Recycling – The Circular Economy: Admirable Efforts, With Significant Challenges As The Efforts Expand & Become More Complex for Businesses

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

In these closing days of the year 2018, of course, we’ll be seeing shared expert perspectives on the year now ending and a look into the new year, 2019.  Sustainable Brands shared one person’s perspectives on three sustainability trends that are gaining momentum heading into 2019.

The commentary is authored by Renee Yardley, VP-Sales & Marketing of Rolland Inc., a prominent North American commercial & security paper manufacturer established in 1882. The company strives to be an environmental leader in the pulp and paper industry. A wide range of fine paper products is made using renewable energy, recycled fiber, and de-inked without the use of chlorine.  Rolland started making recycled paper in 1989 and adopted biogas as an energy source in 2004. The company is privately-owned and headquartered in Quebec, Canada.

The trends the author explains, do of course, affect users of all types of paper products — but also are useful for businesses in other sectors & industries.  He sees:  (1) a shifting of global recycling mindsets and in the circular economy; (2) more open collaboration and partnerships for impactful change; and (3) the need for more measurement and efforts to quantify impact.

Rolland is a paper supply company and so there is a focus on recycled (post-consumer) paper, fiber, forests, the recycled paper process, moving toward zero waste, municipal recycling in North America, and so on.

On recycling:  we are seeing reports now of problems arising in the waste stream; in the USA, municipalities are calling for a reduction of waste and automating processes (to help reduce costs).  There are new on-line marketplaces as well for buying and selling recovered items.  The “market solution” is a great hope for the future as we continue to use paper products (we are not quite a paperless society, are we?).

Part of the issues recycling advocates are dealing with:  China is restricting the import of recyclable materials (think:  that paper you put at curbside at home of business).  Consumers can be encouraged to reduce consumption but paper is paper and we all use it every day – so new approaches are urgently needed!

That leads to the second trend – developing and leveraging partnership & open collaboration:  Yardley writes that collaboration across the spectrum of an organization’s stakeholders can help to address supply-chain wide sustainability if an organization can “understand the wider system” it is operating in (citing Harvard Business Review).  And, if an organization can learn to work with people you haven’t worked with before.

Rolland, for example, leverages biogas as a main energy source, partnering with a local landfill to recover methane (since 2004).  This trend is on the rise, with the EU biogas plants expanding by 200% (2009-2015).

And then there is Measure and Manage:  Environmental measuring and reporting is an important part of a company’s sustainability journey – at the outset and continuing and at G&A Institute we stress the importance of reporting year-to-year results in a standardized format, such as in a GRI Standards report  — most important, including a GRI Content Index.

At the Sustainable Brands New Metrics conference in 2018, SAP explained that organizations integrating ESG objectives see higher employee retention, and minimizing of risk for investors.

Renee Yardley’s commentary is our Top Story choice for you this week – do read it and you’ll find excellent examples of how companies in various sectors (Ford, Microsoft, Starbucks, Patagonia, Unilever) are dealing with their sustainability commitments in the face of challenges posed.

Click here for more information on Rolland and its environmental / sustainability efforts and products.

 

This Week’s Top Story

Three Sustainability Trends Gaining Momentum for 2019
(Friday, December 14, 2018) Source: Sustainable Brands – In the spirit of looking ahead to 2019, we’ve identified three important societal trends for 2019, relating to sustainability in business…

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.

The Bangladesh Garment Factory Workers Tragedy — and Investor and Corporate Response Five Years On

By Hank Boerner – Chair, G&A Institute

We are five years on from the Rana Plaza “Savar” five-story factory building collapse and fire that killed more than 1,000 garment workers in Dhaka (Dacca), the crowded capital city of Bangladesh. (The accident was on April 24, 2013). In the ashes and debris there were the labels of prominent developed nations’ apparel marketers. Reputations were at stake — “Reforms” discussions were immediately underway in Europe and North America.

The Europeans moved on with the “Bangladesh Accord on Fire and Safety” while in North America brand marketers were moving on “The Alliance on Bangladesh Safety.”

Where are we today?

The Interfaith Center on Corporate Responsibility (ICCR) is keeping the accident and aftermath in the focus of the investment community and stakeholders. Yesterday ICCR (a coalition of 300-plus institutional members managing $400 billion AUM) and the group of allied investors issued a statement that helps to explain where we are.

About The Accord

Right after the building collapse, the Bangladesh Accord on Fire and Building Safety was created as a model for collective action by brand marketers and retailers that source in Bangladesh.

The Accord is now being extended (as the five-year deadline is reached in May) for another three years to complete the remediation of the 1,600 factories and companies that have not signed on (yet) are being invited by the investor coalition to become signatories and to implement the reforms spelled out in the Accord.

The Accord, the investors point out, is still serving as a model that can be adopted and applied to other at-risk countries and sectors.     

The Bangladesh Investor Initiative – led by ICCR – was a catalyst that brought together 250 institutional investors with US$4.5 trillion in AUM in May 2013 to urge a stronger corporate response to the Rana Plaza tragedy, including urging companies to sign on to the Accord.

The coalition invited companies to commit to strengthening local worker trade unions to ensure a “living wage” for all workers, and to engage with the Bangladesh government.

About the Accord:

  • Corporate signatories agree that global and local trade unions and NGOs could be invited to inspect the country’s apparel factories and implement reforms to protect workers.
  • Companies were asked for transparencies in publicly disclosing their suppliers – including those located in the nation of Bangladesh.
  • Worker grievance mechanisms and effective remedies (including compensation) should be put in place for all workers and their families.
  • The investor coalition argued that supply chain transparency is critical to safeguarding workers and employer responsibility – including information on sub-contractors.
  • Note that the Accord is legally-binding for signatories.

Making the Case

Lauren Compere, Managing Director of Boston Common Asset Management makes the case for companies: “Stakeholders, including investors, rely on transparency as a tool for evaluating corporate performance on a range of social, environmental and corporate governance issues. The Accord has been very transparent in requiring disclosure of each of the 1,600 companies it covers, which helps investors track progress. This is a ‘best practice’ that all companies need to implement, beginning with Tier One suppliers, then throughout their supply chain.”

Progress Report – 5 Years On

To date, 220 brands and retailers have signed on to the original Accord. Remediation plans have made 2.5 million workers in “Accord factories” have been made “meaningfully safer”. A steering committee made up of an equal number of brand and union representatives and a neutral chair from the International Labor Organization govern the Accord.

The Accord provided for in-depth health and safety training to personnel in 846 factories, reaching 1.9 million workers. A grievance process is in place; to date, there have been 183 worker complaints investigated and resolved.

Detailed information is required for each factory.

The Rana Plaza Donors Trust Fund has been established to compensate workers injured in the collapse and families of workers who were killed (note that Bangladesh has no national employment injury system). $30 million has been raised to date; companies sourcing garment/apparel work in the country were asked to contribute; 30 companies did so, along with several union funds and foundations. The ILO is the trustee and oversees distributions.

The investor coalition is pleased with the progress made to date – but stresses that there is much work still be done (therefore the 3-year extension is necessary). “The job of mediating all of the issue is far from done and we will continue to urge those companies that have not signed on to the 2018 Accord and its three-year extension to do so.”

The New Elements to the Accord

The 2018 Transition Accord has gathered140 signatory companies to date, with 1,332 factories covered. The new elements include:

  • Safety Committee & Safety Training at all covered factories;
  • Training and Complaints Protocol on Freedom of Association;
  • Severance payments for affected workers in factory closures and relocations.
  • Voluntary expansion of the scope to include home textiles; fabric and knit accessories;
  • Transition of Accord functions to a national regulatory body.

We’ll bring you updates as the Transition to the new Accord continues.

About the Nation of Bangladesh

Located in Southeast Asia, the People’s Republic of Bangladesh is the world’s 8th most populous country, according to Wikipedia (163 million estimated). It was once part of “British India” until East Bengal became part of the Dominion of Pakistan, was re-named East Pakistan and then became independent in the early -1970s. It is characterized as a “developing country,” one of the poorest, and trades with the USA, EU, China, Japan, India, and other nations. Per capita income was estimated at US$1,190 in 2014.

The largest industries are textiles and ready-made garments; leather-goods (footwear is the second largest in exports. Bangladesh is the second largest exporter of clothes in the world.

# # #

Notes / Information:

There’s more information for you on the ICCR web site: www.iccr.org

Information about the Accord: http://bangladeshaccord.org/

The Accord Update for April is at: http://bangladeshaccord.org/wp-content/uploads/ACCORD_FACTSHEET_Apr2018.pdf

There’s information for you in G&A Institute’s “To the Point!” management briefing platform:

https://ga-institute.com/to-the-point/a-big-year-2018-for-developments-in-corporate-sustainability-sustainable-investing-the-two-halves-of-the-great-whole-of-the-new-norms-of-capitalism/

CNBC in commenting on the five year anniversary (on April 24) noted the factories still pose a life-threatening risk, with 3,000 of 7,000 factories endangering the lives of low-paid garment workers (according to a New York University Centre for Business and Human Rights Study).

The story is at: https://www.cnbc.com/2018/04/24/bangladesh-factories-still-pose-life-threatening-risks-five-years-on-from-rana-plaza-disaster.html

The NYU report authored by Paul M. Barrett, Dorothee Baumann-Pauly and April Gu is at: https://static1.squarespace.com/static/547df270e4b0ba184dfc490e/t/5ac9514eaa4a998f3f30ae13/1523143088805/NYU+Bangladesh+Rana+Plaza+Report.pdf

Human Rights Watch also weighed in with “Remember Rana Plaza: https://www.hrw.org/news/2018/04/24/remember-rana-plaza

Mondelez International – Food & Beverage Marketers With Strategy of a “Call for Well Being” for Stakeholders — Colleagues, Suppliers, Farmers & Consumers

Executives of major consumer brand marketers are increasingly concentrating their focus on their sustainability and responsible business practices up and down the value chain.  Senior managements are paying attention to their global enterprise value chain, from beginning to end.

For food marketers, as example, that includes greater engagement with their partners at the beginning of the chain:  farmers, small growers and suppliers. And at the other end, the all-important consumer reaching for their product at the local supermarket.

For many large marketers, the beginning of the value chain is populated with growers and small “holders,” family farmers located in less developed countries, with small amounts of land, supplying important ingredients for their large customers’ products.

Around the Equator, in countries near “zero degrees” latitude, this especially includes cocoa growers and coffee growers. These small holders are concentrated in a dozen or so such nations as [for coffee] Ethiopia, Kenya, Indonesia, Colombia, Mexico, Ecuador, Brazil, and Costa Rica; and [for cocoa] some of those countries plus Cote d’Ivoire (Ivory Coast), Ghana, Nigeria and Cameroon.  For most food companies, countries like Madagascar (for vanilla, found in many food products) are also important production centers.

In the USA, consumers are paying more attention to the sources of ingredients in their food; the method of growing or raising food; conditions on the ground where ingredients are sourced; the treatment of farmers and growers at the source, and more.

Recently, Mark Bittman, prominent food writer and editorial commentator at The New York Times, described his surprise (and delight) at how rapid this rise in interest in “food origin” has been in recent years. (“When I began, nearly five years ago, food was not generally considered as serious a topic as it is now,” he wrote in September in his Sunday Times farewell column.)

Of significance:  Mark Bittman, in many of the news stories, commentaries and editorial page columns over the years, identified the major issues “facing us in the interwoven worlds of food, agriculture, nutrition and the environment.”  Food & beverage marketers are taking these issues into account as they create their sustainability strategies.

And as more retail customers raise concerns about these and other issues related to the food and beverages they consume, prominent brand marketers are paying close attention.  Companies are devising corporate sustainability strategies, operationalizing these, engaging with producers, and reporting on their achievements. (Often this is by publishing a sustainability progress report following the GRI framework, and reporting to CDP on emissions, water, supply chain, forestry practices, and other aspects of their operations, among various disclosure practices.)

Mondelez International – a Proactive Sustainability Journey

An example of corporate sustainability leadership by global brand marketers is Mondelez International (NASDAQ:MDLZ), headquartered in Deerfield, Illinois and marketing its products in over 165 countries.

The company’s “brand family” in the United States includes such well known products as: belVita and Chips Ahoy (biscuits), Dentyne & Trident (gum), Hall’s (lozenges), Triscuits, Wheat Thins, Premium and Ritz (crackers), and Tang (powder beverage);  Lu Petit Beurre (cookies), Mikado (cookies), Kinh Do (moon cakes), Stimorol (gum), and other brands that are well known in local markets; and, global brands favored by many consumers, such as Oreo cookies, and  Cadbury’s chocolate products. Many of these familiar brands date back a century or more.

The Company’s Core Values

The Mondelez International corporate management team is headed by Irene Rosenfeld, chair and CEO, and includes Robert Marques, EVP and president of North America operations.  The core values set in place by the team are built around these seven pillars:  (1) Inspire Trust; (2) Act Like Owners; (3) Keep It Simple; (4) Discuss/Decide/Deliver; (5) Tell It Like It Is; (6) Open and Inclusive; (7) Lead From Head and the Heart.

How do these thematics translate to the Mondelez International sustainability journey?  We chatted with Jonathan Horrell, MI’s director of sustainability (based in the UK at the Cadbury facility in Bournville) to learn more about MI. The company has a long tradition of taking a holistic view of its operations, he explains, and has structured its sustainability journey on four pillars that are high level strategic priorities:  (1) sustainability; (2) community; (3) mindful snacking; (4) safety.   The integration of these are summed up in the “holistic” and connected approachthe call for well-being.

Reporting on the Progress of the Journey

The company’s 2014 Call for Well Being Progress Report describes the specific goals related to the Mindful Snacking theme of the sustainability journey, and the progress made toward it at the end of 2014, with highlights. For example, on the goal of reducing saturated fat in products by 10 percent by 2020 – they noted more progress needed.  For increasing whole grains by 20% by 2020 — on target. (Since 2012, MI has increased whole grains by 23% across the entire global product portfolio, and has launched new whole grains products.)

Highlights are available at: http://www.mondelezinternational.com/~/media/mondelezcorporate/uploads/downloads/cfwb2014progressreportataglance.pdf

Concern for Developing Economies

Important ingredients for Mondelez products originate in developing countries, including cocoa and coffee (Note: The company was the world’s #2 coffee marketer.  In July, the company combined its coffee business with DE Master Blenders 1753 to create JACOBS DOUWE EGBERTS (JDE), now the world’s leading pure-play coffee company).

There are thousands of small [land] holders/ growers in the company’s supply chain, mostly located across the global Equatorial growing belt (such as in the West Africa region).  The company invests millions of dollars in community development, training, and smallholder assistance.

In these (and other regions), climate change issues are front-of-mind.  There is also the consideration for Mondelez with its factories around the world (i.e., carbon emissions, water usage, water disposal, etc.).

As many global companies are doing, Mondelez is looking closely at the new Sustainable Development Goals (SDGs) approved this fall at the United Nations.  Horrell explains that in terms of gender equality, for example, the work done with small holders includes assistance for the females involved in the growing communities.  The goal of eliminating poverty comes into play with the coffee and cocoa belt programs for suppliers.  And for the food safety SDG, Mondelez has long been focused on nutrition and food safety.

Stakeholder Engagement

Horrell notes that NGOs play an important role in providing advice and on the ground experience to Mondelez to help the company set strategies and calibrate its actions. For example, World Wildlife Fund has been of great assistance with advice on relations with growers of cocoa and palm oil.   Community-based agricultural associations are important partners in key areas.

As director of sustainability, Horrell’s mission is to embed sustainability throughout the business.  He is the lead in external engagements, and internally, is the point person bringing business units and functions into the company’s sustainability efforts.  His CEO is very involved in the sustainability journey, Horrell notes, and key members of the management team are involved and supportive, as well as the board of directors. (There is a board committee with sustainability responsibilities in the charter).

Among the company’s many recognitions, Horrell points to the Dow Jones Sustainability Indexes (DJSI) — Mondelez has been included in these important sustainable investing benchmarks for the past decade.

Mondelez International has a well-structured materiality process, says Horrell.  Engagement with stakeholders is a key element, including investors, customers and suppliers.  The materiality process began in 2012 and is regularly reviewed.

Another key element is lifecycle assessment (LCA). The company’s use of LCA to assess environmental impacts has resulted in an end-to-end approach across the whole product life cycle.  This requires establishing policies all along the value chain — upstream at the producer level, choice of ingredients, through factory operations, to marketing, distribution, to consumer relations – with a particular focus on raw material sourcing and manufacturing.

Jonathan Horrell’s Background

He joined Mondelez three years ago after a decade’s work with a dairy products chain and several years with Kraft Foods. Jonathan was director of corporate affairs for Kraft Foods in the UK and Ireland, and director of sustainability and global issues management. (In 2012, Kraft was spun off from Mondelez).  He comes from a farm family background, which prepares him well for his relations with small holders, he believes.  He began his career as a journalist (Accountancy Age, covering UK business, accountancy, finance) after graduation from University College, London (University of London).

Commenting on his work, Horrell says that he sees small steps in the company’s sustainability journey leading to significant positive change.   Putting a code of conduct in place for suppliers sends a strong signal as to MI’s expectations of its suppliers, and brings continuing improvements in such as areas as water quality, labor relations, solid waste reduction, and improved production of basic crops.  This is true, he explains, in MI’s palm oil and cocoa supply.

MI Chairman & CEO Irene Rosenfeld in her progress report message noted:  “When we began our journey three years ago, we set a high bar for ourselves — to create delicious moments of joy. To make that dream a reality, we knew we had the opportunity to grow our business by building a bright future for all of our stakeholders — colleagues, suppliers, farmers and consumers.”  That setting of the high bar resulted in the strategy of “Call for Well-Being.”

Movers & Shakers in Shareholder Activism — Watch the 2015 Proxy Season and ICCR

by Hank Boerner – Chairman, G&A Institute

For more than 35 years, the Interfaith Center on Corporate Responsibility (ICCR) has been in the forefront of pressing for changes and reforms in corporate policies, practices and behaviors. This is a coalition of 300 institutional investment organizations — mainly faith-based and “values-driven” institutions — directly managing US$100 billion in assets.

Members include major religious denominations, sustainable & responsible investing organizations, foundations, unions, colleges & universities, and social issue advocacies.

ICCR through its long0-term activism and corporate engagement — especially in proxy season and importantly, year-round — influences many billions of dollars more in AUM in the US and global capital markets.

Issues on focus for ICCR members in 2014 included:

Corporate Governance — a traditional/perennial set of concerns; this includes separation and chair and CEO positions, and independence of board members;

The Environment – especially global warming / climate change and environmental justice;

Food – access to nutritious food, ag & land use, use of antibiotics in meat animals, food & sustainability…and more; note that for ICCR, food issues include the impact of climate change on growing areas (such as flooding and droughts);

Global Health – access to medicines by people in less-developed economies is a long-standing concern of members, who over the decades have engaged with pharma companies change marketing practices;

Human Rights — increasingly in recent years the focus on corporate supply chain behaviors, policies, and actions has increased;

Water – this ties in to human rights and access to water is a key factor; also, the trend to privatization of water supply is an important focus;

Financial Services – responsible lending was in focus long before the major banks took on too much risk and led the nation into crisis with subprime lending shenanigans; as investors, ICCR members are focused on “risk” as much and perhaps more than many mainstream institutions.

Big issues for ICCR members in recent years includes the focus on corporate political spending (lobbying, contributions); and, strategies / policies / actions / disclosures (and especially lack thereof) on the part of companies in member investment portfolios.

Says the coalition:  “ICCR members advocate for greater transparency around how company resources are used to impact elections, regulations and public policy.”

ICCR through member organizations engages with corporate boards and managements to discuss issues of importance to members, who operate in “a multi-stakeholder collaboration.”  Typically, brand names among public companies are the enterprises engaged for discussion.  Changes made at the brand names will eventually affect (and result in change) for more companies in the industry or sector or geography.

At G&A Institute we have long had a collaborative relationship with ICCR and see [ICCR] actions as important sustainable investment leadership positioning by key institutional and individual investors on ESG issues — especially in the annual corporate proxy voting seasons.

Recently Al-Jazeera America network broadcast an informative segment featuring ICCR leadership –the program interviews feature Sister Pat Daly (leader of the Tri-State Coalition for Responsible Investment), Sister Barbara Aires (Sisters of Charity of Paterson NJ), and ICCR Chair Father Seamus Finn, OMI (Missionary of Oblates of Mary Immaculate).

Father Finn is a regular contributor to The Huffington Post — his very readable posts are at: http://www.huffingtonpost.com/rev-seamus-p-finn-omi/

Sister Pat, the segment reported, filed 20 proxy resolutions and had corporate engagement meetings in 2014.

The segment is available on line at:  https://ajam.app.boxcn.net/s/7bkt7oc4mpymnfuow3g3

Worth noting:  In December, JP Morgan Chase released a report on changes in how the company does business; ICCR member institutions invested in JPMC welcomed the public release of the report.

Stay Tuned to ICCR in the new year — it’s an important capital markets force…”Inspired by faith, committed to action.”

ICCR is led by Executive Director Laura Berry; you can learn more about her at:   https://www.youtube.com/watch?v=HJ4PzEpyiD4; information on ICCR is at:  www.iccr.org