Recently, Elm posted a piece discussing comments from Kevin Parker, the CEO of Deutsche Asset Management, an investment firm with three-fourths of US$1 trillion under management. We expanded that original post for EHS Journal, who just published it. The expanded … Continue reading →
For years, those of us in the environmental/sustainability profession have sought credible ways and metrics for quantifying the economic value of our efforts, activities and programs. A myriad of studies completed dating back to the late 1980s attempt to demonstrate “environmental value”. Most of these studies have shown rather tenuous linkages or used meaningless metrics. Interestingly, most of these studies link to equity markets – i.e., stock prices. Maybe because stock prices grab headlines, are tied to compensation or are the target to which Boards and senior executive generally manage. The problem is that environmental/sustainability matters don’t fit into this model, either because they tend not to be financially material, or they don’t develop economic certainty within the “current quarter” myopia of corporate management, financial markets and analysts. A recent article on the topic was published in The International News. The article includes an interview with Kevin Parker, CEO of Deutsche Asset Management (DeAM) on the subject of how capital markets currently view environmental/sustainability risks. DeAM manages over US$775 billion in assets. With simplicity, clarity and unquestionable credibility from the financial market viewpoint, Parker made key points in the article and interview: Bond markets are poised to punish polluting companies
Read more →A recent article on the absence of sustainability reporting for Berkshire Hathaway is highly thought-provoking. The piece begins: This company, as many of you may know, was founded and is run by the 80 year old Warren E. Buffett, the current chairman and CEO, one of the richest men in the world and, apparently, one of the most successful investors of all time. The Berkshire Hathaway company turns over about $30 billion and employs 287,000 people. It owns a long string of Companies, 10 of which are in the insurance sector, and the other 60 or so in a diverse range of sectors including textile and apparel, jewelry, furniture, gas, electricity, steel and many more. And now the moment you have all been waiting for: ESG, CSR, citizenship, sustainability, responsibility or any form of similar non-financial disclosures are conspicuously absent from any of Berkshire Hathaway’s communications… Apparently, the company seems to be sustainable, since, from its beginnings in 1965, the book value of the company has grown by 20.3% compounded annually, whatever that means, but it sounds successful. And ends with … it astounds me that there are still leading, influential, financially successful businesses such as Berkshire Hathaway, with the potential to do so much to engage 257,000 people
Read more →Last month, McKinsey & Co. published a study titled “How companies manage sustainability”. The survey was conducted in February 2010 and received responses from 1,946 executives representing a wide range of industries. The fact that the topic of sustainability is significant enough for McKinsey to conduct this analysis is notable. The study itself is short and it is easy to distill the major themes presented. Theme 1: “Sustainability” has no defined definition … many [companies] have no clear definition of [sustainability]. Overall, 20 percent of executives say their companies don’t. Among those that do, the definition varies: 55 percent define sustainability as the management of issues related to the environment (for example, greenhouse gas emissions, energy efficiency, waste management, green-product development, and water conservation). In addition, 48 percent say it includes the management of governance issues (such as complying with regulations, maintaining ethical practices, and meeting accepted industry standards), and 41 percent say it includes the management of social issues (for instance, working conditions and labor standards). Fifty-six percent of all the respondents define sustainability in two or more ways. Theme 2: What gets measured gets managed, or vice versa [E]xecutives [of proactive companies] … are more aware than executives
Read more →The environmental newsletter of the Association of General Contractors (AGC) sheds some light on the status of EPA’s developing regulation of coal ash or coal combustion products (CCP). The newsletter indicated that the agency expects to release a rulemaking on coal combustion residuals (or waste) in April 2010, with a hazardous designation reported likely. CCP has been exempted from regulation as a hazardous waste through an interpretation of existing hazardous waste law. Under that interpretation, coal ash was “pardoned” as part of the “Bevill Amendment” – a 1980 amendment to the federal waste management legistration that excluded from regulation certain mining and mineral processing waste. The amendment also mandated that EPA conduct a study to determine how to manage CCP. The study was completed and the findings were presented to Congress in 1988 and again in 1999 – both times, EPA recommended that CCP not be regulated as hazardous waste. Two regulatory determinations were subsequently published – one in 1993 and one in 2000, both again affirming that regulation of CCP as hazardous waste was not warranted. Although EPA has not yet released its proposed regulation, AGC’s article stated that sources indicate that EPA is strongly favoring a hazardous waste
Read more →The Financial Times reported that the retailer has announced an initiative to eliminate 20 million metric tons of CO2 emissions from its supply chain over the next 5 years. All but 10% of the reductions will come from Walmart suppliers rather than direct Walmart operations. The article stated that: Mike Duke, chief executive repeated Walmart’s view that its efforts would ultimately lower prices for its customers, chiefly through resulting savings in energy use. The company is in the process of developing GHG emissions/reduction quantification standards. What remains to be seen is the extent to which the methodology will align with existing – and regulatory – calculation standards. Clearly, suppliers will be expected to pass emissions-related cost savings on to Walmart, while concurrently addressing the additional administrative requirements related to the sustainability/emissions reduction programs. The company has stated that vendor sustainability will become incorporated into its buying decisions. As we mentioned in an earlier post, some suppliers may choose not to take on the additional efforts and costs associated with implementing Walmart’ sustainability and CO2 emissions requirements. But before making such a decision, suppliers should conduct a thorough assessment of it environmental profile to identify where the opportunities and risks lie.
Read more →The Global Risk Network (GRN), an initiative under the World Economic Forum (WEF), released its Global Risk Report 2010 today. The report is produced annually in conjunction with the WEF Conference in Davos and 2010 is the fifth year of the report. This year, the report emphasizes the “interconnectivity” of global matters and the long-term view needed to identify and reduce major risks. The report sets the stage by noting that the increase in interconnections among risks means a higher level of systemic risk than ever before. Thus, there is a greater need for an integrated and more systemic approach to risk management and response by the public and private sectors alike. In a contrast to previous years, today’s report underscored that a long-term view is critical to predicting major exposures. Previous Global Risk Reports have not been as careful to clarify the timeline of the discussed exposures. The report comments that: the biggest risks facing the world today may be from slow failures or creeping risks. Because these failures and risks emerge over a long period of time, their potentially enormous impact and long-term implications can be vastly underestimated. Further, the 2010 document seeks to provide more pragmatic guidance
Read more →EPA announced two more major Clean Air Act enforcement settlements today that stemmed from the Agency’s long-standing industry New Source Review (NSR) enforcement initiatives. Saint-Gobain Containers, Inc. of Muncie, Ind. agreed to install pollution control equipment at an estimated cost of $112 million to reduce emissions of NOx, SO2, and PM by approximately 6,000 tons each year. The settlement covers 15 plants in 13 states. This is the federal government’s first nationwide Clean Air Act settlement with a glass manufacturer that covers all of a company’s plants. In addition, as part of the settlement, Saint-Gobain has agreed to pay a $2.25 million civil penalty. Lafarge North America, Inc., based in Herndon, Va., and two of its subsidiaries agreed to install and implement control technologies at an expected cost of up to $170 million to reduce emissions of NOx by more than 9,000 tons each year and SO2 by more than 26,000 tons per year at their cement plants. In addition, as part of the settlement, Lafarge has agreed to pay a $5 million civil penalty. Companies potentially on EPA’s NSR radar screen should review their environmental audit programs to evaluate how critically the programs evaluate plant changes that could trigger
Read more →A report released today by The Conference Board concluded that few companies link Enterprise Risk Management (ERM) data into corporate performance management/metrics. Enterprise risk management and performance management are two complimentary processes essential for the management of an organization. Both disciplines are designed to support organizations’ efforts in making decisions and meeting their goals–ERM through the identification and management of those risks that could affect business objectives, and performance management through the identification and measurement of the drivers needed to achieve results. Risk-adjusted performance metrics offer managers tools that strike the appropriate balance between meeting performance goals and achieving appropriate returns for the risks being taken. The application of risk-based performance management may also lead to incentives that are more aligned with an organization’s long-term success. These points raise interesting implications for those companies implementing sustainability and other EHS management programs. - How are EHS elements reflected in the ERM program? - Are existing EHS/sustainability performance metrics aligned with internal risk management standards and benchmarks? - Do financial measures of EHS/sustainability performance incorporate risk-adjusted factors that are obtained from the ERM framework? Elm’s Return on Investment of Loss Avoidance (ROIa)© is an innovative valuation methodology that links EHS/sustainability risk data
Read more →Recently, Patty Calkins , Vice-President for Environment, Health, and Safety for Xerox posted a piece in BusinessWeek’s blog. In her article “Dispelling Two Sustainability Myths for Small Businesses”, she stated that many small businesses still struggle to justify an investment in green initiatives, because they perceive the efforts will generate added costs, not concrete business benefits. Lawrence Heim, Director in Elm’s Atlanta office, posted a response that offered a valuable perspective about “various ways to identify and quantify benefits AND RISKS of choosing a sustainability path.” Read the Business Week blog entries here.
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