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…

Global Trade – Good or Bad For Nations – For Individuals — a Factor in Encouraging Greater Sustainability for Society?

by Hank Boerner – Chair, G&A Institute

“Trade” can be viewed in the macro-environment or the micro, with personal advantages and disadvantages for men and women in both developed and developing nations.

With a new administration coming to Washington DC in January 2017, the heated rhetoric of the 2016 presidential primaries and during the general campaign quickly moved “trade” as a loose-lip and often-un-informed talking point at rallies in the direction of possibly enacted national public policy.

Tear up NAFTA  – punish China – make cozy deals with countries one-at-a-time instead of multi-lateral agreements.  That’s seemingly the direction of the Trump Administration policy-making in 2018 — if we believe the rhetoric.

So — the question hangs — is global trade good or bad for U.S. workers…for the economy…for workers in both developed and developing nations…as a positive or negative in the quest for greater global sustainability?

As in all policy making, we must search for truth and evidence to help answer the questions — and guide public governance.

We do have help if we want to tune in to the source:  The independent, not-for-profit National Bureau of Economic Research (NBER) weighed in in April with a Working Paper: “How Large Are the U.S. Economy’s Gains From Trade?”

FYI – NBER (founded in 1920) is based in Cambridge, Massachusetts, and has a huge cadre of economists and researchers that work to provide us with “objective, quantitative analysis of the American economy.”

The scholars issue a steady stream of Working Papers for public consumption (and study and discussion by policy makers looking for “truth, fact, objectivity, reliable findings”  — my characterizations).

The name may ring a bell — NBER is the non-governmental organization that declares the official start and end of a U.S. recession, for example.  Their declaration is often separate of what is going on in the capital markets so it stands out.

In the current paper, the researchers examined “estimates of the economic benefits of a globally-open economy.”  And the impact plus or minus on the American economy.

Most likely results: they see a gain for the U.S. domestic economy of from 2% to 8% through open global trade, depending on certain assumptions about consumer and producer behavior.

What if we actually slammed the door shut on trade beyond our borders?  Authors Arnaud Costinot and Andres Rodrigues-Clare explain there is [surprisingly] little direct quantitative evidence on how the economy would react if we did begin to close the doors on global trade. (Note to policymakers: That’s why we don’t make hasty or dumb decisions on trade!)

Looking at such factors as labor and capital embedded in goods purchased from around the world, they estimated the gains from trade by comparing the size of a “counter-factual” U.S. economy that would depend entirely on domestic sources compared with a nation (like the USA) that has ready access to foreign services and goods.

While the dollar value of U.S. imports is large, as a percentage of national spending it is actually really small.

There are varying impacts of open trade on individual industries – and the enterprises and their workers.

For garment and apparel companies the demand for cheap labor is “in-elastic” in economic lingo. Not much wiggle room or flexibility. That is why the companies go to East Asia for labor inputs.

For an American automaker, the import of German-made transmissions for installation in Detroit’s models is somewhat lesser of an impact (there are always alternatives).  US manufacturers used to be more “integrated” and made most of the components for their trucks and cars. Now the industry is defined as a global sourcer.

For U.S. farmers, the impact depends on where else in the world wheat is grown and the ready availability and pricing for that wheat. Trade is critical to the American farm belt.

Think of rare minerals used in manufacturing — if vital minerals are only available in certain areas of the globe, and are needed (say for making cell phones or other electronic products), the dependency is greater for U.S. manufacturers (again, in-elasticity reigns).

Tradeoffs in global trade exist everywhere: Lower consumer prices are enjoyed (as designer-label garments flow to U.S. retailers’ shelves from cheap East Asian labor sourcing) — but too many American workers may lose jobs and/or work for lower wages.  And in turn, local communities suffer.  The 2016 elections showed one of the results of that suffering as voters signalled their discontent with trade policies.

Global Trade ESG Issues

NBER researchers looked at a different topic in the trade bucket for their Working Paper: the effects of Fair Trade Certification.

The movement began led by a church-affiliated NGO in Holland and quickly spread throughout Europe and to the U.S.A. and various groups coalesced in the Fair Trade Labelling Organization (“FLO”) in 1997.

In this research effort, NBER authors Raluca Dragusanu and Nathan Nunn examined the impact of the Fair Trade movement on coffee producers in the Central American nation of Costa Rica, in the heart of the global coffee belt (typically countries near the Equator).

They looked at FLO impacts on incomes of coffee growers, their neighbors and communities.

Fair Trade policies, they assert, is a positive as it raises prices for local growers, to begin with, high enough to cover the cost of production. The higher prices are typically intended as well to raise the quality of life in the coffee-growing region.

Premium prices paid by buyers above the set minimums are used to build schools and establish scholarships, create local health care facilities, and various infrastructure, and to help improve growing practices.

Through fair trade practices, income rises in Fair Trade growing areas, for both certified growers and many of their non-growers neighbors.

Income levels were on average 3.5% higher for growers and as much as 7.5% for “skilled” coffee growers (when the “intensity of fair trade increases in an area).

The researchers found that price premiums for growers increased school enrollments (2%-to-5%) for children ages 13-to-17 — critical ages for young men and women preparing for their adult lives.

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We found this and other NBER research interesting. We have “cold, hard facts” about the economy and trade and the “what-ifs” if present trade policies and practices are messed with, and the results are in the main “unknown”.

And we see that global trade is lifting people and their communities in a Central American country where coffee growing is an important agricultural pursuit.  And a benefit of open and fair trade.

Like climate change and many other public issues, there are plusses and minuses in trade affairs — and no easy answers!

Therefore, we can argue, let reason reign, common sense be applied — and science and facts and evidence-based research be the foundations of good public sector decision-making!

Thanks to NBER researchers for their efforts (in producing more than 1,000 Working Papers a year) to continue to produce research and surface evidence that can add to be leveraged to develop both public and private sector strategies.

You can learn more at:  www.nber.org

Feeding 9 Billion People in 2050? Challenging!  – A Leading U.S. CEO in the Food & Agriculture Business Has Important Perspectives to Share

by Hank Boerner -Chair, G&A Institute

The CEO of one of the nation’s leading food and agriculture companies has important messages for us:  “To move the planet forward, farmers must lead the charge. But they cannot do it alone. Coordinated action on sustainability across the food supply chains is the only way to achieve lasting progress.”  He tells us how and why in his commentary in a Top Story in our Sustainability Highlights newsletter.

BackgroundThe Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat in the 2017 revision of the World Population Prospects (the 25th version of this report) says: the current world population of 7.6 billion is expected to reach 8.6 billion in 2030, 9.8 billion in 2050 and 11.2 billion in 2100.

More than 80 million people are added to the world’s population each year. One of the 2030 Agenda for Sustainable Development Goals (the SDGs) is to end poverty and hunger – how do we achieve this will depend in large measure on the success of growers in the USA and many other lands.

Looking at global agriculture moving towards 2050, there are serious challenges posed; the UN’s Food and Agriculture Organization (FAO) in 2009 described some of these:  much more food and fiber must be produced; there will be a smaller rural labor force to help do this; there will be increased demand for more feedstocks for a potentially huge bioenergy market; adapting to climate is  necessary; and, ag producers must be more efficient and sustainable.

Demand for cereals, as example, could almost double from today’s production (for animal feed and human food). Almost all of the land expansion for ag could be in sub-Saharan Africa and Latin America.

The CEO of Land O’Lakes, Chris Policinski writing in Agri-Pulse explains that while the discussion about climate change and other challenges seems to be focused on developments being a generation away, American farmers are dealing right now with such things as harsh drought, severe weather and more pests…the challenges to the food supply are happening right now.

And it is time to start talking about sustainability differently…to include (for example) the reality of what farmers face, acre-by-acre/field-by-field. And then, “farm-to-fork” issues.

Bringing together big-picture, company-level sustainability commitments and acre-by-acre conservation efforts makes both more effective. The great example used by the CEO is Wal-Mart’s Project Gigaton, which aims to remove one billion metric tons of GhGs from the company’s supply chain by 2030.  (Land O’Lakes was one of the first supply partners to sign on.)

There’s much more for you in the Land O’Lakes CEO’s message in one of our Top Stories this week.  There are related items “up top” for you – this week we have ag and food in focus in the Highlights.

Note:  Land O’Lakes, Inc. is a member-owned cooperative agribusiness and food production company based in Minnesota, with $13.7 billion revenues in 2017. The cooperative is almost 100 years in operation and ranks #215 on the Fortune 500® roster.

Top Stories – Ag & Food In Focus

Opinion: To Move Our Planet Forward, Food and Agriculture Must Think about Sustainability Differently
(Friday – April 06, 2018) Source: Agri-Pulse – In many ways, the sustainability story of the American farmer mirrors that of every other American. Farmers genuinely care about doing their part to protect our planet, for all the same reasons as anyone else. They want to leave…

Smallholder farmers are key to making the palm oil industry sustainable
(Monday – April 02, 2018) Source: Eco-Business – Smallholder farmers play an increasingly prominent role in Indonesia’s growing palm oil industry and could be the vanguard of sustainability, say WRI researchers.

A few surprising industries affecting the concept of sustainability in a positive way
(Tuesday – April 03, 2018) Source: Augusta Free Press – In the last ten years, sustainability has become a very important element in the business processes in many industries. For instance, all-natural and organic have become trendy terms in the food industry. Companies which are part…

Opinion: To Move Our Planet Forward, Food and Agriculture Must Think about Sustainability Differently
(Friday – April 06, 2018) Source: Agri-Pulse – In many ways, the sustainability story of the American farmer mirrors that of every other American. Farmers genuinely care about doing their part to protect our planet, for all the same reasons as anyone else. They want to leave…

Don’t Believe In Global Warming? Just Ask A Tuscan Winemaker
(Wednesday – April 04, 2018) Source: Forbes – “Have you seen the effects of climate change and global warming in your region?”

Hershey is investing in more sustainable cocoa for its chocolate treats
(Wednesday – April 04, 2018) Source: LA Times

Corporate Human Rights Performance — Benchmarking and Ranking of Global Companies

by Hank Boerner – G&A Institute

Interesting news out of Switzerland today — the first wide scale project to rank up to 500 global companies on their human rights performance was launched, and corporate human rights performance in key sectors will be researched and ranked over the coming months.  The first sectors in focus are Agriculture, Apparel, Extractives, and Information and Communications Technology.

This is the new Corporate Human Rights Benchmark (“CHRB”).

The organizers of the long-term project include Aviva Investors; Business and Human Rights Resource Center; EIRIS; the Institute for Human Rights and Business; and VBDO (a sustainable investment forum for SR investors in the Netherlands).  The Corporate Roundtable (ICAR) has endorsed the project.

In announcing the project, the organizers said that investors, companies and consumers are increasingly aware of the impacts of business on human rights.  The project will share the first publicly-available (open source) information on corporate policies, processes and performance on human rights…including what managements are doing to address negative impacts, and what they can do to scale resources.

Among recent positive developments the organizers citied:

  • A year after the Rana Plaza factory fire in Bangladesh, the Bangladesh Accord has spurred on greater transparency, with increased public reporting on factory inspections.
  • Beverage industry giants Coca Cola Company and PepsiCo have committed to Zero Tolerance policies on “land grabs.”
  • The European Union is committed to restricting exports of spyware surveillance technologies because of human rights concerns.
  • The recently-adopted Conflict Mineral legislation in the United States has resulted in a 65% drop in armed groups profiting from illegal mining trade.

Backgrounds of the partnering organizations in the project:

  • Aviva Investors – global asset management business, and part of Aviva plc, one of the UK’s largest insurance services providers.
  • Business and Human Rights Resource Centre – international NGO that tracks human rights impact of 5,600 companies in 180+ countries, with information available in 7 languages.
  • Calvert Investments – influential US investment management firm and long-time recognized leader in advancing sustainable & responsible investment strategies.
  • EIRIS – global leader in ESG research and SRI strategies (UK based with members in the EU).
  • Institute for Human Rights and Business – global “think and do” tank, providing “impartial space for dialogue to deepen understanding of human rights challenges and the [appropriate] role of business.”
  • VBDO – The Dutch association of institutional investors promoting  sustainable development; members consider both financial and ESG criteria for their investments.

Over the next 3 years the 6 organizations — organized as the “CHRB Steering Group” — will conduct a worldwide “consultation” on the methodology and results with diverse stakeholders, and collect and release information on 500 companies’ human rights performance.  The information will be open source, and available to company managements, investors, the public sector, local communities, and NGOs.

Steve Waygood of Aviva Investors commented:  “Our benchmark will introduce a positive competitive environment and companies try to race to the top of the annual ranking.  [The effort] will also shine a light on those [companies] where performance needs to improve.

“It took more than 60 years from the signing of the Universal Declaration of Human Rights before the UN Guiding Principles on Business and Human Rights were developed.

“We believe that within 6 years of their approval, we can help to make these Guiding Principles routine corporate practice through the development and use of the Benchmark.”

Information is available through EIRIS:  contact is Stephen Hine, head of Responsible Investment Development – Stephen.hine@eiris.org

Note that the team at Governance & Accountability Institute identifies, tracks and monitors third party recognitions of companies for a variety of [their] achievements. These include scores, rankings, ratings, and “best of” lists.  This is definitely a growth business, and the third party actions can have influence on a company’s reputation and capital markets valuation.  Investors and other third parti4s will be watching the new human rights benchmarking as the project moves forward.

Top 10 GRI Sustainability Aspects for the Agriculture Sector

Sustainability – What Matters in the Agriculture Sector?

Recent research conducted by the Governance & Accountability Institute attempts to answer important questions for company managements in the Agriculture Sector, by examining the disclosure practices of 26 global peer organizations publishing GRI reports in the sector.

The top 10 Global Reporting Initiative (GRI) aspects that were determined to be material by the managements of reporting organizations in the Agriculture Sector are:

  1. Child Labor
  2. Prevention of Forced and Compulsory Labor
  3. Biodiversity
  4. Public Policy
  5. Water
  6. Non-Discrimination
  7. Anti-Competitive Behavior
  8. Freedom of Association and Collective Bargaining
  9. Occupational Health and Safety
  10. Indirect Economic Impacts

Results:  The complimentary report examining 35 sectors including top 10 GRI aspects, and top/bottom 10 GRI performance indicators can be downloaded here:
www.ga-institute.com/sustainability-what-matters

The full rankings for all 84 GRI performance indicators and all 37 GRI Aspects for each of the 35 sectors examined are available for purchase at:
www.ga-institute.com/getall84

Organizations included in the Agriculture Sector study are:

AGCO Corp, AGRAVIS Raiffeisen AG, Agrium, Becker Underwood, Bunge Argentina, Camposol, Copersucar, Danper Trujillo, First Resources, Golden Agri-Resources Ltd, Grupo Los Grobo, Grupo Viralcool, Incauca, Ingenio Pichichi, inpEV (Instituto Nacional de Processamento de Embalagens Vazias), Jain Irrigation Systems, Kelani Valley Plantations PLC, KWS SAAT, Monsanto, Monsanto Latin America South, Netafim, Nidera Argentina, Novus International, Inc., Olam International Limited, Syngenta, Yara International

 

About G&A Institute (www.ga-institute.com)
G&A Institute is a New York-based, private sector company providing sustainability-focused services and resources to corporate and investment community clients, including: Issue Counseling & Sustainability Strategies; Sustainability Reporting; Materiality Assessments; Stakeholder Engagement; Benchmarking; Investor Relations; Communications; Coaching, Team Building & Training;  Issues Monitoring & Customized Research; Third Party Recognitions.  G&A is the exclusive Data Partner for the GRI in the United States of America, the United Kingdom and the Republic of Ireland.

Editors
On the G&A Institute web site there is additional information available on the Fact Sheet: What Matters Project (www.ga-institute.com/research-reports/sustainability-what-matters/fact-sheet).  The resulting “most important” to “least important” ranking for the 35 sectors is available to media on a case-by-case basis please contact:  Peter Hamilton (phamilton@ga-institute.com).

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