Sustainability and Social Responsibility, Now Mainstream Concepts, Remain Difficult to Achieve at Both Country and Corporate Levels

“Sustainability” and “social responsibility” have entered the mainstream vocabulary over the last two decades. Sustainability is a “second generation” term, having morphed into a more generalized concept from its narrower meaning in the phrase “sustainable development” that gained the world’s attention during the United Nations Conference on Environment and Development (UNCED) in Rio de Janeiro in 1992. The most widely cited definition of sustainable development came in Our Common Future (also known as the Brundtland Report) published in 1987: “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

Social responsibility has had a parallel development. Early on, the term often appeared with the prefix “corporate,” but recognition that social responsibility is an obligation of institutions and governments as well as corporations has broadened the term’s application. A draft international standard, ISO 26000, embraces the broader context with its title “Guidance on social responsibility.” The ISO document defines social responsibility as “responsibility of an organization for the impacts of its decisions and activities on society and the environment through transparent and ethical behavior.”

If only it were as easy to achieve sustainable development and social responsibility as it is to define the terms!

Delegates to the follow-up conference to UNCED, which met in Johannesburg in 2002, generally voiced their disappointment that more progress had not been made to achieve the goals set out in the Rio Declaration on Environment and Development called Agenda 21. In the nearly eight years since 2002, some progress has been achieved on coordinating action to combat climate change, but as the results of the December conference in Copenhagen shows, the world is still far from agreeing on a set of binding commitments to make the changes scientists say are needed to keep the Earth’s average temperature from rising more than 2° Celsius by the end of the present century.

In the meantime, some countries (Denmark, for example) have demonstrated that it is possible both to grow their economies and reduce their carbon intensity while adding “green” jobs. Other countries have taken on the binding commitments defined in the Kyoto Protocol, though not all will actually achieve their targeted reductions.

Many of the largest and most visible corporations commit publicly to operating in socially responsible and sustainable ways. Some acknowledge that the commitments help them preserve what they call their “social license to operate.” This means taking voluntary, proactive action to meet or exceed legally required actions in areas such as worker health and safety, environmental protection, and social impact mitigation. Corporations may promote sustainability in decision making not only to develop new or preserve existing lines of business, but also to manage risks and derive public relations benefits.

The Great Recession of 2008-2009 refocused the attention of many citizens on the bread-and-butter issues of jobs, income security, and the risks associated with rising government indebtedness. In the near term the political will to address climate change in the United States appears to have diminished as short-term costs of transitioning to a low-carbon economy take precedence over long-term questions of intergenerational equity.

The old adage that “a rising tide lifts all boats” no longer rings so true on Main Street. Ordinary citizens are distraught over persistently high unemployment in their communities and the financial challenges facing state and local governments. Many question the fairness of the apparent rebound of the Wall Street institutions that some say were principally responsible for the near collapse of the world economic system.

As painful as the Great Recession continues to be for individuals and families directly impacted by it, early shoots of recovery are visible in the United States. Will economic recovery shift attention to the need to act sustainably and in a socially responsible fashion? There are reasons for optimism. Sustainable development principles now are given consideration in the planning processes of many governments and are recognized by private sector actors. Social responsibility is defined and its concerns inform the planning and operations of many leading corporations. Results are measurable, and accountability is possible, if not always through legal mechanisms, then in the court of public opinion.

In the end, nearly everyone shares the common goal of leaving our children and grandchildren a world at least as good as the one we inherited. Demonstrating social responsibility and achieving sustainable development are important barometers for measuring the success of our generation’s stewardship of the Earth we inhabit.

© Futurepast: Inc., 2010.

Federal Trade Commission’s “Green Guides” Aim To Protect Consumers Against Misleading and Deceptive Environmental Marketing Claims

The US Federal Trade Commission is expected to extend the reach of its “Guides for the Use of Environmental Marketing Claims” when it updates the regulation codified at 16 CFR Part 260. Although FTC’s “Green Guides,” as they are commonly called, are provided only as guidance, organizations that make environmental marketing claims ignore them at their peril. The Federal Trade Commission Act grants the Commission the authority to file complaints against firms that engage in misleading or deceptive business practices. Under the law, the FTC can seek injunctions, issue cease-and-desist orders, and impose civil penalties. In practice, the majority of cases is settled without the imposition of sanctions.

The Green Guides help businesses make environmental claims that are truthful and verifiable. In the parlance of the FTC, companies making environmental claims should have a “reasonable basis” for doing so. FTC oversight extends to claims that are made both by businesses to consumers as well as to other businesses.

The Green Guides caution companies against making overly general claims like “eco-friendly.” Claims about recyclability should specifically state whether the claim applies to the packaging or to the product, or both. Enforcement actions by the FTC have increased under the administration of President Barack Obama. In 2009 the Commission filed three complaints against companies it said misused claims of biodegradability and four claims related to the purported environmental friendliness of clothing made from bamboo fibers. In the two terms of the George W. Bush administration, no complaints were filed against firms for misleading or deceptive environmental claims.

Some observers of the FTC hope the Commission’s updated Green Guides will address new types of environmental claims. At public workshops conducted in 2008, participants asked the Commission to expand the document to cover topics such as greenhouse gas emission reduction offset credits and Renewable Energy Certificates. Other environmental claims that have become common since the last issuance of the Green Guides address products that their marketers consider “sustainable” or “carbon neutral.”

The Commission’s Green Guides track closely ISO 14021, an International Standard published in 1999 with the title “Environmental Labels and Declarations—Self-declared environmental claims (Type II environmental labelling)” and adopted in 2001 as an American National Standard. Subcommittee 3 of ISO Technical Committee 207 is currently amending ISO 14021 and has before it some of the same issues that arose in the FTC’s public workshops.

ISO’s draft amended standard would allow qualified claims of “sustainable” or “sustainability” to be made as long as they can be justified in accordance with the 18 tests enumerated in clause 5.7 of the ISO 14021 standard. The draft amended standard addresses claims made about greenhouse gases, such as those relating to the “carbon footprint” of a product and claims that a product is “carbon neutral.” A new definition of “offsetting” refers to a “methodology by which the removal of CO2 from the atmosphere or prevention of emissions to the atmosphere from one process can be procured by the operators of another separate and unrelated process to counterbalance their own CO2 emissions that occur from the production or use of that process or product.” Claims that products composed of biomass are “renewable” are also discussed, as are claims related to “renewable energy.”

Given the past influence of ISO 14021 on the Green Guides, it can be reasonably expected that the FTC will take the amended ISO 14021 into consideration when finalizing its Green Guides revisions.

There are practical reasons for basing FTC guidance on International Standards. Primary among them is the influence that ISO standards have in international trade. When regulations adopted in the United States parallel ISO standards, actions the FTC takes to protect consumers against misleading or deceptive product claims are easier to sustain when challenged in bodies such as the World Trade Organization. Moreover, Congress in the National Technology Transfer and Advancement Act of 1995 instructed federal agencies to give preference when possible to voluntary consensus-based standards.

Futurepast is an active member of the US Technical Advisory Group to ISO Technical Committee 207, and is participating in the development of US positions related to the amended ISO 14021 standard. Futurepast provides expertise to clients on the development of environmental claims that can be substantiated in accordance with FTC Green Guides.

© 2010, Futurepast: Inc.

Taking the Measure of Organizations’ Supply Chain Climate Risks and Opportunities: Reporting Upstream and Downstream Greenhouse Gas Emissions

An emerging focus of managing climate change risks centers on greening the supply chain. Organizations do this for a variety of reasons. They want to ensure the dependability of the raw or intermediate materials they source, and materials produced and transported in an environmentally sound manner have lower risk profiles. They take an interest in the readiness of their supply chain partners to meet new greenhouse gas regulatory requirements and to absorb potentially higher or more volatile energy costs. And they seek to protect their corporate reputations by dealing with supply chain partners that conduct their businesses sustainably and in compliance with legal requirements and ethical principles.

Greenhouse gas emissions from supply chain partners increasingly are analyzed to detect missed opportunities to increase energy efficiency and reduce emissions. This scrutiny may begin when an organization inventories its “Other Indirect” greenhouse gas emissions, also known as “scope 3” emissions. Other Indirect emissions are those that are influenced by a reporting organization, rather than emitted directly as combustion, process or fugitive emissions. Other Indirect emissions are also distinguished from “Energy Indirect” emissions, which result from the consumption of purchased electricity, steam or cooling. Other Indirect emissions from the production and transportation of raw or intermediate materials that occur outside the organizational boundary of the reporting organization are known as “upstream emissions.” Other Indirect emissions resulting from wholesale and retail distribution of products, and during the use and disposal phases of a product’s life cycle, may be called “downstream emissions.”

Other Indirect emissions can be more difficult for organizations to quantify and report than either Direct or Energy Indirect emissions. Often, the data needed to inventory these emissions reside outside the reporting organization in its supply chain, and are difficult to access. Complicating matters further are questions of allocation, which arise when a supplier furnishes a diverse set of products for multiple customers and then is asked to account for only the emissions associated with a subset of those. Practical questions include “how much to count,” and “how far upstream and downstream” the supply chain accounting should go.

Requests for business-to-business greenhouse gas emission information are becoming more common, and are likely only to increase. Business customers, particularly those with well-known brand names to protect, want assurance that suppliers are managing their risks, including those related to climate change. The concern does not stop with emissions accounting, as a broad examination of climate risks include physical risks from climate change, regulatory risks, and shifting consumer preferences. The first category of risks includes increased frequency of extreme weather conditions, flooding and sea level rise, and changing temperature and rainfall patterns. Resource scarcity is a corollary impact from climate change, which may be triggered by decreasing biodiversity, higher rates of disease, or an increase in desertification. Regulatory risks include the potential imposition of cap-and-trade programs, carbon taxes, or requirements for installation of Best Available Control Technology (BACT). Changes in consumer preferences can impact organizations by shifting consumption from one product category to another, enhancing or harming reputations, and creating markets for new products and services.

Business drivers for taking action now are gaining board room attention. According to PriceWaterhouseCoopers analysts who interviewed more than one thousand CEOs from the world’s leading companies for the Carbon Disclosure Project, “48% of CEOs were already making changes in their supply chain in response to climate change or would start in the next 12 months. 66% of these CEOs were already making a return on this investment or expected to do so within the next 12 months. We have seen a number of examples delivering real cost reductions as a result of using carbon as the value driver within the supply chain. For example, one major clothing retailer recently reduced their supply chain operating costs by 17% and saved over 4,500 tonnes of carbon by redesigning their distribution and logistics chain.” (CDP Supply Chain Report 2009, p. 7, accessed on 2010-01-10 at www.cdproject.net/reports.asp.)

For companies whose primary customers are other businesses, meeting the demand for information concerning their greenhouse gas emissions and other climate risk management strategies can be challenging. Many corporate staffs find it difficult to respond, with in-house expertise thinned and overextended. What’s more, the desired response from customers seeking climate change related information is not satisfied with the provision of a copy of the supplier’s environmental policy or ISO 14001 registration certificate. Real data are demanded that meet data quality standards and adequately characterize uncertainty.

Help is available from specialized consultancy firms like Futurepast. And new international standards and consensus-based protocols are under development. One of the first documents specifically to address supply chain reporting of greenhouse gas emissions is the Scope 3 Accounting and Reporting Standard, to be published as a Supplement to the GHG Protocol Corporate Accounting and Reporting Protocol. This document is available in draft form (November 2009) from the Greenhouse Gas Protocol Initiative, at www.ghgprotocol.org/standards/product-and-supply-chain-standard (accessed on 2010-01-10).

The International Organization for Standardization (ISO) also has begun to develop a document. ISO Technical Report 14069, Greenhouse gases – Quantification and reporting of GHG emissions for organizations (carbon footprint of organizations) – Guidance for the application of ISO 14064-1, is intended to complement the ISO 14064 Part 1 standard published in 2006. Publication of the ISO technical report is not likely before the end of 2012. Futurepast’s president, John Shideler, serves as a US Expert on the ISO working group developing this document.

The main purpose for counting Other Indirect emissions is, of course, to manage them better. Once quantified, organizations in all parts of the supply chain can focus on initiatives to design more sustainable products, improve energy efficiency in manufacture, optimize transportation and logistics resources, and promote end-of-life recycling. Some observers will see connections to other business planning tools such as Six Sigma and Lean Manufacturing which now will be applied to help meet the goals of reducing carbon emissions and managing climate risks.

Top Five New Year’s Climate Change Resolutions for Organizations of All Types and Sizes

New Year’s resolutions may date back millennia, perhaps as far as early Babylonian times. In the modern era individuals may make solemn commitments to lose weight or exercise more. Meanwhile, organizations set about to achieve quality and environmental objectives while maintaining or improving financial performance metrics. Fortunately, when it comes to climate change resolutions, organizations—and individuals—can often achieve win-win outcomes. In this spirit Futurepast offers its Top Five Climate Change Resolutions for Organizations in 2010.

We rank as number five the establishment of an organizational inventory of greenhouse has emissions. For leading organizations, GHG inventories are not new. However, getting one is the place to start for organizations that have put off formal consideration of the carbon intensity of their operations and products. An inventory allows companies, governmental units, and other types of organizations the chance to quantify how much carbon dioxide equivalent gases they emit on an annual basis. The inventory is broken down by type of emission, such as Direct Emissions from stationary and mobile combustion, as well as process and fugitive emissions. Another category is Energy Indirect Emissions, which acknowledge how an organization’s demand for purchased electricity or steam frequently causes utility companies to combust fossil fuels to produce the energy an organization needs. A third category of accounts is Other Indirect Emissions which includes emissions associated with both the upstream supply of raw and processed materials an organization uses as well as the downstream effects of the products and services it furnishes to the market. Transportation of these materials, goods and services typically are also included in the upstream and downstream calculations. Definitely, if your organization doesn’t already have one, now is the time to establish an accurate and verifiable GHG inventory.

Number four on our list of resolutions for the New Year is to obtain information from your supply chain about the carbon intensity of their inputs to your organization’s activities. Leading companies like Walmart have pioneered in this field, and more and more market leading organizations understand the importance of doing so. It comes down to sustainability. Simply put, organizations that are not able to reduce their carbon footprint in the coming years run the risk of falling behind their competitors and losing market share. This is bad for them, their customers, and other stakeholders. Now that market leading organizations have inventoried their carbon emissions and considered ways to reduce them, the next logical place to look is in the upstream part of the value chain.

Our number three resolution is to use the organization’s inventory to set emission reduction targets. An inventory allows organizations to see clearly where their most carbon-intensive operations or activities lie. Armed with this information, objectives for performance improvement can be set. This typically occurs at the highest level of the organization during periodic exercises known as “management reviews.” Top management sets the direction, assigns responsibilities and time frames, and allocates the resources necessary to achieve the targeted improvements.

Futurepast’s second most important resolution for organizations this year is to communicate its GHG performance and improvement objectives to stakeholders. The audience for this communication is both internal and external. Employees must understand the message so they can take needed actions to meet the organization’s climate change objectives. Suppliers need to know what part of the value chain the organization has identified as bearing the highest potential for targeted emission reductions, so they may rise to the challenge and deliver them. Customers are an important audience as well, because increasingly they will make business-to-business or consumer decisions based upon least intensive carbon options, when all other factors are equal. Last but not least, the investor community has a growing desire to know how the organizations they own are meeting the climate change challenges of the twenty-first century. Indeed, in some cases, climate change disclosures may already be called for in securities regulations in those cases where a publicly traded company has determined that a reasonable person could be influenced by its climate change risks and management’s decisions about how to address them.

This year we cap our suggestions for resolutions with our number one recommendation: Reduce the carbon footprint of your organization’s activities and products. Implement actions that reduce consumption of energy, squeeze carbon emissions from the upstream supply chain, and reduce the carbon footprint of products over their life cycles. Increase the efficiency of lighting and heating/cooling systems, optimize distribution networks, reduce packaging, and improve recyclability. Encourage employee car-pooling, transit use or biking to work. Like the individual that goes on a diet and exercises more, organizations that produce equivalent products and services that use less materials and energy will gain an edge in the competitive marketplace and augment its appeal to customers. And in the classic win-win way, it will achieve these benefits while benefiting the organization’s bottom line.

Nations Worldwide Seek Advice from American National Standards Institute on Establishing Greenhouse Gas Accreditation Programs for GHG Validation and Verification Bodies

The American National Standards Institute (ANSI) is a national accreditation body that has led its peers in establishing a greenhouse gas accreditation program for validation and verification bodies. ANSI’s program began in 2008 and by December of that year had accredited in a pilot program its first seven greenhouse gas verification bodies to ISO 14065:2006, Greenhouse gases – Requirements for validation and verification bodies for use in accreditation or other forms of recognition. In the year since those first seven bodies were accredited, ANSI has given its approval to six more.

Other countries that have launched accreditation programs for greenhouse gas verification bodies include Australia-New Zealand, Brazil, Canada, Japan, Mexico, Korea and Taiwan. Moreover, ANSI has received applications from greenhouse gas validation and verification bodies from outside the United States, in particular, China. European greenhouse gas validation and verification bodies are accredited to EA 603, a European Union regulatory document.

Accreditation is a process whereby a third party, in this case ANSI, attests to the competence of the greenhouse gas validation or verification body (GHG VVB) to perform services. Competence is demonstrated by the GHG VVB through its maintenance of documented procedures and records, and through performance of witnessed validation or verification engagements. Accreditation is not a one time event. The accreditation body conducts annual surveillance audits of the GHG VVB that include witnessing additional validation or verification engagements and assessing conformity with documented requirements at the offices of the GHG VVB. The object of the surveillance assessments is to ensure that the accredited bodies continue to meet the requirements of ISO 14065 and conduct their validation and verification audits in conformity to ISO 14064-3 and any applicable GHG program requirements.

How does accreditation benefit the consumer of greenhouse gas validation and verification services? The end-use customer benefits in many ways.

  1. The customer has assurance that a competent body has evaluated the GHG VVB and found that their program meets the requirements of ISO 14065 and that the validation or verification audit will be conducted in accordance with the requirements of ISO 14064-3 (Greenhouse gases – Specification with guidance for the validation and verification of greenhouse gas assertions).
  2. The customer can rely upon the accreditation body to maintain a process for handling appeals or complaints that the customer may raise against the decisions reached or actions take by the GHG VVB.
  3. The customer can expect the marketplace to ascribe value to the placement of an ANSI accreditation mark on a greenhouse gas statement issued by an accredited GHG VVB.

I serve as a member of the ANSI Greenhouse Gas Validation-Verification Advisory Committee in my role as Greenhouse Gas Program Manager for NSF-ISR, one of ANSI’s accredited GHG VVBs. In Copenhagen this week I will be discussing ISO 14064-3, ISO 14065, and the use of other ISO greenhouse gas standards in two separate side events at the COP-15 meeting as an accredited member of the ISO delegation. The purpose of those side events is to communicate to COP-15 negotiators what International Standards and accreditation infrastructure already exists to support governance, trust and integrity in the emissions markets.

In a future blog I will share with you what attendees at the IETA/ISO Copenhagen side event had to say about these ISO standards and existing conformity assessment mechanisms