Monday, September 01, 2014

London Business School research shows employee welfare and financial returns are linked

Alex Edmans is professor of finance at London Business School and Wharton. 

He's been researching the links between investing in employee welfare, and financial returns. 

Alex's prior research shows that companies listed in some "Best Companies To Work For" lists beat the market by 2 to 3 per cent per year over a 26 year period. 

His new study, released last month, extended the results to 14 countries.

Alex Edmans
It shows that the results hold in nations with flexible labour markets, where the retention and motivation benefits of employee welfare are particularly strong. 

In fact, says Alex, the "Best Companies" perform even better in the UK than the US. Here's an op ed he wrote recently about it.

I sent him some questions, which he has answered below. His responses make for interesting reading.

TW: Your earlier research suggested that US firms with high employee welfare outperform their peers by 2-3%/year over a 26-year period, controlling for other determinants of stock returns. What was the reaction to this, and how did you work it out?

AE: It’s hard to assess objectively but I believe that it was very positively received. 

The conventional wisdom is that companies should try to extract as much out of their employees as possible, so people liked the message that “doing the right thing” is actually good for you. 

More generally, while there has been an active CSR movement, and an active human relations movement, there was little evidence that these initiatives improve the bottom line – the business case is unclear and so it was hard to push through CSR/HR initiatives. 

This paper helped support this. In fact, as mentioned in point 4 below, if anything the reaction was “too” positive – people got overexcited about it and said that the paper proved that CSR improves firm value (when it only looked at one dimension, employee welfare, and only in the US).

I came up with these findings as follows. I take the list of the 100 Best Companies to Work For in America (and in the second paper, similar lists worldwide). 

Then I calculate the return to these Best Companies starting from one month after the list was published (to ensure my results aren’t driven by reverse causality). 

I compare the returns of the Best Companies not only to the overall market, but also to companies in the same industry. For example, Google is frequently in the Best Companies list, but its high returns could be due to the tech industry doing well, rather than its employee satisfaction. 

I also compare each company to peer firms with similar characteristics (e.g. size, dividend yield, recent performance, valuation ratios). 

In short, I try to control for as much as possible, to isolate the effect of employee satisfaction. 

I also remove the effect of outliers, to ensure that any superior performance of the Best Companies isn’t due to a few star performers such as Google.

TW: Your new paper looks at 14 countries. It shows that the original results do hold in a global context, but only in countries with high labour market flexibility, since employee welfare is particularly beneficial for retention, recruitment, and motivation where labour markets are flexible. Tell us which countries that meet this criteria and a little more about why you believe your findings are accurate.

AE: Countries with high labour market flexibility include UK, US, and Canada. 

We use two measures of labour market flexibility, both of which have been used in prior research (and thus accepted to be good measures of LMF). 

One is the OECD Employment Protection Index, the second is the labour market flexibility categories of the Fraser Institute’s Economic Freedom of the World index. Under both measures of LMF, we find that the return to being a Best Company is increasing in the level of LMF. 

We believe the findings are accurate for two reasons: 

1) They hold under both level of labour market flexibility. 

2) We control for other country-level differences, such as GDP growth, the size of the capital market, the rule of law etc. 

This ensures that it’s LMF, rather than other country-level factors, that are driving the results.

TW: So what about countries without high labour market flexibility, does this mean that it’s harder to make the case for higher employee welfare activities by companies? 

AE: The results suggest that, on average, the returns to having above-average employee satisfaction are lower. 

This makes sense – in countries with rigid labour markets, regulation already guarantees companies a minimum level of employee satisfaction, so perhaps there’s not as much need to go above and beyond. However, note that this is only an average result. 

It doesn’t mean that companies in countries with low LMF should never invest more than the minimum amount. 

There will still be initiatives to increase ES that are also beneficial to firm value – it’s just that the company should be more circumspect at evaluating these opportunities. 

By analogy, taller soccer goalkeepers tend to be better than shorter goalkeepers. 

But, that doesn’t mean that a team should never sign a short goalkeeper, just that a team might need to evaluate a short goalkeeper more carefully when deciding whether to sign him.

TW: You argue that this paper shows the importance of the institutional environment for the value of CSR. Why?

AE: The first paper was fortunate to be met with a positive reaction. 

The prevailing view was that CSR is at the expense of shareholder value – a dollar invested in other stakeholders is a dollar taken away from shareholders. 

The first paper overturned this conventional wisdom, and so made a splash. 

However, some readers may have got over-excited about it, and interpreted it as “proving” that investing in employees necessarily improves firm value – thus all companies should simply invest more in employees and their value will automatically rise. In science, you can prove things. 

Hydrochloric acid in the UK is the same as hydrochloric acid in Brazil, so if you combine it with sodium hydroxide, you’ll get salt in both countries. 

But, social science is about people, and people are different across countries, so you can’t necessarily extrapolate the findings in one country to another. While the original paper did find an interesting result, it was only based on US data. This new paper shows that the results in the first paper do hold in other countries – but only those countries with high labour market flexibility.

The institutional environment is important because business decisions that work in one country may not work in another country. 

That’s true for non-CSR decisions – for example, a restaurant in China will often have private dining rooms because business is often conducted over dinner in China, whereas this is rarer in a restaurant in the UK. 

So, it’s logical that it’s true for CSR decisions as well. Investing in high employee welfare is valuable if labour markets are flexible and thus having good working conditions can allow you to hire new workers. 

If labour markets are flexible, you face constraints on hiring, so there are fewer benefits of having high employee welfare.

TW: You also suggest that this is the first academic study to investigate the profitability of an SRI strategy in a global context. Why do you think this area is under-studied? In my experience a lot of research has been done in the ‘business case for responsible capitalism’ space in the last 20 years. 

AE: The “business case for responsible capitalism” has indeed been well-studied over the last 20 years, but primarily by researchers in Management or Strategy. 

These papers typically study the relationship with profits or other measures of firm value. However, it’s difficult to ascribe causality. 

If CSR is positively correlated with profits, it could be that CSR leads to higher profits, or only profitable firms can spend on CSR.

I’m from Finance. In Finance, we look at stock returns, rather than profits. The advantage of looking at stock returns is that this can address reverse causality issues. 

For example, for the UK list published in April 2012, I study the returns of the listed companies between May 2012 and April 2013. 

If high satisfaction in April 2012 were the result, rather than cause, of good performance, the stock price would already be high in April 2012, and so you should not expect superior stock returns going forward. 

However, because CSR has not historically been a Finance topic, few people from finance had studied CSR. In particular, the prevailing wisdom in finance was so clear that CSR could not lead to high stock returns. 

Milton Friedman famously said in 1970 that “the social responsibility of business is to increase profit”. In addition, many finance academics believes markets are efficient and you can’t beat the market with any trading strategy – especially not a “fluffy” one like social responsibility. 



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Three focused, detailed and practical sustainable business events for your diary

Upcoming Innovation Forum events in 2014:
Collaborate effectively with suppliers and NGOs, understand policy and enforcement trends

28th-29th October, 2014, London. More details here.

An exclusive two-day executive training workshop, certified by the CSR Training Institute
30-31 October, 2014, London. More details here.

How to get beyond policy, manage risk and build relationships

10 November, 2014, London. More details here.

Friday, August 29, 2014

Top tips on stakeholder engagement

John Aston and Alan Knight have just published a new book with DoShorts in the UK.

It's called Smart Engagement: Why, What, Who, How.

I sent Alan five questions about the book.

Here's what he had to say below:

TW: Someone said to me the other day they feel that stakeholder engagement is one part of the field that has gone backwards in the last ten years. Do you agree?


A handy primer on the topic

AK: I don’t think that thinking about engagement has gone backwards but it is perhaps fair to say that the common way in which it is practiced has gone backwards.

As engagement has become a more accepted part of management practice many more organisations have looked for ways to claim they are doing it, without really understanding what it is or what purpose it serves.

So you get a lot of perfunctory efforts and a lowering of the ‘common practice’ bar.

In part this book was written to address this.

We make it very clear that if you are going to do it, understand what it is and how to do it right.

Do it for a purpose and be SMART about it.

TW: Linked to question one, are too many companies, when they do engage, just doing it to tick boxes, and to have something to put into their sustainability report?

AK: Without doubt. If the only purpose for engaging is so that they can tick a box in a report you are wasting everybody’s time. This is clearly nonsense.

The purpose of engagement is not engagement. The requirement to report on the M&E of engagement and to have good assurance of engagement M&E can be the pin that pricks this bubble.

TW: Your book talks a lot about process. But good examples of engagement are told through storytelling and anecdotes. What's the balance between process and more organic relationships to strike?

AK: Process is important. It s like the technique you have to learn to play the piano well or to ride a bike. It is only when you have the technique or the process down that you can really begin to play something people want to listen to or to ride competitively.

Also, once you have the technique down you don’t need to think about it. It is there in your muscle memory or wherever. It is your foundation. So once you have an understanding and experience of engagement process and technique you can begin to develop those relationships and stories that work and make sense and bring benefit.

One point we make in the book is that while process is important, understanding the why, the what, the who and the how is more important. Process is just a way to getting to the answers. So following every step of the process correctly is not the purpose.

Winning the race is the purpose. Match the need for process to the purpose. And draw on only as much as you need to succeed.

TW: Which companies do you respect for their approaches to stakeholder engagement, and why?

AK: We respect all companies who engage for the right reasons, do it systematically and then evaluate what they have achieved and look for ways to improve.

You will have noticed that in the book, while there are a large number of stories about the engagement experiences of real companies, we have anonymised these stories. We did this for a very specific reason.

First, we have not done a systematic analysis or index of the engagement practices of the FTSE 250 or the DHSI companies. So we have no defensible benchmark. Secondly, all of the stories are based on the personal experiences of John and I.

We wanted to present the stories as relevant to a better understanding of practice and not necessarily as ‘the’ benchmark for good practice. There are many ratings and indices out there that include stakeholder engagement in their criteria.

In many cases the criteria is as simple as: ‘Do they engage their stakeholders’. We don’t put much credence in these.

It would be fun to do a systematic analysis based on the criteria in the book and then name names. Maybe that’s next.

TW: Is the problem that we often use the wrong language in business? Is there a more effective way to frame "stakeholder engagement" so it's more meaningful for business?

AK: Language is always a problem, and perhaps too easy an excuse. But it is clear that the term ‘stakeholder engagement’ is interpreted in different and sometimes contradictory ways.

Many people confuse stakeholder engagement with public consultation, while it should more properly include both internal and external stakeholders.

At the same time the term has gained significant currency. The longer it is used as the default term, the harder it becomes to replace it.

As a pragmatist I would suggest we put our efforts into developing a generally accepted definition – such as the one in the book – and put our energies into promulgating that.

More on the book at this link: Smart Engagement: Why, What, Who, How.


Advertisement: (Note to readers, I will be facilitating/teaching on this course below) 


An exclusive two-day executive training workshop, certified by the CSR Training Institute

30-31 October, 2014, London

An unhappy stakeholder with a cell phone and internet connection can turn a problem into a crisis that can threaten the very survival of your company 

Twenty executives will spend two intense days learning from and with global experts on how to effectively engage stakeholders in emerging markets. 

This course is a practical blend of lectures, case studies, discussions, dilemma-solving group work and individual reflection. 

The two-day programme combines real-world tools and strategies with strategic insights and down-to-earth approaches. These will equip executives to engage and work better with stakeholders especially in lean or frontier markets.
  • Find out how the world's leading extractive companies engage stakeholders successfully
  • Learn how your company can get difficult engagement right, in process, in practice and on the ground
  • Discover how to make the case for more resources to senior management - and how to make that stick
  • Expert tips from your peers in a closed environment, learn from those who got it right, and wrong
  • Our experts taking part in this workshop have experience at working with companies such as Arcelor Mittal, BP, Anglo American, Rexam, Golden Star, BHP Billiton, Shell, and many others 

Download the brochure or check out the agenda here.




Tuesday, August 26, 2014

Water wars, fascinating article on water and the environment in the middle east

Scary read, but essential 
This article by Fred Pearce in Yale Environment 360 provides pause for thought.

Entitled "Mideast Water Wars: In Iraq, A Battle for Control of Water" it's a helpful reminder of the power of the natural environment.

Fred's book "When the Rivers Run Dry" from a few years ago is a frightening tour of water risk.

Nestle's chairman, Peter Brabeck, believes water is a bigger looming crisis than climate change, given timescales.

The two are of course inter-connected. But water is definitely a shorter/medium term risk in terms of sustainability.

The Colorado river, the Mekong, the Murray, the Indus, the Yellow River, all of these, and how they are 'managed', have a major impact on how we live today, and will do in the future.

What can a sustainability-minded company do about this most macro of issues, this vitally important mega trend of water risk?

Footprint management and use reduction in the supply chain is of course the first step. The second?

Becoming more involved in supporting institutions that raise awareness and help lower risk.

The UN CEO water mandate is one such. There are others, depending how much your company wants to, or can, get engaged in helping tackle, of raise awareness of the challenges.

Of course, water is just one of a myriad of risk issues facing companies. Priorities are everything.

Water though, needs to be fairly high up the list for any company with a significant footprint.


UPDATE: An eagle eyed reader of the blog made this useful comment:

"Particularly pertinent given the fact that Coca-Cola have just abandoned their $20m bottling plant in India due to the uproar about how it was treating water sources.



Sunday, August 24, 2014

The top five mistakes companies make in engaging stakeholders

Wayne Dunn
I've known, fished with, and worked with Wayne Dunn since about 2007.

He's one of the most knowledgeable and experienced advisors in the field of CSR and sustainable business that I have met in my years in the field.

When I first met him he was working on a plan to take submerged timber from lake Volta in Ghana and elsewhere around the world.

He's done all sorts of interesting jobs all over the world, so I thought his advice on what stakeholder engagement means to him since 2014 would be useful for readers.

My questions and his practical responses are below. I think you'll find they are worth ten minutes of your time.

Wayne is a Professor of Practice in CSR at McGill University and the President & Founder of the CSR Training Institute.

I recently worked with Wayne on CSR training in Ghana, during which we trained three cabinet ministers and thirty other senior corporate managers and NGO reps on some of the latest thinking.

There's a link at the bottom of this post to a two day workshop Wayne and I are running in London on October 30-31. That's all about stakeholder engagement in emerging markets

Here are my questions and his answers:

1) Has corporate stakeholder engagement lost its meaning because it's so casually over used by companies today?

It gets real meaningful real quick when your operation gets shut down by disgruntled stakeholders and their allies!

The reality on the ground, where business meets community is usually way different than the language of corporate websites and presentations. Call it what you will; and yes, many phrases are over-used so much the words are nearly meaningless.

Still, how companies engage with local stakeholders, and how they can organize operations and activities to bring meaningful benefits to local stakeholders, can often mean the difference between long term success and shuttered operation and damaged brand.

2) I would suggest FMCG companies and extractive firms are the leading sectors in viewing engagement as strategic, would you agree?

Absolutely.  And I think that is driven by their vulnerability.

Extractive firms have complex permitting processes to navigate at start-up and ongoing.  These create intervention platforms for unhappy stakeholders and their allies.

They provide a process that allows stakeholders to publicly communicate their concerns and they can often delay, disrupt and sometimes kill projects, damage corporate reputational capital and derail individual careers.

Fast Moving Consumer Goods (FMCG) companies are vulnerable because they have so much value tied up in Brand.

In today’s always on, instant global communications world disgruntled stakeholders can find ways to reach consumers and influence how they think about brands. This can have big and quick impacts on sales and profitability (and on companies and careers).

Both sectors are vulnerable to the impact that disgruntled stakeholders can have so finding ways to deliver value to stakeholders and engage effectively with them is highly strategic.

3) Big companies now understand that stakeholder engagement is just good risk management, but how many really see the opportunity side? Surely without that, firms risk slipping into complacent box ticking?

Stakeholder relations can be an effective risk management tool, but simply ticking the boxes only gets a company part way there. There is a big difference between strategic stakeholder engagement and compliance focused engagement.

With the ever-increasing number of global standards, reporting frameworks and engagement protocols it often feels safer to focus on compliance.  It is an easier story to tell and easier to manage.

Unfortunately, a purely compliance based approach too often misses key strategic opportunities; opportunities to create value for stakeholders and company. And these strategic opportunities that can create new value for stakeholders and company are often the best opportunities to mitigate risk.

Coming from a hockey background (I’m Canadian, eh?) I see strategic engagement as more like offense and compliance focused engagement more like defense.

The balance between offence and defense; strategic and compliance, is not easy to find.  Effective stakeholder engagement takes both.  You don’t win many games with just one.

4) Give us some examples of companies who do engagement well, or have done it well

There are many examples of projects, or even business units, that do stakeholder engagement well, but not nearly so many where a large company does it well across all of its operations.

One of my favourite examples comes from the 1990s. Cameco Corporation, the largest Uranium mining company in the world at the time, was a leader in developing the Saskatchewan (Canada) uranium industry.

The industry was based in northern Saskatchewan with a population of 40,000 people, largely Indigenous) scattered over 250,000 square kilometres.

Literacy levels were low, there was little history of industrial employment and many families were only a generation away from a nomadic lifestyle on the land.

There were regulatory requirements around consultation and benefits but Cameco realized that it had to find a way that local indigenous peoples would benefit directly and substantially. That required a strategic approach.

By late 1999, 450 aboriginal employees, representing about 45% of the site operations workforce, made Cameco one of Canada’s leading industrial employers of aboriginal people.

A northern supplier development program was finding new and innovative ways to engage local people in the industry supply chain. Today northern suppliers, many of them indigenous, are supplying ½ billion/year in goods and services.

However, despite the incredible success Cameco was having in Canada with stakeholder engagement and benefits this wasn’t consistent across the company.

In 1999 the company’s share price along with its reputation and its operations in Kyrgyzstan took a pummelling. The impacts of an accident and a cyanide spill were compounded exponentially because of poor or non-existent relationships with major groups of stakeholders.

5) You work a lot in emerging markets, what are the top five mistakes you see companies making in stakeholder engagement, and what does it cost them when they do?

1. Defining stakeholders too narrowly. Too often key groups of stakeholders are missed and this means missed opportunity for companies and stakeholders.

The group that I see missed most often is the international development community

Agencies like the UNDP and development partners like Britain’s Dept for International Development (DfID) and the United States Agency for International Development (USAID), etc. are committed to MDG priorities such as education, health, poverty alleviation and gender issues

These objectives are shared with community stakeholders and the company and can create huge opportunities for synergy and collaboration and benefits for community stakeholders.

Unfortunately, many companies define their stakeholders too narrowly and miss these opportunities

2. No balance between defense (compliance) and offense (strategic opportunities). It is not easy to maintain a balanced approach to compliance and identifying and developing strategic opportunities for stakeholder engagement and value creation.

3. Going defensive too quickly. Community/stakeholder meetings, especially in the early stages of a project, often seem to start negatively with people lining up to voice displeasure and concern over one thing or another.

For company representatives, especially senior executives, there is often a tendency to ‘correct facts’ and provide balance and perspective when faced with seemingly endless negative comments. This is a mistake!

I’ve been in hundreds of community meetings and the negative comments and complaints at the beginning are often more about local community politics and posturing than they are about anything the company has done or is doing.

This isn’t to say that there aren’t often real and meaningful grievances and issues, just that the best approach to the early stages of a community meeting is to simply listen.

I’ve found that by sitting and listening the complaints and feelings and issues can come out and, generally, at some point, the energy will shift and a constructive dialogue can develop.

Of course, it doesn’t happen this way all the time, but in general it is best to simply listen and hear in the early stages of a meeting.

4. Concealing self-interest. Let’s be clear. Companies engage with stakeholders and strive to create local value and benefits for them because the company sees that as being in their own self-interest. If they didn’t, why would they spend the time and money.

Too often companies will try to position their engagement and CSR work as being more about the interests of local stakeholders and because the company is ‘good’.

This can not only create an awkward donor/recipient type of relationship and undermines a company’s credibility, but can also lead to questions on the sustainability of the company’s efforts.

If the company is only doing it because it is good for local stakeholders then it seems like it would be easy to cut from the budget if financial challenges arise.

Far better to openly acknowledge self-interest and fully engage stakeholders in the search for those areas where company and stakeholder interests can come together.

5. Communication. Too much, too little, too promotional, too simplistic. And often not disseminated in a way that will reach the intended audiences.


Here's two day workshop Wayne and I are running in London, with others, on October 30-31. That's all about stakeholder engagement in emerging markets. The experts taking part in this workshop have experience at working with companies such as Arcelor Mittal, BP, Anglo American, Rexam, Golden Star, BHP Billiton, Shell, and many others.

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Three focused, detailed and practical sustainable business events for your diary

Upcoming Innovation Forum events in 2014:

How business can tackle deforestation
Collaborate effectively with suppliers and NGOs, understand policy and enforcement trends

28th-29th October, 2014, London. More details here.

How to effectively engage stakeholders in frontier markets (emerging markets)
An exclusive two-day executive training workshop, certified by the CSR Training Institute
30-31 October, 2014, London. More details here.

Business and human rights
How to get beyond policy, manage risk and build relationships
10 November, 2014, London. More details here.

Friday, August 22, 2014

As a manager, when your company doesn't really care, what can you do? (updated)

With the news that Kara Hurst, head of the Sustainability Consortium is to join Amazon as a senior sustainability executive an important question arises.

"If you work in sustainability/CSR in a company that doesn't really care about the agenda, what can you do about it?"

There are two ways to answer this question.

One is the standard way whereby you make the usual case that sustainability/CSR enhances:

- Reputation in general
- Employee attraction, motivation, innovation, retention and productivity
- Investor attraction (albeit limited)
- Licence to operate when things go wrong
- B2B partner and supplier relationships
- Local and national government relations
- Your ability to meet current and future environmental requirements
- NGO conversations and partnerships
- Community satisfaction
- Executive career paths
- Your ability to innovate and see short/medium/long term risks
Etc etc

The second is much harder.

Amazon should know all of the above. But founder Jeff Bezos doesn't seem to take these points seriously. Presumably other senior managers follow his lead.

So what can you do if you join a company that just doesn't want to do much?

Perhaps Amazon now wants to do more. It's possible. Apple proved that a recalcitrant firm can listen to external voices and make a key hire that changes things.

It's equally possible they have hired Kara Hurst just to look good. 


(Let us hope she will lead the changes that former US EPA boss Lisa Jackson is credited with at Apple. Presumably you don't make senior hires like his unless you are serious. Time will tell)

Amazon aside, if your bosses just want you to be window-dressing, what can you do except resign?

I don't know. I have a few thoughts, but I have a feeling some readers do too.

Look forward to your ideas. 


UPDATE: After first publishing this post on Friday 22nd as an experimental approach to crowd sourcing some ideas/solutions, as usual I had a few comments from readers which may form some kind of answer to the above question.

The general mood from commentators was, if you can't be taken seriously as a change manager or catalyst, then go work somewhere you can make a difference. 

Others pointed out that defining "not caring" is quite tough, and there are nuances to consider. 

Here's a few points to consider when dealing with a company which today, only wants to do the minimum:

1) The compliance agenda counts 
For example, even in a company such as Amazon, which has dealt with the sustainability agenda by largely ignoring it, they have to comply with environmental regulations. So how can you creatively use the creeping regulatory agenda on green issues, combined with increased transparency demands, to build interest in getting ahead of that regulation, and make a business case out of this. 

2) Re-frame sustainability/CSR as business efficiency. Take out all the jargon, all of it. Focus entirely on teams of empowered employees driving money saving programmes. Pretty soon the greener / sustainability agenda will provides some useful stats (think basics like fuel, lights, transport, logistics etc)

3) Talk about offsetting political risk (this is the license to operate model but on a macro level) in emerging markets. Many countries are becoming much more aggressive with foreign companies, so dig up some examples of where shareholder value has been affected and link these with better operating practices. 

4) Push harder on the innovation agenda. A bit like point two, removing all jargon and making the links based on evidence is the way to try persuading your board to engage in sustainability/CSR.

If I receive any further comments from readers I will update this post further. Meantime here's a link to a relevant article I wrote last year on this area.

It's called: 


This slide deck from 2013 that I put together may also be useful:

http://www.slideshare.net/Tobiaswebb/csr-trends-strategy-ethics-and-the-business-case


Advertisements:

Three focused, detailed and practical sustainable business events for your diary

Upcoming Innovation Forum events in 2014:

How business can tackle deforestation
Collaborate effectively with suppliers and NGOs, understand policy and enforcement trends

28th-29th October, 2014, London. More details here.

How to effectively engage stakeholders in frontier markets (emerging markets)
An exclusive two-day executive training workshop, certified by the CSR Training Institute
30-31 October, 2014, London. More details here.

Business and human rights
How to get beyond policy, manage risk and build relationships
10 November, 2014, London. More details here.

Tuesday, August 19, 2014

Sustainable business: "the problem with 2020 targets is that they’re just way too distant" - Guest post by Scott Poynton

Scott Poynton gives a personal view on why the deforestation debate should focus on action now and not targets for future improvement


Poynton: Has 'sustainability' become meaningless?
I have seen many bad things, close up and personal, over the last 20+ years working on deforestation issues.

I believe that our path to survival lies through the goodness of the human heart, but I often despair at some of the things I see that human heart doing – really bad things that destroy the environment and people’s lives.

It creates a genuine feeling of despair that despite all we’re doing, despite all the efforts of the NGOs, despite the good things done by many businesses, ultimately we will lose our forests, we will plunge the world beyond climate change thresholds and we will create real horror.

And yet, at the same time, from despair springs hope so I tend to oscillate between being hopeful – where I like to think I spend more time – and feeling despair.

It can change in a moment based on a phone call, a human interaction or an interaction with nature. Mostly I try to put those feelings aside and just keep going, just keep pushing.

One of the things I despair about is that the whole concept of “sustainability” has become so bastardised that it’s nigh on meaningless.

It has become a throwaway term and so long as a business has a sustainability policy or a sustainability manager, they become insulated, to some degree against the change process.

Business as usual

Grand reports and all sorts of proclamations often hide the fact that business as usual continues unabated and that all that has happened has been participation in meetings, discussions and not much else.

So when I see the term “sustainability” being thrown about to cover inaction, I get pessimistic.

I’d like to see more action and on the ground change. Then folk can call it “sustainability” or whatever they want. We seem to have become enamoured by the process rather by genuine achievement of urgently required ends.

We should first ask what outcomes we want and then celebrate our progress toward them.

No one speaks so much about ends and that is why at TFT we use such sharp language as No Deforestation and No Exploitation.

These are ends we seek to achieve and I become optimistic when people are ready to embrace these ends rather than speak about ill-defined “sustainability”.

The targets problem

It’s become clear that 2020 deforestation targets aren’t going to deal with the problem. This is because the pace of deforestation in places such as Indonesia where the destruction has already been so immense, continues unabated.

If we don’t move more quickly, we aren’t going to save those last remaining forests and the critical species like the Sumatran tiger, rhino and elephant and orang-utans that live there.

This is a human tragedy, a deep human failure. On top of that, we can add a further human tragedy that continues to unfold as indigenous people and local communities continue to be displaced and disrespected. We’ve just got to move a LOT more quickly.

The problem with 2020 targets is that they’re just way too distant. If you’ve got a 2020 target, you’re not going to get serious about delivering it until at least 2018 … people really do need to be honest about that.

All these announcements about No Deforestation by 2020 are just unhelpful noise because it effectively gives suppliers a license to continue business as usual for the next six years.

It takes the pressure off and I’m disappointed that NGOs, including those that I respect very much, such as Greenpeace, are celebrating companies committing to 2020 for No Deforestation as a victory.

More ambition

It isn’t a victory to allow six more years of deforestation in a context where many forests will be destroyed in that period. So we’re asking people to be much more ambitious.

Set targets that mean you have to start acting NOW, today. And report how you’re going transparently, honestly, so that others can see and judge your progress themselves.

And if you work with TFT, we’ll kick you out if you don’t start real action today. We don’t have time to ponder what we might or might not start doing in 2019.

The other side of the story is that the change we need is not one company at a time.

We need whole industries to transform and the change processes for that to happen are so huge, complex and gruelling that we need to start working through them immediately if we’re going to get anywhere in the years ahead.

If we only start in 2018 (or later), we’ll not be where we need to be, if at all, until way after 2020.

It’ll be easy to deliver No Deforestation targets when there’s no more forest to cut down so let’s recognise that we’re setting these targets to save forests, not to win some award or be hailed as an environmental hero or to get more funding for more campaigns while suppliers carry on business as usual. Policies count for nothing; it’s change on the ground we need and we need it now.


Scott Poynton is executive director of The Forest Trust. He will be speaking at the Innovation Forum deforestation conference in London on 28-29 October. Other speakers include McDonald's, Nestle, Unilever, Ikea, Wilmar, New Britain Palm Oil, Waitrose, Mondelez, Marks & Spencer, Mars, Greenpeace, TFT, WWF, Sky, Aviva Investors, Oxfam, Robertsbridge and many others.

Brochure here, and embedded below:


Tuesday, August 12, 2014

Coffee and climate change "one degree changes the taste dramatically"

Here's a short, informative and very interesting video about coffee and climate change:

KEW GARDENS - Beyond the Gardens: The Forgotten Home of Coffee from LONELYLEAP on Vimeo.

Some of this you may know, if you've looked into the topic before, but the little run through of the history and genetic diversity angle is well worth a watch.

Here's the link if you can't see the embedded video.