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 →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 →Lawrence Heim, CPEA, Director with The Elm Consulting Group International LLC, will speak at the 2010 Annual Hospitality Law Conference on February 3-5, 2010 in Houston. Mr. Heim’s presentation will be part of the “It Ain’t Easy Being Green” track at the annual conference. The presentation will review business risk concepts to be considered when evaluating when and how to develop and implement a sustainability program in the hospitality sector. Topics covered include relevant activities and exposures to be condered within such a risk assessment considerations and scoping and ideas for quantifying the economic value of reducing identified environmental, helath and safety (EHS) risks. In addition to presenting, Elm will also be an exhibtor at the conference, showcasing the company’s EHS and sustainability consulting expertise. Elm is the only EHS/sustainability consulting service provider participating in the exhibition and conference presentations. The Annual Hospitality Law Conference is a one-of-a-kind opportunity that brings together more than 350 private attorneys, human resource professionals, in-house counsel, loss-prevention personnel, risk managers, and hospitality owners and operators to learn about a host of legal issues pertinent to the hospitality industry. The 2010 Hospitality Law Conference covers the areas of lodging, food and beverage, human resources, and
Read more →The New York Times published an article highlighting questions surrounding a major forest preservation project in Bolivia sponsored by American Electric Power, BP and PacifiCorp, known the Noel Kempff Climate Action Project. Greenpeace claims it found that from 1997 to 2009, the estimated reductions from the program had plummeted by 90 percent, to 5.8 million metric tons of carbon dioxide, down from 55 million tons. It also questioned the “additionality” of the program, which says that a specific forest area would not have been preserved without the program. What is striking about this matter is not the debate of the project’s effectiveness (given the on-going controversy surrounding the use of forestry in climate risk management). The surprise was a comment made by Glenn Hurowitz, a director of Avoided Deforestation Partners, a small nonprofit organization that claims to “advance the adoption of U.S. and international climate policies that include effective, transparent, and equitable market and non-market incentives to reduce tropical deforestation”: In the proposed climate legislation, you can’t get credit for conservation or any other type of offsets until you’ve delivered the offsets. So inaccurate projections would not affect the issuance of credits. This statement clearly demonstrates a critical business risk
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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