Strategic CSR - Culpability

The article from The Economist in the url below captures the "tragedy of the commons" element of the climate change problem very effectively. First, a statement of the obvious:

"The vast majority of readers of The Economist would recoil at the idea of stealing from a poor Malian goatherd or a struggling Bangladeshi farmer. Next to none would countenance murdering such a person. They would feel little differently if they committed these crimes as part of a mob, rendering the responsibility diffuse. Nor would they feel much better if their actions were only likely, but not certain, to do blameless strangers serious harm: they would not scatter landmines in a populated area, for instance."

Second, the author extrapolates the metaphor to incorporate the very real nature of climate change:

"How, then, should we think about readers' (and your correspondent's) responsibility for global warming? Almost every human activity involves some emissions of greenhouse gases. Global warming is already harming the livelihoods of many people, including lots of poverty-stricken goatherds and farmers. At the extremes, the increasing frequency and intensity of droughts, floods, storms and heatwaves brought on by global warming is killing people—a tragedy that will get worse as the planet bakes. Are rich Western consumers thus conniving in theft and murder?"

While establishing individual culpability is challenging (and, perhaps, a red herring), it is real in a very tangible way:

"… during the course of their lives, wealthy Western consumers generate a lot of emissions. Estimates of the damage done vary widely, but none concludes it is insignificant."

Specifically?

"In 2011, John Nolt, a philosopher at the University of Tennessee, estimated that a typical American, born in 1960, would be responsible for enough greenhouse gas emissions over his or her lifetime to cause between one and two deaths. John Broome, another philosopher, things the typical Westerner shortens a human life by six months. Either way, it is a grim thought. And that is only the average. Drive a gas-guzzling car, heat or cool a big house or fly a lot and your rap sheet gets worse."

Happy Halloween, everyone.

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 

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The Green Man's Burden: The Moral Philosophy of Climate Change

December 23, 2023

The Economist

Late Edition – Final

39-41

https://www.economist.com/christmas-specials/2023/12/20/what-responsibilities-do-individuals-have-to-stop-climate-change

 

Strategic CSR - Patagonia

The article in the url below provides some details on the opaque organizing structure that Yvon Chouinard created for Patagonia when he relinquished control of the company, in 2022 (different, but no doubt related, to its decision to restructure as a Benefit Corporation, in 2021; see Strategic CSR – Patagonia). As Chouinard announced at the time (somewhat inaccurately, but still worth reading), "Earth is now our only shareholder." I noted the decision when it became public, but did not understand anything about the scale and potential impact of the decision – something Patagonia deliberately does not advertise and, as illustrated in Chouinard's original statement, left vague:

"Here's how it works: 100% of the company's voting stock transfers to the Patagonia Purpose Trust, created to protect the company's values; and 100% of the nonvoting stock had been given to the Holdfast Collective, a nonprofit dedicated to fighting the environmental crisis and defending nature. The funding will come from Patagonia: Each year, the money we make after reinvesting in the business will be distributed as a dividend to help fight the crisis."

Right, as clear as mud, which brings us back to the article that is the focus of today's newsletter, which is the first somewhat detailed analysis of how things have been working out, ever since:

"Patagonia, the outdoor apparel brand, is funneling its profits to an array of groups working on everything from dam removal to voter registration. In total, a network of nonprofit organizations linked to the company has distributed more than $71 million since September 2022."

And from, moving forward:

"Patagonia paid an initial $50 million dividend to Holdfast in 2022. It made another payment to Holdfast last year. … Each year going forward, Patagonia will transfer all the profits it does not reinvest in the company to Holdfast."

Given the amount of money that is being distributed, along with the ideological nature of the causes, Hodfast's activity is beginning to attract some attention:

"Holdfast Collective created and manages five nonprofit groups — Holdfast Trust, Chalten Trust, Sojourner Trust, Wilder Trust and Tail Wind Trust. They are registered under a section of the tax code, 501(c)(4), that allows them to make unlimited political donations, provided their primary purpose is social welfare. The nonprofit groups, which pay management fees to Holdfast Collective, hold 98 percent of Patagonia's nonvoting shares. The shares are valued at $1.7 billion but will not be sold."

One of the founding principles of the structure is that it has to distribute all the money it receives from Patagonia, every year, and does not try and carry over any funds. This means they are able to distribute broadly to other organizations deemed sympathetic to the causes Chouinard cares about, even if they don't directly work to sustain the environment:

"And there was a slew of political contributions last cycle, including $100,000 each to Senate Majority PAC and House Majority PAC, which work to elect Democrats to Congress, as well as smaller gifts to groups such as the Black Voters Matter Fund, the Center for American Progress Action Fund and the Georgia Investor Action Fund."

There are lots more details about Holdfast's activities in the article, but I primarily enjoyed learning more about how it came about, and the selfless act by Chouinard to protect what he and his wife had created, for the foreseeable future:

"Because the Chouinards did not sell the company and retain the proceeds or leave the company to their children, they did not face a significant tax bill. And because they donated the shares to 501(c)(4) organizations, they did not receive a substantial tax write off. Instead, the family paid about $17.5 million in taxes to facilitate the transaction in 2022."

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/

At Patagonia, Profits Fund Preservation

By David Gelles and Kenneth P. Vogel

February 12, 2024

The New York Times

Late Edition – Final

B1, B2

https://www.nytimes.com/2024/01/30/climate/patagonia-holdfast-philanthropy.html

 

Strategic CSR - Airlines

The article in the url below covers the issue of sustainability in the airline industry and the current U.S. administration's attempts to incentivize the development and widespread use of sustainable aviation fuel (SAF):

"The best thing for the planet would be for everyone — particularly the most frequent flyers, responsible for the majority of emissions — to fly less. Airlines and government officials around the world, though, are vowing that commercial flight can grow while sharply curtailing its climate footprint. Their plans hinge on using vast quantities of sustainable aviation fuel. In the US, the Biden administration and airlines have trumpeted a goal to use 3 billion gallons of SAF by 2030."

Perhaps not surprisingly, the article also notes the reality of how far we are lagging behind that goal:

"The supply of cleaner jet fuel, though, is still only a trickle. US volumes hit 24.5 million gallons last year. That's an uptick from the 2.4 million gallons produced in 2019. But to reach the industry's goal by decade's end, airlines would need to somehow increase SAF consumption by 122-fold."

The chart accompanying the article demonstrates how far off track we currently are:

 

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 Airline Industry's Biggest Climate Challenge: A Lack of Clean Fuel

By Ben Elgin

April 11, 2024

Bloomberg

https://www.bloomberg.com/news/articles/2024-04-11/united-british-airways-search-for-sustainable-aviation-fuel-to-reach-net-zero

 

Strategic CSR - Google

The article in the url below is, on the face of it, a step back in Google's environmental performance:

"Google has ended its mass purchase of cheap carbon offsets and thus stopped claiming that its operations are carbon neutral, according to the tech giant's latest environmental report. The company now aims to reach net-zero carbon emissions by 2030. The Alphabet Inc. unit has claimed that it's been carbon neutral in its operations since 2007. The status was based on purchasing carbon offsets to match the volume of emissions that were generated from its buildings, data centers and business travel. But in its latest report, the company states: 'Starting in 2023, we're no longer maintaining operational carbon neutrality.'"

In reality, however, I think it represents a mature step in the way that we think (and talk) about reducing carbon emissions. In other words, it suggests Google is serious about reducing actual emissions, not simply trying to cover up emissions by purchasing ineffective carbon offsets (most of which are symbolic, if not downright fraudulent):

"It's a sign of a company learning to adapt to strengthening sustainability criteria. 'In line with a changing market — including a more robust carbon-removal ecosystem we helped catalyze — we've shifted our strategy,' a Google spokesperson said. 'We aim to avoid or reduce greenhouse-gas emissions to reach our absolute emissions reduction target.'"

In general, the carbon environment is getting tougher for any company that is involved with A.I. (see Strategic CSR – Three Mile Island):

"The changes to its carbon credits purchase strategy have coincided with Google and Big Tech's push on artificial intelligence, which Bloomberg News investigation has shown is extremely resource intensive. As a result, Google's total planet-warming emissions in 2023 are 48% higher than 2019. In that period, its total energy consumption has doubled."

But, this does not dismiss the heightened honesty with recognizing the carbon offset industry for what it is (see Strategic CSR – Carbon offsets):

"The definition of carbon neutral is when an entity balances its planet-warming emissions with techniques that draw down the same amount of carbon dioxide from the air. However, most companies making carbon-neutral claims today rely on cheap offsets — where one credit equals a ton of emissions — that are derived from projects that claim to protect forests or deploy clean energy and avoid the production of emissions. While those are actions that should help the world tackle climate change, experts have found that the purchase of the emissions-avoidance offsets does little to actually reduce emissions. Many deforestation projects exaggerate their claims, while most renewable energy plants would have been built without the small sums raised by the offset purchased. That's why most carbon-neutral claims from companies and products are questionable."

And Google has been a large contributor to the problem, previously:

"In 2022, Google bought nearly 3 million tons of such offsets to counterbalance its direct emissions and business-travel emissions. Though the company did not declare what specific projects those offsets came from, its sustainability report stated that the credits were verified 'under the Climate Action Reserve (CAR), American Carbon Registry (ACR), Verified Carbon Standard (VCS), or the UNFCCC Clean Development Mechanism.'"

This step is much more than a change in tone. It is a significant reassessment of its substantive understanding of the underlying problem:

"After offsets-based claims from companies came under scrutiny, Google stated in a Bloomberg Green story in 2021 that it aimed to reach carbon neutrality without offsets. But now, instead of bulk purchase of emissions-avoidance offsets, Google says it's going to focus on absolute reductions in emissions and buy carbon-removal credits for its residual emissions. These tend to be more expensive, but also have greater chance of verifiably drawing down carbon dioxide from the air."

In other words, a meaningful step 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/

Google Is No Longer Claiming to Be Carbon Neutral

By Akshat Rathi

July 8, 2024

Bloomberg

https://www.bloomberg.com/news/articles/2024-07-08/google-is-no-longer-claiming-to-be-carbon-neutral

Strategic CSR - Methane

Among the many reasons to be frustrated with the corporate conversation around ESG (and sustainability, in general) is the disproportionate attention focused on carbon, rather than other greenhouse gasses, such methane, which is so much more damaging in the short term (e.g., see Strategic CSR – Methane). This narrow focus can result in less pressure to set targets and less oversight of performance, even when targets are set:

"The United States' booming fossil-fuel industry continues to emit more and more planet-warming methane into the atmosphere, new research showed, despite a U.S.-led effort to encourage other countries to cut emissions globally."

This is particularly ironic, given the leading role the U.S. played in setting global limits on the emissions of this gas:

"Methane is among the most potent greenhouse gases, and 'one of the worst performers in our study is the U.S., even though it was an instigator of the Global Methane Pledge,' said Antoine Halff, the co-founder of Kayrros, the environmental data company issuing the report."

One reason could be where methane (relative to carbon) is emitted in the supply chain:

"Unlike carbon dioxide, methane emissions don't derive from consumption, but rather from production and transportation of the gas, which is the main component of what is commonly known as natural gas. Methane can leak from storage facilities, pipelines and tankers, and is also often deliberately released. Methane is also released from livestock and landfills, and occurs naturally in wetlands."

The lack of oversight has produced predictable results:

"The concentration of methane in the atmosphere is now more than two-and-a-half times as much as preindustrial levels, and more than half of the world's methane emissions are man-made."

Why methane has remained overlooked, however, is less important than the consequences of it having been so:

"Its presence in the atmosphere dissipates in roughly 12 years, a relatively short span of time, but numerous studies point to its heat-trapping effects as being as much as 80 or more times stronger than carbon dioxide's. That means it can have more immediate consequences for the climate."

What is consistent in the debate (as with most sustainability issues), though, is the degree to which everyone says they are willing to act, but then fails to do so meaningfully:

"In 2021, the United States was among the first signers and promoters of the Global Methane Pledge, which set a target of reducing global, man-made methane emissions by 30 percent from 2020 levels within a decade. The pledge has been signed by 158 countries. '2030 is rapidly approaching, though, and emissions are still being released in huge amounts,' said Mr. Halff. 'This seems in large part because oil and gas production is surging both in the U.S. and elsewhere.'"

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/

Despite a Global Pledge of Reduction, U.S. Emissions of Methane Keep Climbing

By Max Bearak

September 20, 2024

The New York Times

Late Edition – Final

A18

https://www.nytimes.com/2024/09/19/climate/us-methane-greenhouse-gas.html

 

Strategic CSR - Trees

The other day, I was looking through some old newspaper cuttings and ran across a quote in the Financial Times that was attributed to "an African proverb," which I thought you would all enjoy:

"The best time to plant a tree is 20 years ago. The second-best time is now."

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/

 

Strategic CSR - Three Mile Island

The article in the url below, covering the revival of Three Mile Island (the site of the worst nuclear accident in the U.S.), is interesting for a few reasons. First is that it can be revived at all – I had no idea it was only one reactor that failed – a second one is perfectly usable and had been operating up until a few years ago:

"Three Mile Island's undamaged Unit 1 reactor sits next to Unit 2, which was shut down after a partial core meltdown in 1979 led to five days of panic. The incident heightened awareness of nuclear plants' potential safety problems and contributed to a loss of enthusiasm for the industry that lasted decades. But the 835-megawatt Unit 1 continued operating and closed only under economic pressure five years ago."

 

The issue appears to have been the growing competitive pricing of renewable energy sources:

 

"Years of flat U.S. power demand had created a bruising battle for market share. Nuclear plants had a tough time competing against renewable energy and natural-gas-fired plants that tapped into a cheap source of fuel from the U.S. shale boom."

The second reason is Microsoft's creative decision to fund this revival in the form of an exclusive energy supply:

"Constellation expects to spend around $1.6 billion to restart the reactor by early 2028. Microsoft has signed a 20-year power-purchase agreement with Constellation, the companies said Friday. The deal would help Microsoft pair its 24-7 electricity use with a matching source of nearby clean power generation."

As a related story in Bloomberg noted:

"Microsoft has agreed to purchase the energy for two decades and declined to disclose financial terms. This is the first time Microsoft has secured a dedicated, 100% nuclear facility for its use."

And the third reason is what is driving the demand from Microsoft:

"A deal between Constellation Energy and Microsoft will restart Pennsylvania's Three Mile Island, the site of the country's worst nuclear power accident, to help power the tech giant's growing artificial intelligence ambitions. Under the agreement, Constellation would revive the plant's undamaged reactor, which was too costly to run and closed in 2019, and sell the power to Microsoft. The plan signals the gargantuan amount of power needed for data centers for AI, along with the tech industry's thirst for a carbon-free, round-the-clock electricity source needed to meet climate goals."

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/

Three Mile Island's Rebirth: Microsoft AI power Source

By Jennifer Hiller

September 21-22, 2024

The Wall Street Journal

Late Edition – Final

A1, A9

https://www.wsj.com/business/energy-oil/three-mile-islands-nuclear-plant-to-reopen-help-power-microsofts-ai-centers-aebfb3c8

 

Strategic CSR - Clean tech

The graphic and quotes below were embedded in the April 11, 2024 issue of the Bloomberg Green newsletter, arguing that China's dominance of core technology in the sustainability space is increasing, with rapid investment having "pushed China's share of global production capacity above 80% in 11 clean technology value chain segments." The graphic accompanying the point, generated by BloomberNEF) is compelling:

It is important to note that this is data presented on a selected set of 11 technologies, so is certainly not everything. Nevertheless, the technologies on the list all seem central to any attempt by other countries around the world to develop a more sustainable economy, and with whom many of which China has strained relations (e.g., Strategic CSR – Geopolitics).

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/

Strategic CSR - Sweatshops

Ever since we have had greater awareness of the global supply chain, and the low wages that drive it (and underpin the cheap prices we pay in the West for much of our clothing), there has been pressure on fashion firms to pay their contracted workers more. An important point along the way was the Nike sweatshop scandal of the 1990s, but nothing much has changed since, as noted in the article in the url below. What never ceases to amaze me, however, is the scale of the operation required to sustain the mass market fast fashion industry:

"In Bangladesh, the nearly 600,000 people making clothes for Swedish giant H&M—one of the biggest retailers in this space to start talking about paying living wages—earned an average of $119 a month in the first half of 2023, excluding overtime, the latest available data shows. That is well below the $194 living-wage figure for the suburbs of Dhaka, the capital, where clothing factories are clustered, according to the Global Living Wage Coalition, a research and advocacy group whose benchmarks are widely used in the industry."

The implications of these pay levels?

"At those income levels, workers say they have no savings. Often, they borrow from relatives to cover medical expenses or meet unforeseen emergencies. Some months, they even buy food on credit. Frustration over low wages boiled over in October when workers in Bangladesh set factories ablaze and smashed machines in protest."

The article makes the case that firms would like to change that, but are not sure how best to do that:

"[Western fashion companies] generally don't own the factories where their products are made and don't determine pay for workers. They say they don't want to go down the road of imposing specific wage levels on supplier factories. Instead, they have tried other solutions. H&M, for instance, brought Swedish study circles to Bangladesh to train workers in negotiation, experimented with model factories and pushed for more transparent pay structures for workers."

What is required, argue advocates, is exactly the coercive methods the companies are saying they want to avoid:

"What will work … is setting a higher wage level supplier factories must meet and a clear schedule for phasing in those higher wages."

The companies instead advocate for self-sufficiency:

"H&M said it agrees wages are too low in many sourcing markets, but that setting wage levels for suppliers is a 'shortsighted tactic that undermines the role of workers, unions, employers' organizations and governments.' They, and others like Zara-owner Inditex, stress the importance of workers negotiating higher pay for themselves via collective-bargaining agreements, where labor unions hammer out higher wages with employers."

The problem is whether the infrastructure for such agency exists (let alone the training to know how best to self-advocate):

"… in many of the places Western brands buy from, such as China, Vietnam and Bangladesh, independent unions are either banned or repressed. A review of Inditex disclosures shows just 3% of its supplier factories in Asia have collective-bargaining agreements."

The key barrier to progress, of course, is whether the higher costs that lead to higher prices will be supported by customers in the West. In other words, are they willing to pay more for their clothes, so that the workers who made them can be paid something close to what Western consumers say they want them to be paid?

"Part of the problem is low wages are core to fast fashion. It is no coincidence that Bangladesh, the world's second-largest exporter of clothes, is also the place where workers who make clothes earn among the lowest wages of industrial workers anywhere. To sell shorts and shirts cheaply—and increasingly, compete with so-called ultrafast fashion brands like China-founded Shein, known for their rock-bottom prices—clothing giants pressure their suppliers to keep costs down."

The key point:

"Insisting on higher wages would mean paying more for the clothes and potentially putting themselves at a competitive disadvantage if other companies aren't making similar moves."

Which is another way of saying that the companies do not have faith their consumers are willing to pay (even slightly) higher prices to support the working conditions they say they want for these workers:

"German shoemaker Puma said in its 2022 annual report that its factories in Pakistan and Bangladesh—accounting for roughly an eighth of its total products—don't pay a living wage. Even California-based Patagonia, known for its progressive ethos, says that of the 29 factories it bought clothing from, only 10 paid a living wage in 2022."

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/

Fashion Firms Still Wrestle with How to Pay Workers a Living Wage

By Jon Emont

January 4, 2024

The Wall Street Journal

Late Edition – Final

B2

https://www.wsj.com/business/big-fashion-still-hasnt-figured-out-how-to-pay-a-living-wage-3675153f