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The Executive Newsletter of TheOfficialBoard

Sustainability in a Downturn

By Bruno Berthon, Accenture

Over the past five years, we’ve seen sustainability steadily move from the periphery to the heart of business. Companies have adopted sustainability practices for a host of reasons depending on the industries and geographies in which they operate. By now, it’s safe to say that most companies acknowledge that sustainability is good for business.

Today’s economic downturn, driven in large part by the frozen global credit markets, has placed an immediate premium on liquidity. As a result, companies are casting a critical eye towards all investments and initiatives, including those focused on environmental sustainability initiatives.

But high performing companies know that this isn’t the time to be shortsighted. It makes sense that amid continuing economic uncertainty companies scrutinize all investments, but not at the risk of eliminating or suspending sustainability investments because they would be viewed as superfluous.

Sustainability investments are closely aligned with critical moves companies need to make in a downturn—moves like “doing more with less”, returning to basics and investing prudently. Our research is proving that sustainability is a critical success factor for companies today and for how they set themselves up for the future. This is most visible in environmental programs that reduce emissions whilst simultaneously shrinking operating costs. To put it plainly, sustainability solutions and programs are a good proxy of high performance in companies.

Also, the key drivers of sustainability are independent of the present economic context. And they aren’t going away. The growing scarcity of natural resources will continue. So do consumer preferences for sustainable products and services. Employees are more aware of sustainability issues vis-à-vis the strategy and actions of their companies. In capital markets, we see not only more references to sustainability indexes, but also investments in sustainable technologies—demonstrating that investors still consider sustainability a wise investment option. Regulatory bodies at national, regional and global levels are not backing off. In fact, there seems to be an almost unanimous recognition among regulatory agencies to keep the pressure on.

Based on our most recent research and work, we recommend that companies follow five low-cost sustainability principles to gain an edge now:

  1. Growth: Even today, there’s at least one place that companies are capturing the type of growth that the investment community craves—the growing market for sustainable products and services.
  2. Profitability: More and more firms are finding that initiatives that reduce environmental effects also reduce operating costs.
  3. Positioning for the future: By linking arms with stakeholders and competitors alike to showcase their sustainability actions and impact, companies can influence the direction of public debate about sustainability and prepare themselves for forthcoming environmental regulations.
  4. Longevity: For companies seeking to stay current and capitalize on demand for sustainability products and services, the current downturn provides an attractive opportunity to acquire quality assets at below-market prices.
  5. Consistency: Companies should make extra efforts to remain aligned with sustainability’s ongoing evolution while they attract and retain customers and boost employee engagement to ensure predictable results period after period.

It’s more important than ever to demonstrate the value of sustainability, not only for long-term success but also as a part of the effort to survive or even thrive in the downturn.

Bruno Berthon is Managing Director, Growth & Strategy at Accenture, the global management-consulting, outsourcing and technology company. Mr. Berthon is also the global lead for the Accenture Sustainability Practice.

Filed under: Business Development,Sustainability — @ 7:00 pm on May 6, 2009
 
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In Arbitration We Trust

By Jean-Georges Betto, Lovells

It is commonplace to say that arbitration is the preferred mechanism to resolve international commercial disputes. The growing number and diversity of cases submitted to arbitration together with the use of arbitration clauses in the vast majority of international contracts are particularly convincing evidence of this current trend.

The reasons why international companies keep turning away from national court systems are equally well-known. Arbitration is the most appropriate mechanism of dispute resolution for complex international matters involving a high level of expertise and aspects of foreign law together with a large number of documents to be analysed and handled as exhibits in the course of the arbitration proceedings.

For the past few decades, arbitration has gained strength as a private system able to fulfil the parties’ expectations and needs and strike the most perfect combination between flexibility and efficiency in the resolution of disputes.

Arbitration has evolved and expanded. While it has always been praised for granting parties a great deal of autonomy in the administration of their cases, it is the recent phenomenon of institutionalisation which has contributed to making it so attractive and successful.

Indeed, major arbitration institutions such as the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA), International Centre for Settlement of Investment Disputes (ICSID) or the American Arbitration Association (AAA), which handle thousands of new cases every year, have developed a sophisticated set of rules that guarantee a rational, fair and efficient treatment of international disputes. This has contributed to reinforce the confidence placed in the process, arbitration no longer being perceived as an obscure or dubious means of dispute settlement.

Despite this success, some practitioners have recently voiced concerns that arbitration may be on the decline. Among the reasons often cited to support these views are (i) the progressive disappearance of confidentiality motivated by an accrued transparency in cases involving important “public interest” and (ii) the length and rising costs associated to the proceedings, due to the use of increasingly complex procedures sometimes based on national court procedures (e.g. discovery process imported from US litigation model).

Arbitration today faces important challenges which deserve careful consideration. In particular, it is of fundamental importance that a creative approach to the needs of the parties is adopted by providing tailor-made and adapted dispute settlement tools, rather than following the path of imitating other domestic court systems.

The relative drawbacks do not provide sufficient grounds for pessimistic or absolute predictions about the future of arbitration. Rather, some recent moves provide encouraging signs of a strong dedication to still offer innovative and attractive solutions to international companies.

The recent release of reports and guidelines aiming at controlling time and costs and simplifying procedures (such as the 2007 Report of the Commission on Arbitration) are but a few examples of the strong commitment to constantly respond to the concerns of those that are involved in arbitration proceedings.

Jean-Georges Betto is Partner at Lovells. Lovells is one of the largest international business legal practices, with over three thousand people operating from 27 offices in Europe, Asia and the United States.


Filed under: Legal — @ 6:00 pm on May 5, 2009
 
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Understanding the Satyam Case

By Valéry Marchive

It’s referred to as the Indian Enron : by the beginning of January 2009, the fourth biggest Indian IT services provider has been at the center a huge financial scandal, stemming from the misbehaviour of its former CEO, Ramalinga Raju, just weeks after being banned from the World Bank in a case of “inappropriate benefits.”

Ramalinga Raju is understood to have diverted more than a billion dollars from Satyam, through hundreds of companies while artificially inflating the IT company business results in order to hide the fraud. Now, Satyam will be bought by another Indian IT company, Tech Mahindra.

But the question remains: how isolated is the Satyam case? What kind of a light does it shed on Indian corporate governance practices, in a country well known for its family-run business culture? According to Nasscom, the Indian National Association of Software and Services Companies, this is only a “sad incident as the Indian IT and BPO industry has set up very high standard rules for governance and ethics.” Nonetheless, Nasscom decided, by mid-February, to create its own governance and ethics committee.

According to Gilles Moutounet, Vice President, Strategy and International, Gitanjali Group, a leading Indian Jewellery group, the Satyam scam should not be seen “as a potential Indian issue.” Trying to be reassuring, the Indian Minister for Commerce explained, by the beginning of January, that “all necessary actions have been taken to avoid future scams” like this one.

For the Indian journalist Devidas Deshpande, working with the Pune Mirror (Times Group), the Satyam scam relates to a strong cultural heritage, extracted from the Mahabharata book, often considered the largest poem ever composed. In it, a king lost his kingdom after carelessly following his sons in their misbehaviours. According to Deshpande, there are several examples of this syndrome in the modern Indian worlds of business and politics..

In mid-December, Sucheta Delal, an Indian journalist specializing in corporate finance and governance, pointed out the unfriendly behaviour of the Satyam board, towards investors. In addition, an anonymous source at head of an Indian IT company asserts that local regulations encourage looting. Last but not least, in March the Asia Development Bank stressed the fact that « the Satyam scandal in India highlights the need for sound enforcement of rigorous accounting standards. A particular area for close study is monitoring family-run businesses. » The Satyam may definitely not be as isolated as some may want to believe.

In this quite tense atmosphere, the current Indian Prime Minister, Manmohan Singh, expressed, mid-April, his “confidence” in India regulators to prevent new scams like the Satyam one. Unfortunately, governance rules placed upon listed companies are said to encourage more and more companies to delist. Thus, a new and stronger code of governance is currently mulled for unlisted companies. However, nothing should really change before 2010, at least. But the Institute of Company Secretaries of India just launched a study on international corporate governance practices and intends to compare them to the Indian ones.

Valéry Marchive is senior editor at www.lemagit.fr a leading publication on technology analysis.

Filed under: Finance — @ 3:00 pm on May 4, 2009
 
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Cloud Computing

By Bruce Tonkin

Cloud computing, like – green power –  or – environmentally friendly -, is a marketing term that encapsulates a range of technical, business, and social developments associated with the Internet.

The – cloud – term has taken over the previous term the – world wide web -. It comes from the common use of a cloud on PowerPoint slides to represent the Internet – which is a complex series of interconnected computer networks. Cloud computing involves virtualised computers, capacity on demand, and the ability to use and pay for this capacity in short intervals of time.

30 years ago, most computer applications operated on large shared mainframe computers, and each application received a “time-slice” to perform operations. Users paid for computer time. For the past 10 years, the low cost of individual computers has meant that most applications today assume people have their own computer to use. The problem with this model is that these applications only use a small fraction of a computer’s processing capacity.

When companies such as Google and Amazon begin to use many computers to operate their applications – there are great inefficiencies in use of space, power, and cooling. Even the weight of all these computers is an issue when placed in multi-storey buildings. Virtualisation is a software technique that allows an application to operate as though it has its own dedicated computer, but is able to share the same computer with other applications.

Additional computing capacity can be accessed as an application’s requirements change, and multiple copies of the application can be operating on multiple computers. Organisations that operate large collections of computers for their applications are now able to sell their computing capacity to other organisations – and this has given rise to the term “cloud computing”.

Cloud computing is still evolving. Microsoft is now creating software applications which support development for either on a local computer, or computers spread around the world. Ideally a company no longer needs to own or operate its own computers, but can now focus on developing software that meets their needs and use the “cloud” to carry out the computing tasks.

The advantage of cloud computing is that companies may not have to invest as heavily in technology hardware. Harvesting computer energy more efficiently is cost effective and environmentally friendly.

The downside of cloud computing may involve data management. Customer information – is the most valuable resource for a company. In a pure cloud model this information can be sent anywhere in the Internet where there is spare capacity, and may be able to be accessed by other parties.

Also software services which operate solely in the cloud – e.g customer relationship software, human resources applications – mean that the data is never in the hands of a company, because users enter their data directly through the user interfaces of those applications. If a company switches to a different software application, how does it retrieve customer information which may be in a proprietary format that the company has direct access to. Data can also be “lost” – clouds do dissipate and blow away in the wind!

Pure cloud computing is ideal where the data itself is either not important or would be made public anyway. For example, recent social changes mean that many users are happy to share personal information via services such as Facebook, Myspace and Twitter.

A common application of cloud computing, is the use of Web Hosting Companies such as Melbourne IT – where the computers and data storage associated with a particular company application are managed within defined geographic locations (in that case, within Australia and within known secure data centres).

The data can be retrieved at any time and shared with other applications. This combines the benefits of cloud computing and sharing expensive computing capacity on demand, with the security and peace of mind of knowing where the data is located, who can access it, and how to retrieve all the data when the needs of your business change.

Dr Bruce Tonkin, Chief Strategy Officer, Melbourne IT.  Melbourne IT is an Internet services company that provides domain name registration and management, website and software-as-a-service hosting, online brand management, and digital recording solutions.

Filed under: Technology — @ 5:00 pm on May 3, 2009
 
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Reduce Workplace Accidents

By Wayne Herbertson

My passion for safety is driven out of a personal loss of a best mate in a work related accident in 2007. Hoping to prevent other losses, I wrote a book Practical Safety Guide To Zero Harm which tries to prevent workplace injuries by sharing my accumulated knowledge from working 20 years in Manufacturing, Mining, and Refinery. Proceeds from the book will help establish a safety scholarship fund.


My goal is to provide practical tools and techniques that can be applied immediately in any workplace. My hope is that people will not only read the information, but apply it in their workplaces.  If we are to avoid tragedies, it’s about safely doing what we say, when we say.

These 7 steps to success have proven themselves in several industries including manufacturing, projects, construction and refineries, with safety injury reductions in excess of 90%.  They have also been applied in several Greenfield site developments.


The Practical Safety Process:
Step 1. Identify Hazards and Assess Risks
Step 2. Identify Desired People Requirements
Step 3. Identify Compliance Requirements
Step 4. Ensure Safe Physical Work Environment
Step 5. Develop Safe Systems of Work
Step 6. Assess Competency
Step 7. Monitor and Review Performance


Before applying these 7 Steps there are 2 fundamentals that must be addressed which are:
1.    Commitment of Management and
2.    Involvement of Employees.

These are essential for success and are often difficult to address because they require a critical analysis of organizational design and a balanced approach to strategy and solution development. Safety must become an integral part of the organization planning and development and not just an “add on.”

Wayne Herbertson is a foundational Director of Practical Safety International. Wayne is also General Manager Human Resources at Bradken, a leading supplier of equipment for the mining industry.

Filed under: Safety — @ 4:00 pm on May 2, 2009
 
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Our Electric Car Future

By Bill Moore

Several years ago, the Photovoltaic trade publication Photon International posed some questions about biofuels, solar panels, and cars:

Given a hectare of land — roughly 2.4 acres — which energy crop would power a motor vehicle the furthest? The energy derived from various biofuels grown on the theoretical hectare were capable of propelling an internal combustion engine vehicle several tens of thousands of kilometers. 

What if solar panels were installed on that same hectare of ground and the electricity produced over the year was used to power an electric car; how far could that car travel?


The answer is more than 3 million kilometres! Why the huge difference?  Two fundamental reasons: solar panels convert sunlight more efficiently than plants and can do it year around, while most croplands in the northern hemisphere have to lie fallow a good part of year.

More importantly, an electric car is so much more efficient. The efficiency of electric motors is 85-95 percent, while even the best diesel engine is only one-third as effective.  Most of the energy in gasoline is wasted heat; only a small percent of the energy burned reaches the wheels and actually moves the car.

Besides unparalleled efficiency and surprising performance, the electric car is the ultimate alternative fuel vehicle.  Its “fueling” infrastructure is ubiquitous: there are literally tens of millions of electric power outlets everywhere.  Those outlets are powered by electricity generated mainly from domestic fuels: coal, natural gas, hydro-power, nuclear, geothermal and renewables like wind and solar.

We also have sufficient overnight capacity in our current electrical infrastructure to power tens of millions of electric cars and trucks. Pacific Northwest National Labs calculated in 2006 that 70% of America’s 230 million motor vehicles could be charged overnight if they were electric, with an actual decrease in carbon dioxide emissions despite much of that base load power coming from coal.

Electric cars are just emerging from a long technological hibernation, despite being around since the days of Thomas Edison.   They remain relatively expensive, and recharge times are far longer than the typical stop at a filling station, but advances in battery technology is providing greater durability, longer service life and faster recharge times.

Experiments with modern nano-based lithium batteries have demonstrated 10-minute recharges and driving ranges well in excess of 100 miles with second and third generation batteries promising 200 and then 300 miles between recharges by around 2015. However, before electric cars become as commonplace as cell phones, costs will have to come down. That will happen, as it did with cell phones, with volume and advances in technology and manufacturing processes.

Despite the current limited number of commercially-available electric vehicles, hope is around the corner.  While currently only Tesla is delivering cars, both domestic and foreign car companies are racing to bring vehicles to market: Mitsubishi, Nissan, Ford, Chrysler, GM and  BYD all have plans to offer electric cars here in North America starting as early as 2010.

To be sure, they will initially be in relatively small numbers, as the industry gets comfortable with the technology and nurtures its supplier base. The trend, however, is clearly towards the increasing electrification of the motor vehicle fleet worldwide, promising a less petroleum-dependent, more sustainable transportation system in the coming decades.

Bill Moore is the Publisher of EV World.Com. EV World.com provides a human face to the topic of sustainable transportation with a focus on the people and policy, as well as technology.

Filed under: Sustainability — @ 2:00 pm on May 1, 2009
 
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