CR Magazine May/June 2014

Corporate Responsibility Magazine • www.thecro.com

Pernod Ricard CEO Bryan Fry

May/June 2014

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CR MAGAZINE | MAY/JUNE 2014

CONTENTS

Cover Story Walking The Line Pernod Ricard’s Bryan Fry is growing a customer base – while promoting responsible consumption

By Elliot Clark

Page 10

Professional Development

Columnists

Departments

16 Who’s Who in Sustainability Education: Leading course offerings to consider

By The Editors

33 Supply Chain Report

Can you manage supplier impacts?

By Mike Wallace

4

CEO’s Letter The stubborn facts about the 100 Best Corporate Citizens List

By Elliot Clark

6

Editor’s Note Results, rules & identity

By Bill Hatton

7

CRA Chair From where I sit

By Jim Murren

8

CR Roundup Paper firm saves tigers …

By Allie Williams

Energy Efficiency 26 Smarter electric usage: New energy-efficiency technologies that save cash (and carbon)

By Bill Hatton 28 Case Study: Stretch goals for reducing energy costs

By Sharon Nolen

36 The Ethics Report

Keys for fostering an ethical culture

By Anne R. Harris 38 Collaboration Report

CSR & The Cluster-Help:

What can go wrong and

right when NGOs, government

and corporations try to work together

By Richard Crespin 40

Impact Investing New research reveals sustainable portfolios can outperform traditional investing

By R. Paul Herman and Srdana Pokrajac

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CEO’s LETTER

The stubborn facts about t

By Elliot Clark

“Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence.”

– John Adams In 1770, as the passions of the revolution were boiling over in the colony of Massachusetts, the Boston Massacre set off a renewed outcry by the uninformed citizens of Boston for the hanging of five British regulars. John Adams, a noted advocate for colonial rights, surprisingly took the case and demonstrated the circumstances of the firing were justifiable given the FACTS. His defense included the statement above. You see, the outcry of the uninformed, is a most dangerous situation. In today’s world, placing a microphone or a keyboard in front of someone for whom facts are not “stubborn” things can lead to the grossest misperceptions.

Susan Adams (no relation to the former presidents as far as we know) who, at one time, ran the CSR blog page for Forbes magazine,. wrote an article that was less than complimentary of our 100 Best Corporate Citizens List. I write this response today not because I am opposed to the debate. It is because I am opposed to factually incorrect opinion pieces masquerading as journalistic coverage. Susan is a blogger.

I was part of the Forbes CSR blog contributing group, but the organizational issues lead to that blog being cancelled. By the end, due to communication issues, very few pieces, if any, were being contributed. I would argue that CSR was still important and the writers in the community were still passionate, but that their effort was so flawed that is was unsustainable.

Facts are stubborn things. In her piece she attacked the inclusion of Bristol Myers Squibb as the top-rated company. She cited their involvement with the Medicines Patent Pool as part of the reason for their selection. Actually, while we commend them for taking part in that effort, our methodology is based upon publicly available disclosures and applies to all companies on nearly 300 data points we automatically collect on the entire Russell 1000. We cannot judge the value of individual initiatives for each company and, frankly, we do not want to be a judge. We maintain an objective, not subjective, process.

Companies get to take part in the data cleaning process, which is arduous due to some websites that do not distinguish updated from older historical data. However, this is a not a self reported questionnaire based rating.

She also attacked BMS over the Plavix deal with Apotex that delayed the sale of product into the U.S. This deal was not properly cleared as I understand it for anti-trust issues and led to U.S. government litigation. Arguably, not the most respon-

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CR MAGAZINE | MAY/JUNE 2014

CEO’S LETTER

t the 100 Best Corporate Citizens List sible moment in the history of the company; however, she fails to mention that it occurred in 2005 and was settled in 2007.

This all predates the tenure of the current CEO Lamberto Andreotti and the current management team.

The other issue she raised was our application of a yellow card for outstanding litigation in a class action based on environmental hazards at the site. Once again, let’s tell what radio journalist Paul Harvey called “the rest of the story.” The site in New Brunswick has been in remediation since 1993 under the supervision of the New Jersey DEP. BMS has never been cited for failure to comply with the remediation plan. The original contamination dates back to disposal at the site from the 1930s and the 1940s. During the succeeding decades, the site was owned by BMS and, at one time, sold and repurchased.

The case had been dismissed but came back to life in 2013. We issued the yellow card because, while it was decades ago, we typically do this with respect to litigation and, once adjudicated, determine if additional penalty cards are in order.

The other issue that inflamed my sensibilities is the allegation that we lack the resources to fact check the survey. Interesting coming from someone who fact checked her article after it was posted, and I have the e-mails from her that afternoon proving it. She asked Bill Hatton, our Editor in Chief, about his staff, which includes himself and two full time resources.

She then ASSUMED that was the total staff complement involved. In fact, our research department, not editorial, actually manages the study working with editorial so that is five resources within SharedXpertise, the publisher of CR Magazine and then another six to ten resources from IW Financial. So, that brings the total staff on this survey to roughly a dozen resources working on it during each calendar year.

I hardly think we qualify as “small staff and limited resources” that in her assertion “cannot probe below the surface.”

Forbes has more resources than us, I grant you, but this superficial blog post is hardly in a position to throw stones at anyone. Susan was shocked later in the day when I corrected the many misconceptions she voiced in the article. She seemed surprised that the Plavix case was years earlier*.

Facts are stubborn things, so let’s make sure we know them before we voice an opinion. One thing we can all agree upon is that superficial reporting is a far cry from journalistic responsibility.

Elliot H. Clark, CEO *There is a current newly publicized case on Plavix involving the assertion by the State of Hawaii that Plavix is less effective on people of Asian descent and it is too early for us, or anyone else, to have an opinion on that legal allegation. There are other outstanding cases on medical issues that are beyond our scientific expertise and we do not comment on issues without being conversant with the facts.

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Editor’s Letter

Results, Rules, and Identity In this issue’s CEO interview, Pernod Ricard CEO Bryan Fry starts out noting what many CEOs and CR/sustainability professionals we’ve talked to have said: Corporate Responsibility is something integral to the company, not something external. Like most discussions of responsibility, Fry’s commentary is rooted in ethical discussions that have been going on for a long time.

As we know, over the centuries, history’s big thinkers have done a lot of heavy lifting for us with their thinking about duty, responsibility, and right/wrong. In general, these centuries of discussions boil ethical decisions down to one of three options: 1. Results. In ethical terms, it’s good if it ends well. When people try to justify doing good because it improves results, they’re speaking in utilitarian terms.

The classic objection is that if you stick to strictly results-oriented terms, you sooner or later justify doing evil that good may come: “If you could torture one child in exchange for world peace …” and something within us says no, that’s wrong. When we are trapped in results-based ethics, though, it’s hard to explain why.

2. Rules. Immanuel Kant attempted to create a universal ethical system, which, if you will forgive me for reductionism, boils down to the question: What if everyone acted that way? In ethical terms, it’s good if everyone does it that way. The problem: Mathematician Kurt Godel proved that logical systems can be complete or consistent, but not both. There is no perfect set of rules possible. A consistent set of rules will have to point to something outside of itself. And that tends to get people into fights over who stands as an authority outside the system, etc., etc. Fortunately, there is another way …

3. Identity. In ethical terms, what you do tells us a lot about who you are. You don’t lie, cheat or steal not because it’s against the rules or because it hurts others–you don’t lie, cheat or steal because you’re not a liar, a cheater or a thief. These are Aristotelian virtue ethics. They are effective because appeals to personal character tend to stir the heart to action; it’s a call to be that which we want to become, our best selves.

On the corporate side, appeals to values as a matter of identity tend to command respect. It could be as simple as Pittsburgh Steelers Coach Mike Tomlin saying, “Steeler football is 60 minutes.” Or, garnering more news lately, CVS made a decision to stop selling tobacco—it’s arguable as a business decision ($2 billion in tobacco sales) and it’s legal to sell tobacco, so results and rules aren’t the applicable ethic here: Identity is.

Even those who disagree with the decision can respect the company’s defining itself as providing healthcare, not harming people. And that’s true even if, to the neo-Kantians out there, the position is not perfectly consistent. (Some of the products it distributes, such as soda, may not be completely healthy.)

The bottom line: The answer to the question “Who are you as a company?” is a great way to determine what CR actions to take next.

Bill Hatton Editorial Director [6]

CR MAGAZINE | MAY/JUNE 2014

CEO: Elliot H. Clark Elliot.Clark@SharedXpertise.com Editorial Director: Bill Hatton Bill.Hatton@SharedXpertise.com Managing Publisher: Gale Tedeschi Gale.Tedeschi@SharedXpertise.com Executive Editor: Debbie Bolla Debbie.Bolla@SharedXpertise.com Publisher: Bill MacRae Bill.MacRae@SharedXpertise.com Associate Editor: Audrey Roth Audrey.Roth@SharedXpertise.com Contributing Writers: Mike Wallace, Richard J. Crespin, R. Paul Herman, and Srdana Pokrajac.

Webmaster: Michael Fernandez webmaster@SharedXpertise.com Subscription services: For subscriptions, renewals, changes, and back issues, email subscriptions@SharedXpertise.com.

About CR Magazine CR Magazine [ISSN #1933-5903] is published bimonthly by SharedXpertise, LLC © 2014. All Rights reserved. URL: www.thecro.com.

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CR ROUNDUP

PAPER FIRM SAVES TIGERS … … and orangutans, elephants—and a million hectares of rainforest

By Allie Williams Asia Pulp and Paper (APP) is a trade name for a group of pulp and paper manufacturing companies in Indonesia and China. The APP Group of companies is one of the world’s largest producers of products that meet the growing global demand for tissue, packaging and paper.

APP is a forestry dependent business. Therefore, corporate responsibility is integrated across the entire operations as well as in their products. One key market driver, as already noted, is rising customer demand for products or services that meet their own level of ESG principles.

“The paper industry, traditionally staid, is in transition,” says Ian Lifshitz, director of sustainability & stakeholder relations, at APP. “The industry is working to meet growing demand for paper products, especially in emerging markets, while also having to address increased challenges posed by climate change, and the environmental, social and governance (ESG) principles related to forestry products. Increasingly, customers, the public and NGOs demand ever increasing evidence of compliance in all three areas from the industry.”

Lifshitz says, “No matter how much emphasis is placed on sustainability and CSR programs, companies can’t truly deliver on these commitments unless they are driven throughout a company’s entire supply chain. This not only means taking a close look at the sustainability practices of every supplier your company works with, but also knowing the right questions to ask potential suppliers and the answers you need to receive during the bidding process.”

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CR MAGAZINE | MAY/JUNE 2014

CR ROUNDUP

Companies can also turn to non-profit organizations for advice, and to conduct certification auditing on their behalf.

Overall, it’s critical to understand the regulatory and legal landscapes of every supplier’s industry.

Deforestation In April 2014, APP announced a plan to restore and support the conservation of one million hectares (2.4 million acres) of rainforest across Indonesia. This is an area larger than the Grand Teton, Yosemite and Grand Canyon National Parks combined.

APP executives developed this initiative with input from many stakeholders, including WWF, Greenpeace and NGO members of APP’s Solutions Working Group. Lifshitz explains: “The commitment, which takes the company well beyond its legal conservation requirements, is approximately equivalent to the total area of plantation from which APP sourced pulp fiber in 2013.”

As a first step, APP will work with an NGO coalition to preserve the natural forest in the 30 Hills landscape (Bukit Tigapuluh) in Jambi, Sumatra – a vital habitat for tiger, elephant and orangutan populations. This will include increased protection of the corridor road from illegal activities, work on protecting the threatened elephant herd in the Tebo Multi Agro concession, and assessment of the viability of creating an animal corridor in the WKS concession that would connect important forest habitat blocks.

APP is currently in consultation with WWF and other stakeholders, to develop plans for identified priority landscapes in which APP and its suppliers have commercial forestry-based operations, which will then be implemented by the company in close collaboration with other relevant players in the landscape.

“We believe that third party oversight is essential to the success of the FCP and our one million hectares initiative. From the start we’ve known we had to work with NGOs in order to achieve our goals, but what we didn’t realize was just how critical this collaboration would be to our success. Along the way it became clear that we needed to engage a wider range of NGO stakeholders, so that their interests were represented, and so that we could learn from them.”

Working with NGOs that were once your critics – and you may not always agree with them – can be a challenge, but collaboration has been essential to building the right policies for APP, Lifshitz says, “This engagement has also ensured that we are held accountable and are constantly working toward our benchmarks. Once a level of trust is established, these can be very effective working relationships.”

Commitment: The commitment to protect and restore one million hectares of forest in Indonesia may be the largest of its kind. It will set a new standard and what APP hopes will be a replicable model in protection of the world’s valuable forests while helping ensure the future protection of endangered species, such as the Sumatran tiger, orangutan and elephant.

Lifshitz concludes, “We believe the one million hectares initiative will have a significant impact on the landscapes both in and around the plantation concessions in APP’s supply chain.

Not only that, it provides an opportunity for companies – not just APP, but other NGOs, companies, and governmental partners as well – to effect real change on a landscape level.

This isn’t just a donation towards a cause, but the start of something real and tangible and what we think will be quite significant.”

Allie Williams is the executive director of the Corporate Responsibility Association

“Over the coming months, this commitment will be developed into a more detail time-bound plan that will form part of APP’s Integrated Sustainable Forest Management Plans (ISFMPs), which are currently being developed by APP, High Conservation Value (HCV), High Carbon Stock (HCS) and social experts as well as a peatland management team,” says Lifshitz.

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THE CEO INTERVIEW

WALKING THE LINE Pernod Ricard’s Bryan Fry is growing a customer base – while promoting responsible consumption

By Elliot Clark Bryan Fry is president and CEO of Pernod Ricard USA. He ascended to the top job in 2012 after serving three years as chairman and CEO of Pernod Ricard Brazil. Fry started with Pernod Ricard in 1995 in Australia, where he worked his way from grower liaison officer to global marketing manager. Bryan recently sat down with CR Magazine’s CEO Elliot Clark to discuss Pernod Ricard’s corporate responsibility strategies; in particular, how to educate customers about responsible use of their products, and how that forms a sustainability strategy.

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Elliot Clark: How has social responsibility and corporate responsibility at Pernod Ricard evolved during your tenure at the company?

Bryan Fry: To a certain extent it has, and to a certain extent it hasn’t. CSR has always been intrinsic in the DNA of Pernod Ricard, [starting] when we were a very small, French-based company. In regards to the focus on responsible consumption, that was championed very hard by Patrick Ricard over the last 20 years.

The big difference, the growth, is the way we’ve taken it out across the globe as we’ve expanded our operations.

Taking more of a leadership mindset is how we want to champion responsible consumption.

Clark: You have a number of processes that communicate that message. One is the Accept Responsibility Campaign.

Is this a global program?

THE CEO INTERVIEW

Fry: The Accept Responsibility Campaign is unique to the U.S.A., but is rooted in our global programs. The Accept Responsibility Campaign is an education campaign and was set up for parents, educating [them about] juvenile consumption.

Fry: If you look at the consumers that are underage, Accept Responsibility is not a brand driven campaign, it’s more about education of parents, focusing on making sure people aren’t consuming alcohol until they are of legal drinking age.

We’ve had strong group adoption with the trade with giving them the tools to educate on how to responsibly consume alcohol. Within that, we have trade education for bartenders with a program called Bar Smarts, a training program on being a better bartender. A core component with that is “Accept responsibility as a bartender.” How should they responsibly serve alcohol?

In regards to our brands campaign, we have stringent rules around the ages of the models we use in the campaign, responsibility messages on all the campaigns we put in place; we also have an internal review panel that reviews all brand campaigns globally to ensure we are not targeting people that are under legal drinking age.

With our 18,000 employees around the world, we have core ambassadors of responsibility to educate internally as well. For example, we have Z cards that are put out to all employees around the world. They are very simple five-second education tips on how people should responsibly consume alcohol.

Clark: Is underage drinking more prevalent in the U.S.A.: Is that why the program is part of Pernod Ricard USA? Fry: Globally, we consider that 99.9 percent of the time our products are consumed in a responsible way. But it doesn’t take away from the fact that we need to educate people on the consumption of alcohol and other issues, like drunk driving and heighten awareness. We don’t consider it any worse or better in the U.S. or anywhere else.

There has been great work done by a lot of parties in the U.S. over the years.

We do a lot of work with a strong Foundation for Advancing Alcohol Responsibility, which has excellent programs in regards to educating people on drunk driving and underage consumption. Industry-backed programs have decreased the numbers in the U.S. But that does not mean we should be resting on our laurels.

Clark: As a brand-driven company, how do you walk the line—between getting people to adopt your product early in their life to become lifelong consumers and then making sure that you are targeting the audience from a communications and advertising and Accept Responsibility Campaign standpoint—to balance between getting people to start consuming your product at an appropriate and responsible age versus the underage drinking message about Accept Responsibility? How do you target that to just hit the line appropriately for your business?

With regards to the approval part, it’s quite strict. Things like cartoons come up under scrutiny. I think we really have never been questioned by anyone in the industry in how we advertise our products. It’s getting more and more content. With the digital age, there is a lot going on with the Internet so the internal approval panel is quite busy.

There is a lot more content; it’s not like having one TV commercial and three print ads every six to eight months.

These things happen every day.

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THE CEO INTERVIEW

Clark: Do you believe the legal age of 21 is appropriate given that by 18 many young people are in military services, and the US has a higher drinking age than many other countries? What do you think, and you don’t have to necessarily answer for PR. Fry: We have no issue with the drinking age. There are plenty of people in U.S. It is far big enough here to make a good business. No issues to challenge it.

Clark: Your Accept Responsibility Campaign now includes a linked website called Thealcoholtalk.com. What is that all about, and does the overall focus of Accept Responsibility remain the same?

Clearly we want to have a sustainable business for the long term so we can still have it in 40/50 years. We have to be very responsible with how people come into the consumption of alcohol and once they are in there, how they do certain things.

Fry: Thealcoholtalk.com emphasizes the timing, language and opportunities parents can use to credibly and confidently talk with their teens about drinking.Making sure people don’t drink before legal drinking age and that people don’t drive drunk are the two key focuses of Accept Responsibility.

Pernod Ricard is a member of a wide industry of wine spirits and beer. There is an organization called GAPG (Global Alcohol Producers Group), which is all these organizations that come together to focus on self regulation, a key focus for us. So when we talk with NGOs, we have an interest in how alcohol can be managed around the world. We want to be at the forefront in regards to showcasing that we can be a self-regulated business.

Clark: How much of the Accept Responsibility Campaign is a personal vision?

Fry: The Accept Responsibility Campaign was launched in 2007 and is an extension of Pernod Ricard’s global view of responsible consumption. It’s not deviating. The Accept Responsibility Campaign is not my personal vision, but it does dovetail into what the leaders of PR feel is the sustainability of our business.

What is interesting at the moment, we have had excellent adoption of the campaign. For control states, where states have control of the distribution and sale of alcohol we’ve had great adoption. They’ve actually taken the assets and used them for their own campaigns. For example, they put it on public service announcements. As an extension, we want to have a more active role in social media. We continue to look at how we can do it better every year. We consider how we can utilize tools like Facebook. How do we extend that to different levels of the trade like open states, distributors and retailers. There is still a lot of work to be done, but we feel we are moving in the right direction.

Clearly we want to have a sustainable business for the long term so we can still have it in 40/50 years. We have to be very responsible with how people come into the consumption of alcohol and once they are in there, how they do certain things.

Visit http://www.acceptresponsibility.org [12]

CR MAGAZINE | MAY/JUNE 2014

THE CEO INTERVIEW

Clark: What are the metrics that you use to access the impact of this program?

Fry: First and foremost, the important thing is my employee base is U.S.-engaged. Are they understanding what we are doing? Are they ambassadors of responsible consumption?

We don’t look it as an issue of increasing or decreasing our bottom line over one year. Again, it’s about the sustainability of our business. We are investing in the future.

The other thing is to get visibility of the impact at a consumer level, which can be very difficult.

We look at our engagement in our social media program, working with other NGOs like the Foundation for Advancing Alcohol Responsibility, have a lot of programs, and measure how people are educated. The most visible thing we can get is our education of trade through Bar Smarts bartenders. As we unveil each level of complexity with the responsibility actions particularly as we move into social media, there will be more data to capture. For example, the control states take our tools and use them as public service announcements. I am not able to capture that data, but I am extremely happy.

Clark: Do you do an annual employee survey?

Fry: What are we doing on a global level? How employees can be involved. At the end of the day, we do some surveys on engagement. It’s around May or June. It’s a global commitment. And it’s not just about one day; it’s a compilation of one year’s efforts. It’s important to have one day a year to share and showcase what we are doing in different parts of the country and around the world. People can see it’s not just words on paper but we are living it.

Clark: One day of activity—that’s an enormous investment from a financial perspective. Do you have employees that tell you they selected PR because of the program?

Fry: I think anecdotally, more and more people are seeing it as a strength. Whether people come to us because of it could be a piece to the puzzle. We are very open minded in what our responsibility is as a good corporate citizen for the selling and distribution of alcoholic beverages. We had a Responsib’All Day last week and a happy hour/get together afterward; a few new employees were pleasantly surprised how seriously we took it globally.

It’s something we are refining year after year. First and foremost is employee engagement. They need to be the key ambassadors in the marketplace. In the future I look at our distributors as an extension of our employee base.

We do an annual global day called Responsib’All Day. Everyone stops working for a day, and we talk about responsible consumption.

Clark: What are other scopes outside of responsible consumption? You must use a lot of water, a lot of glass.

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THE CEO INTERVIEW

Fry: If we expand to a wider CSR platform, we have very strong requirements from the group as to our energy consumption, water consumption, the carbon footprint of our plants, and we are close to some of our plants being carbon neutral. Looking at how we use stock across the world, cheaper, more efficiently and reducing our carbon footprint. In terms of our environmental impact, there is a lot of work going on with our group in Paris in terms of setting key objectives to meet across the world. Each department, like the U.S., is challenged with being more efficient and assessing continuously our environmental impact.

Clark: As a campaign, what are the channels you find most successful in getting the message out?

Fry: Debbie Phelps (the mother of Olympian Michael Phelps) was extremely engaging and she works for the Foundation for Advancing Alcohol Responsibility on a PT basis, promoting responsible consumption programs. The key part of the day was her challenge to our employees to have good conversations with your family to get the message out on responsible consumption.

We look to see how we can work with the control state organizations, and how we can partner with our distributors and with retailers in the future. There is still plenty of wide open space we could be working on to spread the message.

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Every brand campaign out of PR USA does have a responsibility message on it. We have age verification on all of our websites and social media.

Clark: Do you have any metrics around consumers preferring your brand because of the strong social responsibility conscience of the company?

Fry: Not yet. I think we don’t expect that soon because people don’t know PR; they know our brands. It’s not something we’ve set out to do. That’s when you go out saying our responsibility message is going to be a bottom line driver as a core focus, which it’s not really the focus.

The focus is on the sustainability of our business and the industry we are in, in terms of the long term.

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PROFESSIONAL DEVELOPMENT

WHO’S WHO IN SUSTAINABILITY EDUCATION Leading CSR course offerings to consider

By The Editors

The question in the marketplace has turned from why conduct socially responsible business to how to conduct socially responsible business. To meet this new educational need, an increasing number of schools are integrating social responsibility courses and degrees into their business programs.

These educational offerings range from singular courses on business ethics to entire MBA programs dedicated to sustainability. Each year these options have multiplied in number and many believe in value, and the current possibilities are plentiful. This list provides a provisional-level index of some of the ethics and CR programs at schools across the country.

School: Albers School of Business / Seattle University Website: https://www.seattleu.edu/albers/ Continuing Education for Executives: Leadership EMBA, Health Leadership EMBA, Executive Leadership Program CSR Curriculum: Ethical Leadership Course description: The course examines leadership and ethical decision- making and delivers information needed to establish ethical goals and resolve ethical problems in a global marketplace.

School: American Public University Website: http://www.apus.edu/ Continuing Education for Executives: Master of Science in Environmental Policy and Management, Graduate Certificate - Environmental Sustainability CSR Curriculum: Environmental Economics, Elements of Sustainable Design, Energy Policy Sustainability.

Course Description: The courses detail the principles of sustainability, the roles of multiple disciplines in their effective implementation, and management strategies that incorporate environmental compliance standards and achieve organizational missions.

School: Anaheim University Kisho Kurokawa Green Institute Website: http://www.anaheim.edu/schools-and-institutes/kisho-kurokawa-green-institute Continuing Education for Executives: MBA and DBA CSR Curriculum: Sustainable Management Course Description: The Anaheim University Kisho Kurokawa Green Institute provides online courses to give students a vast knowledge of the world of sustainable management. The green MBA recognizes the need for candidates to have business skills that integrate social, environmental, financial, and ethical considerations.

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PROFESSIONAL DEVELOPMENT

School: Anderson School of Management / University of California, Los Angeles Website: http://www.anderson.ucla.edu/ Continuing Education for Executives: EMBA, Global EMBA for Asia Pacific,Global EMBA for Americas CSR Curriculum: Corporate Governance; Business Sustainability & the Environment (Global EMBA for Americas); Business Law & Ethics (Global EMBA for Asia Pacific) Course Description: The courses discuss the importance of corporate governance and the mechanisms that help control managerial behavior; and the environmental issues to make your company more successful.

School: Anderson School of Management / University of New Mexico Website: http://www.mgt.unm.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Ethical, Social, Political and Legal Environment Course Description: The course examines the roles and responsibilities of businesses, relationships with stakeholders, key legal concepts, and ethical decision-making processes.

School: Antioch University New England Website: http://www.antioch.edu/ Continuing Education for Executives: MBA in Sustainability; Sustainable Business Certificate CSR Curriculum: Introduction to Sustainability; Earth Systems in Organizations; Ecological Economics for Social Entrepreneurs Course Description: The courses focus on understanding the theoretical foundation of sustainability with a focus on complex ecological systems as essential to the origins of the concept; employs a systems approach to understanding the intersections of business and earth systems, also known as the evolutionary corporation; and survey the breadth of current application tools for measuring efficiency in sustainability terms, primarily through the lenses of social entrepreneurship and business applications.

School: Bainbridge Graduate Institute Website: http://bgi.pinchot.edu/ Continuing Education for Executives: MBA in Sustainable Business and MBA in Sustainable Systems Course description: BGI takes their mission seriously, with the motto of “Changing Business for Good.� BGI incorporates social and environmental responsibility into all courses within these departments, insuring full comprehension of sustainable business practices by their graduates.

School: Bard College Website: http://www.bard.edu/mba/ Continuing Education for Executives: MBA in Sustainability CSR Curriculum: The programs fully integrate the study of business and sustainability and ensures that students master the business case for sustainability, understanding how to align profit with ecological and social mission.

School: Benedictine University Website: http://www.ben.edu/ Continuing Education for Executives: Ph.D or D.B.A. in Values-Driven Leadership Description: The program integrates the fields of strategic leadership, organizational change, and corporate responsibility and sutainability in a three-year program designed to meet the demanding schedules of senior leaders who commute globally to participate.

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School: Boston University School of Management Website: http://management.bu.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Business Law, Ethics Course Description: The course focuses on learning legal rules affecting business. Topics covered include contracts, employ ment law, intellectual property, corporate governance, and ethical decision-making.

School: Brandeis International Business School at Brandeis University Website: http://www.brandeis.edu/global/academics/mba/index.html Continuing Education for Executives: MBA CSR Curriculum: Sustainability specialization School: Carroll School of Management / Boston College Website: http://www.bc.edu/schools/csom/ Continuing Education for Executives: Center for Corporate Citizenship Description: The Boston College Center for Corporate Citizenship is a membership-based knowledge center that provides networking opportunities, knowledge, and expertise around the practice of corporate citizenship.

School: Central Michigan University Website: www.cmich.edu Continuing Education for Executives: (Ex: EMBA, MBA in Sustainability,Development Programs, etc.): We have no continuing education offerings CSR Curriculum (i.e. “Business Ethics,” “Sustainability and Competitive Advantage,” “Principled Leadership,” “Social, Ethical and Legal Systems,” etc.): Minor in International Business and Sustainable Development to all CMU undergraduate students; a course called Global Business & Sustainability is offered in CMU’s MBA program A description of the program offered: This new minor is five required courses and two electives, for a total of 21 credit hours.

It is for those CMU students who wish to complement their major course(s) of study with a knowledge base and skill set that will let them become involved, either in graduate school or career employment, with the planning and implementation of sustainability projects. The MIBSD course of study outlined below provides the student with a broad understanding of sustainable development, which is viewed as encompassing three dimensions – ecological, social, and economic. By including all three dimensions in the sustainability concept, the likelihood of achieving a sustainable earth, as specified in the Brundtland Report (1987), becomes feasible.

“We do make a distinction between sustainability and sustainable development. Our emphasis is on the latter, which fits the Michigan context better than does sustainability.”

-Dr. Van Miller, Department of Management faculty member School: Daniels College of Business / University of Denver Website: http://www.daniels.du.edu/ Continuing Education for Executives: EMBA CSR Curriculum: The Compass Course Description: The program is a three-quarter sequence of three required courses for all MBAs—The Essence of Enterprise, Ethics for the 21st Century Professional, and Building Sustainable Enterprises. They have a heavy emphasis on experiential learning focused on values based leadership, team building, self-awareness, critical thinking, community service, and creating shared value.

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PROFESSIONAL DEVELOPMENT

“Today, more than ever before, students are seeking an education that will give them an opportunity to both make a living and a difference in the world. At the Daniels College of Business, the Compass courses connect the concepts of private profitability and public good in ways that enhance stakeholder value. While our focus is always on the practice of business, understanding the purpose of business in the larger society is the foundation of our educational experience.”

- R. Bruce Hutton, Dean Emeritus, Daniels College of Business, Director, Ethics Integration for the College

School: Darden Graduate School of Business Administration / University of Virginia Website: http://www.darden.virginia.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Business Ethics Course Description: Business Ethics encourages students to think deeply about the nature of business, the responsibilities of management, and how business and ethics can be put together.

“At Darden, ethical leadership and sustainability topics are seen as key disciplines, the have-to’s of business. From our required Business Ethics first year course, to sustainability electives and leadership courses, Darden integrates sustainability issues throughout the curriculum.”

- R. Edward Freeman, Professor Business Administration, Academic Director, Business Roundtable Institute for Corporate Ethics School: Foster School of Business / University of Washington Website: http://www.foster.washington.edu/ Continuing Education for Executives: Development Program CSR Curriculum: Business Ethics Course Description: The program explores frameworks for analyzing and addressing ethical issues in organizations.

School: Fuqua School of Business / Duke University Website: http://www.fuqua.duke.edu/ Continuing Education for Executives: MBA Concentration in Energy and Environment; Master of Environmental Management/ MBA joint degree CSR Curriculum: Duke University’s MEM/MBA joint degree and MBA Concentration in Energy and Environment programs, students participate in cutting-edge curriculum, engage in applied learning projects both domestically and internationally, and interface with the world’s leading sustainability and energy experts.

School: Haas School of Business / University of California, Berkeley Website: http://www.haas.berkeley.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Leading with Ethics and Compliance (part of Leadership Program) Course Description: The executive program coaches ethics and compliance practitioners in how to lead their teams and their organizations in a rapidly evolving global economy. Sessions are led by Haas School of Business faculty and experts from Adobe, Cisco, Dell, Dignity Health, Elan Pharmaceuticals, McKesson, and Google.

School: Hough School of Business / University of Florida Website: http://www.ufl.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Business Ethics and Social Responsibility; Social Entrepreneurship; Competitive Strategies in Sustainability; Ethics and Public Policy for Marketers and Consumers

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Course Description: The courses examine practical issues of managers in addressing ethical and moral problems in business; how social entrepreneurs work to create positive social change, fostering economic and social equality; how competitive strategy entails a production process that respects the environment and sustainability of the earth’s ecosystems and business philosophy and culture that favors environmentally friendly practices; and why consumers make the wrong choices and how marketing can encourage them to make better ones.

School: Kelley School of Business/ Indiana University Bloomington Website: http://www.kelley.iu.edu/ Continuing Education for Executives: Kelley Institute for Social Impact Description: The Kelley Institute for Social Impact bridges business education with strategies to alleviate poverty through work in social entrepreneurship, economic development, and global community building.

School: Kellogg Business School / Northwestern University Website: http://www.kellogg.northwestern.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Ethics and Executive Leadership Course Description: The course examines the role of the CEO and top leaders in organizations, highlighting their ethical challenges and exploring the implications of a variety of ethical frameworks to facilitate more effective complex organizational decision-making.

School: Kellstadt Graduate School of Business Website: kellstadt.depaul.edu Description of Programs: The Kellstadt Graduate School of Business offers an MBA concentration and a master of science degree in sustainable management. Students in the MBA program learn to view, challenge and reframe traditional management practices through the lens of sustainability. The master’s degree provides managers with the skills and knowledge necessary to develop integrated, sustainable strategies for managing their human, social, financial and natural resources responsibly, as well as the ability to respond to market demand for sustainable products and services.

“DePaul’s MS and MBA degrees in sustainability leverage the resources of the city of Chicago, offering a fertile laboratory for studying sustainability. Many corporate headquarters are located in Chicago, and their sustainability efforts provide a wide range of opportunities for study. Kellstadt’s course collaborations with DePaul’s environmental sciences and communication programs provide a multidisciplinary approach to studying sustainability management, producing a distinctive, well-rounded student.”

- Scott Young, chair of the Department of Management at DePaul’s Kellstadt Graduate School of Business School: Kenan-Flagler Business School / University of North Carolina Website: http://www.kenan-flagler.unc.edu/ Continuing Education for Executives: EMBA, Global OneMBA CSR Curriculum: Ethical Aspects of Management (EMBA); Business Ethics (Global OneMBA) Course Description: The courses examine business ethical issues and dilemmas that confront managers; and examine ethical analysis and decision-making in global business to strengthen ethical awareness, judgment and action.

School: Leeds School of Business / Colorado University Website: http://www.colorado.edu/leeds/ Continuing Education for Executives: EMBA CSR Curriculum: Ethics and Corporate Social Responsibility Course Description: The course emphasizes how socially responsible companies consider the perspectives of multiple stake holders balancing goodwill and optimizing profit for the business.

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PROFESSIONAL DEVELOPMENT

School: Lundquist College of Business / University of Oregon Website: https://business.uoregon.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Business Ethics Course Description: This course emphasizes the conflict managers experience when choosing between two alternatives.

School: Mays Business School / Texas A&M University Website: http://mays.tamu.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Legal and Ethical Issues in Business School: McCombs School of Business / The University of Texas at Austin Website: www.ethicsunwrapped.utexas.edu Description of Program: Ethics Unwrapped, an award-winning educational program used in dozens of organizations around the world, is a FREE high-quality online resource for those who wish to learn about, or teach, ethical decision-making and behavior. Our engaging videos, and the teaching guides that accompany them, bring ethical concepts to life and offer an innovative platform for fostering meaningful discussion about ethics in the classroom and beyond.

“It is surprisingly hard to consistently make ethical decisions in the competitive business world. Ethics Unwrapped provides tools for ethical decision making by focusing not on what is ‘right’ or ‘wrong’, but rather on how to live up to personal ethical standards.”

- Program’s Faculty Director, Robert Prentice, Chair of the Business, Government & Society Department School: McDonough School of Business / Georgetown University Website: http://www.msb.georgetown.edu/ Continuing Education for Executives: EMBA, Global EMBA CSR Curriculum: Ethical Decision Making Course Description: The course focuses on practical applications of ethics in business settings and covers the economic, legal, and ethical implications of decision-making and the interplay of these issues for managers.

School: Mendoza College of Business / Notre Dame University Website: http://business.nd.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Ethics Course Description: This course explores the ethical dimensions of business; applies normative ethical theories; examine stakeholders’ relevance; simulates moral imagination; and analyzes ethical leadership.

School: Monterey Institute of International Studies Website: http://www.miis.edu/ Continuing Education for Executives: MBA concentration in International Sustainable Business School: Naveen Jindal School of Management / University of Texas at Dallas Website: http://www.jindal.utdallas.edu/ Continuing Education for Executives: Global Leadership EMBA Program Course Description: GLEMBA curriculum focuses on policy framework for establishing business ethics, corporate social responsibility to meet the business, social, and legal obligations in a global business environment.

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PROFESSIONAL DEVELOPMENT

School: Olin Business School / Washington University in St. Louis Website: http://www.olin.wustl.edu/ Continuing Education for Executives: EMBA CSR Curriculum: The Decisions Around Business Ethics Course Description: This course imparts an understanding of how law, ethics, and public policy affect modern business.

School: Palumbo Donahue School of Business / Duquesne University Website: http://www.duq.edu/ Continuing Education for Executives: Sustainability MBA CSR Curriculum: Ethical Decision Making Course Description: This course explores essential qualitative decision-making skills for analyzing business issues with an ethical dimension.

School: Portland State University School of Business Administration Website: http://www.pdx.edu/sba/home Continuing Education for Executives: MBA CSR Curriculum: Law, Ethics and Stewardship School: Presidio Graduate School Website: http://www.presidioedu.org/ Continuing Education for Executives: MBA in Sustainable Management School: Robert H. Smith School of Business / University of Maryland Website: http://www.rhsmith.umd.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Ethical Leadership Course Description: This course examines the scope of managerial agency and the economic, legal, and ethical responsibilities to various stakeholders.

School: Samuel Curtis Johnson Graduate School of Management / Cornell University Website: http://www.johnson.cornell.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Principled Leadership; Sustainable Global Enterprise Course Description: These courses focus on the kinds of principles and cognitive processes that underlie complex leadership decision making; and illustrate the principles of sustainable global enterprise and provides instruction on how to map the terrain.

School: Scheller College of Business / Georgia Institute of Technology Website: http://www.scheller.gatech.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Ethical Decision Making; Ethics in Global Business Course Description: The courses focus on understanding and applying ethical decision making practices in business; on the appropriate role of business in a global society.

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PROFESSIONAL DEVELOPMENT

School: Schulich School of Business / York University – Toronto Website: http://www.schulich.yorku.ca/ Continuing Education for Executives: EMBA CSR Curriculum: Ethics and Leadership Course Description: The course focuses on the ways in which leaders must recognize and respond to a variety of competing values and beliefs both within and outside their organizations.

School: Smeal College of Business / Pennsylvania State University Website: http://www.smeal.psu.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Ethical Leadership Course Description: This course explores the value of a firm’s reputation with external stakeholders such as customers, suppliers, and the general public.

School: Stanford Graduate School of Business / Stanford University Website: http://www.gsb.stanford.edu/ Continuing Education for Executives: Stanford Executive Program (flagship) and other development programs CSR Curriculum: Strategy Beyond Markets (core); Building Sustainable High- Growth Ventures, Environmental Science and Management (electives) School: Stern School of Business (New York University) Website: http://www.stern.nyu.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Professional Responsibility Course Description: The course develops the argument that ethical considerations are important in the decision-making process and then develops analytical reasoning skills that enable students to identify and weigh competing ethical concerns in that process.

School: Tippie College of Business / University of Iowa Website: http://www.tippie.uiowa.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Ethics School: UC Davis School of Management / University of California, Davis Website: http://www.gsm.ucdavis.edu/ Continuing Education for Executives: Development Programs CSR Curriculum: Programs in Energy & Sustainability School: University of Colorado at Denver Website: http://www.ucdenver.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Business Ethics and Corporate Social Responsibility; Sustainable Business Practice Course Description: The courses emphasizes how socially responsible companies consider the perspectives of multiple stakeholders balancing goodwill and optimizing profit for the business; and explores how sustainable business is concerned with the triple bottom line – people, planet, and profits – and is global in scope.

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School: University of South Florida Website: http://www.usf.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Social, Ethical and Legal Systems School: University of San Diego School of Business Administration Website: http://www.sandiego.edu/business/ Continuing Education for Executives: Development Programs Course Title: Ethical Leadership and Organizational Behavior Course Description: This course provides the concepts and skills for the ethical leadership of people in organizations by introducing the basic behavioral skills needed for self-management and promoting productive relationships with others in organizations.

School: Villanova University School of Business Website: http://www.villanova.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Ethics and Law in Corporate Governance Course Description: This course has a focus on the principles of business ethics and ethical decision-making, and ethics in leading organization.

School: The Wake Forest School of Business / Wake Forest University Website: http://www.business.wfu.edu/ Continuing Education for Executives: Development Programs CSR Curriculum: Qualification in Environmental Sustainability Course Description: Corporations continue to identify the critical need to institutionalize sustainability efforts across all business units. The program combines business management, social sciences, humanities, sciences and law. Participants not only learn about sustainability, they develop a Sustainability Action Plan (SAP) to take back to their corporations.

School: Wisconsin School of Business / University of Wisconsin - Madison Website: http://bus.wisc.edu/ Continuing Education for Executives: MBA CSR Curriculum: Business, Environment, and Social Responsibility Course Description: Students enrolled in the Graduate Certificate in Business, Environment, and Social Responsibility (BESR) program are engaged in learning about the various challenges associated with the consideration of economic, environmental, and social issues in the business world, and how to effectively manage them.

School: W.P. Carey School of Business / Arizona State University Website: http://www.wpcarey.asu.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Ethical Issues for Managers Course Description: The course offers an in-depth focus on business ethics and social responsibility both with respect to the individual decision maker and the organization and its interactions with its stakeholders.

School: The Wharton School / University of Pennsylvania Website: http://www.wharton.upenn.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Foundations of Leadership and Teamwork Course Description: This course focuses on lateral and vertical leadership, team building and performance, and team leadership.

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School: University of San Diego School of Business Administration Website: http://www.sandiego.edu/business/ Continuing Education for Executives: Development Programs Course Title: Ethical Leadership and Organizational Behavior Course Description: This course provides the concepts and skills for the ethical leadership of people in organizations by introducing the basic behavioral skills needed for self-management and promoting productive relationships with others in organizations.

School: Zicklin School of Business / Baruch College Website: http://zicklin.baruch.cuny.edu/ Continuing Education for Executives: EMBA CSR Curriculum: Ethics; Sustainability; and Global Excellence Course Description: The courses identify ethical issues in business situations and develop ways of thinking through ethical dilemmas in an increasingly complex world; explore the environmental and social challenges that contribute to the complexity of the business environment and drive companies to assess their social and environmental impacts; and deliver direction on how to lead effectively across cultures by developing greater sensitivity to differences in perspectives, institutions, and practices among business people from around the world.

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ENERGY EFFICIENCY

Smarter Electric Usage New energy-efficiency technologies that save cash (and carbon)

By Bill Hatton Climate change stirs up passionate disagreement—one side insists that the “debate is over” and that there’s no doubt that mankind’s activities are warming the earth. Another side insists the scientific debate continues.

The good news: All sides agree that saving energy (and reducing associated costs and greenhouse gas emissions) is a good thing. And when it comes to saving energy, there’s more good news: New Smart Grid energy-efficiency technologies continue to advance, and offer real savings for companies–while also winning good corporate citizenship points with employees, communities, and customers.

To help facilitate adoption of Smart Grid technologies, the U.S. Department of Energy has been offering grants to utility companies large and small. Here are some of the latest examples of how utilities are deploying Smart Grid Tech to help companies save energy: 1. Advanced metering infrastructure Virtually every Smart Grid project uses advanced metering infrastructure (AMI). For example, Louisiana’s Cleco Power used a $20 million federal grant for a $61 million Smart Grid project that included installing 285,000 new AMI meters for its commercial and small industrial customers.

The goal was to remotely monitor usage (via a secure wireless radio frequency system), increase system reliability, and set a foundation for future Smart Grid technologies. Results: The utility saved $5.1 million in meter-reading costs in the first year, made 141,238 fewer truck rolls, and detected more than 300 theft-of-energy cases.

Bottom line for customers: Lower GHGs from their utility (part of the supply chain, after all) and a more secure electric supply.

2. Communications infrastructure and data management Virtually every Smart Grid project uses a new communica-

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tions infrastructure. Besides remote-reading capability, secure wireless radio-frequency networks allow for remote updating of software to improve access to information.

These networks can also be used to push new software with greater functionality and services out to the customer.

In the case of Cleco, utility executives plan to use the communications infrastructure to increase customer participation, and track electricity delivery and reliability. They also plan to increase their demand response.

From the perspective of company executives, information gathered means information used or information wasted.

Executives need to put systems in place to maximize the use of this information, as opposed to creating files of automated reports.

Who’s monitoring the usage reports coming back from the utility and who’s in charge of turning the information into action items? Are there triggers (usage spikes or rate spikes) and if so, who can adjust operations—either adjust on the fly for unexpected occurrences or prepare for those patterns that are predictable? Who is doing the forecasting based on the new information?

3. Customer system devices Once the advanced meters, secure communications systems, and data management systems are in place, the Smart Grid utility next offers customers’ access to the information. Georgia’s Cobb Electric Membership Corporation received $15 million in DOE Smart Grid funds for a $30 million implementation, and some of that went to developing a Web portal for nearly 200,000 customers.

This breaks out usage by hour, allowing customers to understand variable usage rates. Most Web portal access will be for residential, but in some cases commercial/industrial customers will have access to more sophisticated systems and data. Again, policies, procedures and action triggers need to be in place to take advantage of the information.

ENERGY EFFICIENCY

4. Time-based rate programs Supply and demand is the basis of the economic system.

Since there is only limited storage capacity of electricity (more on that later), electricity usually must be produced right about when it’s needed. Since customer needs fluctuate, that makes the pricing more or less valuable by when the electricity is used. A hot summer day is going to require a lot of air conditioners, and that drives up the price.

The problem is traditionally with utilities, customers didn’t know the pricing changes until it was too late to act.

A residential study by DTE Electric (formerly known as Detroit Edison) is engaging in a two-year study to find out the best ways to get customers to cut peak usage and save money on their energy bills. They are studying Smart Grid technologies’ impact, such as advanced metering and improved information-gathering. The method was simple— give residents the opportunity to learn about pricing differences when it matters and see if the behaviors will change versus just educating customers. Data isn’t in quite yet, but we can imagine that seeing the pricing change might change behavior.

One idea: Awards for residential use reduction. Just as companies enlist workers in volunteering and corporate-giving projects, you can also enlist workers in energy-reduction projects, if you have a Smart Grid utility with time-based programs. Avoiding peak hours (when possible) and critical peak hours will not only save them money, but will allow them to receive recognition.

5. Energy storage.

The traditional problem with electricity is that it can’t be as efficiently stored as other methods. A tank of gas is a more effective way of storing energy than batteries, even as battery technology improves.

Some solar-thermal companies are using methods that amount to storing mechanical energy. During non-peak hours, electricity is used to pump water up a tower, for example, and then that water generates electricity as it is released and passed through a turbine on its way back to

earth. Other plants store steam in insulated tanks until it’s time to turn a turbine.

East Penn Manufacturing Co., Lyon Station, PA, is using UltraBattery Technology in an effort to demonstrate grid-scale energy storage to partners Noble Energy and Met-Ed. The idea was to take some of the supply-based pain (and cost) out of the system by storing some during non-peak hours for use during peak hours. Initial reports to the DOE find some success, though the engineering and operational issues are still being ironed out.

Take home: There are storage options out there to give you a second line of defense against peak pricing (the first being conservation/altering schedules out of peak usage).

6. Distribution system reliability improvements.

Tennessee’s Electric Power Board of Chattanooga (EPB) used $111 million in DOE funds on a $226 million Smart Grid project that included most of the above improvements, but also deployed distribution-system automation and upgrades for 232 of the systems 370 circuits. These included automated feeder switches and sensors.

Benefits: The DOE reports that automated switching reduced storm-related investigations—the system detects much more closely where the system is damaged and thus can pinpoint where to send maintenance crews. Automation also allowed for voltage controls that reduced peak demand by approximately 30 megawatts per month. Reliability is up as well: interruption frequency and interruption duration is down.

Take home: This utility covers a vast area and is frequently hit with storms. So it’s a good sign that this technology works in this system—so if and when Smart Grid distribution automation is added by your utility, you can expect potentially lower peak costs and increased reliability in your electricity supply. A study from energy think tank VaasaETT analyzed 200 smart grid projects and learned utilities found an average nine percent improvement in voltage quality, transmission losses, and system interruptions.

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ENERGY EFFICIENCY

STRETCH GOALS FOR REDUCING ENERGY COSTS What we did to improve three straight years

By Sharon Nolen Eastman has always focused on sustainability and efficient operations, even before a defined sustainability strategy or target goals were set in place. We have a long history of energy efficiency improvements and extensive deployment of combined heat and power.

More than 90 percent of our production occurs at sites using combined heat and power, a well-established best practice. In comparison, 29 percent of the electricity in the chemical industry is generated in this efficient manner and only 15 percent for industry in general. However, several years ago, Eastman executives saw the need to make greater investments in sustainably-focused initiatives, including energy efficiency. In 2010, Eastman’s leadership set an aspirational goal of 25 percent improvement in energy intensity in 10 years, with a baseline of 2008. This became the catalyst to revitalize our energy program.

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We knew there were improvements that needed to be made to our processes and operations, but how we should approach these improvements at a corporate level became the question. There are many resources available for companies trying to develop or enhance their energy management programs. We did our research and identified ENERGY STAR® as our guide.

As a result of our efforts, Eastman has been recognized as an ENERGY STAR Partner of the Year in 2012 and 2013, making us the first chemical company to receive the award more than once.

ENERGY EFFICIENCY

In 2014, we were recognized with the organization’s Partner of the Year Sustained Excellence award, its highest honor. Getting there was no easy task, but use of the ENERGY STAR resources made a difference in our organization.

Partnering with ENERGY STAR Established in 1991, ENERGY STAR has helped countless organizations improve their energy efficiency and reduce emissions. Eastman became a partner in 2008. As a partner, organizations pledge to focus on saving energy in homes and businesses. Partners range from retailers, commercial buildings and manufacturers to small business, construction companies and congregations. (What you need to become a partner is available on the ENERGY STAR website, as well as resources for organizations of any kind and energy programs of any size.) To assess our current program and identify areas of improvement, we benchmarked our existing program against the ENERGY STAR “Guidelines for Energy Management.” The “Guidelines for Energy Management” are proven tools created by the Environmental Protection Agency (EPA) that represent the best practices from thousands of energy programs in a step-by-step guide. (Referred to as the “road map,” the guidelines are available to download from the ENERGY STAR website for any company looking to enhance their energy program.)

The guidelines start with an emphasis on making the commitment to continuous improvement by forming a dedicated energy team.

Eastman created an Energy Management Team, which consists of energy engineers and representatives from the 16 manufacturing sites in our program. Serving as the Manager of the Corporate Energy Program, I lead the team and serve as the liaison between it and Eastman’s executive team and Sustainability Council.

Once a team is established, an assessment of the current state is essential to determine a baseline and set program goals. This can be challenging, especially when you have multiple sites and locations to measure. We established common definitions for the measure, increased the reporting times, and benchmarked with other companies’ strategies for achieving a credible goal. The measure has since been audited internally and found to be adequate for external reporting. Having the aspirational goal promoted interest and prioritization for the program.

In general, goals not only allow you to measure success, they create ownership and demonstrate commitment.

After a baseline was determined and performance goals were in place, it was time to create an action plan, the next step in the guidelines. In working to address the gaps in our program and establish a plan going forward, I found that other ENERGY STAR partners were often willing to share ideas. I attended ENERGY STAR Industrial Partner meetings and webinars. I learned from the presentations I attended and more important, from the relationships that I made with other energy managers. We are extremely active in all of these opportunities, both formally and informally, recognizing that the value far exceeds the cost.

Developing an action plan requires thinking through what is going well and identifying gaps that need to be addressed. Eastman is clearly accomplished at executing energy efficiency projects – we’ve won American Chemistry Council Awards for the last consecutive 21 years. However, we quickly realized there were several needs that could be added to our efforts. A centralized database to collect project ideas promoted sharing of information and a repository to draw upon when money and resources become available. The database was designed to easily allow for changes in energy prices so that the project returns could be reevaluated as the market changes. There were also many opportunities to share best practices and exper-

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ENERGY EFFICIENCY

tise between sites. The team developed the action plan and achieved buy-in from the Sustainability Council and the Manufacturing Team.

Tracking and monitoring progress is critical to successful implementation. It is important to continuously track and monitor success against established goals. For example, if a particular energy efficiency initiative isn’t meeting the projected energy conservation goals, you must be prepared to make necessary changes to ensure the right approach is being taken. A willingness to recognize when a certain part of a program is underperforming is crucial to ensuring that a program is reaching its full potential.

As we made progress and engaged more actively with ENERGY STAR, the possibility of becoming a Partner of the Year seemed more and more feasible. We applied several times before we won. However, working with the organization after the 2011 application, asking for feedback and suggestions for improvement, demonstrated our interest in true improvement. As a result, Eastman was provided both a mentor (an energy manager at another company) and a technical advisor, which continue to be resources for us today. Each reviewed the existing corporate energy program and provided specific suggestions for improvement as we set our sights on Partner of the Year.

The application process proved to be a great resource and benchmark for assessing our improvement. The application process closely follows the “Guidelines for Energy Management” outline.

A narrative explaining how you have accomplished each step of the guidelines is required, including commitment, assessment, goals, action plans, execution, and results.

That narrative is accompanied by established measurements and improvement data, including detailed project

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information. The last section of the application includes communication and promotion of ENERGY STAR and your corporate energy program. In addition to the application, attachments including photos, communications, and expanded details about your program are invaluable to the application process. Maintaining concrete evidence of your action plan and progress is crucial when sharing the story of your energy management program. While the process is time consuming, we believe the benefit is worth the cost. By thinking about the application throughout the year, we find ourselves continually referring to the guidelines and making corrections as needed to ensure full compliance with them.

Sustaining performance Once you become a Partner of the Year, there is no guarantee that your organization will be selected in subsequent years. In fact, ENERGY STAR personnel don’t mind saying that they don’t continue to award programs that stand still. After our first recognition in 2012, we knew we had to not only maintain our high level of performance; we had to continue enhancing it. We received additional feedback from ENERGY STAR each year that we applied

ENERGY EFFICIENCY

and have seriously considered all their suggestions and adopted most.

Following Eastman’s second consecutive Partner of the Year recognition, we realized we were eligible for the Partner of the Year Sustained Excellence award in 2014. To be considered, an organization must be a Partner of the Year for three consecutive years. We focused on continuing our improvements in manufacturing, operations, and maintenance. But we knew we needed to increase involvement in the energy program in a variety of ways beyond process changes or building improvements.

One of the biggest wins for the Corporate Energy Team was the increase in our corporate improvement energy budget, including capital and expenses, $11.5 million in 2013.

This decision signified the realization that these projects are integral to improving the efficiency of our operations and minimizing our environmental footprint and have the nice benefit of being financially attractive. Having engagement from the senior management level is pivotal in moving your energy program forward. I routinely provide updates to executive team members about the current state of program, progress against our goals, issues that need to be addressed that are hindering progress, and new opportunities we are pursuing. This type of collaboration makes the difference between a standard energy program and one that has a meaningful impact throughout the company.

A key internal opportunity for employee engagement has been our annual energy fair that has been established.

The purpose of these fairs is to educate employees on how they can make more energy efficient choices at home and at work. External vendors and several pertinent internal

organizations set up informational display booths, which employees can visit at their convenience throughout the day. In 2013 Eastman’s largest site hosted its third annual energy fair with great success. In addition, two additional energy fairs were held at our sites in Texas and Ghent, Belgium. We also hosted our first office energy fair in our corporate headquarters to raise awareness about office building energy efficiency and inform employees how they can help us reach our energy goals. ENERGY STAR provides resources to help organizations host an energy fair event.

We have also participated in the ENERGY STAR Battle of the Buildings program, which provided Eastman with an opportunity to involve employees serving various functions within the company. Three Kingsport site buildings, B469, B470 and B471 competed against more than 3000 buildings across the country. The competition challenged buildings to reduce energy use by 20 percent. Together competitors cut their energy costs by more than $20 million. Recognized this year as the #9 Top Performer, B470 reduced its energy use by 29.64 percent. Additionally, B469 was recognized as the #10 Top Performer, reducing its energy use by 29.59 B471 was recognized for reducing its energy use more than 20 percent as well, reaching a reduction of 25.47 percent. All three buildings are now ENERGY STAR certified, proving that engaged and educated employees can make great strides in energy efficiency. The Battle also gave us the opportunity to complete process changes, identify the changes that made the most difference, and implement them in other buildings and sites.

As Eastman’s energy program has matured, the company has increasingly engaged internal and external partners to contribute to reaching the company’s goals, such as collaborating with procurement, lighting manufacturers, and HVAC controls manufacturers to identify opportunities to improve energy efficiency. We encourage suppliers and customers to become actively involved with energy management. We’ve also completed sustainability audits of 27 strategic suppliers, with specific questions around energy efficiency initiatives. Working across the value chain is a key component to being an ENERGY STAR Partner.

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ENERGY EFFICIENCY

We continue to seek opportunities for improvement and we realize that our work is never completed. Energy management, like sustainability, is a journey, and we plan to continue our focus on improving our footprint, reducing our energy intensity, and sustaining excellence in our corporate program.

Results What started in 2010 with the Energy Management Team asking for support and trying to drive change has turned into other organizations coming to the team with new ideas to reduce energy and save money. Part of the credit goes to having funding that the sites can receive for good ideas but the ENERGY STAR awards also should be recognized for building brand recognition for our program and a positive perception for our activities. It is encouraging when fellow Eastman employees engage in a voluntary conversation with me about energy. It reaffirms that we are creating an environment in which employees understand and care about energy efficiency, not only at work but at home.

Since 2008, Eastman’s energy management efforts have collectively achieved an improvement in energy intensity of approximately eight percent. In 2013, Eastman achieved a one percent improvement in energy intensity, which resulted in an energy savings of more than $3 million. This equates to greenhouse gas reductions of 145 million pounds, or all the emissions from approximately 12,000 cars. Overall, using the baseline energy intensity compared to current production and energy prices, Eastman estimates we would have spent $25 million more in 2013 on energy had it not implemented a new management plan.

Our work with ENERGY STAR has opened a number of doors with customers, suppliers and communities as well.

With a brand recognition as prevalent as ENERGY STAR, it allows us to start conversations about energy efficiency and sustainability in ways we never could before. With the resources available, a committed team, defined targets and an openness to learn from others, any company can be a star in energy management.

Sharon Nolen, PE, CEM, is manager of the Corporate Energy Program at Eastman Chemical Company.

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SUPPLY CHAIN REPORT

Can you manage supplier impacts?

New ways some organizations are finding effective

By Mike Wallace Supply chains are increasingly being seen as the low hanging fruit of sustainability. That’s why most of the largest companies in the world are already enhancing their Supplier Codes of Conduct (SCOC) and sharing amazing stories about how they have required all their suppliers to “do something” with regard to sustainability. While this is all great news for our mutual sustainability efforts as a whole, there are tremendous inefficiencies that are being uncovered in supply chains and a new recognition of where one can achieve the most impact.

When the idea of sustainability first came about, it was mostly focused on a company’s direct impacts and their efforts to manage these impacts.

But over the last five years or so, the discussion has evolved from direct impacts to indirect impacts – more specifically, supply chain impacts.

Often, companies develop a whole sustainability program around managing their direct environmental and social impacts as they pertain to daily operations.

This leaves out a huge piece of the puzzle – supply chain.

For smaller companies who have a handful of suppliers, the idea of helping to manage supplier impacts seems less daunting. But for large companies such as Walmart, or large institutions like government agencies and state universities, the thought of trying to not only manage direct impacts but all the indirect impacts of suppliers seems nearly impossible.

The fact is that for large companies with thousands of suppliers it is unrealistic to expect that all impacts will be managed completely. But there are steps companies can take to educate its supplier base and give them the tools to effectively manage their own impacts. For example, Intel has

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SUPPLY CHAIN REPORT

16,000 suppliers in over 100 countries. This supply chain is also one of the world’s most complex and technologically advanced. One way Intel manages its supply chain impacts is by assessments and audits to identify compliance gaps where immediate action is needed. This also enables Intel to find root causes and develop systemic solutions. In 2012, Intel held a two-day conference in Shanghai dedicated to supplier sustainability. This conference allowed the company to bring together a multi-stakeholder group to collaborate on key sustainable supply chain challenges and share best practices.

Intel also sets clear expectations for its suppliers to incorporate corporate responsibility strategies and policies into their own business plans long before this supplier conference. In 1998, Intel first documented these expectations around human resources, environmental management, worker safety and business ethics. Six years later they helped form the Electronics Industry Citizenship Coalition (EICC) and adopted the Electronics Industry Code of Conduct. By 2012, Intel requested that their top 75 suppliers publish sustainability reports in accordance with the Global Reporting Initiative (GRI) Guidelines.

To support this request, Intel partnered with GRI to provide training to suppliers to help them either begin reporting or make improvements to their reporting practices. Not only did Intel desire a better understanding of its supply chain and respective suppliers, but took the time and effort to develop sustainability capacity within that supply chain.

They also offered training to suppliers who are not just exclusively supplying to Intel, but also to some of Intel’s competitors, as well as business partners. Further, by asking its suppliers to report using GRI and do so publicly, Intel gave the world a new look at sustainability information from companies that may have never reported on such things publicly. The Intel story takes us into a new direction and results in positive impacts in the area of greater transparency.

Public institutions provide another interesting angle. Take for instance the University of California (UC)—one of the

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largest higher education systems in the world. Think of that supply chain and how the system might examine direct and indirect impacts. The University of California, at Berkeley (one of the ten campuses in the UC system) has produced a sustainability report for several years.

UC Berkeley held its first Sustainability Summit in 2004, formed an Office of Sustainability in 2008, and met its first carbon reduction target in 2013; reducing emissions lower than they were in 1990.

UC Berkeley also has environmentally-preferable purchasing policies and procedures, and carries out daily initiatives to achieve its goals. For example, in 2012 the campus purchased approximately $14.4 million in environmentally-preferable products, including sustainable food, recycled paper, and office furniture with recycled content. To make sustainable purchasing easier for the decentralized system (department users initiate their own purchasing transactions in the BearBuy e-procurement system), UC Berkeley has a contract with America To Go to provide catalogs with contracted local catering companies and restaurants for departments to use.

In light of these growing customer demands, companies like Steelcase and Staples are launching specific programs to help buyers more easily purchase sustainable products.

And organizations like the Sustainable Procurement Leadership Council (SPLC) are organizing a range of institutional buyers to help standardize and streamline sustainable procurement.

Next Generation – Impact Sourcing Responsible procurement and supply chain management in the sustainability area are evolving in a very interesting way. While the Intel story shares a new level of positive impact that can come from a progressive supply chain management approach, some organizations are looking at supply chain through an even broader sustainability lens –a business model of helping companies create shared value throughout their services supply chain that some experts are calling Impact Sourcing.

SUPPLY CHAIN REPORT

For example, service sector companies are employing high potential workers in disadvantaged areas (such as parts of Africa and India) to help meet and exceed cost and quality objectives, as well as enable these workers to earn a higher income; sometimes up to 200 percent more than they would earn in another job. A recent survey found that 46 percent of companies were likely to engage this kind of “Impact Sourcing� if they participate in corporate social responsibility (CSR) initiatives. The fact that companies are both meeting their business needs while giving people they might otherwise overlook an opportunity to work (and learn valuable workplace and technical skills) makes for an inherently more responsible supply chain. It also contributes to broader impacts in family and community, such as the reduction of poverty and further investments in family healthcare and education.

Who and How?

So the question becomes: How and who do you choose? Because a massive supply chain is difficult at best to manage, how do you prioritize key suppliers to engage with more deeply, more proactively and in alignment with your larger sustainability objectives?

And how do you go about such engagement?

Regardless of prioritization, the common thread in working effectively with your supply chain is engagement– more specifically, education.

More often than not many companies in your supply chain do not have the necessary capacity to easily respond to the myriad of sustainability demands they are increasingly receiving.

Providing these companies with tailored training and helping them understand the growing interest in transparency on material sustainability issues is not only mutually beneficial, but benefits the broader, common sustainability interests of the marketplace. Rewarding transparency with continued contracts reinforces this transparency and helps us all make a strong business case for sustainability.

As referenced above, there are several ways to prioritize.

Intel focuses on their top 75 suppliers as these compile the majority of their supply chain. Other companies may choose to focus on areas where their operations have the biggest impact on the socioeconomic conditions of the people who live and work there.

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THE ETHICS REPORT

WANT AN ETHICAL COMPANY?

Keys for fostering an Ethical Culture

By Anne R. Harris Let’s assume you were appointed to Chief Ethics & Compliance Officer (CECO) at your company a year ago. The CEO directed you to minimize risk by embedding integrity in the business, and you’ve worked diligently to implement an Ethics & Compliance (E&C) program. You’ve established a variety of program elements: risk assessments; a Code of Conduct; policies and procedures; E&C representatives; training and awareness communications; a confidential Helpline; and processes for monitoring, auditing and continuous improvement. Finally, you completed your first self-audit report for the CEO and concluded that a comprehensive E&C program is in place.

Can you now congratulate yourself, assured that your program works effectively? Not yet. Each of those program elements is important, but for meaningful impact you also need to create a strong ethical culture. The Ethics Resource Center’s National Business Ethics Survey (NBES), conducted biennially since 1999, has found that companies with lower rates of ethical misconduct have both strong E&C program elements and strong ethical cultures. In such companies, employees also experience less pressure to compromise standards, greater willingness to speak up internally, and less retaliation.

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In companies that continually foster a culture of integrity, transparency is essential. Management shares information and welcomes ideas. Employees are encouraged to ask questions and raise concerns about E&C matters. Employees experience a greater commitment to conducting business with integrity when they see that their managers trust them and set a clear standard for good conduct. The company learns about concerns and can address them before they become bigger problems.

There are many ways that you, with the support of your CEO, can move your company culture toward one that promotes and fosters integrity in business conduct. Two of the most powerful drivers are Leadership Commitment and Management Engagement.

Leadership Commitment Leadership Commitment requires more than just making sure the CEO talks about the importance of integrity at meetings. True leadership commitment manifests itself in behavior evincing discipline and backbone. It is reflected in leaders’ decisions about how your E&C program is implemented—and how your company is run every single day.

Give your E&C program “teeth.” Empower people to en-

THE ETHICS REPORT

force compliance across the board. If misconduct is found, take appropriate corrective action and do so consistently, regardless of organizational level or contribution to performance. Don’t allow a senior executive to accept a gift from a vendor in violation of policy if you wouldn’t allow a lower-level employee to do so. Employees learn about these exceptions and grow cynical. Forty-four percent of respondents to a recent global survey indicated that no disciplinary action took place in their firms for violations of bribery and corruption policies. Charter a cross-divisional, cross-functional committee to regularly review cases and outcomes for impact and consistency. A sophisticated case management database can help ensure such a committee’s effectiveness.

• Mandate E&C-related performance objectives for every member of management. Incorporate goals such as completing management training, discussing E&C topics during staff meetings, conducting training for the department, recognizing staff for exemplary ethical conduct, or initiating process improvements that help prevent E&C lapses. The more substantive the objective, the more impactful the message to the leaders in your organization.

• Commit to a high level of transparency in communications about your E&C program—to the public, to the board and to employees. Employees have to believe the organization is just and fair in order to trust it. Publish Helpline metrics on your E&C Intranet page.

Many companies now publish a “rogue’s gallery” of actual company cases involving E&C failures and consequences on the intranet or in the employee newsletter.

Sanitize the cases to conceal departments or names, or use cases from one division in another division’s communications. You will raise awareness and generate productive “water-cooler” conversations. You’ll also improve employees’ confidence that management will take appropriate action when issues are raised.

Management Engagement

• Teach managers active listening techniques. The majority of E&C concerns are reported directly to managers.

Many managers, however, lack the skills to listen and respond appropriately; they unwittingly “shut down” employees who approach them. Teach managers how to support and encourage communication. In addition, make sure they know when to refer matters to functional experts in the organization.

• Most supervisors are not comfortable talking about E&C issues. Help them by preparing “Team Talks” scripts or mini-cases they can use for 5-10 minute “How would you handle this situation?” discussions with their teams. Over time this will increase everyone’s comfort level.

• Engage managers in the fight against retaliation. Educate them about what retaliation looks like, including peer-to-peer retaliation, and involve them in identifying ways to prevent and eliminate it. Correct people appropriately for retaliatory behavior.

• Involve managers actively in your company-wide E&C training initiatives. One highly effective approach is the “cascade” training method, where each manager trains his or her direct reports, starting at the very top and cascading down through the company.

• Give managers tools, such as spot bonuses or certificates, to recognize employees for exemplary ethical conduct.

Creating an ethical company culture takes time and is not easy. If you work at it, however, your business will realize significantly greater gains from your investment in Ethics & Compliance.

Anne R. Harris is vice president of ethics and compliance, JTI, Inc., Great Falls,, VA, and the former chief ethics officer for General Dynamics.

Employees’ perceptions of workplace culture are based largely on their managers. Help all managers take ownership for creating an ethical culture.

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COLLABORATION REPORT

CSR & The Cluster-Help What can go wrong (and right) when NGOs, government, and corporations try to work together

By Richard Crespin Ever watch six year olds play soccer? They all cluster around the ball, desperately kicking it and each other. No one plays a position and no one scores a lot of points. That’s what it can look like when companies, NGOs, and governments try to work on a problem.

They cluster around it, rarely talking to one another, often kicking or undermining each other, and a lot of energy gets wasted without achieving much impact. I call it cluster-helping.

At Pyxera Global’s Annual International Corporate Volunteer Conference and Public Private Partnership Forum on April 7-8, leaders from all three sectors came together to look at how they could work better together to, in the words of the conference’s theme, “Catalyze Growth in Emerging Markets.” With such a concentration of people working on cross-sector collaboration, I took the opportunity to ask how the sectors can “un-cluster” and work better together.

While answers varied, many of the people I talked to focused on the need to divide up roles when it comes to risk-taking, financing, and innovation. Figuring out who’s taking the risk and who’s paying for the innovation underlies untangling the cluster-helping challenge.

Everyone thinks they can innovate but innovation requires risk-taking and embracing failure—which is

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scary for anyone and doubly scary for anyone working with public money.

I asked leaders like Congressman Jim Moran (D-VA), Intel’s Wendy Hawkins, Dow Chemical’s Bo Miller, PSI’s Karl Hofmann, JP Morgan Chase’s Bruce McNamer, Pyxera’s Deirdre White, and the State Department’s Daniella Foster, what “position” each sector should play when it comes to risk-taking and innovation. They all agreed that there is a direct correlation between an organization’s willingness to take risks and its ability to innovate. So imagine my surprise when I asked Congressman Jim Moran (D-VA) if government agencies should “fail fast, fail forward” to come up with the big innovations necessary to tackle big problems and he said, “No.” In contrast to the Congressman, the other executives I interviewed all felt that ventures should take intelligent risks in order to quickly learn, adapt, and scale. People in the private sector know from experience that, in the words of Intel’s Wendy Hawkins, “...when you’re on the bleeding edge, the only way you can learn is from your mistakes.” Civil sector leaders are more circumspect.

Some, like PSI’s Karl Hoffman live on the bleeding edge themselves. Karl’s work creating markets for affordable condoms for people in the developing world required

COLLABORATION REPORT

intelligent risk taking. At the same time, he faces a different level of donor and public scrutiny than companies engaged in commercial research and development.

In the public sector, there’s greater anxiety. Admitting failure brings tons of public, media, and Congressional criticism. Congressman Moran followed his definitive, “No,” with a nuanced and thoughtful response. “The private sector is made to quickly reconstitute itself,” he said, to rapidly set things up and tear them down, “Government isn’t set up that way.” The more I thought about it, the more his answer rang true. Our Constitution, with its checks and balances and separation of powers, protects us from tyranny by deliberately slowing things down. It takes a lot to set the wheels of government in motion and to stop them once they get going.

The real trick, according to the Congressman, “is to figure out how to work with companies to innovate and then with government to execute. You need failure in innovation, not in execution.” Easier said than done, but true nonetheless. The real challenge for public-private-civil collaboration is to enable the private/civil partners to take on risk and innovate and then bring in the government at the right moment to execute and scale.

As Pyxera’s Deirdre White told me, “Cross-sector collaboration is so critical to actually making any progress on some of the biggest challenges ... but we’re not getting the volume of creative solutions that we should be.” While part of the answer, according to White, is to fail fast, “finance is the real barrier.”

In untangling the cluster-helping knot, White suggests taking some targeted bets. “We’ve got a lot of dabblers out there. What we need are donor institutions willing to bet a little on innovation ... or find a corporation willing to put forward experts, equipment, or other resources along with some core grant money to make things happen and invest in capacity building.”

While she agreed with the Congressman that government should come in when it’s time to scale, the fact is that, “the government isn’t coming in to help scale.”

To resolve at least the financing part of the cluster-helping equation, Daniella Foster at State is looking at crowd-funding. At State, they realized the problem wasn’t just in finding start-up capital, it was in finding “mezzanine capital” for scale. Daniella and her team along with “RocketHub, an online crowd-funding platform, have partnered to support innovative solutions to some of the world’s toughest challenges by accelerating projects awarded by the Department’s Alumni Engagement and Innovation Fund (AEIF),” according to a State Department press release. “AEIF alumni will now be able to find alternative funding and investment options beyond U.S. government support for their projects.”

From my conversations with these leaders, here’s what I took away: When starting down the road to collaborate, talk to your colleagues from the other sectors.

Look at how you and they can make specific contributions that complement each other. Be willing to make tradeoffs—give up some control in exchange for resources or specialized skills. And once you stake out a position, play your position full out—until your team needs you to move. That’s what makes unwinding the cluster-helping knot so hard: it’s not about you or your organization. It’s about solving the world’s toughest problems and that means having the courage to let go.

The upcoming US Chamber Foundation’s Corporate Citizenship Conference will delve even deeper into these issues with its focus on the “Impact Equation” on September 8-10 in Washington, DC. I have a few discounted passes. If you’d like one, tweet me @rjcrespin.

Richard Crespin is CEO of CollaborateUp, a senior fellow for the U.S. Chamber of Commerce Foundation, and the director of business outreach for the U.S. Global Leadership Coalition.

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IMPACT INVESTING

BETTER WORLD BETTER PORTFOLIOS New research reveals sustainable, responsible, impact-focused portfolios can outperform traditional investing

By R. Paul Herman and Srdana Pokrajac More than $220 trillion is invested globally across all types of assets – stocks, bonds, real estate and more.

When selecting how to invest this money for a portfolio, we can attempt to follow, the Nobel-prize winning theories taught in MBA programs, and reinforced by the media, that the capital markets are “efficient.” In other words, all the information needed for investors to make sound, attractive decisions is widely available and is swiftly incorporated in the prices of those assets.

However, are the theories actually true? Or is real life investing not optimal?

One example of this not-seemingly-rational market behavior that has left many “traditional investors” in awe is perhaps the high valuation of companies such as Twitter or Facebook when they go public.

A common question is “Where is the value of Twitter or Facebook captured on the financial statements?” to which we could add: “Is this valuation based on past or future performance?”

The above questions could be asked about just any company whose shares are traded on the stock market. In fact, across the S&P500, 80 percent of the S&P 500 stock market valuation is driven by factors that are not accurately

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captured on the financial statements (Ocean Tomo’s analysis calls them “intangibles”) – and are typically ignored or under-analyzed by investors, analysts, advisors and fund managers.

According to interviews with institutional investors representing trillions of investor capital, the tools from Morningstar, FactSet, and other firms “primarily analyze historical risk and return, not the full set of factors that drive future risk and return.”

Yet forward-thinking analysts and investment managers are looking ahead through the windshield, not just backward in the rear-view mirror. “Past performance does not indicate future results” is embedded in every financial offering. We hear that, but when making decisions, many people focus on what’s already happened instead of what future results and risks those companies may encounter.

Modern Portfolio Theory (MPT), distilled in 1952 by Nobel-prize-winning Dr. Harry Markowitz at the University of Chicago, is seen as the gold standard of portfolio construction. To apply MPT systematically, investors typically use index funds that follow the market. However, the underlying assumptions are that the market prices are efficient and accurate, incorporating all relevant information.

IMPACT INVESTING

Nearly a decade of research, analysis from our sustainable, responsible, impact investing industry, and more than 20 academic papers, reveal the new fundamentals of investing. At HIP Investor, with cross-disciplinary analysts, we have identified more than 20 quantifiable factors creating cash flow and profit, or lessening risk, that are not used

by Wall Street experts. Most financial analysis looks backward at what has already transpired to predict the future and make forecasts. But what are the forward-looking sources and drivers of shareholder value creation? Is it time to re-examine our investing practices and financial fundamentals?

There are many factors that are included in the stock price that are not so accurate and measurable after all, so why rely on this type of information, especially since we like to think of ourselves as “rational human beings?”

Credit Suisse.

In a comparison of portfolios that invest in mutual funds and ETFs that include sustainable firms with portfolios adhering to traditional MPT approach sustainable, high-impact portfolios with 24 (HIP 24) and 10 funds (HIP 10) incurred lower risk and stronger returns relative to risk over 1, 3, 5, and 10 year periods. Across all time periods analyzed, the HIP 10 portfolio approach shows less risk and exceeds the annualized returns of the Nobel-Prize winning MPT approach. New fundamentals can transform traditional investing.

Sustainable portfolios can outperform the market, as they integrate meaningful, quantifiable information that is knowable yet ignored by most investors, analysts, endowments, pensions, and foundations.

Smart investor portfolios diversify to mitigate the potential downside of future risks Also, no common standard and seek the upside associis used by Wall Street investors for measuring net ated with all the possible opportunities. More than $220 beneficial impact on society, trillion of global financial aswhich could significantly improve the performance of insets could be stronger and For annualized time period over the past three years ending vestments in all asset classes more resilient by measuring December 31, 2013 (one fund with less than 3 years history worldwide. its future risk exposure and alblends in its benchmark-index performance) locating to funds and investments that can lower that risk, seek enhanced returns, and Investors can enhance return potential and lower risk by spur net positive impact for society. To date, US-SIF identiinvesting in equities of companies and bonds of companies, governments and nonprofits that incorporate the fies $3.7 trillion in the USA and $4 trillion in Europe that is following in their strategy, operations, and management: currently pursuing positive impact in portfolios.

Valuing People as an Asset: A portfolio model of publicly listed firms in Fortune’s Best Companies to Work For, calculated by Wharton finance professor Alex Edmans, typically outperforms the S&P500 (since 1998).

Natural Resource Efficiency: The S&P Carbon-Efficient Index of firms more efficiently using energy has outperformed the S&P500 since its inception in 2011.

Leadership Inclusive of All Talent: Boards of firms with one or more women on the Board have realized higher return on equity with lower volatility (2005-2011), according to

Every investment—stock, bond, or fund—can be rated for its future risk, financial return potential, and net impact on society. In the three years ending 12/31/2013, a diversified allocation of HIP-focused funds exceeded the MPT portfolio funds; more sustainable-friendly funds performed above the financial “efficient frontier” and color-coded “green” for lower future risk and more positive impact. Using investment ratings of this type to measure the true impacts of investing—and then divesting less sustainable and reinvesting in more sustainable—can strengthen your portfolio.

Every investment and fund has a future risk-return-impact profile; Muni bonds can rate higher on impact by funding

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IMPACT INVESTING

nonprofits in healthcare and education, as well as government services for water and cities. Private-equity funds (and firms like KKR which partner with Environmental Defense Fund, edf.org) can manage risks and pursue impacts more systematically than publicly listed companies. Hedge funds can be low transparency about their exposure to future risks.

Do you know the future risks embedded in your portfolio? Is it built for 21st century opportunities? Portfolios

designed thoughtfully that incorporate knowable-yet-ignored factors of value-creation and future-risk reduction can realize stronger performance, more resiliency and a better society.

R. Paul Herman is CEO of HIP Investor Ratings LLC, which serves investors, advisers, fund managers and retirement plans. Srdana Pokrajac is an advisor to HIP. See all disclosures at www.HIPinvestor.com.

HIP’s 24-fund portfolio covers mutual funds, ETFs, and stocks that are fund-like (e.g., KKR private equity firm, also partnered for impact with EDF.org)

Modern Portfolio Theory funds and allocations are the MPT model approach prescribed by software-based advisor WealthFront, as published on its website in Q4-2013 [42]

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CR Magazine’s Responsible CEO Awards Dinner October 9, 2014 | New York Downtown Marriott | New York, NY

Meet the World’s Most Responsible CEOs!

2013 Participants Included: Marillyn A. Hewson CEO and President Lockheed Martin

Denise Morrison President and CEO Campbell Soup Company

Jim Murren Chairman and CEO MGM Resorts International

Patrick Prevost President and CEO Cabot Corporation

John Veihmeyer Chairman and CEO KPMG LLP

Charlie Moore Former Executive Director CECP

Dan Hesse CEO Sprint

Gale Klappa Chairman, President & CEO Wisconsin Energy

Paul Rooke President and CEO Lexmark International

For sponsorship opportunities, please contact Vince Albergato at 215.606.9562 or Vince.Albergato@SharedXpertise.com.

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October 8-9, 2014 New York Marriott Downtown New York, NY

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