The Environment Writer

This article was originally published in Enterprise Asia’s “The White Book 2011: Best CSR Practices Across Southeast Asia.” Enterprise Asia is a non-governmental organization whose mission is to champion entrepreneurship development across Asia and strive to cultivate a culture of honesty, fairness and corporate social responsibility. For more information on Enterprise Asia and their Asia Responsible Entrepreneurship Awards (AREA), please visit their website.

Financial Innovation for Implementing CSR in Small and Medium Enterprises

For entrepreneurs with small or medium enterprises (SMEs), it is a challenge to channel excess revenue into any programs that do not see immediate growth returns, so Corporate Social Responsibility (CSR) programs can seem like a luxury not often afforded to SMEs. However, fortunately for entrepreneurs, innovation is an innate characteristic of smaller, more flexible companies. This innovation grants a comparative advantage to SMEs to find alternative funding sources to institute CSR projects and to leverage those benefits to gain investment and grow business.

The advantages gained from environmental footprint and social development improvements can directly correlate to operational cost savings, lowered employee turnover and absence costs, and positive public relations marketing value. But another, often overlooked benefit of CSR initiatives, particularly for SME entrepreneurs, is the ability to attract investment and grow business by establishing a track record as an environmentally and socially responsible business.

According to a 2009 study by wealth management newswire WealthBriefing, 90% of wealth managers surveyed revealed that their responsible investment (RI) portfolios performed as well or better than other portfolios. The same study identified higher client retention rates for wealth managers who invest in RI portfolios, and it acknowledged a correlation between the entrepreneurial investment community and its targeted interest in RI portfolios.  For SME entrepreneurs, this study indicates the significant potential for drawing higher, longer-term investments by prioritizing CSR as an essential component in business.

Yet, SMEs often find it challenging to realize new investor potential because few SMEs have financial surpluses flexible enough to accommodate the upfront costs associated with seeding CSR initiatives. This barrier can be overcome by utilizing a variety of funding sources, including innovative contracting, government incentives and dedicated social enterprise business development and investors.

Performance contracting is a popular and growing form of service contracting. Often used in energy efficiency retrofits, it places cost-saving performance risk on the service provider rather than the company purchasing the retrofit. This type of contracting has gained significant traction in North America and Europe, with the Institute for Building Efficiency reporting that revenues from energy service companies using performance contracts to retrofit buildings were $4.1 billion in 2008 and projected to reach $7.1 to $7.3 billion in 2011. Another innovative and increasingly popular plan is a power purchasing agreement (PPA), which reduces the liability of installing and maintaining equipment and is often used for high-tech installments like solar photovoltaic panels (PV). Many other financing options, like lease options and certificates of participation (COP), may be available in growing sustainability markets with low upfront capital and minimized risk for business purchasers.

Governments worldwide are realizing the need to reduce upfront costs and financial risks of business to institute socially and environmentally responsible programming. Singapore alone has over 30 government programs promoting sustainability incentives and it provides funding for a wide array of energy efficiency, alternative energy, water efficiency, transportation and other environmental innovation projects. All across Asia, governments, notably including quickly developing India and China, are targeting efficiency and innovation to make their country’s businesses more sustainable. Governmental tax incentives and rebates can be extremely advantageous to a business that is seeking capital to start any CSR programs.

Emerging sectors of investors that are interested in socially responsible investing (SRI) can also be central to CSR improvements in a business. Many of these investors can be found through associations and business development organizations that link investors with responsible business opportunities and provide assistance particularly to SMEs interested in green growth and CSR development. Examples of these groups include organizations such as Enterprise Asia, New Ventures, Small Enterprise Assistance Funds (SEAF), and The Association for Sustainable and Responsible Investment in Asia (ASrIA).

Many venture capitalists also see opportunity for profitable returns from environmental and social initiatives. For example, in 2010 ZheShang Nuohai Low Carbon Fund raised $32 million “to be China’s first dedicated private equity vehicle focused exclusively on the energy conservation, environmental protection and new energy sectors,” according to a report by the Asian Venture Capital Journal. The Impact Investment Exchange Asia (IIX), based in Singapore and launched in 2010, is an example of a trading platform created to meet the demand of investors reaching social enterprises.

While some of these funding opportunities may be non-traditional, the growth of these opportunities shows that there is potential for capital investment in CSR programs. As market innovators, SMEs are well poised to utilize various funding opportunities and turn them into profitable, environmentally beneficial and socially equitable benefits. Additionally, returns on initial CSR efficiency programs can then be converted into seed money for future investments with higher complexity and even greater benefit. With a proven CSR track record, a company can attract even more investments from the burgeoning SRI sector, creating a positive-feedback system of enhanced environmental, social and economic efficiency.

Take one part social programming, one part environmental responsibility and one part corporate profit, mix into one programmatic title and serve up Corporate Social Responsibility (CSR), one of the most important concepts for competitiveness in today’s business climate. Each of these elements, also known by the catchy phrases “people, planet, profit” or “triple bottom line,” dramatically enhance the ability of the others to components to perform. Maintaining a CSR program, therefore, that focuses on integration of these components can have a sum benefit much greater than a focus on any one part alone.

Social Programming

If customers and employees are treated as mutually beneficial partners in a business relationship, profitability becomes much more sustainable over the long-term. Healthy, satisfied customers are loyal customers that will continue to return to the business. A safe, healthy and environmentally friendly workplace causes employees to take fewer sick days and stay with the company longer, allowing fewer work delays, decreased turnover and lowered training costs. By organizing and participating in social charity work, a business enhances reputation, name recognition, and essential public relations value.

Environmental Responsibility

Corporate environmental sensitivity ensures the health and safety of customers, employees, and it also maintains a sustainable supply of natural resources. Reducing toxins and petrochemicals may not only lower manufacturing costs but also reduce risk management and employee insurance costs. Increasing energy, water and material use efficiency in terms of water, energy and material se directly impacts the environmental footprint of a business. A improved environmental footprint alone has great marketing value, but it also allows for a reliable supply of resources or expanded operations based on the same resource flow. Ecological restoration projects can have significant marketable offset value and sometimes even can provide useful ecosystem services to business operations.

Corporate Profit

Ensuring social equity and environmental integrity have a direct impact on bottom line profits. Efficiency measures, resource use reduction, employee health and safety and CSR marketing initiatives can significantly reduce costs and improve brand value. Long-term business stability is sustained by preserving customer and supply chain viability through natural resource protection, customer loyalty and positive brand management opportunities. In turn, a more profitable business is able to spend more capital on social and environmental programs, which again cycles back into profitability.

The inseparable nature of CSR components creates positive and integrated feedback mechanisms that sustain global business, environment and society. A systemized approach to people, planet and profit is one of the most important tools that a business can use to succeed today.

To learn more about what an integrated Corporate Social Responsibility program that promotes operations efficiency and marketing for your business, visit The Green Den Consultancy or contact Daniel McDonell.

Picture: Cornell Sustainability Hub

300 words on slowing down the pace.

One of my favorite extra-curricular activities is the old-fashioned stroll. Whether walking around the block or through the woods, nothing creates a more calming, refreshing and connecting perspective than a stroll. I am not talking about “hiking” or “backpacking,” because those terms imply a pre-determined destination, a physical commitment and some kind of a challenge. Although I do, on occasion, enjoy a good hike or backpacking trip, the stroll is a completely different approach to walking.

A stroll has several characteristics that differentiate it from other forms of walking, and these traits are often best described by the absence of prescriptive requirements. For example, a stroll has no pre-determined length or destination, and asked where one is heading on a stroll, a person might just respond, “Oh, just around.” Lacking a plan, the stroll also has no set pace that must be followed, a condition which usually results in a medium to slow, but almost always variable, rate of walking. Finally, a stroll requires minimally specialized location and equipment. The stroll could take me down to the neighborhood park in my loafers or down a windy forest path in my sneakers. Either way, I like to leave the water bottle and backpack of energy bars at home. More than likely, I will be home in time for dinner anyway.

By slowing the pace and wandering around, strolling allows my attention to become distracted by curiosities I might normally overlook, like dogs playing in the park, a street hot dog vendor’s interactions or the first blades of spring grass. By allowing my mind to absorb the subtle details of the everyday environment, the stroll provides me with important connections about the world around me, and I find these links provide one of the best mediums for a calm and refreshed perspective.

The Tiger by John Vaillant

In The Tiger: A True Story of Vengeance and Survival, John Vaillant uses the 1997 factual account of a man-eating Amur tiger (also known as Siberian tiger) in Primorye, Russian Far East to frame the ambivalence of humans to the essential ecology that they cherish, respect, overuse and fear.

The story is set in a surrealistic landscape, the southeastern most region of Russia. A liminal realm whose maritime and taiga ecologies intermingle subarctic and subtropic species, whose economy and civilized order has been decimated by recent government perestroika and the collapse of the USSR, and whose people eke out a subsistence living from the forest in eerie post-apocalyptic style ghost villages.

Vaillant gives great weight to this unique ecology as a driving force between the conflicts. His descriptions of this exceptional geography, which he dubs a ‘Boreal Jungle,’ paint a colorful picture of the most biodiverse region in Russia:

“Here, timber wolves and reindeer share terrain with spoonbills and poisonous snakes, and twenty-pound Eurasion vultures will compete for carrion with saber-beaked jungle crows. Birch, spruce, oak, and fir can grow in the same valley as wild kiwis, giant lotus, and sixty-foot lilacs, while pine trees bearing edible nuts may be hung with wild grapes and magnolia vines. These, in turn, feed and shelter herds of wild boar and families of musk deer whose four-inch fangs give them the appearance of evolutionary outtakes. Nowhere else can a wolverine, brown bear, or moose drink from the same river as a leopard, in a watershed that also hosts cork trees, bamboo, and solitary yews that predate the Orthodox Church. In the midst of this, Himalayan black bears build haphazard platforms in wild cherry trees that seem too fragile for the task, opium poppies nod in the sun, and ginseng keeps its secret in dappled shade…. It is over this surreal menagerie that the Amur tiger reigns supreme.”

It is in this bizarre ecosystem that human beings, as with most ecosystems on Earth, have chosen to make their home. But by 1997 in Sobolonye, the remote village around which this story takes place, the people have lost the government sponsored logging company and the only means of industrialized revenue. The isolated villagers in Sobolonye are essentially left to fend for themselves as the government frameworks crumble and supply chains have broken down. This decline leaves a strange kind of life for the villagers where, the author says, they are “governed by a kind of whimsical rigidity – a combination of leftover Soviet bureaucracy and free market chaos.” He goes on to point out the bizarre outcomes of this decline up through present times in a real scene that could be taken straight out of an absurdist play:

“The status quo of dysfunction here was summed up by the local postman, who traveled his hairy, backcountry route in a government van decorate with tassels, fringe, and an inverted American flag. After stopping in at Sobolonye’s administrative offices one winter day in 2007, he returned to his vehicle shaking his head. ‘There’s no government here,’ he said. ‘It’s anarchy!’”

Without jobs, government, basic supplies or options, the villagers turned to the land to survive through subsistence trapping, fishing, hunting, gathering and poaching. An existence based on this land is hard and poverty and starvation are ever present.  But the technology, such as an ancient diesel generator and satellite televisions leftover from more optimistic times, still lingers in the village, an odd juxtaposition that adds to the paradoxical nature of the place. “Nowadays,” the author points out, “in many parts of the world – not just Sobolonye – it is possible to starve while watching television.”

Most poaching in the Bikin Valley, where Sobolonye lies, was and is done on a small subsistence scale to satisfy a meager hand-to-mouth existence. But one Amur tiger corpse, although illegal both in Russia and China, could bring a poacher $50,000 USD just over the Chinese border. The Chinese appetite for all parts of the Tiger, combined with the opening of the border to trade in the 1990s, has taken a tremendous toll on the Amur tiger, that actually was beginning to rebound in population through the 1980s.

Loss of habitat and prey added to tiger poaching demands creates a desperate situation for the Amur tiger, where there were about 450 remaining in the region in 2008. It is in this setting that the hero of the story, Yuri Trush, a sort of Wyatt Earp wild-west lawman of the Bikin Valley, emerges as the necessary medium between poachers and the law, between taiga and civilization and between tiger and man. In 1997, he is the head of a regional unit colloquially known as ‘Investigation Tiger,’ whose position, funded by international conservation groups but with broad law enforcement powers, focuses on preventing tiger poaching and export to China.

But Trush is also described as a man of the people, who understands that illegal poaching is a necessary evil for these villagers and struggles deeply with the conflicting requirements of regulation, conservation and desperation. By being able to connect with each of these worlds through commiseration, he represents the undying hope for a future coexistence between humans, their methods of economy and the preservation of their ecology.

In the case of the man-eating tiger terrorizing Sobolonye, however, Yuri Trush is also the person that must hunt down one of the animals he is hired to protect. Because of the increasingly desperate times for both tiger and human, the two species’ crossed irrevocably and people were killed. In the case of this particular tiger, there is no option in the struggle: the tiger learned how to hunt humans and must be killed.

Modern humans’ struggle for coexistence and sustainable livelihoods within their ecologies is the greater theme of The Tiger, and in it Vaillant does present options. By employing descriptive analyses of evolutionary biology and anthropology, he draws useful parallels between the potential of impending doom for the Amur tiger and that of human civilization. Both tigers and humans are smart, adaptable predators at the top of the food chain. Both species’ survival is based on competition, habits and fierce defense of territorial possessions. In the case of Sobolonye’s villagers, both humans and tigers even compete for the exact same food sources. As such, the tiger truly represents a keystone species for humanity, a “canary in the coal mine” that is giving fair warning of the overuse of the resources that sustain both species.

Some might argue that it is simply that human intellect and industry has allowed people to compete and survive better, and the tiger is merely a casualty of this evolutionary competition. But drawing out competitive over-consumption to its logical conclusion after the tiger is gone, will tragedy, poverty and violence between humans not also result from a lack of resources? As the author asks, “Where does this trend ultimately lead? Is there a better way to honor the fact that we survived?”

Recently, I traveled to Amsterdam on a course designed by the Foresight Design Initiative to make a comparative analysis of sustainable innovation in Chicago and Amsterdam. Both cities are doing fascinating work in the environmental sector, but one of the most simple yet striking features of sustainability in Amsterdam is the bicycling. I probably don’t need to spend much time describing why bicycling is one of the most sustainable, healthy and freeing modes of transportation, but the cultural pervasiveness of bicycling in Amsterdam and the Netherlands can certainly teach us some lessons. The following is a short excerpt from my presentation at the Chicago Green Drinks about our bicycling tour Amsterdam:

There are several reasons why bicycling is so popular in Amsterdam: like Chicago, it’s a flat city. They have very little space (a reason which motivates many of their environmental initiatives), so they have to embrace alternative forms of transportation (perhaps even alternative forms of bikes). The city has a history and culture built around bicycling which leads to the development of policy and infrastructure around the bicycle. The combination of culture, policy and infrastructure make this a very practical and comfortable form of sustainable transportation.

On what must have been one of the coldest days of the year in Amsterdam, not so different from the weather we left in Chicago, our group went for a morning bicycle tour with Pascal van den Noort, director of the organization Vélo Mondial, an international non-profit that promotes cycling.

Some interesting features of the tour included dedicated and separated bike lanes with their own stop lights, features like the award winning Nesciobrug pedestrian and biking bridge and other newer developments incorporating features like bike lanes between buildings and traffic diversion to the periphery.

On the topic of making bicycling a practical, comfortable and safe experience, I was interested to see the lack of bicycle helmets – I don’t think I saw one the entire trip. While personally I’m a fastidious helmet wearer in Chicago, this contrast really exemplifies the ease of biking in Amsterdam and the stress and danger of biking in Chicago. The biking culture and environment in Amsterdam really does promote a safe and relaxed environment for riding that can be utilized by everyone from men and women to small children to the elderly.

One last plug has to be made for our excellent tour guide Pascal and his organization. Vélo Mondial promotes cycling as a positive mode of transportation and sustainable mobility through global conferences, projects and events. I hope there could be a potential to involve the organization in the promotion of biking here. In Amsterdam, a city where Pascal described one of the main problems as “not enough bicycle parking,” I have high hopes that Chicago can and will learn a great deal in terms of making sustainable mobility a practical, comfortable and typical activity in the city.

Bicycle Parking (from velomondial.blogspot.com)

There has been much ink spilled over the environmental and economic costs and benefits of the federal government’s “Cash for Clunkers” program (officially known as the Car Allowance Rebate System)- whether the higher gas mileages outweigh the benefits of new raw material use, whether the foreign automobile sales really helped the American economy or whether the money spent there would have been spent elsewhere anyway.

But a certain economic aspect of the program I have not heard frequently addressed frequently is the resulting deadweight loss from the economy in the long term because of the inefficiency resulting from taking an entire segment out of the used car market.

For simplification, I will disregard the requirements and break vehicles into three segments based on economic value in a hypothetical regular market:

Group A. High Value: > $4,500

Group B. Medium Value: $1,000 to $4,500

Group C. Low Value: < $1,000

Here it is important to pose a new vehicle to purchase in our hypothetical example, and we select the cheapest to find out what the minimum cost to the consumer is in this program. The Hyundai Accent GS Base is the cheapest new car on the current market, running around $10,000. In the highest rebate Cash for Clunkers category, the consumer can receive a $4,500 credit. This leaves the consumer paying, at a minimum $5,500 to participate in the Cash for Clunkers program.

Minimum Vehicle Cost ($10000) – Maximum Rebate Allowance ($4500) = Minimum Consumer Cost ($5500)

Group A, the highest value used cars, are not worth trading into Cash for Clunkers because they are worth more on the market than the value of the rebate.

Group B, the medium value vehicles, are the most useful for Cash for Clunkers, because the economic return to the consumer is greater than the value of the car. Additionally, individuals owning cars valued at $1,000 to $4,500 are far more likely to be able to afford the minimum consumer cost of $5,500 for a new vehicle, unlike:

Group C, the low value vehicles. Like Group B, the economic return is greater than the value of the car, greater even than those consumers in Group B. However, these consumers are much less likely to afford the minimum $5,500 necessary to take part in the program.

The clincher comes when one considers what Group C will do 1-5 years in the future as their low values cars necessarily need replacement. Normally, consumers in Group C would move to cars in Group B that have reduced in value enough to become affordable to them. However, many of the Group B cars have been taken out of the market due to the program. The result is a future bottleneck as demand outstrips supply of Group B cars as Group C begins to need them.

Group B vehicle prices will increase. However, because having a vehicle in the US is rather inelastic (ie, necessary, so the demand will not change much) consumers in Group C must either spend a higher percentage of money on these vehicles (at the cost of something else) or suffer the potential economic, employment and social consequences of not having a vehicle, which are rather great in the United States. Many on the edge of affordability will not have a choice and will be forced to take the latter.

This scenario, which government and consumers have gladly bought into in the Cash for Clunkers program, is called ‘deadweight loss’ a term describing an economic inefficiency when goods and resources are not allocated efficiently. When we talk about efficient resource allocation, we are also talking about environmentalism. Although we must use natural resources to live, environmentally conscious living uses the least resources for the greatest gain, which is also economic efficiency.

When doubts about the ostensible environmental and domestic financial short term gains from the program are put into the equation, we will only be able to look back at the Clash for Clunkers program with regret.

“Civilization is revving itself into a pathologically short attention span. The trend might be coming from the acceleration of technology, the short-horizon perspective of market-driven economics, the next-election perspective of democracies, or the distractions of personal multi-tasking. All are on the increase. Some sort of balancing corrective to the short-sightedness is needed-some mechanism or myth which encourages the long view and the taking of long-term responsibility, where ‘long-term’ is measured at least in centuries.”

The Long Now Foundation “hopes to provide counterpoint to today’s ‘faster/cheaper’ mind set and promote ‘slower/better’ thinking [and] to creatively foster responsibility in the framework of the next 10,000 years.” You won’t find a lot of discussion on sustainability and environmentalism on the website, and although the foundation is geared toward scientific studies of time, technology and complex societies, the issues they are promoting drive at the heart of the sustainability problems today.

One of the graphics from their website, featured below, shows a relative timeline in society’s attention span from fashion to culture, each change rate slowing. It is underscored by the rate of natural change and response, which although extremely slow underscores all of the above.

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Of course, each layer affects and is affected by the others. The implied questions when dealing with ecosystem services to humanity are:

1. Can the quickly changing layers of commerce and culture outstrip the ability of nature to sustain us and our livelihoods?

 

2. If our short-term thinking has led us to the environmental problems we now face, can a longer-term vision of the future help us to solve these problems?

Certainly when dealing with problems of environmentalism, we are not taking the typical 5 year business model approach of typical market economics. We are facing the challenges of adequate resources, climate and ecosystem support for generations to come – that is we are focused on perpetually sustaining human life rather than continually increasing consumption.

In such a view, looking 100 to even 10,000 years ahead, as The Long Now Foundation suggests, does not seem so ridiculous. They are doing some really interesting projects including the Rosetta Project to preserve language knowledge and building a 10,000 Year Clock. As we understand more of our natural world and the extremely long-term effects we can have on it and our survival, it is definitely worth considering a cultural shift in thinking to the ‘Long Now’.