Economic inclusion becomes a sustainability imperative
The following is adapted from State of Green Business 2018, published by GreenBiz in partnership with Trucost.
In nature, diversity builds ecosystem health, productivity, longevity and resilience. So, too, in communities: Sustainable economic and social systems need to be diverse and inclusive in every respect.
Gender and ethnic diversity have been business concerns ever since the corporate social responsibility movement dawned several decades ago. Economic inclusion — ensuring that everyone has equal opportunity to participate in the economic life of their community as employers, employees, consumers and citizens — increasingly is being seen as part of the sustainability agenda.
The very first Sustainable Development Goal, set by the United Nations in 2015, is to "end poverty in all its forms, everywhere," followed closely by gender equality. The green economy will be a "powerhouse," said Christiana Figueres, former U.N. climate chief who now co-leads the Formula E advisory board — if we have "clean energy for everyone and emissions from no one."
Companies, cities and other institutions are opening pathways to leadership and inclusion in order to serve women, people of color and marginalized members of both rural and urban communities. That takes more than just "checking a box" on diversity, said Whitney Tome, director of the nonprofit Green 2.0, tasked with increasing diversity in the mainstream environmental movement.
Sustainability membership group BSR, which has consulted large companies for 25 years, found that social resilience is a rising corporate concern, with income and gender inequality on par with risks such as cybersecurity and natural disasters. Businesses have a growing stake in helping shape "a social contract for the future," said BSR President and CEO Aron Cramer.
Silicon Valley's top firms are embracing diversity, said Van Jones, author, political commentator and founder of #YesWeCode, a national initiative that teaches information technology skills to young people from disadvantaged backgrounds. In his 2017 book, "Beyond the Messy Truth," Jones wrote that all of Silicon Valley's top firms are responding to the need to close their diversity chasm. For example, in 2017, Google partnered with Howard University to hire black computer science majors. Since 2016, HP diversified its corporate boards and workforce, and brought more women to the executive level. In 2015, Salesforce CEO Marc Benioff spent $3 million for pay parity for men and women.
Such programs are good for business, too: Public companies ranking in the top quartile for ethnic and racial diversity are 35 percent more likely to have above-average financial returns, and those in the top quartile for gender diversity are 15 percent more likely to perform better financially.
As societal expectations increase, many companies are becoming more transparent about the results of their diversity and inclusion initiatives, even if they are still slight. For example, underrepresented ethnicities comprised 3 percent of Pinterest's staff in 2015 yet rose to 7 percent in 2016, the year it hired Head of Diversity and Inclusion Candice Morgan. In November, Glass Lewis, an institutional investor adviser, warned corporate boards without women that it will urge investors to vote against them in 2019. And in 2018, the EU will require large, listed companies to include diversity information in their annual reports.
More recently, corporations have backed diversity and inclusion policies that boost their resilience. Microsoft publicly supported extending the Deferred Action for Childhood Arrivals program from cuts proposed by the Trump administration for sound business reasons: the powerful immigrant contributions to the company's workforce. And after the 2016 U.S. presidential election, hotelier chain Marriott International's CEO Arne Orensen penned an open LinkedIn letter urging Trump to minimize divisiveness around sexual orientation, gender, race, religion, disability and ethnicity.
The specter of climate change is also spurring companies to action.
Renewable energy is at the heart of other economic inclusion initiatives. For example, innovative "pay as you save" (PAYS) financing, pioneered by Holmes Hummel, uses a tariff structure to fund energy improvements for low-income homeowners and renters without requiring upfront costs or a credit check. In one Appalachian community in southern Arkansas, PAYS programs provide energy efficiency and renewable power to low-income rural residents at no upfront cost.
Low-income communities often find themselves on the front line of sustainability crises in a climate-unstable world. Hurricanes typically hit low-income communities hardest, as witnessed in 2017's onslaught of storms. The imbalance can be felt years later: While four out of five white residents believe that New Orleans mostly has recovered from Hurricane Katrina in 2005, nearly three of five blacks said it has not. In 2017, New Orleans appointed a chief resilience officer in part to help bridge that divide.
One job of city resilience officers is to include members of marginalized communities in urban planning sessions, decreasing the risk that even environmentally responsible development causes gentrification that displaces low-income residents. The green-building community recognizes this. Under new CEO Mahesh Ramanujam, the United States Green Business Council committed 20 percent of its growth by 2020 to underserved communities.
"Architects and designers could learn new techniques from the ingenuity and genius of black and brown communities," said Mike Ford. Known as the "Hip Hop Architect," he is the founder of Brandnu Design, which focuses on community engagement, "pre-development" strategies and capital campaigns for new urban developments.
Louis Stewart, the first chief innovation officer of Sacramento, California, sees equity and urban mobility as essential ways to attract talent and ensure sustainable economic growth. For one, ride-sharing can transport low-income people to jobs in high-rent areas, or could nix expensive parking lots, easing housing costs in cities such as Houston.
Urban resilience can grow from small seeds: Allowing low-income students to participate in a gardening program moved the graduation rate in a South Bronx school from 17 percent to 100 percent.
Then there are growth spurts. Late last year, JPMorgan Chase invested $900,000 in sustainable infrastructure projects in Detroit. The funds will help use the vacant space between commercial properties for green infrastructure that can mitigate stormwater drainage fees and turn vacant land into commercial spaces that support minority small business owners.
"Sustainable infrastructure is critical to the efficient and continuous operation of small businesses and to revitalizing commercial activity throughout Detroit," said Matt Arnold, the bank's global head of sustainable finance.
You can't have a healthy economy in an unhealthy community. It's in companies' interests to help ensure everyone's well-being.