25 August 2010

Ceres: Greening Corporations

An interview with Mindy Lubber

Mindy S. Lubber is President of Ceres, a coalition of investors, environmental organizations and public interest groups that pioneered corporate partnerships to address global climate change by integrating sustainability into capital markets. She directs the Investor Network on Climate Risk (INCR), and is the recipient of the Skoll Social Entrepreneur Award. Ceres has been awarded Global Green USA’s 2009 Organizational Design Award and Fast Company Social Capitalist Awards in 2007 and 2008. Before coming to Ceres, she was the Regional Administrator of the U.S. Environmental Protection Agency and Founder/CEO of Green Century Capital Management, an investment firm managing environmentally screened mutual funds.

Ceres was founded in 1990 by a group of environmentalists and investors who had, in Lubber’s words, “ a joint mission to assure that large companies are factoring in the impact of environmental sustainability issues into what they do and how they work.”

Question: How did Ceres begin?

Mindy S. Lubber: Investors cared about environmental impact because they worried that companies that ignore environmental issues do so at their financial peril. They do not fully incorporate the risks of toxic spills, of not being prepared for climate change, or of water shortages. So we came together right after the Exxon Valdez oil spill [1989]. It was not about confrontation, but about saying the impact of business practices on our environment and on our economy is profound, and we need to raise the standards for sustainability within capital markets.

Q: How long did it take to get corporate attention?

Lubber: It took a couple of years to make the case that it really was in a company’s best interests to address sustainability, climate, and other environmental issues. That was a new concept in the early 1990s. We asked companies to support an ethic of environmental sustainability principles. Getting companies’ support takes time. They don’t just support things — their lawyers read it, their boards read it, and their CEOs read it — as they should. People said it was never going to happen, companies would not support a set of serious principles, but they did. And that started many long-lasting and fruitful relationships.

We said companies need to be doing more. The first thing to do is disclose their sustainability footprint. We designed something called the Global Reporting Initiative, which has become the international gold standard for corporate reporting on sustainability. And we were told nobody would do that, but we now have 1,695 multinational companies who do sustainability reports built off the Global Reporting Initiative. Just as we expect companies to do a financial report, we expect companies to do a sustainability report. What is their carbon footprint?

How are they addressing it? What are their toxic waste dumping practices? We design a reporting system that not only informs the public, neighbors, and investors — people who own companies — so they understand the potential risks and liabilities companies might have from sustainability issues. So there has been a progression of impact, results, engagement, and convening, but it has taken time.

Q: Has interest in sustainability best practices grown?

Lubber: Fifteen years ago when we talked about best practices for corporations fully reporting their sustainability footprint from human rights to the environment, it turned out to be not only about disclosure, but companies learning how to look at their impact. Indeed, we learned that what gets measured gets managed. When companies measure their risks, from water shortages to toxic spills, they manage them better. From the mid-1990s to 2000 companies were getting a handle on sustainability as it relates to their companies, how they measure it and how they manage it. In the next five years we worked with companies on specific initiatives: How could they build better facilities, or integrate sustainability into their products?

Now we are not debating whether sustainability and climate issues are legitimate capital market issues. We have 8 trillion dollars’ worth of members in our investor side of Ceres [Investor Network on Climate Risk] saying that these are real investment risks and opportunities. We have 82 companies that are partners in integrating sustainability from the boardroom to the copy room. The U.S. Securities and Exchange Commission (SEC) now requires companies to disclose the material risk from climate in their reports to the SEC.

Ceres recently published a study about the 21^st-century corporation: It’s more than principles, disclosure, or one-off deals; it is now the expectation of stakeholders, consumers, neighbors, labor, and investors that companies integrate sustainability throughout the food chain.

So the expectations have grown. It is no longer a one-off “We do a great recycling project. Aren’t we a good environmental company?” We push them, work closely and stay with it, in a collegial, partnership way. We are very specific about the expectations and we write them down. Our position is that each corporation needs a board committee that looks at sustainability, and an executive officers’ compensation, in many cases, should be tied to sustainability metrics, as it is to a hundred other metrics. Sustainability officers should be elevated to the executive suite and report to somebody who really is managing the whole enterprise.

The world had progressively changed, we have moved from sustainability in word to sustainability in deed.

Q: Does association with Ceres and similar groups enhance the corporate image?

Lubber: Affiliating with Ceres or other organizations sends a very clear message to employees. Companies want to be on the leadership team. They want to do what is right. They are willing to be transparent, and that’s a good thing. Being out there with credibility — which is required if they are going to work with us — is value to their investors, who are now asking questions about how companies are addressing sustainability, and to their consumers.

Q: What are the most effective components in corporate climate change partnerships?

Lubber: The most important elements that mean success are companies changing their practices. Not talking about it, but changing. It’s happening, still piecemeal, but it’s starting, and the more we see change, and the more we can help companies change, the better.

Q: Can you give some examples of successful partnerships with Ceres?

Lubber: The fact that all of our companies are executing thorough sustainability reporting is an example of mass success, as is filing a legal petition with the SEC to require better disclosure of sustainability reporting.

But more specifically, American Electric Power, a large emitter of carbon, is not your traditional “green” company. We started working with them about four years ago, first on a broad-based sustainability report on the economics of being a utility that emits carbon. We worked directly with their board members on a detailed study of how they need to slowly back out of a largely coal-fired utility. We then worked with them to integrate sustainability in a broad way across the company, and they did one of the better sustainability reports. They are starting to sell more energy efficiency than they sell coal or electricity built off of coal.

They have made sustainability a hallmark of what they do.

We just worked with Dell on redesigning their entire environmental program, and hosted a meeting with fifteen stakeholders from around the world to push Dell on what the company’s priorities ought to be, the changes they ought to make, and how they ought to do things.

We’ve worked with National Grid, whose chief executive officer now has metrics on compensation based on carbon footprint reduction. They are integrating sustainability into compensation, which we ask companies to do.

Q: Does integrating sustainability contribute to profits?

Lubber: Most of the time. The very tricky piece of sustainability is that companies are evaluated on what they spend and make over very short periods of time. The results from sustainability initiatives often don’t show up over these three- or six-month periods.

But there is a reason why Wal-Mart has made sustainability their hallmark these days. They’ve saved an enormous amount of money. They’ve generated an enormous amount of enthusiasm in their work force. They are having better luck hiring the best and the brightest out of the top business schools because they are seen as a sustainability leader. So in their case, they are saving money, they are making money, it is good for business.

In some instances it takes a bit longer. You can’t see it immediately. Insurance companies that are addressing climate change don’t want more Hurricane Katrinas where they are paying out 40 billion dollars in liabilities. They’d like to see climate change mitigated, but they see results over time.

When Dell redesigned their computers so there is less toxic waste, and their practices to include strong “take back” policies — rather than dumping computers in landfills where toxic chemicals go into our water supply — it cost them a lot of money at the outset. But they believe, and we believe, that in the long term it’s going to increase their market significantly.

Q: Is “greenwashing,” where companies falsely present themselves as environmentally friendly, a problem?

Lubber: I am desperately concerned about greenwashing on a regular basis, which is why Ceres doesn’t give the companies we work with a “green star” or “green plus.” Any company, even those taking steps forward, is going to find things that are hugely problematic. So we push companies to be transparent and detail-oriented. If they’ve done something good, they have to tell what the results were.

Q: Are you optimistic about the direction corporate environmental partnerships are headed?

Lubber: I think enormous change has come, but there is a long way to go. It is very important that we are no longer debating whether sustainability is a business issue. Wall Street firms are putting out sustainability and climate change analytics every day. Bloomberg has an environmental sustainability platform for how to analyze companies. The SEC has mandated it and companies are doing it. Now the goal is to move companies to act in a much more comprehensive way. The good thing is they are open, they are listening, they understand there is a business proposition, and we are trying to move them ahead as fast as we can.

The opinions expressed in this article do not necessarily reflect the views or policies of the U.S. government.

(This is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://www.america.gov)