Sustainability Midterm, Business and Sustainability Midterm

Example of investor action on ESG: Danish Pension Fund ATP

- used internal staff to scan for companies that violate their ESG policies - began discussions with Danish company Lundbeck who makes ingredient used for sedative in lethal injection... asked them to stop selling to prisons (violates human rights) - Lundbeck saw the value of ATP as an investor and stopped selling the drugs to prisons

Ecological Overshoot

"the demand on the natural world that exceeds its ability to renew" As our consumption levels continue to rise and time goes on, our carrying capacity will continue to degrade

What is the International Integrated Reporting Counci?

(IIRC) a form of sustainability reporting

The author or No Impact Man outlines two arguments for buying used products. Describe both.

(pg. 152) You do not need to take out additional resources - they're already there You will get the most value out of your goods if it cannot be easily replaced.

What are shareholder resolutions

- Opportunity for shareholders to suggest changes to company policy, governance and management practices or sustainability issues. - A meaningful ways to shareholders to be heard by management. - Involves introducing a proposal or resolution which is voted on at an annual meeting.

Benefit Corporations

- They create benefit for all stakeholders ― shareholders, employees, community, and environment - a for-profit corporation, but in addition to creating value for its shareholders, it has three additional legal attributes: 1) accountability, 2) transparency, and 3) purpose

who are institutional investors?

- pension funds - mutual funds - money managers - insurance companies - investment banks - commercial trusts - endowment funds - hedge funds - hedge fund investors

What are LC3s?

"Low profit limited liability company" primary goal is to contribute to a social purpose, with profit serving as secondary goal treated as an LLC for tax purposes: members have limited liability Can distribute profits to shareholders (as opposed to non profits)

What agencies give annual awards for best CSR reports?

-ACCA-CERES and corporateregister.com

How do stage 4 and stage 5 companies differ?

-About 90% of the actual behaviours of stage 4 and 5 companies look the same. They differ in their motivations. Stage 5 companies are usually founder-owned companies with a priority on values- based corporate citizenship. Many stage 5 companies do not go through the first four stages. 98% to 99% are medium to small businesses. Their company values mirror the values of their founders.

Video summary: The Story of Stuff w/ Annie Leonard

-Corporations control our consumption patterns -Outsourcing occurs and is unsustainable -Advertising and marketing ploys for higher consumption -Planned obsolescence of goods for continuous consumption (iphones, textbooks) -It is important to consider more than the bottom line as a consumer and as a corporation

Drivers of the threats to our planet

-Laws and regulations -Public sector finance -Consumption choices and beliefs and attitudes about nature -Business practices -Private sector finance

Why isn't recycling enough?

-Would only be recycling 1/7th of the waste that the particular product produces (think of wasted material making it, c02 from shipping it overseas to US... etc) -Only a small part of the problem - we need to learn how to break the cycle of consumerism

Deforestation

-damage to quality of land -swaths half the size of england are lost each year -earths rainforests could completely vanish in a hundred years at current rate of deforestation

What are some reasons people read CSR reports?

-investors read them for data material to companies stock price and long-term business prospects -employees, current or prospective, can determine which companies have best/safest work environments -customers can identify companies with positive social/environmental records

Toxic Waste programs include

-paint -pesticides -tires -computers -oil -antifreeze -lead acid batteries -solvents and flammable liquids

True or False: Increased employee attrition expenses in one of the sustainability benefits described by Willard.

False- increased expenses is not a benefit

Primary characteristics of CSR reports?

-provide details on policies and practices -report data that is company wide -set goals for future social and environmental performance -confront failures as well as promote successes -address the most difficult issues a company faces, particularly those relating to business models -analyze the materiality of CSR issues to daily operations -should include graphs and tables, GRI indexes to identify which key social and environmental data points, interviews, etc. Readers will find a CSR report credible when it discusses throughly and honestly the issues that most deeply impact a company's business model and its implications for a just society and sustainable today and tomorrow.

Benefits of EPR

-reduces energy use, air and global warning pollution -saves taxpayer money and removes government from waste business -creates job -decreases toxic pollution

Bob Willard reading

-saving the world and making a profit is not an either/or type proposition. -current economic model is unsustainable and is threatening core existence as species -governments cannot be effective in changing this from lack of tax revenue funding - only human enterprises that are large and powerful enough are "enlightened businesses" -need socially environmentally enlightened businesses to be the "trojan horses" paving way for other businesses to join - need to speak their language- quantify benefits of being sustainable -need to convince business owners with strategy, that more responsible of capitalism generates higher profits- must quantify! 3 Legged Sustainability stool- environmental leg, economic leg and social leg, society is unstable in one leg is weak Corporate Sustainability three legged stool: Essentially, people, planet, profit 1. Economy/Profits (jobs, products, services) 2. Environment/Planet (eco-effectiveness) 3. Equity/People (employees, communities, world) Smart business three legged stool: 1. Economic/Financial capital 2. Natural capital (show the firm they rely on natural resources to operate) 3. Human and social (relationship with customers) capital Take-make-waste business model- Overconsumption and poor resource management- we need borrow use return model! CONTINUOUS GROWTH DOES NOT WORK! It's an elephant in the room, but it is true, we will eventually run out of natural resources if we continue our exponential growth! -rich countries should turn away from economic growth and focus on wellbeing- rising incomes increase happiness/wellbeing only up to a level that has since been passed in rich countries. Economic growth has not brought full employment, eliminated poverty, etc. Consumption -artificial fulfillment of psychological needs UN Report- humans could triple the amount of resources they consume by 2015 if growth continues exponentially

What is Greenwashing?

The act of misleading consumers regarding the environmental and/or sustainability practices of a company or the environmental benefits of a product or service.

Ecological Overshoot

The demand on the natural world that exceeds its ability to renew

Biocapacity or Regenerative capacity

The earth's ability to renew its resources (water, forests, air)

What are the types of firm level greenwashing (get examples of each)

1. Dirty Business: Touting an environmental program or product, while the firm's core activity is inherently polluting or unsustainable (Ex. gas companies playing up green R&D projects while most spending is directed towards reinforcing old, unsustainable, polluting practices) BP invested 98% of its capital in gas and only 2% in wind energy. 2. Ad Bluster: Similar to Dirty Business, but is distinguished by companies in general, while dirty business is more known unsustainable companies that aggressively contaminate the environment. Using targeted advertising to exaggerate an environmental achievement and divert attention from environmental problems; investing more more in environmental claims than cost of actual implementation. (A company that invests in a million dollar ad campaign about a clean up that actually costs less to implement than the ad itself) 3. It's the law, stupid! Advertising or branding a product with environmental achievements that are already required or mandated by existing laws. Example would be a company that has been forced to change a product, clean up its pollution, etc, that then uses PR campaigns to make the action look proactive and voluntary. 4. Political Spin: Advertising or publicly speaking about corporate "green commitments while lobbying against pending or current environmental laws and regulations. Advertising and public statements used to emphasize corporate environmental responsibility in the midst of legislative pressure or legal action. 5. Fuzzy Reporting: Companies who use CSR reporting as a form of greenwashing, "companies can excel at reporting and the utilization of environmental management systems while still emitting tons of pollution." Companies established these process as a form of window dressing as supposed to implemented solutions that will drastically change end results.

Growth in Sustainable Investments

1. ESG assets are growing at a faster pace than broader conventional assets 2. Nearly one out of every eight dollars under professional management in the US (12%) is invested responsibly 3. ESG assets were the only area to grow during the recent financial crisis

Natural Step on SD

1. Nature's functions and diversity must not be subject to increasing concentrations of substances from the earths crust 2. Nature's functions and diversity must not be subject to increasing concentrations of substances produced by society 3. Nature's functions and diversity must not be impoverished by over harvesting and other forms of resource manipulation 4.Resources must be fairly and efficiently used in order to meet basic human needs worldwide

Biocapacity/ regenerative capacity

The earth's ability to renew its resources (water, forests, air)

What are the 4 stages of Lifecycle analysis?

1. Goal and Scope definition 2. Inventory Analysis 3. Impact Assessment 4. Interpretation (comes each of these three levels)

3 clues to tell Institutional investors care about sustainability

1. Sustainability shareholder resolutions are gaining traction 2. Steady growth in sustainable investment 3. Continued positive relationships between environmental, social and governance factors (ESG) and financial performance

What are the seven sustainability benefits?

1. Increased revenue and market share (ex: tesla- forged own market share) 2. Reduced energy expenses 3. Reduced waste expenses 4. Reduced material and water expenses 5. Increase employee productivity and innovation 6. Reduced employee hiring and attrition expenses 7. Reduced risks

What are the three clues that institutional investors care about sustainability?

1. Sustainability shareholder resolutions are gaining traction 2. Steady growth in sustainable investment 3. Continued positive relationships between environmental, social and governance factors (ESG) and financial performance

9 Questions of Thorough CSR Reporting

1. Is this a CSR report or a community affairs report? 2. Does the report provide details on CSR practices as well as policies? 3. Does the CSR report provide systematic data or just anecdotes? 4. Does the company report data in a comparable format? 5. Does the report present future goals as well as past practices? 6. Does the report include bad news as well as good news? 7. Does the report address the company's greatest challenges? 8. Does the company integrate CSR reporting with its traditional business strategy and its financial reporting? 9. How can readers look beyond a CSR report?

What are the seven strategies used in Sustainable Investment?

1. Negative/exclusionary screening (exclude certain industries from investment- fracking, mining, oil industry, coal) SIN industries- consuming alcohol, weapons and gambling.. no one will invest in these 2. Positive/best-in-class screening (picking best company from industry- biggest shift to move to this type of investment) 3. Norms-based screening (must be in a certain club/group then in position to be considered for investment) 4. Integration of ESG (Environmental, social and governance factors) Factors (more subjective- get data and information on your sustainability performance.. wut?) 5.Sustainability themed investing (investing based on particular theme- ie renewable energy) 6. Impact/community investing (ie Vancity investing in indigenous, organic food and healthcare for elderly- allows for return on investments) 7. Corporate engagement and shareholder action (need info)

Sustainable investment encompasses the following activities and strategies:

1. Negative/exclusionary screening, 2. Positive/best-in-class screening, 3. Norms-based screening, 4. Integration of ESG factors, 5. Sustainability themed investing, 6. Impact/community investing, and 7. Corporate engagement and shareholder action

7 strategies used in sustainable investment

1. Negative/exclusionary screening, 2. Positive/best-in-class screening, 3. Norms-based screening, 4. Integration of ESG factors, 5. Sustainability themed investing, 6. Impact/community investing 7. Corporate engagement and shareholder action

What do shareholders care about?

1. Political spending including lobbying 2. Executive Compensation - Say on Pay 3. Separation of Board and Chair 4. Sustainability Reporting 5. Hydraulic Fracturing 6. Sexual Orientation - non-discrimination

Topics of shareholder resolutions

1. Political spending including lobbying 2. Executive compensation- say on pay 3. Separation of board and chair 4. Sustainability reporting 5. Hydraulic fracturing 6. Sexual orientation - non -discrimination

5 Stage Sustainability Journey

1. Pre-Compliance 2. Compliance 3. Beyond Compliance 4. Integrated Strategy 5. Purpose and Passion

Bob Willard and the 5 Stage Sustainability Journey

1. Pre-Compliance (company does not obey laws- cuts corners, etc.) 2. Compliance (obeys laws but does nothing else- the baseline) 3. Beyond Compliance (does some CSR, but does not have integrated strategy, "less sustainable" -Company voluntarily moves when they realize they can save money with proactive operational eco- efficiencies. It reaps "low hanging fruit" Will focus efforts where they can generate big results, fast. Usually marginalized within specialized departments. 4. Integrated Strategy (completely redesign supply chain, affects every aspect of business) Company adopts a cyclical, borrow use return model of sustainable capitalism. Deploy business stategies that respect environment, communitity, etc. 5. Purpose and Passion (Company is created for the purpose of sustainability.. Ex: Patagonia, Anyone certified by B corps/ b lap).

What are the five characteristics of a sustainable, cyclical, borrow-use-return business model?

1. Radical resource productivity 2. Investment in natural capital (companies protect and restore ecosystems to sustain societal and business needs) 3. Ecological Redesign (companies eliminate human made toxic chemicals from production processes, minimize use of energy/resources, used closed-loop production, decrease harmful emission.) 4. Service and flow economy (company will take back obsolete products to recycle or remanufacture) 5. Responsible Consumption (Responsible consumption reduces the demand for stuff and its associated pollution- consumers can make better informed decisions if they know origins, ingredients, packaging, life-cycle analysis, etc.)

7 sustainability benefits

1. increase rev and market share 2. reduce energy expenses 3. reduced waste expenses 4. reduced material and water 5. increase employee productivity and innovation 6. reduced employee hiring and attrition 7. reduced risk

7 Sins of Greenwashing

1. sin of the hidden tradeoff 2. sin of no proof 3. sin of vagueness 4. Sin of Worshiping False Labels 5. Sin of Irrelevance 6. Sin of Lesser of the Two Evils 7. Sin of Fibbing

Stage 1: Goal and Scope definition

A description of the product system in terms of the system boundaries and a functional unit. The functional unit is more important basis that enables alternative goods, or services, to be compared and analyzed. "In the goal and scope definition phase, the purpose of the assessment is established and decisions are made about the details of the product system being studied. The goal and scope are defined at the outset of the study, before any data are collected. The importance of this first phase is often underestimated. It is a very important phase because this is where the exact approach to be followed is determined.

What can you do to help with prioritization of tapping into/ utilizing natural assets?

A risk assessment Natural asset is listed, then 5 sections including, -Services the natural asset provides -Hazards that could occur when utilizing natural asset -Impact if hazard occurred (high, medium or low) -Likelihood of occurrence (high, medium, low) -Risk (high, medium, low)

Who are the three CSR reporting standard-setting and consulting firms?

AccountAbility, Global Reporting Initiative and SustainAbility

Materiality and CSR reporting

Advocates of CSR believe that the definition of materiality should be extended to the societal relevance of an issue for all stakeholders. Examples that would be including in materiality: -best practices of the industry as established by peers/competitors. behaviour relative to broad social norms/stakeholder behaviour.

All SRI strategies continued to experience growth between 2014 and 2016, as shown in Figure 3. The fastest growing strategies, although also the smallest in absolute dollar terms, were impact/community investing (146 percent) and sustainability-themed investing (140 percent), as shown in Table 3. Europe and the United States were the largest contributors to both of these categories.

Also continuing to grow are norms-based screening (42 percent) corporate engagement/shareholder action (41 percent), ESG integration (38 percent), negative/exclusionary screening (25 percent) and positive/ best-in-class screening (16 percent).

What are B Corps?

B-Corps are purpose driven, they create benefit for all stakeholders- shareholders, employees, community and environment Examples of Bcorps: Ben and Jerry's, Salt Spring Coffee

LC3s in Canada: The C3

BC was the first province to introduce an organizational form similar to L3Cs: The community Contribution Company (C3) -but, hasn't gotten much traction- companies with this certification aren't well known or do much

What is Lifecycle analysis?

The environmental impact of a product throughout its whole life from extraction of materials through to final disposal. Product life cycle: Raw Material Acquisition, Processing, Manufacturing and Assembly, Product Life, End of Life

What is the difference between a Benefit Corporation and a B Corp?

Benefit is for profit - accountability, transparency and purpose While BCorp can be any type of business or organization, for profit or non profit, etc.

Ecological Overshoot Factors

Carbon (the largest because it is related to all other factors) Cropland Grazing Forest Fishing Built-up land

No Impact Man reading

Consumerism has grown 55% in the US, meanwhile happiness stays absolutely the same People filling in the void of not spending time with their kids by showering them with gifts at christmas (in spite of guilt) In America, economic growth, 40% of that growth goes to 1% of the richest Work hard to get stuff, but stuff ends up destroying the planet, making us depressed The same people who want christmas less commercial are usually the ones buying tons of stuff during it No impact challenge is only catered to those who have excess income vs. people who don't make much at all and should be consuming more Designed Obsolescence : Manufacturers purposefully making their products break in a few years so you have to buy them again Fashion Obsolescence: things go "out of style" so then again you throw em away and get a new one Don't substitute resources, just use fewer Buying used clothes with a story is much more sentimental and makes you appreciate it more

Lifecycle of a Levis jean

Cotton production, fabric production, garment manufacturing, transportation and distribution, consumer care, recycling, end of life

Global Sustainable Investment Alliance (GSIA)

Created the : Global Sustainable Investment Review 2016, the third edition of this biennial report. This review continues to be the only report collating results from the market studies of regional sustainable investment forums from Europe, the United States, Canada, Australia and New Zealand, and Japan. It provides a snapshot of the sustainable and impact investing in these markets

Provide 2 examples of potential municipal natural assets and how they can support the goals of traditional infrastructure systems?

Creek- drainage system Aquifer- provides clean water

What is the business case for sustainability according to Barton? What factors does he argue are pushing companies to focus more on sustainability?

DOMINIC BARTON (head of McKinsey) says, "A sustainability agenda just goes hand in glove with performance of a company or an organization" Barton speaking with investor: "ESG is real and they need to measure it because they've got a 60-year time frame, so this has real impact on the performance of their investment, so this isn't some nice-to-have; it's real and you better understand it. So getting that investor perspective, long-term investor perspective, was another driver to say we've got to do something more significant here." many examples where thinking about the inputs that you use and the waste that you create can have real consequences to your license to operate. There's pressure from consumers, so companies have to think about this. There's actually pressure from employees, and I think there's pressures from the community in which people operate. More and more countries and companies are moving to that model of more integrated reporting which includes sustainability factors. And investors are asking more for this. broaden the set of lenses, if you will, on that performance and health, people start to say OK, yeah, I do need to think about these other factors like my environmental costs.

CSR reports: Financial Data

Debt Assets Liability Cash Flow Current Market Value Executive Compensation

SASB's sustainability topics are organized under five broad sustainability dimensions:

Environment: includes environmental impacts, either through the use of nonrenewable, natural resources as inputs to the factors of production or through harmful releases into the environment that may result in impacts to the company's financial condition or operating performance. Social Capital: the expectation that a business will contribute to society in return for a social license to operate. This dimension addresses the management of a company's human resources as key assets to delivering long-term value. It includes issues that affect the productivity of employees, management of labor relations, and management of the health and safety of employees and the ability to create a safety culture. Business Model and Innovation: addresses the integration of environmental, human, and social issues in a company's value-creation process, including resource recovery and other innovations in the production process; as well as in product innovation, including efficiency and responsibility in the design, use phase, and disposal of products. Leadership and Governance: involves the management of issues that are inherent to the business model or common practice in the industry and that are in potential conflict with the interest of broader stakeholder groups, and therefore create a potential liability or a limitation or removal of a license to operate. This includes regulatory compliance, risk management, safety management, supply-chain and materials sourcing, conflicts of interest, anticompetitive behavior, and corruption and bribery.

What are the three main pillars of Sustainability?

Environmental, Social and Cultural

True or False: the share of Canada's total national income claimed by the poorest and middle-income groups has increased since 1990

False

What is integrated reporting?

Financial data + non financial data = integrated reporting! Examples of financial data: Debt Assets Liability Cash Flow Current Market Value Executive Compensation Examples of non- financial data: Greenhouse Gas Emissions Number of female executives Water usage Human Rights Supply Chain Training Health and Safety Executive Compensation 3 types of integrated reporting: SASB IIRC GRI

What are the 2 major levels of greenwashing?

Firm and Product level greenwashing

BMW Case

For BMW to continue to sell cars that live up to the company's "ultimate driving machine" claim, the manufacturer needed to offset those emissions with a viable electric vehicle for growing cities, where more and more potential customers would live. That was the start of the i3. The strategy to develop a carbon fiber-based electric car wasn't without its critics at BMW. Eichinerand CEO Reithofer had to defend their choices to skeptical company managers around the world to get the rank and file on board. "When you take a new path, there's always risks involved," said Eichiner. "But if we succeed here, then it's a huge chance, and the competition will need time to catch up. There's not many opportunities in this industry to gain an edge like that."

The Corporation Chapter 2 "Business as Usual"

Friedman's viewpoint: Does not agree that corporations should try to do good for society if it hurts the bottom line. A corporation is the property of its stockholders and that is where its interests should also line- not in the environment. Executives who choose social/environmental goals over profit- who try to act morally- are in fact immoral -BUT the executive who uses social/envir. values as a means to maximize shareholders wealth- commits no wrong Profit. money. success= bottom line. Everything else comes second Corporations now follow a social responsible route Pfizer Inc. was one of the most respected corps for social responsibility Pfizer Inc = started as small chemical co., become world's largest pharmaceutical co. Tom Kline, senior vice prez, real nice guy, looked spiffy in bad hood, almost got mugged at train station but he still manages to say "love you" and greet everyone on the street like they were his friends etc. After train station incident, he decided to keep the factory in bad hood running because he thought to make the hood flourish and "make the community better" rather than close the doors n let the hood rot. Kline felt like it was his responsibility as a business person to "improve conditions of American cities". Company also donated lots, as people started calling them the most generous company. Looking not socially responsible nowadays looks "uncool", for example Sunbeam's president was pictured on the cover of a magazine with a machine gun lookin all "freedom" like, looks like a complete idiot today. Today, business are focused on "capitalism with a conscience" , causing business schools to start up a sustainability/social responsibility class Social responsibility now sells as much as "sex" (from top billing ads) Ford refuses to invest in social responsibility because they believe it would "likely undermine the value of the corporation to the owners". Said if there were to be an executive who was big into social responsibility, fire him right away. Also from Ford, corporations are NOT meant to be moral entities. They have one mission, to increase shareholder value. Money corporations invest is not theirs, they can't work miracles essentially, but they can use the money to buy expensive homes etc. Body Shop story: Roddick made her company from making soaps in her own home to the big body shop. She was a big supporter of human rights/social responsibility etc, however she made her company public so she could raise some more money. Soon enough with the control being "out of her hands" (since you are to run your company to please your shareholders), she wanted to continue her ways of social responsibility and challenge the WTO (World Trade Organization, controllers of international trade)... basically "no one" but her wanted it, as she realized not standing up to the WTO just made her any other ordinary corporation. She's sure she will go private as she thinks its the only way she can she can take control once again her "maverick, ...unusual Body shop". Body shop then ended up going for sale, she still makes some of the profits. She hoped the buyer will have the same mindset as her when it came to social responsibility, however the new buyer only cared a little and the rest about profits. Marc Barry, a "corporate spy" is hired to .. well, spy on companies. He sets up a phony recruiting firm and calls up executives from competitive companies to offer them a fake "better job". This process is a ploy to get all the competitor information possible from another executive. He can draw the line at his personal life, thus he believes he is still a decent human being. Despite his "shady" work, he goes on to say a really good point and that is: "do you think shareholders think whether or not you're Barry Buttercup or not? Do you think that they really would prefer you to be a nice guy over having money in their pockets? I don't think so. I think people want their money. That's the bottom line." Book author then compares Barry's work to be the complete opposite of how Roddick from the Body Shop does business, and in fact Barry's work is everything Roddick wanted to avoid. Roddick claims that this type of "shady" business basically makes us "inhuman", working without a "sense of empathy with the human condition". Book author likes to point out businesspeople are similar to schizophrenic psychopaths (thanks) with the help of Dr. Hare Dr. Hare states that corporations relate to each other superficially, to present themselves in a certain way that appeals to the public, yet not their REAL interest. (see my comment above regarding selling "pretend social justice") End of the chapter brings up Enron's crash, which is probably one of the biggest scams/scandals in modern business history. Enron is basically the company that created too big a gap between social responsibility and the "greed" of business

Sustainability reporting with GRI standards

GRI is the first global standards for sustainability reporting (founded 1997) Report on energy use, diversity, corruption, etc. Sustainability reporting can improve stakeholders relationships, build trust and enhance your reputation.

What zones are high risk in the environment?

Genetic diversity (species loss) , nitrogen and phosphorus (fertilizer) Main point to know: There is a broad range of environmental systems

CSR reports: Non Financial Data

Greenhouse Gas Emissions Number of female executives Water usage Human Rights Supply Chain Training Health and Safety Executive Compensation

What is the ecological footprint a measure of?

How fast we consume resources and generate waste compared to how fast nature can absorb our waste and generate new resources. Human demand on the Earth's ecosystems. The supply and demand of goods/services for an entire planet assuming that the whole planetary population follows a specific lifestyle of a known person/ group of people. E.F. Estimate changes depending on where person lives, Due to the fact that ecosystems vary in their ability to produce useful biological material, and to absorb C02, which is called the biocapacity.

What is Ray Anderson's "more happiness, less stuff" version of Ehrlich's original formula?

I = (P*A*T1)/ T2 I: Impact on the environment P: Population A: Consumption per capita (affluence) T1: Technology/stuff T2: Sustainable, renewable, recyclable technology

What is the Paul Ehrlich Equation?

I = P * A * T I: is the impact on the environment resulting from consumption P: is the population number A: is the consumption per capita (affluence) T: is the technology factor

Global Sustainable Investment Review (GSIR)

In the report, Every region saw a rise in ESG integration, sustainability themed investing and impact or community investing. Growing concern over climate change has resulted in rising interest in green finance, including climate-aligned bonds. From 2014 to 2016, the fastest growing region has been Japan, due to greater reporting and sustainable investing activity by Japanese institutional asset owners, followed by Australia/New Zealand and Canada. In terms of assets, the largest three regions were Europe, the United States and Canada, respectively.

What are the two markets for sustainable products and services?

Investors- Institutional investors (pension funds, money managers, insurance companies, hedge funds, commercial trusts, etc) AND... Consumers- LOHAS

What are the major stakeholder groups and what are they interested in?

Investors: -business model and integrated CSR into this -corporate governance -ethics: maintenance of transparency Environment: -energy efficiency and climate change -waste and toxic emissions -life- cycle design Employees: -health and safety -union relations -wages, profit sharing and benefits -diversity -work life balance Customers: -product quality and saftey Suppliers: -labour standards and general CSR standards Communities: -giving, volunteerism, community Governments: -human rights -taxes, lobbying, pubic policy

Stage 2: Inventory Analysis

Involves the compilation and qualification of inputs and outputs, for a given product throughout its lifecycle. Ex: Cotton inputs: land, soil, seeds, water, fertilizer, pesticides, insecticides, fossil fuels

Inequality

Key messages: -Canada gets a "C" grade and ranks 12th out of 17 peer countries. -Income inequality has increased in Canada in past 20 years -Since 1990, richest have increased share of national income, while poorest have lost share.

Sin of the hidden tradeoff

Labeling a product as environmentally friendly based on a small set of attributes (i.e., made of recycled content) when other attributes not addressed (i.e., energy use of manufacturing, gas emissions, etc.) might make a bigger impact on the eco-friendliness of a product as a whole. Bamboo- 'sustainable' as it grows fast, but very unsustainable to treat and process (has to be treated with a harsh and toxic chemical which produces air pollution) (Most commonly used sin)

current threats to our planet

Natural resource overexploitation Pollution Climate change

What is the term used to describe how manufacturers deliberately caused their own products to become out of date or to fail prematurely?

Planned obsolescence

No Impact Man: How can we live good lives without harming the planet?

Practice mindfulness with consuming "Is this consumption really making me happy?" Borrow, Buy or rent used (excepts socks and underwear) Buy only organic underwear and socks No movies or mass-canned entertainment Find alternatives to throwaway products, or products that come in thowaway packacking Ex: Buy one lawn-mover instead of 6 and use it between neighbors... no one mows their lawn more than once a week

Species Extinction

Rapid loss of species Estimated to be between 1,000 to 10,000 higher than natural extinction rate -We may be losing 10,000- 100,000 species every year

Stage 4 Interpretation

Results are reported in the most informative way possible and the need and opportunities to reduce the impact of the products or services on the environment are systematically evaluated.

Integrated Reporting

SASB= sustainability accounting standards board (companies can come to these accountants for help reporting) IIRC= international integrated reporting council (advise companies how to report their sustainability practices) GRI= global reporting initiative (looks beyond shareholders to stakeholders)

Stage 3: Impact Assessment

The effects of the resource use and emissions generated are grouped and quantified into a limited number of impact categories which may then be weighted for importance. Examples of Environmental Impact Categories: Acidification Potential, Global Warming Potential, Ozone layer depletion potential, human toxicity potential

Usually helpful to change environmental impact into "simpler" terms, where people will understand the impact the product lifecycle has on the environment

So.... comparing shoes. Taking the GWP equivalent to driving a car... Shoe 1: 3.9 miles or 29 hours powering a light build Shoe 2: 4.2 miles or 31 hours Shoe 3: 17.4 miles or 129 hrs... easy to see which shoe has the least amount of impact- is the "sustainable" choice

How can companies go from stage 3 to stage 4? Four stepping stones...

Stage 3.0: improve company eco- efficiencies and sustainable brand (reduce carbon footprint by making energy reductions) Stage 3.1: Improve supply chain conditions and footprints (acknowledge environmental impacts of products throughout their life cycles, make sure all suppliers are cleaning up their acts) Stage 3.2: Create eco-friendly effective products, services or leases -redesign to be radically more eco friendly Stage 3.3: Imbed sustainable governance -bake sustainability into decision making, policies, culture, etc.

What is SASB?

Sustainability Accounting Standards Board

Sustainability reporting

Sustainability and CSR reporting has had a short and varied history. Many firms still don't produce sustainability reports. In some cases, the reports stand alone from the annual report, sending the message that the sustainability report is a "bolt-on" addition - not as important, or a "nice to know" not a "need to know".

What is sustainability?

Sustainability is meeting the needs of the present without compromising the ability of future generations to meet their own needs. (Our Common Future, Bruntland Commission, 1987)

What is Sustainability?

Sustainability is meeting the needs of the present without compromising the ability of future generations to meet their own needs."

What is the name of the UN's current framework goals related to sustainability, and can you describe each goal?

Sustainable Development Goals: Plan by the UN to continue their work from the MDGs, but focus on ensuring that methods are sustainable and will increase the longevity of the planet. 17 goals 2015-2030 1. No poverty 2. Zero Hunger 3. Good health and well-being 4. Quality education 5. Gender equality 6. Clean water and sanitation 7. Affordable and clean energy 8. Decent work and economic growth 9. Industry innovation and infastructure 10. Reduced inequalities 11. Sustainable cities and communities 12. Responsible consumption and production 13. Climate action 14. Life below water 15. Life on land 16. Peace, justice and strong institutions 17. Partnerships for the goals

What is sustainable investment?

Sustainable, responsible and impact investing (SRI) is an investment discipline that considers environmental, social and corporate governance (ESG) criteria to generate long-term competitive financial returns and positive societal impact.

What is Sustainability Investment?

Sustainable, responsible and impact investing (SRI) is an investment discipline that considers environmental, social, and corporate governance (ESG) criteria to generate long-term competitive financial returns and positive societal impact.

What is important to remember about natural capital within ecosystems?

That Ecosystem services can be valued. Ex: -Pollination - sustains plants with no human intervention -Soil formation - gives humans fertile land to grow crops on -Storm protection -Wood and timber- natural resource we did not have to create but can use to our benefit -Clean water production- allows us access to drinking water "In the town of Gibsons, natural assets play an essential role in our infrastructure system. Creeks, ditches and wetland help us effectively manage stormwater. Naturally occurring aquifer filters drinking water so pure it meets health standards without chemical treatment. "

Examples of Product level greenwashing?

The 7 sins

Natural Capital

The world's stocks of natural assets which include geology, soil, air, water and all living things

Natural Capital/ Assets

The world's stocks of natural assets which include geology, soil, air, water and all living things. Natural assets provide services by default that do not need to be built or manufactured.

Walk or Talk matrix

There is positive communition or no communication and bad or good for firms. There are green washing firms (positive communication and bad) vocal green firms (positive communication, good) silent brown firms (no com, bad) and green mutes (no com, good)

Materiality

This term is borrowed from the accounting profession. In accounting, materiality refers to the IMPACT that an omission or mis-statement in accounting records could affect.

Sin of vagueness

When a marketing claim is so lacking in specifics as to be meaningless - 'All-natural' is an example of this sin. Arsenic, uranium, mercury, and formaldehyde are all naturally occurring, and poisonous.

Ecosystems Collapse

When a resource is depleted to the point that it is unable to regenerate itself

Ecosystem collapse

When a resource is depleted to the point that it is unable to regenerate itself Ex: Easter island trees were all consumed- it is barren now Desertification- permanent desserts Atlantic Cod- resource managed poorly- affected business and stocks crashed

Sin of Lesser of the Two Evils

When an environmental claim makes consumers feel 'green' about a product category that is itself lacking in environmental benefits. Organic cigarettes are an example of this sin.

Sin of Irrelevance

When an environmental issue unrelated to the product is emphasized. One example is the claim that a product is 'CFC-free', since CFCs are banned by law.

Sin of no proof

When environmental assertions are not backed up by evidence or third-party certification. One common example is facial tissue products that claim various percentages of post-consumer recycled content without providing any supporting details (certifications, etc.)

Sin of Fibbing

When environmental claims are outright false. One common example is products falsely claiming to be Energy Star certified. Hummer has an add that says "thirsty for adventure, not gas"

Sin of Worshiping False Labels

When marketers create a false suggestion or certification-like image to mislead consumers into thinking that a product has been through a legitimate green certification process. One example of this sin is a paper towel product whose packaging has a certification-like image that makes the bold claim that the product 'fights global warming'

LOHAS (lifestyles of health and sustainability)

a consumer segment that worries about the environment, wants products to be produced in a sustainable way, and spends money to advance what they see as their personal development and potential -Estimated to include 22% of the market -tend to be first adopters of natrual food trends and products, and spend 10% more on items that meet their ideals of healthiness and sustainability -Benefits: -strong customer loyalty -builds brand identity -lowers product costs (customers bring own bag, cups, etc) -Lowers waste costs (starbucks customers take away used coffee grinds) LOHAS represents a seismic and permanent shift in consumer attitudes and behaviours. Companies not offering healthier or more sustainable products are missing a critical opportunity to improve margins, charge premiums, strength consumer relationships, etc.

Zero Wate

a goal to guide people in changing their lifestyles and practices to emulate sustainable natural cycles, where all discarded materials are designed to become resources for other to use. Waste means designing and managing products and processes to systemically avoid and eliminate the volume and toxicity of waste and materials and conserve and recover all resources. NOT burn or bury them. Implementing zero waste will eliminate all discharges to land, water, air that are a threat to planetary human, animal or plant health.

B-Corp

a third party certification - looks at benefit corporations and agreed/ disagrees to certify it with their "stamp"

Sustainability lenders have...

better stock performance lower volatility better return on equity Success is based on: -superior governance structures -better constructive engagement with stakeholders

Industries that need sustainability strategies

chemicals industrial companies conglomerates

Why isn't Pfizer's free drug program enough?

could be withdrawn at any time- ie when it is no longer in the corporations self interest (when it no longer is a smart PR stunt to make the company look good and they get tax breaks when they donate drugs) Unsustainable program and does not stem from true sustainable practices

Canadian Ecological Footprint

ecological reserve in Canada is narrowing 3rd largest footprint per capita in the world B/C.... 1. Canada depends on natural resources for economic growth- extracting takes a toll- timer, oil, etc 2. geographic distribution- takes longer to drive to different cities since canada is so big 3. climate- takes more heating to keep warm 4. an affluent country so more GHG

Precarious Work

employment that is uncertain, unpredictable, and risky from the point of view of the worker Representative of a 'gig' economy (a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs.) Downfalls: no security, no control over polices, etc. Examples: Uber driver

What is Extended Producer Responsibility? (EPR)

environmental policy approach in which it is the producers responsibility (physical and/or financial) for a product - it is extended to the post consumer stage of the products life cycle (the company has to deal with it after its done- which currently does not happen) EPR shifts responsibility upstream and away from municipalities and regional waste authorities. Provides incentives to products to incorporate environmental considerations into the design of their products. (If they have to deal with it later, they'll want it to be easier to recycle/ etc) Ex: Pringles containers!

ESG

environmental, social and governance. Generally, ESG refers to the additional information that is of interest to stakeholders of your firm. They take an interest in these because the long-term success of the company is often dependent on more than just the financial figures.

What is a benefit corporation?

for-profit corporation, but in addition to creating value for its shareholders, it has three additional legal attributes: 1) accountability 2) transparency 3) purpose

INVESTING FOR A SUSTAINABLE FUTURE (reading)

http://sloanreview.mit.edu/projects/investing-for-a-sustainable-future/#chapter-1 read this and take notes when at the library!

The SASB Materiality Map™ is an

interactive tool that identifies and compares disclosure topics across different industries and sectors.

Sustainable investing is an

investment approach that considers environmental, social and governance (ESG) factors in portfolio selection and management

Positive/best-in-class screening

investment in sectors, companies or projects selected for positive ESG performance relative to industry peers;

Sustainability themed investing

investment in themes or assets specifically related to sustainability (for example clean energy, green technology or sustainable agriculture);

Design for Environment (DFE)

involves thinking ahead to design products that are easier to recover, reuse, or recycle products with less packaging, last longer, use less harmful chemicals, and use less energy

How can CSR reports be confusing to readers?

length of the reports, the volume and variety and information included and because it is often difficult to distinguish the information they contain that is valuable from what is not. (material!)

Sustainability accounting reflects the

management of a corporation's environmental and social impacts arising from production of goods and services, as well as its management of the environmental and social capitals necessary to create long-term value. It also includes the impacts that sustainability challenges have on innovation, business models, and corporate governance and vice versa.

Greenwashing

marketing or PR intended to deceive customers into believing that a company is practicing environmentally friendly policies and procedures. -First introduced in the 1989 -using the environment as an exploitable marketing opportunity -hard to distinguish firms from "doing good" to "doing green"

Ecological Footprint

measures: how fast we consume resources and generate waste compared to how fast nature can absorb waste and regenerate resources. based on usage of: - energy - settlement - timber and paper - food and fibre - seafood

Interesting to look at the transportation network

of U.S. denim products-> it gets shipped all across the states before the jeans are actually made! Then either disposed in the landfill or incinerated

What are shareholder resolutions?

opportunity for shareholders to suggest changes to company policy, governance and management practices or sustainability issues. a meaningful way for shareholders to be heard by management involves introducing a proposal or resolution which is voted on at the annual meeting Ex: asking company to disclose how much natural resources they consume

Triple Bottom Line

people, planet, profit

Borrow-Use-Return Model

r= radical resource productivity i= invest in natural capital e= ecological redesign s= service and flow economy r= responsible concumption

Norms-based screening

screening of investments against minimum standards of business practice based on international norms;

ESG

stands for environmental, social and governance. Generally, ESG refers to the additional information that is of interest to stakeholders of your firm. They take an interest in these because the long-term success of the company is often dependent on more than just the financial figures.

companies sustainability value creation

sustainable strategy clear business case business model that realizes potential

Impact/community investing

targeted investments, typically made in private markets, aimed at solving social or environmental problems, and including community investing, where capital is specifically directed to traditionally underserved individuals or communities, as well as financing that is provided to businesses with a clear social or environmental purpose

Negative/exclusionary screening

the exclusion from a fund or portfolio of certain sectors, companies or practices based on specific ESG criteria (sin industries)

ESG integration:

the systematic and explicit inclusion by investment managers of environmental, social and governance factors into financial analysis;

Carbon Footprint

the total greenhouse gas (GHG) emission to the environment throughout a particular period of time by a person or organization takes into account the amount of GHG emitted in C02 equivalents gives an idea about the impact on the planet that results from burning fossil fuels carbon footprint is the rapidly growing competent of humanity's overall ecological footprint; 54% of the overall ecological footprint

Corporate engagement and shareholder action

the use of shareholder power to influence corporate behavior, including through direct corporate engagement (i.e., communicating with senior management and/or boards of companies), filing or co-filing shareholder proposals, and proxy voting that is guided by comprehensive ESG guidelines

Zero waste pyramid

top to bottom: re think reduce reuse recycle/compost recover residuals management unacceptable

Examples of greenwashing

towels in hotels- use again? More good for the hotel (less work) than the environment. Are the hotels implementing any other sustainable programs or is it just the towels so they dont have to clean them? automobile and gas companies spending over $1 billion on advertising for green campaigns but almost nothing on pollution control (8x less)

One Planet Scenario: Saanich

wants to reduce consumption so saanich's ecological footprint is just one planet - means heavy reductions

Social Sustainability

water, food, health, income and work, peace and justice, gender equality, networks, social equality

Materiality

whether an item is large enough to likely influence the decision of an investor or creditor "a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the "total mix" of information made available." IIRC: "A matter is material if it is of such relevance and importance that it could substantively influence the assessments of providers of financial capital with regard to the organization's ability to create value over the short, medium and long term."