So to say that WMT dominated the pages of SRI listservs today would be an understatement! It's been blustery Boston 'Northeaster in October' all day, might have been all that hot air. But is WMT "faking it 'til it makes it?" I'll drink to it today, but keep the 1983 Moet in the cellar for now.
After getting coverage all day, including archived audio of the WMT analyst teleconference, tonight CNBC's On the Money in its new slot 7-8pm had Dylan Ratigan interview Joan Bavaria re. WMT's new approach. Dylan played Joan off against an activist with stopwalmart.org(missed his name) who is invloved with the website www.wakeupwalmart.org which headlined today with Wal-Mart offers sham health care as publicity stunt. I could not find the transcript, but basically Joan described a "benefit of the doubt" approach, looking for back-up in performance down the line.
The host Ratigan played her off against the activist unhappy that the health plan and the worker rates are simply re-packaged benefits. It was impressive to see Trillium mentioned only later as an SRI firm looking at values, not in the initial intro. Positive news for the Global Reporting Initative was Joan identifying the GRI as an early and important step to reporting what WMT actually does, Joan mentioning about 700 firms now report on GRI.
Intriguing was the activist's attack on WMT's business model as the reason for the change, not the personal enlightenement that was claimed for CEO Scott and had been reported by CNBC earlier. The activist pointed to the upper and middle class as being the next segment WMT has to attack, defined it as being discretionary spending tied more to values than value, and that WMT had not "got religion" but was being forced to play by the rules of the segment.
Wed morning 7am on Squakbox I am looking forward to the CFO Tom Schoewe explaining. CNBC has had a high profile with WMT since they hosted in November 2004 the feature length story on The Age of Wal-Mart last year by David Faber. In some ways it is an easy bet. Anyone who has crunched the numbers can tell you: energy efficiency in a truck fleet is a no brainer when gas prices are still above $60/barrel.
Like GE's efforts on "Ecomagination", each new step creates an opportunity to encourage the corporation (which probably has internal tensions on the move they are trying to balance) while undoubtedly leaving some aspects of SRI/CSR undone.
My friend Heather who is active with the North Carolina Net Impact Professional chapter and is a consultant at Deloitte had gotten wind of a new sustainability initative at WMT in the Summer. Sustainable Value Partners are rumored to be heading up the project. I wonder if WMT CEO Scott is the "The CEO of a Fortune 100 retail company who wanted to take a proactive approach to developing and implementing an environmental sustainability strategy" referenced on the SVP client list?
So WMT has definitely won the day one PR battle - it even received airtime on CNBC re. "kinder, gentler" WMT, with the "panel" approach bunted to the 7-8pm slot.
The bottom line for the SRI industry is plain: It's happening, and "who is buying [the drinks]?!" in the words of Shelley Alpern at Trillium. While I am always happy to post a few cocktails, the more strategic questions for the SRI community is:
1. On what terms and
2. At what stage should SRI recognize small positive steps in CSR?
This the complete text of a what one SRI analyst called a "jaw-dropping speech" that Lee Scott made yesterday: http://walmartstores.com/Files/21st%20Century%20Leadership.pdf starts with Twenty First Century Leadership Presented by Lee Scott October 24, 2005 "Thank you for joining me this morning and for giving me an opportunity to share some perspective on our business and the significant opportunities we have ahead of us."
For a PR offensive, crazy how WMT's PR people somehow managed to bury it under the Environment folder, not even WMT in the news? Maybe they need to bump up the PR people from their bunker to a blue-sky orientation to match Scott's more positive orientation.
Today's NY Times article on Wal-Mart's environmental goals (copied below) is just the latest in a string of news along these lines that I've been hearing from this company. As one KLD analyst put it "Big changes for a company that has a history of not being very receptive to this stuff".
CNBC reported Scott had seen the light personally through the Katrina experience. In his speech Scott writes of the post-Katrina events:
During this time, we were asked by governments, relief agencies and communities to help. And look what happened. We were showered with gratitude, kindness, and acknowledgments. This was Wal-Mart at its best.
Katrina asked this critical question, and I want to ask it of you: What would it take for Wal-Mart to be that company, at our best, all the time? What if we used our size and resources to make this country and this earth an even better place for all of us: customers, Associates, our children, and generations unborn? What would that mean? Could we do it? Is this consistent with our business model? What if the very things that many people criticize us for – our size and reach – became a trusted friend and ally to all, just as it did in Katrina?
That ties to my new thesis about the personal enluightement of the leadership, starting with the CEO, proven positively by DOW and GE, and negatively by ExxonMobil.
Either way, adding to GE, a major world business player is now making environmental and social arguments for better business, this after coming to some corporate governance sense after firing an executive earlier in the year. WMT's massive supply chain, next to UPS, FEDEX and DHL, has the potential for a massive knock-on effect, the point made by Amory Lovins CEO of the Rocky Mountain Institute in the NYT article.
Chris McKnett spotted on. C2 of today's WSJ the headline "Wal-Mart Investors Fret Over Costs". The story ranked fourth on WSJ subscriber ranking for the day (of course below the story about Florida home property values!). Chris commented that:
"Making the numbers is the perpetual siren song of the Street, and if the Street doesn't see a connection between the initiatives laid out in the NYT and better margins, it is incredibly hard for CEO's to justify these efforts (one of the reasons GE's Ecomagination was so well received was the smart case that they made for it). For example, Wal-Mart is modifying the wheel wells of their fleet, and if the modification can increase fuel efficiency just 1 MPG about $50 million drops to the bottom line, not to mention the annual benefit = 1 MPG lower emissions X (7,000 trucks x # gallons of fuel used per truck)".
Based on WMT being FEMA for a lot of people around Hurricane Katrina, I'm willing to give them some slack. And what a sweet moment if SRI and CSR advocates can share in the champagne...
Extract from NYT: Wal-Mart to Seek Savings in Energy By MICHAEL BARBARO and FELICITY BARRINGER Published: October 25, 2005 BENTONVILLE, Ark., Oct. 24 -
Wal-Mart's chief executive is set to announce on Tuesday a set of sweeping, specific environmental goals to reduce energy use in its stores, double its trucks' fuel efficiency, minimize its use of packaging and pressure thousands of companies in its worldwide supply chain to follow its lead. Embracing energy-conscious and environmentally conscious goals will help both the company's bottom line and its customers' needs, H. Lee Scott said in an interview Monday.
Mr. Scott's announcement signals that the nation's largest retailer is joining the nation's largest manufacturer, General Electric, in pursuing policies that set specific goals for environmental performance, while advertising those goals to shareholders and customers and the public as strategic business decisions. G.E. faced criticism for its own environmental practices; Wal-Mart has faced criticism as well, but largely over its low wages, scant health insurance coverage and what its critics have called poor treatment of workers. Those critics responded to Wal-Mart's environmental initiative by saying that, while admirable, it is intended to divert attention from the chain's image problems. Mr. Scott told Wal-Mart's top officers here this morning, in an address broadcast to employees by video conference, that, "As one of the largest companies in the world, with an expanding global presence, environmental problems are our problems."
His goals, he said, are to invest $500 million in technologies that will reduce greenhouse gases from stores and distribution centers by 20 percent over the next seven years; increase the fuel efficiency of the truck fleet by 25 percent over the next three years and double it within 10 years, and design a new store within four years that is at least 25 percent more energy-efficient.
News of the upcoming announcement drew carefully parsed praise from leaders of environmental groups, including some, like Environmental Defense, which have a history of joint initiatives with large businesses, and others, like the Sierra Club, which have traditionally been more confrontational. In general, they applauded Wal-Mart's initiatives and commitments, but sought assurances that there would be a continuing public accounting - using a concrete baseline - of factors like energy use, fuel-efficiency and reduction in solid waste. "I thought G.E. was big," said Alyson Slater, a spokeswoman for the Global Reporting Initiative, a group based in Amsterdam that provides guidance to companies seeking to analyze and publicly report their environmental practices. "But Wal-Mart? Whoa. That's big."
"There are a lot of people out there who are going to be skeptical," she added. "But if they can prove it, if they can say: Here's our targets. Here's how we're meeting them," then the company could win over many skeptics, she said. Wal-Mart's community activist and organized labor critics said the environmental goals failed to address what they said were the company's most pressing problems. "It is a diversionary tactic," said Chris Kofinis, of Wake Up Wal-Mart, a group founded by the United Food and Commercial Workers Union, which is trying to organize the chain's workers. "Wal-Mart understands that they have a growing public relations disaster on their hands. American people are looking at a company with $10 billion in profit and $285 billion in sales that makes excuse after excuse about why it can't provide a living wage and health care to its workers."
Tuesday, October 25, 2005
Saturday, October 15, 2005
A friend's kindness: Two Citigroup SRI papers from London
A friend at Smith Barney who acts as a Financial Consultant, Financial Planning Specialist, Guided Portfolio Management offered two papers for good reading on Citigroup Asset Management/Smith Barney's thinking on SRI, best enjoyed with Shiraz on rainy Sunday...!
I was introduced to him by Michael Connor, Publisher & Executive Editor of Business Ethics Magazine who thought it might be worth passing along as a contact for an article on SRI Retirement options I am writing for the Winter 2005 edition of the quarterly magazine. Michael met the advisor at a panel at the NYU School of Business. One of the audience members specializes in SRI investing for average folk. The advisor happens to have a doctorate in environmental science and his marketing material says he "has investigated the relationship of environmental performance of large corporations with their valuations in the capital markets..."
The SRI papers, "Crossing the River..." and "Sustainable Investable Themes" both dated 1 July 2005 from the London Equity office led by Mike Tyrell and Meg Brown who presented to select Citigroup clients earlier this month but were prevented from speaking with SIRAN or other analysts because of compliance issues. In an embarassing twist for Mike & Meg, my peers and I who had accepted the invite to the call were disinvited from the telecon. I deleted the emails as requested (as requested), so perhaps them finding their way to me this afternoon in Boston was a good turn returned in kind.
Sustainability Themes (112 pgs) is referenced as "industry report" providing "A guide to the environmental and social factors affecting each industry sector" offers a neat collection of available SRI info: CitiGroup company coverage, neat "forthcoming events" calendar, lists relevant Smith Barney research, references notable reports written by third parties and outline the expected sustainability reporting timetable of companies. It looks at each sector in a thin but broad way: "in a way that relates their potential financial impact, their environmental and social significance and the degree to which further analysis will be best rewarded".
I noted how they focus on "financial materiality" first, then enviromental and social factors, and finally "where [firms] will be rewarded first" - the first mover argument for SRI. My friend used this in his pitch for SRI used for the HNW market, suggesting that that SRI acts as a proxy for business risk and the old moniker "doing good by doing well" has been flipped to "doing well by doing good". It is used in a SB marketing piece "Doing Well By Doing Good: Interest in Socially Responsible Investing Increases" which references their use of KLD's SOCRATES research in their investment program.
Most interesting from a business perspective is Citi/Smith Barney's SRI research proposition and "SB stepping stones aim to help SRI analysts and financial analysts bridge the current gap between sustainable development and capital markets".
Crossing the river (60 pgs) is intended for action, interpreting SRI for financial markets "as companies begin to exploit sustainable development as a key source of competitive advantage and as institutional investors come under pressure to factor environmental and social factors into their investment processes…"
Questions to ponder: does this SRI capability
I was introduced to him by Michael Connor, Publisher & Executive Editor of Business Ethics Magazine who thought it might be worth passing along as a contact for an article on SRI Retirement options I am writing for the Winter 2005 edition of the quarterly magazine. Michael met the advisor at a panel at the NYU School of Business. One of the audience members specializes in SRI investing for average folk. The advisor happens to have a doctorate in environmental science and his marketing material says he "has investigated the relationship of environmental performance of large corporations with their valuations in the capital markets..."
The SRI papers, "Crossing the River..." and "Sustainable Investable Themes" both dated 1 July 2005 from the London Equity office led by Mike Tyrell and Meg Brown who presented to select Citigroup clients earlier this month but were prevented from speaking with SIRAN or other analysts because of compliance issues. In an embarassing twist for Mike & Meg, my peers and I who had accepted the invite to the call were disinvited from the telecon. I deleted the emails as requested (as requested), so perhaps them finding their way to me this afternoon in Boston was a good turn returned in kind.
Sustainability Themes (112 pgs) is referenced as "industry report" providing "A guide to the environmental and social factors affecting each industry sector" offers a neat collection of available SRI info: CitiGroup company coverage, neat "forthcoming events" calendar, lists relevant Smith Barney research, references notable reports written by third parties and outline the expected sustainability reporting timetable of companies. It looks at each sector in a thin but broad way: "in a way that relates their potential financial impact, their environmental and social significance and the degree to which further analysis will be best rewarded".
I noted how they focus on "financial materiality" first, then enviromental and social factors, and finally "where [firms] will be rewarded first" - the first mover argument for SRI. My friend used this in his pitch for SRI used for the HNW market, suggesting that that SRI acts as a proxy for business risk and the old moniker "doing good by doing well" has been flipped to "doing well by doing good". It is used in a SB marketing piece "Doing Well By Doing Good: Interest in Socially Responsible Investing Increases" which references their use of KLD's SOCRATES research in their investment program.
Most interesting from a business perspective is Citi/Smith Barney's SRI research proposition and "SB stepping stones aim to help SRI analysts and financial analysts bridge the current gap between sustainable development and capital markets".
Crossing the river (60 pgs) is intended for action, interpreting SRI for financial markets "as companies begin to exploit sustainable development as a key source of competitive advantage and as institutional investors come under pressure to factor environmental and social factors into their investment processes…"
Questions to ponder: does this SRI capability
- Replace what niche buy-side SRI analysts could do?
- Would clients buy this (or indeed get it gratis from sell-side analysts) and still want to buy SRI research, or
- Would Citi AM/SB (soon to be Legg Mason) buy buy-side research to use as basis for this paper?
- Does it apply to both sides of Atlantic?
Most interesting to my mind is the strategic conception they offer in "Crossing the river..." which I quote verbatim (Tyrell/Brown, 2005, p.12/60):
Why does [SRI] exist at all?
Why SRI exists at all is perhaps the most interesting question to address. Simplifying to make the point, there are a variety of views of the role that SRI plays in society. We review each in turn and outline their prospects:
1 SRI is a mechanism for allowing those investors with specific moral or political preferences to exercise these through their investments.
2 SRI is the investment dimension of a wider self-regulation process being encouraged by European governments whereby voluntary action by companies, investors and civil society organisations reduces the need for governments to intervene.
3 SRI is a thematic investment strategy for investors who wish to make money by focussing on investing in companies in emerging and growing markets for environmental technology, education etc.
4 SRI is a broader strategy for investment outperformance based on the thesis that robust environmental and social management systems are useful indicators of broader management systems and therefore a lead indicator of share price outperformance.
5 Combining factors 3&4, some regard SRI simply as the investment community’s first steps towards financing sustainable development.
I really like what these two papers add to the SRI lexicon and hope to speak with both authors soon.
Friday, October 14, 2005
Net Impact and MBA's in Boston, who is investing in SRI?
NetImpactBoston, the professional chapter of Net Impact in Boston "New-generation leaders using business for social impact", had its first face-to-face gathering last night at Grafton St Grille in Harvard Square.
A good showing from locals [Maddy, Tammy, Mark O., Chris, Kerry, Amy, Mark R., Birud, Tom, Alex., Kristin, Reese, Chris and me] with surprise visit from Net Impact professional chapter leader in Triangle/NC, Heather. It was excellent to see and meet professionals from different fields, but all looking to build a network using business skills and sustainability as cornerstones to leading a better world. With over 12,000 members in over 100 chapters, NI is healthy and growing. I hope to measure its impact from the SRI perspective over the next 5 years. I have a strong sense that NIB is going to work.
Alex from HBS was there, and asking about roles in SRI at mainstream money managers, like SEI Investments, my old firm in Philadelphia where John Diederich is heading up the SRI at SEI Investments in the investment management unit (IMU). Alex was amusing, relating how she had spoken with a money manager over the summer who said investors "should have no emotion". The money manger's own father died of lung cancer but invests in tobacco stocks!
As always I harvested data-points from my market: I polled members, before last night, on their CSR/SRI thoughts and actions. Nothing like making it personal to see where people are and can get to! One of the best indications of the interest of professionals is the quick build of the NIB membership - now 43 members with no advertising, only using NI alumni networks and word-of-mouth.
In a survey to NetImpactBoston members with 43 respondents in October 2005 I asked four targeted questions with possible answers of 1. Always, 2. Mostly, 3. Seldom, 4. Never, 5. N/A:
Will you pay 20% premium for a good/service from a socially responsible firm?
10% (4)
71% (29)
20% (8)
0% (0)
0% (0)
Do you currently invest in a socially responsible investment fund/stock?
7% (3)
17% (7)
17% (7)
17% (7)
43% (18)
Will you stop purchasing from a company with poor CSR record or reputation?
10% (4)
74% (31)
12% (5)
0% (0)
5% (2)
When you choose/chose your career firm, how important is/was CSR record or repuatation?
37% (15)
44% (18)
7% (3)
0% (0)
12% (5)
Total Respondents
42
From an SRI point-of-view, it was instructive. The response in this demographic - all college-educated, most with graduate degrees, all of whom you assume have some money/investment literacy and CSR understanding:
1. Around a quarter of respondents "Mostly" or "Always" choose SRI
2. Fully 43% seem not to be investing - another worrying sign of the dissavings pattern in the US.
Most compelling for SRI research point-of-view, is the interest in tying consumption and career decisions to company CSR performance. All important elements in the mission of SRI, and with more pressure points, the opportunity to make the case that CSR is the business of business, perhaps. Mr Friedman just flinched?! Not likely, and the NI membership self-selected, but maybe another step toward something better.
I wonder what statistics I could get if we had a bigger sample. A reason to follow up at the Net Impact conference at Stanford 10-13 November. Looking forward to it, with Al Gore, Chairman of Generation Investment Management. Interesting note from SRIiR (the major SRI retail conference in the US) is from David Blood, co-founder of GAM and former player at Goldman Sachs, that they have only raised $80m since inception 6 November 2004. Proof of the power of consultants and the need for a track record before funds flow? My South Africa experience in money management reminds me that 18 months was average for institutional sales.
I look forward to hosting a great SRI panel on “Expecting Returns: How well can socially responsible investments perform” with Nancy Pfund of Bay Area Equity Fund, Lila Preston of Generation Investment Management [founder of the London Business School NI chapter], and Devin Zeller of Calvert. I am also hoping that Lloyd Kurtz can be there, host of SRI Notes.
What is the average person thinking re. SRI? I cannot say, perhaps we will find more pressure through the HNW channel from managers of Separate Accounts programs. At an institutional level, there were two positive comments recently, one from UBS inLondon and one from Goldman Sachs in NYC re. demand from marketplace leading them to look at SRI a little more. More on that later.
A good showing from locals [Maddy, Tammy, Mark O., Chris, Kerry, Amy, Mark R., Birud, Tom, Alex., Kristin, Reese, Chris and me] with surprise visit from Net Impact professional chapter leader in Triangle/NC, Heather. It was excellent to see and meet professionals from different fields, but all looking to build a network using business skills and sustainability as cornerstones to leading a better world. With over 12,000 members in over 100 chapters, NI is healthy and growing. I hope to measure its impact from the SRI perspective over the next 5 years. I have a strong sense that NIB is going to work.
Alex from HBS was there, and asking about roles in SRI at mainstream money managers, like SEI Investments, my old firm in Philadelphia where John Diederich is heading up the SRI at SEI Investments in the investment management unit (IMU). Alex was amusing, relating how she had spoken with a money manager over the summer who said investors "should have no emotion". The money manger's own father died of lung cancer but invests in tobacco stocks!
As always I harvested data-points from my market: I polled members, before last night, on their CSR/SRI thoughts and actions. Nothing like making it personal to see where people are and can get to! One of the best indications of the interest of professionals is the quick build of the NIB membership - now 43 members with no advertising, only using NI alumni networks and word-of-mouth.
In a survey to NetImpactBoston members with 43 respondents in October 2005 I asked four targeted questions with possible answers of 1. Always, 2. Mostly, 3. Seldom, 4. Never, 5. N/A:
Will you pay 20% premium for a good/service from a socially responsible firm?
10% (4)
71% (29)
20% (8)
0% (0)
0% (0)
Do you currently invest in a socially responsible investment fund/stock?
7% (3)
17% (7)
17% (7)
17% (7)
43% (18)
Will you stop purchasing from a company with poor CSR record or reputation?
10% (4)
74% (31)
12% (5)
0% (0)
5% (2)
When you choose/chose your career firm, how important is/was CSR record or repuatation?
37% (15)
44% (18)
7% (3)
0% (0)
12% (5)
Total Respondents
42
From an SRI point-of-view, it was instructive. The response in this demographic - all college-educated, most with graduate degrees, all of whom you assume have some money/investment literacy and CSR understanding:
1. Around a quarter of respondents "Mostly" or "Always" choose SRI
2. Fully 43% seem not to be investing - another worrying sign of the dissavings pattern in the US.
Most compelling for SRI research point-of-view, is the interest in tying consumption and career decisions to company CSR performance. All important elements in the mission of SRI, and with more pressure points, the opportunity to make the case that CSR is the business of business, perhaps. Mr Friedman just flinched?! Not likely, and the NI membership self-selected, but maybe another step toward something better.
I wonder what statistics I could get if we had a bigger sample. A reason to follow up at the Net Impact conference at Stanford 10-13 November. Looking forward to it, with Al Gore, Chairman of Generation Investment Management. Interesting note from SRIiR (the major SRI retail conference in the US) is from David Blood, co-founder of GAM and former player at Goldman Sachs, that they have only raised $80m since inception 6 November 2004. Proof of the power of consultants and the need for a track record before funds flow? My South Africa experience in money management reminds me that 18 months was average for institutional sales.
I look forward to hosting a great SRI panel on “Expecting Returns: How well can socially responsible investments perform” with Nancy Pfund of Bay Area Equity Fund, Lila Preston of Generation Investment Management [founder of the London Business School NI chapter], and Devin Zeller of Calvert. I am also hoping that Lloyd Kurtz can be there, host of SRI Notes.
What is the average person thinking re. SRI? I cannot say, perhaps we will find more pressure through the HNW channel from managers of Separate Accounts programs. At an institutional level, there were two positive comments recently, one from UBS inLondon and one from Goldman Sachs in NYC re. demand from marketplace leading them to look at SRI a little more. More on that later.
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