Charity Ranking Programs

I’ve written several posts (Why weren't we at the top? and Ranking corporate sustainability performance) that have expressed my views on the pros and cons of programs that endeavor to quantify and rank a company’s corporate sustainability performance. Especially, in reference to those programs that try to cover all spheres of sustainability.

At the Corporate Advisory Council (CAC) of the American Red Cross this week we had very similar discussion about charity ratings programs. The issues were very much the same.

The very influential Charity Navigator recently downgraded The American Red Cross from a four star to a two star rating. Charity Navigator's ratings can significantly influence donations from individual donors. Ratings are based on publicly available information drawn from financial reports, IRS 990, that charities are legally bound to produce. This is a logical approach, but it also limits the breadth of information from which the conclusions can be drawn.

The ratings offer an evaluation of financial health relative to similar charities. This precludes evaluation of how many people are served by the organization per dollar spent for example, or the value of the service provided per dollar spent. These sorts of measures can generically be called return on mission and are perhaps an even better indication of a charities performance. But they are much harder to quantify from publicly available information and even harder to compare on an apples to apples basis.

I draw the same conclusions as I did in my December posts. These types of ratings programs have a part to play, but their limitations must be recognized. For ratings intended for public consumption there is an even greater obligation on the program organizer to express the limitations to their audience than there is for ratings intended for business to business consumption.

Signs of an Inflexion Approaching

There are tensions within government and business on both sides of the Atlantic in emissions reduction. I think it is a good sign, and one that reflects government and business moving up another notch in the seriousness with which they take emissions reduction.

On March 1, the Washington Post carried an article that referred to the House of Representatives abandoning a plan to make its offices carbon neutral. The article raised the uncertainties around what it really means to buy offsets and the lack of a widely accepted standard for carbon neutrality.

At the end of February the EPA issued new guidance for Green Power Partners raising minimum levels, clarifying and tightening rules around new renewables and future RECs, and clarifying rules about which party can make green power claims especially at leased facilities.

Similar things are happening on the other side of the Atlantic too. In the UK, DECC (Department of Energy and Climate Change) has issued new rules for carbon accounting that change the dynamics of how carbon reductions can be accounted and claimed. A number of companies, including BT and Tesco are questioning these rules and the impact they will have on development of renewables.

Government and business are taking the conversion to renewables more seriously than ever and looking more closely at how they are accounted for and credited. I think the dynamics of the examples above and their coincident timing are a healthy sign. These are important debates that should be happening and should be resolved in a way that best provides incentives for the development of renewables and reduction of emissions. We have some way to go, but we are approaching an inflexion in how we quantify and act on carbon emissions reduction.

Complimentary teleconference - UK and US efforts to stimulate a low carbon economy

The British American Business Council is holding a teleconference on Tuesday March 17th at Noon EST. The discussion will be focused on a comparison of UK and US efforts to stimulate a low carbon economy. I will be hosting the event with presenters Nick Bridge, Counsellor for Global Issues from the British Embassy in DC and Matt Kalman, Research Assistant on energy and environment at the Brookings Institution.

The event is free to members of the BABC and to readers of my blog! Click on here to register and to download audio and webinar information. Where you are asked to enter your BABC Chapter enter 'CSR Perspective'. I hope you are able to join us.

Green goes Mainstream

The lead article "Data Centers: The Next Generation" by Marta Bright in the March/April edition of Oracle's magazine includes comprehensive examples from small and large companies (including BT of course!) that are implementing leading edge technologies in data centers.

The article seamlessly covers the efficiency of data centers and business performance. In a very short period of time we have gone from questioning the validity of environmental concerns, through viewing it as a stand alone issue to where we are today - placing it squarely as a mainstream business concern equal with operational effectiveness and business performance. Integrating it with other business needs is where green needs to be if we are going rise to the challenge in a sustainable way. I welcome Oracle's positioning.

The Scale of the Challenge

Sometimes it is the personal impact that can help underline the scale of a challenge. On my 13 mile drive into the office this morning I heard the great news that work is going to begin this month on the extension of the Washington DC Metro system out to Dulles Airport. I sometimes avoid the drive and the association emissions by teleworking. But I enjoy coming into the office and being with colleagues, so I don’t do that every day. The Metro rail extension should be great news for my commute as it involves extending the line from the Metro station nearest my home out to a new station that will be within walking distance of my office.

The extension will be completed in 2013 - so I only have to wait four years until I can leave the car behind and take the train to work.

But then I realized that although the Metro service is available now into DC, I still often drive when I have a meeting downtown. Why? To take the Metro, the station is two miles from my home, so I have to start my journey in the car anyway. Parking can be unpredictable in DC, but I can always find something, whereas after 10 am there is often no parking at the Metro and I end up driving anyway. Metro plus parking costs just short of $10.00 and takes about 50 minutes door-to-door. Driving plus parking costs $16.00 but takes a very predictable 25 minutes door-to-door.

I am thrilled that the Metro rail extension is on its way, but I think this small example illustrates the scale of the challenge we face in just one component part of creating a more sustainable infrastructure.

What about Whitewash?

The media and blogosphere is all over greenwash and rightly so. But what about its namesake, whitewash. I view the move from philanthropy as the central component of CSR, towards a much broader view of sustainability, as an important evolution. In the Four Dimensions of Sustainability, I use carbon emissions as the vehicle to illustrate the dimensions but the principles apply equally to economic and social sustainability – the impact of companies on the economic and social well-being of the communities in which they operate.

A responsible company needs to compare the impact of its charitable giving (dimension - inform and influence) in any particular sphere, with the impact of its products and services in the same sphere. In some situations, companies will find that their impact through the way they offer their services into the market place is an order of magnitude greater than the opportunity for change through their philanthropic giving. Whether it is an ICT company putting philanthropic dollars into digital inclusion, a food company funding nutrition education or a bank foundation subsidizing education for economically deprived communities on fiscal responsibility, the CSR professional also should be considering the impact of the company’s products and services on that community.

Corporate philanthropy has and will continue to provide enormous value to society. I would argue that it becomes whitewash at the point that it detracts from attention to the in-life and enabled impact of the products and services produced by the company.

What is Greenwash?

The blogosphere is full of accusations of greenwash and I think there is some justification. I intended that the Four Dimensions of Sustainability framework would add to the understanding of greenwash and help companies avoid the label by taking the right actions on sustainability.

The first part of the test seems to be reasonably straightforward. Let’s say for the sake of an illustration I were to introduce 50% hybrid vehicles into my vehicle fleet, I shouldn’t claim in my communications that this in itself makes me a green company unless my vehicle fleet contributes a significant proportion of my emissions. This is a pretty straightforward materiality test that sits within the direct dimension of the Four Dimensions of Sustainability.

But we need to go further and ensure that actions and communications on sustainability are also consistent across the four dimensions (within the context of materiality).

For example we might be less understanding of a company that has reduced the in-life energy consumption of its products and publicizes the green benefit (dimension – in life), but is pursuing a policy path (dimension – inform and influence) that is designed to undermine constructive legislation and regulation on climate change. Or a company that communicated to its customers that its products and services can help them reduce their footprint through substitution (dimension – enabled impact) but had done little or nothing to reduce its own footprint.

I would maintain that conflicting or inconsistent actions between the dimensions (within the context of materiality) is a sign of greenwash and stakeholders should call it out as such.