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Civic Spirit, Stuart Gulliver and HSBC

This morning international news was all a flutter about Stuart Gulliver, chief executive of HSBC, who sheltered millions of pounds in a Swiss bank account, the funds to which came ostensibly via a registered company in Panama.

That a corporate executive of his stature has a Swiss account is on its own of little account. That he has money slushing about between different banks in different countries is also not uncommon. It would indeed be more surprising if he hadn’t such accounts – except for the fact HSBC has been the center of a “we provide our clients “dodgy” tax shelters and sometimes money-laundering” services controversy for some time now.

“Income tax has made more liars out of the American people than golf.” — Will Rogers, humorist

Has Gulliver been purposely avoiding taxes? Of course he has. No bank executive these days doesn’t. But there are lines of acceptable in tax avoidance — from the murky grey just-bad-form but still-okay, to the you’ve-stepped-over-into-dark shadows often illegal ones.

Did Gulliver stray into the shadows? Legally, probably not. Did he cross from good to poor citizenship? Undoubtedly.

Paying taxes is after all a measure of good citizenship. Good citizens pay them where some might say bad citizens set up foreign companies to funnel income through to unidentifiable Swiss bank accounts, and/or all sorts of other financial gyrations to avoid them.

“Taxes are what we pay for civilized society.” — Oliver Wendell Holmes, Jr., U.S. Supreme Court Justice

I am not saying Mr. Gulliver is a bad citizen. Not at all. But many find it ludicrous why already very well off people typically work so hard to avoid paying taxes. If you are rich you get this; if you’re not, the of culture wealth is often just too far beyond us to understand.

But if you care about sustainability and/or you have lived or worked in a country where tax avoidance is common, you will notice life is hard for many, many more than it is easy.  That is to say, good tax systems seem to correlate with decent general welfare.

Most studies on tax avoidance and the common good, unfortunately, are ambiguous at best. Yet one can’t help but eyeball a tax-human welfare correlation in Norway, Sweden, Canada and the like, where more people are doing o.k. than naught and tax avoidance gymnastic are generally frowned upon.

Sidebar to think about – Is it outlandish to hypothesize an association between growing tax avoidance, concentration of wealth, and deteriorating national infrastructure even in well-off countries?

We can’t blame Gulliver for the practice of tax avoidance, income disparity, or the state of our bridges, roads, educational systems etc. But we can question his civic spirit as business leader. Given recent revelations/allegations of HSBC’s conduct we might also want to question his bank’s commitment to anything on the sustainability front as well.

“Where there is an income tax, the just man will pay more and the unjust less on the same amount of income.” — Plato

Gulliver? He didn’t do anything outrageous or uncommon for someone in his position. Mucky yes, illegal no. Even so, if enough people – particularly influential people –condone tax avoidance through words or action, well, bad things are going to happen to civilization, that much is clear.

Let’s not kid ourselves, Mr. Gulliver is a poor example on many fronts. He let his employees, clients (including me), company and country down.

Perhaps HSBC should show a little civic spirit of their own (not to mention protect their brand) and let him go, free to wander over the lines of his own choosing without them.

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Corporate Conservative Sustainability, Foxenomics, H&M, & Vested Interest Malarkey

I was a more than a bit shocked last week when H&M’s CEO warned of a social and economic catastrophe if we stopped buying the 20% of things we buy but don’t need.

In my politely Canadians way I said in a post that this was a having-the-cake and wanting to-eat-it too variety of argument.

Unfortunately there is both truth and misconception in the catastrophic perspective.

It is true that immediate reduction of unnecessary consumption would lead to loads of “dislocation.” Not the least of which in developing countries, a subject I will treat in a later post.

It is misconceived however because capitalism is a net sum game. Humans will always produce about the same amount of wealth within the bounds of our more or less free capitalist system.

What we choose to produce and consume, what we choose to value… well that is a whole different matter. And right now we have a highly wasteful, material economy, we value things. What we need is a less stuff, more experience based Dont buyeconomy. That’s a cultural change not economic one, and a change certainly not lead by the hoped for technical fix we are implicitly relying on.

We’ve known this for years. This is not news.

Sadly in this statement we also hear strains of our friendly Foxonomic Ecopundits whose fear-first message tells us “fixing” the climate will have devastating economic costs.

This is nonsense on two counts. First, because just as we value diamonds jewelry (whose functional value outside making someone happy is almost nil), we will soon start valuing a stable climate. Paying for a sustainable global habitat, I dare say, will not be seen through the lens of cost but of value.

Second, we all know most Foxonomics for what it is: vested interest malarkey.

What both Fox and the CEO of H&M (albeit wrapped in softer language and genuine sustainability efforts of H&M) warn us of is that vested interests are at risk. To get this point we need only look at the explosive growth of alternative energy and how it will soon tear the established energy order asunder (especially coal/centralized utilities)

For any one company or vested interest to cry “Catastrophe Ho” in support of continued materialism is like saying the flotilla is sinking but save my boat ‘cause it has fewer leaks.

Besides consider the catastrophe if we don’t move from an economy of stuff to one of experience.

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Conservative Sustainability Disruptions… nowhere fast?

C&M’s CEO Karl-Johan Persson was recently quoted in the Guardian saying “If we were to decrease 10% to 20% of everything we don’t need, the result on the social and economic side would be catastrophic.”

Karl is right. The implications of not wanting stuff we don’t need are, quite incredibly, incredible.

How insane is that?

Disruptively insane but maybe not in the way Mr. Persson might want.

A good disruption implies innovation or change that does away with the old way of doing things. The best disruptions change not only the players on the field, but the field itself. A clean slate.

From this perspective, most efforts to make our economy sustainable are far from disruptive. Rather, they are premised on the idea we can “tech” our way to “sustainable” without fundamentally altering our unsustainable lifestyles.

We are only fooling ourselves believing “endless want” could ever be sustainable.

The opposite, however, can be liberating.

Imagine the feeling: 20% less stuff in your house; 20% less gas to buy; 20% less work; 20% less preoccupation; 20% more time to smell the roses, spend with your kids, read books…..

The correlation may not be that direct but we are talking about the 20% we don’t actually need! Personally and economically disruptive? No doubt: but more so for some than others.

That is crucible. Disruptions are always not good for everyone. Someone – usually with a vested interest in way thing are – tends to lose more than others.

Because H&M sustainability efforts are far better than most what comes next I say with the greatest respect: H&M’s fast fashion business model is antithetical to sustainability. Implicitly or explicitly, it underwrites values of waste, haste, inequality, inexplicably complex supply chains etc.…..the very stuff of the impossible-to-tech-our-way to sustainability pathway.

We do not need throw away fashion, no matter how closed-loop the cycle, no matter how caring the supply chain. Perhaps even less desirable is the endorphin inducing shopping culture it engenders.

To say we should continue to want things we don’t need is incredible (!) and invites a catastrophe far greater than naught. Suggesting this in the context of sustainability is like saying driving fast towards a cliff is dangerous so let’s learn to drive fast more safely.

A post coming soon will look at why not buying things we don’t need wouldn’t be as catastrophic as we might think…

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Stakeholder Muscle in the Sustainable Century™ ….

Market places were once more than just places of commerce, they were also important gathering places, social events, where news was delivered, politics organized, betrothal commitments made, and legal proceeding conducted…. social currency in fact figured almost as great as financial.

Markets today may seem more impersonal, even ethereal, but doing business now is no less a social engagement than it ever was. How business is conducted, and how goods and services are produced and exchanged deeply affects the way in which we spend much of our time on this planet. It affects how our resources are used, how our communities are organized and thrive – or not, how we related to neighbors, communities, countries, family members and much more. Doing business remains an innately complex human affair and we are all stakeholders in a massively interconnected web of economic and social relationships, impacts, and outcomes.

Super charged by the power of social media, sustainability minded stakeholders are increasingly flexing their muscles to let companies know exactly what they expect. Advocacy groups in particular have harnessed the internet to let their opinions be known and to flex their influence.

But its more than just opposition to what is not right sustainably. Companies that are brave and smart enough are now learning from stakeholders. They are learning to accept even proactively seek out critique and, ironically, support from stakeholders, even some that were once considered the “enemy.”

And stakeholders have more than just opinions to offer, in their diversity and differences of perspective they can help companies create shared stakeholder value in ways that advance both stakeholder and company needs. Stakeholder involvement in companies is quite simply about the future of business in a sustainable world.

Sustainable Century
 
This is the theme of Chapter Two of The Sustainable Century by Design or Disaster my soon to be published book (355 pages approx).  For more information write me at mdess@esglobal.com
 
 
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Market Signals = The Lifeblood of Sustainable Capitalism

Sustainable CenturyThe Sustainable Century by Design or Disaster (my upcoming book) is guided by seven themes (see box). Below is an overview of Chapter One where the theme of market signals is explored as critical to creating a sustainable global economy.

In a world crowded to excess with hopelessly uncreative, ineffective and wasteful conventional marketing efforts, it may seem hard to believe that sustainability values, obscured as they may be, are growing in strength and having increasing influence on the supply of the goods and services we want and need.

Still not nearly strong enough to push the market over a “sustainability tipping point” or the moment when sustainability drives the majority of demand impulses and supply reactions, sustainability signals are notable and rising in volume.SCDD 7 thoughts

Growth of fair trade markets, organic foods, non-GMO food production, the sharing economy, and most important of all, sales of products with some inherent “sustainability value” in conventional retail outlets are growing at rates much faster than “traditional” products/markets.

It will take some time to block out the great static of superficial unsustainable demand and replace it with deeper universal sustainability values, but all the signs point to great change in store.

Chapter One of The Sustainable Century by Design or Disaster explores the nature, strength and challenges behind making louder more forceful sustainability values market signals.

Excerpted from upcoming book by Marc de Sousa Shields, Managing Partner ES Global, The Sustainable Century by Design or Disaster…. For more information write info@esglobal.com
 
 
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On Low Oil, Fulcrums and a Sustainability Tipping Point Moment – All Hell Shall Stir for this!

Malcom Gladwell gave the world the tipping point. In it he argued a few people with the right idea at the right time can affect great social change.

Many now believe we are nearing a tipping point for a dramatic climate change fix.

I agree but not because enough folks are on board but because the fulcrum point of change has shifted.

Let me explain.

Think of a society, or any given issue as a plank resting on a fulcrum or point of support. As social, economic, and political contexts change, the fulcrum shifts to favor one world view or another… see- sawing back and forth if you will.

With each shift, the amount energy required to affect major change one way gets harder or easier. Tilting one end of the see-saw right to the ground is equally difficult until the fulcrum point is met, until SWISH, somehow your butt is on the ground.

Large or small, in combination or isolation, suddenly or evolutionarily, contextual variables work to move the fulcrum along under the plank. Sustainability fulcrum moving events are many. They include Rana Plaza, Exxon Valdez, the end of apartheid in South Africa, the rise of social investment, among many others.

The fulcrum has been shifting slowly in favor global Climate Change action for some time. Low Oil is a fulcrum moving event. In fact, it may be THE variable needed to shift the fulcrum over to a Gladwellian tipping point.

The sudden and precipitous drop in oil price has put the oil patch/energy sector in a house of havoc. Images of BP’s Gulf Coast oil spill are still fresh in our minds. The oil divestment movement has noisily served notice with some pretty strong voices. A growing number of conservative politicians are publicly admitting climate change is real. New Energy is a sleek alternative, with new technologies gaining ground daily on Old Energy.

Will Low Oil cause the Climate Change Wall to tumble down?

Hard to say. But one thing is sure: Old Energy is weak and the energy required dramatically shift climate change fulcrum is the lowest it has ever been.

The Low Oil window is likely open only for a short time, a strategic moment for climate change to be sure.

We need to strike now with a global carbon tax (or equivalent).

There is occasions and causes why and wherefore in all things.

All hell shall stir for this.

Henry V

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Why Corporate Decision Makers Don’t Always Get Sustainability Investment Options & 4 Things You Can Do About It.

We all know the best investors are those willing to take calculated risks and know their investments inside out…. right?

Yes and no.

Yes: understanding the nature and size of risk is important.

No: investors who over-think investments tend to lower their risk reward appetite and the breadth of investments they might consider.

This Yes-No condition is sometimes referred to as myopic loss aversion (MLA). It is the result of:

  1. Evaluating investments too intensely and too often;
  2. Being unable to objectively compare competing risk-reward “payoffs”;
  3. Not having experience or a framework to accept an unfamiliar yet calculated risk.

Almost all substantial corporate sustainability investment decisions are afflicted by MLA.

Why?

First, most involve high degrees of sensitivity often crossing departmental lines. This leads to over analysis, not to mention turf wars, which in turn leads to more analysis.

Next, tangible and intangible returns of a sustainability investment are almost always poorly understood as too risky.

As a result, sustainability proposals are analyzed literally to death, or at least far more prejudicially than competing conventional investment proposals — even those with similar or less interesting risk-return potential.

Last, sustainability investments don’t easily fit into conventional risk-return assessment frameworks most executives use.

An example — and one that still hurts: we once showed a client how a $400k investment in fleet maintenance and alternative fuel conversions would result in a 25% ROI within 12 months. A no brainer right?

Nope.

We got nowhere. Despite numerous, very good presentations which clearly demonstrated competing projects offered nothing near 25%, we met ferocious opposition from all sides.

We made two key mistakes which stroked a bit more than just a little MLA.

First, we tried to convince too many people, in too many different departments. This took time and fueled too much analysis, thought, discussion and debate.

Second, we failed to compare our project risk to others with similar risk profiles and not just lower RIOs. We should have talked about reputational risk, fuel price risk, and maintenance risk, logistics risk etc. or risks executives intuitively get and need not think much about.

With nothing to hang in their conventional risk reference frameworks, we were completely and unequivocally rejected – ambushed by MLA.

Here’s what we should done:

  1. Be patient and only get in front of the right people and only present once or twice;
  2. Prepare a simple matrix comparing our proposal with conventional projects of similar risk levels and characteristics (i.e., RIO comparators are not enough);
  3. Connect decision makers to stakeholders in direct comparator projects;
  4. Give the company a short time to accept our proposal so they couldn’t over-analyze.
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The Time for a Global Carbon Tax is NOW

The world needs a global tax on carbon. Imposed immediately, in all countries at once.

Of all the sustainability issues great and small that merit our attention, a global carbon tax is the only magic bean the sustainability bag.

The time to push hard for the tax is now. Here’s why.

Dramatically lower energy prices are making consumers happy – very happy – for the first time in a long, long while. Low priced oil will help the average US consumer save about USD 2,000 on gas and USD 350 on heating/cooling.  Add lower cost food, air travel, etc. and folks in the US, Japan, and Europe alone will save an estimated USD 590 B in the coming year. The savings are equally impressive for the 178 net energy importing countries. Who might notice or disagree with a small feel good carbon tax?

“Big Energy” meanwhile is very, very unhappy and historically distracted by over the cliff income loss. Halliburton – for many the poster child of all that is wrong with energy – for example, lost 49% of its value since June 2014. Big and Small Energy (aka Frackers) alike are trimming budgets rapidly and dramatically. Many Frackers will go out of business. Their financiers will also suffer substantial loan defaults and fee income loss. That’s a lot of lost anti-carbon tax lobby bench strength.

Holding the many potential negative economic and sustainability effects of “Low Oil” aside for the moment, the generally positive economic outlook offers what may be the most politically palatable moment for introducing a carbon tax.

Some Big Voices agree.

Former US Treasury Secretary Lawrence Summers believes consumers enjoying a Low Oil windfall probably won’t mind a modest carbon tax.  The Milton Friedman professor at the University of Chicago – the altar of free-markets, Michael Greenstone is also for taxing carbon. So is former GOP Congressman Bob Inglis, who argues Low Oil is an opportunity to swap income for emission taxes.  Jeff Rubin, former chief economist at CIBC World Markets believes  it’s time for Alberta – home to Canada’s massive tar sands projects – to stop “relying on bitumen royalties (and) to start taxing carbon.”

If sustainability is about natural processes, and it is, Old Energy is best seen as the aging beast it is. Alternative energy is youthful, aggressive, svelte and savvy, with economics that are now competitive enough to push the staggering old bastard aside.

Two things can help put Old Energy down humanely (to the world economy that is). First, the rapid and global introduction of a carbon tax. Second, switch the estimated USD 750 B to USD 1T Old Energy subsidies over to alternatives.

Too much to ask of national governments’ mostly able to only agree on nothing much important?

Perhaps.  But there is still enough carbon in the ground that the radical reductions are needed now. The Low Oil windfall may be the best, even last chance to accelerate the current pace of change – a pace certain only to boil us to death a bit slower than if we do nothing.

Put aside other sustainability issues for now, let us strike.

What do to with the carbon tax income coming soon…

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A Circular Economy in a Complex MultiDimensional Sustainability Game

You may have heard of the circular economy.

It is an economy where economic material flows enter the biosphere with manageable or no impact.

There is lots to like about this! Indeed, this is the environmental end game of sustainability is it not?

The best news is that the European Parliament is talking seriously about serious plans to support a circular European economy.

But the term seems a bit two dimensional, particularly when we think of the social and economic imperatives of sustainability.

Imagine this instead: a great complex sphere of economic, social, cultural, physical interrelationship hurling down a path littered with signpost screaming: STOP UNSUSTAINABLE.

That is the economy we live in today and that’s why it is so hard to instigate change. Circular just doesn’t quite capture the complexity and inertia of it all.

Its plausible, for example, to have a completely circular economy with the same intolerable levels of social injustice or economic inequality.

A multidimensional, circular economy is the sustainability goal it would seem.

In the meantime, I’ll take what we get on the circular front. So lets cross our fingers for Europe.

Test your knowledge on the circular economy quiz at the Guardian.

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Regulatory Klieg Lights, Corporate Photophobia and Sustainability.

I like a good government intervention from time to time. Problem is, good, market moving interventions are far and few between.

Some, like Naomi Klein, advocate massive infrastructure investments as a means to solve our climate crisis. Even if this was politically feasible, endless public investment might never be enough to stem underlying forces of unsustainable, dare I say ignorant consumption.

Bolstering growing but still weak sustainability market signals, on the other hand, seems a more feasible, less costly and faster way to the same end.

Requiring pension funds to publically state if they considered social, environmental and governance (ESG) criteria in investment decisions worked to this end, for example, leading to dramatically increased ESG investment levels in Canada, England and France with minimal financial or political costs.

Transparency works because consumers by and large want good things to happen. Sustainability reporting, labeling, or any form of shining light on corporate behavior lets consumers and investors decide if we want – or not – to buy or invest.

If a company fears light there is a reason for it.

The massive corporate-led, anti-GMO labeling campaign in various US states is instructive. Why don’t companies want us to know about GMOs? I am pretty certain it’s because they don’t really want us to understand what GMOs are all about.

Consumers may be ignorant but we are hardly dumb. Indeed, a recent Pew Foundation poll found while most consumers don’t really know what GMOs are they are pretty sure they can’t be a good thing! The poll also found that more information about GMOs would only confirm this fear and dramatically alter buying habits. Hence the corporate photophobia.

So while Kline is right about the climate crisis, it may be easier and ultimately more enduring to leverage capitalism by shining a little klieg lighting on corporate deeds rather than swim against implacable and fickle political tides.

Make sustainability reporting and labeling mandatory.

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