Sustainable business, from the bottom up

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For the most part, corporate sustainability programs drive change from the top down. If Apple wants to improve safety at the factories where its products are made, or Walmart wants to reduce fertilizer runoff in agriculture, or McDonald’s pledges to buy beef raised in environmentally friendly ways, those companies set targets and goals, they deploy a mix of carrots and sticks to bring their suppliers along, those suppliers push further down the chain and, if all goes well, workers, farmers and maybe the planet are all a little better off.

Whatever one thinks of this theory of change–my view is that it works quite well–it does little for the billions of people who are untouched by global supply chains. In my latest story for Guardian Sustainable Business, I write about a project called Fish Forever that is designed to help fishermen and women who work beyond the reach of global supply chains.

I heard about Fish Forever from Brett Jenks, the chief executive of a conservation group called Rare, which is based in Arlington, VA.

Interestingly, Fish Forever is a collaboration of Rare with the Environmental Defense Fund and the sustainable fisheries group at the University of California at Santa Barbara (UCSB). It’s uncommon but welcome to see NGOs working together this way.

Here’s a bit more about the program, from my story:

Fish Forever is launching this year in five countries – Belize, Brazil, Indonesia, Mozambique and the Philippines. It targets fishers with a single boat or two, as well as those who fish from shore. In developing countries, these mostly poor, small-scale fishers account for half of all fish caught, the vast majority of which is consumed domestically….

Each Fish Forever partner brings expertise to the partnership. Environmental Defense has been a pioneer in rebuilding fisheries through what is often called rights-based management. Rare specializes in mobilizing communities in poor countries on behalf of conservation. And the scientists at UCSB are experts in monitoring and measuring the health of fisheries.

Here’s how the program works: with the backing of state or national governments, local fishers get exclusive fishing rights to a community fishing areas – a bay or stretch of coast. The community then has good reason to adopt conservation practices because it will reap the benefits if they work.

Typically, those practices include the establishment of a marine preserve, also known as no-take zone, located inside the community fishing area, or nearby. These no-take zones give fish in the area the opportunity to recover and regenerate themselves. Local fishers enforce the no-take zones themselves.

The idea is to create incentives for the community to think long-term about the value of their natural asset, and take steps to protect it.A sense of ownership leads to stewardship. As a wise man once said, no one washes a rental car.

Rare isn’t a high-profile NGO but it has attracted support from some big names. Michael Bloomberg, Hank and Wendy Paulson and Jeremy Grantham are all donors. Which leads me to conclude that Brett Jenks and his group must be doing something right.

You can read the rest of my story here.

Business and human rights

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I’m just back from a few days in Geneva, where I moderated a panel at the 3rd annual UN Forum on Business and Human Rights. I met some interesting people—Mo Ibrahim, the African telecom billionaire, who is now a prominent philanthropist, and Ambassador Keith Harper, a lawyer and advocate for Native Americans who is the US representation on the UN Human Rights Council–and learned a bit about business’s involvement with human rights issues around the world.

Traditionally, of course, governments have been entrusted with the job of protecting human rights. But in the last decade, human rights activists have drawn business into the fray. Yahoo was excoriated for providing information about a Chinese dissident, Shi Tao, who was then sentenced to a 10-year prison term. Internet service providers have had to wrestle with censorship issues around the world. Meantime, pressures on retailers and brands to improve factory conditions in their supply chains put them in the position of enforcing labor laws in poor countries, including China, where governments failed to do that job.

Several years ago, the UN asked Harvard law professor John Ruggie to draw up a set of principles to guide businesses on human rights. The UN Guiding Principles on Business and Human Rights were endorsed by the UN in 2011, and this week’s forum was intended, in part, to figure out how to further advance those principles. About 2,000 people from governments, NGOs and business attended.

Alas, like many UN events, this one was stilted. CEOs and activists alike droned through prepared speeches suffused with platitudes and generalities. (One exception: Sharan Burrow, head of the International Trade Union Confederation, who was terrific.) With the support of some excellent UN staff people, I tried as a moderator to bring things down to earth and to provoke some honest conversation, but I didn’t succeed as well as I had hoped to.

But the forum stimulated my own thinking about the roles of governments and business when it comes to  human rights. The Guiding Principles are careful to define those roles—governments, it says, should “protect” human rights and business should “respect” them—and the intention is clearly to limit the role of business to those places where they have influence, notably their operations and supply chains. But discussions at the forum (and elsewhere) blurred those distinctions.

That led me to write a story for Guardian Sustainable Business suggesting that that we may be asking too much of business. Here’s how it begins:

Scan the headlines about modern day slavery in Qatar, forced labor in Uzbekistan, a ban on trade unions in Swaziland, a draconian anti-gay law in Uganda andwidespread economic and social discrimination against women – as well asmillions of children who are abused, neglected or exploited – and it is hard to argue that global corporations are being asked to do too much to protect human rights.

And yet as the number of human-rights demands placed on business – and particularly on global companies with supply chains in poor countries – continues to escalate, there’s a risk that governments will be let off the hook. After all, governments are obligated, if not always willing or able, to protect human rights.

This is one of the themes that arose at this week’s UN Forum on Business and Human Rights, an annual meeting that attracted about 2,000 people from business, government, labor groups and nonprofits to the sprawling Palais de Nations compound in Geneva. The meeting comes three years after the UN endorsed a set of guiding principles on business and human rights, which define the private sector’s responsibilities in broad terms.

One of the difficulties for companies taking on the responsibility of protecting human rights is that the definition of the term “human rights” is infinitely expandable. The UN says it includes labor rights, gender rights, children’s rights, gay rights, cultural rights, freedom of expression, the right to food and water, land rights, indigenous people’s rights, the rights of development and self-determination, all of which are interrelated, interdependent and indivisible. One panel at this week’s conference pondered the question: “Does the world need a human-rights-based convention on healthy diets?”

It’s no wonder some companies duck and hide what they are doing to protect human rights.

In retrospect, I wish had noted the distinction in the guiding principles between government’s obligation to “protect” and business’s to “respect.” Still, if human rights activists and the UN hope to win broader adoption of the principles, particularly in the US, where anything having to do with the UN is met with skepticism, people need to be clear about what they are asking of business. It may be that when it comes to human rights, the most important job of business is to get governments to do their job.

You can read the rest of my story here.

Old clothes

045be76d-5287-489c-ac5f-0b33a13e6fe4-620x372Last month was one of the busiest I’ve had in a long while, with trips to Boston, Singapore, New York and Berlin over a four-week span. All for the good, but I’ve fallen behind on this blog, so I’m looking back today at a story that I wrote and posted last month on Guardian Sustainable Business.

As regular readers know, I’ve been paying attention to the circular economy, a term that describes an economy where nothing goes to waste, everything is made into something else at the end of its life, and the whole shebang is powered by clean, renewable energy. We’re a long way from there, obviously, but I see bits of the circular economy arriving in unexpected places.

One  is the textile industry, which even as it has become dominated by cheap, throwaway “fast fashion” is  simultaneously embracing recycling. That has created some unexpected tensions between old-fashioned charities like Goodwill and the Salvation Army, and newer, for-profit companies that see a business opportunity in collecting, reusing and recyling textiles.

Thus, the”clothing bin wars,” as I explained in this story in the Guardian:

Welcome to the clothing bin wars, a battle that comes complete with lawsuits alleging dirty dealing, lobbying of local and state politicians, rogue operators who put bins on other people’s property and even bizarre allegations that some big players in the clothing recycling industry are front groups for a mysterious Danish cult.

Who knew that recycling T-shirts and towels could get so complex?

This is basically a good-news story: Lots of people want your old clothes, sheets and towels because they have value. What you do with them is up to you–there is no perfect solution. (As a commenter in the story pointed out, even charities like Goodwill and the Salvation Army face questions about their conduct.) There are bins everywhere (but read the fine print before you dump your clothes in one) and, as I’ve written before, retailers including H&M take back clothes in their stores. You can even mail them at no cost to a company called Community Recycling that I wrote about in the story. So there’s no excuse for dumping textiles in a landfill.

One more thing struck me when reporting the story: People seem to want something in return when they giveaway their old clothes–a tax deduction from a charity,  a discount on future purchases (which H&M offers), the feeling that they are doing the right thing. Even though we no longer want them, giving away clothes is an emotional decision in a way that recycling plastic bottles or newspapers is not.

Was Climate Week a good week?

climate_summit_2014A reporter’s job is sometimes fun and glamorous, often not. My trip to New York for “Climate Week” was not. It was, in fact, a bit of a fiasco. I had hoped to cover a Climate Group event on Monday but was told that I had to be there by 10 a.m., without luggage, for security reasons. This was all but impossible since I was coming up from DC that morning. So I watched a live stream of the event, which froze and skipped during an interview with Apple CEO Time Cook.

Meanwhile, I twice tried to pick up my UN credentials and both times found lines winding up 45th Street, with estimated wait times of about two hours. Crazy, no? The UN knows how many credentials, roughly, it will have to give out because they all required advance approval, and still it can’t staff its desks properly. These are the people want to oversee a global regulatory scheme to manage greenhouse gas emissions. Good luck with that.

I say this not to complain–I have a great job, mostly–but to explain that my less-than-sunny mood during the week might have affected my coverage. (I hope not but we’re all human.) I wrote two stories for Guardian Sustainable Business, one pegged to Tim Cook’s interview, which eventually found its way online, and another looking at the yawning gap between the rhetoric at Climate Week events and the reality that the world is losing the battle, such as it is, to curb climate change.

Needless to say, I don’t think it’s time to give up. I’d like to do some more reporting before coming to any conclusions but it seems increasingly possible that the US and China can lead the way to global GHG reductions, outside of the UN process, with support from the EU and Japan. Getting a dozen so-called major emitters to work on the problem might prove more fruitful hat another confab of 190 countries at COP-20-something-but-who’s-counting.

Later, I was heartened to read about an agreement announced this week called the New York declaration on forests under which governments and global companies agreed to bring a halt to deforestation by 2030. Again, I need to do some more reporting on this. but the commitments from such big firms as Cargill and Asia Pulp and Paper are signs that we may actually be winning the battle to slow or stop deforestation. A big deal, if true.

In any event, here’s how my story on Tim Cook and the Climate Group event begins:

Tim Cook is the CEO of Apple, possibly the world’s most innovative company and inarguably its most valuable – just ahead of fossil-fuel giant ExxonMobil. So his appearance at the opening of Climate Week 2014 on Monday lent a little celebrity buzz to a day which otherwise had a been-there-done-that feeling about it.

The climate change issue, Cook told a gathering of business and political leaders in New York, resonates with Apple’s workers and with its customers, which is why the company has moved from environmental laggard to green leader in recent years, winning plaudits even from Greenpeace.

“The long-term consequences of not addressing climate are huge,” he said. “I don’t think anyone can overstate that.”

You can read the rest here.

My broader look at Climate Week begins this way, and later references a new study on how the world is building coal plants faster than it is dismantling them:

Covering UN meetings is not a job for the faint of heart, and this week’s climate summit in New York has been no exception. Two-hour waits for credentials are common. Staffers are plentiful, polite and ineffectual. Barricades, private security forces and squadrons of New York’s finest protect the UN compound on Manhattan’s Upper East Side from unwanted incursions from the world beyond.

The summit itself consists of a series of carefully-scripted speeches from business and political leaders. They mix dire warnings with calls to action. Invariably, we are told, no country, company or NGO can solve the problem on its own; we must all work together. Partnerships are key. Climate is the defining issue of our time. The problem is urgent. The time to act is now. The future depends on us.

It is all depressingly familiar to anyone who has been to Durban, Cancun or Copenhagen for summits past.

“You can make history or be vilified by it,” says the newly appointed UN Messenger of Peace on Climate Change, as the official proceedings began on Tuesday. Why, it’s Leonardo DiCaprio of Titanic fame, who knows a disaster in the making when he sees one.

You can read the rest here.

Duck duck goose: How to stop their abuse

e38443ba-d070-4e4b-a7ed-f94ecfbcfc00-460x276I’ve worn down jackets over the years, but never given much thought to where the down came from, or how it was harvested, if that’s the right word. Down, it turns out, is a byproduct of the meat industry. Feathers from ducks and geese that are raised for meat, mostly in eastern Europe and China, are collected, cleaned and processed into down, which is then supplied to the factories that manufacture garments that are insulated with down.

Unfortunately, some of those ducks and geese are treated cruelly, practices that have been documented by animal-welfare groups such as Four Paws, PETA and the Humane Society of the United States. Some of the waterfowl are “live plucked,” meaning their feathers are pulled out when they are still alive, which is said to be very painful. Others are force-fed in order to produce foie gras.

The abuse is unnecessary. The alternative is simply to collect the feathers after the ducks or geese are killed in slaughterhouses–assuring, in the meantime, that they were not force-fed or live-plucked beforehand.

Under pressure from the animal-welfare groups, Patagonia and The North Face over the past few years have independently developed standards for responsible down production. Both companies deserve credit for doing so, but Patagonia’s standard is stronger and more comprehensive–and the people at Patagonia worry that the more lenient standard written by North Face will become the industry norm.

I took a look at the issue in a story for Guardian Sustainable Business. Here’s the lowdown on down:

For decades, The North Face and Patagonia have competed in the marketplace for outerwear, backpacks and pullovers. Now they’re engaged in a smackdown over down – specifically over which company has put forward the strongest standards to protect ducks and geese, whose feathers are made into down insulation, from cruel practices on farms and in slaughterhouses.

This month, The North Face announced that it would begin selling down next year that complies with its Responsible Down Standard (RDS), which it describes as “the broadest and most comprehensive approach to animal welfare available in the down supply chain”. Patagonia says that’s simply not so, and that its own Traceable Down Standard provides “the highest assurance of animal welfare in the apparel industry”.

Four Paws, an independent animal-welfare group that advocates for the ethical treatment of, agrees that Patagonia’s standard is superior. While The North Face standard is “a step in the right direction”, Patagonia has “a lower tolerance for a set of things that we think are important for animal welfare”, says Nina Jamal, an international farm animal campaigner for Four Paws, which is based in Vienna.

The fact that these two longtime rivals are competing over corporate responsibility should come as no surprise. Patagonia’s founder, Yvon Chouinard, a celebrated rock climber, fly fisherman, environmentalist and author, has made his company a sustainability pioneer. And after Doug Tompkins, The North Face’s founder, left the company decades ago, he went on to acquire vast amounts of wilderness for conservation in Chile and Argentina and publish a book assailing factory farms. In 1968, Chouinard and Tompkins, who were then pals, took a celebrated road trip to Patagonia.

The issue of competing standards isn’t limited to the down industry, of course. There are competing standards for forest products, Fair Trade, green buildings and sustainable tourism, just to pick a few examples. Ordinarily, competitive markets product benefits for consumers, but they may not be the case in the “market” for standards, where the risk is that a proliferation of labels will confuse consumers and permit companies to shop around for the weakest standard.

I don’t think that’s a concern here, though, because people at The North Face and at the Textile Exchange, a nonprofit that is making The North Face’s Responsible Down Standard widely available, tell me they plan to strengthen their standard. Let’s hope they deliver on that promise–there’s no need for waterfowl to suffer in order to keep people warm.

The end of garbage

p12608In nature, nothing goes to waste. The excrement of one species (forgive me if you are reading over breakfast) becomes food for another.

Why can’t we design the industrial economy to be like nature?

This isn’t a new idea. During the American Revolution, iron pots were melted down to make armaments. I take notes with a pen made out of recycled bottles. The gospel of “natural capitalism” or “cradle to cradle” has been spread by  such pioneering environmental thinkers as Paul Hawken and Bill McDonough.

Lately, though, I’m pleased to report, the idea of eliminating waste is gaining traction among big global companies, which increasingly are talking about — and acting to bring about — what is called the circular economy.

As regular readers of this blog know (see this and this), I’ve long been excited by the idea of a zero-waste world. I wrote a story for FORTUNE called The End of Garbage in 2007. Recently, I revisited the topic for Ensia, a magazine and website about environmental solutions.

Here’s how my story begins:

Don’t let fashion go to waste,” says H&M, the global clothing retailer that booked $20 billion in revenues last year. So I brought a bag of old T-shirts, sweaters and khaki pants to an H&M store in Washington, D.C., where it took them, no questions asked, and gave me a coupon for 15 percent off my next purchase. H&M takes back clothes in all of its 3,100 stores in 53 countries.

Next, I pulled an ancient iPod and an iPhone 4S with a cracked screen from a desk drawer. On the website of a company called Gazelle, I answered a few questions and learned that the company would pay me $37 for the pair. (Without the cracked screen, the iPhone would have been valued at $135.) I printed out a free shipping label, and they were on their way. Not to landfills, but to a new life.

Meanwhile, not far from my home, a garage owned by the Washington Metrorail system is about to undergo a makeover. Existing lighting fixtures will be replaced by LEDs that are expected to reduce energy usage by 68 percent. The LEDs will be manufactured, owned and monitored by Philips, which will take them back when they need to be repaired or replaced.

Welcome to the emerging world of the circular economy.

I go on to write about McKinsey & Co., Philips, Sprint, Best Buy, all of whom are getting serious about circular business models. This is getting real, folks. You can read the rest here.

Why animal welfare is a “green” issue

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Where bacon begins

Environmentalists love animals, the more exotic, the better. You can find environmental organizations dedicated to the protection of pandas, polar bears, sea turtles and birds. Elephants and whales, too.

Pigs, chickens and cows? Not so much.

But the way we treat animals in agriculture has profound environmental implications. And the group doing the most to change that is not a green group at all but the Humane Society of the United States. I recently interviewed Wayne Pacelle, the HSUS’s president and CEO, about the environmental impact of the animal welfare movement for the website Yale Environment 360.

In the interview, Pacelle makes the point that crowding pigs, chickens and cows into so-called factory farms inevitably creates environmental problems, particularly around waste disposal. So, of course, does the sheer number of animals we raise for meat–about 9 billion in the US alone–and the enormous amount of grain that most be raised to feed them.

Pacelle told me:

We cannot humanely and sustainably raised nine billion animals in the United States. And we’re asking consumers, if they care about animals and the environment, to eat a smaller amount of animal products. 

As regular readers of this blog know (see this or this), I agree with Pacelle that all of us should, at minimum, think about how we consume meat and, to a lesser degree, fish. There’s debate about the environmental impact of animal products but  a recent study published in the Proceedings of the National Academy of Sciences that quantifies the land, water and greenhouse gas burdens of meat, eggs and dairy production points to “the uniquely high resource demands of beef.” So there are compelling environmental reasons to avoid steak and hamburgers from factory-farmed cows. Of course, there are health reasons as well to eat less meat, as well as strong moral reasons to avoid meat from factory farms or, for that matter, all animal products.

HSUS has had a big impact on how animals, especially pigs, are raised in the US. The organization’s savvy campaign against gestation crates has helped persuaded big brands like Costco and McDonald’s to eliminate the crates from its supply chains, bringing pressure of major pork producers like Smithfield and Cargill.

Pacelle, as it happens, is a vegan. But HSUS is not trying to abolish animal agriculture. In our interview, he said

We are an organization that embraces humane and sustainable farmers. The vast percentage of our members eat meat, drink milk and consume eggs.

Others see that as a betrayal of animals. I saw this tweet the other day from Mark Tercek of The Nature Conservancy, himself a vegan, which led me to an interview with Phillip Wollen, a former Citibank executive who became a hard-line animal rights activist after visiting one of his bank’s client’s slaughterhouses.

An Australian, Wollen has this to say about the so-called humane slaughter of animals:

Anyone who tells me there is such a thing as “humane” slaughter should contact me. I see a wonderful business opportunity to sell them the Sydney Harbour Bridge. I seriously wonder how they define the word “humane”. It is a saccharine, feel-good word designed to provide convenient cover for an atrocious act of barbarism. And it gives consumers a smug sense of satisfaction that eating animals is ethical, after all. A ghastly con – a betrayal of the worst kind.

Fascinating, no? You can read more here from Wollen.

I’m not yet persuaded, as Wollen is, that eating animals is being complicit in murder.

But I don’t feel good about continuing to eat chicken and fish.

General Mills, Walmart, Target and compassion

compassion-wordThe other day, I went to a daylong meditation retreat about lovingkindness. One of the themes: how to find ways to bring an attitude of loving kindness not just to friends, but to strangers and even to the most difficult people in our lives. My rabbi, Fred Dobb, with whom I ordinarily spend my Saturdays, touches on a similar theme when he talks about widening our circles of compassion, to go beyond family and friends; the edict to  love thy neighbor extends not just to the folks next door but to the needy around the world. I don’t mean to go all Biblical on you here but it is written in Exodus 23:9: “And a stranger shalt thou not oppress; for ye know the heart of a stranger, seeing ye were strangers in the land of Egypt.”

What does this have to do with corporate responsibility, and sustainability, the topics of this blog? A lot, actually, as I realized when a pair of stories that I wrote for Guardian Sustainable Business were published in quick succession this week. Both stories are about big, publicly-traded companies that seek to enhance shareholder value with considerable vigor. But both, at heart, are also about the idea that good companies increasingly take an expansive, as opposed to a constricted view, of their place in the world, and their obligations to the world.

Yesterday, I wrote a story about General Mills’ new climate policy. Here’s how it begins:

Two months after Oxfam launched a campaign urging food and beverage companies to take stronger action to curb climate change, General Mills has promised to reduce greenhouse gas emissions in its agricultural supply chain and to advocate for government climate policy.

General Mills on Monday detailed its new policy on its website, saying: “The imperative is clear: Business, together with governments, NGOs and individuals, needs to act to reduce the human impact on climate change.”

In a news release, Oxfam praised General Mills as “the first major food and beverage company to promise to implement long-term science-based targets to cut emissions from across all of its operations and supply chains that are responsive to the goal of keeping global temperature rise below 2C.

“It’s a major leap,” said Heather Coleman, climate change manager for Oxfam America.

What’s noteworthy about the General Mills’ policy is that it dig deep into the company’s agriculture supply chain, where its environmental impact is greatest, and that it commits the company to be more politically active on climate issues. Put another way, this big food company is taking responsibility for trying to reduce the environmental impact of oats that go into Cheerios. You can read more here.

Today, the Guardian published my story about an unusual collaboration between Walmart and Target that aims to insure that beauty and personal care products are produced more sustainably. Here’s how that story begins:

In an unlikely partnership, rivals Walmart and Target have joined together, working with suppliers “to improve sustainability performance in the personal care and beauty industry”.

Their first event, the day-long Beauty and Personal Care Products Sustainability Summit, will be held on 4 September in Chicago. It’s being organized by Forum for the Future, a UK-based NGO with an outpost in New York.

Up until now, Walmart, the largest US retailer, and Target, the fourth-ranked retailer (according to the National Retail Federation), have taken divergent paths on sustainability. Why are the two companies now joining forces around the sustainability of soap, toothpaste, hair care products, shaving cream and cosmetics?

The story goes on to say:

It may be – and this definitely falls in the category of informed speculation – that Walmart and Target have come to realize that they are not as powerful as they want to be when dealing with big consumer brands and their suppliers in the chemical and fragrance industries.

The secrecy around ingredients in beauty and personal care products, along with the complexity of chemical formulations, creates information asymmetries. The brands and their suppliers know a lot more about product formulations than the buyers at Walmart and Target. They often tell critics that there’s no readily available substitute for a “chemical of concern.” And they are unwilling to share information about whether they are researching or developing safer chemicals.

An industry insider told me: “There’s so much that’s hidden in these supply chains that even Target and Walmart don’t know what goes into everything on their shelves.”

The point is, Walmart and Target are digging deeper than ever before into their supply chains, seeking to understand the chemicals that go into cosmetics or hair care products, or the impact of packaging.

You can see these shifts across the field of corporate responsibility. Look at the apparel and electronics industries which, over time, have agreed, at least in theory,accept responsibility for the working conditions and environmental practices deep in their supply chains, in places like China and Bangladesh.

Are companies becoming more compassionate? I don’t think so, at least not in the since that people can seek to become more caring. But are they recognizing that the long-term health of their business depends upon their reputations as corporate citizens, not to mention the health of the planet or the safety of the products they sell? Yes, they are. It’s a very slow and imperfect process, but it’s real.

Tax avoidance, and corporate responsibility

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

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

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

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

Here’s how the story begins:

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

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

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

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

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

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

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

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

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

You can read the rest of my story here.

When NGOs can’t be trusted

DonateNonprofitsLogos304I’ve spent the last couple of weeks reporting a story for the Guardian on NGOs and GMOs–specifically, the ways that some nonprofit groups have stirred up fears about genetically-modified organisms, by taking facts out of context, distorting mainstream science or, occasionally, saying things that simply are not true. I did the story in part because I believe that agricultural biotechnology could be–could be–a valuable tool as we try to feed people in a resource-constrained and warming world. I’m by no means an enthusiastic fan of biotech crops — the rollout of the technology has been managed poorly by the industry–but I’m fairly confident  that they have enormous potential. That potential will never be realized until we can have a rational fact-based debate about how the technology should be managed.

But my hope is that this story will make a bigger and more important point about the non-profit sector: That the claims of NGOs and advocacy groups should be received with the same skepticism and scrutiny that we apply to claims from business and government. That might seem like an obvious point, but my experience tells me that many people tend to take what NGOs say at face value. Public opinion surveys also find that NGOs are trusted, far more than corporations or the government.

On the GMO issue, this is a terrible  shame. But it helps to explain why, as I write

so many people – 48%, according to Gallup – believe that foods produced using genetic engineering pose a serious health hazard, despite assurances from corporations, government regulators and mainstream scientists that the genetically modified organisms (GMOs) now on the market are safe and, indeed, have been studied, tested and regulated more than any other food product in history.

More broadly, though, it’s too easy to forget that NGOs, like companies or the government or, indeed, all of us, are driven by a set of incentives. Again, from the story:

..non-profits and the people who lead them are subject to the same temptations, pressures and incentives that drive companies: They are self-interested. They seek attention in a noisy marketplace. And they rely on the financial support of donors, just as companies depend on customers.

As it happens, some of the groups opposed to the spread of GMOS are backed largely by corporate interests: Just Label It, a dot-org coalition that favors GMO labels is financed by organic and “natural” food companies that benefit from the anxiety around biotech food.

Follow the money, as Woodward & Bernstein used to say. A lot of money behind the anti-GMO movement comes from the organic food industry. Right now, the best way to avoid GMOs at the supermarket is to buy organic.

To take an example from another arena: When I talk to scientists or engineers about climate change, most do not believe we will be able to power the US economy anytime soon entirely with renewable energy. They believe that some form of zero-carbon baseload power will be needed — either nuclear energy or coal plants with carbon capture. (About which there was a bit of encouraging news this week.) In the US, depending entirely on solar and wind, along with the required energy storage and transmission lines, would be enormously expensive. In places like China and India, it’s unthinkable. So it makes sense for the US to find ways to make nuclear power or coal plants with carbon capture a lot cheaper, so we can export those technologies to the developing world. This is true for solar and wind as well, of course.

Yet environmental groups–the Sierra Club and Greenpeace, in particular–are implacably opposed to nuclear power and, as best as I can tell, they oppose coal with carbon capture. Fracking, too. I don’t doubt the sincerity or the intelligence of their leaders, but I have to believe that if they wavered in their opposition to nukes and coal with carbon capture, their customers, i.e., their members and donors, would revolt. So, at the very least, the deep green groups are less than transparent about the tradeoffs that will be required if we give up on nuclear or so-called clean coal, and put all of our investment into wind and solar.

Another example, from the story:

The issue of credibility goes well beyond GMOs, of course. What’s the most effective way to improve the lives of the world’s poorest people? It’s hard to know whether a comprehensive approach (the Millennium Villages), major health initiatives (the Gates Foundation), micro enterprise (Kiva) or disaster relief (Care) will work best. Each NGO understandably touts its own approach. Meanwhile, economists say trade has done more than aid to help the global poor.

A bigger and more important point, which I’ll save for another day, is the question of who is holding NGOs accountable. It’s an important question because, like it or not, as taxpayers we all help finance the nonprofit sector because donations to NGOs are frequently tax-deductible.

None of this is intended to diminish the enormous value delivered by the nonprofit sector. My next Guardian story will be built upon a terrific new report on corporate taxation put together by a couple of NGOs. The NGOs that I know best, those in the environmental sector, including Greenpeace and the Sierra Club, for the most part do great work. My wife and older daughter work for NGOs, and I’m on the board of Net Impact, a nonprofit that I (obviously) believe in strongly.

None of which means you should automatically believe everything you hear from a so-called public interest group. You shouldn’t.