The ESG Advocate 013 - At the intersection of purpose and doing good
This week we're standing at the intersection of purpose and doing good as NYC Climate Week kicks off. On one street, we see Patagonia and others leading with purpose from the inside. On the other street, we see companies under stakeholder and regulatory pressure to change.
With this metaphor in mind, let's get to it!
Driving inspiration from the inside out
Patagonia's lesson in purpose
My role at Microsoft is kind of a sales overlay, so I think about impact a lot. There are two types of impact I see. The first is a hard, quantitative impact. In my role, this is obviously related to revenue accountability and sales. For ESG practitioners, this first type of impact ranges from metric-driven commitments to risk mitigation and value creation (opportunities).
The second type of impact is more difficult to quantify. This is where purpose sits. It's where storytelling meets action, purpose meets people, and inspiration is born. But how do you measure inspiration?
Enter Patagonia. If you've ever taken a sustainability-focused business class or looked for ESG examples, you've likely been inspired by the perennial favorite example of Patagonia's 2011 "Don't Buy This Jacket" environmental campaign.
This campaign connected with its customer community in a new way by extending the life of its wares while supporting the environment.
Last week, Patagonia's reluctant billionaire founder and his family took the voting shares and common shares, created a new trust and non-profit, and transferred ownership to solve climate change.
There's no doubt that this move will be studied by academia ad nauseam in the coming years, but for now, here is a short analysis:
This purpose-driven move has less to do with ESG and more about sustainability.
Regardless of the first point, there will undoubtedly be improved stakeholder engagement (customer acquisition, employee retention) as a result
While this flies in the face of capitalism, it isn't degrowth as Patagonia still needs to make a profit to support its objective, which means growth. For now, I'd align this closer to green growth.
This move certainly won't save the world from climate change.
Along the last bullet point, it is estimated that Patagonia will contribute about $100M annually to the global climate change efforts, clearly a fraction of what is needed to solve the problem.
Now for my opinion:
Who cares if it doesn't save the world? Patagonia is making a move to impact the world in a way that aligns with its purpose.
People are already writing about where the impact of that money could be the greatest. Ashok Swain, editor-in-chief of the journal Environment and Security, put the qualitative benefit this way:
“We need to change the mindset of these big leaders, and that’s where I think this money could make a big difference,” Swain said. It is less important how and where the money is spent, he said, as long as it can be leveraged as inspiration to build momentum among other billionaires and leaders — that the money and can continue to build on itself, both its value and its message.
There are real questions being asked about this decision and its impact. For now, I'd wager that taking purpose to inspire others goes well past the monetary value.
Ethereum goes green, but for ESG reasons
From Patagonia's purpose, we go to the opposite end of the environmental spectrum to find some hope in cryptocurrency. Over the past few years, cryptocurrency has been a short-term speculative investor game under the guise of democratized access to capital. Despite these personal opinions, one fact remains irrefutable, cryptocurrencies are a massive and wasteful strain on energy grids and, as a result, the environment. Some stats from this read:
The Digiconomist's Bitcoin Energy Consumption Index estimated that one bitcoin transaction takes 1,449 kWh to complete, or the equivalent of approximately 50 days of power for the average US household.
To put that into money terms, the average cost per kWh in the US is close to 12 cents. That means a bitcoin transaction would generate approximately an energy bill of $173.
Bitcoin mining uses around as much energy as Argentina.
But, there was some hope last week as Ethereum completed the 'Merge.' The Merge moves Ethereum away from the intense computational model where you had to provide "proof of work" through mining to something called "proof of stake." At a high level, the latter requires a user to add a stake to gain a small reward rather than waste computing cycles and energy mining.
As reported by The Guardian, this change means "the electricity footprint of Ethereum should fall from around 8.5GW to less than 85MW, almost overnight."
On the surface, this seems to be an inspirational sustainability story for Ethereum, but the reality is that this is an ESG story. Starting with this shift, Ethereum is setting itself up for more efficiencies and future development. The Motley Fool put it this way:
Changing to proof-of-stake lays the foundation for Ethereum to support more use cases in the future.
The next goal of Ethereum developers is to introduce a process known as sharding, which will divide the main blockchain into smaller, more efficient chains.
It will also further reduce the amount of data validators have to store on their machines, meaning they could operate using a laptop instead of a bank of costly computers...Once live, speeds will be faster and those pesky fees will likely come down.
Let that sink in. An efficient environmental improvement will further democratize platform access, improve performance, and lower costs. This is core ESG.
The reality here is more complex and nuanced, as is typical with ESG. The Merge also means that Ethereum could be treated like a security. Regulation invites stability but also creates fleeing speculative investors. In other words, this ESG action might drive short-term losses but could result in long-term stability. I'll be curious to see how it plays out.
An ESG toast to Angel's Envy
I'm a huge bourbon fan, and Angel's Envy is one of my favorites. While I enjoy sipping on it with just a splash of water, I have long been a lover of a good story, which it has in its name.
This month ushers in Angel's Envy's annual Toast the Trees initiative, where bourbon lovers can take a simple social media action to plant a tree.
From now through September, post a toast with #ToastTheTrees and help us achieve our most ambitious goal yet – planting up to 75,000 White Oaks. Together, we can grow the legacy of bourbon and ensure we have barrels for years to come.
At this point, I usually shout 'greenwashing' at my screen because this type of tree planting activity is largely inconsequential and immaterial. For Angel's Envy, planting White Oaks ensures they have a sustainable supply of trees to support a core production issue - the availability of quality barrels.
My small contribution is here:
Now again, this is complex, but worth the inspiration. I'd love to see information on how they protect these trees, how they are lowering emissions during the burn process, how they are protecting biodiversity, and more. For now, I will take what I can get!
Avoiding blue whales not because it is easy
The last story to cover on the 'E' comes from Sri Lanka, where the Mediterranean Shipping Company (MSC) has rerouted ships around where blue whales are known to congregate. MSC is the world's largest shipping line.
The company made this decision after research surfaced the issue. Like Patagonia, one company's actions on a busy shipping route are unlikely to stop blue whales from being struck, but it does make an impact. Advocates are hoping the move drives inspiration:
MSC's voluntary rerouting does not impact other shipping carriers, but advocates hope their decision could help lead to permanent changes to the official shipping lane that would impact all vessels.
DEI isn't only about doing good
The environment wasn't the only place to find inspiration this past week.
Two people who inspired me won an award for their work. So, here's a huge shoutout to Liv Gagnon and Sonya Dreizler for their win at the Wealthies.
👏👏👏
If you aren't familiar, Liv and Sonya created Choir, which helps address the lack of diverse voices at financial services conferences through the commitment of attendees, speakers, and sponsors. Per its site:
The Choir Certification™ sets the financial industry’s first benchmark for conference diversity. Our goal is to make conference stages across all sectors of finance representative of the U.S. population.
For me, this is an inspirational intersection of DEI and ESG. By helping companies and sponsors ensure diverse voices are heard, Choir adds those voices to the perspectives at conferences and helps drive attendance to hear those voices.
Another voice added to inspiration last week. Vanice Hayes, Dell's Chief Culture, Diversity, and Inclusion Officer, was interviewed on the One Vision podcast by Theodora Lau. She explained her role and the impact it has on Dell.
The entire podcast is well worth the listen, but one critical callout for leaders shows the intersection of DEI with ESG. At one point, Hayes discusses the benefits of allowing people to bring their best selves to work.
Fosters innovation
Serves customers well
Drives the business
She also covers the digital divide and inclusive technology, a key social justice issue. One material philanthropic program is the Dell Student Tech Crew. This program upskills high school students to become their school's help desk support and offers them a chance to earn certifications. I totally would have done this in high school!
You can learn about the program here 👇
Students get hands-on learning with Dell's Student TechCrew | ZDNET — www.zdnet.com High schoolers can earn a tech industry hardware repair certification before graduation.
I love when companies find intersections between philanthropy and its ESG issues. It shows a real understanding of how it can drive impact through its industry knowledge and skills.
Stakeholder pressure and litigation move others
Not every action a company makes comes from inspiration. Sometimes stakeholder pressure, litigation, or the government can force change and drive impact.
Submitted here without comment are stories aligned to external pressures. Like everything ESG-related, these stories have a ton of nuance and will play out over the long term.
Biden Announces Tentative Deal to Avoid Rail Strike Is Reached - The New York Times — www.nytimes.com President Biden praised the agreement as a “big win” for workers and the rail companies.
National Labor Relations Board hits Starbucks with complaint over 'union busting' in Pittsburgh — www.msn.com The complaint relates to the company's alleged treatment of workers who unionized four Pittsburgh stores.
H&M to Remove Sustainability Labels from Products Following Investigation by Regulator - ESG Today — www.esgtoday.com
Fashion retailer H&M and sporting goods chain Decathlon have made commitments to the Netherlands Authority for Consumers and Markets (ACM) to remove sustainability-related labels from their products and websites, and to improve the use of sustainability claims in the future, following an investigation by the Dutch regulator.
Climate campaigners say pollution from multibillion-dollar clothing company’s production is inconsistent with its ethical branding.
Misconduct settlements have led insurers to force police reform - Washington Post — www.washingtonpost.com Insurance companies are successfully dictating reforms in police departments, a movement driven by the large settlements out of use-of-force cases.
20th Century Fox to Finally Pay for Ruining That Thai Beach in ‘The Beach’ — www.vice.com Two decades ago, the idyllic bay was transformed for the cult classic starring Leo DiCaprio. Today, the area is still struggling with the ecological fallout.
Tweet of the Week
It's hard not to put up Patagonia's first reply to its tweet above as our Tweet of the Week. I mean, how can you not be inspired?