Ratings, rankings and the world’s most sustainable company

January 26, 2012

I’m skeptical about efforts to rank and rate green or sustainable companies, and I have been for a time. [See 100 Best Corporate Citizens? What a CROck!] It’s terribly difficult to compare big and small companies, retailers with manufacturers, software firms with oil companies, etc. We once tried at FORTUNE, and gave up because we decided it couldn’t be done right.

Having said that, I’m impressed with the rigor and methodology used by a Canadian magazine called Corporate Knights to produce its 8th annual list of Global 100 Most Sustainable Companies, which it calls “the most extensive data-driven corporate sustainability assessment in existence.” The ratings are transparent and they encompass social as well as environmental metrics, among them energy, carbon, waste and water productivity, diversity and employee turnover, safety and, interestingly, the ratio between CEO and average worker pay–a revealing metric that most such rankings do not include. Disclousre: While I played no part in putting the list together, I did write a profile of Novo Nordisk, the top-ranked company, for Corporate Knights.

A couple of things to note about the list. First, US companies perform poorly. There’s not one US-based company in the top 10. Intel (No. 18) Life Technologies (No. 15) is the highest ranked US-based firm, followed by Intel (18), Agilent (59), Johnson Controls (64), Procter & Gamble (66) and IBM (69). Lest you suspect a Canadian bias, our neighbors to the north did no better. The top-ranked Canadian firm was Suncor (48), which calls itself an “oil sands pioneer. Go figure.

Of the 22 countries with companies that made the list,  the UK led the way with 16 Global 100 companies, followed by Japan with 11 and France and the US with eight. Northern European countries (Denmark, Netherlands, Norway, Sweden) punched above their weight, which isn’t surprising.

Interestingly, these more sustainable companies have outperformed their peers. Toby Heaps, CEO of Corporate Knights, said in a news release: “In a year in which Wall Street was occupied and capitalism became a bad word, the Global 100 companies serve as ambassadors for a better, cleaner kind of capitalism which, it also turns out, is more profitable.” The magazine reported:

From its inception on February 1 2005 to December 31, 2011, the Global 100 Most Sustainable Corporations has achieved a total return of 41.70%, outperforming its benchmark, (the MSCI All Country World Index at 29.30%) by more than 11%.

How did Novo Nordisk reach the top? According to Corporate Knights, the Danish pharmaceutical firm

is on record that access to essential medicines is a human right, and sells human insulin (the most basic kind) to 33 of the world’s poorest countries, at no more than 20 per cent of the average price in the western world. On the key clean capitalism metrics measured by Corporate Knights, Novo Nordisk scored top quartile performance in energy productivity ($4,851 in revenue generated per unit of energy consumption, compared to a pharmaceutical sector average of $3,603), carbon productivity ($68,585 in revenue generated per unit of carbon emitted, compared to a pharmaceutical sector average of $56,414) and pay equity (CEO/average employee remuneration ratio of 15 vs. a pharmaceutical sector average of 93). Novo Nordisk is the only pharmaceutical company within the Global 100 to report linking CEO remuneration to corporate performance on clean capitalism KPIs.

What impressed me about Novo Nordisk was how deeply sustainability issues are woven into the fabric of the company. In my story, I write about the firm’s approach to drug pricing, to climate and energy issues and to China. Here’s how the story begins:

Don’t ask Novo Nordisk for the company’s corporate responsibility report. The Danish pharmaceutical firm, which had revenues of DKK 60.7 billion (US$10.5 billion) in 2010, doesn’t publish one. Instead, Novo Nordisk reports on its environmental and social performance – including water and energy consumption, waste reduction, employee turnover, the diversity of its management team, new patent filings and charitable donations – alongside its financial performance in a single annual report.

This integrated approach to reporting reflects the way business is done at Novo Nordisk, the world leader in diabetes care and the No. 1 firm on the 2012 list of Corporate Knights Global 100 Most Sustainable Corporations. Novo Nordisk has pursued a triple bottom line of financial, social and environmental gains since the 1990s, when the phrase was coined by writer John Elkington, and it incorporated the concept into the company’s legal structure nearly a decade ago.

“The main foundation for Novo Nordisk is the triple bottom line because that is what’s protecting our license to operate,” says Lars Rebien Sorensen, the firm’s president and CEO. “That begs and obliges everybody in the company not only to see that we become a good business – that’s the financial bottom line – but that we do so in a way that is socially and environmentally responsible.”

Lise Kingo, who has worked on sustainability issues since joining Novo Nordisk in 1988, says the company’s business case for corporate responsibility goes well beyond protecting its license to operate. Today, she says, the firm envisions sustainability as a way to drive innovation, and finds that engaging with stakeholders helps spot business opportunities as well as avert trouble. One sign of the value that the company places on sustainability is the fact that Kingo, 50, has been part of Novo Nordisk’s five-person executive management team since 2002.

You can read the rest here.

And, speaking of rankings, I was pleased once again to be named to the Ethisphere Institute’s 100 Most Influential People in Business Ethics. Lists are fun so long as we don’t take them too seriously. (Really, how do you compare the influence of federal prosecutor Preet Bharara, Russian blogger Alexei Navalny and Walmart CEO Mike Duke, all of whom are in the top 15?) Still, some of the business people on the list whose work I know certainly deserve to be spotlighted, including Starbucks’ Howard Schultz, Coca-Cola CEO Muhtar Kent, Jeffrey Swartz of Timberland, Brian Dunn of Best Buy, Yalmaz Siddiqui of Office Depot and Bob Corcoran of GE. I was also thrilled to see my friend Liz Maw, the executive director of Net Impact (where I’m on the board), be recognized for the great work that she, her staff and the organization are doing.

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The place in your house you don’t like to go

January 24, 2012

I spent the day today at the GreenBiz Forum 12 in New York. I’m a senior writer at GreenBiz, which does a great job producing events. I interviewed Dan Hendrix, the CEO of Interface, who’s picking up where the company’s legendary and visionary founder, Ray Anderson, left off; more here. And I wrote about Israel Ganot, the co-founder and CEO of Gazelle, a fast-growing startup that recycles electronics. Please read this story if, like many of us, you don’t know what to do with your old gadgets. I first covered Gazelle back in 2009. [See Cash for (electronic) clunkers.]

Here’s how the story begins:

Think, for a moment, about that one place in your house where you don’t like to go.

That closet. The garage. In my house, it’s the attic. Ugh.

The place where you put stuff you no longer want or need.

“How much is enough?” asks Israel Ganot.

Ganot, who is the president, co-founder and CEO of Gazelle, spoke today at the GreenBiz Forum 12 in New York. He has a way to help you de-clutter your home, at least when it comes to electronics. Gazelle buys back cell phones, laptops and other electronics, offers free shipping and then pays you for them. Gazelle makes money by reselling the used goods in the U.S. or abroad. What it can’t resell, it recycles.

“We give new life to old gadgets that still have value,” he says.

You can read the rest here.

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Climate change: It’s time to get ready

January 22, 2012

This blogpost about climate preparedness is part of the 2012 State of Green Business Report, published by GreenBiz, where I’m a senior writer. You can download a copy of the full report here.

Last December, government officials, corporate executives and activists met in Durban, South Africa, for high-level climate talks. They went home with an agreement … to keep talking. Meanwhile, we’re emitting more carbon dioxide every year, and atmospheric concentrations of greenhouse gases are steadily rising. If CO2 levels were somehow to stabilize now–they won’t–the world will keep warming. The bottom line: Climate change is inevitable. The world needs to learn how to prepare for it.

Increasingly, smart businesses are starting to do just that. Utilities, the oil and gas industry, agricultural companies and insurers are building assumptions about rising temperatures and extreme weather events into their scenario planning. This is what’s being called climate adaptation or climate preparedness.

The payoff from investing in adaptation could be substantial.  In 2011, insured losses in the U.S. from natural catastrophes, including tornadoes, floods and hurricanes, topped $105 billion, breaking the record of $101 billion set in 2005, the year of Hurricane Katrina, according to Munich Re, the world’s largest reinsurance firm. Some of those losses had nothing to do with climate change, but others did. [click to continue…]

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The sharing economy and me

January 18, 2012

You can rent this penthouse in Rio for $258/night on AirBnB

You hear a lot these days about the sharing economy and collaborative consumption, especially if you spend time in northern California. I spent last week in San Francisco, where people told me about AirBnB, which allows people to share their homes or apartments with visitors, RelayRides,  Share My Ride and getaround, which allow people to rent their cars for a few hours or days, and ThredUp, where parents buy, sell and share children’s clothes, toys and books. Meantime, Prosper.com and Lending Club connect people who want to lend money with those who want to borrow. With peer-to-peer lending, who needs Citi or Bank of America?

Last year, Fast Company published a thoughtful and well-reported overview of the sharing economy by Danielle Sacks under the headline: “Thanks to the social web, you can now share anything with anyone anywhere in the world. Is this the end of hyperconsumption?” More than 3 million people from 235 countries have “couch-surfed,” she reported, and more than 2.2 million bike-sharing trips are taken each month.

Many sharing websites, like Freecycle and Couch Surfing, are nonprofits. Seattle and Berkeley have tool libraries, where people can borrow a lawn mower, power saw or drill. But other sharing ventures are business. Some analysts expect the sharing economy to generate real money, Fast Company reported:

Gartner Group researchers estimate that the peer-to-peer financial-lending market will reach $5 billion by 2013. Frost & Sullivan projects that car-sharing revenues in North America alone will hit $3.3 billion by 2016.

I’ve always liked the idea of sharing–hey, I paid attention back in kindergarten–because of its obvious environmental benefits: The more we share, the less stuff we need to own. But I’ve been skeptical of the claim that the sharing economy would end–or even slow down–hyperconsumption. My week in San Francisco made me less of a skeptic. This idea just might spread. [click to continue…]

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Pennies down the drain

January 15, 2012

Imagine if you had to put a quarter in a slot every time you took a shower at home. Or 50 cents to run the dishwasher. Or $2 to water the grass.

You’d think about water differently, wouldn’t you?

A San Francisco startup called WaterSmart Software wants to remind people that wasting water is wasting money, and to show consumers how to conserve both.

“People don’t have a mental image of pennies going down the drain,” says Peter Yolles, a founder and CEO of WaterSmart Software, which is based in San Francisco.

But they should.

“We’re helping the consumer save money,” Yolles says. “And we’re helping the utility save money.”

WaterSmart is a small company–just six people–that wants to help tackle a very big problem: Fresh, clean water is a finite resource. As populations grow, incomes grow and the planet warms, water scarcity will create business opportunities.

If you’re like me (and I hope you’re not in this instance), you know very little about your water use. I just checked my quarterly bills for the past 12 months and found that I paid $994.21 for water, or $82.85 per month. That’s higher than I thought and, unfortunately, quite a bit higher than the average bill for US households of about $50 month, according to WaterSmart.

What’s more, Yolles tells me, the water bill is “the fastest growing bill in your home,” faster then the electricity or even the cable bill.

Here’s a chart showing typical household water use:

You may be surprised, as I was, to see how much usage comes from leaks and the toilet as opposed to say, the dishwasher, which doesn’t merit its own slice of the chart. (This is from a 1999 study.)

WatersSmart software aims to give people, first, more information about their water use and then, second, advice on how to use water more efficiently. Using billing information from water utilities, along with real estate, climate and geographic data, WaterSmart will compare a household’s water use with the neighbors in a friendly, easy-to-use format, on line and in print. It’s similar in concept to a fast-growing startup called OPower which promotes energy conservation. [See my 2010 blogpost, Opower, peer presssure and climate change.) [click to continue…]

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SABMiller: Beer at the bottom of the pyramid

January 12, 2012

In the developed world,  brewing giant SABMiller, whose global brands include Miller, Peroni, Grolsch and Pilsner Urquell, competes with the even bigger brewing giant Anheuser-Busch InBev, which owns Budweiser, Beck’s, Stella Artois and Michelob. They’re the Pepsi and Coke of beer, which, by the way, is the world’s third most popular drink, after water and tea.

But in Africa, SABMiller’s biggest competitor is the guy (or gal) who makes beer at home. That’s a big reason why the company, which had revenues of $28 billion last year, recently began selling Impala, a beer made from cassava, in Mozambique. Similarly, for about a decade, SABMiller has been selling Eagle Lager, a beer brewed with sorghum, in Uganda.

Using local like cassava and sorghum crops appeals to local tastes, supports local farmers and keeps costs down so SAB Miller can price its beer lower to compete with homemade brews.

“By using locally-sourced raw materials, we can make high-quality, but affordable products for consumers who would otherwise be drinking informal or illicit alcohol. So the long term commercial opportunities are significant,” Andy Wales, SABMiller’s global head of sustainability, told me in an email interview.

Beer at the bottom of the pyramid, you could call it.* [click to continue…]

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Which side are you on? The solar trade wars

January 8, 2012

Should we worry about Chinese government subsidies to its solar industry? Or send the Chinese a thank-you note?

A group of seven US-based manufacturers of solar panels is alarmed. These manufacturers, led by Solar World, a German firm with a plant in Oregon, filed a complaint with the United States International Trade Commission, which reached a preliminary conclusion in December that US companies were, in fact, being harmed by subsidized imports. If the Commerce Department goes on to find that Chinese firms have been dumping solar panels on the US market at prices below their costs, it could impose steep tariffs of 50 to 250% on Chinese panels, according to this report in The Times by Matt Wald. The Chinese government provides billions of dollars of low-cost financing and free or cheap land to Chinese solar firms.

Jigar Shah

But much of the solar industry–led by Jigar Shah, the founder of Sun Edison, entrepreneur and environmental advocate–thinks this complaint is a terrible idea. Tariffs  would raise the costs of solar power to US business and consumers, at a time when those are coming down; they could also set off a solar trade war that would harm other US solar companies.

As it happens, the U.S. had a trade surplus of nearly $1.9 billion in the solar sector with China in 2010, as exports of raw material and factory equipment more than offset imports of finished solar panels, according to the Solar Electric Industries Association,. What’s more, Jigar says, most of the 100,000 or so jobs in the US solar industry — he says as much as 97-98% — are downstream of the manufacturing business in project development, logistics, construction and installation.

“SolarWorld’s petition will do far more damage than good to the U.S. solar industry as a whole,” Jigar wrote in this letter to Gordon Brinser of Solar World. “Every morning, thousands of hard-working Americans put on their tool belts and go build solar power plants. Our country needs more of those jobs, not fewer.”

What got me thinking about this brouhaha was an email the other day from a California company called Solar Power Inc., or SPI, that underscored for me just how committed the Chinese are to getting their solar panels onto rooftops in the US.  SPI said it had secured construction financing worth $44 million from the state-owned China Development Bank to fund construction of solar projects in New Jersey. [click to continue…]

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The eerie quiet of the insurance industry

January 5, 2012

If there’s one industry that ought to be concerned about the threat of global warming, it’s the insurance industry. OK, the ski industry, too, but I digress.

Dave Jones, California’s insurance commissioner, recently put it this way: “Climate change is an obvious physical threat to us all, but increasingly it also poses a serious financial threat to the insurance industry…” When extreme weather causes damage, insurers pay.

So you’d expect insurance companies to be among the most forceful voices in corporate America calling for the regulation greenhouse gas emissions.

Uh, no. They’ve been eerily quiet.

And, at the least, you’d expect them to be proudly steering some of their massive investments to clean energy or energy efficiency projects aimed at reducing emissions of greenhouse gases.

Wrong again.

“It’s surprising, in a sense, because they have so much to lose from climate change,” says Sharlene Leurig, senior manager of the insurance program at Ceres, a nonprofit coalition of investor and environmental groups. But, she notes, insurance is a conservative business. The industry is all about risk, but it doesn’t want to take the risk of speaking out on climate change. [click to continue…]

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Climate, insurance and the next financial meltdown

January 4, 2012

Miami Beach oceanfront properties

Well-to-do Brazilians are buying up luxury condos on the beach in Miami, The Times reported last week. “They are taking Miami by storm,” one real estate executive declared.

It’s an unfortunate metaphor.

That’s because, sooner or later, storms will likely damage or destroy much of the property on the Florida shoreline. And, while a beachfront real estate revival may be welcomed by developers who, according to the Times, are “starting or restarting ambitious condo projects,” the risks are being borne not by the developers or by the condo buyers or even by private insurance companies but, for the most part, by a state-run, not-for-profit, tax-exempt corporation called the Citizens Property Insurance Company. Citizens has become the biggest insurance company in Florida since it was created in 2002, and many of its policies ($232 billion worth, according to a 2009 story in the Miami Herald, referenced here) are written on riskier, coastal properties. As a government-sponsored entity, Citizens has the implicit backing of Florida taxpayers who, you can be sure, will turn to the rest of us for help if the big one hits.

“Who’s on the hook when a wall of water hits the coast of south Florida? You and me,” says Sharlene Leurig, senior manager of the insurance program at Ceres, a nonprofit alliance of investors and environmental groups. Her  job is to raise awareness of climate risk within the insurance industry, and to prod the industry to respond.

It’s not just a problem in Florida–many states are assuming the risk of natural disasters, despite the rising costs of extreme weather events, which are more frequent and more severe because of climate change, scientists say. So is the federal government: The National Flood Insurance Program (NFIP) has $1 trillion in exposure, according to Ceres, and it’s $20 billion in debt. Although no individual storm can be attributed to climate change, the rising prevalence and intensity of storms, floods, droughts and wildfires are consistent with what scientists say can be expected as global temperatures rise.

Sharlene Leurig

Today, I’m devoting the first of two blogposts to the insurance business and climate change. Have another cup of coffee if you must, but this is important. According to Leurig and a September 2011 report from Ceres, the insurance industry has yet to fully recognize the risks posed by climate change. This isn’t just their problem. It’s ours because what Ceres describes as he industry’s “sluggish and uneven response to the ever-increasing ripples from global climate change” threatens not just the insurance business but the stability of the global economy.

[click to continue…]

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Why I’m (still) an optimist

January 1, 2012

Happy New Year! And good riddance to 2011, a year during which we made little or no progress on some of the issues that I care most about: climate change, the long-term federal debt, social mobility (aka the American dream), and our dysfunctional Congress. Yet I remain an optimist.

Texas drought 2011

I could write many words about our woes. Instead, I’ll try to be succinct. On the climate issue, global emissions of carbon dioxide from fossil-fuel burning jumped by the largest amount on record in 2010, we learned recently, and 2011 surely brought further increases.  Concentrations of CO2 are 39% above where they were at the start of the industrial era and approaching the point when some scientists say it will be nearly impossible to contain global warming, the Guardian reports. Neither the US nor the UN moved closer to regulating CO2. In a discouraging development, Republicans Mitt Romney and Newt Gingrich backed away from their once-sensible support of greenhouse gas regulation, in what can only be seen as shameless pandering to the know-nothing wing of the Republican Party. Discouraging, too, was the Fukushima nuclear disaster, which will slow down the growth of carbon-free nuclear power. So will the failure of Solyndra. Meanwhile, the U.S. suffered massive flooding of the Mississippi and Missouri Rivers, a terrible drought in Texas, record wildfires and at least 2,941 monthly weather records that were broken by extreme events, according to the NRDC.. Coincidence? Uh, no.

Like the atmospheric concentrations of CO2, the federal budget deficit has been growing.That’s no coincidence either. We’re living beyond our means, whether by burning fossil fuels or taxpayer dollars, and sticking future generations with the cleanup bill. Just last week, the White House asked for a $1.2 trillion increase in the federal debt limit, raising it to about $16.4 trillion. According to Marketplace Radio, that amounts to about $52,000 for every American. For a typical  family of four, that’s bigger than the mortgage. [click to continue…]

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