Caterpillar jumps on the green bandwagon

As reported byMarc Gunther, senior writer at Fortune (which is so much better than Wall Street Journal), corporate America is greening, and Caterpillar is starting to get involved. The company has not yet faced up to the fact that its products are used by Israeli forces to demolish Palestinian homes in acts of collective punishment. However, taking an expanded view of capitalism to engage in environmental sustainability will get them on a path where they might have to face up to that.


NEW YORK (Fortune) -- Will it play in Peoria?

Since the days of vaudeville, entertainers, politicians and business people have come to this mid-sized midwestern city, halfway between Chicago and St. Louis, to take the pulse of middle America.

Towering over the city is Caterpillar, Peoria's biggest employer. An 82-year-old industrial giant with $41.5 billion in 2006 revenues and 95,000 workers, Caterpillar makes "big iron" - mining, construction and road-building equipment, diesel and marine engines, and gas turbines, among other big-ticket items.

Will green play in Peoria?
This is not, in other words, a company where you will find a bunch of tree-huggers. Even so, here are the headlines that jump out when you open Caterpillar's just-off-the-press 2006 Sustainability Report:

Rapid population growth.

Limited natural resources.

Strained ecosystems.

No simple solutions.

Yes - Caterpillar (Charts, Fortune 500) is getting real about sustainability. While no one would confuse this conservative icon of smokestack America with, say, Ben & Jerry's, the changes unfolding here are further signs that the greening of corporate America is unstoppable, and that products and services that help solve big environmental problems can be good for business.

As Jim Owens, Caterpillar's chairman and CEO, puts it in his introduction to the report: "Sustainable development can create value for our customers, investors and environment."

What Caterpillar means by sustainable development is nothing less than "meeting the needs of the present without compromising the ability of future generations to meet their needs." That's a radical goal, when you think about it - it calls into question the operations of some of Caterpillar's biggest customers, including companies that mine coal, copper and iron ore (all of which are in limited supply) or those that extract oil from the sands of western Canada, where hundreds of Cat machines are at work.

The biggest and best example of sustainability inside Caterpillar is a unit called Cat Reman. That's the business that sells remanufactured equipment and components that the company says will meet its performance standards, but at prices substantially below those of new products.

Cat Reman itself isn't new - it's been around since the 1970s - but lately it has grown briskly. Revenues are up by 67 percent between 2001 and 2006, in part because of acquisitions, and the unit now employs about 2,000 people at 15 facilities around the world. Besides remaking Caterpillar equipment and parts, Cat Reman does remanufacturing for Ford (Charts, Fortune 500), General Motors (Charts, Fortune 500) and Daimler Chrysler (Charts), among others.

"Reman is really a recycling business," explains Steve Fisher, a Cat vice president who oversees the unit. "Instead of wood, paper and plastic, we're recycling engines and components."

The environmental benefits are significant - recycling industrial equipment saves raw materials and energy and reduces waste. What's more, if the U.S. takes steps to require manufacturers to take back their products, as the European Union has done, Caterpillar will be ready.

Meanwhile, Cat is supporting efforts to build mass transit systems to reduce pollution and congestion in 18 big cities in Asia and Latin America. Close to home, Cat makes diesel/hybrid engines for low-pollution General Motors buses in Seattle.

The company has also been a leader on environmental policy. Cat was one of the original members of the U.S. Climate Action Partnership (USCAP), a group of 10 companies and four big environmental groups that have called on the federal government to enact strong legislation to regulate greenhouse gases.

That can't have been easy for a company that sells more mining equipment than any other - and whose biggest customers include coal companies that oppose carbon regulation. Cat's Fisher told me that company executives had to persuade their coal company customers that carbon regulation would not prevent the development of "clean coal" power plants.

Meanwhile, Caterpillar has established targets for its own operations, aiming to reduce greenhouse gas emissions, waste, water use and workplace injuries. It has sought advice from environmental groups like Environmental Defense.

Indeed, Caterpillar's journey to sustainable development got a big push back in 2005 when CEO Owens invited Jonathan Lash, the president of the World Resources Institute, a Washington-based think tank, to spent a day with senior execs in Peoria talking about sustainability.

Still another push came from Fred Mason, a plain-spoken Caterpillar executive with 34 years of tenure, who got the company involved with an organization called the World Business Council on Sustainable Development. "I'm the curmudgeon for sustainability," Mason told me. (Disclosure: I volunteered to moderate a sustainability summit this week in Peoria, organized by Cat.)

None of the changes at Cat are groundbreaking. General Electric (Charts, Fortune 500) has gone further by setting revenue targets for products and services that improve the environment. Cat remains wedded to selling big iron. And there's not even a mention in the sustainability report of a controversy set off by the death of Rachel Corrie, a 23-year-old American peace activist who in 2003 was run over in the Gaza strip by a Caterpillar bulldozer, operated by Israeli Defense Forces. That has sparked a lawsuit and protests against Caterpillar.

In response, Caterpillar has said that it can't control how its products, once they are sold, are used or misused. That may be. But if the company is to become a force for sustainable development, it will have to take a more expansive view of its responsibility. Ultimately, Cat will want to engage more closely with dealers and customers to ensure that its products are used to good ends.

Edward Boyd, African-American corporate pioneer dies

NEW YORK (CNNMoney.com) -- Edward F. Boyd, a seminal figure in African-American business history, died Monday at the age of 92, Pepsi announced Wednesday.

In 1947 Pepsi-Cola hired Boyd to lead an all-black sales force to sell the soft drink in the African-American market, seeking to gain a foothold against well-entrenched Coca-Cola (Charts, Fortune 500). The sales team endured Jim Crow-era segregation as it traveled the country doing work that led to double-digit percentage sales increases, according to a release from Pepsi.


Edward F. Boyd
Boyd helped integrate the professional staff of Pepsi-Cola. He was also responsible for changing the image of African-Americans as caricatures in advertisements to conventional, attractive, middle-class Americans, the release said.

Boyd's sales team was featured in the 2007 book, "The Real Pepsi Challenge" by Stephanie Capparell.

Boyd left Pepsi (up $0.60 to $67.00, Charts, Fortune 500) in 1951 and worked at the ad agency Sherman & Marquette before going on to be a mission chief for the international aid agency CARE in 1954. He later worked for the Society for Ethical Culture.

Boyd retired in 1981 and lived in New York City. He's survived by his wife, four children, their spouses, and a granddaughter

Midamerican Energy Holdings, Berkshire Hathaway, and Salmon

Berkshire Hathaway is a diversified insurance company. It owns Geico, an auto insurer, General Re, a reinsurer that insures insurance companies, and a few others. It takes the money that people or companies pay in premiums, and invests that. This is how they make money. Berkshire has about 41 publicly traded stocks, and Warren Buffett's investments are scrutinized by rabidly curious investors eager to ape him. Berkshire also will buy over private companies.

Midamerican Energy Holdings is one of those. They seem to be serious about environmental responsibility, judging from the RESPECT statement on their website. They generate 15% of their electricity using "green" sources, such as wind geothermal, biofuel, solar, and hydroelectric power. They generate 1,167MW using hydropower, the largest proportion of their "green" energy.

And there is a problem with that. PacificCorp, which is a subsidiary of Midamerican, is being sued over its dams on the Klamath River by environmentalists, Native tribes, and fishers. Allegedly, toxic algae blooms in the reservoirs behind the Iron Gate and Copco dams in Northern California generate liver toxins that endanger the salmon, as well as the tribal medicine men who bathe in the water. Allegedly, PacificCorp "improperly controls the intake and release of water, allowing it to stagnate as temperatures in the reservoirs rise well above natural levels."

PacifiCorp, owned by a subsidiary of Berkshire Hathaway (Charts, Fortune 500), is pursuing renewals of its licenses to operate the dams with the Federal Energy Regulatory Commission.

PacifiCorp has been working with 26 interested parties to find a solution to issues related to the relicensing for at least a couple of years, a company spokeswoman said, but added that the company had no immediate comment on the lawsuit.

The U.S. Department of the Interior last year recommended removing the dams or building "ladders" for the spawning fish if PacifiCorp wants to keep them.

The Klamath River salmon population, once one of the West Coast's most robust, has declined during the past two decades as the dams and declining water levels from farm irrigation blocked their spawning routes. Growers have objected to attempts by environmentalists to limit the amount of water they can divert from the river for their crops during dry years.

Berkshire Hathaway is one of more ethical companies out there. Perhaps it is not the greenest company around. However, its boss is concerned with ethics and is one of the more broad-minded capitalists around. This incident concerns Christians because of effects on the environment, and on an indigenous group. Let us pray for a just solution.

Banking runs on margins and interest, not trust

A Smartmoney article goes a bit more in depth into how the mortgage market works, and some of the potential moral consequences. It also mentions Islamic banking. At its worst, Islamic banking is just a pro-forma workaround to enable the same result. However, the author also points out how some of its principles make good ethical sense in finance. Related to this, there's an Islamic mutual fund which has performed quite well; Islamic finance prohibits gambling and frowns upon debt, so the fund has loaded up on financially-strong companies, and avoids trading rapidly, both of which make very good sense in mutual funds.


But this isn't about ABN Amro, or its boss's rather pathetic-sounding claim that his global finance whale has become a "toy for hedge funds." This is about the realities of modern banking, which is in turn about collecting interest and fees from all-but-anonymous strangers. It's a business that runs not on trust and confidence, but on margins and volume.

In a world of commoditized credit, it's hard to know who's on the other end of a contract. Often, it pays not to ask. The brokers who arranged all those liar loans got paid long ago, as did the bankers who approved them. The investors who bought the riskiest securities backed by those no-documentation mortgages will be the ones to take a bath.

So now there are plans afoot in Congress to do away with "predatory lending" and subject mortgage brokers to more paperwork. The problem is that commoditized credit is predatory by its very nature, because the issuer of tradable debt cares about the creditworthiness of the debtor only one time — in the present. The future becomes someone else's problem.

The market seems to be responding to the subprime failures just fine without help from Congress by cutting off credit to the most reckless brokers and lenders and by leaving some of them broke. But yield spreads remain narrow, suggesting that the money that once flowed into risky mortgages has moved on to junk bonds and the like without the missing a beat. And as long as money remains plentiful, the people arranging deals retain a perverse incentive to care as little as possible about the arrangements' long-term risks.

Where will the mismatch between future risks and present-day rewards cause trouble next? It could be in commercial real estate, or perhaps in the syndicated lending for the leveraged buyouts currently propelling the stock market. Sam Zell and Larry Fink don't strike me as Chicken Littles.

Without question, the commoditization of credit has democratized access to financing and stimulated growth. But at some point the pension plans and insurance companies lining up to buy all that debt will have to ask whether the long chain of intermediaries has undermined the traditional bond of trust between lender and borrower.

I have accounts with several national lenders, and none of them really know me beyond my credit score, or see our relationship as anything more than an opportunity to market expensive credit monitoring. Of course, I view them as interchangeable suppliers of interest-free credit and charge-card rebates. I'm not at all profitable for most of them now, and the only way that would change is if I were to suffer a financial reversal. Beyond the rote expressions of gratitude by South Asian customer service reps, our relationship is adversarial in its economics.

And while there's no need to go overboard and adopt the Shariah, the main precepts of Islamic banking could have proven pretty useful at curbing some of the mortgage market's worst abuses. Since Islam forbids interest charges, Islamic mortgage contracts are essentially rent-to-own arrangements. The basic principle of Islamic finance — the long-term pooling of risk between the supplier of funds and their investor — would also have allowed banks and homeowners to share the housing downturn's pain through a mechanism less wasteful than foreclosure. The entire system depends crucially on sound collateral and full disclosure of benefits and costs — the very safeguards that so many subprime mortgage players failed to deliver in a rush to beat near-term volume quotas.

The more superficially the financial industry knows its customers and the more it views them as near-term profit catalysts, the more it spends to advertise the very opposite. I see these not-quite-white lies all the time in between snippets of business news: The investment advisor who's like a member of the family, the kindly loan officer next door.

If only someone were still willing to pay these people to care. In reality, many of them have been replaced with software models. It's called progress. On ABN Amro's personal banking page, the bank presents itself as "the partner that can help clients take charge of their financial future by planning in the present." And then there's Preferred Banking, "a relationship-banking approach for mass-affluent customers" who desire "individual recognition." That luxury costs extra.

Connecticut requires all hospitals, including Catholic ones, to dispense emergency contraception

The Connecticut state Senate overwhelmingly approved a bill Wednesday April 25 that would require all hospitals — including the four Catholic facilities — to provide the Plan B emergency contraceptive to rape victims. The abortifacient drug is also known as the morning after pill.

“This bill is a violation of the separation of Church and State,” wrote Bishops Henry Mansell of Hartford and William Lori of Bridgeport in a letter to lawmakers on Wednesday. “The Catholic Bishops of Connecticut are responsible for establishing and determining what moral guidelines Catholic institutions should follow; not the Connecticut General Assembly.”

“Senate Bill 1343 should contain language that respects the religious beliefs of Catholic hospitals and not force them to cooperate, either directly or through a third-party contract, in an abortion,” they said.

The bill, which passed 32-3, now heads to the House, where it appears likely to pass, reported the Journal Inquirer.

The bill allows hospitals to first give patients a pregnancy test. Those with religious or other objections could hire an outside physician to administer the contraceptive rather than assign that duty to hospital staff.

The Connecticut Catholic Conference rejected the measure, saying that hiring a physician outside of regular staff would not undo the ethical concern.

"It is clear to us that this approach would involve the hospital in a way that would violate Catholic moral principles of cooperation," the bishop wrote. "It would still involve Catholic hospitals in the performance of early abortions by administering Plan B when the medication cannot act solely as a contraceptive."

The state's four Catholic hospitals — St. Francis, St. Raphael, St. Vincent, and St. Mary — do not provide the contraceptive if a woman is ovulating or pregnant.

The Catholic hospitals have argued that the Plan B contraceptive could cause an abortion by preventing the implantation of a fertilized egg. Catholic teaching holds that human life begins at conception.

“Catholic hospitals provide emergency contraception to rape victims in the vast majority of cases,” the bishops noted in their letter. “In fact, it is an extreme rarity when this medication would not be provided.”

Senate Minority Leader Louis DeLuca (R-Woodbury), Sen. Daniel Debicella (R-Shelton), and Donald DeFronzo (D-New Britain) opposed the bill.

DeLuca had proposed an amendment, which was endorsed by the Catholic Conference, would require every hospital to have a written protocol for dealing with rape victims. Hospitals would be allowed to refer such patients to other facilities, but would have to report their reasons for doing so to the Department of Public Health.

“Catholic hospitals, in those rare cases, would provide the patient information on where the medication is available and provide transportation to another hospital if the patient requests a transfer. Outside rape crisis counselors are also available from outside the hospitals if the patient requests their support,” the bishops said.

DeLuca did not succeed in getting the amendment passed.

Dilbert and labor relations

Wal-Mart breaks the law to stop labor unions

Allegedly, at least, Wal-Mart has engaged in both legal and illegal anti-union activities. Companies go to great lengths to avoid unions, and many measures are legal. They can hire anti-union consultants, and spread propoganda. I remember an article in the local newspaper saying that it was no accident the Toyota plant in Kentucky was non-union, because of the articles the plant exposed its workers to. However, Wal-Mart is alleged to have engaged in illegal measures, such as firing pro-union workers.

Article 23, section 4 of the Universal Declaration of Human Rights states, "Everyone has the right to form and to join trade unions for the protection of his interests."


NEW YORK (Reuters) -- Wal-Mart Stores Inc. has used a myriad of tactics, including some that are illegal, to hinder the ability of its workers to form labor unions, a human rights group said in a report to be released Tuesday.

According to Human Rights Watch, the world's largest retailer has restricted the dissemination and discussion of pro-union views, threatened to withhold benefits from workers who organize, interrogated workers about their union sympathies and sent managers to eavesdrop on employee conversations.

Wal-Mart, the largest private employer in the United States, has also refused to bargain collectively, fired employees it knows to be pro-union and focused security cameras on areas where union organizing is heaviest, according to the report.

Wal-Mart employs more than 1.3 million workers nationwide, none of which is in a union. "Wal-Mart workers have virtually no chance to organize because they're up against unfair U.S. labor laws and a giant company that will do just about anything to keep unions out," said Carol Pier, who researched the report for Human Rights Watch, which probes human rights abuses around the world.

Wal-Mart spokesman David Tovar said the Human Rights Watch report is based on "unsubstantiated allegations" and added that the retailer respects its workers' right to a free and fair unionization vote.

"Wal-Mart provides an environment of open communications and gives our associates every opportunity to express their ideas, comments and concerns," Tovar said in an emailed statement.

"It is because of our efforts to foster such an environment that our associates have repeatedly rejected unionization attempts."

Human Rights Watch, based in New York, said it interviewed 41 current and former Wal-Mart workers and managers, met with labor lawyers and union organizers, and analyzed lawsuits that accuse Wal-Mart of violating U.S. labor laws.

Attack of the Wal-Martyrs
"Wal-Mart is a poster child for what is wrong with U.S. labor laws," said Pier. "Many tactics comport with U.S. law but taken together they create a climate of fear and intimidation."

Wal-Mart exposes new hires to anti-union training sessions and videos, gives managers union-prevention manuals and uses a "union hotline" and a centralized database to track union activity across the country, Human Rights Watch said.

U.S. labor laws fall short of international standards, the report said, and "allow a wide range of employer conduct that violates workers' right to organize and fail to include 'sufficiently dissuasive sanctions against acts of interference by employers against workers and workers' organizations,' as required by law."

Wal-Mart, which competes against Target (Charts, Fortune 500) and Costco (Charts, Fortune 500), operates some 4,000 stores nationwide, has battled critics who charge it with providing poverty-level wages and inadequate health care.