Page 31 – Sustainability Academy

Today, we live in a world where everything that surrounds us is driven and impacted by big data. As data gathering is becoming advanced, so is our ability to understand copious amounts at once. The corporate world can use Big Data in order to better understand the environmental impact of their operations and optimize their use of resources.

One “real world” problem that Big data analytics is being applied to right now is environment sustainability. Climate change is currently happening and there is nothing that can truly deny its existence. World leaders are discussing climate change at almost all major forums as the problem has moved to the forefront of world-scale issues. This is because it is affecting every country.

Human activity has proved to be the major cause of this change as CO2 emissions have heavily increased in recent years. While a major part of the climate change damage is irreversible, it is still possible to get some control over the global increase in temperature. Big data applications can be as relevant towards the cause of environment sustainability as they have been to other sectors, such as healthcare.

Understanding Environmental Impact and Resource Optimization through Big Data

Big data’s usefulness lies in its ability to help businesses understand and act on the environmental impacts that their operations are having. Big data’s potential impact on sustainability rests on its power to present a clear picture of the complete impact their operations are having.

An important application of Big Data is assessing environmental risks that the world faces right now or might possibly face in future. Another contribution of Big Data to the corporate world is its ability to help optimize usage of resources. Small improvements in efficiency due to resource optimization can result in large company savings.

Moving Towards Better Environmental Regulation

Big data can also be integrated with government policies to ensure better environmental regulation. Governments can now implement the latest technology and adopt real-time reporting of environmental quality data. This data can be used to monitor the emissions of large utility facilities.

Keeping track of how various business operations have an impact on the natural world gives way to new and innovative ways for bringing sustainability to an organization’s structure. Big Data is actively helping create a change, cut costs and boost long-term profitability in a resource-constrained world. That’s the real objective that every corporation should be aiming towards.

The Ecological Footprint is a measure that calculates human consumption and its demand on the planet’s ecosystems. According to reports from the GFN (Global Footprint Network) the world would need 1.7 Earths to support its current demands on renewable, natural resources.

Ecological Footprint & Biocapacity

The footprint takes into account how much in biological resources (such as forest land or fishing grounds) is necessary to fulfill the consumption of a country to absorb its waste. Along with an ecological footprint, the GFN also measures bio-capacity. This is the country’s ability to renew the resources demanded from its ecosystems. The smaller a country’s ecological footprint, and the bigger a country’s bio-capacity, the better it is.

Many countries have bio-capacities that are declining quickly. In some countries, this can be due to a combination of rapid population growth and deforestation. The United States for example, makes up 13% of the world’s total footprint and has the second-largest deficit in the world, after China. While the United States’ total footprint has been slightly decreasing since 2005, it is still twice the size of India’s and far greater than in other developed countries. Its consumption rate is still far from completely sustainable.

Economic Development

Economic development often means using more resources and increasing carbon emissions. For developing countries, an increase in ecological footprint may be necessary to strengthen their economies. The footprints in these countries may not be high to begin with, so small changes can cause a big jump. Also sustainable technology may not be as widely available in developing countries.

For developed countries, the opposite may be true. Because their rate of growth is decreasing and most already have large footprints, the fluctuations might not be so obvious. There are many different solutions, but the fastest way for a country to reduce its ecological footprint, according to GFN is to switch to greener energy sources.

On Friday, April 21, 2017, the United Kingdom had its first official coal-free day since the 19^th century. This marks an extremely historic milestone in Britain’s attempt to shift away from carbon fuels.

Coal-fired power generation is known to contribute heavily to climate change. Burning coal produces just as much carbon dioxide as it does to burn natural gas. We should attempt to reduce the world’s reliance on coal, by encouraging the use of renewable energy sources like solar and wind power instead.

UK’s Coal History

Historically, the U.K. was the first country in the world to use coal for electricity. Thomas Edison built the first ever coal-fired power station in Holburn, London back in 1882. This was considered absolutely groundbreaking for the time. Ever since that fateful day in 1882, coal burning has generally had nothing but success and expansion. That is, until the gradual industry decline of recent years. In 2015 the last deep coal mine closed, although open cast mining continued.

Before the complete coal shut down on April 21^st, the longest coal-free period in the U.K. had been in 2016 and lasted only 19 hours. The head of energy at Greenpeace UK, Hannah Martin remarked, “The first day without coal in Britain since the Industrial Revolution marks a watershed in the energy transition. A decade ago, a day without coal would have been unimaginable, and in 10 years’ time our energy system will have radically transformed again”.

Going Coal-Free in the UK by 2025

Fortunately, the government has announced that it aims to switch off all coal plants in the country by 2025 through the Paris Agreement. As a general advocate of renewable energy the UK has more offshore wind turbines installed than any other country in the world, as well as fields of solar panels with as much capacity at seven nuclear reactors.

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The head of climate and energy at WWF, Gareth Redmond King said that this change was a “Significant milestone in our march towards the green economic revolution.” Hopefully this dramatic, environmental step forward will be used as an example for other cities and countries around the world. We can only hope that in the future coal-free operations will become increasingly more common.

Today, we hear a lot about Chinese investments and money pouring into diverse markets and even Chinese loans being used to bail out struggling economies. The world is wondering “is China really that rich?” and the answer is yes, since the country has managed to accumulate huge financial assets in recent years.

While the sales and financial assets of Chinese companies have continued to grow for the past decade, more and more focus seems to be placed on their domestic and global performance in the realm of corporate social responsibility (CSR). Therefore, leading Chinese companies have started making fundamental changes in their strategic thinking, placing greater emphasis on becoming some of the world’s most reputable and pre-eminent brands.

..Looking to Expand Globally

Chinese business leaders have recognized the need to evolve, particularly in the area of CSR in order to become more competitive on a global scale. With the growing presence and influence of Chinese companies abroad, host countries increasingly expect Chinese companies to contribute positively to their sustainable development objectives and not to merely profit from their investments. The rise of more conscientious domestic and global consumers and investors, the prevalence of social media and the increasingly competitive global marketplace can all be viewed as key initial drivers for Chinese attention to CSR.

Becoming a Leader through CSR

The Chinese government has strongly supported the concept of CSR as a way for Chinese companies, mainly state owned, to drive harmonious integration into the broader global market. But, on the other hand, China wants to create its own CSR definition and guidelines that fit its unique economic situation and business culture.

Like many of their Western counterparts, Chinese companies faced a variety of societal and market pressures that ignited their CSR journey. However, perhaps more than their competitors, many Chinese companies view their futures as inextricably linked to their CSR performance and have begun viewing it as a potential competitive edge. China has learned that CSR, in the current economic and political landscape, will help the country to become a leader, not a follower.

At the UN Climate Conference in Paris, known as COP21, 196 countries joined together in the Paris Agreement, a universal pact that sets the world on a course to a zero-carbon, resilient, prosperous and fair future. While the Agreement is not enough by itself to solve the problem, it places us clearly on the path to a truly global solution.

The Agreement marks a new type of international cooperation where developed and developing countries are united in a common framework, and all are involved, engaged contributors. It reflects the growing recognition that climate action offers tremendous opportunities and benefits, and that climate impacts can be tackled effectively, with the unity of purpose that has brought us to this moment.

What is the Ambition Mechanism?

However, to fully understand why the Paris Agreement is such an achievement, we must unpack one of its core ingredients, what has become known as the ambition mechanism or cycles of action. This mechanism lays out a process to continue strengthening action in a regular and timely way every five years, starting before 2020. The Ambition Mechanism refers to an ongoing process to increase action by all countries and can be broken down into three main components:

Global Stocktake of implementation and collective progress every five years
Submission of updated nationally determined contributions (NDCs) from each country every five years informed by the Global Stocktake
Expectation of progression and highest possible ambition for each successive contribution.

What will happen after 2020?

After the 2018 assessment, the next moment for all countries to come back and assess implementation and collective progress will be in 2023, referred to in the Paris Agreement as the “Global Stocktake.” This Global Stocktake will then occur every five years and serve as the pivotal collective moment to assess implementation and progress towards achieving long-term Paris Agreement goals.

The Global Stocktake has broad scope and purpose—assessing mitigation action as well as adaptation, means of implementation (including finance, technology transfer and development, and capacity building), and other support. Assessments will be based on equity and informed by the best available science, including the latest Intergovernmental Panel on Climate Change reports. All Parties will be required to prepare and communicate new NDCs for mitigation, informed by the Global Stocktake outcomes.

The world has now embarked on a historic transformation. The regular and ongoing process to review and increase ambition across all elements of the Paris Agreement is what will ensure this is a historic, dynamic and durable outcome capable of driving the needed level of climate action.

The outcome of the U.S. presidential election seems to be the latest step in a longstanding global trend of increasing political and environmental uncertainty. As far as Sustainability is concerned, President Trump’s regulatory freeze that halted four rules designed to promote greater energy efficiency, appears to be just the first salvo in an ongoing plan to roll back environmental protections and slash environmental budgets.

As the economy becomes more sustainable and energy efficient, a new market for clean energy and sustainability jobs is created. This market is large, growing and intrinsically local. Even better, these jobs span across economic sectors, including renewable energy, energy efficiency and other green goods and services, like local and state government, transportation and corporations.

Key trends as sustainability jobs continue to grow

As sustainability jobs continue to grow across the US, there are several key trends that need to be taken into consideration. First of all, sustainability jobs represent a large and growing portion of the U.S. workforce across multiple sectors. Sustainability now collectively represents an estimated 4-4.5 million jobs in the U.S., spanning energy efficiency and renewable energy, to waste reduction and environmental education. Moreover, due to the on-site nature of many renewable and energy efficiency jobs, these jobs cannot be outsourced, and can pay above average wages. Lastly, it is a fact that clean energy and sustainability jobs are present in every state in America, providing 2.2 million jobs across the nation.

How can we continue this momentum?

Investments in clean energy and sustainability pay off in the long run and foster a stronger economy – that equals more jobs and a cleaner future. This is why businesses are increasing their investments in sustainability. All in all, Corporate America understands that prosperity and a low-carbon economy go hand-in-hand, and should continue to support investment in this area. America is transitioning to a clean energy future and we can’t afford to stand in its way!

by Michael Hines

Minimizing a company’s impact to society has long been considered to be at odds with maximizing stakeholder returns. Better informed customers, as well as liability averse investors are now requiring companies to do better. Companies are responding, and a bottom line benefit is emerging.

In the last 50 years sustainability has primarily been seen in Socially Responsible Investing (SRI), which avoids investment in companies with unethical or risky practices. While a positive development for society, this exclusionary practice has generally been associated with at best average investor returns.

Today corporate sustainability has evolved to where it is possible, even advantageous, to operate in a manner that is a win win for an organization, its partners and society. There is strong evidence that companies with their “Triple Bottom Line” – Environmental, Social and Governance (ESG) – ducks in a row are rewarded with a lower cost of capital and frequently outperform. These “best in class” companies are not only reducing their impact on others, but cutting waste and mitigating liabilities in their operations.

While a new concept for many, ESG is coming on strong. After nearly zero a decade ago, ESG related assets under management at the end of 2015 were over $21 trillion. Morningstar now has ESG sustainability ratings for funds. It’s both carrot and stick – recent financial crises have convinced regulators and investors that more information is needed from companies. And companies have recognized that being a good citizen is a point of positive product differentiation.

Much of the impact of ESG falls on the CFO’s desk. For the Social component – the S in ESG, companies that treat employees and suppliers fairly reap rewards of increased productivity plus less turnover and litigation.

Recent data breaches at companies like Target and Home Depot have shown that companies need to manage supply chain vulnerabilities that can threaten their sustainability. Companies like ThirdPartyTrust have emerged to address the issue as companies scramble to identify and manage this risk. For suppliers, demonstrating data security has become a necessary requirement to win contracts as well as a potential competitive advantage.

Strong corporate governance (the G in ESG) creates transparency and stability, encouraging investment.

Most early adopters are large multinationals, particular those in Europe with regulatory requirements from public exchanges. Companies such as Mitsubishi, Apple, and Cummins are providing ESG disclosure in an annual report like format. Goldman Sachs is a solid example of ESG reporting.

Standards for ESG measurement and reporting are evolving. Unlike standard GAAP financial principles with a well defined one way dissemination of information, ESG measurement is still both an art and a science. Communicating this sometimes hard to measure information is ideally a two way conversation with stakeholders. Just as GAAP represents a standardization of best practices over time, initiatives such as GRI and SASB aim for the same consistency and eventual auditability.

Driving change at an organization begins with measurement and communication of the relevant drivers. Sustainability Academy’s Certificate in ESG Performance for Investors and Sustainability Professionals provides useful knowledge about ESG reporting and the opportunities and challenges of this changing field.

What gets measured, gets managed. Markets and companies becoming more transparent will benefit both the environment and the economy.

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Michael Hines is an executive, consultant and entrepreneur. He is experienced in financial management, operational improvement, sustainability, and strategy. His work includes large and small companies, restructurings, startups and acquisitions.

EU Objectives for 2030

Brexit has made many headlines, both before and after the outcome of the referendum on 23 June 2016. Although there is still a lot of uncertainty with regard to the consequences and exit arrangements, we can already look at the potential impact of environmental, social and governance commitments made by the UK.

In addition to the 2020 objective, the EU has defined its objective for 2030. It boils down to a 40% reduction of greenhouse gasses, a 27% improvement in energy efficiency and a 27% share of renewable energy in the primary energy supply. This objective has been defined including the United Kingdom and revolves around two main axes: the reduction of greenhouse gasses and the share of renewable energy in the energy supply. Indisputably, the United Kingdom’s exit from the EU impacts the commitment made for 2030.

..What about the EU then?

Since the UK is no longer part of the aggregated EU statistics, the EU will be obliged either to lower its commitment or to ask the remaining members to put in more efforts by means of compensation. More specifically, according to HSBC calculations, in order to obtain a 40% reduction of greenhouse gasses, Member States should contribute an additional 7.6% reduction. It may seem relatively easy since it will be divided among 27 states. However, as some large emitters are resisting, it is no easy task.

One other important element to consider is that the UK exit would lead to a redistribution of the voting rights in the European Parliament. Therefore, the climate-skeptic countries would rise. This compromises the commitment to work harder and make more investments in renewable energy.

The UK Environmental Commitments

As far as the UK is concerned, it is quite possible that, even without the EU, the United Kingdom may show a strong commitment to climate change. We should indeed stress that in 2008 the country adopted the Climate Change Act, which remains valid up to now and aims to reduce greenhouse gas emissions by 80% by 2050. Moreover, the UK has achieved impressive results when it comes to the reduction of greenhouse gas emissions and improving energy efficiency. Particularly, between 1990 and 2014, the country’s energy consumption fell by 10% while its GDP increased by 65%.

All in all, despite the fact that the climate is not a priority in the discussions about the exit arrangements, climate change remains a challenge today and requires a global, ambitious and swift response.

The biggest cosmetics brand in the world is on a mission to prove that all businesses can become sustainable without compromising their profitability.

The L’Oréal Group is the largest and most profitable company in the cosmetics industry, currently valued at $13.69 billion. Nonetheless, between 2005 and 2016 the company was able to reduce its greenhouse gas emissions by an impressive 67% while at the same time it managed to increase its entire production by 29%. This is an amazing accomplishment that demonstrates a true devotion to sustainability. As Alexandra Palt, L’Oréal’s chief sustainability officer recently mentioned to FastCompany magazine “We are really serious about sustainability across all of our products and services”.

Sustainability Can Go Hand-In-Hand With Economic Success

Achieving sustainability in the cosmetics industry is nowhere near as simple as swapping out petroleum-based products for plant-derived alternatives, since the entire industry supply chain from the sourcing of material to the packaging of products can leave a huge environmental footprint. However, L’Oreal’s CSO was able to focus on each stage of product development and achieve an effective sustainability overhaul. Mrs Palt was able to do that through the following steps: Sourcing from renewable raw materials like plants; tightening transit routes and switching to electric vehicles to reduce transport-related emissions; converting manufacturing facilities to run on renewable energy; reducing the amount of water wasted in the production process by installing on-site treatment mechanisms; re-engineering packaging to use less plastic, or biodegradable materials when possible.

The Importance Of Employee Training Programs

Under the leadership of the L’Oreal CSO, the company was able to tackle this daunting task mainly through comprehensive employee training programs (like the sustainability training programs offered by CSE) on various areas of sustainability (CSR). This is extremely important in order to create a strong sustainability department that can guarantee positive results. When the CEO has such a strong vision for how a company can transform, you have to have a way to transform that strategy into action,” Palt says. So, the CSO’s department has been able to accelerate its plans to increase sustainability by linking all L’Oréal brand and country managers’ bonuses to outcomes on environmental targets.

As the largest cosmetics company in the world, L’Oréal is an obvious benchmark in the industry. However, Palt doesn’t want the company’s sustainability efforts to be seen as attempts to teach other businesses a lesson. Instead, these efforts are driven by a sincere desire to effect real change and ensure that future generations will be able to enjoy the same benefits as we do.

Recently we celebrated International Women’s Day, a global celebration which aims to inspire women in countries across the world. The tradition began with the first National Women’s Day, on the 8^th of March in 1909 and its roots are in campaigning for better pay and voting rights.

Nonetheless, reports show that while more and more companies file CSR reports every year, the lack of transparency into workplace gender equality still remains troubling. Nowdays, women outperform men academically and increasingly enter the workforce, but they still do not reach leadership , even though they are qualified to do so. Many governments have stepped in to regulate the matter. For example Norway requires 40% of directors be female while in the U.S., public companies must disclose whether and how their nomination committees considers diversity in selecting directors.

Gender Equality Leads to More Productivity

Closing the gender gap in management and governance positions actually correlates to stronger productivity on both corporate and national levels. However, despite the mounting data proving the benefits of ”a woman’s touch” in corporate governance, almost 85% of Fortune 500 company board positions still belong to men.

Gender Equality in CSR Reporting

CSR reporting recognizes companies with initiatives and efforts that go beyond legal requirements. Including gender in CSR reports allows tracking of gender equality progress by company, industry and nation. The Global Reporting Institute provides guidelines for companies to start tracking and reporting their gender-related initiatives.

The time has come to go further than merely recognizing the value women provide in corporate governance. It is time to take down the glass ceiling, close the gender gap and realize the benefits of gender equality to the private and public sectors.