The Center for Sustainable Innovation launches a new tool for measuring corporate sustainability using emissions reductions goals set by science, not business or politics.

SocialFunds.com -- There has been a profusion of diverse corporate social and environmental performance quantification tools spawned over the last half-year. For example, the sdEffect translates corporate social and environmental performance into financial valuations for benchmarking companies to each other in terms the business community understands. ADVANCE similarly expresses sustainability performance in monetary terms, and then it benchmarks against political policy targets. And Trucost's Carbon Footprint benchmarks corporate greenhouse gas (GHG) emissions against their revenue.

Free SRI Mutual Funds KitWith its new Global Warming Footprint, the Center for Sustainable Innovation (CSI) similarly measures GHG emissions, but it takes a next step in benchmarking against targets emanating not from the business or political realms, but rather from the scientific community. While business and political leaders weigh a variety of factors (such as profitability, popularity, and expedience) in formulating responses to climate change, scientists focus on empirical evidence. When it comes to climate change, profits and politics for scientists may melt in significance compared to cold, hard facts.

Tom Wigley at the National Center for Atmospheric Research in Boulder, one of the most highly cited scientists in climatology, has developed the so-called WRE350 scenario for mitigating climate change that the Global Warming Footprint uses as its benchmark. WRE350 is a scientific model that forecasts carbon emission reductions necessary to reverse carbon dioxide build-ups in the earth's atmosphere (currently at about 385 parts per million, or ppm), and stabilize them at a non-threatening level of 350 ppm by 2150.

"Benchmarking company behavior to scientific community targets such as WRE350 would seem to be an ideal approach, whereby the goal is reducing carbon and other emissions to target levels that would minimize climate change potential," says Cary Krosinsky, a member of the Expert Group for the Principles for Responsible Investment (PRI) of the United Nations Environment Programme Finance Initiative (UNEP FI) who has analyzed CSI's Social Footprint as well as Trucost's Carbon Footprint. "The Global Warming Footprint proposed by CSI creates a seemingly unique vehicle for companies and their investors to measure where they have to be from an environmental performance standpoint in order for overall emissions to get to a level that avoids potential catastrophic levels of climate change."

"Other measures, scores and ratings tend to be relative and measure sustainability performance without attempting to judge whether a company is acting in a truly sustainable manner over the long term," Mr. Krosinsky told SocialFunds.com.

CSI tweaks its Social Footprint methodology to the case of global warming by comparing corporate GHG emissions to WRE350 targets then divides by the number of employees ("people feet") to arrive at a measure of environmental impact in human terms ("societal quotient.") A quotient of less than 1 is not sustainable, while a quotient of more than 1 is sustainable. CSI applies this methodology for the years 2001 through 2005 to five companies--BT (ticker: BT.L), BP (BP), Shell (RD), Johnson & Johnson (JNJ), United Technologies Corporation (UTX)--as well as a university that participated on condition of its anonymity.

"Three of the six organizations shown were sustainable all five years, with two of the three (BT and UTC) improving in their performance over the date range, and the other (BP) declining," states Mark McElroy, executive director of CSI, in the report on the Global Warming Footprint. "Shell has declined in performance over the five-year period [and] J&J has improved (and is nearing sustainability.)"

Interestingly, the university performed worst of all, suggesting that business pressures can drive strong sustainability performance. However, systemic pressures on businesses may also create obstacles to improving environmental performance.

"The problem, as it stands today, is that short-termism, in combination with a lack of adequate legislation, acts as a barrier to companies improving their environmental performance," explained Mr. Krosinsky, whose primary position is director of ownership data at CapitalBridge. "In fact, hedge funds demanding economic performance could well be the biggest obstacle of all, were they to demand profit performance at the expense of further emissions efficiencies."

Ironically, while some pension funds such as the California Public Employees Retirement System (CalPERS) are taking a leadership role in confronting corporate contributions to climate change, pension funds as a whole are increasingly moving toward hedge fund investments.

"Will pension funds continue to seek short-term gain at long-term expense via hedge fund investments in this regard?" Mr. Krosinsky asks. "As it stands, the current equity market mechanisms potentially encourage companies to not be sustainable--unless, of course, it is profitable for them to do so."

CSI is not without its critics. Mallen Baker, a prominent corporate social responsibility (CSR) expert who works with Business in the Community (BITC, lambasted the Social Footprint in the April 9, 2006 edition of his Business Respect email newsletter.

"The idea that any organization is responsible on a per capita basis relating to its workforce is simply nonsensical," wrote Mr. Baker, among many other points of criticism.

Mr. McElroy wrote a list of problems with the critique, which Mr. Baker posted on his website.

"But having reviewed all of these, and trying to disentangle the argument of ideas from the namecalling, I stand by the original review," stated Mr. Baker in the next edition of Business Respect. "But the proof will be in the action."

"Ultimately, if the Social Footprint proves to be an effective tool for businesses to use, it will be used and I will have to eat my words," he continued. "A good method can survive bad criticism."