The Business Roundtable’s statement of purpose, one year on

August 17, 2020 by  
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The Business Roundtable’s statement of purpose, one year on Joel Makower Mon, 08/17/2020 – 02:11 When the Business Roundtable updated its  Statement on the Purpose of a Corporation a year ago this week, its members surely didn’t anticipate a global pandemic, a recession of historic proportions and a movement for racial justice becoming mainstream. Yet here we are, a year later, looking at a very different world than the one envisaged last August. Now that the business group’s statement has been stress-tested well beyond anyone’s expectations, it’s a good time to take a look at what difference it has made in its first 12 months. The short answer: It’s mostly business as usual. That’s an admittedly blunt and sweeping assessment of the state of corporate responsibility. While many companies have stepped up in some fashion to address the urgency of the moment, few have done so in ways that could help advance the kinds of long-term structural changes needed to ensure that the organization’s lofty statement has enduring impact. And some have neutered their stated commitments with actions that harm workers, communities and the environment. First, a refresher. The statement, signed by the chief executives of more than 180 large corporations, declared that business needs to move away from its shareholder-centric mission and advocate for “a fundamental commitment to all of our stakeholders.” In part, signatory companies committed to: compensate employees fairly, including through training and education, while fostering diversity and inclusion; deal fairly and ethically with suppliers; support “the communities in which we work” by respecting people, protecting the environment and “embracing sustainable practices across our businesses” and generate long-term value for shareholders, “who provide the capital that allows companies to invest, grow and innovate.” Not exactly radical statements, given that these commitments reflect much of the corporate sustainability agenda that has been decades in the making. These days, they represent society’s basic expectations of companies and their leaders. Still, the statement signaled a significant departure from the shareholders-at-all-costs orthodoxy of the past half-century, as articulated by the economist Milton Friedman. Fifty years ago next month, writing in the New York Times (PDF), Friedman argued that the social responsibility of business was to “increase profits.” And that anything businesspeople might do otherwise would be part of “the socialist view that political mechanisms, not market mechanisms, are the appropriate way to determine the allocation of scarce resources to alternative uses.” As I noted in a  2006 essay on the occasion of Friedman’s passing: We know better now. For example, we understand that ignoring environmental and social issues can be bad for business. Companies that pollute their local communities risk poisoning their customers. Ignoring the state of the local school system risks depleting the pool of qualified workers. Abusing workers risks higher turnover and training costs, not to mention greater difficulty attracting the most qualified candidates. The roundtable’s statement may have been a departure from the Friedman orthodoxy, but not as profoundly as some seem to think. For example, it acknowledged that “the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all.” In other words: Business knows best how to protect people and allocate resources. Somewhere, Professor Friedman must be smiling. When the Business Roundtable statement was announced, much of the immediate criticism wasn’t from those who disagreed with its goals, but rather those concerned how the commitments would be translated into action, how progress would be measured and how companies would be held accountable. Somewhere, Professor Friedman must be smiling. With good reason: Sustainable business still lacks universal definitions, metrics and accountability. Sure, there are ESG metrics, sustainability ratings and corporate rankings galore. And the pursuit of those can help move companies further faster. But not all companies strive to achieve high scores and rankings, probably because no one, internally or externally, is demanding that they do. And companies can fare well in these rankings even if they, say, extract oil or hire workers at minimum wages without benefits, among other things that are not likely considered “socially responsible” by some. Shareholders first So, what, exactly, has happened in the 12 months since the statement was made? I was hard-pressed to find any significant corporate actions that can be tied directly to the Business Roundtable’s doctrine. Maybe I’ll be surprised in the coming week, should companies or the roundtable itself use the one-year anniversary to assess progress or announce bold new initiatives. That doesn’t mean companies aren’t acting. Corporate initiatives have continued largely unhindered by the recession and pandemic,  as I’ve noted previously . And the George Floyd murder and all that followed has spurred companies to address a range of long-festering racial and social justice issues. But nearly all of those things would likely have happened without the Business Roundtable statement. At best the statement codified what hundreds of big companies are already doing. Moreover, under the laws of the state of Delaware, where 60 percent of Fortune 500 companies (and many smaller ones, including GreenBiz Group) are registered, corporate directors still have a fiduciary duty to act in the best interests of shareholders. The statement does not alter this reality. That means companies are still legally required to put shareholders first. To the extent that it provided a fig leaf that enabled CEOs to pursue business as usual — well, it was probably worse than doing nothing at all. And to the extent that corporate boards and executives have remained on the sidelines of such front-burner issues as voter disenfranchisement, criminal justice reform and climate change rather than advocating for policies to address these critical issues — well, that doesn’t necessarily line up with the Business Roundtable’s stated efforts to “ensure more inclusive prosperity.” Worse than nothing? In the end, the Business Roundtable’s statement was probably far less than it seemed. Companies were already on a path to address many of society’s pressing social and environmental ills, albeit incrementally. To the extent that the statement gave political cover to CEOs that had been reticent to jump in, great. To the extent that it provided a fig leaf that enabled CEOs to pursue business as usual — well, it was probably worse than doing nothing at all. There have been robust efforts for years among academics, NGOs, entrepreneurs and a handful of business executives aimed at reinventing capitalism and corporations. (Allen White, vice president and senior fellow at Tellus Institute, who directs its Program on Corporate Redesign, has written  several thoughtful pieces for GreenBiz on these topics.) Those conversations are extremely valuable, becoming more so every year, and are worthy of a much larger engagement. Ultimately, the power to effect structural change doesn’t necessarily reside in boardrooms, Wall Street or the corridors of political power. It is we, the people, in our roles as the very stakeholders the Business Roundtable’s statement aims to appease — customers, employees, suppliers, communities and shareholders — who are best able to push companies to change, along with supporting the political influencers who understand that the reward systems for doing the wrong things need to be fixed. The Business Roundtable and its members no doubt understand that. But their 2019 statement is unlikely to lead us in that direction. Not without a full-court press from you and me. I invite you to  follow me on Twitter , subscribe to my Monday morning newsletter,  GreenBuzz , and listen to  GreenBiz 350 , my weekly podcast, co-hosted with Heather Clancy. Pull Quote Somewhere, Professor Friedman must be smiling. To the extent that it provided a fig leaf that enabled CEOs to pursue business as usual — well, it was probably worse than doing nothing at all. Topics Leadership Corporate Social Responsibility Featured Column Two Steps Forward Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Shutterstock

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The Business Roundtable’s statement of purpose, one year on

The many faces of energy resilience

August 17, 2020 by  
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The many faces of energy resilience Michelle Moore Mon, 08/17/2020 – 00:30 This series explores how clean energy can deliver on finance and corporate social and governance goals alongside climate and environmental benefits. “Resilience” is a powerful word in 2020. Fires, floods, pestilence, pandemic — I don’t know about you all, but I was raised in a fundamentalist Southern Baptist Church and my Revelations bingo card is just about full. Thinking about the idea of resilience as it relates to equity and energy systems merely as the ability to keep the lights on, however, is missing a powerful opportunity to right the scales of justice. Large corporate energy buyers and utilities, in particular, hold the opportunity to build better and make things right. On resilience The term “resilience” can be applied to a vast array of natural, built and social systems and refers to the ability to recover function following a significant, potentially unpredictable disruption. As it relates to energy, moving away from long transmission lines and centralized power plants burning extracted, polluting fuels and towards a distributed system that combines local energy storage with renewables improves resilience — consistent with the principles of biomimicry. That’s the vision. But how is that vision valued? Resilient energy systems combining renewables, microgrids and energy storage are being deployed by corporations and other institutions that can assign an economic value to resilience as a service, by residential customers who can afford it and by utilities that benefit from the resulting infrastructure and other cost reductions. If we define the value of resilience in such narrow economic terms, however, we will build a clean energy dystopia. But we can choose a better way. Do justice Our energy systems, like most legacy systems, are infused with racial injustices that do particular harm to Black communities, families and individuals because many of our laws and institutions were designed for that purpose. Systems produce outcomes according to the values on which they are founded, and the outcomes are clear. As the NAACP has highlighted , 68 percent of Black and African-American individuals live within 30 miles of a coal plant and are twice as likely to die from asthma than white Americans. Only 1.1 percent of those employed in the energy industry are Black, while Black households comprise more than half of those paying 10 percent or more of their entire income to keep the lights on. Moreover, Black and Latino households pay almost three times as much for energy as higher income and white households.  If we define the value of resilience in such narrow economic terms, we will build a clean energy dystopia. But we can choose a better way. Just because you didn’t write the rules that made things so broken doesn’t absolve you of accountability to fix them. As my colleague Chandra Farley, Just Energy Director with Partnership for Southern Equity, has pointedly noted, Black people, communities of color and low-income communities are resilient because they have endured hundreds of years of systemic racism and disinvestment. Recognizing this, every decision maker leading an energy storage project can choose to do justice by understanding the value of resilience as encompassing more than the money. Here are four examples of how to begin. Communities can define their own resilient energy futures , anchored by colleges and universities. In service to the Atlanta University Center Consortium , Groundswell is supporting the design and development of an innovative Resilience Hub that celebrates the leadership of Atlanta’s historically Black colleges and universities (HBCUs). Partnership for Southern Equity is on the team to ensure that the voice and vision of the surrounding neighborhoods, among the most energy-burdened in the city, are the priority. Enabled through NREL’s Solar Energy Innovation Network, this project is tackling how to deploy community-led energy resilience in a regulated, utility-driven energy market. Large corporate energy buyers can share resilience as a service to the communities surrounding their facilities and installations. Doing so in a way that aligns with local community needs and values requires building relationships with local communities and listening to and meeting their needs. John Kliem, formerly the head of the U.S. Navy’s Resilient Energy Program Office, oversaw an early example of this approach in collaboration with the Kaua’i Island Utility Cooperative in Hawaii. The resulting solar-plus-storage facility, recognized b y a 2019 U.S. Department of Energy award, improves energy security for the local Naval facility while supporting local goals. Kliem, who now leads federal energy strategy for Johnson Controls, also has identified co-location of energy storage facilities to share resilience with critical infrastructure such as hospitals and municipal water pumping stations as opportunities. Cities, municipalities and other jurisdictions can use their planning authority to embed community-driven resilience at the building level. The city of Baltimore is helping to lead the way. Funded through a Maryland Energy Administration Grant, Baltimore is working with Groundswell and energy storage innovators A.F. Mensah to identify and develop up to 20 local Resilience Hubs across the city that will host solar and energy storage installations and provide refuge for local community members in case of extreme weather or other events. Importantly, funded collaborations such as this support critical place-based R&D into optimal approaches to financing larger scale deployment while navigating local, state and regional regulations that impact siting, interconnection and access to revenue opportunities such as selling stored power back to the grid at peak.   Rural electric cooperatives are demonstrating how utilities can deploy energy storage that reduces electric costs for their member customers. Curtis Wynn, CEO of the Roanoke Electric Cooperative and president of the National Rural Electric Cooperative Association, is studying offering energy storage as a service to industrial customers and sharing the resulting cost reductions from reducing peak demand with his residential customers, who are largely low- and moderate-income households. Using smart hot water heaters for energy storage offers similar potential benefits to lower income customers, which is just one of the innovative ideas being advanced by the Beneficial Electrification League . Towards regeneration Building energy resilience can do more than keep the lights on for those who can pay for it. Resilience can be reparative, and the resulting investments can support the regeneration of communities that have been held back by institutionalized systems of oppression. We have a corporate as well as an individual responsibility to do justice. We are called to advocate for and share what we have with others so that everyone is treated equally and with dignity, and it’s the privilege of our generation to be alive at a time when we can make things right. Pull Quote If we define the value of resilience in such narrow economic terms, we will build a clean energy dystopia. But we can choose a better way. Topics Energy & Climate Social Justice Community Resilience Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off GreenBiz photocollage, via Shutterstock

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