Worst polluters are multinationals or gov't run?

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Citigroup came out with their sustainability analysis for mining companies: Which businesses should you invest in that are protecting themselves against environmental liabilities?



Corporate multinationals came out on top: BHP Billiton, Anglo American and Alcoa. The losers were state owned entities: Kazakhmys, CVRD and Norilsk Nickel--companies set up by governments to protect people and the nation's wealth from the predations of multinationals.



The study, which is analyzed at www.mineweb.com, states the following:



"In recent years, a groundswell of public opinion has caused sustainable development to become a serious business consideration for investors," the report asserted. "We argued that five factors that make up sustainable development will affect long-term shareholder value and that those companies which are reacting most effectively to these challenges, are likely to outperform." Citigroup's analysts based their sustainability risk assessment on governance and human rights, health, safety and environment, commodity issues, country risk aspects, mine development prospects and the company's ability to access capital.

LOL. All it takes is the threat of economic hurt to make corporations do the right thing. Can you

imagine if we all behaved like that? What a mess things would be.



Hmmm, can't tell if you're being sarcastic or not this morning Stump....I read the above and think two things....good companies are finally starting to realize that environmental protection and sustainability make a difference to the bottomline so they better improve their stewardship of these assets not just watch the cash in the bank.....the second thing I think is yeah that's a natural flow - government run organizations are likely not to recognize these potential environmental liabilities since if they do become real cash costs, the government is picking up the tab not the managers. Just one more argument against state run companies.

Oh, there was just a touch of sarcasm.


"companies set up by governments to protect people and the nation's wealth from the predations of multinationals."


is Michael's editorializing I think? Didn't see that sentence in the article. Further:


"Kazakhmys plc (the "Company") is an international business with bases in Kazakhstan, Germany and the UK. Our principal business is the mining, processing, smelting, refining and sale of copper and copper products, including cathodes and rods. As by-products the Company together with its subsidiaries in Kazakhstan and Germany ("the Group") also processes, refines and sells zinc, gold and silver. We are the tenth largest refined copper producer and the tenth largest mined copper producer in the world based on 2004 production."


From their website. Sounds like corporate multi-national to me. Perhaps Michael can point out the differences for us as I wouldn't presume to know much about the mining industry.


The article did note that the resource being processed played a big part in their ratings. What I inferred from the article was that companies mining precious metals were better positioned for the future and environmental accountability than coal-mining companies (as an example). Which strikes me as pretty logical.

If a company has a corporate office in London or wherever else, it doesn't mean it is a true corporate entity. Kazakhmys is largely run by the Kazakhstan government. See http://grassi.siteboard.de/grassi-post-42.html.



The majority shareholder for CVRD is Chile, and the majority shareholder for Norilsk is Russia.



What I inferred from the article is that multinationals are responding to pressures from social activists to clean up. Nationalized companies are not. The ironic thing is that most social activists are pushing for nationalization. Witness events in Bolivia, Venezuela and Mexico.

"What I inferred from the article is that multinationals are responding to pressures from social activists to clean up. "


Like it or not, the only thing multinationals (and business in general) respond to is the bottom line. If it happens to coincide with the desires of anyone, it's a bonus.

I would say multinationals respond to the needs of their customers, profits follow. Body Shop is a corporation and it is responding to customer needs. Profits are following. GM and Krispy Kreme are not responding to customer needs and profits are not following.

I don't know much about Body Shop... how is it putting customers ahead of $$?

One of the reasons Body Shop is doing well is they established (and are sticking to) a brand image. Certainly they do good work in a field rife with problems (cosmetics)... I wrote that as 'costmetics' the first time.. haha, how Fruedian, but a big part of their success comes from their effctive marketing of their ethical stance. Or so I've heard... I don't shop there more than once or twice every couple of years.

Well how about Toyota, maker of Prius, and Subway, maker of relatively less junky food. They are responding to customer needs. GM, maker of Hummers, and Krispy Kreme, maker of obesity, are not responding to customer needs. Their profits are getting killed.

Ok, so they are responding to customer needs. But do you think they would do that if they weren't going to make money off it? I don't think I'm understanding where you're going with this...


And I'm pretty sure Krispy Kreme didn't make obesity, they just profited from it.

Krispy Kreme got killed because they pedalled obesity. The corporation is, pun intended, belly up.


My point is the following, from the original article that started this whole thread:



"In recent years, a groundswell of public opinion has caused sustainable development to become a serious business consideration for investors," the report asserted. "We argued that five factors that make up sustainable development will affect long-term shareholder value and that those companies which are reacting most effectively to these challenges, are likely to outperform." Citigroup's analysts based their sustainability risk assessment on governance and human rights, health, safety and environment, commodity issues, country risk aspects, mine development prospects and the company's ability to access capital.

Well, I don't know about 'getting killed'


BTW, are you lumping GM in with Krispy Kreme as a 'maker of obesity'? For once we agree Michael! :-)


---------------------------------------------------


GM Reports 2004 Financial Results


GMAC Posts Record 2004 Earnings, 10th Year of Net Income Growth


Global Automotive Earnings Rise in 2004, Sales Volumes Gain 4.3 Percent


Record 2004 Revenue of $193 billion


DETROIT - General Motors Corp. reported adjusted 2004 earnings from continuing operations of $3.6 billion, or $6.40 per diluted share, led by record earnings from financial services and a 12-percent improvement in automotive earnings. These results, which were in line with GM's original guidance, compare to earnings of $3.2 billion, or $5.62 per share, in 2003. Adjusted revenue rose 4.5 percent to a record $193 billion

Putting words in Michaels mouth, but it appears to me he is saying that companies respond to the needs of consumers. They do so to earn a profit. If the consumer didn't have a need then the profits would decline....ie donut demand down due to fad diets etc....so KK's profits are being hit.


Where that ties in to the multi-nats mining etc... is that they are seeing a demand from consumers to manage their assets in an environmentally sustainable way and that they will acheive higher profits (and reduce potential liabilities) by meeting that demand. It's a chicken and egg argument to an extent but in the end Mike's right if people don't need it (or want it) then they won't pay for it.


Why do you think Greenpeace etc... push consumer boycotts - because they understand that a bottomline hit will make a difference and if consumers express their 'need' via the boycott then the companies will realize quickly what changes they need to make.

Stump - maybe look for the second google hit to see more current results....


General Motors Corp. (NYSE: GM) today reported a 2005 calendar-year loss, excluding special items, of $3.4 billion, or $5.99 per share, compared with net income of $3.6 billion, or $6.37 per share, in 2004.


If you'd been keeping up with your investment portfolio like I told you you'd have dumped this stock a while back.

Which for me ties in nicely with my presumption that education and advocacy are the best way to achieve 'buy-in' on enviro-issues.


I agree with Michael that public pressure is crucial, I'm just not as convinced it's a public vs private ownership problem. There are areas and industries where maximizing the bottom line (the first and foremost responsibility of a corporation to its shareholders) can have serious enviro-costs. Just look at the recent caustic soda spill in the Cheakamus Canyon... almost certainly a result of the corporation running the trains trying to run more cars than is prudent, despite warnings that a derailment was more likely. The problem didn't appear to be as serious when B.C. Rail was publicly owned. Cause and effect? I don't know, but it's certainly a strong possibility.

GM is getting killed. Look at a couple of news items about GM in Google news.



Dilbert expertly explains how it all works:



http://www.dilbert.com/comics/dilbert/archive/dilbert-20060219.html


If you'd been keeping up with your investment portfolio like I told you you'd have dumped this stock a while back.




I shovelled all my money into buying Halliburton!


/joke

"I'm just not as convinced it's a public vs private ownership problem. ".....so you're refuting the results of the study based upon your belief system?

I don't think I'm refuting the study. Exercising some skepticism is all.


Provided an example of private ownership that has allegedly delivered an environmental problem as well, just a different industry.


And, to go back to G.M. for just a sec, isn't the big drop in earnings due in part to problems with a benefits deal G.M. signed with the unions and problems with their financing arm GMAC? I don't know about the second one so much, but the first definitely isn't a consumer pressure issue.


Further, last year's big loss cancels out the profits in the year previous, but isn't two years a very short time in which to judge a company's performance? That's the kind of short-term thinking problem that seems to plague corporations beholden to shareholders.

It's easy to plop one example down and say it refutes an entire study - so easy people do it all the time - anecdotal evidence as truism...ahh the height of logic.


RE: GM - yeah they have a bunch of problems form pensions to benefits to financing...the biggest issue though is that their cars aren't selling without massive rebates...why - because they aren't meeting customer's needs.


The main reason this past year has seen them hit the dumpster is because they have been trying to pull back on the rebates changing the value proposition that customers had become accustomed to. It's a long term fix for a solution that started as a short term fix to sales problems - now they have to cleanup the mess they made and they are paying for it....unfortunately it came at the same time as a number of other fiscal issues. Stock prices are generally a reflection of future value not past value - if the company is only 50/50 as to surviving, then the share price will be chopped in half as well....(to be very loose and fast with market pricing theory). So to say stock prices are a short term reflection of current events only incorrectly describes market behaviour.

Again, I don't think my one example is a refutation. It's pretty easy to take things at face value too, but I wouldn't recommend it.

Then why bring the example up - what purpose does it serve.....I guess my point is that in this rational and public debate you have one person citing a study and you bring up an anecdotal event (also noting you have no evidence as to the true causes of the event). I presume it is brought forward to weaken other arguments. In that purpose I have to argue my position that an anecdote is not evidence and cannot be considered in the argument for a rational debate to continue. If that isn't your purpose then what is your ulterior motive in making the connection (not taking your statements at face value....)


I don't take the study at face value without thought - I considered the contents of the study summary/report - the logic behind it, the motivations of the study proponents and gave it a general sniff test. It appeared to be well a well thought out, broadly based study. The study proponents are, to my understanding, paid for being right in their predictions as to market reactions to the companies being studied and not paid just to pump certain stocks. My weakness is assuming that they aren't also trying to move the market for other motivations. That said given ths sniff test the results of the report appear logically as I had noted in my initial response so I let that assumption pass... Would I invest money on this level of investigation - no - would I argue that the position seems logical and well thought out - yes. Would I say it is more reliable than some anecdotal evidence from another industry in predicting the environmental stewardship of corporate entities in the mining sector - yes. Would I say that this example of environmental stewardship reflecting on the bottom line will likely stand in other industries - maybe some but not all.

"you bring up an anecdotal event "



There's strong evidence that 'stringing' was the reason for the derailment. At this point the investigation is continuing I believe, so I'm not going to say it was the cause definitively, but an overloaded, over-long train is one very logical, plausible reason.


And if you re-read the post that originally mentioned the Canyon, the reason why I brought it up is right there.

Ok - I re-read it - you were arguing the public vs. private environmental responsibility angle and as I said you brought up one example. Even in the example you cited the definitive cause has yet to be determined and the fact that the event occured under private vs. previously public ownership has not been directly correlated (yet). Therefore your example and your use of anecdotal and unsupported 'evidence' doesn't actually support your argument (IMO) - it may win points in a public debate, but it is not a rational argument that pushes this debate forward.....


Also upon rereading I let one item slip by as it seemed to be splitting hairs, but now that I think about it, it is a very salient point. Your note that companies focus on the bottom line is slightly off target. Management theory has it that the focus is on maximizing shareholder value. It seems to be a small difference but consider two near identical companies MineCoA and MineCoB - both with identical revenue, cost and profit figures - both have mines that will be closing up in 10 years. One company has been handling their effluent properly - the other hasn't. This is public knowledge - I ask you which company is more valueable? This is exactly the difference that the study was describing. In the analysis the problem with public entities is that they are not beholden to the market - merely to voters (notoriously apathetic) as such if the elected official feels they can get away with something and still get elected, they will. The market is much more punishing in that respect.