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Blog | Wednesday April 19, 2017

Building Climate Resilience in Asia: Why Companies Should Invest in People

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At a BSR event in Hong Kong last month, we presented our new framework for private-sector climate risk and resilience to a group of company representatives and adaptation experts who shared their experience and knowledge about working in Asia. These conversations made clear that companies do not fully understand climate risk—including risks like disruptions and scarcity of raw materials that affect direct operations, infrastructure, and supply chains, and societal risks such as loss of livelihoods, jobs, homes, and health that could affect workers and the communities where these companies operate.

Parts of Asia, including the south and southeast, are extremely vulnerable to physical climate change risks such as more intense and frequent typhoons and flooding, sea-level rise, temperature rise, and disease vectors. In 2011, Thailand experienced severe flooding, with damages that reached as high as US$45 billion. Most affected companies were within the manufacturing sector, but many in the insurance industry suffered large insurance pay-outs, which has led to increased premiums, withdrawal from certain markets, and even refusal of new contracts for fear of repeat extreme weather events.

BSR’s new framework helps companies assess climate risks and provides a strategy to evaluate solutions to build resilience based on six capital assets: physical, financial, social, natural, political, and human capital. In Asia, the effects of climate change on society and businesses are deeply linked, so the BSR event focused primarily on enhancing societal and corporate resilience by investing in human capital.   

Companies in Asia like Gammon Construction have already experienced climate effects such as intense storms and floods that have hit their assets, as well as heat waves and vector-borne diseases that have affected their workers. In 2016, Southeast Asia experienced its worst heat wave in more than 60 years, with temperatures soaring past 112°F in Thailand and 108°F in Cambodia. Most people can’t work in these conditions, and many of the BSR event participants agreed that this makes the human impacts of climate change one of the most important issues to consider.

Participants also considered how climate change affects vulnerable groups such as women. There is no doubt that climate change magnifies inequalities. Women are 14 times more likely to die in a disaster due to underlying social, economic, political, and cultural factors. Underlying factors such as lower levels of education, less access to finance and land, and lack of basic skills such as how to climb a tree or swim during a flood make women more vulnerable than men. Women represented nearly 90 percent of the fatalities during a 1991 Bangladesh cyclone.

This matters to business because women comprise the majority of the workforce in sectors like agriculture and apparel. By enhancing the resilience of women, many companies can build their own climate resilience.

Event participants discussed four ways to help build human resilience to climate change:  

1. Invest in prevention methods such as education and training that helps workers prepare for and respond to a climate-related hazard.
2. Create alternative work spaces and technologies to protect workers from climate-related events such as heat waves or vector-borne diseases.
3. Provide financial access to workers and those in surrounding communities to help promote resilient livelihoods.
4. Collaborate on resilience strategies with other businesses in the same industry, as well as suppliers and the community.

Although Asia is often referred to as ground zero for climate change, the region also possesses bountiful traditional knowledge that can be used to respond to climate disasters. Businesses that want to enhance their own climate resilience can build on this critical knowledge and implement strategies that reach beyond the company walls, into the supply chain and the communities that stand at the front lines of global warming.

To collaborate and learn about how to implement BSR’s private-sector climate risk and resilience framework, consider joining BSR’s Resilience and Adaptation Initiative.

Blog | Tuesday April 18, 2017

BSR at 25: Meeting the Moment

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This year marks BSR’s 25th anniversary. While such milestones often prompt a look back (and we are doing a bit of that), this juncture in history is a time to stay firmly focused on the future.

We are living in a time of extraordinary change. Virtually every dimension of business is changing. As I have been reflecting on what these changes mean for the future of all companies, I have zeroed in on three big changes that are flowing together: One of the changes is positive, one is neither inherently good nor bad, and one is problematic.

The first change is that we now have a clear roadmap for sustainable business. The arrival of the Sustainable Development Goals (SDGs) and the Paris Agreement have defined a powerful global agenda for the next decade and beyond. Combined with other significant efforts like the UN Guiding Principles on Business and Human Rights and the Women’s Empowerment Principles, we have universally agreed reference points on the core elements of the sustainability agenda. The question today is not where to go, but how to get there.

Second, every business is experiencing disruptions that are presenting existential questions about the future: What business are we in? Who are our customers and competitors? How do we deliver value? How do we secure the natural resources we need? How do we communicate effectively in an era of hyper-transparency? These questions about the future arise even as competitive pressures in the present are unrelenting.

Third, we are experiencing a time of great political uncertainty. The twin shocks of the Brexit and Trump votes in the U.K. and United States last year are still playing out. Whatever happens, there are some clear lessons for business. First, public policy frameworks supportive of sustainability cannot be assumed, especially when governments have a hard time demonstrating the value of open societies and the global economy amid public anxiety over change. The political earthquakes of 2016 also remind us that the sustainability agenda should focus more on basic economic fairness and demonstrate how attention to climate can deliver innovation, competitiveness, and prosperity that reaches throughout society.

As we look ahead from our 25th year, it is good to see clarity about sustainability objectives, even if the business and political environments are far less certain. I am optimistic: We have a golden opportunity to reorient business around the sustainability agenda—an opportunity to use new technologies, new business models, and new ways of delivering value to achieve the vision of the SDGs and the Paris Agreement. Business can use its voice to demonstrate values-based leadership at a time when many of our elected officials have turned away from open societies, collaboration, and a principles-based approach to governing.

At a time of massive change, the question all of us face is simple: Will we meet this moment?

This is the first in a series of blogs on the occasion of BSR’s 25th anniversary that will explore how to redefine sustainable business.

We will also discuss these ideas at the BSR Conference 2017—stay tuned for registration launch in May and join our mailing list to be the first to receive Conference news and updates.

Blog | Monday April 17, 2017

How Men Can Help Empower Women through HERproject

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At a pilot factory for the BSR HERproject in Bangladesh, a male supervisor has seen for himself the benefits of our peer-to-peer, workplace-based training initiative. “I am more supportive of my workers attending trainings and more willing to give them time to go because not only do I see the impact it has on their attitudes and behavior, but I am also receiving trainings myself,” he said.

This kind of statement and engagement from a male supervisor is a good sign for women’s empowerment. From its beginning in 2007, HERproject has consistently worked to address challenges facing low-income women workers in global supply chains. As such, women have always been at the heart of HERproject. But it has become increasingly clear that for women to be able to make and act on choices they value, support from men—as coworkers, as managers, and as family members—is vital.

As we celebrate HERproject’s 10th anniversary, we are therefore reflecting on how we can continue to work with men—particularly when it comes to whether and how to integrate men into training programs, and how we can actively encourage male workers to advocate for women’s empowerment. In considering this, we have taken a step back to look at how men influence the different issues covered in our HERproject programs, including violence against women, access to health, and financial inclusion.

With the launch of HERrespect in 2016, we began tackling one area where working with both men and women is imperative: changing the gender and social norms that underpin violence against women. Through HERrespect, we’re providing training to both men and women, including workers and managers, to help them improve their communication skills and recognize how harmful gender stereotypes affect women at work and at home. Prior to formalizing male engagement in this program, men had demonstrated an interest in the trainings. Giving men the space to talk about issues related to gender norms, their relationships at home and at work, and violence against women has helped them become allies in promoting gender equality. Not only have we seen men actively engaging in the trainings themselves, but many say they are making personal changes—from how they interact with their wives to how they support their female colleagues in the workplace.

We also looked at another one of our programs, HERfinance, through which peer educators share lessons on budgeting and saving money. In that program, we identified a need to equally engage men in order to overcome some of the cultural barriers that may keep women from applying what they learn. While the HERfinance lessons can help women make a real difference in their lives and those of their families, in some countries, women are expected to hand over their salary to their husbands, or they are unable to contribute to decision-making about family finances. To address this, we offer HERfinance training to both men and women that focuses on the importance of collective decisions regarding family finances. In doing so, we ensure that men have access to critical information regarding the management of their own finances; they also receive knowledge and develop skills that augment the impact of the program on women.

Through implementation of HERhealth in Bangladesh and Kenya, we have learned that men can also play direct and indirect roles in empowering women workers to take control of their health. In Bangladesh, most of the top and middle managers are men, which makes their support and buy-in crucial to ensure work time is given for our training programs. Male managers can also be champions in improving access to health services by making sanitary napkins available in factories or developing partnerships with nearby hospitals or clinics.

In Kenya, the engagement of men in HERhealth is even more direct. We include men in the peer health educator selection process so that men and women receive the same lessons and understand that women’s health and family health is a shared responsibility. This is helping break the taboos associated with masculinity and family planning. Some women have told us that they hide their family-planning methods from their husband due to concerns that their husband would disagree with their choice and assault them. By inviting men, the traditional decision-makers, to trainings, HERhealth is slowly breaking down some of these barriers. In our trainings—which take place in a shared, inclusive space—we aim to help men understand why they should care about family-planning methods, and how engaging in these discussions with their partner can help their family make the best choices.

The issues we aim to address through HERproject are complex and often deeply rooted in gender norms. Engaging directly with men helps us maximize the impact of our program. Through the development and pilot of HERrespect and through the expansion of HERfinance, we’ve formalized male engagement as a key component of our programs. Now we are excited to build on these lessons to shape the continued contribution and engagement of men throughout HERproject. As we pursue this objective, we invite all of our partners and others to share their feedback and ideas.  

Blog | Wednesday April 12, 2017

Better Energy Management Electrifies the Corporate Agenda

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Forward-looking businesses are realizing huge cost savings by investing in energy efficiency measures and switching to renewable energy—as well as being able to make and meet ever more ambitious greenhouse gas commitments. Recent trends, such as tumbling renewable energy prices and innovative energy technologies, are driving never-before-seen energy procurement options and tools for companies to decrease the direct cost of their energy use. As companies’ cost structures evolve to take advantage of these trends, energy sourcing and efficiency are being pushed to the forefront of corporate agendas. All industries are finding ways to cash in: This year, 2,000 suppliers reported to CDP that implementing emissions-reduction projects has saved a total of US$12.4 billion. The challenge for companies is to determine which of these capital investment opportunities present the best possible return on investment.

Cost Savings through Investing in Energy Efficiency

Even in the face of low energy prices, corporate leaders are also focused on returns on energy efficiency investments. More than US$200 billion is being invested annually in energy efficiency worldwide, an increase of 6 percent from 2014 to 2015. Examples of investments that have resulted in significant energy efficiency gains and cost savings include:

• Procter & Gamble saved more than US$500 million in 4 years through actions like reducing energy use at its facilities by 20 percent per unit of production.
• Walmart’s fuel efficiency initiatives, such as collaborating with manufacturers on new technologies from 2005-2015, resulted in savings of US$1 billion in 2015. In the process, the company avoided emitting almost 650,000 metric tons of carbon dioxide.
• Dow Chemical invested US$2 billion from 1990-2010 to streamline energy used in manufacturing. This vast capital investment significantly paid off: Dow netted US$7 billion in total savings, a 350 percent return on its initial investment. In the process, Dow has prevented more than 200 million metric tons of greenhouse gas emissions.
• Johnson & Johnson allocates US$40 million each year to energy efficiency projects, resulting in energy cost and emission reductions of 15 percent in the last 10 years. 

Cost Savings through Renewable Energy Sourcing

In addition to energy efficiency investments, companies have begun to make the move to renewable energy to support their climate commitments, hedge against future electricity market price fluctuations, and take advantage of plummeting renewable energy prices. Amazon, Apple, Google, and Microsoft have specifically cited the need to protect themselves against price swings and ensure long-term, stable electricity costs at their data centers as a reason to commit to renewable energy, as explained in their amicus brief in support of the U.S. Clean Power Plan. Companies like Facebook, LinkedIn, and Salesforce also recognize this opportunity and are collaborating through BSR’s Future of Internet Power initiative to enhance their ability to procure renewable energy to power data centers.

Procuring energy via renewables is the cheapest option in many places in the United States, and there are several options for companies to leverage the falling cost of renewables, including producing their own renewable energy or setting up long-term contracts and agreements. Power purchase agreements, which lock in renewable energy costs at a specific price, have exploded recently, growing 3,100 percent from 2012 to 2015.

Examples of corporate action around renewable energy procurement include:

• AB InBev recently committed to make the company’s US$400 million a year worth of purchased electricity 100 percent renewable by 2025. CEO Carlos Brito said this decision was rooted in business sense because in many markets, it is already cheaper to go renewable.
• The case to switch to renewable energy was so compelling that MGM Resorts and Wynn Resorts are paying fees in excess of US$150 million to their current electricity provider to exit their utility contract and control their own energy costs. Along with the lower cost of solar in Nevada and California, MGM and Wynn said the decision was influenced by clients’ increasing demands for the resorts to use responsible energy sources. The resorts project that the savings and value creation will exceed the exit fees.
• General Motors recently signed with EDP Renewables North America for a 14-year supply of wind energy. Through this project and others like it, General Motors estimates that it is saving US$5 million annually, and the company announced plans to increase investment to bring more projects online.

Leading companies are leveraging energy efficiency technologies and low-cost renewable sourcing options to make greenhouse gas commitments and support global climate goals, and in the process, are saving millions of dollars. These commitments have included pursuing 100-percent renewable energy through the RE100 initiative or working with the Science-Based Targets initiative to align with the Paris Agreement and contribute to the absolute emissions reductions needed for the planet to stay within 2°C warming above pre-industrial levels.

Companies that embrace these trends and move them to the forefront of their corporate agendas will improve their energy cost structures and position themselves to prosper in the new low-carbon economy.

Blog | Tuesday April 11, 2017

Automation: How Business Can Lead a Sustainable Transition

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Automation will profoundly alter the future of work and society, as a great deal of recent research and projections on its impacts have shown. Some have predicted automation will lead to a gloomy future of permanent high unemployment, while others have touted many potential benefits around health, safety, and the environment. Yet, automation also poses a practical challenge for today’s business leaders, who must tackle how to take advantage of the productivity and innovation opportunities presented by automation technologies while also ensuring a smooth workforce transition. These leaders will have to help their current employees adapt to new technologies or retrain for new occupations, and they will also have to build a future talent pipeline that is educated, trained, and capable of meeting the needs of an automated workplace.

In a new BSR issue brief, “Automation: A Framework for a Sustainable Transition,” we explore some of the ways that companies are beginning to address automation, including engaging with civil society partners and governments. The brief explores four practices companies can adopt to facilitate a smooth transition.

1. Forecast and Communicate Planned Changes Early

The rollout of automation will affect different industries, occupations, and communities at different points in time. Early notice is critical, so that workers and governments have time to plan for the transition, reskill and train for new occupations, and minimize time spent in unemployment. The European Union’s CEDEFOP has started an early warning system that forecasts needed skills and workforce changes. By contributing their projected future needs to these systems, companies can help current workers and students plan for the skills that will be in demand in a specific geographic area.

2. Commit to Training and Support Education Partnerships

Companies can commit to partnerships with local educational systems, as well as open-source and online education, to prepare new generations of workers and upskill their incumbent workforce. Examples include partnerships with secondary schools and colleges to teach technical skills and coding or participation in formal workplace training programs through the Global Apprenticeship Network. Companies can also directly fund upskilling of their workforce through onsite training and use of micro-credential programs like Udacity.

3. Provide Support to Displaced Workers

Companies can play an important role in improving the outcomes of workers who will lose their jobs to automation by giving them early notice and extensive support to retrain and/or relocate to pursue new opportunities. Companies can partner with nonprofits and governments to include additional benefits in severance and outplacement packages, such as training grants to reskill for a new role in the company or for a new occupation, relocation assistance, or technical support and funding to start a new business.

4. Support Public Policies to Modernize the Social Safety Net

Automation represents the type of global challenge that can’t be solved through government policies or through individual companies’ CSR programs alone. It requires a coordinated and collaborative approach. Business leaders can play an influential role by using their collective voice to encourage governments to adopt policy frameworks that support workers in the transition to automation. U.S. policies currently being explored include wage insurance programs, which would help workers who lost income during the process of their career transition. Some countries, including France, are developing ITAs, or individual training accounts, which allow workers to accumulate tuition funds and paid leave so that they have time and funding to reskill during their careers. And business leaders are participating in dialogues around transformative policies, such as Bill Gates’ proposal for a “robot tax” to help governments make up shortfalls in payroll taxes. Other longer-term ideas are also in pilot tests in various countries, such as the universal basic income, championed by Tesla CEO Elon Musk, Y Combinator, and union leader Andy Stern, among others.  

Whether adopting and sharing the lessons of their individual company programs, forming industry-wide partnerships, or advancing public policy solutions, business leaders can play a critical role in the global effort to redefine the future of good jobs in the age of automation in the 21st century and build an economy that works for all. 

Blog | Monday April 10, 2017

Beyond Today’s Conflict and Beyond Today’s Minerals

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Before joining BSR, I directed the Conflict-Free Sourcing Initiative (CFSI) at the Electronic Industry Citizenship Coalition (EICC). During that time, the CFSI helped make tremendous progress around ensuring a conflict-free mineral supply chain: CFSI membership more than tripled, the first tungsten smelters were validated as conflict-free, and the total volume of validated conflict-free tin, tantalum, tungsten, and gold (3TG) grew exponentially. We also saw the rise of a standardized reporting tool, called the Conflict Minerals Reporting Template (CMRT), which companies now share among one another to identify the smelters and refiners in their supply chains.

Since joining BSR—where we place significant emphasis on the role of collaboration to create systemic change—I’ve reflected on what we achieved with the CFSI and how to increase those impacts.

My conclusion is that too many companies focus on requesting reports from suppliers and sending reports to customers without addressing the real social and economic issues at stake. Today’s paper-only exercise strips resources away from companies actually investing in changes on the ground.

To get out of the request-and-report resource drain and into a position where their conflict minerals programs create real and positive social impacts, companies should broaden and deepen their conflict minerals work. This will help break the link between mineral extraction and serious human rights abuses.

Companies can do this by broadening their geographic focus and responsible procurement efforts and deepening their transparency efforts and partnerships to engage government. 

Geographic Expansion

To date, most programs have focused on the Democratic Republic of the Congo and its surrounding countries and only on 3TG. However, these challenges exist around the globe and exist regardless of the mineral. Numerous programs, organizations, and initiatives have emerged to address human rights in minerals and materials extraction more broadly, including the EICC’s Responsible Raw Materials Initiative, European Partnership on Responsible Minerals, the Initiative for Responsible Mining Assurance, the Responsible Cobalt Initiative, and others. Companies should look to see which of these target the right minerals, issues, and geographies for their risk profile.

Responsible Procurement

Companies should take a systemic approach to their procurement. As the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Guidance) correctly contemplates, the link between minerals extraction and serious human rights abuses exists regardless of geology or geography. For companies to truly meet this expectation, as well as the UN Guiding Principles on Business and Human Rights, they need to take a system-wide approach. This means that companies should look at the full suite of minerals in their products and use the existing systems to determine the source of the minerals in their supply chain across that full suite. If those refiners have clear information on the mines from which they source via a set of agreed-upon metrics (more on that below), they can provide assurance to their downstream customers as to their products’ provenance and impact. While it sounds complex, the CFSI and others have created a strong foundation and shared tools to accomplish this.

Meaningful Transparency

To break the link between minerals and serious human rights abuses, companies need information about the conditions at the extraction sites, and simply exchanging CMRTs back and forth across the supply chain does not give companies the right kind of information to do this. Furthermore, investors are increasing the pressure on mining companies to provide more transparency as to the human rights conditions at extraction sites. The challenge requires a common set of metrics, KPIs, and criteria regarding the conditions at the mines that can be shared across the many tiers of the supply chain. Doing so would make it easier for smelters to have a clear sense of their suppliers’ sustainability practices and provide further assurance to downstream companies and investors. While that may sound daunting, many structures are already in place to efficiently share this information. For example, Apple’s recent Supplier Responsibility Report is the first to include cobalt in its conflict minerals disclosure using a similar model to its 3TG efforts. This shows that it is possible for companies to expand on the existing efforts to include minerals beyond 3TG.

Partnering on Government Engagement and Supporting Rule of Law

Companies should take what they learn from their responsible procurement practices to identify and collaborate with initiatives designed to support rule of law, good governance, and sustainable economic development where they obtain minerals. No single company can break the link between minerals extraction and human rights abuses, because that link is often the result of a lack of rule of law and government’s ability to protect human rights. However, companies can collaborate and speak with a unified voice to those governments. They can apply their business pressure to push for reforms and action on the part of those governments. With meaningful transparency from the mines to the brands, combined with system-wide responsible procurement, companies can collectively identify the geographies and minerals that are most critical and focus their government engagement efficiently.

Now is an important time for companies to act because the policy environment is growing more uncertain. The current U.S. administration has signaled an intent to roll back section 1502 of the Dodd-Frank Act and the SEC Final Rule that compels conflict minerals disclosure in the United States. Meanwhile, the European Parliament just approved regulation that will require importers of 3TG to undertake due diligence in line with the OECD Guidance. With these four principles in mind, companies should rally together behind the OECD Guidance and UN Guiding Principles frameworks, use the resources available from the emerging initiatives, and move forward to break the link between minerals trade and human rights abuses.

Blog | Thursday April 6, 2017

Made in Africa: How the Apparel Sector Can Build an Ethical Sourcing Destination

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When conducting field research in Ghana for our report, “Women’s Economic Empowerment in Sub-Saharan Africa: Recommendations for Business Action,” and accompanying apparel industry brief, we met with a woman factory owner who told us that when she got started, she was very strict with her employees and didn’t want to get involved in their personal lives. This resulted in several business challenges, including high turnover rates. She eventually rethought her approach and focused on the needs of her women workers. She told us: “I’ve come to realize it isn’t about handing out money; it is about listening and providing guidance [or] a word of advice. Help[ing] them with how to take care of their children. It has really worked. They feel like there is someone who listens and cares. [It] makes a huge difference.” She now runs a one of the leading fashion houses in the country and has attracted the attention of international brands.

Thanks to favorable trade policies, a large youth population, and convenient access to European and U.S. markets, sub-Saharan Africa is increasingly becoming an attractive apparel sourcing destination. This presents apparel brands with a unique opportunity to play offense and proactively build an apparel manufacturing sector that prioritizes women’s economic empowerment in their expectations of suppliers—right from the start.

Although sub-Saharan Africa accounts for less than 1 percent of global clothing exports at the moment, many companies are starting to source from the region. Capitalizing on the region’s potential could transform national economies and create millions of formal job opportunities, particularly for women. However, if safeguards and investments to protect and empower workers are not established, the industry could present significant risks to workers’ health, rights, and well-being.

In the aftermath of the Rana Plaza factory disaster in Bangladesh nearly four years ago, the apparel industry has been rethinking its own approach and has begun to implement reforms in sourcing policies and in engagement approaches with the factories and workers in supply chains. As apparel manufacturing expands in countries like Ethiopia, Kenya, Tanzania, and Uganda, it is important that brands, factories, and governments apply lessons learned—especially in Asia—to ensure that human rights, safe working conditions, and women’s empowerment are priorities. An approach that goes well beyond growth at all costs will have positive long-term impacts on workers, the environment, communities, and the wider economy.

Our research found that women face many of the same challenges in sub-Saharan Africa that they do in Asia, including poor working conditions, high turnover, and weak infrastructure. And like other women in the sector globally, women in sub-Saharan Africa—who make up the majority of garment factory workers in the region—face risks of sexual abuse and harassment, few career-growth opportunities, and limited access to basic services. These findings reinforce the need for brands to work with suppliers to prioritize labor rights, reduce workplace risks, provide clear career pathways, and strengthen access to quality childcare and healthcare.

Our report offers recommendations on how apparel brands can advance women’s economic empowerment, including the following actions:

• Build inclusive supply chains through responsible sourcing practices, promoting positive relationships with suppliers, and incentivizing suppliers to advance women’s economic empowerment. Brands can also participate in industrywide efforts that advocate for and share best practices on these responsible, inclusive approaches.
• Create gender-sensitive workplaces where women’s concerns are addressed and workers have access to feedback channels that create spaces for women’s voices to be heard by management and improve worker-management relations.
• Invest in education and training programs for workers that build basic literacy and education, as well as job and life skills. Brands can support factories’ involvement in Better Work, Ethical Apparel Africa, and BSR’s HERproject.
• Prevent sexual harassment and ensure proper remediation if it occurs by communicating and enforcing no-tolerance policies, helping factories establish anonymous reporting mechanisms, and working with factories and community partners to provide referrals to counseling services.
• Build inclusive communities by partnering with local and global organizations to improve women’s access to essential products and services, create an enabling environment for women, and address cultural barriers that hold women back.

There is an opportunity for brands to embed responsible business practices into their engagements from the beginning, which will help prevent challenges that have plagued other regions and establish sub-Saharan Africa as a responsible sourcing destination. This will not happen, however, without brands making a concerted effort not to repeat the mistakes of the past. 

Blog | Wednesday April 5, 2017

Business Risk, Reward, and Resilience in the Face of Extreme Weather

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Extreme weather can spark extreme business costs. It matters, therefore, that extreme weather is trending upward—by a factor of three over the past 35 years, according to an analyst with insurer Munich Re. It also matters that businesses can mitigate against these risks and buffer against attendant costs through actions focused on climate resilience.

A few corporate examples vividly underscore why businesspeople would be wise to carefully assess the potential corporate risks of extreme weather, as well as to identify proactive mitigation actions. The Center for Climate and Energy Solutions has reported on numerous examples, including, in 2011, automaker Honda lost more than US$250 million when unprecedented rains led to serious flooding in Thailand. In 2012, Energy company Dominion Resources was forced to shut down operations within a Connecticut-based nuclear plant because record-setting summer heat significantly elevated ocean temperatures, and cooling the facility with seawater was not feasible. And Munich Re had a 38 percent quarterly profit tumble when it had to pay out US$350 million in claims after flooding in Australia in 2010-2011.

Clearly, avoiding these extreme-weather financial losses are in all corporate decision-makers’ best interest, particularly as these events are occurring with greater frequency and intensity due to climate impacts. As corporate decision-makers begin to assess extreme-weather risks and opportunities, as well as consider investments in building resilience, they should keep the following in mind.

• Severe weather is on an upward trend in frequency and intensity, as National Oceanic and Atmospheric Administration data on U.S. billion-dollar disaster events has shown.
• Businesses can mitigate the impacts of extreme-weather-related risks by starting with assessments of specific risks and suites of appropriate responses—as outlined in a BSR report on Thailand, among a growing body of work on climate resilience. Both the upside and downside is significant enough now to warrant insurance companies, such as Zurich Insurance, to offer “resources and knowledge to help its customers build greater climate resilience.”
• The effectiveness of the corporate response will be contingent upon accurate assessments. Since extreme weather comes in many forms—floods, droughts, hurricanes, intense rainfall and snowfall, and high and low temperatures, among others—corporate responses must take into account how specific weather events will affect supply chains or operations (see recommended analytical approaches in a BSR blog on resilience). 

BSR has developed an approach to help companies properly diagnose climate risk throughout their operations, supply chains, and surrounding communities. The approach, which is part of BSR’s Resilience and Adaptation Initiative (READI), also helps companies respond through actionable methods to enhance corporate and societal resilience. READI builds collaboration among companies and leading adaptation experts on the issue of corporate risk and resilience.

Early corporate adopters—who are future-proofing supply chains and operations in light of extreme weather—are finding that actions exist to address vulnerabilities to extreme-weather-related business disruptions. It is becoming clear that businesses can afford to invest in resilience, when these investments consider risks and potential losses. In fact, key business stakeholders are asserting that the risk is big enough to warrant action today and are willing to advise on pathways forward to extreme weather resilience, as the Zurich Insurance example shows.

The pathway forward is clear and leads toward less risk and more reward in the form of avoiding or mitigating operational disruptions. It is now time for companies to roll up their sleeves and convene to assess and address extreme weather risk, resilience, and reward.

Blog | Friday March 31, 2017

Emptier Refrigerators as Social Capital: Redefining the Value of Food in the United States

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Today, I came home to a barren refrigerator—for many, the calling card of a bachelor living on takeout and dinner dates. But in my house, it’s the sign that we’re cutting food waste: I’ve challenged my family to eat everything in our refrigerator, and I mean everything. But that’s not the typical U.S. household … yet.

If you grew up in the United States during the middle of the 20th century, you very quickly learned the American social code around food—fresh cooked food every day meant mom (always mom) cared, a party of 15 meant you cooked for 30 for fear of running out, and an empty refrigerator was considered cause for embarrassment. While grandma or mom, who survived the Great Depression, took extra time getting her doggie bag after dinner at the local restaurant, the rest of us didn’t risk the faux pas.

Food abundance was, and still is, considered a sign of wealth, love, and social capital. But what’s the impact of all that abundance if it’s under-used?

U.S. consumers produce an estimated 27 million tons of food waste annually. Wasted food, left to sit and decompose in landfills, emits methane, which is a leading cause of climate change. That waste also presents a critical social problem, where food is thrown away instead of going to the 40 plus million people in the United States struggling to feed their households.

Of course, there’s even more food thrown away long before it gets to our homes. Another 25 million tons of food are wasted by consumer-facing businesses, 1 million by manufacturers, and another 10 million lost on farms—for a grand total of 63 million tons, equaling an estimated US$218 billion.

The good news is that the food waste landscape is improving. The past two years have seen an increased focus on food waste, ranging from individual business commitments to collaborative commitments, such as YieldWise by the Rockefeller Foundation to reduce global food loss and waste, the Consumer Goods Forum Food Waste Resolution, and the U.S. government pledging to cut food waste by half by 2030. Some commitments were inspired by the UN Sustainable Development Goals—Target 12.3 calls for a 50 percent reduction of global food waste by 2030.

However, most efforts exclude consumers, who in the United States are responsible for 43 percent of the food wasted per year. But there are some examples of successful attempts. For example, in April 2016, the National Resources Defense Council partnered with the Ad Council on a “Save the Food” campaign, which encourages consumers to alter their behavior. The campaign is a step toward raising public awareness—and there is a clear opportunity for companies and organizations to capitalize on the momentum and broaden the impact of these types of efforts.

This past February, BSR, with support from The Rockefeller Foundation, challenged 15 participants from companies and civil society organizations to consider what it would take to engage consumers on food waste prevention in the United States.

Throughout a day of case studies, new research on messaging to drive sustainable behaviors, and a group activity leveraging the BSR/Futerra Sustainable Lifestyles Frontier Group framework on developing the value proposition for sustainable behaviors, the group identified three areas where collaboration could help to create a movement around food waste reduction:

• Developing a business case for engaging the broader business and integrating sustainability and marketing efforts to address consumer food waste
• Testing and refining consumer messaging through creative media to drive food waste reduction
• Partnering on local/community-based events to highlight and encourage better practices around food purchasing and use, particularly with children and families

Individual organizations can execute against these tasks, but the real opportunities are in the shared investments, resources, and outcomes that can come through a collaborative effort. BSR will continue to address this complex issue by engaging companies and brands in a proposed collaborative initiative to address the three areas outlined above.

Influencing, and ultimately changing an individual’s perceptions of the value of food and his or her subsequent consumption behaviors is complex and challenging. We hope this important work will shift social norms around food waste in the United States—our vision is that emptier refrigerators and leftover consumption become a badge of social awareness, respect for the environment, and with hope, delicious meals.

If you are interested in joining a collaborative initiative to engage U.S. consumers on food waste, please contact jmarinez@bsr.org. 

Blog | Thursday March 30, 2017

A Guide to Stakeholder Engagement for Healthier Communities

Preview

Social and economic factors, healthy behaviors, and physical environments account for 80 percent of our health outcomes. The contribution of clinical care to health is the modest remainder. As such, governments, healthcare professionals, and businesses cannot singlehandedly influence U.S. health outcomes without tackling the broad range of factors that determine our health. While the health policy debate in the United States is focused largely on the government’s role, the private sector must embrace its vital role in improving population health. Health is a shared social responsibility—and better health is everyone’s business.

Healthy business management practices recognize the need to improve the health of employees, customers, and communities. To develop strategies, innovate solutions, and provide the resources that will deliver social impact, there is no substitute for the wealth of insights offered by engaging with stakeholders. When it comes to healthy business, the most successful companies are those that connect with the people they seek to benefit.

The Healthy Business Coalition’s new Stakeholder Engagement Guide is designed to help companies engage key stakeholders on their healthy business goals, progress, and obstacles. By developing a robust engagement plan, companies can connect with key stakeholders and receive feedback that is essential to ensuring their healthy business programs are viable, actionable, and impactful.

To some degree, companies already practice stakeholder engagement—they share information with stakeholders by publishing sustainability reports or disclosing safety data. But stakeholder engagement must be a two-way street, and it requires companies to foster the relationships that will provide insights and influence needed to make healthy business programs succeed.

Our new guide is intended to help companies manage the stakeholder engagement process more effectively and outlines three steps for companies to consider.

1. Align on Objectives and Benefits

Knowing how stakeholders can help is an important first step in developing a stakeholder engagement strategy. Does the company need to align healthy business programs with community expectations? Does it need to engage stakeholders to earn the “social license” to deploy programs and validate their approach? Or does the company need guidance on the right metrics to track their programs?

Clarifying “why” to engage is fundamental—and not only to launch the process. To ensure internal alignment, which is required to move the process forward, companies must understand the purpose for engagement. And stakeholders will want to engage only when they know their feedback will be valued and influential. The Stakeholder Engagement Guide provides a framework to organize the benefits to each company and help articulate those benefits internally.

2. Determine Who and How to Engage

A strategic approach to stakeholder engagement requires that a company identify and prioritize its stakeholders. The Stakeholder Engagement Guide helps companies develop an identification tool (a fully developed version of this tool is available to all Healthy Business Coalition members) to prioritize stakeholders based on their ability to engage, degree of influence, and level of expertise. By identifying stakeholders and scoring them against these criteria, a company’s long list of stakeholders can be organized per the appropriate engagement approach.

BSR’s stakeholder engagement continuum informs the entire process. Depending on where a stakeholder lands, a company will approach that stakeholder differently. Stakeholders on the far right of the continuum, in “Collaborate,” are closely aligned with a company’s healthy business efforts and capable of bringing their expertise and influence to improve those programs. Conversely, some stakeholders may not necessarily be appropriate collaboration partners but deserve to be consulted on programming. Connecting with the right stakeholders in the appropriate format is essential to making stakeholder engagement strategic and efficient.  

Effective stakeholder engagement is about the quality of that engagement—and companies should ensure they invest time and resources to further relationships with the specific stakeholders that can improve healthy business programs. The list of tactics helps companies select the engagement formats that are best suited to each stakeholder’s role.

3. Integrate Learnings from Stakeholder Engagement

Successful stakeholder engagement doesn’t finish when the interview or roundtable ends. Companies must distill their stakeholder interactions into insights and actionable next steps. Getting value from engagement and deepening relationships depends on leveraging these insights to help refresh healthy business strategies, innovations, and partnerships. Importantly, this follow-up is not limited to external stakeholders. Internal stakeholders should be engaged to build on the momentum and help incorporate the insights gathered.

The Stakeholder Engagement Guide is the final tool in the Healthy Business toolkit—and rightly so. Stakeholder engagement is the method for refreshing the healthy business communications, strategy, and innovation processes featured in the other three tools. Engaging with communities and partners will fuel the revision and improvement of a company’s healthy business approach. By testing programs and products with the stakeholders who benefit from these solutions, a company can incorporate valuable feedback to make its solutions even better. Interaction creates a feedback loop that informs strategy, tests the efficacy of innovations, and refines how a company considers a topic internally and communicates its progress externally.

BSR invites all companies to apply the Health Business Toolkit, which is now fully available online, and we welcome any feedback on ways to improve these tools. We look forward to hearing about how companies have risen to the occasion to make healthy communities their business.