The Reports of Summer: Five Easy Pieces

The normally dry days of August have been fertile when it comes to research and reports on green business topics. Recent weeks have seen a flurry of publications from corporate, nongovernmental, and other organizations. Whatever happened to slow summer days?

I've pored through much of what's been served up this summer. Herewith are summaries of what I learned from five of them:

Water Footprinting: Identifying & addressing water risks in the value chain (Download - PDF), a joint effort of WWF and the beverage giant SABMiller, was published recently during World Water Week. Water footprinting is being used increasingly to understand the total amount of water it takes to create the clothes we wear, the food we eat, and the beverages we drink, among other products and services. Water footprinting isn't just an academic exercise: it can help companies make better decisions about how it manages it plants, works with suppliers, or engages with governments on policy issues.

The report provides insight into the learnings of two water footprint pioneers, WWF and SABMiller, who collaborated with consultancy URS Corp. to undertake water footprints of the beer value chain in South Africa and the Czech Republic. The report discusses what the water footprint results in South Africa and the Czech Republic mean for SABMiller's businesses and their action plans in response to the findings.

Why would a company open itself up to such scrutiny? Perhaps because of the findings:

In comparison with other beverages, beer's water footprint is relatively small; for example an independent report has estimated that coffee, wine, and apple juice all have water footprints more than three times that of beer.

However, the water footprint figure itself does not give the whole picture, as WWF and SABMiller point out. More important is the context — where water is used, what proportion of the area's total water resource it represents, and whether water scarcity creates risks to the environment, communities and businesses now or in the future.

Climate Change Compass: The Road to Copenhagen (download - PDF), from the U.K.-based research firm EIRIS, compares 2009 performance of the 300 large companies and finds that "while corporate commitment to mitigation has improved, unmitigated risk is still unacceptably high." EIRIS reviewed the 300 largest global companies by market capitalization listed on the FTSE All World Index to assess the current state of corporate responses to climate change. The report highlights the direction companies are taking with regard to the issue and examines its implications for investors.

Fully a third of the companies studied have unmitigated climate change risk, about the same as a year earlier. Just over half (55%) have short-term targets on climate change (compared to 48% in 2008), while 91% of "high" and "very high" impact companies (such as those in industrial metals, food producing, and oil and gas production) disclose absolute CO2 or greenhouse gas emissions data (73% in 2008).

Even where there's good news, it's still rather sobering. EIRIS found that about one in five (19%) companies deemed to have a "high" and "very high" risk still have "no or a limited response to climate change." This is an improvement from 34% of companies in 2008, but hardly anything to cheer about.

Carbon Risks And Opportunities in the S&P 500 (download here), a collaboration of the nonprofit Investor Responsibility Research Center Institute and Trucost, a global provider of environmental data and analysis, analyzes the potential financial implications of applying a carbon price to global emissions for companies listed on the Standard & Poor's 500 Index. It concludes that "the financial risk to companies in the S&P 500 would vary greatly under a cap-and trade program requiring the purchase of carbon emission credits."

If a market price of $28.241 were applied to each ton of CO2-e emitted by companies in the S&P 500 and their first-tier suppliers, carbon costs would total over $92.8 billion. This equates to over 1% of revenue from the companies in 2007, and over 5.5% of combined EBITDA.

At the company level, carbon costs would vary, from less than 1% of EBITDA for 203 companies, "while 71 companies could see earnings fall by 10% or more."

Trucost and IRRC point out that some large investors are beginning to view their portfolios through the lens of carbon risk and mitigation, a hopeful sign that could push companies to become more proactive even in advance of legislation.

One recent development within the institutional investing arena is that some asset owners and managers have begun to invest in companies that are on a clear path to reducing their emissions, or that provide "solutions" such as energy efficiency and clean technologies and renewable energy supplies. For instance, the Norwegian Government Pension Fund – Global announced plans in April 2009 to allocate approximately $2.8 billion to an environmental program, including investments in "climate-friendly energy" and improving energy efficiency.

Removing the Roadblocks: How to Make Sustainable Development Happen Now (download - PDF), published by the law schools at UCLA and UC Berkeley and sponsored by Bank of America, is the first in a series of reports on how climate change will create opportunities for specific business sectors and how policy makers can facilitate those opportunities. It focuses on California but has relevance outside the Golden State.

The report identifies four major obstacles "blocking environmentally sustainable neighborhoods," including aging utilities and scarce transit lines, the high cost of building multi-level structures, regulatory barriers from planning and zoning laws, and tax incentives that favor suburban sprawl. The report recommends long- and short-term action steps that policy makers and industry professionals can take to remove these obstacles.

Among the recommendations for "industry leaders":

Invest in sustainable development and utilize the experience and expertise of sustainable developers.

Create a group of industry leaders to lobby government decision-makers to end the barriers to better land use policies.

Conduct a public education and outreach campaign "to inform voters about the benefits to them of sustainable development and the need for infrastructure support like transit and utility upgrades."

How Green Will Save Us is the intriguing cover headline of the September issue of Harvard Business Review (view here, subscription required), a package of stories covering innovation, energy, consumers, and green technology. In the lead story, "Why Sustainability Is Now the Key Driver of Innovation," the authors report on their study of sustainability initiatives of 30 large corporations, concluding that "sustainability is a mother lode of organizational and technological innovations that yield bottom-line and top-line returns."

The quest for sustainability "is already starting to transform the competitive landscape," say the authors.

By treating sustainability as a goal today, early movers will develop competencies that rivals will be hard-pressed to match. That competitive advantage will stand them in good stead, because sustainability will always be an integral part of development.

But it's not easy, they point out. Companies that have started the journey go through five distinct stages of change, with innovation opportunities at each stage:

• Stage 1: Viewing compliance as opportunity

• Stage 2: Making value chains sustainable

• Stage 3: Designing sustainable products and services

• Stage 4: Developing new business models

• Stage 5: Creating next-practice platforms

That model may not be quite as catchy as Elizabeth Kübler-Ross's five stages. On the other hand, the HBR issue is one of the few uplifting reads for summer's end.

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Comments

[Carolyn]

Excellent variety of reports, I look forward to reading them and passing on the word about the solutions discussed. Thanks for making them available. Carolyn

[Greg Andeck (Environmental Defense Fund)]

I'd like to add my plug for the HBR "How Green Will Save Us" article. Unlike many articles in the green space that focus on eco-efficiency, this one reinforces the importance of using a sustainability lens to influence product design and company strategy (as opposed to seeing sustainability as something to be tacked on at the end or as a branding mechanism for existing initiatives). At EDF, we're seeing that leading corporations see the value in this approach and are fundamentally rethinking their products and services with this in mind.