How effective stakeholder engagement shaped Samsonite’s ESG strategy

November 16, 2020 by  
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How effective stakeholder engagement shaped Samsonite’s ESG strategy Christine Rile… Mon, 11/16/2020 – 01:00 In March, Samsonite announced “Our Responsible Journey,” a new global sustainability strategy that outlines its commitments across four priority areas: Product Innovation; Carbon Action; Thriving Supply Chain; and Our People, including engagement, development, diversity and inclusion. Samsonite is proud of its 110-year history of industry leadership in the innovation, quality and durability of its products. With Our Responsible Journey, Samsonite strives to lead the lifestyle bag and travel luggage industry across key sustainability indicators, including the use of recycled materials in its products and packaging and achieving carbon neutrality across its owned and operated facilities. With strong support from the entire senior management team and especially from Samsonite CEO Kyle Gendreau, the company has embarked on this journey to make sustainability a key tenet of its brand promise. The goal is to keep the world traveling while staying true to Samsonite’s long-standing ethos, the “Golden Rule,” which guides how we treat each other and care for the world we live in. Our CEO and the Samsonite leadership team wholeheartedly supported the initiative and even encouraged us to up-level some key goals in order to truly lead the industry in sustainability. Samsonite first disclosed the state of its environmental, social and governance (ESG) journey with the publication of its first ESG report in 2016, a requirement for the company’s listing on the Hong Kong Stock Exchange. When I joined as the company’s first global director of sustainability in December 2017, I was tasked with developing a global ESG strategy that would include attainable goals and the action plans that would enable the company to demonstrate continuous improvement and progress toward achieving those goals. We report our progress annually in Samsonite’s ESG report. From the very beginning, the Samsonite executive team empowered me to take the lead on developing an industry-leading approach. The team was directly involved in every phase of the project, including providing feedback, participating in interviews and dedicating resources from their respective regions and functional areas. With executive support, I engaged with Brodie, a London-based consulting firm, to co-lead our materiality assessment. Materiality assessments matter I am a firm believer in the value of materiality assessments, especially when a company is first developing a sustainability strategy. It enables you to identify and validate your issues objectively; educate your company and colleagues about your ESG efforts; effectively allocate resources for your ESG strategy and strengthen credibility with external stakeholders. As we progressed through the internal interview process, I was continually impressed by the number of initiatives already underway to increase the use of sustainable materials in our products and to reduce our carbon footprint. For example, Samsonite North America launched its first product made with post-consumer recycled PET fabric, in January 2018, one month after I started. And by the end of my first year, we already had diverted nearly 30 million PET bottles from landfills through our global use of post-consumer recycled PET fabric in our products. In addition, the company already had installed solar panels on its manufacturing facilities in Hungary and Belgium and had plans to install them on its manufacturing facility in India. It became clear that one of my primary responsibilities would be to identify and organize all of these existing efforts under a comprehensive, focused strategy. Based on the outcomes of the materiality assessment, we identified four key pillars focused on Samsonite’s products, carbon footprint, supply chain and people. One key learning ;from the materiality assessment was that when people thought about sustainability, they often defined it in the context of the environment. As a result, we realized we had to include a brief overview of the issues that fall under the umbrella of ESG so people would evaluate the business across a broader range of initiatives. We further identified two action platforms within each pillar that would allow the company to set goals and to communicate our progress. For example, one pillar focuses on product innovation because Samsonite’s ambition is to lighten the journey of its customers by creating the best products using the most sustainable and innovative materials, methods and models. Within that pillar, we have an action platform that focuses specifically on materials innovation to drive continuous improvement toward developing new, more sustainable materials and increasing the use of more sustainable materials in Samsonite products and packaging. The other action platform targets the product lifecycle and underscores the company’s efforts to continue to make products that are built to last, repairable and, eventually, recyclable. Goals that are specific, yet ambitious The next step was to articulate specific goals and, ultimately, we identified nine global goals with targets set for 2025 and 2030. One of Samsonite’s goals is to achieve carbon neutrality across its owned and operated facilities by 2030. Recognizing that the company’s impact extends beyond its own facilities, we also set a goal to estimate, track and support actions to reduce Scope 3 emissions — those emissions tied to Samonite’s business but outside our control. Our CEO and the Samsonite leadership team wholeheartedly supported the initiative and even encouraged us to up-level some key goals in order to truly lead the industry in sustainability. One of our original goals focused on developing a recyclable suitcase. The feedback was that this was too narrow in its scope. The final goal is more aspirational and states that the company will continue to develop innovative solutions to ensure the durability of its products, extend the life of products and develop viable end-of-life solutions to divert as many of its products from the landfill for as long as possible. The directive was to expand the company’s ambition and further incentivize continuous innovation. The resulting set of goals better reflect Samsonite’s vision and its ambition. Complementing this effort, we needed to establish a global carbon footprint across 1,500 retail, office, manufacturing and distribution facilities worldwide. Partnering with Industrial Economics (IEc), an environmental consulting firm, we collaborated with cross-functional leads worldwide. Specifically, we worked with individuals responsible for the equipment and operations at our owned and operated manufacturing and distribution centers; representatives from our IT and HR departments who source office equipment and train employees on energy-efficient behaviors; and employees from our retail and development teams who make decisions about lighting and real estate. We also worked with global finance teams to collect hundreds of utility bills to ensure an accurate and representative sample size. From all this data, we established a baseline using 2017 data. An extended dialogue While the process is relatively straightforward, Brodie, IEc and I did not do it in a vacuum. Critical to our success was engaging a wide-ranging group of internal stakeholders and subject matter experts. Samsonite operates using a primarily decentralized management structure across its four key regions: North America; Asia; Europe; and Latin America. With the strong support of our regional presidents, we formed a global sustainability committee and a global carbon reduction committee. Membership is varied across functional areas and included human resources, marketing, sourcing, facilities, retail, finance and product development. Participants are nominated by their regional president based on their contribution to the company’s sustainability efforts and/or their interest in the topic. Another way we engaged internal stakeholders was by holding extensive feedback sessions with representatives from different functional areas about the respective goals to ensure that they would be able to successfully implement initiatives and provide data that would be useful and practical when demonstrating progress. The directive was to expand the company’s ambition and further incentivize continuous innovation. The resulting set of goals better reflect Samsonite’s vision and its ambition. For example, when we first set a product-related goal, we recommended establishing a target percentage of sustainable materials across our product lines. As we engaged the design and sourcing teams, it became clear that the target percentage was distracting us from the intent of the goal to increase our use of sustainable materials. There were endless ways to define that number, and we would need to spend significant time determining how to measure it. Rather than significantly delaying the goal-setting process, we decided to develop the quantitative target as part of measurement process. Now that the goals have been announced, we are actively working with marketing, design and sourcing to clearly define how we will demonstrate progress against our goal to increase the use of materials with sustainable credentials in all our products and packaging to lessen our impact on the environment. The global carbon reduction committee was involved in the process of choosing the environmental consulting firm, reviewing proposals, meeting with the candidates and making a final recommendation to work with IEc. The individual committee members, along with others, also provided feedback on the data-collection process. We shared both the results and the credit with everyone who was part of the process. This extensive stakeholder engagement meant that the process took two years from launching the materiality assessment to announcing the strategy. I am proud Samsonite has a sustainability approach that everyone can feel ownership of, and ultimately all of us are invested in its successful implementation. The world has changed a lot over the past two years, and especially during the past six months. Sustainability is increasingly important to consumers as more and more, we recognize the impact of our behaviors and consumption habits on the environment. I am proud that Samsonite has developed an ESG strategy that aligns with my personal and professional commitments and with Samsonite’s ethos, the “Golden Rule,” which guides how we treat each other and care for the world we live in. Pull Quote Our CEO and the Samsonite leadership team wholeheartedly supported the initiative and even encouraged us to up-level some key goals in order to truly lead the industry in sustainability. The directive was to expand the company’s ambition and further incentivize continuous innovation. The resulting set of goals better reflect Samsonite’s vision and its ambition. Topics Corporate Strategy Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off The interior of a Samsonite facility. Courtesy of Samsonite Close Authorship

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How effective stakeholder engagement shaped Samsonite’s ESG strategy

Kraft Heinz sustainability chief reflects on ‘interdependence’

October 28, 2020 by  
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Kraft Heinz sustainability chief reflects on ‘interdependence’ Heather Clancy Wed, 10/28/2020 – 01:00 Food company Kraft Heinz has been relatively quiet about its corporate sustainability strategy in the five years since it was formed through the merger of food giants Kraft and Heinz — stepping out in early 2018 to provide an update . In September, the maker of well-known brands such as Kraft Macaroni & Cheese, Planter’s Nuts and Heinz Ketchup — which had $25 billion in revenue last year — spoke up again with a second combined report that shows it stalled on 2020 goals for energy and water through last year (it will miss both) and doubles down on work to create circular production processes for packaging (it’s ahead of schedule and will introduce the first circular Heinz bottle in Europe next year). Kraft Heinz also updated its commitments with new targets pegged to 2025. Here are some of the latest commitments, along with perspective on progress so far: Procure most electricity from renewable sources by 2025 and decrease energy usage by 15 percent. The company didn’t previously have a renewables target, but it has been emphasizing a goal to reduce energy consumption (per metric ton of product produced) by 15 percent, which it had hoped to achieve by this year. Through 2019, it managed a 1 percent reduction against a 2015 baseline. Decrease water usage by 20 percent at high-risk sites and 15 percent overall by 2025 (per metric ton of product made). The company had hoped to reduce consumption by 15 percent by this year, against a 2015 baseline, but it actually increased water use by 1 percent per metric ton of product produced.   Decrease waste by 20 percent across all Kraft Heinz manufacturing operations by 2025. That’s a higher percentage than its previous commitment, which focused on waste to landfill. The company actually increased waste to landfill by 16 percent through 2019 but is has pledged to focus more closely on “a strong byproducts plan, product donation strategy and improved forecasting.” Make 100 percent recyclable, reusable or compostable packaging by 2025. Through 2019, it has achieved 70 percent. Kraft Heinz is undergoing an assessment so it can set a science-based target for greenhouse gas emissions reduction. Emissions have increased since its 2015 baseline, although the company managed a 5 percent cut from 2018 to 2019. Responsible sourcing is a big focus , with the company aiming for 100 percent sustainably sourced tomatoes by 2025, 100 percent sustainable and traceable palm oil by 2022, and 100 percent cage-free eggs globally by 2025 (among other ingredients). Rashida La Lande, general counsel at Kraft Heinz, took on responsibility for the company’s environmental, social and governance (ESG) strategy at the end of 2018. I caught up with her recently for a brief conversation as the company disclosed its new target, chatting about how best practices from the previously independent companies have been shared, how the pandemic has affected progress and what’s to come for sustainable agricultural practices. Below is a transcript of that discussion, edited for style and length. Heather Clancy: It seems unusual for a general counsel to have this role. What prompted the decision to make it part of your responsibilities? Rashida La Lande: I think it was a couple of things. There are some general counsels that have it. It sometimes falls within corporate affairs, sometimes it falls within procurement. I think for depending on where you see it, it kind of reflects the way that the company might focus on the issue. From our perspective I think it reflects several things. One, it reflects the fact that it’s a passion of mine. It’s something I view, and I think is important. And I think at the time our CEO wanted to make sure that someone who was passionate about it and had real sense of the business and the industry was leading it. The environmental and, of course, the social are hugely important to us but we really start from the perspective of how can we design policy and reporting to maximize our result. In addition, when we look at ESG, I think the fact that it’s within legal also reflects the heavy importance that we put on its governance. From the governance part of it — meaning the reporting level of the board, the oversight, the disclosure — we really truly do believe that what you track, what you measure, what you report on, what you compensate on are the things that you see effectively change. So, of course, the environmental and, of course, the social are hugely important to us but we really start from the perspective of how can we design policy and reporting to maximize our result. Clancy: How is your team blending the legacy knowledge of the two separate programs at Kraft and Heinz? La Lande: That’s a really good question. Business continuity was the primary focus of the merger and of aligning the two companies. And they had very different sustainability programs at the time. Right now, what we’re trying to do is to make sure that the ESG focuses on the key parts of our enterprise strategy so we put the time and resources behind our commitments and where we think we can drive the biggest change. With the merger, we’re able to assess what each company was doing and how they were thinking about it. Frankly [we could] identify where we can take the things that they were doing best and then identify the things that each side needed to do better. So, for example, we had strong sustainable palm oil sourcing programs on the Kraft side whereas on the Heinz side there was a really strong focus on agricultural and sustainable agriculture commitments stemming from ketchup and our use of tomatoes. … Both companies had really strong histories of philanthropical support, Heinz in particular with the relationship it had in Pittsburgh. And so it’s coming together and really thinking about as a food company how can we best talk about food insecurity and feeding people globally, which is something that really gels from both companies’ background. Media Source Courtesy of Media Authorship Kraft Heinz Close Authorship Clancy: How has the pandemic changed the focus of the Kraft Heinz ESG team? La Lande: It really put a focus on how much of a global company we are and our interdependence through all of our systems, businesses, units and people. And frankly, it has highlighted some of the ways that our global ESG perspective [is a strength] for us as a company and how important it is for our strategy. One of the things that we have been talking about since I started working on ESG is how important it is for us to support our community in their time of need. So we really looked at places where we’ve got employees and factories and consumers and customers, and we started to do more programming around not only the food insecurity but also making sure that we were available to people at the time of the disaster. So when the pandemic hit, it really caused us to quickly recognize that how we were thinking about this already, in terms of community, disaster relief and feeding people, put us in a really unique position to be impactful and to think about the global need that was going to be coming from the pandemic. So, we committed to provide meals to those in need and trying to do what we could to eliminate global hunger. And the pandemic just punctuated the need. At this point, to date, we’ve donated more than $15 million in financial and product support to help people all across the globe access the food that they need. And we’ve done it both in a fast time, mobile way as well as [through] a local touchpoint where we have business and community impact. Clancy: I know I’m jumping around a little bit. That’s the nature of having only a few minutes with you. What is the company’s policy for protecting biodiversity? La Lande: Right now, we’re working to update our sustainable agricultural practice by the end of 2020. We’re doing the work with a very seasoned agricultural team … primarily coming from the Heinz side but not exclusively. We have a strong history of sustainable agriculture. We’re working with developing that program further based on input from our growers and our suppliers, the farmers that we buy from. And we even have an upcoming “In Our Roots” program where we’re going to be working with suppliers to ensure that all of their agricultural practices satisfy our customer needs for safe food and traceable origin, [and] satisfy consumer demands for reliable supply, particularly of affordable nutritious food. We focus on promoting and protecting the health and welfare and the economic prosperity of the farmers, the workers, the employees and the communities within our supply chain. We’re very focused on minimizing our adverse effects on the Earth’s natural resources and biodiversity. We think those are the ways that we’re going to contribute, and that’s what we’re focusing on as we develop this program. We expect to roll it out more effectively — more widely, I should say — in 2021. Our main focus is on being good stewards of the environment, sourcing responsibilities, tracking and verifying where our ingredients come from, making our concerns and commitments with our suppliers and our supply chain very clear. Clancy: Will regenerative ag be part of that? La Lande: I think that is one of the things that we’re talking about, but I think we’ll have an ability to think more specifically about it once we make a more specific announcement in 2021. Clancy: Fair enough. How does Kraft Heinz blend environmental justice considerations into its ESG strategy? La Lande: Our main focus is on being good stewards of the environment, sourcing responsibilities, tracking and verifying where our ingredients come from, making our concerns and commitments with our suppliers and our supply chain very clear. Working and partnering with our supply chain to make sure that they have the training and expertise and understanding of our expectations. And verifying our ingredients, where they come from, what the impacts of our operations are. Through all of this, we think we’re better able to ensure that our environmental impacts are not so delineated by socioeconomic or demographic lines and instead really focus on how we can impact and have good stewardship worldwide. That’s why you see one of our key pillars being environmental stewardship as a global strategy. Clancy: You probably have 18 priorities or probably 18 million priorities. But what do you feel is your most important priority in this moment? La Lande : My goodness. I do have 18 million priorities. But for me, I think in this moment in the pandemic it’s really the focus on feeding people. There is a lot of hardship that people are facing. Unfortunately, I think there’s going to be more hardship kind of globally before we [as a society] get ourselves out of the position that we’re currently in. So I think while everything that we’re doing is extremely important, I think the day-to-day needs that we’re seeing and addressing those needs for people have to be at the forefront of what we do and have to be our first commitment. Pull Quote The environmental and, of course, the social are hugely important to us but we really start from the perspective of how can we design policy and reporting to maximize our result. Our main focus is on being good stewards of the environment, sourcing responsibilities, tracking and verifying where our ingredients come from, making our concerns and commitments with our suppliers and our supply chain very clear. Topics Food & Agriculture Collective Insight The GreenBiz Interview Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Kraft Heinz general counsel Rashida La Lande leads the giant food company’s corporate social responsibility and ESG strategy. Courtesy of Kraft Heinz Close Authorship

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Rethinking the role of sustainability reports

October 20, 2020 by  
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Rethinking the role of sustainability reports Mike Hower Tue, 10/20/2020 – 01:00 Corporate sustainability has a reporting problem — it always has. Companies typically don’t enjoy creating them and investors, customers, employees and most other stakeholders don’t revel in reading them. Yet, with investors more interested in environmental, social and governance (ESG) issues than ever before, this long-standing problem has become an immediate liability for companies looking to maximize shared value. Today, some 90 percent of companies in the S&P 500 produc e corporate sustainability reports, and the practice has become so ingrained in corporate sustainability culture that few question its purpose or efficacy. Reporting has risen to prominence for good reason — there never has been a more critical time for companies to communicate their strategies and actions for corporate sustainability. Many investors evaluate nonfinancial performance based on corporate disclosures, with most finding value in assurance of the strength of an organization’s planning for climate and other ESG risks. Meanwhile, consumers increasingly are demanding responsible products, and attention to sustainability issues has become an employee expectation. But something isn’t right with the status quo of reporting. “By trying to meet the demands of multiple stakeholders, sustainability reports have become bloated, overly complex and expensive to produce,” said Nathan Sanfacon, an ESG expert at thinkPARALLAX , a sustainability strategy and communication agency. “This results in companies spending scarce resources on a report that doesn’t quite satisfy the needs of any stakeholder group.” To be more effective at engaging investors and other critical audiences on ESG, companies ought to shift towards communicating relevant data in a more agile and real-time format. This is particularly problematic for large, publicly traded companies seeking to attract and retain institutional investors. “To be more effective at engaging investors and other critical audiences on ESG, companies ought to shift towards communicating relevant data in a more agile and real-time format,” Sanfacon said. Addressing this disconnect is at the core of the new thinkPARALLAX white paper, ” The New Era of Reporting: How to Engage Investors on ESG ,” which examines the pitfalls of sustainability reporting in the past and present and offers a better way forward for corporate sustainability practitioners. A short history of sustainability reporting While reporting might seem a recent phenomenon, its origins go back nearly half a century — emerging first in Europe in the 1960s and later in the United States in the 1970s after the first Earth Day launched the modern environmental movement. Many of the earliest reports were strictly environmental and more about addressing public image problems than communicating anything that might resemble a proactive sustainability strategy. What we might call the modern era of sustainability reporting began in 1997 when public outcry over the environmental damage of the Exxon Valdez oil spill compelled Ceres and the Tellus Institute to create the Global Reporting Initiative (GRI) . The aim was to create the first accountability mechanism to ensure companies adhere to responsible environmental conduct principles, which was then broadened to include social, economic and governance issues, GRI says on its website. “Prior to GRI, there was no framework to ensure that reporting was consistent or reflective of stakeholder needs,” said Eric Hespenheide, chairman of GRI, in an email. “First through versions of the GRI Guidelines and since 2016, the GRI Standards, we have been furthering our mission to use the power of transparency, as envisaged by effective disclosure, to bring about change.” Since then, multiple other reporting frameworks have emerged to cater to the ever-growing list of corporate sustainability stakeholders, such as the investor-focused Sustainability Accounting Standards Board (SASB) and Task Force on Climate-related Financial Disclosures (TCFD) . “While sustainability reporting has come a long way, a lack of standardization means that there is a disconnect between what investors are looking for and what companies are communicating,” Sanfacon said. Giving investors what they want Here’s a billion-dollar question: What do investors look for when evaluating companies on ESG? The simple answer: data; data; and more data. “Investors tell us they’re looking for raw ESG data that is consistent, comparable and reliable — data that is focused on the subset of ESG issues most closely linked to a company’s ability to create long-term value,” Katie Schmitz Eulitt, director of investor outreach at SASB, wrote in an email. Schmitz Eulitt regularly engages with the investment community on disclosure quality, including with members of SASB’s 50-plus member Investor Advisory Group, who collectively manage more than $40 trillion in assets. “When companies more explicitly connect the dots between how they manage sustainability-related risks and opportunities and their financial outcomes, it’s both an opportunity to enhance transparency and strengthen performance,” Schmitz Eulitt added. When companies more explicitly connect the dots between how they manage sustainability-related risks and opportunities and their financial outcomes, it’s both an opportunity to enhance transparency and strengthen performance. But this is easier said than done because corporate leaders, investors and other stakeholders must work with two separate and disjointed reporting systems: one for financial and the other for ESG performance. “Companies can be screened in or out using various criteria, but there is no way to integrate the data into earnings projections or valuation analysis,” wrote Mark Kramer et al. in a recent piece in Institutional Investor. “The result is two separate narratives, one telling how profitable a company is, the other highlighting whether it is good for people and the planet.” The new era of reporting Investors, of course, aren’t the end all, be all of corporate sustainability communication — companies also want to reach customers, consumers, regulators and employees, among others. But limited time and money often results in corporate sustainability practitioners attempting to use annual or bi-annual reports as a one-size-fits all solution. More often than not, these reports are heavy on human-centric stories and light on quantitative information. While non-investor stakeholders tend to appreciate the human stories, they also typically aren’t taking the time to download and devour a portly PDF. Meanwhile, while investors are people too and can enjoy a good human story, they ultimately aren’t getting enough of the hard data they desire. In the new whitepaper, thinkPARALLAX proposes addressing this problem by dividing sustainability communication into two drivers — demonstrating performance and building reputation — so that companies can better invest time and resources to better engage investors and other stakeholders. Demonstrating performance involves conveying the effectiveness of a company’s sustainability strategy and management of material ESG issues, such as disclosing data around carbon emissions or diversity and inclusion through a digital reporting hub. Building reputation focuses on showing that a company is acting responsibly, limiting its environmental impact and delivering societal benefits. This could take the form of communications activities such as social media campaigns, microsites, videos, speaking or op-eds, among others.  “Companies most interested in engaging investors should focus more on demonstrating performance by communicating the hard ESG data they are looking for, as opposed to human interest stories,” Sanfacon said. “But if non-investor stakeholders like consumers, employees or customers are a primary audience, the company should invest more in building reputation by bringing the data to life through inspiring stories.” While this won’t single-handedly solve corporate sustainability’s reporting problem, it’s a start. As companies shift away from massive PDF reports and toward more targeted, real-time investor communication, they’ll free up time and resources to better engage consumers, employees and other key stakeholders on corporate sustainability. Pull Quote To be more effective at engaging investors and other critical audiences on ESG, companies ought to shift towards communicating relevant data in a more agile and real-time format. When companies more explicitly connect the dots between how they manage sustainability-related risks and opportunities and their financial outcomes, it’s both an opportunity to enhance transparency and strengthen performance. Topics Reporting ESG Featured in featured block (1 article with image touted on the front page or elsewhere) On Duration 0 Sponsored Article Off Shutterstock Kan Chana Close Authorship

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David Crane is back, with a climate-tech SPAC

October 8, 2020 by  
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David Crane is back, with a climate-tech SPAC Heather Clancy Thu, 10/08/2020 – 01:45 One of the hottest 2020 trends in raising capital is infiltrating climate-tech investing.  As of mid-September, the stock market had welcomed at least 82 initial public offerings this year by special purpose acquisition companies (SPACs) — organizations that collectively raised more than $31 billion. Last week, former NRG Energy CEO David Crane joined the frenzy.  Crane was instrumental in leading NRG into renewables and other clean energy sectors and was ousted in late 2015 after its stock tanked. (Disclosure: Crane is a former GreenBiz editor at large, and you can read his body of work here .) As of Monday, his new company, Climate Real Impact Solutions (CRIS), had raised more than $230 million for the purpose of merging with a company focused on solving the climate crisis.  “Over the past decade, American entrepreneurs have brought forth a wide array of exciting products and services which are clean, green, smart and affordable,” Crane said in a statement. “We have formed Climate Real Impact Solutions to help those entrepreneurs gain access to the capital, the connections and the talent they need to take their businesses to the next level while amplifying their climate impact.”  The public markets have this appetite for companies that want to change the world. The “we” in that statement includes high-profile clean energy veterans: former Green Mountain Power CEO Mary Powell (the chairperson), ex-Credit Suisse energy group executive John Cavalier (CFO) and onetime GE vice chair and GE Ventures lead Beth Comstock (chief commercial officer).  A SPAC , also known in financial circles as a “blank check” company, is a corporate structure created with the mission of merging with another firm — usually within a two-year timeframe. After the merger, the acquired company becomes listed.  Why would a startup do this? You can think of it as an alternative for a late-stage venture capital round, Crane told me last week when we chatted about the venture. It’s of interest to companies that feel capital-constrained, and the current uncertain state of the economy has galvanized interest.  There isn’t as much scrutiny on the company going public as there would be with a traditional IPO, which is why SPAC-enabled deals are a controversial topic right now. One of the most vivid examples of what could go wrong is the hoopla surrounding Nikola Motors, the electric truck maker. The company’s founder, Trevor Milton, resigned in September after being accused of fraud and sexual misconduct. Quite a few next-generation transportation companies have used SPACs to go public this year, including EV maker Fisker and autonomous vehicle sensor company Velodyne Lidar. Even former Uber executive Emil Michael is getting into the act: He registered plans for a $250 million SPAC late last week. Crane told me he actually considered creating a SPAC three years ago but decided the market wasn’t ready. But now, investors are far more interested in startups looking to raise capital that have strong environmental, social and governance (ESG) stories. “The public markets have this appetite for companies that want to change the world,” he said. What is CRIS looking for? A SPAC can only buy one company but the team plans to evaluate carbon removal and avoidance businesses. There’s a long list of categories that fit that bill, including ones where Crane and company have a lot of expertise in their background: distributed generation plays (such as rooftop solar), utility-scale renewables ventures, energy storage startups, renewable natural gas, energy efficiency service providers and green energy retailers, electric vehicle infrastructure or decarbonized fuels. There’s also a chance the company could focus more on organizations removing carbon from the atmosphere, such as a reforestation, regenerative ag or carbon capture company, although those startups tend to be at an earlier stage given the dynamics of carbon pricing, Crane said.  CRIS plans to use both traditional financial evaluation methods and “climate-focused environmental metrics” to make their decision, and you can expect the CRIS crew to be actively involved with mentoring and supporting the acquisition target’s management team. The CRIS board also includes Mimi Alemayehou (Black Rhino Group), Richard Kauffman (former New York energy and finance czar) and Jamie Weinstein (managing director of PIMCO, which helped organize co-sponsors for the offering). I’m eager to see who CRIS targets, aren’t you? Pull Quote The public markets have this appetite for companies that want to change the world. Topics Climate Change Finance & Investing Climate Tech Featured Column Practical Magic Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off NRG.com Close Authorship

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This new cooling technology also prevents viral spread

October 8, 2020 by  
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This new cooling technology also prevents viral spread Gloria Oladipo Thu, 10/08/2020 – 00:40 In the face of dangerous heat waves this summer, Americans have taken shelter in air-conditioned cooling centers . Normally, that would be a wise choice, but during a pandemic, indoor shelters present new risks. The same air conditioning systems that keep us cool recirculate air around us, potentially spreading the coronavirus. “Air conditioners look like they’re bringing in air from the outside because they go through the window, but it is 100 percent recirculated air,” said Forrest Meggers, an assistant professor of architecture at Princeton University. “If you had a system that could cool without being focused solely on cooling air, then you could actually open your windows.” Meggers and an international team of researchers have developed a safer way for people to beat the heat — a highly efficient cooling system that doesn’t move air around. Scientists lined door-sized panels with tiny tubes that circulate cold water. Stand next to a panel, and you can feel it drawing heat away from your body. Unlike air conditioners, these panels can be used with the window open — or even outdoors — making it possible to cool off while also getting some fresh air. This reduces the risk of spreading airborne viruses, such as the coronavirus. “If you look at what the health authorities and governments are saying, the safest place to be during this pandemic is outside,” said Adam Rysanek, an assistant professor of environmental systems at the University of British Columbia who was part of the research effort. “We’re trying to find a way to keep you cool in a heat wave with the windows wide open, because the air is fresh. It’s just that it’s hot.” Cooling panels have been around for a while, but in limited use, because scientists haven’t found a good way to deal with condensation. Like a cold can of Coke on a hot summer day, cooling panels collect drops of water, so they have to be paired with dehumidifiers indoors to stay dry. Otherwise, overhead panels might drip water on people standing underneath. Meggers and his colleagues got around this problem by developing a thin, transparent membrane that repels condensation. This is the key breakthrough behind their cooling technology. Because it stays dry, it can be used in humid conditions, even outdoors. We’re trying to find a way to keep you cool in a heat wave with the windows wide open, because the air is fresh. In air conditioners, a dehumidifier dries out the air to prevent condensation. This component uses an enormous amount of energy, around half of the total power consumed by the air conditioner, researchers said. The new membrane they developed eliminates condensation with no energy cost, making the cooling panels significantly more efficient than a typical AC unit. The research team involved scientists from the University of British Columbia, Princeton, UC Berkeley, and the Singapore-ETH Centre. They published their findings in the Proceedings of the National Academy of Sciences. “This study demonstrates that we can maintain comfortable conditions for people without cooling all the air around them,” said Zoltan Nagy, an assistant professor of civil engineering at the University of Texas who was not affiliated with the study. “Probably the most significant demonstration of this study is that humans can be provided with comfort in a very challenging thermal environment using a very efficient method.” Researchers developed their technology for use in the persistently hot, muggy climate of Singapore, where avoiding condensation would be particularly difficult. To test their design, they assembled a set of cooling panels into a small tunnel, roughly the size of a school bus. The tunnel, dubbed the “Cold Tube,” sat in a plaza in the United World College of South East Asia in Singapore. Scientists surveyed dozens of people about how they felt after walking through the tunnel. Even as the temperature neared 90 degrees F outside, most participants reported feeling comfortable in the Cold Tube. We can maintain comfortable conditions for people without cooling all the air around them. Scientists said they want to make their technology available to consumers as quickly as possible, for use in homes and offices, or outdoors. Climate change is producing more severe heat , which is driving demand for air conditioners. Researchers hope their cooling panel will offer a more energy-efficient alternative to AC units. If consumers can use less power, that will help cut down on the pollution that is driving climate change. Before they can sell the panels, researchers said they need to make them hardy enough to survive outdoors. The anti-condensation membrane is currently so thin that you could tear it with a pencil, so it must be made stronger. Scientists also need to demonstrate that the panels work efficiently indoors. Hospitals and schools in Singapore already have shown interest in the cooling system. “We know the physics works. Now we need to do one more test so we have a bit more of a commercially viable product,” Rysanek said. “It’s really about trying to get this into people’s hands as quickly as possible.” Pull Quote We’re trying to find a way to keep you cool in a heat wave with the windows wide open, because the air is fresh. We can maintain comfortable conditions for people without cooling all the air around them. Topics HVAC Nexus Media News Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Cooling panels draw heat away from people standing nearby. Lea Ruefenach Close Authorship

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ESG investments: Exponential potential or surfing one wave?

September 21, 2020 by  
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ESG investments: Exponential potential or surfing one wave? Terry F. Yosie Mon, 09/21/2020 – 00:30 Amidst four concurrent crises — health, economic, race relations and climate — one stand-out 2020 development has been the rebound of major stock markets and, particularly, the growing performance and prominence of environment, social and governance (ESG) traded funds. ESG portfolios not only have outperformed traditional financial assets this year, but also a data analysis prepared by Morningstar, a financial advisory research firm, concluded that almost 60 percent of sustainable investments delivered higher returns than comparable funds over the past decade. Morningstar also found that ESG funds have greater longevity than non-ESG portfolios. About 77 percent of ESG funds that existed 10 years ago are presently available, whereas only 46 percent of traditional investment vehicles maintain that survivorship. These developments raise two overriding questions: what factors have converged to catapult ESG portfolios into the front rows of investment strategy, and what challenges can transform (for better or worse) ESG fund performance in the future? ESG investing has made important strides in the past decade and possesses significant momentum to expand its reach into the broader economy. ESG’s arrival at the Big Dance Since the rebound from the 2007-08 financial crisis, it would have taken a singularly motivated unwise investor to lose money in U.S. equity markets. ESG investors were not unwise. Several sets of factors converged to make these funds an even better bet than the S&P 500, Dow Jones or NASDAQ exchanges that covered a broad array of individual equities, mutual funds or indexed portfolios. These factors include: Less risk and volatility. ESG asset managers and their customers generally prefer a longer-term planning horizon than many of their traditional competitors whose reliance upon program trading or other methods result in more frequent turnover in holdings. In retrospect, it also turned out that ESG portfolios contained less financial risk because they had more accurately identified risks from climate change and considered other variables — such as resilience — for which no accepted risk methodology exists. The response to the international COVID-19 pandemic has become a de facto surrogate to measure corporate resilience and has previewed the economic and societal chaos that is increasingly expected to arrive from accelerating climate change. For investors, ESG portfolios have provided a welcome shelter in the storm and a more profitable one at that.   A declining investment rationale for fossil fuels. What was once a trend is now a rout. ESG asset managers, closely attuned to climate-related risks, recognized the receding value of first coal, and now, petroleum investments that are in the midst of an historic decline. Prior to the 2007-08 financial crash, ExxonMobil enjoyed a market capitalization in excess of $500 billion. By 2016 (and accounting for the rebound from that crash), it stood at about $400 billion. Today, it is $159 billion even as overall equity valuations reach historic highs. Asset write-offs from the oil sector continue to mount and include BP’s write-down of $17.5 billion and Total’s cancellation of $9.3 billion in Canadian oil sands assets. By virtually any established financial metric — net income, capital expenditures, earnings per share — petroleum companies are shrinking. As an industry group, energy is one of the smallest sectors in the S&P 500.   Convergence of transparency and governance. While there are frequent complaints about the lack of robust financial metrics to evaluate ESG investment opportunities, the fact is one of growing convergence around some critical reporting measures. For climate change, these include the information obtained from companies adhering to the Task Force on Climate-related Financial Disclosures (TCFD) that provide for voluntary and more consistent financial risk reporting. CDP is widely respected among asset managers, and there is growing interest in the efforts of the Global Reporting Initiative-Sustainability Accounting Standards Board to arrive at a simpler, sector-specific, financially relevant set of performance metrics. Governance expectations also have accelerated as more financial firms seek not only fuller disclosure but understanding of actual plans to achieve an impact through, as one example, Scopes 1, 2 and 3 reductions within specific time frames.   Collaboration among financial asset management firms. No longer is it necessary for nuns organized through the Sisters of St. Francis or the Interfaith Center on Corporate Responsibility to maintain their lonely vigil to persuade management of their social and environmental concerns. In recent years, their cause has been transformed by the world’s largest asset management firms that have the added advantage of being very large investors in the companies whose practices they wish to change. These organizations — including BlackRock, BNP Paribas Asset Management, CalPERS and UBS Asset Management — generally have no difficulty in meeting with CEOs or, more recently, obtaining increasingly large support for the shareholder resolutions they support. Most significant, in the aftermath of the 2015 Paris Climate Accord, these firms increasingly collaborate through organizations such as Climate Action 100+, known as CA100+ (which presently has more than 450 investor members with over $40 trillion in assets), Ceres and the Asia Investor Group on Climate Change. Their climate change action agenda includes setting an emissions reduction target, disclosing climate-related financial risks through the TCFD reporting framework and ensuring that corporate boards are appropriately constituted to focus upon and deliver climate results. In reflecting on this evolution, long-time sustainability investor John Streur of Calvert Research & Management wrote, “We need to spend more of our engagement time pressing for change, as opposed to asking for disclosure.” Disrupting and being disrupted — the road ahead The ESG investment movement has every reason to be optimistic in the short term. There is growing investor and stakeholder momentum for the goals of expanded disclosure, improved corporate governance and measurable plans and impacts, especially for climate change. There is significant expansion in the staff sizes and expertise that better enable firms with ESG portfolios to evaluate financial risks. And their financial performance continues to impress. What could go wrong, come up short or require adaptation? Several factors bear a closer scrutiny. ESG’s value proposition is principally based on de-risking assets. This is too limited a value proposition to meet future needs . For example, ESG data does not reveal much insight for identifying research and development priorities, product innovation opportunities or effective branding and marketing strategies. As Brown University professor Cary Krosinsky has commented, “ESG data doesn’t tell you the most important thing: who will win the race” in future business competition and success for the long-term. In short, is ESG investment too disconnected from the very purpose of an enterprise — to innovate new products, gain customers and make money over time through business development?   As ESG investment goes mainstream, it will face new challenges and risks. A current advantage that ESG managers possess is that their decisions focus more on pure-play outcomes such as de-risking companies from climate change or other sustainability challenges. As more traditional investment firms acquire or expand ESG capabilities, more complexity will enter into investment decisions to reconcile clients’ needs or manage the trade-offs between ESG performance measures and those applied through shareholder value driven outcomes (earnings per share, quarterly financial reporting). Aligning expectations concerning executive compensation, independence of directors and future investment opportunities are major unresolved issues between ESG and traditional investment practitioners.   To be more impactful, the composition of ESG portfolios will need to change. Currently, ESG funds are dominated by equities, but significant capital is invested in other sectors such as bonds, exchange traded funds (ETFs) and real estate. The methodology for evaluating these asset classes will need to be modified from that applied to the assessment of equities. At the same time, ESG funds are heavily weighted in ownership of technology stocks, particularly the so-called FAANG companies — Facebook, Amazon, Apple, Netflix and Google — in addition to Microsoft. A number of these firms have inadequate data security and privacy protections, weak corporate governance and poor business ethics. The long-term wisdom of piling so many investment eggs into a single sector basket, combined with the multiple ESG problems of current technology portfolios, challenges ESG asset firms to become more transparent about their own evaluation criteria and decision making about portfolio diversity.   ESG assessments should assign a higher priority to social issues. The “S” in ESG is the least understood of the three factors, and it will be the most challenging to apply. As diversity, inclusion and equity become a greater focus of corporate sustainability policies and programs, the methodology for their evaluation is the least advanced. In part, this reflects the cultural and racial filter of a largely white and wealthy investor class lagging in its comprehension that race and social justice are material investment criteria. Simultaneously, data on social indicators will be more difficult to collect. Large numbers of companies are reluctant to disclose such information because it will expose gender and racial gaps in pay and promotion and general under-representation of minorities. Again, the technology sector is a major laggard on such issues. More broadly, the collection of social data, especially for racial diversity, is made more difficult as a matter of policy by many governments outside the United States, including in Europe where it is illegal in some countries to collect ethic and racial information. Some ESG investors are beginning to expand their dialogue around these issues, but they are much further behind when compared to their assessments and investment policies on environmental and governance issues. ESG investing has made important strides in the past decade and possesses significant momentum to expand its reach into the broader economy. Karina Funk, portfolio manager and chair of Sustainable investing at Brown Advisory, sees an approaching convergence between ESG and traditional investment philosophies. “ESG is a value-add,” she noted in a recent conversation. “It provides an expanding array of tools — financial screening, data analysis, issue-specific consultations with companies, proxy voting and an emerging focus on social risks — so that, in five years, ESG will be a standard expectation in asset evaluations. The key will be to focus on all risks facing a company, quantifiable or not, the exposure of business models and identifying what factors are within a company’s control.” Will management listen to ESG investors? Voices as varied as the U.S. Department of Labor and Harvard economics professor Gregory Mankiw are urging company executives and fund managers to tip the scales against what they consider to be economically risky and materially irrelevant ESG factors. In re-asserting the primacy of shareholder value, they remind us that voice of Milton Friedman still echoes from the crypt even as it grows fainter within the rapid humming of today’s marketplace and changing society. Pull Quote ESG investing has made important strides in the past decade and possesses significant momentum to expand its reach into the broader economy. Topics Finance & Investing ESG GreenFin Featured Column Values Proposition 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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ESG investments: Exponential potential or surfing one wave?

Earth911 Reader: Climate Migration, 2,700 EV Charging Stations, and ESG Investing

August 5, 2020 by  
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Welcome to Earth911’s daily climate, sustainability, and recycling reader, a … The post Earth911 Reader: Climate Migration, 2,700 EV Charging Stations, and ESG Investing appeared first on Earth 911.

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Semiconductor firm Applied Materials puts supply chain at center of new commitments

July 28, 2020 by  
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Semiconductor firm Applied Materials puts supply chain at center of new commitments Heather Clancy Tue, 07/28/2020 – 02:00 The sustainability ambitions of the world’s largest cloud software companies — Amazon, Google, Microsoft and Salesforce — have been well-documented. The broad semiconductor industry’s position to date, however, has been less transparent and less ambitious, with the highly visible exceptions of AMD, IBM and Intel.  That stance is shifting, as the sector contemplates the explosive growth projections for connected computing devices, including sensors, smartphones, tablet computers and personal computers, not to mention the massive server hardware needed to process artificial intelligence algorithms.  By 2030, there could be a half-trillion such devices “at the edge” of the digital networks driving business innovation around the planet, Applied Material President and CEO Gary Dickerson noted last week in a keynote address during a virtual edition of the industry’s annual conference, SEMICon West .  The association behind the gathering, SEMI , projects semiconductor revenue could reach $1 trillion by that same timeframe, more than double last year’s sales of about $470 billion. It previously took 20 years for the industry to double in size.  The big question for the sector at large and Applied Materials specifically, Dickerson said, is how to support accelerating growth without dramatically increasing the industrywide carbon footprint associated with creating all those components — currently estimated at 50 million metric tons of CO2 annually across more than 1,000 fabrication facilities worldwide (a.k.a. “fabs”).  We are going to hold our supply chain to the same standards that we hold ourselves in the areas of environmental impact, labor standards, and diversity and inclusion. “I’ve been amazed at the increasing amount of power required to manufacture these ever-smaller chips, and I would join with others in encouraging all of the equipment manufacturers to work together to reduce carbon emissions in the manufacturing of these advanced semiconductors and finally continue decarbonizing the power supply on which the data centers operate,” former Vice President Al Gore  told me last week , when I asked him how the semiconductor industry could step up. Applied, which specializes in materials engineering, sells equipment and services used in the production of virtually every new chip and advanced display in the world. It generated more than $14.6 billion in annual revenue in 2019, and Dickerson estimated its Scope 1 and Scope 2 emissions — mainly from the power used to run its labs and factories — was the equivalent of 145,000 metric tons of CO2 in 2019. (Disclosure: Al Gore’s investment firm, Generation Investment Management, holds a position in the company. Applied was responsible for my invitation to lead an interview with Gore last week during the same conference.) “The first thing we need to do is decouple our growth from our environmental impact,” Dickerson noted. “If we double or triple the size of our company, it would be irresponsible to double or triple our carbon footprint!” That conviction resulted in the company’s decision to adopt a series of new policies designed to shore up its environmental, social and governance (ESG) story, including a commitment to use 100 percent renewable energy worldwide by 2030 (by 2022 for its U.S. operations) and to cut its Scope 1 and Scope 2 emissions by 50 percent over the next decade. Moreover, Applied has created a sweeping new initiative intended to bring other companies in the semiconductor supply chain along for the ride. “We are going to hold our supply chain to the same standards that we hold ourselves in the areas of environmental impact, labor standards, and diversity and inclusion,” Dickerson said. “We’re introducing a sustainability scorecard into our supply selection process, alongside our traditional metrics for performance, cost and quality.” Making improvements of this magnitude and — at the same time — driving the technology roadmap forward is not easy and requires deep partnerships with customers. The new program, SuCCESS2030 (short for Supply Chain Certification for Environmental and Social Responsibility) will extend to all aspects of Applied’s operations, from procurement to packaging. It will now require these shared commitments from its suppliers, according to the press release about the program: A shift to intermodal shipping to reduce the industry’s reliance on air freight, aiming for an interim emissions reduction of 15 percent by 2024. A transition to recycled content packaging, with a target of 80 percent of such materials within three years. The complete elimination of phosphate-based pretreatments for metal surfaces within four years. The creation of a diversity and inclusion strategy to increase Applied’s spend with minority- and women-owned businesses by the same time frame. (There is no disclosed percentage for this goal.) “The response has been great, and we have six key partner suppliers already signed up to help us kick off this program,” Dickerson said. Those companies are Advanced Energy, Benchmark Electronics, Foxsemicon Integrated Technology, NGK Insulators, Ultra Clean Holding and VAT. Technically, Applied doesn’t yet have an official emissions reduction target in place for its Scope 3 footprint, but the company has joined the Science Based Targets initiative with the intention of doing so within two years, according to Dickerson. To improve its own competitive story with customers, Applied will use risk scenario analysis recommendations from the Task Force on Climate-related Financial Disclosures, and it has adopted a new “ecoUP” policy that includes a “3 by 30” goal for improvements in its own manufacturing systems on a per-wafer basis: a 30 percent reduction in energy consumption, a 30 percent cut in chemical consumption and a 30 percent increase in “throughput density,” the number of wafers that can be produced per square foot of cleanroom space. “Making improvements of this magnitude and, at the same time, driving the technology roadmap forward is not easy and requires deep partnerships with customers,” Dickerson said. Among those actively working with Applied on the new approach include Intel and Micro Technology, which is stepping up its own commitments. The latter intends to dedicate 2 percent of its annual capital expenditures over the next five to seven years — about $1 billion — on environmental and social stewardship.  Pull Quote We are going to hold our supply chain to the same standards that we hold ourselves in the areas of environmental impact, labor standards, and diversity and inclusion. Making improvements of this magnitude and — at the same time — driving the technology roadmap forward is not easy and requires deep partnerships with customers. Topics Information Technology Corporate Strategy Technology Manufacturing Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Courtesy of Applied Materials Close Authorship

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How Cargill’s new science-based water targets go with the flow

July 27, 2020 by  
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How Cargill’s new science-based water targets go with the flow Joel Makower Mon, 07/27/2020 – 02:11 Cargill, the giant food and ag conglomerate, last week announced a new set of 2030 corporate water targets, the latest to do so among firms in its sector. But this was no me-too kind of endeavor. Rather, it put the company at the front of the pack, going well beyond its own operational footprint to engage its entire supply chain, and to do so using a novel science-based approach for water. Specifically, Cargill said that by the end of the decade it would restore about 158 billion gallons of water, reduce about 5,500 tons of water pollutants and boost access to safe drinking water — all in what it refers to as  priority watersheds , regions around the world where the company has a significant operational or supply-chain water footprint.  This isn’t small potatoes. Agriculture represents about 80 percent of freshwater use in the United States and about 70 percent globally. Ag also is a major contributor both to water pollution and climate change; the water sector, which includes the collection and treatment of wastewater, accounts for 4 percent of total global electricity consumption,  according to the International Energy Agency . Few food and ag companies have taken on the full measure of their water footprint the way Cargill seems to have done, and by using a science-based approach. “If there’s a more robust enterprise level ambition for water, I haven’t seen it,” said Jason Morrison, CEO of the Pacific Institute and head of the United Nations  CEO Water Mandate , who advised on the project. “This is a really impressive piece of work that they’ve done and a pretty ambitious commitment they’re making. It’s got a lot to it.” If there’s a more robust enterprise level ambition for water, I haven’t seen it. Cargill has made water commitments in the past, but they covered only the company’s direct operations, a relative drop in the bucket of the water needed to bring to market the $114 billion or so of products and services it sells each year. About a year ago, the company set out on a journey to understand its water risks relative to its supply chain and operations, explained Jill Kolling, the company’s vice president for global sustainability. “Where does water really matter for us in our business?” she explained to me recently. “And where should we really be putting our efforts?” The goal, she said, “was to come out of this and have some aspirational goals to work against and also to make sure we’re working where it matters most. So, having that strong prioritization, backed up by science.” Science-based targets have become de rigueur in setting corporate greenhouse gas commitments. In effect, they ask what level of carbon reductions represents a company’s fair share, given its contribution to the climate problem. It was inevitable that this approach eventually be applied to water. Indeed, for the past two years a group called the Science-Based Targets Network has been looking at how to apply such methodologies to  a range of environmental impacts , including  water . But water is unlike climate gases in several fundamental ways. First, water is inherently local, with droughts in some areas and a surfeit in others. With climate gases, any improvement anywhere in the world helps alleviate the global problem; not so with water. Water is also temporal, with conditions changing throughout the year and from year to year, based on both normal and abnormal climatic shifts. And while the aggregate amount of available water is important, so is its quality. Having millions of gallons of water isn’t helpful if it is toxic, brackish or otherwise unsuited for human use. Rivers of data In the case of Cargill, these and other factors were applied not just to its own operation, but also to its more than 250,000 suppliers, ranging from multinational corporations to single-family farms in developing nations. They provide the raw materials for everything from cocoa and cotton to salmon feed and sweeteners. Cargill already had dipped its toes into water issues. It has invested in such programs as the  Soil and Water Outcomes Fund , which helps farmers adopt soil health and water conservation practices. It also participates in the  Midwest Row Crop Collaborative’s efforts to support and accelerate sustainable agricultural practices in Illinois, Iowa and Nebraska, including on improving water quality across the Upper Mississippi River Basin, which supports nearly 44 percent of U.S. corn, soy and wheat production. Still another Cargill initiative is  BeefUp Sustainability , which focuses in part on restoring grasslands, which perform many ecosystem services including filtering water. To develop its latest commitments, the company turned to World Resources Institute, with which it had previously worked on water issues. The first step was to aggregate the data Cargill needed to prioritize locally relevant decisions. “We’ve got  globally comparable data on water risks that we help companies leverage in order to look at water risks to their supply chain, and now increasingly use that same data to help think through what an effective science-based target could look like,” Sara Walker, WRI’s senior manager, water quality and agriculture, told me. “They’re kind of our science partner,” Kolling said of WRI. “What they bring to the table is datasets, tools and scientists who are able to help do the analysis. It’s also good to have an NGO partner working with you to push you to be more aspirational. They’ve provided tremendous guidance through this.” “There’s quite a lot of good data out there,” explained Truke Smoor, director of water at Cargill. “But if you look at the number of companies who have said they want data for water quality and costs, for both operations and the supply chain, you see there are very few.”  600 billion liters — it’s insanely large. It’s more than the total amount of water that we use in all our operations.   That may be in large part because the available data isn’t always consistent across watersheds and borders. Smoor said that Cargill ended up “combining a global data set with a better data set for the U.S. to meet our needs. And now we have the data we need to help us prioritize.” The commitments Cargill settled on were stretch goals, Smoor said. For example: “Six hundred billion liters — it’s insanely large. It’s more than the total amount of water that we use in all our operations. So, we’re basically offsetting double our total water use in those priority water systems in the regions where it’s needed most.” Down on the farm In some ways, getting the data was the easy part. Working with farmers — from Big Ag behemoths to smallholders in far-flung economies — is another matter. Promoting change can be hard work, although some farmers are beginning to realize the need to adapt new kinds of practices to ensure the long-term viability of local water supplies. “I think farmers are starting to realize that it’s ultimately the consumer who’s starting to care more and more about this,” Kolling said. “Over the coming years, those pressures and those desires from consumers to want to know more about how their food was produced and having greater expectations, we believe it’s going to grow and will continue to trickle back to the farmer. I think some of those more resistant farmers may realize that this is the way things are going.” Most farmers aren’t yet feeling those market impacts, she said, but there are other compelling arguments for their linking arms with Cargill on water. “At the end of the day, farmers are businessmen and women,” Kolling said. Toward that end, her company is helping farmers understand the business case today for improving water management practices, ranging from improving soil health to ensuring community water supplies. “It helps us make the change we want to make for the environment and for social and economic reasons.” And, of course, there’s climate change. Specifically, its relationship to both water quality and quantity, as well as the role of farming in sequestering carbon dioxide, which, in turn, improves soil health. “Water is so critical for nature, for agriculture, for communities,” Smoor said. “And it has that synergies with climate change.”  For example, she said, “Look at soil health practices. They help in carbon sequestration and they help in reducing greenhouse gas emissions. That is tied to fertilizer use, water quality and runoff. So, soil health practices provide water quality benefits. And through increasing soil moisture, we actually make sure that more water can recharge, so you have improved water availability. They really go hand in hand, which is such a powerful thing. Through combining these, you have so many touchpoints, whether it’s through farmers or regulators or the community.” Pooling resources As with every sustainability issue, one company’s leadership action is but a start. It will take collective action to achieve global goals, but also to ensure each company’s efforts aren’t undermined. For example, Cargill’s water conservation efforts in a particular basin may be for naught if other companies, large or small, aren’t similarly engaged there. In April, Cargill  announced that it would contribute $2 million to the next phase of its partnership with WRI. The two entities said they will combine their expertise to accelerate the development and improvement of tools, including a new Water Management Toolkit, to enable companies to set science-based targets for water. The toolkit “will allow us to address shared water challenges and promote sustainable water use within planetary boundaries across the industry,” they said in a statement. Cargill is already making its methodology publicly available. “We’re hoping we can invite others — customers, competitors, whomever — to collaborate with us where their sourcing and focus may intersect with our same watersheds,” Smoor said. But companies seem to be uncertain about when to jump into the pool. “We’re getting a lot of questions from companies like, ‘Should I wait for better data or should I wait for the Science-Based Target Network to tell me what exactly to do?’” WRI’s Walker said. “We’re really trying to encourage companies to act now. I think Cargill is a good example of this.” On the other hand, Smoor said, companies can wait until — some day. “You can continue to analyze everything forever, and especially in water, with all the different aspects. You can get stuck in risk analysis. You can get stuck in needing better data. Our approach is, we’re starting now; we’re going to drive the change. We will validate if we are doing the right thing.” 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 If there’s a more robust enterprise level ambition for water, I haven’t seen it. 600 billion liters — it’s insanely large. It’s more than the total amount of water that we use in all our operations. Topics Food & Agriculture Water Efficiency & Conservation Science-based Targets Featured Column Two Steps Forward Featured in featured block (1 article with image touted on the front page or elsewhere) On Duration 0 Sponsored Article Off Shutterstock

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How Cargill’s new science-based water targets go with the flow

Danone’s Eric Soubeiran: ‘The food system is broken’

July 20, 2020 by  
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Danone’s Eric Soubeiran: ‘The food system is broken’ Cecilia Keating Mon, 07/20/2020 – 00:30 Earlier this year, Danone became the first listed company to become an “enterprise à mission,” a new type of corporation created by a 2019 French law. The pioneering governance structure will see the food giant officially entrench environmental, social and societal objectives into its bylaws, alongside more typical profit goals. Danone, founded more than a century ago and famously declared an asset of national importance by the French government in 2005, has long prided itself on being a purpose-led business. Its new status is the latest in a string of moves the company has made to boost its environmental, social and governance (ESG) credentials as it works towards meeting a highly publicized aim of becoming one of the first B Corps certified multinational. Eric Soubeiran, the company’s vice president of nature and water cycle, explained that weaning the company off intensive farming is at the core of its new sustainability mission. Danone, which owns a range of household brands including Volvic, Evian, Actimel, Alpro and Activia, is first and foremost a dairy company, after all. “If you really want to do sustainability well in a company, you need to know your business well,” Soubeiran said. For a food company, that means knowing how and where you source your ingredients, what your customers want, and understanding the provenance of your direct and indirect carbon emissions. “Concretely, when you look at Danone, 60 percent of our carbon footprint is from agriculture,” Soubeiran acknowledged. “Eighty-nine percent of our water footprint is from agriculture. [Sustainability] starts from knowing your Scope 3 [value chain emissions]. It is looking at the elephant in the room, and going after it piece by piece. That is why it’s very important for us to have an opinion about the agriculture model we want.” [Sustainability] starts from knowing your Scope 3 [value chain emissions]. It is looking at the elephant in the room, and going after it piece by piece. As such, the company is working with farmers worldwide to adopt a regenerative approach to farming that encourages healthier soil and ecosystems, better water stewardship and a broader diversity of cultivated seeds and crops. Danone is providing training to farmers in France to make the switch to new techniques to meet a goal to rely on 100 percent regenerative farming in the country by 2025. And in order to encourage the approach beyond its supply chain, Danone recently founded the One Planet Business for Biodiversity (OP2B) initiative, a cross-sector effort to improve the private sector’s approach to biodiversity. The strained food production system is begging for reform, argued Soubeiran. “It is very clear in Danone’s vision that the food system is broken,” he reflected. The practices ensconced in the “green revolution” of the 1970s, he said, have “intensified agriculture practices to a point where we have created a situation where food has become a commodity. And by definition, a commodity has no value or very limited value. That’s why [as an industry] we are focused on volume, not quality, and how we have reached a point where we accept the fact that 30 percent of all food produced globally is wasted.” The transition away from intensive farming, he stressed, not only can prevent the loss of wild species, create better working conditions for farmers and livestock, end monocropping and protect local ecosystems, but is also a lever that Danone must pull if it is to reduce its carbon emissions to net zero by mid-century in line with global climate goals. Soubeiran has experience disrupting what he dubs “linearalized” food chains and moulding them to be more sustainable. In a previous role at Danone, he was charged with managing the company’s milk supply during the period when France liberalized its previously tightly controlled milk market. The company decided to eschew a price mechanism focused on volume and set its milk price based on the cost of production, giving Danone leeway to firm up production conditions with farmers. “We wanted to stabilize our relationship with farmers so that we could discuss the way they were farming, talk about sustainability and animal welfare,” Soubeiran explains. “It’s hard to do that when you have huge [price] volatility.” Indeed, Soubeiran is under no illusions that the wholesale transition to regenerative farming comes at a cost premium, despite growing interest in sustainable products from customers across Danone’s markets. “There is a market for sustainable food — people look for it — but we need to develop parallel stream of financing,” he said. “That’s why Danone has signed the green recovery appeal at the European level, because we believe the transformation and the renegotiation of the agriculture policy is instrumental to that.” There is a market for sustainable food — people look for it — but we need to develop parallel stream of financing. An additional stream of financing is targeted at helping farmers improve the quality of what they are producing while keeping prices down for the customer, Soubeiran explained. As such, in May the company urged the EU to use its upcoming Farm to Fork and Biodiversity 2030 strategies to establish an EU Common Food Policy that provides incentives to farmers to switch to regenerative practices. These, the company suggested, could range from crop and livestock insurance that minimizes the risk of lower yields through the transition process; “innovative multi-stakeholder financing mechanisms” or carbon bonds for agricultural products with pricing adjusted to reflect soil carbon sequestration performance; and guarantees of “first loss” inspired by the renewable energy sector that would allow farmers to fund the transition to more resilient agricultural systems. Soubeiran contends that the coronavirus has, in some respects, made his mission easier, given that the animal-originating coronavirus has underscored how ecological systems support human life. “If we protect biodiversity, we are basically protecting the diversity of DNA,” Soubeiran mused. “There’s also a sanitary aspect to it, given that we’re protecting corridors of biodiversity. While that was not that obvious six months ago, that’s obvious now for everyone.” He points out more than 65 percent of all emerging infectious diseases in humans are zoonotic — transmitted to people from animals. But, while the zoonotic coronavirus has turbocharged public understanding of biodiversity and served as a “call to action” for Danone’s corporate sustainability initiatives, Soubeiran concedes that on a practical level the pandemic has hampered the firm’s ongoing efforts to transition farmers to regenerative practices. For example, when social distancing regulations were at their most demanding, trips to train farmers on new practices and discuss investment and financing plans became logistically impossible. On the bright side, however, the crisis has underlined the resilience of Danone’s direct sourcing model, he says, which minimized supply chain disruptions caused by the pandemic. The firm sources 75 percent of products directly from suppliers, Soubeiran explained, adding that the model is a major boon in a world where collaborations and knowledge-sharing between multinationals and their suppliers are critical to meeting carbon targets and other joint sustainability objectives. Soubeiran contends that there is a healthy appetite from company shareholders for Danone’s growing file of sustainability initiatives, in particular its decision at the close of last year to publish carbon-adjusted earnings per share (carbon EPS) in its quarterly reports. The metric sends a very strong message to shareholders that the company “has done its homework” on counting its Scope 1, Scope 2 and Scope 3 emissions, according to Soubeiran, as well as exposing them to the invisible cost of carbon. Danone, banking on the assumption it reached peak emissions in 2019, is confident that its carbon-adjusted EPS will rise over the years to come. And investors are engaging with the approach — in 2018, Soubeiran estimates he had 70 interactions with shareholders; last year, it had more than doubled to 190. Moreover, in late June, 99 percent of shareholders backed Danone’s motion to become an “enterprise à mission,” a turnout dubbed “mind-blowing” by Danone chief executive Emmanuel Faber. “Huge kudos to our shareholders after today’s unanimous support of the change of Danone’s by-laws to incorporate health, planet, people and inclusiveness objectives as part of our mission,” Faber enthused. “You showed evidence that finance can change the world. It is on us, boards and CEOs, CFOs to engage finance on what matters. It responds. Big time.” Very often, sustainability is seen as a constraint — about less carbon, less pesticide, less fertilizer. Over the coming months, Soubeiran will focus on steering a cross-sector effort to improve the private sector’s approach to biodiversity, dubbed the One Planet Business for Biodiversity (OP2B) initiative. The coalition, launched by Danone at last year’s UN COP climate conference, counts consumer goods heavyweights L’Oréal, Google, McCain, Walmart, Kellogg, Nestlé and Unilever. The companies have promised to work together to scale up regenerative agriculture practices, to increase the number of ingredients sourced in order to reduce the world’s reliance on a handful of crops, and to better protect local ecosystems through nature restoration and eliminating deforestation. The group is developing a framework for action that will be unveiled at the IUCN World Conservation Congress, postponed six months to January in the wake of the pandemic. The initiative has been inspired by “systems thinking,” Soubeiran explained, and will focus on specific actions that can be monitored instead of overarching science-based targets or percentage-based goals. “With OP2B the focus is on action, action that can trigger a transformation,” he said, adding that that the single-issue, action-orientated initiative is “quite a new way of collaborating” for Danone. Overall, Soubeiran is buoyed by the boundless opportunities’ biodiversity boosting initiatives present to food companies looking to enrich their portfolios — a fact underlined by this week’s World Economic Forum study highlighting how a nature-focused recovery could deliver over $10 trillion of economic gains . “Very often, sustainability is seen as a constraint — about less carbon, less pesticide, less fertilizer,” Soubeiran reflected. “But biodiversity is about more: More choice, more taste, more experience. It’s a very interesting topic and creates a positive spin on sustainability.” Pull Quote [Sustainability] starts from knowing your Scope 3 [value chain emissions]. It is looking at the elephant in the room, and going after it piece by piece. There is a market for sustainable food — people look for it — but we need to develop parallel stream of financing. Very often, sustainability is seen as a constraint — about less carbon, less pesticide, less fertilizer. Topics Food & Agriculture Leadership COVID-19 Biodiversity Regenerative Agriculture ESG COVID-19 BusinessGreen Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Workers fills up milk storage tank at a Danone dairy plant in Normandy, France, April 2008. Source:  Photoagriculture Shutterstock Photoagriculture Close Authorship

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Danone’s Eric Soubeiran: ‘The food system is broken’

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