Rupert Murdock Fails Management 101

Rupert Murdock apologized profusely today in response to accusations form the UK parliament but accepted no responsibility for all that happened under his watch as the leader of News Corp. Rebecca Brooks similarly seemed to suggest that her lack of awareness of the scandals absolves her of any responsibility. These remarks are particularly striking because they naively overlook the influence of institutions on the behaviour of individuals. By institution I mean the business itself that possesses an intricate array of complex systems and processes that shape norms, standards, belief systems, and principles resulting in collective behaviour and a well-defined and highly influential culture. Consider an organization's aggressive reward systems or promotion criteria that elicit a highly aggressive competitive environment or internal norms related to unethical behaviour that leaders endorse or ignore. As Noam Chomsky put it in describing the behaviour of organization members of particularly psychopathic corporations:

“When you look at a corporation, just like when you look at a slave owner, you want to distinguish between the institution and the individual. As individuals they may be nice to their slaves, benevolent, friendly, nice to their children, caring about other people. But in their institutional role they may be monsters, because the institution is monstrous” (Chomsky from The Corporation).

Decades of research has concluded that leaders, executives, and managers shape and mold the culture of their organizations through the institution of these systems and structures and, most importantly, through their own behaviour. In explaining the downfall of Enron, “The Smartest Guys in the Room” nicely showed the similarity between the leadership style of President Jeff Skilling and the highly competitive and aggressive behaviour of their traders. The aggressive culture created by Enron leaders transcended to other parts of the organization. Management research would therefore predict that these traders may not have engaged in similar behaviour in another organization under a different culture.

The influence of leaders on the behaviour of their organizations is undeniable. Although Murdock might not have known about particular scandals, there is no question that he is indirectly responsible for the behaviour of his employees. In fact, I would argue that Murdock’s molding of News Corp’s culture is more destructive than his role in choreographing any individual hacking initiative. To absolve responsibility as a leader in situations like these ignores the fundamentals of Leadership 101. Rupert presumes that organizational culture is irrelevant and that individuals behave through their own devices. Large organizations are complex and leaders of these organizations accept a risk and responsibility of the actions of the organization. Otherwise, they do not belong in these positions.

Photo taken from greatpost.info reproduced through Creative Commons

Canada's Oil Sands and the Survival of Humanity

In light of ongoing US debate about whether to go ahead with the Keystone XL oil pipeline that would connect Alberta to the southern states, a number of articles have emerged flagging the climactic consequences of extracting oil from the tar sands. While these assertions are not at all new, recent articles have stressed warnings put forward by James Hansen, which suggest that if all the oil were to be extracted tomorrow, CO2 emissions would increase from 390 parts per million today to 600 parts per million, well above the scientifically recommended 350 parts per million.

600 parts per million is an amount equivalent to a time millions of years ago when life on Earth nearly died. Several people are therefore positioning Canada’s decision to exploit this resource as the defining moment that will determine whether humanity curbed its effect on the climate or whether, as Stern worries, it is "essentially game over".

In a recent post, I argued that Canada's enthusiastic extraction of oil is ultimately a signal of our country's unsustainability. But lately, authors are extending the consequences of Canada’s decision to the survival of the human species.

Unfortunately the people of Canada, while seemingly concerned about these sorts of issues, are not at all eager to initiate pressure on their governments to stop this infernal machine. As I’ve written before, Canada’s culture fundamentally lacks the leadership required to initiate social change. This lack of leadership is particularly pervasive in our government but it is also evident in Canadian citizens. I asked a Calgarian the other day about her thoughts on the climate change impacts of oil sands extraction and her answer was, “but that’s where the money is right now”.

The climate change story is getting oil; so old that while people know it's a problem, serious action to curb our impact has taken a back seat. Nowhere is this more obvious than in Alberta where many (not all) people are raking in thousands at the expense of future generations. Keeping our heads in the "oil" sand is not only going to compromise future Canadian generations but, as Stern notes, the future of humanity. We have the power as Canadians to show leadership. The question is: will we exercise that power and re-brand our position in the world as thought leaders in curbing climate change? I sure hope so!

Barrick Gold's Failure to Engage Local Communities

Barrick Gold has interestingly managed to escape relatively unscathed in the mainstream media thus far for its complicity in the massacre that is unraveling in its Tanzanian operations. Although several people have died and dozens have been injured and/or wrongfully imprisoned, the media seems to be quite silent in covering the story. Those who have paint the local community trespassers as “invaders” implicitly sympathizing with the corporation’s perceived innocence, quoting the apparently shocked executives as saying phrases like “highly disturbed”, “deeply distressed”, and “regret the loss of life”.

Barrick’s response thus far has been textbook PR demonstrating remorse for the events that have unfolded and deferring all investigations to the supposed independent local police force. But more interesting is the discrepancy between Barrick’s account of the events and information emerging on the ground. One Barrick executive said, “North Mara regularly faces illegal intruders who are armed and aggressive, and many are linked to organize crime”. But Mobhare Matinyl, writing for The Citizen in Tanzania, asked how it was possible for 1500 people to “meet, plan and carry out such an operation without the authorities noticing something unusual”. Most striking perhaps is Canadian journalist Geoffrey York’s correspondence in Africa where he interviewed a number of these supposed “invaders”. He found compelling evidence suggesting that the police and Barrick’s security forces were out of line in their attacks on the people uncovering a rather pervasive discrepancy between what Barrick is saying in terms of citizen attack on the police and what witnesses and the police themselves are saying, including the regional police commander who said that the “seven injuries among the police were all caused by stones”.

But clouded behind Barrick’s PR rhetoric and the details on the ground is the fact that what is happening in Tanzania is a symptom of a greater systemic problem that Barrick has chosen to ignore for some time. First, it’s important to consider how Barrick’s western ideology influences their judgment on how to operate in an environment like this. Based on what we teach in business and economics textbooks, Barrick appears to be the innocent victim in all of this. They are considered by many to be a company going about its business of extracting gold for export. It’s not their problem that the surrounding communities are living in extreme poverty and that public services are virtually non-existent. They are not breaking any laws and they have full approval from the Tanzanian government to extract the gold. They pay royalties and taxes that are meant to be filtered down to the local communities. It’s not their problem that the government isn’t doing their job to pass on these royalties or is corrupt. On top of all this, Barrick has an impressive CSR program that contributes resources for schools, hospitals and infrastructure…something that is beyond the law. So this is a problem that should be addressed by the Tanzanian government and local authorities so that companies like Barrick are encouraged to invest in these regions on an ongoing basis. (See Wente's column for this very misguided and outdated perspective)

Although this discourse continues to be plastered in business schools, it is becoming quickly outdated especially in the global south . Since the 1990s, we’ve seen example after example of intense foreign direct investment and supposed economic growth having little, no, or an exacerbating effect on social inequity. In fact, there are countless examples of companies operating under this philosophy and facing huge financial backlash as a result. Shell’s infamous Niger Delta debacle is very similar to Barrick’s reaction here where they are relying on existing institutional infrastructure to solve the problem. This is their first mistake. Companies operating in this region should not be under the false impression that there is a reliable institutional infrastructure to which to defer these issues. By institutional infrastructure, I’m referring to a reliable and objective police force whose priority is for the long-term welfare of local communities, a proper legal system with due process that addresses community issues and a democratic system that ensures those in power are accountable to the citizens who put them there. Deferring to the police force may be appropriate in the West but in many locations in this part of the world such a strategy is akin to handing the investigation over to the mob. And who can blame the police force for being corrupt when they too see millions of dollars leaving their countryside in the form of gold while they are making pennies a day.

But beyond this incident is the fact that a weak institutional environment implies substantial voids in public service for surrounding communities. By public services, I mean access to health care, education, water, proper infrastructure and, more importantly, opportunity for capacity building, entrepreneurship and grassroots economic growth. Combined with the export of rich natural resources like gold that sell for an amount that local villagers earn in three years (USD $1600), it’s no wonder why revolt ensues. This places companies in a very unfamiliar position where they must engage in political activity to fill voids in public services and to help build local governance structures to deal with poverty issues. While Barrick has been quite active in the corporate social responsibility arena by building schools and hospitals, they chose not to engage in a more systematic, long-term community building strategy that would ultimately prevent these sorts of instances from taking place (see this article for a description of the difference). In my view, the privilege of operating in this region along with the benefit of extracting rich natural resources at low cost means that companies must get involved politically to prevent what Hilary Clinton calls New Colonialism. This is not a nice thing to do but a must do!

For too long companies have been at odds with their local communities, keeping roles separated as they presume government agreement parallels local community acceptance rather than looking for opportunities to collaborate locally. A couple hundred kilometers north of the North Mara mine is a small village called Magadi in Kenya. Tata Chemicals Magadi (previously called Magadi Soda Ash) operates a large soda ash plant surrounded by 30,000 Masai who, after a massive drought in the 1990s, imposed similar pressure on the company as we’re seeing on Barrick today – albeit without the presence of gold. The company underwent a 5-year process of building close relations with the surrounding community and instituting a platform through which multiple stakeholders (senior chiefs, elected officials, NGOs, company representatives, community-based organizations) work together to address public service issues with the ultimate objective to reduce poverty through a self-sustained and informed community governance system. In effect, the company helped create a local governing body that encompassed all actors in the region emulating the very principles of sustainability – inclusion, interconnectedness, and equity.

But most companies like Barrick resort to exclusive and disconnected approaches to helping communities resulting in power imbalances, dependency inequality, corruption, and an unsustainable community situation. Building schools and hospitals and then touting on your website all that you’ve spent and built may address public service gaps in the short-term but doesn’t address the need for community capacity, integrity, and dignity that fuels grassroots economic development. What is happening in Tanzania is very sad but it is not inevitable. For-profit companies have a choice on how they deal with highly complex situations such as the extraction of a rich substance from an impoverished region. The easy way is to throw money at high-profile initiatives to create the impression that you’re a good company not there to merely take resources and to leave the rest to government. The hard way is to challenge corrupt governments and to build relationships, local capacity and local governance systems involving multiple stakeholders making decisions collaboratively for the long-term welfare of the community. Only then will companies begin to understand what sustainability means.

Photo acquired from Amnesty International reproduced under Creative Commons

Tim Horton's Drive-Thru Coffee Brought to You by Coca-Cola©

Last year I found myself sitting in a Tim Horton’s drive-thru in Gravenhurst Ontario; a town of about 11,000 people located 100 miles north of Toronto, Canada. Not one who is privy to these sorts of experiences, I was somewhat in awe by two very interesting characteristics of this drive-thru. First, as I’m figuring out where the line of a dozen or so vehicles ends, I notice a second adjacent lane that is meant to absorb over-flow traffic so that the lineup doesn’t extend into the main street. Similar to the ending of a passing lane, vehicles are expected to merge into one lane as they approach the intercom. Drivers knew to take turns: left lane, right lane, left lane, right lane….it worked seamlessly. Customers either were frequent users of this drive-thru or, unlike me, were smart enough to figure it out.

Second, as you make your way around the corner to place your order, drivers are exposed to a string of advertisements posted on a long cement wall adjacent to the outlet. Printing companies, insurance companies, financial institutions, auto mechanics, you name it, a whole host of companies taking advantage of this apparently lucrative advertising space. As the driver behind me crudely leaned on his horn for me to close my jaw and move forward, I couldn't help but reflect on the absurdity of what I was observing and how this symbolized a number of very disturbing trends in our Western society.

First and perhaps more obviously, the popularity of the drive-thru illuminates our very sedentary lifestyle. If there are any doubters out there that our consumer-oriented society is linked to obesity, one only has to take a look at this fascinating phenomenon. The fact that there is now a market for advertising in what was once an unpopular or at least peripheral means of getting served shows that we live in a society where walking on our own two feet is a nuisance. Shopping complexes are built with stores separated by massive parking lots encouraging consumers to move their vehicle from one store to another. This reminds me of the creative Disney film Wall-E where an envisioned future shows human civilization restricted to a hovering chair that has all the amenities available at the touch of a button. In the same way that we hover to make our orders in the drive-thru would we hover into our houses if the technology were available?

Second, the drive-thru has become so commonplace that the line-ups in the store that originally motivated the drive-thru are all but gone. This means that the time actually saved is marginal. In fact, substantial time is lost when you are vehicle number 15 when no one is in the store. It’s no wonder that when one actually goes in the store, they are neglected because staff are catering to the onslaught of customers making their way through the drive-thru.

Third, and more striking to me, is the fact that there is an apparently lucrative market to offer advertising space along the drive-thru route. There is so much traffic that marketers consider this platform to be an effective means of spending their advertising dollars. This either means that we’ve come to a point where we slice and dice every possible combination of opportunities to bombard people with messages or it means that a majority of Gravenhurst citizens go through this drive-thru. Perhaps it’s a combination of these. Whatever the case, I can’t help but consider this to be a sad state of affairs that very likely extends beyond this sleepy town.

The documentary “The Greatest Movie Every Sold” by Morgan Spurlock (see his Ted talk) nicely illuminated the extreme nature of corporate involvement in society by symbolically funding the entire film with product placements. The film was likely trying to illustrate the potential dangers of living in a society that is wholly owned and funded by corporations. Recent public services such as education and health care, in light of tightening budget constraints, have explored corporate product placements as a means of generating revenue.

Is there anything wrong with the bombardment of advertising in our lives? Is the above Tim Horton's example merely the evolutionary nature of advertising doing its work? Or is this a warning of a potentially perverse future that derides our sense of reality and objectivity at a time when many of us are searching for truth and meaning?

Photos taken by the author

Apple and Google's Passive Approach to Privacy Issues

Privacy concerns associated with Google and Apple’s smartphone locational services made headlines for a brief couple of days last week as the U.S. Judiciary Subcommittee on Privacy subpoenaed the two companies for questioning. Research by O’Reilly Radar found that Apple is collecting location data that is unencrypted and unprotected and storing it in a hidden file on the iPhone. In response, Apple's spokesperson said, “Apple does not track users’ locations…Apple has never done so and has no plans to ever do so”. Later though, the Apple spokesperson said that Apple “may collect, use and share precise location data”. When asked by subcommittee chair Senator Franken whether Apple’s and Google’s locational data are traceable and thus not anonymous, an independent researcher said that both were possible. Both Apple and Google scrambled to respond to a scolding by the US government.

Locational services have been a recent and highly instrumental service for customers using GPS and looking for nearby businesses. They have also been useful for companies aiming to conduct target advertising based on locational information of customers. It is this latter service that has sparked some debate on whether locational services may have some important drawbacks when we consider how much companies would be willing to pay for data breach disclosure. According to ABI Research, the market for location-based services is expected to increase to $4.7 billion by 2015 from $1.6 billion in 2010. Advertisers would be particularly interested in using locational data to develop consumer profiles to which they can target specific advertising. Those companies developing “apps” for the smartphones are motivated to give the apps away for very little so that they can collect and sell personal information on users to advertisers.

Is there anything wrong with this? On the one hand, some may argue that this targeted advertising allows consumers to avoid those messages that don’t appeal to them. Single people wouldn’t be exposed to baby and children advertisements and teenagers wouldn’t be bothered by advertisements targeted to their parents. But another argument is that consumers may slowly detach from reality as they become locked into their own bubbles in an ever-increasing digital world exposed to specific information that is based on their individual behaviour. Some may recall the film Minority Report where advertisements are automatically allocated to particular consumers through the reading of their eye-balls, the content of which is likely based on years of individual activity, behaviours, and routines. On the one hand, the fear is that we would be stuck in a perceptual loop, unable to challenge ourselves to think differently. On the other hand, consumers would be exposed to certain messages that benefit corporate interests rather than their own. Given that society is highly influenced by advertising, wouldn’t it be in the best interests of these advertisers to use the captive audience to tell them what to buy and what to do? Conspiracy theory? I don’t think so. This is merely a systemic outcome of a technology used by an actor (i.e. business) whose primary and often exclusive accountability is to shareholders. If you were in their position with data that allowed you to very effectively influence the purchase decisions of consumers, wouldn’t you be interested in doing so considering that you’re being evaluated on the amount of shareholder wealth you’re creating?

During the supposed “scolding”, Apple and Google were asked whether they felt it was their responsibility to control or at least influence the actions of app developers. Using an analogy, Apple spokesperson said, "We don't go after trucking companies because they happen to handle damaged goods…we go after the manufacturers." This is no different than Nike in the 1990s denying responsibility for the horrific labour conditions of their suppliers in Asia. These manufacturers of Nike products are independent companies outside the control and supposed responsibility of Nike, explained Phil Knight and several other Nike VPs. Given that app developers are not under Apple and Google’s control, they appear to be saying the same thing, this time for the digital supply chain. We all know the lessons Nike learned.

A major difference between what is happening now and what is happening to Nike is that the affected stakeholder is the Western consumer not the developing country worker. Because of that, government is eager to get involved. But as it stands now, “there is no comprehensive federal regulation that enforces data breach disclosure." Consider this gap in regulation against the philosophy among tech companies that "all data is good". Jason Weinstein, deputy assistant attorney general at the Department of Justice is bang on when he said that the proliferation of handheld devices is a breeding ground for data theft.

Whose responsibility is it then to deal with this? Is it the market to demand privacy protection? Jessica Rich, deputy director of the Bureau of Consumer Protection at the Federal Trade Commission, said the FTC believes "consumers have no idea about the layers of sharing [data] that goes on behind the scenes." Relying on government to build regulation as a response is time consuming and is highly dependent on the identification of the issue, which, in this case, happened somewhat by chance. What happens for those issues that are left unidentified or for those issues that are identified but take months, sometimes years, to be addressed? What happens until then?

As I regularly explain to my business students, managers need to make a decision about whether they will act passively in response to consumer demands and government regulation, or whether they will incorporate ethical criteria in their decisions proactively. Clearly, Google and Apple are blinded by the economic opportunities associated with locational services and do not have the mental models to consider non-economic factors such as breach of privacy until they demonstrate a direct and observable impact on their bottom line, which is essentially what happened last week. Will companies ever learn by being proactive or will they consistently go through the very reactive exercise of figuring out through negative media exposure what other social and ecological issues are inextricably tied to financial performance?

Photo taken from politics.co.uk reproduced under Creative Commons

Chipotle Challenges Conventional Fast-Food

With a philosophy of “Food with Integrity”, Steve Ells, the founder and chairman of fast-food chain Chipotle Mexican Grill believes that it’s really important that people know where their food is coming from.

Ells is a certified chef trying to defy the definition of fast food for the many consumers visiting its 870 restaurants. Chipotle buys no pork from factory farms and 100% of the chicken they serve is grown on a vegetarian diet, free-ranged with no antibiotics.

Steve’s main supplier is Joel Salatin, owner of family-owned Polyface Farms, who prides himself on sustainable farming practices that fundamentally challenge the existing food system. More details are available in ABC’s coverage of the story.

The ABC journalists’ skeptical demeanor is representative of those who struggle to understand why any business person would want to run a business that defies conventional wisdom in a well-established industry. Is it not suicide, or at least an oxymoron, to combine the ideology of fast food with sustainability?

The journalist asked about the exorbitant costs expected from the operation of a restaurant like Chipotle as if to suggest that it would be impossible to compete with the likes of McDonald's. But this misses the bigger point. Chipotle’s strategy is a really good example of how sustainability can be a differentiator in the $1 billion dollar fast food industry. For the first time, consumers can align their quest for convenience and relatively low-cost food with health, well-being and environmental sustainability.

The video ends with the journalist asking Ells whether he is more excited about the business model than the consumer. An interesting question indeed. Many of the businesses I’ve had the pleasure of visiting that embed sustainability in this way recognize that the market typically isn’t there waiting for the company to provide what this product or service. Otherwise all the reactionary unsustainable companies would have changed by now. Social entrepreneurs and the visionaries need to play a role in creating, or at least redefining, the market. A huge part of this involves educating the consumer on 1) the dangers socially and ecologically of the existing fast food industry and 2) the opportunity associated with having best of both worlds.

To the question: “Do you think consumers will appreciate it more? Steve responds:

“Well I think they will appreciate it more. Again, I think this is a journey. You can’t just flip a switch and have 100% free ranging chicken and pork…this is something that is going to take time.”

Unlike traditional entrepreneurs who build businesses based on existing market demands and trends, social entrepreneurs adopting sustainability need to play an active role in building a market for their products and services - perhaps an illustration of the difference between those who follow and those who lead.

Logo graphic taken from Chipotle Mexican Grill reproduced under Creative Commons

The Role of Business Schools in the Financial Crisis

“Give it your best shot” says a frustrated and annoyed Dean of Columbia Business School as the interviewer in the Oscar winning documentary “Inside Job” questions him about a potential conflict of interest. The Dean, as Chairman of the Council of Economic Advisers under the Bush Administration, advised the deregulation of the derivatives market while earning hundreds of thousands of dollars as a consultant and director of financial firms that would ultimately benefit financially if the government followed his advice. But the President of the Economics Department at Harvard argues that economics and business academics Laura Tyson, Frederic Mishkin, and Larry Summers are not facing a conflict of interest despite their dual role as key public policy figures and advisers on the one hand and as consultants for hedge funds that rely heavily on derivatives, board members of financial institutions, or authors of financial market reports paid for by the Chamber of Commerce on the other.

The film does a fantastic job in laying out what led to the financial crisis, identifying those responsible, and describing its consequences. One of its broader conclusions is that the financial crisis was caused by the collusion of a small number of elite individuals looking out for their own self-interest – the same self-interest that economists continually boast to be the engine of a just and equitable society. John Cassidy, in his book “How Markets Fail: The Logic of Economic Calamities”, calls this “rational irrationality” where the rational self-interest of an individual – make money – is irrational when considering the broader negative impact on society. The revolving door syndrome is particularly pervasive whereby top executives of investment banks, public policy makers, and academics swap roles as part of an ‘incestual’ soup of elitism. According to the film, these untouchables have railroaded the world economy, have not been penalized for it, and shockingly remain in these powerful positions without any regulation to change behavior.

I was particularly intrigued by the blame placed upon the economics and business faculties of universities and colleges, the discussion of which focuses on the aforementioned conflicts of interest among professors. But the documentary falls a bit short in discussing the underlying ideology inherent in business schools and economics departments that end up as gospel in textbooks and curricula that instill a certain worldview and skill set among future executives. Many argue that the conventional business frameworks students learn in business schools are out of date and flawed in their ability to contribute to overall public welfare, making professors in those schools complicit, if not active agents, in the crisis.

Debate for a fundamental rethink of the field of finance, for instance, is practically non-existent while accounting for non-financial measures is presented anecdotally as some kind of nice to have in accounting textbooks. The marketing discipline tends to focus on execution and technological sophistication at the exclusion of social issues. But the crux of the problem, in my view, originates from my home discipline of strategic management which advises managers to increase power and influence over public opinion and public bodies, to create monopolistic environments, and to influence markets in ways that maximize benefit for the firm. Colleagues of mine, for instance, study and prescribe managerial behavior that proactively influences governmental bodies to put in place regulation that is aligned with the firm’s core competencies. Never mind public interests.

While the economics discipline can be blamed for its over emphasis on economic utilitarianism and the abolishing of government regulation in favor of the free market, the business strategy discipline can be blamed for teaching managers how to disrupt perfect markets for profit gains while at the same time limiting government intervention. Managers are taught to shape and mold their competitive environments in ways that build power over all other stakeholders (customers, suppliers, government, communities, environment, entrepreneurs, and competitors) such as the weakening of consumer protection agencies. They are taught to shape public opinion and market trends, engage in political lobbying to protect these positions, and build their organizations to be too big to fail. To this latter point, investment banks got to a size where the Securities Exchange Commission (SEC) heavily relied on their expertise when deciding whether they should raise leverage restrictions. SEC Commissioner, Roel Campos, was quoted as saying, “These are firms that do most of the derivative activity in the US. We talked with some of them about what their comfort level was”. The SEC Director then said, “The firms actually thought the number was appropriate”. The result is the creation of market imperfections that result in wealth for the firm - specifically its executives - at the expense of wealth for society.

It's important to remember that this behavior isn't a result of some mafia takeover of Wall Street or the devil himself paying a visit to the executives of these firms. These managers are simply pushing the envelope on what they learned at a fundamental level in their business school courses. The Economist nicely flagged the hypocrisy of corporate social responsibility where companies spend money on philanthropy and tout their socially responsible behavior when they work behind the scenes to build industries that make them too big to fail, command premium prices through industry concentration, and ultimately usurp the free market system. So while business schools may tout their attention to CSR and sustainability, it ultimately masks the underlying fundamental ideology of business which is, in fact, to usurp public interests if the opportunity arises.

Charging Bull photo taken from flickr.com reproduced under Creative Commons

No Nuclear? No Coal? Now What?

I had the pleasure of meeting Stanford Professor Mark Jacobson during his visit to Ivey Business School a couple of weeks ago. Mark argues that there is no reason why we can’t power all our energy needs with renewable sources. Ranked in order of most sustainable, he suggests the following:

• Wind
• Concentrated solar power
• Geothermal
• Tidal Power
• Photovoltaic
• Wave Power
• Hydro
• Nuclear – this would drop to the bottom when considering the potential for nuclear fallout which is happening right now.
• Coal using Carbon Capture and Storage (CCS) – carbon capture does not capture the carbon used to transport the coal and extract it out of the ground – which represents a large percentage of where coal related CO2 comes from

In a debate on Ted.com Mark goes up against one of the fathers of the environmental movement, Stewart Brand, who argues for nuclear energy as our solution to climate change. Although Brand puts forward some good arguments, Mark comes back with some impressive statistics that counters many of Brand’s claims. I asked Mark about the growing number of environmentalists and climatologists advocating nuclear power as the best approach to replace coal. He finds it frustrating when these scientists put forth opinions that are not based on their area of expertise. In Brand's argument he says that those who know the most about nuclear are least worried. But then he puts up James Hansen as an example of a person who is not worried about nuclear. Climatologists are not experts in energy and neither are environmentalists. James Hansen is an Earth and Environmental Scientist and Andrew Weaver is a climatologist – both of whom advocate for nuclear – perhaps until recent events in Japan. Listening to some of the experts on nuclear these last few days, I would say they're worried!

With the growing distaste towards nuclear energy, Mark’s assertions are likely to gain popularity. Mark is the first to accurately map out global wind and solar energy creating capacity. He published these findings in the Energy & Environmental Science Journal* where he reports that global wind capacity can generate up to 1700 terawatts of electricity while solar capacity can generate up to 6500 terawatts of electricity. On land, these sources of energy can generate up to 70-170 TW of electricity (excluding Antarctica) and 340 TW respectively. Today’s population demands 12.5 TW of electricity with an estimated 16.9 TW by 2030 – a small percentage next to what is possible.

So what’s the problem?

Mark tells me that wherever he goes to present his work, he receives a typical set of questions from the audience. The first is the issue of availability. How can we assure a stable supply of energy when the wind doesn’t always blow and the sun doesn’t always shine? Mark asserts that the energy solution requires a combination of energy sources that work in unison depending on what energy is available. In a pilot test in California over a two year period, Mark found that based on a stable supply of geothermal energy, available wind and solar energy, and hydro-electricity, the population in the experiment would not have to resort to natural gas sitting in reserve. His experiment ultimately trumps those who would argue that renewable energy is an unreliable source of energy. Mark calls this “load-matching” whereby the source of energy remains flexible so that energy utilities can draw on the source most available at a given point in time. Hydro-electricity is particularly useful as a backup because it allows for quick on and off if and when solar and wind are not available.

What about the ecological footprint and negative health effects of wind turbines? This is another popular question and was the source of resistance to an off-shore wind project in Ontario. In a presentation I attended here at UWO, a medical doctor from Doctors without Borders presented results of a study that showed no significant health effects originating from wind turbines. In fact, compared with coal and the potential fallout from nuclear, wind turbines are essentially benign. Mark too reamed off a number of studies suggesting no health effects. With respect to bird wildlife, he spoke of an interesting study showing that birds are in fact worse off from the indirect effect of coal than any direct effect of turbine blades. Finally, there’s the ecological footprint of the wind turbine itself. James Lovelock, another environmentalist and self-declared energy expert, is a nuclear supporter because of the impact wind turbines have on ecosystem health. But Mark says that this is a myth when you consider the fact that the base of the wind turbine is quite small and that turbines need to be a minimum distance from one another, leaving huge plots of undisturbed land. If we were to power the entire US vehicle fleet on wind energy, we would need 1-3 square kilometers of land for the bases of the turbines (larger once you consider the natural land between the turbine poles)

The final question he typically receives is related to the prohibitive costs and time of construction associated with renewable energy. He is alarmed that the Ontario government’s feed in tariff awarded individuals and organizations $0.11 for each kw of energy generated from wind and $0.41 from solar. He argues that wind should cost between $0.03 and $0.05 per kw hour whereas coal costs between $0.12 and $0.14 once you include health costs ($0.07 to $0.09 if you don’t). What about transmission of wind and solar power? This cost is included in the calculation. Wind and solar are two of the quickest in terms of construction.

Mark then goes so far as to advise what the global energy mix should be based on his findings. He says that wind should power 50% of global energy needs (6-8 TW of electricity), which means that we need 3.8 million wind turbines. Concentrated solar power should represent 20% of our power which would require 49,000 concentrated solar power plants (300 MW per plant). Photovoltaic comes in at 14% with 14,000 solar PV plants at 300 MW each. The rest is geothermal, hydro, tidal and wave power with relatively small proportions of the energy mix.

So what’s going on here? Why aren’t we moving in this direction? In asking him this very question, he says that this is where his work ends. He’s not a social scientist but knows that there are some very powerful players who would be quite upset if we moved away from coal, oil and nuclear energy. It’s estimated that existing energy companies receive 8-10 times in subsidies as renewable energy companies and spend 8-10 times more in political lobbying than their renewable counterparts**. I was saddened to hear a Professor in Anthropology in Japan talking about the attack on democracy as he describes how the interests of a few powerful actors pushed forward nuclear energy policy in the country in the past.

Although Mark’s study is the first of its kind, we’re likely going to see more of the same. This study is perhaps a starting point in refuting those who claim that renewable energy is too unreliable, costly, unproven, and not pragmatic. It may also show that resistance has more to do with protecting a group of elite interests who have a lot to lose from changing the status quo than it does with science or physics.

* Source: Jacobson (2009). Review of solutions to global warming, air pollution and energy security. Energy and Environmental Science. 2: 148-171
**Nick Parker, CEO of CleanTech. Presentation at the Ivey School of Business: Steering the Storm. March 9th, 2011.

Nuclear plant photo taken from Renewable Power News reproduced under Creative Commons
Wind turbine photo taken from Erie Shores Wind Farm Reproduced under Creative Commons

Air Canada Plays Hockey

Yesterday, Air Canada sent letters to all 6 Canadian NHL teams expressing concern about the recent number of on-ice incidents that have made headlines in the hockey world. The letters came the day after Boston Bruins star Zdeno Chera hit a Montreal Canadiens player, leaving him with a fractured vertebrae and a severe concussion. Air Canada was quoted as saying:

“While we support countless sports, arts and community events, we are having difficulty rationalizing our sponsorship of hockey unless the NHL takes responsibility to protect both the players and the integrity of the game.”

As owner of the naming rights to Toronto’s Air Canada Center and major corporate sponsor of the 6 Canadian NHL teams, Montreal-based Air Canada is clearly exercising their power to influence the NHL.

I find this story fascinating for a number of reasons:

First, part of the explanation for Air Canada’s move could be attributed to an increasing pressure on companies to extend their responsibility beyond economic and legal obligations. As Denis Vandal, Air Canada’s director of marketing and communications said:

“From a corporate social responsibility standpoint, it is becoming increasingly difficult to associate our brand with sports events which could lead to serious and irresponsible accidents; action must be taken by the NHL before we are encountered with a fatality.”

Many companies, in an attempt to save face in the public’s eye, have exercised their power as sponsors to proactively influence their partners to change behavior.

Second, and perhaps more skeptically, we should be careful to prematurely label Air Canada as a valiant hero before thinking about some of the absurdities of this move. Notice in the first quotation that Air Canada thinks they are positioned to make judgments on what is best for the “players and integrity of the game”. Has Air Canada recently announced a diversification strategy into the world of professional sports? I’m not sure if there are many capabilities used in operating an airline that could be transferred to informing the rules of a professional sport.

Third, this is another example of a company getting involved in public affairs that have nothing to do with their core business. Like Google’s efforts to eliminate censorship in China or Visa’s attempts to weaken WikiLeaks by cutting off their funding supply, Air Canada is attempting to use its powerful position to influence NHL rules. Whether or not Air Canada is correct in their stance is irrelevant next to the fact that business’ dominating role in society is allowing them to get involved in the public domain at an unprecedented level, without any shred of expertise, and, most importantly, guided by a uni-dimensional motivation of profitability, which we know doesn’t have the best track record for aligning with society’s interests.

Fourth, I question Air Canada’s motives. While it is the responsibility of companies to manage future risk, I find it very hard to believe that Air Canada’s reputation could be damaged in a society where hockey defines its culture. Does the location of Air Canada’s headquarters - Montreal - mean anything here (home team of the victim of yesterday’s incident)? Ironically, while Air Canada is playing the CSR card in explaining their actions, the fact that they seem to be responding rashly over an incident that impacted their home team smells of conflict of interest and irresponsibility.

Finally, I’ll end with a criticism to those who would argue that Air Canada should keep its nose out of these sorts of things. In the early 1980s, the organizing committee for the Olympic Games in Los Angeles made an unprecedented move when they funded part of the 1984 Games with corporate sponsorship. 20 years later, the Sydney organizing committee solicited $1 Billion in sponsorship to fund 50% of the budget. Over these 2 decades, we’ve seen an unprecedented level of corporate funding for a range of individuals, organizations, and events both within and outside the sporting industry. Public educational institutions in the US are turning to corporations to reduce budget deficits through marketing in schools and funding of different programs.

How can we expect to benefit from this lucrative pot of money without sustaining some consequences. If we want the luxury of fat corporate funds to run these events, teams, organizations and venues, then we have to be prepared to accept their active role…experts or not. Perhaps the bigger question is not whether Air Canada has a right or should be able to influence the NHL but instead whether we made decisions that permitted corporate sponsorship in haste without thinking through how this trend would subsequently lead to increased corporate involvement in activities held sacred by public interests.

Photo taken from Disabled Travelers reproduced under Creative Commons

Is Canada Sustainable?

Some of you may have read recently that Canada is now a Petro state. Barrie McKenna writes, “Canada’s fortunes – and its currency – are now more closely tethered to oil than any other industry, including autos, forest products or agriculture”. Of course, a large part of what explains this statistic is Alberta’s relentless pursuit of bitumen, the so-called oil sands, that is expected to produce 2.36 million barrels a day by 2013-2014.

Should Canadian citizens feel a sense of shame when their wealth is inextricably tied to an unsustainable, dirty, and energy-intensive natural resource (cast your vote to the right)? To incite debate, I put forward 5 provocative questions for why this moment in Canadian history might disturb its citizens:

1. Are Canadians Greedy? Is there something wrong with the fact that we as Canadians grow richer as a country by feeding the growing international demand of a substance that is undeniably linked to climate change, ecological devastation and indigenous community despair? Alberta’s recent budget projections are pegged on the assumption that oil sands production will increase 35-40% over the next three years. Compare this to the meager increase in environmental funding of 1.4% over the same time period. As more money flows into our pockets, we compromise the livelihoods of existing and future generations.

2. Are Canadians Unsustainable? Our success as a country, inappropriately measured by Gross Domestic Product (GDP), is predicated on the extraction of a substance that is inherently unsustainable. Fossil fuels take millions of years to develop as the Earth naturally breaks down dead organisms. Because we are extracting this substance at an astronomically higher rate than it can be reproduced, we’ve pinned our livelihood on adding value to a substance that will eventually run out. Then what? Like a vulture, will we move from one natural resource to another until we’ve exhausted them all?

3. Are Canadians Short-Term Oriented? Other wealthy countries heavily reliant on fossil fuels have massive petroleum funds like Norway’s $400 billion pot put aside for a future without oil exports. Not only that, Norway’s fund is the second largest fund in the world affording them immense power to encourage more sustainable business practices. In comparison, Alberta’s “rainy day” fund is at a meager $17 billion. But recently, Alberta announced that it is using this fund to reduce the deficit, leaving next to nothing for future generations to deal with the onslaught of issues associate with climate change and environmental degradation. The Finance Minister said: “the province’s sustainability fund was created for the purpose of a recession”. The province's energy minister, when asked about Norway's fund, said that Alberta has nothing to learn from Norway. Ironically, a recently released report commissioned by the Alberta government recommended that the province adopt a Norway-type fund. This means stop using resource-revenue for today's revenue fund and to instead increase provincial sales tax and/or increase personal and corporate taxes. As Jeffrey Simpson noted, these recommendations were likely "dead on arrival" as Albertans are quite content with the status quo. Not only is this short-sighted environmentally, but it leaves little capacity for Alberta to diversify economically to other industries when international regulation imposes restrictions on oil sands imports. So social and ecological consequences aside, we are not even considering the economic welfare of future generations when we consider the finite substance we are extracting.

4. Is Canada’s Reputation Tarnished Internationally? Is it not embarrassing that we are becoming known as a petro state in the international community? Because the European Union has instructed its fuel suppliers to reduce the carbon footprint of fuels by 6 percent over the next decade, they are looking to block imports of Canada’s tar sands. In response, the Canadian government is threatening to scrap a trade deal with the EU and is lobbying heavily to be excluded from the EU fuel supply restriction.

There was a time where the international community considered Canadian culture as one that embraced the beauty of the outdoors, treasured the natural landscape, and stood up for human rights between and across generations. The massive plots of dead land in and around Fort McMurray now visible from outer space hardly expresses our respect for nature and future generations. We are becoming known as the source for dirty oil. Combined with our fundamental lack of political leadership in Copenhagen and Mexico, our reputation has undergone a complete reversal from the early 1990s.

5. Are Canadians De-evolving Economically? Economies usually start with agriculture then move to the extraction of natural resources, then manufacturing, then service. Germany, Japan, and the US garner tremendous economic advantage from their intellectual prowess in advanced technologies, not their brute power and force in mining and extraction. Poor countries lacking the educational infrastructure to develop and retain good talent need to rely on their natural resources and then through time evolve to more advanced forms of economic development. I do not mean to insult the mining and oil and gas industries because I recognize the technological innovation they have achieved in extracting seemingly inaccessible natural resources. However, we chose to dedicate our intellectual capabilities to these efforts rather than supporting the development of capabilities in more sustainable sources of energy or other creatively destructive technologies that position Canada as a premier hub for technological advancement and its role in a sustainable society.

I’m sure there are many out there wondering about the benefits associated with oil sands development. The process is labor intensive creating up to 540,000 jobs per year by 2020 and exchanging $170 billion worth of goods and services from other provinces. Isn’t that fantastic for our economy? Isn’t oil sands development, as the conservative and liberal governments would argue, necessary for jobs and the economic welfare of our nation? On top of that, isn’t it our responsibility to make use of the natural resources that we have inherited as the second largest land-based country in the world?

These are indeed important arguments. Yet they suffer from three misguided and often overlooked assumptions. First, the role of oil as an anchor of our economy is by no means an accident or a result of a seemingly uncontrollable set of circumstances. Government policies put in place over lengthy periods of time have fundamental impacts on the subsequent economic behavior of a country. At the time of a chronically weak Canadian dollar we chose to focus on extractive industries to attract foreign markets. Rather than planning for the long-term by instituting policies that would build intellectual capacity in non-energy intensive industries, we took advantage of the 20% discount afforded to the international community through our weak dollar and invested heavily into commodity-based industries. Any politician, business person or economist who claims that we are uncontrollably dependent on our natural resources for the sake of our economy ignores the series of short-term decisions that have and continue to lock us into this scenario.

Second, there are many different ways to achieve economic development, some easier, some harder. There is no doubt that the relatively simple way to develop economically in a country like Canada is to extract natural resources that are so readily available under our feet. Lumber, potash, oil, gold, nickel, copper, you name it. Why take the extra time to endure the physical and intellectual effort to cook a healthy and tasty meal when you can eat ready-to-serve processed food caked with sugar, salt and fat right out of the freezer? Why bother creating new industries, the value of which are based on our intellectual prowess when we can sell commodities and manufacture vehicles that require no need for creative destruction and keep our comparative advantage pinned on readily available resources (e.g. nature and labor)? Why reinvent the wheel when we can simply use sources of economic development already proven around the world?

Finally, and perhaps most importantly, "We don't inherit the earth from our ancestors, we borrow it from our children". What will be the state of the earth when we return it to future generations?

This ultimately comes down to a question of leadership. My fundamental beef with my country is its lack of leadership at the political level, at the business level, and at the individual level. Although there are minor exceptions, the bottom line is that we are no longer known as a country of leadership. We base our growth and development on practices that are based on the status-quo, that don’t question taken-for granted behaviors. Practices that create jobs easily, feed mouths more easily, make money more easily, and grow our GDP more easily all for short-term gain at the expense of future generations. When we think of the most memorable leaders of our past, we think of those who have inspired change in others, those who have led groups of people in new directions that challenge fundamental assumptions in the face of great uncertainty. Canada unfortunately lacks this leadership at a pivotal moment in time when our future requires leaders who inspire such change.


Canadian Flag of oil picture taken from Adrian Wyld of the THE CANADIAN PRESS Reproduced under Creative Commons
Greed photo taken Word Press Reproduced under Creative Commons
Oil Sands photo taken from Google Earth Reproduced under Creative Commons
MLK photo taken from stifu.com reproduced under Creative Commons