BE Blogs: A Voice for Responsible Business

As part of our sustainability pledge to discuss best practices openly and honestly, we share insights that allow others to effect change in their community. While companies have responsibility to drive change internally, we believe they also can add to their insights and impact by sharing their experience with others.

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Browsing articles from "June, 2010"

Employee Performance: Does Purpose Trump Money?

Jun 15, 2010   //   by Colin Manuel   //   Company Culture  //  No Comments

Sustainability programs offer better motivation than financial incentivesAre you getting the most from your employees? If you rely on financial incentives alone to boost results, you may be doing more harm than good. To improve employee performance, you must pay as much attention to your company’s culture as your economic indicators.

When Money Misses the Target

People are motivated by a lot of factors. While money is the most universal and quantifiable motivator, it turns out to be one of the most detrimental.

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SEC Issues Guidance to Companies: Climate Change Has Material Consequences

Jun 10, 2010   //   by Melinda Owens   //   Accounting & Finance, Regulation  //  No Comments

SEC rules that climate risk is material informationIf a paradigm shifts in corporate reporting, would your company or shareholders notice? On January 27, 2010, the Securities and Exchange Commission (SEC) issued guidelines to encourage public companies to disclose climate-related issues facing their business.

BusinessEarth has long believed that significant and sustainable changes will only occur when environmental and social impacts are reflected in a company’s bottom line. With the SEC’s guidelines, we are one step closer to seeing if this is the case.

The SEC has always required companies to evaluate the impact that financial and legal risks have on their liquidity, capital resources, or results of operations, and disclose the risks if material. Until recently, climate risk was viewed as either too remote or too uncertain to disclose. With the new guidelines issued, we should begin to see climate risk being discussed in more SEC filings.

What is Climate Risk for Companies?

Specifically, the SEC’s interpretative guidance highlights the following areas as examples of where climate change may trigger disclosure requirements:

  • Impact of Legislation and Regulation: Will climate related laws and regulations such as the Waxman-Markey energy/climate bill impact your business in a material way?
  • Impact of International Accords: Are there international laws, such as the Kyoto Protocol, that will materially affect your operations?
  • Indirect Consequences of Regulation or Business Trends: Will failure to lower your emissions reduce customer demand for your product?
  • Physical Impacts of Climate Change: Will the effects of climate change limit your ability to source raw materials, invest in infrastructure, etc…?

What Gets Measured Gets Managed

The relevance of climate risk has expanded from investors with moral or policy interest to investors with a financial interest. A company’s financial condition could depend upon its ability to avoid climate risk and to capitalize on new business opportunities by responding to the changing physical and regulatory environment.

King Coal and Climate Regulations

The coal industry demonstrates the risks and impact companies can face from emerging and expected climate regulations. On July 25, 2007, a front page Wall Street Journal article Coal’s Doubters Block New Wave of Power Plants spotlighted the increasing difficulty of building coal-fired generation. The article pointed to proposals for new coal-fired power plants in Texas, Florida, North Carolina, Oregon and Minnesota that have been cancelled because

“States have concluded that conventional coal plants are too dirty to build.” The article reported that “the rapid shift away from coal shows how quickly and powerfully environmental concerns, and the costs associated with eradicating them, have changed matters for the power industry”.

In a search of SEC 10K filings over the past year (May 2009 – May 2010), we were shocked to find that only six companies mentioned the phrase “Climate Risk”.  With the April 2010 BP oil spill in the Gulf of Mexico on everyone’s minds, it makes us wonder, what will BP and other oil companies disclose in upcoming SEC filings?  Do you think that companies will provide more disclosures or will companies ignore the issued guidelines? After the dramatic drop in BP stock, shareholders may leave public companies no choice but to disclose more of the climate and social risk inherent in their operations.

Social Capital: How to Understand and Grow Yours

Jun 9, 2010   //   by Colin Manuel   //   Terminology  //  2 Comments

How to find and grow social capital for your companyLabels clarify, organize and structure information in a coherent way. At least, that’s what they’re supposed to do. So why do labels often get in the way of comprehension and action?

Social capital is a classic example of a clear, intuitive idea that is muddled by a confusing label.  Once you grasp the concept, you can measure and grow social capital at your company.

Trust: The Foundation of Social Capital

Social capital is the idea that social relations have productive benefits. Sound a lot like trust? We think so. Most people agree that trust has a financial impact on their company’s long-term profitability. So why does social capital get left out of the equation?

It’s easy to see “capital” in the form of a tool or factory. You invest money in a tangible good in order to make more money. While concrete investments, like widgets, are easy to count and quantify, that doesn’t lessen the value of intangible forms of capital. Like plant, property or equipment, social capital is essential to growing your wealth.

Integrating Social Capital in Your Business

Sustainable business practices offer one of the most efficient frameworks to grow social capital. As a socially and environmentally responsible business, you’ll find more opportunities to focus on the three key activities behind social capital: bonding, bridging and linking:

  • Bonding – Strengthen your “strong ties”
    • Strengthen your strong ties by nurturing a company culture based on openness, trust and transparency. For example, empower employees to develop the framework for a sustainability strategy in collaborative, cross-functional teams. Recognize their work and act on their suggestions
  • Bridging – Connect your “weak ties”
    • Introduce people and ideas outside of your company, industry and specialty. Connecting “weak ties” often results in the cross-pollination of ideas and a spring well of innovation. For example, create regular sessions where experts from diverse fields speak to your employees. Encourage your employees to return the favor and speak to others about their work.
  • Linking – Leverage partnerships for greater change.
    • Join forces with institutions and organizations that have a mutual interest in the success of your social and environmental initiatives. You’ll likely find that you can be more effective together than apart. For example, Patagonia, a leader in environmental stewardship, is helping Walmart green its supply chain.

Build it Before you Need It

You can’t buy social capital when you need it most. It takes time to grow and dedication to nurture. But taking the first steps toward sustainability, from a recycling initiative to volunteer days for employees, you’ll start building the kind of social capital that benefits all parties.

Can you think of any other areas where you could develop social capital? Where have you seen it used most effectively? Have you seen any cases of its failure?

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