Getting What I Can For My Money

Operations is not a class that leads to a ton of "aha!" moments. I really enjoyed this quote today from our prof's foray into explaining CSR.

Sustainability:
Transforming our ways of living to maximize the chances that environmental and social conditions will indefinitely support human security, well-being, and health.

~McMichael, Butler, Folke; Science, 2003

Real Global Warming Options

As someone who finds myself fascinated with simple mechanisms scientists think might help (like painting roofs white, or sending a giant bomb up into the atmosphere to deflect radiation), I am even more fascinated by a recently released ranking of the various methods.

We hear so many options in different contexts, and they all sound good, so how do we know which ones to actually try?

I am often struck by the fact that many people, when faced with something they are told is a "good cause", react with some sense of obligation to goodness. People not in the field, or not associated with the field, often justify drunken galas or excessive auction spending (guilty!) with the "good cause" clause. As long as it's going to charity, it's good, and I get to feel good about myself...right?

In philanthropy, it's an entirely different world. Because there are so many "good causes", we not only have to determine which issues are most important (to our boards, to our missions, to the world), but also which organizations address those issues best. It's a crazy competitive world involving impact rankings, financial efficacy, and some relationships thrown in for good measure. We never take a good cause as simply that - always delving into it further before supporting it.

The green movement, however, throws most of us back into the uneducated category. We all want to do something good for the world. We want to address the issue, so we grasp at anything we can. We step up our recycling, we promote windmills, we install solar panels, and we might even paint a roof or two white. But are we really doing the right things?

Well, Wired Magazine just featured a recently published scientific paper that collects the different ways in which we could address global warming, and how effective each of these methods would be. VERY informative article with some great graphics and a pretty comprehensive and easy to understand list of potential solutions.

Here are a few of the more interesting ones, with rankings:

1. Inject enough sulfur dioxide into the stratosphere to reflect the small percentage of sunlight necessary to offset increased warming caused by carbon dioxide. This scheme is akin to the cooling induced by large volcanic explosions.
2. Manufacture sea salt spray to change the way clouds form over the ocean to increase their reflectivity.
3. Cover the earth's non-sandy deserts with a material composed of a white polyethylene top and an aluminum bottom. That would increase the albedo of those surfaces, cooling the earth.
4. Use chemical processes to pull carbon dioxide out of the air and sequester it in geological reservoirs.
7. Create charcoal from biomass, effectively sequestering the carbon in the plant matter, and bury it.
9. Breed or genetically engineer shinier crops to increase the reflectivity of the world's farmed land.
12. Plant massive amounts of trees across the Earth and count on them to sequester more carbon dioxide naturally.
16. Cool down huge amounts of water with large pumps to form and thicken sea ice that would in turn cool the sea water. That water would descend to the depths, taking a bit of extra carbon with it.
17. Make cities considerably more reflective by, say, painting roofs white.

Check out the complete Wired article, including awesome graphics.

At the very least, I feel a bit less guilty about not secretly splashing white paint on all the roofs of the city.

And my goal is still top 10%

I must be nuts.

Haas School of Business was ranked #1 in the US in Corporate Social Responsibility by the Financial Times. #2 by the Wall Street Journal.

But then again, it seems maybe I picked the right field:

Berkeley CA - The Haas School was ranked #1 in corporate social responsibility in the Financial Times Global MBA 2008 Rankings of full-time MBA programs published on January 28. This is the first time in the seven years of the annual survey the top ten programs by academic discipline were identified. Inclusion of corporate social responsibility (CSR) on the FT's top academic discipline list signifies its rapidly growing visibility and importance in the business world.

“We have been fortunate to receive some great recognition for our Center. This FT rating catapults us out into the global CSR-leadership stage and makes us more proud than ever of the Center's faculty, staff, and, most importantly, our Haas MBA students – who have continued to drive us forward with their intense desire to use the power of business to make a better world," said Kellie McElhaney, executive director and professor at the Haas School's Center for Responsible Business.

Coupled with the recent #2 ranking in CSR by The Wall Street Journal for the second consecutive year, the Haas School is leading business education in CSR teaching, research, and experiential learning opportunities for students, which is offered through the Center for Responsible Business. The Center works closely with a host of companies - including Gap Inc., Hewlett-Packard, McDonald's, Intel, eBay, and Levi Strauss - on strategic consulting engagements, research projects, case competitions, and fellowship opportunities.

Adds McElhaney, “We are honored that a reputable global publication such as the Financial Times now counts corporate social responsibility among its substantive fields of recognition within MBA rankings, solidifying its place among good business strategy.”

The trend article, "Making an impact", which focused on career opportunities in CSR and sustainability, also acccompanied the rankings. The article highlighted the increasing number of MBA graduates who are looking for jobs that exhibit at least an element of corporate social responsibility. The trend – a 37 per cent increase per year in the number of postings for CSR jobs since 2004 – is reflected in recent research by Net Impact and Ellen Weinreb CSR Recruiting, both based in the US.

My Invitation Must Have Been Lost in the Mail

The Global Philanthropy Forum is taking place at Google this week. I so want to be there!!! Just to meet some of the people mentioned in the San Jose Mercury News article. Even Judith Rodin, the CEO of Rockefeller Foundation, is jumping on the capitalist philanthropy model! I want in!

Some basics:

Philanthrocapitalism'

They invest in social causes as they would the stock market or a start-up, but the return is measured not only in financial viability but also what impact the initiative has in solving global problems. The new hybrid model has been dubbed "philanthrocapitalism" and its practitioners "philanthroprenuers."

The 1/1/1 model

Marc Benioff, founder of Salesforce.com and the Salesforce Foundation, created a model for corporate philanthropy known as the 1/1/1 model. His company donates 1 percent of its employees' time, 1 percent of its equity, and 1 percent of its product to philanthropic endeavors. Google has copied Benioff's 1 percent commitment formula.

Profit from benefit

Yet others see a new era dawning.

"Google exemplifies this emerging blur between for-profit and non-profit," said Peter Hero, an adviser to the Silicon Valley Community Foundation. "It gives them an ability to invest in a for-profit entity that doubles or triples the bottom line, provides a financial return but also a significant social and environmental return."

The guiding theme of the Global Philanthropy Forum meeting this week is to explore market-based solutions and encourage entrepreneurship. Instead of funding a medical clinic, that might mean investing in a biotech company for a new vaccine.

I Love You, Bono!

Costly Red Campaign Reaps Meager $18 Million ~Ad Age

Gap's Red campaign isn't doing so (red) hot. $100 million in marketing costs only led to $18 million actually going to the Global Fund. The Ad Age article uses a sharply negative headline on what is otherwise a balanced presentation to show that some are concerned about the cost to benefit ratio.

As a nonprofit professional, I tend to agree with the guys at buylesscrap who think we should encourage direct giving rather than consumption. However, that "meager" $18 million is a whole heck of a lot more than the $13 million they received from the private sector last year. With a budget of around $1 billion, Global Fund receives 99% of its funds from governmental organizations. Any addition to that tiny 1% from corporations and everyday folk is good, right?

The guys at buylesscrap.org don't think so. They promote charitable giving rather than buying crap we don't need. Of course, they're right in so many ways. In theory, all people should give directly. In theory, communism is a great idea. But we've seen how that works in practice. The fact is that many of the people who bought red items would not have dropped $10 into a jar at the counter. Sadly, so many people need motivation to give that consumerism is the only way to draw them out.

So perhaps throwing Bono out there to motivate goodness isn't such a horrible thing. If someone is going to go buy a shirt anyway, they are more likely to pay extra for a charitable shirt than they are to forgo the shirt altogether and make a direct donation. Sad, but true. Yes, we should give up the junk we buy, but most people aren't ready for that. So let's take some baby steps and get a corporation to donate a portion of the products we buy for them. Not a horrible idea.

It could work, and I think it would have worked a lot better if the public really understood the problem. The marketing campaign has really focused on tying the project in with Bono and creating a buzz around the "everybody is doing it-even so and so celebrity" idea. It might have been nice if a portion of that $100 million marketing campaign actually demonstrated the good work of the Global Fund and the need for support. This might be one area where corporations could have used the nonprofit field to come in and show them how to pull those heart strings.

As for that cost to benefit ratio, the Ad Age article is doing a little propaganda of their own.

The $100 million was funded by Gap, Apple, Motorola, and others. This result in some amount of income for each of these companies, PLUS $18 million to the Global Fund. Ad Age is assuming some standard to compare this against, but this is a fairly new idea in the large corporate world and thus doesn't really have a standard to meet. Even if the income for the companies is lower than $100 million, that loss is on the part of the companies and could really be considered an in-kind donation to the Global Fund.

So give it a rest, naysayers. We can't really judge how well it's doing yet. This could be the start of a great movement. Paired with the absurdly large philanthropic gifts from major CEOs as of late, this could be the beginning of something bigger than we ever thought.

Maybe, just maybe, consumerism could save the world.

Crossing my fingers, but not holding my breath.

Are People Essentially Good?

Ervin Peretz thinks so. He got so hot and bothered during an argument over the concept, that he decided to try a little experiment to prove his point. That little experiment meant dropping six figures on start up costs for a new coffee shop in Kirkland, Washington called Terra Bite.

How does opening a coffee shop prove that people are inherently good? It doesn't. But not charging people anything and asking them to pay what they feel when they feel they should goes a long way toward providing the necessary evidence. So far, Ervin says, it seems that the people who pay more than enough or making up for those who don't.

You can read the article for yourself at AZ Central.

Another View on Gates

The Economist reported on the leader of the Bill and Melinda Gates Foundation, Patty Stonesifer in article yesterday:

BEING called “incredibly disingenuous” by the Huffington Post, an influential blog, cannot have been how Patty Stonesifer expected to mark her tenth anniversary in charge of Bill Gates's efforts to make the world a better place. But these are strange times for the chief executive of the Bill and Melinda Gates Foundation, a charitable institution accustomed to being showered with praise. Two recent articles in the Los Angeles Times accused the foundation—the world's wealthiest, with assets of $32 billion—of profiting from investments in companies whose activities contribute to the very problems the foundation is trying to solve (poverty, debt, disease and so on). This prompted an avalanche of media comment along the lines of “giving with one hand, taking with the other”.

Meeting the straight-talking Ms Stonesifer, it is hard to imagine anyone less disingenuous. This is easily the most hostile press coverage of the foundation in the decade since Mr Gates asked her to take over the day-to-day running of his foundation, shortly after her departure from a senior post at Microsoft, his giant software firm. But, she says, this is the price—a “small price”—that the foundation has to pay for having come so far during that time. “We have become the reference point for all the interesting questions in philanthropy,” she says. And whether a charitable foundation should use its portfolio of assets to reinforce the thrust of its giving—or “mission-related investing”—is, she says, “certainly an interesting debate”.

Many American foundations are jumping on this particular bandwagon, either by screening nasty firms out of their share portfolios, trying to improve bad firms through shareholder activism, or accepting lower financial returns in pursuit of a double or triple bottom line that takes non-financial results into account.

It will be interesting to see how the rest of this plays out.

Investments: Good or Profit?

In Life of Pi, a character states that "...the Greater Good and the Greater Profit are not compatible aims...". Bill Gates has seemingly found a compromise by achieving greater profit for his company and working toward greater good with his personal foundation. The recent issues regarding the foundation's investment choices, however, call into question this compromise.

An article in the Financial Times last week went so far as to say that the Bill and Melinda Gates Foundation "snubbed" the whole movement of socially responsible investing in their philosophical statement posted on their website.

Bill Gates, the world’s richest man, on Friday delivered a snub to the ethical investment movement by saying his foundation should concentrate on grant giving, rather than judging the social impact of businesses in which it invests.

In a statement on its website, the Bill & Melinda Gates Foundation, the world’s largest philanthropic body with $35bn in assets, ruled out screening companies in which it invested based on factors such as their environmental record or lending policies.

I believe the FT article goes a bit far in its interpretation of the statement, but it does raise a major question: Can ethical investing lead to good returns, or does it intrinsically lead to lower returns than investing without consideration of ethical factors? Can the greater good and the greater profit coexist?

This is a question Pete and I have addressed several times. He owns stock in Mobil. Should we at some point get married, I would then own stock in Mobil. This is a question for me. The first part of the question is whether Mobil is even actually an ethically questionable investment. It may very well not be for me, and I would need to do a great deal of more research before determining that for myself. For the sake of argument, however, let's assume that this stock is bad. When it then becomes shared stock, do I ask Pete to sell and invest in something that makes me feel all warm and fuzzy? This stock put him through college. This stock might just sustain him (or us) in retirement. Do we give up that return to be better people? Do we have to give up a return at all? Investment experts are all over the place on this issue. The Financial Times quotes two with very different opinions:

The official [of the Gates Foundation] said: “We focus our energies on the investments we can make through our programmatic work, because that is how we can have a direct and dramatic impact that will improve people’s lives.”

Penny Shepherd, chief executive of the UK Social Investment Forum, said: “This is a rather out-dated perspective. The evidence is that you can invest responsibly without damaging your financial returns.”

However, Danny Truell, chief investment officer at the Wellcome Trust, the UK’s largest medical charity with a £14bn endowment, endorsed the Gates’ approach, arguing that focusing on ethical investment would sharply limit returns.

And even if ethical investments do limit returns, shouldn't we do it anyway? I'm not sure how I feel about the average joe's investments, but Bill Gates is THE leading examble of charitable giving in our time. I feel very strongly that Gates, as this role model to the rest of the world, SHOULD be making socially responsible investments. I think people in his position have to make a compromise. Perhaps the returns are somewhat lower, but is that really going to hurt the charities? In my January 8th post, I quoted an LA Times article that stated that Gate's giving in the Niger Delta was less than half of his investments in companies that contribute to the pollution and other problems that affect the people in the same region. So how do we solve this dilemma?

This time around, it seems we're not getting the answer from Gates.

Gates Addresses the Issue

In response to the criticisms made of the Gates Foundation investments, Many papers reported that the foundation is reassessing its investment policies. The LA Times reported:

In a significant change, the Bill & Melinda Gates Foundation announced Wednesday that it would review its investments to determine whether its holdings were socially responsible.

In addition to what it called a continuing review of "our approach to investments," the foundation said on its website, "we will review other strategies that can fulfill a social responsibility role, both in terms of their aspirations and in understanding the impact that they may have."

...In its website statement, the foundation said it would establish a procedure in which the founder and his wife would personally assess its holdings and matters of social responsibility. "We will … formalize the process," it said, "by which Bill and Melinda Gates analyze and review these issues."

Experts in socially conscious investing said the development would probably cause other foundations to rethink their endowment policies. The David & Lucille Packard Foundation and the William & Flora Hewlett Foundation, both among the nation's 10 largest, said Wednesday that they too were reevaluating their investments to assess social and environmental effects.

..."They have become the face of philanthropy for the country, if not the world," Gunderson said. "The move you saw today is the kind of socially responsible reaction that the Gates Foundation will consistently engage in … because they recognize their impact on all of philanthropy."

But just a few days later, the chief executive said the foundation is NOT planning this change. Again, from the LA Times:

Despite recent statements that it planned several changes, the Bill & Melinda Gates Foundation will keep its current approach to investing its endowment, Patty Stonesifer, its chief executive, says.

It would be naive, Stonesifer said in a letter published today on the editorial page of the Los Angeles Times, to think that changing the foundation's investment policy could stop the human suffering blamed on the practices of companies in which it invests billions of dollars.

Stonesifer wrote in response to an investigative series published by The Times last Sunday and Monday that showed that the Gates Foundation, founded by the chairman of Microsoft Corp., reaps vast financial gains from investments in companies that contribute to the human suffering in health, housing and social welfare that the foundation is trying to alleviate.

In a more personal article, the Gates Foundation Chief Executive speaks out:

In the recent coverage of the Bill & Melinda Gates Foundation's investments, The Times implies that we have made secret investments. We have always been open about the investments we make. Every corporate stock and bond we invest in is listed on our public tax forms, which are posted on our website going back to 2002.

The stories you told of people who are suffering touched us all. But it is naive to suggest that an individual stockholder can stop that suffering. Changes in our investment practices would have little or no impact on these issues. While shareholder activism has worthwhile goals, we believe a much more direct way to help people is by making grants and working with other donors to improve health, reduce poverty and strengthen education.

Bill and Melinda Gates have always reviewed investments and will continue to do so. To explain our philosophy and clarify how we make decisions, we have posted a statement on our website, gatesfoundation.org.

Hrrrrrmmmmmmm. What's next?

Socially Responsible Investing

I give Pete crap about having stock in Mobil, but I have to say i don't think that's nearly as bad as huge public figures investing in hypocritical ways--like Bill Gates. Sadness.

Dark Cloud Over Good Works of Gates Foundation

An excerpt:

The Gates Foundation has poured $218 million into polio and measles immunization and research worldwide, including in the Niger Delta. At the same time that the foundation is funding inoculations to protect health, The Times found, it has invested $423 million in Eni, Royal Dutch Shell, Exxon Mobil Corp., Chevron Corp. and Total of France — the companies responsible for most of the flares blanketing the delta with pollution, beyond anything permitted in the United States or Europe.

How Capitalism WILL Save the World

Bloomberg offers one example:

The Office of Economic Opportunity -- a $150 million plan to offer innovative solutions utilizing private resources to help New York's poor.

Bloomberg for President?

The Cost of a Human Life - The Philanthropic View

Peter Singer (I've always thought of him as "the ethics guy") wrote a fabulous article on the value of human life versus the way we give to charity. He makes two strong assumptions that should then lead to a pattern of giving:

1. If we were to place a number on the value of a human life, it would surely be in the millions.

2. All people are created equal.

Singer attempts to determine an appropriate amount of giving that would even out the discrepancies between intrinsic worth (which should be equal) and actual net worth in dollars (bill gates vs. you or me). He points out that Gates has given away nearly 35% of his total worth, while former partner Paul Allen, the 5th richest man in America, has given only 5% (although that 5% reaches over $800 million). Should we all strive to be like Gates? or is 5% enough? Who would tell Paul Allen that $800 million is not good enough?

Singer then goes through various income brackets and argues what they could reasonably give, pointing out that the richest of the rich (the top .01% of taxpayers) could reasonably give 1/3 of their income and still be super wealthy. The rest of the top .1% could give 1/4. The top .5% could give 1/5, and the rest of the top 1% could give 15%. If the then remaining top 10% of taxpayers paid a traditional tithe of 10%, a total of $404 billion could be given to those in need. Singer admits the scale could be steeper, so that the rich pay more and the comfortable pay less, but regardless of the scale, this is only asking the top 10% to pay a relatively small amount. But it adds up to so much!!! And this is only from America. If the rich in other countries did the same, think of what could happen to global poverty!

He says so much more, but the point is made.

I personally believe very strongly in a capitalist society, but have always felt that includes the generosity of the rich to the poor. If only the richest of the rich took heed and followed Singer's plan to share brotherly love, capitalism could still lead to the greatest cure for social problems in our times, too.

The challenge is on, rich folk.