UN IPCC Warns Us: The Time to Act Is Now – The Window For Action on Global Warming is Fast Closing

by Hank Boerner – Chair and Chief Strategist – G&A Institute

The buzz for the past few days has been about the report of the UN Intergovernmental Panel on Climate Change (IPCC) that urged governments everywhere to “take rapid and far-reaching and unprecedented changes in all aspects of society” to avoid catastrophic events and conditions brought on by climate change.

Why?  The planet temperature could reach the critical point – keep 1.5 degrees Celsius / 2.7 F above pre-industrial levels in mind.  We must get measures in place to address the threats of floods, rising seas, food shortages, shrinking arable land, wildfires, rising seas…and more.

Today 195 countries are members of the IPCC (including the United States, United Kingdom, China, Germany, and France) — and thousands of scientists all over the world contribute to the work of the organization.

The panel based its findings on the current high levels of greenhouse gas emissions (GHG).  These are carbon dioxide (CO2), methane (CH4), nitrous oxide (NO2), and a number of fluorinated gases (such as hydrofluorocarbons). GHGs are measured in parts per million (ppm), parts per billion (ppb) and per trillion. The gases can remain in our atmosphere for years, decades, centuries.

The end effect is to make our Earth warmer and warmer over time.

And where do the GHG emissions come from?  Transportation, production of electricity, industry (using fossil fuels for energy, production), buildings (commercial, residential, industrial), and use of the land (agriculture, forestry, ranching).

The key takeaways from the IPCC report:  We have not done enough in the past / we are not doing enough now (to address global warming) – and we have to dramatically increase the critical steps needed to slow and stop global warming and move the global society back to the pre-industrial levels of GHG emissions (150 to 200 years ago).

The key is more aggressive and rapid reduction of carbon emissions.  Think about achieving that while continuing economic growth (everyone’s desire, everywhere); dealing with steadily increasing population growth (we are on our way to 9 billion level by 2050 says the UN); keeping public sector expenditures at levels that sustain our present way of life while allocating funds to address climate change threats; and, avoiding catastrophic upheavals of various kinds in the decades ahead.

The IPCC report is sobering.  Our Top Story this week is a good review by CNN of where we are today and the rapidly-diminishing days we have left to begin very serious efforts for a course correction.

IPCC background information is available for you at: https://wg1.ipcc.ch/

The U.S. EPA web site also has information at a glance for you: https://www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions

You can also access the annual Inventory of U.S. GHG Emissions and Sinks there.

This Week’s Top Story

Planet has only until 2030 to stem catastrophic climate change, experts warn
(Monday – October 08, 2018) Source: CNN – Holding global warming to a critical limit would require “rapid, far-reaching and unprecedented changes in all aspects of society,” says a key report from the global scientific authority on climate change.

Economic Growth, Protecting & Preserving Our Ecological Systems – Are These Conflicted, Or Complementary As We Strive For Greater Global Sustainability?

by Hank Boerner – Chair and Chief Strategist – G&A Institute

The continued drive toward greater societal sustainability is very encouraging.  The public sector, multilateral organizations, companies, investors, NGOs, and other stakeholders are adopting new strategies and embracing new approaches and best practices.  Picture the installation of the vast array of a desert solar generating “farm” – that’s progress to cheer.

But there are substantial societal challenges that will require much more effort than we see today if we are to achieve greater, widespread sustainability — worldwide.

Growth is good/growth is an issue.  We are on track, demographers tell us, to see the global population grow from today’s 7.6 billion to 9.6 billion by the year 2050.  We recall a description that describes the challenge of meeting this particular situation: It is like changing tires on an automobile that is moving.

The imagery of that is tantalizing to consider.  This could apply to the challenges of developing solutions to vexing social, environmental and governance issues of 2018 as we steadily move towards 2050.

The United Nations Sustainable Development Goals (the SDGs) comprise an excellent roadmap for us to (1) look at the vexing societal issues and (2) collaborate and innovate to develop solutions, even as economic, population, demographic, political, financial, and other issues throw up still more challenges to meet as we strive to meet today’s challenges.

Reality:  We have to continue “growing”, right?

The 17 SDGs include such laudable and aspirational goals as ending poverty (#1), proving education (#4), providing clean water and sanitation (#6), and achieving “zero” hunger (#2).

Governments, industry, investors, civic leadership, NGOs, and other stakeholders are busily trying to figure out the “how” of addressing the challenges.  (And, how to pay for the work to be done.)  This week the UN Secretary General spoke about the lack of progress in general since the goals were structured in 2015.  Only 12 years are left until the 2030 deadline for having solutions in place, observers noted.

So the question:  Can sustainable development logically co-exist with current economic growth?  The Phys.Org organization provides an interesting (brief) exploration of the topic in a feature article in September. There’s an elephant in the room, say the authors, and that is the “trilemma of population growth, economic growth, and environmental sustainability” – which (they say) reveals the vast incompatibility of current models of economic development with environmental sustainability.

These are some of the findings of a study published in the Proceedings of the National Academic of Sciences (USA); the lead author is Professor Graeme Cumming of the ARC Centre of Excellence for Coral Reef Studies at James Cook University.

An example of the research results:  High-income countries often rely more on non-extractive industries, such as manufacturing and services, but consume more per capital and import more raw materials.

In low-income countries, populations depend more on the extractive industries (agriculture, mining, logging), but have lower per capita consumption rates and higher population growth (and will have more mouths to feed).

The world is divided into two distinct groups of national economies, the authors posit in the Proceedings, roughly equated to developed and less developed nations…and both are pushed toward two different equilibrium points that are unsustainable under population growth. (They studied data and models that are described in the Journal report.)

The solution that we can all agree on:  We need to find ways to make economic development and good standards of living compatible with ecological sustainability.  We can use this knowledge to steer economic growth towards win-win outcomes for people and the environment (so say the authors).

The Journal article is available to you at:
Linking Economic Growth Pathways and Environmental Sustainability by Understanding Development as Alternate Social-Ecological Regimes http://www.pnas.org/content/early/2018/09/04/1807026115

Our Top Story provides highlights of the report authored by Professor Cumming and his colleague, Stephan von Cramon-Taubadel); Dr. Cumming presents brief highlights for you.

This Week’s Top Story

Can sustainable development co-exist with current economic growth?
(Thursday – September 06, 2018) Source: Phys.org – New research confronts the elephant in the room—the ‘trilemma’ of population growth, economic growth and environmental sustainability—and reveals the vast incompatibility of current models of economic development with…

Sustainability Over the Next Two Decades – Forward? Backward? Something We Just Take For Granted in Running a Company or Investing In One?

by Hank Boerner – Chair and Chief Strategist, G&A Institute

Predicting the way forward (that is, defining the future) is always challenging but pundits do try anyway. One of the most often quoted of such predictions is the 1944 forecast for the computer and copier markets with CEO Thomas Watson of IBM projecting…a market of perhaps five computers and as many as 5,000 copying machines! 

This week we bring you a two-part look at where Sustainability and Corporate Responsibility may be headed over the next 20 years, with 20 business leaders with expertise and experience in sustainability and CR weighing in on Edie.net.

The experts bravely putting forth their views of the future include John Elkington, well-known author and Co-founder, Volans Ventures; the Director of Sustainability for Carlsberg (Simon Boas-Hoffmeyer); the Managing Director, Energy Services of Renault-Nissan (Francisco Carranza Sierra); Moody’s head of Global CSR, Arlene Isaacs-Lowe; Interface’s Jon Khoo (he’s an Innovation Partner); Leonie Schreve, Global Head of Sustainable Finance at ING, Peter Harris, the director of sustainability at UPS…and others.

Among the intriguing perspectives shared in the two-part feature on Edie.net are these brief outtakes:

What is “sustainable” today will be the new normal so we’ll need something transformational.

We are witnessing the design of the future city; it’s an urban design experiment and the future city will need to be cleaner and greener.

The next two decades for sustainability in real estate will be absolutely critical.  The window of opportunity for preventing the worst effects of climate change is fast closing and so meaningful action across all parts of the R.E. value chain is essential.

The sustainability role is going from being executing sustainability-related actions to be a driver of change.  Driving the development through an integration of the sustainability agenda in the different functions of the company…going from doer to change maker.

Companies have always been bottom-line driven but the question now is whether their views will shift from short-term return perspective to long-term sustainability perspective.  The reality is that because of the way we invest, there needs to be a deliberate focus on what the long-term future of a company is going to reveal.

There’s much more for you in the two part feature.  So  – what are your thoughts about the directions of sustainability (forward… back… sideways… really unknown?) for the next 10 or 20 years?  Send us your views and perspectives so we can share them in our newsletter and on the blog!

This Week’s Top Stories

Thinking Forward: 20 Business Leaders Define the Next 20 Years of Sustainability – Part One
Thinking Forward: 20 Business Leaders Define the Next 20 Years of Sustainability – Part Two
(

Thursday/Friday – August 23 & 24, 2018)
Source: Edie – we’ve gathered the insights of 20 sustainability experts to give their views on the next 20 years of corporate sustainability, across of range of key areas. From resource efficiency to green finance; board diversity to consumer…

Global Warming / Climate Change — What Are Current Weather Events and Dramatic Changes Telling Us?

By Hank Boerner – Chair and Chief Strategist – G&A Institute

The National Geographic describes “Global Warming” as a set of changes to the Earth’s climate, or long-term weather patterns, varying from place-to-place.  The dramatic changes in the rhythms of climate could affect the face of our planet – coasts, forests, farms, mountains…all hang in the balance.

So, also hanging in the balance:  the fate of humanity!

Explains NatGeo:  “Glaciers are melting, sea levels are rising, cloud forests are dying, and wildlife scrambles to keep pace.  It’s becoming clear that humans have caused most of the past century’s warming by releasing heat-trapping gases as we power our modern lives.  Greenhouse gases (GhGs) are at higher levels now than in the last 650,000 years.” *

“Climate Change” is the less politically-volatile term used by leaders in the public and private sectors (such as in the numerous shareholder-presented proxy resolutions that are on the ballots of public companies for owner voting and in the language of corporate sustainability reporting).

Carbon Dioxide emissions (CO2) released into the atmosphere have increased by a third since the start of the Industrial Revolution, and so addressing this challenge would logically be a prime responsibility of those who benefited most from the 200-year-plus revolution – pretty much all of us!

The political climate in most of the developed industrial world is mostly reflective of the will to do “something” – witness the almost 200 sovereign nations signing on to the Paris Agreement in 2015 (“COP 21”) to work together and separately to holding the temperature rise to well below 2-degrees Centigrade (3.5F), the pre-industrial levels — and pursuing efforts to limit the temperature rise to 1.5-degrees C above pre-industrial levels. (“As soon as possible.”)

The Agreement also calls for the increasing society’s ability to adapt to the adverse impacts of climate change and foster climate resilience including low GHG emissions development. **

The outlier nation to the agreement, sad to say, is the world’s largest economy and significant GHG emitter, the United States of America, which has begun the withdrawal process from the Paris Agreement.

This week we present a selection of top stories about climate change – and global warming! – to illustrate the effects of a changed climate around the globe.  And to send signals to the doubting policymakers in Washington DC that the threat is real!

The good news is that many corporate managements, powerful institutional investors, and public policy makers in a growing number of leaders in U.S. cities, states and regions are committed to the goals of the Paris Agreement and working to implement steps to hold the line – to build resilience – that will benefit all of society.

We really do have to hurry — take a look at what is happening around our planet:

This Week’s Top Stories:
Drought, Heat Wave, Wild Fires
— Is the Earth Burning Up?

Earth at risk of becoming ‘hothouse’ if tipping point reached, report warns
(Tuesday – August 07, 2018) Source: CNN – Scientists are warning that a domino effect will kick if global temperatures rise more than 2°C above pre-industrial levels, leading to “hothouse” conditions and higher sea levels, making some areas on Earth uninhabitable.

5-year drought raises questions over Israel’s water strategy
(Monday – August 06, 2018) Source: ABC News – For years, public service announcements warned Israelis to save water: Take shorter showers. Plant resilient gardens. Conserve. Then Israel invested heavily in desalination technology and professed to have solved the problem by…

Our climate plans are in pieces as killer summer shreds records
(Monday – August 06, 2018) Source: CNN – Deadly fires have scorched swaths of the Northern Hemisphere this summer, from California to Arctic Sweden and down to Greece on the sunny Mediterranean. Drought in Europe has turned verdant land barren, while people in Japan and…

Are devastating wildfires a new normal? “It’s actually worse than that,” climate scientist says
(Wednesday – August 08, 2018) Source: CBS News – California Gov. Jerry Brown has called the devastating wildfires tearing through Northern California “part of a trend — a new normal.” But one climate scientists says “it’s actually worse than that.”

Europe battles wildfires amid massive heat wave
(Wednesday – August 08, 2018) Source: ABC News – Record-breaking temperatures across Europe have forced people to sleep in a Finnish supermarket, uncovered a piece of World War II history in Ireland and are making it harder to battle the wildfires that have been raging in Spain…

Don’t despair – climate change catastrophe can still be averted
(Wednesday – August 08, 2018) Source: The Guardian – The future looks fiery and dangerous, according to new reports. But political will and grassroots engagement can change this…

Australia’s most populous state now entirely in drought
(Thursday – August 09, 2018) Source: CBS – CANBERRA, Australia — Australia’s most populous state was declared entirely in drought on Wednesday and struggling farmers were given new authority to shoot kangaroos that compete with livestock for sparse pasture during the…

Nearly 140 people dead amid Japan heat wave
(Thursday – August 09, 2018) Source: WTNH – Japan is dealing with a heat wave that had killed 138 people. The heat wave started back in May and has been roasting the country ever since…

Europe bakes again in near-record temperatures
(Thursday – August 09, 2018) Source: Phys.org – Europe baked in near-record temperatures on Monday but hopes were for some respite after weeks of non-stop sunshine as people come to terms with what may prove to be the new normal in climate change Europe…

* Greenhouse Gases are defined as a gas trapping heat in the atmosphere, contributing to the “greenhouse effect” by absorbing radiation:  carbon dioxide/CO2, methane, nitrous oxide, and flouorinated gases (such as chlorofluorocarbons, sulfur hexafluoride).

** The Paris Agreement is at: https://unfccc.int/sites/default/files/english_paris_agreement.pdf

INSTITUTIONAL INVESTORS LAUNCH ALLIANCE FOCUSED ON HUMAN RIGHTS

by Hank Boerner – Chair and Chief Strategist, G&A Institute

ICCR Provides Leadership for Investor Collaboration To Advance Corporate Sector and Investor Action on Human Rights Issues

The recently-launched Investor Alliance for Human Rights provides a collective action platform to consolidate and increase institutional investor influence on key business and human rights issues.

For nearly 50 years, the Interfaith Center on Corporate Responsibility (ICCR) has been engaging with corporate managements and boards, coalescing with asset owners and managers and waging campaigns on key E, S and G issues.

ICCR has become a major influence for investors at corporate proxy voting time, and in ongoing investor-corporate engagements.

Consider:  The member institutions have AUM of US$400 billion and influence many other investors (depending on the issue in focus at the time).

ICCR has 300-plus institutional investor members, many (but not all) are faith-based organizations. A good number of member institutions are leaders in making available sustainable & responsible investment products and services. (See representative names in references at end.)

Key issues in focus for ICC members include:

  • Human Rights (key: human trafficking, forced labor, fair hiring practices)
  • Corporate Governance (board independence, CEO comp, lobbying)
  • Health (pharma pricing, global health challenges)
  • Climate Change (science-based GhG reduction targets)
  • Financial Services (risk management for financial institutions, responsible lending)
  • Food (antibiotics in food production, food waste, labor)
  • Water (access, corporate use of water and pollution)

HUMAN RIGHTS IN FOCUS FOR NEW ALLIANCE

On the last issue – Human Rights – ICCR has long been involved in various Human Rights issues back to its founding in 1971 and has been organizing the Investor Alliance for Human Rights since late-fall 2017.  Here are the essentials:

  • Investor Alliance participants will have an effective “Collective Action Platform” for convening, information sharing, and organizing collaboration on action to make the case to corporate decision-makers and public sector policymakers (and other stakeholders) on the need for urgency in addressing human rights issues.
  • The umbrella of a formal alliance will help individual participants to build partnerships and develop collaboration within their own universes of connections (such as NGOs, other investors, community-based organizations, trade groups, corporate leaders, multi-lateral organizations, and other institutions and enterprises).
  • Among the work to be done is the encouragement and support of building Human Rights criteria and methodology into asset owner and manager guidelines, investing protocols, models, and to integrate these in corporate engagements and proxy campaigns, as well as to guide portfolio management. (Buy/sell/hold decision-making.)
  • All of this will help to expand investor reach and influence and strengthen advocacy for best practices in Human Rights by both companies and investors. Leveraging of broader investor influence is key in this regard.

The Alliance will provide participants with a “rapid response” resource to assure that the “investor voices” are clearly heard in corporate board rooms and C-suites, in public sector leadership offices, and in media circles when there are threats posed to effective actions and reforms in Human Rights issues.

The Alliance is outreaching to NGOs, faith-based institutions, academics, media, labor unions, multi-lateral global institutions, trade and professional associations, corporate managements and boards, and of course to a wide range of asset owners and managers.

# # #

The key player at ICCR for the Alliance is David Schilling, a veteran staff member who is Senior Program Director – Human Rights & Resources. (email:  dschilling@iccr.org)

David joined ICCR in 1994 and has led initiatives on human rights in corporate operations in Africa, Asia and Latin America, often visiting factories and meeting with workers on the ground.

David is currently Chair, Advisory Board of the Global Social Compliance Program; member, International Advisory Network of the Business and Human Rights Resource Centre; member, RFK Center Compass Education Advisory Committee; UNICEF CSR Advisory Group; and, Coordinator (with ICCR member institutions) of the Bangladesh Investor Initiative (a global collaboration in support of the “Accord for Fire and Building Safety”.

# # #

ICCR stresses that it sees its work “through a social justice lens.”  For more than two decades members and staff have worked to eradicate human rights abuses in corporate operations and across global supply chains, such as forced child labor in cotton fields in Uzbekistan.

The organization has an Advisory Committee of Leaders in Business and Human Rights (formed in late-2016).  Members include representatives of Boston Common Asset Management; Shift; Landesa; The Alliance for a Greater New York; Oxfam America; Mercy Investment Services; International Corporate Accountability Roundtable; and Global Witness.

# # #

ICCR has a long history in Human Rights progress.  The organization came together as a committee of the mainstream Protestant denominations under the  umbrella in 1971 to organize opposition to the policies and practices of “Apartheid” in South Africa.

Over time, the U.S. corporations operating in South Africa stopped operations there.  More than 200 cities and municipalities in the United States of America adopted anti-Apartheid policies, many ending their business with companies operating in South Africa.

Protests were staged in many cities and on many college & university campuses, and U.S. and European media presented numerous news and feature presentations on the issue.

In time, the government of South Africa dismantled Apartheid and the country opened the door to broader democratic practices (the majority black population was formerly prohibited to vote).

Over the years since the Apartheid campaign, ICCR broadened its focus to wage campaigns in other societal issues, including:

  • Focus on fair and responsible lending, including sub-prime lending and payroll lending.
  • Putting climate change issues on the agenda for dialogue with corporations, including the demand for action and planning, and then greater disclosure on efforts to curb GHG emissions.
  • Encouraging investment in local communities to create opportunities in affordable housing, job development, training, and related areas.
  • Promoting greater access to medicines, including drugs for treatment of AIDS in Africa, and affordable pricing in the United States.
  • Promoting “Impact Investing” – for reasonable ROI as well as beneficial outcomes for society through investments.
  • Promoting Islamic Finance.
  • On the corporate front, requesting greater transparency around lobbying by companies to influence climate change, healthcare and financial reforms, both directly and through trade associations and other third-party organizations.
  • Opposing “virtual-only” annual corporate meetings that prevent in –person interaction for shareholders.

Proxy Campaigns – Governance in Focus:

ICCR members are very active at proxy voting time.  Among the “wins” in 2017:

  • Getting roles of (combined) Chair & CEO split – 47% support of the votes for that at Express Scripts and 43% at Johnson & Johnson; 39% at Chevron.
  • More disclosure on lobbying expenditures – 42% support at Royal Bank of Canada and 41% at First Energy; 35% at Cisco and 25% at IBM.

# # #

Notes and References:

Information on the new Alliance is at: http://iccr.org/iccr-launches-new-alliance-amplify-global-investor-influence-human-rights

ICCR’s web site is at: www.iccr.org

And at http://iccr.org/our-issues/human-rights/investor-alliance-human-rights

The Alliance initiative is supported with funding from Humanity United and Open Society Foundations.

Influence and Reach:  The ICCR member organizations include the AFSCME union fund, Walden Asset Management, Boston Common Asset Management, Oxfam, The Maryknoll Fathers and Brothers, and Maryknoll Sisters, American Baptist Churches, Mercy Investments, Christian Brothers Investment Services (CBIS), Wespath Investment Management, Everence Financial, Domini Social Investments, Church of England Ethical Investment Advisory Group, Gabelli Funds, Trillium Asset Management, Calvert Group, Clean Yield, The Nathan Cummings Foundation, and other institutional investors.

 

 

 

 

 

Critical Development for CDP Responders in 2018 & 19: CDP Introduces Additional Alignment With FSB Task Force on Climate-Related Financial Disclosures Recommendations

By Hank Boerner – Chair & Chief Strategist, G&A Institute

Corporate ESG Data, Data, Data – it’s now everywhere and being digested, analyzed and applied to corporate equity analytics and portfolio decision-making.

Whether your public company participates in the annual round of organizing responses to the ever-more comprehensive queries from leading ESG / sustainability / CR rating agencies or not, there is a public ESG profile of your company that investors (asset owners, managers and analysts) are examining and applying to their work.

If you don’t tell the story of your firm’s progress in its sustainability journey, someone else will (and is).  And if you have not embarked on the journey yet…and there is not much to disclose and report on…you are building the wrong kind of moat for the company.  That is, one that will ever-widen and impair access to capital and affect the cost of capital.  And over time, perhaps put the company’s issues on the divestiture list for key investors.

This sounds a bit dramatic, but what is happening in the capital markets these days can be well described as a dramatic shift in focus and actions, with corporate ESG strategies, actions, programs, achievements, and disclosure becoming of paramount importance to a growing body of institutional and retail investors.

Consider these important developments:

  • The influential Barron’s editors, reaching hundreds of thousands of investors every week, beginning in Fall 2017 made coverage of corporate sustainability and sustainable investing a mainstay of the magazine’s editorial content.
  • Morningstar, the premier ranker of mutual fund performance, added sustainability to the analysis of funds and ETFs with guidance from Sustainalytics, one of the major ESG rating firms (and Morningstar made a significant investment in the firm).
  • SustainableInvest, headed  by Henry Shilling, former leader on sustainability matters for Moody’s Investor Service, noted that in 2Q 2018 as the proxy season was ending, 2018 voting was notable for the high level of “E” and “S” proposals, some achieving majority votes in shareholder voting at such firms as Anadarko Petroleum, Kinder Morgan and Range Resources.  Assets in 1,025 sustainable funds analyzed added $14 billion during 2Q and ended in June at US$286 billion; more than $1 billion was new net cash inflows, demonstrating investor interest in the products.

Significant:  according to the Harvard Law School Forum on Corporate Governance and Financial Regulations, two-thirds of investor-submitted proxy resolutions focused on having the company follow through on the 2-degrees scenario (testing) were withdrawn and company boards and managements agreed to the demand for climate risk reporting.

The FSB TCFD Impact on Corporate Sector and Financial Services Sector

The Financial Stability Board, an organization founded by the central bankers and financial leaders of the G-20 nations, created a Task Force on Climate-related Financial Disclosures (“TCFD”) to develop climate-related financial disclosures for adoption by financial services sector firms and by publicly-traded companies in general.

The 32-member Task Force, headed by Mayor Michael Bloomberg, announced financial recommendations for companies and investors in June 2017.

The essence of the recommendations:

  • Corporate boards and managements should focus on the risks and opportunities present and in the future taking into account a global temperature risk of 2-degrees Centigrade (3.5-F), and in the future, 4-C and even 6-C global temperature rises.

The risks (presented are not just to the affected companies but to the financial sector institutions investing in the company, institutions lending funds to the company, carriers insuring the company, etc.).

The risks and opportunities related to climate change should be thoroughly analyzed using the scenario testing that the company uses (an example would be projecting future pricing, regulations, technologies, and “what ifs” for an oil and gas industry company).

The company should consider in doing the scenario testing and analyzing outcomes the firm’s corporate governance policies and practices; strategies for the long-term; risk management policies and resources; establishing targets; and, putting metrics in place for measuring and managing climate risk.  Then, the next step is disclosing this to investors and other stakeholders.

Key Player:  CDP and its Wealth of Corporate, Institutional and Public Sector Data

The CDP – formerly known as the Carbon Disclosure Project – was founded almost two decades ago (2000) as a United Kingdom-based not-for-profit charity at the urging of the investment community, to gather corporate “carbon” data.

Timing:  soon after the start of meetings of the “Conference of the Parties” (or “COP”), organized by the United Nations as the Climate Change Conferences. (The “UNFCCC”.)

In the mid-1990s, the Kyoto Protocol emerged that legally-bound nations to their pledge to reduce Greenhouse Emissions (GHGs).  The U.S.A. did not sign on to the global protocol during the tenure of President George W. Bush, and the agreement reached in Paris at the COP meeting in 2015 was finally agreed to by President Barack Obama.

And then began the process of withdrawal under President Donald Trump.  The U.S.A. is now the prominent holdout (among the community of 197 nations signed on) in the global effort to address global warming before the danger point is passed.  In Paris, the COP agreed that the threshold was 2-degrees Centigrade.

Today, a growing universe of investors and many other stakeholders are increasingly focused on the role of carbon emissions in the framing of questions about what to do as scientists charted the warming of Earth’s climate.

And so — ESG / environmental data is critical to the mission of determining “what to do” and then implementing measures to address climate change challenges.

The Critical Role of CDP 

CDP over almost two decades since its founding has become the premier repository of corporate data related to climate change – with more than 6,000 companies’ data collected and shared in organized ways with the investment community.  (That includes the ESG data of half of the world’s public companies by market cap.)

The CDP emissions data focused has broadened over 16 years to now include water, supply chain, forestry (for corporates) and environmental data from more than 500 cities and some 100 states and regions available to investors.

Key user base:

  • 650-plus institutional investors with US$87 trillion in Assets Under Management.
  • Corporate Supply Chain members (such as Wal-Mart Stores) that collect data from their suppliers through CDP—a universe of 115 companies with over $3.3 trillion in combined purchasing power.

When the TCFD recommendations were being developed, CDP announced a firm commitment to align with the task force recommendations.

Following their release of the Task Force recommendations in July 2017, CDP held public consultations on a draft version of the TCFD-aligned framework. The current 2018 Climate Change questionnaire that corporations received from CDP is fully aligned with the TCFD recommendations on climate-related disclosures related to governance, risk management, strategy, and metrics and targets.

The TCFD recommendations are already aligned with the majority of CDP’s longstanding approach to climate change disclosure, including most of the recommendations for climate-related governance, strategy, risk management as well as metrics and target disclosure.

However, this year CDP has modified some questions and added new ones — the most impactful being on climate-related scenario analysis to ensure complete alignment.

Some modifications include:

The Governance section now asks for more information about oversight of climate change issues and why a company doesn’t have board-level oversight (if applicable). CDP also requests information about the main individual below the board level with the highest responsibility — and how frequently they report up to the board.

Next, in the risks and opportunities section, CDP now asks for the climate-related risk & opportunity identification, and assessment process.

As in past years, questions are posed in the Business Strategy module to allow companies to disclose whether they have acted upon integrating climate-related issues into their strategy, financial planning, and businesses.

CDP has also added a question for high impact sectors on their low carbon transition plans, so data users can gauge and further understand the sustainable and strategic foresight that these companies aim to achieve.

CDP also added a new question on scenario analysis, explaining that scenario analysis is a strategic planning tool to help an organization understand how it might perform in different future states.

A core aim of the TCFD recommendations is for companies to improve their understanding of future risks and develop suitable resilience strategies.

Finally, the TCFD recommendations highlighted five (5) sectors as the most important. In 2018, CDP rolled out sector-specific questions for the four non-financial sectors that the TCFD highlighted (they are energy, transport, materials, and agriculture).

TCFD also highlighted the financial sector – looking forward, in 2019, CDP is planning to release a financial sector-specific climate change questionnaire.

The TCFD resources for investors and corporate managers are embodied in three documents – (1) the Main Report; (2) an Implementation Annex; (3) the Technical Supplement for Scenario Analysis.  These are available at:  www.fsb-tcfd.org

G&A Institute Perspectives:

Our team has been assisting corporate managers in organizing the response to the CDP annual survey and we’ve tracked over the years the steady expansion of information requested of companies.

Our advice to companies not reporting yet:  get started!  The CDP staff members are very cooperative in assisting new corporate reporters in understanding what data are being sought (and why) and providing answers to questions.

CDP’s founding CEO Paul Simpson cautions:  “Big companies:  get better at telling those who hold the purse strings how climate risks could affect your bottom line.”

And so, our mission at G&A includes helping corporate issuers tell a better sustainability and ESG story, including the story told in the data sets communicated to 650-plus institutional investors by CDP!

CDP data is everywhere, we advise clients, including for example being part of the volumes of ESG data sets that Bloomberg LP shares on its terminals (through the terminal ESG Dashboard).

On the supply chain side, we point out that more than US$3 trillion is the collective spend of companies now addressing their supply chain sustainability factors and environmental impacts (customers see suppliers as part of their own CDP footprint).  Corporate leaders in this effort include Apple, Honda and Microsoft, CDP points out.

Resources:

CDP’s Technical Notes on the TCFD are available at: https://b8f65cb373b1b7b15feb-c70d8ead6ced550b4d987d7c03fcdd1d.ssl.cf3.rackcdn.com/cms/guidance_docs/pdfs/000/001/429/original/CDP-TCFD-technical-note.pdf?1512736184

The “A” List of CDP naming the world’s business leaders on environmental performance (160 firms) is at: https://www.cdp.net/en/scores-2017

The CDP USA Report 2017, focused on key findings on Governance, ESG and the Role of the Board of Directors is available at: https://b8f65cb373b1b7b15feb-c70d8ead6ced550b4d987d7c03fcdd1d.ssl.cf3.rackcdn.com/cms/reports/documents/000/002/891/original/CDP-US-Report-2017.pdf?1512733010

There’s an excellent interview with CDP CEO/Founder Paul Simpson at: http://www.ethicalcorp.com/disruptors-paul-simpson-atypical-activist-who-woke-c-suites-climate-risk

You can check out Henry Shilling’s SustainableInvest.com at: https://www.sustainableinvest.com/second-quarter-2018-sustainable-funds-investing-review/

 

U.S. States and Cities — “Still In” to the Paris Agreement — and Great Progress is Being Made

By Hank Boerner – Chair & Chief Strategist, G&A Institute

This is our second commentary this week on the occasion of the first anniversary of the decision by the Trump White House in June 2017 to begin the multi-year process of formal withdrawal of the United States of America from the Paris COP 21 climate agreement…

The action now is at the state and municipal levels in these United States of America.

Where for years the world could count on US leadership in critical multilateral initiatives – it was the USA that birthed the United Nations! – alas, there are 196 nations on one side of the climate change issue (signatories of the 2015 Paris Agreement) and one on the other side: the United States of America. At least at the sovereign level.

Important for us to keep in mind: Individual states within the Union are aligned with the rest of the world’s sovereign nations in acknowledging and pledging to address the challenges posed by climate change, short- and longer-term.

Here’s some good news: The United States Climate Alliance is a bipartisan coalition of 17 governors committed to upholding the goals of the Paris Agreement on climate change. These are among the most populous of the states and include states on both coasts and in the nation’s Heartland.

The Paris meetings were in 2015 and at that time, the USA was fully on board. That was in a universe now far far away, since the election of climate-denier-in-chief Donald Trump in 2016.

On to the COP 23 and the USA

In 2017, two years after the Paris meetings, the USA officially snubbed their sovereign colleagues at the annual climate talks. A number of U.S. public and private sector leaders did travel to Bonn, Germany, to participate in talks and represent the American point-of-view. This included Jerry Brown, Governor, California (the de facto leader now of the USA in climate change); former New York City Mayor (and Bloomberg LP principal) Michael Bloomberg; executives from Mars, Wal-mart and Citi Group.

While the U.S. government skipped having a pavilion at the annual United Nations-sponsored climate summit for 2017, the US presence was proclaimed loud and clear by the representatives of the U.S. Climate Action Center, representing the climate change priorities of US cities, states, tribes and businesses large and small who want action on climate change issues.

Declared California State Senator Ricardo Lara in Bonn: “Greetings from the official resistance to the Trump Administration. Let’s relish being rebels. Despite what happens in Washington DC we are still here.”

# # #

As the one year anniversary of President Trump’s announcement to leave the global Paris Agreement (June 1, 2018), state governors announced a new wave of initiatives to not only stay on board with the terms agreed to in Paris (by the Obama Administration) but to accelerate and scale up their climate actions.

Consider: The Alliance members say they are on track to have their state meet their share of the Paris Agreement emission targets by 2025.

Consider: The governors represent more than 40 percent of the U.S. population (160 million people); represent at least a US$9 trillion economic bloc (greater than the #3 global economy, Japan); and, as a group and individually are determined to meet their share of the 2015 Paris Agreement emissions targets.

Consider: Just one of the states – California – in June 2016, according to the International Monetary Fund, became the sixth largest economy in the world, ahead of the total economy of France (at #7) and India (#8).

Consider: The US GDP is estimated at $19.9 trillion (“real” GDP as measured by World Bank); the $9 trillion in GDP estimated for the participating states is a considerable portion of the national total.

The states involved are: California, Colorado, Connecticut, Delaware, Hawaii, Maryland, Massachusetts, Minnesota, New Jersey, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia, Washington, and the Commonwealth of Puerto Rico.

The initiatives announced on June 1, 2018 include:

Reducing Super Pollutants (including hydrofluorocarbons (HFCs), one of the Greenhouse Gases, and harnessing waste methane (another GhG).

Mobilizing Financing for Climate Projects (through collaboration on a Green Banking Initiative); NY Green Bank alone is raising $1 billion or more from the private sector to deploy nationally).

Modernizing the Electric Grid (through a Grid Modernization Initiative, that includes avoidance of building out the traditional electric transmission/distribution infrastructure through “non-wire” alternatives).

Developing More Renewable Energy (creating a Solar Soft Costs Initiative to reduce costs of solar projects and drive down soft costs; this should help to reduce the impact of solar tariffs established in January by the federal government).

Developing Appliance Efficiency Standards (a number of states are collaborating to advance energy efficiency standards for appliances and consumer products sold in their state as the federal government effort is stalled; this is designed to save consumers’ money and cut GhG emissions).

Building More Resilient Community Infrastructure and Protect Natural Resources (working in partnership with The Nature Conservancy and the National Council on Science and the Environment, to change the way infrastructure is designed and procured, and help protect against the threats of floods, wildfires and drought).

Increase Carbon Storage (various states are pursuing opportunity to increase carbon storage in forests, farms and ecosystems through best practices in land conservation, management and restoration, in partnerships with The Nature Conservancy, American Forests, World Resources Institute, American Farmland Trust, the Trust For Public Land, Coalition on Agricultural Greenhouse Gases, and the Doris Duke Charitable Foundation).

Deploying Clean Transportation (collaborating to accelerate deployment of zero-emissions vehicles; expanding/improving public transportation choices; other steps toward zero-emission vehicles miles traveled.

Think About The Societal Impacts

The powerful effects of all of this state-level collaboration, partnering, financial investment, changes in standards and best practice approaches, public sector purchasing practices, public sector investment (such as through state pension funds), approvals of renewable energy facilities (such as windmills and solar farms) in state and possibly with affecting neighboring states, purchase of fleet vehicles…more.

California vehicle buyers comprise at least 10% (and more) of total US car, SUV and light truck purchases. Think about the impact of vehicle emissions standards in that state and the manufacturers’ need to comply. They will not build “customized” systems in cars for just marketing in California – it’s better to comply by building in systems that meet the stricter standards on the West Coast.

US car sales in 2016 according to Statista were more than 1 million units in California (ranked #1); add in the other states you would have New York (just under 400,000 vehicles sold); Illinois (250,000); New Jersey (250,000) – reaching to about million more. How many more vehicles are sold in the other Coalition states? Millions more!

(Of course, we should acknowledge here that the states not participating yet have sizable markets — 600,000 vehicles sold in Florida and 570,000 in Texas.)

Project that kind of effect onto: local and state building codes, architectural designs, materials for home construction; planning the electric distribution system for a state or region (such as New England); appliance design and marketing in the Coalition states (same issues – do you design a refrigerator just for California and Illinois?).

There are quotes from each of the Coalition governors that might be of use to you. (Sample: Jerry Brown, California: “The Paris Agreement is a good deal for America. The President’s move to pull out was the wrong call. We are still in.”) You can see them in the news release at: https://static1.squarespace.com/static/5a4cfbfe18b27d4da21c9361/t/5b114e35575d1ff3789a8f53/1527860790022/180601_PressRelease_Alliance+Anniversary+-+final.pdf

# # #

In covering the 2017 Bonn meetings, Slate published a report by The Guardian with permission of the Climate Desk. Said writers Oliver Milman and Jonathan Watts: “Deep schisms in the United States over climate change are on show at the U.N. climate talks in Bonn, where two sharply different visions of America’s role in addressing dangerous global warming have been put forward to the world.

“Donald Trump’s decision [to pull out of the Paris Climate Agreement] has created a vacuum into which dozens of city, state and business leaders have leapt, with the aim of convincing other countries that the administration is out of kilter with the American people…”

# # #

At the US City Level

Jacob Corvidae, writing in Greenbiz, explains how with the White House intending to withdraw, cities are now in the driver’s seat leading the charge against climate change.

Cities have more than half of the world’s populations and have the political and economic power to drive change.

The C40 Cities Climate Leadership Group is the Coalition helping cities to make things happen. The C40 Climate Action Planning Framework is part of a larger effort to make meaningful progress toward carbon reduction goals and build capacity at the municipal level. Cities are expected to have a comprehensive climate action plan in place by 2020. This will include 2050 targets and required interim goals.

The cities have the Carbon-Free City Handbook to work with; this was released in Bonn in 2017 at COP 23. There are 22 specific actions that can (1) drive positive impacts and (2) create economic development. This September the Carbon-Free Regions Handbook will be available. There is information for you about all of this at: https://www.greenbiz.com/article/every-action-how-cities-are-using-new-tools-drive-climate-action

The clarion call, loud and clear: We Are Still In!  Watch the states, cities and business community for leadership on meeting climate change issues in the new norms of 2018 and beyond.

We Are “Out” of the Paris Accord — Really? What a Year! Signs of Great Progress in the Trump Denial Era

June 1, 2018

By Hank Boerner – Chair and Chief Strategist, G&A Institute

It was just one year ago – ah,, but it seems much longer…

WASHINGTON — The New York Times – June 1, 2017: “President Trump announced on Thursday that the United States would withdraw from the Paris climate accord, weakening efforts to combat global warming and embracing isolationist voices in his White House who argued that the agreement was a pernicious threat to the economy and American sovereignty.

In a speech from the Rose Garden, Mr. Trump said the landmark 2015 pact imposed wildly unfair environmental standards on American businesses and workers. He vowed to stand with the people of the United States against what he called a “draconian” international deal.

“I was elected to represent the citizens of Pittsburgh, not Paris,” the president said, drawing support from members of his Republican Party but widespread condemnation from political leaders, business executives and environmentalists around the globe.”

What was to follow?

A Year of Significant Progress!

Today — interesting perspectives are shared in The Washington Post on where we are one year after President Donald Trump “withdrew” from the Paris Climate Accord. The United States of America is the first – and perhaps will be the only – nation to join and then withdraw the Agreement. Sort of.

Participation in the agreement for the USA runs to year 2020 so we are “still in” (officially).  The withdrawal process will take the next three years.

By that time, there might be a new occupant in the White House. 

This nation is still in by examination of various other factors that are explained by writer Chris Mooney in the WaPo. (He covers climate change, energy and the environment, reported from the Paris negotiations in 2015, and has published four books on the the subjects he covers.)

The key points we took away from Mooney’s excellent wrap up today:

  • The Trump Administration still has no consistent message about climate change,  and no clear policy, except for the antics of EPA Administrator Scott Pruitt, with his slash & burn attacks on environmental and climate-related regulations.
  • There is a positive development: NASA Administrator Jim Bridenstine embraced climate science.  (See notes at end.)
  • There has been unrelenting attack on President Barack Obama’s skilled moves to protect the country – and the planet! – such as the Clean Power Plan.
  • But, while the White House is the cheerleader for the coal industry, market forces reward renewable energy and natural gas as powerful drivers for change.
  • Other countries are sticking with the Paris Accord, but some of those countries may find it challenging to stay the course without U.S. leadership (says John Sterman of MIT).

BackgroundThe Obama Administration agreed in Paris with many other nations to the goals of a 26%-to-28% reduction of emissions below the 2005 levels — and today the U.S. and the whole world is off that metric, writes Chris Mooney.

Even if the commitments were realized, there would be a temperature rise of 3.3 degrees Celsius (almost 6% F) over time (according to MIT’s Sterman). So the USA would have to do even more than agreed-to in Paris. (The USA is the world’s second largest GhG emitter.)

Where are we? According to the Climate Action Tracker produced by NewClimate Institute and Ecofys, the USA is on track for an 11% to 13% decrease by year 2025, which is about halfway to the Obama Administration pledge.

What may interfere: the move to rollback auto fuel efficiency standards; an analysis by Rhodium Group projects adding 100 million tons (annually) by year 2035 for auto emissions alone if the rollbacks move forward.

The good news – from the “We Are Still In” front: the states of Virginia and New Jersey are making moves to cut emissions and the states of Colorado and California are developing new electric vehicle policies.

Vicky Arroyo (director of the Georgetown Climate Center is quoted:   At least we are not losing the momentum that was feared (one year ago today).

Kate Larsen, who directs climate change research at the Rhodium Group, thinks that the country is on track to meet or even exceed the Obama-era Clean Power Plan goals — thanks to the use of lower-cost renewable fuel sources and natural gas.

Greenhouse Gas Emissions in the United States are “hardly set to explode” and the country is moving toward lower GhG emissions over time, writes Mooney.

But. What the Trump announcement did last year on June 1 was to create fog about US national policy regarding climate change. The thing we all have to face: the slow progress exhibited and achieving climate change goals (those coming out of Paris) are not compatible.

The WaPo commentary is at: https://www.washingtonpost.com/news/energy-environment/wp/2018/06/01/trump-withdrew-from-the-paris-climate-plan-a-year-ago-heres-what-has-changed/?utm_term=.782d3cb38b3f&wpisrc=nl_most&wpmm=1

Counterpoint!

The EDF – a/k/a Environmental Defense Fund – today trumpeted the Year of Climate Progress (since June 1 2018).

EDF members and environmentalists immediately began the counter-attack in June 2017 and in EDF’s words, that led to a year of extraordinary climate progress. The organization presents a timeline on line.  Highlights:

  • June 5, 2018 – EDF helps launch a coalition of organizations, businesses and state and local civic and political leaders to pledge “We Are Still In!” – today there are 2,700 leaders participating.
  • On to July 2017 – California Governor Jerry Brown signs into law an extension of the state’s cap-and-trade program out to 2030.  The state is the sixth largest economy in all of the world!
  • September – North of the border, Ontario Province links its cap-and-trade program to the California-Quebec carbon market, creating a huge market covering 580 million tons of emissions. Sister province British Columbia intends to increase its carbon tax for April 2018 through 2021.
  • Nine Northeastern US States in the Regional Greenhouse Gas Initiative complete their second program review and agree to reduce emissions by 30% from 2020 to 2030.
  • Halfway around the world in December 2017 China announced its national carbon market (to be largest in the world); this will start with electric power and expand to seven other industrial sectors. (So much for the Trumpian claim China is doing nothing to meet Paris Accord conditions.)
  • We move further into 2018 and the Federal Energy Regulatory Commission (FERC) rejects the DOE coal and nuclear proposal.
  • Despite shouts and threats and Trumpian boasting, the U.S. Congress adopts the 2018 budget in March 2018 that leaves the EPA budget mostly intact (EPA Administrator Scott Pruitt wanted to cut the agency’s budget by 30%. Other environmental / energy agencies see budget increases.)
  • April – the UN’s International Maritime Organization adopts a climate plan to lower emissions from container ships, bulk and oil carriers, by at least 50% below 2008 levels by 2050.
  • Also in April — In the key industrial State of Ohio, the Public Utilities Commission approves AEP’s Electric Security Plan – this, EDF points out, will enhance and diversify the state economy, unlock millions in funding, provide customers with clean energy options and overall, will reduce pollution.
  • Next door, in April, the Illinois Commerce Commission approves the state’s Long-Term Renewable Resources Procurement Plan to have a pathway for electric utilities to produce 25% of power from renewable sources by 2025 and put incentives in play for development of wind and power.
  • April — EDF President Fred Krupp gives a TED Talk, outlining the plan to launch methane-detecting satellites in orbit above Earth to map and measure oil and gas methane emissions. The data and information gathered will help countries and companies spot problems, identify savings opportunities and measure progress.
  • April sure was a busy month – Canada issued policies to cut oil and gas emissions by 40% to 45% at new and existing facilities. This was part of a pledge made in 2016 (when President Obama was in office) for the USA, Canada and Mexico to decreased such emissions in North America by that amount by 2025.
  • On to May – and recently-elected New Jersey Governor Phil Murphy – a former Goldman Sachs exec – signed into law the plan to cut GhG emissions by almost half by 2030 (hey, that’s twice what the Clean Power Plan would have required!). The Garden State will require 50% of NJ electric needs to be met from renewable sources.
  • And on to May – ExxonMobil announced plans to reduce oil and gas methane emissions by 15% and flared gas volume by 25% — worldwide – by 2020.

Yes – a remarkable year, kicked off on June 1st 2017 by a vindictive head of state set on reversing the significant progress made under his predecessors.

But many individuals, companies, investors, civic organizations, NGOs proclaimed: We are still in.  The movement represents city halls, board room, college campuses, investors, and more…interests representing US$6.2 trillion (one-sixth of the entire American economy) have signed on to the We Are Still In declaration — https://www.wearestillin.com/we-are-still-declaration

Have you?

Notes:

The New York Times story by Michael Shear, June 1 2017 is at: https://www.nytimes.com/2017/06/01/climate/trump-paris-climate-agreement.html

The American Institute of Physics info on NASA, embrace of climate change consensus: https://www.aip.org/fyi/2018/bridenstine-embraces-nasa-science-climate-change-consensus

We Are Still In information at: https://www.wearestillin.com/

As the Global Demand for Palm Oil Rises, There is More Focus on the Growing Areas – and on Industry Behaviors Such as Deforestation

By Hank Boerner – Chair, G&A Institute

Palm Oil is one of the world’s most popular vegetable cooking oils and in western nations is widely used as prepared food ingredients. Food industry interests promote the benefits: lower cholesterol levels, less heart disease, more Vitamins A and E, and much more, derived from the rich beta-carotene from the pulp of oil palms.

Palm oil also shows up in our detergents, shampoo, cosmetics, pizza slices, cookies, margarine — and even in biofuels. Palm oil is especially used for cooking in Africa, Asia and parts of South America and is growing in favor in other regions such as in North America.

The palm oil plantations are located in such regions of the world as Southeast Asia – and there the industry is linked to the downside of the beneficial consumer product: deforestation, degrading of flora and fauna habitat, abuses of indigenous peoples, and negative impact on climate change as old growth land and tropical forest is cleared to make way for oil palm plantations.

Stakeholder reaction resulted in the creation of “reliable No Deforestation, No Peat, No Exploitation” policies – the “NDPE”.

These were developed for certification (to buyers) by the Roundtable on Sustainable Palm Oil (RSPO) and adopted in 2013 and 2014 by numerous Southeast Asian palm oil traders and refiners.

The policies (spelled out as best practices) are designed to prevent clearing of forests and peat lands for new palm oil plantations. There are 29 company groups, reports Chain Reaction Research, that have refining capabilities and have adopted NDPE policies. (Climate Reaction Research is a joint effort between Climate Advisers, Profundo and Aidenvironment.)

“Un-sustainable” palm oil practices are an issue for investors, customers (buying the oil), companies with sustainable practices, and countries in which palm oil is grown and harvested.

According to a new financial risk report from Chain Reaction Research, major markets with customers that accept “unsustainable palm oil” include India, China, Pakistan and Indonesia.

One of the major centers of production is the huge – more than 3,000-miles wide — Pacific Basin archipelago nation of Indonesia (once known as the Dutch East Indies). Almost half of the world’s palm oil refineries are in Indonesia and Malaysia.

The Indonesian government (the Ministry of Agriculture) reacted to the NDPE policies and proposed changes to its own certification program – known as the “Indonesian Sustainable Palm Oil Standard” (ISPO) – that would appear to be presenting companies with pressure to adopt one or the other of the certifications.  (The ISPO policy focus is on reducing Greenhouse Gas Emissions and addressing environmental issues.)

For Indonesia, palm oil is a strategic product that helps the government to meet job creation and export market goals. “Small holders” account for more than 40% of production in the country.

“Evidence suggests that the need for edible oil and energy will continue as populations grow, “Darmin Nasution, Coordinating Minister for Economic Affairs for Indonesia points out. “Land that can be utilized will decrease, so the question is how to meet those needs in the limited land area. Increasing productivity will be the key.”

Companies using the existing Indonesian ISPO certification were accused of human rights abuses and “land grabs” and so in January the government developed the new certification, which opponents claim weakens protection (the draft changes for the regulation removes independent monitoring and replaces “protection” with “management” for natural ecosystems).

Stranded Asset Risks

CDP estimates that global companies in the industry had almost US$1 trillion in annual revenues at risk from deforestation-related commodities. As the developed nation buyers looked carefully at their global supply chains and sources, “stranded assets” developed; that is, land on which palm oil cannot be developed because of buyers’ NPDE procurement policies. Indonesia and Malaysia have some of the world’s largest suppliers.

Western Corporate Reaction

Early in 2018 PepsiCo announced that it and its J/V partner Indofood suspended purchasing of palm oil from IndoAgri because PepsiCo — a very prominent global brand marketer — is concerned about allegations about deforestation and human rights were not being met.

Institutional Investors are busily identifying companies that source Crude Palm Oil (“CPO”) without paying attention to sustainability requirements, putting pressure on both sellers and buyers and perhaps pushing the smaller players to the sidelines. European buyers import CPO in large quantities to be used in biofuels.

The bold corporate names in western societies show up in rosters of company groups with refining capacity and NDPE policies, including Bunge, Cargill, Louis Dreyfus Company, Unilever, and Wilmar International. These are large peer companies in the producing countries (like IOI Group, Daabon, Golden Agri-Resources) are aiming for “zero deforestation” in their NDPE policies.

Other companies that source palm oil include Kellogg’s, Procter & Gamble, Mars, General Mills, Mondelez International, and other prominent brand name markets.

Your can check out the Chain Reaction Research group paper – “Unsustainable Palm Oil Faces Increasing Market Access Risks – NDPE Sourcing Policies Cover 74% of Southeast Asia’s Refining Capacity” at: http://chainreactionresearch.com/2017/11/01/report-unsustainable-palm-oil-faces-increasing-market-access-risks-ndpe-sourcing-policies

What About Exercise of National Sovereignty?

This situation raises interesting questions for developed nation brand marketers. If the government of Indonesia presses forward with the country’s own standards, should the purchaser in a developed country ignore or embrace the country standard? Instead of the Roundtable on Sustainable Palm Oil (RSPO) standard? What about “sovereign rights,” as in the ability for a sovereign nation to establish its own policies and standards governing the products developed within its borders?

As industry groups create their own standards and invite industry participants to embrace these (such as for product certification), corporations may find themselves bumping up against “nationalistic” guidelines designed to benefit the internal constituencies rather than “global norms” imposed from outside the country’s borders.

# # #

Responding to the streams of negative news coming out of Indonesia, Chain Reaction Research on April 26 reported that Citigroup has cancelled loans to Indofood Agri Resources and its subsidiaries. Citigroup will exit its overall relationship with Indofood other than specific financial relationships that are not related to the palm oil business, says the research organization.

The research firm said that labor and environmental violations by Indofood and other companies related to Anthoni Salim and his family have been documented. The web of companies: Salim and family own 44% of First Pacific, which owns 74% of Indofood.

In April a report commissioned by Rainforest Action Network Foundation Norway and SumofUS and prepared by Chain Reaction Research alleged deforestation of almost 10,000 hectares of peatland by PT Duta Rendra – which is majority owned, the report says, by Salim and PT Sawit Khatulistiwa Lestan, which is associated by Salim.

Notes:

As we prepared this commentary, the Danish Institute for Human Rights and The Forest Trust carried out a Labour Rights Assessment of Nestle’s and Golden Agri-Resources palm oil supply chain in Indonesia.  Nestle’s and GAR and going to share their own action plans in response to the findings and recommendations.

For The Roundtable on Sustainable Palm Oil information: https://www.rspo.org/

There is information from a recent conference in Jakarta for you at: https://www.scidev.net/asia-pacific/forestry/news/science-can-keep-palm-oil-industry-sustainable.html

The Indonesian Government ISPO information is at: http://www.ispo-org.or.id/index.php?lang=en

General Mills Statement on Responsible Palm Oil Sourcing is at: https://www.generalmills.com/en/News/Issues/palm-oil-statement

Rainforest Action Network information is at: https://www.ran.org/palm_oil?gclid=EAIaIQobChMIuJyBg97i2gIVE1mGCh3A-QMYEAAYASAAEgKZePD_BwE#

The Union of Concerned Scientists information is at: https://www.ucsusa.org/global-warming/stop-deforestation/drivers-of-deforestation-2016-palm-oil#.WudvOKjwbAw

A U.S. Corporate Leader Shares His Thoughts on Sustainability – EDF’s Fred Krupp Interviews Tom Linebarger of Diesel-Maker Cummins Inc.

By Hank Boerner – Chair, G&A Institute

Fred Krupp is head of the two-million-member Environmental Defense Fund (EDF), a leading global not-for-profit that creates “transformational solutions” to address environmental problems by linking economics, law, science and innovative private-sector partnerships.  Since the mid-1980s he has been a very vocal thought leader, activist, and champion for change on various climate change issues, striving to use the power of the marketplace to protect the global environment.

Krupp has worked with many business leaders over the years and today characterizes Tom Linebarger – the Chair and CEO of Cummins, Inc. (leaders in diesel engine manufacturing) – as one of the forward-thinkers on sustainability and environmental innovation.  Krupp interviewed the CEO for Forbes, our Top Story for this issue.

Cummins Inc. has publicly committed to set science-based targets for reducing GHG emission across the company’s supply chain, which would help to address stakeholder concerns and help contribute to the future well-being of communities in which the company operates.

Cummins’ innovation efforts will also help to make a difference in terms of the company’s products (such as vehicle and stationary engines), its facilities and the supply chain.  Diesel power is central to the progress of the economy, says Linebarger, moving vast amounts of products and supplying power just about everywhere — and is a factor in driving wealth creation.  While doing this, the Cummins’ products also impact the environment and so the intense focus on corporate sustainability for the company.

Here are some welcome words for us in the Trump/Pruitt era of tearing up environmental rules and regulations and denying the impacts of climate change:  “Regulations play an important role in protecting the environment, and we’ve worked to make sure we’re a positive contributor to the effort,” the CEO explains.

Cummins also pushes industry peers and its suppliers to support tough, clear, science-based, enforceable regulations that are good for the industry.

Also, welcome to other champions of corporate sustainability – this making the business case statement:

“There’s no question that our focus on environmental innovation and leadership has caused our company to grow, to become more profitable, and to increase our appeal with big companies that would like to partner with us because of our leading technologies.”

Cummins (NYSE: CMI) is headquartered in Columbus, Indiana; the company designs manufactures, sells and services diesel and natural gas power engines; and, alternative-fueled electrical generates sets, “emission solutions”, and components for electronics and fuel systems. The company has 58,600 employees and serves customers in 190 countries – sales are US$20 billion (2017).

Disclosure:  The G&A Institute team members were instrumental in 2000 in assisting diesel power and vehicle manufacturers in organizing the Diesel Technology Forum, a not-for-profit advocacy dedicated to raising awareness about the importance of clean diesel engines, fuels and technologies.  Cummins was instrumental in the concept of and the founding of DTF and over the years since has been active in advancing the mission. Our former colleague Allen R. Schaeffer is the organization’s Executive Director.

You’ll want to read and share our Top Story this week with very encouraging comments about sustainability from a respected U.S. corporate sector leader.

Top Stories

Cummins CEO Says Innovation, Sustainability, And Regulations Are Good For Business
(Thursday – April 19, 2018) Source: Forbes – As head of the largest independent maker of diesel engines and related products in the world, Tom has set lofty environmental goals for Cummins, including cutting energy intensity from company facilities by a third by 2020.