calls to scale back sustainability expectations in light of the recession, particularly in developing and emerging economies. We will try and get some more info on the underlying research.

Better ESG Disclosure Needed in Emerging Markets

The Emerging Markets Disclosure (EMD) Project has released results of an investor survey on environmental, social and governance (ESG) disclosure practices in emerging economies. While giving credit to Brazil and South Africa for progress made in recent years (including the launch of national sustainability indices), investors hold more critical views on the overall state of ESG disclosure:

The survey shows that at a time when increasing numbers of institutional investors are demanding more openness and transparency, poor ESG disclosure by emerging market companies threatens to undermine investor confidence and could potentially reduce investment allocations to emerging markets.

More details here. Full survey findings will be presented in New York on 25 June.

ILO Helpdesk: Open for Business

The International Labour Organization has recently opened an email helpdesk for managers and workers seeking to understand the application of international labour standards. Guidance is free of charge, and replies are prepared by a multi-disciplinary team, ensuring that users receive a comprehensive response (within two weeks).

To submit a question to the Helpdesk, send an email to assistance@ilo.org. More information here.

Anti-Corruption Reporting Still Lacks Transparency

Transparency International has just released Transparency in Reporting on Anti-Corruption – A Report of Corporate Practices. The comprehensive study looks at ways in which nearly 500 listed companies from 32 countries and a wide range of sectors report on strategies, policies and management systems to tackle corruption in all its forms.

The bad news:

The average company analysed scored only 17 out of a possible 50 points and was awarded two stars out of a possible five. Only seven companies achieved the highest possible five star score.

The better news:

Half of the companies that achieved a four- or five-star rating came from higher risk sectors where corruption, or the threat of it, is regarded as widespread. This could indicate that companies in these sectors recognise that putting robust policies and systems in place to address bribery and corruption is a form of risk management.

The good news:

Slightly more than one-quarter (26 per cent or 127 companies) of the sample were signatories of the GC. Signatories scored slightly higher in the TRAC report than non-signatories. The average score of GC signatories was 20.4 (a borderline three-star average score).14 For non-GC signatories the average was 15,6 (within the two-star rating). GC signatories are likely, on average, to have slightly more publicly available information in the area of policy and management systems related to anti-corruption and antibribery.

Yet:

17 GC signatory companies in the sample had little or no information in the public domain, and were on the bottom end of the one-star range. This indicates that some GC signatories may not be compliant with reporting on the GC tenth principle.

We’ll look into that. (TI press release here.)

Goodness! Not Another Ranking

Folks at Goodness500 have just launched the … Goodness 500 – a social responsibility ranking of US companies. The problem: measuring charity donations, executive diversity and toxicity produced/released does not really allow for much more than ranking companies by, well, charity donations, executive diversity and toxicity produced/released.

Take charity donations, for example. Spending money is the easy part. The fundamental point is one that we and others have made time and again: corporate responsibility is not about how money is spent, it is about how money is made. There are plenty of companies with big wallets, but poor environmental and social performance.

So, what about human rights policies, labour standards in the supply chain, greenhouse gas emissions, codes of conduct, occupational health and safety, anti-corruption policies, investment principles, water use, third-party verification, and so on? That’s where ESG performance is measured. And it’s also where true responsibility should be assessed (although there are plenty of views on the general validity or CSR rankings). Perspectives welcome.

(Just for the record: Kudos to the Goodness500 people for taking the initiative. Our concerns revolve around the methodology, not the intention.)

The Frightening Specter of Climate Poverty

MIT researchers Melissa Dell, Benjamin Jones and Benjamin Olken have looked at the correlation between climate change and economic development. Among the sobering findings:

For example, our estimates imply that global climate change would lower the median poor country’s growth rate by 0.6 percentage points each year from now until 2099. Extrapolated over 90 years, the median poor country would then be about 40% poorer in 2099 than it would have been in the absence of climate change. While this estimated effect of higher temperatures is quite large, it is actually quite consistent with what one would predict just by looking at the cross-section of countries in the world today. Since we find no effects on rich countries, the results imply that future climate change may substantially widen income gaps between rich and poor countries. (Source: VoxEU.org)

(Hat tip: Andrew Sullivan)

The Case for Market Openness

The OECD has recently published International Trade: Free, Fair And Open?, a new book aiming to show how trade contributes to economic growth and job creation. It’s a timely reminder of the need for market openness in times of economic crisis. As Ken Ash, OECD Director for Trade and Agriculture, put it,  government actions to discriminate against foreign goods, services, firms or workers “could have a devastating effect in terms of prolonging and deepening the recession.” More specifically: 

• Consumers would be hurt by higher prices and reduced choice. 
• Domestic industries would face higher input costs, as a huge amount of trade today is in intermediate goods and services. 
• Exporters would be penalised twice:  through higher costs and through retaliation from other countries. The net effect on the economy would be even bigger job losses than otherwise.

Way to Go on Climate Risk Disclosure

CERES, the Environmental Defense Fund and the Center for Energy and Environmental Security have come out with a sobering assessment of climate risk disclosure by large corporations. Reclaiming Transparency in a Changing Climate, one of two studies on the issue released today, looked at references (risk assessments, strategies, policies) in thousands of SEC filings between 1995 and 2008. Money quote:

While the study finds some modest improvement in climate risk disclosure since 1995, in 2008 75% of annual reports filed by S&P 500 corporations failed to even mention climate change and only 5% articulated a strategy for managing climate-related risks. 

(Hat tip: The Guardian)

At the risk of comparing red apples (climate risk disclosure) and green apples (emissions disclosure), it is worth noting recently published research by Yale University, looking at the way in which Caring for Climate signatories are reporting climate data in their COPs or CDP filings.  

Update:  Check out this Businessweek piece on climate-related shareholder activism.  

Yale University, School of Forestry & Environmental Studies and The Center for

Business and the Environment at Yale