In Focus: Climate Change Challenges for Financial Sector Players and the Companies They Provide With Capital – Measuring and Managing the Risk

August 2 2020

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

Some encouraging developments for you from the (1) capital markets community and (2) the corporate sector and (3) the combining of forces of each.

To start: Morgan Stanley has become the first major U.S. bank to join the Partnership for Carbon Accounting Financials and will begin measuring and disclosing the emissions generated by the businesses that it lends to and invests in.

Big deal, we say:  the sources of capital telling the world what the companies they lend to, invest in, are emitting…whether the company discloses that or not. 

PCAF is a global collaboration of financial institutions aiming to standardize carbon accounting for the financial sector.

The work of the partnership could profoundly change the way that financial institutions and their corporate clients address climate change issues (and disclose the result of same).

Morgan Stanley will lend its insights and expertise to help the coalition development global standard that can be used by all financial institutions to measure and reduce their own climate impact.

In addition to measuring its Scope 3 emissions – including financed emissions, defined by the Greenhouse Gas Protocol as Category 15 emissions.

Morgan Stanley’s announcement comes a year after the institution released a report outlining the financial benefits of decarbonization for businesses — with an earnings potential between US$3-to-$10 billion.

Also involved in the standards project on the Steering Committee: ABN AMRO, Amalgamated Bank, ASN Bank, Tridos Bank, and the Global Alliance for Banking on Values (GABV).

Today there are 66 institutions involve in the partnership, with $US5 trillion-plus in collective AUM. The partnership is planning on releasing the standard at the COP 26 global gathering.

The Morgan Stanley Institute for Sustainable Investing builds “finance solutions” that seek to deliver competitive financial returns while driving positive “E” and “S” solutions.  Audrey Choi is the bank’s Chief Sustainability Officer and CEO of the Institute.  More information is at: www.morganstanley.com/sustainableinvesting.

And here is the encouraging news from the corporate sector and the investor service provider community:  Microsoft (MSFT) is teaming with MSCI – the global investment community advisor on risk and ESG issues – to “accelerate innovation among the global investment industry”.

MSFT’s cloud and AI technologies along with MSCI’s portfolio of tools will be aligned to “unlock innovations for the industry and enhance the ESG ratings agency’s products, data and services”.

The collaboration begins with migration of MSCI’s products onto the Microsoft Azure cloud platform with Index and Analytics solutions and then on to the MSCI ESG products and ratings.

Going forward MSFT and MSCI will explore possibilities to further drive development of climate risk and ESG solutions for investors and corporates.

Third item:  Microsoft is aiming to become a Zero-Carbon Enterprise.  The company announced a “suite” of  initiatives to wipe out the carbon “debt” acquired  — get ready – over the lifetime of this tech company.  Every bit of carbon “debt” ever generated over several decades!

MSFT is joining forces with Maersk, Danon, M-Benz, Natura, Nike, Starbucks, Unilever and Wipro to create a new coalition – Transform to Net Zero. (Environmental Defense Fund/EDF is a founding member).  MSFT peer/competitor/fellow transformation of society company Apple is aiming to have net-zero impact on every product in the next 10 years.

These Top Stories are of a “fit” – as financial institutions develop new approaches to meeting climate change challenges the Global Carbon Accounting Partnership moves forward to bring a new standard to the financial services community.

And the MSCI / MSFT collaboration will be developing tools and resources that align with the standards effort.  MSFT itself is moving toward to become Zero Carbon tech company.  Do stay tuned!  Some details for you….

Morgan Stanley Becomes First U.S. Bank To Measure Carbon Footprint Of Its Loans (Source: OilPrice) Morgan Stanley has become the first U.S. bank to start measuring the emissions generated by the businesses it lends to and invests in, the bank said in a press release.

The news from Microsoft and MSCI on their collaboration:
https://www.msci.com/documents/10199/b8849622-7a48-1901-123e-29d39cca3814

As we prepared the above perspectives in our weekly newsletter, more related news came in:  Stefanie Spear, our colleague at As You Sow, alerted us that Bank of America and Citi Group joined Morgan Stanley in the commitment to publicly disclosure carbon emissions from loans and investments. (The two institutions are part of the Partnership for Carbon Accounting Financials, a global framework for financial institutions to measure and disclose the emissions from their lending and investment portfolios.)

And one more for you – Polly Ghazi of Triple Pundit (part of 3BL Media) prepared an excellent roundup of recent news that includes Morgan Stanley, BlackRock and Boston Consulting.  (And thank you to her for the mention of the G&A Institute’s S&P 500 research results on corporate reporting.)

We present 3BL media roundups in the weekly G&A newsletter, Sustainability Highlights — here is Polly’s post: https://www.triplepundit.com/story/2020/sustainability-reporting-new-highs/121006

America’s Tech Giants Address Climate Change, Global Warming With Bold Initiatives in 2020

August 12 2020

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

It’s global warming, you say?  Well, we have to say that it certainly is a hot summer in many parts of the world (north of the Equator) and the U.S. National Hurricane Center has a large list of names for the storms to come.

That’s Arthur and Bertha on to Vicky and Wilfred – 21 named storms so far, with “Isaias” whipping through as tropical storm and causing hundreds of thousands of homes and business to lose power this past week in the NY region. And it was not even a full hurricane in the U.S. Northeast!

And during this week, many communities in the American Midwest lost electric power. Not be provincial here – in the Eastern North Pacific there are storms to come named Amanda and Boris on to Yoland and Zeke.

For the Central Pacific? – Akoni and Ema, and Ulana and Wale are possibly coming your way.  So, can we say this is an effect of global warming or not?  Let’s say…yes, with a number of contributing factors.

Like steadily-rising Greenhouse Gas Emissions trapping heat in the atmosphere.

Think of methane (CH4), carbon dioxide (CO2), nitrous oxide (N2O-or-NOX), ozone, and a host of chlorofluorocarbon gasses steadily drifting upwards into the atmosphere and over time, changing weather patterns to create more super storms. Think: tornadoes, floods, more torrential rain coming down (hello, Houston and New Orleans!)

In the U.S.A. major companies have been steadily addressing their carbon emissions and putting in place important programs to reduce emissions, such as by adding renewable energy sources, and taking small and larger steps to conserve electric power use, and more.

But if you are a company using a lot of power…and constantly adding power…there are ever more challenges to address.

That’s the case as the world continues to move online for many activities in business, education, healthcare, investing, shopping, and more.  And coming online — we are seeing more AI, robotics, approaches to develop self-driving vehicles, machine-to-machine learning, more and more communication…5G systems…all coming our way.  All needing more power generated.

Over the past few days some of the major U.S.-headquartered, powerhouse tech firms have been announcing their plans to address GHG emissions…and in the process the companies have or are putting significant strategies and initiatives in place to protect the planet and do their part of address climate change.

Eight companies launched the Transform to Net Zero coalition, to accelerate action toward a net zero carbon economy. (The firms are A.P. Moeller-Maersk, Danone, Mercedes-Benz, Microsoft, Natura & Co, Nike, Starbucks, Unilever, Wipro, along with the Environmental Defense Fund.)

The examples for you this week in our Top Story choices are familiar names in the U.S. corporate sector: Microsoft, Apple, Facebook, Alphabet/Google.  Read on!

Top Stories

Progress on our goal to be carbon negative by 2030
(Source: Microsoft)
By year 2030, MSFT intends to be carbon negative and by 2050, will remove from the environment more carbon than the company ever emitted since its founding.  The company launched a new environmental sustainability initiative in January 2020 focused on carbon, water, waste and biodiversity.

Microsoft commits to achieve ‘zero waste’ goals by 2030
(Source: Microsoft)
By the year 2030, Microsoft will divert at least 90% of the solid waste headed to landfills and incineration from its campuses and datacenters, manufacture 100% recyclable Surface devices, use 100% recyclable packaging, and achieve 75% diversion of construction and demolition waste for all projects.

Facebook to buy 170MW of windpower in landmark renewables deal 
(Source: Power Engineering International)

Renewable energy developer Apex Clean Energy has announced a power purchase agreement (PPA) with Facebook for approximately 170MW of renewable power from its Lincoln Land Wind project in the US state of Illinois, making the social media giant Apex’s largest corporate customer by megawatt.

Apple commits to be 100 percent carbon neutral for its supply chain and products by 2030 
(Source: Apple)

Already carbon neutral today for corporate emissions worldwide, Apple plans to bring its entire carbon footprint to net zero 20 years sooner than IPCC targets. That “footprint” includes the company’s supply chain and products… every device sold! (Apple is already carbon neutral for its global corporate operations.)

Alphabet issues sustainability bonds to support environmental and social initiatives
(Source: Google)

As part of a $10 billion debt offering, Alphabet has issued US$5.75 billion in sustainability bonds — the largest sustainability or green bond by any company in history. During the past three years Google has matched the company’s entire electricity consumption with renewables…and has been carbon neutral since 2007.

COVID-19 — And the Global Fashion Industry – Dramatic Impacts – And Good News

By Jesse VelazquezGRI Report Analyst Intern at G&A Institute

Good news in the midst of bad news — emblematic of the COVID-19 crisis environment. 

#7 in the Series – Excellence in Corporate Citizenship on Display in the Corona Virus Crisis

The impact of the coronavirus on the fashion industry has been felt at the height of the season’s fashion month with fashion show events from Giorgio Armani, Prada, Gucci, and Versace, to name a few, cancelled across the world.

In the midst of the bad news there is also welcome news of excellence in corporate citizenship from the industry.  We bring you this wrap-up.

Sharp decreases in sales and revenue loss with global brands like Nike and Uniqlo closing store locations and experiencing major supply chain disruptions with many factories operating out of China, Italy, and France having to close.

The troubling news:

Some retailers, such as Victoria’s Secret, have also had to temporarily close their e-commerce sites.

Reported earnings are stark across the board, with names like Ralph Lauren reporting a decrease in sales by an estimate of US$55 to $70 million dollars.

Capri Holdings — which owns Versace, Michael Kors, and Jimmy Choo brands — experienced a revenue loss of US$100 million dollars, according to CNBC.

Fashion retailers took major hits in the stock market with companies like Gap Inc., down 11.8%; J.C. Penny, down 12.1%; and Nordstrom Inc., down 11.4% (to name but a few).

Smaller fashion brands are unable to weather the financial losses of the pandemic. Los Angeles fashion brand Bldwn had to go directly into Chapter 7 bankruptcy, liquidating assets and letting go of its entire staff.

There are others that have also had to file Chapter 7. Chanel, a major fashion house, had to halt its productions in Italy, France, and Switzerland for the next 2 weeks — but announced its workers will still be paid.

Looking Creatively At the Way Forward

In the midst of all the turmoil, the fashion industry is looking for creative ways to move forward, such as staging fashion shows on Facebook Live and stepping up their philanthropic efforts in their impacted communities.

The Good News
Here are just some of the contributions to COVID-19 relief from the global fashion industry:

Giorgio Armani has donated 1.25 million euros to hospitals and institutions in Italy, and Versace contributed about $144.000 to the China Red Cross Foundation.

LVMH — which owns Dior, Fendi, Louis Vuitton, and Givenchy — is using its perfumes and cosmetics division to produce and distribute hydroalcoholic gel (free) for French hospitals. They also announced that they will be supplying French authorities with more than 40 million face masks in collaboration with a Chinese manufacturer.

Ralph Lauren pledged $10 million dollars to be split among World Health Organization (WHO) COVID-19 Solidarity Response Fund and CFDA’s “A Common Thread” project, among others.

Gucci is donating 2 million euros to COVID-19 efforts. This is split between the Italian Civil Protection Department (Gucci is based in Italy), and through a matching Facebook campaign for the WHO COVID-19 Solidarity Response Fund. Gucci also pledged to make more than 1 million protective face masks.

Nike had announced that it will donate $15 million dollars in COVID-19 relief efforts in communities both in the US and abroad where Nike employees live and work. It has also recently announced that it is prototyping a face shield to help protect healthcare professionals.

GAP Inc. announced that it will use its factories to make gowns, masks, and scrubs for healthcare workers.

Prada is one of the latest high-end fashion brand to announce that they will produce 110,000 masks by April 6th..

As businesses are able to reallocate their personnel, assets, and networks to support the communities that support them in times of crisis, there are strong signals that the private sector has the capacity to not only transform business to be more resilient to change, but also our communities, and society.

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Note: Along the lines of this wrap-up, Hank Boerner highlighted Estee Lauder’s actions in the Excellence in Corporate Citizenship Series on Display in the Coronavirus Crisis blog –  on March 25, 2020.

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Jesse Velazquez is a GRI Report Analyst Intern at G&A Institute. He’s a career managers in retailing with leading organizations and stepped down from his management role to pursue a degree in Environmental Sustainability (full-time) and now analyzing corporate sustainability / responsibility disclosure & reporting at G&A.

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G&A Institute Team Note
We continue to bring you news of private (corporate and business), public and social sector developments as organizations in the three societal sectors adjust to the emergency.

The new items will be posted at the top of the blog post and the items today will move down the queue.

We created the tag Corporate Purpose – Virus Crisis” for this continuing series – and the hashtag #WeRise2FightCOVID-19 for our Twitter posts.  Do join the conversation and contribute your views and news.

Send us news about your organization – info@ga-institute.com so we can share.   Stay safe – be well — keep in touch!

Is There a Trend of Greenwashing in the Fashion Industry?

By Reilly Sakai – Sustainability Analyst at G&A Institute

Despite being identified by some as one of the top contributors to impact on society’s environmental and social issues, on close inspection we could say that the fashion industry continues in 2020 to lag behind other sectors when it comes to a close review of the industry’s sustainability efforts.

The positives: Some major apparel industry players have or are attempting to create strategies and initiatives to reduce plastic and improve the sustainability of their supply chain.

However, in reviewing industry performance overall, it can be difficult to parse through which initiatives are actually making a difference — and which are simply an example of greenwashing, especially given the lower rate of disclosure of ESG emissions by prominent companies’ reporting.

Solutions? What Steps To Be Taken?

So, we can ask, what steps must be taken now — both at the company and the consumer level?

We can ask this question: Is it possible for an industry that so depends on continuous consumption of its products (clothing) to become more sustainable?

The fashion industry is reported to be responsible for more carbon emission than all international flights and maritime shipping combined — “producing 10 percent of all humanity’s carbon emissions” (source: UNEP, 2018).

The apparel industry is also the second-largest consumer of the world’s water supply — after fruit and vegetable farming, which can be very intensive in terms of water use (source: Thomas Insights, 2019).

And, among the challenges, it’s reported that up to 85% of textiles end up in landfills rather than being recycled or upcycled (UNECE, 2018).

Between 2000 and 2015, clothing sales increased from 50 billion units to over 100 billion units, while utilization of clothing (the average number of times a garment is worn) dropped 36% during the same timeframe (Ellen MacArthur Foundation, 2017).

These figures are nothing to scoff at as various sectors and industries move toward less water use; less waste to landfill; more recycling and re-use, among many measures adopted throughout industries.

Is the Fashion Industry Drive to Sustainability Slowing Down?

And yet, according to the Pulse of the Fashion Industry report from the year 2019, sustainability efforts in the industry appear to be slowing down rather than accelerating to address these issues.

In GRI’s Sustainability Disclosure Database, there are currently 248 organizations that fall in the textiles & apparel sector worldwide. Put that in perspective of the total 14,476 organizations in the database.

That’s less than 2% of reporting organizations in the textile & apparel sector. In the sector, there are just 80 GRI Standards industry reports, vs 4,089 GRI Standards reports in the database as a whole.

Given the rate at which the global fashion industry has been growing (before the coronavirus emergency) – more people, more apparel, more income, etc) — we might conclude that companies in the industry have simply not been doing enough to offset their well-charted detrimental environmental impacts.

So what to do now? We know that the fashion industry is important in terms of global economic impact and employment, and creativity – while also being a top contributor to waste, greenhouse gas emissions, water pollution, and an array of other negative environmental factors.

Incentives For Changing – Lacking

Today, there aren’t major economic or societal incentives in place for apparel companies to make real changes.

It’s going to take a lot of time and effort, not to mention considerable investment, to switch factories in which clothes are produced and polluting or violating human rights and so on (to address key ESG issues).

And it’s also quite difficult to have real transparency at every level of the apparel and footwear global supply chain to help to ensure a more sustainable production process.

Consumer Tastes – May Make a Difference. Maybe.

Moreover, while many consumers are now starting to buy what they believe to be the more sustainable products in many categories including fashion, very few consumers are apparently willing to pay more for them — or have the time or means to investigate every company’s sustainability initiatives and track record before making their purchase (Source: Pulse of the Fashion Industry, 2019).

Since it’s so much quicker and cheaper to do, companies instead may turn to marketing messaging that tells their customers that they are working towards a more sustainable future — without actually doing much or even anything in reality.

What Leading Companies Are Doing – the Positives

There is good news.  The “we are sustainable” message has begun to sell well and customers have been moving to certain apparel brands that are promoting a sustainable vision — without the buyer being able to (at point-of-sale) fact-check a company’s claims. That is the reality of at-market sales.

We can begin by taking a look at Everlane, which touts “radical transparency,” but doesn’t actually divulge the name of the factories in which its garments are produced.  So we don’t know what is going on there.

Patagonia, on the other hand, is considered best-in-class, offering repair and buyback programs in order to promote a circular economy, and has a multitude of policies and systems in place to ensure they’re doing everything they can to protect the environment and people who work at or interact with the company.

Nike, similarly, has done a lot to improve their supply chains over many years, using innovation as a driver for sustainability.

Rather than increasing factory audits to ensure that workers are wearing protective gear, Nike engineered a non-toxic glue so protective gear is no longer needed.\

Nike’s flyknit sneaker vastly reduced the amount of material needed to construct a shoe, meaning lower costs and less waste.

Other brands, from Adidas to Puma, have followed suit.

On the luxury end, Eileen Fisher has been a staple of sustainable clothing for decades, sourcing environmentally friendly materials, offering a buyback program, upcycling old materials into new garments, and sharing the wealth with all of her employees by offering a comprehensive ESOP.

Looking to the Future to Protect the Planet

With our Planet Earth’s environmental situation growing ever more dire, it is critical for the fashion industry — now! —  to encourage and make major changes — but convincing individual corporate leadership that this is a worthwhile investment is no small feat.

Because of the higher costs typically associated with implementing sustainability initiatives (or at least the perception of higher cost), overhauling a company’s entire supply chain is quite challenging.

Many fashion companies do not find it feasible in this competitive pricing environment to raise their prices or cut into their margins, especially when they continue to see the industry growing at such a swift pace year-over-year.

Perhaps more and more companies will consider Nike’s successful approach. That is, increasing spending in R&D as opposed to marketing, which has major potential to decrease costs and increase margins in the long-term, while improving their ESG efforts at the same time.

In my opinion, it’s going to probably take some form of public sector intervention or a mass consumer revolution or some similar dramatic action to influence the bulk of the fashion industry to move toward a truly sustainable future – and one of those things might happen sooner than later.

The leaders in corporate sustainability in the industry will be the major beneficiaries when the tide turns.

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Reilly SakaiReilly Sakai is a sustainability analyst at G&A Institute; she began her work with us as one of our outstanding analyst-interns in grad school. She is completing her MBA program in Fashion & Luxury at NYU Stern School of Business, where she is specializing in Sustainable Business & Innovation, and, Management of Technology & Operations. She has been working with NYU’s Center for Sustainable Business on an independent study that explores environmental sustainability in apparel manufacturing.

“The Girl Effect”: Empowering Girls in the Developing World

By: Selene Lawrence
GRI Data Partner Report Analyst, Governance & Accountability Institute

 

Selene Lawrence Headshot

In 2008, the Nike Foundation channeled their foundation’s experience in the developing world to take part in a new empowerment and education initiative called “The Girl Effect”. The project was created in partnership between Nike and the NoVo Foundation, which searches for sustainable, bottom-up approaches to promote social and economic development. It is co-chaired by Jennifer and Peter Buffet, as well as the United Nations Foundation and Coalition for Adolescent Girls.

The Girl Effect targets vulnerable adolescent girls in the developing world by using funding, awareness and volunteer work to address and uproot the stem of poverty and inequality. The Girl Effect focuses on education, healthcare, and policy to change the lives of millions of young girls threatened by adolescent pregnancy and the debilitating effects poverty. The approach is multi-faceted; the initiative operates by reaching out to NGO’s, volunteers, policy makers, donors and community activists to spread awareness and attract the necessary partners they need to make a difference.

Monetary donations to The Girl Effect from corporations or individuals can be designated to a variety of projects that they either support or have created. To encourage donations the foundation suggests: “Send a girl to school”, “Help her fight a legal case”, “Give her a microloan” or “Start the Girl Effect”. The organization has protocols in place to start the process.

The Nike Foundation’s projects are impressive in their range of approaches. Examples of their twelve innovative, girl-focused projects include programs for Uganda’s adolescent girls which a US$ 30 donation provides 3 washable feminine hygiene kits that girls can utilize for up to 3 years, and a US$ 50 donation provides 250 health and education manuals to girls participating in Teen Girls Workshops throughout the year.

In Zimbabwe, US$ 60 will provide 10 orphaned girls training about their legal rights. In Cambodia, a program has been established that empowers girls rescued from sex slavery where a range of donation levels gives girls their own jewelry making kit to provide income and the capital to provide medical examinations. A US$ 140 dollar donation covers tuition, housing, and medical care for two months.

The Teen Mother Empowerment Program in Cameroon will use a US$ 100 donation to cover the materials and logistics for one group of teen mothers to obtain a microloan. Not only are young girls extremely vulnerable, but they also represent the future and their programs in early education, such as providing pre-schooling for girls’ children in Ghana, foster awareness and education at an early age.

These examples are just a fraction of their donation-based programs which are extremely impressive in the scale, variety and organization of programs that are at the forefront in tackling girls’ issues in the developing world.

Although The Girl Effect is Nike’s biggest initiative with the widest array of partners and networks, the Nike Foundation also created “Girl Hub” in collaboration with the U.K. Department for International Development (DFID) in 2010. Girl Hub actively engage adolescents in Ethiopia, Nigeria and Rwanda in encouraging participation in family planning, outreach, and resource planning. This work, along with The Girl Effect is setting-up the empowerment of young girls on a local level with the resources essential for development.

Through Girl Hub they have created a radio-drama program in Ethiopia called Yenga (ours). The broadcast has a program with characters that reflect the lives of so many of its listeners, young girls dealing with and overcoming violence, teenage marriage and pregnancy, staying in school etc. Immediately following Yenga is a talk show that hosts recognized journalists and artists who address the issues presented in the drama. This is an exciting, actively engaging way for young, isolated and impoverished girls to gain confidence and foster independent ideas.

Yenga has produced a music video for a song in the show called “Abet”, which translated means: We Are Here. This video has been viewed 500,000 times in Ethiopia, which The Girl Effect proudly states is the fifth most watched video in the country. Permeating the minds of young girls as well as providing the resources and outlets to gain resources is the spark towards change.

In 2013 The Girl Effect produced the official “Girl Declaration” in collaboration with the development organizations with whom they partner. This declaration incorporated the input of 508 impoverished girl voices from around the world. The declaration has goals, targets, and principles as well as individual stories that map out the goals of The Girl Effect and provide a framework for The United Nations and other organizations to address the problem. UN secretary-general Ban Ki Moon publicly backed the declaration stating: “To achieve meaningful results, we need fresh solutions to girls’ education challenges and we must heed the voices of young people.” The Girl Declaration has demanded and received attention from the political world to aid the change that the Nike Foundation and their global partners seek to achieve.

In October 2013 The Girl Effect, as well as multiple foundations that work alongside Nike, promoted the second annual International Day of the Girl (IDG). This special event emphasized the continued need for prioritizing young girls in the development agenda.

Targeting communities and individuals though education, culturally relevant and engaging economic initiatives has been the breakthrough in modern sustainable development theory, and Nike has used their advantages to make headway in the field. Nike is putting young girls as a priority on the path towards a healthier and independent sustainable global community.

About the Author: Selene Lawrence is a GRI Data Partner Report Analyst at Governance & Accountability Institute (the exclusive GRI data partner in the US, UK, and Ireland).  While analyzing Nike’s sustainable business report, a GRI-G3 Application Level B report, she came across this wonderful program. She is also an Undergraduate student at Hunter College, City University of New York, and expects to graduate in Fall 2014. Selene is using her experience at Governance & Accountability Institute to gain insight in applying sustainability to the corporate world and improving transparency.

Visit http://www.girleffect.org/ to explore their programs, watch videos and find ways to get involved.

Watch “Abet” here: https://www.youtube.com/watch?v=DjqCEZO04yc