Updates: Aqua America, Benefit Corporations, Philly Sports Teams

I was thinking about some posts I wrote last year, and what has happened since then. The posts I had in mind concerned Aqua America, the B Corporation, and the Philadelphia Eagles (one of the Philadelphia area professional sports clubs). I was curious what was happening with sustainability at Aqua, the progress of B Corporations around the country and what other Philly sports teams have been doing on the green front since last year.

Aqua America (my water company)

I got my quarterly shareholder report letter from Aqua America last week. In it, aside from the usual reports of growth, capital programs, etc, is a notation that the 2010 sustainability report had been released at the annual shareholders meeting last month. Not a big deal, just something that the company does. The entire report is available from the www.aquaamerica.com website, via a big button on the front page. This is like the Sherlock Holmes story in which the dog did not back. Sustainability seems to be woven into the fabric of the company.

As some perspective, in 2009 management opposed a sustainability proposal to stockbrokers; in 2010 the company released its first such report with a fair amount of hoopla. In 2011, the sustainability efforts are still there. The tone is different, more business-like. Which probably means that these efforts will continue as long as Aqua’s capital program does.

B Corporation(s)

I noticed that 2 more states have approved “benefit corporations”. New Jersey and Virginia have joined Maryland and Vermont in approving these “alternative” corporate structures. By law, the main corporate purpose for most companies is making money. I am all for making money, especially when the check has my name on it. However, there is an increasing movement in this country of people who want to combine business purposes and broader public benefits.

These laws in general allow companies to declare a public purpose, i.e. to save the environment. So if a company is delivering public benefits in that regard, it cannot be sued for activities in support of that goal.

Philadelphia Sports Teams

Last fall, the Philadelphia Eagles (NFL) announced a pioneering initiative to make their stadium one of the first in the country to be powered by solar, wind, and dual-fuel energy. Six months later, another Philly sports team (baseball’s Phillies) received national recognition for its greening efforts—a 2011 Green Power Leadership Award from the Environmental Protection Agency (EPA).

This is in recognition of an array of programs the Phillies have implemented in the last few years. A few years ago, for example, the team agreed to purchase 100% renewable power, and they have done this ever since. This year, they put in place an organic composting system at Citizens Bank Park. The idea is divert compostable material from the landfills. They also hosted an e-cycle event during last weekend’s series with the Oakland A’s where could come and drop off a large variety of electronics for recycling such as copiers, scanners, and much more. These are only a small sample of their greening program.

It felt really good to see that the original sustainability efforts I wrote about last year in those posts were not one-shot wonders. Rather, they have become part of an ever-increasing array of initiatives embedded into how the business of these organizations is being done.

Previous Posts:

Aqua America

http://https://sustainablewritings.wordpress.com/2010/06/29/aqua-america-releases-sustainability-report/

Benefit Corporations

http://http:/sustainablewritings.wordpress.com/2010/04/26/for-the-benefit-of/

Philadelphia Eagles Renewable Power:

http://https://sustainablewritings.wordpress.com/2010/11/22/fly-eagles-fly/

Aqua America Releases Sustainability Report

Ordinarily, the release of a sustainability report by a single company would not be a big deal. However, when I read in my quarterly report that Aqua America (my local water company) had posted one on their website, I paid attention. I paid attention because last year there had been a shareholder proposal to publish a sustainability report according to a set of guidelines used by many companies in numerous industries. The response from management had been less than sympathetic. Their position essentially was that it would cost too much, and that the regulatory authorities (state water or public utility commissions) were not requiring such a report.

Fast forward a year. Now, at the annual meeting (in May, 2010) the company announced a…..sustainability report. The report’s presentation was given by the Chief Environmental Officer (whom I hope reports directly to the CEO). It was also accompanied by a press release picked up by the usual business media (Bloomberg, Yahoo Finance, the Wall Street Journal, etc). The company’s report is located (from a colorful icon on the home page—always a good sign) at http://www.aquaamerica.com.

There is certainly room for debate about their concept of sustainability—it clearly places the economic implications of sustainability first, and the environmental ones second (at least in my opinion). Based on the prominence of issues in their report, it seems that the most important aspect of Aqua’s sustainability is the ability to continue to invest in capital improvements that in turn make the distribution of their product (water) more efficient, which in turn is good for the environment. Not too far behind is the ability to build an organization that will “outlive the current management” to quote the Chairman’s letter—i.e., an organization that will be around for a long time to come.

The report’s later sections have the type of material that most sustainability advocates tend to equate with sustainability. That is, the greenhouse gas estimates, the watershed protections, the wind and solar power usage, the measurement of fuel usage, the types of inks used on the statements, etc. One interesting aspect was the array of recycling programs in place—tires, motor oil, etc. I should note that the company has received a fair number of awards (listed in the report) for its varied environmental efforts. Also included are various civic involvement and employee development efforts. The employee development efforts can help retention, which ties back to the goal of building an organization that can outlive current management.

On one hand, I was a little disappointed in Aqua’s report, because I was looking for greater prominence on environmental issues. On the other hand, the general impression is that Aqua incorporates sustainability in a myriad of ways across their normal course of business. And if this truly so, then this is one of the more sustainable sustainability efforts out there. Underlying this blog is the idea that companies could and should incorporate sustainability into their regular lines of business. That is, sustainability is just something they do—not unlike producing profit guidance for investors.

I just hope they keep up what they are doing and use their efforts as a baseline, not as a mission accomplished.

Inquiring Shareholders Want to Know

Many companies have their annual meeting of shareholders at this time of year. Amongst them is a company I happen to have a little bit of stock in, Aqua America. Aqua America provides (tap) water services to about 2,500,000 customers (including me) in about 13 states. Many township and governments provide water services to their citizens as a public good (ie, the Philadelphia Water Department). Other townships, like mine, have contracted out or sold their water services to private companies like Aqua America. In many cases, this was due to the massive capital investment needed to upgrade the water pipes and associated infrastructure. This is especially important in the Philadelphia area. Providing drinkable water sourced from the Schuylkill and Delaware Rivers (and others) is really nothing short of a miracle, so all the Philadelphia area water companies deserve a shout out for that.

I found a very interesting shareholder proposal in this year’s Aqua America annual meeting packet. The Calvert Social Index Fund has put out a proposal to require the company to produce a sustainability report that will describe “corporate strategies to sustainably manage water use” …and detail how the company (Aqua America) will address greenhouse gas emissions, energy use, waste management, and employee and community relations. And, the report should contain the company’s definition of sustainability and include a company-wide review of company policies, practices, and metrics related to long-term social and environmental sustainability. One of the reasons Calvert gives for their proposal is that 80% of the Global Fortune 250 companies release corporate responsibility data, an increase from 64% in 2005.

Aqua America’s Board of Directors recommends that I vote NO on this proposal. They feel that the very nature of their business keeps the water infrastructure sustainable. I’ll grant them that. I am always seeing someone from Aqua America fixing water pipes somewhere. They also mention the fact that they have to go before varied state utilities commissions and “recover” the rates customers pay to support the capital investments required to keep the water pipes in good shape. They feel that a) the costs of the sustainability report would not be recoverable and b) no state utility commission is requiring it anyways.

As more people focus on water issues, the state utility commissions just might start asking questions about a given utility’s sustainability practices. I am not in regulatory affairs per se, but I would think that having an answer in advance to a question that could easily be asked is better then scrambling around after the fact. It is certainly possible that state utility commissions, (like the World Bank) will start attaching environmental criteria to their rate case reviews.

The company also notes that the guidelines Calvert recommends are lengthy, complex, and in places unclear. However, there is nothing saying Aqua couldn’t define and implement sustainability in its own way. Aqua is also concerned about how much it would cost to produce such a report. They also wonder how much good will actually come out of it. These are valide concerns per se. On the other hand, there are certainly companies out there that have discovered significant operating costs savings by adopting sustainability practices—if they are open to it.

After reading all this, I’ve decided to vote my 50 shares FOR the Calvert proposal. There are approximately 135 million shares outstanding, so I am not expecting my shares to tip the balance; but I think it is important that management know that some people really care about this.

Addendum

I am voting AGAINST management on the sustainability proposal. However, I am voting FOR management when I buy more stock. Part of sustainability is economic sustainability and profitability. Aqua America has raised their divided for the past 10 years by over 5% year to year. Further, their stock price held essentially even in 2008 (ok, it lost 2%, vs. 40% for the rest of the stock market). So on one hand, I am not thrilled about rate increases, but the investor piece of me is happy. Sometimes sustainability creates divergent interests—even in the same person.