Guest Post, by Alan Petrillo, Writer, Editor of KLD Research & Analytics, Inc.

This week, in a statement cited at Green Inc., Nike said that it “fundamentally disagrees” with the US Chamber of Commerce’s position on climate policy. The shoe giant joins three major utilities in opposing the Chamber’s recent lobbying efforts, which include a call for a “Scopes monkey trial of the 21st century” regarding man-made climate change.

Why are some corporations so eager “to boost their green credentials,” in the words of Ann Fifield of the Financial Times? Perhaps these firms would rather defy their peers than alienate their customers – or their Senators.

“Social movements shape political power,” David Vidal told me last week. Mr. Vidal is Global Corporate Citizenship Research Director at The Conference Board, an independent organization working in the public interest to help businesses strengthen their performance and better serve society. He is also a member of the Newsweek Green Rankings advisory panel. He said his perspective is drawn from personal and professional experience, since the Board takes no official positions on legislation.

Mr. Vidal believes that concerned citizens, supported by empirical tools like the Green Rankings, can move even the most entrenched corporate and political interests.

Will “Coal States” Always Vote for Coal Senators?

While utilities such as PG&E and Exelon have broken with the Chamber of Commerce, others, including American Electric Power (AEP), have not. In my conversation with Mr. Vidal, I relayed a statement made by the head of AEP at a KLD forum last winter. I had found it interesting that CEO Mike Morris, in explaining why coal would continue to power the US economy, justified his position in political terms.

“We have 25 ‘coal states’,” Mr. Morris said. “That’s 50 Senators whose states depend on this [coal-friendly] economy.”

Mr. Vidal took issue with this calculus:

“The coal industry, and the wealth it represents, doesn’t hold those Senators as tightly as it thinks.

“Think of it this way: Before the Civil War, slaves were the single biggest ‘asset class’ in the American economy. History shows us that the power of wealth, of ownership, can be trumped by the power of social and political change.

“Coal is a big part of the economy, but do the coal interests really hold the constituents of ‘coal state’ Senators? Public views on the environment, and the urgency of environmental issues, have changed fast. Younger voters have been recycling since kindergarten. They’ve been hearing about climate change for almost as long. Coal has a negative connotation for many people, even in ‘coal states’ – think of the Tennessee ash spill last year.

“Will the public continue to vote for Senators who just do what a few companies expect them to do?”

Green Rankings give “Ethical Context”

The Green Rankings, in Mr. Vidal’s view, can amplify the voices of citizens and companies that take a longer view of sustainability. He believes that the financial markets have failed to do this:

“Let’s stop fooling ourselves. There is no financial incentive, in the current capital markets, for firms to act for systemic benefit – even if it’s in their own self-interest. The financial markets have given us the results of this short-term thinking, in the form of the worst economic crisis since the Depression.

“What the Rankings measure are the costs to the community, to society, of a company’s operations. This is not morally neutral. The Rankings are creating an ethical context in which to judge a company.”

New Language for a New Corporate Culture

The Conference Board, through its engagement with executives and directors, seeks similar goals at the corporate level.

“There is an existing culture of governance, and there is a sustainability culture emerging. These two cultures are seeking common language, but they don’t have it yet.

“For the Green Rankings project, we worked to develop terminology that businesses, consumers and policymakers can all use. The bridges between these groups are being reimagined and rebuilt. The language of engaged citizens, investors and managers can supplant financial language as the sole means of describing a corporation’s worth.”

As noted in a previous KLD Blog post, the Green Rankings encompass qualitative evaluations of corporate culture and reputation. Mr. Vidal sees a company’s cultural shift – as we may be seeing at Nike, PG&E, and other firms – as an important measure of success.

“Culture is what you do in the absence of specific external requirements,” he said. “You can’t measure culture the way you measure carbon emissions, but so what? To rely just on quantitative metrics is to miss the point. As consumers and citizens, we need to ask: Does this company empower smart people to go above and beyond what’s expected?

“We aim to shift the center of reference beyond what can be easily quantified. We need a broader measure of what each company demands from the environment, and from the community. These costs may not show up on the bottom line, so we have to find a way to expense them for society.”

***

For more on the Chamber of Commerce dispute, see this article by Pete Altman at the National Resource Defense Council. NRDC research finds that “only 23 members of the U.S. Chamber’s board have a publicly stated position on climate change and more than 80 percent [19 members] are not on board” with the Chamber’s official position.

Of the other 4 Chamber board members, 3 are coal companies. (Thanks to Scott Stapf for sharing the NRDC story with the Social Investment Forum listserv.)

Alan Petrillo is a Writer/Editor with KLD Research & Analytics, Inc. a social research company for institutional investors. Alan supports KLD’s marketing and communications efforts. He works with Client Services and the Research staff to explain and promote KLD’s work to both the SRI community and the general public.  Prior to joining KLD, Alan was a communications and editorial consultant for corporate, academic and public policy clients. He has written on politics and community development issues for outlets including the Providence Journal and Boston-area weeklies that are now part of the GateHouse Media group.   Alan earned an MS in Political Science from Suffolk University and a BFA in Industrial Design from Carnegie Mellon University.

© 2009, KLD_Blog. All rights reserved. Do not republish.

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Author: KLD_Blog (2 Articles)

The KLD Blog reports and comments on issues relevant to the firm’s core business of environmental, social, and governance (ESG) investment research and indexes. Founded in 1988, KLD Research & Analytics, Inc. is a Boston-based independent investment research firm. Hundreds of institutional investors and money managers worldwide use KLD products and services to integrate environmental, social and governance (ESG) factors into their research and analyses. KLD analysts stay apprised of economic, financial and political developments worldwide, and the KLD Blog shares that expertise with you. KLD Blog topics include: SRI/ESG Investing , Corporate Social Responsibility (CSR) , Shareholder Engagement , Government and Regulations and Other Environmental, Social and Governance(ESG) Issues.