Investing in Bangladesh factories–for a profit

bangladesh-garment-workersOliver Niedermaier is selling a “capitalist solution to one of capitalism’s worst problems” — the unsafe, exploitative, polluting factories in the global south. That’s the topic of my latest story for Guardian Sustainable Business.

Here’s how it begins:

After more than a decade of corporate investment in social responsibility programs, codes of conduct, teams of inspectors and public reporting – all of it intended to improve the working conditions of factories in poor countries – anyone paying attention knows the system isn’t working very well. The Tazreen factory fire and Rana Plaza building collapse in Bangladesh were poignant symbols of its failure.

Maybe it has failed because Western clothing brands and retailers – Nike, Gap, Walmart and the rest – have been behaving like regulators by writing rules and meting out punishment. At least, so argues Oliver Niedermaier, the founder and CEO of Tau Invesment Management. He advocates that businesses should instead try acting like capitalists, using markets and the potential of investment gains to reform their global supply chains.

Tau plans to raise $1bn to turn around factories in poor countries, beginning with the garment industry. Tau promises to deliver “improved transparency, greater dignity for workers, cleaner environments for communities, and enhanced performance and value for stakeholders”.

As the story goes on to say, this is an intriguing–but very much untested–idea. Can Tau raise the money? Will brands partner with the company, a newcomer to supply-chain issues? Most important, can factories in places like Bangladesh that adhere to the highest standards compete effective with those who do not?

I don’t have answers. But I do know that a new approach to the problem is desperately needed.

The future

9780300176483The bet between the biologist Paul Ehrlich and the economist Julian Simon, which was described as  “the scholarly wager of the decade” by the Chronicle of Higher Education, was settled without drama–or graciousness. As Paul Sabin writes in The Bet: Paul Ehrlich, Julian Simon and Our Gamble over Earth’s Future:

One day in October 1990, Julian Simon picked up his mail at his house in suburban Chevy Chase, Maryland. In a small envelope sent from Palo Alto, California, Simon found a sheet of metal prices along with a check from Paul Ehrlich for $576.07. There was no note.

It was a victory not just for Simon but for optimists everywhere, and so a fitting way to start the year of 2014. The two men–who did not like one another–had in 1980, at Simon’s urging, placed a $1,000 bet on the price of five metals ten years hence. Ehrlich, whose book The Population Bomb warning of a coming global catastrophe had made him a celebrity, as well as one of the most influential environmentalists of all time, believed that food, energy and commodities would all grow scarce, and thus more expensive over the decade. Simon, a free-market economist, had enormous faith in the power of markets, prices and innovation to solve problems. (Before the bet, Simon was best known as the inventor of the auction system used by airlines to pay passengers not to take overbooked flights.) Between 1980 and 1990, the prices of the five minerals–chromium, copper, nickel, tin and tungsten–had fallen by an average of almost 50 percent.

Simon was lucky as well as smart. A global recession in the early 1980s depressed the prices of metals, and they never recovered. As Sabin reports in his first-rate and very readable book, economists who ran simulations of the bet during every 10-year period between 1900 and 2008 found that Ehrlich would have won the bet 63 percent of the time. Yet the history of the past 45 years, since Ehrlich published The Population Bomb, weighs heavily in favor of Simon’s worldview. Market signals, human ingenuity and technological progress have solved problems that Ehrlich said would doom us all. [click to continue...]

Sustainable business: What’s ahead in 2014?

equipmentprotection3So the answer to the question above is, honestly, it’s anybody’s guess.

As a reporter, I’ve always resisted the idea of what editors like to call “forward looking” stories. Predictions are fun, but it’s hard enough to fully understand the present and the past. My preference is to leave the future to fortune cookies.

So when an editor at Guardian Sustainable Business asked me to write about the year ahead in sustainable business, I’d ignored her and took a look back instead. Here’s how my story begins:

It’s tough to make predictions, especially about the future, the baseball player Yogi Berra reportedly said. (Or was it the physicist Neils Bohr? Or Hollywood mogul Samuel Goldwyn?)

Whoever said it, I agree – so instead of trying to forecast 2014, let’s look back at the the big stories in sustainable business from 2013, knowing that they will shape whatever lies ahead. As the US editor-at-large ofGuardian Sustainable Business, I’ll offer what is unavoidably a US-centric perspective.

My story goes on to look at five themes of the year just past:

  1. The decline in greenhouse gas emissions in the US
  2. Solar power, mainstream at last
  3. The aftermath of Rana Plaza
  4. Industrial-strength sustainability, by which I mean collaborative efforts to change entire industries or systems.
  5. Inequality, on  the political agenda

You can read the rest of the story here.

I see reason to be optimistic about all of these themes. Each offers opportunities for forward-thinking companies. That said, the challenge for business in 2014 will be to accelerate and scale its efforts to deal with the world’s big environmental and social problems. That’s one prediction I will comfortably make.

A libertarian joins The Nature Conservancy

Lynn Scarlett

Lynn Scarlett

Can conservatives be brought back into the conservation movement? That’s the question facing Lynn Scarlett, the new director of public policy at The Nature Conservancy, who joined the environmental NGO after working as president of the Reason Foundation and in the interior department of the Bush II administration.

As I wrote today at the Guardian Sustainable Business, Scarlett is taking on a big and important job:

Fortunately, she’s not alone. Bob Inglis, a former Republican congressman from South Carolina, leads the Energy and Enterprise Initiative at George Mason University, which aims to “unleash the power of free enterprise to deliver the fuels of the future”. A group called the Conservation Leadership Council, which is led by Gale Norton and Ed Schafer, who were interior and agriculture secretaries during the George W Bush administration, is “encouraging conservative voices to join the conversation about the environment”.

Furthermore, prominent business leaders, including John Faraci, the CEO of International Paper, and Jim Connaughton, a vice-president at Constellation Energy and a former White House official, also belong to the council.

“There are solutions to environmental problems that are consistent with conservative principles,” Scarlett told me last week at The Nature Conservancy headquarters in Arlington, Virginia. The business-friendly NGO works across party lines and has branches in all 50 states (and in 35 countries).

The story goes on to say that no major environmental law has been enacted by Congress without bipartisan support. But, for reasons that have mostly but not entirely to do with the climate-change debate, Republicans and conservatives have broken away from the environmental movement since the 2008 presidential election.

Bringing Republicans and conservatives back into a climate movement will be tough. Some in the Tea Party wing are anti-science; they simply reject the notion that man-made greenhouse gas emissions are warming the earth. Many climate-change solutions are big and complicated, and similar in that sense to Obamacare, which has united Republicans like no other issue. And the big business lobbies that could help bring back conservatives are dominated by fossil fuel interests.

Still, there’s something fundamentally conservative about the idea that people and companies should clean up after themselves and be responsible for the messes they make–even if the mess, in this case, is CO2, the colorless and odorless gas that drives climate change.

You can read the rest of my story here.

Bankers, behaving badly, backing coal

india-coal-power-007The  big Wall Street banks say all the right thing about sustainability and corporate responsibility but investment bankers are, above all, driven by the deal. Turning away business is just not part of their skill set, or mind set.

That’s the best explanation that I can come up with for the fact that Bank of America, Goldman Sachs, Credit Suisse and Deutsche Bank, along with three India-based banks, are managing a share offering for Coal India, a company with an environmental and human rights record that is, at best, spotty.

Their decision to do so is the topic of my story today at Guardian Sustainable Business. Here’s how it begins:

If you’re an investor seeking to profit from the coal industry and you’re indifferent to the issues of climate change, forest destruction and human rights, Bank of AmericaGoldman SachsCredit Suisse and Deutsche Bank have a deal for you.

The four US and European banks, along with Indian investment banksSBI Capital MarketsJM Financial and Kotak Mahindra Capital Co., are managing a share offering in Coal India, one of the world’s biggest coal-mining companies.

They’re doing so despite Coal India’s dismal environmental record, despite the climate impacts of burning coal, despite allegations that the state-owned firm has run roughshod over tribal communities and despite objections by the Sierra Club, Greenpeace and the Rainforest Action Network, as well as by Indian environmentalists.

They’re also doing so despite their own rhetoric about sustainability and corporate responsibility.

I hope you take the time to read the story. It’s tough, I think, but it’s a reflection of the difficulty that the corporate-responsibility and environmental movements have had gaining traction on Wall Street. Most of the big financial institutions have made “green” commitments, and that’s great, but if they continue to finance fossil fuels on a grand scale, they could wind up doing more harm than good.

None of the banks would talk to me on the record for the story, and I imagine that if they did, they would say, correctly, that burning fossil fuels is perfectly legal in India, and everywhere else, as is dumping emissions into the atmosphere at no cost. That’s a political problem, and not a Wall Street problem, they could argue. True enough. But if the banks believe what they say about climate change and the environment, they should then make their voices heard more forcefully in the climate debate in Washington and elsewhere.

Until they do, their rhetoric about sustainability will remain hollow.

Sensible dialogue about GMOs

Monsanto-protestOK, I know that’s not an attention-getting headline. I was tempted to go with “Why Monsanto cannot and never will be able to control the world’s food supply.” But because genetically-modified crops are already one of the most divisive and emotional topics in sustainability, there’s no need to pour fuel on the fire. Instead, let me point you to this forum in the current issue of Boston Review which seeks to bring insight, respectful conversation and yes, science, to the conversation about GMOs.

The forum is anchored by a long and thoughtful essay from Pamela Ronald, a professor of plant pathology at UC Davis, who argues that GMOs are safe for humans to eat and pose no special environmental risks. Nevertheless, she writes, governments need to regulate new GMO crops and public-sector financing, as opposed to corporate control, is probably the best way to research and develop seed varieties to benefit farmers in poor countries.

Pamela (who I’ve written about before, here) also reminds shoppers who pursue so-called natural foods that

virtually every crop grown for human consumption has been genetically modified in some way: bananas are sterile plants with artificially induced triple chromosomes, some varieties of California-certified organic rice were developed through radiation mutagenesis, and most cheeses use genetically engineered rennet as a key ingredient.

In other words, unless you forage for wild berries, hunt game, or catch wild salmon, you are consuming a food that has been genetically altered.

Yes! There really is almost no such thing as natural foods, despite the labels that proliferate in supermarkets. [See my July blogpost, Our misguided fetish for "natural" foods.)

I also liked this essay by farmer and dietician Jennie Schmidt, explaining why farmers decide to plant GMO seeds, and the measured approach taken by Margaret Mellon of the Union of Concerned Scientists, who explains that her "major concern about genetic engineering is not its risks but that its over-hyped promises will divert resources from the pursuit of more promising technologies."

I've contributed a story to the forum that looks at corporate opposition to GMOs. Companies like Whole Foods, Stonyfield Yogurt, Naked Juice (which is part of PepsiCo) and even McDonald's have either opposed transgenic crops, or tried to steer clear of them. I argue that their resistance to support GMO technology could "stand in the way of biotech innovations that, at least in theory, could make agriculture more sustainable."

My story concludes:

This corporate opposition to GMOs surely has effects, hard as they may be to measure. In all likelihood, they discourage research into biotech solutions to plant diseases such as the coffee rust that threatens the coffee industry and the “citrus greening” that has spread through Florida orange groves. Biotech companies have developed soybeans with a healthier fatty acid composition, which would give soybean oil a profile more like that of heart-healthy olive oil. But consumer resistance could mean that such healthier products never reach the shelves. Indeed, despite the defeat of California’s GMO labeling initiative last year, it appears as if the anti-GMO forces are winning the battle for the hearts, if not the minds, of America’s food shoppers. So much for Monsanto’s quest for world domination.

The idea that Monsanto--or anyone--can control the world's food supply is, frankly, ludicrous. No farmer is obligated to buy Monsanto's seeds and many, of course, do not.

Two concluding thoughts: I wrote in my story that "organic farmers understandably worry that their crops will be contaminated by genetically modified crops growing nearby." Jon Entine of the Genetic Literacy Project wrote me to say that "contamination" is a loaded word, and that the correct scientific term is "cross-pollinate." Cross-pollination isn't a health or environmental issue, but when GMO crops find their way into organic or conventional fields, by wind or insects or some other means, the organic or conventional farmers can suffer economic damage, particularly if they are growing for export markets. [See my 2011 blogpost, Attack of the mutant rice, and my 2007 Fortune story, also called Attack of the mutant rice, if you're curious about what can go wrong.]

Finally, I’ve been pleased to read some superb reporting about GMOs lately, particularly from Amy Harmon of The New York Times and Nathanael Johnson of Grist. Maybe, just maybe, we can get beyond the polarized GMO debate. The more that people understand what plant breeders and farmers do, and why they do it, the more likely that we will collectively make wise decisions about when GMO technology makes sense and how best to manage it.

MillerCoors: A trickle-down theory of corporate sustainability

Beer-on-Bar-007Every big company understands that saving energy, water and raw materials in its own operations is good for business. You don’t need an MBA to grasp that efficiency reduces costs, which can lead to lower prices, gains in market share and higher profits.

Not as well understood are the opportunities that await companies that dig into their supply chains to drive efficiencies. If big companies can work with their suppliers to save energy, water and materials, everyone should gain, and we’ll waste fewer resources.

That’s the theme of my story today for Guardian Sustainable Business, about MillerCoors, water and barley farmers. It’s an example of what I’m calling the “trickle-down down theory of corporate sustainability.” By that I mean that  sustainability initiatives taken by the biggest companies trickle their way down into remote corners of the global economy.

Here’s how the story begins:

So you think you have a cool app on your smart phone? Meet Gary Beck, an Idaho barley farmer who, from the comfort of his living room couch, can control giant irrigation systems miles away, turning sprinklers on and off or adjusting their spray.

Every drop counts. “Right now, we’re in a huge drought,” Beck says. “Some of the old timers have never seen it this dry before.”

Beck manages a farm that grows about 2,500 acres of barley for MillerCoors, the US’s second-largest beer company (behind Anheuser-Busch InBev), with revenues of nearly $9bn last year. His thorough water-conservation efforts – including redesigning equipment, abandoning some fields and using more compost – have paid off big time, saving water, energy and money.

Even more notable, they have been guided – and partly financed – by his biggest customer, MillerCoors, with a nudge from its biggest customer, Walmart; by local utility Idaho Power, which wants to help its customers save energy; and by The Nature Conservancy, which owns the Silver Creek Preserve, a nearby high-desert fly-fishing destination that attracts an abundance of wildlife, including eagles, hawks, coyotes, bobcats and mountain lions – all of which, of course, need water.

It’s an example of how companies such as MillerCoors are reaching beyond their own boundaries to help solve environmental problems.

Note a few things about this story. First, although my focus is MillerCoors, you could easily argue that Walmart, with its supplier sustainability index, is equally responsible for the water-saving projects on barley farms. By asking aits suppliers–about 60,000, at last count–to track the lifecycle impacts of their products, Walmart forces them to think about where their environmental impacts are greatest, and urges them (to put it kindly) to make improvements.

Second, unlike Walmart, MillerCoors is getting its hands dirty and spending its own money as it works with suppliers. It’s investing in best practices on one barley farm, and helping to spread them. It’s the kind of thing Starbucks has done for years with its coffee farmers.

Finally, I couldn’t help but notice that the first (and, as of now, only) reader comment on this story says: “Adfomercial. Naughty Guardian.” This may be because SABMiller is a sponsor of the Guardian’s water coverage–a fact that I only learned when, to my dismay, the story was accompanied by a banner ad for SABMiller. All water-related stories on Guardian Sustainable Business, it turns out, run with a banner from SABMiller. You’ll have to trust me when I say I didn’t know that when I began to report this story.

But there’s a bigger issue here. My role, as I see it, isn’t to be a full-time corporate critic. Instead, I try to jeer companies when they screw up and cheer those that try to do the right thing. If I’m wrong about MillerCoors, by all means let me know. But I’d find it too depressing to spend all my time looking for bad news.

Will solar power disrupt regulated utilities?

Applications_ResidentialOne of the business megatrends of my lifetime has been decentralization. Mainframe computers gave way to laptops and PCs. The AT&T monopoly exploded, and landlines led to a proliferation of cell phones. Airlines were deregulated, creating space for startups like Southwest  and JetBlue. Newspapers have been rattled by the Internet, where anyone and everyone has a voice.

Could distributed power–specifically, rooftop solar–nowbe poised to disrupt regulated utilities?

That’s the topic of my latest contribution to the YaleEnvironment360 website. Some utilities evidently feel threatened, so they are pushing back against subsidies for solar.

Here’s how the story begins:

Issues of electricity regulation typically play out in drab government hearing rooms. That has not been the case this summer in Arizona, where a noisy argument – featuring TV attack ads and dueling websites – has broken out between regulated utilities and the rooftop solar industry.

An Internet web video attacks the California startup companies that sell rooftop solar systems as the “new Solyndras,” which are spending “hard-earned tax dollars to subsidize their wealthy customers.” Meantime, solar companies accuse Arizona Public Service, the state’s biggest utility, of wanting to “extinguish the independent rooftop solar market in Arizona to protect its monopoly.”

Similar battles about how rooftop solar should be regulated have flared in California, Colorado, Idaho, and Louisana. And the outcome of these power struggles could have a major impact on the future of solar in the U.S.

The politics of this debate are unusual, as the story goes on to explain. Please read the rest here.

A couple of thoughts. First, it’s important to keep some perspective here. Solar is growing fast but off a very, very small base. It generates less than 1 percent of the electricity in the US. Some coverage of this issue–notably a long story in Business Week with the absurd headline, Why the U.S. Power Grid’s Days are Numbered — conveniently overlooks that context. Regulated utilities are not going away anytime soon and if the grid’s days are, in fact, numbered, it’s a really really big number.

Having said that, a regulatory system that tilts heavily towards solar–by allowing solar customers to sell their excess power back into the grid at inflated rates, for example–will create problems for the utilities, as well as inequities for other customers. While the regulatory debate has become politicized in places like Arizona–the Koch brothers make a cameo appearance at the end of my story–what’s needed is fair treatment for solar customers and the utilities.

What’s fair, you ask? That’s why we have regulators.

Peak suburbs

The End of the Suburbs Book Cover(2)I grew up in the suburbs (Croton-on-Hudson, NY), and raised my children in suburbs (Grosse Pointe Park, MI, and Bethesda, MD) and so, obviously, I’m among those who believe that there’s lots to like about suburbs: spacious homes, good schools, safe neighborhoods, lawns, at least when you don’t have to mow them.

But as I read Leigh Gallagher’s terrific new book, The End of the Suburbs, which argues that suburbs, and particularly newer suburbs, are in decline, I felt like cheering.

In the book, Leigh, who is a colleague of mine at Fortune, argues persuasively that social, economic and demographic forces are converging to end a half-century of suburban growth in the US. Young people seem to prefer cities. Energy prices are rising. People have come to hate long commutes. Some like to walk or bike. Hurray!

Since finishing the book a couple of weeks ago, I’ve come across more evidence here and there that Leigh is onto something. Take, for example, this New York Times story about how water scarcity in southwest cities like Phoenix and Los Angeles have prompted local governments to pay people to get rid of their lawns. Lawns–like so much else in the suburbs–are incredibly wasteful.

I interviewed Leigh by email for a story about “peak suburbs” and what they mean for sustainability in Guardian Sustainable Business.  Here’s how it begins:

Have we reached “peak suburbs”? In her new book, The End of the Suburbs, Fortune magazine editor Leigh Gallagher argues that powerful social, economic, environmental and demographic forces are converging to end a half-century of suburban growth in the US.

This is good news for those who believe that the US economy must become more sustainable, and that big houses, big cars and big commutes are wasteful. “No other country has such an enormous percentage of its middle class living at such low densities across such massive amounts of land,” Leigh writes. Acerbic critic and author James Howard Kunstler, who’s interviewed in the book, more bluntly calls suburbia “the greatest misallocation of resources in the history of the world.”

leigh_gallagher

Leigh Gallagher

But if cul-de-sac living is approaching a dead end, what’s next? And what opportunities for more sustainable businesses will arise as the suburbs decline? Those are among the questions I put to Leigh in this Q&A.

Let’s start with the basics. Why are suburbs in decline? Are rising energy prices – or, dare we say it, concern about the environment – playing a role?

You can read Leigh’s answers here. Better yet, read the book.

The end of consumer culture as we know it?

ErikI wanted to eat insects with Erik Assadourian. Erik is a senior fellow at the Worldwatch Institute who directs its Transforming Cultures project, and he believes that we need to think differently about everything we consume, including our food. We’d first hoped to cook up some cicadas, but the much-anticipated bugs never made it to my neighborhood in Bethesda, Md. The Dutch Embassy served crickets and mealworms at a dinner last month to talk about the future of food, but I had a prior engagement. (Really.) Then we’d hoped to sample an appetizer called Cazuela de Chapulines, i.e., grasshoppers, at Casa Oaxaca, a Mexican restaurant, but they were closed for lunch. Bummer.

So we settled on Thai food, no bugs and a conversation about why western consumer culture as we know it has to come to end, at least in Erik’s view. He tells me that consumer culture could end more-or-less happily because we choose to make the transformative changes needed to adapt to a world of finite resources. Or it could end badly.

In the 2013 edition of  the Worldwatch Institute’s annual state of the world review, titled Is Sustainability Still Possible?, Erik writes:

…given that consumerism and the consumption patterns that it fuels are not compatible with the flourishing of a living planetary system, either we find ways to wrestle our cultural patterns out of the grip of those with a vested interest in maintaining consumerism or Earth’s ecosystems decline and bring down the consumer culture for the vast majority of humanity in a much crueler way.

Erik, who is 36, is not your typical environmentalist. He studied anthropology and religion at Dartmouth, and he’s as interested in economic “de-growth,” pet care and burial rituals as he is in Washington politics or electric vehicles. He’d like to see a broader and deeper environmental movement, one that helps people find their purpose in life. [click to continue...]