The pursuit of profit is responsible for capitalism’s uncanny ability to adapt, for better or for worse. If the means of obtaining it are not regulated, profit can lead to corporate self-destruction, as the world witnessed in 2008, when short-termism and greed led to the downturn of the global economy and the shedding of a few multibillion-dollar corporate tendrils (such as Lehman Brothers). It has also resulted in longer-lasting and ultimately more significant external degradation, such as the poisoning of the atmosphere, freshwater and ecosystems. Moreover, the collective emissions of a global economy have brought CO2 levels to a point where climate change is an inevitable part of our long-term future.

While the economy is often perceived and discussed as something separate from nature, it has never been clearer that economic survival is inherently linked to environmental well-being. By necessity, decades of destructive profiteering have ended in a capitalism whose only means of survival is to evolve into a more compassionate and responsible economic model. But is it possible?

“First, we have to recognize that the past 20 years have not been a victory for capitalism at all. Second, to realize capitalism allows for growth in the power of the citizenry. Companies are not ethical or moral, nor are governments. People are ethical; the people create the standards. People need to be educated in an ethical context, and the market needs to be set up in such a way that the people who work in corporations are able exercise their ethics.”

—John Ralston Saul, Canadian author and essayist

“In the climate era, we need all hands on deck. We need innovation, entrepreneurship and leadership from all sectors. In order to ensure that we don’t run from disaster to disaster, as we have from the Gulf oil spill to Fukushima, our society needs to chart a fast course to clean, safe renewable energy systems that ensure climate stability, economic stability and healthy communities. This challenge requires innovation and leadership from all sectors. Most importantly, it requires strong laws from government to change the rules of the game.”

—Tzeporah Berman, co-director, Greenpeace International Global Climate and Energy Program

“We need to make markets work for a better world. Companies must move away from this obsession with short-termism; the financial crisis showed us how poorly resources are allocated when that occurs. The Dodd-Frank financial reform bill, while increasing disclosure requirements, has not addressed this fatal flaw in the system. Investors and governments must demand long-term planning be integrated into corporate culture.”

—David Runnalls, senior fellow, Sustainable Prosperity

“Capitalism will only work in symbiosis with humankind and the environment if its rules incorporate the full and true costs of pollution. If we don’t sufficiently put a price on pollution, capitalism will ultimately fail humankind.

–Marlo Raynolds, senior advisor, Pembina Institute

“As we look at more disasters happening like the BP spill, and now the major oil spill in Alberta, companies have to start looking seriously at risk management. With that, it becomes about looking to social responsibility, working with the public and with First Nations, using traditional indigenous wisdom and ecological knowledge of the spaces we do business in. We have to look at the long-term use of resources we have, not at short-term profits. I believe we are changing towards more long-term vision as we go forward.”

—Judith Sayers, Hupacasath First Nation, associate professor of law, University of Victoria

“It largely depends on the humans who are running the companies. It comes down to attitudes, and if people are greedy or think they need bonuses and salaries that amount to 500 times of the base employees are making, then you aren’t going to change it. You need to get the narcissists out of the executive suite; they aren’t healthy for the companies, let alone the ecosystems and everything else. My view is that it is their phony leadership that is destroying companies. What we have is a management crisis, with people in management focused on personal and short-term gains.”

—Henry Mintzberg, Canadian author and professor of management studies, McGill University

“Some organizations will wait until their bottom lines are negatively affected by their lack of action related to environmental and social responsibility. Others will act when they realize their employees, current and future, consider it a requirement of engagement. Still others will wait until they are mandated to act via regulatory or legislative pressures. But the leaders of their industries are already illustrating how a commitment to a healthy world responds to the ever increasing expectations of all stakeholders by engaging their staff in driving innovation, improving performance, and ensuring long-term health for all.”

—Kathy Bardswick, CEO, The Co-operators Group, 2011 Best Corporate Citizen

“Today the Arctic, while fully immersed in the modern system of capitalism, must continue to retain the sharing philosophy of our ancestors. Inuit have always lived symbiotically with their environment. Capitalism has taken on a human face here in the North. Nunavut is a society with a rich tradition of sharing and respect for the land, and a ‘cleaner capitalism’ is the natural progression.”

—Eva Aariak, premier of Nunavut

The post Oh, the humanity! appeared first on Corporate Knights.

No mooing. No distress. Just calm, cute, milk-fed creatures.

Vegetarians might cringe. If red meat is on their do-not-eat list, then veal is taboo. Climate advocates, well, they just wouldn’t approve. They point out that red meat is generally about 150 per cent more greenhouse gas intensive than chicken or fish.

But the fact is Canadians like eating cows and, for some, the younger the beast the tastier the dish. Each year more than three million cattle are slaughtered in Canada for food. On average, we each eat 23.3 kilograms of red meat a year, according to 2008 figures from Statistics Canada. About 70 per cent more red meat makes it into our stomachs than poultry, though the numbers are gradually shifting to chicken and turkey.

Delft Blue certainly doesn’t consider its veal a sin food, but the company has taken several steps to reduce the environmental impacts and improve the ethical image of its operations. It turns cow manure into clean electricity that is sold into the Ontario grid. It captures waste heat from that process to heat water and keep its barns warm in the winter, significantly offsetting its natural gas use. LED lighting strips also keep the barn stalls bright and welcoming for their temporary guests.

“We’re constantly trying new things, and I’m always looking to make the whole farm operate more efficiently,” says Aron Hamm, who oversees operation of Delft Blue’s 500-kilowatt on-farm biogas system. “The heat costs on the farm are just astronomical, so we can offset that significantly. With this system, we’re looking at a payback of 5.5 years on our investment.”

It all starts in the stalls. When the cows poop, the manure falls through slats in the floor grates and is carried by gravity through a series of pipes to a central collection point. The manure is then pumped into a large holding tank—the anaerobic digester—and mixed with a combination of pre-pasteurized fats, oils and greases (FOGs) delivered every two days from local sources, and some dry materials such as crop residue and grass.

Once in the digester, the mixture is heated to 38 degrees Celcius and stored for 30 days while special microbes convert the organic material into methane gas. The gas is captured, cleaned up and burned in onsite generators that inject power into the Ontario grid. Waste heat is captured and repurposed. The digester byproduct, a nutrient-rich liquid fertilizer, can be sold to other farms.

“It’s basically a big giant stomach being optimized to fart 24/7,” says Dan Jones, co-owner of European Power Systems, the company that oversaw construction of the system. The entire operation is automated, and specially designed software allows Hamm to monitor and adjust each step of the process from a small control room—and from his iPhone, if necessary.

Jones says the system isn’t just helping Delft Blue offset its costs; it’s also giving the company an edge over competitors by allowing it to market its veal as a low-carbon product.

It’s the kind of branding that Loblaws and Walmart, both customers of Delft Blue, find attractive, adds Hamm. “The digester story is one of the reasons they wanted to go with us.”

Less clear is whether a greener veal product should be labelled as such on store shelves, and whether such a label will do anything to influence consumer purchasing decisions in the low-carbon direction.

WILL BUYERS BITE?

There are plenty of so-called green products on the market, from natural phosphate-free dish soaps to bleach-free coffee filters, but specifically promoting the low-carbon nature of retail products in Canada is largely untested.

South of the border, and in the absence of serious climate policy, there has been some talk of introducing carbon labelling to products as a way of nudging consumer and corporate purchasing behaviour. A bottom-up approach, some researchers say, may be more effective in the short term than waiting for political leadership.

“A private carbon-labelling program for consumer products could help fill the policy gap by influencing both corporate supply chains and consumer behaviour,” writes Michael Vandenbergh, co-author of a recent commentary in the journal Nature Climate Change. “A substantial segment of the population in many countries is motivated by climate concerns, and their preference for low-carbon products is a resource to draw on in the absence of international and national government action.”

For Vandenbergh, a professor of environmental law at Vanderbilt University in Nashville, it’s about improving a consumer’s ability to make the right choices. He points to the success of nutritional labelling, which has shown to influence product selection and consumption. “Back-of-package labels required by the U.S. Nutrition Labelling and Education Act of 1990 are correlated with healthier eating habits among those who report using them,” he writes, adding that there is also evidence that non-nutritional labelling has worked. For example, research shows that consumers have modified their purchasing behaviour when tuna cans carry “dolphin-safe” labels.

Would it work with carbon? “It’s a really interesting question,” says Andrew Pelletier, vice-president of sustainability at Walmart Canada. “So far, we’re not really seeing a big movement from people going out and spending more on products that are sustainable.” According to Pelletier, customers are telling Walmart they want sustainable products—just not at a premium.

It comes down to making all products more transparent over time so customers can make educated choices, says Pelletier. How is a particular item made? How much energy was used to manufacture it? How much water was consumed?

Pelletier says one of the company’s boldest, multi-year projects is development of a sustainable product index. “The index will give customers a lens into all the products they purchase from us. It will be a simple rating system for customers across all categories or products,” he says. “Carbon will probably end up being a piece of that index.”

In Europe, some companies are choosing to focus strictly on carbon. U.K. grocery giant Tesco is the leader in this regard, having already put carbon labels on more than 500 products—from milk to toilet paper—as part of a long-term plan to label all in-store merchandise. Tesco conducted a survey that found that 60 per cent of its customers would actively seek out a product with a low-carbon footprint if doing so is convenient and if the product doesn’t cost more.

In Sweden, the government has been pushing the concept of carbon labelling for retail products since 2008. It created voluntary guidelines for industry that are now being studied by several European Union countries. Without a doubt, the most popular label so far in Europe comes through a non-profit outfit called Carbon Trust. So far, the U.K.-based organization has signed up 90 brands covering 5,000 different products.

The approach has its skeptics. Mike Berners-Lee, a U.K.-based expert on carbon footprinting and author of the new book How Bad Are Bananas? The Carbon Footprint of Everything, isn’t convinced that consumers will be swayed because a Tesco label says a litre of milk has a carbon footprint of 800 grams.

“Carbon numbers on food labels really don’t work,” says Berners-Lee. “Over 95 per cent of consumers have no idea whatever as to what an 800-gram footprint means—they have no sense of scale.” Also, the methodology used to pinpoint that number is complex, resource intensive and not necessarily accurate.

Forget numbers, adds Berners-Lee. It’s better to have a basic system of a few labels that can be slapped on products and describe in simple terms the climate-friendly characteristics of the supply chain behind it, he says.

In Canada, some companies are flirting with this simpler approach. This summer, Kraft Canada will begin printing the logo of green energy retailer Bullfrog Power on packages of Dad’s oatmeal cookies, which will be made using renewable electricity and green natural gas services purchased from Bullfrog.

“To my knowledge it will certainly be the first large brand of cookie in Canada that will be carbon-neutral,” says Dino Bianco, president of Kraft Canada. “It will cover 15 million packages a year, so it will be quite a substantial impression in the marketplace.”

Tom Heintzman, chief executive of Bullfrog Power, says the company’s logo—the image of a leaping green frog—is simple but increasingly recognizable to Canadians. People know it represents zero-emission electricity, or, more recently, green natural gas sourced from renewable landfill gas. “That one small green frog captures a relatively complicated idea,” says Heintzman.

But should individual companies, let alone individual countries, be marketing their own low-carbon labels—especially, as in the case with Bullfrog, when they double as a corporate brand? Is there a risk that too many labels will enter the market and consumers will become confused or disinterested?

Vandenbergh mentions the need for a single label overseen by an organization with global reach. He notes that the International Organization for Standardization is developing ISO 14067, a carbon-labelling standard for products, which is expected to be completed sometime this year.

Heintzman isn’t willing to sit around and wait for an international standard to make its way into Canada. “One of the difficulties of carbon labelling is complexity and standards and getting everybody to agree,” he says. “Rather than weighing into a long, multiyear debate on such a thing, we and our customers are just plunging in and doing it. We hope that in five years there will be a lot more of our green frogs on the things you buy.”

Delft Blue, meanwhile, is taking a low-carbon approach not just to impress its corporate customers, but also because it makes good business sense. It doesn’t need a label to do that, nor would one offer any obvious benefits.

Besides, there’s something particularly unappetizing about the marketing of “green” veal, or any other red meat for that matter.

The option is there if large buyers such as Walmart decide to take the low-carbon message directly to consumers. Beyond the simple idea of leaping frogs, however, carbon labelling in Canada just doesn’t seem to have much traction.

The post Cows, carbon and you appeared first on Corporate Knights.

The Greek philosopher defined business in two ways: chrematistics, which means the art of money-making, and oikonomia, the Greek root word of economics, meaning household stewardship or management.

A household is ultimately an enterprise—a group of citizens who choose to live and strive together for the purpose of optimizing their well-being and happiness. A business is simply a legal enterprise that is ultimately an extension of a household. By nature, I believe we are all economists who run an enterprise called a household for the purpose of pursuing happiness. Yet fundamentally, business has strayed from this principle.

In eight years of teaching business students at the University of Alberta about ethics, corporate responsibility and social entrepreneurship, I have often posed the question: what is the role of business in the 21st century? This year, the discussion led my students to a sobering conclusion: they were graduating as professional chrematists, being taught to pursue profit above all. And they weren’t happy about it.

The majority of Canadian and U.S. business schools continue to teach that the primary purpose of business is to make money or maximize profits for owners and shareholders. However, I believe this philosophy is problematic, particularly so when one looks closely at the statement of “best interests” in a business’s legal charter. In fact, there are no clear statements about what a business is responsible for.

The demand for greater corporate social responsibility (CSR) over the past 15 to 20 years has been driven by several factors, including the Enron and WorldCom scandals and the Madoff affair. CSR has taken the form of sustainability reports, triple-bottom-line accounting and the ongoing promotion of the new image of companies trying to do good. But some cynics, including many of my business students, believe these are merely token gestures, made mostly by larger companies, serving to mask the corporation’s true character.

Others have criticized CSR as a concept more fundamentally. The late economist Milton Friedman believed it to be downright immoral, as it is contrary to his perception of the corporation’s ultimate responsibility: maximizing profits. Friedman argued that because a corporation is the property of its stockholders, there is no “social responsibility” for corporate executives. In his view, executives must make as much money as possible for their shareholders, and those who choose social and environmental goals over profit are, in fact, acting immorally.

While there are undoubtedly conflicting beliefs about the purpose of business, no definitive statements are reflected in the law. Because of this, the role of a business becomes whatever its owners, directors and shareholders dictate it to be. It could certainly be said that a corporation is inherently devoid of values or principles to guide its behaviour; nothing explicitly exists against which we can hold its actions to account.

While more and more companies are voluntarily producing sustainability reports, corporate social or environmental responsibility is still not enshrined in their legal DNA. Presently, environmental and social accountability is discretionary and not legally binding.

But should we strive to redesign the corporate charters of business to incorporate environmental and social responsibility? Bryan Redd believes so. Redd is a corporate lawyer and CEO of Upstream 21, a Portland, Oregon-based corporation seeking to improve the financial, social and environmental performance of small companies.

“I would disagree that as a matter of law corporations are compelled to maximize shareholder value,” he says. “I am not aware of a single legal case in all of the U.S. states which I have studied in preparing the corporate charter for Upstream 21.”

Redd believes it was Wall Street’s short-term and somewhat irrational focus on quarterly performance results that led to the flawed decision-making by investors, corporate managers and directors and ultimately caused the recent economic downturn.

In response to this, Upstream 21 has set an important precedent by establishing a new kind of corporate charter. The charter clearly defines the responsibilities of a company to multiple stakeholders and imposes an accountability structure that considers the impacts of its business actions on all of its constituents.

The example of Upstream 21 suggests that there is an opportunity to optimize the genuine wealth or well-being of communities and the environment through clearly spelled out responsibilities.

In 2009, Harvard business students seized such an opportunity with a proposal for a declaration of a professional code of conduct for business professionals, similar to the Hippocratic Oath for doctors. Their proposed oath for business is: “to do no harm to the people and planet through their business operations” and ultimately be held to account for their actions as a licence to operate. They argued that a Hippocratic Oath for business would explicitly define management obligations towards society and the “diligent application of knowledge” through a specific set of norms. This is my vision of the future of business, which I see many new business students embracing: business and enterprise that is committed to financial sustainability, yet with a heart and passion for contributing to the overall health of the environment and the communities in which they operate.

Fortunately, more and more businesses are voluntarily moving in this direction, including Mountain Equipment Co-op, the Co-operators Group and Vancity Credit Union. Even corporate behemoths like Walmart are beginning to explore new ways of operating on the basis of financial, social and environmental sustainability principles. In Walmart’s case, it has recently released a sustainability scorecard measuring environmental performance in four key areas: greenhouse gas emissions, waste and water use, natural resources, and responsible and ethical production.

Yet what is particularly exciting is the emergence of new business alliances throughout Canada and the U.S. calling for a new corporate modus operandi. The Business Alliance for Local Living Economies (BALLE) is a network of local businesses working together to help create vibrant, resilient and flourishing local economies where environmental economic and social well-being is the ultimate objective. From Halifax to Vancouver, BALLE is helping to redefine business and competition.

The post The caring corporation appeared first on Corporate Knights.

If you don’t have an answer, you are not alone. Despite an intense debate in Canada over the last decade and years of on-and-off discussions before that, there is no agreement on what corporate social responsibility entails or even on what it should be called. New labels crop up constantly: sustainable business, corporate citizenship, responsible business conduct, triple bottom line, voluntary corporate initiatives, total sustainable mining, E3 plus. Some emerge from business, government or advocacy groups trying to slant the concept in a favourable direction. Others come by way of consultants, advisors and gurus, who slap a new name on an old idea in order to make it their own. There is so much murk surrounding the issue that it’s difficult to see your way clear.

That’s the bad news. The good news is that few corporate executives still approvingly quote Milton Friedman’s dictum that the only social responsibility of business is to increase profits, at least not publicly. These days, companies are happy to boast when they hit the top rung of a CSR ranking or win an award for their program. There is growing agreement that business should integrate social, environmental and economic considerations into decision-making, and aspire to meet international standards and the expectations of society. Through the Global Reporting Initiative, there is even emerging consensus on which international standards to use and on how to report on the processes put in place to meet them.

It all sounds rather rosy until you dig a little deeper. The rankings are a good place to start. They generally give a deceptive impression of progress because most measure what processes have been put in place, rather than the impact of those processes. Having a process is an essential first step to improving corporate performance, but not proof that this has been done. Measuring actual impact – for example, whether the code of environmental conduct actually reduced a company’s carbon emissions or the code of ethics actually eliminated bribes – remains a work in progress, and a difficult feat. The convergence on how to report does not extend to what to report, even among the largest companies in the world. UNCTAD, the United Nations body that tracks such information, says 87 of the world’s top 100 transnational corporations report some information on their climate change policies, but they do not all report the same kind of information or to the same extent.

Advocacy groups have long sought to clear up the confusion by having governments set some clear rules and make corporate social responsibility mandatory. For business, more regulation remains an abomination. But it has started to creep in at the edges in some countries through requirements for stock exchange listings or in legislation aimed at solving a particular problem. A good example here is the Dodd-Frank Act in the U.S., which, although broadly aimed at fixing the problems that led to the recent financial crisis, also requires companies to ensure they are not using minerals that might be fuelling the conflict in the Democratic Republic of Congo.

The fight over whether there should be mandatory rules or voluntary guidelines has been central to the debate in Canada, which has focused on mining and petroleum companies. The Canadian Chamber of Commerce, which speaks for 192,000 companies, doesn’t like the term corporate social responsibility, preferring “responsible business” or “voluntary corporate initiatives” to underline the fact that this is optional behaviour by companies that have already met their legal obligations.

Perhaps it isn’t a surprise then that Canada has lagged rather than led in this area. There was an early attempt in 1993 to get out in front with the Whitehorse Mining Initiative, which at the instigation of the Mining Association of Canada brought together business, government, environmental groups and Aboriginal groups to discuss the challenges ahead for mining. It is one of the few examples where Canada actually led the world in exploring new ways for corporations to take into account the concerns of stakeholders beyond shareholders and employees.

Yet in looking at the major milestones on the road to corporate social responsibility, a pattern emerges of Canada following behind after others have forged ahead. In 1992, the year the Earth Summit in Rio de Janeiro endorsed the idea of sustainable development that had come from the Brundtland Commission report, a group of far-sighted international CEOs set up the World Business Council for Sustainable Development to promote the idea. That same year, a separate group of multinationals set up Business for Social Responsibility. The Canadian equivalent, Canadian Business for Social Responsibility did not appear until three years later. In 2000, some governments, non-governmental organizations (NGOs) and businesses agreed on the Voluntary Principles on Security and Human Rights, meant to deal with the growing problem of human rights abuse by the security forces of extractive companies. Although this was a key concern for Canadian mining and petroleum companies working overseas, Canada did not commit to the principles until 2009. The Extractive Industries Transparency Initiative, established in 2003 when the problem of corruption in resource-dependent countries had reached such a scale it could no longer be ignored, did not attract Canadian participation until 2007.

It is not as though advocacy groups were silent during this period. Starting with the controversial decision by Talisman Energy to invest in an oil consortium in Sudan in 1998, there have been loud and vociferous calls by NGOs for the government to step in. Yet for much of the decade, this just served to increase the hostility between these groups and business. There was a brief moment of détente when government, industry and NGOs worked together on the National Roundtables on Corporate Social Responsibility and the Canadian Extractive Sector in Developing Countries and produced a consensus report with recommendations in 2007.

That fragile consensus fell apart two years later, however, when the Canadian government responded with a strategy that adopted many of the recommendations—including setting up a Counsellor for Corporate Social Responsibility and a Centre of Excellence to do further research on the subject—but ignored those dearest to the heart of the advocacy groups who participated in the roundtables. Chief among the ignored provisions were establishing sanctions with teeth, making the new Counsellor independent of government, setting up a tripartite review committee to work with the Counsellor, and making reference to comprehensive human rights standards in endorsing guidelines that companies should follow. At the time, John Ruggie, the UN special representative for the secretary general, was still working on his guidelines for business and human rights. While his final report, released in 2011, clarifies business responsibilities, it does not recommend any legislated changes.

The battle over Bill C-300, a private member’s bill that included many of these provisions but was narrowly defeated in the last parliament, deepened divisions. In many ways, the debate over corporate social responsibility in Canada is stuck close to where it was a decade ago, with both sides even more firmly entrenched.

It would be easy to blame business intransigence or unrealistic demands by advocacy groups for the current impasse. But the problems go deeper than that. Although executives no longer publicly side with Friedman, the capitalist system they work in pressures them to do his bidding, and make profits and the interests of their shareholders their only priority.

An increasing number of management thinkers have zeroed in on this dilemma and have begun to propose solutions that could lead to a giant leap in corporate social responsibility. In their article “Creating Shared Value,” which appeared in the January issue of the Harvard Business Review, Michael Porter and Mark Kramer say that capitalism has to be reinvented so that corporations recognize and are rewarded for advancing not just their interests but those of society at large. In that same publication, Dominic Barton, global managing director for the consulting firm McKinsey & Company, calls for an end to the short-termism that encourages executives to focus on quick profits at the expense of sustainable growth. In The New Capitalist Manifesto, economic strategist Umair Haque tackles these same issues. Closer to home, Roger Martin of the Rotman School of Management talks in his new book Fixing the Game of the destructive split between the real market (the business of designing, making and selling products and services) and the expectations market (the business of trading stocks, options, and derivatives) and how capitalism must reflect the concerns of the real market if it is to survive.

The post Big country, small steps appeared first on Corporate Knights.

Socialism collapsed because it did not allow the market to tell the economic truth. Capitalism may collapse because it does not allow the market to tell the ecological truth.

– Oystein Dahle, former VP of Exxon for Norway and the North Sea

Ten years ago, Corporate Knights ventured forth into the realm of corporate rankings—not the usual league of tables comparing revenues and profits, but the murkier space deep in the woods. This shaded area of corporate eco-social performance will answer civilization’s big question: Can we find a way to reconcile our capitalist system on this hot and crowded planet or does an age of Mad Max proportions await?

Some may ask: What does corporate citizenship have to do with the fate of humanity? Thirty years ago, states were more powerful than corporations, but no longer. In 1980, the market value of all publicly traded companies was one-quarter of global gross domestic product (GDP). Today, that ratio stands at eye level with global GDP at approximately US$60 trillion. What’s more, our largest corporations hold marionette strings extending into the heart of the democratic world’s super-structures; from 24 Sussex and the Beltway, to Whitehall and Elysée.

What companies do with social, ecological, natural and financial capital to thrive in the present and shape the future matters.

The nature of the quest has morphed along a continuum that started with corporate social responsibility, evolving to responsible business, and then to the cusp of clean capitalism—a daunting but more exciting age of opportunity that will reward companies that pursue profit concurrently with social and ecological prosperity.

Imagine a prediction 10 years ago that investors with trillions of dollars in combined investments would be holding companies’ feet to the fire to usher in a low-carbon economy (the $65-trillion Carbon Disclosure Project) and standing on guard for human rights and long-term societal value creation as an existential fiduciary notion (the $25 trillion committed under the United Nations Principles for Responsible Investment). Or that more money would be invested in renewable electricity ($243 billion in 2010) than coal, natural gas and oil power stations combined. Or that Proctor & Gamble, Nike and Johnson & Johnson would quit the U.S. Chamber of Commerce over its dinosaur position on climate change. The list of ideological accomplishments doesn’t stop there, and would have been written off as crackpot predictions a decade ago. Yet, as so often happens, yesterday’s dreams become today’s reality.

What can we do in the next 10 years to veer even further from the path of corporate and planetary bankruptcy and seize the opportunity of cashing in on the Promised Land of enlightened clean capitalism?

Capital market actors can innovate the transparent, low-cost, inclusive tools and products (like green and social impact bonds) to transform the trillions of dollars of dead money and rhetoric (less than two per cent of investors who hail the virtues of clean capitalism have made it part of their mainstream investment strategy) into investment reality. Yes, bond traders really can save the world if they update their valuation models to take stock of merging social and environmental realities.

Energy more than any other vector is where the rubber hits the clean capitalist road. With $243 billion of investment in renewable electricity generation in 2010, we are half-way to the average of $500 billion a year for the next 20 years the International Energy Agency says will be necessary to win the fight against dangerous climate change. Winning will require a smart electricity grid that maximizes our potential to generate and integrate clean energy wherever it lies —from the Sahara desert’s solar power, to the wind of Saudi Arabia, and the hydro pump storage in Canada’s great wilderness.

Many billion-dollar companies have already caught the scent of opportunity that lies in the clean capitalist economy. The next step is to refashion policy so it rewards those who lead the way on natural and social capital productivity. Get ready for business councils for clean capitalism, a parade of big businesses who take the policy bull by the horns to lead this change. This is already happening on single issues—such as with the International Emissions Trading Association, stocked with members like Shell and Rio Tinto, which recently beat environmental groups to the punch to help prevent a possible climb-down by the B.C. government from the highest rung of continental carbon pricing leadership.

Last, but certainly not least, the eco-social data revolution offers the chance to optimize natural and social capital productivity with the same meticulous vigour applied to financial productivity. But this is not a given. Focus can cut through the data obesity. Thanks to Bloomberg and Thomson Reuters’ provision of social and environmental corporate data and the 15 countries, including India, now working on implementing a green GDP, we are rapidly moving environmental and social data out of the statistical ghetto into the heart of the main documents that guide decision-making in our society: profit and loss statements, and GDP.

The prize of clean capitalism is the space race of the next decade. With Canada’s unparalleled combination of per-capita natural capital assets and stable pots of rock-solid big money institutions—and the 2011 Best 50 Corporate Citizens leading the way—we are uniquely poised to pioneer prosperous models that will enable us and our civilization to win this race against the clock. We have nothing to lose but our chains to a fairy tale whose time is up.

The post 10th anniversary of Best 50 appeared first on Corporate Knights.

The question begged to be asked is: Why not?

Was it because natural capital losses are losses of public wealth, and therefore less newsworthy than private wealth? Or was it because nature’s benefits are difficult to quantify and express in monetary terms, having no markets and no prices? Or perhaps it was because natural capital and its benefits—and losses—are missing from that ubiquitous measure of national economic performance, gross domestic product (GDP).

GDP is the most commonly used paradigm today for measuring human progress. Virtually all economic policy is currently oriented directly or indirectly towards maximizing GDP growth. It is so deeply ingrained that people forget that it is an entirely artificial construct created in the mid-20th century as part of the war effort and Marshall Plan recovery that followed.

Of course, rulers from ancient times have kept some record of economic activity for the purposes of taxation. However, national accounts as we know them were designed by economists Richard Stone and James Meade, with support from John Maynard Keynes, as a way to keep track of wartime economic activity. Given the circumstances, their framework was necessarily industrial in its essence. There was no space in it for niceties such as environmental degradation and socio-demographic developments. After the war, this framework was adapted to create the GDP number that is now used around the world.

Lost in the margins

In theory, GDP is a measure of the value added by an economy in a particular year; that is, the value of all outputs after deducting the value of all inputs. A simple method, yet in practice it has proved to be a limited and often arbitrary measure for three main reasons.

The first lies in the treatment of natural and environmental capital, both in depletion of natural capital (say, through mining) and in the production of environmental ills (such as pollution). For instance, if we cut down a pristine rain forest, we are clearly destroying value in terms of biodiversity, watersheds, carbon sequestration, flood control, non-timber forest produce, and so on. Yet, in the current system, this destruction of value will register as GDP growth from logging.

The second major drawback of GDP is that it is an inadequate measure of human well-being. It tells us little about issues such as security, leisure, social mobility, education and health, and other facets of social capital. In some cases, this is a methodological or computational problem, as these are difficult things to quantify, but in others it can be a fundamentally conceptual problem. For instance, the overall GDP number tells us little about income distribution or how it is affecting the well-being of the people.

The third major problem with GDP relates to its treatment of activities and transactions that happen outside the marketplace, both in ecological and social infrastructure. GDP ignores the work done by stay-at-home parents, including cooking, housekeeping and looking after children. There is clear value-addition from these services, but they do not enter the marketplace. Yet they would be included in national accounts if they were offered as market transactions. In this particular example, the problem is not conceptual but one of practicality (one has to draw a line somewhere). However, there are other areas where markets do not exist at all and are simply left out—in the case of carbon sequestration and other ecological services provided by a forest, for example.

The creators of GDP were aware of its limitations. In his Nobel Memorial Lecture in 1984, Richard Stone began by stating: “The three pillars on which analysis of society ought to rest are studies of economic, socio-demographic and environmental phenomenon.” While his work had focused mostly on economic accounting, he realized that “environmental issues, such as pollution, land use and non-renewable resources, offer plenty of scope for accounting.”

The creators of GDP thought of it as work-in-progress. Unfortunately, 60 years on, the world continues to focus its energy on maximizing an incomplete and outdated paradigm.

Nature’s invisible economy

Biodiversity, or wild nature, is the living fabric of this planet. It is the whole extent and variety of the earth’s ecosystems, the diversity and abundance of all species that inhabit them, and the number and variability of genetic material. This living fabric provides us many benefits—from food and fuel, to services such as freshwater cycling and carbon sequestration by forests; from leisure to prospecting for new medicines.

But as citizens, are we sufficiently aware of our share of the free flow of nature’s goods and services to be willing to object when they are lost? The loss of a wetland or forest diminishes nature’s free public services. We certainly would not let our bank CEOs or our pension fund managers off the hook if they simply lost our deposits or lost our pensions. But how often do citizens hold businesses and governments to account for immense losses in natural capital? Our planetary home is something to which we as human beings should ascribe infinite value, but through the usual lens of economics, this value is invisible. A 50-year scenario analysis done for TEEB concluded that if we continued with business as usual, by 2050, we would lose a wilderness area roughly the size of Australia, or 7.5 million square kilometres. The lost value of this biodiversity would amount to as much as seven per cent of global GDP. The natural capital being lost, every year, was estimated at US$2.0 trillion to US$4.5 trillion.
The economic invisibility of nature is one of the key drivers for nature’s destruction. But how do you start putting an economic value on what comes largely free from nature?

A study done by Trucost for the United Nations Principles for Responsible Investment estimated the negative externalities (or third-party costs to society) generated by about 3,000 listed companies at close to US$2.2 trillion per annum, or one-third of their profits. This can evidently make the difference between profit and loss, but in this case they were externalities and were not accounted for. The main externalities were greenhouse gas emissions, water extraction and air pollution.

We need two main transformations to make people aware of the true costs of externalities. First, we have to measure the value of these externalities, so they can be managed. Second, we have to remodel the corporations themselves, because the old ways of behaviour are not likely to survive. Change will happen; the question is how sharp, unsettling and costly to society and corporations the transition will be.
Encouragingly, there is some movement in the right direction. At the 10th meeting of the Convention of Biological Diversity in October 2010 at Nagoya in Japan, President Bob Zoellick of the World Bank made a surprising and bold announcement of a project to measure and report the natural capital of countries as an addendum to their national accounts. India took the bold step of announcing that it would incorporate natural capital into its national accounts by 2015, and has since launched a national TEEB study to help. And in March 2011, a group of international experts convened by the World Bank in Washington compared experiences and ideas, and agreed to move forward to achieve this goal with a group of “first mover” nations.

Still, it is remarkable how little nature is accepted today as part of economic infrastructure. Attitudes and responses change when you talk nature versus talking “man made.” For example, when one is pitching investment in a carbon capture and storage facility at a cost of only $5 billion, there’s interest until you mention that the technology is a forest.

As people become more comfortable with the idea of including natural capital in economics, beginning with our national accounts, we will surely move towards a society that not only makes profit, but also lives harmoniously with nature—our most valuable and all-encompassing asset.

The post Measure for measure appeared first on Corporate Knights.

In fact, the environmental NGO (ENGO) staffer had to explain, it was going to be about increasing the diversity of voices within the environmental movement—an issue such organizations have historically failed to recognize.

That’s a problem, says Dong, because at the moment, the predominant voice is likely to be middle-class and white, despite an increasingly diverse population. As the diversity project manager at the Sustainability Network, a Toronto-based ENGO, Dong sometimes finds herself the only non-white attendee at environmental events.

“Most ENGOs today have little diversity and don’t reflect or authentically engage the communities they serve,” she says. For instance, the executive directors of the David Suzuki Foundation (DSF), Greenpeace Canada, Pembina Institute, Sierra Club of Canada and WWF-Canada are all white males.

It’s a North American problem, too. American environmentalists of colour such as Lisa Jackson, head of the U.S. Environmental Protection Agency, and Marcelo Bonta, executive director of the Center for Diversity and the Environment in Oregon, have coined the phrase “tyranny of fleece” to highlight the movement’s homogeneity.

Perhaps top ranks aren’t filled with people of colour because ENGOs don’t think diversity is necessary. A 2009 report by Earth Day Canada found ENGOs mistakenly believe visible minorities are not interested in environmental well-being. In a time when mainstream environmental interest is fading—contrast the discourse of the 2008 and 2011 federal elections—ENGOs must extend their reach into diverse communities more than ever.

Looking in the mirror

“The environmental movement is failing,” says geneticist and broadcaster Dr. David Suzuki. “I don’t call myself an environmentalist anymore. It’s time to broaden our tent and realize if we are working for a sustainable society, any group facing terrorism, genocide or war is not going to give a damn about the environment.”

Freelance journalist Ayana Meade agrees that when survival is at stake, environmental issues aren’t top of mind. Meade, who is based in New York, founded the Society of Environmental Journalists’ Diversity Task Force in response to the low percentage of journalists of colour reporting on environmental issues.

“Poor people of colour aren’t going to be concerned with existential happenings like global warming,” says Meade. “The movement needs to connect with their immediate concerns: economic and social development.”

This is vital, since environmental degradation disproportionally impacts people of colour. A 2005 Associated Press study found black Americans are 79 per cent more likely than whites to live in neighbourhoods where industrial pollution is suspected of posing the greatest health danger. While there hasn’t been an equivalent Canadian study, as of January 2011, almost one in five First Nations communities—117 in total—were under drinking water advisories.

For that reason, says Meade, “it’s important the face of the movement is not just a white face. It should reflect the people most affected by these issues.”

To achieve that reflection, ENGOs need to take off their blinders and realize “hunger and poverty are [their] issues,” Suzuki says. “We’ve got to look at issues of equity and peace [because] they work against truly sustainable societies.”

Reflecting the community

When reaching out to ethnic communities, the DSF tries to remind people social justice and the environment are linked. Suzuki uses his own family history as an example.

“My grandparents came to Canada from Japan in the 1900s for the fish,” Suzuki says. “Many in the East Indian community came for the trees and are still involved in farming in the Okanagan. We explain those resources are all heavily under assault. We’re also trying to tell people the way we live means many of the oil companies are going into more extreme areas to drill, impacting the countries many of our immigrants come from.”

Suzuki’s childhood also shows that diverse communities have much to teach environmentalists. He recalls his parents taking pride in a coat they bought for him that was later handed down to each of his three sisters. “The idea of a throwaway society wasn’t a part of my childhood,” he says. “When you’re poor, you make do with whatever you have.”

Dong’s mother, a Chinese immigrant, had a similar upbringing. “She composts, recycles and grows her own food. She was poor when she was young,” she says. Yet Dong’s mother doesn’t self-identify as an environmentalist. Says Dong: “I think about all the people who wouldn’t call themselves environmentalists, yet should be involved with the discourse because they do all [the right] things.”

Following tradition from the motherland can lead to green actions, too. Suzuki recalls visiting a friend’s Italian parents who grow their own vegetables, can their own sauces and make their own sausages.

“They’re living like they did in Italy,” he says. “I said to my friend, ‘This is what we’ve got to rediscover.’ He was kind of embarrassed they’re still clinging to [tradition.] But this is where a huge amount of the movement has got to go: becoming much more local and self-sufficient. Immigrant groups that come here having a much smaller ecological footprint are going to be instructive in how to live with much less of everything.”

To that end, ENGOs need to realize they can have two-way conversations with diverse communities and forge reciprocal relationships.

“Go out to events,” says Dong. “Learn about the culture and ask what people are interested in before you start talking about your organization. We tend to think we know what’s best—it’s almost paternalistic. Don’t think you’re the expert and [that only] they are going to benefit from the discussion.”

Winnie Hwo, a DSF climate change campaigner and award-winning journalist from the Chinese-Canadian media who is active in Vancouver’s Chinese communities, agrees. “Every time we do outreach, it’s a two-way conversation.”

Hwo has found immigrants are “the doers” because they want to save money. “We’re learning from them,” she says. “We need to widen our thinking as environmental activists and tell [immigrants] they’re doing the right thing.”

Dong cautions the alternative to such engagement can be costly and counterproductive.

“We’ve heard from groups who have invested in translation services, and have stacks of literature in their office because no one wants it,” says Dong. “You need to understand whether or not those translations are meaningful to that community. It’s like looking for a job and adjusting your cover letter accordingly.”

That means removing jargon from pamphlets that even native English speakers stumble over. “How do you explain environmental capacity-building?” Dong laughs. “You can do a straight translation but it’s not going to make sense.”

As such, ENGOs are demanding assistance—and Dong is more than happy to provide it via Sustainability Network’s ENGO-geared Environment and Diversity Project. For instance, the network’s Aboriginal training session for ENGO employees in 2009 turned out to be one of its most popular workshops.

“We’re just not informed about the people who really founded this country. There’s this steep learning curve,” she says. “But because there’s an urgency to work on these issues, we want to just fast-track through it. It doesn’t work that way.”

While some feel diversity is an end goal, Dong says it’s a journey that’s never done. “You have to work at it. There’s always something you need to learn. We need to listen to the feedback coming back to us.”

Harpreet Johal, a fellow climate campaigner with DSF, says the feedback she’s seen is a hunger for more environmental information in the Indo-Canadian communities. “They’re really happy when we come knocking on their doors and ask for input on what role we can play,” Johal says. “A lot of people are already doing more than the average person for the environment, just for different reasons.”

She and Hwo are pleasantly surprised at Suzuki’s name recognition in ethnic communities, and enjoy bringing him onto Vancouver’s ethnic radio shows to engage with diverse communities.

“Even though he needs translation, he’s talking directly to the audience. They call in and try to impress him,” Hwo says. “They say things like, ‘Can you tell David I don’t eat meat three days each week, even though he suggests starting with one day a week?’ ”

Hwo and Johal connect with ethnic community leaders who recognize Suzuki’s name and are receptive to the green message. These leaders then spread that message within their neighbourhoods. It’s this type of grassroots effort, experts agree, that will lead to more inclusive and lasting change.

Other shades of green

MELDI
The Multicultural Environmental Leadership Development Initiative (MELDI) is a project housed at the University of Michigan’s School of Natural Resources and Environment. MELDI aims to increase diversity in environmental organizations as well as within the broader environmental movement. It also promotes greater leadership diversity in the environmental field.

MELDI’s faculty and staff conduct research on environmental workforce dynamics and provide resources such as jobs directories, a listing of environmental justice researchers and organizations, and a database of over 200 minority environmental professionals.

Hip Hop Caucus
The Hip Hop Caucus is an American civil and human rights organization that began in 2004. Its vision is to create a more just and sustainable world by engaging more people, particularly youth and people of colour, in the civic and policy making process. With over 650,000 supporters across the U.S., its makeup is quite diverse: 70 per cent are under 40 and 60 per cent are female; a majority are African-American and Latino, with a large white contingent, as well as Asian-American and Native American.

“The environmental movement needs to connect with young people, and the best way to do that is with popular culture,” says Ayana Meade. “Particularly with young people of colour, it’s the hip hop culture.”

Green Change
The Green Change project is an initiative that was started in 2009 to reach out to residents in the Jane-Finch corridor of Toronto on environmental issues. The area has a multicultural population that includes refugees and low-income earners, and it frequently struggles with gang violence. The project trains local youth to talk to residents about reducing waste, conserving energy and other money-saving green ideas.

Sonia Dong says the project is successful because of the grassroots approach. “Other environmental groups were coming out and asking, ‘Why do you have a space heater in your apartment?’ or ‘Why are you opening the window when the heat’s on?’ ” What these other groups didn’t understand, she says, is that residents of community housing [generally] do not have control over the thermostats.

“People are familiar with the youth ambassadors and trust them,” Dong says. As a result, these ambassadors are able to gain more insight into residents’ needs. Resulting initiatives include a green jobs project that will see carpenters providing technical skills training for green renovations.

The post Missing persons appeared first on Corporate Knights.

Hence, while yesteryear you might have heard talk of rebooting or even rethinking capitalism, it might be just a touch harder to do so today. And in case you’ve been living on Mars recently, today’s suggestions that capitalism is at the juncture of historic transformation aren’t just coming from long-time critics and adversaries, but from practitioners and luminaries. In the McKinsey Quarterly, Paul Polman, Unilever’s CEO, has discussed what he calls “long-term capitalism.” No less an eminence than Michael Porter, the dean of corporate strategy at Harvard, has pronounced the need to “reinvent capitalism.”

So can the practice of capitalism—the art of being a capitalist—transform as radically over the next few decades as it did during Adam Smith’s era? I believe it can, and I believe more vitally that all of us will change it. I believe not just that we’re already standing atop the cliff, but that some of us are already taking a quantum leap to the other side. What, then, lies across the gap—the gap where the challenges above, like monsters of yore, twist and hiss?

Before we get there, consider, first, what lies on this side. Alfred Chandler, in his masterwork, The Visible Hand, painted a detailed portrait of what he termed “managerial capitalism”—a global economy powered by behemoth, globe-straddling bureaucracies we today call multinational corporations. From Milton Friedman to Niall Ferguson, a generation of scholars has detailed—and explored—the rise of “financial capitalism”: a global economy pulsating with a dense web of markets and networks, where traders and bankers are the technicians of the engine. In its heyday, given the explosive rise of prosperity globally, I’d bet we all know that managerial/financial capitalism was a great leap beyond the purely industrial capitalism that preceded it. Yet, I’d bet we also know: that the engine’s running out of steam, we’ve entered an Age of Dilemma, and the dismal choices of the dilemma can be summarized, regardless of title, location or ethical predilection, as follows: more profit means more harm to the planet, the people that live on it, their neighbours, not to mention maybe even your society, your grandkids, and many of the things that matter most to anyone who’s got a soul slightly more developed than either Hannibal Lecter or a zombie overlord.

And though all the above might often trouble us, as practitioners of the art of capitalism, it’s often difficult to know what to do about it. That’s because the industrial age’s great dilemma is like a Gordian knot—a problem that’s simply unsolvable, vexingly intractable if we’re still confined to thinking in yesterday’s terms. The knot cannot be untied, but only cut. Escaping the capitalists’ dilemma requires a paradigm shift.

Here’s how I’d sum up the philosophy behind the paradigm. Twenty-first century capitalism must organize the better saving and accumulation of every kind of productive resource for tomorrow. Its precepts and commandments must begin with minimizing economic harm and end with maximizing the creation of authentic economic value.

If we were to craft the crude, bare outlines of an updated economic paradigm—one that might have the power to blaze past yesterday’s firewall of prosperity—what would be different about it, first and foremost, is optimization.

Here then are rudimentary sketches of the two fundamental axioms of such a paradigm.

The first axiom is about minimization: through the act of exchange, an organization cannot, by action or inaction, allow people, communities, society, the natural world or future generations to come to economic harm.

Conversely, the second axiom is about maximization: the fundamental challenge facing countries, companies and economies in the 21st century is creating more value of higher quality, not just low-quality value in greater quantity.

The great question that 21st century economics asks is: must profit always require economic harm? A handful of revolutionaries today are answering no. Their answer, echoing across the global economy, is a better kind of capitalism built for a tiny, fragile and crowded world: constructive capitalism.

Insurgents for a better tomorrow

I call the next generation of capitalism “constructive”—because it’s about building new foundational institutions, because those foundations create more authentic, enduring and meaningful value, and because that value allows firms to play a more constructive role in society. And I believe it’s a transformation every bit as epochal as the great leap from purely industrial capitalism to managerial/financial capitalism: vital for our continued prosperity, critical to a vibrant economy, and probably even a little bit necessary to reclaim our humanity for the future of humanity.

Hence, at my lab, we undertook a research program designed to delve into it. Out of a statistical sample of 250 companies, we found 15 that were throwing yesterday’s cornerstones out of the proverbial window. Our first surprise was who the constructive capitalists were: a motley crew, but not a ragtag one. They were some of the world’s biggest companies and some of the smallest; some of the world’s oldest companies and some of the newest; those that fit the stereotype of the forever nimble, radical innovator and those with reputations as lumbering giants. They cut across traditional industry, market and geographic boundaries. We expected many more stereotypically game-changing startups to be insurgents, but we found that most were radical in name only. In contrast, many were companies we least expected to be discontented with industrial era capitalism’s status quo, like Walmart, Nike and Unilever.

Here’s what makes the 15 insurgents disruptive. Constructive capitalists aren’t just building better products, services, strategies or business models: they are building better institutions, first. It isn’t a capitalism that J. P. Morgan or John D. Rockefeller would recognize. It is composed of a disruptive new set of cornerstones, geared for the new economics of interdependence.

To utilize resources by renewing them instead of exploiting them, constructive capitalists are shifting from value chains to value cycles. To allocate resources democratically and respond better to demand and supply shocks, they are shifting from value propositions to value conversations. To become more competitive over the long term instead of just blocking competition temporarily, they are shifting from strategies to philosophies.

Today’s revolutionaries are institutional innovators: they’re reconceiving not just products, services or business models, but the foundations they are grounded upon. The new cornerstones that constructive capitalists are carving operate at a more fundamental level: they order and organize production, consumption and exchange. John Hagel III, guru of corporate strategy and cochairman of the Deloitte Center for the Edge, one of institutional innovation’s cutting-edge pioneers, puts it this way: “[It] redefines roles and relationships across independent entities to accelerate and amplify learning and reduce risks.” That’s why, in the 21st century, “institutional innovation will trump either product or process innovation in terms of potential for value creation.”

Peter Senge, an American scientist and director of the Center for Organizational Learning at the MIT Sloan School of Management, argues that over the last decade, a growing number of revolutionary organizations “have all, in their own ways, learned how to see the larger systems in which they live and work. They look beyond events and superficial fixes to see deeper structures and forces at play.” And innovating those “deeper structures”—institutions—is, today, a better bet than churning out new products, services, strategies or business models; it’s what is truly scarce, rare and hard to imitate.

Hand me the detonator

When, millennia hence, our progeny build the hall of fame of humanity’s greatest creations, I have a hunch: in the dusty “Extremely Ancient Prehistory” annex—right next to democracy, the scientific method and the microchip—capitalism will probably occupy its own spotlit exhibit. It might feature a holodeck replaying the great failure of central planning that Friedrich Hayek presciently divined; a 4-D demonstration of an invisible hand lifting billions out of global poverty, just as Adam Smith foretold; or the grand, enigmatic equation behind the pulsing waves of entrepreneurship that Joseph Schumpeter so elegantly described.

Yet, if they could beam a message to us today, they might just remind of us of the fable of the Coyote—as in Wile E. The gizmos he ordered from Acme, Inc., might have worked.

But what Coyote could never overcome was his own inherent self-limitations: his lack of imagination, his shortsightedness, his insatiable fixation on short-term gratification and his remarkable inability to learn from the last time he got blown up. Hence, poor old Wile E. spent his beleaguered existence falling off cliffs, getting run over by trucks and doing faceplants into brick walls.

Your challenge, our descendants might counsel us, is much the same—to reimagine your own role as a capitalist (if you are so inclined) and, in so doing, to build a capitalism that learns from its mistakes, without sacrificing its gains. In a global economy already shaken to its core by a historic crisis, those shortcomings have rarely been more apparent.

So here’s the 21st century capitalists’ agenda in a nutshell. First, to rethink the “capital”: to build organizations that are less machines and more living networks of the many different kinds of capital, whether natural, human, social or creative. And, second, to rethink the “ism”: how, when and where the many different kinds of capital can be most productively seeded, nurtured, allocated, utilized—and renewed. Put these two together and the promise is for companies, countries and economies to climb to a higher level of advantage, to scale a steeper apex of achievement.

If I had to summarize it, I’d put it this way: I’d say you no longer merely stand on the cusp of, but are already present in an age where saying “More profit? More harm” is probably going to earn you yawns, shrugs, and eye-rolls (when it doesn’t earn you tomatoes, pitchforks and pillories, that is). That’s because whatever your industry, you’ve probably already got not just rivals, but next-generation competitors, who are beginning to say: “Less harm? More profit”—and by doing so, who are turning earning the art of advantage upside down. So what of the capitalists’ dilemma that confines 90 per cent of companies to the tired, toxic terms of the industrial age? They’re discovering that the art of creating the future isn’t about mutely, resignedly being a hapless victim to it—but about blowing it to bits.

The post Capitalism, reconstructed appeared first on Corporate Knights.

Ten years ago, Corporate Knights ventured forth into the realm of corporate rankings—not the usual league of tables comparing revenues and profits, but the murkier space deep in the woods. This shaded area of corporate eco-social performance will answer civilization’s big question: Can we find a way to reconcile our capitalist system on this hot and crowded planet or does an age of Mad Max proportions await?

Some may ask: What does corporate citizenship have to do with the fate of humanity? Thirty years ago, states were more powerful than corporations, but no longer. In 1980, the market value of all publicly traded companies was one-quarter of global gross domestic product (GDP). Today, that ratio stands at eye level with global GDP at approximately US$60 trillion. What’s more, our largest corporations hold marionette strings extending into the heart of the democratic world’s super-structures; from 24 Sussex and the Beltway, to Whitehall and Elysée.

What companies do with social, ecological, natural and financial capital to thrive in the present and shape the future matters.

The nature of the quest has morphed along a continuum that started with corporate social responsibility, evolving to responsible business, and then to the cusp of clean capitalism—a daunting but more exciting age of opportunity that will reward companies that pursue profit concurrently with social and ecological prosperity.

Imagine a prediction 10 years ago that investors with trillions of dollars in combined investments would be holding companies’ feet to the fire to usher in a low-carbon economy (the $65-trillion Carbon Disclosure Project) and standing on guard for human rights and long-term societal value creation as an existential fiduciary notion (the $25 trillion committed under the United Nations Principles for Responsible Investment). Or that more money would be invested in renewable electricity ($243 billion in 2010) than coal, natural gas and oil power stations combined. Or that Proctor & Gamble, Nike and Johnson & Johnson would quit the U.S. Chamber of Commerce over its dinosaur position on climate change. The list of ideological accomplishments doesn’t stop there, and would have been written off as crackpot predictions a decade ago. Yet, as so often happens, yesterday’s dreams become today’s reality.

What can we do in the next 10 years to veer even further from the path of corporate and planetary bankruptcy and seize the opportunity of cashing in on the Promised Land of enlightened clean capitalism?

Capital market actors can innovate the transparent, low-cost, inclusive tools and products (like green and social impact bonds) to transform the trillions of dollars of dead money and rhetoric (less than two per cent of investors who hail the virtues of clean capitalism have made it part of their mainstream investment strategy) into investment reality. Yes, bond traders really can save the world if they update their valuation models to take stock of merging social and environmental realities.

Energy more than any other vector is where the rubber hits the clean capitalist road. With $243 billion of investment in renewable electricity generation in 2010, we are half-way to the average of $500 billion a year for the next 20 years the International Energy Agency says will be necessary to win the fight against dangerous climate change. Winning will require a smart electricity grid that maximizes our potential to generate and integrate clean energy wherever it lies —from the Sahara desert’s solar power, to the wind of Saudi Arabia, and the hydro pump storage in Canada’s great wilderness.

Many billion-dollar companies have already caught the scent of opportunity that lies in the clean capitalist economy. The next step is to refashion policy so it rewards those who lead the way on natural and social capital productivity. Get ready for business councils for clean capitalism, a parade of big businesses who take the policy bull by the horns to lead this change. This is already happening on single issues—such as with the International Emissions Trading Association, stocked with members like Shell and Rio Tinto, which recently beat environmental groups to the punch to help prevent a possible climb-down by the B.C. government from the highest rung of continental carbon pricing leadership.

Last, but certainly not least, the eco-social data revolution offers the chance to optimize natural and social capital productivity with the same meticulous vigour applied to financial productivity. But this is not a given. Focus can cut through the data obesity. Thanks to Bloomberg and Thomson Reuters’ provision of social and environmental corporate data and the 15 countries, including India, now working on implementing a green GDP, we are rapidly moving environmental and social data out of the statistical ghetto into the heart of the main documents that guide decision-making in our society: profit and loss statements, and GDP.

The prize of clean capitalism is the space race of the next decade. With Canada’s unparalleled combination of per-capita natural capital assets and stable pots of rock-solid big money institutions—and the 2011 Best 50 Corporate Citizens leading the way—we are uniquely poised to pioneer prosperous models that will enable us and our civilization to win this race against the clock. We have nothing to lose but our chains to a fairy tale whose time is up.

Click here to go back to the ranking landing page.

The post Editor’s introduction appeared first on Corporate Knights.

National Green Party leader Elizabeth May, a senior federal government policy advisor and executive director of the Sierra Club at the time of the accord, spoke with the former prime minister to reflect on the breakthrough treaty. She and Brian Mulroney discussed challenging negotiations, the importance of Canadian leadership when confronting environmental issues with the U.S., and the lessons we should learn when planning effective climate change strategies going forward.

MAY: Can you recall the first time you heard the term “acid rain”? To me, it was a better way of communicating a problem than anything we’ve come up with to describe the climate crisis.

MULRONEY: I remember first hearing it around 1980, and I agree with you: the words acid rain conjure up, in a very graphic way, the reality of the problem–as opposed to air quality agreements, or even more benign descriptions. Acid rain was like a menace coming right at us, at our lakes, rivers and streams, and so people tended to get it right away.

MAY: Acid rain had been on the radar for the previous two governments, but it wasn’t until you were prime minister that it became the top bilateral issue for Canada when dealing with the United States. How did that happen?

MULRONEY: When I became leader of the party in 1983, I insisted that acid rain be placed on our agenda on a priority basis within the opposition study group system that I had implemented. In June 1984, when I went down to Washington as leader of the opposition for my first meeting with President Reagan, I raised the acid rain challenge with him in the oval office. I told him that if I were successful in the next election, I would be back to see him soon, and often, in regards to the ultimate resolution of this problem. So we made it a priority and we followed through.

MAY: DId you feel that you had an uphill battle in convincing Reagan to take this issue seriously?

MULRONEY: We certainly had an uphill job because, in the course of the negotiations of other things, I transformed the acid rain treaty into what I called the litmus test of our valued association. If we couldn’t make progress on that, then we were going to be in trouble. There was the time that [Reagan] sent Vice-President Bush to Ottawa to see me, and Bush famously told the media, “Boy, did I ever get an earful today from Prime Minister Mulroney.” And when I was invited to address the U.S. Congress, I got into the acid rain challenge at considerable length. The leading Democratic senator from New York, Daniel Patrick Moynihan, said he was really stunned by Prime Minister Mulroney’s description of the problem and the urgency he attached to it, and he stated that they had to respond in kind.

MAY: Canada’s complex federation is often cited as a reason we don’t make progress on environmental issues, because the mixed and shared jurisdiction gets in the way. But you achieved agreements with each of the eastern provinces and firm agreements through bilateral agreements. What were the elements of making that work?

MULRONEY: It was largely a regionally-based problem in eastern Canada, so I determined we could move to a different formula in terms of dealing with it. I felt that we should try bilateral negotiations and see how they went. We also heard early on in the process that the Americans who didn’t want progress were accusing Canadians of complaining too much, as if they themselves were not part of the acid rain problem. I said to my cabinet: We’re going to resolve this by devising a “clean hands” strategy, so when we come to the table the Americans will not be able to say the acid rain problem is because of us, because we will have implemented a program to clean up the problem. This enabled us to work closely with the provinces, and ultimately we legislated on it in 1985.

MAY: What would have happened if you had decided on this acid rain issue that we weren’t going to do anything until we saw what the Americans would do?

MULRONEY: That approach was unacceptable to us, unacceptable to me, because acid rain was not only a serious problem but also a visible problem. When I told the American Congress that acid rain was spewing from the U.S. industrial mid-west, and killing lakes and streams and forests in central and eastern Canada, I wasn’t kidding around. I told them they can come and visit and take a look.

MAY: There was a good working relationship between the governments, provincially and federally, as well as with environmental groups in Canada. Environmental groups were even encouraged to go down to Washington in work on legislation there. That government leadership and civil society engagement has never occurred as successfully as it did in that era. How do you explain the fact that there is such a different atmosphere, politically, around the climate issue, as opposed to the acid rain issue?

MULRONEY: All I can say is that that was then, and now is now. I was the prime minister then, and someone else is prime minister now. For progress on environmental issues to occur, it needs to be a top priority with the prime minister. If it’s a secondary or tertiary matter of importance for the prime minister, it’s not going to get done. That’s the manner in which you galvanize the system. If the system understands that this is the prime minister’s priority, if he wants to see it happen, you understand that the message has come down loud and clear. We better be on our game 100 per cent because the boss is going to be here and he’s going to want to know what the hell’s going on and how come we haven’t made the progress he set out for us.

MAY: Can you think of any particular lessons learned from the acid rain issue that you would recommend to anybody about how to address the climate crisis?

MULRONEY: I can’t get into anything that’s going on now, for a number of reasons. But if one is confronted with a major challenge that has both domestic implications and interprovincial ones together with nuanced international problems, to ensure that Canada is both a player and is viewed as a constructive player internationally, that it is vital, for progress to be made, that the prime minister drive the file. If the prime minister is not driving the file, then nothing’s going to happen. If he is, then it’s possible that big things will happen. It’s not guaranteed, but it’s possible.

The post True grit appeared first on Corporate Knights.