Strategic CSR - Concrete

As the article in the url below notes, concrete is very useful. It is also highly problematic:

"The most widely used construction material on the planet, it has given us sculptural buildings, sturdy bridges and dams, parking garages and countless other structures that surround us. But concrete is also responsible for about 8 percent of global carbon emissions. If concrete were a country, it would rank third in emissions behind China and the United States."

And, given how popular and versatile concrete is, this is not a small problem:

"In the United States alone, 370 million cubic yards of concrete was produced last year, with nearly 40 percent of it going into commercial real estate, according to the National Ready Mixed Concrete Association, a trade group."

This reminds me of a fact that I saw in the Financial Times a few years ago. While the U.S. uses a large amount of concrete, it pales into comparison when compared to its use in China, which "poured more concrete between 2010 and 2013 than the U.S. did in the entire 20th century." The cement industry knows this and is trying to do something about it. Who knew, but there is a lot of innovating going on in the cement industry:

"Before climate change became a pressing issue, concrete producers sought to reduce the amount of cement in their mixes for the simple reason that it tended to be expensive, in part because of the energy-intensive heating in producing it. Decades ago, they began substituting some of the cement with cheaper fly ash, a byproduct of coal-burning plants, and slag, a byproduct of steel production. Using such materials had the added benefit of diverting them from landfills, and they were also found to improve concrete's performance. Only in recent years has concrete with fly ash and slag been promoted as a greener product. But now there's a hitch: With coal plants being retired, fly ash is not as plentiful as it once was. The decline of steel production in some parts of the country has made slag scarcer. The shortages have set off price increases for these materials, adding to the urgency of experimentation with alternative concrete mixes."

Today, rather than cost on the supply side, the innovation is being driven by the demand side – i.e., architects and developers who are under pressure from their customers to producer more environmentally sustainable buildings:

"Recycled post-consumer glass — which otherwise might be sent to landfills — is being crushed into a powder, known as ground-glass pozzolan, that can be used in place of some of the cement in concrete. The cement industry is promoting Portland-limestone cement, which reduces carbon 10 percent, according to the Portland Cement Association, a trade group. Several new ways to make concrete greener employ waste carbon dioxide."

There are a number of examples detailed in the article, but this one from Canada illustrates the level of creativity currently re-shaping the concrete industry:

"CarbonCure Technologies, a company based in Halifax, Nova Scotia, invented a process that involves shooting liquid carbon dioxide into concrete during mixing. Doing so not only keeps the greenhouse gas out of the air but also strengthens the concrete and reduces the amount of cement needed. So far, CarbonCure concrete has a net carbon reduction of only 5 to 7 percent, but the technology has already been installed at 225 plants in the United States."

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

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

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

A Fixture of Construction Gets a Lot Greener

By Jane Margolis

August 12, 2020

The New York Times

Late Edition – Final

B7

https://www.nytimes.com/2020/08/11/business/concrete-cement-manufacturing-green-emissions.html

Strategic CSR - BRT

The article in the first url below reviews progress by signatory companies to last year's statement on stakeholder capitalism by the Business Roundtable, BRT (see Strategic CSR – Business Roundtable and Strategic CSR – Business Roundtable (II) and Strategic CSR – Business Roundtable (III)). In the original statement, "the CEOs of more than 180 major companies" pledged to broaden their purpose to focus on all stakeholders, rather than merely shareholders. The media responded very positively to this and influential voices in academia have heralded the statement as an important turning point in the evolution of the stakeholder perspective (e.g., see here). The article below, in contrast, sets out to collect data to see whether this optimism has necessarily turned out to be warranted:

"Although the Roundtable described the statement as a radical departure from shareholder primacy, observers have been debating whether it signaled a significant shift in how business operates or was a mere public-relations move."

This attempt to quantify whether each company was genuine in its intent focuses on the extent to which the decision was treated as important, internally:

"Major decisions are typically made by boards of directors. If the commitment expressed in the statement was supposed to produce major changes in how companies treat stakeholders, the boards of the companies should have been expected to approve or at least ratify it."

Specifically, they operationalized this in terms of who was the highest authority who signed-off on the decision:

"We contacted the companies whose CEOs signed the Business Roundtable statement. … Of the 48 companies that responded, only one said the decision was approved by the board of directors. The other 47 indicated that the decision to sign the statement, supposedly adopting a major change in corporate purpose, was not approved by the board of directors."

The researchers then reflect on the possible interpretation of these findings:

"What can explain a CEO's decision to join the Business Roundtable statement without board approval? Even 'imperial' CEOs tend to push major decisions through the board rather than disregard it. … The most plausible explanation for the lack of board approval is that CEOs didn't regard the statement as a commitment to make a major change in how their companies treat stakeholders. That may be because they believe their companies are already meeting the standard for taking care of stakeholders. But it still implies that they believed signing the statement wasn't a major step for their businesses."

To reinforce the idea that any major change in focus by the statement's signatories should have been approved by the Board, the researchers checked the governance documents for each company. They found these documents are essentially unchanged and "mostly reflect a clear 'shareholder primacy' approach":

"Take the corporate governance guidelines of JPMorgan Chase, whose CEO, Jamie Dimon, chaired the Business Roundtable at the time the statement was issued. These guidelines state that 'the Board as a whole is responsible for the oversight of management on behalf of the Firm's shareholders.'"

Johnson & Johnson is another example cited:

"The corporate governance guidelines of Johnson & Johnson —whose CEO, Alex Gorsky, served as chairman of the Business Roundtable Corporate Governance Committee—indicate in clear terms that 'the business judgment of the Board must be exercised . . . in the long-term interests of our shareholders.'"

The article concludes:

"The evidence is clear: Notwithstanding statements to the contrary, corporate leaders are generally still focused on shareholder value."

While I am not sure these data are quite as definitive as the authors suggest, they are certainly not an indication that things have changed. It is still early, but these studies are beginning to emerge and I have not seen one that paints the BRT signatories in a positive light. For another, more recent example, see the article in the second url below:

"The coronavirus, its attendant economic devastation and the ongoing movement against racial injustice have collectively posed the first test of the lofty words proclaiming a kinder form of capitalism. The results have fallen short of the promise, according to a study released Tuesday and obtained in advance by The New York Times. The Business Roundtable's statement of a purpose of a corporation, released last year, was touted by prominent executives as a landmark in the evolution of corporate governance. But its signatories have done no better than other companies in protecting jobs, labor rights and workplace safety during the pandemic, while failing to distinguish themselves in pursuit of racial and gender equality, according to the study."

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

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

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

'Stakeholder' Capitalism Seems Mostly for Show

By Lucian Bebchuk and Roberto Tallarita

August 7, 2020

The Wall Street Journal

Late Edition – Final

A15

https://www.wsj.com/articles/stakeholder-capitalism-seems-mostly-for-show-11596755220

Stakeholder Capitalism Falters in Study

By Peter S. Goodman

September 22, 2020

The New York Times

Late Edition – Final

B1, B4

https://www.nytimes.com/2020/09/22/business/business-roudtable-stakeholder-capitalism.html

Strategic CSR - Climate Action 100+

As the article in the url below explains, we may well be getting somewhere (at least in terms of climate change), thanks to a stand taken recently by Climate Action 100+:

"Climate Action 100+, an initiative supported by 518 institutional investor organisations across the globe [who collectively manage 'more than US$47tn in assets'], has written to 161 fossil fuel, mining, transport and other big-emitting companies to set 30 climate measures and targets against which they will be analysed in a report to be released early next year."

 

Whether this is sufficient or happening quickly enough are both important questions, but this statement at least feels substantive. Specifically, the group is seeking public commitments to target net-zero emissions:

"It is the latest step in a campaign by climate-concerned shareholders to force business leaders to explain how their targets and strategies will help reach the goals of the 2015 Paris agreement."

 

Why these 161 companies?

 

"The targeted companies are responsible for up to 80% of global industrial greenhouse gas emissions. They include mining giant BHP, which last week promised to reduce emissions from its operations by 30% over the next decade on a path to net zero by 2050 after sustained pressure from activist shareholder groups. Others on the list include Exxon Mobil, PetroChina, BP, Royal Dutch Shell, Rio Tinto, BlueScope Steel and major Australian energy companies AGL, Santos, Woodside and Origin."

And, the demands are both specific and extensive:

"… the Climate Action steering committee lists 'indicators' on which the businesses will be measured, including whether they have strategies to reach net zero emissions by 2050 or sooner and reduce the 'scope 3' emissions released by customers using the companies' products."

The inclusion of scope 3 emissions, in particular, raises the bar for these companies to meet the group's expectations:

"Stephanie Pfeifer, chief executive of the UK-based Institutional Investors Group on Climate Change, said a step-change was urgently required, and the analysis would ensure it was clear which companies were treating climate change as a 'business-critical issue.' 'Investors will be paying particular attention to those shown to be falling short,' she said."

We will see. Being willing to hold firms to account is essential in order to ensure such actions are understood by the firms to be in their best interests.

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

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

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

Investors that manage US$47tn demand world's biggest polluters back plan for net-zero emissions

By Adam Morton

September 14, 2020

The Guardian

https://www.theguardian.com/environment/2020/sep/14/investors-worth-us47tn-demand-worlds-biggest-polluters-back-plan-for-net-zero-emissions

Strategic CSR - Patagonia

As the article in the url below reminds us, you have to love Yvon Chouinard:

"Patagonia's founder, Yvon Chouinard, isn't afraid to get political. The outdoor clothing and gear company has a long history of environmental activism, but as the world falls deeper and deeper into a harmful climate crisis, Chouinard feels it's imperative to call out climate deniers who hold positions of power. Bluntly."

 

How blunt exactly?

 

"In addition to providing election resources and encouraging people to vote for climate leaders, Chouinard is also making Patagonia's political stance crystal clear with the slogan, 'Vote The Assholes Out.'" 

And they are integrating the slogan into their product design. Specifically, they are adding it to some of their apparel labels:

The tags were only added to a specific line of clothing, which itself is part of the message:

"'They were added to our 2020 Men's and Women's Regenerative Organic Stand-Up Shorts because we have been standing up to climate deniers for almost as long as we've been making those shorts,' [Patagonia spokesperson Corley] Kenna wrote."

Patagonia has long promoted good democracy practices – not only encouraging its employees to surf, but also to vote (e.g., see Strategic CSR – Patagonia). Given the firm's political battles over the past 4 years or so, it is perhaps not surprising that Chouinard has had enough and is no longer just telling people to vote, but telling them which way they should vote.

Have a good weekend

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

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

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

Yes, Patagonia's viral 'Vote the Assholes Out' tags are real. But the slogan isn't new

By Nicole Gallucci

September 15, 2020

Mashable

https://mashable.com/article/patagonia-vote-the-assholes-out-tag/

Strategic CSR - Architects

The article in the url below raises an interesting moral question for architects, but one that I think can be applied (in different contexts) to any profession:

 

"Like many organizations in the wake of George Floyd's killing, the board of the American Institute of Architects issued a statement the other day expressing solidarity with protesters — and offering a mea culpa. 'We were wrong not to address and work to correct the built world's role in perpetuating systemic racial injustice,' the statement said. But 'we support and are committed to efforts to ensure that our profession is part of the solution.' To that end, the statement added, 'we will review our own programs' and 'ask our community to join us and hold us accountable.'"

 

That all sounds fine, on the surface. As the author of the article notes, however, there are ways the (AIA) can easily demonstrate its commitment to meaningful change:

 

"That's good to hear. So, for starters, how about stop repeating that it's OK by you for architects to design death chambers and solitary confinement cells in racially biased prisons that incarcerate and execute an overwhelmingly disproportionate percentage of African-Americans?"

 

As you can see, the author's issue is as much with the professional oversight body, the AIA, as it is with architects more broadly. I wrote about this issue in response to a 2015 column by the same author (see Strategic CSR – Architects) and it seems that nothing has changed, as of yet:

 

"Several years ago, I wrote about a petition filed with the A.I.A. by an organization called Architects/Planners/Designers for Social Responsibility. A Bay Area architect, Raphael Sperry, leads the group. The petition asked the A.I.A. to censure architects who designed death chambers and solitary confinement facilities, which, as constituted and employed in countless American prisons, often function as instruments of psychological and physical torture. As Mr. Sperry pointed out, while the death penalty is legal in the United States, the United Nations and other human rights organizations have determined that it violates human rights. The A.I.A.'s code of ethics instructs its members to 'uphold human rights in all their professional endeavors.' Last year, Pfizer, the pharmaceutical giant, became the latest among dozens of drug companies to ban the use of its products in executions; and the American Medical Association instructs doctors not to participate in execution and torture. So why not architects, too? The A.I.A. rejected the petition."

The AIA's position is that architects build and it is the owners/occupiers of the building who are responsible for how that building is subsequently used. The author of the article has got that retort extremely well covered:

 

"Do we need to run the numbers again? Between 1976 and the end of last year, there were 21 white defendants executed in this country for the deaths of African-American victims — 295 African-American defendants executed for the deaths of white victims. African-Americans constitute some 13 percent of the United States population but more than 40 percent of the death row population."

 

The AIA's intransigence against what is an exceedingly compelling argument may be the result of the current composition of architects, which is decidedly non-diverse:

 

"Fewer than 3 percent of licensed architects in the United States are African-American."

 

I don't quite see how the AIA can rebut the core argument:

 

"… death chambers and many solitary confinement cells … are extreme cases. Architects should not contribute their expertise to the most egregious aspects of a system that commits exceptional violence against African-Americans and other minorities."

 

As the author concludes:

 

"The least the American Institute of Architects can do now is agree."

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

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

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

 

It's Time for Architects to Stand Up for Justice

By Michael Kimmelman

June 13, 2020

The New York Times

Late Edition – Final

C1, C6

https://www.nytimes.com/2020/06/12/arts/design/architects-prison-death-chamber.html

 

Strategic CSR - Exxon

The article in the first url below offers some hope that investors are becoming more serious about the idea of climate change as a potential threat to business in certain industries. The focus is on Exxon's recent removal from The Dow Jones Industrial Average, which illustrates the growing weakness of the oil and gas industry:

 

"When trading begins next week, the blue-chip benchmark will include only one energy stock: Chevron Corp., which will represent just 2.1% of the price-weighted index, according to an S&P Dow Jones Indices analysis. In the broader S&P 500, the group isn't faring much better: Its weighting has shrunk to less than 2.5%, leaving energy as the least influential of the 11 represented industries. That is a dramatic fall from the end of 2011, when energy stocks accounted for 12% of the market."

 

There is historical context, too, that is specific to Exxon:

 

"Although the removal from the Dow is largely symbolic—much less money tracks the 30-stock index than follows the S&P 500—Exxon's departure has historical significance. The company is the longest-tenured member of the benchmark, having joined in 1928 as Standard Oil of New Jersey. It is also a reminder of Exxon's fall from the top echelon of American industry. As recently as 2013, Exxon was the largest U.S. company with a market value above $415 billion. It has since shrunk to less than $180 billion and has been eclipsed by the technology giants such as Apple Inc., Amazon.com Inc. and Microsoft Corp. that now drive the American economy."

 

The reaction by investors to Exxon's decline is as important as the news itself:

 

"Usually, market contrarians say a sector that is so beaten down should be ripe for bargains. But many investors remain skeptical of an energy rebound, pointing to muted expectations for global growth and spotty earnings. Energy is by far the worst-performing S&P 500 sector this year, down 40% while the index as a whole has gained 6.6%. The underperformance is nothing new: Energy was also the weakest performer in 2018 and 2019."

 

Of course, this decline partly reflects the dramatic drop in oil price in recent years (accelerated this year), but also reflects the news from oil and gas companies about large write-downs this year (see Strategic CSR – BP) that, in turn, represents a growing concern that a large part of each firm's value is based on reserves they will not be allowed to extract. As such, the headline here is Exxon, but the trend is industry-wide:

 

"Exxon shares are off 41% this year, while Chevron is down 29%. The pain is even more acute among some of the oil-field services companies and shale drillers. Schlumberger has dropped 52%, and EOG Resources Inc. has fallen 47%. Only one company in the S&P 500's energy sector, Cabot Oil & Gas Corp., is up for the year."

 

For more detail about what the WSJ describes as Exxon's "stunning fall from grace," see the article in the second url below:

 

"Just seven years ago, Exxon was the biggest U.S. company by market capitalization. It has since lost roughly 60% of its value, with its market cap now at around $160 billion. … Analysts estimate Exxon will lose more than $1 billion this year, compared with profits of $46 billion in 2008, then a record by an American corporation. … At the heart of the problem: Exxon doubled down on oil and gas at what now looks to be the worst possible time. While rivals have begun to pivot to renewable energy, it is standing pat. Investors are fleeing and workers are grumbling about the direction of a company some see as out of touch and stubborn."

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

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

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

 

Exxon's Removal from the Dow Highlights Decline of Oil Sector

By Karen Langley

August 26, 2020

The Wall Street Journal

Late Edition – Final

B1

https://www.wsj.com/articles/exxons-departure-from-dow-highlights-markets-retreat-from-energy-bets-11598390465

 

Exxon's Bet on Oil and Gas Drags Down U.S. Titan

By Christopher M. Matthews

September 14, 2020

The Wall Street Journal

Late Edition – Final

A1

https://www.wsj.com/articles/exxon-used-to-be-americas-most-valuable-company-what-happened-oil-gas-11600037243

Strategic CSR - Philanthropy

I like Fast Company magazine. I find it a bit shallow, but it is useful to get a sense of current trends in business. The article in the url below is a good example – it is a response to the sudden increase in children who now need to be schooled at home:

 

"In the midst of COVID-19, schools across the country have closed their doors, and a majority of the 50 million K-12 students are now learning from home. For many, that means logging on to laptops to teleconference teachers who take digital attendance, then accessing lessons and homework to do on their own."

 

One of the main challenges this creates, of course, is that many of those children do not have access to the hardware (or internet connection) they need to study properly:

 

"The crisis will be the great stress test of digital learning, but one failure is already known: Roughly one in five teens reported having difficulty doing their homework because of a lack of access to computers and the internet. Chicago Public School principals are begging for hardware for students, while hundreds of thousands of children in NYC are still without laptops as teaching goes virtual."

 

Given this problem, the author has a potential solution:

 

"Ten million students need computers and internet access now. So who should provide it? Three of the most valuable companies in the world, each with more than $100 billion in cash for a combined pile of over $400 billion to weather the storm. Apple, Google (Alphabet), and Microsoft. Together, they could buy every vulnerable student in America a $1,000 laptop. Actually, they could buy every vulnerable student 40 laptops, or every K-12 student eight laptops, or every single American a laptop and then some. … At the bare minimum, each company could chip in $3.3 billion dollars to outfit the 10 million low-income students with a laptop or a tablet with a keyboard. Better still, these devices would be bundled with free LTE internet access."

 

And, from the author's perspective, this was not a request, but a demand:

 

"… the big three have enough cash on hand to outfit every student in America with respectable technology to learn remotely, without depleting their generous cash reserves. And let me be clear: They should. Each of these companies is individually wealthy enough to tackle this challenge entirely on their own, or they could team up. As we face this pandemic, the three greatest American technology companies should be paying back their profits, not to stockholders on dividends, but to the consumers who stacked their profits in the first place."

 

Of course, these are complicated issues and there are other nuances I could mention, but I had three responses to this core idea that came immediately to mind:

 

First, the way the article is written suggests that the money is just sitting around or would otherwise be wasted if the companies did not 'donate' it to all these kids. Of course, that is not the case, and Apple and Google are some of the largest companies investing in R&D (as well as distributing their profits to many other stakeholders in different ways). So the money is still circulating and adding value, even if the companies do not do what the author suggests.

 

Second, the key question the article raises is, which option creates the most value (and for whom)? Should the companies donate the money to help the kids or should they reinvest it in their businesses? This is the essential question from a societal perspective. Companies are not the government and do not run the educational system. That is the responsibility of the government and you could easily argue that the government could/should buy the laptops for every kid instead of buying a few nuclear weapons (not recommending that, just saying the opportunity cost is high). The 'responsibility' of the firm is to create value for its broad set of stakeholders. If a firm has an extra $1 to spare, therefore, they should invest it in the way that creates the most value for the most stakeholders. One reason for the firms' collective success (which the author seems to suggest is a gift from society), is that they already create so much value. So, you could argue that the largest benefit gained from an extra $1 would be to reinvest it in their core business – making their products and services even better than they already are.

 

This leads me to my third point: It is no doubt that the companies would create value by making this donation, but what would their 'return' be? If a fraction of those kids or their parents became lifelong fans (and customers) or future employees, maybe that would be worthwhile. The danger, from the companies' perspective however, is that 'society' would simply pocket the gift and give the companies nothing in return. This would be a very expensive way to get a headline in the papers. I think a potential 'return' on the investment could be measured in many ways (it is not simply a matter of a direct exchange of money). Customer loyalty, for example, is an 'investment' made by the customer in the company, and the company values it and returns it to the customers in terms of express delivery, better service, etc. – in other words, capitalism at its best! :-)

 

There are many new challenges we are all facing as a result of the current pandemic and associated economic dislocation. As ever, for-profit firms are often the best answer to these challenges, but we do not need to throw out economic principles in order to access those solutions.

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

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

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

 

Apple, Google, and Microsoft are failing U.S. students during the COVID-19 crisis

By Mark Wilson

March 30, 2020

Fast Company Magazine

https://www.fastcompany.com/90482278/apple-google-and-microsoft-are-failing-u-s-students-during-the-covid-19-crisis

 

Strategic CSR - Shareholder democracy

Count the article in the url below as another strike against the idea of shareholder democracy here in the U.S. Specifically, the article discusses an interesting practice that I was unaware of – share lending:

 

"[Investment firms, such as BlackRock, Vanguard, and Fidelity, who commonly hold a large percentage of a listed firm's shares] loan shares through brokers and intermediaries who act for clients unknown to the original lenders. Short sellers often borrow those shares to bet against companies, paying fees to funds that supply them with those shares. Those fees get passed back to fund investors."

 

While this is a good source of income for the funds (particularly in times of low yield, such as these), the result is that the funds are not able to use the votes associated with the loaned shares at the focal firm's annual general meeting:

 

"Investors from hedge funds to pensions make these tradeoffs all the time. For the biggest asset managers, the decision can occur on a massive scale as these firms direct trillions of dollars for investors."

 

This is particularly interesting choice for funds such as BlackRock, that have made so much noise about forcing executive teams to respond more directly to the firm's broad set of stakeholders:

 

"While investing giants have raised their voices to prod companies to address society's most pressing problems, they sometimes decide not to control the ballots that drive change. Their choice to loan out shares in some of the heavily shorted companies breaks with many people's assumption that firms overseeing economic interests in companies will cast full votes to maximize the value of the shareholdings."

 

The funds are clearly focused on the fees associated with this lending practice, while the result can be influential in determining the outcome of shareholder ballots:

 

"Many managers typically don't retrieve shares that have been lent out unless they think their vote is worth giving up income from lending out shares. The shares they put on loan are conduits for short selling. [For example,] In the last two weeks of April, GameStop has roughly 90% of shares outstanding sold short."

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

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

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

 

Investing Giants Cede Full Vote Power

By Dawn Lin

June 11, 2020

The Wall Street Journal

Late Edition – Final

B1, B10

https://www.wsj.com/articles/how-investing-giants-gave-away-voting-power-ahead-of-a-shareholder-fight-11591793863

also in full, here:

https://www.morningstar.com/news/dow-jones/202006111673/investing-giants-cede-full-vote-power-wsj

 

Strategic CSR - BP (II)

This newsletter follows-on from Tuesday's newsletter about the write-downs BP and other fossil fuel companies have made recently due to lower anticipated future oil prices and the likelihood they will be unable to extract all of the oil they currently report as reserves. This second article about BP, in the url below, looks at how the company is reacting to this new reality. Specifically, it details the beginnings of a shift away from a reliance on fossil fuel driving revenues toward a business model that gives significantly more weight to renewable energy:

 

"On a webcast with analysts [BP CEO, Bernard] Looney described a transformation plan that Stuart Joyner, an analyst at the market research firm Redburn, said in a note to clients was 'major, positive, thoughtful and largely unexpected.'"

 

More specifically, the CEO was rationalizing the new competitive environment he perceives BP faces in light of the firm's commitments on future carbon emissions:

 

"Mr. Looney, though, was more specific in his investment goals, saying that he intended for BP in a decade to be investing around $5 billion a year in renewable energy like wind, solar and hydrogen, a clean-burning gas, about 10 times the current amount. BP's capital spending is likely to be about $12 billion this year."

 

Further:

 

"He said that he wanted to reduce oil and gas production by about 40 percent in that time frame. As part of the shift, BP, whose origins date back to the discovery of oil in Iran in the early 20th century, would not enter any new countries to explore for oil and would also pare back its refining by about one-third, Mr. Looney said."

 

It is the commitment to cutting oil and gas exploration and extraction that is so notable, and something that might create pressure on other energy firms to match. BP's history of commitments in this area, however, has not been forgotten. The concern is twofold – first, that the firm intends to sound more serious than it actually is and, second, that any deception will lay the foundation for future disasters, as was the case with Deepwater Horizon in 2010:

 

"BP has aspired to be a different kind of energy company before. In 2000 it adopted the slogan Beyond Petroleum, though early forays into renewable energy lost momentum after the 2010 Deepwater Horizon accident in the Gulf of Mexico."

 

In order to achieve its goals, Looney is committing BP to focus on electricity generation and invest heavily in renewable energy:

 

"By 2030 BP plans to have about 50 gigawatts of renewable generating capacity, roughly equivalent to fifteen large modern nuclear power stations."

 

Given that BP under Looney has committed to achieve "net zero" emissions only by 2050 and that "cash from oil and gas will fund investment," this shift is going to be insufficient in itself. But, it is a beginning, and BP is the first of the fossil fuel companies to even contemplate what this new reality looks like.

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

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

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

 

After Loss, BP Vows to Diversify Beyond Oil

By Stanley Reed

August 5, 2020

The New York Times

Late Edition – Final

B4

https://www.nytimes.com/2020/08/04/business/energy-environment/bp-renewable-investment.html

 

Strategic CSR - BP (I)

This week's newsletters will focus on a couple of recent articles about BP. The first of these articles, in the url below, is interesting because, at the time, it was the first announcement I had seen by a major fossil fuel company (in this case, BP) that it is writing down a substantive amount of its oil reserves:

 

"BP sent a signal to investors … that the economic shock of the pandemic would reverberate for years, and that less gas and oil would probably be needed in the future. The London-based oil giant told shareholders the company expected to write down as much as $17.5 billion of its oil and gas holdings in its next quarterly report."

 

I think the article is important because this write-down is not merely because the firm's current reserves are worth less (due to a drop in global demand, which has caused a significant drop in the price of oil), but also because the firm fully expects to leave some of those reserves in the ground:

 

"With the write-down, which could amount to as much as 12 percent of the previous book value of the oil and gas assets, [CEO, Bernard] Looney, 49, is preparing the company for a future in which it will produce less fossil fuel than previously expected. It is likely to be the largest write-down since 2010, when the company recorded a $32 billion hit related to the Deepwater Horizon disaster in the Gulf of Mexico."

 

This is a dramatic turnaround from only a short time ago, when investors were rewarding new discoveries of oil, irrespective of the debate around climate change, with the full expectation that those reserves would be extracted:

 

"In past years, companies rushed to acquire oil and gas fields and bring the crude or natural gas to market. Now, analysts say, investors are skeptical of all but the most profitable investments in fossil fuels because it is not clear that there will be demand for them — especially as many governments strive to meet the requirements of the 2015 Paris agreement on global warming."

 

Specifically:

 

"The write-downs are being taken for two reasons. BP has cut its long-term expectations of oil and gas prices by about 30 percent, to $55 a barrel for oil, a move that reduces the value of its assets. The company is also writing off resources, in places like the Gulf of Mexico and Canada, that it has on its books but may decide not to develop over the coming decades."

 

This is essential if we are to remain within our carbon budget (see Strategic CSR – Divestment) and have any hope of preserving the planet in anything like its current livable form. And there is some evidence that this perspective is spreading through the industry, although is not shared by all firms. See here for a similar announcement by Shell, subsequently, but here for an article reporting Exxon's resistance to such a write-down of its assets.

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

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

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

 

BP Steps Up Preparations for a World That Wants Less Oil

By Stanley Reed

June 16, 2020

The New York Times

Late Edition – Final

B7

https://www.nytimes.com/2020/06/15/business/energy-environment/bp-oil-gas-write-down.html