“Vice vs. Nice”

Joyce Hanson of Advisor One writes “Doing good versus making money—that was the topic at the Javits Center in New York. In a sometimes feisty Oxford-style debate, portfolio managers and professors sparred over whether socially responsible investment has any business contributing to—or subtracting from—a company’s bottom line…”

READ the September 29, 2011 FULL FEATURE HERE

Corporate Responsibility magazine & NYSE Euronext hosted an Executive Summit on Sept. 27 as part of the COMMIT!Forum: the gathering of leaders improving business and society, featuring successful practices from the world’s 100 Best Corporate Citizens. (LIST at www.TheCRO.com)

At this concurrent gathering of senior executives — including HIP Investor’s CEO R. Paul Herman — across business, government, academia, and NGOs, leaders shared ideas and innovations that are re-shaping how corporate responsibility and sustainability drive sales, save money, and improve asset values.

In honor of the occasion, John Ruggie, Berthold Beitz Professor in Human Rights and International Affairs at Harvard University rings The Closing Bell^SM , along with a dozen leaders, including executives from HIP Investor, Manpower, JP Morgan Chase, Environmental Defense Fund, U.S. Department of State, University of Michigan, CNN International, and more:

READ media release: http://www.nyse.com/about/newsevents/1316772014912.html

VIEW the Closing Bell photo:   http://www.nyse.com/events/1317033146512.html

WATCH the Closing Bell video (1:12):  http://exchanges.nyx.com/en/new-york-stock-exchange/corporate-responsibility-magazine-nyse-euronext-host-commitforum

Fans of cable-channel star Stephen Colbert, of The Colbert Report, enjoy watching Stephen profiling the “good life” of living large.  One day (hopefully soon), Colbert will discover how investing can be more HIP.  What would that interview be like?  Here’s one take:

STEPHEN – Could I Be More HIP by Being More Greedy?  Yeah, I’m green, like a forest full of money

STEPHEN COLBERT:  Welcome to Paul Herman, a very HIP investment manager, and our (future) next guest on Colbert Platinum – which, as you know, is focused on the good life.

I know you tree-huggers [er, impact investors] – you want to convince me to make less money in order to save the planet. But I like making money! I can save the planet after I own it! 

PAUL HERMAN (HIP): I like making money too, Stephen. In fact, I bet I can make more money than you and your old-fashioned ways.

STEPHEN COLBERT: What do you mean? I had some great ideas, like, switching to dirty coal because it’s cheaper now…

PAUL HERMAN (HIP): Stephen, there could be quite a mess cleaning up after your “ash” – how about we just harness the winds of Mother Earth for easily renewable power.

STEPHEN COLBERT: OK, Mr. HIP, how about we make more money by firing some people –

PAUL HERMAN (HIP): Stephen, you know that any new idea comes from people, not computers.  So how about we not only keep them, let’s value their ideas on the financial statements.  In fact, the more diverse the staff, the better a company typically performs. More women on the Board of Directors correlates with higher financial performance.

STEPHEN COLBERT: I like women, so let’s make some room…we can take down some trees to save money

PAUL HERMAN (HIP): Actually, Stephen, GE has sold $17 billion worth of spinning wind blades, producing locomotives that are more efficient, and keeping your lights on in this studio with eco-lighting. Plus, don’t you want to own the Amazon’s trees and all its ingredients for Prescott Pharmaceuticals (your pharmaceutical company).

STEPHEN COLBERT:  Good idea, health does come first. But, no need for pesky files, let’s burn our paper records…

PAUL HERMAN (HIP): Hold on Stephen – if you actually publish them on the Internet, then everyone will know you are more truthful, just like Hewlett Packard, Nike and Starbucks are doing with the businesses they buy from. Plus they actually loan money to farmers who produce organic and fair trade coffee beans.  Don’t you want Esteban Colberto to expand his fair-trade coffee empire??

STEPHEN COLBERT: He does need a bigger pension-ay.  Maybe we can cut back on his healthcare benefits.

PAUL HERMAN (HIP): No need Stephen, just open the windows and let some fresh air and light in.  Did you know if you did that, employee absenteeism would decline, and you would make money sir! No more temp agencies for you.  Plus, employee health care costs go down when they breathe natural air – even here in Manhattan (though it’s not so true in Harlem).  Higher test scores too for kids in schools that have natural-light, open-air eco-buildings like the Empire State Building – don’t you want to own that too?

STEPHEN COLBERT: Speaking of kids, how about child labor – aren’t they cheaper?

PAUL HERMAN (HIP): Come on Stephen – if you want to make more money than you know how to burn, how about educating all the kids – boys AND girls worldwide – and then employing them as your money managers and as R&D scientists for your Pharma company – that’s very HIP!

STEPHEN COLBERT:  I like the sound of that.  And may I say, you sir, are a formidable opponent. 

Now, let’s move some books, and give HIP the Colbert “Bump” – go get “The HIP Investor: Make Bigger Profits by Building a Better World” ……(Stephen whispering) just don’t tell anyone I am doing good – it risks my reputation at the country club!

Ladies and Gentleman, Paul Herman, investment adviser and author of The HIP Investor book, we’ll be right back after I go shine my bio-diesel Land Rover I “borrowed” from Gov. Schwarzenegger!

* Like this? Want to see Stephen interview HIP? 
Tweet, Facebook, or blog about this page at www.ColbertNation.com.

THE REACTION: The vote was met with great appeal from large institutional investors and environmentalists who have been petitioning the SEC for several years to require an increase in such transparency. Anne Stausboll, CEO of pension fund CalPERS said:

“Investors have a fundamental right to know which companies are well positioned for the future and which are not.”

Some speculation by DailyFinance’s Zac Bissonnette and The Wall Street Journal’s Kara Scannell and Siobhan Hughes have deemed the SEC’s ruling as political feuding and a terrible waste of time, while Triple Pundit touts the vote as a hard fought victory for investors. Reuters and other news stations have been covering the petitions initiated during the George W. Bush administration.

WHAT’S NEXT? With this new information being published and discussed by corporations, look for a shift of investments towards companies with better environmental performance – and away from those with lesser eco-results. Large institutional investor petitioned for this SEC ruling, so do not be surprised when they shift their portfolios based on increasing disclosure about risks – and opportunities.

What do you think?  Reply below:

Walmart, the world’s largest retailer at $400 billion in revenue and 7000-plus stores, the US’s second-largest employer with 1.8 million staff, and a leader in sustainability– has just launched a new, sustainability scorecard for the 60,000-plus suppliers across its global supply chain.

By one estimate, the total value of all goods and services sold by Walmart suppliers equals about one-third of global output. Yes, 1 in 3 dollars worldwide is associated with a company that does business with Walmart. So, if you shift Walmart and its suppliers, the global economy shifts with it.

The Value of Sustainability for Walmart

How can sustainability be profitable for Walmart? Let’s look at the income statement effects from implementing sustainability:

Higher Revenue: New products targeting existing customer needs can add to top-line sales. Suppliers like Clorox and its recent launch of its Green Works line of cleaning products has added $200 million of revenue for Clorox, and an associated margin in its retailers (including Walmart). Walmart’s LoveEarth Jewelry line, which allows customers to track where the source metals have come from online using Google Maps, is one of the fastest growing product categories in the chain. Walmart and its sister warehouse-store Sam’s Clubs have sold more than 260 million compact fluorescent light bulbs, a boost to top-line revenue and bottom-line profit.

Lower Costs: Walmart needs to move products from-warehouse-to-store while operating one of the largest fleets in the US. Overall efficiency in the fleet (e.g. fuel-efficient trucks, using batteries when parking, turning off the engines when unloading, packing more volume into the same trucks) has improved 38% since 2005. Walmart China’s stores have already reduced energy usage by 24% and water use by 35%. On the whole, Walmart has eliminated 91% of (formerly wooden) pallets for jewelry and made the remaining 9% of recyclable materials. All of these innovations reduce cost, reduce carbon emissions and are better for both the shareholder and the environment.

Lower Taxes: Where Walmart installs renewable power like solar panels, many government tax incentives exist at the federal, state and local levels, which are positioned to offset the company’s tax liabilities. These investments provide ecological value and reduce costs.

Higher Shareholder Value: During the recession, Walmart’s comprehensive selection and low prices have supported a higher shareholder value than many other enterprises and competitors. By establishing a continued pursuit of sustainability, Walmart is likely to continue its top-line revenue growth and bottom-line performance – while serving customers desire for more sustainable products that also benefit the environment.

So, What Is Walmart Implementing?

Walmart has defined three enterprise goals to deliver Human Impact + Profit based on the above factors:
(1)   Zero waste,
(2)   100% renewable energy, and
(3)   Sustainable products on the shelves for customers to purchase

Earlier this decade, Walmart introduced Sustainable Value Networks (SVNs), led by staff in collaboration with BluSkye consultants and other collaborators to improve specific categories related to the company’s goals including:

• Packaging (e.g. no more toothpaste boxes, just sell the tube),
• Cleaning products (e.g. eliminate 70% of phosphates),
• Agriculture (e.g. facilitate re-capture of methane from cows to fuel energy plants)
• Jewelry (e.g. track the gold and metals back to the source).

These initiatives created new products and revenue (e.g. Love Earth jewelry), decreased costs (e.g. square milk containers save shipping), and tapped into tax incentives for energy efficiency (e.g. solar panels).

In a 2007 test, Walmart found significant markets for 200 sustainable products (half of all products tested) and during Earth Month 2008, Walmart’s sustainable products sold so swiftly, many of the products sold out before the month-long promotions ended. This customer demand accelerated Walmart’s push for more sustainable products – and a way to showcase it to consumers.

In 2008, the Sustainability Index team sought to design a framework, process and “nutrition label” for products to communicate their overall environmental and social impacts to customers, to give individuals the products they wanted and the information they needed.

The Challenge: Suppliers are 90% of Carbon Emissions

Despite these impressive gains, when Walmart began calculating its global environmental footprint , it discovered that 90% of its carbon emissions (from transportation to manufacturing to farming) were from its suppliers, and only 10% from its own stores, staff and transportation.

What’s Next? The New Sustainability Index and Scorecard?

Building from the positive internal momentum and demonstrated customer demand, Walmart worked with experts like BluSkye Consulting, the Environmental Defense Fund, academics and sustainability metrics experts like HIP Investor to design a new Supplier Sustainability Index. The first version of this “supplier scorecard” is rolling out now to all 60,000 suppliers and asks 15 questions in four categories.

• Energy and Climate – using less fuel and saving greenhouse gas emissions
• Material Efficiency – consuming less, processing less, reusing and recycling, and ultimately moving to zero waste
• Natural Resources – higher quality production with fewer inputs (like water), which could be certified according to standards
• People and Community –open communication and increased transparency about sourcing, and its impact in the local society.

These four categories are designed to serve customers with sustainable products, operate at lower cost and impact to society, and deliver value for both shareholders and stakeholders.

You can download Walmart’s 15 questions for suppliers in 2009, and additional information on the latest milestones here: http://walmartstores.com/FactsNews/NewsRoom/9277.aspx

How Has Walmart Embedded This In Management Practices?

Details of Walmart’s systematic pursuit of sustainability and the decision groups it has organized can be found at http://walmartstores.com/Sustainability/.

As Walmart has rolled out the Index internally, it has aligned the buying criteria of its purchasing agents. In addition, buyers are rewarded for contributing to the big 3 goals of zero waste, 100% renewable energy and sustainable products.

Walmart overall has become more HIP by embedding sustainability into five areas of its management practices:

1)  Vision (“Save Money. Live Better.”)
2)  Performance Measures (balanced scorecard of eco-metrics as well as profit)
3)  Financial Alignment (understanding the value to the top- and bottom-lines)
4)  Accountability (support at the Board, executive, manager and staff level – and incentives and rewards for performance at each level)
5)  Decision Making (the Index criteria focused on environment and society operate alongside the traditional financial go/no-go evaluations)

Who Is Responsible for Sustainability Success at Walmart?

Success has many parents – and at Walmart, this is certainly true. Chair of the Board Rob Walton (son of founder Sam Walton) is committed to sustainability, including his founding $250 million investment in renewable power firm First Solar (FSLR). Former CEO Lee Scott and current CEO Mike Duke are leading the charge internally to highlight the new mission, “Save Money. Live better.”

SVP Sustainability Matt Kistler, who first sold fair-trade coffee in response to Yale U. students on-campus demands for it, is heading the multiple initiatives inside Walmart and broad outreach to all stakeholders. Director Rand Waddoups was on point for the development of the Index with many Walmart team members, and continues to help drive them forward – as well as openly blog about the successes and challenges of implementing sustainability at Walmart.

And many thousands of Walmart staff are engaged in sustainability for customers or their own behalf as part of a voluntary program called a Personal Sustainability Plan (PSP), originated by Adam Werbach of Saatchi and Saatchi S (formerly Act Now Productions).

The Future of Sustainability at Walmart

With this new sustainability index, Walmart is introducing a new system to quantify impacts, link it to business value and communicate these results to customers, staff and stakeholders. This new approach is poised to transform the global economy and integrate sustainability measures as an everyday tool for better buying, innovative company practices, and more sustainable supply chains.

How Can You HIP Your Life?

• Buy Sustainably. Whether at Walmart or other retailers, when your purchase rings up at the register, those daily revenues are recognized by companies seeking growth, market share and financial performance. Your choices can help shape which products you are offered.

• Innovate at Work. You don’t need to be in charge of sustainability to be sustainable. Implement small (or large) changes where you are – in your group, department or location. Success catches on fast – and will be recognized if its’ HIP.

• Invest for the Future. Seek out companies that are embedding HIP into their company, and research what companies are actually accomplishing that is quantifiable. Then, allocate your portfolio to align with those sustainability results – these are the new fundamentals of 21st century investing.

Disclosure: HIP Investor Inc. was one of several advisors to Walmart on the design of the Sustainability Index. HIP Investor and its clients may hold a position in Walmart, including as part of the HIP 100 Index. This overview is intended to describe the value of sustainability and its impact on shareholder value overall. This analysis is not intended as an investment recommendation. This is not an offer of securities.

HIP HIGHLIGHTS 3 WAYS TO GROW REVENUE FOR CORPORATES PARTNERING WITH MICROFINANCE GROUPS (MFI’S)

By R. Paul Herman and Tom Willis of HIP Investor Inc.

Microfinance institutions (MFIs) have a large customer base of 100 million reliable entrepreneurs seeking to build the health and wealth of their family. These citizens also desire a cleaner environment and equal opportunities. By comparison, the 50 largest global companies comprise about 20 million workers. For forward-thinking MNCs partnerships with MFIs offer the opportunity to meet these “human needs” by generating both positive “human impact + profit” – or what we call “HIP”.

How does a Corporation Become More HIP ? By partnering with MFIs (microfinance institutions), there are three ways to be HIP: generating results for the top-line and bottom-line, as well as society:

1. Encourage products that make money for micro-entrepreneurs too.

2. Tap micro-entrepreneurs to be leaders of sales networks.

3. Collect information about group demand – and purchasing power.

READ THE FULL FEATURE, AND DETAILED CASE STUDIES OF
HOW TO BUILD PROFIT – AND HUMAN IMPACT