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.

Fortune Brainstorm Green, and the limits of corporate sustainability

Harrison Ford at Fortune Brainstorm Green
Harrison Ford at Fortune Brainstorm Green

The 2013 edition of Fortune’s Brainstorm Green conference was, by most accounts, a hit. We had a record number of attendees, including more than 50 CEOs of companies and nonprofits, big and small; plenty of entertaining and informative conversation; and a healthy dose of fun, with celebs like Harrison Ford, and (my favorite) ultra marathon runner Scott Jurek. As co-chair of the event since the first Brainstorm Green in 2008, I love to reconnect with colleagues and sources, meet new folks and learn from and, occasionally, by inspired by our top-notch speakers. The theme of the conference has been a constant: How can business profitably help solve the world’s most important environmental problems?

Unavoidably, the challenge of an event like Brainstorm Green (as well as a conundrum for anyone who writes about corporate sustainability) turns on the question of how much to cheer or jeer the efforts of companies that are trying to “go green.” My job, as I see it, is to do both–to applaud the leaders, to prod the laggards, and to do my best to tell one from the other. That’s difficult balance to do in a conference setting where the mood is one of bonhomie, where the speakers are our “guests,” and where the presumption is that everyone is doing the best they can. The trouble is, that’s usually not good enough.

Mark Tercek at Brainstorm Green
Mark Tercek at Brainstorm Green

As Mark Tercek, the CEO of The Nature Conservancy, who I interviewed at Brainstorm Green, put it in his excellent new book, Nature’s Fortune:

Nearly every precious bit of nature–teeming coral reefs, sweeping grasslands, lush forests, the rich diversity of life istelf–is in decline. Everything humanity should reduce–suburban sprawl, deforestation, overfishing, carbon emissions–has increased.

Sad but true.

So if corporate America is changing for the better when it comes to the environment–and no doubt, many companies are–the pace of change is too slow and the ambitions of business leaders are too modest. Incremental change is not getting us where we need to go. [click to continue…]

Energy Points: Science, data and feel-good environmentalism

Today, I’m going to tell you about an intriguing sustainability start-up called Energy Points, and its founder, a Greenpeace activist turned physicist named Ory Zik. But first, a word or two about the kinds of questions that Energy Points hopes to answer.

A not-so-serious question: I used to go through 3-4 pairs of running shoes a year, and hated to throw old ones away. So I’d pack them in a box, and send them to Nike in Oregon. The company’s ReuseAShoe program makes old shoes into playgrounds, or tennis courts, or materials for new shows. Nike has collected 28 million pairs of shoes since 1990. Does this make sense? Or would the world have been better off if I’d just trashed them?

A more serious question: You’re the chief sustainability officer of a big  company. Working with the chief technology officer, you’ve just saved $1 million in energy costs by consolidating data centers and replacing old desktops and printers with efficient ones. Your CEO is so pleased that he’s told you to invest some of the savings in a sustainability project that will make a difference. Do you buy LED lights? Put solar on a warehouse roof? Install low-flush toilers in the restrooms?

“We don’t have any numbers to drive decisions,” says Ory Zik, the CEO of Energy Points, who, at age 48, is starting his third company. Particularly when comparing impacts across different arenas — energy, water and materials — there’s no common language.

“Saving a billion kilowatt hours versus saving a billion gallons of water — what is most important?” he asks. “What do you do–drip irrigation, solar panels, hybrid vehicles?” [click to continue…]

Carl Bass: Environmentalist, craftsman, CEO

This bench, fashioned from a single piece of black granite, was inspired by an African headrest and designed by Carl Bass. An accomplished and dedicated woodworker, Carl has lately been making thins out of  stone and metal, too.

In his day job, Carl is the CEO of Autodesk, which makes 3D design software that helps shape the world we live in. With just under $2 billion in revenues, Autodesk, which is based in San Rafael, CA,  sells to the architecture, building, construction, manufacturing and entertainment industries.

I traveled to San Francisco this week to interview Carl at an Autodesk sustainability summit. We met at the Autodesk Gallery at One Market Street, a cool space that showcases some of the cutting-edge sustainability projects designed using the company’s software–the ongoing renovation of the San Francisco Bay bridge, the Tesla electric car, Masdar’s headquarters building which is supposed to generate more energy than it uses.

Autodesk has a slew of sustainability initiatives, including working partnerships with the US Green Building Council, the Biomimicry Institute, the Cleantech Open and Granta Design. It gives away millions of dollars of software every year to clean tech startups and entrepreneurs in 29 countries.

As you’d expect, Carl uses Autodesk’s software — Inventor,  in the case of the bench — to test out his designs. This is known in the business world as eating your own dog food. I began our conversation by asking him about his latest creation, a bowl (below) made of metal, stainless steel and bronze that he produced, believe it or not, on a 3D printer. What follows are edited excerpts from our talk. [click to continue…]

Big brands take climate action but…

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

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

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

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

GreenBiz: Innovation is alive and well

Despite policy gridlock (or worse) in Washington, despite cheap abundant natural gas (which threatens the development of renewable energy), despite Solyndra (which highlights the risks of crony capitalism), there is good news in the world of business and sustainability.

Innovation is alive and well in companies big and small.

That’s my takeaway after spending the last 36 hours at the GreenBiz Innovation Forum in San Francisco. I’m a senior writer at GreenBiz and let me tell you, it’s been great to get outside the Beltway bubble this week (and not merely because the weather here in SF is spectacular). Here’s are four reasons why:

Nike goes for gold: While she was tantalizingly skimpy on details, the always dynamic Hannah Jones of Nike made clear that the company’s drive to become more sustainable is causing people inside the company to ask ever bolder questions–including how to generate sales without necessarily making and selling more shoes and apparel.

“How do you think about the world of sport and the athlete and human potential in terms of services?” Jones asked. “Could one create revenue streams that are decoupled from any material?”

“Our mission statement isn’t ‘make lots of stuff,” she said. “It’s ‘inspire and innovate on behalf of the athlete.” [click to continue…]

BSR’s Aron Cramer: Leaders need to listen to weak signals

Aron Cramer

Today, I’m pleased to publish the second in a series of guest posts about redefining leadership from Aron Cramer, the president and CEO of BSR. BSR (formerly Business for Social Responsibility) works with its 250 member companies to promote a more just and sustainable world, through research, consulting and industry collaborations. Aron, who’s a longtime colleague and friend, has worked all over the world on business issues ranging from labor rights in global supply chains to Internet freedoms in China to the meaning of “sustainable consumption.” Here, he writes about the importance of listening to and learning from voices at the margins.

When I was researching my book Sustainable Excellence, Nike CEO Mark Parker told me that he manages by the principle that “there are a lot of smart people in the world, and most of them don’t work for me.” And while Parker is duly proud of the people he does have at Nike, he points to a central truth: Valuable insight and knowledge is now held in more hands than at any other time in human history.

As we consider how leadership is changing, it is clear that today’s most effective leaders have the ability—and willingness—to listen to weak voices they would have considered irrelevant to their business a generation ago. Indeed, these leaders are able to see across multiple disciplines, perspectives, and geographies.

Historically, leadership used to be exercised by people (usually men) who  had a corner on information, and who would speak with unshakeable authority. They were expected to have all the answers. Today, those who lead do so through their ability to find  all the answers. As Stewart Brand famously said, “information wants to be free.” In a world which is drowning in data, no own can monopolize knowledge; but smart leaders can win by listening to voices that others ignore and by mining the data  for fresh insights. [click to continue…]

Aron Cramer: Business needs to step up

Aron Cramer

Today, I’m pleased to publish the first in a series of guest posts from Aron Cramer, the president and CEO of BSR. BSR (formerly Business for Social Responsibility) works with its 250 member companies to promote a more just and sustainable world, through research, consulting and industry collaborations. Aron, who’s a longtime colleague and friend, has worked all over the world on business issues ranging from labor rights in global supply chains to Internet freedoms in China to the meaning of “sustainable consumption.” Here, looking ahead to BSR’s 2011 conference in San Francisco, he writes about the need for business leaders to step outside the boundaries of their companies to re-energize the sustainability agenda.

Most years, people are reluctant to see summer fade into fall. But the summer of 2011 was a bit of a bummer, bringing hurricanes and earthquakes in the American Northeast; ongoing political stagnation in the United States, Europe, and Japan; and signs that the world’s mature economies are stuck in neutral—and may remain that way for some time. Leaving this summer behind feels like a relief.

It’s up to business to turn things around. That’s why BSR has made redefining leadership as the theme of the BSR Conference 2011.

We view this opportunity as having four dimensions, which we outlined in our most recent annual report. In this series of blog posts, I want to elaborate on each one, beginning with the need for business leaders to invest in the infrastructure required for sustainability. [click to continue…]

Nike: running towards sustainable consumption

A  company’s journey to sustainability is always going to be — cliche alert! — a marathon and not a sprint.

Just ask Nike. The company is a leader in environmental design, and yet it has a long way to go to reach its sustainability goals.

At least Nike knows where it’s headed. It has a bold  long term called the North Star. A key tool is known as Considered Design, where the goal is to

design products that are fully closed loop: produced using the fewest possible materials and designed for easy disassembly, while allowing them to be recycled into new product or safely returned to nature at the end of their life.

This is a big, radical, inspiring idea. Here’s a cool video, just a minute long, about Considered Design:

I run marathons, so I know that you need to take a lot of steps to reach your goal. Recently, I saw down with Lorrie Vogel, the general manager of Considered Design, to learn more about what steps Nike has taken, and what’s left to do, after hearing her excellent presentation at the State of Green Business Forum in Chicago. [click to continue…]

Sustainable Excellence: Is it enough?

Last week was a terrific week for corporate sustainability. Unilever unveiled a bold plan to reduce its environmental impact and Chevrolet — Chevrolet! — announced $40 million of carbon reduction projects. Forestry giant Georgia Pacific–owned by the Koch brothers, of all people–signed an agreement to protect endangered forests in the southern U.S., winning praise from the Dogwood Alliance and NRDC. Greenbuild, the world’s largest convention on environmentally-friendly buildings, attracted 1,000 exhibitors and 27,000 people to Chicago. Wow.

None of this will surprise readers of  Sustainable Excellence: The Future of Business in a Fast-Changing World (Rodale, $25.99) by Aron Cramer and Zachary Karabell, a smart, readable and provocative book that argues that business success in the long run will be earned by companies that “integrate consideration of society and the environment into their DNA.”  As CEO of Business for Social Responsibility since 2004, Aron has had a front-row seat (actually, a place on the field) from which to track changes in how business is being done, while Zachary is an accomplished journalist and scholar who also did a stint as a Wall Street money manager. Together, they have provided a map of the ever-evolving  business landscape, along with valuable guidance to executives who must deal with a range of sometimes competing pressures on companies to do good and to do well.

What’s the business case for sustainable excellence? They write:

What has made sustainable excellence necessary is the simple imperative of maintaining profitability in a world altered by a trio of interlocking challenges: the financial crisis that hobbled the economy, the rise of the emerging world and the increased urgency to decouple economic growth from natural resource consumption.

In short, the drive to integrate sustainability into business is a function of thousands of companies recognizing that now and in the future, this is the only viable path forward.

Aron and Zachary tell stories about GE, Google, DuPont, Shell, Levi-Strauss, BP, PepsiCo, Starbucks and Coca-Cola, among others–companies that, to varying degrees, are redefining themselves to deal with the long-term trends they’ve identified, and to meet the rising expectations of business that come from their employees, their customers, communities and NGOs. [click to continue…]