Tax avoidance, and corporate responsibility

uncle-sam-pay-your-taxes1Would you consider Apple, Coca-Cola, General Electric, Google, Microsoft, Nike and PepsiCo good corporate citizens? Certainly they position themselves that way, and they deserve credit for their leadership around human rights (Apple, Nike), climate change (GE), water (Coca-Cola), renewable energy (Google, Microsoft) and sustainable agriculture (PepsiCo).

But when it comes to paying corporate income taxes, they have some explaining to do.

That, at least, is the conclusion that I came to after reading an excellent report on tax avoidance titled Offshore Shell Games, and published last month by Citizens for Tax Justice and US PIRG.

Corporate taxation is all over the news these days as US firms move their headquarters overseas for tax reasons, in a process known as inversion. But aggressive maneuvering to avoid taxes is nothing new, as I wrote today in a story for Guardian Sustainable Business.

Here’s how the story begins:

America’s a great country. That’s why people from all over the world — including, lately and tragically, thousands of poor children from Central America — clamor to get in. So why are some of America’s wealthiest companies trying to get out?

It’s simple, really — they don’t want to pay US taxes.

You’ve probably heard about Walgreen’s, your neighborhood pharmacy that is contemplating moving its headquarters to Switzerland to reduce its tax bill. Medtronic, the big medical device company based in Minneapolis, Minnesota, has plans to move to Ireland, for tax-avoidance purposes. Then there’s Mylan, a maker of generic drugs based near Pittsburgh, Pennsylavia, which intends to incorporate in the Netherlands, where the tax rate is lower. Mylan’s CEO, as it happens, is Heather Bresch — the daughter of US Senator Joe Manchin, a West Virginia Democrat — and she says she has no choice but to go.

Other companies aren’t going so far as to relocate their headquarters, a process known as inversion that often requires them to acquire a company based elsewhere. Instead, to avoid US taxes, they are parking their earnings offshore, often in tax havens like Bermuda and the Cayman Islands that levy no corporate income taxes. That tactic, which like the inversions is legal, is being employed by companies that position themselves as good corporate citizens — among them Apple, Coca-Cola, General Electric, Google, Microsoft, Nike and PepsiCo.

Exploiting loopholes in the tax laws may or may not be legal–the IRS is hopelessly outgunned by big corporate tax departments–but it’s unethical.

The report from Citizens for Tax Justice and US PIRG, which makes for surprisingly compelling reading, details a number of questionable tax avoidance strategies that allow companies to shift earnings, purely for tax purposes, from high-tax jurisdictions like the US to tax havens. Here are my favorite fun facts from the report:

The report found that subsidiaries of US companies reported earning $94bn in Bermuda, which has a gross domestic product of just $6bn. That doesn’t compute. US firms reported earning another $51bn in the Cayman Islands, where GDP is about $3bn.

This is outrageous, and please don’t tell me that the way to fix the problem is to reduce the admittedly high US corporate income tax rate. The US cannot compete with places where the tax rate is zero.

All of these companies, of course, benefit enormously from government services–public education, police, the rule of law, highways, etc. Those companies that don’t pay their fair share shift the burden to others–small businesses that can’t afford high-priced accountants, companies that don’t have overseas operations and therefore can’t take advantage of the opportunity engage in tax-avoiding shenanigans and, of course, the rest of us.

You can read the rest of my story here.

Fair Trade USA, growing and still controversial

fairtrade_6833958232_076a8a019b_bFair Trade is an elegant idea. It’s an attempt to make globalization work for the world’s poor. Those of us in rich countries agree to pay a bit more for whatever it is we are buying — coffee is by far the No. 1 Fair Trade commodity — and, in exchange, we are assured that the farmers and workers at the other end of the supply chain are treated fairly.

If only it were that simple.

Today, in the US, there are no fewer than seven Fair Trade and Fair Trade-like labels. You can find an analysis of them here, if you so choose. The trouble is, they are competing in what remains by any measure a niche market.

Paul Rice, the founder of Fair Trade USA, formerly Transfair, wants to change that. I went to see him last week in Oakland, CA., and wrote about his efforts the other day in a story for Guardian Sustainable Business.

Here’s how my story begins:

Paul Rice, the hard-charging CEO of nonprofit Fair Trade USA, recently toured the Brooklyn headquarters of furniture company West Elm, along with former president Bill Clinton and West Elm’s president, Jim Brett. They were there to celebrate West Elm’s commitment to handcraft products, including the first Fairtrade rugs, which are made in India. “You can have a huge impact on the wage structure in India,” Clinton enthused. “Consumers will buy these. They’re beautiful, besides.”

Fairtrade rugs? What’s next? A lot more than coffee in church basements, it turns out. “We’re talking about furniture, we’re talking about linens, we’re talking about all kinds of things,” says Rice, when we met last week at Fair Trade USA’s offices in Oakland, California. “This move into the manufacturing sector puts us on the threshold of something really big.”

Fair Trade USA is in fast-growth mode. This fall, Patagonia and PACTwill begin selling Fairtrade apparel, made in factories that they say will meet strict environmental and social standards; a small company called Oliberté already sells Fairtrade shoes. Several years ago, Fair Trade USA formed a partnership with a nonprofit startup called Good World Solutions, which has developed mobile technology to connect big companies to the farmers and workers in their supply chains. Meantime, Fair Trade USA is working to certify a bell pepper farm in British Columbia, Canada, expanding the movement beyond its roots in the global south.

This flurry of activity has brought Rice lots of attention, some of it unwelcome. His supporters say that he works tirelessly to expand the impact of fair trade. Critics accuse him of abandoning its principles. As Jonathan Rosenthal, a co-founder of the co-op Equal Exchange, told The Nation: “Paul is not afraid to think and act on a big scale. That’s one of his great gifts. And he’s willing to cut any corners to get there. That, to me, is one of his great faults.”

The disagreements about what constitutes authentic Fair Trade can get pretty arcane pretty quickly. Some people, for example, argue that a chocolate bar should not be labeled Fair Trade unless the chocolate and the sugar were both procured from worker owned co-ops; others say the chocolate alone should do it. Small differences often matter, but in this arena, it seems to me that the priority ought to be growing the idea and practice of Fair Trade, even if compromises must be made along the way. As the movement grows, the bar can be lifted.

If you want to know more, see my 2012 blogpost, A schism over Fair Trade. You can read the rest of my Guardian story here.

The upside of outsourcing

To match Insight INDIA-OUTSOURCING/I heard an excellent, in-depth interview this week with William Easterly, the development economist and author of a new book called The Tyranny of Experts: Economists, Dictators and the Forgotten Rights of the Poor. Easterly, a controversial figure, is critical of top-down development experts — he names Jeffrey Sachs and Bill Gates, among others — who push technocratic, centralized approaches to alleviating poverty. Instead, he argues that the best way to promote economic development is for westerners to push for democracy, human rights and free markets in the world’s poorest countries.

Easterly cites, among others, the Nobel laureate Amartya Sen, who has said: “No famine has ever taken place in the history of the world in a functioning democracy.” Others disagree, noting that parts of India came perilously close to famine just a decade ago. What’s more, China has lifted hundreds of millions of people out of poverty while suppressing human rights, but allowing economic freedom.

I’m in no position to try to adjudicate the debate about how poor countries become rich, but I was thinking about Easterly’s faith in markets and global trade as I wrote my story this week for Guardian Sustainable Business. The story looks at an idea called “socially-responsible outsourcing” or simple “impact sourcing,” and a nonprofit called DDD that tries to put that idea into practice. (DDD stands for Digital Divide Data.) DDD operates businesses in Cambodia, Kenya and Laos that employ young people, typically high school age, to provide information technology and web research, mostly to clients in the US. The goal of the enterprise is to provide economic opportunity to the poor, DDD’s founders told me.

Here’s how my story begins:

So much attention is paid to deplorable factory conditions in poor countries that it’s easy to forget that global supply chains for electronics, apparel and toys have helped lift masses of people out of poverty. Since 1980, 680 million people have risen out of poverty in China which has seen its extreme-poverty rate fall from 84% to about 10%, largely because of trade, reports The Economist.

Now, a small number of companies, nonprofits and foundations want to see if the rapidly growing global supply chains that process data and operate call centers — an industry usually described as business processing outsourcing, or BPO — can be deployed to help alleviate poverty in Africa and South Asia. Can outsourcing, a business driven by the search for cheap labor, reconfigure itself to do good?

“By responsibly and ethically employing hundreds of thousands of people, BPOs have a role to play in shifting the social landscape in emerging economies around the world,” says a report called Outsourcing for Social Good from Telus International, a Canadian outsourcing firm, and Impakt, a social responsibility consultancy.

Others agree. The Rockefeller Foundation has committed $100m to a project called Digital Jobs Africa that aims to improve one million lives in six African nations. A nonprofit called Samasource organizes poor women and youth in Africa and Asia to deliver data services to such businesses as Microsoft and Google. And a company called Cloud Factory that operates in Kenya and Nepal says digital outsourcing can “flatten the world, connect people into the global economy and raise up leaders to fight poverty and change their communities.”

The pioneer of what is called socially-responsible outsourcing or simply impact sourcing is DDD (Digital Divide Data), a New York-based nonprofit that operates for-profit data centers in Cambodia, Laos and Kenya. DDD and its impact-oriented peers set themselves apart from outsourcing giants such as Tata, Accenture and Infosys because, they says, they deliberately seeks out workers in the some of the world’s poorest places and provides them not just with jobs, but with the education, training and career counseling they need to rise into the middle class.

“Our ultimate mission is to alleviate poverty,” says Jeremy Hockenstein, 42, the founder and CEO of DDD. “We focus on students who are finishing high school, who are very motivated and very smart and who come from low-income homes.”

Having met Jeremy Hockenstein (via Skype) and his co-founder Michael Chertok (face to face), I have no doubt of their good intentions. Both gave up more lucrative careers to start the nonprofit. DDD is about helping its global employees, not exploiting them.

But their work raises an intriguing question about how much intentions matter when it comes to infotech outsourcing, or all of global trade, for that matter. Despite all the the abuses in the global manufacturing supply chain, it seems inarguable that the factory jobs created in China, Mexico, India and Bangladesh have benefited the poor in those countries. Is it possible the Walmart and Apple have done more to alleviate poverty than Bill Gates and Jeffrey Sachs?

You can read the rest of my story here.

Feeding the hungry at Panera Bread

Not by coincidence, I’m blogging today from a Panera Bread cafe near my home in Bethesda, MD. The atmosphere is pleasant, the people are friendly, the wi-fi is reliable and the food is pretty good. (I have a weak spot for the shortbread cookies.) But, as I learned recently, there’s more to this company than meets the eye of a casual visitor.

I wrote a story about Panera Bread this week for Guardian Sustainable Business. The peg was the release of the company’s comprehensive food policy, which is worthwhile — the company is going to try to get rid of all artificial flavorings and colorings in its food by 2016  – but unremarkable in a world where fast-casual competitors like Chipotle and SweetGreen market “food with integrity” or “authentic food.”

What stands out about Panera is its commitment to doing something about hunger in America. Its CEO, Ron Shaich, has spoken eloquently about the problem. Panera has long donated leftover food to homeless shelters and food pantries. Most interestingly, though, Panera through its foundation has opened five “community cafes” where people pay whatever they want. The “community cafes” suggest donations, but there are no fixed prices. The hope is that those with means will pay enough so that those who are poor can eat there, too, and enjoy the full Panera experience–the food, service, atmosphere, maybe even the wi-fi. The concept is working fairly well, although Shaich told me that the cafes still require modest subsidies from the foundation.

Here’s how my story begins:

When you hear the word company, what comes to mind? You might think about business, or perhaps the military (a company of soldiers), the arts (a touring company) or the evening ahead (are you expecting company?). The word company evolved from the Old Frenchcompaignon, literally “one who breaks bread with another”, and before that from the Latin panis, for “bread”. A company, in the broadest sense of the word, is a group of people who join together to do something no one can do alone.

Which is a fitting introduction to the fast-casual restaurant chain Panera Bread – yes, the name comes from that same word panis, Latin for bread – and its founder and CEO, Ron Shaich. An idealist, Shaich pondered a career in politics before opening a tiny cookie shop in Boston in 1980.

Since then, Shaich has consciously tried to build a company that is about more than the bottom line. Today, the 60-year-old CEO guides a chain of 1,800 restaurants that serves more than eight million customers a week and employs more than 80,000 people. Last year, Panera generated $2.3bn in revenues and nearly $200m in profits.

But, as Shaich told me by phone the other day, Panera’s purpose is not to generate revenues or profits. Its purpose is to serve: to serve good food, and to serve its customers, workers and communities. If it does those things well, he says, business results will follow.

“If we don’t touch people, and we don’t make a difference in their lives in a real way, we don’t have a reason to exist,” Shaich says. Companies need to sustain those around them. “If all we’re about is extracting profits from the community, there’s not going to be a community left from which to extract profits.”

You can read the rest of the story here.

Has success spoiled Green Mountain Coffee?

image“Doing well by doing good” has become a cliche on the corporate-responsibility circuit. And for good reason–smart companies that serve their customers, provide opportunity to their workers and connect with their communities are likely to deliver superior shareholder returns.

But doing well can complicate the desire to do good. That’s been the challenge lately for the company formerly known as Green Mountain Coffee Roasters and now called Keurig Green Mountain Coffee.  Thanks to the sales of Keurig coffee machines and literally billions of single-serve coffee pods — which cannot be recycled — the Vermont-based firm has been on a tear, rapidly growing its revenues and stock price, while generating enormous amounts of waste. And to what end?

My story about Green Mountain was posted today at Guardian  Sustainable Business.  With apologies for my formatting problems today (I’m working on an iPad) here is a link that you can copy into a browser –  http://flip.it/sSCuG  - and here is how the story begins:

Not long ago, Green Mountain Coffee and it’s chief  executive, Bob Stiller,  were hailed as corporate responsibility pioneers. Green Mountain was the world’s largest buyer of Fair Trade coffee. The company offset the carbon emissions of its energy use and won a “green power” award from EPA. Twice, it topped CR Magazine’s list of the 100 best corporate citizens.

Today, Keurig Green Mountain (KGM), as it is now known, remains a corporate-responsibility standout. But the Vermont-based firm has a dark stain on its reputation. Since acquiring Keurig, the inventor of a single-serve coffee machine and its patented K-Cups, the company has become the driving force behind what critics say is an environmental scourge – the throwaway coffee pods made of plastic and aluminum foil that waste energy and materials, and are all but impossible to recycle.

Meanwhile, Stiller, an ex-hippie who briefly became a billionaire, was forced out of KGM after going on a spending spree with borrowed money, acquiring a 164-foot yacht, a $10m, 7,500-square-foot Palm Beach mansion and a $17.5m Manhattan condo formerly owned by New England Patriots quarterback Tom Brady. Green living, that’s not.

What went wrong with Green Mountain? In a word, success. Its story challenges easy pieties about doing well by doing good. This is a company that has done very well – but only by setting aside, at least for now, the environmental values it once held dear.

Green Mountain shareholders certainly aren’t complaining. Shares of Keurig Green Mountain (NASDAQ:GMCR) have grown 50% in the last year and 548% in five years. Sales have skyrocketed to $4.4bn last year from $492n in 2008. Those Keurig machines and the little plastic cylinders that pop into them have driven that growth, accounting for more than 90% of revenues.

Keurig Brewing Systems are now used in 16m US homes, about one in six, the company estimates. In 2013, KGM says it sold roughly 8.3bn “portion packs”.

To be fair, Keurig Green Mountain recognizes that the waste created by its coffee pods is a problem and promises to reduce it. Monique Oxender, the company’s senior director of corporate responsibility, told me: “Recycling is one of those areas where we have a lot of work to do, and we know that.”

This isn’t a simple story.  Keurig Green Mountain says it intends to make 100% of K-Cup packs recyclable. And the company argues that the single serve machines save resources in the the coffee-growing supply chain because the machines waste less coffee than traditional brewing methods.

But Keurig also has announced alliances with Coca Cola and Campbell Soup to develop single serve machines for cold drinks and soups. In the company’s latest annual report, CEO Brian Kelly writes: “Our mission is to have a Keurig® System on every counter and a beverage for every occasion.” That sounds like a recipe for a whole lot more waste.

By now, we should know better. As author and activist Amy Larkin told me:  “We now understand waste, water usage, manufacturing, mining, freight transport and packaging and their impact on the world. It seems madness to develop a product line that increases all of the above.

That said, Green Mountain remains a sustainability leader in other arenas, particularly as a strong support of the Fair Trade movement. I’m told that its coffee buying team is one of the most progressive and creative in the industry.

In other words, it’s complicated–a lot more complicated than “doing well by doing good. ”

 

The art and science of systems change

pdfnewThe corporate sustainability movement, such as it is, has made enormous progress in the last decade. Just not enough. Despite the well-intentioned efforts of forward-thinking companies, greenhouse gas emissions are rising, species are dying, forests are shrinking, etc. Smart companies have come to understand that acting alone, they can’t bring about the change we need.

This is why companies are collaborating to drive what’s being called systems change — that is, efforts to remake complex systems such as supply chains or marine fisheries. Recently, I heard a consultant named Joe Hsueh (it’s pronounced Shway) talk about systems change at an event sponsored by Guardian Sustainable Business and Forum for the Future.

Joe has a PhD from the Sloan school at MIT, so he understands the science of how systems work and knows how to deploy tools like systems maps (like the one above). Perhaps more important, though, he spent a year volunteering with Buddhist nuns in Taiwan, his native land, so he has practiced listening and empathy.

I wrote about Joe this week in the Guardian. Here’s how my story begins:

Until recently, the momentum driving US businesses toward greater sustainability came from big, influential companies: GE with itsecomagination campaign, Walmart with its bold environmental goals, Google with more than $1bn in renewable energy investments and Nike with its pioneering design work, among others.

Lately, though, much of the most exciting work in sustainable business has focused on systems change – sometimes within an industry, sometimes up and down corporate supply chains and sometimes across industries and geographies. Systems-change initiatives like the The Sustainability Consortium, the Sustainable Apparel Coalition and ZHDC, which stands for Zero Discharge of Hazardous Chemicals, differ in their approach and structure, but they are all tackling problems too sprawling and too complicated for even the biggest companies to solve on their own.

The process of changing large-scale systems is a mix of art and science, and its practitioners can be found inside companies, in consulting firms and in academia. The consulting firm BluSkye helped the dairy industry reduce its carbon emissions and was hired by Alcoa to try to give US recycling rates a big boost. Starbucks engaged MIT professor Peter Senge to take a systems-based approach to the challenge of recycling the billions of cups the food service industry uses every year to hold hot liquids. Nonprofit WWF has dived into system-change efforts such as theRoundtable on Sustainable Palm Oil, a standard-setting group that brings together producers, processors, traders, brands, retailers and NGOs.

To grow systems change, a group of individuals and organizations formed the Academy for Systemic Change in 2012. Joe Hsueh, one of its founding members, recently sat down with me to talk about systems change, how it works and why it matters.

You can read the rest here.

A murmur, not a message

800px-US_Capitol_SouthOne reason why it has been so hard for President Obama and environmentalists to persuade Congress to enact climate-change legislation is strong opposition from much of corporate America. The U.S. Chamber of Commerce, the National Association of Manufacturers and the editorial page of the Wall Street Journal, which is seen as the voice of business, all, when it comes down to it,  oppose a carbon tax or an economy-wide scheme to cap greenhouse gas emissions.

They’ve got some sound reasons for doing so: Climate regulation by the US, if it is not followed by regulation in China and India and the rest of the world, will do little to curb global warming, but it will disadvantage the US economy and cost consumers money by raising energy prices. The thing is, China and India and the rest of the world are unlikely to price carbon unless the US leads the way. And right now it’s “free” for fossil fuel companies and utilities and the rest of us to pollute the air with CO2, and so we do so with impunity.

Thankfully, the chamber, NAM and the Journal don’t speak for all of business. That’s why a business coalition known as BICEP (it stands for Business for Climate and Energy Policy) needs to grow in numbers and in political clout. BICEP favors climate regulation, and its members include such well-known companies as eBay, Gap, Levi Strauss, Mars, Nike and Starbucks. But BICEP, pardon the bad pun, doesn’t carry much weight in your nation’s capital, and it’s fairly easy to understand why.

For the US fossil fuel industry, most of which opposes carbon regulation, the climate issue is a matter of the utmost importance. Environmentalists  who worry about the climate crisis increasingly argue that much of the world’s reserves of coal and oil must be left in the ground, unless and until  engineers come up with practical and cost-effective way to capture CO2 from power plants or from the air.  If that argument that we need to burn dramatically less coal and oil prevails, the stock-market value of the fossil fuel industry would collapse. This is the so-called carbon bubble, and it is an existential threat to the fossil fuel companies.

By contrast, climate change is an important issue Mars, Nike, Starbucks and the other companies in BICEP,  but it’s by no means their biggest issue. They are to be commended for stepping out, but so far they have not thrown the full weight of their Washington operations (or, for that matter, their marketing departments)  behind their position.

That was evident last week when BICEP organized a lobbying day on Capitol Hill. I covered the event for Guardian Sustainable Business. Here is how my story begins:

It is not often that big business comes to Washington to seek regulation. But a group of companies including IKEA, Jones Lang LaSalle, Mars, Sprint, and VF Corp did so this week, asking Congress to take steps to prevent catastrophic climate change.

Executives organized by the business coalition BICEP (Business for Innovative Climate and Energy Policy), testified before a Senate and House task force on climate change, telling lawmakers about their own corporate commitments to reduce carbon pollution. Then they fanned out across the Capitol to lobby on behalf of a clean-energy financing bill.

They did so on the first anniversary of the release of the Climate Declaration, a corporate call-to-action that has been signed by more than 750 companies. It was a reminder to legislators that the US Chamber of Commerce, the coal industry and the Wall Street Journal editorial page do not speak for all of corporate America when they oppose government action to regulate carbon pollution.

“Business is not a monolith,” said Anne Kelley, who coordinates BICEP’s lobbying efforts. “That’s been the message of BICEP since the beginning.”

But if BICEP has shown that hundreds of companies favor political action on climate, its efforts so far have been drowned out in Washington by those of the US Chamber and its allies, a US Senator told the group.

Senator Sheldon Whitehouse, a Rhode Island Democrat and a strong advocate of climate action who convened the hearing, said BICEP’s voice is “a murmur and not a message”, and he urged companies to spend more of their political and reputational capital on the climate issue.

Whitehouse, as the story goes on to explain, urges the BICEP companies to be more forceful. Until more companies understand that the threat of climate change, and the costs of adapting to extreme weather such as heat waves and drought, is a core issue for them, the debate in Washington will be dominated by the likes of the US chamber. And that’s a problem for all of us.

Who’s responsible for obesity?

photo (7)While I have long been inclined to think of American’s obesity epidemic as fundamentally a matter of individual responsibility — after all,  despite what has been called an obesogenic environment, many Americans manage to keep fit or at least avoid getting too fat through a combination of healthy eating and exercise — I’m gradually coming around to the belief that big food companies and the US government need to take some of the responsibility for obesity-related diseases, and for their costs.

The other day in Guardian Sustainable Business, I wrote a story about Lunchables, the fun-to-assemble packaged lunches aimed at kids that were invented in 1988 by Oscar Mayer, then and now a division of Kraft. I did the story after learning that a healthier and more “natural” packaged lunch had been introduced by Revolution Foods, a company I admire. (See my 2012 blog post, Healthy school lunches: You say you want a revolution.)

As part of my research, I read a chapter about Lunchables in a 2013 book by Michael Moss, a New York Times reporter, called Salt Sugar Fat: How the Food Giants Hooked Us. I’ve since read nearly all of the book, and it delivers on the promise of its title, by showing how big food companies, notably Kraft, Kellogg’s, Coca-Cola and PepsiCo, formulated their products with unhealthy ingredients, employed the world’s best food scientists to figure out how to get people to consume more of them, and then marketed them in ways that were often calculated to deceive. For example, they used unrealistic portion sizes on nutrition labels, or added a very small amount of fruit juice to a product and then boasted that it contains “real fruit.”

The government hasn’t been helpful in this regard either, despite the well-publicized efforts by First Lady Michelle Obama. Farm bill subsidies flow to cheap corn and soy, used to feed chickens, fatten cows or sweeten soft drinks, and not to healthier fruits and vegetables. The USDA coordinates marketing checkoff programs to promote meat, milk and cheese. Dairy marketers “teamed up with restaurant chains like Domino’s to help foster concoctions like ‘The Wisconsin,’ a pie that has six cheeses on top and two more in the crust,” Moss writes. Americans now eat about 33 pounds per capita of cheese and cheese-like products per year, he reports, triple the amount we consumed in the 70s.

As it happens, Lunchables deserve a small portion of the “credit” for the growth in consumption of fat-laden cheese and pseudo-cheese. Interestingly, the product was created way back when to increase sales of bologna–which were falling as a result of health concerns about processed meat. It worked, as my story notes:

Back in the 1980s, health-conscious shoppers began to shy away from processed meat because of worries about fat and salt. Executives at Oscar Mayer, facing declining bologna sales, could have sought healthier alternatives. Instead, they invented Lunchables, the packaged, refrigerated, convenient meal in a box.

Kids loved them – they found it fun to assemble the crackers, bologna and cheese – and so did harried parents. But food critics were, and still are, appalled by the fat, sugar and salt packed into Lunchables’ familiar yellow packages.

Today, Lunchables is a $1bn brand with a persistent image problem – and it’s facing a new competitor aimed at health-conscious parents.

The new arrival is Revolution Foods, a small company based in Oakland, California, that has already enjoyed success delivering healthier meals for kids to schools. Last fall, Revolution Foods introduced packaged Meal Kits. They can now be found in more than 1,000 stores, including Safeway, Target, King Sooper’s (a unit of Krogers) and Whole Foods.

Will Kraft Foods, Oscar Mayer’s parent company, respond with better-for-you versions of Lunchables, or will the company stand pat and risk further damage to its reputation?

To be sure, Kraft has already improved the nutritional profile of Lunchables, reducing sodium, fat and calories. What’s more, the company is in a tough spot because people like foods with fat, salt and sugar. When companies like PepsiCo and Campbell’s Soup removed fat, salt or sugar from products, sales reportedly declined.

I’m not sure how to resolve what appears to be an unavoidable tension between what’s good for business and what’s good for the health of Americans. Despite the rhetoric about social responsibility that comes out of the food industry — this page about Kellogg’s “Passion for Nutrition” is a personal favorite — companies like Kraft and Kellogg’s and Pepsico pay people to go to work every day and sell as many boxes of Lunchables or Frosted Flakes, or bags of Fritos, or cans of Pepsi as they possibly can. Of course, as these companies are quick to remind us, they also offer plenty of healthier alternatives. Consumers do have choices.

So can we blame the food companies when some people make themselves sick by consuming too much of their products? Hard to say, but I’m less likely to brush away the question than I used to be.

You can read the rest of my story here.

Natural capital: Breakthrough or buzzword?

forests-why-matter_63516847We depend on nature. Forests, fisheries, water, soil, clean air, the ability of the atmosphere and the oceans to absorb CO2, minerals, biodiversity, pollination, the serenity of the wilderness: They make life possible. Not to mention more pleasant. Fine. That’s not news.

Lately, though, environmentalists and a handful of companies and consultants have tried to assign a dollar value to the products and services provided by nature. This idea is what’s called “natural capital,” at least as I understand it. I took a look at the idea in a story posted yesterday at Guardian Sustainable Business.

The story has already generated reaction, positive and negative. (Sometimes from people in the same organization.) Before you read it, I want to clarify what I meant to say–something a reporter shouldn’t have to do, but it may be helpful in this case. I didn’t mean to diss the entire notion of natural capital. It strikes me as potentially a useful idea, particularly when applied at a modest scale, and with some humility. Specifically, some companies and government agencies have found that by “investing in nature,” they can generate favorable returns when compared to other more conventional investments. For example, Coca Cola bottling companies have paid upstream farmers to take better care of their land, as a way of protecting water that the company needs to make beverages. A small nonprofit in Oregon called The Freshwater Trust has found that working with landowners to plant trees along riverbanks can improve water quality more effectively and at a lower cost than installing conventional pollution controls. (Here’s an example, a project the group administered for the City of Medford.) Most famously, Dow Chemical has worked with the Nature Conservancy to develop “green infrastructure” instead of “gray infrastructure” at a big facility in Texas. Maybe because I can get my head around them, these projects make sense to me.

What’s harder for me to understand are the more ambitious and complicated efforts to account for natural capital on a corporate or even a global scale. The calculations get complicated, in a hurry. (PUMA and its parent company, Kering, have spent years trying to measure their impact.) The numbers become less reliable when we start talking about billions or even trillions of dollars. Most important, the object of the exercise is…..what, exactly? Some people argue that valuing natural capital helps company identify risks or opportunities in its supply chain, but does an apparel company really need to hire accountants and consultants to understand that growing cotton will be harder in a water-constrained world than it is today? What’s more, as I explain in the story, the idea of “finite” natural resources, on which much of the analysis depends, is itself flawed. Yes, we may run out of this or that, but over time, inventive people are about to devise substitutes for scarce resource as the prices of those resources. This is how markets and innovation work. After,  the  stock of natural capital in the 19th century would have included whale oil for lighting and horses for transportation; they were, perhaps, finite, but they became irrelevant.

In any event, here’s how my story begins:

The corporate sustainability movement needs many things – scale, acceleration, a sense of urgency, science-based targets and goals – but one thing it surely does not need is another buzzword. Yet that is what “natural capital” is at risk of becoming.

At the GreenBiz Forum last month in Arizona, which attracted nearly 600 sustainability professionals, talk of natural capital was everywhere. The Nature Conservancy and the Corporate Eco Forum unveiled the Natural Capital Business Hub, which aims to “help companies uncover opportunities to enhance their bottom lines by integrating the value of natural capital into their strategy, operations, accounting and reporting.” Companies identified as Natural Capital Leaders – including Kimberly Clark, Freeport McMoran and Adobe – were praised.

So what, exactly, is natural capital? And why should companies care? Will accounting for natural capital drive meaningful change – or will it merely consume time and energy, occupy panelists at sustainability conferences and generate consulting fees?

Defining natural capital is relatively easy. “It’s the products and services that nature provides to business,” explains Libby Bernick, a senior vice president at Trucost, a consultancy that has popularized the idea. Forests, fisheries, water, soil, clean air, the ability of the atmosphere and the oceans to absorb CO2, minerals, biodiversity, pollination, even scenic landscapes upon which tourism may depend: all these are forms of natural capital.

The problem, as some see it, is that businesses and individuals use natural capital without paying for it. As Pavan Sukdev, a former banker who helped spread the idea, likes to say: “We use nature because it’s valuable, but we lose it because it’s free.” It’s a profound statement. Catchy, too.

But putting a price on nature’s products and services and then using those valuations to actually do something useful – well, that’s when things get fuzzy.

You can read the rest of the story here.

Easy targets

UnknownHow do companies set their climate reduction targets?

I wondered about that after reading an analysis of 100 global companies that was published last year by Climate Counts and the Center for Sustainable Organizations. The companies had all been measuring and reporting on their global greenhouse gas emissions at least since 2005. In that regard, they are climate leaders, at least in terms of their transparency. Yet the study found that only 49 of the 100 companies are on track to reduce carbon emissions “in line with scientific targets to avert dangerous climate change.”

Companies, it would seem, are setting climate targets, meeting them and yet not doing enough. Could there be  something wrong with their targets?

That’s the topic of my story that was posted today on Guardian Sustainable Business. Here’s how it begins:

Every company that aspires to be responsible sets targets for reducing its greenhouse gas emissions. General Motors says its manufacturing plants will reduce their carbon intensity by 20%. Wells Fargo says it will achieve a 35% reduction in greenhouse gas emissions from its buildings. UPS aims to reduce airline emissions by 20%.

These global corporations recognize the reality of climate change and they are striving to become more efficient. While governments, including the US and China, the world’s two leading emitters, can’t agree on binding climate targets, it would seem as if companies are doing their part.

Unhappily, most are not.

The trouble is, corporate climate targets are almost never based on climate science. That is, they are not designed to do the job that needs to be done–bringing global carbon emissions down to levels that will avert dangerous climate change. Instead, the corporate targets appear to be driven by internal considerations–what companies can achieve and afford, what their peers are doing, even what round numbers will fit into a headline or press release. No one promises to cut emissions by 23 percent by 2021.

The story goes on to chronicle my efforts to get companies to explain how and why they set their targets–a question that led mostly to answers like “sorry, we’d rather not discuss that,” even from companies that are ordinarily more than ready to promote their green good works.

What this points to is the need for what some advocates are calling “context-based sustainability,” that is, setting targets that are shaped by science-based thresholds. Want to know more? Read the story, here.