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Monday, May 16, 2011

An analysis of Green Mountain Energy



Introduction
When your company’s service it providing clean renewable energy everyday and every sale is an act of corporate social responsibility. This is the key difference that separates multinational corporations that sell terrible products but make commitments to responsible business, and companies that make commitments to sustainability such an ingrained aspect of their business that they can’t imagine making or selling a subpar product. Ultimately it is not the rhetoric but the actions that differentiate a company’s “commitment” to better governance, and by extension, corporate social responsibility.

Case Study: Green Mountain Energy

Dedicated to offering clean electricity products, and carbon offsets to residential and commercial customers, Green Mountain Energy from its inception in 1997, has made a name for itself as the, “longest serving green power marketer in the United States”.[1] In 2005, “As part of its corporate commitment to sustainable business practices and focus on improving the community in which it does business,”[2] Green Mountain Energy announced that it would “offset a full 100 percent of its carbon dioxide (CO2) emissions.”[3] The Director of EPA's Climate Protection Partnership Division at the time, Kathleen Hogan, noted that "Green Mountain Energy Company's voluntary participation in the EPA's Climate Leaders program demonstrates a serious commitment to Corporate Social Responsibility initiatives."[4] Formed with the mission of making clean power available to the most number of people, Green Mountain Energy, in 2009 became the United States’ leading provider of energy from renewable sources.[5]

Seeking to further its commitment to better governance and CSR, Green Mountain Energy took it upon itself to “created partnerships with groups such as American Forests, EarthShare and the Coalition of Environmentally Responsible Economies (CERES) to further expand its contributions to the preservation of the environment.”[6] Additionally, the company developed an “incentive scheme for the top commuters among its employees, since using mass transport greatly reduces the carbon emissions of an individual driving an automobile.”[7] Continuing its commitment to CSR, Green Mountain Energy announced on May 5th 2011 that in honor of the 41st Earth Day, “the University of Houston and Austin-based Green Mountain Energy Company announced several new green initiatives for the University;”[8] not the least of which is the a check for 140,000$ for university’s first solar array.

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Compressed Earth Blocks for Sustainability and The Mountain Institute




Introduction
Building with dirt is nothing new. Indeed, the use of earth in construction has been a staple of man’s time of the earth. While the creation of simple shelters may be the most prominent example of earth construction in many people’s minds, many of the worlds “great feats of construction involved the use of mud or dirt. The Great Wall of China (246-209 BC) was built of earth along most of its route. Hannibal's watchtowers, built with compressed earth in Europe in 300 BC, stood for more than 600 years.”[1] As man has evolved, so have the methods used to make structures with dirt. Many of today’s earth made structures are made with compressed earth block machines. These machines create higher quality bricks – as compared to manual compression – and produce bricks at a significantly faster rate. Armed with a new compressed earth block (CEB) machine, an international nonprofit organization looked into launching a for-profit entity to promote its new CEB machine. Was this a good idea?
Case Study: The Mountain Institute

Founded in 1972, The Mountain Institute (TMI) seeks to empower “communities in the world’s great mountain systems through education, conservation and sustainable development.”[2] In 2002, TMI received a U.S. patent for its new CEB machine. The machine was designed by TMI board member Jim Underwood.[3] TMI believed that because the new CEB machine was “price-competitive, allowed for low-cost construction and was environmentally friendly,”[4] it not only was ideal for people’s living in mountain regions around the world, it also fit TMI’s mission to ‘empowers communities…through education, conservation and sustainable development.’
A recent MBA graduate, TMI hired John Buffington to assist in continuing the prototype study it was conducing with its new CEB machine in Tibet as well as develop a business plan for further promotion and the possibility of marketing TMI’s new invention around the world. After spending ten months examining the long-term viability of the CEB machine for a global market, Mr. Buffington realized that “this project was not going to be as easy as he had originally anticipated”.[5] The prototype project in Tibet had been “slowed and offered limited guidance on possibilities in other markets… [and the] apparent value proposition of the machine had become tempered with the identification of a growing number of challenges facing wide-scale promotion and expansion in the developing world.”[6]

Challenges for TMI’s CEB Venture

Problem 1: Production
As part of the prototype phase in Tibet, the new machine seemed to be plagued with problems stemming from the CEB machine’s “slower than expected block production and overheating” concerns.[7] While the inventor of the new CEB machine insists that the issues that the machine faced in Tibet are “only small bugs expected with any start-up manufacturing operation,”[8] Mr. Underwood is not factoring in the additional difficulties and lag-time of fixing these ‘small bugs’ in Tibet or other developing countries. Underwood seems confident that an additional month in the planning stages should be sufficient to debug such issues in various host countries. While this may be sound business advice this does not sufficiently account for the cultural dimension associated with this longer debug time. Underwood himself seems to hint at this cultural problem when he acknowledges that TMI’s Tibetan partners are not self-empowering. This inability for self-empowerment “means that small solvable problems can take a long time to fix.”[9]

Problem 2: Promotion
Looking to gain insight on promotion of CEB and other relatively inexpensive products to developing countries, Buffington contacted Martin Fisher, cofounder of ApproTec. Buffington was interested to know why he does not operate as a for-profit company instead of a non-profit. Mr. Fisher’s response was that “the products he sells require far too much hands-on marketing and training for the relatively small profit per unit he achieves.”[10] Smaller than necessary margins are a serious concern for TMI and their potential CEB machine sales. Mr. Fisher goes on to state that his organization “can spend up to two to three times what they make in revenue on marketing for a given product.”[11]

Problem 3: Piracy
Perhaps TMI’s biggest problem, many at TMI have “worried that the simplicity of the design leaves it vulnerable to copying by would-be competitors, particularly in the developing-country regions where TMI intends to have the technology manufactured.”[12] This is perhaps a particular worry since the prototype for TMI’s machine was in China, a country notorious for its piracy and violations on intellectual property rights. As part of Mr. Underwood’s design for TMI’s CEB machine, the unit is to be,
Safer, lighter, more portable, ergonomic in use, less expensive, adaptable to local power sources, and capable of local manufacture and repair. In essence, this machine was specifically designed for use in developing countries, with an emphasis on simplicity and engagement of local populations.[13]
This simplicity of design, while an advantage in many ways, leaves the machine vulnerable to complete and total copy. Mr. Fisher does not view the piracy issue as a significant threat, he stated that “if the ultimate goal is market development, piracy and increased competition could serve as a measure of success for” his organization.[14] While providing greater access to such technologies is certainly part of the larger mission of TMI, TMI will ultimately have to decide if its mission in the short term is worth possibly sacrificing its mission in the long-term.

Problem 4: Licensing Agreement
As part of Buffington’s analysis there was an expectation that TMI’s “licensing arrangements could create an incentive for a local TMI-selected manufacturer or distributor to try to eliminate TMI from sales involvement after initial manufacturing hurdles have been cleared and demand was growing.”[15] While TMI has had past successes “leveraging participation from government agencies, which have a special interest in assuring that the projects they are involved with run smoothly so as not to lose face,”[16] such an approach is inherently risky and by no means a plan for operation success.

Problem 5: Managing from Afar
The final problem facing TMI’s CEB machine globally is the “lack of significant local presence.”[17] In many developing countries there is considerable importance placed on ‘relationships’. Setting up TMI’s new CEB machines will require significant discretion on the part of the local government, manufacturers, industry and mortgage loan providers, etc. Without an established ‘relationship’ with these players, it will not only be difficult to prevent piracy, it may be difficult to make sure that production stays on track, that corruption does not ensue, and that market development happens fast enough and with appropriate measures such that this industry grows. Because of this, Buffington thought to “initially focus on those geographies where TMI operations already exist. TMI currently has formal operations in India, Nepal, Peru and the United States and coordinates on efforts in a number of other countries.”[18]
Conclusion

Taking all of the considerations into account TMI has a decision before it. There may well be opportunities for growth and success both monetarily and for TMI’s mission if the CEB machine project is given the green light. That said, TMI needs to be aware that there is a strong likely hood that the project will not succeed. Possible reasons include cultural misalignment, insufficient market acceptance, smaller than expected revenue margins, etc. Additionally there are significant concerns related to theft and piracy. Given its design, it may be very easy for competitors, in several countries, to cheaply recreate TMI’s CEB machine and cut out the middle man. From a business point of view TMI’s CEB machine is clearly competitive, if not superior to other CEB machines on the market. This superiority does not seem enough to outweigh the potential obstacles to success that TMI will face. If TMI’s goal with its CEB machine is to simply fulfill its mission and provide a superior product that can be easily reproduced and copied around the world by almost anyone then there is little reason not to go ahead with the production and training of people’s around the world on new CEB technology. If TMI is hoping to add this to the repertoire of TMI products and services and make a surplus on this project then this is certainly not something that TMI should invest itself in.



[1] Hamschmidt, Jost, ed. Case Studies in Sustainability Management and Strategy: The oikos collection. Sheffield: Greenleaf Publishing, 2007. Page 164. [2] http://www.mountain.org/ [3] Hamschmidt, Jost, ed. Case Studies in Sustainability Management and Strategy: The oikos collection. Sheffield: Greenleaf Publishing, 2007. Page 166. [4] Ibid. Page 162. [5] Ibid, page 163. [6] Ibid, Page 163. [7] Ibid, Page 180. [8] Ibid, Page 180. [9] Ibid, Page 180. [10] Ibid, Page 180. [11] Ibid, Page 180. [12] Ibid, Page 180. [13] Ibid, Page 166. [14] Ibid, Page 181. [15] Ibid, Page 181. [16] Ibid, Page 181.[17] Ibid, Page 181. [18] Ibid, Page 181.
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Migros and the Search for Sustainable Palm Oil



Introduction
According to the Roundtable on Sustainable Palm Oil (RSPO) website, the WWF began exploring the possibility for an organization to examine the potential for sustainably produced palm oil back in 2001. The result was an “informal co-operation among Aarhus United UK Ltd, Golden Hope Plantations Berhad, Migros, Malaysian Palm Oil Association, Sainsbury's and Unilever together with WWF in 2002.”[1] Formally established in 2004 the RSPO was the result, according to authors Jens Hamprecht & Daniel Corsten in their article ‘Purchasing Strategies and Sustainability: The Migros Palm Oil Case, of a collaboration between the WWF and Migros back in early 2000 in order to “explore the possibility of a partnership for the creation of a sustainable palm oil supply chain.”[2] Since Migros is not mentioned more prominently in the history page of RSPO’s website, the question becomes how should Migros communicate its palm oil project to the public?

Case Study: Migros Palm Oil

Founded as a cooperative by Gottlieb Duttweiler in 1925, Mirgos has grown to become Switzerland’s largest retailer.[3] Following a newspaper article written in 1999, about the hardship of the native people of Borneo because of deforestation from both the timber and palm oil industries, Migros, which manufactures many of the products that it sells in its stores, decided to look into both mitigating the fallout of the article as well as look to gain some good will by exploring the possibility of sourcing sustainably grown palm oil for European sales. In the years that followed the first meeting between representatives of WWF International and Migros, the industry to make palm oil and the Roundtable on Sustainable Palm Oil have both grown more and more prominent. Since its inception, RSPO has established its Principles & Criteria (P&C) for certification of mills and plantations; ‘Formation of Working Groups on Green House Gases to address climate change issues; Smallholder Task Force to protect the rights of small farmers planting oil palm; and Biodiversity Technical Committee to work out biodiversity issues pertaining to sustainable production and biodiversity protection and conservation.’[4]

Communicating its successes

Detailed in the book ‘Case Studies in Sustainability Management and Strategy: The oikos collection’, “Migros followed three major approaches in communicating the palm oil project to the public. First, Migros granted the WWF and other NGOs to present its palm oil project as a role model for other businesses and to demonstrate its leadership role in the issue.”[5] “Backed by the public recognition that Migros now enjoyed for the palm oil project, Migros engaged in a second, more active approach to communicating the project: it reported about it in its own media.”[6] Finally, “Despite the campaign of the three global NGOs and the articles in Migros’ own media, Fausta Borsani was well aware that any reputational advantage of Migros could only be short-lived as “people easily forget”. Thus, it was agreed that a national poster campaign would follow. That poster Migros represented Migros’ third major approach in communicating the project.”[7] Despite the efforts made by Migros to publically disseminate its goals and successes as it relates to sustainable palm oil production, the key strategy for developing an industry standard, and by proxy, the work that Migros has made for sustainable palm oil remains the Round Table on Sustainable Palm Oil.[8]

Conclusion

Authors Jens Hamprecht and Daniel Corsten state that in the summer of 2002, “the WWF and Migros began preparations for an international roundtable of organizations interested in developing an industry standard.”[9] They go on to say that, “While both Migros and the WWF approached potential partners on an individual base as well as on conferences, care was taken not to let the preparatory roundtable appear as an event staged by Migros and the WWF.”[10] While some may note that Migros is not taking full advantage of the work it has done in development of a more sustainable palm oil industry, it is also important to realize that if Migros had taken more of a prominent role in the creation of standards and the RSPO in general, there may not have been as much growth in this industry. It is unclear if the intentions of the Migros leadership was truly benevolent when they decided to take a more passive public role in the role of RSPO. What is clear is that it may have been significantly more difficult to attract other companies into the ranks of the RSPO if it was perceived as a self-serving enterprise for Migros. Ultimately, as there could well have been some logical arguments made for not stepping aside during the initial growth of the RSPO, it may well have been the best for both Migros and the environment for the WWF and others to take the lead in the sustainable palm oil industry. Indeed such an action by Migros is in keeping with the highest standards and the core values of sustainability at large.



[1] http://www.rspo.org/?q=page/10 [2] Hamschmidt, Jost, ed. Case Studies in Sustainability Management and Strategy: The oikos collection. Sheffield: Greenleaf Publishing, 2007. Page 132. [3] Ibid, page 123 & 125. [4] http://www.rspo.org/?q=page/789 [5] Hamschmidt, Jost, ed. Case Studies in Sustainability Management and Strategy: The oikos collection. Sheffield: Greenleaf Publishing, 2007. Page 136. [6] Ibid, page 137. [7] Ibid. [8] Ibid, page 139. [9] Ibid. [10] Ibid.
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Global 100: Most Sustainable Corporations in the World, & General Electric?





Introduction
According to the Global 100’s report for 2010, General Electric, PG &E Corp., Tnt Nv, and H&M are the four ‘most sustainable corporations in the world’.[1] All publicly-traded companies, The Global 100 bases its rankings on research and analysis of nearly two thousand companies worldwide. These companies are deemed to have the “best developed abilities, relative to their industry peers, to manage environmental, social and governance risks, and to take advantage of new business opportunities”[2] in their respective areas. One would assume that the matter of sustainability in an organization's operation should be reflected in the development of a sound mission statement which reflects the organization's commitment to minimizing its impact on the relevant ecosystems. Does this assumption measure up to the reality of the Global 100’s top ranked companies?

Case Study: General Electric
GE does not have a defined mission statement per se. However, according to GE’s 2003 annual report, GE’s mission center around four core values. These are: Imagine, Solve, Build, and Lead.[3] The annual report goes on to detail what GE values about these core principles.
Imagine at GE is the freedom to dream and the power to make it real. This requires the values of passion and curiosity. Solve reflects GE’s unique ability to tackle the world’s toughest problems and expresses our values of resourcefulness and accountability. Build requires a performance culture that creates customer and shareowner value, and the word captures our values of teamwork and commitment. Lead reflects our spirit of optimism that embraces change, and our values of openness and energy; it’s what it will take to win.[4]
While the lack of a specific mission statement might be an indication of a company confused about its values, company culture, and goals for the future, this is clearly not true for GE. The above statement that has been a guiding force for executives at GE for years is perfectly suitable for both a successful growth driven company as well as a company that dynamic and flexible enough to accept and adopt an ever changing business landscape and embrace the need but also the business case for a more sustainable way of operating. Specifically, the value Imagine is not only important from an innovation point of view but the value of passion and curiosity are essential elements of growing a sustainable business practice. Solve. While it is noble and admirable to value the power of dreams and free thoughts; it is through passion and curiosity that solutions are created. In an ever-changing world the ability of a company to both envision both the problem and the solution is invaluable. Such abilities will only become more important as the world becomes more globalized and fuel sources become less abundant. Build. GE fuels the passion for these ideas by requiring a performance culture that benefits all stakeholders. A new and revolutionary way to handle energy or technology infrastructure not only benefits the individual, the company and the shareholders, it benefits all stakeholders and perhaps even society and the environment at-large. Holding all these other values together and providing an overall focus is GE’s concept, Lead. Leadership is perhaps the most important element in the continued success of GE or any company. It is leadership that has taken the initiative and made GE what is it today. It is that same leadership that will propel it into a new era of sustainable business.

Case Study: PG &E Corp.[5]
Like GE, PG&E Corporation has no specific mission statement. Listed by the Global 100 as the second most sustainable company in the world for 2010, PG&E does list an ‘environmental commitment’ on its website. It states,
As a provider of electricity and natural gas to approximately 40 percent of Californians and 1 in 20 Americans, we recognize that the way we produce and deliver our products and serve our customers has a direct impact on the environment. We understand that environmental excellence is necessary to be a leader in our industry and to the success of our business. A healthy environment is also necessary for the well-being and vitality of our customers, employees, and the communities we serve—as well as society at large.
That's why our environmental commitment extends beyond compliance. Our vision of becoming the nation's leading utility requires that we raise the bar for ourselves, and that we work with others to do the same.[6]

If an examination of companies on the Global 100 seeks to assess if a company’s values are consistent with its sustainability commitments, then PG&E certainly meets the minimum qualifications. As an energy company it is important that PG&E’s chosen industries can be very taxing on the environment. The acknowledgement of PG&E of this is notable. The commitment goes on to say that ‘environmental excellence is necessary to be a leader in our industry and the success of our business.’ From these statements it would seem clear that PG&E acknowledges the challenges that, it and its industry face, in the transition to a more sustainable business model. That future business success can only come with the continued success of the environment and community that PG&E serves.

Case Study: TNT N.V.

The mission statement for TNT N.V. is to “exceed its customers’ expectations in the transfer of their goods and documents around the world.”[7] The mission goes on to say that “TNT delivers value to its clients by providing the most reliable and efficient solutions through delivery networks.”[8] Specifically, “TNT aims to lead the industry by:
  • instilling pride in its people,
  • creating value for its shareholders, and
  • sharing responsibility for the world in which it operates.”[9]

While the crux of the mission statement for TNT does not, at first, appear to be very reflective of its sustainability commitment, TNT does have a marked pledge toward ‘shared responsibility’. TNT’s goals for its industry include developing a sense of pride and purpose to the lives of the men and women that work in express and mail delivery industry. One can only assume that part of the pride that TNT is referring will come from its pledge of ‘sharing responsibility for the world in which” TNT operates. According to the ‘corporate responsibility’ section of TNT’s website, “a responsible company can no longer flourish by focusing on its financial performance alone. To perform well, to attract and motivate employees and to retain its license to operate, TNT must adopt a more holistic approach to managing its business, one that focuses on all of its key stakeholders.”[10] In many ways, TNT is living up to its commitment to responsibility and the holistic approach to business that it describes. Listed as the third most sustainable company in the world by the Global 100, TNT is a model for its industry.
Case Study: H&M
H &M Hennes & Mauritz AB often referred to simply as H&M is a Swedish fashion company that operates thousands of stores across over 35 countries. Ranked as the forth most sustainable company by the Global 100 in 2010, the mission statement of this company is "Fashion and quality at the best price."[11] Of all the mission statements discussed in this analysis, H&M’s is perhaps the least reflective of its commitment to sustainability and responsibility. The ‘corporate responsibility’ section of H&M’s website goes into greater depth about H&M’s commitment to sustainability.
At H&M, quality is about more than making sure that our products meet or exceed our customers' expectations. It also means that they have to be manufactured under good conditions and that our customers must be satisfied with us as a company. Taking responsibility for how our operations affect people and the environment is also an essential prerequisite for H&M's continued profitability and growth.[12]
Like many companies today, H&M has realized that their operations affect people and the environment. More importantly, that consideration of people and the environment are “essential prerequisites for H&M’s continued profitability and growth”. This is a powerful assessment from H&M, and one of the more reflective of H&M’s commitment toward a sustainable business future.

Conclusion

Through the work of some dedicated sustainability research groups the Global 100 is able to produce a ranking of the most sustainable corporations in the world. Assessing sustainability is by no means an easy task. As a developing field of study, there are, as yet, no absolute or universally accepted measures for the ‘sustainability’ of any given company. That is not to say that the work being done by the Global 100 is not valuable. There are always growing pains in any industry. One aspect not examined by the Global 100 is the assumed correlation between a corporation’s sustainable performance and its general mission statement. Indeed, in the case of both General Electric and PG&E Corp. there is no mission statement at all. This may be less of an argument against the overall sustainability of a company and more a general business oversight than anything else. Both TNT N.V. and H&M have mission statements but neither mention sustainability. It is interesting to note the marked absence of specific and powerful language within the above mentioned companies mission statements for sustainability. The lack of commitment in their mission statements is even more interesting when you consider, that these companies are ranked, at least by one organization, as the most sustainable in the world. It is not clear what importance mentioning sustainability, a relatively new concept, may have for companies that have had established mission statements for years. While including sustainability in a mission statement would certainly confirm a company’s commitment, actions have always spoken louder than words.

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