Strategic CSR - COP 28

In recognition of the COP 28 meeting (an attempt to layer binding global policies and targets on top of national regulation and practices), which started today in Dubai, the article in the url below argues that "the biggest obstacle to saving rainforests is lawlessness." The area of ground that law enforcement agents are expected to cover is so great, that illegal mines and logging operations are easy to hide in plain sight. Even when authorities are able to identify an illegal operation, arriving in time without first alerting the perpetrators is next to impossible:

"The pickup trucks left before dawn. Their occupants—six military police and nine agents from Brazil's national parks service—wore bulletproof vests. Their target was an illegal gold mine deep in the Amazon. To save the rainforest, Brazil's new government is trying to catch the criminals who cut it down. First, though, it must find them. Satellite images had revealed the location, 140km from Itaituba, a city in the state of Pará. After seven hours of driving, two men on a motorbike spotted the convoy and sped off to alert the miners. The trucks gave chase, but got stuck in knee-deep mud. Five kilometres from their target, the forces of law and order had to turn back. That gave the wildcatters time to hide their equipment, which the agents would have torched. A follow-up raid is unlikely."

But, given that the article appeared in The Economist, there is a market-based solution:

"The destruction of the world's rainforests is not only a scandal; it is a colossal market failure. Rainforests brim with biodiversity and help regulate the water cycle. Most importantly, the forests are giant carbon sinks. Deforestation accounts for 7% of global carbon-dioxide emissions. … clearing and burning a hectare of the Amazon pumps 500 tonnes of carbon dioxide into the atmosphere. It each tonne causes $50 of harm by accelerating global warming, … then the total damage is $25,000. Set against this, the profits are puny."

Thus, the way to prevent the criminal activity is some form of upfront compensation (that exceeds the likely profits, but is less than the likely harm) to incentivize the protection of the forests, rather than their destruction. This is where "lawlessness" reenters the conversation:

"If rainforests were in countries where property rights were clear and the rule of law was strong, it would be straightforward to pay the landowners to conserve them. Where property rights are muddled and the rule of law is weak, however, whom do you pay, and how do you know he or someone else won't chop down the forest anyway? Alas, rainforests are often in the second kind of country."

The article provides examples of how difficult it can be to introduce obvious market solutions in Brazil, Indonesia, and Congo, given the contextual poverty and political instability. The graphic accompanying the article shows the amount of rainforest in these three countries that was lost between 2000 and 2020. There is still a lot left, of course, but the physics of tipping points suggests that we do not have much room for further loss:

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (6e)

© Sage Publications, 2023

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler6e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

The rule of saw

March 4, 2023

The Economist

Late Edition – Final

52-54

https://www.economist.com/international/2023/02/27/the-biggest-obstacle-to-saving-rainforests-is-lawlessness

 

Strategic CSR - Energy subsidies

Looking past the hyperbole and faux incredulity that the government would actually try and do something about climate change, the article in the url below from the WSJ's op-ed page makes an essential point that many in the area of sustainability seem unable to comprehend:

"As much wood is burned in the U.S. today as in 1885, when coal surpassed it to become our largest energy source. Wind and hydropower were in use centuries before fossil fuels arrived and never stopped growing. Solar voltaic has grown like topsy since its invention in the 1950s."

The point:

"There's only 'additional' energy and no upward limit on humanity's willingness to consume it except through the workings of price. If energy were cheap enough, we'd have flying cars, supersonic airlines and space travel for the middle class. You would open your windows in the winter to enjoy the benefit of fresh air and heat at the same time. Energy is convenience. Energy is control over our environment. Humans will consume all the energy it makes sense to consume at the available price."

To emphasize the final sentence of that previous paragraph:

"Humans will consume all the energy it makes sense to consume at the available price."

In other words, the price of that energy matters (see Strategic CSR – Carbon Tax and also Strategic CSR – Carbon tax). The makeup of our energy profile also matters – the more sustainable our energy mix, the better. The trouble is that we do not appear to be making much progress on that front:

"Cut to the chase: global CO2 emissions actually grew 12% faster in 2022 than energy consumption did. … [That year] around the world, wind and solar still accounted for less than 2.4% of humanity's total energy consumption. Their annual increase was still a small fraction of the annual increase in fossil-fuel consumption. They remain functionally additive to humanity's energy budget, rather than displacing coal or oil on a global basis."

In short, we cannot escape the laws of fundamental economics – what the author terms "the price effect":

"When certain consumers are subsidized to use less fossil energy, others in the U.S. and world will take advantage of lower prices to consume more."

Thus, our fundamental problem. Even though we are capable of enforcing higher prices of unsustainable energy (ideally through a carbon tax, which is applied worldwide) than the market would otherwise make available, our current track record suggests that is unlikely. In this, and many other ways, we are the architects of our own fate.

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (6e)

© Sage Publications, 2023

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler6e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Why Are Carbon Emissions Up?

By Holman W. Jenkins, Jr.

August 16, 2023

The Wall Street Journal

Late Edition – Final

A13

ttps://www.wsj.com/articles/carbon-emissions-up-inflation-reduction-act-biden-climate-change-renewable-green-energy-subsidy-b5d90085

Strategic CSR - Fast fashion

The article in the url below caught my eye. It focuses on "single-material clothing" and an attempt by the EU to encourage the reduction of waste (and an increase in recycling) in the fashion industry:

"Clothes often contain a mix of fibers, including organics, such as cotton grown on farms, and synthetics, such as polyester refined usually from petroleum. Garments with multiple materials—such as a T-shirt made from 99% cotton and 1% spandex—are difficult to recycle because separating the fibers is tricky."

And, clearly, the room for improvement is significant:

"Currently, less than 1% of the world's textile waste is recycled into new clothes, with the bulk ending up in trash heaps. The EU wants to change this, and the relatively short time frame promises to challenge the big players in fast-fashion, which may have to retool their design processes and rethink their sourcing."

The underlying motivation is to combat the wastefulness of fast fashion (see Strategic CSR – Fast fashion) and, instead, promote an industry that produces products that are more sustainable:

"The European Commission, the EU's executive branch, published a plan in March that aims to put 'fast fashion out of fashion' by 2030, referring to the trend of people buying clothes and throwing them out in less than a year. Clothing should be 'long-lived and recyclable, to a great extent made of recycled fibers,' the EU said."

Given the size of the European trading bloc, a significant change there will affect supply chains and product quality, worldwide:

"European Parliament members and the heads of its 27-member states still need to agree on specific laws. But the regulations would cover all clothes sold in the bloc, which imports nearly three-quarters of its textiles. This will affect not only Europe's homegrown brands, but also American multinationals such as sportswear giant Nike Inc. and jeans-maker Levi Strauss & Co., and Japan's Uniqlo or China's Shein. EU nations have already agreed to collect discarded textiles separately from other waste by 2025."

I didn't realize that the barrier to progress in the fashion industry relies so heavily on this issue of material composition. It is something on which some firms are making progress:

"German sportswear maker Adidas AG, for example, launched a line of single-fiber clothes last year including shoes, coats, T-shirts and pants under its 'Made to be Remade' label. 'These products are created with just one material and once they reach the end of their useful life, they can be cleaned, shredded and recycled for use in new products,' an Adidas spokesman said."

But not to the extent or speed that is needed:

"Still, some single-fiber garments may not be durable enough in some cases, a Hennes & Mauritz AB spokeswoman said. The current share of fabrics with a 100% composition constitutes around a third of the total output of the Swedish fashion retailer, better known as H&M. … in fashion, design remains the most important element, said Christina Dean, founder of fashion nonprofit Redress. She said the EU's focus on the makeup of clothes will drive designers to choose single materials. 'That is addressing this cocktail of fibers that is currently being used,' Ms. Dean said."

Happy Black Friday!

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (6e)

© Sage Publications, 2023

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler6e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

EU Regulators Add to Push for Single-Material Clothes

By Joshua Kirby and Dieter Holger

September 7, 2022

The Wall Street Journal

Late Edition – Final

B4

https://www.wsj.com/articles/fashion-firms-look-to-single-fiber-clothes-as-eu-recycling-regulations-loom-11662467248

Strategic CSR - Cars + parking spaces

The article in the url below presents an interesting challenge to addressing climate change – US car size meets urban parking space. The article opens by describing the way architects determine how big they should make parking spaces when designing a building or parking lot – an allowance that is termed a "design vehicle":

"The design vehicle is a statistical composite of a car, compiled by the Parking Consultants Council, a professional association of parking lot designers. Every five years or so, the Parking Consultants Council analyzes the U.S.'s car sales data. It then calculates the 85th percentile car size. … The design vehicle Schneeman and his industry colleagues use is six feet seven inches wide and 16 feet 10 inches long; incidentally the exact width of a Ford's F-150, the U.S.'s most popular vehicle and a symbol of the country's appetite for larger cars."

The problem is that this method, which has served "the parking industry" well in the past ("ensuring space sizes accommodate the vast majority of American cars and leaving about 20 inches of space for people to open their doors and maneuver on either side"), is running into a problem. Specifically, there are no longer enough spaces and they are not big enough. The problem is particularly noticeable, of course, in older buildings or parking lots, where the size of the space was determined based on average car sizes from previous generations:

"Increasingly, cars are too big for parking spaces, especially in parking garages and other paid parking lots where developers pay close attention to space size. Like the proverbial frog in a slowly heating pot of water, our cars have gotten ever-so-gradually bigger with each passing year, but the parking space standards have barely budged. Now, in the third decade of the growing car size trend, people are starting to notice."

It seems that people put a lot of thought into parking spaces, and they want them bigger – that is until they realize the associated cost:

"When Warren Vander Helm, a partner at Parking Design Group, first meets with a client on a new project, one of the first things they will say is they want the spots to be big. But once Vander Helm walks them through the local zoning regulations that require a certain number of parking spaces, how much more surface area big spots will require to meet that minimum, and how much more that will cost, the enthusiasm for big spots wanes. 'For a surface lot, you're looking at $7,000, $7,500 just to build one parking space,' Vander Helm said. 'For an underground garage, in a city, it can be $200,000 per space, easy. Structured parking above ground is $40,000, $45,000 per space.'"

And, when multiplied by a large number of spaces in a building, "even a few inches can be the difference between profit and loss." And, today, car consumers in the U.S. want a different kind of car (SUV instead of sedans) and they want them bigger:

"Consider someone who switched from a Honda Civic to a Honda CR-V. This added about three inches in width. A CR-V to a Pilot, a large SUV, would add five more inches in width. This may not sound like much, but repeat for half the cars in a parking lot and it adds up. For example, in a 700-space garage, if each car is four inches wider than its predecessor, that is 233 additional feet in car width—from the goal line to the opponent's 23 yard line on a football field—that needs to be accommodated."

How are these trends compatible with addressing climate change? Even if all cars become electric (which has massive implications for our electricity generation system that is still driven largely by fossil fuels and, at current capacity, falls well short of what is required), a car-based society is not what we should be aiming for, as anyone who has spent any time living in a European city with functioning public transport can report. We have developed an effective way of allocating scare and valuable resources (in this case, valuable real estate) – the pricing mechanism. In short, if something is in high demand but limited supply, the price should rise to help determine how much of that good any one person should have:

"Essentially, parking lot owners will have two choices: Either make spaces bigger and charge more for them or make some spaces bigger, charge vehicles that park there more, and keep the prices lower for smaller vehicles. Oversized vehicle fees have become popular in dense urban parking lots, especially in New York City, but are rare in the rest of the country. It's easy to imagine the backlash that may ensue from any effort to charge people with large vehicles more for parking, even though the suggestion that people who use more of something should pay more than people who use less is one of the most basic tenets of economic theory and the basis of capitalism. But now, everything with a hint of stifling Traditional American Values is part of the culture wars. And, somehow, big cars have become part of that worldview. But there is nothing traditional about huge cars."

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (6e)

© Sage Publications, 2023

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler6e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

American Cars Are Getting Too Big For Parking Spaces

By Aaron Gordon

February 8, 2023

Vice

https://www.vice.com/en/article/y3pyzx/american-cars-are-getting-too-big-for-parking-spaces

 

Strategic CSR - Nuclear

If you want to understand why nuclear energy has to be a part of our collective solution to climate change, the article in the url below offers one of the most comprehensive and compelling explanations I have seen:

"Progressive lawmakers, along with environmental groups like the Sierra Club and Natural Resources Defense Council, have historically been against nuclear power — often focusing on the danger, longevity and storage requirements of the radioactive waste."

Key to the argument, you won't be surprised to hear, is removing the fearmongering and misinformation that is routinely spread about the byproduct of nuclear energy, nuclear waste:

"So it's no surprise that many Americans believe nuclear waste poses an enormous and terrifying threat. But after talking to engineers, radiation specialists and waste managers, I've come to see this misunderstanding is holding us back from embracing a powerful, clean energy source we need to tackle climate change. We must stop seeing nuclear waste as a dangerous problem and instead recognize it as a safe byproduct of carbon-free power."

First, the obvious advantages of nuclear energy (other than being carbon-free, of course):

"The countries that have cleaned up their electricity production the fastest have generally done so with hydroelectric power, nuclear, or a combination of the two. The distinct advantage of nuclear is that it requires little land and can reliably produce lots of power regardless of weather, time of day or season. Unlike wind and solar, it can substitute directly for fossil fuels without backup or storage. The International Energy Agency believes it's so crucial that global nuclear capacity must double by 2050 to reach net-zero emissions targets."

Next, overcoming the understandable (and arguably misplaced) fears about the waste, which is often presented in popular media as some fluorescent material that burns through anything it touches:

"In reality, nuclear fuel is made up of shiny metal tubes containing small pellets of uranium oxide. These tubes are gathered into bundles and loaded into the reactor. After five years of making energy, the bundles come out, containing radioactive particles left over from the energy-making reactions. The bundles cool off in a pool of water for another five to 10 years or so. After that, they are placed in steel and concrete containers for storage at the plant. These casks are designed to last 100 years and to withstand nearly anything — hurricanes, severe floods, extreme temperatures, even missile attacks."

The key takeaway:

"To date, there have been no deaths, injuries or serious environmental releases of nuclear waste in casks anywhere. And the waste can be transferred to another cask, extending storage one century at a time."

And, what about all the misinformation about the half-life of nuclear material?

"The way radiation works, the waste products that are the most radioactive are the shortest-lived, and those that last a long time are far less dangerous. About 40 years after the fuel becomes waste, the heat and radioactivity of the pellets have fallen by over 99 percent. After around 500 years, the waste would have to be broken down and inhaled or ingested to cause significant harm."

The author compares this to industrial waste that we are much less careful with, even though it tends not to lose any of its toxicity, over time:

"Take ammonia: It is highly toxic, corrosive, explosive and prone to leaking. Hundreds of ammonia-related injuries and even some fatalities have been reported since 2010, and we continue to produce and transport millions of tons of it annually by pipelines, ships and trains for fertilizer and other uses."

While there may be security reasons for storing nuclear waste in a single location, deep in the mountains, the author argues there is not much of a safety justification for doing so:

"The waste should really be a chief selling point for nuclear energy, particularly for those who care about the environment: There's not very much of it, it's easily contained, it becomes safer with time and it can be recycled. And every cask of spent nuclear fuel represents about 2.2 million tons of carbon, according to one estimate, that weren't emitted into the atmosphere from fossil fuels. For me, each cask represents hope for a safer, better future."

For interest, the NYT collected reader responses to this article, most of which appear to focus on the storage of nuclear waste, rather than rebutting the core argument (which is that the fears are greatly overblown):

https://www.nytimes.com/2023/05/04/opinion/letters/nuclear-waste.html

The article in the second url below demonstrates the potential, via a company that has developed a technique that can be attached to existing nuclear reactors to generate hydrogen, at scale. Overall, of course, we need to proceed with caution (and there are all kinds of other issues with nuclear energy, such as how long it takes to approve and build a power station), but our options for significant carbon reduction are limited, and time is running out. Much better to be guided by facts, rather than mythical fears, in plotting the most effective way forward.

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (6e)

© Sage Publications, 2023

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler6e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

We're Thinking About Nuclear Waste All Wrong

By Madison Hilly

May 1, 2023

The New York Times

Late Edition – Final

A18

https://www.nytimes.com/2023/04/28/opinion/climate-change-nuclear-waste.html

Billion-Dollar 'Pink Hydrogen' Plan on Hold as US Weighs Rules

By Will Wade

May 30, 2023

Bloomberg

https://www.bloomberg.com/news/articles/2023-05-30/pink-hydrogen-plans-hinge-on-fine-print-of-biden-climate-law

Strategic CSR - 2022 (+ 2023)

I recently Zoomed into a class where my textbook was being taught to answer questions from the students (which I am asked to do, occasionally). At some point in the conversation, I was asked whether I am hopeful for the future, given that things are beginning to change. There is so much conversation around sustainability and CSR-related topics (although the acronym of the day is now more likely ESG), the questioner suggested, that there should be reason for hope.

There are many ways to process that question and begin to formulate a response but, for me, a straightforward answer that cuts to the heart of whether we are serious about doing something on climate change (and that effort can be a proxy for so many social and societal initiatives) is global carbon emissions. As I noted in a prior newsletter, during COVID, when the world that we knew had effectively come to a halt, total emissions only dropped 6% (see Strategic CSR – COVID-19), while there is increasing evidence that companies are promising a lot and delivering much less (see Strategic CSR – Accountability). And we claim to be serious about net-zero targets in 2050.

Along similar lines, the article in the url below focuses on the sustainability reporting metrics of financial institutions (and introduces the useful term, "financed emissions"). In a related story, it includes a chart of annual total carbon emissions, worldwide, since 1899:

Feel free to draw your own conclusions on whether this graph presents a picture of hope: 

As a result, it is not surprising that 2023 is being predicted by scientists to be the hottest year for global temperatures, on record.

Have a good weekend

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (6e)

© Sage Publications, 2023

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler6e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Oil and Gas Companies Face an Era of Credit Downgrades, Fitch Warns

By Gautam Naik

October 31, 2023

Bloomberg

https://www.bloomberg.com/news/articles/2023-10-31/credit-downgrades-loom-large-as-fitch-zeroes-in-on-oil-issuers

 

Strategic CSR - Lego

The article in the url below reflects a company making a sustainability-related decision based on an honest assessment of its ability to make a difference, rather than the appearance of making a difference:

"Lego is scrapping plans to make its toy bricks from recycled plastic bottles after determining that switching to the material would result in it producing higher carbon emissions.

Importantly, the company is not giving up, just recognizing that the technology is not there, at present:

"Lego has long sought to replace its petroleum-based bricks with more sustainable materials. It tried making pieces from corn, but that resulted in bricks that were too soft. A wheat-based brick didn't look right. Bricks made from other materials over the years proved too hard to pull apart or lost their grip. Its latest effort was focused on recycled plastic bottles. The company found a one-liter plastic PET bottle could produce around 10 of its classic 2×4-stud bricks. The company has been testing bricks made from the material for their quality, durability and "clutch power"—the name Lego gives to the brick's ability to lock together with other bricks."

The challenge:

"Lego said it is abandoning the effort because it found that scaling up production wouldn't cut the company's carbon emissions: The extra steps involved in production would use more energy and manufacturing facilities would require retooling. … The company said it would instead continue with testing and developing Lego bricks made from a range of alternative sustainable materials, including other recycled plastics."

This reminds me of a phenomenon I have increasingly experienced when I meet people working in the CSR-related space. This is no doubt related to my advanced age and growing frustration, but I have taken to asking the people I meet whether they are interested in making money or interested in making a difference. It is obvious that there are plenty of ways to make money, via the perception of action or meaning. All the work being done in the market for ESG-related investment products is a great example – a whole industry has grown around consumer demand for more sustainable funds, with no discernible impact (as far as I can see) on either corporate behavior or, more important, actual carbon emissions. Nevertheless, there are plenty of people willing to dive into the space, because money is there to be made. When I push these people who I meet on the issue, 9 times out of 10 I don't hear from them anymore. My takeaway is that they are in it for the money, which is fine (people need to earn a living and markets offer a powerful motivator for change, when directed appropriately), but not conversations I want to waste time on. What is interesting about the Lego example is that it suggests the intention to make a difference, even if it means taking a short-term hit to perceptions (i.e., withdrawing a proposal that appears sustainable, on the surface).

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (6e)

© Sage Publications, 2023

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler6e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Lego's Latest Effort to Avoid Oil-Based Plastic Hits a Brick Wall

By Dominic Chopping

September 26, 2023

The Wall Street Journal

Late Edition – Final

B3

https://www.wsj.com/business/retail/legos-latest-effort-to-avoid-oil-based-plastic-hits-brick-wall-8046af66