In it together

New forms of financing for investment can help us transition to a sustainable economy, if we first get clear about who benefits, says Mike Tuffrey.

Every so often there’s a new kid on the block. Right now it’s issuing green bonds.

Last month, Sainsbury’s borrowed £200 million to invest in environmental, sustainability and water-related projects. In March, Unilever issued a £250 million bond, lining up a pipeline of projects for investment in water, waste and GHG reduction. Back in January, a consortium of bulge bracket investment banks devised a set of voluntary guidelines – the Green Bond Principles – to help get this new type of financial instrument onto a sound footing.

The market is estimated to grow to around $50 billion by the end of this year and big name players like BlackRock and Barclays are launching investment portfolios and indexes. There’s talk of motor manufacturers and even oil companies joining the rush, to finance activities such as zero-emission cars and carbon capture and storage schemes.  Stand by for accusations of ‘green-washing’ as old economy companies highlight aspects of their operations that are somewhat less environmentally damaging, while continuing to trash the planet in their mainstream.

In fairness, with the market still in its infancy stage, there’s bound to be a range of models. Some will simply promise how the proceeds are used, while in others the lender has direct exposure to the success or otherwise of those projects for their interest payments and eventual capital redemption. At one end it’s just smart fundraising in a crowded and competitive bonds market place. The other end marks a real transition to a ‘green economy’.

That distinction parallels a wider challenge that faces the whole corporate responsibility and sustainability movement – the difference between reducing harm and shifting to an alternative economic model that’s viable for decades to come. The former is of course welcome but not enough, the latter much harder but the ultimate goal. Against that test, how many of the burgeoning number of sustainability plans (a previous new kid on the block) would truly meet the mark?

And that leads me to ask: do we need a gold standard in green bonds – a category of financing moves to a green economy, with social as well as environmental benefits? In other words, what Fritz Schumacher called “economics as if people mattered”?

Real transparency about tax payments at a country-by-country level just took a big step forward, says Mike Tuffrey.

This week Barclays made an announcement that brought a smile to my face… and here’s why.

Regular readers will recall I’ve been banging on about tax as a business responsibility issue for several years.  To begin with the companies I was advising argued they have a fiduciary duty to minimise their tax payments and so maximise shareholder value. I countered by pointing out that in practice most don’t exploit every available loophole. Sometimes they adopt a principled approach such as maintaining the corporate HQ in a high tax jurisdiction for historic reasons. With colleagues we developed the ‘tax map’ to help companies develop a more coherent position, based on some guiding principles and practical policies.

At the same time politicians and campaigning NGOs were stepping up the pressure. Combined with the economic downturn and fiscal squeeze, the question of ‘who pays what?’ became a toxic issue. Hapless executives were called before legislatures and ridiculed when they could not answer simple enquiries about the amounts of tax paid, percentage rates and use of tax havens –  famously dubbed ‘sunny places for shady people’ by Vince Cable.

Leading companies – including SABMiller, Vodafone, Unilever and Centrica to name only a few – set about developing a principled position and published policies and procedures. Many more started talking about their economic impact. But the one thing most would not do was publish data about tax payments at a country level…. too complex, too confusing, not relevant, open to misinterpretation, or just not practical, companies variously argued. The fact that some did manage it – Anglo American springs to mind – seemed to cut no ice.

Then Vodafone – who had become a particular target for campaigners – broke ranks last year and issued data on 25 countries. And now Barclays – a hugely more complex business – has set a new standard for corporate disclosure, with a three page spreadsheet containing data on revenues, employees, taxes and subsidies plus a business description about their 30 main jurisdictions and a summary of the rest. Hence the smile on my face. It can be done after all.

Of course the companies were right when they told me this would provide grist to the campaigners’ mills. Tax Research UK has jumped straight in drawing critical conclusionsabout Barclays. Action Aid aren’t letting up on their attacks either.

But that’s the whole point. Tax is complex. There are few black and white answers. For example, Barclays’ effective global tax rate is now higher than the UK headline rate. Indeed the UK is positioning itself as a low tax jurisdiction (a haven by any other name?) – a stance the Labour opposition has just pledged to maintain.

The way forward on tax as a responsibility issue is to set some principles, publish the data and get stuck into the debate. Enjoy.

The tortuous process of moving from the current Millennium Development Goals (MDGs) to a new set of Sustainable Development Goals reached an important milestone in June.

In 2012 the UN Conference on Sustainable Development, dubbed Rio+20, agreed a detailed process to devise the post 2015 development agenda. This included an open working group of 30 countries, which has been deliberating without (so far) getting locked into squabbling geographical blocks –the G77 versus the EU and the like. They have just published a ‘zero draft’ of their thinking.

No doubt this will change before it is finalised in July and sent up for further deliberation and decision by the UN in time for next year. But already it is interesting to see many of the issues that corporate sustainability mangers grapple with are being referenced – such as inclusive growth, small-scale enterprises, food waste at retail and consumer levels, international tax avoidance, and even capital accounting methods that incorporate social, human and environmental aspects.

Of course the basic approach is still structured around big world goals, like ending poverty and hunger and promoting gender equality. Nonetheless, it’s possible to see how the role of big corporations could be hard-wired in, unlike the MDGs. One of the 17 proposed new goals is even headed “promoting sustainable consumption and production patterns”.

This need for greater global agreement including business was underscored for me by the continuing spat over palm oil. As we finalised this month’s CCBriefing round-up, the Roundtable on Sustainable Palm oil was meeting in London for its European roundtable.

Everyone agreed on the long term goal of full sustainability and that some progress is being made. But I was still saddened to see the Indonesian government trading insults with Greenpeace about neo-colonialism, with walk-on parts by the Malaysian smallholders, global trader Cargill and a lone consumer voice in proxy from Marks & Spencer. More heat than light was generated.

Currently only about 16% of global palm oil production is certified as sustainable, and consumer and political pressure is mounting for traceability down the supply chain – as this month’s comment from Mark Robertson of Sedex highlights. With tropical deforestation responsible for about 18% of greenhouse gas emissions, according to the IPCC, this stuff matters.

Sadly the facts on the ground are changing, while the UN diplomats continue to debate.

Talking to a sceptical journalist about companies’ ability to make a real difference on the environment

Talk to some people and you’d think that innovation is the answer to pretty well all the environmental constraints we face. Put “eco innovation” into a search engine and Google offers up 27 million references while Bing provides a scarcely more manageable 9 million. Rapidly you are lost in a world of solar panels, hybrid vehicles, nano technologies, and lots of ‘re’ words – reuse, recycle, repurpose and the like.

Last week a sceptical reporter from the Guardian asked me whether all this buzz doesn’t just amount to gradual incrementalism – a little by little approach that doesn’t add up to the step-change needed. In fact, can individual employees really make a difference, however committed they are to finding micro-innovations in product development, production and delivery? Good questions!

My answer came in three parts. First, there’s no problem with changes that yield cost savings. That goes with the grain of corporate systems. My top-of-mind example came from Unilever’s Sustainable Living update report, published the day before: half-sized compressed deodorant aerosol sprays use 25% less aluminium and have 35% lower road usage in transportation of product to market.  Replicate that across a whole portfolio and you do get a big difference, both to the environment and to the bottom line.

However you need more than cost savings to drive large scale change – you need a BHAG, or rather a set of Big Hairy Audacious Goals that people initially say can’t be done. At Corporate Citizenship, we’ve done a study of the phenomenon of corporate sustainability plans Steps to Sustainable Success.  One recent BHAG that caught my eye is Coca Cola’s pledge that “the carbon footprint of the drink in your hand will be one third less” by 2020.

Despite this optimism, my third point accepted that journalist’s scepticism. Ultimately companies can only do gradualism; they operate within the rules of the game, they don’t set them. Short term competitive pressures do act as a constraint, whether from customers on price or investors on returns.

But that means companies also have a responsibility to advocate – openly and honestly – for game changing shifts in regulation or legislation. And that’s the logic behind Unilever’s new pledge to focus on “fundamental change to entire systems, not just incremental improvements” in tackling the big sustainability challenges.

Companies are still not clear enough about how to meet external expectations

Spending time this week with two very different groups of professionals set me thinking again about where companies should go to get the inspiration, guidance and clear direction on building the responsible and sustainable businesses we need to thrive on this small planet.

The first group was of managers from small firms who are using the quality excellence model to become better businesses, in all respects. The part that is proving hardest for them is the ‘society results’ module, requiring both performance and perception measures on their impacts covering local economy, community, values, ethics and the like.

My job was to introduce the many different external standards, indexes and ratings schemes that purport to answer this question – from the well-known ones like DJSI and FTSE4Good, to specialist models such as CDP and our own LBG, and taking in along the way a snap shot of the 250 or more that we recently mapped.

The unfortunate conclusion was that these models can provide useful tools but they can’t answer the question – what should we do? Each has its own set of assumptions and underlying value judgements about what matters. Without care, they can become the tail that wags your dog.

The second group could not be more different – high powered professionals from the big banks and international investment houses. Here the question was to take stock of the five years since the global financial meltdown and ask – what have we learned? Are expectations of customers, regulators and wider society now clear? Above all, how should we now be doing things differently?

What became apparent to me from their comments is that – sadly – we are not much clearer. To lend more (to first time buyers and small firms) or less (as we are still massively over-indebted)? To prioritise employees (and their bonuses?), customers (but think misselling) or shareholders (including you and me, thanks to the semi-nationalised RBS and Lloyds Banking Group, as well as all of our pension funds)? There may now be greater clarity about what the financial sector should not be doing, but there is rather less in terms of expectations about the positive impact they can have.

This need for external guidance is the reason I’m so keen on the move underway globally to devise a set of Sustainable Development Goals (SDGs) to replace the current Millennium Development Goals, which are due to expire next year. This hugely tortuous process holds the prize of a clear set of aspirations, underpinned by measurable and time-limited targets and endorsed by all national governments.

Of course that will still require inspirational individuals to make it happen: to be the change-makers and occasional troublemakers inside our big companies, small firms and micro start-ups. So I give a warm welcome to a new book just out (which we’ll be reviewing shortly) about that demanding role – Social Intrapreneurism and All That Jazz: How Business Innovators are Helping to Build a More Sustainable World by David Grayson, Melody McLaren and Heiko Spitzeck.

Change from the inside out, or the outside in? Whatever my hopes for the SDG process, we can be sure that the creative tension between these will continue to drive change for many more years to come.

With the UK barely a year away from a general election, signs are growing of a challenge to conventional thinking

James Carville’s aphorism from the 1992 Clinton presidential campaign has come to define politics on both sides of the Atlantic. The global economic slowdown and the era of austerity in public finances have redoubled the sense that the voters only care about ‘pocket-book’ issues. Yet new thinking is challenging that convention, and from some surprising sources.

In early February a group of UK conservatives, led by Tory MP, Laura Sandys, published the results of a 2020C policy commission called Sweating Our Assets. This argues that we focus too much on growth in demand, measured by rising GDP, and on trying to grow labour productivity, which means using less labour for the same or more output. Instead, 21^st century economic policy should be about resource efficiency, creating more value with fewer resources and, crucially, less waste – which they have dubbed ‘profitability’.

Among their eye-catching proposals is the suggestion to shift responsibility in government for waste from the environment ministry, Defra, to the economics ministry, BIS. That sounds like a modern day reworking of the famous Yorkshire saying – where there’s muck, there’s brass.

Hot on their heels came another attempt to position conservatives as conservationists. The end of February saw the publication of a set of essays Responsibility & Resilience: What the Environment means to Conservatives. Among the 14 international contributors are former New York mayor, Michael Bloomberg, former World Bank chairman, James Wolfensohn, and former California governor Arnold Schwarzenegger. Interestingly, the business contribution came from Europe: a trio of knights – Stuart Rose, Ian Cheshire and James Dyson – together with the ubiquitous Paul Polman.

My own contribution to this growing debate comes in a few weeks’ time, when I launch with Liberal Democrat colleagues an update to our Green Book thinking. Last year we published a book challenging liberals in politics to put ‘future-proofing’ the economy at the heart of their manifesto making. At a debate in Westminster in March, Juliet Davenport, chief executive of Good Energy and David Nussbaum, chief executive of WWF-UK, will respond to our latest proposals.

This debate is starting to get interesting. The question is: are the voters listening?

With pundits busy predicting what the year ahead holds, I review their forecasts and conclude that it’s down to individuals to make the difference

The start of a new year can be relied on to herald two things. First, a desire to set some personal resolutions – drink less, exercise more and suchlike – which (in my case at least) rarely survive the end of January.

The second may last longer and be more productive: pundits get out their crystal balls and contemplate what the year ahead will bring.

Three caught my eye during January. From Asia comes a warning that labour disputes, natural disasters and supply chain risks will grow. From the USA, a more optimistic scenario describes employees coming on board through gamification and micro volunteerism, adaptation for climate change accelerating, and consumers expecting greater transparency on labelling and ingredients.  Meanwhile, from the UK comes a greener picture, with consumers becoming more savvy, environmental impacts like severe weather and air pollution changing attitudes, and a growing consensus about green growth being the future.

In similar vein, two of our guest contributors this month used their new year break to set out their hopes and expectations for 2014 – Mark Wakefield from IBM and Peter Gilheany from Forster Communications. A common theme between them and our other contributors (my colleagues, Thomas Milburn and Peter Truesdale) is the importance of individuals – as employees and consumers – in determining how companies behave.

But what about individuals as voters? What does the year ahead hold for governments? Some of the key moments are in the diary already. In Europe, elections in May mean most big decisions are on hold until a new Commission is in place. Nonetheless I’m expecting that proposals for enhanced company reporting on social and environment impacts will move forward, albeit watered down to limit the numbers required to comply.

On the international stage, the UN General Assembly will receive a report in September from the working group on a new set of Sustainable Development Goals to replace the Millennium Development Goals which expire in 2015. This will give us a better idea about the extent of governmental support for the initiative and whether they really do want companies to make a full contribution. I’m hopeful the SDGs will be a lot better than the MDGs from a corporate perspective.

Less predictable is progress on climate change. In theory, a draft text of a new universal climate agreement will be on the table at COP20, the next UN Climate change conference due to be held in Peru in December, as the last step before global agreement in Paris in 2015. Don’t hold your breath, given the frustrations at Warsaw’s COP19 last November.

So much for crystal balls. As a wit once remarked, “Prediction is very difficult, especially if it’s about the future.” I prefer the thought that the best way to predict the future is to help make it. Optimist or pessimist, that comes back to us as individuals – as consumers, employees, voters, and ultimately as citizens – to make 2014 what we will.

Corporate responsibility practitioners need to get out more and start talking about the issues ordinary people care about.

What are people talking about on a Friday night down at the local or when out clubbing later? What are the top-selling tabloids writing about? What’s trending on Twitter?

In among all the celebrity gossip, you do find issues there that touch on corporate responsibility: bankers and their bonuses, sometimes lending too much (to home buyers) or sometimes too little (to small businesses); immigrants one day taking ‘our’ jobs or the next stealing our benefits; and why ‘green crap’ is pushing up fuel bills and the cost of living.

Yet if you sit through any of the key note speeches at the growing number of sustainability conferences, as I recently had to, you’ll hear a different set of issues – or rather a different angle using a very different language: human rights and carbon dioxide emissions, materiality matrixes, natural capital valuation, and an alphabet soup of acronyms – CCS, GRI, DJSI and the like.  Small wonder, then, that we have so much difficulty enlisting consumers’ interest on these issues – which only goes to prompt more worthy speeches about behaviour change theories.

Some people in the CSR world (there, I’ve used jargon myself) are congratulating themselves on having moved from talking about corporate responsibility to the creation of sustainable value, and that’s rightly a more business-focused approach. Yet I’d argue we now need to move another step and apply the ‘pub test’ to the issues we address and the language we use. As they say in America when talking about the mainstream “will it play in Peoria?”

A good opportunity to apply this test is the forthcoming UK government Framework for Action on corporate responsibility, promised before the end of the year. The omens aren’t good, because at a recent BIS consultation session the speakers and language were all strictly esoteric for the professionals. However in the long list of ‘CR issues’ that individual government departments are apparently working on, there are some that would certainly play in Peoria – local jobs, food and obesity, unemployment, welfare reform and troubled families, prompt payment of suppliers, and the rural economy, among others.

So I’m putting on my Christmas present wish-list a government strategy on business responsibility that talks to real people about the issues they care about. Father Christmas does exist, doesn’t he?

Being out of London this week on half term, I got caught up in the storms that brought power lines down across rural southern England. That set me thinking about the resilience of cities and how the history of humans huddling together first in hamlets and villages, then in towns and now in mega-cities is actually something to be welcomed.

Today half of us live in urban areas – some 3.6 billion people. By 2030 that’s projected to rise to 5 billion, accounting for 60% of humanity. In India’s cities, floor space equivalent to the whole of Chicago is being added each year. In China it’s running at more than twice that rate.

Got right, cities can offer more effective transportation, greater energy efficiency, higher productivity and more opportunities to increase skills, knowledge and social and cultural interaction. There’s a growing body of research on how to do more with less through urban living. For example, I found it interesting to see how much of Jonathon Porritt’s latest analysis – in his new book ‘The World We Made’ which we review here this month – depends on reinventing the way we live in towns and cities.

For managers in companies trying to make sense of what sustainability means, I’ve often said – just see it as long term thinking: try to do the right thing for your shareholders and other stakeholders over the long term.

Now I’m starting to think we also need to build in a greater awareness of locality, as well as the long term, and so focus much more on the ‘place-effect’ of what we are doing. When considering who to employ and where to source local will often (but not always) turn out to be best. Above all, when considering what customers need, then providing products and services that help improve the quality of live in crowded urban areas will increasing be the route to sustainable commercial success.