Coca Cola

Biz and NGOs: too cozy?

November 14, 2008

Only a mindless anti-business zealot (and unfortunately there are still too many of those) would argue that environmental groups should not cooperate with big business when they have shared interests. Even activist groups like Rainforest Action Network and Greenpeace work closely with big companies like Citigroup and Coca-Cola, to help them make their operations more efficient or their strategy more environmentally friendly.

But there’s lots of debate about whether NGOs should accept money from their corporate partners. Does it compromise their independence? Threaten their credibility? Or enable them to bring in more money, and therefore have a bigger impact? That’s the topic of today’s Sustainability column.

By coincidence, I spent the day at the Net Impact conference in Philadelphia where corporate-NGO partnerships were one topic on the agenda. (Net Impact is an organization of business students and young business people who are committed to using business to make the world a better place. Some 2,400 people attended the very impressive event at Wharton.) I moderated a conversation about a corporate-NGO alliance with John Brock, CEO of Coca-Cola Enterprises and Carter Roberts, CEO of the World Wildlife Fund, and then listened to another where Ken Mehlman of private-equity firm KKR and Elizabeth Seeger of Environmental Defense Fund talked about their work together. CCE’s Brock and KKR’s Mehlman both said their firms got real value out of the partnerships—in terms of advice on how to better manage their operations, and from the public-relations value of the association with a green group. ”If we’re going to save the plant, we’re going to do it by making a profit,” says Mehlman. “That is the only way tit will be truly sustainable.” (When private equity firms, which are notoriously unsentimental, get serious about “going green,’ then you know the business case has become truly compelling.)

Interestingly, CCE and its sister company, Coca Cola, pay the WWF for its advice, and make donations to the group to help restore rivers and streams. But no money changes hands between KKR and EDF.

There are good arguments for both models, and you can read them in the column. My belief is that the NGOs, at a minimum, need to be transparent about their dealings with business. That is, they need to disclose how much money they are taking from their corporate partner over what period of time, and what services they are providing in return. One controversial partnership, a deal between the Sierra Club and Clorox, fails to meet this test. Here’s how the column begins:

Some environmentalists attack bottled water. Not Conservation International, a Virginia-based nonprofit that aims to protect the earth’s biodiversity.

When Fiji Water announced a sustainability initiative last spring to help protect forests on the remote Pacific Island of Fiji, Conservation International Peter Seligmann praised the move.

“We applaud Fiji Water for offsetting the climate impact of its products, reducing the impact of its operations, and funding crucial conservation efforts that support local communities and protect some of the last remaining forests in the South Pacific,” he said in a Fiji Water press release.

The endorsement didn’t surprise anyone who understands the relationships between Fiji Water and Conservation International. The privately-owned bottled water company pays Conservation International – neither party would say how much – to finance the work they do together. Stewart Resnick, who owns Fiji Water with his wife, Lynda, sits on Conservation International’s board and donates to the group.

Such cozy arrangements are increasingly common as big companies work side-by-side with big NGOs (non-government organizations). Clorox secured the endorsement of the Sierra Club – and the use of its logo — for a line of eco-friendly cleaning products, called GreenWorks that the company introduced late last year. Neither will disclose how much cash is involved.

You can read the rest here.

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Coke’s dilemma

October 30, 2008

Can a company grow and shrink at the same time?

That’s what The Coca-Cola Co. is trying to do. Like every big company, Coca-Cola wants to grow its revenues and profits. It also wants to reduce its environmental footprint. Is this possible?

The answer is probably not, at least not right now.

That’s not because Coke isn’t trying. Indeed, few companies take environmental issues more seriously than Coca-Cola. I’m an admirer of the company’s chairman, Neville Isdell, and its sustainability guru, Jeff Seabright. (See Coke: The Green Thing at fortune.com and this blogpost.) The trouble is that, at least for the moment, the more stuff that Coke sells, the more it is likely to emit, pollute and consume natural resources.

That, in any event, is my takeaway from today’s announcement from Coca-Cola and the World Wildlife Fund that they are extending a partnership announced last year and setting new targets aimed at reducing water usage and greenhouse gas emissions throughout Coke’s sprawling, global system. Coke beverages – its $1 billion brands include Coke, Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid and Georgia Coffee (a coffee-flavored drink sold in in Asia) — are sold in more than 200 countries.

As you may know, Coke products are produced and distributed by dozens independent bottlers, so the seemingly simple task of tracking the system’s global environmental footprint isn’t simple at all. Getting all those bottlers to line up behind promises to use resources more efficiently can’t be easy, either.

Seen in that light, Coke’s progress to date and its new targets deserve praise. The company improved its water efficiency by 20% from 2002 to 2007, and it aims to use water even more efficiently by 2012. “Water is at the core of what we do,” Seabright says. Its energy use ratio, another efficiency measure, improved by 19% between 2002 and 2007. These efficiency measures, in essence, means that Coke is using a lot less water and a lot less energy and emitting significantly fewer greenhouse gases per unit of product sold. That’s no small accomplishment, but you need to understand that we are talking about eco-efficiency here.

In absolute terms, Coca-Cola cut its water usage by 2% between 2002 and 2007, but it expects to use more water in 2012 than it does now because its business is growing, particularly outside of the U.S. Similarly, Coca-Cola’s greenhouse gas (GHG) emissions actually grew between 2002 and 2007. Going forward, it aims to keep emissions from its manufacturing operations flat between its baseline year of 2004 and 2015. (That’s just manufacturing. The company is working separately on its refrigeration, packaging and transportation, which aren’t part of the targets announced today.)

You see the problem, right? Coke is conceding that it can’t grow (the business) and shrink (its footprint) at the same time. I say this not to point a finger at Coke, but to point to the limits of what any company going “green” can do.

If Coke manages to stabilize its water use and carbon emissions, that would be a major accomplishment. But when it comes to greenhouse gas emissions, scientists say we need to first stabilize them and then reduce them dramatically over the next 30 to 40 years.

Put another way, the earth’s atmosphere is indifferent to eco-efficiency.

To its credit, Coca-Cola is working on a variety of other projects that could bring about absolute reductions in energy and water usage and emissions. With other NGO and corporate partners, it is trying to eliminate HFCs and HCFCs, which are potent greenhouse gases, from the refrigeration industry. It has a venture arm that is investing in small “green” companies like RecycleBank and WeatherTrak, which adjusts irrigation systems to changing weather conditions. It is working with WWF on its supply chain, starting with sugar cane, to encourage farmers to increase their output while using fewer inputs of water, fertilizer, pesticides, etc. All important stuff. You can read a lot more about what Coca-Cola is doing in its new 2008 sustainability report.

I do wonder about WWF’s role in the partnership, though. Coca-Cola has agreed to pay nearly $24 million over five years to WWF, in part because WWF is helping the company to become more sustainable. But by taking the money, is WWF giving up an opportunity to push Coke harder?

Judge for yourself. Here’s what Suzanne Apple, Vice President & Managing Director, Business and Industry at WWF, said when I asked her whether Coke’s efficiency targets go far enough: “Targets like these are very much consistent with our mission and our conservation priorities…We are pragmatic in our approach. We are pushing companies to set ambitious targets. But they have to balance their economic interests and their environmental interests.”

Well, sure. But it sounds to me like WFF is also balancing its economic and environmental interests. While I’m all in favor of corporate-NGO partnerships, I’d feel better if big NGOs didn’t take big grants from big companies, even good ones like Coke. Then they would only have one client to worry about—the earth.

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A watt is a terrible thing to waste

August 27, 2008

I’m writing this post on my Apple PowerBook G4, which ordinarily does very well what I need it to do—except that right now it is sitting on my lap and giving off enough heat to keep me warm on a cool day.

That might be welcome if today were a February day in Denver. But it’s August.

I’m in the mile-high city where the sun always seems to shine to moderate a discussion on sustainability for Coca Cola Enterprises, the big bottling company; to attend a bunch of events on the environment and energy; and to soak up the atmosphere as the Democrats and thousands of hangers-on here to nominate Barack Obama.

The Coke discussion went well, I thought—participants included the major of Atlanta, Shirley Franklin, who talked about the drought and water conservation, Majority Leader Steny Hoyer who said that a climate-change bill could get enacted in Congress by a year from now, author-consultant Dan Esty of Yale and Joe Nation, a Stanford lecturer, economist and former California legislator who was a leading backer of that state’s revolutionary law to regulate greenhouse gases. Others who I heard or spoke with during my brief visit include Sir Nicholas Stern, the British author of the well-known report forecasting the economic impact of global warming, Carl Pope of the Sierra Club, Dow Chemical CEO Andrew Liveris, former EPA chief Carol Browner, Tim Wirth of the UN Foundation (back in the state that elected him a U.S. Senator) and too many governors, members of Congress and mayors to list. Energy and the environment were very big on the agenda here, if not on prime time TV.

Which brings me back to my laptop. Because while much of the conversation revolved around government policy, and offshore drilling, and the differences between McCain and Obama, I also kept hearing reminders about how much energy we continue to waste in America.

The heat given off by laptops, TVs, DVD players and incandescent light bulbs is wasted energy. So is the AC or heat that escape through the walls and windows of leaky office buildings and homes. Then there’s the gasoline we burn by driving cars that are bigger than we need. The energy wasted in heating and cooling rooms of housings that are too big. And so forth.

The economic and environmental costs of all that waste are substantial. The question is, why do we continue to pay them?

Much as I’m a believer in markets, I’m increasingly coming to think that markets don’t do a very good job of driving efficiency when it comes to energy consumption.

If you doubt it, let me pose a few questions.

1. When you bought (or rented) your home, how important were the insulation, the thickness of the windows and the efficiency of the furnace or refrigerator to your decision? Not very, I’d bet.

2. Is your TV/dvd player/cable box hooked up to a surge protector so you can turn them all off with one click when you are not watching? If not, you are writing a bigger monthly check than necessary for your electricity.

3. And why do so many people continue to buy incandescent bulbs when their lifetime costs are much higher than the costs of CFLs?

One problem here is lack of information—people may not be aware that their electronic appliances consume power even when they are turned off. Or they don’t know the lifecyle costs of different light bulbs.

Another obstacle is that builders, say, who make decisions about insulation or what appliances to install in a new home or apartment have to spend more for efficiency upfront, but the resulting savings go to the buyer of the home.

Still another example: Retrofitting existing office buildings could save an enormous amount of money and generate thousands of so-called green jobs. But getting landlords and tenants and their lenders together to figure out how to do so, who pays and who benefits is enormously complex.

All this would argue for government action—beyond the obvious need to put a price on carbon emissions—to require products to be more efficient. We do that already—there are efficiency standards for air conditioning, appliances and cars—but they are not very stringent, and so we use considerably more energy per capita than Europe or Japan.

You may recall that a very thorough McKinsey & Co. report last year found that about 40% of the reductions in greenhouse gas emissions needed to curb global warming can be achieved through energy-efficiency measures with a reasonable payback time that would save money.

You’d think that rising energy costs would take care of this problem, and they will help, but they are unlikely to work on their own. Consider my laptop—when I bought it, its energy usage never entered my mind, and probably wouldn’t even if electricity cost 25 cents per hwk.

The Sierra Club’s Carl Pope argued that markets sometimes don’t even do their fundamental job of creating products people want. He said an owner of a small business, who needs a truck to haul stuff around and drives 100,000 miles a year, and pays $20,000 or more a year for gas, might want to save money. But how?
“The Ford Econoline van has not been redesigned in 27 years. It gets 13 miles to the gallon,” Pope said. “He’d rather have a more efficient Econoline. It doesn’t exist. It should.”

Then there is the vexing problem of showers. “The average American teenager takes 45 minutes worth of hot showers every day,” said Brian Keane, president of an NGO called SmartPower that promotes clean energy. “That’s an efficiency problem we must address.”

Well, sure—although that may be the one form of waste that neither markets not the government can eliminate.

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