Melissa Schweisguth photo credit: TIME

This is third guest post on eco-friendly running from Melissa Schweisguth. (Here’s the first, on clothing and shoes, and the second, about racing, training and tech.) I’m featuring Melissa’s post because running and the environment are two of my passions, and she’s done a beautiful job of marrying the two.

Melissa is a 36-year-old fellow sustainability professional and writer who also enjoys running. She puts me to shame, and not just because she clocked an impressive 3:11:07 in the Eugene (Oregon) Marathon this year. Melissa hasn’t thrown anything into a landfill since 2006, which earned her notice in Time magazine (due to non-consumerism and creative reuse.). She thrives on an organic, whole foods, locally-based and almost exclusively vegan diet, (as does famed ultra runner Scott Jurek). She’s been working on improving her running footprint to avoid trampling people or planet and has written three blogposts on running “au naturel” for her blog, Living Acoustically, which she’s kindly agreed to let me share here.  I don’t expect most runners to be as “green” as Melissa, but my hope is that she’ll inspire you, whether you run or not, as she has inspired me to make a change or two in your lives. When she isn’t running, Melissa works a freelance writer and consultant on sustainability issues and media relations, and as director of membership and development for the Food Trade Sustainability Leadership Association.

Here’s my last post about my efforts to maximize and improve running performance while honoring a guiding principle that defines sustainability for me: “live simply so that others may simply live.”

As noted…This is being shared for informational purposes only and not intended to be preachy or judgmental, as neither is my style. We all have different backgrounds and resource demands in our lives, and I’m the first to admit there are many things I can improve!

Food

I grew up eating home-cooked whole food, much of it homegrown organic, and eat exclusively organic whole foods sourced as locally as possible now, and fuel my runs the same way. When I trained for and ran my first race, a marathon, in 2000, so-called energy bars, gels, etc. were emerging and unknown to me. Oatmeal with nuts and raisins worked well enough for me to train for and finish that marathon in 3:39:30.

Clif bars greeted me at the finish line and I had two jobs that routed free samples my way so I started to eat them periodically before long runs and longer races (with the trusty oatmeal) and later added Clif Shots/Bloks/Moons moons for some long runs and races. After deciding to save my trash for a year and realizing the wrappers made up quite a bit of my waste, I made a tote bag from the wrappers, returned to just oatmeal and started making my own energy gels (rice syrup, honey, molasses, cacao powder, salt –provides key electrolytes: sodium, potassium, magnesium, with an initial kick and sustained energy from sweeteners with different glucose/fructose ratios).

All ingredients are from my food co-op’s bulk section, except rice syrup (jar), making for 100% organic shots with no packaging waste for 20 cents each versus $1 or more for packaged ones. I mix with water and put in plastic bottles (#2), not ideal but haven’t found a workable metal one yet. They’re simple to make, flavors can be customized, no need to take water separately and squeeze bottle is easier, faster and cleaner to deal with than packets. For caffeine, add instant coffee or eat coffee beans or chocolate-covered coffee beans.

After running a marathon (3:11:07), a trail 50k (4:53) and some shorter races (10-mi 1:04:30; hilly 6 mi 38:22) fueled by these, generally improving (NB: times listed for context, not self-promotion), I can say they work as well or better than store-bought. People have different needs and preferences. Check sweetener composition (gel recipes, too) and nutritional data to find what works best.

For solid food on runs, there are lots of energy bar recipes online and many long-distance runners eat real food for training/racing and share info online. (Scott Jurek’s a good one to follow: blog, twitter.) Pitted dates stuffed with cacao nibs and nuts are an energizing snack, and a cheaper, no-waste version of a Clif Nectar or Lara bar.

Beyond my anecdotes, there’s plenty of evidence that no-frills sustenance suffices. Before special ‘performance enhancing’ products existed, elite runners performed incredibly well with real food, honey, water, salt tablets and the like. Today, the Tarahumara, made famous in the book ‘Born to Run,’ still stay fueled with cornmeal and water and hold their own against technically-fortified elites. The book birthed a growing barefoot running movement, but didn’t ignite an all-out embrace of what one might call “organic” or “au natural” running. Curious, since the Tarahumara don’t rely on any of today’s must-have synthetic, miracle-laden “food,” drinks and gear.

For those not inclined to make gels, organic products such as GloryBee’s Liquid Gold and Clif Shots and Blocks are good options. Liquid Gold is 100% organic and comes in a #5 plastic reusable bottle that can be recycled in some localities. (Thisgel recipe looks close to Liquid Gold. Regular molasses works, just use more to get the potassium level you want and reduce honey accordingly. I found this too sweet and energy was less sustained than rice syrup.) Clif Shot is 90% organic and Bloks are 95% organic, with packaging that generally isn’t recyclable locally, though they have a recycling program for bar wrappers.

Water + Drink

I never got into bottled water and drink unfiltered tap water since local supplies have good testing reports (free, public info – check them and save the cost and waste of filters). For pre- and post-race water, I bring my own filled, reusable metal bottles since some races have only bottled water. I used to run with a reusable plastic water bottle but switched to stainless steel for my larger sizes to avoid toxins that leach from plastic and eliminate petroleum-based materials. I still use plastic bottles (#2) for smaller sizes and should get metal replacements. No need for a special ‘hydration pack’ – these fit in an old money belt/waist pack, shorts pockets or pockets I sewed on my running top. For those who like handheld bottles, ponytail holders, large produce rubber bands or a loop of elastic work with less weight than a special bottle holder.

During races, I used to keep cups from aid stations and compost them but that was clunky so I started carrying my own collapsible cup. This doesn’t slow me down any more than taking a single-use cup.

I don’t use sports drinks but for those so inclined, organic powdered mixes like Clif Bar’s electrolyte drink mix are a good option, choosing the bulk canister versus packets.

All for now…happy trails!

Note from Marc: Happy trails to you, too, Melissa! Thanks so much for sharing.

Melissa Schweisguth photo credit: TIME

Two of my passions are running and the environment. I do my best to marry them: I’ve recycled my old running shoes. I currently run in Vibram FiveFinger “barefoot” shoes, which are light weight and last a long time. I mix my own Gatorade from a 3 lb. 3 oz. can of powder, which saves plastic bottles. But I also use high tech equipment (Garmin GPS, Monster headphones, iPod shuffle), own dozens of T-shirts from races that are stuffed in a closet and drive 2-3 miles most days just to get to the place where I start my run. Over the years I’ve flown to marathons in Chicago, San Diego, Big Sur and Athens, Greece.

Melissa Schweisguth is a 36-year-old fellow sustainability professional and writer who also enjoys running. She puts me to shame, and not just because she clocked an impressive 3:11:07 in the Eugene (Oregon) Marathon this year. Melissa hasn’t thrown anything into a landfill since 2006, which earned her notice in Time magazine (due to non-consumerism and creative reuse.). She thrives on an organic, whole foods, locally-based and almost exclusively vegan diet, (as does famed ultra runner Scott Jurek). She’s been working on improving her running footprint to avoid trampling people or planet and has written three blogposts on running “au naturel” for her blog, Living Acoustically, which she’s kindly agreed to let me share here.  I don’t expect most runners to be as “green” as Melissa, but my hope is that she’ll inspire you, whether you run or not, as she has inspired me to make a change or two in your lives. When she isn’t running, Melissa works a freelance writer and consultant on sustainability issues and media relations, and as director of membership and development for the Food Trade Sustainability Leadership Association. Here’s her first post, about clothing and shoes:

Sometimes we need new, ready-made things, but, more often, we can reuse, buy used, or make something easily, and get a better, cheaper, more healthful product. It’s easy to forget this since marketers are skilled at wooing us, we’re encouraged to seek upward mobility and novelty, and our culture has devalued making things ourselves: gardening, basic cooking and the like.

While running, I’ve sought to maximize and improve performance while honoring a guiding principle that defines sustainability to me: “live simply so that others may simply live.” (Or, following this blog’s theme, unplug from consumerism and run acoustically.) Below are examples of things I do, some long term and some more recent changes. This is being shared for informational purposes only; it’s not intended to be preachy or judgmental, as that’s not my style. We all have different backgrounds and resource demands in our lives, and I’m the first to admit there are many things I can improve!

Clothing

When I started running, “technical” fabrics and performance-optimizing clothing weren’t on the market. I wore basic clothing and never really bought into the marketing around newfangled stuff. More apparel uses fabrics marketed as environmentally friendly, such as organic cotton, wool, bamboo, hemp and recycled poly, which are great if new things are needed. However, the most sustainable choices are items we have or can get used, which also saves money. I’ve found great shorts, tops and running tights at thrift stores and yard sales. Last fall, arm sleeves made of bamboo grabbed my interest but I made my own from old kids’ leggings (super easy) and a tank top (a bit more work). Old nylons and wool socks also do the job with no sewing required. Retired apparel can be donated if still in good shape or used to stuff pillows, stuffed animals, etc.

Running bras and socks I prefer new, so I look for durable, responsibly made products, sourced and manufactured as close as possible. Patagonia’s recycled poly bra has held up (no pun intended) for more than two years and thousands of miles. I hand wash it in shower water and air dry it (like the rest of my running clothes), which probably helps. For socks, I look for recycled poly and organic natural fibers. “Eco-friendly” materials aren’t guaranteed to be grown, harvested or manufactured with good labor or environmental practices. Bamboo may be grown on deforested rainforest and processed with harsh chemicals, for examples, and sweatshops are a reality in the U.S. and abroad. More businesses are sharing supplier information (check websites) so it’s easier to size up options. Companies that aren’t transparent lose the race with me.

Shoes

While some may say barefoot running is the most environmentally friendly way to go go go, I like wearing shoes and think they’re generally better new. This is one of the more challenging areas since options are limited and those don’t fit every foot or situation.

For road running, Brooks’ Green Silence is marketed as the greenest option on the market, with 60% recycled content, biodegradable components, less materials, and other positive attributes. Brooks has several environmental initiatives and a great supplier responsibility program. Check out an article I wrote on the shoe and company here.

My preferred terrain is mountain trail. Brooks’ Cascadia is a great, durable trail shoe with recycled content and a biodegradable midsole, though a bit heavy for me. I like the New Balance 100, which is light and thus saves on materials but otherwise not distinct in terms of sustainability. New Balance retains some US manufacturing presence and has good environmental practices. They also sponsor ultrarunner Kyle Skaggs, who’s an organic farmer, which gets big points from me.

Old shoes are great for walking and hiking after their life in the fast lane ends. They can also be donated for reuse or recycled, and many stores and races collect them for such programs. I started planting things in them to extend their useful life and try to close the loop on my end.

Note from Marc: Melissa gives new meaning to the words shoe tree…

Tomorrow: Racing, training and technology

So it makes sense—and it’s certainly about time—for the companies that sell outdoor apparel and equipment to come up with common standards to measure the environmental impact of their products.

This week, an industry group called the Outdoor Industry Alliance announced that its members have spent several years doing just that. The companies unveiled “a ground breaking environmental assessment tool” that they call an Eco Index, saying:

It provides companies throughout the supply chain a way to benchmark and measure their environmental footprint, allowing them to identify areas for improvement and make informed sourcing and product life cycle decisions.

It sounds good, doesn’t it? The trouble is, the group says it will take a long time for the industry to develop and agree on standards that are simple, reliable and meaningful enough to present them to consumers. In fact, there’s no commitment to turn the index into a shopper-friendly tool, the industry says:

The current focus of the index is to be an internal/supply chain facing tool and not a consumer-facing label. This focus could be revisited in future years.

That’s disappointing. It’s particularly disappointing because one company—Timberland—has demonstrated that it’s possible to measure and report on the impact of its products. As it happens, Timberland today (Aug. 3) convened a conference call to talk about its own Green Index and how it fits into the new industry-wide initiative.

Jeff Swartz, the CEO of Timberland and a leader of the corporate-responsibility movement, said he wants to play nicely with competitors and other retailers, as the industry tries to settle on common metrics. “We can’t afford a Betamax-VHS debate,” he said. “Harmonization is an imperative.”

At the same time, Swartz made clear that he’s frustrated by the slow pace of the industry initiative.

Without labels or online data that enable consumers to compare, say, a boot from Timberland with one from Steve Madden or UGG, companies that do the right thing—whether by eliminating harmful chemicals from their products, using more recycled materials, or putting solar power on the roof of a store—will struggle to get rewarded for their efforts, which frequently add costs.

This isn’t a problem only for Timberland. Patagonia, Nike, Levi’s and REI have all undertaken meaningful sustainability efforts.

“Consumers need information that helps them discriminate between brands,” Swartz said.

The challenge is especially acute for brands that distribute through mainstream retailers because sales people there are less likely than those in specialty stores to know, or care, about sustainability issues.

Said Swartz: “It’s very hard for me at Nordstrom or Macy’s or places like that to present outdoor product, thoughtfully made, and have the consumer value it.”

None of this is meant to suggest the rating products is simple. David Labistour, the CEO of a Canadian retailer called Mountain Equipment Co-op, who joined Swartz on the call, said even a seemingly simple question–is a garment made of organic cotton?–can be complicated by such variables as the amount of water needed to grow the cotton, the labor standards on the farm, or the lifecycle impact of using cotton versus polyester, which needs less time in the dryer.

Labistour pointed out that it’s been impossible, so far, to get the industry to agree on performance standards for products, for which there’s presumably greater consumer demand.

“What is the difference between a Patagonia waterproof jacket and a North Face waterproof jacket?” he asked. Which sleeping bag is warmest? Right now, there’s no way for a consumer to know.

Still, Timberland’s Green Index shows what can be done. Introduced in 2007, it measures a variety of product impacts–the greenhouse gases generated through production, the presence of hazardous chemicals in the products and the use of recycled, organic or renewable materials–and uses a formula to come up with a single score for each product. (You can read more about the methods here and download a 16-page 2009 report on the Index from Timberland’s information-packed website.) Here’s a sample label:

How’s Timberland doing? That’s hard to say because its performance can’t be compared to industry norms. During the second quarter of this year, the company’s average score was 6.91 on a scale of zero to 10, where lower scores mean a lighter footprint. “It ain’t so good, and it’s slightly worse than it was this time a year ago,” he said. Partly that’s because fall and winter products, which are heavier and therefore have a greater impact, are shipping earlier this year. Not until the end of next year will Timberland reach the point where it can apply the Green Index to all of its footwear. “It’s very perplexing if you’re a consumer,” Swartz.

Even more discouraging, there’s not much evidence that most consumers care all that much about the environmental impact of the things they buy. I’m at the beach in Delaware this week and, I swear, 80% of the vehicles here are minivans or SUVs, EPA mileage ratings notwithstanding.

“I don’t think we can rely on consumers,” said Labistour.

And yet–there are reasons to be encouraged as the outdoor industry, along with others, stumbles gradually towards standards and metrics.

Most consumers may not care, but a growing number of young shoppers do. So do the people who work at companies like Timberland and REI. Other pressures are coming from major retailers like Wal-Mart, with its sustainability consortium, and from the new initiative from UL Environment and Greener World Media. (See The Business of Rating Business.) Good Guide is another step in the right direction.

Bottom line: We’re closer than ever to the point where shoppers have access to simple, meaningful and reliable information about the sustainability of the things they buy. That’s got to be a good thing.

And what’s responsible business? “Make money, make it ethically and make a difference.”

Bob Corcoran

Bob is vice president for corporate citizenship at GE, a 30-year company veteran, and a good guy. We met in 2o04 when we traveled together in Ghana while I was reporting a story on GE’s values for FORTUNE. (See Money and Morals at GE.)  Recently we spoke about GE’s 2009 citizenship report, and about what GE has learned in the past five years from its corporate citizenship efforts, including its high-profile campaign around Ecomagination, which focuses the company, and its marketing, on products and services that help solve the world’s big environment problems.

Inside GE, Ecomagination is deemed a success, so much so that it has spawned a sister initiative (if you can spawn a sister) called Healthymagination, focused on profitably creating better health for more people. GE says that it expects Ecomagination product revenues to grow at twice the rate of GE’s overall revenue between now and 2015.

The logic behind both initiatives is simple, Bob noted. Big global problems demand big solutions from big companies. GE prides itself on “tackling the world’s most complex and pressing problems,” as chief executive Jeff Immelt writes in the report.

The trouble is, the payoff for GE’s shareholders have been disappointing. I didn’t realize just how disappointing until I put together this chart comparing GE’s stock-price performance to the S&P500 and to a couple of its conglomerate competitors, Siemens and United Technologies.

In the past five years, here’s how the numbers look:

GE: -54%

S&P500: -10%

Siemens: +25.3%

United Technologies: +39%

Yikes.

Now, there are a lot of explanations for this. Perhaps the biggest is that  GE, unlike its peers, has been in a couple of business that have suffered in the last five years–GE Capital, its finance operation, and NBC Universal, its TV, cable and Hollywood unit, which is now being spun off into a joint venture with Comcast. Their problems mean that GE’s fundamentals look only a bit better than its stock price: Revenues have grown from $72 billion  (2004) to $157 billion (2009), profits have slid from $16.3 billion (2004) to $11 billion (2009). Profits are back up again this year, and Bob says the company is poised to grow.

In any event, there’s no doubt that GE takes its corporate responsibilities seriously. This citizenship report is thoughtful and detailed, reporting on everything from the company’s greenhouse gas emissions (down by 22% from 2004) and water usage (down by 30% from 2006) to its illness and injury rate (down by 16% in a year) to the number of employees fired (118) as a result of ethics complaints filed with about 700 GE ombudspersons (their word, not mine) around the world. There’s much, much more here.

Behind the numbers are compelling stories. GE writes about reverse innovation–the idea that along with developing high-end products for the US or Europe, the company will create low-cost products in poor countries and then distribute them globally. For example:

In countries like India and China, where per capita incomes are smaller, customers often prefer decent performance at an ultralow cost. This insight led a GE Healthcare team in China to develop a U.S. $1,000 handheld electrocardiogram device and a U.S. $15,000 portable ultrasound — each a fraction of the respective technology’s typical price. Given these markets’ infrastructure challenges and high rural populations, such products have helped meet critical human needs — and demand has followed.

Insights gleaned from China and India can then be used to help deliver health care in the west at lower cost.

Another example: Many environmental NGOs worry about how people will adapt to the impacts of global warming–higher temperatures, water shortages, disease, flooding of low-lying areas and who knows what else–but this isn’t, as far as I know, a mainstream business issue, except perhaps for the insurance industry. To its credit, GE convened a group of sustainability experts last year to discuss the threat and figure out if GE’s businesses could help vulnerable communities prepare.

GE has gotten much better at listening to critics and outside voices, and in working with them. Just this week,  GE said it will expand a partnership with the Environmental Defense Fund to help cities, hospitals and universities save energy by using its “Treasure Hunt” program. GE’s citizenship report includes a commentary by a panel of outside experts, including such CSR gurus as Simon Zadek and Jane Nelson. They write: “Undoubtedly, GE continues to demonstrate leadership in vision, aspiration, strategy and practice on the ground.”

But not leadership in financial performance, alas. After I ran the numbers, I emailed Bob for a comment. Here’s what he had to say:

The company is always managing through a number of factors — product launches, regulation, pension expense, things like that. So we have positives and negatives. But…we are positioned for attractive earnings growth in 2011.

GE is focused on value creation (evident in our second quarter earnings). We’ve repositioned GE Capital for significant profit growth and competitive advantage, our Infrastructure businesses are benefiting from a strong global position and continued R& D investment, we’re focused on process excellence (the foundation of a strong CSR strategy), and our strong cash position gives us lots of flexibility in capital allocation decisions to create long-term shareholder value.

I think as more things come into focus on GE Capital returning to earnings growth, financial regulatory reform, this just gives us tremendous flexibility from a cash standpoint in terms of where we invest and how we grow. Building expertise and value around process excellence. Our margins are good. Our cash flow from operating activities are good. Our risk management has held strong. So I think investors should feel good about that.

Topping the list of U.S. brands is Burt’s Bees, which is a unit of Clorox–a fact that isn’t exactly trumpeted on Burt Bee’s extensive website. Instead, the company tells the story of how Roxanne Quinby started the company in rural Maine by making candles out of Burt Shavitz’s beeswax, after which they fell in love and moved into an abandoned schoolhouse to make more. Her folksy little essay concludes: “The honey and candles are gone, the kids are grown, our friend sold the schoolhouse and now it’s a tattoo parlor, and Burt bought a classic motorcycle with his earnings, but otherwise everything’s pretty much the same here at Burt’s Bees.” Well, yes, everything’s pretty much the same except that Burt and Roxanne split, she sold to 80% of the company to a private equity firm, which then sold it to Clorox, best known for its bleach, for $913 million in 2007.

Tom’s of Maine is No. 3 on the list. (Maine is obviously a green state, in the eyes of consumers.) Its marketing, too, features homey images from the company’s early years and talks about “putting the good of community and planet first.” Its toothpastes, mouthwashes, soaps and deodorants are all natural (no aluminum in the deodorant) and use environmentally-friendly packaging. Meriting only the briefest mention is the fact that the family-owned firm was sold in 2006 to Colgate-Palmolive, which makes Ajax and Speed Stick, a deodorants whose active ingredient is aluminum ziconoium tetrachlorhydex. (So is aluminum in deodorant a good or bad thing? Who knows?) Tom’s co-founders Tom and Kate Chappell, meanwhile, have moved on to a new company called Rambler’s Way which makes “superfine, sustainable, American worsted wool apparel.”

And then there’s Aveeno (“That’s the beauty of nature + science”), No. 6 on the list, whose founders were drive by their “belief that centuries-old remedies hold the promise for human wellness” when they invented a natural bath additive made from oatmeal that they sold to the Mayo Clinic. Today, Aveeno makes a vast array of body care, facial care, hair care, skin care, sun care, baby care products–nice to know they are so caring, isn’t it? They’re also owned by Johnson & Johnson, which in recent months has been embarrassed by a series of recalls of more than 40 different products, including children’s pain and allergy remedies, because of manufacturing problems at its plants. Apparently some of the products contained tiny metallic particles that shouldn’t have been there. J&J’s Tylenol showed up on shelves with a “moldy odor.”

This business of green sure is complicated, isn’t it? So is the business of listing and ranking green brands and green companies. This list, like all of them, has its flaws. Notably, it’s far from comprehensive–in the U.S., the survey including only about 50 brands–and it inevitably mixes and matches products and companies. If those of us who pay attention to business and sustainability have trouble sorting out all this out, pity the consumer in a hurry with a limited budget who is trying to do so.

With those caveats, here’s the Top 10 list, which makes up only a small part of the global survey:

1. Burt’s Bees

2. Whole Foods Market

3. Tom’s of Maine

4. Trader Joe’s

5. Google

6. Aveeno

7. SC Johnson

8. Public

9. Microsoft

10. Ikea

So what’s the significance of the list?

Once you understand that lots of environmentally-progressive consumer goods companies were not included in the survey–Seventh Generation, Method, Stonyfield Farm and a host of other food companies come to mine–my first reaction is consumers are pretty smart. I could quibble with a name of two, but it’s interesting, as an example, that consumers recognize the work being done S.C. Johnson, particularly since that isn’t a brand at all (unless you count Johnson’s Floor wax.) It’s encouraging to see that Wisconsin-based SCJ is getting credit for its path-breaking work around green chemistry and transparency.

Second, as noted above, is the blurry line between brands and companies. Can a not-so-green company make a green product? It’s an interesting question but smart companies that want to do any green marketing at all should probably make sure they clean up their whole act before doing any boasting. “From a green strategy point-of-view, you need to be working to get all the pieces of your green house in order,” says Annie Longsworth, global sustainability practice leader for Cohn & Wolfe, one of the WPP companies that conducted the survey. (The others are Landor Associates and Penn Schoen Berland, along with Esty Environmental Partners, the consulting firm run by author and Yale prof Dan Esty.)

Third, as Annie pointed out to me, the list is dominated by “in me, on me, around me” companies that make or sell things we eat or slather on our bodies or use to clean ourselves, clothes or homes. But they are joined by what she calls “helper brands” that provide guidance to consumers who want to be more sustainable. Google and Microsoft fall into this category.

Companies that didn’t make the top 10, by the way, including, in no particular order, Starbucks, Wal-Mart, Apple, Marriott, Disney, HP, Dell. None of the auto companies or oil companies (surprise!) make the top 10 either. WPP didn’t release the full list–that’s not very transparent of then, but then again, they’re trying to market this data to their clients, so that’s business.

Happily, smart people are working to bring clarity to this hazy world of green brands. Among them are the people at The Sustainability Consortium organized by Wal-Mart, my colleagues at Greenbiz.com who are working with Underwriters Laboratories, Good Guide and others. (See The Business of Rating Business.)

The day when consumers can get reliable, third-party rankings of products and companies can’t come soon enough.

Fans of Cameroon, meanwhile, will don their team’s green World Cup jersey.

Ivory Coast

Algeria

Puma also sells replicas of the World Cup jerseys for Algeria and the Ivory Coast.

What all these shirts have in common is that they are manufactured  by Impahla Clothing, a supplier to Puma based in South Africa that was started a few years ago by a man named William Hughes.

Surely there will be drama when play begins in the World Cup, but it will have to be exciting to compare with  the drama in the life of William Hughes. He has known first-hand the joy of victory and the agony of the defeat.

Born in Kenya, Hughes, who is now 47, moved at a young age with his family to Zimbabwe. They began farming and eventually acquired a landholding of 6,000 acres upon which they grew maize, soybeans, wheat and tobacco for African markets, as well as avocados for export to Europe. The operation was sizable–his family employed about 100 year-round workers, most of whom lived in homes on the farm with their families, and another 150 seasonal workers.

You know where this story is going, don’t you? William could see trouble brewing by the time he’d taken over the farm from his parents. Since gaining independence from Great Britain in 1980, Zimbabwe and its president, Robert Mugabe, had been talking about land reform. In the beginning, that meant buying property from white landowners and then giving it to mostly poor blacks, arguably the rightful owners. British and other foreign governments financed this “willing seller, willing buyer” approach, but stopped in 1997 amidst charges that the land was mostly going to cronies of the president. Subsequently, government-backed forces would simply seize the land they wanted. Farmers who resisted were often tortured or killed, and many of them—but not Hughes, who was active in the deeply-divided national farmers’ union—urged compromise with the Mugabe regime.

His farm was invaded in August, 2003. A mob  occupied the land and gave him 24 hours to leave. By then, his mother, his wife and two young children had been sent away. “My wife and my children were never exposed to the massive intimidation, but they were obviously aware of it,” he said. “Your house, your livelihood—it’s gone. It was absolutely devastating.” The family left for South Africa, where he began looking for a new business.

William Hughes

He was fortunate to come across a T-shirt company in Capetown that was about to go out of business. He bought its assets, and offered jobs to all of its people—notably Lena Jansen, a coloured woman who had worked in the clothing industry for more than 25 years, beginning as a cleaner and working her way up to production manager. She was given 10% of the company in return for her agreement to stay on, and run production.

I met William last week in Amsterdam at the 2010 conference of the Global Reporting Initiative. He was being recognized because Impahla is one of the very few small companies—it now has about 180 employees and revenues of about ZAR 20.5 million (about $2.5 million) —to publish a sustainability report. The company has committed itself to workers’ rights, health and safety, and to becoming South Africa’s first carbon-neutral garment manufacturer.

Much of this has been encouraged and supported by Puma, the German sports and lifestyle company, which has encouraged 20 key suppliers in China, Vietnam, Cambodia and elsewhere to do their own reports. This is interesting in its own right because it reflects change in the way that global brands do business with suppliers. Increasingly, they are looking beyond short-term transactions to build relationships with suppliers; that’s partly  to avoid the potential for embarrassment when suppliers exploit workers or pollute the environment, but it’s also intended to build a more secure and trusted supply chain.

“We depend on suppliers, and they depend on us,” says Stefan Seidel, a sustainability executive with Puma. “We don’t jump for a couple of cents from one supplier to another.”

Certainly Impahla (the Xhosa word means clothing) depends on Puma. While the company used to sell to adidas, New Balance and Levi’s, Puma now gets more than 95% of its production. Sustainability is key to the relationship, but William told me that quality and price are, of course, crucial as well. “We’re lean and mean,” he said.

Nearly all of what Impahla makes is sold in Africa, and the company benefits because South Africa has an import tariff on clothing. Even so, the garment industry in the western Cape has struggled to compete with Asian factories. South Africa garment workers were paid an average of  $2.22 per hour in 2008, which doesn’t sound like much, but workers are paid much less in coastal China ($1.08), inland China ($0.80), India ($0.51), Vietnam ($0.38), Cambodia ($0.33) and Bangladesh ($0.22), according to Impahla’s report, citing data gathered by China’s national apparel council.

Hughes has good relations with his workers, who are paid slightly more than the national average. They chose to keep working during a national garment workers strike last year. The company has a lower than average turnover ratio, and pictures of every worker appear in the sustainability report.

A couple of thoughts about this story: First, the resiliency of entrepreneurs never ceases to impress me. Despite losing everything, William mustered the will to start over. The key, he said, was not looking back. “When we moved on, we moved on,” he told me. Second, brands like Puma, Nike, Gap, by working more closely with their suppliers, really can play a role in creating wealth and opportunity in the global south. It’s quite a turnabout from the days when they were on the defensive about their labor and human rights practices.

By the way, William will be rooting for South Africa next week–along with Ghana, Cameroon, Algeria and Ivory Coast, of course. Business is business.

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

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

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

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

If all goes according to plan, the new ratings system will rise above the crowd because it combines the knowledge and networks of Joel and Rory Bakke, director of sustainability at Greener World Media, who has worked extensively with government purchasing agencies, with the brand and credibility of UL, a global nonprofit that has been ratings products for safety for more than 115 years. UL has 6,700 employees and 65,000 customers around the world.

The UL-Greener World Media product–it doesn’t have a name yet–could also complement the data on products being compiled by the Sustainability Consortium organized by Wal-Mart, whose members now include retailers Safeway and Best Buy, and consumer products giants P&G, Disney, General Mills, PepsiCo, S.C. Johnson and Unilever. Jon Johnson, co-director of the consortium, was also at the GRI panel, and he said that UL’s company ratings would be a good fit with the consortium’s product data.  “Walmart has reached out to ULE,” Johnson said.

For  now, the business of rating and ranking products and companies around sustainability is an ungodly mess–although not for lack of efforts. Media companies such as Newsweek and CRO Magazine have tried to rank the greenest, most sustainable or responsible companies but their efforts have generated as much derision as respect. (See 100 Best Corporate Citizens? What a CROck!) A startup called Good Guide that rates products on health, environmental and social criteria has won adherents but also criticism from corporations. Claus Conzelmann of Nestle complained at the GRI event that Good Guide doesn’t have enough specific product data–Nestle alone makes 100,000 different products–to do a reliable job, calling some of its ratings “grossly misleading.” Socially responsible mutual funds and financial indexes like the Dow Jones Sustainability Index rank companies, but most don’t make their standards or criteria public. Most recently, Fast Company magazine online has  published “sustainability faceoffs” (they should have called them “sustainability smackdowns”) comparing Apple to  Microsoft, McDonald’s to  Starbucks, and Coke to Pepsi, using data and methodology from a book called The HIP Investor. (See How to be a HIP investor.)

Allen White of the Tellus Institute,  a co-founder of GRI, said: “The quantity of information is exploding. Is the quality keeping up? Is the usability there?…It does, at times, become very confusing, overwhelming.”

Marcello Manca

Many details of the UL-Greener World Media approach remain to be determined. The companies have begun talking  with companies and NGOs about their approach, which will combine, as Joel indicated, a point system with good-better-best ratings, mostly likely giving companies a silver, gold or platinum seal, or no rating at all, meaning they have work to do.

The ratings will go beyond “green.” Said Manca: “We’re looking at governance. We’re looking at workplace. We’re looking at supply chain. We’re looking at community engagement. It’s a holistic approach, and it’s all based on verifiable data.”

Several questions remain:

Will the results be made public? “This is still under discussion,” Manca said. “Our strong desire is that all of our clients will accept full disclosure.” If companies resist, UL and Greener World Media will be in a tough spot–they intend to make money by charging the companies that will be rated.

Why would companies pay for ratings? Partly because they want  third-party snapshot of their sustainability performance but mostly because their customers — Walmart, other retailers, governments — will insist that they get rated.

Isn’t it a conflict of interest for companies to pay for their own ratings? The evidence is mixed. Bond-rating agencies Moody’s and Standard & Poors did a dismal job rating financial products, giving AAA ratings to bonds that turned out to be junk because they wanted the business. But UL’s safety ratings are respected even though they are paid for by the companies.

I can’t be objective about the UL-Greener World Media venture, not only because I work closely with Greenbiz but also because I have so much respect for Joel and his colleagues. I like to tease Joel that he’s the “guru of green business” (AP once called him that) but the truth is that he has thought more about this set of issues than anyone I know. So I’m betting that the UL-Greener World Media will bring clarity, rather than clutter, to the business of rating business.

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

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

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

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

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

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

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

In the report card, RAN and Sierra Club looked at nine financial institutions, and gave them letter grades from A to F, based on their MTR lending policies and publicly-known practices. Companies ranked, from top to bottom, were Credit Suisse (A-), Wells Fargo (B+), Bank of America (C), Morgan Stanley (C), Citi (C-), JP Morgan Chase (F), GE Capital (F), PNC (F) and UBS (F).

About PNC, the report said:

PNC does not appear to have a robust environmental policy and has not responded to our communication. A review of their website shows no evidence of a CSR or environmental staff team covering their commercial lending and investment banking business.

UBS, the big Swiss bank, also has no specific policy on MTR.

Amanda Starbuck of RAN told me: “They (PNC and UBS) both seem to be picking up business from coal clients that others won’t touch.” She said that, to the best of her knowledge, neither RAN nor Sierra Club has plans to target PNC, but she noted that the Earth Quaker Action Team (cool name!),  a new group of “Friends and friends of Friends” based in the Delaware Valley around Philadelphia, has begun a campaign of nonviolent direct action aimed at PNC. The group staged a silent vigil last month outside a PNC brank in Philly to mourn the deaths of 29 miners in the Upper Big Branch mine owned by Massey Energy. (Massey, by the way, held its annual meeting today, too, attracting hundreds of protestors and shareholder opposition to the re-election of three directors.)

Earth Quaker Action Team says this about PNC:

PNC is the fifth-largest bank in the U.S. in terms of deposits, and makes money from its involvement with mountain-top removal coal companies.  PNC also portrays itself as a “green bank” because of its building practices.

This is one of those places where climate change meets economic justice, where the profitable exploitation of people and nature hurts locally and globally, by pushing more carbon into the atmosphere.  PNC Bank can choose a different kind of escalation.  Instead of supporting the war against people and nature represented by mountain-top removal, it can escalate its own commitment to green practices, going beyond vegetated roofs on its local branches to cleansing itself from financial dealings with coal companies.

Meanwhile, JP Morgan Chase published its first policy on MTR in its 2009 corporate responsibility report (available for download) released this week. Several paragraphs are devoted to MTR, saying, among other things that the bank does an “enhanced review of all proposed banking transactions for companies engaged in MTR,” that the bank supports the Obama administration’s review of MTR rules and that

As the public record reflects, in 2009, JPMorgan Chase did no financing for any company with significant MTR operations.

RAN’s Amanda Starbuck calls this a step forward, although the overall policy (like those of most banks, as I reported here) is “quite fuzzy, quite woolly.” She’d probably raise the bank’s grade from F to D, she told me.

Interestingly, without saying so directly, JP Morgan Chase appears to have backed away from financing Massey Energy. It was the lead manager, with UBS, when Massey borrowed money in 2008, but did not participate (although UBS did) when Massey returned to the market in March.

“It is very clear they have dropped Massey as a client,” Starbuck says.

Is there a business case for banks to avoid lending to coal companies? While public opposition to both MTR and new coal plants appears to be growing, Americans will be burning coal to make electricity for a long time. Coal-fired power plants currently account for about 50% of our electricity. To put this in personal terms, roughly half of the 1,000 words in this blogpost are coal-powered, maybe more depending on what my local utility, PEPCO, is doing today.

But if the reputational costs of burning coal and financing MTR or new coal plants continue to grow, that will help persuade banks and utilities to invest in cleaner forms of energy–natural gas, nuclear power, wind and solar.

That’s what RAN and the Sierra Club hope to accomplish, and they appear to be gaining ground.

Mountain photo courtesy of flickr.com/photos/sierraclub/2825430279/

Billboard photo courtesy of flickr.com/photos/quinnanya/3392446245/

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

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

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

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

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

The report says of the chemicals:

Among them are chemicals associated with hormone disruption and allergic reactions, and many substances that have not been assessed for safety in personal care products.

Also in the ranks of undisclosed ingredients are chemicals with troubling hazardous properties or with a propensity to accumulate in human tissues.

Consumers  can’t count on the government to protect them from potential hazards, according to the report:

A review of government records shows that the U.S. Food and Drug Administration has not assessed the vast majority of these secret fragrance chemicals for safety when used in spray-on personal care products such as fragrances. Nor have most been evaluated by the safety review panel of the International Fragrance Association or any other publicly accountable institution.

Now, as the headline on this blogpost not-so-subtly indicates, the fact that perfume companies won’t disclose their ingredients is an unfortunate thing. But is it a reason for alarm? I’m not qualified to judge. Keep in mind that advocacy groups, like the industries they target, have an agenda, which is about getting attention and raising money. And while the 44-page report is laced with references to scientific studies, the science of measuring the effect of tiny amounts of chemicals on human health is both uncertain and controversial. See, as an example, the recent report by the President’s Cancel Panel which warned of the threats from chemicals in the air, water and food, and the reaction it provoked from, among others, the American Cancer Society. Teasing out cause and effect is just incredibly hard to do.

Having said that, why anyone would choose to smear these chemicals on their face or body is a mystery to me.

Why, as a consumer, would you take any risk, when the allergic effects associated with fragrance products, according to the report, include “headaches, chest tightness and wheezing, infant diarrhea and vomiting, mucosal irritation, reduced pulmonary function, asthma and asthmatic exacerbation, rhinitis and airway irritation, sense organ irritation and contact dermatitis”?

And why as a company would you subject your customers to risk? Here’s how crazy the confusion over chemicals has become: Several perfumes tested including a chemical called diethyl phthalate (DEP), which S.C. Johnson, the forward-thinking maker of Windex, Shout and Glade, agreed last year to phase out because of consumer concerns, while saying the chemical is safe.

What’s a consumer to do? ” I advise people to reduce exposure to fragrance wherever they can,” says Stacy Malkan, who is a co-founder of the Campaign for Safe Cosmetics and author of a book called Not Just a Pretty Face: The Ugly Side of the Beauty Industry.

This isn’t as easy as it sounds. While people can stop buying perfume, fragrances are everywhere–in soaps, shampoos, home cleaning products.  “Even looking for a shampoo without added fragrances is really challenging,” Malkan says.

Nor is it simple to seek out safer alternatives.  Terms like “natural fragrance” and “pure fragrance” found on some personal care products don’t have an enforceable legal definition. And, as the report notes, “just because a fragrance ingredient is derived from a plant or an animal source does not mean it is safe for everyone, since many all-natural and herbal products contain fragrance allergens.” Try smearing poison ivy on your face if you doubt that.

Still, companies like The Body Shop and Aveda have built their brands around being safe and green. They have a vested interest in retaining the trust of consumers. What’s more, about 200 companies, mostly  small ones, have promised to fully disclose all ingredients, including fragrances,  on their labels, as part of their commitment to the Compact for Safe Cosmetics, a pledge of safety and transparency.

Not surprisingly, the EWG report calls for government action, both to require full disclosure of ingredients and to test them for safety. In a press release announcing the report, three Democrats in Congress–Jan Schakowsky of Illinois, Ed Markey of Massachusetts and Tammy Baldwin of Wisconsin–say legislative action is needed.

“Comprehensive federal safe cosmetics legislation” is needed, the report says, “to protect the safety and health of the American people from toxic, untested and unregulated chemicals in the cosmetics and personal care products we buy every day.”

Again, I’m not persuaded.  Do we really want the FDA spending its time and our money trying to prove than the more than 3,000 chemicals used in fragrances are safe?

Markets could solve this problem, provided enough consumers care. Here’s how:

First, no one is forcing anyone to buy perfume. If you splash some eau de Britney on your neck and the result is “reduced pulmonary function,” well, you’d have to be a moron to keep using it.

Second, people can buy from the more than 200 companies that have decided it’s in their best interests to disclose their ingredient. If consumers favor them, others will follow.

Third, since there are concerns about the second-hand effects of fragrances, workplaces could take action to get rid of them. This is already happening. The Center for Disease Control and Prevention has apparently established a fragrance-free policy in its offices to protect health and prevent indoor air pollution.

Perfume. The new tobacco.

R. Paul Herman

Make money by making the world a better place.

What’s not to like about that? So appealing is the idea of doing well by doing good that a significant slice of the financial services industry is devoted to persuading people that they can invest with their values without sacrificing returns. That’s what so-called socially responsible mutual funds are all about.

R. Paul Herman, the founder and CEO of an investment advisory firm called HIP Investor, goes a step further:  He argues that companies that are leaders in sustainability and corporate responsibility are likely to outperform their peers. Those companies can be identified by using publicly-available data, he says. So by constructing an index of big companies, and investing more money into the better companies and less into the not-so-good, Herman says he both promote good corporate behavior and make money for his investors.

HIP stands for Human Impact plus Profit, Herman explained today during a talk at the  Kenan Flagler business school at the University of North Carolina. (I’m in Chapel Hill for a couple of days, participating in a conference called Global Innovations in Energy organized by Kenan Flagler’s Center for Sustainable Enterprise.) I interviewed Herman, who gave a talk about HIP investing and his brand-new book, called The HIP Investor: Make Bigger Profits by Building a Better World. He’s a personable, 41-year-old Wharton grad who did a stint at McKinsey and worked at Ashoka.org and the Omidyar Network before starting HIP.

The core of his argument, as expressed on the HIP website, goes like this:

Our world of more than six billion people faces many human problems that need solutions, many of which can be served by companies.  By solving these human needs profitably through products and services (from Walmart’s $4 generic drug program to ICICI Bank’s micro-loans to Vestas’s wind turbines), a company can benefit customers, inspire employees, engage suppliers,  and deliver sustainable profitable growth for its investors.

Well, sure. Like many, I believe that Herman’s fundamental investing thesis makes sense.  I wrote it right into my bio: “Companies that make the world a better place—by serving their customers, their workers and their communities—will deliver superior results to their owners in the long run.”

The challenge for an investor comes in identifying those better companies and deciding whether they are fairly priced by the market. Efficient market theory would argue that any information about companies gathered by Herman has already been factored into their stock price, since he works from public information.

Just to be clear about how his model operates: Herman’s HIP 100 Portfolio includes the same 100 companies as the S&P100, the big, familiar names like ExxonMobil, Wal-Mart, Citi, Goldman Sachs, Dell, Disney, Chevron and P&G. But unlike the S&P index, which weights the companies by their market capitalization–bigger companies get a bigger share of every dollar invested–the HIP 100 Portfolio weights them based on an analysis of their  products, their management practices, their reputation with customers, their environmental impact and their ability to satisfy five human needs (Health, Wealth, Earth, Equality, Trust).

What does this mean in practice? When compared to the S&P100, Herman told me: “We have more Intel, more Cisco, more United Technologies, more P&G. We have dramatically less Exxon, significantly less Wal-Mart.” Google? Less than the market index. Ford Motor? More.

The Portfolio’s Top 10 holdings are Procter & Gamble, GE, Intel, UPS, H.J. Heinz, HP, PepsiCo, Cisco, IBM and Nike, according to an overview that you can download  here.

As usual, things get squishy when you dig into the details of any investing model. Why PepsiCo rather than Coke? Why HP instead of Dell? Why UPS rather than FedEx? More to the point, are you persuaded that PepsiCo, HP and UPS will outperform their rivals because of their superior environmental and social practices?

What’s more, the criteria that determine the HIP 100 inevitably include value judgments, as does any approach to investing. Herman basically likes nuclear power, he told me. He doesn’t like Washington lobbying–companies that spend more money than their peers trying to influence legislation take a hit. That’s strange, since it would penalize GE or Duke Energy or Nike for spending on behalf of environmental legislation like the Waxman-Markey climate bill. Transparency matters a lot, so Google, which does lots of good things but keeps lots of information about itself private, suffers as a result. Note the absence of oil or coal companies from the Top 10, which makes sense from a “green” standpoint but suggests that performance will suffer if energy prices rise.

Herman points to the performance of the HIP 100 Portfolio as evidence that his model works, saying:

The HIP 100 portfolio has consistently outperformed the S&P 100 Index by at least 400 basis points (4%) annually over the past five years, when backtested in a model.

But back-testing is a crude measure. More significant is the actual performance since HIP Investor launched the HIP 100 Portfolio last July 30.. Those results are not quite as persuasive. Between July 30 and December 31, 2009, the value of the HIP 100 grew by 14.23% while the S&P100 grew by 12.23%, net of fees. That’s a 2% edge which takes into account the fact that HIP Investors charges a 1% management fee and works through a broker-dealer, FolioFN, that charges another 0.25% fee. Six months, of course, is not nearly long enough to test out the validity of any model.

Now, don’t get me wrong. I fervently hope that the HIP 100 Portfolio thrives, just as I would like to see the Dow Jones Sustainability Index, the FTSE4 Good Index and social fund families like Domini, Calvert and Portfolio 21 do well. (Especially the latter three, since I’m invested in all three.) I’m sure those indexes and funds do some good just by keeping a close eye on corporate practices. They’re useful watchdogs and, in the case of the social funds, effective shareholder advocates for causes they believe in.

But I’m not persuaded that there’s any single model that can consistently outperform the market. The social funds, as a group, have failed to do so. So, as best as I can tell, have the sustainability indices. (I couldn’t find historical performance data on the DJSI website.) In fact, it’s sad but true that the vast majority of actively managed mutual funds underperform index funds over time because of their higher fees and trading costs.

Put simply, most fund managers aren’t worth whatever they are paid.

Will Paul Herman be the exception? I hope so. But I’m not betting on it yet.