May 2010

The business of rating business

May 30, 2010

good-better-bestIs Coca Cola a more sustainable company than PepsiCo? Which company is greener, Dell or Hewlett Packard? Both UPS and FedEx say they are environmental leaders—who’s right?

Underwriters Laboratories (UL) — one of the world’s oldest and most respected standard-setting organizations — is going to help settle some of those arguments.

In cooperation with Greener World Media – the publisher of Greenbiz.com, where I’m a senior writer — UL plans to launch a ratings system for companies by the end of the year. This is a big deal because it could help bring credibility and clarity to the very crowded and confused business of sustainability ratings, rankings and eco-labels.

The news that Greener World Media and UL are working together on a sustainability standard surfaced last week when Marcello Manca, the vice president and general manager of UL Environment, spoke on a panel at the Amsterdam Global Conference on Sustainability and Transparency convened by the Global Reporting Initiative (GRI). At the same time, my friend Joel Makower, the founder of Greener World Media, wrote a detailed blogpost, explaining the origins of the project, which go back to the early 2000s.  Joel calls the new venture “LEED for companies,” saying:

We’ve long described this in shorthand as “LEED for Companies” — that is, a point-based rating system along with good-better-best levels of certification. We have been inspired by the success of the U.S. Green Building Council’s LEED green building rating systems, which created definitions of “green building” where there were none. Those ratings systems were critical catalysts in spurring the green-building market. Similarly, we believe this new standard and rating system will help define sustainability at the enterprise level, growing markets for certified companies.

If all goes according to plan, the new ratings system will rise above the crowd because it combines the knowledge and networks of Joel and Rory [click to continue…]

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The next debt crisis will be ecological

May 27, 2010

one_earthAnyone who paid attention learned a lot from the global financial crisis of 2008. Here are three lessons that were burned into my brain:

1. Live within your means. Debt creates risk. When homeowners, investors or banks take on lots  of debt, and something goes awry—and it will—they will pay, big time.

2. We’re interdependent. It’s not only those who take foolish risks who will pay; the rest of us will, too.  The global financial system, for better or worse, is so interconnected that failure in one sector can become contagious.

3. Accounting matters. People at the banks didn’t understand what they owned, what it was worth or the risks. They got the numbers wrong.

All of this comes to mind this week because I’m attending (and speaking at) the Amsterdam Global Conference on Sustainability and Transparency of the Global Reporting Initiative (GRI). That’s a lot of words to describe an event that is, at heart, about…living within our means, understanding that we are interdependent and getting the accounting right.

Only this time the piling up of debt, failure to see connections and shaky accounting isn’t just about money. It’s about the earth. We’re living way beyond our ecological means.

What’s more, if you thought the meltdown we just went through was bad, well, just wait for the next one. Who’s going to bail out the earth if it can no longer support us in the ways to which we have become accustomed? Mars? Venus? [click to continue…]

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Chef to the rich, advocate for the poor

May 25, 2010

Herbs at the Dupont Circle farmers market in Washington

Herbs at the Dupont Circle farmers market in Washington

Can you think of a simple idea that would fight obesity, support local farmers and help the poor, all at once?

Michel Nischan and Gus Schumacher did. Nischan is an award-winning chef, cookbook author and owner of a tony, Westport, Connecticut restaurant co-founded with the late actor Paul Newman. Schumacher is a longtime  government official who worked for the state of Massachusetts, the World Bank and as Under Secretary for Farm and Foreign Agricultural Services at the U.S. Department of Agriculture (USDA) during the Clinton years.

Their idea? Subsidize poor people who get food stamps or benefits under the federal WIC (Women, Infants, Children) program so that their grocery dollars go twice as far at farmers’ market.

Several years ago, to make it happen, they started the  Wholesome Wave Foundation with the help of some well-connected friends, including Newman (before his death in 2008), his daughter Nell, and investors and activists Jesse Fink and his wife Betsy, who own their own small farm in Connecticut.

Now the idea is spreading faster than a zucchini plant in July. [click to continue…]

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The surprising roots of Earthbound Farm

May 23, 2010

goodman_revDrew and Myra Goodman never planned to become farmers. Two kids from New York City,  they graduated from the same high school and made their way to northern California, where Drew went to UC-Santa Cruz, Myra to Berkeley. (She majored in “The Political Economy of Industrial Societies.”  Ah, Berkeley. ) Grad school was next on her agenda—Myra anticipated a career in international relations—but she and Drew decided to take a year off to live in a 600-square-foot home in rural Carmel Valley. “A romantic adventure,” she called it.

But, as John Lennon once wrote, “life is what gets in the way when you are making other plans.” Drew and Myra grew raspberries on a two-and-half acre plot, selling them first at a roadside stand, then to restaurants in nearby Carmel. They didn’t know much about farming, but because they didn’t like the smell of the chemical fertilizers and pesticides, they tried organic farming, guided by Rodale’s Encyclopedia of Organic Gardening. They grew salad greens, too, and while they made only $9,800 in their first year, 1984, they decided that grad school could wait. And then wait some more.

earthboundfarmA quarter century later, their Earthbound Farm is America’s largest grower of organic produce. Drew and Myra were the first to sell the pre-washed bagged salads that are now on supermarket shelves everywhere, and they dominate that market. Today, Earthbound processes and markets more than 100 varieties of salads, vegetables and fruit, gathered from about 150 farmers who tend 35,000 organically-farmed acres from British Columbia to Mexico. Earthbound Farm products are available in 75% of supermarkets across the country, and the firm makes store brands for chains like Costco, Safeway and Trader Joe’s. Annual revenues top $400 million.

Talk about organic growth!

“We’ve been sprinting nonstop,” says Drew, just to keep up. Things eased up a bit lately after he  [click to continue…]

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A food revolution?

May 21, 2010

OgAAAOMz3dH0-HafZx1TctR2lFMwnVnyn6UpdLUHNQ_8SAcyDMFhCebvsjC51YuU8w8gRAXu46wPNy5WHetI_9W0XewA15jOjFRxqljFWwNaFDgYenGcIpUAl50UHave you noticed? A food revolution has begun—with the goal of making our food and agriculture systems better for us, better for the environment, maybe even better for workers and democracy.

So, at least, says Marion Nestle, the author, activist, NYU professor and corporate critic, who gave a rousing closing speech at Cooking for Solutions, a mind-stretching, belly-expanding conference and foodfest organized by the Monterey Bay Aquarium.

The revolution will be inspired, in part, from the top—symbolized by the White House organic garden, First Lady Michelle Obama’s anti-obesity campaign and some encouraging legislation, including a requirement in the health-care law that fast food restaurants put calorie labeling on menus.

“I can’t remember every having a First Family that was interested in the issues that I’m interested in,” said Nestle, a veteran of the food wars and author of six books, including a new volume about pet food.

More important, the energy for a food revolution is being generated by diverse, decentralized grass roots (pun intended). Signs include the robust growth of organic food, albeit from a small base; the slow food movement; the rapidly increasing number of farmers markets across America; strong interest in local agriculture; Jamie Oliver’s broadcast TV prime time anti-obesity crusade; other celebrity chefs who tout “green” practices; the battle to reform school lunch programs; the campaign against bottled water; the animal welfare movement; and the obsession with food issues in so much of the media, ranging from Michael Pollan’s bestsellers to indie movies like Food Inc. to the  legions of food bloggers, many of whom came to Monterey.

When you look at it that way, there’s a lot going on. [click to continue…]

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The high cost of cheap food

May 20, 2010

hamburger-and-fries-l“We have very, very expensive food in this country.”

“It’s just that the prices are cheap.”

So said Paul Hawken, the environmentalist, entrepreneur and author, in a speech that began Cooking for Solutions, a conference on food and the environment, accompanied by lots of marvelous eating and drinking, this week at the Monterey Bay Aquarium in Monterey, CA.

The American industrial food system, he said, is bad for the planet, bad for farmworkers and bad for consumers.  “How did we make destroying our land, our children and our health a big business?” Hawken asked.

This was not an upbeat way to start the two-day event, but it’s hard to argue with his analysis. Big Ag produces lots of food–particularly grain and meat–at very cheap prices. According to USDA (cited by Bryan Walsh in this terrific article in TIME), Americans spend less than 10% of their incomes on food, down from 18% in 1966. Farm price supports, cheap fossil fuels and vast amounts of water all drive down the price of food.

And the true social and environmental costs? Let’s tally them. They include millions of tons of fertilizer that runs into rivers and the Gulf of Mexico, created an oxygen-starved dead zone that kills of sea life. Hog and chicken waste that contaminate waterways and the Chesapeake Bay. Overuse of antibiotics on animals that helps create antibiotic-resistant bacteria. If you care about animals, there’s the horror of confined animal feeding operations, or CAFOs. We’ve got food safety risks. Tons of global warming pollution. And, oh yeah, an epidemic of obesity, which, again according to TIME, adds $147 billion (that’s billion with a B) a year to our medical bills.

Ugh. And so, for the rest of day, scientists, activists, academics and a sprinkling of farmers and food company executives such as Gary Hirshberg of Stonyfield Farm and Margaret Wittenberg of Whole Foods Market talked about how to make our food system more sustainable.

Here are a just a few highlights: [click to continue…]

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Walmart: Still the green giant

May 19, 2010

051026_MB_GreenWalmart_exWalmart and GE are the superpowers of corporate sustainability. They have enormous impact (WMT) and influence (GE). Recently, I hosted a dinner about sustainability for Motorola where an executive named Bill Olson described how the company developed its Eco-Moto W233 Renew carbon neutral, energy efficient, environmentally friendly phone. To do so, Motorola needed a company that would sell it recycled plastic for the phone. That was GE. It also needed a retailer to enthusiastically sell the phones. That was Walmart. In fact, as Bill recalled, WMT exec told him that giant retailer would before long be selling nothing but “green” phones.

The point is, WMT and GE are changing business, often in unseen ways. So it’s worth keeping up with their efforts to meet their own ambitious sustainability goals. Where are they succeeding? Where are they falling short? How strong is their commitment?

WMT’s 2010 Global Sustainability Report, which was released recently, provides a snapshot of the retailer’s work. The 47-page report (available here) is, if nothing else, a reminder of the scope  and depth of WMT’s efforts—the company is buying renewable power, reducing packaging, reducing waste, making its fleet more efficient, and selling more sustainable products, and not just here in the U.S.

Here are some highlights:

Bentonville Buddies: Mike Duke and Environmental Defense Fund's Fred Krupp

Bentonville Buddies: Mike Duke and Environmental Defense Fund's Fred Krupp

When CEO Mike Duke took over last year from Lee Scott, there were questions about his commitment to the sustainability efforts. He now appears to be a believer. In the introduction to the report, he writes that  WMT has been able to “broaden and accelerate” its commitment to sustainability even during the recession. And he says:

Sustainability continues to make Walmart a better company by reducing waste, lowering costs, driving innovation, increasing productivity and helping us fulfill our mission of saving people money so they can live better.

That’s about as good a summary of the business case for sustainability as you’ll find. [click to continue…]

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PNC Bank: Helping to destroy mountains

May 18, 2010

2825430279_a3aa7cd059_oPNC, a big regional bank (annual revenues: $16 billion) based in Pittsburgh, has become the bank that environmental activists love to hate because of its support for mountaintop removal mining.

The bank was identified as the worst of the worst in Grading the Banks: A Mountaintop Removal Scorecard, a new ranking compiled by the Rainforest Action Network and the Sierra Club.

According to the report, the bank has made loans to six companies engaged in mountaintop removal mining: Massey Energy, Patriot Coal, Alpha Natural Resources, International Coal Group, Arch Coal and Consol Energy.

PNC, by the way, was a recipient of TARP funds (since paid back) so these loans were, at least in a small way, your tax dollars at work.

I emailed PNC to ask for their comment and got a prompt reply from Fred Solomon, vice president, corporate communications:

PNC’s practice is not to comment on analyst or other research reports, and in general, our credit policies are proprietary information.

Interesting. We’ll see how long that no-comment approach lasts, if any of the enviro groups decide to bring pressure directly on PNC, a major consumer bank in the mid-Atlantic region. Transparency, evidently, is not for now part of the PNC culture.

I’m returning to the topic of banks and coal after just a couple of weeks (See J.P. Morgan Chase’s Coal Problem) because of a couple of significant new developments. The first is the RAN/Sierra club report card–a tactic that, in the argot of the corporate campaigns, is known as “rank ‘em and spank ‘em”. The second is a new policy from by JP Morgan Chase, released just before the bank’s annual meeting, which was held today. [click to continue…]

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Warren Buffett’s BYD: Revving up, fast

May 16, 2010

byd_e6_1

BYD's e6 electric car

Warren Buffett is a busy man, and never more so than during Berkshire Hathaway’s annual meetings, sometimes called the Woodstock of capitalism, which attract thousands of people each year to Omaha, Nebraska.

But Buffett found time during this year’s gathering to sit down for an hour with Chuanfu Wang, the chairman and CEO of BYD, the Chinese company that makes cars, batteries, electronics and solar power equipment.

And why not? Berkshire’s MidAmerican Energy Holdings unit bought a 10% stake in BYD for about $230 million in September, 2008. Today, it’s worth nearly $2 billion.

That’s a nifty return, even by Buffett’s standards.

“BYD is really running on all cylinders,” says Li Lu, a BYD investor and money manager who brought the company to the attention of Berkshire vice chairman Charles Munger several years ago. Munger took the idea to Buffett and to MidAmerican chairman David Sokol, who now sits on BYD’s board.

I wrote a FORTUNE cover story about BYD in 2009, met with Mr. Wang in Shenzhen and late had the pleasure of meeting Li Lu. He’s a fascinating guy—participated in the Tiananmen Square uprising in 1989, then fled China, earned business and law degrees at Columbia University and for the past 13 has run an investment firm called Himalaya Capital. He’s been an informal adviser to BYD and traveled to Omaha with Mr. Wang. Li Lu now lives and works in Pasadena, Ca., where we met last week.

warren_buffett_byd.03The most important thing to know about BYD—the letters are the initials of the company’s Chinese name, but they have come to stand for Build Your Dreams–is that the company has enormous ambitions. It aims to be not only the world’s biggest carmaker, but a leader in cheap solar power and utility-scale battery storage as well. Mr. Wang, the founder and chairmen, has said that he believes that the automobile and energy industries are on the verge of a major transformation. Buffett, Munger and Sokol all told me that they were really impressed with Mr. Wang–not a bad trio of endorsements.

BYD’s been in the news lately for three reasons. In March,  the company announced a joint venture to develop electric cars in China with Mercedes. The idea is to combine Mercedes’ design excellence with BYD’s technological savvy, particularly with respect to batteries, and the Chinese firm’s access to its home market. “Daimler’s know-how in electric vehicle architecture and BYD’s excellence in battery technology and e-drive systems are a perfect match,” Mercedes chief Dieter Zetsche said at the time.

Last month, BYD announced that it will open its North American headquarters in a downtown neighborhood of Los Angeles. Mr. Wang was joined by California Gov. Schwarzenegger and LA Mayor Villaraigosa at the ceremony and, interestingly, the company said it would put more than its electric cars on display—it will showcase “solar panels, energy storage systems and advanced LED lighting products” as well.

To lure BYD, the city of Los Angeles promised to buy some of the company’s electric vehicles, including buses; to  streamline the approval process for installing charging stations in garages; to make it easier for people to install charging stations in their homes and to display a BYD car at LAX, according to the Wall Street Journal.

Third, BYD and KB Homes, the big homebuilder, announced that they would build homes together that not only include solar panels on the roof but batteries in the garage–so that the owners can enjoy solar-powered electricity even when the sun’s not shining. This is a big deal, as the Sunpluggers blog reported:

Off-grid solar owners for many years have used battery banks to store their generated electricity for later use, but the plan for the KB Home development – smack in the middle of a grid-tied suburban subdivision – could help alter the trajectory for adoption of both solar electricity and plug-in vehicles.

BYD is already growing fast, as Li Lu reminded me. It has about 160,000 employees, most in Shenzhen and Xian in  China, but others at offices in the Netherlands, Denmark, Hungary, Romania, Japan, South Korea, India, Taiwan and Hong Kong. (There’s even an office in Shaumburg, Illinois, where Motorola is a big customer for BYD’s batteries and handsets.)

BYD sold about 450,000 vehicles in 2009, up 170 percent from a year earlier, and it intends to sell about 800,000 this year, nearly all of them gasoline powered. The company’s all-electric car, called the e6,  is currently running as taxi in Shengzhen in small volumes. Rollout is slightly behind schedule, but more are expected to be produced this year.  Unlike the U.S., China has yet to lay out a policy for subsidizing electric cars, which has slowed things down. The car will cost about $40,000, the company has said. It hasn’t talked about a timetable to bring the car to the U.S. or Europe, which could be a big export market because prices there are high.

Li Lu

Li Lu

“The big challenge now is to bring down the initial cost,” Li Lu told me. Eventually, BYD would like  to sell the car for about the same price as conventional vehicles, and win over auto buyers by offering them lower operating costs and higher performance. “The only way to conquer this market is to provide a product that is comparable at the beginning and superior in the end,” he said.

BYD’s greatest strength is in battery technology, the company’s first business. Manufacturing a safe, reliable, long-lasting, and fast-charging battery for a car at an affordable price is a complex and costly undertaking. The Chinese firm believes that it has an edge over its rivals.

“There are not many in the world that have comparable experience and expertise,” Li Lu says. “They seem to have  a commanding lead right now.” The BYD technology is super safe, its batteries will last a long time and they will cost less than competitors, he said.

All that remains to be seen, of course. But BYD has not one but three opportunities to change the world–with its electric cars, its rooftop solar panels with battery storage and with large-scale batteries that could be used by electric utilities to store solar or wind power.

If BYD succeeds in even one of those businesses—let alone all three—it will become one of the most important clean tech companies in the world.

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This stinks: What perfume makers won’t tell you

May 13, 2010

curiousBritney Spears lends her name to a perfume called Britney Spears Curious Eau de Parfum. But if you are curious about what goes into Britney’s eau, don’t ask Elizabeth Arden, the cosmetics giant that makes the fragrance.

Sure, some ingredients are identified on the label. They include Alpha Iso Methyl Ionone, Benzyl Benzoate, Benzyl Salicylate, Cital, Citronellol, Diethyl Phthalate, Eugenol, Farnesol, Galazolide, Hydroxycitonelle, Limonene and Linalool.

But another 17 chemicals are not listed, and they could be bad for your health, according to two advocacy groups, Campaign for Safe Cosmetics and the Environmental Working Group.

It’s no wonder the marketing for the perfume asks: Do you dare?

This week, the Environmental Working Group (EWG) and the Campaign for Safe Cosmetics published a report called Not So Sexy: The Health Risks of Secret Chemicals in Fragrances. The report included the results of laboratory tests performed on 17 name-brand fragrance products revealing that, as a group, they contained 38 so-called secret chemicals. The average product contained 14 chemicals not listed on the label.

Products tested include Hannah Montana Secret Celebrity Cologne Spray (yes, it’s really called that), Jennifer Lopez J. Lo Glow Eau de Toilette Natural Spray, Halle by Halle Berry Eau de Parfum Spray, Coco Mademoiselle Chanel, Calvin Klein Eternity, Abercrombie & Fitch Fierce, American Eagle Seventy Seven, Clinique Happy Perfume Spray, Dolce & Gabbana Light Blue and Old Spice After Hours Body Spray.

The report says of the chemicals: [click to continue…]

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