Stranded assets, stranded egos and stranded careers

Stranded assets are a big barrier to change. Both environmental and economic progress can be stifled by stranded assets. But stranded egos and stranded careers may be even bigger barriers to progress.

Stranded assets

Oxford University defines stranded assets as “assets that have suffered from unanticipated or premature write-downs, devaluations, or conversion to liabilities and they can be caused by a variety of risks.” Simply put, if you’ve got billions invested in the old way of making something, you have a real disincentive to support a new, better way that makes your multi-billion-dollar investment worthless.

PNM San Juan (NM) generating plant [Durango Herald picture]

Climate change is a classic example of the stranded asset problem. Investors have huge sums in firms that depend on coal and oil, from “value in the ground” to extraction to refining to burning them for energy. Not surprisingly, those investors – and the management of those firms – are not eager to see those investments decline in value. Those investors and managers don’t tend to be fans of trends favoring alternative energy sources with lower environmental impacts.

Putting on blinders and denying those trends is a lousy strategy. More elegantly, a 2013 report by the Generation Foundation decried “the false comfort of the status quo” and noted bluntly:

The competitive landscape for fossil fuel-intensive companies is losing its attractiveness at an accelerated rate. … Likely increases in regulation, a boom in more cost-effective (economically, environmentally, and socially) alternatives, and growing unpopularity with the public, should lead any thoughtful investor to reconsider the viability of fossil fuel assets being profitable and growing in the future.”

Increasingly, investors realize that stranded assets are still stranded even if you cover your eyes and shout “no no no”. Denial just prolongs your risk while reducing your ability to manage that risk. Investors are getting the point, demanding that even companies like Exxon Mobil provide “more open and detailed analyses of the risks posed to its business by policies aimed at stemming climate change.”

There are no easy answers here. As Joel Makower noted: “The question of how to manage this transition remains open. How do you wind down the fossil-fuel economy in a way that is equitable to shareholders and doesn’t unduly shock the economy — but still recognizes that time is of the essence?”

Stranded egos, stranded careers

Overflow crowd, NM Supreme Court

I sat in a crowded NM Supreme Court last week and heard lots about stranded assets – but I think I heard even more about stranded egos and stranded careers.

In a nutshell, I was there to hear New Energy Economy argue against efforts by the local utility (PNM) to dig a deeper hole for itself. PNM is attempting to make the ratepayers pay for its stranded assets in coal and nuclear – and to put even more ratepayer money into more of those stranded assets. As New Energy Economy’s Executive Director, lead attorney and all-around dynamo Mariel Nanasi told the New Mexico Supreme Court, this was PNM’s “…attempt to foist uneconomic assets that have enormous associated risks and liabilities from the shareholders to the ratepayers.”

Lawyers argued for hours about what is prudent or imprudent, what is arbitrary and capricious, who had approved what and when, and which precedents applied. That’s what lawyers do.

But underneath all that, I heard something else. I heard the voice of stranded egos and stranded careers from the PNM side. I heard arguments that said, in effect, “we’ve done it this way for 30 years, why change now?” I heard complete denial of not only the negative impacts of coal and nuclear, but of the inevitable policy shift toward renewables. I heard no recognition of the profound shift in costs favoring renewables. I’m pretty sure I heard renewables referred to as “phantom resources.“

I heard powerful echoes of what I’ve encountered over the years: the human problem is bigger than the economic problem. Executives who made their reputations and careers doing things one way are simply unwilling or unable to question that one way. Sure, they have perverse financial incentives to avoid writing down economic assets, at least until they’ve retired and collected their pay-out. But the resistance I’ve seen is deeper and more emotional. It’s when the executives’ identities are so wrapped up in their 30 or 40 years of work, promotions and status. They just can’t cope with seeing that questioned. They don’t want to hear “what you did with your life was great, but it’s not the right answer any more.” They absolutely don’t want to hear “maybe what you did with your life was part of the problem.” I’ve seen it in business, at oil companies and at railroads historically dependent on the margins from coal traffic. I’ve seen it in government, as state and local officials try to force obsolete businesses to keep doing operating when and where it no longer makes any economic sense.

It’s not just executives and leaders. We’ve seen the political consequences of voters whose stranded careers and egos make them eager to believe hollow promises about the return of steel and coal. It now looks like those stranded careers and egos (along with the hollow promises) are leading stranded towns and people to shun retraining and other services that might help them rejoin the world economy.

This isn’t inevitable. It’s not easy to get out of a dead end, but you can do it – as long as you don’t try to just plow ahead blindly. There are often routes to what a respected colleague (in a company weighed down by stranded assets) calls “strategic adaptation”. Those routes are seldom easy and painless. They do have one common first step: recognize the hole you’re in and stop digging.

But if that pig won’t fly…

We’d all like to help our colleagues, clients and others find those peaceful routes to “strategic adaptation”. Sometimes, though, that just doesn’t work. Sometimes the stranded egos and careers keep you from rational progress. Those in control of key institutions continue to defer, deny, delay in order to defend the way they’ve always done business.  That may leave you with no choice except to defy and even disrupt. If you’re dealing with a PNM, and it resists change at all costs, then maybe you have to question whether the PNMs of the world can be trusted with the monopoly status they’ve been given over the years.

PNM web site [https://www.pnm.com/energy-sources]

When I started work in central Illinois after graduating from Harvard 40+ years ago, I started my real education in politics.  One lesson I learned quickly was that not everyone is willing to change.  As I was told: “Never try to teach a pig how to fly.  It won’t work and you’ll just irritate the pig.”  Listening to PNM’s advocates last week, all I could think was “That pig ain’t gonna fly.”

I then heard New Energy Economy’s Mariel Nanasi say the same thing more eloquently to the Supreme Court justices: “Essentially PNM invested in an old used non-functioning Ford Pinto — when ratepayers could have had a brand new Tesla for half the price — without any comparison shopping.”

Clearly solar makes no sense in New Mexico…

Stranded egos and stranded careers can make very smart people want to not only buy that Pinto, but then drive it down the highway (as fast they can get it to go) looking through the rear-view mirror of past practice instead of looking through the windshield at the future that’s coming at them faster and faster.  It would be great if you could talk them out of it.  But at the very least, make sure they don’t make you pay for the Pinto – and don’t get in the car with them.

[Opinions in this blog are solely those of Scott Nadler and do not necessarily represent views of Nadler Strategy’s clients or partners, or those cited in the post. To share this blog, see additional posts on Scott’s blog or subscribe please go to nadlerstrategy.com.]

A good man went to work for a bad man and I applauded

A man I’ve known and trusted for 30 years has taken a post in the Trump administration. Rather than being appalled, I am delighted and relieved.  And there may be some lessons for all of us in this Era of Tough Choices.

2013 BNSF Casselton ND [ABC News photo]

The man is Howard “Skip” Elliott. The post is Administrator of the Pipeline and Hazardous Materials Safety Administration (PHMSA). It’s a job that has real economic importance for many parts of the country. It’s also a job that has real life-and-death implications for many people who never had a choice, who never knew they were living near massive amounts of materials that could potentially destroy their health, homes and lives.

It’s also a job that has been vacant for far too long. As deadly hurricanes ripped through the oil, gas and chemical intensive Gulf coast in August and September, I shouted impotently at my TV asking why Skip wasn’t on the job to help protect those people.

I’m glad the DOT Secretary chose to put a professional and not a political appointee in this post. I’m glad Skip made the choice to take this post. He’s extraordinarily qualified on the substantive aspects of the job. More importantly, I have complete faith in Skip’s ethical and moral approach to the job. Over 30 years, Skip and I haven’t always agreed; frankly, we often disagree. When we do, often (not always, but often) he’s right. But he’s always been clear, thoughtful, and honestly faced the implications of his decisions. If I didn’t know Skip and just saw the press, I’d be worried: the oil and gas industry supported him while issues were raised about positions he took in his years of working for industry. All I can say is, if my town, family, and livelihood all stood in the path of the kind of decisions PHMSA makes, I’d want Skip making the decisions.  When my wife (whose politics are far left of mine) heard of Skip’s appointment, her immediate visceral response was “Thank God.”

I don’t know if I would have made the same choice Skip did. I’ve made tough choices in my day, from which clients to work for (would I work for Philip Morris? For pharmaceutical giants?), to which governors to work for (in Illinois where they don’t all go to jail, just most of them), to whether to leave a job I loved because of actions I was being told to take which I found objectionable (as I did after 15 years with Conrail).  But you never really know what you would do until you actually have to make the decision with real consequences. I would have respected Skip’s decision, no matter what he chose.

So what? The man already has the job and has been confirmed. Why does this matter now?

  1. Because we’re all facing tough choices these days. Which official, company or cause will we work for – or refuse to work for? Will we say what needs to be said, do what needs to be done, even if it puts our job at risk? Will we protest things we find morally objectionable, even if others find our protest morally objectionable? In this Era of Tough Choices, we need to make our choices thoughtfully, learn from the choices others make, and especially respect those choices.
  2. Because we’re all jumping to conclusions these days, moving to binary judgements of who is right or wrong, who is good or bad. On paper, I would assume Skip is yet another industry hack being put into a critical non-political job by an incompetent and corrupt administration (usually I say “Regime”). I would be wrong: Having seen Skip under incredible pressure in real-life situations with communities at risk, I have complete faith in him.  But that’s a useful cautionary tale: if I would be wrong about Skip, what – and who – else am I wrong about?

None of this changes what I think of the Administration Skip is going to work for. It does make me wonder why they can’t fill other important jobs (South Korea ambassador, anyone?) with well-qualified people. But they got this one right.

[Opinions in this blog are solely those of Scott Nadler and do not necessarily represent views of Nadler Strategy’s clients or partners, or those cited in the post. To share this blog, see additional posts on Scott’s blog or subscribe please go to nadlerstrategy.com.]

Revisiting South Africa: The window and the mirror

I just came back from 2 weeks in South Africa, exactly three years after my first visit there.  My sense of wonder is even stronger than after that first visit. This time, though, I came away with more insights into both the opportunities and challenges South Africa faces – and the ones we face here at home.  The trip was both a window into another world and a mirror that forced me to take a fresh look at my own world.

After all, a zebra may just be another species of horse. But seeing animals like zebras roaming freely makes you look at a lot of animals with a fresh eye.

The window: Incredible diversity and challenges

I dove more deeply into South Africa this trip, but my perspective is still superficial and based on impressions rather than data. I make no claim to expertise. Compared to the last visit, I did spend more time both as a tourist and talking and working with clients. I talked with a wider range of people: black, white, Indian, Afrikaans, men and women, bankers, corporate managers from chemical and insurance companies, lodge managers, artists and craftspeople, a refugee from Zimbabwe, a former political prisoner on Robben Island, professionals deeply involved in environment and sustainability and others deeply involved in Black Economic Empowerment.

The diversity of the country is fascinating and overwhelming.  There is diversity in every dimension including history, landscape, wildlife, cultures. Going from the Cape Town waterfront to Sandton’s wealth to Soweto’s streets to the mountains of northern Limpopo feels like different continents or planets, not different provinces of the same country.

Language is a great indicator of the diversity and complexity: there are 11 official languages, and while English may be the most common language for government and business, it is “only the fifth most spoken home language.” Not to mention that there are three different national capitals in three different provinces.

The mirror: The challenge of social and economic Transformation

Admittedly it was a relief to get out of the intensity of the current US political bubble, with its non-stop tweets, reporting on tweets and tweets about the reporting. The trip was a good reminder that there is life outside that bubble, and other people have their own political, social and economic challenges – and tougher ones than ours.

But South Africa also turned into a mirror for me. The country faces tremendous challenges around race and the halting, decades-long struggle for social and economic transformation. Learning more about that struggle gave me a fresh perspective about social and economic challenges in the US.

The country is still struggling to move from an economy dominated by a white minority to one which provides much greater opportunity and empowerment for the black majority.  The original policy intent 20 years ago was to accomplish this with “broad based empowerment”, without disenfranchising (and driving away) white business and investment. Some believe progress has been too slow; they focused instead on “narrow based empowerment” which emphasizes transferring ownership from whites to blacks. Some in turn believe that narrow ownership transfer enriches few and empowers fewer. And so the search continues for an effective form of more radical transformation.

To an outsider, the challenge is that genuine transformation requires both growth and redistribution, rather than trading off either one for the other. Delivering both, of course, is difficult and requires consensus, collaboration and compromise, along with a good dose of innovation – and macro-economic luck (e.g. commodity prices going the right direction).

That challenge seemingly needs to be met, though. Any alternative to the “win-win” outcome of both growth and redistribution seems risky at best:

  • Growth without redistribution means the rich get richer, creating more inequality and anger.
  • Redistribution without growth is likely to stall an economy, incurring the costs of disruption without the benefits, and driving away needed investment.
  • Having neither growth nor distribution is unacceptable, creating a downward spiral of stagnation and frustration.

Genuine transformation, combining growth and redistribution, appears difficult but necessary.

Sitting in South Africa hearing these discussions I found myself sketching the two-by-two matrix above. And as I sketched, I got confused about whether I was describing South Africa or the US. Beneath the personalities and absurdities of last year’s US political campaign, there were genuine economic and social issues. Arguably, populist elements of one party pushed for growth without redistribution, while the populist wing of the other party fought for redistribution without growth.  Somewhere in the discussion, the challenge of building coalitions for the win-win outcomes seemed to get lost.

And so I found myself looking in the mirror, with South Africa’s challenges helping me take a fresh look at the challenges back in the US. Getting out of your bubble  can do that.

[Opinions in this blog are solely those of Scott Nadler and do not necessarily represent views of Nadler Strategy’s clients or partners, or those cited in the post. To share this blog, see additional posts on Scott’s blog or subscribe please go to nadlerstrategy.com.]

Winners and Losers: Globalization and Technology

The biggest divide in the US may not be along party, race or gender – big as those divides are. The biggest divide may be between winners and losers: in an economy shaped by globalization and technology (G&T), who are the winners and who are the losers?

In last year’s elections, we heard voices supporting unconventional outsider candidates in both parties. That was in part the frustrated outrage of those on the losing end of G&T.

The fallacy of the whole

Globalization and technology have benefited the world overall (lifting millions out of poverty) and even the US as a whole (including helping the slow recovery from recession). That’s the problem though: None of us personally is “the whole”. Day to day, we live our lives in our own skin, in our own jobs (or lack thereof), in our own communities.  Saying we’re better off “as a whole” is like saying that, if you have one foot in a block of ice and one foot in a raging fire, on average you’re comfortable. That may be statistically accurate, but if one of those is your foot you damn well know it’s false.

In economic terms, we can argue that the benefit/cost ratio is positive for globalization and technology. The problem is, some people have been getting most of the benefits and others have been getting most of the costs. If you work in cloud-based technology or global finance, G&T works pretty well for you. But if you work in traditional manufacturing and are hoping to keep your job and benefits and pension, or work for a local bank or a local newspaper in the Midwest, or if you carry heavy student debt and are hoping to find a good entry level job, it’s not working out so well for you. You’re not smiling and saying, “It’s okay, on average we’re all doing better.”

That on average we are better off is no comfort to those without jobs or hope. It’s personal, not statistical. As Joe Biden once said: “You know, my Grandpop Finnegan used to have an expression: he used to say, ‘Joey, the guy in Olyphant’s out of work, it’s an economic slowdown. When your brother-in-law’s out of work, it’s a recession. When you’re out of work, it’s a depression.’”

The Globalization and Technology bubble

We’re blinded to this because those of us who have benefited from G&T increasingly live inside the G&T bubble. Yes, I said “us”. I’m not pointing fingers at somebody else. I’ve been fortunate enough to benefit from G&T. I sit in my home office living and working where I want to. I spend my days on Skype or WebEx or GoToMeeting or Google Hangouts with clients and colleagues from South Africa to Italy, Boston to Austin. We work on their opportunities and challenges in China, Turkey, Mozambique, India.  Then I get on a plane and fly to work with them, as nonchalantly as a daily commute to work.

What I don’t do often is pick up a phone and call old colleagues and friends in Decatur Illinois, Altoona Pennsylvania or Akron Ohio who aren’t in that G&T world. We just don’t have as much in common, as many shared concerns or travel horror stories to compare. When you win from G&T, your clients, colleagues – and yes, ultimately your friends – tend to be others who are also on the winning side. You’re in a G&T winners’ bubble; everyone else is on the outside.

Expand the winners, don’t blame the losers

The answer isn’t to try to slow down globalization and technology. It won’t work in the long run, and it probably will lead to a genuine average where we really are all in the same boat – worse off.

But the answer isn’t to ignore (or blame) the G&T losers, either. The answer is to get outside our bubble, reconnect with the rest of the economy and the community around us. Start to think about how to help more people benefit from G&T, and not just how your people can benefit more from G&T.

Try starting personally and locally. For example, I’ve been working with some bright, hard-working people with a long-track record of respecting and helping a particular Indian tribe in the US southwest. I’m just beginning to work with them, and learning a lot. In one recent discussion of economic development and empowerment, we began to hatch great ideas that wouldn’t force the next generation to choose between economic hope and staying in their culture. Except we then realized that these ideas depended on leveraging globalization and technology – and no one at the table had any idea of bandwidth and connectivity on the Reservation. That may be where we need to start.

In the long term, the real winners will be those who recognize G&T’s uneven impacts and adapt their strategies accordingly. The losers will be those G&T beneficiaries who don’t get outside their bubble – and are shocked by a growing momentum to burst that bubble.

[Opinions in this blog are solely those of Scott Nadler and do not necessarily represent views of Nadler Strategy’s clients or partners, or those cited in the post. To share this blog, see additional posts on Scott’s blog or subscribe please go to nadlerstrategy.com.]

Personal Strategies for the New Political Reality

Some of us are dismayed and even appalled by the incoming administration, its policies and its behavior. (If that doesn’t include you, feel free to read on and disagree, or to delete and move on.)

By Daderot (Own work) [Public domain], via Wikimedia CommonsThose of us who do feel that way need to review our personal strategies including how we spend our professional time, energy and credibility.  That’s hard to do. This new political reality can be overwhelming and represents so many kinds of failure – of the system, of ourselves, of my generation, of civility, of truth.

Many have focused on three broad approaches, none of them attractive: fight everything (“resistance”), try to work with the new administration (“accommodation” or maybe “collaboration”), or crawl into a hole and hold your breath for 4 or 8 years (“avoidance”). Each has its attraction, each has its flaws.

I’ve got some blunt advice which probably won’t satisfy proponents of any of those three approaches. (I’ve also written more neutral advice specifically for the workplace, posted on LinkedIn as “New Political Reality: Rules for the workplace”.)

Pick your battles

My advice: pick your battles.  Differentiate among:

  • Impact issues: The issues that have the greatest impact on us all, and where we each have a chance to have an impact. In my case, one is climate change. That doesn’t mean climate change has to be one of your impact issues. Choose your issues, dedicate yourself, focus, look at how your professional decisions impact those issues.
  • Boundary issues: The issues that simply can’t be tolerated, no matter what. These are issues of right and wrong, not right and wrong policy. Many are basic issues of human rights and civil rights. When these lines are crossed what stand will you take?  And should that stand be any different in the work place? If it’s wrong on the street why is it okay in the office?
  • Regrettable issues: The issues which we wish we could fight, but have to let go or leave to others.

You can address impact issues in two different ways. One path is trying to influence policy (e.g. reduce homelessness through changes to housing and employment policy). The other path is trying to mitigate the actual impacts of policies (e.g. feed hungry homeless people tonight). These two paths are both necessary, and are complementary rather than conflicting (though they often compete for attention, volunteers and funding).

Make your plan

Once you’ve figured out which issues are which for you, you can start to build a plan of action:

  1. Focus on impact issues. Get to work researching, writing, volunteering, negotiating, advocating.
  2. Stand up and be counted on boundary issues.
  3. Learn to breathe deeply on regrettable issues.
  4. Build coalitions. As I noted in my LinkedIn post: “Don’t apply ideological tests. People don’t have to agree with your reasons to support your proposal. In Washington that used to be called ‘reaching across the aisle.’ It works. (It even can create mutual understanding that makes real progress.) Don’t get sanctimonious about it.”
  5. Get involved locally. Get down to earth and focus on the day-to-day reality. You’ll learn a lot about the issues. More importantly, you’ll actually do something. If you feed someone, they’re fed for that day, no matter what someone tweets out of Washington.
  6. Support each other. People are going to be discouraged, including you. Many are going to feel isolated in their companies, agencies, communities and even families. Reach out. Respond to those who reach out to you. Look for new platforms that allow you to connect with others wrestling with the same challenges.

Act

This isn’t an easy plan to follow. For many of us, there is no easy plan for the next few years. But we each have to find the right balance.  We can’t resist everything: that’s exhausting and turns important voices into a dull roar of background noise. We can’t just wait and see: there are already important decisions being made (wrongly) and lines being crossed. We can’t just sit in the Facebook echo chamber sharing SNL videos with each other.

It’s time to remember the words of someone who mastered the social media of his day without deprecating others, Mahatma Gandhi: “It’s the action, not the fruit of the action, that’s important. You have to do the right thing. It may not be in your power, may not be in your time, that there’ll be any fruit. But that doesn’t mean you stop doing the right thing. You may never know what results come from your action. But if you do nothing, there will be no result.”

Or to put it in terms the new administration might understand: “Do the right thing even if results uncertain. If you do nothing, you can be sure no result. #Pickyourbattles.”

Dressing for the new realities

[Opinions in this blog are solely those of Scott Nadler and do not necessarily represent views of Nadler Strategy’s clients or partners, or those cited in the post. To share this blog, see additional posts on Scott’s blog or subscribe please go to nadlerstrategy.com.]

Corporate Sustainability: The stakes just got a whole lot higher

poker_chips_2Corporate sustainability didn’t become passé with this election: it became essential. We now know that government isn’t going to ride in and save us on climate change. Government isn’t going to focus on air quality or water quality or social and economic consequences of infrastructure projects.  Government isn’t going to set the standards or raise the bar.

For those of us in business, that means it’s on us. We have to set our own standards and drive our own accountability. And those outside business are going to turn to us as the change agents they can still hope to influence. They will raise their expectations and their pressure on us, whether as our investors or customers or communities or employees.

Like most of us, I didn’t see this election result coming. I was nervous but not prescient. A week before the US election, I spoke at an industry sustainability symposium. I posed two challenges to the group. With these election results, the stakes on those two challenges just got a whole lot higher.  What are those two challenges?

1. Focus on what really matters for your sector and company

This is a lot harder than it seems. There are scores of sustainability issues. The babble keeps getting louder.  There are some important signals, but the noise-to-signal ratio is bad and getting worse.

The highly-visible players in the reporting/ratings/rankings world make it harder, not easier, to focus. SASB, DJSI, SAM, GRI, CDP, FTSE4Good, ISO, SDGs: the alphabet soup is pretty thick.  Each wants to be the standard for standards, each wants your attention, each wants your time. Each comes from groups with their own strategies for visibility, credibility and influence.  There’s nothing wrong with them having their own strategies – but their strategies shouldn’t drive yours.

Are all these standards relevant? Probably. Are they indicative of issues you should be aware of? Yes. Are they required? No, but ignoring some of these can hurt you by getting your company on the wrong list; think of these as table stakes that may be necessary to play in the sustainability space, but not a bet that can pay off for you. Are they efficient? Absolutely not. Are they effective? Depends on who you are and what you’re trying to accomplish. Are they (as lawyers would say) dispositive, settling the debate over where you should focus? Absolutely not.

Instead of focusing on the standards, concentrate on the issues that are truly critical to the health and success of your business. For example, if your company is in the food/agriculture sector, you can’t ignore obesity and water. In the industry I addressed last week (railroads) there are some obvious issues like air quality and carbon/energy.  But there are other critical issues like “post peak coal,” life in a carbon-constrained world, resiliency (including the growing impacts of and narrowing window to prepare for sea level rise) and impacts on sustainable cities and communities. A good materiality process has to highlight those kinds of issues.

Once you’ve figured out what matters to your business:

  • Does your business acknowledge it?
  • Does your business have a plan to deal with it?
  • Are you really implementing your plan?
  • If so is it working?

Above all, as you go through this process, are you looking through the windshield or in the rear view mirror? Some of us are painfully aware of generational changes in our employees and what they value.  How many of us, in materiality, are looking at generational changes in our customers – let alone in our investors?

2. Decide what your personal role should be

Once you’ve figured out the issues that matter, there’s a second question: What is your role in helping your company understand and act on those issues? Is your role to enable? Apologize? Defer? Deflect? Explain? Inform? Improve? Influence? Challenge? Lead from below?

To look at the tough question of your role, you need to ask yourself honestly–

  • Not just who you talk to, but who listens to you?
  • What would be different if your job didn’t exist?
  • Do you help your company understand and face issues or avoid them?
  • Do you help your company learn and get better, or get by longer without having to change?
  • Do you get buy-in from senior management, or do you settle for acquiescence? Do you sell them on facing the tough issues, or only sell them what you know they’re already pre-disposed to accept?
  • How much do you manage performance, and how much perception? (Both are valid – but what’s the right mix of the two?)

Above all, what’s your legacy going to be from your time in your role?  It’s not just CEOs who get to – or have to – ask that question. One advantage of age is that I’ve been around long enough to see the consequences of my roles and actions.  What may seem like the distant future to you now will be your present and then your legacy all too soon. You can’t shape your legacy retroactively; you need to make those decisions now.

So what do you do?

I’m not proposing that corporate sustainability professionals commit career suicide. I am proposing that they:

  • Use materiality for real – to figure out “what matters”
  • Use materiality to drive action, not just communication
  • Use materiality to identify and engage key stakeholders
  • Make connections to the revenue stream, not just cost
  • Make connections to real business risk
  • Identify and recruit champions, often not your boss or even in your chain of command
  • Decide what you want your role to be. I can’t tell you what that role should be, but I can tell you it should be determined by design and not by default.

All this was hard before the election results.  In the political climate after the election, it’s that much harder – and more essential. In the US, government is not going to solve key sustainability issues.  It may not even acknowledge them. If you work in business, if you work in sustainability, and if you think the issues you’re working on (like climate change) really matter, then you don’t have much choice.  The time to focus on what matters and on your role is now.

[Opinions in this blog are solely those of Scott Nadler and do not necessarily represent views of Nadler Strategy’s clients or partners, or those cited in the post. To share this blog, see additional posts on Scott’s blog or subscribe please go to nadlerstrategy.com.]

The Easiest Environmental Decision You’ll Ever Make

Hillary Clinton says: “Climate change is an urgent threat and a defining challenge of our time.”

Donald Trump says: “I don’t believe in climate change. … It’s a hoax.”

Greenland ice melt Sept 2016, courtesy of John Englander

If you understand that climate change is real and happening and of huge importance, that doesn’t leave you much to decide. That’s a political decision, of course.  I don’t usually write about politics.  But the policy implications of the political outcome are just too big to ignore.

This isn’t one of those issues that gets lost in the swamp of charges and countercharges and the race to the bottom of whom you trust least.  This doesn’t depend on which cable news channel you watch. Just go to the source.  Go to their campaign web sites:

  • Hillary Clinton’s web site lists “Environment” as a top level issue. Donald Trump’s web site  has no Environment section at all. His site has an “Economic Vision” section which includes “Energy reform”, where he addresses environmental issues.
  • On the Paris Agreement: Clinton’s “Environment” section begins, “Hillary’s plan will deliver on the pledge President Obama made at the Paris climate conference.” Trump’s site says: “Cancel the Paris Climate Agreement (limit global warming to 2 degrees Celsius) and stop all payments of U.S. tax dollars to U.N. global warming programs.”
  • On the Clean Power Plan: Clinton promises to “[d]efend, implement, and extend … the Clean Power Plan and standards for cars, trucks, and appliances that are already helping clean our air, save families money, and fight climate change.” Trump promises to: “Rescind all the job-destroying Obama executive actions including the Climate Action Plan…..”

That leaves no choice. A vote for Hillary Clinton is a vote to admit climate change is real and make urgent progress to deal with it.  A vote for Donald Trump is a vote for denial – denial of science, denial of reality, and denial of our responsibility to our future, our children and our world. And make no mistake.  A vote for anyone else – or failure to vote – is, in effect, a vote for Trump and denial.

If this discomfits any of my clients or partners, so be it.  This issue is too important to be left vague.  I do want to be very clear: I am speaking for myself, and not them (please see my usual disclaimer below.)

To those clients, though, I would suggest a few moments’ reflection.  I am deeply sympathetic to the challenges of stranded assets – not to mention stranded careers, pensions and egos.  However, I also know that many clients in fact do understand climate change but find it politically uncomfortable – if not dangerous – to speak openly in their companies.  To those clients, I would say: “Let’s talk about how to exercise responsible leadership in your company  without committing suicide.  Let’s talk about ‘leading from below.’ But please remember, your company won’t be in the voting booth with you.”

As a strategist, I would advise even those clients who don’t agree to think carefully.  Public demands for climate change action will continue and intensify, regardless of the outcome of the election.  The question is whether government will step up and play its role to lead on solving public policy issues, or step back and leave business to bear the brunt of those demands.  Would you rather have rational public policy that sets clear expectations applying to all companies, creates a level playing field and spells out what should be disclosed?  Or would you like intensified guerrilla warfare with your consumers, customers, investors, employees and the media?

Doesn’t seem like that hard a decision.

[Opinions in this blog are solely those of Scott Nadler and do not necessarily represent views of Nadler Strategy’s clients or partners, or those cited in the post. To share this blog, see additional posts on Scott’s blog or subscribe please go to nadlerstrategy.com.]

Mylan, EpiPen and the Fog of CSR

Mylan has received plenty of attention lately for the decision to dramatically increase pricing for the life-saving EpiPen.  The intense debate about this decision points to a broader problem: the fog that surrounds Corporate Social Responsibility (CSR) and its many definitions, levels and claims.  This fog can obscure efforts to improve how business functions.  Mylan is an interesting case study.FogRoad

Mylan and CSR

Mylan’s CEO Heather Bresch defended the EpiPen price increases, blaming the healthcare system and saying “The system incentivizes higher prices.” She offered her view of stakeholder concerns a year ago when attacked for financial moves: “I try to look at it from the perspective of I should be flattered that so many people are trying to tear us down.”

Wouldn’t it be great if a pharma giant like Mylan were headed by a CEO who cared about CSR?  Someone who might say:

“…[W]e put people and patients first, trusting that profits will follow. This philosophy, which we call Doing good and doing well, reflects our belief that [our company] is not just a company, we’re a cause. … we weigh every decision we make with the utmost care, asking ourselves how it might affect all of our stakeholders, including patients, customers, employees, communities, vendors, creditors and investors.”

Oh, wait. Mylan’s CEO did say that.  That’s a quote from the CEO message at the front of  Mylan’s 2015 social responsibility report “which is designed to acquaint you with our many CSR accomplishments to date.” The report goes on to say: “Our shared belief in Doing good and doing well is based on our values, which we express every day through our actions.”

Reviewing Mylan’s CSR report and Mylan’s actions “every day” on EpiPen pricing may produce cognitive dissonance.  Something doesn’t connect.

The Fog of CSR

This disconnect could be just the frequent CSR gap between “what we say” and “what we do”.  That’s not uncommon.  Too much CSR reporting is still flat-out greenwash.

The Mylan disconnect might be something deeper: Mylan may interpret CSR differently than do some of its stakeholders (like patients).  That’s disturbing but not surprising.  CSR has become an esoteric topic, filled with systems, standards, guidelines, goals, and acronyms.  There is an entire industry of folks who set CSR expectations, write reports about meeting those expectations, and evaluate reports to see if they met those expectations.  It’s all too easy to separate all that CSR stuff from what companies actually do in their day-to-day business.

(To make matters worse, “CSR” is just one label.  There is huge confusion around CSR versus “Global Citizenship”, “Sustainability”, “Sustainable Development” and a plethora of other terms. That babel only adds to the fog.  Anyone using those terms should examine them carefully, and consider whether they are using those terms as tools for clarity or as weapons to keep up the fog level.)

Of course, some companies do very good things.  Some of them go to great lengths to show how those actions fulfill their responsibility as companies, and meet public expectations.

For some companies, though, CSR is just a cost of doing business, something you have to salute and spend some time and money acknowledging.  And for some companies, CSR seems to be a menu, from which they can pull out the parts they like and ignore the rest.

Cutting through the CSR Fog

In practice, CSR is a hierarchy of behavior, not a menu.  In working with a wide range of companies on CSR, I’ve seen five levels of what we actually expect from a socially responsible corporation. There is a clear hierarchy among these, starting with the most basic expectations at the bottom.  Interestingly, the first three are just corporate versions of “personal social responsibility”: we would expect them of our neighbors.  The last two are uniquely corporate.

  1. Don’t be a jerk. Don’t unnecessarily harm people, animals, the environment, even if there’s no law against it. Think of this as the “don’t be a bad neighbor” level: cut your lawn, don’t leave trash out in the yard, don’t start using loud lawn equipment when the neighbors have the kids’ birthday party, don’t take up every parking spot on the block, don’t shout offensive comments or names at people walking past your house, and promptly shovel your own walk when it snows. Don’t expect to get any credit for performing at this level. If you don’t perform, though, don’t be surprised if the neighbors are critical of anything else you do.
  2. Don’t break the law. Laws are supposed to apply to everybody. Don’t speed in the school zone, don’t shoot out your neighbor’s windows.  Again, don’t expect a whole lot of credit for fulfilling this expectation.
  3. Do your part. Actively be a good neighbor. Help mow the elderly neighbor’s lawn or shovel their walk when it snows. Volunteer at your school. Donate food to the local food pantry. This offers the chance to get credit for your actions, without actually having to change how you live (or do business) day-to-day.  This is the level of CSR many companies are happiest to focus on.
  4. Do what the law fails to do. We ask business to do what we can’t get government to do. Climate change is the clearest example: it is a classic public policy challenge, which should have been met by public action years ago (carbon tax, cap and trade, regulation, whatever). Business doesn’t want to be in the business of filling this public policy gap. Many businesses would prefer to see a public policy solution that creates clear expectations and a level playing field.  Business could then do what it does best: figure out how to make money in that new reality, by cutting carbon or investing or innovating. Instead, business has to guess where the bar “should” be, risk incurring costs that more recalcitrant competitors don’t face, and incur the wrath of investors who question why business is acting on what is really “Government Social Responsibility”.
  5. Do what the law can’t do.   Innovate. Invent the new technology that reduces carbon. Develop the approach that feeds more people. Raise the bar and challenge your competitors to follow you.  Drive your business by seeing CSR issues as strategic opportunities.

It’s all CSR?

The problem is that all of this is called “CSR”.

Arguably, Mylan may be doing great things in level 3, but missing (or ignoring) what it is doing with EpiPen pricing in level 1. If you’re not getting the basics right, don’t expect people to be impressed by anything else.

No company has to agree with this CSR hierarchy.  But every company should take a serious look at what it has bundled in its CSR portfolio, what terms it’s using (CSR versus Sustainability et al), what it claims in its CSR report, and what it’s doing in its business day-to-day.  At the very least, that might help burn off some of the fog and let in some clarity within the business.

[Full disclosure: I did a small bit of consulting work with Mylan on CSR approximately 5 years ago.  Nothing in this post reflects any confidential information or insight from that engagement.

Opinions in this blog are solely those of Scott Nadler and do not necessarily represent views of Nadler Strategy’s clients or partners, or those cited in the post. To share this blog, see additional posts on Scott’s blog or subscribe please go to nadlerstrategy.com.]

Redesigning EHS amid the chaos

It seems strange to talk about organization amid all the current national and global turmoil.  But people still have to do their day jobs and fulfill their responsibilities to their companies, their people and themselves, so the discussion goes on.  Especially because turmoil – much less dramatic than on the national stage but disruptive all the same – is going on at so many companies.

The challenge for high value, low visibility functions – like EHS – is to redesign themselves for life after the turmoil, without having the luxury of waiting for all the smoke to clear.  The most visible situation is post-merger. But the same chaos and need also exist in other corporate disruptions including acquisitions, corporate splits, the dreaded “new strategy” and ensuing reorganization, or simply massive downsizing (“de-organization”).

Let’s face it.  In most of these corporate shuffles, functions like EHS are an afterthought. It would be nice to think this will change as companies mature, that senior management will recognize the virtues and talents of the EHS organization and protect the exceptional people and programs that have already been established. Sadly, that’s unlikely to happen. Irrational and arbitrary cuts will happen. The EHS organization will have to find ways to step up both efficiency and effectiveness, not trade off one for the other. EHS leaders have to deliver the value their company needs within the budget and organizational envelope the company wants.

Organogram AbstractionThis is serious stuff. Bringing two companies’ EHS departments together post-merger isn’t like hosting a wedding dinner where the biggest problem is keeping the two families apart, containing the obnoxious relatives and stretching the alcohol budget.  This goes well beyond drawing up the tables and assigning seats. This is a serious strategic process with implications for business performance, EHS performance, and careers.  It requires asking the tough questions — even if you have to answer them yourself.

Some EHS leaders do a great job of this.  In one recent acquisition the EHS leader of the acquirer framed the strategic questions even before he was sure he had the top EHS job.  As soon as he got the nod, he developed clear hypotheses of what the new, merged company would be like and what it would need from EHS.  Without waiting for guidance, he proposed cutting out an entire layer, designing new centers-of-excellence based on emerging needs, and staffing those centers based on skill rather than prior job levels. At a stage where his peers are often waiting for direction and facing budget death of a thousand cuts, he has a plan, won approval (or acquiescence), and is busy creating an effective new leadership team.

A colleague and I pulled together some of the lessons learned from lots of painful experience in a new article, After the Deluge: Designing EHS Organizations for Post-Merger Companies.  Take a look.  Share your experiences, either in comments on that article or back on this blog.  And good luck to all.

[Opinions on this site are solely those of Scott Nadler and do not necessarily represent views of Nadler Strategy’s clients or partners, or those cited in blogs. To share this post, see additional posts on Scott’s blog or subscribe please go to nadlerstrategy.com.]

Mixed Greens: Green Giants, Green Shoots, Green Lions and Green Whisperers

Two different views of corporate sustainability collided in my inbox last week.

One email said that Freya Williams will speak at the US BCSD/WBCSD/Yale meeting next month. Freya Williams’ Green Giants book argues persuasively that business sustainability and business strategy have to be one and the same, not two competing directions.  She details seven businesses which have created great “win-win” outcomes, companies growing their business by integrating sustainability issues into core business strategy. She offers great examples and lessons, describing these leaders’ “epiphanies” and how those translated into business strategy and process.

A second email came from a friend and former client who now works for a regional service company nearing $1b in annual revenue. The email said:

I am trying to locate an article … directed at the executive level, indicating why they should care about sustainability.  This should probably be old news but in [this] sector that is where we are.  We use a lot of water but are recycling and the conversation about climate change doesn’t have a day-to-day impact (at least not yet)…. [T]he Harvard Business stuff and other articles would almost certainly leave our executives shaking their heads.

That friend is a Green Whisperer, helping to nudge business leaders toward awareness and progress.  That company’s leaders are unlikely to be Green Giants in any foreseeable future.  They are not likely to make game-changing transformational leaps requiring career-threatening courage, unyielding commitment and contrarian tendencies (characteristics Williams cites).

Green Giants are great exceptions but not the norm.  Let’s use reporting as an example.  I certainly don’t think reporting is the definition of sustainability progress but it is an indicator of effort.  Freya Williams points out that “95 percent of the largest 250 companies in the world now [produce] a sustainability report,” but:

Beyond that group, though, the news is less good. First-generation sustainability reporting— the process of reporting on employee turnover, energy, greenhouse gases, lost-time injury rate, payroll, waste, and water is still limited to just 3 percent of the world’s largest 3,972 listed companies and 0.04 percent of the world’s small listed companies.

Thyme_and_Goat_Cheese_Tart_With_Mixed_Tender_Greens_in_Champagne_VinaigretteThe reality of corporate sustainability is that we have to have a lot of different types of “greens”.  We certainly need the leaders, the disrupters, the Green Giants. Let’s recognize, applaud and learn from them. We also need the Green Whisperers. They are not blessed with Green Giants as bosses. They toil in the trenches, trying to move the majority of companies in the right direction.  They deal with the hard truth that epiphany is not an easily-reproducible management process.

We also need Green Lions, who take the lead and charge ahead, leading from the middle.  GM’s John Bradburn is a great example, leading his company’s zero waste effort, driving innovation and material reuse and cost savings all at once.

And we need to nurture the Green Shoots, the game-changing ideas that may take years of hard work, nurturing and perseverance before they start to sprout.  The US BCSD’s Materials Marketplace is a great example. After more than a decade of small experiments in making the circular economy real, the Materials Marketplace is now sprouting in Austin and other locations around the US and winning international attention.

We’re bringing a lot of these different greens together in one big salad bowl, a hands-on session in New Haven next month (June 14-15 2016). We’ll have the perspectives of Green Giants and Green Lions, Green Whisperers and Green Shoots.  We’ll see what they can learn from each other, and what they can create together.  Come join us there, and see what you can get from – and add to – the mix.

[Opinions on this site are solely those of Scott Nadler and do not necessarily represent views of Nadler Strategy’s clients or partners, or those cited in blogs. To share this post, see additional posts on Scott’s blog or subscribe please go to nadlerstrategy.com.]