Will Human Innovation Save Us From Future Extinction? 10-15

Does the human ability to innovate suggest an immunity to total extinction?

Yes and no. Currently, innovation reduces our chance of extinction in some ways, and increases it in others. But if we innovate cleverly, we could become just about immune to extinction.

The species that survive mass extinctions tend to share three characteristics.They're widespread. This means local disasters don't wipe out the entire species, and some small areas, called refugia, tend to be unaffected by global disasters. If you're widespread, it's more likely that you have a population that happens to live in a refugium. 

They're ecological generalists. They can cope with widely varying physical conditions, and they're not fussy about food.

They're r-selected. This means that they breed fast and have short generation times, which allows them to rapidly grow their populations and adapt genetically to new conditions.

Innovation gives humans the ability to be widespread ecological generalists. With technology, we can live in more diverse conditions and places than any other species. And while we can't (currently) grow our populations rapidly like an r-selected species, innovation does allow us to adapt quickly at the cultural level.

Technology also increases our connections to one another and connectivity is a two-edged sword. Many species consist of a network of small, local populations, each of which is somewhat isolated from the others. We call this a metapopulation. The local populations often go extinct, but they are later re-seeded by others, so the metapopulation as a whole survives. 

Humans used to be a metapopulation, but thanks to innovation, we're now globally connected. Archaeologists believe that many past civilizations, such as the Easter Islanders, fell because of unsustainable ecological and cultural innovations. The impact of these disasters was limited because these civilizations were small and disconnected from other such civilizations.

These days, a useful innovation can spread around the world in weeks. So can a lethal one. With many of the technologies and chemicals we're currently inventing, we can't be certain about their long-term effects; human biology is complex enough that we often can't be absolutely certain something won't kill us in a decade until we've waited a decade to see. We try to be careful and test things before they're released, and the probability that any particular invention could kill us all is tiny, but since we're constantly innovating, it's a real possibility.

Pandemics pose the same problem for a well-connected species. There are certain possibilities where species extinction is really hard to avoid; fortunately, they're also very unlikely, but we are definitely not immune from this.

The most likely cause of our extinction, in my opinion, is innovation in machine learning/AI. This could destroy the planet, but even if it doesn't, humans will be ultimately redundant to the dominant systems. They might keep us alive in a zoo somewhere, but I doubt it. A happier scenario (to me at least) is transhumanism, where humans become extinct in a sense because we've managed to liberate ourselves from biology.

So how could innovation prevent our extinction? We seed the galaxy with independently evolving human populations to create a new metapopulation. These local populations would hopefully be sufficiently isolated that some would survive an innovation or disaster that wipes out the rest. They would, of course, evolve in response to local conditions, perhaps creating several new species. So you could say this is still extinction, but it's as close as we'll come to persistence in our ever-changing universe. 

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Creating a Pension to Fit the Needs of the Rural Poor 03-25

Pensions are, in a sense, a necessary by-product of a rich economy. But what will it take to sell the idea to the rural poor? Especially when their income (never particularly substantial) is seasonal, increasing at harvest time and with demand in the cities for construction-related labor. What are the inducements that can convince them to invest for a future forced upon them by the changing social structure?

Olivia S. Mitchell, a Wharton professor of business economics and public policy and executive director of the Pension Research Council, and Anita Mukherjee, a professor at the Wisconsin School of Business at the University of Wisconsin-Madison, set out to answer these questions in a research paper titled, “Assessing the Demand for Micropensions among India’s Poor.” They chose India as the subject country because it is an ideal setting to study the market for micropensions, or pension plans designed for low-income individuals; the country’s new pension system is designed to reach informal sector workers. A micropension product — Swavalamban — has been applicable to all citizens in the unorganized sector who have joined the National Pension Scheme since 2011.

This scheme was funded by grants from the government. It has been replaced with the Atal Pension Yojana, in which all subscribing workers below the age of 40 are eligible for pension of up to Rs. 5,000 ($74) per month after turning 60. In the Atal Pension Yojana, for every contribution made to the pension fund, the central government also co-contributes 50% of the total contribution or Rs. 1,000 per annum, whichever is lower, to each eligible subscriber account, for a period of five years. The minimum age of joining the Atal Pension is 18 and the maximum is 40. The age of exit and the start of the pension is 60.

There was a significant need for a pension system in India. “According to the government of India’s Planning Commission (2014), nearly 30% of the country’s 1.2 billion population lives below the poverty line (BPL),” the researchers write. “At the same time, according to the Population Research Bureau, the share of India’s BPL population age 60 or older is expected to increase from 8% in 2010 to 19% in 2050. Many of these older persons work in the unorganized sector and, as such, lack the identification and proof of employment documents required for accessing basic financial services. Nevertheless, current research estimates that about 80 million of these workers are capable of saving for retirement and the untapped savings are in the order of $2 billion.” 

There are other systemic pressures at work. “In India, as in many developing countries, younger adults are moving from rural to urban areas for economic opportunity,” Mitchell and Mukherjee tell Knowledge@Wharton. “Often this means that parents are left behind in the rural areas and, though they may receive financial support from their children, this revolution in traditional family structure can make older people more vulnerable. As a result, older cohorts today may be more interested in a micropension product than they were in the past.”

“Our research shows that individuals broadly preferred a micropension plan that offers withdrawals starting at age 60, as well as partial withdrawals beforehand, to other variants that had different access features.”

Micropension Options

The experiment was conducted in two of the 71 districts in the central Indian state of Uttar Pradesh — Fatehpur and Siddharthnagar. Overall, the statistics are comparable to those of BPL populations. The average survey respondent was 43 years old, owned land, was illiterate and had minimal schooling. The two most common livelihood activities that the respondents engaged in were farming via cultivation of one’s own land (37%), and agricultural labor supplied to non-owned farms (34%). With respect to educational attainment, more than 60% had never attended school, while 21% had five to 10 years of formal schooling. Insurance access among the respondents was low, at 20% of the total sample population. But 66% held a life insurance policy. Saving penetration was relatively high, with 55% having access to a formal saving account. Respondents who had saved had an average balance of Rs. 3,000 in their accounts. 

The study placed the existing pension plan as the baseline. An appropriate information and educational scheme was unfolded for the respondents. They were then asked two sets of questions.

Group 1 was asked about variants 1B, 1C and 1D, and Group 2 was asked about variants 2B, 2C and 2D. The first variant (A) is the basic micropension product that was then being offered by the Indian government. The other variants included early withdrawal (1B), where the eligibility age was 55 instead of 60; a lower matching rate of 50% instead of 100% (1C); no early withdrawal (1D); delayed withdrawal, where the eligibility age was 65 instead of 60 (2B); a higher matching rate of 150% instead of 100% (2C), and option for full withdrawal at age 60 (2D).

“Our research shows that individuals broadly preferred a micropension plan that offers withdrawals starting at age 60, as well as partial withdrawals beforehand, to other variants that had different access features,” say the authors. “This is similar to the micropension currently on offer in India. One exception to this, not surprisingly, is that our respondents preferred an option that boosted government matches to their plan contributions.”

“Previous studies on the financial lives of the poor have documented that their incomes are irregular and highly seasonal. As a result, requiring them to pay significant sums in just a few payments could significantly reduce demand for the pension product.”

The study results included a few small surprises. Respondents were asked to rank their levels of trust in six institutions on a scale of one to five, with a level of one indicating a complete lack of trust and a level of five representing a very high level of trust. Banks topped the list with a score of 4.49. The government clocked in with 4.22, while non-governmental organizations (NGOs) at 2.55 and village councils (3.34) were regarded as relatively less trustworthy. “We do not know for certain why NGOs were less trusted relative to government entities, but it could be because they had a smaller presence in the areas we studied,” say the authors.

These results are informative about whether microfinance institutions or local governments are likely to be successful intermediaries in the micropension product. Since the government was viewed as a trusted entity, having government support for micropensions may have helped boost adoption and contributions, the researchers note.

The faith put in banks is understandable. “For some time, there has been a growing awareness of the benefits of secure banking, even in remote areas of India,” say the authors. “Moreover, technological improvements using audio cues and fingerprinting have helped expand banking to those who cannot read or write. The Jan Dhan Yojana plan was an important vehicle used to include many rural Indian families in the formal banking system. The Indian government’s demonetization policy has also spurred an interest in enhancing poor peoples’ access to banking, as it created cash constraints throughout the economy.”

Pointing out that India’s recent effort to eliminate larger banknotes was intended to crack down on the “shadow” economy,” the authors add: “It has prompted even poor and rural communities to take up mobile payment services. One example is Paytm, a phone-based system for transferring payments from a bank account to cover people’s everyday liquidity needs.”

Growing the Appeal

The paper has some advice for governments or other entities that are developing micropension products. The researchers write that an effective retirement savings device for the poor must take into account cash-flow needs, income seasonality, competing spending priorities and alternative investment options. They note that respondents to the study were among the poorest in their communities and relied heavily on income from agriculture.

“Previous studies on the financial lives of the poor have documented that their incomes are irregular and highly seasonal. As a result, requiring them to pay significant sums in just a few payments could significantly reduce demand for the pension product,” the researchers write. “For this reason, offering frequent opportunities for such individuals to contribute can be critical to the scheme’s success.”

“To grow [the appeal of micropensions], the focus should be on proper investments (inflation is currently around 10%) and policyholder retention.”

The ability to contribute frequently to an agent who makes door-to-door visits could also help explain why people were interested in micropensions even when making fixed deposits at an Indian bank would offer them high annual returns. “Our initial hypothesis in designing this survey experiment was that some respondents would exhibit a preference between early or late eligibility for withdrawal, and that we would be able to identify the heterogeneity driving these decisions,” the researchers write. “Instead, we found that with the exception of the high match variant, respondents were less willing to adopt or contribute to the alternatives to the baseline micropension product.”

Regarding the faith in the government, the authors elaborate: “In our study setting of rural Uttar Pradesh, one of India’s poorest states, individuals receive many benefits from the government such as ration cards for discounted groceries and free health care. We believe that this repeated and positive interaction with the government has engendered the high level of trust we found.” In addition, the country’s largest life insurance company, the Life Insurance Corporation of India, is also state-owned and enjoys a high level of trust. The authors note that the low levels of education and financial literacy found in the communities they studied highlight the need to provide a financial literacy program in conjunction with the micropension. 

“We believe that the move toward digitized finance can facilitate automatic contributions to enhance the appeal of the micropension product in India,” the authors say. “Yet for a micropension plan to work for India’s poor, it must allow policyholders to contribute according to the seasonal incomes they earn while encouraging savings sufficient to provide meaningful support in old age.”

The paper finds that the Indian government’s current micropension product is appealing to the audience it is meant to reach, Mitchell and Mukherjee say. “To grow that appeal, the focus should be on proper investments (inflation is currently around 10%) and policyholder retention,” they add. “The Gates Foundation is also pushing innovations in digital finance [in India] and elsewhere in the developing world, as a means to help the poor do more to save, invest, borrow and mitigate financial risks.”


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IIMB’s doctoral programme research initiatives get a fillip from Wipro 01-18

Shyam's views on this project

We often ask as to why Indian Universities do not rank high in global rankings while China has some. Even a small country like Singapore has world class Universities.

This was explained by the former HRD minister and a scholar Dr. Shashi Tharoor. He says the main criteria for ranking of Universities are the amount of Research they do and citations they receive in International Papers. These two factors carry 60 weightage in the rankings.

Our Universities and the Educational... Institutions lack the funds to spend for research. They also seem to be very lethargic in approaching the corporates and multinationals for funding or collaborations in their research programmes.

in this background, it is really heartening to know the fact that Wipro has come forward to fund the research programme in sustainability at IIM Bengaluru.

IIM Bengaluru's Fellow Programme in Management (FPM) will now be funded by Wipro for research into Sustainability.

IIMB’s doctoral programme research initiatives get a fillip from Wipro

Sustainability Fellowship and Sustainability Grant from the IT major to boost FPM students’ research on sustainability.

BENGALURU, JANUARY 19, 2016: The Indian Institute of Management Bangalore (IIMB), in its efforts to reach greater heights in the domain of education and research, has entered into a partnership with Wipro Limited (NYSE:WIT, BSE: 507685, NSE: WIPRO), a leading global information technology, consulting and business process services company, headquartered in Bangalore.

Wipro will partner and support the Wipro Sustainability Fellowship and the Wipro Sustainability Grant, for doctoral students of IIM Bangalore. This is as part of their overarching charter on sustainability in education – the Wipro-earthian program. The Fellowship and Grant will commence during the academic year 2015-16.

Mr. P.S. Narayan, Vice President and Head-Sustainability, Wipro Limited, said: “We are delighted to partner with IIMB in a joint effort to foster doctoral research on areas that lie at the intersection of business and sustainability. The business sector has a critical role to play in facing the manifold challenges of sustainability. Therefore, embedding sustainability in management education has become a critical imperative.”

The Fellow Programme in Management (FPM) is the globally ranked doctoral programme of IIMB, which is committed to training individuals who will excel in their area of research and publish high quality work. Professor Shashidhar Murthy, IIMB’s FPM Chairperson, said: “We at IIMB are glad that Wipro values our students and the nurturing provided by our faculty. We thank Wipro for their generosity. This will provide an impetus to students’ research in the area of Sustainability.”

The FPM at IIMB is a premier source of rigorous and inter-disciplinary research in all areas of business management and public policy, including Corporate Strategy & Policy, Economics & Social Sciences, Finance & Control, Marketing, Organisational Behaviour & Human Resource Management, Production & Operations Management, Quantitative Methods & Information Systems, and Public Policy.

The Wipro Sustainability Fellowship & the Wipro Sustainability Grant each allows up to two FPM students to be funded, to support research interests that fall in the broad area of sustainability.

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Top 5 Benefits of a Sustainability Audit 11-16

Top 5 Benefits of a Sustainability Audit

Why a Sustainability Audit?

A sustainability audit is a powerful tool.  A sustainability audit takes an inventory of all of the policies, procedures and practices of an organization and compares these to the best practices in their industry.  In essence, an audit is a gap analysis and a maturity analysis of the sustainability practices of an organization. It is meant to document ‘what you are doing’ and ‘to what extent’ across a wide range of sustainability categories.  Upon completion, an organization will have a sustainability baseline it can use to track progress going into the future.

What a Sustainability Audit is Not

A sustainability audit is not an exercise in counting carbon or tallying the financial implications of sustainability initiatives.  Nor is a sustainability audit an in-depth examination of any specific program of work.  However a sustainability audit should identify and help an organization prioritize these more specific sustainability management tasks.

Benefits of a Sustainability Audit

Your organization can expect some great benefits from a sustainability audit.

1. Compare your practices to Industry Best Practices – This is probably the most obvious benefit of a sustainability audit.  No Chief Sustainability Officer or Sustainability Manager has the time to stay on top of all of the latest developments in the world of sustainability.  The right sustainability audit should provide this benefit.  It is critical the framework and sustainability categories be comprehensive.  If so, your organization should know how it compares to the industry leaders in sustainability.

2. Planning, Structure and Accountability – A huge challenge facing many organizations is that they want to implement a comprehensive sustainability plan, but sustainability initiatives often times gets blended into operations, facilities or information technology initiatives.  A sustainability audit identifies these initiatives and provides a means for account for these within a sustainability program.  This allows for effective planning, a structured approach and accountability that reaches across organizational boundaries.

3. Identify New Sustainability Initiatives – One of the most striking benefits of a sustainability audit is that for the typical organization, it is going to identify dozens of initiatives in areas previously never considered.  This raised awareness will translate in to enthusiasm, innovation and unexpected benefits across the organization.

4. ‘Period to Period’ and ‘Business to Business’ Tracking – One of the biggest complaints about sustainability management is the lack of ‘period to period’ and ‘business to business’ tracking and accountability. Once a sustainability audit has been conducted, your organization will have a comprehensive snapshot of all your green activities.  If your organization has multiple locations, you now have a tool to compare these using exactly the same criteria.  The same is true about comparing operations from period-to-period.

5. Higher Sustainability Performance - A sustainability audit can allow your organization to increase its sustainability performance across the board.  You will have all the information at hand to improve planning, execution and follow-through for a range of initiatives.  By doing so, you will poised to realize the core benefits of sustainability outlined below.

• Cost – A natural result of most sustainability initiatives will be a reduction in costs. Looking for ways to reduce consumption (raw materials, energy), increasing the efficiency and effectiveness of business practices, and exploring new and innovative product and services will all result in operational performance.
• Compliance – Compliance risk is an increasing challenge facing organizations. The number and complexity of international, national and regional regulations that address the environmental impact of product, services and business activities is increasing. Companies can expose themselves to considerable risk by not effectively managing these issues.
• Reputation Risk – Reputation Risk can be defined as any action, event or situation that could adversely or beneficially impact an organization’s reputation. Regulatory noncompliance, unethical behavior and perception of green-washing all represent ways in which an organization can negatively impact their reputation. Behind financial and litigation risk, reputation risk in the global marketplace represents the greatest risk to an organizations long-term success.
• Competitive Advantage – Sustainable practices can provide an organization significant competitive advantages in the form of reputation, lower costs, better compliance, greater levels of innovation and many others.
• Innovation – One of the most important benefits of beginning sustainability activities is innovation. At the core of the process of moving towards better sustainability performance, organizations needs to take a fresh look at how they conduct business, what is going into their products, and how do their products effect the environment and society once they are sold.

Current State Sustainability Audit

Current State is based on the Three Tiers of Sustainability™ framework. The framework organizes sustainability into 3 main categories: Green IT, Business and Facilities. It further divides these areas into 28 additional sub-categories.

The survey is delivered either online or through a pdf form – only takes a few hours to complete – and results can be delivered in a matter of days, not weeks or months.  CurrentState™ can deliver higher quality results for a fraction of the cost of other consulting services.

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Extending Credit to Burma’s Rural Poor 10-31

Extending Credit to Burma’s Rural Poor

Local social enterprise Proximity Designs explores how to take better loan options to the furthest reaches of Burma

27 Years of economic sanctions have laid difficult foundations for expansion of formal 

financial services among the poor in Burma (also known as Myanmar). Many Burmese people turn to informal savings and loan options under unfavourable terms, which ultimately reduce people’s ability to invest in their livelihoods.

But Rangoon-based social enterprise Proximity Designs is hoping to change that, with a more affordable, “on-the-move” loan geared at helping rural families cope with seasonal income fluctuations.

“Our loan product is designed to provide a safety net for rural families whose loved ones are temporarily away to work,” said Su Mon, head of Proximity Designs’ knowledge and social impact team.

The loan is the culmination of in-depth research into the financial habits of rural Burmese, which Proximity conducted earlier this year with consultancy Studio D Radiodurans and design company Frog. Commissioned by the Institute for Money, Technology and Financial Inclusion, the research highlighted the shortage of credit options for rural migrant workers, many of whom head to the fertile Irrawaddy Delta region during rice harvests.

The research also found that most people borrow money from informal sources at extremely high interest rates. Though Burma’s Central Bank restricts private banks to13% interest annually on borrowing, bank services and other formal loans are not suited to the needs of the rural poor who need to borrow to invest during planting and pay back loans after the harvest.

Ohn Han, a young farmer in Pegu Division’s Thae Kone township, said people therefore turn to convenient but costlier informal lenders.

“As we need money to invest, we have to take loans from money-lenders with higher interest rates. We pay them back with paddy [unmilled rice], not money, so the lenders end up paying half price for a bag of paddy,” he said.

Burmese also remain distrustful of formal finance. Under the rule of General Ne Win from 1962-88, the government repeatedly devalued higher-value kyat notes without warning, wiping out many people’s cash savings. More recently, a banking crisis in 2003, and the government’s long-standing manipulation of the exchange rate have meant the kyat, especially in cash, is not a trusted commodity.

“The country’s long history of monetary instability and capricious policy-making has scarred many to formal finance of any form,” said Burma specialist Sean Turnell, an economics professor at Macquarie University in Sydney who has written about micro finance in Burma.

“In other words, Burma is not starting from a blank slate, but from well behind the starting line.”

 To grow its businesses and improve the lives of its people, Burma is building a secure, reliable payment structure with partners like Visa.

A survey of 5,100 people by the UN Capital Development Fund and the UN Development Program published in May found that only about 4% of Burmese have a savings account at a bank. Some 62% do not save at all, the survey results suggested, a fact the UN agencies said leaves people vulnerable to shocks like illness and natural disasters, and hurts Burma’s broader economy.Since 2007, Proximity Designs has provided loans to rural farmers to help them pay for energy and irrigation products via affordable instalments over long periods.

Su Mon said that in her experience, the key to getting rural people in Burma to take up a financial product was to make it as easy as possible for them.

“People in rural [Burma] can be motivated to use more formal financial services if those services are flexible and accessible to meet their needs,” she said.

Proximity Designs’ “on-the-move” loan seeks to do just this. With support from Visa, Proximity is capitalising on its previous research to develop a loan product that meets an unmet need: affordable loans for temporary migrant workers. The loan is still being developed, but is expected to be dispersed through a network of localised loan officers.

“We will customise the loan to meet our targeted customer needs in terms of timing, payment terms, ways to deposit loan payment, and loan origination process,” Su Mon said.

Hiro Taylor, Burma country manager for Visa, said the company, which entered Burma two years ago and has partnered with local banks, would be looking at ways its technology could help Proximity Designs to digitise and improve the ease and security of its loan product.

“[Proximity Designs] are going to test the pilot in a paper-based environment. We’ll study that product and gather these learnings and see how we can apply Visa’s financial services tools to facilitate those loans,” Taylor said.

“This is part of Visa’s overarching focus in the region to move consumers away from cash to secure, sustainable digital solutions,” said Stephen Kehoe, head of Visa Inc.’s global financial inclusion team.

With the entry of two new international telecommunications firms in recent months, millions more of Burma’s people will shortly be using mobile phones and internet. This mobile revolution can be harnessed to bring the security and flexibility of digital currency transactions to Burma’s cash-reliant economy, Taylor said.

“That creates a very interesting proposition,” he said, “for banks, for telecommunications companies, for technologists, for marketers, and for networks like Visa to figure out if there are ways to digitally leapfrog traditional payments systems and to roll out services and build a backbone that can be trusted and reliable.”

Content managed and produced by Visa

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The Changing Face of African Innovation 10-09

The Changing Face of African Innovation

Africa has great resources and untapped potential, however, the lack of funding acts as a significant barrier to entrepreneurship and innovation. In order to fully utilise our resources, we need meaningful investments to provide inclusive prosperity on the continent. The Innovation Prize for Africa (IPA) 2015 is an annual competition founded by the Africa Innovation Foundation (AIF) that encourages innovators to come up with ground breaking solutions that further promotes Africa’s economic growth.

Africa is on the rise with more than half of the world’s fastest growing economies from Nigeria, Angola, Mozambique, Ghana, Tanzania, Uganda, Democratic Republic of the Congo, Ethiopia, Rwanda, Sierra Leone, and Zambia. Africa is now emerging as one of the world’s premier destinations for cutting-edge innovation and inspiring entrepreneurship. Awards like the IPA prompt conversation around innovation in Africa. It also helps to highlight talent, provide a platform to attract funding for start-ups and the adoption of new and emerging technologies.

According to a report from the World Economic Forum, Africa faces 28% of the global disease burden but only has 3% of the world’s healthcare workforce. This is a major concern for the growth and progress of the continent. IPA finalist, Joshua Okello from Uganda saw a need and created an innovative product that would ease the struggles of midwives and mothers to be. He created Winsenga, a low cost smart phone-based tool that enables untrained midwives in rural areas in Africa to effectively and accurately monitor the health of an unborn child during antenatal care and labour. The IPA gave his product much needed visibility and has helped create more awareness about the need for innovators to focus on real challenges faced by their communities.

The continent has made a considerable amount of progress over the past few years and it is important that African countries continue to learn from one another. The IPA provides a platform for this sort of knowledge sharing and it encourages entries in key categories that are critical to Africa; Agriculture and Agribusiness, Environment, Energy and Water, Health and Wellbeing, ICT applications, and Manufacturing and Services Industries. Open to all Africans globally, the Innovation Prize for Africa invests in transformative ideas, innovations and business models across sectors that are constantly evolving and improving the lives of many Africans.

Imperative to building a better future are Africa’s youth, and by encouraging creativity through innovation and entrepreneurship, I am convinced that Africa will have a great future. The more Africans produce and innovate solutions to the continent’s daily challenges, the less we will have to rely on outside support to fund our economic growth and build a sustainable future.

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Who Is the Chief Sustainability Officer? 10-09

H

Who Is the Chief Sustainability Officer?

There are only a few dozen chief sustainability officers in American companies, although their number has been growing rapidly. A new study byGeorge Serafeim and Kathleen Miller explains who they are, where they come from, and how to make them more effective.

Since the start of the 2000s, a high-level corporate position has evolved that is still something of a mystery. As companies have engaged in more efforts around sustainability, environmental and otherwise, the "chief sustainability officer" has been created to champion and monitor these efforts.

But despite dozens of individuals in some of the world's largest companies taking on these duties, the role has been little studied. Just what are chief sustainability officers (CSO), where do they come from, and how much influence do they exert?

“THE APPOINTMENT OF THE CSO REFLECTS AN UNDERLYING NEED FOR COMPANIES TO NOT ONLY MONITOR BUT ALSO IMPROVE THEIR PERFORMANCE”

"Companies are monitoring the impact they're having environmentally and on society, and the appointment of the CSO reflects an underlying need for companies to not only monitor but also improve their performance," says Harvard Business School associate professor George Serafeim.

To create more understanding about the position, Serafeim wrote the paper 

"Chief Sustainability Officers: Who Are They and What Do They Do?" 

with Kathleen Miller, CEO of Miller Consultants. 

Their results suggest that CSOs are of critical importance in successful sustainability efforts, but ironically become less central as sustainability efforts blossom.

Although often linked with environmental issues such as water and energy use, a growing number of companies are taking sustainability efforts much further by improving working conditions in their supply chain, creating better safety procedures, and reaping profits from products that address environmental and social problems.

"Regulators and investors are asking for it, customers are demanding it, and employees are expecting it," Serafeim explains. "Once you reach a point where a customer says, 'What are your policies in terms of your supply chain operations?' you better have a good handle on that."

Enter the CSO.

The position of CSO has been created at an increasing number of companies over the past few years. In 2003, twice as many companies had fulltime sustainability officers than in 1995, and between 2003 and 2008, the number doubled again, research shows. (The first CSO with that title in an American publicly traded company is believed to be DuPont's Linda Fisher, appointed in 2004.)

THREE STAGES OF SUSTAINABILITY

To study a CSO's responsibilities and to look at how the role shifts depending on the company's level of commitment, Serafeim and Miller surveyed 66 CSOs and people with similar duties but different titles in 27 industries. They found that companies are often engaged in sustainability at one of three stages:

Compliance: In this initial phase, companies often start with activities related to complying with regulations. Activities are not strategic or centralized. In addition to compliance, employees may volunteer to work on recycling projects or green teams. Most companies at this stage have not created a formal CSO position.

Efficiency: Next, companies become more strategic about sustainability by finding ways to achieve efficiencies that will save corporate dollars, such as cutting energy and water use or reducing waste generation and carbon emissions. "These things are an easy sell," Serafeim says. "They're a good thing to do and the obvious thing to do."

At this stage, more companies are likely to hire or appoint an official corporate sustainability officer, who works with the CEO. The CSO is often tasked with building a business case for making changes that improve the company's bottom line, while also protecting or enhancing the company's reputation. "The CSO is really driving the execution of the sustainability strategy," Serafeim says. Many companies end up hovering in this phase without moving on to the final stage, innovation, the research shows.

Innovation: A select number of companies shift to a more advanced innovative stage by integrating sustainability into the core of the business in ways that transform the company. Strategies tend to be driven by the market with an eye on maximizing long-term profitability, and sustainability efforts often look to address bigger problems in society, including climate change, water management, and obesity.

Study findings imply that in this stage ultimate responsibility for sustainability shifts from CEO to CSO. The CSO's main responsibility is to help develop a sustainability strategy as well as map out how changes will be made, and the CSO must often unify subcultures within the firm.

But the CSO also delegates more sustainability responsibilities to various departments. So while at the Efficiency stage the CSO concentrates responsibilities, at the Innovation stage he does exactly the opposite: He delegates decision rights and makes functions and business units accountable.

"What companies are doing at this stage is refocusing their strategy from an inward perspective to an outward focus," Serafeim says. "How can we enable our customers, suppliers, and others to behave and operate in a more sustainable way? It allows you to envision new markets, new opportunities, and new needs. Very few companies have reached this stage."

BOOSTING COMMITMENT

Many companies don't make it to the innovation stage because they focus only on short-term goals like the cost savings they achieve from reduced energy use, rather than taking risks with more ambitious sustainability plans.

"Many organizations are afraid to raise the stakes and make bigger bets," Serafeim says. "It's not easy to make that transition. That's why you need the CSO to make a push to move on, become more ambitious."

Nike and Dow Chemical are examples of companies that have made it to the innovation stage. After Nike faced accusations about violations of human rights by subcontractors, it made drastic changes to operate more responsibly in its supply chain. At Dow, company officials used its science capabilities to develop components for solar panels and are now working on materials for cars that make them safer and more efficient.

"Dow is using its science background to address fundamental issues and problems we're having," Serafeim says. "That's a whole different level of sustainability strategy. And it's trying to understand how those environmental, social, and governance issues create value in the long term."

SUCCESSFUL SUSTAINABILITY

The CSOs in the study made a variety of suggestions for success:

• CSOs should plant themselves as close as possible to the corporate areas where sustainability can produce value for the company. Initially, CSOs need to work with company officials who oversee compliance and issues. As sustainability goals become more ambitious, the areas where sustainability will produce value will vary from company to company.


• CSOs should have their finger on the pulse of the company culture, understanding what motivates employees and devising a strategy for implementing change that aligns with the workforce. Sometimes the strategy needs to be customized to work for offices located in separate geographic locations. "If you come up with a strategy that the workforce is not going to buy, you will have a very tough time implementing that strategy," Serafeim says. "The strategy needs to be compatible with what employees are expecting, the skills they have, and their aspirations."


• Some say the CSO should be placed on the executive team because the mere presence of the CSO at the C-suite table keeps sustainability on the agenda.


• It's important to articulate a compelling business case for such efforts and to make the strategy understandable and relevant to internal stakeholders. CSOs are often challenged with pushing company leaders out of the "trade-off" mentality. "For years there was this institutional logic that says if you do the right thing, your competitiveness will be hurt and it will come at a cost to the firm," Serafeim says. "People don't understand that if you do things strategically, you can create significant value for the firm. The CSO is in the best position to change this perception, but he needs to have the data and the tight business case to communicate that."


• CSOs should focus on a manageable set of sustainability issues, rather than biting off more than they can chew at once. And they should keep in mind that sustainability goals will change over time. Edelman says his approach is "evolutionary, not revolutionary." IKEA CSO Steve Howard says, "You can't transform everything at once. The hardest thing about leading the change is managing the complexity …"

Serafeim agrees that companies need to constantly rethink and revise their sustainability strategies.

"Sustainability is not something that's static," Serafeim says. "It has to be dynamic because social expectations are continually changing."

It helps to have a dedicated employee—the CSO—steering the ship.

"The way to think about the CSO is it's the person who is the change agent," Serafeim says. "It's the person who sees how the future is developing, how social expectations are changing, how regulations and the business environment are changing in the future. The CSO is the ambassador with the vision, the person who decides what needs to change when it comes to how the company is interacting with the communities and the broader societal context in which it operates."

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Solar Light Libraries, A Social Business effort at Sustainability in Africa 10-04

Solar Light Libraries, A Social Business effort at Sustainability in Africa 
   

Are you looking for a way to grow demand for solar lights in Africa that doesn't undermine attempts to build a sustainable market? We thought so. Then perhaps this Guide to our successful Light Libraries project is right up your street.

You may remember from a previous blog the Light Library project is funded by Lighting Africa, a World Bank/IFC joint initiative, and delivered in partnership with the Senegalese Rural Electrification Agency and the Ministry of Education.

Nearly 5,000 solar lights, 58 schools and an estimated 55,000 people gained direct exposure to the solar lights through the project whose objective was to support market-building by overcoming two of the main barriers to uptake: lack of trust and awareness.

As a follow up to the project, our social enterprise SunnyMoney, delivered its traditional sales campaign to assess change in demand and found that sales were dramatically higher in the Light Library schools at 35% of school population (2,138 lights) than in control schools with15% uptake (966 lights).

The Light Library model not only appears to have increased uptake but also seems to have reduced the perception of risk. Many of the Light Library schools included customers from lower-income families who are generally more risk averse and less prone to become early adopters.

The Guide shares information on the design and delivery of the project and the subsequent delivery of SunnyMoney’straditional sales model. It shares the results of the evaluation as well as the lessons learned, challenges faced and key issues addressed.

We know that the only way we’re going to be able to eradicate the kerosene lamp is by being open, transparent, and sharing our knowledge with others. As part of this ethos we will make the tools and materials designed for the Light Library project available for public use.

Sustainability’s strategic worth: McKinsey Global Survey results 08-12

Sustainability’s strategic worth: McKinsey Global Survey results

Executives at all levels see an important business role for sustainability. But when it comes to mastering the reputation, execution, and accountability of their sustainability programs, many companies have far to go.

Company leaders are rallying behind sustainability, and executives overall believe the issue is increasingly important to their companies’ strategy. But as it continues to grow into a core business issue, challenges to capturing its full value lie ahead. These are among the key findings from our most recent McKinsey survey on the topic,¹ which asked respondents about the actions their companies are taking to address environmental, social, or governance issues, the practices they use to manage sustainability, and the value at stake.

One such challenge is reputation management. Year over year, large shares of executives cite reputation as a top reason their companies address sustainability; of the 13 core activities we asked about, they say reputation has the most value potential for their industries. However, many of this year’s respondents say their companies are not pursuing the reputation-building activities that would maximize that financial value.

Comparing companies with the most effective sustainability programs (our sustainability “leaders”) with others in their industries highlights another obstacle: incorporating sustainability into key organizational processes, such as performance management, one area where the leaders report better results than others. Beyond strong performance on processes, the leaders share other characteristics that are keys to a successful sustainability program—among them, aggressive goals (both internal and external), a focused strategy, and broad leadership buy-in.

Sustainability rising

According to executives, sustainability is becoming a more strategic and integral part of their businesses. In past surveys, when asked about their companies’ reasons for pursuing sustainability, respondents most often cited cost cutting or reputation management. Now 43 percent (and the largest share) say their companies seek to align sustainability with their overall business goals, mission, or values² —up from 30 percent who said so in 2012 (Exhibit 1).

Exhibit 1

More and more companies are addressing sustainability to align with their business goals.

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One reason for the shift may be that company leaders themselves believe the issue is more important. CEOs are twice as likely as they were in 2012 to say sustainability is their top priority. Larger shares of all other executives also count sustainability as a top three item on their CEOs’ agendas (Exhibit 2).

Exhibit 2

Company leaders and all others increasingly see sustainability as a top CEO priority.

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As sustainability rises in significance, capturing its full value grows more challenging—perhaps because the more that companies prioritize sustainability, the more it needs to be integrated into (and even change) the core business. At companies that are already taking action, respondents most often cite challenges related to execution: the absence of performance incentives and the presence of short-term earnings pressure that’s at odds with the longer-term nature of these issues. Accountability is an increasing concern: 34 percent of executives (compared with 23 percent in 2011) say too few people at their companies are accountable for sustainability. At companies that aren’t pursuing sustainability activities, respondents continue to cite a lack of leadership prioritization as the top challenge to taking action.

Reckoning with reputation

Of 13 core sustainability activities we asked about, executives most often say their companies are reducing energy use in operations (64 percent), reducing waste (63 percent), and managing their corporate reputations for sustainability (59 percent). These actions were cited most often in 2011 and 2012, and a growing share of executives now identifies reputation management as a core activity. They are also most likely to say that among these activities, reputation management has the highest value-creation potential for their industries over the next five years.

Yet there’s a lack of clarity around reputation management, compared with other, better-defined activities, such as reaching new markets with sustainable products. We asked executives what actions the companies they work for take to manage their reputations, and, on average, companies most frequently communicate their activities to consumers and maintain stakeholder relationships. Yet the results vary by industry, indicating that companies understand and value reputation in very different ways (Exhibit 3).

Exhibit 3

Companies’ current approaches to reputation management vary by industry.

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Many of the differences depend on how much action companies are taking on reputation, and on the overall sustainability agenda. In extractive services, executives say their companies are pursuing seven core sustainability activities, with three-quarters saying reputation management is one of them (compared with 59 percent of all respondents). The reputation-building actions these companies focus on—local community investments, external reporting, and employee volunteering—differ, then, from those of their peers in high tech, where companies take an average of five actions and just half of respondents say reputation management is one of them. These results confirm that there’s no one-size-fits-all approach to reputation, possibly one reason why reputation, like sustainability more broadly, is hard for many companies to manage.

When asked which activities maximize financial value, respondents most often cite customer communications. Beyond that, there are disparities between current reputation-management activities and the ones that are most critical to value creation (Exhibit 4). These results also vary by industry and reflect the importance of understanding and communicating sustainability’s financial value, from the leadership down. In extractive services, where the board and C-suite are most engaged and respondents are the most likely to expect that sustainability will create value, respondents identify the same activity (community investment) as a current action and a source of value. In contrast, those in financial services—where respondents report the lowest level of leader engagement and perceived value—most often cite employee volunteering, the activity they rank lowest with respect to value creation.

Exhibit 4

The reputation-management activities viewed as most important are not necessarily the most pursued.

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What leadership looks like

Regardless of a company’s industry, its value-creation efforts require certain organizational traits. From our experience and previous work,³ we identified a few as the building blocks of a successful sustainability program. Indeed, when we identified our sustainability leaders—companies where executives report the strongest performance on core sustainability activities, relative to industry peers—we found that they share these characteristics.

It’s not surprising that leaders are much likelier than other companies to possess all 12 of these characteristics, though the results suggest which traits differentiate leaders from the rest (Exhibit 5). Executives at these companies are almost five times more likely than others to say they use aggressive external goals for sustainability, more than three times likelier to report a focused strategy, and nearly three times likelier to report an organization-wide understanding of sustainability’s financial benefits. In addition, leaders more often have in place the key components of performance management, such as aggressive internal goals and broad leadership coalitions to develop their programs.⁴

Exhibit 5

Sustainability ‘leaders’ set themselves apart through target setting and a clear strategy.

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What’s more, much larger shares of executives at the leader organizations say their top leaders prioritize sustainability and report higher employee engagement on sustainability at every level, including CEOs, board members, and sustainability advisory committees. They report that their companies are taking more action to manage the life cycles of their products, and are four times more likely than others to say they have already implemented a life-cycle strategy. And they say their companies face fewer barriers to realizing value from sustainability, because they report better overall performance on the practices that underpin a healthy sustainability organization.

Organizing for sustainability

To better understand the defining traits of well-performing sustainability programs, we examined the organizational practices that underlie these characteristics. Of these, executives say their companies are better at fostering an organizational culture around sustainability and setting the direction for their programs. They struggle most with components of program execution, including employee motivation, capability building, and coordination of their sustainability work, which is reflected in the responses on specific practices (Exhibit 6). These results make sense, given the current levels of alignment between sustainability and various elements of the organization. Fifty-eight percent of executives say sustainability is fully or mostly integrated into their companies’ culture, compared with 38 percent who say so for performance management.

Exhibit 6

Organizations excel at creating a culture and direction for their sustainability programs, but they struggle with elements of execution.

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Sidebar

Four approaches to the sustainability organization

Looking more closely at individual practices, some interesting patterns emerge. We identified four distinct approaches to the sustainability organization: leader supported, execution focused, externally oriented, and deeply integrated (see sidebar, “Four approaches to the sustainability organization”). The first approach is characterized by actively engaged leaders across the company, employee encouragement, and clear strategy; the second by clear structure, accountability, and middle-manager engagement; the third by the use of external ideas, networks, and relationships, as well as top-leader and middle-manager engagement; and the fourth by employee incentives for sustainability work, a focus on talent, and even engagement on sustainability at all levels of tenure. Our sustainability leaders are represented in each of these four approaches, confirming that there’s no single formula for sustainability success.

Looking ahead

• Extend the product life cycle. Today, resource constraints are creating unprecedented prices and volatility in natural-resource markets. Yet the results indicate that most companies have not even begun to implement strategies that extend the life of their products and thereby reduce their resource dependence in a significant way. According to our other research,⁵there is huge value potential in better design and in the optimization of products for multiple cycles of disassembly and reuse. Forward-looking companies should begin investing in the “circularity” of their products, for the benefit of society and for their bottom line. On materials alone, companies could potentially save more than $1 trillion per year.
• Look to technology. Similarly, technological advances are creating opportunities to drive sustainability solutions.⁶ Yet only 36 percent of respondents say their companies are mostly or fully integrating sustainability into their data and analytics work. Companies that want to capture increasing value in a resource-constrained world should spend more time thinking about how to integrate their technological capabilities into their overall sustainability agenda.
• Focus your strategy. As sustainability becomes more central to the business, companies should align internally on what they stand for and what actions they want to take on these issues, whether it’s economic development or changing business practices. Whatever approach companies take, they should develop a strategy with no more than five clear, well-defined priorities—one of the key factors for successful sustainability programs.

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