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Insurance Giant Allianz Targets Climate Change Risk: Expending “Unavoidable Emissions”

09 Wednesday Jul 2014

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Picture_Martin_EwaldAfter chatting with Barclays’ Director of Citizenship Jillian Fransen on the financial institution’s allegiance to carbon offsetting and how she is leveraging the increasingly popular mechanism to not only offset its unavoidable carbon footprint, I turned to insurance giant Allianz who has also chosen to use carbon offsetting to target deforestation and reduce its environmental footprint.

Excerpts from my conversation with Martin Ewald, Head of Investment Strategy and Renewable Energy/Infrastructure Equity with Allianz Global Investors.

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Describe your emissions reduction program and goals.

Allianz has set itself the target of avoiding, substituting and reducing its own CO2 emissions and is 100 percent climate-neutral since 2012. This means that all remaining emissions are being neutralized – in particular through direct investments in climate protection projects.

By 2015, Allianz aims to reduce its carbon footprint per employee by 35 percent compared to 2006.

What are “unavoidable emissions”?

Unavoidable emissions are CO2 emissions that are intrinsically linked to our business activity, like business travel, that we cannot always avoid or only avoid at very high expense. These emissions are still harmful to the climate. Corporates can take a leadership role in offsetting emissions related to their business activity by investing in responsible sustainability projects – this is not required by regulation in our sector.

But it is responsible behavior and makes good business sense. In fact, we have identified climate change as one of the three most critical sustainability challenges for Allianz (alongside demographic change and access to finance).

Where does offsetting fit into your sustainability strategy?

In addition to our carbon reduction target, being a carbon neutral business is the second pillar of our commitment and contribution to achieving a low-carbon economy.

In 2012, 175,000 credits, each accounting for one metric ton of carbon avoided, were sourced and retired from projects we support – retiring credits means that CO2 certificates, each representing one ton of avoided emissions, are taken off the market. Our remaining carbon footprint was neutralized by credits bought from the carbon market, which underwent a stringent sustainability screening to ensure they met the same high standards as the credits from projects we invest in.

The quality of the underlying projects determines the value of each and every credit in the voluntary sector, and REDD+ rate amongst the highest valued carbon credits.

Why did you choose REDD+ as one of the preferred offsets?

Our investment in REDD+ is consistent with our strategy of supporting effective climate projects in emerging and developing countries. We have invested in forest protection in Kenya with Wildlife Works, one of the leading developers of REDD+ projects. These projects don’t simply protect threatened forests; they also involve the local population and provide them with a source of livelihood.

REDD+ will also raise awareness of how to deal with resources in a responsible manner, besides helping preserve the habitat of the local population. Due to the considerable impact generated, we plan to continue investing in the REDD+ sector.

How has supporting REDD+ benefitted your company – and its stakeholders?

For the CO2 stored by the forests we receive certificates, which we can then use to offset business-related CO2 emissions. This way we ensure our climate neutrality and at the same time make a worthwhile investment. For us the yield also includes enhancing climate protection and biodiversity. We may also benefit from positive branding, but it is too early to tell since 2012 was the first year that we were carbon neutral.

As a financial institution, what is Allianz’s most challenging source of carbon emissions?

Ninety eight percent of our emissions stem from energy, travel and paper. So, the focus is on reducing CO2 emissions in these three areas.

In times of growing business, this is a challenge but we managed to reduce emissions across all three key areas in 2012, i.e. by sourcing lower-carbon energy or by making better use of video conferencing rather than traveling to business meetings.

How are these programs hallmarks of “responsible corporations”?

Since our business activity is not very carbon intensive, investing in REDD+ and similar projects today allow us to lock-in emission reductions over many years. We consider this to be responsible corporate practice: leveraging our capital base to build up the low-carbon infrastructure of tomorrow – be it forest protection or renewable energy, railways or electricity grids. This strategy also pays off, which is important to meet the expectations of our clients and shareholders. And this is a good basis to expand on our sustainable leadership agenda.

What role do you prescribe to Allianz in addressing climate change globally and locally?

We have introduced a group-wide strategy, which commits us to play a lead role in addressing climate change. For us it is about addressing the risks, e.g., the uptake in insurance loss from natural catastrophes, and making use of the opportunities. We have invested about EUR 1.7 billion in renewable energy projects, for instance, and set up a renewable energy fund, which has already attracted significant financial interest from our clients.

Moreover, we offer around 130 green products and services to our customers, including renewable energy home insurance, advisory services related to renewable energy and insurance premium discounts for drivers of electric/hybrid cars. The aim is to integrate climate change into our business  model, step by step building the business case for a climate friendly economy.

How can the private sector play an important role in reversing/addressing climate change? 

By understanding the climate issue as an investment case. Protecting forests is the cheapest way of saving carbon. To speak bluntly: if we first cut down the forest and then try to reduce the same amount of carbon we emitted, it would be much more expensive than just avoiding deforestation.

But as stated before, the most distinguishing factor about REDD+ is the opportunity to carry out investments that help improve social livelihoods and support local communities as well. Therefore supporting projects like the pioneering activities of Wildlife Works are appropriate activities that corporations need to support.

As long as there is no internationally binding climate protection agreement and as long as national regulation lacks teeth, the REDD+ market allows us to participate in voluntary projects around the world to address climate change. Consequently we have just carried out an additional REDD+ transaction in Indonesia.

What do you expect from policy makers to help expand your clean investments?

We stand at a critical juncture. We can continue business as usual with a small but dynamic niche of renewable energy projects and a reliance on fossil fuels for the big chunk of our economy. But this will not prevent dangerous levels of global warming.

Or we embark on a trend change, as we hopefully are seeing right now in Germany.

For this, we need a clear and reliable regulatory framework that gives investors appropriate incentives and the necessary regulatory certainty to finance clean technologies rather than coal or oil.

Originally written for and published on CSRwire’s Commentary section Talkback on September 5, 2013.

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Life Technologies: When the Search for Sustainability Becomes a Radical Overhaul

09 Wednesday Jul 2014

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For Cristina Amorim, sustainability has been an evolutionary journey.

Having spent almost a decade with Life Technologies – a life sciences company that produces a wide range of medical and research science products – which quadrupled in size through a series of mergers and acquisitions in that time, the company’s chief sustainability officer has seen multiple renditions of sustainability evolving to the next level.

“I’ve spent a decade looking at opportunities and getting sustainability initiatives off the ground that engage every employee, from the copy room to the board room,” she says. On the heels of the announcement that Thermo Fisher Scientific, a giant in life sciences research, is acquiring Life Technologies, I caught up with Amorim on what the past decade has taught her – and her employer – about setting a sustainability strategy that is evolutionary—moving from being good to being smart business.

Evaluating Sustainability: Asking the Right Question

From 2008 to 2012, the company cut energy use by 22 percent, water use by 52 percent, hazardous waste by 13 percent and CO2 emissions by 21 percent, according to its latest sustainability report. With greater growth on the horizon, can Life Technologies continue its sustainability march?

According to Amorim, that’s the wrong question.

“We’re well positioned to harvest the smart business prophecies of sustainability. There is a lot to do to reach a closed loop system and position ourselves in the circular economy. The question is: when do you know you’ve gotten there?”

“I think this is a continuous spiral with no particular end point, but constantly looking for the new frontier that the sustainability lens brings. This is not about creeping incrementalism; it’s about radical change. It’s about turning a moment into a movement, and fostering multiple movements to effect real change”

“Five years ago, no one was talking about zero waste. The economy has changed, allowing zero waste to be a financially viable undertaking. We now have five certified zero waste sites, and the movement goes on. And what would come next?” she continued. “After zero waste, we would envision a zero emissions site—one that has no emissions to air, water, or landfill.”

Now in her fifth year of sustainability reporting, Amorim has spent the better part of the last decade in an environment, health and safety role and understands the complex dynamics of Life Technologies’ Cristina Amorimmainstream products. Acknowledging that her journey has been more about challenging the status quo, she explains:

“We constantly ask questions to challenge what we have been doing. For example, can we source raw materials that are less toxic? That would create a less permitted and safer operational environment with less waste to dispose of. This in turn leads to products that are simpler and cheaper to ship, as they require less packaging, less regulated storage and fewer transportation fees. As a result, our customers will have less packaging and hazardous waste to deal with, reducing their total cost of ownership.”

When Complex Challenges of the 21st Century Meet Genetic Sequencing

So how did Amorim, who was recognized by Ethical Corporation in 2012 as Sustainability Executive of the Year and is Life Technologies’ first CSO, initiate a sustainability strategy that leverages the company’s technology in the markets it serves?

“As I see it, the entire company is the epitome of sustainability. Our genetic sequencing technology has the potential to address some of the world’s most pressing challenges. Just like in the 20th century, computing science turned a mainframe computer into an iPhone, in this century, life sciences is increasingly putting more DNA sequencing power into smaller devices at a lower cost – making it accessible to every scientist in the world. As sequencing is becoming democratized, scientists increasingly have the tools to transform life as we know it.”

In a world where 70 percent of available freshwater is used for agricultural irrigation, Life Technologies products have the potential to transform food economics. By re-engineering seeds, scientists can create higher-yield and drought-resistant crops.

Amorim continues, “As scientists leverage DNA sequencing technology to harvest oil from algae, biofuels will free us from extracting petroleum from the earth and tackle climate change
simultaneously. The significantly decreasing cost of sequencing the genome hastens theLifeTech_2012 development of more effective medicines, vaccines and clinical solutions that alleviate the health and economic burdens on society.”

Embedding a Cultural Shift: A Decade in the Making

As a biotechnology company, Life Technologies manufactures temperature-sensitive products requiring storage and shipment conditions ranging from -80° Celsius to ambient. Cold shipping requires expanded polystyrene (EPS) coolers and refrigerants like dry ice and gel packs, to maintain specific conditions during transport.

As the U.S.’ largest shipper of dry ice with FedEx, each year we ship 800,000 EPS coolers (equivalent to 105 truckloads) and consume 4500 metric tons of dry ice, costing $15 million in packing, refrigerant and freight. Given the poor recyclability of EPS, energy intensity of refrigerants and package weight, this represents our largest environmental impact and opportunity.

How is Life Technologies turning this challenge into an opportunity? Amorim explains, “Our strategy includes eliminating the need for coolers by converting products from cold to ambient shipping, piloting cooler reuse options, and investigating alternative materials to expanded polystyrene.”

Through a robust stability testing program, we have proven that some of our products can safely withstand ambient transport conditions. Just like transporting ice cream from the supermarket to your home freezer– we don’t carry a cooler or dry ice in our trunk.

“So far we’ve converted genetic analysis, sequencing, cell culture and molecular biology reagents, top-selling capillary electrophoresis and transfection reagents. The impact has been significant—each year, we now ship 250,000 fewer EPS coolers (33 fewer truckloads), use 2400 fewer metric tons of refrigerant, and save $4 million in operational costs globally. Most importantly, we know our packaging becomes our customers’ waste. These product conversions help us leave less branded garbage in their hallways.

Of course, the effort requires engagement across multiple functions. “From R&D to distribution and sales & marketing, everyone has a part to play. We tapped into natural leaders across these functions to become ambassadors for these initiatives. It provided them with visibility and career growth opportunities. They are delivering cost savings, protecting the environment and feeling good about it,” she added.

The Externalities: Collaborating with Suppliers

While these examples prove a significant point about how sustainability thinking can shift mindsets on profit, purpose and business value across organizations, what about Life Technologies’ external supply chain? With over 50,000 products and complex transportation cycles, how is the company addressing sustainability in its supply chain?

“I have a hard time understanding the traditional concept of ‘greening the supply chain.’ Asking hundreds of suppliers to fill out forms and check boxes provides no tangible value. We could never understand how to take action on that supplier data,” Amorim explained. “Instead, we find more value in partnering with key suppliers.”

One example is Kimberly-Clark. On the path to zero waste, Amorim and her team went dumpster diving one morning to understand their waste streams. What they found was a sea of blue and
purple  latex gloves.

We approached the glove supplier, Kimberly-Clark, who partnered with us to implement a glove take-back program. It started in one location and has today expanded to five. We segregate the gloves at the point of use and Kimberly-Clark sends them to TerraCycle, who turn them into purple park benches. This partnership provides true value—glove take-back helped us achieve our zero waste goal and helped Kimberly-Clark increase their revenue by becoming our sole glove supplier globally.

Take Back: Turning Obligation into Opportunity

The circular economy has arrived. That is what excites Amorim, one of very few female CSOs in the private sector. “The regulatory environment is also helping us close the loop. The WEEE [Waste Electric Electronic Equipment] legislation in Europe is one example,” says Amorim.

WEEE institutionalizes the cradle-to-cradle concept as a means of keeping electronic equipment containing heavy metals out of landfills. “Wouldn’t you like it if Maytag removed your dishwasher at the end of its life? I can’t move it and it doesn’t fit in my trashcan. In Europe, we now have to set up a take-back scheme for all of our instruments. How can this be done profitably?”

“We realized that by taking instruments back only to recycle the parts was a cost burden. Instead we bring them back to refurbish certain product lines for resale, harvest high-value parts to be used on service calls, and responsibly recycle what’s left.”

For Life Technologies and other companies, refurbished instruments open up an entire new market. At a lower price point, instruments such as DNA sequencers are more accessible to more scientists. And with increased revenue, the WEEE obligation becomes an opportunity.

While issues like cold chain shipment, waste, and regulatory compliance present thorns on the way to the gilded goal of a closed-loop model for Life Technologies, triangular connections in its supply chain and their appetite for cutting-edge innovation leads one to believe the opportunities are endless for Amorim and her team.

As the exuberant sustainability chief concludes, “We’re aiming for radical.”

Originally written for and published on CSRwire’s Commentary section Talkback on July 22, 2013.

Unilever’s Sustainable Living Plan: The Challenges of Being Too Ambitious

09 Wednesday Jul 2014

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Unilever’s Sustainable Living Plan was created and launched amid much fanfare in 2010. It was lauded for its ambitious goals, an exhaustive list of metrics and for its commitment to put sustainable and equitable growth at the heart of its business model.

This week, the consumer products company released its second progress report and it began with a stark statement from CEO Paul Polman:

The world continues to face big challenges. The lack of access of many to food, nutrition, basic hygiene and sanitation, clean drinking water or a decent job should be a concern to all of us. We firmly believe business has a big role to play in striving for more equitable and sustainable growth, but large-scale change will only come about if there is real collaboration between companies, governments and NGOs across all these areas.

Now, the report is impressive, exhaustive and filled with data. So to get beyond the flash, the  avalanche of Keith_Weed_Unilevernumbers and statistics, I reached out to Keith Weed, Chief Marketing & Communications Officer also responsible for the Sustainable Living Plan, to discuss not only the challenges of reaching some of the goals Unilever is striving for by 2020 but also the successes, the unforeseen road bumps and the transformation the company is undergoing culturally because of the Plan.

To get started, here are the three overarching goals Unilever began its Plan with:

  1. Help more than a billion people take action to improve their health and well-being;
  2. Source 100 percent of agricultural raw materials sustainably;
  3. Halve the environmental footprint of its products across the value chain.

Ambition: Sustainability in Perspective

“The report is indicative of what we’re trying to do. We’re trying to do things at scale. This is not a [standalone] CSR project in Africa but something that touches every single element across our value chain,” he began.

It takes a mindset shift to put Unilever’s plan in perspective. As Weed explained, “The idea that it isn’t just about the footprint of your facilities…we have to think all the way through the lifecycle of a  product from consumer to facilities to sourcing to the impact of key productions. The Unilever Sustainable Living Plan guides our direction.”Unilever__Sustainable_Living_Plan

Did his team realize the magnanimity of the goals they were setting? “We knew that we couldn’t achieve all of them but that if we set them like this, we would find solutions along the way by working with others,” he said, adding, “When you get interconnected, solutions and opportunities open up. That was the spirit we started with.”

And the results encapsulated on Unilever’s website and a 53-page PDF download, are in keeping with that spirit. “It’s not about mechanically ticking off the targets and goals. Our Sustainable Living Plan is a movement to get business to move toward socially and environmentally sustainable future,” he clarified.

The Unilever Sustainable Living Plan: Highlights

First of, he reminds me that from the outset, the Plan set out the sustainability goals to be achieved alongside the mission set out in 2009 to double the business. “We serve two billion people a day and another 2.5 billion are expected to be added to the world’s population by 2050. So our goal is to reduce our environmental footprint and increase our social impact while doubling our business.”

The good news: “We have started to drive sustainability into the core of our business and today, our sustainability efforts are helping to drive business growth.” One example is Unilever’s popular Lifebouy  soap, which was rebranded in 2010 with a social purpose alongside:

[We went] from selling soap to encouraging people to wash their hands – and wash them correctly. And our efforts have resulted in double-digit growth over the last three years – and reaching millions with our Handwashing campaign. It’s proving the coherence of our strategy of combining social impact with business growth instead of just a sales goal,” Weed explained.

USLP_ContextOther examples:

  • Laundry cleaner: Unilever increased its market share by 10 percentage points since 2010 to over 25 percent, with its concentrated liquids, which according to Weed carry a much lower carbon footprint in production and use.
  • Dry shampoos: A huge opportunity for the company, right now dry shampoos are mostly sold in the U.S. – where Unilever occupies a 75 percent market share. But as the company enters into more water-restricted countries, Weed predicted an accompanying increase in sales.  The environmental benefit? Compared to heated water, dry shampoo reduces CO2 by 90 percent through lower water usage and less heating of water for the shower. An added benefit for developing countries: water conservation.
  • Dove: The Self Esteem campaign continued to gain momentum with 62 percent of women who know of the campaign now recommending Dove to others. “The campaign started with the idea that we should think differently about how we portray beauty,” said Weed, “Today, it’s a global movement.”
  • Oral hygiene: Unilever’s oral hygiene campaign helped its Signal brand grow by 22 percent in 2012. “People brush their teeth in the morning and evening, which requires more toothpaste, ergo a virtuous circle,” contextualized Weed.

A Twist on Purposeful Cause Marketing?

So cause marketing spelt and implemented differently. By attaching value and impact with its core products, Unilever is addressing a question all consumer products companies continue to struggle with: how do you change consumer behavior to scale a company’s sustainability efforts?

For Unilever, this has meant active pairing of product and messaging with a focus on impact and growth, yet ultimate success is far away.

As Weed explained:

This is a coherent strategy that works – we’re increasing our social impact while growing our business. However, while we’re making good progress, we’re still facing challenges across the value chain, whether it’s with sourcing, food production or disposal.

And each carries with it a nuanced set of challenges, a complex set of solutions and invariably a cobweb of marketing, brand positioning and partnerships.

We have reduced our CO2 emissions, non-hazardous waste to landfill has been reduced in 50 percent of our factory sites, we’re sourcing over a third of our agricultural raw material from sustainable sources, up from 14 percent when we started in 2010…yet we’re miles away from our 2020 target of 100 percent,” he offered.

Scaling Behavior: Easier Ideated than Done

Of course, a key ingredient in Unilever’s Plan is the ability to scale. For the world’s largest tea consumer behaviorproducer, these achievements might mean small metrics today but when scaled are attribution to an entire value chain at work on technological improvements, environmental studies, and more. However, the opportunity is also a challenge:

“The sheer scale of our commitments is tremendous. For example, we want to be able to educate a billion people by 2020 on washing their hands correctly. That’s a lot of people – despite the progress we’ve already made since 2010 –119 million people reached since 2010, of whom 71 million were reached in 2012. Scale has been more challenging than we originally thought,” Weed explained.

Another challenge: encouraging people to adopt new behaviors.

Consumer Behavior: The Toughest Challenge Yet?

“When someone tells you something about hygiene, it’s easy to do it for a couple of days and then switch back to your old habits. Habits are hard to change and we’re seeing this come up in almost every initiative,” he said.

Using the example of laundry, he exemplified:

The biggest use of domestic water across households worldwide is for laundry.  Only a few hundred million in North America and Europe use machines. The other billions wash their clothes by hand and usually use four buckets of water to do so: wash in one, rinse in three. Our challenge is to reduce that rinsing from three buckets to one.  So we came up with a product that kills the foam – wash in one bucket and rinse in one bucket. Water used is instantly cut to half. And we expected the product to be a runaway success.

The team found that embedding that behavior change of using one bucket instead of three was  instrumentally Laundry_Unilevertough. Even in water scarce markets where people have to walk long distances for water. “Rinsing is hard work. I thought this would be a rapid victory but we found that it takes time to change habits and we ended up reaching only 29 million households, much lower than anticipated,” he recalled.

When your footprint encompasses billions of culturally diverse populations with very different social and environmental settings, scale becomes an ever-moving target.

Perhaps Weed puts it best again: “If you went to work in a Boeing 747, it wouldn’t make a difference to the planet. If half the planet started doing that, it would make a huge difference. The power of individuals is when you scale them together.”

Its hard work.

And Unilever’s 2012 Progress Report while celebrating the company’s achievements does not undercut the challenges ahead. “We’re breaking new ground every day. We’re showing results. But there are several pieces we are yet to crack,” said Weed.

Originally written for and published on CSRwire’s Commentary section Talkback on April 24, 2013.

Shared Success at Verizon: No Silver Bullet for Sustainability, Say CSR & Sustainability Chiefs

09 Wednesday Jul 2014

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Verizon recently released its second Integrated Report, combining the company’s financial and non-financial data and metrics into one clean look at its overall performance.

While the technology giant has been publishing its environmental, social and governance results for almost a decade, integration with the firm’s financial performance is relatively new. And Verizon saw several significant changes in 2012 to its approach to sustainability and shared value – which Verizon calls “shared success” – including a reformat of its Foundation’s model.

In a recent webinar, I had the opportunity to discuss the report, Verizon’s goals, challenges and a whole host of issues with Verizon’s CSR and sustainability chiefs Kathy Brown and Jim Gowen, along with an engaged audience.

Here are excerpts – and a link to the webinar recording.

Whether you’re eager to learn more about Verizon’s approach to sustainability or what the future holds for integrated reporting and sustainability standards, the webinar will provide you with exemplary context, insights into one company’s efforts to reduce its impact, and how a multinational must pick a strategy that is holistic, focused and measurable.

Shared Success:

Kathy Brown: “When Lowell McAdam became our CEO a year and a half ago, he brought with him a set of principles by which he inspired us to live. It is a value-based approach to our work in the market. We deliver outstanding communication and technology for our communities and country. And we are to share our success with the community. While Michael Porter gets a deep bow for creating Shared Value, these pillars – solutions, service and sustainability – state our mission and our version of shared success.”

Verizon's Shared Success Innovation Process

“We want to achieve measurable social impact. We can do a number of things at one time because our technology is powerful enough for us to find a way to do well for our shareowners and stakeholders, communities and countries in tackling the world’s problems…Specifically, we are focusing on how technology can bring transformational change in education, healthcare and energy management. The platform is our fiber network [and] our wireless network. Through these [networks] we are able to reach millions of users and applications that can literally change the world.”

Setting Aggressive Targets:

Jim Gowen: “Our sustainability program includes aggressive targets, follow-up and our people [who] really do make the difference. In September 2009, when we created the Office of Sustainability, one of the challenges was how were we going to make an impact on a business that [in many areas] is growing exponentially. So we set the Carbon Intensity Metric as the way to grow most efficiently. We set an objective by 2020 to improve our carbon efficiency by 50 percent. Since 2009, we have driven our carbon efficiency 37 percent.”Verizon_networks

“But as I often tell my employees, that was the easy part. Now comes the tougher part. We’ve taken care of all the low hanging fruit. How do you keep that momentum going? For example, e-waste is one of our biggest impacts. We’ve set a goal of collecting more than 2 million pounds of e-waste by 2015. That’s no small feat.
We’re doing that internally as well as externally with our Recycling Rallies.In the last two years, we’ve held 36 of these [across the country]. That objective is very important to Verizon and our customers.”

Environmental Footprint: Setting the Stage

Jim: “Our environmental footprint is quite large. Supporting hundreds of millions of customers takes a lot of work. We operate 42,000 cell towers, 31,000 facilities globally, and [a] 38,000 private fleet of trucks and vans, etc. We had to concentrate on our own resources and see how to become sustainable.”

“We focus on four key areas: making our networks more efficient; expand[ing] our renewable sources of energy; run[ning] our fleets more efficiently; and reduc[ing] the lifecycle cost of ownership of how we operate.  From purchasing to logistics and sustainability – they all match up nicely.”

Highlights from 2012: From Packaging to the “Magic Bus”

Jim: “How do we make our packaging more environmentally-friendly? How do we handle the end of life for that? We asked our OEMs to make their equipment more energy efficient – 30 percent more than legacy equipment. Then we looked at our consumer stores: 131 stores have been LEED certified so far with the U.S. Green Building council, and a pilot is underway to increase that number across our markets.”

“We recently launched our Magic Bus program. The idea was generated by one of our line managers in New York who suggested that, instead of driving our own vans around very congested areas of New York, why couldn’t we drop off our employees with their equipment to provide service to our customers?”

“From that originated a three-month pilot where we used vans that could host eight to 10 technicians with their equipment and inventory on board, and we started driving them around areas of Manhattan. We would pick [up] and drop them [off] and provide service to them throughout the day when they needed it. The benefit was significant – for our customers and our employees. We’ve now started 25 of those Magic Buses in New York and removed 250 of our vans off the roads of New York City.”

No Silver Bullet for Sustainability

Jim: “There is no silver bullet and no magic button. It’s going to take a lot of trial and error and a lot of commitment. While we think and look at our lifecycle approach, we’re still in our immaturity stage,  and the Verizon_reportopportunities ahead of us are so powerful that we can have a significant impact”

From Sustainability to Integrated:

Kathy: “Our Shared Success Council is made up of senior executives across the company – including marketing officers, product managers, general counsel, etc. – who are clearing the strategy for growth and in the process, sharing the idea of Shared Success. The report recognizes these efforts.”

“The process involves a lot of collaboration between executives and the folks on the ground. We focus a lot on our data, and we don’t see this journey as involving any one data point. It’s a journey of doing business, and the report reflects that. We’ve shown enormous efforts and growth, and the information is easy to read and use for our stakeholders across the board.”

Jim: “The report also helps us tell our story concisely. Our customers are asking, as are our investors. They are asking how we’re measuring ourselves? What are our goals – people want to invest in sustainable companies – and how are we incrementally achieving those?”

Technology and Health Care: Powerful Answers

Kathy: “We need to work on reducing costs on factory delivery systems and improv[ing] patient outcomes. Think about what you have on your iPad or phone today. We believe we can, in a more systematic way, think of security and identity issues for patients, fast connections, and [the] ability for patients and doctors to talk to each other in a secure environment through our technology, etc. We call this Powerful Answers.”

Who’s Reading the Report?

Kathy: “Internally, the audience is our employees who can have sense of our values as a company. Externally, people want to do business with companies with a heart but also have the technology and wherewithal to solve their problems. Beyond individuals, this includes communities [and]  governments who take on big ideas about congestion, smarter cars, health care, etc. This report does a good job [of] painting the bigger picture for this audience.”Verizon_Powerful_Answers

Jim: “[The] hip market that will change the world [is] using our technology, and this report helps them see first-hand the choices they have. Sustainability at Verizon is driven by our employees and our communities, not just one executive.”

Supplier Responsibility:

Jim: “Over the last couple of years, we have queried our top 200 suppliers, which represent 80 percent of our total spend, to ask them how they manage their CO2 and greenhouse gas impact. What goes into the products they supply to Verizon? And we were very surprised at the answers we got back and tallied them up and graded them.”

“Whether they’re early adopters or much more mature with their sustainability strategies, we’ve set ourselves a 2015 goal: to operate with over 40 percent of our suppliers that have targets and greenhouse gas emission goals. That impact is significant, and we’ve already seen that through the innovation they’re bringing to us about how they can become more sustainable and continue working with us.”

Evaluating Success:

Kathy: “We get all sorts of consumer indicators of how we’re doing in our community. We know how they use our network, what they think of it, etc. Once we start asking consumers how we’re doing in terms of impact, the responses have been very good. But it has been a challenge to do that in a broad way across many segments.”

For more insights from Verizon, listen to the webcast.

Originally written for and published on CSRwire’s Commentary section Talkback on April 18, 2013.

SAP’s 1st Integrated Report: From Sustainability to Integrated Thinking

09 Wednesday Jul 2014

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Using Integrated Reporting as a catalyst for integrated thinking.

That’s how Peter Graf, SAP’s Chief Sustainability Officer expressed the firm’s decision to replace two reports – the annual report mandated by the law and submitted to the SEC indicating the company’s financial performance and the sustainability report , voluntary in nature and showing its non-financial performance– by one Integrated Report for 2012.

While Integrated Reporting is a fairly new trend – The International Integrated Reporting Committee [IIRC] website hosts a total of 41 Integrated Reports since 2011 – it’s not surprising.

As the trend of CSR and sustainability reporting grows – due to multiple factors including a recessionary economy, dwindling resources, emerging conflicts in supply chains and a better connected world – logically, Integrated Reporting is the next step for any organization truly attempting to be as transparent as possible about its financial and non-financial challenges and performance.

Shift in Engagement: From Sustainability to Integrated

At SAP, the impetus for the shift was the realization that “we needed to engage within our organization on a different level” according to Graf. “We have been reporting on our sustainability performance since 2008. The report has grown in sophistication over the years and we even won several awards in the last two years for our report’s interactive nature, etc. So technically, we could have continued on that road,” he added.

Last year, CSRwire collaborated with Graf and his team on a webinar to launch SAP’s new interactive report. Complete with social media buttons, comment sections and multimedia options, the report could be customized and perused in multiple ways depending on your agenda. The report was well received – and in a span of an hour SAP_Integrated_Reportwe received over 30 questions from a very engaged audience.  [Join us for a webinar with Peter Graf, IIRC CEO Paul Druckman and others today at 11am ET]

SAP set a trend last year, so why the shift again?

 

Connecting the Dots: The Bigger Picture

“We have been measuring key performance indicators [KPI] on the financial and non-financial side for quite a while. But one day, we started to put them all on a white board trying to draw connection lines between them. Before we knew it, the chart was pretty full. We started to do research both internally and externally , to better understand and compute those relationships. Suddenly it became clear, just how interconnected non-financial and financial performance indicators really are,” he explained.

“When I heard about Integrated Reporting for the first time, I got excited. But then I thought: It’s going to be a very long process to achieve the integrated thinking that must be portrayed in the report. I viewed the Integrated Report as an outcome. However, over time our team reached the conclusion that instead of waiting for the right engagement at SAP to happen, we should use the process of producing an integrated report as the forcing function to drive the necessary engagement,” Graf added.

“In its integrated report, SAP lays out the interdependencies between financial and non-financial indicators,” said Graf. Proof points like: an increase or decrease of one percentage of SAP’s retention employee retention at SAPrate saves/costs the company 62 million euros. And since 2007, a peak year for energy consumption at the company, SAP has avoided 220 million euros ($285 million) through energy conservation efforts.

“When these kinds of relations appear between financial and non-financial indicators, they do more than make the business case for sustainability. They serve as the catalysts for an integrated corporate strategy.” said Graf.

While the entire report is available online, a parsed version – “we kept out customer stories but retained all other ESG data and metrics” – is submitted to the Securities & Exchange Commission.

SAP’s 2012 Performance: Key Highlights

So what will you find in the integrated Report this year?

For one, retention was up [94 percent in 2012] as was diversity, i.e., the number of women in management [an increase of one percent from 2011 to 19.4 percent].

The goal: to reach 25 percent by 2017.

Total energy consumed stayed stable at 2011 numbers while revenue increased by 17 percent and emissions per Euro in revenue and per employee were reduced for the sixth year in a row. Overall emissions were slightly reduced, in spite of the company  adding 9,000 new employees in 2012. Finally, the use of renewable energy increased from 47 percent in 2011 to 60 percent in 2012.

Also intriguing to me was a section, which detailed SAP’s People Strategy.

I asked Graf what the strategy involved – and how did they measure the outcomes besides retention and diversity?

“Having a sound strategy around people is essential in a company that solely relies on its employees to create value. Thus our ability to compete is highly dependent on our human resources and it’s impossible to separate that from our financial performance,” he said.

“First, we want to hire more diverse people. We believe more diverse groups innovate better. Second, we want to nurture our talent through clear development plans, challenging assignments, social media, e-learnings, etc. And finally, we want to leverage employee engagement as a decisive factor. So we measure retention and diversity but also engagement, which is a core and central KPI in driving our overall performance in the future,” Graf added.

Measuring Employee Engagement: Critical to Business Performance

So what contributed to a drop in employee engagement in 2006-2009?

“I believe there are various reasons that led to a decrease in engagement during that time. Most important, however, is how we made it back to the high engagement scores of today: When economic growth came back after the recession, the leadership of the company changed, a compelling innovation strategy for growth was established, the company was given the purpose of helping the  world run better to improve people’s lives and Energy_consumption_SAP_2012overall we enjoyed strong and continuous revenue growth as a result. So, a combination of issues got us into low engagement scores and a combination of things got us back on track.”

SAP also measures a Business Health Culture Index. Does that measure the company’s engagement quotient and connect it with business performance?

“We use this index to measure the health of our employees. There are four times as many stress-related illnesses in the intellectual property industry as compared to other industries. So we use data from eight questions [purpose, leadership, recognition, empowerment, rewards, stress levels, compared to people my age I feel more/less healthy] to understand where we stand and what we need to do to take care of our employees.”

In 2012, SAP’s Health Index stood at 66 percent, a one percent increase since 2011 and significant growth since 2008-2009.

Integrated Reporting: Check. What’s Next for SAP?

With all the data and metrics dancing around in my brain, the only question left to ask was, what’s next?

“On the one side, we recognize that integrated reporting is an early trend and that we certainly have to continue to improve and learn. On the other side, we have the ambition to lead, even if this means that we may make a mistake that followers might be able to avoid,” said Graf.

“The next steps clearly are to continue to move away from just having a sustainability strategy to making our corporate strategy more sustainable. This requires an engagement with leaders across SAP that we have not achieved before moving to integrated reporting,” he added.

His recommendations for companies who might be complacent with limited voluntary disclosure or perhaps hesitant to mix the voluntary with the mandatory?

“As soon as people recognize that  integrated reporting helps companies understand and grow the way how they create value at their core, , it will pick up. More and more people know this intuitively today but when someone connects all the financial and non-financial numbers with each other, then the big picture emerges,” he said.

SAP’s Integrated Report 2012 is available at www.SAPIntegratedReport.com.

Originally written for and published on CSRwire’s Commentary section Talkback on March 25, 2013.

Ceres Investor Summit 2012: 5 Trends Not to Bet Against

03 Thursday Jul 2014

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Last week, Ceres and the United Nations came together to host the 2012 Investor Summit on Climate Risk & Energy Solutions in New York City. With several announcements marking the day—a record $260 billion was invested in clean energy in 2011—it was Bank of America Chairman Chad Holliday’s pre-lunch presentation that stood out for its aspirational message.

I had the opportunity to host Holliday last year for a keynote on responsible business practices. The occasion: The release of Carol Sanford‘s book The Responsible Business, for which Holliday provided an articulate Foreword.

This time around too, Holliday chose to focus on lessons learned from his years leading DuPont, which saw record growth, transition from a chemical company to a science-based products company, as well as the country’s first chief sustainability officer appointment.

“As you listen, make sure you’re not inadvertently betting against something,” he cautioned adding, “Whether you want to own it or not is merely situational. But listen.”

Here then are Holliday’s five things to not bet against:

1. Don’t Bet Against Breakthroughs

“Don’t bet against a major breakthrough or a series of breakthroughs that create clean, cheap energy.” Holliday followed this warning by a reminder that “the price of natural gas in the Middle East” used to be our prime concern.

“No one was talking about shale energy, tidal [energy] 10 years ago. Somehow we missed that,” he added. Holliday also alluded to the American Energy Innovation Council he set up when at DuPont that counts Bill Gates, Xerox CEO Ursula Burns, GE’s Jeff Immelt and others as members: “We
really felt that such a breakthrough was probable so don’t discount the power of innovation.”

2. Don’t Bet Against America

“Particularly American engineers and research universities,” he continued. “Thirty five of the 50 top research institutions worldwide are located in the U.S. Seventeen of the top 20 are in the U.S.,” he said

Bank of America Chairman Chad Holliday Admission rates in Science, Technology, Engineering and Mathematics (STEM) have been declining for years in the U.S., and several sectors are ramping up their community development and research dollars to invest in STEM initiatives and academic institutions. While it is true that graduates from Asian countries have increasingly filled STEM jobs—and have an incredible presence in Silicon Valley—in recent years, Holliday was quite right to point out that “it will require other countries to grow awfully fast to catch up with us.”

“What we see in the press is that China is overtaking us in engineering. In fact, there is no question that China is indeed leading us in the number of graduating engineers. But when it comes to quality and diversity—biotechnology, nanotechnology, quality control, systems engineering—we are hands down champions,” Holliday said.

3. Don’t Bet Against Sustainable Energy For All

“One of the three commitments of the United Nations General Secretary was to provide electricity to the 1.3 billion people globally who still don’t have access to electricity,” said Holliday. “Now let’s discuss the 1.3 billion-strong population of China: How productive would they be without access to electricity?”

His message: That’s opportunity to deliver value for business, investors and entrepreneurs.

4. Don’t Bet Against Dramatic Events Driving Dramatic Government Action

“One nuclear fallout after the tsunami that struck Japan was enough to compel Germany to take the decision to go completely nuclear-free for their energy supply,” he said.

Emphasizing that one must increasingly view business and investment in the context of their social and environmental setting, Holliday offered a glimpse into his role on Shell’s CR committee: “I regularly meet with NGO groups and investors to understand what they are thinking. I then coordinate with Shell’s corporate responsibility committee to visit sites to really check and see if they are doing what they commit to. Then it makes a difference,” he said, adding, “We cannot measure growth and success from afar because that’s just PR.”

5. Don’t Bet Against People in This Room

Putting the onus on the over 500 investors in attendance, Holliday said: “You’re here today because you think private money can make a difference in this sector. You’ve made a good decision.”

Indicating to his recent appointment as Bank of America’s chairman, he continued:

“I joined Bank of America in the time of a recession. I didn’t have much time to do any due diligence so I decided to find out what they were doing on sustainability. And I’m proud to say that I was impressed. They have already made an 18 percent deduction in greenhouse gases (GHG), made a $20 million commitment to loans for sustainable projects and nurture a working culture that prioritizes sustainability.”

Many other firms in the room could probably tell similar stories, he added, warning: “But don’t bet against each other.”

Emphasizing the need for public private partnerships, he concluded: “Working with the public sector and other stakeholders is going to be key in our goal of sustainable energy for all.” There too, he had the same warning: “Don’t bet against each other.”

Originally written for and published on CSRwire’s Commentary section Talkback on January 18, 2012.