Monthly Archives: December 2011

NRDC OnEarth

Meet the Change Makers: Avon Calls for a Green Makeover | OnEarth

Q&A with Avon’s director of corporate responsibility Susan Arnot Heaney

The first “Avon Lady” started knocking on doors in New Hampshire back in 1886, selling beauty products directly to her friends and neighbors. The door-to-door approach may seem familiar — even quaint — today, but it was groundbreaking at a time when women had few job options outside the farm or factory and rarely owned or ran their own businesses. By offering credit, products, and sales support, Avon created the possibility for them to do so. By the turn of the century, the ranks of Avon Ladies surpassed 5,000.

Today, more than 6.5 million independent sales representatives sell Avon products in over 100 countries to more than 300 million customers. Echoing its original appeal in the United States, the brand continues to find fast success opening up opportunities to women in emerging markets such as Kazakhstan and Saudi Arabia. With a product line that now spans makeup, perfume, and jewelry, as well as gifts, clothes, jewelry, and housewares, Avon’s sales totaled $11.3 billion through September.

These big numbers inspire Susan Arnot Heaney, but they also make her job more difficult. As Avon’s director of corporate responsibility since 2006, Heaney focuses on developing, tracking, and reporting efforts to reduce the impact of Avon’s activities on the planet. Each year, the New York-based company has to balance expanding its business while also managing and reducing the use of resources, including trees to make hundreds of millions of catalogs, tons of palm oil for its cosmetics, more energy, water and other materials.

In recent years, Avon has mapped out in increasing detail how, when, and by how much it wants to alter its impact. Earlier this month, the company published its third corporate responsibility report detailing efforts and goals set out in 2009-2010. By 2020, for instance, Avon aims to cut its consumption of water per unit produced by 40 percent, compared with a 2005 baseline, while also aiming for 20 percent absolute reductions in energy use and greenhouse gas emissions. In the same period, Avon aims for its operations to produce zero waste by fully recycling or reusing any leftovers from its factories and distribution centers.

OnEarth contributor Adam Aston recently caught up with Heaney at the unveiling of the company’s new LEED Gold-certified Manhattan headquarters to learn more about the beauty brand’s sustainability agenda and how it aims to harness the power of millions of “affiliates” — better known as Avon ladies — to help further it.

Susan Arnot HeaneyThe “Avon Lady” is practically a cultural icon, yet on Main Street, Avon storefronts are conspicuously absent. How do you get by with no brick-and-mortar stores?

It goes back to 1886, when David H. McConnell founded the company. At the time, women had relatively limited job options: teaching, factory work, and farming jobs dominated. Very few owned their own businesses.

Starting with the first Avon Lady, in New Hampshire, McConnell devised a model that let women build a business of their own, by selling cosmetics face-to-face.

The approach also meant that Avon has never built shops or showrooms. Today, our store is a brochure, and our website. Our representatives use these to show products to millions of customers in more than 100 countries. Orders are delivered by via mail, online or through mobile technology.

In terms of our sustainability efforts, this means that, unlike other big retail chains, we have never had to build — or heat, cool, and fit out — storefronts. That said, we still have millions of square feet of real estate worldwide — offices, factories and distribution centers — and ourGreen Building Promise ensures all new or major renovations around the world are certified “green,” such as our U.S. headquarters in New York City.

But this model means you print a lot of paper?

Yes. We’re one of the largest printers in the country. Our product brochures — we call them “brochures” because that’s what they were dubbed in 1886, even though you would call them catalogs — are printed around the world.

They’re smaller than a regular magazine: our current holiday brochure is about 5.5 inches wide by 8 inches high and has 227 pages. And we produce one campaign like this every two weeks, all year long, printing here in the U.S. somewhere between 13 and 17 million copies for each. Then there are our even larger international sales. Brazil, for example, is a bigger market for us than the U.S.

Keep in mind, these product brochures are never mailed. We do not do anything direct-to-consumer. Instead, we ship them to our sales representatives, who order the quantity they need and then distribute them to their customers.

Isn’t the greener path to move towards paperless catalogs and ordering?

Yes. We’re paper-intensive, but we’re reducing that. Customers can go online and page through a virtual brochure. But that approach doesn’t yet address the needs of our face-to-face sales process. We’re very careful about altering that process, but we also have a robust online business and we are experimenting with lower-paper workflows.

In addition to the web, we have mobile apps for consumers and our sales representatives to place their orders. In Eastern Europe, where a smaller volume of business lets us experiment more easily, we’re testing a paperless sales model.

Recycled is considered the greenest option, since it reduces the amount of trees that are felled. Yet supplies are limited. How do you meet your enormous appetite for paper?

Yes, so we’re tackling the paper problem through a number of efforts. Last year, we launched our Hello Green Tomorrow initiative, which ties together our global environmental management work, including paper, forestry conservation, and palm oil. As part of that we announced the Avon Paper Promise, where we instituted very stringent internal guidelines for our paper buyers.

The policy was developed with input from several environmental NGOs, including the World Wildlife Fund (WWF). In October 2010 we were invited to join the Global Forest & Trade Network (GFTN), a WWF program to end illegal logging and improve some of the world’s most threatened forests.

Our goal is that by 2020 — and I’m certain we’ll do it sooner — 100 percent of our paper will be either Forest Stewardship Council (FSC)-certified or post-consumer recycled content. FSC is our preference among the “green” options for paper, when possible. But FSC is still evolving, and at any given moment, there may not be sufficient supplies available to match the size of our paper needs.

Currently, 74 percent of our product brochures, which account for the vast majority of our paper use, have already met the Paper Promise commitment. Of that, about 25 percent of our paper is already FSC-certified, and the remainder is recycled or carries other certification.

What about product packaging?

Our impact on paper is largely driven by our brochures. Because of our direct sales approach, we tend to have far less packaging per product than brands whose products sit on a shelf in a store. In those environments, the products need more packaging to prevent damage. They need more visible branding too, to fight for a buyer’s attention. We actually don’t use cartons for a lot of our products, so for instance, a tube of moisturizer won’t be delivered in a box, packed into yet another container.

A challenge with programs such as Paper Promise is to induce change beyond your operations. How do you see Avon’s efforts in this respect?

We’ve learned that the impacts beyond us depend on our size, but also on our image. With paper, for instance, we are such a huge buyer globally that we are in strong position to influence supply trends. When we press for more FSC paper, suppliers see that demand and will alter their growing and purchasing habits in turn.

Palm oil is an environmental hot spot because tropical forests are being razed to plant palm plantations. How does this differ from the challenge you face with paper?

In some ways, paper is an easier problem to solve. In part, because we have more weight given how much we buy. But also because forests can be maintained sustainably, over decades, so that trees that are cut down can be replaced. And recycled paper offers another option. With palm, the conversion from forest to plantation cannot as easily be reversed.

The other difference is the degree of our influence. In palm oil, it’s almost the reverse: we have little buying power but enormous visibility. Food accounts for a far larger share of palm oil consumption — more than 80 percent — than cosmetics, so changes in that industry are the real driver of change. In truth, even if we stopped using palm oil tomorrow, there wouldn’t have a major impact on global palm markets. But lending our name to the issue raises it in the minds of many who wouldn’t otherwise know.

What we’ve done through the Avon Palm Oil Promise is to commit to buy only certified sustainable palm oil through the purchase of Green Palm certificates. This year we became the first major beauty company to hit the 100-percent goal.

So given Avon’s relatively small size as a palm oil user, how do the company’s actions influence other buyers?

We work with the Roundtable on Sustainable Palm Oil (RSPO) to help influence industry practices. There are those NGOs who criticize the Roundtable’s efforts precisely because it engages with companies, who feel that commercial buyers are the source of the problem. I see it differently: that you have to bring everybody — the planters, buyers, and environmentalists — to the table. RSPO is the one body right now that is trying to pull everyone together. We’re doing this through Green Palm certificates, where we buy “book and claim” certificates to support plantations that commit to grow palm in a sustainable, verifiable way.

Our goal is not just to do our purchasing sustainably, but also to help drive demand for sustainable palm oil and influence other bigger buyers. We can help by raising the awareness of sustainable palm oil, increasing the supply of it, and then, through that, reducing the pressure on forests and on the endangered species that live in these endangered forests.

Palm oil aside, critics have charged that the industry has a poor track record in terms of making ingredients transparent. In fact, the U.S. Congress is considering labeling rules to require fuller disclosure. How does Avon approach this issue?

The cosmetic and personal care industry has one of the longest safety records of any, and Avon is especially proud of our 125-year commitment to safety. As one example, in a recent report on breast cancer and environmental exposures by the Institute of Medicine, the findings did not support the risk of cosmetic ingredients as a cause of concern.

Avon adheres to all labeling requirements in the more than 100 countries in which we do business. Complete ingredient disclosure is found on product labels and avon.com according to the strict guidelines established by governing bodies, allowing consumers to make personal choices on products they select.

For many companies, health and environment are lightning-rod issues, attracting lots of outside attention. But studies show consumers, in aggregate, put such concerns further down their list. How do you reconcile this?

For better or worse, most customers of any brand don’t care too terribly much what’s coming out of the back end a factory in Guangzhou. We hope more will care, since we work to keep those waste flows in accord with the best global practices. But we know from marketing studies that most of what motivates the customers are the brochures, the samples, what they see in their hands. However, numerous studies show that customers — including Avon customers — increasingly consider environmental issues as a factor in brand choice, with some studies showing an 80 or even 90 percentile level of interest.

As a result, it may be hard to say clearly that sustainability policy X drove Y sales. But we also know that sustainability is a decision with very little downside –internally with our employees or externally with suppliers and customers. And there’s tremendous upside in terms of cost reduction, risk management, and employee engagement. And it is, quite simply, the right thing to do.

What’s an example of the cost reductions that you’ve found from these efforts?

We find that there’s real passion around these issues, and that leads to real change, and genuine improvements in operations. Take Brazil, our biggest market. As you can imagine, when you’ve got hundreds of thousands of sales representatives, delivering their orders can mean criss-crossing trucks.

As part of a program requesting green improvements from our employees, the team in Brazil mapped out all these routes to find and eliminate the overlap. It was a massive project, but the savings has been amazing–in man-hours, in fuel, in speed of delivery and, ultimately, the environmental impact. And this came from someone just saying, “You know what? We have to do this better.”

TRUTH SQUAD

Checking industry claims with NRDC’s sustainability experts

Few would think of Avon as a forestry expert. Yet palm plantations in tropical Asia provide plant oils for its cosmetics. And temperate North American forests are a source of paper for its catalogs. In both markets, harmful deforestation is an ongoing threat, one that Avon is countering using its buying power and influence. NRDC experts laud Avon’s efforts in these areas but would like to see the company take even tougher steps to lower its impact and help accelerate wider change.

For palm oil, Avon has pledged to buy enough GreenPalm Certificates to cover all of its global demand. The certificate system works by offering farmers a premium price for palm grown in ways that are certified as environmentally and socially responsible, that do not destroy primary forest, and where farmers have committed to continually improve their operations. The premium paid for certificates to qualified farms acts as an incentive to lure others to improve their growing practices.

The rub? By design, certificate buyers such as Avon generally don’t receive delivery of the actual sustainably-grown oil their certificates bought. Rather, because of the way palm oil is traded, the certified crop is comingled with conventional palm oil from other producers at each stage of distribution.

This approach is “a good first step,” since it spurs farmers to change practices and boosts the total harvest of more sustainable oil, all while working within existing market mechanisms, saysDebbie Hammel, an NRDC senior resource specialist based in San Francisco. Yet Avon and others can do better, she adds. “NRDC believes that companies should progressively work to clean up their supply chains,” by requiring physical delivery of the certified palm oil, says Hammel. “This is more challenging that buying certificates, but it would ensure that none of the oil used is resulting from the harmful impacts of conventional production.”

Likewise, in its paper purchases, Avon is doing good work now but could be doing better, saysDarby Hoover, a senior resource specialist in NRDC’s San Francisco office. She lauds Avon’s commitment to buy paper certified by the Forest Stewardship Council (FSC) yet would to see Avon commit to buy a larger share of its paper from recycled sources. Recycled is better than FSC paper because to no trees are felled when making new paper from old. Moreover, less energy and chemicals are consumed to transform old paper into to recycled stock, compared with converting wood pulp into virgin paper, says Hoover.

“Avon should set a public target of 10 percent post-consumer recycled content and work towards 30 percent.” Putting that goal in writing, says Hoover, will drive industry-wide change, giving paper makers a clear incentive to buy more waste paper to convert into more recycled paper. “I’m not discouraging the use of FSC-certified paper, but there’s a hierarchy and recycled in better,” she says. — Adam Aston

 
NRDC OnEarth

Book Review — High Voltage: The Fast Track to Plug In the Auto Industry | OnEarth

Jim Motavalli | Rodale Books, 272 pp., $24.99

When the Toyota Prius debuted in the United States a decade ago, reactions were polarized. Fans loved its tantalizing mileage; skeptics scoffed at its relatively high cost and smug eco-imaging. Today, with more than two million sold, the groundbreaking gas-electric hybrid is as uncontroversial as it is unsexy, its success a profitable reward for an early, risky bet on green technology.

In High Voltage, the longtime automotive journalist Jim Motavalli argues that we’re at the start of a similar arc with electric vehicles, or EVs. As these finally hit the streets, we’re still early in the fascination-versus-skepticism phase. Pundits fret over “range anxiety” — how far an EV can go on a charge — while consumers are drawn to the remarkable mileage, the equivalent of as much as 100 miles per gallon of gasoline.

High Voltage: The Fast Track to Plug in the auto industry Riding shotgun with Motavalli, readers get a sense of how this technology may not only electrify most new cars (either partially or completely) but also remake the auto industry, rewire our electrical grid, and redefine how and where we refuel — all while lowering oil consumption and cutting greenhouse gas emissions.

For the lay reader, Motavalli breaks down the basics of the technology, untangling the often confusing taxonomy of subspecies. There are the now-familiar gas-electric hybrids, such as the Prius, which are never plugged in. There are plug-in hybrids, such as the Volt, which recharge from an outlet but also have a gas engine for extended range. And there are the truest EVs, such as Nissan’s Leaf, which use no gasoline, drawing all their energy from a supersize battery pack.

If you think the $40,000-plus Volt is too costly, Motavalli writes, blame the battery. Higher-capacity batteries may spell the difference between success and failure, which explains, he says, why “battery companies have become the rock stars of the EV business.”

How and where EVs recharge is shaping up to be a monumental technology shift in its own right. From developing a safe, standard design for EV plugs to transforming the grid to handle the EV era, the effort has pulled in some big newcomers to the auto biz. There’s Southern California Edison, which is working out the kinks to install at-home and public charging points. Then there’s GE, which is fortifying the grid for EVs and rolling out “smart grid” technologies, including curbside gizmos that will allow even garageless city dwellers to recharge.

China, already the world’s largest auto market, looms as the EV industry’s game changer. China’s top battery maker, BYD (which is one-tenth owned by Warren Buffett), is targeting the U.S. market with both battery and plug-in hybrid models, the latter priced just south of $30,000, about $10,000 less than the Volt. They’re still crude, and safety is a question, Motavalli reports, but the same was said of the first Japanese imports in the 1960s, and those turned out to be harbingers of a sea change in design and efficiency.

Motavalli concedes that “because of high cost, range issues, relatively low fuel prices, and a scarcity of federal incentives,” EVs may yet hit one of the potholes that has crashed past runs. The odds are with them, though. High long-term oil prices are driving the shift, as are moves toward higher fuel-efficiency standards. Without some measure of electrification, Motavalli contends, few manufacturers will be able to sell in tomorrow’s car markets.

A decade from now, EVs may be just one more kind of vehicle stuck in traffic. That would be exactly the sort of humdrum success EV players hope for. And it would be great for the environment, too.

View and comment on the original story at http://www.onearth.org/article/high-voltage-the-fast-track-to-plug-in-the-auto-industry.

GreenBiz

Avon’s CSR Report Gives Its Paper, Water & Energy Use a Makeover | GreenBiz

Avon's CSR Report Gives Its Paper, Water & Energy Use a Makeover

Makeup is sometimes used to conceal embarrassing flaws. Today, with the release of its latest corporate responsibility report, cosmetics giant Avon opted to reveal more about its sustainability and philanthropic work than in the past. Titled “The Beauty of Doing Good” and available online-only atresponsibility.avoncompany.com, the self-assessment covers 2009-2010 and is the third such evaluation in the company’s 125 year history.

Avon wanted to increase transparency across the “three pillars” of its corporate responsibility missions: empowering women, sustainability and philanthropy. “Presenting the report online, in an interactive format, saves paper, but also lets us update the data more frequently,” said Susan Arnot Heaney, Avon’s Global Director of Corporate Responsibility. She added that Avon plans to publish a full report every odd year, with continuous updates of new developments, performance data, news and achievements as they happen.

Produced in accordance with the Global Reporting Initiative (GRI) G3 Sustainability Reporting Guidelines, Avon’s corporate responsibility report aims for GRI Level B standards, a notch higher than the Level C achieved in Avon’s last self-assessment. The update includes a GRI Content Index listing of all standard disclosures covered in the report.

As with all such efforts, the details tell all the good stuff. Little familiar with Avon’s sustainability story until now, I was expecting to find a focus on organically sourced beauty care products. That’s in here, in the form of Avon’s policy to promote sustainable palm oil practices. I also anticipated an update on Avon’s support of breast cancer research (about to celebrate its 20th anniversary), and prevention of violence against women (founded 2004), both of which are touched on here too.

What surprised me is how much Avon has in common with the Fords and Fedexes of the world: Like big manufacturing and distribution companies, Avon is trying to drive up its energy efficiency, improve resource optimization, and chop down its waste. On those topics, here are a handful of achievements highlighted by Heaney when we chatted:

• Paper. By volume, Avon’s paper consumption leaves a larger footprint on the planet than do its cosmetics ingredients, Heaney explained. Surprised? Turns out that Avon is one of the largest commercial printers in North America. Famous for a direct-sales model embodied by “the Avon lady,” Avon has no retail outlets. Instead the company relies on “brochures” that agents pass on directly to customers every two weeks.

For instance, the current holiday edition of the North American version of this small-sized catalog was bigger than usual, but suggests the huge amount of printing Avon does: The publication numbered over 200 pages, with upwards of 15 million copies printed.

To formalize its effort to cut the impact of this river of ink and paper, Avon last year launched Hello Green Tomorrow, a broader green agenda that included the Avon Paper Promise: a comprehensive policy for promoting responsible use and protection of forest resources, and developed with input from World Wildlife Fund (WWF) and several other environmental NGOs. In October 2010, Avon joined (by invitation) the Global Forest & Trade Network (GFTN), WWF’s initiative to eliminate illegal logging and drive improvements in the world’s most valuable and threatened forests.

As part of this pledge, Avon has set a target to buy 100 percent of its paper from certified and/or post-consumer recycled content sources by 2020 with a certification preference of Forest Stewardship Council (FSC). As of 2011, 74 percent of Avon’s brochure paper met the Avon Paper Promise commitments, and approximately 25 percent of paper used in Avon’s product brochures is sourced from FSC certified forests.

• Reforestation. In 2010, as part of Hello Green Tomorrow, Avon contributed $2.1 million to a Nature Conservancy Program to help restore 5,000 acres in the Atlantic Rainforest in South America. Latin America is increasingly important to Avon, accounting for $4.6 billion of Avon’s $10.9 billion in 2010, making it Avon’s largest global market. In 2011, Hello Green Tomorrow expanded its support for reforestation efforts to Indonesia.

• Green buildings. Avon launched its Green Building Promise worldwide in 2010 as well, formalizing a long-held commitment to design and build all new major buildings and renovations in accordance with LEED (or local equivalent) certification standards.

The company achieved Gold in Zanesville, Ohio (U.S.), Sao Paolo, Brazil, and Guarne, Colombia; Platinum certification in Shanghai, China; BREEAM Very Good in Northampton, U.K. At its new U.S. Headquarters in New York City, Avon is aiming for LEED Gold for Interiors, awaiting final certification.

• GHG emissions reductions. At its manufacturing operations, Avon exceeded their initial goal of 25 percent GHG emissions reduction, on a 2002 base, four years early with a 31% reduction reached by 2008. The company has committed to a further 20 percent reduction by 2020. Overall, this would cut GHG emissions by 40 percent from 2002 levels.

• Material use & waste reduction. In 2010, Avon increased by seven percentage points to 76 percent the share of waste that was reused at its global manufacturing sites. In its distribution centers, the rate rose to 80 percent.

• Water use reduction. In 2010, Avon reduced overall water usage by 10 percent in manufacturing operations, both in absolute and per unit terms, and by 23 percent throughout administrative facilities and distribution centers in absolute terms. Avon’s long-term goal is to reduce water intensity by 40 percent by 2020.

There’s plenty more in the report. And if you simply must read it in print, you can build your own version of the report and generate a custom PDF through their site.

NRDC OnEarth

Meet the Change Makers: Tiffany’s Diamonds and Gold Get Greenish Sparkle With Stance Against Pebble Mine | OnEarth

Most businesses hungrily pursue new sources of vital raw materials. Tiffany & Co., by contrast, has begun to forge a different path. In the last several years, the company has taken an increasingly public and vocal stand against an enormous gold mine that has been proposed at the headwaters of Bristol Bay, Alaska. Pebble Mine, as the project is known, is estimated to hold more than $300 billion worth of gold ore and other precious metals.

Publicly listed Tiffany & Co. traces its roots back to 1837, when Charles Lewis Tiffany and John Young set up a “stationery and fancy goods emporium” in New York City. Today, with $3.1 billion in sales last year, the storied jeweler has a very big appetite for gold, diamonds, and similar earth-borne treasures. Yet Tiffany CEO and chairman Michael J. Kowalski sees the near-term costs of squelching a new gold supply as far outweighed by Pebble Mine’s potential risk to the environmental, and in turn, to Tiffany’s brand.

The proposed mine lies within a 40,000-square-mile watershed, filigreed by dozens of pristine rivers and tributaries, that is home to beavers, moose, and caribou, which feed off summertime plant growth. A huge population of bears, as well as the native Yupik people, relies on the annual return of spawning sockeye salmon, a flood of wild fish that ranks among of the world’s largest such runs. Opponents argue the fishery — worth hundreds of millions of dollars a year — and the broader ecosystem could be imperiled by mine construction and runoff of acids and dissolved metals. “I can’t think of a mine that threatens more ecological value in North America than Pebble,” Kowalski said.

Tiffany’s take on mining issues has evolved over a two-decade span that roughly coincides with Kowalski’s tenure, during which time the company has faced the overlapping crises of blood diamonds and conflict gold. Mining practices in strife- and famine-torn regions have led to grievous human rights abuses, as warring factions fight for access to mineral wealth, as well as environmental damage, such as mercury pollution from small-scale gold-mining operations. Today, the company states flatly that, with respect to mining: “We recognize that some public lands are simply not suitable for mining, and that their value for recreation and conservation is far greater than their value as a source of minerals.”

Michael J. Kowalski

Tiffany’s increasingly visible commitment to sustainability is documented in its first corporate sustainability report, released last month. In addition to advocating for responsible mining, the company has also focused on its retail operations — manufacturing its iconic blue boxes and bags, for instance, exclusively from materials certified by the Forest Stewardship Council. Efficiency upgrades and solar panels in its stores have lowered greenhouse gas emissions by more than nine percent per square foot since 2006.

OnEarth contributor Adam Aston recently discussed Tiffany’s evolving approach to sustainability with Kowalski at his office — decorated with photographs of family travels to national parks in the United States and overseas — at the company’s Fifth Avenue headquarters in midtown Manhattan.

Tiffany & Co. depends on mining, yet mining is destructive by nature. How do you decide one proposed project is promising, but another, like Pebble, is not?

It’s difficult for us to make definitive statements about what constitutes responsible mining today. But in a simplistic sense, we’re clear that it’s better to extract minerals from a legacy mine than to threaten a pristine ecosystem. That led us to Rio Tinto’s Bingham Canyon Mineoutside of Salt Lake City. The precious metals used in our U.S. manufacturing come from there as well as from recycled sources.

The mine has been there for 100 years. There are legacy issues, certainly, but today the mine is being managed responsibly. I know Mr. Redford would disagree [Ed. note: Writing for OnEarth’s Community Blog, NRDC Trustee Robert Redford has compared the threat of the proposed Pebble Mine to the environmental damage done by Bingham Canyon Mine]. But it is a worthwhile debate.

Look, we all may not be pleased with the standard of U.S. environmental regulations for mining, but they are pretty good in a global context. The greater concern is mines in less-regulated areas. Isn’t the more positive thing to source from a nearby mine that is monitored than from one that is far away, where we have no influence, and regulations are practically nonexistent, such as in, say, Papua New Guinea?

For those reasons, some have suggested that Pebble Mine would operate using the world’s best practices, including regulation and monitoring.

The argument has been made: “Well, if you really care about responsible mining, you should be a supporter of Pebble because it will be the most responsibly built and managed mine in the history of mining, and it is unfair to tar Pebble with the abuses of past mining practices.” In fairness to the Pebble Partnership (a joint venture between a subsidiary of Anglo Americanand Northern Dynasty Minerals), I want to make this clear: We have no doubt that they would do everything possible to develop that mine as responsibly as they possibly can. And I’m going to presume that the state of Alaska will do everything possible to make certain that happens if the mine goes forward.

That said, we have reached the conclusion — as have many non-governmental organizations (NGOs) and local Alaska residents — that the risk is simply too great. Despite the best of intentions, the location of this mine is so inherently problematic that it is simply not worth the risk of a catastrophic event. Other jewelers have come to the same conclusion and, like us, signed The Bristol Bay Protection pledge.

Is this is first such position you’ve taken on gold mining?

No. Starting back around 1994, we began receiving a fair amount of unsolicited mail asking us to oppose the New World gold mine that was planned right outside of Yellowstone National Park. At that point, we didn’t have the ability to see into our gold or silver supply chain, nor had our company policy on these issues been developed.

We began making inquiries, and as we learned more we thought, “If the New World mine is built, and there’s a catastrophic failure of the tailings dam, the flood would destroy a good part of Yellowstone National Park. That’s not a good thing for the jewelry industry.” It was that simple. We drew the conclusion that, as leaders of the jewelry industry — not necessarily by size but certainly by reputation — it was appropriate for us to speak out in opposition.

When did you begin to formalize your mining policies?

About 10 years ago, we began to see concerns about gold mining enter the mainstream media. So around 2001, we started making inquiries to the NGO community, saying, “We’re very interested in responsibly mined metals, but what should we do?” The response shocked us because, back then, a lot of NGOs said, “There are no standards of responsible mining yet. We really can’t tell you where to go.”

In 2002, we began working with NGOs like Earthworks to move forward on this issue. Today we abide by a set of core principles around responsible development and operation of large-scale mines.

Tiffany is synonymous with diamonds. How did the crisis of blood diamonds influence your position on mining?

Our experience with blood diamonds certainly raised our awareness about the environmental and human rights risks connected to metal mining. They weren’t remotely on our radar screen when the stories first surfaced. That’s because, back in in the early ’80s, we did not manufacture the majority of our jewelry. We bought it from manufacturers around the world, primarily from Europe, and some from the U.S. We would also buy polished diamonds — not rough unfinished diamonds — from diamantaires* in historic diamond centers such as New York, Tel Aviv, or Antwerp. Because of this arrangement, we had little insight into the supply chain beyond those levels, and quite frankly, little incentive to make needed improvements to our supply practices. [*Ed. note: Diamantaire is an industry term, describing buyers, traders, and artisans who work in the middle layer of the supply chain. Diamantaires buy, cut and polish raw diamonds before they’re set into jewelry to sell to larger wholesalers or retail jewelers.]

So dependency on diamantaires left you with little control over the origin of the gems?

Yes. Then, in essence, we became our own diamantaires. We had also undertaken a separate effort to vertically integrate our supply chain, beginning some years before the blood diamond problem first surfaced. The company was growing rapidly, and we needed to assure the flow of supply of manufactured goods, and later raw materials. We committed to cutting and polishing our own diamonds so that we could buy rough diamonds at the mine head. That gave us better knowledge of where a particular diamond came from.

The horrors of Sierra Leone crystallized this part of the strategy. We knew we absolutely had to be able to identify the country of origin and, ultimately, the mine of origin of as much of our raw materials as we could.

It’s an ongoing process. We’re not all the way there, even today. But we’re confident that over time, for diamonds, we can identify the mine of origin, and attest to the social and environmental conditions at those mine sites.

Many industries have abandoned such vertical integration, arguing that high-volume specialists can be more efficient. How has taking control over your manufacturing process affected your bottom line?

By streamlining the supply chain, we have been able to capture a greater share of the profits typically taken at each step, from mine to trader, from trader to polisher, and so on. The vertical integration has been a strong profit-driver, and it’s also allowed us to try to exercise some leadership on corporate social responsibility issues around the supply chain. For example, we have invested heavily in places like Botswana and Namibia to train diamond setters and polishers. By investing in those communities, we’ve helped create industries that deliver more income than the simple extraction of gems could alone.

We’re probably rather unique, I think, for a retailer. We are without a doubt the most vertically integrated retail jeweler in the world. We make about 65 percent of all our jewelry at facilities here in the U.S., at a site in Westchester County, New York, and another in Providence, Rhode Island. This includes the jewelry we sell around the world — in fact, we’re a net exporter, even to China.

Other industries have established standards — I’m thinking of industry-created definitions of “organic” in the food business. Tiffany has been outspoken about the need for third-party standards for responsible mining. What progress are you making?

We very much believe that if there are to be standards for human rights and environmental practices in the jewelry industry, there must be genuine third-party certification, where NGOs and other stakeholders participate in the establishment of those standards. You saw this with blood diamonds. I think the industry rallied dramatically to correct the problem by creating theKimberley Process [to certify rough diamonds as conflict-free], which I think has largely been a success.

We have every control in place to be certain that diamonds from Tiffany only have Kimberley certificates. Can I make a 100 percent affirmative claim that nothing here has every come through? No one can. And that is, I think, where some of the biggest challenges are, in trying to assure supply chain integrity.

Does this position create tension with the mining industry?

We take great umbrage at criticisms we’ve faced. Some of the pro-mining folks have said of our efforts, “This is all about public relations.” In response, I say, “Hold on. We’ve been concerned about this for almost 20 years. This is not about greenwashing. This is something we’ve been committed to. It’s what our customers want. It’s about the business imperative.”

In fact, we’re pro-responsible mining because we think that’s what is essential for the growth and long-term economic health of the jewelry industry.

TRUTH SQUAD — Checking industry claims with NRDC’s sustainability experts

The prestige of Tiffany’s brand means there is real force behind the company’s efforts to reshape the way jewelry retailers and the broader mining industry are approaching sustainability, says Joel Reynolds of the Natural Resources Defense Council, who directs its urban west program and the marine mammal protection and Southern California ecosystem projects. He also leads the Save Bristol Bay campaign, bringing together a broad coalition of interests opposing the proposed Pebble Mine in Bristol Bay, Alaska. In particular, he says, “Tiffany has a unique ability to draw attention to [Pebble Mine].”

As Tiffany turned up the volume on the issue, other major retailers such as Walmart and Target — which sell high volumes of lower-cost gems, gold and other jewelry — have taken notice, says Reynolds. This is leading to a process that he believes will improve industry practices and lead other major jewelry retailers to sign on to the The Bristol Bay Protection pledge, as Tiffany has done. At the core of the issue, Reynolds said, is the question of whether the mine can be built and operated without significant risk. “Under comparable hydrological circumstances, 93 percent of similar mines in the U.S. have failed to meet the standards they commit to in their original environmental impact assessments,” he notes, pointing to a 2006 study of water-quality problems at hard-rock mines.

Key state and federal deadlines for Pebble’s developers to submit permit applications for the mine were originally set for this year, but have been pushed back to 2012 and 2013. This suggests opposition to the project is getting traction, Reynolds says. Outside Alaska, the mining reform organization EarthWorks has successfully lobbied more than 60 jewelers to take the “No Dirty Gold” pledge, which would apply to the Pebble Mine. Tiffany & Co. is a long-time signatory. Target is the most recent retailer to sign on, in March of this year.

By taking this voluntary pledge, jewelers agree to abide by The Golden Rules of responsible mining: to ensure that toxins, such as sulfuric acid, don’t contaminate the land, water, and air, and that workers rights and labor standards are respected. Still, critics charge that until a third-party certification system for gold mining exists, efforts to clean up the industry will remain piecemeal and difficult to verify. — Adam Aston

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GreenBiz

Despite Boom in Renewables, Risks Could Hurt Further Growth | GreenBiz

“Alternative” energy is officially not so alternative anymore. Last year, for the first time ever, spending on projects to generate electricity from renewable sources eclipsed the amount spent to build conventional fossil fuel plants.

In 2010, renewable projects drew $187 billion in investment, 19 percent more than the $157 billion spent to build or augment conventional generating plants, fuelled by natural gas, oil and coal, according to analysis released by Bloomberg New Energy Finance for the Durban climate talks.

As the clean energy sector comes of age it must now reckon with the challenges of more mature industries. Namely, managing the risk posed by larger, more complex projects. According to “Managing the Risk in Renewable Energy,” a report released this week by the Economist Intelligence Unit and Swiss Re, minimizing financial risk is one of the most “acute” challenges facing the sector in the near term.

The renewable energy sector will face an even more uncertain future if it fails to manage the growing risks associated with larger, more complex projects, EIU found. The study was based on survey of 284 senior-level renewable energy executives.

The survey found that renewables have moved to center stage. Power companies increasingly view renewable energy as central to their business strategies, and are developing larger and more complex renewable energy projects. Billion dollar projects, once rare, have become regular.

Worry is rising among renewable energy investors that some of the other 100 or so governments supporting clean energy will cut public subsidies as part of austerity measures, the report found. Fiscal crisis in Europe and economic malaise in the U.S. suggest public support for renewable energy is more likely to shrink than grow in the near term. For example, solar feed-in tariffs are being slashed across Europe: lowered by 15 percent in Germany and up to 70 percent in the U.K.

As public funds dry up, the appetite for renewables remains strong, siginaling a shift to more private funding. “Risk management measures such as insurance will be key to encourage further private sector investment,” said Agostino Galvagni, Chief Executive Officer Swiss Re Corporate Solutions in a statement. “Additional investments into renewable energy are needed to achieve the transition to a low-carbon economy,” he added.

A major issue in renewable energy projects is their high up front costs. Projects are typically capital-intensive and highly leveraged, with up to up to three quarters financed through debt. As companies seek to scale up investments, overcoming financial risks is one of the biggest challenges, according to 76 percent of the survey respondents.

Among plant investors, owners and operators surveyed, other significant concerns included political and regulatory risk (62 percent) while weather-related volume risk comes in third for wind power producers (66 percent). These risks increase further as projects grow in scale and complexity.

The report revealed that while companies are sophisticated in using insurance elsewhere in their businesses, the dearth of risk-management tools in the renewables space has limited their use. About two-thirds of respondents already use insurance to transfer risks. But only half of respondents said they are currently transferring risk successfully, for example through insurance to hedge against the risk of weather-related reductions in output of a solar park or wind farm. Instead, because of the limited availability of suitable risk-transfer mechanism, many retain the risks related to renewable energy assets on their balance sheets due to.

The use of solutions such as weather-based financial derivatives is slowly picking up, even though only 4 percent of wind power producers apply them to their projects. Many solutions on the market today are unsuitable for small-scale projects. In the survey, executives say they would transfer more risk if suitable risk-transfer products become more widely available in the future, particularly more standardized and cost-effective products.

With the next round of global climate talks expected to founder in Durban, the need to develop more efficient private sector investment tools for technologies that mitigate climate change, such as renewables, is only growing. The toll for climate related damage is expected to continue to rise in coming years. In 2011, the U.S. eclipsed the prior worst-year record for extreme weather events, with 14 such events doing more than $1 billion in damage. In 2008, the prior record year, the tally was nine such events.

“New technologies and innovation in renewable energy will be the only possibilities left should a global policy regime to reduce carbon emission not materialize,” says Andreas Spiegel, Swiss Re’s Senior Climate Change Adviser in a statement.

As the reports sponsor, Swiss Re is eager to “better understand how insurance can mobilize financing for renewable energy projects and identify the most cost-effective ways to reduce risks,” Spiegel added. Insurance can help lower construction and operational risks, by covering losses in the case of accident or delay.

For deeper dive into the survey’s findings, check out the EIU’s summary analysis here [PDF]. Cribbed from that analysis, here are the reports key findings, as well, according to Aviva Freudmann, Research Director at EIU.

1. Renewable energy is growing in strategic significance in the power industry, and is the focus of ever-larger investments.2. As renewable energy projects grow in number, scale and complexity, the industry faces a growing range of risks — as well as significant challenges in managing them.

3. Plant financiers and operators consider financial risks the most significant, particularly in early project stages.

4. Industry players are becoming more cautious, taking a variety of measures to reduce their exposures and transfer the remaining ones. One emerging way to manage certain risks is to diversify by geography and by technology.

5. By a wide margin, the industry chooses insurance to transfer financial risks to third parties, followed by capital-market instruments such as catastrophe bonds.

6. For operational risks, industry players seem unsure whether to continue using current risk transfer mechanisms, which focus on insurance and capital-market instruments. Many transfer operational risks to hardware suppliers.

7. Confusion abounds on how best to manage weather-related volume risks. The industry calls for a broader range of risk transfer products to cover such risks.

Solar farm photo via Shutterstock.