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In Search of Sustainable Enterprise - The Case of GE's Ecomagination Initiative
By Stuart L. Hart and Mark B. Milstein
This article has been highlighted by the Carnegie Council. Stuart L. Hart is S.C. Johnson Chair of Sustainable Global Enterprise at the Johnson Graduate School of Management, Cornell University. Mark B. Milstein is a Lecturer at the Johnson Graduate School of Management and Director of Business Research at the World Resources Institute. The article was first published in Value. Tomorrow's Markets, Enterprise & Investment.
The following is an excerpt:
In this article, we contend that Ecomagination is a bold undertaking that still leaves significant opportunities unrealized. It is a credit to the company that Ecomagination is framed not in terms of social responsibility, but rather in the language of business opportunity. Yet to truly judge the efficacy of GE's strategy, it is important to understand it in the context of the broader movement toward corporate sustainability over the past fifty years.
In a nutshell, much of the past fifty years has been characterized by a corporate attitude of denial or obligation. Only over the past fifteen to twenty years have companies begun to look at social and environmental challenges as business opportunities—either by "greening" their current products and processes or by moving "beyond greening" to technologies that leapfrog us into the future and make incumbent technology obsolete through a process of "creative destruction." GE's Ecomagination initiative is the most recent and visible of these opportunity-driven initiatives.
Looking forward, however, the greatest opportunity may lie not in reaching only the wealthy of the world with clean technology, but the four billion plus at the base of the economic pyramid which have historically been bypassed, underserved, or ignored by economic globalization. To do so will require not only technological ingenuity, but also disruptive new business models and a willingness to listen and co-create rather than imposing new technologies from the top down.
It is here where GE's Ecomagination initiative may have an enormous opportunity for expansion in the future. Indeed, Ecomagination has thus far focused on improving existing products and technologies so as to better serve existing markets and customers.
To read the full article click here.
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Ethics and Pandemic Preparedness:
Planning Guidelines for Businesses
In her article for the Fall 2006 issue of Management Ethics Newletter, published by Ethics Centre CA, a non-profit organization that promotes ethics in Candadian businesses, Dr. Kirsty Duncan, a professor of medical geography at the University of Toronto, argues that businesses must urgently prepare for possible pandemics and offers guidelines for doing so. Drawing on the case of the bird flu influenza, she argues that effective planning is encompassed by three broad considerations: 1. compliance with relevant legislation 2. partnerships among business, communities and governments; and 3. management of the range of ethical implications associated with pandemics.
The following are key highlights from her article:
1. International Pressure for Business Preparedness: Over the past few years there has been an increase in world leaders calling on the business world to plan for pandemics. For example, according to Duncan, on December 6, 2005, Michael Chertoff, Secretary of Homeland Security in the U.S., Carlos M. Gutierrez, Secretary of Commerce, and Michael O. Leavitt, Canada's Secretary of Health and Human Services appealed to the American business community: ‘We are requesting that you, as a business leader, focus on the need for planning within your organization for the possibility of an influenza pandemic…your business should develop specific plans for the ways that you would protect your employees and maintain operations during a pandemic.’
2. Current Lack of Preparedness: According to Duncan, Western companies are ill-prepared for a pandemic should one arise. Citing a March 2006 survey by management consultancy Watson Wyatt Worldwide, Duncan writes that only 15 per cent of large American companies had a bird-flu plan at that time. Moreover, a June, 2006 survey by The Conference Board of Canada of executives showed that there are major gaps in businesses' current planning for issues such as compensation for workers covering absent employees, response to workers who refuse to work in an unsafe environment, and most significantly the lack of coordination with the public sector (according to the survey 94 per cent of participating companies reported that they had not as yet had discussions with any level of government)
3. Legislative Compliance
Duncan stresses the importance of researching existing laws on employee safety and health. “It is advisable,” she writes, “for employers to engage legal and professional experts to determine what constitutes ‘every precaution reasonable.’"
4. Ethical Considerations
According to Duncan, companies should adopt a pre-determined ethical framework to inform organizational polices on issues such as benefits and compensation, decisions to shut down offices or sites, employee evactuations, financial assistance, flexible worksite and work hours, preventive medical opportunities, etc.
After confirming legal compliance, companies should incorporate four issues into their pre-crisis planning:
- The Precautionary Principle: ‘Where an activity raises threats of harm to the environment or human health, precautionary measures should be taken even if some cause and effect relationships are not fully established scientifically.’ Duncan argues that the principle should be implemented and enforced according to democratic values.
- Surveying of Employees, Management, and Unions: Without the advice, help, and buy-in of staff, Duncan argues, plans will not be effective.
- Assessment of Existing Principles/Codes/Values: Duncan advises companies to re-visit their guiding values in order to ensure organizational health in the time of a crisis as well as perceptions of the plan as “fair” by employees.
- Inclusive Process for Ethical Decision-making: Companies should pre-establish processes for ethical decision-making that are accountable, inclusive, open and transparent, reasonable, and responsive.
For the full article, which includes a detailed model set of guidelines for pandemic planning, vist EthicsCentre CA's website.
Posted 3/1/07
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Women’s Health In Global Supply Chains: Recommendations for Factories
Reprinted with permission from
Business for Social Responsibility
www.bsr.org
In its report, Women’s General & Reproductive Health in Global Supply Chains, Business for Social Responsibility, a global non-profit business association, assesses the status of women factory workers’ general and reproductive health in 34 factories in six developing countries: China, India, Indonesia, Mexico, the Philippines and Viet Nam (funded by the David and Lucile Packard Foundation).
Stating that women account for a disproportionately large percentage of the workforce engaged in manufacturing for export markets (according to BSR, in the apparel, footwear and toy sectors, factories with greater than 80 percent women workers are the norm), the report argues that by improving the health systems within their supply chains, businesses can improve factory productivity and quality and reduce worker absenteeism and turnover. Its findings cover reproductive health, HIV/AIDS, nutrition, occupational and general safety, and education. In its ‘Recommendations’ section of the Executive Summary, the report offers suggestions for improving women’s health in future factory- and supplier-led initiatives, excerpts of which are reproduced below:
From the Recommendations Section:
…It is our conclusion that internal motivation among factory management represents the most effective way by which to successfully promote women’s health programs.
Services Integration
Factories with a holistic approach to women’s health generally realize more effective results. This is especially true for women workers who are also concerned about the welfare of their children, husbands and other family members. A factory that provides transport facilities, child care and advice on proper nutrition will witness greater improvement in health than factories that only provide diagnostic and treatment services, however advanced their services may be.
Accessibility
Health care facilities must be easily accessible to workers and permission to leave the production line must be granted when the need exists. If the clinic is located away from the factory, workers are reluctant to take the extra time to go to the clinic, even if transportation is provided to them. Also, if the line supervisor or production manager is not amenable to workers taking time to visit the clinic, workers will be less inclined to do so.
Nutrition
Most worker ailments, such as anemia and gastritis, stem from poor nutrition and poor eating habits. Factories can improve worker health in the long-term by placing more emphasis on nutrition through training and individual counseling, and by providing nutritional supplements and free or subsidized meals, particularly breakfast.
Education
Training on health issues requires long-term commitment from factory management. Sustained efforts on the part of management can help to ensure that workers are informed about trainings and have the time to attend.
• Proactive Education and Information Sharing: Since workers are often embarrassed or do not know to ask for information, factories should identify ways to disseminate information easily and discreetly, including posters or brochures posted in semi-private spaces.
• Regular and Frequent Health Campaigns for All Workers: If campaigns are voluntary, many workers will choose not to attend unless they are in a location whereworkers are already congregating, such as the cafeteria. Because factories often experience high turnover, health campaigns that occur only annually reach a small percentage of the population, so campaigns should occur more frequently. Even if turnover is low, changing worker attitudes requires repetition and frequency.
• Locally Tailored Programs: Companies should support factory initiatives, instilling company values and guidelines but allowing flexibility for local managers to design programs that are tailored to worker needs and consider cultural and socioeconomic sensitivities. The success of such programs can be enhanced by providing opportunities for input and feedback from workers and by having worker committees or peer health representatives that demonstrate worker ownership of health issues.
Departmental Coordination
Coordination between different functions within the factory is important to ensuring improvements in health….Periodic and systematic coordination and sharing of information and findings between medical service providers, human resources, production, cafeteria management, dormitory staff and senior management remains essential. For examples, deficiencies in nutrition can be remedied through the sharing of information between doctors and cafeteria management; if workers are dehydrated, line supervisors and production managers must be reminded to instruct workers to drink more water during the work day.
Counseling and Support Systems
Women workers tend to value the opportunity to talk to someone about their personal problems, which may include domestic violence, children’s education and financial concerns….Workers should have access and frequent communication with counselors on an individual basis.
Basic Elements of Effective Factory Health Programs
While the projects visited had various levels of health systems and facilities, the following represent the basic elements of a successful program:
- Doctor: ...While it is not necessary for the doctor to be a specialist, a female doctor or gynecologist is helpful when the factory has a majority of female workers.
- Medical Records
- Counseling and Support Staff
- Annual Health Check-up
- Dedicated Personnel
Interaction with Government Health Facilities
In India, the Philippines, Mexico and Viet Nam, where government health insurance for workers is mandatory, factories could put more effort into leveraging the public health system and supporting workers through interaction with government hospitals and management. Factories that regularlyaccompany their workers to government hospitals for follow-up treatment and develop communication channels with doctors and management at those hospitals find that their workers receive a higher quality of care. .
Collaboration with Government and NGOs
Factories should work closely with government agencies and NGOs, including actively partnering with government health campaigns in their communities. Factories alone may lack the expertise and financial resources to organize and train workers, so utilizing existing programs may be more cost effective. Family planning services are one area in which all focus country governments offer a number of programs. Government agencies and NGOs can also be invited to conduct health programs within a factory. Several NGOs interviewed during this study expressed willingness to provide health education to factories, in many cases free of charge, because their costs are often covered by bilateral, multilateral and private donors.
For the full report click here.
Posted 2/5/07
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Offsetting Emissions: A BSR Business Brief on the Voluntary Carbon Market
In its December 2006 ‘business brief’, “Offsetting Emissions: A Business Brief on the Voluntary Carbon Market,” Business for Social Responsibility, a non-profit business association that works with corporations to create a more just and sustainable global economy, offers guidance for companies considering the purchase of voluntary offsets for their greenhouse gas emissions. It presents an overview of the voluntary carbon market and offers steps to aimed at guiding early assessments and enabling corporate decision makers to become educated consumers within voluntary carbon markets. Reproduced with permission below are excerpts from its executive summary:
from the Executive Summary:
An Overview of the Voluntary Carbon Market
Global carbon markets have doubled in size over the past year (1). Current estimates place regulated markets at US$21.5 billion and voluntary markets at about US$100 million for the first three quarters of 2006 (2). And the prospects for continued growth in carbon markets are strong.
The reason is simple: companies are increasingly entering the voluntary carbon market. American Electric Power, Ford Motor Company, HSBC, Google and DuPont are all engaging in voluntary markets to offset their emissions. A recent survey of 92 companies by The Conference Board found that about 75 percent of respondents are actively measuring their carbon footprint, which includes greenhouse gas emissions from both their direct and indirect operations (3). Over two thirds of the corporate boards covered by the survey have carbon on their agenda. While only 50 percent of surveyed companies have programs in place to reduce or offset emissions, the rapid increase in company carbon inventories (entity level registries) points to a growing pool of potential market players. Only 15 percent of companies surveyed currently engage in voluntary emissions trading, but an additional 40 percent are considering voluntary engagement.
To meet rising interest, the number of voluntary carbon offset providers has grown dramatically in the past two years. Providers such as The Climate Trust invest in renewable energy sources, methane capture and technology retrofits to offset their corporate buyers’ emissions. The diversity of offset projects is constantly growing, from reforestation to soil tillage to carbon capture.
Offsets are designed to ensure that emissions do not continue to rise. They do not, however, decrease emissions, which is essential to addressing climate change drivers. When offsets are coupled with corporate efforts to concurrently decrease total emissions, they can become an essential part of corporate climate strategy.
Today, the motivations for companies engaging in voluntary carbon markets are as diverse as the players and include:
· Fulfilling corporate greenhouse gas reduction targets, especially when internal reductions are not feasible or cost-effective;
· Gaining carbon market experience in order to increase authority and influence in policy discussions about climate change and greenhouse gas regulation;
1 The World Bank & International Emissions Trading Association (2006). “State and Trends of the Carbon Market 2006,”Washington D.C.
2 Bayon, R. (2006). Ecosystem Marketplace.
3 The Conference Board (October 18, 2006). “‘'Carbon Footprint' an Increasing Management Concern,” Executive Action, No. 213.
Reprinted with permission from Business for Social Responsibility: www.bsr.org
Posted 1/12/06
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The State of HIV/AIDS Business Coalitions in Sub-Saharan Africa
As HIV/AIDS continues to increase costs, weaken business environments, and threaten consumer bases for business in sub-Saharan Africa, more and more companies have responded by forming coalition and associations. In many cases, these coalitions can more effectively leverage corporate resources in order to share best practices, permit economies of scale in the development of workplace HIV/AIDS products and services, and create a stronger front for policy advocacy, than could companies acting alone. As a result, at least 20 business coalitions now exist in sub-Saharan Africa, and more are being created every year. In its report, The State of Business Coalitions in Sub-Saharan Africa, the World Economic Forum’s Global Health Initiative in cooperation with the World Bank reports on the context, condition, and weaknesses of business coalitions against HIV/AIDS in sub-Saharan Africa - their governance, secretariat capacity, relationships with each other, coordinating mechanisms, fee and outreach approaches, internal and external activities, and financing. The report lays out areas of major weaknesses with suggestions for improvement.
Key excerpts from the report which draws on data from the profiles of 20 coalitions created during a mapping exercise undertaken over the previous 12 months are reproduced below:
For the full report and individual profiles on the 20 coalitions, visit the World Economic Forum’s website.
Findings
Programs – Focus on HIV/AIDS in the Workplace
"Looking first at what coalitions actually do, we see them engaging in a broad range of activities and fulfilling several functions: from acting as the voice of the private sector to advocating increased action or being a facilitator of treatment programmes. Most of them, however, spend the largest proportion of their time and effort supporting company action against HIV/AIDS in the workplace. This ranges from developing country-specific toolkits to implementing tailored employee training programmes.” From the Introduction
Financial Sustainability – Unpredictable Funding
“One of the most important challenges reported by coalitions, membership-based or not, is the heavy reliance on unpredictable funding. While membership fees – and in some cases income generating activities – typically bring in some revenue, all coalitions remain dependent on donor funding to cover the majority of their costs. This funding is typically short-term and difficult to renew, which makes it difficult for coalitions to engage in long-term planning or implement programmes with longer time horizons with certainty. In response, some coalitions are now aiming to have membership fees cover the core staff salaries, so there is at least some stability within the secretariat.” From the Introduction
Difficulty in Engaging Small and Medium Enterprises
”With respect to scaling up the private sector response, coalitions face a particularly difficult challenge in engaging small and medium enterprises (SMEs). While large companies have the resources to invest in comprehensive HIV/AIDS workplace programmes – and tend to be the most active – SMEs remain largely unresponsive to HIV/AIDS…They are, however, a critical sector to activate, particularly in sub-Saharan Africa, where some countries report that SMEs employ up to 80% of the formal economy’s workers” From the Introduction
Potential Total Demand for Coalition Services Exceeds Supply
“…Even the most advanced coalitions are only reaching a small proportion of the total private sector. Specifically, SMEs and the informal economy pose a particular challenge as they are traditionally less responsive and require different services and approaches to large companies. Meanwhile, coalitions tend to have a small group of very advanced companies that often need specialized, and resource intensive, support.
Therefore, the total potential demand is not only very high, but could also grow in a number of different
dimensions. On the other hand, coalitions today are not able to meet this potential demand. Coalitions are constrained by a lack of human capital, which appears to be driven by two main factors: poor financial sustainability and a lack of specific skills.
• Poor financial sustainability: As coalitions remain dependent on donor funding, which is typically short term, they find it difficult to plan for the long term with certainty, which in turn makes it difficult to expand secretariats significantly.
• Lack of specific skills: Meanwhile, a lack of key skills means that, in some cases, coalitions are not able to make full use of their existing staff. The most important key skills coalitions report they lack are:
- project management skills
- strategic marketing skills (to help both recruit new members and secure more fundraising).
A number of organizations, such as the World Bank, GTZ and UNAIDS, are already helping business coalitions develop such skills, but there are certain areas where a more focused approach could help further.” From ‘Conclusion and Opportunities’
Analysis and Suggestions
Business Coalition Formation Should be Country-Led and Based on Specific National Needs
“…The most important lesson is that each country business coalition should define its own response by learning from challenges and opportunities from other countries and partners, by coordinating with the national response to HIV/AIDS and by incorporating the needs of its own business community (potentially through a situational analysis, e.g. Mauritania) and the national situation.
Questions might include:
• What set-up would most help achieve the NAC (as representative of the national response to HIV/AIDS) objectives?
• What types of private sector entities should be members of the business coalition, but are critical to the private sector response, and how should the coalition engage organizations that are not businesses? For example, DRC extends membership to any organization or institution that has an interest in addressing HIV/AIDS in the workplace, including businesses, employer federations, unions, individual entrepreneurs and the informal sector.
• How does the model for fees and business outreach impact the activities of the coalition?”
From ‘Conclusion and Opportunities’
Engaging Small and Medium-Sized Enterprises (SMEs) and the Informal Economy
Two primary methods for business coalitions to engage SMEs and the informal sector currently exist.
1) The supply chain approach – where large companies support SMEs in their supply chain to establish HIV/AIDS workplace programmes – may be one solution. There are a number of examples of this already happening, with close support from nbusiness coalitions, e.g. SABCOHA (South Africa) nis supporting Eskom, and VW reach out to their nsupply chains. This approach can help leverage the vast supply chains of large companies – and the hundreds of SMEs involved. They can also harness the capacity within large companies to reach out and support SMEs, potentially relieving capacity constraints within coalitions. As in the case of SABCOHA, it can also create a new revenue stream for business coalitions. The World Economic Forum’s Global Health Initiative has partnered with several multinationals to understand how large companies can play this role better. See www.weforum.org/globalhealth for guidelines and case studies of this approach in Africa.
2) Business coalitions have also been able to successfully engage SMEs through existing structures such as employer federations and trade associations. For example, the DRC coalition has worked with the Réseau des Très Petites Entreprises – RTPEC (an employers’ federation of very small businesses) to obtain World Bank MAP financing for its HIV/AIDS activities. RTPEC is one of the few private sector organizations that has successfully disbursed and accounted for 100% of its total MAP financing.
Increasing Revenues and Increasing Financial Sustainability
Coalitions may need to explore alternative financial models. This may require an increased focus on income generating activities. We have seen some coalitions make the move towards greater service
provision for members, which earn profits for the coalition. Coalitions can develop a menu and fee
structure for services such as trainings, space for activities and access to funding opportunities (see section 4: Coalition Functions and Activities for more service provision options). It may also mean exploring greater support from national governments. This could reduce dependency on the international community, which is perhaps less stable than national government support, but coalitions risk losing their independence if they rely on funding from national governments. Furthermore, a diversified funding portfolio will provide coalitions with increased stability, while international organizations, umbrella business organizations and NGOs can help business coalitions structure their funding in a more sustainable way.
Maximizing the Quality of Outputs
There may be a role for the international community to increase investment and support in focused skills building from organizations that have this expertise and are willing to translate it to the national level. Groups such as the World Bank and GTZ should continue to support the business coalitions as they have done to date – by providing specific technical skills and opportunities for coordination and sharing of experiences in annual workshops. Coalitions may also explore increased partnering with umbrella organizations for service delivery, in addition to recruiting members, a role that some umbrella organizations currently fulfill.
Posted 1/8/07
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The Business of Social Responsibility
From: The McKinsey Quarterly Chart Focus Newsletter
December 2006 | Member Edition
Eighty-four percent of the executives from around the world who participated in a McKinsey survey agreed that their companies should pursue not only shareholder value but also broader contributions to the public good. Most acknowledged that their companies could handle sociopolitical issues more successfully, as well. To improve, a company should identify emerging trends and develop coherent organization-wide responses—an approach that requires it to integrate social issues into all dimensions of the business, not just the making of strategy.
If companies don't adopt that approach they run the risk of misalignment—a CEO saying one thing, the rest of the company failing to translate those good intentions into practical action. A company whose external-communications strategy emphasizes the search for more environmentally friendly products and processes, for example, will stumble if it simultaneously fights limits on carbon dioxide emissions.
Posted 12/22/06
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