More than a decade after the Nike scandals of the late 1990s exposed terrible working conditions in the Asian factories where most of our stuff is made, has anything changed? To be sure, in the years since, most US brands — not just footwear and apparel companies like Nike, Timberland and Gap, but corporate giants like GE and Walmart — have assumed responsibility for human rights and environmental problems throughout their supply chains. But are conditions any better for the workers?

Those questions are front-page news these days, literally, in The New York Times, which has published two long and extraordinary stories about Apple and its supply chain in China. [See How the US Lost Out on iPhone Work and especially In China, Human Costs are built into an IPad.] The Apple-in-China story is also brought to life by Mr. Daisey and the Apple Factory, a lively, provocative episode of public radio’s This American Life, in which an actor-turned-reporter  named Mike Daisey investigates conditions at a Foxconn factory in Shenzhen. Together this reporting paints a shameful picture of harsh and unsafe working conditions at Apple suppliers: sometimes deadly safety issues, chemicals that scar people’s hands, 60-hour weeks, long stretches of work with no breaks, a rash of worker suicides, etc. To get some perspective, I spoke with Dan Viederman, the executive director of Verite, a nonprofit that helps companies build more humane and sustainable supply chains, and I’ve been reading my friend Adam Lashinsky’s excellent new book, Inside Apple.

Foxconn offers medical care on its campuses

For starters, let’s be clear: This is not an Apple problem. The focus of both The Times’ reporting and Mike Daisey’s story is Foxconn, which is said to be China’s biggest private employer and may be the world’s largest manufacturing company. It employs 1.2 million people (!) and assembles an estimated 40 percent of the world’s consumer electronics, for customers including Amazon, Dell, Hewlett-Packard, Nintendo, Nokia and Samsung, according to The Times. Part of a company called Hon Hai that is headquartered in Taiwan, Foxconn operates not just in Asia, but in the Czech Republic, Mexico and Brazil. It publishes a corporate social responsibility report and has US-based employees in Houston and Austin, TX.  Most Americans, of course, have never heard of Foxconn although they probably own something that was made by the company.

Nor is the problem of harsh, unsafe working conditions limited to Foxconn or even the electronics industry. Problems abound in the apparel and toy industries, too, as well as in mining, farming, fishing and construction. [See Walmart: A Bully Benefactor at Fortune.com for my story about Walmart's work to prevent  child labor on cotton farms in Uzbekistan]. Last summer, Nike admitted that “nearly two-thirds of the 168 factories making Converse products fail to meet Nike’s standards for contract manufacturers,” according to this story by Good Guide’s Dara O’Rourke, who as a graduate student working in Vietnam in 1997 turned a spotlight on Nike’s use of child labor.  In its most recent corporate-responsibility report, Gap says  that between 10 and 25% of its suppliers in south China don’t comply with child labor laws, don’t pay overtime as required and don’t provide one day off each week. I turned to Gap’s report not because they are a laggard but because, to their credit, they are a leader when it comes to being open about where their factory monitoring efforts are falling shorts. Other companies don’t say nearly as much about where their stuff is made, or how. The factories themselves are often walled off from NGOs and journalists. The result is that, for better or worse, most of our stuff is made in faraway places by people who are invisible to us. Can you find Shenzhen, a city of 14 million people (bigger than New York!) and the world’s manufacturing hub, on a map?

Apple CEO Tim Cook

As best as I can tell, Apple is no worse than most other companies when it comes to protecting the rights of workers in its factories. It may be better. In its sixth annual Supplier Responsibility Report released last month, Apple disclosed the names of its suppliers for the first time–but not the location of their factories. The company also became the first electronics firm to join the Fair Labor Association, a nonprofit group that works to improve conditions for workers. (Its other clients include Nike.) In an email to employees, Apple’s CEO Tim Cook wrote: “The FLA’s auditing team will have direct access to our supply chain and they will report their findings independently on their website.” They don’t, however, tie violations to particular factories.

In its report, Apple also said that it

dedicated additional resources to protecting the rights of workers who move from their home country to work in factories in another country. Many of these immigrants are charged exorbitant fees that drive them into debt, an industrywide problem that Apple discovered in 2008 and that we classify as involuntary labor. In 2010, we continued our search for these violations, auditing all of our production suppliers in Taiwan and many in Malaysia and Singapore. As a result of Apple’s audits and rigorous standards,
foreign workers have been reimbursed $3.4 million in recruitment fee overcharges since 2008.

This is significant because it’s a rare example of a US brand putting money in the pockets of overseas workers. “On the migrant labor issue, Apple is absolutely a leader,” says Dan Viederman of Verite. [Disclosure: Verite has worked with Apple and my wife, Karen Schneider, is a board member of  Verite.] Others see Apple differently. A consultant for BSR (also know as Business for Social Responsibility) who declined to be identified told The Times that Apple refused to push Foxconn to try out a program where workers could have access to private “hotlines” to report abusive conditions.

The more fundamental problem is that Apple’s reporting doesn’t tell you much about what impact the company is having. Cook’s email, for example, says that Apple’s

Supplier Responsibility team led more than 200 audits at facilities throughout our supply chain last year. These audits make sure [emphasis added] that working conditions are safe and just..

But othey don’t. Suppliers are notorious for faking pay records and gaming the inspectors. And Apple’s track record makes clear that conditions are not safe and just.

Cook also boasts that Apple offers free continuing education programs at  factories in China, saying that “more than 60,000 workers have enrolled in classes to learn business, entrepreneurial skills or English.” But are they earning more money? Working fewer hours? Safer?

Dan Viederman

See the problem here? Apple and other companies are measuring their actions, and not their impact. There’s a big difference between the two.  It’s reason why we don’t know whether the people who make the iPad are better or worse off than those who make an HP printer or a Microsoft X-Box. “Companies report on their activities – audits conducted, training delivered – but don’t tell us what impact that effort has achieved for workers,” Dan says. “As a result, while companies are getting better at reporting on their activities, we don’t have a meaningful way to compare one company to another.” We’d know more if companies reported on the wages that workers are paid, the number of workplace injuries, turnover rates, environmental discharges and the like.

Those who follow these issues also tell me that workplace issues are not part of procurement at most companies. If suppliers had  to demonstrate that they provide ethical workplaces as a condition of doing business with a big US brand, companies might avoid embarrassment–and more important, make a difference in the lives of their workers.

Nicholas Kristof

Having said that, it’s worth remembering that globalization and the manufacturing jobs it has brought to Shenzhen have on balance been good for China and its people. Workers line up for jobs at Foxconn, as the Atlantic reported last week. No less a crusader for the rights of the global poor than Nicholas Kristof has said as much, most famously in a 2000 Times Magazine article called Two Cheers for Sweatshops.

More recently, Kristof, who lived in China, told This American Life that industrialization has

created massive employment opportunities, especially for young women, who frankly didn’t have a lot of alternatives. That tended to give women more clout within families, within the community….for many Chinese, the grimness of factories like Foxconn was better than the grimness of rice paddies.

If you’d prefer the opinion of a Nobel Prize-winning economist, here’s Paul Krugman, writing in Slate, back in 1997:

While fat-cat capitalists might benefit from globalization, the biggest beneficiaries are, yes, Third World workers.

It is not an edifying spectacle, but no matter how base the motives of those involved, the result has been to move hundreds of millions of people from abject poverty to something still awful, but nonetheless significantly better.

What’s more, competition for workers — and the very beginnings of a labor movement — has also begun to  improve conditions in China’s factories. To retain workers, owners are said to be improving wages, working conditions and living conditions, albeit slowly.

But still.

My MacBookPro costs $1299.  My iPad2 retails for $499. I don’t even know how much my iPhone costs, and I don’t want to think about how many iPods, Nanos or shuffles I’ve bought for my family over the years. By selling premium-priced products and generating high margins, Apple was the US’s most valuable company–worth more than ExxonMobil, Microsoft and IBM, last time I checked. It’s holding $97 billion in cash and short-term securities.

Simple fairness dictates that more of that wealth should be shared with the workers in China who are making Apple products.

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.

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.

Social mobility is harder to measure than income inequality (and more important, methinks), but indications are that it’s more difficult to climb the economic ladder in the U.S. than in other western democracies. The Economic Mobility Project, a  bipartisan effort to study the issue, reported recently on a study of 10 western nations that concluded: “In the United States, there is a stronger link between parental education and children’s economic, educational, and socio-emotional outcomes than in any other country investigated.” The sluggish U.S. economy in 2011 didn’t make life easier for those on the bottom who want to work hard and better themselves.

And yet.

As I wrote a year ago (see my blogpost, China, cappuccino and cell phones: reasons to cheer!),  life on this planet is getting better all the time. We humans are richer, healthier and and more peaceful than ever. It’s easiest to forget that, especially if you focus too much on the day-to-day headlines.

Here are several reasons to feel good about the year ahead:

Western economies are slumping, but the rest of the world is growing robustly. The most urgent problem facing mankind isn’t climate change: It’s the human misery that’s caused by poverty. There’s less of that today than there was a year ago, and there will be less on Jan 1, 2013, I’d bet. China’s GDP grew by about 10% in 2010 and by an estimated 9% in 2011. India grew by 6 to 7 percent last year.

A Nairobi street

Then there’s Africa. As Forbes reported last week, in the middle of the 2009 global economic recession, Africa was the only region apart from Asia that grew positively, at about 2%. The continent’s growth has been on an upward trajectory ever since then- 4.5% in 2010 and 5.0% in 2011.

Reliable statistics are hard to come by, but you can be sure that this means that many millions of people are living longer and healthier lives, and that their children have a better shot at an education. This is good  for all of us because the global economy is not a zero-sum game. An expanding pie means a safer world, and more markets for U.S. goods. And there’s even reason to hope believe that the US economy is due for a rebound. See what Matthew Yglesias writes in Slate that Happy Days Are Here Again.

Corporations are taking a more expansive view of their responsibilities: One reason why I write about business is that I believe that corporations can be a powerful force for good. Many are not, but I found reason in 2011 to applaud changes at Walmart (Have I Fallen in Love with Walmart?), McDonald’s (Mainstreaming Sustainability? ), Smithfield Foods (Sustainable pork?), Office Depot (No tree hugging, please), Shaw Carpets (This carpet has moral fiber), Unilever (CEO Paul Polman: Don’t stay on the sidelines), Starbucks (We are indivisible), Marks & Spencer (Sustainability, profits and a carbon-neutral bra),  TD Bank (America’s greenest bank?) and GE (How GE learned to think small and serve the poor). My most popular post of the year, by far, was about Patagonia (Maybe the best retail ad ever).

These companies are responding to rising expectations–from advocacy groups, consumers, a handful of shareholder activists and especially from their own workers. The changes they are making aren’t big enough, and they aren’t happening fast enough, but the forces driving companies to become more sustainable are getting stronger all the time.

Protesters in Egypt

Citizens’ movements are growing here and abroad. Whatever you think of Occupy Wall Street, they got one thing right–the deck is stacked in the US in favor of the well-to-do and the powerful, not just the 1% but the 10 or 20 or 30%, and it’s stacked against those at the bottom of the income ladder. So many laws and cultural practices that we take for granted–from the mortgage interest deduction to the dismal quality of the public education system in our big cities and poorest rural areas–serve the interests of the rich and powerful. Wall Street got bailed out. Main Street got left behind. Thank goodness for people didn’t take that lying down. Thanks, too, to the Tea Party, which is wrong about most things but right about the fact that the federal government can’t keep spending money that it doesn’t have.

Of course, Occupy Wall Street was largely inspired by citizens uprising in Tunisia and Egypt, which in turn seem to inspired people in Russia and even in China to demand more of a voice in their own affairs. This is all to the good, and it should be a reminder to those of us here in the U.S. not to take our freedoms for granted and to exercise our rights as citizens. A big job ahead is to convince Congress to act like adults and treat us that way, understanding that they were elected to solve big problems, even if that requires. We can’t have big government, generous services and low taxes. Or cheap energy without climate risk. Or affordable, unlimited health care for all.

Sure, there’s reason to be gloomy but it always helps to think long term. More people are free today than at any time in human history. More people live comfortably. We’re more tolerant and loving that we used to be. We’ve got an African American president and my daughter, who is gay, will get legally married in June. MLK Jr. had it right: “The arc of the moral universe is long but it bends toward justice.”

Yalmaz Siddiqui is a dark-green environmentalist, who once started a business called, of all things, “eco-eco.” But in his job as the senior director for environmental strategy at Office Depot, the $11.6-billion a year office-products giant based in Boca Raton, FL, he doesn’t talk about saving the planet. Instead, he focuses on the  business benefits of sustainability, particularly those that accrue to Office Depot’s customers.

“It really is rare for me to invoke climate change or landfills or toxicity in my internal arguments,” Yalmaz says.  “We’re in Florida. We’re not in San Francisco or the Pacific Northwest. Impassioned arguments about environmental issues don’t resonate.”

Whatever his approach, it seems to be working: Office Depot has green cred. In Newsweek’s ranking of U.S. companies, they were the top retailer and No. 8 overall,  ahead of rival Staples (17), Best Buy (19),  J.C. Penny (64), Starbucks (82) and Whole Foods Market (106). While the rankings are debatable, Newsweek wrote:

Office Depot, at No. 8, is the single retailer to make it into the U.S. top 10. It’s had its share of operational successes—saving 3,000 tons of wood and up to $1.5 million a year simply by delivering goods in paper bags rather than cardboard boxes, for instance. But, as with IBM, perhaps more significant are the tools Office Depot provides to its largest customers, including cities, states, and large corporations. It shows customers the environmental and financial tradeoffs of their purchasing decisions on everything from copy paper to cleaning supplies.

This customer-centric approach helps explain what Office Depot can do, and what it can’t, when it comes to “green.” You won’t see solar on the roofs of  Office Depot stores, at least for now, because the return on the investment is insufficient.  You will see attention paid to energy efficiency because the ROI makes sense, and you will see even more attention paid to selling greener products because profits from those sales drop right to the bottom line.

I spoke to Yalmaz by phone the other day because I’m  interested in how people inside companies — intrapreneurs, they’re sometimes called — promote change. There’s a small army of these folks in corporate America, and the work they do matters. With Washington gridlocked (or worse) on environmental issues, it’s up to corporate America (as well as state and local government) to deliver the change we need.

Yalmaz, who is 41, started “eco-eco” after college to sell organic clothing, reusable organic cotton bags and other dark-green stuff. “It didn’t resonate with the marketplace,” he said. Subsequently, he got a masters in environment and development, did consulting work with PwC and IBM focusing on the forest, paper and packaging industries and then joined Office Depot in 2006.

The company divides its environmental strategy in three: Be Greener, Buy Greener and Sell Greener. Be Greener focuses on internal operations, and this is mostly about saving money. Mostly but not entirely: Office Depot, as you’d expect, buys recycled paper, for which there’s essentially no business case. (If classical economists were right about how the world works, there’s be no recycled paper. It costs more and performs no better than paper made from virgin forest.)

But, as Yalmaz notes: “It’s an iconic product, when it comes to organizational greening. It’s the everyday symbol of environmental commitment. It’s very tangible.” Through its purchasing requirements, he explained, the federal government helped create the market for recycled paper.

Office Depot also got a lot of attention for replacing cardboard boxes with lighter weight bags when delivering supplies to institutional customers. That was a double win, saving the company money and pleasing customers. “It was sold as way to satisfy customer desire to have less packaging,” Yalmaz says.

Office Depot also took a pragmatic, customer-driven approach when it set out to define greener products. The firm looked at the purchasing policies of key, leading-edge buyers like the EPA and the U.S. Green Building Council, rather than setting out on its own to measure the environmental impact of what it sells. “We’ve tried to make the definition of green products as simple and accessible as possible,” Yalmaz says. That’s a different approach from the one taken by Walmart and its partners in The Sustainability Consortium, who are setting out to do complex, science-based life cycle analyses of thousands of products.

Unlike Walmart, Office Depot hasn’t set big attention-getting goals like zero waste or being powered entirely by renewable energy. It’s ranked No. 16,  behind Staples (No. 4) and Walmart (No. 5) in EPA’s list of the top 20 retail green power partners. But, to its credit, Office Depot is unusually transparent about its environmental performance, posting a dashboard that tracks its progress or lack thereof. For example, you can see that the percentage of copy paper sold with post-consumer recycled content actually fell between 2008 and 2010.

This week, to spur sales of green products, Office Depot recognized 25 of its own customers for their “leadership in greener purchasing.” Winners from the FORTUNE 500 include Chevron, JP Morgan Chase, Google, Bechtel and Comerica. Says Yalmaz: “If I was to be asked, what is the ultimate metric of success of our environmental program, I’d say it was ‘green spend’ by customer.”

To borrow a phrase from economist and author Gernot Wagner, but will the planet notice? That’s hard to say. Clearly, if Office Depot sells a lot more greener products in place of conventional products, we’ll be better off. And if greener corporate behavior paves the way for the political action needed to have a big impact on climate change and other issues, great. “Normalization of green behavior works better than a message of environmental guilt,” Yalmaz says. On the other hand, let’s not fool ourselves into thinking that buying recycled paper or Pilot pens made out of recycled bottles (try them, they’re cool) get us where we need to go. It won’t.

Led by Unilever, Astra Zeneca and Nike, consumer brands are taking climate change more seriously than ever, says a new report from Climate Counts, a nonprofit that rates some of the world’s largest companies on their climate impact.

Big companies are reporting emissions, committing to targets and becoming more vocal in the policy arena, according to the report.

“There’s evidence to suggest we have reached a remarkable tipping point,” says Mike Bellamente, project director of Climate Counts. “Global corporations are increasingly acknowledging climate change as reality and are adopting measures to reduce their emissions and environmental impact.”

This is the fifth report from Climate Counts, which is the brainchild of Stonyfield Farms CE-Yo Gary Hirshberg. The ratings are intended to make consumers more aware of leaders and laggards on climate — the term of art for this is “rank ‘em and spank ‘em — as well as to spur companies to do better. or whatever reason, companies are improving: Bellamente told me over the phone the other day that the average score for the 136 companies rated this year is up by an impressive 54% from the initial set of ratings.

This is nice to hear but the news comes with a big caveat. If there’s one thing we’ve learned from this past decade of growth in both “green” talk and carbon emissions,  it’s this: Voluntary corporate behavior won’t produce an adequate response to the climate crisis. Indeed, it has not: Greenhouse gas emissions rose by record levels last year. “We haven’t made (climate) progress as a society,” Mike acknowledges. Only climate policy will bring meaningful progress.

The trouble is, even companies that have adopted their own sustainability programs are not as active as they need to be in the policy and political arena. Climate Counts reports that 30 of the big companies it ranks expressed  strong support for federal level climate policy, but 82 companies (or 60%) remained silent or in opposition of such efforts. The companies in the survey don’t include stalwart opponents of climate regulation–the coal, utility and oil companies–and so it actually overestimates the degree to which business supports climate action.

Still, as more companies  acknowledge the reality of climate change and reduce their own emissions, this will help set the stage for better policy.

“Many companies are performing well,” Mike told me. “Sustainability is integrated as a philosophy across their business.” Prominent examples include Unilever, this year’s No. 1 company with a score of 88 out of 100, and Nike, with a score of 85, which topped the list last year. (See my blogposts, Unilever CEO: Don’t stay on the sidelines and Nike: Running towards sustainable consumption.)

Other companies that led their industry sectors, with scores in parentheses, include Southwest Airlines (55), Anheuser-Busch/InBev (57), Bank of America (82), UPS (83), Starbucks (70), Herman Miller and Masco (63), Marriott (73), L’Oreal (78), AB Electrolux (80), Microsoft (68), GE (77), AstraZeneca (86) and Hasbro (52).

Some other highlights:

Amazon and Apple are among the laggards in the Climate Counts ratings. That may surprise you because both are innovative companies, and tech companies generally score well on green behavior, but it shouldn’t. Amazon is all but invisible on the climate  issue, scoring a meager 11. “There is little evidence to suggest that Amazon has a management plan in place to account for emissions, reduce their overall environmental impact or report on their progress,” Mike told me. (Not coincidentally, my friends in Seattle tell me that the company plays a minimal role in the sustainability conversations and civil life of the city, in contrast to Microsoft, Starbucks, Costco, REI, etc.) I emailed Amazon for a reaction, and haven’t heard back.

Apple does far better, scoring 60 out of 100, but it still places last in the electronics sector, behind leaders Siemens, HP, IBM, Nokia and Sony. “Unlike corporations of similar size, they fail to disclose a formal company-wide emissions reduction target,” Mike says. Nor does Apply publish a sustainability report.

Rising up the charts were Wyndham Hotels and Resorts, Amgen and VF Corp. Wyndham Hotels surged 30 points  to 57 by launching a green initiative, topping Starwood (48), Hyatt (36) and Hilton (22). Pharmaceutical company Amgen rose 29 points to achieve a score of 57, and VF Corporation, which owns such brands as Nautica and Wrangler, gained 13 points to lift its score to 34.

The “footprint” graphic below reflects the fact that Climate Counts divides companies into three groups. Those that score 50-100 are “striding” towards a low carbon future and identified in green, those that score 13 to 49 are “starting” to address their climate impact and marked in yellow, and those that score 12 or less are “stuck” and colored red.

In 2006, I wrote a cover story for FORTUNE with the headline: Wal-Mart Saves the Planet. Since then, I’ve written dozens of stories about the retail giant. I’ve reported on Walmart’s impact on the gold mining industry (Green Gold in FORTUNE), its efforts to protect child laborers in Uzbekistan and salmon fisherman in Alaska (Walmart: A bully benefactor on Fortune.com), the launch of a path-breaking sustainability index (Inside Walmart’s sustainability index at GreenBiz), LED lights in Walmart parking lots, the company’s CSR reports, etc. I’ve been critical at times–pointing to Walmart’s BIG problem: climate change and writing that Walmart CEO (Mike Duke) has a problem with gays–but most of my coverage of the company’s sustainability effort has been laundatory.

Now here comes Stacy Mitchell, a smart reporter, with a six-part series in Grist called Walmart’s Greenwash: Why the retail giant is still unsustainable. She assails Walmart for promoting suburban sprawl, making only token efforts to buy renewable energy and selling cheap throwaway stuff. She also faults mainstream environmental groups for focusing “on the small bits of good that Walmart could do—reduce PVC in packaging, for example—while ignoring the much larger consequences of its ever-expanding business model.” She also says that she has been “shocked by just how much of a public relations boost the media have given the company and how little public accountability they have demanded in return.”

These are serious criticisms that deserve a responses. Stacy highlights some important points. Fundamentally, though, we disagree about Walmart, and this post (it’s necessarily longer than most) is an attempt to explain why. Some of our differences are probably a result of what psychologists called confirmation bias, which describes the way all of us seek out, sift through and read evidence in ways that confirm our preconceptions. Confirmation bias is a problem in journalism, politics, economics and even in the so-called hard sciences.

Stacy Mitchell

I’m sure that my experience with Walmart has left me vulnerable to confirmation bias. I’ve visited Bentonville, gotten to know executives at the firm, and the company has participated in Fortune’s Brainstorm Green conference, which I co-chair;  my career and reputation have been helped by my reporting on the company. I suspect the same is true of Stacy, who wrote a book in 2008 called Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America’s Independent Businesses. She has “advised numerous communities on strategies and policies to limit chain store proliferation and strengthen locally owned businesses,” according to her bio.

So read on (skeptically) as I try to sort through some of the issues she’s raised.

Renewable energy: In an article headlined Think Walmart Uses 100% clean energy? Try 2%, Stacy notes that Walmart has been slow to adopt renewable energy. The company has several big, ambitious, stretch goals –  one  of them is to be powered by 100% renewable energy — and she writes, accurately, that  ”journalists often repeat these goals verbatim, so they function like stealth marketing slogans that infiltrate media coverage.” Stacy did her own calculation and found that a mere 2% of Walmart’s operations are powered by renewable energy.

That doesn’t even make Walmart No. 1 among retailers, let alone when it is compared to other big companies and government agencies. Walmart ranks No. 15 in EPA’s top 50 green power purchasers, and ranks No. 5 among retailers, behind Kohl’s, Whole Foods Markets, Starbucks and Staples–smaller companies that buy more renewable energy than the Bentonville behemoth.

I asked David Ozment, Walmart’s energy guy, about this, and he told me that the company expects to move up the list next year. Progress in such a big company takes time. “We’ve got to plant this forest, one tree at a time,” he said. Recently, Walmart struck a deal with Solar City to add solar photovoltaics to another 61 sites. Walmart is also one of the largest, if not the largest, customers of Bloom Energy, having installed Bloom’s fuel cells at 26 sites. It’s also  experimenting with on-site wind turbines at a couple of stores. So all the movement is in the right direction.

But the numbers remain small. Walmart and Sam’s Club have about 4,400 stores in the U.S.  The trouble is, as I wrote in GreenBiz last spring, that “buying renewable energy would drive up (Walmart’s) costs, with no tangible benefits to customers, and put the company at a competitive disadvantage.” Walmart’s not willing to do that.

Cheap stuff: In a story headlined Is Your Stuff Falling Apart? Thank Walmart, Stacy writes about a $6 toaster (!) and $10 jeans. Americans are not only buying more stuff, we’re throwing away more than ever, she reports–an average of 83 pounds of textiles per person, mostly discarded apparel, each year, four times as much as we did in the 1980s. She writes:

Where once we measured value when we shopped, Walmart trained us to see only price. Its hard bargaining pushed manufacturers offshore and drove them, year after year, to cut more corners and make shoddier products….

While there are certainly factors beyond Walmart that have contributed to this ever-expanding avalanche of consumption, the company has been a major driver of the trend. Its growth and profitability rest on fueling an ever-faster churn of products, from factory to shelf to house to landfill.

This, too, is an important point. If Walmart and its suppliers make things more efficiently, but the company sells more and more and more things, the planet probably will be worse off. (I say “probably” because if goods sold by Walmart merely  displace goods made more inefficiently  by others, the planet could actually be better off.) But the bigger question here is, who’s responsible for what Stacy describes as “this ever-expanding avalanche of consumption?”

It doesn’t please me to say so but people who buy cheap, throwaway stuff do so because they want cheap, throwaway stuff, or because they can’t afford to buy more expensive, durable stuff, like a Patagonia jacket or the $249 All-Clad Deluxe Slow Cooker that I was eyeing the other day at Williams-Sonoma. The Hamilton Beach slow cooker  at right sells for $14.88 at Walmart.

Markets are far from perfect, goodness knows, but retail markets are more competitive and transparent than most. People get what they want, for the most part. Saying that Walmart “trained us” to see only price reminds me of the argument that big-box stories destroyed Main Street, or Amazon and Barnes & Noble put the independent bookseller out of business. No, they didn’t–their customers did.

The sustainability index: At Grist, Stacy’s story is headlined:  Walmart’s promised green product rankings fall off the radar. She writes: “Was the index just a PR ploy from the start?”

Oh, come now. If this was a PR ploy, the index has been an even bigger flop than the critics would say.  After all, the green product rankings have fallen off the radar, as the Grist headline notes.

One reason you haven’t heard much about the index is that it takes an enormous amount of work to do science-based, life-cycle analyses for tens of thousands of consumer products–that’s the goal of the project. This is going to take time, and it is going to be controversial, but the fact is that the undertaking has won broad-based support not just from Walmart suppliers who, arguably, could be muscled into joining, but from competitors including Best Buy, Kroger, Marks & Spencer and Safeway. Seventh Generation, Stonyfield Yogurt and NGOs including Environmental Defense Fund, NRDC and the World Wildlife Fund are also working with the university-based Sustainability Consortium. This is a big deal.

“So far this has done little to alter business as usual,” Stacy writes. Uh, no. People I respect–I’m thinking here about Hunter Lovins, Catherine Greener and others–who spend their lives working with companies to improve environmental performance tell me that Walmart’s efforts to green its supply chain, including the index, have already had a big impact on the entire consumer products industry.

Suppliers in China are taking note, too. For a nuanced look at Walmart’s impact there, read How Walmart is Changing China, a terrific piece by Orville Schell in The Atlantic. He writes admiringly of the work being done by Walmart but ends on a somber note:

However smart, prescient, and successful Walmart’s sustainability efforts actually turn out to be, just how “sustainable” is the whole bloody global-retail proposition that lies at the heart of the company’s amazing progress? Maybe Walmart’s new initiatives will pencil out in a business sense for the company and, within the terms of the current retail game, even serve as a model of good environmental stewardship. But will the hyperactive retail-consumption model that it has pioneered for global consumers pencil out for the world?

…The bitter reality is that even if unrestrained consumerism becomes less environmentally destructive per unit of production than it was in the past, it is still unsustainable in the long run. So even as this most innovative of corporate and statist green strategies may represent an environmental breakthrough and good business for Walmart, and good politics for the Chinese government, it may nonetheless end up being very bad business for humankind.

What Walmart can’t do: If you pay attention to Walmart, you can’t help but be impressed by its size and power. Schell, a veteran journalist, describes it  “as a corporate entity larger in scope and logistical complexity than any other in human history.” He writes: “Compare Walmart’s annual revenue with the GDP of sovereign nations, and it ranks in the top quartile.”

But it’s easy to overestimate Walmart’s power. This, I think, gets to the heart of the differences between those of us (like me) who believe that Walmart is part of the solution to the world’s environmental problems and those (like Stacy) who believe it is the cause of those problems.

Imagine, for a moment, that Walmart shut down tomorrow. Would the world become less globalized? Would people buy and shop less? What would take its place–locally-owned, small-scale merchants or other big-box stores like Costco or Target? Would Walmart’s 2.1 million workers be better off? How about its 200 million customers?

Walmart didn’t just spring, fully-formed, from the mind of Sam Walton. It grew into the world’s biggest company because it served people’s needs. Maybe not mine–I’ve spent less than $100 in my life at Walmart. Certainly not Stacy’s. But hundreds of millions of  people, not just in the U.S. but around the world, shop at Walmart, in large part because the company has enabled them to buy things that were once beyond their reach. Walmart isn’t a bunch of conniving businessmen in Bentonville, Arkansas. Walmart is us.

It should go withouit saying that Walmart didn’t create consumption or globalization. Nor can it stop them. All it can do is try to make consumption and globalization more sustainable and humane.

As Elizabeth Sturcken of the Environmntal Defense Fund, who works with the company, put it:

Is Walmart still unsustainable? Yes? Probably 95% of our consumer goods, and retail and supply chain system is. But does anyone have more power to change that system than Walmart? No.

It’s not all good or all evil. As usual, the reality is more complex.

So, by all means, let’s hold Walmart accountable.

Let’s ask its top executives–notably, Mike Duke–to speak more publicly and forcefully about sustainability, so that everyone in the organization understands that it matters.

Let’s ask Walmart to build sustainability metrics into its compensation system. There’s no more powerful signal to employees that a company cares about going green.

Let’s ask Walmart to set near-term targets for buying renewable energy or reducing waste to put more teeth into those long-term aspirational goals.

Let’s ask Walmart to begin a conversation with its consumers about what to buy and what they can afford.

And by all means let’s ask Walmart to be a louder voice in public policy debates about energy and climate change.

But there’s no point asking Walmart to stop being Walmart.

In business, and in life, we’d like to believe that good behavior will be rewarded. Most books on management talk about treating people with respect, or being firm but not harsh, or being generous about sharing credit. What goes around comes around, right? Right.

So what are we to make of Steve Jobs?

Walter Isaacson

I’ve just read Steve Jobs, Walter Isaacson’s riveting biography of the Apple founder and CEO. It’s a terrific book, but an unnerving one–because Jobs was successful despite some sneaky dealings, despite his utter lack of interest in corporate social responsibility, at least as it is conventionally defined, and despite treating people in ways that violate most everything that’s taught at business schools, or, for that matter, in kindergarten.

He could be cold, unpleasant, petulant, arrogant, abusive and self-absorbed. What’s more, this dark side of Jobs seems to be  intertwined with his brilliant and obsessive devotion to making great products at Apple. A “demented genius,” one reviewer called him. Having said that, Jobs could also be sweet, vulnerable, boyish, charming and endearing–when he chose to be.

It’s hard to overstate what Jobs accomplished in his 56 years. No, he didn’t cure cancer or alleviate global poverty but he remade a half dozen industries, all with panache: personal computers, music, animated movies (with Pixar), phones, tablet computing and digital publishing. My life is richer, more fun and more productive because of Jobs. I’m writing this on a MacBook, and I own an iPhone4s, an iPad, and a bunch of iPods. I’ve run hundreds of miles with my Nano, loaded with podcasts or music from iTunes, and  I’ve spent, conservatively, close to $10,000 on Apple products for myself, my wife and daughters.

Then again, there’s this…a story about how Jobs, on a trip to New York, gets into a battle at 10 ‘clock at night with a PR woman named Andy Cunningham over what kinds of flowers need to be  in his hotel suite for interviews the next morning. Somehow, she finds the calla lilies he wants, and then:

By the time they got the room rearranged, Jobs started objecting to what she was wearing. “That suit’s disgusting,” he told her. Cunningham knew that at times he just simmered with undirected anger, so she tried to calm him down. “Look, I know you’re angry, and I know how you feel,” she said.

“You have no fucking idea how I feel,” he shot back, “no fucking idea what it is to be me.”

Clearly, Jobs was tormented at times. A former girlfriend, who felt enough fondness for Jobs that she supported him during his battle with cancer, nevertheless tells Isaacson: “I realized that expecting him to be nicer or less self-centered was like expecting a blind man to see…I think the issue is empathy–the capacity for empathy is lacking.” He could be unkind to anyone–CEOs of other companies, his Apple co-founder Steve Wozniak, waiters, hospital nurses.

He was by no means a paragon of  business ethics and  corporate responsibility, Jobs backdated stock options at Apple and Pixar, lied to shareholders about his health, showed no interest in philanthropy (not even matching employee gifts) and brushed off questions about labor rights in China or the environmental impact of Apple’s supply chain, or its products. Other computer makers touted “product design for the environment,” but for Jobs design was all about the user.

So how did he accomplish so much? More specifically, how did he attract legions of great employees who under his leadership accomplished so much? Why did so many people put up with him?

It’s hard for me to understand why Jobs inspired loyalty, but he did. Apple’s lead designer Jonathan Ive, marketing chief Phil Schiller and current CEO Tim Cook spent a decade or more working closely with him, as did many others. Maybe they understood that his brutal honesty was part of what made the company great. Maybe his passion for excellence led them to put up with his tantrums. Maybe they saw him as a tormented soul, and forgave him his outbursts. Maybe Apple was just the coolest place to work.

Isaacson’s book–read it, really–ends with Jobs talking about his legacy in his own words. They offer clues to his success:

My passion has been to build an enduring company where people were motivated to make great products. Everything else was secondary. Sure, it was great to make a profit, because that was what allowed you to make great products. But the products, not the profits, were the motivation.

It’s a subtle difference, but it ends up meaning everything: the people you hire, you gets promoted, what you discuss in meetings.

Yes! So many business executives miss this–profits are not why companies exist, they are the fuel that companies need to accomplish their purpose, which is to solve people’s problems.

Also:

You build a company that will stand for something a generation or two from now. That’s what Walt Disney did, and Hewlett and Packard, and the people who built Intel. They created a company to last, not just to make money. That’s what I want Apple to be.

Jobs, is another words, was not just a great product guy. He thought deeply about the purpose of business, and his own purpose. This–despite his flaws–helps explain why his work mattered.

If you work in marketing or sustainability, you may want to join me tomorrow, Tuesday, Nov. 15, for a free webinar called Social Sustainability: Using Social Media to Advance a Corporate Sustainability Agenda. We’ll begin at 2 p.m. ET, 11 a.m. PT, and run for an hour, and those who join us will receive a free eBook from Sustainable Business Forum, which is sponsoring the webinar. I’ll be moderating, and you can register here.

The topic:

How can social media be a part of a smart sustainability program? Can social tools be used internally or externally to help make a company more sustainable or responsible? And, just as importantly, how can they be used to encourage consumers to engage with your sustainability message and corporate values?

Join us for a discussion of case studies and expert reports that explain how to take a social media strategy to the next step and create a definition for sustainability within your company. Once you’ve defined business sustainability, you can best use the right social media channels to promote your values and efforts. Our panel of experts will address:

• Reaching niche communities
• Social media crisis management
• Engaging customers to help deliver your message of sustainability.

Featuring:

Sarah Leiseca is a Director of Public Strategies’ Consulting practice group, coordinating strategic communications and public affairs campaign services for a range of corporate clients. Her work at Public Strategies has included campaigns for a large nonprofit hospital system, a pet food manufacturer and a major automobile manufacturer. Sarah also coordinates Public Strategies’ Media Intelligence offering, providing others at the firm with leadership in day-to-day media monitoring, crisis media monitoring, media analyses and long-term reputation management assessments.

Lauren Proctor is a New York City based marketing innovation strategist and freelance writer who is fascinated with the forces that motivate people to commune online. She works at L2, a think tank for marketing innovation, and is a researcher at the Hybrid Reality Institute. Lauren also consults a select roster of brands in advancing their interactive new media marketing strategy.

Eileen Brown is CEO of Amastra and a social business specialist who has been working with collaborative technologies for over 18 years.  Eileen creates the social business, ignites communities and improves social commerce and social CRM.  Her book, Working The Crowd: Social Media Marketing for Business, is available on Amazon.   She is a regular speaker at conferences, maintains a successful blog and can also be found on Twitter, Facebook and Google +.

If you pay attention to business, strategy and global issues, you’ve surely heard about “shared value.” The idea has been put forth by business guru Michael Porter and consultant Mark Kramer, both Harvard faculty members, most prominently in a January 2011 article in the Harvard Business Review.

They write:

The principle of shared value…involves creating economic value in a way that also creates value for society by addressing its needs and challenges. Businesses must reconnect company success with social progress. Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. It is not on the margin of what companies do but at the center. We believe that it can give rise to the next major transformation of business thinking.

The purpose of the corporation must be redefined as creating shared value, not just profit per se.

Yes, shared value is being promoted as a big idea, as a way to augment outmoded thinking about corporate social responsibility (CSR), sustainability, corporate citizenship, the triple bottom line, and EHS, even as a way to “reinvent capitalism.” Yikes.

Michael Porter

I wish Michael Porter and Mark Kramer much success. Really. They have access to the most powerful CEOs in the world, and the fact that Porter, an enormously influential business thinker, wants to focus on business’s social and environmental impact has to be good.  Why not try to re-frame social and environmental problems as business opportunities?

But I don’t see much, if anything, that’s new here. And I see some danger in substituting the language of  “shared value” for the goal of “sustainability” – a corporate pursuit that is more powerful, more radical and easier to define.

I learned a bit more about shared value today (Nov. 7) at a conference sponsored by the World Environment Center where Kramer spoke. It was hard to argue with anything he said.

Mark Kramer

“Business, if it wants to redeem itself, if it wants to earn society’s trust, has to demonstrate the positive impact that it’s having,” he told the gathering of corporate execs and NGO leaders. Well, sure. But how?

That “shared value” isn’t new is evident from Porter and Kramer’s own work. The examples they cite of companies that create shared value–GE with Ecomagination, Walmart’s with its sustainability campaign, Mars’ work decoding the cocoa genome–all predate the “shared value” construct. So did the work of management theorist Peter Drucker, who told business school prof David Cooperrider  in 2003: “Every single social and global issue of our day is a business opportunity in disguise.” A Notre Dame business school professor (and Catholic priest) named Oliver Williams put it even more simply to me about a decade ago,  saying that the purpose of business is to “enable human flourishing.” Yes.

Notwithstanding what Porter and Kramer wrote in HBR,  I don’t know of any company that defines its purpose as generating “profit per se.”

An idea like shared value is best understood by seeing what it means in practice. Two companies — Nestle and Royal Dutch Shell — sent executives to the event to talk how about shared value aligns with their strategies.

Nestle’s John Bee talked about how the company has added essential vitamins and minerals to its products, like fortified milk, to address nutrition problems in poor countries. “We’re delivering a social benefit, and we’re delivering double digit growth in markets where we are selling these fortified milk products, for example,” he said.

Shell’s Allard Castelein described the company’s commitment to hiring and training local workers at its oil and gas facilities in Nigeria, about promoting energy efficiency, about its auto-safety programs, and about its support for carbon limits to deal with the climate crisis. Nothing wrong with any of that, but those efforts all sound like conventional CSR.

What’s more, Nestle this year brought Kit Kat bars to Brazil along with fortified milk and Shell’s core business is selling fossil fuels that drive climate change. Nothing wrong with that either–I like chocolate and drive a car–but are those products creating shared value? Who gets to define which social and environmental problems are worth solving? Facebook, iPads, blue jeans, bottled water, candy bars, the dry cleaner, a gas station–don’t these all solve problems and thus create shared value?

After all, any company  that is not solving a problem that matters to people won’t survive for long. That’s what markets are all about.

During a break at today’s event, Mark Kramer told me shared value depends, in part, on intention. Nestle, for example, saw nutrition problems and designed products to solve them. “There’s a difference between solving problems by default and doing it by design,” he said.

Shared value, he went on, means “going above and beyond business as usual, and setting specific objectives.” His nonprofit consulting firm, FSG, is working with Nestle, Intel and Intercontinental Hotels on measuring shared value.

What’s more, it may turn out that companies would prefer to talk about shared value, which emphasizes opportunity, than to talk about CSR, which is more about risk and reputation.

If Porter and Kramer bring more companies into the conversation about solving big global problems, great. Goodness knows we’ve got plenty of problems to solve.

Not since the Great Depression have Americans harbored so much ill-will against what were once called “the monied interests.”

This should worry Wall Street and the big banks.

The latest evidence: Bank of America’s decision this week to drop its plans to charge customers $5 a month for making purchases with their debit cards, in the wake of a customer revolt.

Jay Leno

On change.org, a 22-year-old Washington, D.C., activist named Molly Katchpole started a petition against the BofA fee that gathered 306,000 signatures in less than a month. Politicians chimed in (for better or worse) and even Jay Leno got into the act, saying on Halloween night:

One kid wanted to charge me five bucks to give him candy…I said, “Who are you supposed to be?” He said, “Bank of America!”

BofA reversed itself after rivals Wells Fargo, J.P. Morgan Chase, Sun Trust and Regions Financial said they’d drop customer tests of new debit fees. Analysts say this will cost the banking industry as much as $8 billion in foregone revenue.

In other words, the banks are giving up billions of dollars because people don’t trust them to do the right thing.

Occupy Wall Street is but one manifestation of the discontent, even anger, that people feel towards powerful banks.  Move Your Money Project, an Internet and Facebook campaign, aims to persuade consumers to move their accounts from Wall Street banks to credit unions or community lenders. You can also see stepped-up efforts by local banks and customer-friendly banks like TD Bank (“America’s Most Convenient Bank”) to win away customers of the Wall Street crew.

Much of the ill will is deserved, dating back as it does to the  2008 financial meltdown. In a column called Confronting the Malefactors, Paul Krugman wrote:

In the first act, bankers took advantage of deregulation to run wild (and pay themselves princely sums), inflating huge bubbles through reckless lending. In the second act, the bubbles burst — but bankers were bailed out by taxpayers, with remarkably few strings attached, even as ordinary workers continued to suffer the consequences of the bankers’ sins. And, in the third act, bankers showed their gratitude by turning on the people who had saved them, throwing their support — and the wealth they still possessed thanks to the bailouts — behind politicians who promised to keep their taxes low and dismantle the mild regulations erected in the aftermath of the crisis.

Actually, it’s worse that that. In a 4,000-word take-down headlined Which is the Worst Bank? on The Daily Beast, investigative reporter Gary Rivlin chronicles a long list of offenses by the banks, ranging from J.P. Morgan’s decision to evict military families from their homes (despite a law against doing so) to Wells Fargo’s practice of pushing minority borrowers into high-priced mortgages, dubbed “ghetto loans.” Nice.

People don’t read the financial pages probably aren’t aware of the egregious behavior that infected the banks. Last month,  Citi agreed to pay $285 million (without denying or admitting guilt) to settle an SEC complaint. The bank defrauded its own clients by selling them shares in a mortgage-backed security that was designed to fail, and then bet its own money that the security would collapse, which it did, according to the regulators.

If that sounds familiar, it should: Goldman Sachs paid $550 million to the SEC (again, without denying or admitting guilt) because it failed to inform clients that it had allowed John Paulson, a prominent hedge-fund manager, to pick sub-prime home loans he thought wold fail; he bet against the loans, which Goldman repackaged and sold to unsuspecting investors, a.k.a., the clients that Goldman is supposed to serve.

By contrast, BofA’s $5 fee seems both trivial and defensible. The bank was transparent about its plans for the fee, which helps offset the cost of a nationwide network of ATMs as well as the costs of processing debit charges, which are now capped by the government. Not that I feel sorry for BofA. Rivlin wrote:

Bank of America received two bailouts from Washington totaling $45 billion—and since that time has spent more than $9 million on D.C. lobbyists. The bank was particularly generous to Ken Lewis, the deposed CEO behind the ill-conceived purchases of Countrywide and Merrill: he left the company with an exit package of nearly $64 million in retirement pay.

So what should the big banks do to repair their tattered reputations?

This would be a start:

1. Curb executive pay. It’s outrageous, especially when CEOs  who fail still collect millions. Excessive pay breeds terrible cynicism about business.

2. Instill a culture of service from top to bottom. Easier said than done, but tell people again and again that their job is to serve customers.

3. Punish unethical behavior, ruthlessly.

One final thought: If I were the regulatory czar, I’d cap the size of banks. They are bigger than ever. They won’t be allowed to fail if things go awry again. As a result, they have little incentive to be prudent. Please see the chart below from the Jan-Feb 2010 Mother Jones. (Click to make it bigger.) I find it troubling.

You can also check out Move Your Money. That’s one way to cut the big banks down to size.

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Disclosure: I’ve done writing and speaking in the past for JP Morgan and Citi. For what it’s worth, I was impressed by the values of CEOs Jamie Dimon and Vikram Pandit. Maybe these banks are too big to manage, as well as too big to fail.

Photo collage: The Daily Beast