Sunday, January 29, 2012

How Relevant is Sustainability to Business Executives?

There is no shortage of studies on the growing prevalence of sustainability in business. Below are some of the results from the more powerful ones:

Results from an Accenture study conducted for the UN Global Compact on the importance of sustainability found that 96 percent of CEOs surveyed thought that sustainability issues should be fully integrated into the strategy and operations of a company – up from 72 percent in 2007. Even CFOs, those typically more resistant to sustainability due to pressure of financial market judgments, have shown signs of acceptance. A study of 175 CFOs and other senior executives conducted in 2008 by CFO Research Services found that more than half believed that their companies’ sustainability programs will very likely or somewhat likely increase revenue, cut operating costs, improve employee retention and improve investor returns and shareholder value. They tended to cite reduced risk (78 percent), enhanced brand and reputation (77 percent), customer retention (72 percent) and improved employee health and productivity (68 percent) as the more popular opportunities.

In terms of around sustainability, it appears that regulatory compliance is most important for 61 percent of respondents while improving energy efficiency, reducing greenhouse gas emissions (47 percent) and reducing the environmental impact of operations (45 percent) – those priorities associated with being less unsustainable – came in second.

Some of the greatest challenges identified in these studies included the following:

- The inability to measure the effects of sustainability on shareholder value (46 percent of respondents)
- Inability to document the effects on finical performance (37 percent)
- Lack of standard decision-making frameworks that consider environmental factors

In a study conducted by the Network for Business and Sustainability that asked Canadian managers to define the sustainability challenges in 2012, the following were identified:

- How to redefine the traditional business case to include sustainability
- How can sustainability drive innovation within companies?
- How can companies mobilize citizens to take more sustainable actions?
- How to build sustainability into corporate budgeting and planning
- How to continually green the firm in tough economic times
- How can businesses attract and retain employees through sustainability?
- What are the best (and worst) practices in sustainability reporting?
- How can businesses effectively engage with NGOs on social and environmental issues?

Interestingly, one of the least significant challenges was organizational resistance to sustainability.

One observation from these studies is that while business is increasingly recognize that sustainability is here to stay, their response to the trend is highly incremental. As mentioned, the objective of executives appears to be to understand how to fit society and the environment into the business model rather than the other way around. Put another way, the business ideology is the starting point rather than the laws of nature or the fundamental values of society (e.g. democracy, freedom, equity, inclusion, justice), with which business is forced to align. This is the sort of radical leadership that does not come out of these studies…not yet anyways.

Thursday, January 19, 2012

The Lengths We Go to Promote Our Oil

I've been following Kathryn Marshall's postings on Huffington Post for some time. Marshall is the "spokesperson" for EthicalOil.org, an organization that promotes Canada’s tar sands as the ethical alternative when compared with the socio-political issues evident in traditional oil producing countries like Saudi Arabia and Venezuela. For months Marshall has been blasting political decisions against the Keystone Pipeline and of course those pesky environmentalists, promoting vigorously the claim that Alberta's oil is so much more ethical than oil sourced from virtuously anywhere else in the world. While I’ve been acknowledging these columns as right-wing conservative opinion deserving their own share of airtime, this last column crossed the line in its appalling hypocrisy. I think readers need to be aware that there is a very fine line these days between free speech in the media and clever rhetoric drawing on irrelevant argumentation meant to disguise the reality of a given situation.

Her latest post entitled "Obama Flushes Canadian Interests Down the Pipeline" is a beauty. In it she quotes Obama in a statement he made several years ago regarding his promise to wean the American economy off of oil from the entire Middle East and Venezuela. All of sudden Marshall has become an expert in political commentary and truly interested in whether a politician keeps his/her promises. How sincere! She also sounds so sincere when she explains that the US is going to lose its energy security and will be increasingly dependent on despotic regimes. Again, how nice of her.

What shocks me the most about Marshall and many others who push their agenda by latching on to completely irrelevant arguments is that she is not aware of how hypocritical her writing sounds. For instance, she writes tirelessly about the injustice to the American people of Obama’s decision to cancel Keystone but doesn’t at all consider how the decision to approve the pipeline is in fact a similar if not greater injustice when considering the environmental and economic implications of its approval. What many people don’t realize is that the tar sands really only postpones the much needed development in renewable energy that can represent a huge source of economic development in the US. So the question is not where the US should get its oil but where it should get its energy.

The hypocrisy continues when she appears to claim that the US government is committing a crime in their decision to maintain reliance on oil from terrorist-harboring nations. Now she’s qualified to comment on defense. How diversified in her skill set. Clearly she really cares for these Americans. Pardon my sarcasm, but humorously she sees no connection between the need to protect American citizens from foreign oil and the need to protect American citizens from its reliance on oil more generally.

The greatest irony in her writing is that she, among others, criticize Obama for making this decision for political gain. In particular, she criticizes Obama for masking his true ambition, which is to gain voters by claiming that the pipeline is not in the country’s national interests. Hmmm, that sounds familiar. How is this any different from Marshall, who masks her true ambition of finding markets for ethical oil by appealing to the American and Canadian public on issues that have nothing to do with the tar sands.

She also appeals to the notion that large OPEC oil suppliers are crippling Canada’s oil sands and that environmental extremists are usurping Alberta’s plans to bring their oil to market. Again, this sounds so familiar. Marshall is complaining that large social actors are influencing political decisions and the view of the public on these sorts of issues yet ignores the slew of political lobbyists and right wing extremists using the same strategies to accomplish the opposite. The Canadian government, for instance, has actively lobbied in state, municipal, and federal European capitals to promote policies that are tar sands friendly. It’s as if the tar sand companies are innocently operating a lemonade stand hoping that customers will pass by, yet the unfair police office is diverting traffic from their street. Come on now, let’s be a bit more realistic. Another way to look at this is that the left wing environmentalists have learned that the only way that they can truly induce change is to adopt the tactics of those actors who have influenced public policy for decades.

She then says that "Obama's self-serving decision should remind Canadians of the dangerous risks of relying on just one single customer, and toughen our resolve to build more pipelines.” Is it not also a self-serving decision on the part of Canada to promote these pipelines at the expense of the rest of the planet? She ends with, “we must make sure that our national ambitions and our prosperity aren’t left at someone else’s mercy”. Is it not true that our decisions to advance the oil sands very much strips the ambitions and prosperity of those countries that will suffer further from the implications of climate change? Are they not therefore left at someone else’s (Canada’s) mercy?

I therefore completely disagree with Marshall and other who say, “the Northern Gateway pipeline is an all-Canadian affair…it is our decision alone whether to approve that pipeline, not that of a foreign government, or foreign interest groups”. This view is highly na├»ve, self-centered, and completely absurd. Unfortunately, our Prime Minister shares the same view. Countries outside of South America have for the last decade imposed substantial pressure on countries surrounding the Amazon rainforest to put in place policies that preserve the forest. This is because they realize that any degradation of the rainforest will have catastrophic implications for the entire planet. Country boundaries are a social construction. The planet doesn’t discriminate along these lines meaning that decisions made by individual countries can have dramatic impacts on other countries. One only has to look at the severe environmental conditions of developing countries imposed by the actions of developed countries to see this. So I think that foreign interests have every right to voice their democratic right to oppose decisions of another country especially if those decisions affect their livelihood at home.

Now I recognize that Marshall is just doing her job. She has a cause and she’s finding every and any possible way to further that cause as spokesperson of EthicalOil.org. But at some point you have to draw a moral line in the sand that separates opinion to further a cause from the highly insidious attempt to distract the public from what is really underlying the implications of that cause. The sad thing is that Marshall’s strategy here is to instill a sense of frustration among readers by tapping into their emotional triggers. But at the end of the day, she doesn’t care about whether politicians in the US keep their promises. She doesn’t care about whether the US is less dependent on unethical sources of oil. She simply uses arguments to which the audience is sensitive to push her agenda, which is to get more oil to the US. That’s what she cares about and that’s what EthicalOil.org stands for. The mask behind which these individuals hide is as fascinating as it is shameful.

Perhaps this is the job of the editor of Huffington Post. Should they be publishing columns by someone who clearly has a conflict of interest?

Wednesday, January 11, 2012

What a Deal! Obesity for Only 7% of Your Income

A very interesting study conducted by the Food Service Warehouse plotted worldwide food consumption levels and compared these with income levels. When you put the highest and lowest countries side by side, the outcome is rather striking:



The green line is the recommended daily allowance of calories (typically between 2000 and 2500). A quick glance confirms that western nations are well above the recommended caloric intake, which is no surprise when we consider their overly abundant waste lines. The fact that these are averages means that approximately half of Americans and Canadians consume more than 3800 and 3700 calories a day respectively. That’s a lot of food and/or a lot of really crappy food (i.e. high calories with low nutrients)!! Even France, a country once considered highly disciplined in the eating habits, is not immune to this trend.

Interestingly, the lowest consuming countries are not that far from the recommended daily allowance. This is despite the fact that many of these countries suffer from severe malnutrition, which suggests that much of the food these countries are consuming is likely unhealthy. It would be great to see these statistics over time to see if there is any heterogeneity by country in growing consumption rates. If not, then one has to wonder if the quality of the food available to the entire planet has eroded over time. Indeed, when considering our aggressive agricultural practices, research has shown that nutritional value in global soil levels have eroded over time meaning that we need to consume more of a given unit of food than we did decades earlier.

It gets more interesting when the study authors cross-reference the above data with the percentage of income spent on food in the graph below. With the exception of a few outliers, it’s fascinating that there is a direct and negative correlation between food consumption levels and the amount of income spent on food. With the exception of Romania, all of the biggest eaters dedicate little of their income to food. Fast Company attributes this to the fact that a majority of the high consuming nations consume mostly processed, unhealthy food, which is dramatically less expensive than “real food”.



But when you think about this in more depth, another explanation emerges. What strikes me most about the second graph is that the seemingly educated, more affluent countries are those that are not spending much of their disposable income on food. This goes against the view that we need more disposable income and education to eat better. If this were the case, then what’s going on here? Canadians are one of the lowest in the amount of disposable income that goes to the consumption of food – around 7%. That seems bizarre to me! That’s $2,240 spent on food out of $32,000 annual income. That’s $186 per month or $6.14 per day. Yet we manage to turn this $6 into 3700 calories. A quick glance online and the only foods that can muster such a caloric-bang for the buck include things like animal fat, vegetable oils, salad dressings, junk food, processed meats and fried food. Notice that many of these are highly dependent on caloric-intensive corn derivatives, a point I'll get to later.

On the one hand, Canadians seem to be doing everything they can to minimize the percentage of their income spent on food. As if eating is a necessary evil, it appears that Canadians are doing whatever is possible to leave available disposable income for other things; things that are more important than what we put into our bodies. In 2009, Canadians spent about the same on recreation as they did on food and double on transportation as they did on food. Canadians allocated three times the amount we spend on food to a place to live and a third of what we spend on food for alcohol and tobacco products; meaning that if we lumped tobacco and alcohol under food, they would represent 25%. Perhaps most ironic is that we pay just as much on personal insurance payments and pension contribution as we do on food. Yet food decisions lead to short- and long-term implications for our health. The more we compromise on food the higher our personal insurance fees, and the greater pointlessness of contributing to our pension!

But consumers are not the only ones to blame here. There is an inherent motivation on the part of processed food companies to inject as much processed, caloric-intensive food into the food system as possible. And because a majority of the ingredients in this food are highly subsidized, the price is quite low relative to real food. The fact that a 2 liter bottle of Coca-Cola costs less than the equivalent amount of water is a good illustration of this. This is not to mention the fact that processed food frees us from the seemingly burdening task of making our own food, which would actually encourage us to 1) pay attention to what’s in it, 2) consider eating as a substantial part of our day, and 3) eat slower and therefore not over-eat. Add the billions of dollars spent on marketing processed foods as convenient and complementary to a busy lifestyle and voila, you have people in the West who consume 3700 calories a day for cheap, nutrition-empty food yet with only a tiny portion of their budget. Together, this trend is incredibly frightening because we’ve relegated food to the level of a commodity similar to filling our vehicles up with gasoline. We eat at the office desk, in the car, on the go as if consuming food was as inconvenient as learning that your car is approaching empty.

There is a whole host of interpretations coming from these data. I’d be interested in hearing what you think these two graphs are telling us.