Despite net-zero pledges, banks used $750 billion to finance fossil fuels in 2020

March 26, 2021 by  
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Despite net-zero pledges, banks used $750 billion to finance fossil fuels in 2020 Cecilia Keating Fri, 03/26/2021 – 00:05 Net-zero commitments may have ricocheted across banking sector over the last 18 months, but big banks’ attestations of climate concern did not stop many from expanding financing for the world’s top fossil fuel firms during the pandemic year. That is according to the latest edition of the Rainforest Action Network’s annual fossil fuel financing tracker, which reveals that while fossil fuel financing dropped by a record 9 percent during the pandemic-induced economic recession of 2020, the world’s top banks ramped up financing for the 100 largest fossil fuel expansion firms by 10 percent. The green groups behind the report have warned of an “alarming disconnect” between the global scientific consensus on climate change and the ongoing practices of the world’s leading banks. The analysis, ” Banking on Climate Chaos 2021 ,” underscores that while overall fossil fuel financing did tumble significantly in 2020, the total amount of financing provided to fossil fuel firms in 2020 was still more than $40 billion higher in 2020 than in 2016, at $750 billion. “Despite this significant drop from 2019 to 2020, the overall trend of the last five years is one heading definitively in the wrong direction,” the report states. Overall, the world’s leading banks have channelled $3.8 trillion to coal, oil and gas companies in the five years since the Paris Agreement was signed, it calculates. Lower levels of lending and debt underwriting to fossil fuel firms in 2020 were largely due to COVID-19 economic recession and not because banks are proactively distancing themselves from fossil fuels, according to the report. A separate score card ranking the banking sector’s climate policy commitments concludes that across the board, climate policies are “grossly insufficient” and out of alignment with global climate goals, with not a single bank surveyed racking up more than 94 points out of a total of 200. The overwhelming majority of fossil fuel financing goes unchecked by banks’ policies, it warns, given that climate pledges unveiled to date tend to focus on project-specific finance, which represents a mere 5 percent of all fossil fuel financing handed out by banks. Furthermore, the report underscores that more fossil fuel financing took place January through June than any six-month period since 2016, as large corporations around the world capitalized on low interest rates and central bank bond-buying programs to load up on cheap debt. This binge then was offset by record low financing in the second half of the year, it notes, leading to an overall fall of financing of 9 percent. Ginger Cassady, executive director of the Rainforest Action Network, one of the groups behind the analysis, said the banking sector faced a “stark choice” as it plotted its strategy for steering a global recovery from the coronavirus crisis. “The unprecedented COVID-19 dip in global financing for fossil fuels offers the world’s largest banks a stark choice point going forward,” she said. “They can decide to lock in the downward trajectory of support for the primary industry driving the climate crisis or they can recklessly snap back to business as usual as the economy recovers.” The report reveals that U.S. banks continue to be the largest drivers of global emissions, with JP Morgan Chase retaining its position as the world’s largest fossil fuel funder. U.K. bank Barclays is singled out as being the most prolific fossil fuel funder in Europe over the five-year period surveyed, with the analysis highlighting it increased fracking financing by 24 percent in 2020. Meanwhile, BNP Paribas shot up the scoreboard after increasing its financing to fossil fuel companies by 41 percent in 2020 to $41 billion, making it the fourth worst financer of fossil fuels in 2020. The analysis is the latest in a long line of reports led by the Rainforest Action Network which hammer home the banking sector’s deep ties with the fossil fuel industries fueling the climate emergency, but this year’s edition is somewhat more poignant. The past 12 months have been a calamitous period for the fossil fuel industry amid shrinking demand for oil and gas and depressed prices during the pandemic, and it is against this backdrop the banking sector finally has acknowledged the critical role it must play in ensuring that global temperature increases are capped at safe levels by ending its support of environmentally destructive sectors. “Net-zero financed emissions” pledges have swept the banking sector since January 2020, with the U.K.’s largest fossil fuel financiers —  Barclays and HSBC — and many of the largest U.S. investment banks — Goldman Sachs , Citi Group , Wells Fargo , Bank of America and Morgan Stanley — all vowing to align their lending and debt with global climate goals over the coming 30 years. And yet, even as these pledges were made, investment in fossil fuel infrastructure has continue to flow largely unimpeded. Beyond a welcome tightening of lending policies to coal and tar sand firms, many of the world’s largest financiers have failed to translate their net-zero pledges into a meaningful shift in their investment activities. Banks can decide to lock in the downward trajectory of support for the primary industry driving the climate crisis or they can recklessly snap back to business as usual as the economy recovers. As such, the green organizations behind the report have touted the latest findings as evidence of the “hollowness” of the wave of net-zero targets unveiled by the banking sector and have urged companies to match their 2050 goals with short term pledges to rapidly phase out financing for all fossil fuel infrastructure, including oil and gas projects. Policies are required to “lock in” the fossil fuel declines of 2020 and thus steer a managed decline of fossil fuel production over the coming decade, they warn. “Many of the world’s largest banks, including all six major U.S. banks, have made splashy commitments in recent months to zero-out the climate impact of their financing over the next 30 years,” said Ben Cushing, financial advocacy campaign manager at the Sierra Club. “But what matters most is what they are doing now, and the numbers don’t lie. This report separates words from actions, and the picture it paints is alarming: Major banks around the world, led by U.S. banks in particular, are fueling climate chaos by dumping trillions of dollars into the fossil fuels that are causing the crisis.” Lucie Pinson, founder and executive director of Reclaim Finance, said the numbers exposed “the hollowness of banks’ ever-multiplying commitments” to be net-zero or align with global climate targets. “BNP Paribas merits singling out as the world’s fourth-largest fossil financier in 2020, having funneled multi-billion-dollar loans to oil giants like BP and Total,” she said. “Nonetheless, it’s clear that all banks need to replace empty promises with meaningful policies enacting zero tolerance for fossil fuel developers.” The banking sector maintains that serious change is afoot, pointing to much more stringent lending policies for coal firms and the on-going development of new guidelines and policies that it is hoped will decarbonize their portfolios over the next three decades. They insist it will take time to shift investment practices in a way that delivers a managed transition for businesses and investors alike. Approached to comment on the report, spokespeople from Barclays and HSBC pointed to their respective 2050 net-zero commitments, despite the two banks being ranked the seventh and 13th largest most prolific fossil fuel lenders globally since 2016 by today’s report, having funneled $145 billion and $111 billion into coal, oil and gas, respectively. The banking sector maintains that serious change is afoot. “HSBC has announced it will propose a special resolution on climate change at its AGM in May which will set out the next phase of HSBC’s strategy to support its customers on the transition to net-zero carbon emissions,” the HSBC spokesperson said. “This includes to publish and implement a policy to phase out the financing of coal-fired power and thermal coal mining by 2030 in markets in the European Union and OECD, and by 2040 in other markets.” “We have made a commitment to align our entire financing portfolio to the goals of the Paris Agreement, with specific targets and transparent reporting, on the way to achieving our ambition to be a net-zero bank by 2050,” the Barclays spokesperson said. “We believe that Barclays can make a real contribution to tackling climate change and help accelerate the transition to a low-carbon economy.” JP Morgan Chase declined to comment on the findings, and BNP Paribas and CitiGroup did not respond for a request for comment at the time of going to press. While it is clear the banking sector has reached a turning point on sustainability over the last 12 to 18 months, today’s report provides compelling evidence that net-zero pledges need to be swiftly backed up by credible strategies that will quickly wind down bank’s exposure to fossil fuel assets and ramp up their support for clean infrastructure. Promises to establish climate-responsible investment portfolio in 30 years’ time are clearly meaningless if banks continue to channel hundreds of billions of dollars into the industries that are locking in several more decades of carbon intensive infrastructure. And yet, today’s report comes within hours of the U.K. government demonstrating how ministers are wrestling with precisely the same tensions , as they both talked up plans to slash emissions form the oil and gas industry and left the door open for new exploration in the North Sea. As the global economy rebounds from the pandemic, all eyes will be on whether major banks and governments finally can match their rhetoric on climate action with a managed decline of fossil fuel financing. Pull Quote Banks can decide to lock in the downward trajectory of support for the primary industry driving the climate crisis or they can recklessly snap back to business as usual as the economy recovers. The banking sector maintains that serious change is afoot. Topics Finance & Investing GreenFin Coal Decarbonization Business Green Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Tar sands in Alberta, Canada. Flickr Dru Oja Jay, Dominio Close Authorship

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Despite net-zero pledges, banks used $750 billion to finance fossil fuels in 2020

Unilever sets out net-zero plans for shareholder vote

March 25, 2021 by  
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Unilever sets out net-zero plans for shareholder vote Michael Holder Thu, 03/25/2021 – 00:30 Unilever has become one of the first multinational companies in the world to publish a corporate net-zero action plan for oversight by its shareholders, as it prepares to put the climate strategy to an advisory vote at its upcoming AGM in early May. The consumer goods giant this week unveiled its strategy for achieving net-zero emissions across its entire supply chain by 2039 in line with recommendations from climate scientists, with a focus on decarbonizing its heating and cooling, encouraging its suppliers to set science-based targets, and stepping up its broader advocacy work in the run up to the crucial COP26 U.N. Climate Summit later this year. The “climate transition action plan” (CTAP) is set for a non-binding, advisory vote at Unilever’s AGM May 5, with the company also promising to report annually on its progress towards implementing the strategy in line with the guidelines of the Task Force on Climate-related Financial Disclosures (TCFDs). “We will also submit an updated CTAP for an advisory shareholder vote at our AGM every three years, noting any material changes we have made or propose making,” the company said. The Anglo-Dutch firm first announced plans to give its shareholders a direct say over its climate action strategy back in December , in a bid to boost corporate transparency and governance surrounding its drive to reach net-zero emissions for its core business by 2030 and across its entire supply chain by 2039. It is also aiming to eradicate deforestation in its supply chains by 2023, including for commodities such as palm oil, paper, soy, cocoa and tea. We hope that by setting out our plan, and the assumptions underpinning it, investors will share our confidence — and other businesses will start to follow suit. In a blog post explaining the firm’s decision to give its shareholders a say on its sustainability strategy, Unilever CEO Alan Jope said the aim was “to be transparent about our plans, and to strengthen engagement and dialogue with our investors.” “As governments around the world wake up to the full implications of the climate crisis and start to regulate and price emissions, we are confident that early and ambitious climate action will drive superior performance and create value for all our stakeholders,” he wrote earlier this week. “We hope that by setting out our plan, and the assumptions underpinning it, investors will share our confidence — and other businesses will start to follow suit.” Jope also explained Tuesday that achieving net-zero by 2039 would mean ensuring that the emissions associated with Unilever’s products are reduced towards zero “as far as possible, with residual emissions balanced by carbon removals, through either natural technological carbon sequestration such as reforestation or carbon capture and storage.” However, over the next two decades, the company’s primary focus would be on emissions reduction across its value chain, he insisted. “We will not seek to meet our targets through purchasing and retiring carbon credits, known as offsetting,” explained Jope. “By 2039 and thereafter, we will ensure that any residual emissions are balanced with carbon removals to achieve and maintain our net zero position.” In order to deliver its targets, Unilever said its priority was to decarbonize its use of heating and cooling, including removing HFCs — harmful greenhouse gas pollutants — from its refrigerants, having already achieve 100 percent renewable electricity across its business worldwide. It also has set up a $1.18 billion Climate and Nature Fund to help its brands invest in decarbonization and nature protection projects, and the firm aims to increase its investments in plant-based food offerings and harness the influence of its brands to help encourage greener consumer behaviors. We will also call for ambitious goals and actions by both governments and the private sector on key themes like nature-based solutions, finance, and adaptation and resilience. And, in order to slash both upstream and downstream emissions in its value chain, the company said it would work with suppliers to encourage the adoption of their own science-based emissions targets, and to help its logistics partners to shift towards low emission transport options. Unilever also promised to “step up our climate advocacy ahead of COP26,” including though its membership of global industry groups such as the Carbon Pricing Leadership Coalition and Transform to Net Zero. “We will also call for ambitious goals and actions by both governments and the private sector on key themes like nature-based solutions, finance, and adaptation and resilience,” explained Jope, who argued that leading on climate action “will help Unilever be a more successful business.” “Consumers are becoming more demanding of brands,” he wrote. “Investors are increasingly seeking to build net-zero-aligned portfolios. High-quality talent is seeking employment with purpose-led companies. In this context, we believe that any costs associated with this additional level of ambition represent a wise investment in building our purpose-led, future-fit business, one that will be respected and trusted by future generations as much as it has been by past generations.” Jonathon Porritt, founder and director of corporate sustainability nonprofit Forum for the Future, welcomed the publication of Unilever’s climate transition plan this week as “something of a breakthrough on getting shareholders focused on what companies need to do to get to net zero.” Pull Quote We hope that by setting out our plan, and the assumptions underpinning it, investors will share our confidence — and other businesses will start to follow suit. We will also call for ambitious goals and actions by both governments and the private sector on key themes like nature-based solutions, finance, and adaptation and resilience. Topics Finance & Investing Corporate Strategy Net-Zero BusinessGreen Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Photo by  JHVEPhoto  on Shutterstock.

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Is TCFD a catalyst for transformational climate adaptation?

March 24, 2021 by  
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Is TCFD a catalyst for transformational climate adaptation? Karl Schultz Wed, 03/24/2021 – 01:00 This commentary is part of a series on emerging issues from Adaptation Leader. The Taskforce on Climate-related Financial Disclosures (TCFD), an initiative of the influential Financial Stability Board (FSB) , offers a framework for disclosure of climate risks. Despite the generally positive response and resulting buzz, in particular among advocates for climate action by businesses and those wanting to get on the bandwagon, the uptake of TCFD disclosures has been slower than its proponents had hoped. With time, the levels of disclosure likely will increase with more governmental mandates and shareholder activism on climate action. But the quality of the disclosures is critical in meeting the existential challenge of climate change. There are, of course, two sides of climate action that must be addressed: mitigation (usually by emissions reductions) and adaptation. Economic and social survival can be achieved only through both rapid declines in greenhouse gas emissions and, critically, armed with foresight on the impacts of climate change, decisive action to adapt to these impacts. Can TCFD stimulate adequate movement on both tasks? On its current trajectory, the answer is a clear “no.” Can TCFD stimulate adequate movement on both mitigation and adaptation? On its current trajectory, the answer is a clear ‘no.’ In their current form, the TCFD recommendations lack the specificity and enforcement mechanisms needed to induce broad-scale changes in corporate disclosure. Could they contribute to such a transformation or is this asking too much? We believe that with modifications to the recommendations and the resources to guide climate-related disclosure, TCFD’s activities could lead to important improvements. TCFD could unveil risks and opportunities with tangible impact on the bottom line. As corporate leaders realize that they have the potential to help their organizations adapt, thrive and gain competitive advantage through adaptation, the TCFD recommendations could spur an economic and social transformation. Missing pieces It’s important to understand what is missing in the current framework and disclosure regime. TCFD steers towards carbon exposure and transition risks. TCFD risks are broadly defined into two categories: physical climate risk and “transition risks.” Physical climate risks are risks of impacts caused by flooding, droughts and storms. Transition risks are the risks a company may face when society forces it to curtail its greenhouse gas emissions and the risks of impacts caused by policies and investments that lower emissions such as reductions in fossil fuel demand. TCFD guidance insufficiently emphasizes physical climate risks, which results in corresponding disclosures emphasis on transition risks. Adaptation strategy is under-emphasized. Only 7 percent of companies in the latest review by the FSB “disclosed information on the resilience of its strategy.” The short shrift given to adaptation strategy is quite shocking. Among the early guidance provided to any junior staffer in a corporate setting is some variant of, “Don’t just bring a problem to my attention, tell me how you propose to solve it.” In a climate action context, then, the response(s) being planned or taken to adapt to a changing climate is of primary importance. Adaptation metrics need further development. The International Platform for Adaptation Metrics notes, “One of the key barriers over and again acknowledged is the need for a global effort to build consensus on metrics to help governments, businesses and financial institutions to identify and steer investment.” The FSB acknowledges this insufficiency of guidance on metrics and targets, and recently has undertaken a consultation to identify “decision-useful, forward-looking metrics to be disclosed by financial institutions.” Unfortunately, it looks at high-end financial metrics (value at risk, for example), not the underlying metrics necessary to understand physical climate risk and adaptation. Limiting scope to financial disclosure is a missed opportunity. The TCFD — and it’s in the name — is focused on financial disclosure. The question, then, is by only looking at financial impacts, do the TCFD recommendations do enough to ensure that corporations understand what to do to adapt and be more climate resilient? Corporations need to explore the social and broader contextual, market, employee, customer and supply-chain environmental/physical climate risks, and the adaptation actions they are implementing or could undertake as well, if they are to truly consider the interests of all of their stakeholders. Focus on the disclosing corporate entity ignores important systems effects and solutions. Unlike carbon emissions and mitigation, physical impacts, risks and adaptation to climate change permeate whole systems . For many industries, common but complicated issues may require sectoral disclosures or initiatives, so as to give individual companies a sufficient level of understanding of the types, range and extent of climate impacts on their future assets, productivity, markets and broader stakeholder community. Driving adaptation Given that we are looking at an uncertain climate future, TCFD disclosures, if undertaken to instigate corporate adaptation foresight and nimble planning, could become a key aspect of corporate competitiveness. These disclosures will create positive feedback loops as companies strive to become best adapted and encourage public sector adaptations that further grow their competitive advantages and a more climate-resilient global commons. How could TCFD further contribute to corporate value creation and investment decision making, as well as to the transition to a climate change-resilient economy and society? To begin, we must surmount the considerable remaining hurdles impeding effective, action-oriented disclosures of physical climate risk and adaptation. Adaptation Leader suggests that FSB, corporate entities and other critical stakeholders (trade associations, governments, research bodies) focus on the following measures: Ensure that climate mitigation “policy failure” scenarios are considered to enable adaptation planning and enlightened investment decisions for extreme climate disruptions. Require and make TCFD guidelines and national disclosure policies clear on strategy resilience, including explicitly the need to include adaptation planning strategies. Redouble efforts to integrate not just financial metrics but also support efforts to achieve consensus on and provide guidance on coherent climate impact and adaptation metrics in disclosures. The FSB, national governments and industry associations should prepare guidance, approaches, sector-wide scenario planning methods and industry-specific tools, as well as support capacity building for evaluating corporate physical risks, impacts and adaptation options. Local and regional groups should develop system-wide scenarios and impact assessments to better inform localized corporate disclosure, which would better enable small and medium-sized enterprises to report. At a minimum, the FSB should work with non-financial governance and standards bodies to encourage greater integration of financial disclosure with environmental and social impact, risk and adaptation plans and disclosures. The FSB has taken on a difficult but important task, and thus far through TCFD, it is making some noteworthy progress in stimulating more and better climate disclosures. If we can build on the existing momentum while focusing disclosures more on physical climate risks and adaptation strategies, it may be possible to build the vastly greater direct action and social and political resolve needed to achieve a global economy and society that is resilient to the dramatic changes in climate that lie ahead. Pull Quote Can TCFD stimulate adequate movement on both mitigation and adaptation? On its current trajectory, the answer is a clear ‘no.’ Topics Reporting Climate Change Finance & Investing TCFD 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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For a clean, resilient grid, look to EV infrastructure

March 24, 2021 by  
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For a clean, resilient grid, look to EV infrastructure Katie Fehrenbacher Wed, 03/24/2021 – 00:30 Electric vehicle charging infrastructure could provide a major benefit — boosting both clean energy and resiliency — for the power grid. On Monday, automaker BMW and northern California utility PG&E announced a new expanded program that could help incentivize 3,000 BMW drivers to shift the charging of their vehicles to times of day when clean energy (namely solar power) is abundant. The program could also nudge drivers to curb EV charging during times when the grid is really congested.  “We see smart charging as a way to make EVs more sustainable,” said Adam Langton, energy services manager for connected e-mobility for BMW of North America, in an interview with GreenBiz. BMW previously offered two smaller pilot programs with PG&E and found that smart charging services paired with clean energy could reduce greenhouse gas emissions in Northern California by 32 percent. “Some customers were very motivated to use more clean energy for charging. Using digital tools, we can provide them with that clean energy,” Langton said. Some customers were very motivated to use more clean energy for charging. While the latest effort is still just a pilot program right now, here are five reasons I think this initiative is particularly interesting: Utilities and automakers need to collaborate. To build a grid — with an abundance of clean energy and electric vehicles — that operates well, utilities and automakers will need to create strong partnerships. Currently not many have these relationships in place. BMW’s Langton said this pilot is the only example he knows of where a utility is providing an automaker with clean energy generation projection data. I would think sharing this type of data would be extremely important and valuable to all players across the EV infrastructure and hardware ecosystem. It’s all about data. To enable this type of dynamic smart-charging ecosystem, the automakers, utilities, tech providers, charging companies and drivers need data to optimize the systems. They need clean energy projections, but also predictions about user behavior, dynamic electricity rates, weather prediction data, etc. Data will be the key — the currency — that underlies all of these programs. Design experience will be required. The way these programs are designed, and taking into consideration how users drive and want to drive their EVs, will be extremely important in ensuring that drivers volunteer to take part in them. Negative experiences around programs being difficult to use, complicated, not flexible or just not worth the extra effort to be enrolled will greatly affect the rollout. The teams creating these programs need strong expertise in consumer behavior.  This could be a stepping stone to V2G. Utilities and automakers need to get these smart-charging programs right in order to move to the next stage where they’re looking at projects around enabling vehicle-to-grid capabilities. That’s where EVs can discharge electricity back onto the power grid in an exchange with utilities. V2G has long been overhyped and underdeployed, but to kick it into the next gear will require these smart charging baby steps first.  This is a big year for infrastructure. These types of EV smart-charging pilot programs will become even more important as the federal government is expected to spend potentially trillions of dollars on a stimulus plan this year that could include $1 trillion for infrastructure such as roads, bridges, rails, EV charging and grid gear. Getting the steps right on a micro-level — 3,000 EV drivers in California — will help inform how and where EV infrastructure spending should be deployed.  Want more great analysis of electric and sustainable transport? Sign up for Transport Weekly , our free email newsletter. Pull Quote Some customers were very motivated to use more clean energy for charging. Topics Transportation & Mobility EV Charging Electricity Grid Resilience Featured Column Driving Change Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off

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Get ready, Corporate America: The carbon disclosure mandates are coming

March 17, 2021 by  
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Get ready, Corporate America: The carbon disclosure mandates are coming Tim Mohin Wed, 03/17/2021 – 01:00 A slew of announcements earlier this month point to new regulations on carbon disclosure. Corporate America better get ready. The U.S. Securities and Exchange Commission has been particularly busy. Acting chairwoman Allison Herren Lee issued a public statement directing the SEC staff “to enhance its focus on climate-related disclosure in public company filings.” In a series of tweets , Lee also aligned with the International Organization of Securities Commissions (IOSCO) statement of an “urgent need to improve the consistency, comparability, and reliability of sustainability reporting, with an initial focus on climate change-related risks and opportunities.” Also earlier this month, the SEC hired its first senior policy adviser for climate and ESG . (See a partial transcript from Lee’s speech earlier this week here .) The message is clear: Carbon disclosure will be mandatory. It’s undeniable that climate risks and opportunities are material to corporate performance and must be included in audited financial statements. This is long overdue, but there can be no doubt that climate disclosure will become a fixture for publicly traded companies. Britain , New Zealand and Switzerland already have moved forward with unprecedented speed to require disclosures aligned with the Task Force on Climate-Related Financial Disclosures (TCFD). The TCFD, created by the G20 Financial Stability Board, issued its disclosure recommendations back 2017. Since then, thousands of companies, governments and others have lined up in support.  It’s undeniable that climate risks and opportunities are material to corporate performance and must be included in audited financial statements. T While coming mandates are clear, the required disclosures are still a bit murky. There is real momentum behind the IFRS Foundation’s move to develop international “sustainability reporting” standards . The trustees meeting this month may shed some more light, but don’t hold your breath; the IFRS already has stated that it will “produce a definitive proposal (including a road map with timeline) by the end of September 2021, and possibly leading to an announcement on the establishment of a sustainability standards board at the meeting of the United Nations Climate Change Conference COP26 in November 2021.” With the slow pace of standards development, companies are facing uncertainty about what information to collect. While the requirements are unclear, carbon accounting procedures are well established. The greenhouse gas protocol has been around for many years and sets out a detailed process (more than 700 pages) for measuring corporate carbon footprints. While we wait to see what the required disclosures will be, companies can get a leg up by ensuring that their current carbon reporting is as aligned as possible with the greenhouse gas protocol. Accounting for carbon emissions from large enterprises is a daunting job. Complex multinational enterprises conduct thousands of carbon-generating transactions each day. Adding to the challenge is the Scope 3 problem: accounting for the carbon generated upstream (across the supply chain, for example) and downstream (products). Even for leading companies, creating assured carbon disclosures is hard work and will require new expertise, collaborations and enterprise-level technologies to streamline the process. Companies should start making those carbon finance hires today. Corporate leaders and boards also would be wise to get ahead of these regulations and take stock of their carbon management practices now. Having worked for three Fortune 500 companies, I can say firsthand that they won’t like what they find. Carbon management and disclosure is typically done on spreadsheets once per year and the data can be months old. This is not a management system; it’s a way to track annual performance.  Adding to these gaps is the carbon trading market. Carbon prices in Europe are skyrocketing  — surging 60 percent since November — on the news of impending regulation. Simultaneously, there are efforts in Europe and the U.S . to assign monetary value to each ton of carbon, with the Biden administration’s reinvigoration of the “social cost of carbon” initiative.   And if these developments weren’t enough of a wakeup call, the world’s largest asset manager, BlackRock, made it very clear it would hold the companies it invests in accountable for their carbon management. With $8 trillion under management, this would touch just about every company. Just to make the signal clearer, BlackRock doubled down by signaling it would vote against the boards who fail to meet its standards. Alarm bells are ringing in the C-suite and boardrooms. Corporate compliance officers will be up late scrambling to develop their carbon disclosure strategy. While there is a lot of work to be done, new resources emerge every day to help companies navigate this challenge.   After a long career in the sustainability space, it is gratifying to witness the tipping point where sustainability enters the mainstream of global commerce. It’s about time.  Pull Quote It’s undeniable that climate risks and opportunities are material to corporate performance and must be included in audited financial statements. T Topics Finance & Investing Reporting Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off

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Can C-suite paychecks save the world?

March 9, 2021 by  
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Can C-suite paychecks save the world? Joel Makower Tue, 03/09/2021 – 02:11 Last week, the fast-casual restaurant chain Chipotle Mexican Grill announced a new policy that ties executive compensation in part to environmental, social and governance (ESG) metrics.  Going forward, 10 percent of the annual incentive bonuses for corporate officers — essentially, anyone with day-to-day responsibility for running the company — will be tied to the company’s progress toward achieving such goals as improving diversity, creating more opportunities for advancement amid Chipotle’s lower ranks and increasing the organic, local and regeneratively produced food served in its restaurants. Chipotle is the latest company to spice up its executive pay packages to include social and environmental goals. In January, Apple announced it will incorporate ESG metrics into the annual cash incentives for company execs, using a formula to either decrease or increase bonus payouts by up to 10 percent. The goal, per the company’s proxy statement : “to further motivate Apple’s executive team to meet exceptionally high standards of values-driven leadership in addition to delivering strong financial results.” What in the name of fringe benefits is going on? Linking executive bonuses to sustainability metrics is making waves. But is it making a difference? At long last, companies and their largest investors are recognizing that climate change, diversity and other sustainability issues represent risks to profits and productivity, and that companies that proactively manage these risks are better run and thus more attractive investments. And where investors go, corporate boards of directors quickly follow in the form of carrots and sticks for a company’s top brass. The trend to link ESG metrics to executive pay is a departure from traditional compensation packages, which have relied almost entirely on financial measures — earnings per share, revenue growth and other factors. Now, nonfinancial metrics are being folded into the mix, with a strong emphasis on climate change and diversity and equity issues. The trend is just ramping up, especially in Europe, where the main focus is on climate change. U.S. companies are still mostly at the starting gate. A 2020 analysis of company public disclosures by Willis Towers Watson found that while about 11 percent of the top 350 European companies have linked greenhouse gas emissions to their executive incentive plans, only 2 percent of U.S. S&P 500 companies have done so, as Willis’ Nidia Martínez and Ryan Resch wrote recently on GreenBiz. But a few U.S. companies have stepped up. In 2019, Clorox set a goal to tie executive compensation awards to elements of its ESG goals for members of its executive committee, including for the chair and CEO, although it hasn’t yet announced details on how it will do this, according to Andrea Rudert, its associate director for ESG stakeholder engagement. Starting this year, McDonald’s is linking executive bonuses to increased hiring of “women and historically underrepresented groups.” At Starbucks, compensation for top execs is tied to corporate diversity , with the goal of having at least 30 percent of corporate workers who identify as Black, Indigenous or people of color by 2025. Moving the needle Will all these incentives change anything? In theory, yes. In practice — well, it’s hard to tell. There’s no clear data that companies with sustainability-related executive comp packages perform better in either ESG or financial metrics. One reason is that it’s early days, with many of these policies just kicking in. Adding sustainability into the mix still can move the needle. Whereas most financial metrics are short-term, with a strong emphasis on quarterly or annual performance, most sustainability metrics are by their nature longer-term. And while many of these metrics can be tracked on a quarterly basis, progress in sustainability usually plays out over years. To the extent that ESG metrics lead the C-suite to think longer-term, they could be a positive influence. Moreover, linking executive pay to sustainability can send an important signal through the company, its industry and the corporate world in general that these issues are vital to business success. And to the extent that these early adopters create a bandwagon, social and environmental metrics will increasingly will become an expectation of investors. In many sectors, they already are. Initiating such measures does present some challenges, such as identifying metrics material to the company and its sector, creating stretch goals that demonstrate real progress and establishing time periods that engender meaningful change. And there’s disagreement among large institutional shareholders about which ESG metrics should take preeminence. But these are all surmountable, as the first wave of leadership companies is showing. One good resource: The Aspen Institute recently published a white paper, Modern Principles of Sensible and Effective Pay , designed “to advance fresh thinking in boardrooms about executive compensation given new market priorities, shifting public attitudes towards equity, fairness and the role of business, and fundamental changes in the role of the CEO and executive teams.” In the end, the question remains: Are these executive compensation plans making a difference or are they a check-the-box activity that’s more symbolic than substantive? As I said, there’s no clear evidence either way. And what, if anything, does all this have to do with the much bigger issue of skyrocketing executive pay relative to those further down the corporate ladder? After all, for the millions living paycheck-to-paycheck, the relatively modest compensation adjustments of those at the top are, at best, laughable. In 2019, the ratio of CEO-to-typical-worker compensation in the United States was 320-to-1, up fivefold from 61-to-1 in 1989, according to the nonpartisan Economic Policy Institute . It’s no secret that the rich keep getting richer while the poor stay poor. To the extent that executive compensation is also determined in part by reducing the earnings gap between those at the top and bottom, we’ll begin to see a fairer and more just economy, one that could provide a multitude of sustainability benefits to both people and the planet. 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 Linking executive bonuses to sustainability metrics is making waves. But is it making a difference? Topics Finance & Investing Corporate Strategy Leadership GreenFin 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 GreenBiz photocollage via Shutterstock

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3 tips for anticipating investor requests on climate, water and biodiversity

March 3, 2021 by  
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3 tips for anticipating investor requests on climate, water and biodiversity Thomas Singer Wed, 03/03/2021 – 01:00 2020 undeniably brought the “S” pillar of ESG into greater focus, including issues such as employee wellness, human rights, and diversity, equity and inclusion. But investors didn’t exactly ignore the “E” component and are poised to emphasize it even more in 2021 and beyond, according to a recent Conference Board corporate sustainability disclosure analysis . In fact, three environmental issues — climate risks, water risks and biodiversity impacts — are poised to be in sharp focus this year for investors, and companies should prepare. Here are three ways sustainability executives can anticipate investor requests on each issue. 1. Strengthen climate risk disclosures by replacing boilerplate text with specific risks and opportunities. As more companies include climate risks in financial disclosures, investors will turn their focus to the content and quality of those disclosures. The Conference Board finds that the number of S&P Global 1200 companies referencing climate risks in their financial reports has more than doubled in the past five years. Almost half (44 percent) of global companies include these risks in their 10-Ks or equivalent reports. Investor pressure on companies to report climate risks — and investors’ backing of reporting frameworks such as the one recommended by the Task Force on Climate-related Financial Disclosures (TCFD) — have been key drivers of the uptick in climate disclosure. Regulatory initiatives are also playing a big role in spurring disclosure. The EU Taxonomy, for example, requires certain financial institutions to make climate risk disclosures by the end of this year. This regulation already has an impact: Companies in the financial sector had the greatest uptick in climate risk disclosure, with almost half of financial companies (47 percent) disclosing these risks in 2020, up from 31 percent in 2019. As climate risk disclosure becomes more prevalent, companies should anticipate investors will scrutinize their content. A recent report by The Conference Board and Datamaran found most climate risk disclosures remain general and lack mention of specific risks and opportunities. To prepare for this increased scrutiny companies should examine their current climate disclosures and consider replacing boilerplate text with more specifics, including physical impacts or transition impacts related to climate change. 2. Assess your exposure to water risks and prepare to report on them. For companies in certain industries, it is not a question of if but when water crises will cause major disruptions. But awareness of these risks has not translated into much action — water crises have been listed by the World Economic Forum as a top five global risk in each of the last nine years, yet few companies publicly disclose their water risks. Indeed, BlackRock has labeled water risks as “under-reported,” and The Conference Board analysis confirms disclosure levels are low across most sectors. For example, fewer than one in 10 companies report their water stress exposure (which refers to the percentage of freshwater withdrawn in regions with high baseline water stress). As companies prepare for this year’s proxy season, they should pay close attention to their efforts on climate, water and biodiversity. There are signs that disclosure activity is picking up in some sectors, however. One-third of companies in the materials sector, for example, disclose their water stress exposure, up from 7 percent in 2019. The energy sector also saw disclosure rates more than triple in one year. Investor-focused reporting frameworks are clearly having an impact on disclosure: Both the Sustainabiity Accounting Standards Board (SASB) and TCFD include water stress exposure as a significant metric for companies in the materials and energy sectors. Companies that have not already done so should assess their exposure to water risks and prepare to report on them. Their competitors are increasingly doing so, and investors are paying attention.  3. Take a fresh look at your biodiversity initiatives and examine your value chain for “hidden” impacts. The COVID-19 pandemic has highlighted the interconnection between environmental health and public health. Among other things, the pandemic has reminded us that biodiversity-loss increases the risk of infectious diseases. As a result, companies should expect greater urgency for biodiversity-protection efforts. There is already evidence investors are paying more attention to biodiversity issues: The topic hit headlines in the U.S. last year when nearly 70 percent of P&G’s shareholders voted “yes” on a resolution aimed at addressing deforestation in the supply chain. This issue is likely to feature again in this year’s proxy season as investors are keen to understand how companies are managing their biodiversity impacts. Sustainability executives should also keep an eye on developments related to the Task Force on Nature-related Financial Disclosure recommendations, an initiative modeled after the TCFD recommendations.  The time is right for companies to examine (or re-examine) their biodiversity impacts. Just over one-third (35 percent) of global companies have published a biodiversity policy, yet the number of companies exposed to such risks is likely much higher. Companies that may seem safe from these risks, such as those in the services sector, should take a fresh look at their value chains — doing so may reveal significant biodiversity impacts. Last year’s proxy season demonstrated that the crises of 2020 did not distract investors from the “E” pillar of ESG. Instead, support for shareholder proposals on environmental issues is at an all-time high: Last year these proposals received an average of 32 percent of votes cast — almost double the support they garnered five years ago. As companies prepare for this year’s proxy season, they should pay close attention to their efforts on climate, water and biodiversity. Companies that have not prepared disclosures in these areas should consider the materiality of these impacts to their business. And for those companies that currently have disclosures in these areas, now is a good time to assess the content and quality of those disclosures.    Pull Quote As companies prepare for this year’s proxy season, they should pay close attention to their efforts on climate, water and biodiversity. Topics Corporate Strategy Reporting Finance & Investing ESG Water Conservation Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Shutterstock Shutterstock Close Authorship

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A tidal wave of new carbon emissions data soon will be upon us

February 9, 2021 by  
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A tidal wave of new carbon emissions data soon will be upon us Ian Kearns Tue, 02/09/2021 – 02:00 A radical increase in available carbon emissions data may be just around the corner. Should it happen within a matter of months as proponents hope, its effects will spread around the world to dramatic effect. Cities failing to measure and publish their emissions data will find themselves under renewed and intense scrutiny. Slow-to-change investors and greenwashers in the business community will lose their cover to continue propping up the fossil fuel economy. And citizens and consumers will have the kind of granular information they need to more effectively target the decision-makers and brands standing in the way of a sustainable future. Central to this shift is likely to be is a collaborative endeavor called Climate TRACE . Climate TRACE (Tracking Real-Time Atmospheric Carbon Emissions) is a project to use satellite image processing, remote sensing technologies, machine learning and artificial intelligence to monitor worldwide human-made greenhouse gas emissions in real time. Unlike other approaches to monitoring emissions, it plans to attribute emissions to specific sources, whether these be individual factories, ships, power plants or a range of other facilities and all its data will be placed in the public domain. The initiative is the product of a nine-organization collaboration that has the backing of climate campaigner and former U.S. Vice President Al Gore. Among those involved are nonprofits including Carbon Tracker, CarbonPlan, Hudson Carbon, OceanCarbon, RMI, WattTime and the Earthrise Alliance, and tech companies Bluesky Analytics and Hypervine. Each partner brings a relevant monitoring technology to the table and expertise or a track record working in a key industry such as transport, agriculture or the energy sector. Ultimately, all these impacts from increased transparency will have to be accommodated. If successfully on stream by summer 2021 as its designers hope, the service should drive not only increased transparency but also increased accountability. For the unprepared, the damage could be severe. The kind of Reddit-coordinated collective action by retail investors that disrupted stock prices recently soon may be copied by ethical investors armed with highly specific real-time emissions data to achieve similar effects. Some previously untargeted companies, brands, institutional investors and geographies will be thrust into the limelight as central problems in the battle against climate change. Their asset values and prospects will be damaged by sudden negative shifts in both consumer and investor sentiment as a result.   Those that up to now have been talking a good game on environmental, social and governance (ESG) reporting while failing to deliver in practice are likely to be exposed as greenwashers, sometimes brutally and at high speed. And data sets currently used to track a company’s ESG performance also will need to be radically overhauled. As a result, we can expect to see personal, political and business incentives tilt in favor of more action to combat climate change. Faster private- and public-sector innovation to get emissions down should follow. Sustainable investments should grow as divestment from carbon-intensive industries intensifies. And the newly available data should make it easier for governments to enforce environmental laws and for climate change mitigation measures and aid flows to be more efficiently financed and targeted at the areas of greatest beneficial impact. More controversially, forensically targeted climate activism may spill over more frequently into legally contentious areas and in some jurisdictions, the authorities may double down on their already evident efforts to badge environmental activists as security threats . Climate-centered legal disputes will proliferate as climate-impacted regions, entities and communities increasingly turn to the law to sue carbon-emitting ones. Even the COP26 climate talks, scheduled for November in Glasgow, Scotland, may be made harder as transparency on emissions puts whole countries in the dock for not meeting emissions targets, triggering fresh contention over which countries need to do more and which need to pay more for a faster transition to net zero. Ultimately, all these impacts from increased transparency will have to be accommodated. The technologies to acquire and share new sources of real-time data on environmental conditions are advancing and proliferating at speed. Satellite image processing systems and the billions of remote sensing and monitoring devices making up the internet of things (IoT) are one reason. But many foresee an internet of citizens (IoC) playing an important role in the not-too-distant future, too. A “Digital Technology and the Planet” report from the Royal Society in London recently suggested citizens soon could be use their mobile devices to capture and share emissions data in real time. This “citizen science,” the report argued, would “give everyone an active role and empower citizens to contribute to building data-driven systems for the planet.” The age of radically transparent and democratised carbon emissions data is coming. The only remaining questions relate to how soon, and which leaders and organizations will be ready. Pull Quote Ultimately, all these impacts from increased transparency will have to be accommodated. Topics Finance & Investing Reporting Carbon Removal ESG Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off

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Salesforce, Accenture and a tipping point for carbon accounting

January 28, 2021 by  
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Salesforce, Accenture and a tipping point for carbon accounting Heather Clancy Thu, 01/28/2021 – 01:30 The events of 2020 thrust the issue of corporate sustainability front and center in many C-suites. With that heightened visibility comes questions about accountability and accounting — specifically carbon accounting. It’s a dilemma decades in the making: How to properly track and declare a company’s carbon dioxide emissions in real time, not just in lag time after an annual data hunt. One year ago, cloud software powerhouse Salesforce began touting its answer with the general availability of the Salesforce Sustainability Cloud, a platform for providing real-time access to ESG data such as energy consumption and greenhouse gas emissions. The application was first developed internally for the company’s sustainability team and then spun out into a product meant to help companies collect data for sustainability reporting purposes. This week, Salesforce turned to digital services firm Accenture to accelerate its push to get more companies — especially those already using its Customer 360 platform — to adopt its carbon accounting platform.  Their pitch is that businesses need a digital platform of this nature in order to truly embed ESG metrics and considerations into business decisions. It’s a push to produce “investor-grade” climate data. And, with the leap forward in digitization over the past year, they’re amplifying their push. The announcement also dovetails with a declaration of support this week for “universal” ESG reporting standards advocated by the World Economic Forum. More than 60 big companies have endorsed the framework — including Accenture and Salesforce, but also the likes of KPMG, Deloitte, EY, Dell, Mastercard, IBM and PayPal ( it’s a long list ).  This initiative can help customers on this journey by letting them capture relevant ESG data as well as manage and measure performance against their sustainability targets. By teaming with Accenture, Salesforce hopes to help companies add industry-specific considerations to their dashboards. What’s more, Accenture and Salesforce intend to work together to expand the platform so it can be used to track other metrics that are front-of-mind for companies, including waste management, water consumption and diversity and inclusion data. “Our research shows that more and more companies realize that a sustainable business strategy means more than just ‘doing good’ — it means ‘doing well by doing good,'” noted IDC senior research analyst Bjoern Stengel in a statement. “This initiative can help customers on this journey by letting them capture relevant ESG data as well as manage and measure performance against their sustainability targets.” Salesforce is clearly the biggest cloud software company staking a claim in the emerging carbon accounting software category. While few players are on the field, it’s certainly not the only one positioning to score. I fully expect this year to be abundant with declarations of funding and such by cloud software companies focused on making sustainability reporting more accessible and investor-friendly.  Here are four players I’ll be watching more carefully. (I’ve excluded those linked to energy consulting services or those focused on compliance or managing safety regulations.) Refreshingly, none of them are from Silicon Valley:  Accuvio , an accredited CDP reporting partner, hails from the U.K. and many of its clients are there, including Cobham, West Fraser and Babcock International. ClearTrace (formerly SwychX), which automates carbon emissions and energy data collection for enterprises, investors and real-estate firms, in December raised $4 million. Among early users of its platform are Brookfield Renewables (also an investor) and JPMorgan Chase. Envizi , an Australian firm with customers including Microsoft and Qantas. Its partner list is impressive and includes Accenture, CBRE and Cushman Wakefield.  FigBytes , which last year integrated the reporting metrics from the Sustainability Accounting Standards Board, cites customers including Akamai and Taylor Farms.  My question from last week’s column bears repeating: When was the last time you spent time with your company’s CIO? If companies with net-zero goals have any hope of making those targets, the metrics need to be part of core business IT systems — and the carbon accounting software for supporting that progression is finally starting to emerge.  Pull Quote This initiative can help customers on this journey by letting them capture relevant ESG data as well as manage and measure performance against their sustainability targets. Topics Finance & Investing Corporate Strategy Reporting Information Technology Decarbonization Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off

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Moving beyond 100% recyclable goals

January 28, 2021 by  
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Moving beyond 100% recyclable goals Scott Breen Thu, 01/28/2021 – 01:15 Numerous companies have set 100 percent recyclable, reusable or compostable packaging goals such as Colgate-Palmolive and Kellogg. Virtually all these companies, though, are not tracking whether their packaging is actually recycled and what new products their packaging becomes. Without this end-of-life tracking, they cannot determine the extent of the economic and environmental impact from how their packaging was recycled. Technical recyclability is only the first step of many questions to determine if your packaging works in today’s recycling system. Other questions include: Is the packaging collected in the vast majority of recycling programs? Can the packaging be easily separated from the rest of the single stream recyclables? Once baled with like materials, does the material the packaging was made of sell for an amount that pays for the cost to collect and separate it and, ideally, provide additional needed revenue to the material recovery facilities (MRF) that separate single stream recyclables? Is the packaging downcycled into a product unlikely to be recycled at its end-of-life?  These questions are harder to answer. Further, some companies may not want to look under the recycling hood. They might fear uncovering negative characteristics for a packaging type that they want to continue using because they’ve invested in it, it provides higher margins than other packaging, or consumers find it attractive. If companies are serious about fixing the U.S. recycling system, they need to go beyond a new willingness to fee-setting and long-term recyclability goals . They need to consider what inputs they are pumping into the recycling system. Material flows One way to answer some of the above questions is to use material flow analyses (MFA). MFAs show visually how materials flow through the waste management system. They make it easier to identify where material is being lost and whether there is downcycling or ” real recycling .” While the whopping 82% of plastic going to landfill is jarring, it is important to look at the end-products that this MFA identifies and what percent actually gets recycled once entering the recycling system. Metabolic’s ” Recycling Unpacked: Assessing the Circular Potential of Beverage Containers in the U.S. ” has a beverage container MFA. One can see that a third of PET is lost during the mechanical recycling process and 40 percent of the glass material collected from single-stream recycling systems is used as landfill cover. The MFA also shows the best performer. It is aluminum cans with 82 percent of used beverage cans entering the U.S. recycling system able to be recovered for high-quality closed-loop recycling into another can, which easily can be recycled at the end of its useful life. Closed Loop Partners (CLP) also has conducted a detailed MFA for a variety of plastic resins. While the whopping 82 percent of plastic going to landfill is jarring, it is important to look at the end-products that this MFA identifies and what percent actually gets recycled once entering the recycling system. End uses vary by resin. One of the top end-uses noted in the MFA is synthetic fiber, which typically is used for clothing. Most new clothing , regardless of if it is made with recycled material, will go to landfill unless nascent solutions are scaled. One extra revolution is far from true circularity. Also consider plastic polyethylene (PE) film in CLP’s MFA. The only PE film that is recycled is the small percent that goes to retail store drop-off and commercial direct bales. So, PE film is technically recyclable . Thus, some companies may count it towards their 100 percent recyclable goal, but it is far from being truly recycled in today’s system. It may be difficult for a company to do an MFA of just its products. Still, companies should look to MFAs of material types and packaging generally to get a sense of if there is ” real recycling ” with their packaging. Revenue source or cost for recyclers The more than 350 residential MRFs in the U.S. are struggling with incessant contamination and often pay more to separate recyclables than they earn selling them.  Companies should consider whether the packaging they put into the marketplace will help recyclers on the back end with added revenue. The consistent, relatively high revenue sources for MRFs are certain kinds of paper ( cardboard ), aluminum beverage cans and certain kinds of plastic ( HDPE ). In fact, one recent study by Gershman, Brickner & Bratton determined that without the revenue from used beverage cans, most MRFs wouldn’t be able to operate . Typically low or even negative value materials for MRFs include glass , mixed paper and cartons .  They also should consider if the material is easy to separate and bale to sell for the needed revenue. For example, steel cans are easy to remove from the rest of the single stream recyclables via a magnet . Artificial Intelligence , robotics and optical scanners help address materials being missorted . Nonetheless, many MRFs do not have this kind of technology, nor the capital to purchase it . Environmental impact of recycling In addition to the economic impact of recycling, companies should consider the environmental impact that comes with how their packaging is recycled. The amount of energy saved from making a product with recycled material versus virgin material differs. With plastic and glass, it’s about a third . In contrast, aluminum cans and steel cans save 90 percent and 75 percent , respectively. A company making sure all its packaging is technically recyclable does little to address this problem of too much packaging that the U.S. recycling system cannot process economically and efficiently. Recycled content goals are certainly a step in the right direction toward building up domestic recycling markets and achieving the above environmental impact with greater displacement of virgin material. However, companies still should consider whether the materials in their packaging can loop numerous times. Plastic can be recycled only two or three times . Alternatively, glass and metal can recycle many more times as there is no loss in quality when they are recycled. When multiple loops from the same piece of material are considered , the environmental and economic impacts stack up . Packaging choice is critical to recycling system health The key to a thriving recycling system is either investing in the technology and infrastructure necessary such that all recyclable materials can be economically and efficiently recycled at scale or having more consumer goods companies choose packaging that recycles economically and efficiently in the current system. Neither is happening right now. Too much packaging dumped into the marketplace does not work in today’s recycling system. It’s worthless, multi-material, hard to separate and/or not easy to recycle into anything useful/recyclable. No wonder there are now calls for the chasing arrows symbol to be taken off all plastic packaging, and Greenpeace is suing Walmart for misleading recyclability labels on its plastic products and packaging. A company making sure all its packaging is technically recyclable does little to address this problem of too much packaging that the U.S. recycling system cannot process economically and efficiently. Companies need to go beyond technically “recyclable” in the sustainability metrics they use to choose their packaging . Potential alternative metrics include some percent of all the company’s packaging is above a certain value per ton, some percent of all the company’s packaging is primarily made of material that does not degrade during the recycling process and some percent of all the company’s packaging is primarily recycled into the same kind of packaging or other useful, easy to recycle products. There’s an opportunity for a company to be the first mover in next level recycling metrics and packaging choice. Once many companies make the shift, the recycling system will thrive and the economic and environmental impact from recycling will multiply. Pull Quote While the whopping 82% of plastic going to landfill is jarring, it is important to look at the end-products that this MFA identifies and what percent actually gets recycled once entering the recycling system. A company making sure all its packaging is technically recyclable does little to address this problem of too much packaging that the U.S. recycling system cannot process economically and efficiently. Topics Design & Packaging Circular Economy Recycling Packaging Circular Packaging Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Photo by Nick Fewings on Unsplash .

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