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Blog | Friday March 17, 2017

Evolution in Private Equity ESG: From Policies and Efficiency to Impact

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The evidence and impetus are powerful for integrating environmental, social, and governance (ESG) factors in private equity investing. In response, the sector is doing important work to protect against risk, enhance value, and improve sustainability. But it’s also time for a reality check: Swapping in energy-efficient light bulbs is important and necessary, but it is not sufficient to address the most pressing challenges facing the sector’s business and societal impacts. To address those challenges and stakeholder concerns—including from asset owners, media, employees, and regulators—the sector is evolving toward a more integrated and strategic approach to addressing sustainability impacts, such as good jobs, inclusive economy, sustainable solutions, and transparency.

ESG management practices are increasingly the norm among top U.S. firms and are spreading to the middle market. At BSR alone, we’ve seen an explosion in the number of advisory projects we conduct to support ESG integration, including projects to develop policies and strategies, conduct ESG diligence, and implement ESG at the portfolio level. This growth reflects several factors; chiefly, attention from limited partners (LPs) that invest in private equity firms, requests to portfolio companies’ customers, and the recognition that ESG factors are linked to effective long-term management and value creation.

Most U.S. private equity firms’ efforts focus on management of ESG basics at individual companies—and that makes sense. Efficiency and risk management projects on topics like water use and health and safety offer enormous opportunities to protect and create value while creating tangible sustainability benefits and demonstrating the “business case.”

As important as the focus on ESG basics is, though, it risks missing the forest for the trees. As the U.S. presidential election demonstrated, the public is deeply concerned—even angry—about the relationship among capital, business, and society. Gallup ranks confidence in big business at 6 percent, second-to-last on a list of American institutions; on a subsequent poll on attitudes toward business, the “banking” sector ranked 19 out of 25.

Whether or not it’s fair, private equity often gets the brunt of that negative perception and press due to a number of factors, including full ownership of portfolio companies, a history of limited transparency, complex remuneration structures, and headline-ready examples; it seems not a month goes by without a major media article on the negative impacts of a private equity deal.

These perceptions affect private equity firms in three particular ways. First, asset owners are increasingly concerned about ESG management and reputational risks. Major public pensions, such as in California, France, and Sweden, have adopted policies mandating attention to topics like climate change and human rights. The California State Teachers’ Retirement System (CalSTRS) notably divested from a private equity investment in firearms following a school shooting. University endowments are increasingly taking action in response to student concerns over climate and social impacts.

Second, the sector and its portfolio companies are in a fierce fight for talent, especially as more professionals with MBAs are drawn to Silicon Valley. Dustin Clinard, managing director at Universum Global, a firm that tracks employer popularity, noted: “MBA grads are placing an increasing amount of importance on companies that have an inspiring purpose. They do more than simply make money. They make money with a purpose of greater good to it.”

Finally, regulators and politicians at the U.S. federal and state level have put heavy scrutiny on the industry. In a rare moment of agreement in the 2016 U.S. presidential debates, both candidates expressed a desire to eschew the favorable tax treatment of “carried interest.”

Stakeholder concerns are not focused on whether private equity portfolio companies have health and safety policies or use water-efficient toilets. They are focused on more fundamental concerns about what types of companies private equity invests in, what they do with those companies, and what the impacts are on stakeholders. As a result, the sector’s challenges require more fundamental and strategic ESG thinking. While some firms are already making strides, the sector needs to become more broad, consistent, and bold in asking tough questions, such as:

• Which stakeholders are affected by our investment in a company and how?
• How do we create better jobs that benefit employees, communities, and investors?
• When we feel we must perform layoffs, how can we lessen the negative impacts? (To start, companies can learn from my colleague Susan Winterberg’s research on Nokia’s Bridge program.)
• How can we be more transparent and provide public information on our impacts and efforts, like Apax Partners, The Carlyle Group, Oak Hill Capital Partners, and others?
• How can we harness private capital to tackle some of the world’s greatest challenges, which firms like Bain Capital, KKR & Co., and TPG and are exploring?

In many ways, the evolution from efficiency and policy-driven approaches to more strategic, holistic sustainability integration parallels shifts in the broader corporate sustainability field. Other sectors like technology and consumer products began shifting from strategic philanthropy to sustainability efficiency to integrated approaches years ago. The private equity sector is on a similar path, with a lot of opportunities to advance.

The private equity sector has a powerful and positive role to play in deploying capital toward a sustainable, inclusive economy. While ESG professionals in private equity should remain focused on direct value creation, it is imperative to begin asking broader questions and developing strategic answers. If the investment sector wishes to talk the talk of fueling innovation, growth, good business, and societal benefits, it must also walk the walk—to employees, investors, communities, regulators, and the public.

Blog | Thursday March 16, 2017

Yes, It’s Your Business: The Private Sector Must Address Gender-Based Violence

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While progress on gender equality continues to advance too slowly, we are encouraged by signs that the private sector is taking an increasing role in making women’s empowerment a priority. For instance, more than 1,440 companies have signed the Women’s Empowerment Principles, suggesting that more and more companies are making women’s empowerment a strategic priority, with CEO-level support. In parallel, through our own work developing guidance on how to embed a gender lens in supply chain sustainability programs, we see more companies recognizing that resilient supply chains are intricately linked to the well-being and empowerment of women. And BSR’s HERproject has nearly 50 global active companies enhancing the lives of women working in their supply chains.

Despite these signs of progress, companies remain uncertain of how to grapple with the complex issue of gender-based violence. Without adequate attention and action, this issue will undermine any serious efforts to achieve gender equality.

Gender-based violence, which includes any act that results in, or is likely to result in, the physical, sexual, or psychological harm or suffering of women, is deeply rooted in gender power imbalances and adverse social norms that condone violence. When violence against women is perpetrated by intimate partners or happens in the workplace (whether in direct operations or global supply chains), it is an issue that concerns business. And the two are often linked: Intimate partner violence in the home may manifest as power imbalances in the workplace that facilitate sexual harassment. A staggering one in three women will experience some form of physical or sexual violence in her lifetime, usually by an intimate partner. That means most of us will have a close colleague who is a victim of physical or sexual violence.

For business, addressing gender-based violence in the workplace is a moral and business imperative; however, the damaging impacts of gender-based violence extend far beyond the workplace, affecting individuals, families, and communities. Given the complex origins of the problem and the far-reaching social consequences, many companies ask: “Is it our business?” We think it is. And we want to work with business on a global scale to address the problem.

The Cost to Business of Gender-Based Violence

The cost of gender-based violence to business is both direct and indirect. Violence against women prevents an economy from attaining its full potential, resulting in lower growth, lower taxe revenue, and greater expenses to healthcare, education, the justice system, and social services. For instance, one source estimates that globally, the costs of female homicide and violence by an intimate partner and sexual violence against women at more than US$110 billion per year. A Canadian study estimated the annual cost of domestic violence to the Canadian economy to $7.4 billion (Canadian dollars). It also affects business more directly through increased absenteeism, higher prevalence of presenteeism, and higher administrative and operating costs to compliance, training, and other programs. One research estimate puts the annual productivity loss of sexual harassment in a typical Fortune 500 company at US$6.7 million. Another study suggests that the Peruvian economy annually registers more than 70 million days of missed work because of violence against women.

In addition to the direct impacts, many businesses must also consider the risks—and costs—stemming from gender-based violence in their supply chains. While many global and international companies seek to mitigate the risks of human rights violations in their supply chains (through codes of conduct and associated assurance systems), our work on women’s empowerment shows that the absence of a gender lens means that such efforts are not effective at identifying, mitigating, or redressing gender-based violations. This exposes companies to risk of complicity in human rights violations, as well as risks to supply chain resilience and business continuity.

What Business Can Do

Effective business action to eliminate gender-based violence requires companies to consider the different ways they can prevent violence from occurring in their own operations, as well as how they can use their brands and reach to challenge the norms and stereotypes causing the problem in the first place. We believe companies can take action in three fundamental ways:

• Act to prevent gender-based violence within the company walls through HR-led policies, systems, training, communication, and dialogue, as well as by ensuring adequate complaint mechanisms are in place. Companies should also ensure market-facing business practices in marketing, communications, sales, and other units do not contribute to gender stereotyping and perceptions that influence societal values, norms, and attitudes that condone violence against women.
• Enable and support business and civil society partners throughout supply chains to eliminate gender-based violence in the workplace. For example, companies are partnering with their suppliers through BSR’s HERrespect program to address sexual harassment and violence in factories and on farms. And global facility services company, Sodexo, seeks to connect survivors of gender-based violence to employment opportunities within the company and with partners.
• Influence consumers, customers, business partners, community leaders, politicians, and regulators to raise awareness; influence attitudes and norms; mobilize collective action; and change laws, regulations, and administrative practices to prevent violence from occurring and to provide proper redress and support to survivors when violations do happen.

The basic premise of our act, enable, and influence framework is that effective, lasting solutions require a comprehensive and holistic approach. In this, influence must be viewed as an essential element—even as we recognize that some businesses may see this as going beyond their realm of responsibility. We believe that business has a tremendous role and opportunity—as well as a business case—to go further. In our view, business wields formidable powers through marketing and communications to influence consumer norms and attitudes as intimate partners, as community members, and as colleagues.

We are encouraged that more companies have started to address gender-based violence within and outside company walls. We need this. We also need more discussion and dialogue on the role of business, we need to know what works and what doesn’t, and we need find ways for collective action that involves collaboration among business leaders, engagement with policymakers, and close partnerships with local organizations. Therefore in 2016, BSR, in collaboration with Win-Win Strategies, launched Business Action for Women, a global platform to drive collective action on women’s empowerment. Gender-based violence is one of our focus areas, and we invite you to join as we take this global challenge on. 

Blog | Wednesday March 15, 2017

A New Tool to Help Companies Close the Gender Gap

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At the current rate of change, it will take more than 100 years to achieve full gender equality. The UN’s High Level Panel on Women’s Economic Empowerment, which includes leaders from business, the UN, government, and women’s organizations, reported last autumn that progress has been “far too slow.” And a recent McKinsey study highlights the fact that while many companies are making top-level commitments to women’s empowerment and gender equality, few companies have matched commitments with concrete plans integrated throughout the business. As a result, companies are missing out on tremendous potential gains across their business—from improved performance and retention of employees, to innovation, to expansion to new markets.

With so much clear evidence of the social, moral, and business case for promoting gender equality, what is needed to accelerate the pace of change and for companies to take intentional, ambitious action? One challenge we’ve heard from companies is identifying the right entry point for their company—essentially: “Where do I start?”

A new tool released today is intended to begin answering that question. The WEPs Gender Gap Analysis Tool helps the global business community identify gaps in its performance on gender equality and enables companies to make informed decisions on setting goals and strategies. Inspired by the Women’s Empowerment Principles (WEPs) initiative, the tool is a joint project of the UN Global Compact, UN Women, the Multilateral Investment Fund of the IDB, and the Inter-American Investment Corporation, and is supported by the Governments of Japan and Germany, The Coca-Cola Company, BSR, Itaipu, and KPMG.

The tool is grounded in the WEPs global framework, which helps companies empower women in the workplace, marketplace, and community. BSR signed the WEPs in 2015 to uphold best practices in our own organization, as well as to work with our member companies to promote, share, and scale best practices on women’s empowerment. Since we signed the WEPs, we joined its Leadership Group to contribute to the promotion and uptake of the WEPs by our network of member companies. We’re pleased to be among 38 of our BSR members in joining the WEPs initiative—and more than 1,400 companies globally.

As many of our members know, women’s empowerment is a central focus for BSR, and through our women’s empowerment practice, we work with companies to catalyze effective and ambitious action. Our women’s empowerment practice draws on more than 10 years of experience working on global women’s issues. Developing practical strategies, tools, and solutions with companies is one prong of our strategy.

Through our work on the WEPs tool, we are adding another resource to assist companies to take action on women’s empowerment. BSR and our partners designed the tool to translate the WEPs from principles into action through two key features.

First, the tool provides a broad overview of areas in which companies affect women. The tool asks a number of questions, including around companies’ leadership commitment and workplace policies and programs to support women, as well as a companies’ approach to supply chain, product development, CSR, and more. Companies and gender equality experts identified these areas during 12 global consultations with more than 170 companies.

Second, the tool helps companies understand how far they’ve gone in each area. Have companies made a formal commitment in a particular area, such as business relationships with women-owned businesses? Are they implementing practices to improve their performance? Are they measuring impact and ultimately sharing results with their board or external stakeholders? The tool provides a checklist for companies to see what action looks like across commitment, implementation, measurement, and transparency.

Initial feedback on the tool has been positive. Through the consultation phase, as well as a pilot with an additional 20 companies, we’ve worked to make the tool reflect real-world business practices. During the pilot phase, companies liked that the tool covers broad points of analysis of how a company takes action on gender equality. The tool also inspired internal conversations across the business about “what good looks like.”

By applying the tool, companies will not only have a better understanding of their own status, they will also be equipped to take the next step. BSR now offers additional services to help companies understand the tool’s results, identify priority investments, design and implement a women’s empowerment strategy, and measure impact.

Although much work remains to achieve gender equality, the launch of the new WEPs tool is one resource to make progress. We look forward to supporting companies to take stock of their current performance, and we hope that, in a few years, the tool will evolve to reflect emerging, leading examples of corporate practice. 

Blog | Tuesday March 14, 2017

Sustainability: A Brand’s Secret Weapon

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Business leaders possess a singularly powerful tool to build the world we all want to live in: their corporate brands. We witnessed this recently through a handful of remarkable Super Bowl 50 commercials. Brands such as Airbnb, Budweiser, and Coca-Cola aired politically charged commercials celebrating multiculturalism.

It’s well researched that brands capture consumers’ hearts and minds in an incredibly powerful way. Brands can inspire people to be more tolerant of other cultures, empower women, or conserve resources. Not only can brands make a positive difference, but when they seriously engage with issues like inclusion and diversity, greenhouse gas emissions, raw materials and product design, or labor issues, they can build winning brand strategies.

One of the most talked-about demonstrations of this in practice is Unilever’s “sustainable living” brands, which are growing 30 percent faster than the rest of the business. These brands—including Ben & Jerry’s, Dove, and Knorr—have put societal and environmental responsibility at the very core of their brand strategies, shaping not only brand communications but also community engagement, product innovation, and the supply chain.

In short, the discipline of sustainability can be the brand manager’s best friend. An understanding of social, environmental, and economic impacts can precisely identify the big issues that a brand can credibly address and that are relevant to the organization's strategy, purpose, and material issues. This understanding can also drive insights and creative thinking. Brand managers and sustainability professionals can work together to define meaningful metrics, such as demonstrating success in brand affinity or societal impact.

Yet many businesses are missing these huge opportunities. Sometimes, the brands in their portfolio haven’t fully embraced the corporate-level sustainability strategy, or brand owners haven’t thought through how improved sustainability practices can drive brand desirability, business growth, and innovation.

Integrating sustainability into brand strategy requires a different approach for brand and sustainability teams that may not have worked closely together before. After all, how many brand specialists will be familiar with materiality assessments or, conversely, sustainability experts with the intricacies of brand keys?

Yet, this collaboration can transform the positioning of sustainability within an organization and deliver a purpose-led brand that is differentiated in the market and drives growth. In short, it's a win-win.

To integrate sustainability into the brand strategy requires a two-step process. Brand owners and their creative agencies should start by gathering and refining consumer and cultural insights related to the organization’s sustainability commitments. They then use these insights to create a toolkit whose aim is to help brand managers make the leap from abstract sustainability strategy to consumer-led brand strategies. For example, a brand in a declining fragrance market might find ways to engage women who are concerned about allergens and perfumes when pregnant. A laundry brand, aware of increasingly frequent water crises, could formulate a low-rinse formulation, which creates a consumer benefit, increases brand love, protects its market, and helps alleviate a serious and deepening environmental problem.

In developing the toolkit, it is critical to get inspiration from other brands—both in and out of category—that have embedded sustainability commitments into their core brand strategy or as long-running campaigns. And “steal with pride”—use existing internal brand key or innovation models to help translate the organization’s sustainability commitments to the brand level.

The next step is to work with each brand to figure out how it delivers on the company’s sustainability commitments and, more importantly, how it can leverage sustainability to build brand equity. By examining the toolkit, the specific brand key, consumer insights, and the product innovation pipeline, the brand can identify positioning territories, product innovation ideas, and campaign-able areas to drive brand growth. The process considers the brand’s existing or potential purpose (its role in the world) and its products (encapsulating social and environmental impacts). This process allows brands to build a marketing roadmap to implement in house or alongside their marketing agencies.

But the process can be challenging, and so, we want to share five lessons we’ve learned from working with multi-brand clients in the luxury, beauty and personal care, food, and retail sectors.

1. The process is part art and part science. It combines rigorous process, technical knowledge, consumer insight, and creative thinking. The answers won’t be immediately obvious.
2. Take a robust approach to filtering corporate commitments, and only focus only on those that are relevant and authentic to the brand and its consumers.
3. Involve brands at the earliest opportunity. A purely top-down approach takes too long, and marketers move very quickly once brand-building value is understood.
4. Involve R&D early in the process, as the team’s input, especially on sustainable product innovation, will be invaluable.
5. Ask yourself whether the revised brand positioning passes the sniff test—does it feel authentic? If not, don’t press on.

As business leaders try to make sense of the rapidly changing world around them, one of the most powerful things they might do this quarter to boost the top line and fulfill their duties as corporate citizens, is to invite their brand and sustainability teams to collaborate more meaningfully on the products and marketing campaigns they will bring to life. Now is the time to move to this still largely unexploited phase of sustainability and reap the rewards.

Blog | Monday March 13, 2017

Preventing Violent Extremism: An Interview with Amy Cunningham, GCERF

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Amy Cunningham is a senior advisor at the Global Community Engagement and Resilience Fund (GCERF), a Geneva-based public-private partnership and global fund working to support grassroots initiatives to prevent and counter violent extremism. A foreign policy professional who previously spent five years at a U.S. think tank working on issues related to human rights, security, and religious tolerance, Cunningham leads the fund’s private-sector engagement and supports its external relations and outreach.

She sat down with us to discuss how all stakeholders, particularly the private sector, can engage to provide positive alternatives that prevent vulnerable men, women, and youth from joining terrorist groups.  

Susan Winterberg: Why should business leaders focus on the issue of violent extremism?

Amy Cunningham: Violent extremism threatens not only the safety of citizens, but also economic development and investment. According to the 2016 Global Terrorism Index, the global economic impact of terrorism reached US$89.6 billion in 2015. Violent extremism affects business operations, disrupts markets and supply chains, depletes talent pools, inhibits investment, limits expansion, and curtails innovation. Additionally, it is important that the private sector take this issue seriously because, at times, their actions have inadvertently stoked community tensions or contributed to the ability of groups to perpetuate a violent narrative.

There is a misconception that violent extremism threatens only those companies with assets on the ground. In fact, violent extremism (including the presence of or threat from terrorist groups) prevents access to markets and hinders growth in all sectors. Certain industries have obvious interests in preventing violent extremism, such as extractives and agriculture, which are threatened by violence that erupts in the areas where they maintain personnel and property. For the tourism industry, revenues are twice as large (in terms of contributions to GDP) in countries where there have been no terrorist attacks. There are, however, many other industries that can play an important role in preventing violent extremism and that are also directly affected (food and beverage retailers, garment industry, construction, and technology, to name a few).

Winterberg: How is GCERF working with communities to promote inclusion as a means of preventing violent extremism?

Cunningham: From our work in Bangladesh, Kenya, Kosovo, Mali, and Nigeria, we know that political, social, economic, and other forms of marginalization can play a huge role in motivating a person toward adopting violent extremist narratives. For this reason, GCERF works diligently to promote inclusion and social harmony from the grassroots level upward.

Community cohesion is essential to strengthening resilience against violent extremism ("resilience" being the ability of community members to adapt and recover from violent extremist threats and attacks). For this reason, in each community we fund activities in, we prioritize raising awareness of the threat of violent extremism. To raise awareness, we support community dialogue programs that are inclusive of members of society who might otherwise not have the opportunity to engage with their peers and neighbors. For example, we fund network events for women and girls who might traditionally be excluded, interfaith dialogues to encourage peacebuilding, and gatherings to provide safe avenues for engagement and sharing of frustrations among civilians, law enforcement, and officials. An inclusive society, one where trust, transparency, and human dignity are prioritized, will prove more resilient—and, ideally, resistant—to the violent narratives and ideologies professed by terrorist groups.  

Winterberg: What opportunities are there for companies to become engaged in work on preventing violent extremism?

Cunningham: There is no shortage of opportunities for companies, large and small, to engage in preventing violent extremism. On the whole, the private sector is regarded as faster, more flexible, and more focused than the public sector and, therefore, has the potential to help stabilize at-risk communities, while simultaneously securing its own business operations. When encouraged and supported, enterprise can also take more risks, such as piloting ideas or innovating programs that might fail but still provide valuable lessons for all stakeholders.

We recognize that business can offer more than just financial resources. For example, companies have marketing and branding acumen that can help position and promote prevention of violent extremism objectives. Also, by virtue of working on the ground directly with—and within—local communities, they have intimate understanding of local contexts, cultures, and networks that governments and aid agencies may not. In our experience, some of the best private-sector engagement on this issue comes from communications, technology, and social media companies, which readily harness their internal expertise to produce or amplify content online that counters violent extremist narratives. Similarly, it is no secret that one way to curb the appeal of violent extremist groups is to provide positive, alternative opportunities to vulnerable individuals, such as job training and job creation—two things that the private sector has excelled in.

At GCERF, we frequently meet with dedicated and ethical business leaders who are genuinely committed to making a difference in the communities where they operate, but too often, their CSR objectives are nearsighted or lack a prevention of violent extremism “lens,” which is to say that they fail to appropriately consider fragile cultural contexts and the level of resilience within the community in advance of beginning programming. We are huge advocates for CSR, but we also think prevention of violent extremism should be considered when crafting core business strategies. After all, you can have security without development, but development without security won’t stand a chance.

To learn more about GCERF, visit the organization’s website, or download its annual report. 

Blog | Wednesday March 8, 2017

HERproject at 10: Celebrating HERsuccess, Inspiring HERfuture

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Today, March 8, is International Women’s Day 2017—a good time to take stock of our collective progress toward gender equality. And such a moment of reflection is particularly relevant for HERproject this year, as we are hitting a big milestone: It’s our 10th birthday! On our anniversary, we’re taking a moment to think about what we have achieved and what we have left to do.

The short answer is: We have come far and have much to be proud of. But we cannot (and will not) stop here.

HERproject originated from a piece of research in 2006 into the general and reproductive health of women workers in toy, garment, and electronics factories across six focus countries. The findings were clear: Women often lacked crucial information on health topics, including sexually transmitted infections, nutrition, and pregnancy. Factory managers were well aware that this lack of information—and lack of access to related services—increased absenteeism and reduced productivity, but they didn’t know what to do. And so, HERhealth was born to address this clear need for workplace programs on women’s health.

Since then, much has happened. HERhealth took root, grew rapidly, and spread to 12 countries. But we—as brands, suppliers, NGOs, funders, and HERproject staff—kept going. We realized that we could support women to make the most out of their income by addressing unmet needs around financial knowledge and access to services. We developed HERfinance to provide guidance on financial literacy, planning, budgeting, and savings. This would improve women and families’ resilience to economic shocks, while also helping shift cash payroll to digital wages and raising awareness of the advantages of formal financial services.

Over the course of the last 10 years, we are proud of what we have achieved through our collaboration. Among other things, data from our programs shows:

• A 50 percent increase in the number of women using family planning products.
• A 23 percent increase in the number of women making decisions on what to do with their salaries.
• 91 percent of both men and women stating that they saved a greater portion of their salaries to mitigate future shocks.

While an important step, however, access to information and services does not in itself equal empowerment or equality for women workers. This will require a shift in perceptions around the value and roles of women. And so, to address the root causes of gender inequality, we have launched HERrespect. This piece of the HERproject program creates a space to re-evaluate the norms and structures that underpin discrimination, reset the relationship between women workers and their (often male) managers, and tackle knottier issues around sexual harassment and violence against women in the workplace. This endeavor is not simple or easy, but the fact that brands, factories, and farms see the value in investing time, effort, and money in HERrespect is a great indicator of how far we’ve come.

Women’s empowerment is no longer a footnote at the bottom of the to-do list. Ten years on, we’re spending less time making the case on why to invest in women, and more on how to do it effectively. It’s why a decade of HERproject programs have brought together more than 50 global companies and more than 500 farms and factories to find solutions for women workers. Together, we firmly believe that the workplace can be a space for change, improvement, and opportunity for women—and that an empowered female workforce is critical for the long-term resilience of global supply chains.

Women’s empowerment has gained prominence on the international stage in recent years, such as the launch of the UN High-Level Panel on Women’s Economic Empowerment’s first report in 2016, which squarely emphasized the importance of business action for gender equality and the global benefits of women’s empowerment. This wider discussion (and action) is an important impetus for us to deepen and expand our work.

And yet, in all the talks of global supply chains and high-level panels, we might lose sight of the heart of HERproject. When I talk to women involved in HERproject, I am always struck by the incredible gamble they have taken and are taking. Many have left their villages and families to move to a busy and not always welcoming city, with the goal of working hard to provide a better future for themselves and—especially—for their families. That’s bold.

And when I sometimes get frustrated about the slow and incremental progress required to achieve equality and empowerment for women workers, the women we serve always keep an optimistic long-term view. When I asked Mossammat Moklesa Parvin, a HERhealth peer educator in Bangladesh, what her dreams were, she said she wants her daughter “to study well…I would like to see her as a doctor. Otherwise being a teacher is also good.” Or I think of Antara Akhter Arifa, a HERrespect Change Maker also working in Bangladesh, who wants to send her daughter “to a good college for a better education.” Just as they left their communities to build a better life for their families, they are participating in HERproject for the same reasons.  

Throughout 2017 for our 10th anniversary, we’ll be “Celebrating HERsuccess and Inspiring HERfuture.” That’s the theme of our campaign. But when we talk about “HERfuture,” we’re talking less about the future of HERproject as a project, and more about someone like Parvin. It’s her future that matters, her future that is being improved through the collective commitments from businesses and all the participants in HERproject. Now, we need to ensure that she can make her future a reality. 

Blog | Tuesday March 7, 2017

What Can Companies Do to Empower Women in Sub-Saharan Africa?

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According to the United Nations, gender inequality costs the region of sub-Saharan Africa an average of US$95 billion a year. By eliminating gender inequality and empowering women, the productive capacity of one billion Africans could be raised, delivering a huge boost to the continent’s development potential.

When women achieve their full potential at work and in other aspects of their lives, women and communities are not the only ones that benefit—gender equality is also good for business. And the important role that business plays in the lives of women, directly and indirectly, means that the private sector is uniquely positioned to strengthen women’s economic empowerment—and can and should go beyond simply offering a woman a job.

To advance empowerment, companies should act in the areas under their direct control; enable by supporting, incentivizing and investing in others; and use their influence by advocating and sharing expertise to enhance women’s economic opportunities and empowerment. In BSR’s new report “Women’s Economic Empowerment in Sub-Saharan Africa: Recommendations for Business Action” and three accompanying briefs for the apparel, mining, and mobile telecommunications industries, we have prioritized the areas in which companies are likely to have the greatest impact on advancing women’s economic empowerment. We also provide companies with practical guidance on how they can play a more significant role in making women’s economic empowerment a reality and critical insight into the specific barriers holding women back in sub-Saharan Africa.

Through our research, we found three main trends that informed our analysis.

• Women in the workforce, regardless of industry, face common challenges. These challenges include the need for additional education and training for career progression, a lack of female role models, the absence of decent childcare options and maternity leave, and risks to their personal safety. Although some women have made it into senior business roles, women are more frequently found in lower-paying, vulnerable jobs, which exacerbates many of the challenges above. These commonalities mean that companies across industries can share and learn about these challenges and how to tackle them.
• It will take much more than a job to economically empower women. Women are already very active economic participants in sub-Saharan Africa, but their contributions are not always recognized, rewarded, or encouraged. Women, particularly if they are from low-income households, face a range of systemic barriers, including entrenched poverty; poor access to housing, finance, and health services; and social norms that dictate “acceptable” jobs for women and force women to take on a heavier share of domestic responsibilities. Therefore, companies need to go beyond a narrow focus on economic participation to instead identify ways that they can shift cultural norms and societal expectations, improve infrastructure, and strengthen governance systems that can support greater access to information, services, and opportunities for women.
• To address systemic challenges, companies will need local and global partners. These partnerships should include local grassroots women’s organizations, development finance institutions, local governments, public health care providers, and industry peers. Companies will need to consider all the ways they can drive change as employers, business partners, and influencers in the wider economy. For example, companies can advocate that governments remove laws restricting women’s land ownership, or they can channel funds into programs that support women’s education and entrepreneurship. Companies can use their convening power to bring together local organizations or industry peers to share best practices and develop a common vision for gender equality for workers or other women engaged in their value chain.

Unlocking the full potential of women could have a transformative impact on families, communities, and entire economies, with significant benefits to business. However, the challenges facing women are complex, and tackling them will require significant commitment and investment by all sectors of society. The private sector cannot and should not wait for governments, NGOs, and development agencies: It should take action now in its operations and by enabling and influencing others to advance women’s economic empowerment in sub-Saharan Africa.

Read our new report and accompanying briefs for the apparel, mining, and mobile telecommunications industries.

Blog | Friday March 3, 2017

A New Era for Chinese Industry: Automation, Optimization, and Global Supply Chains

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When you think about industry in China, what images come to mind?

Most imagine gigantic factories, with lines of workers churning out low-cost goods bound for markets abroad. This China pulls from the ground with disregard for environmental implications. It pushes workers to the limit, knowing a steady supply of replacements wait just outside the factory gates.

This may have been the case in the past, but not so anymore.

Chinese industry is entering a new era in which optimization of resources, labor, and cost is critical. A slowing economy, as well as an uncertain geopolitical environment, means the government must find new ways to stay globally competitive.

To do this, China is positioning itself to become more domestically self-sufficient, service-oriented, and competitive than ever before. BSR’s latest working paper, “Optimizing Chinese Industry in the Age of Automation” explores the impact these shifts will have on global businesses and their supply chains. To stay on top of these changes and ensure sustainable business practices, businesses should begin to rethink their supplier relationships and support economic inclusion.

China’s economic shift is being accelerated by rising labor costs, changing policy, and the ever-present specter of automation. For instance, labor costs for the average Chinese worker have increased 15 percent year on year since 2000. When factoring in productivity, Chinese wages are only 4 percent lower than those in the United States. This means that businesses should no longer think of China as a market for cheap production of goods.

Beyond that, policy responses, like the Made in China 2025 plan, aim to bolster productivity, developing domestic manufacturing sophistication that can overtake Germany, Japan, and the United States. And President Xi Jinping’s proclamation of a “robot revolution” will free up billions of renminbi for technology upgrades and industrial robotics. It also starts to address labor costs and shortages. In one startling example, the manufacturing hub of Guangdong aims to automate 80 percent of its factories by 2020.

These shifts will require major changes to the way global businesses operate in China. To that end, the paper also provides recommendations to prepare the workforce of today for the workplace of tomorrow through new approaches to supplier relationships and a focus on an inclusive economy.

Supporting Supplier Relationships

As China moves away from low-end manufacturing, business can play a positive role in shaping the country’s future supply chain. This will be mutually beneficial for both the government and a company. Accomplishing such goals will require investment, engagement, and preparation.

• Invest: Companies should not assume that internal leadership or supply chain partners know about the changing landscape. They should invest in knowledge-sharing that builds management capacity to handle present-day shifts.
• Engage: Companies should have an open dialogue with supply chain partners to get on the same page about what the future holds. They should start by asking: What will it take to stay competitive over the next decade?
• Prepare: The changes happening today will affect different industries in different ways. Those well on their automation journey, such as automotive companies, can share learnings with industries yet to experience change. As they onboard machines, leaders at companies in heavy manufacturing and the information and communications technology sector should consider the risks and labor impacts that automation brings.

Supporting Economic Inclusion

It’s not only the supply chain landscape that is changing. Optimization of the labor force will mean fewer low-skill jobs, higher competition, and a shift in job knowledge requirements. By preparing well today, business can fulfill a moral imperative in supporting economic inclusion among the Chinese workforce. This preparation is twofold.

• Upgrade skills: Companies should assess whether workers have what it takes to be competitive in the workplace of tomorrow. Streamlined operations mean fewer workers accomplishing multiple tasks, so learning and development mechanisms should support a diversification of skills. These mechanisms should also make use of technology to create mobile, accessible, adaptable, and meaningful content.
• Reimagine mobility: Traditional mobility is often seen as a ladder. Reimagined mobility is like a roundabout, with many paths to choose. Some workers may choose to stay within a company. Others may choose to take newfound skills and create their own organization. Regardless, business should consider mobility as an investment in the future competitiveness of a worker, rather than a cost to the company that the worker must pay back through loyalty. With millions at risk of losing jobs in this changing landscape, business can help ensure a painless transition for displaced workers.

At the BSR Conference 2016, John L. Thornton, Executive Chairman of Barrick Gold Corporation, noted that “every person knows far, far less than they should about China.” Given dynamic changes in the country, now is the time to brush up. This isn’t an exercise in multicultural awareness, however. With China squarely at the center of global supply chains, any changes there resonate throughout the world. As shifts in policy, labor, and use of automation occur, is your business ready for an inevitable future where China is no longer simply the world’s factory, but an optimized market of its own?

Blog | Thursday March 2, 2017

Three Ways to Embed Sustainability in Public-Private Partnerships for U.S. Infrastructure

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Since the U.S. election, there has been a lot of discussion about rebuilding America’s infrastructure—namely, its electricity, transportation, and water and sewage systems. Elected officials of both parties, academics, industry associations, and other experts agree that the United States has underspent on infrastructure for decades, leading to a slow deterioration.

According to the U.S. Congressional Budget Office, transport and water infrastructure spending has been fairly consistent in the past 50 years, at around 2.4 percent of GDP (for comparison, China spends about three times more). In a recent Gallup poll, 75 percent of Americans said that the country should spend more on infrastructure. According to the American Society of Civil Engineers, in addition to “business as usual” investment, as much as US$1.4 trillion in additional investment will be needed in the next decade to improve U.S. infrastructure.

BSR sees investing in U.S. infrastructure as a major opportunity to create employment, upgrade to climate-friendly systems, and build a transportation system fit for a low-carbon economy.

While much of the future infrastructure development will be financed by government, a key expectation is that additional new money would also come from the private sector via public-private partnership (PPP) models, where the private sector assumes major risks, costs, and management responsibilities for infrastructure development and operations. The reason for a likely increase in privately developed and financed infrastructure is multifaceted:

• More than 80 percent of U.S. infrastructure funding comes at the state and local level, and about two-thirds of states have PPP legislation and/or demonstration projects in place. A Harvard review cited approximately US$61 billion in new PPP investment in the United States in the past 10 years.
• Some elected officials prefer to limit further government debt financing of infrastructure.
• For some infrastructure, the private sector can more quickly and innovatively develop projects.
• PPPs allow for risk sharing by developers, operators, financiers, and government.
• Long-term private sector operational and maintenance responsibilities are built into projects from the beginning. 

Before BSR, I was an infrastructure PPP economist for almost a decade at the World Bank and taught about PPPs at Harvard Kennedy School. In general, the PPP model has been applied widely and successfully in some countries, less successfully in others, and—as per the above—still in its infancy in the United States. Global experience has shown a valuable lesson for the United States: Both governments and corporate leaders must work together to ensure environmental and social risks are properly managed and societal costs and benefits are fairly spread out. Otherwise, infrastructure PPPs are doomed to fail.

Sustainability considerations should be prominent in all three PPP project phases: the design phase, the development phase, and the operational phase.

The biggest sustainability impacts are determined in the design phase. This may be obvious when we’re discussing solar farms versus coal power plants in the power generation industry. In other industries, such as transportation infrastructure, sustainability priorities are less easy to set. The key question should be whether the United States wants to spend US$1 trillion on today’s sustainable practices (such as high-speed electric rail, which has existed in Europe and Japan for decades) or whether it wants to focus on the next generation of sustainable transportation infrastructure (such as the Hyperloop or driverless cars), which could bring a quantum leap in sustainability benefits. I am hoping for the latter.

In the development phase, the United States already has high standards on environmental impact assessments and mitigation. But there still are many opportunities to go beyond “doing maximally allowed harm” and improve environmental sustainability impacts. For example, Atlanta, Boston, and San Francisco have LEED-certified airport terminals, which has reduced operational costs. In addition, developers often face challenges with social and stakeholder issues, and engagement of a broad base of sustainability stakeholders is critical for success in this phase.

During the operational phase, a big social challenge is that PPPs are for-profit businesses. Often, users consider public infrastructure to be “free,” although they are paying for it through taxes. When direct user fees enter the picture, there is always a tradeoff between the investors’ desire for financial return and fair pricing of a monopoly service. The US$3.8 billion Indiana Toll Road PPP is a good example of a PPP that did not find that balance—and went bankrupt. Infrastructure projects require a certain type of investor mentality, such as pension funds, which often prefer long-term, lower-risk, and predictable returns.

The United States prides itself on its innovators and entrepreneurs, who often look beyond the status quo. I hope that this mindset carries over into the design of and planning for our anticipated infrastructure boom. And as always, BSR hopes that the business benefits of sustainability will be front and center in the minds of our member companies that lead this anticipated infrastructure effort.  

Blog | Tuesday February 28, 2017

Clean Power Generates American Jobs and Business Competitiveness

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Transformations in the U.S. energy sector toward renewable sources have led to increased employment, more efficient energy use and procurement, and greater investments in technical innovation. Withdrawing federal support from the Clean Air Act, including the Clean Power Plan, will slow this progress but will not undermine it. 

Clean Power Creates American Jobs

Renewable energy and energy efficiency are now top employers in the United States and remain on a growth trajectory. The solar and wind industries are both creating jobs 12 times faster than the rest of the U.S. economy. Renewable energy employment in the United States increased by 6 percent in 2015, reaching 769,000 jobs. Within the sector, the solar industry saw a 25 percent growth in employment in 2016, taking total employment to 260,000. This significantly exceeds U.S jobs in oil and gas extraction (177,000) and coal mining (50,000). In addition to renewables, employment in energy efficiency is also booming, with 2.2 million Americans employed in the design, installation, or manufacturing of energy efficiency products or services today.

Clean Power Is a Growing Part of American Energy Use

Last year, renewables became the largest source of new electric capacity for the first time in the United States. A recent article on Bloomberg Markets made waves this February when it announced that “U.S. solar [had] surged 95 percent to become the largest source of new energy.” New photovoltaic panel installations in 2016 more than doubled from 2015. Bloomberg New Energy Finance projects that total installed capacity in the United States will reach 105 gigawatts by 2021—a 276 percent increase from the 38 gigawatts installed today. What is more, renewables (including large hydroelectric projects) and natural gas now meet half of U.S. power demand, up from only 38 percent in 2011.

Companies Want, and Are Buying, Clean Power

Many companies are clear on the business case for renewable energy use and are shifting corporate procurement approaches. There are now 87 companies in RE100, a global collaborative initiative of the world’s most influential companies committed to 100 percent renewable power. Together, these businesses have created demand for around 107 terawatt hours (TWh) of renewable electricity—around the same amount of power consumed by the United Arab Emirates or The Netherlands per year. Goldman Sachs jumped from 14 percent renewable electricity in 2014 to 86 percent in 2015, H&M jumped from 27 percent to 78 percent in that same period, and Google—the largest corporate buyer of renewable energy—will power all of its data centers and offices with renewable energy in 2017. The figures translate into savings: General Motors has reported savings of US$5 million annually from using renewable energy, and this figure is likely to increase significantly as the supply of renewable energy increases.

Investors Are Betting on Clean Power

When it comes to investments, low-carbon technologies and renewables have shown strong growth trends toward becoming cost-competitive. Per a 2015 New Climate Economy report, the cost of solar power systems has fallen by 75 percent globally since 2000, and the cost of energy storage has decreased 60 percent. According to UNEP, global investment in renewable power capacity in 2015, worth US$265.8 billion, was more than double the dollar allocations for new coal and gas generation (estimated at US$130 billion in 2015). Lazard concluded that in 2016, solar energy beat coal in terms of cost: A kilowatt-hour of solar cost a median figure of 6 cents, versus 11 cents for coal.

These trends show no signs of bucking, and their strength relies in part on the continued stimulus provided by city, state, and federal support. Many U.S. cities are implementing plans to cut emissions, including the largest two: New York aims to reduce emissions 80 percent by 2050, and Los Angeles is developing a plan for 100 percent renewable power. And states, such as California and Massachusetts, are considering bills to go 100 percent renewable no later than 2050. Therefore, regulatory support will further strengthen the business case outlined above.

The energy industry in the United States, and all related industries, has undergone a significant shift rife with opportunities and in step with global trends: The Paris Agreement, which the United States along with 195 other countries adopted in 2015, will result in US$13.5 trillion investment in the new energy economy. The federal government has the power to ensure that these opportunities continue to thrive and that the economy remains on its prosperous path.