OMI USA JPIC Blog

Faith Consistent Investing: Not an Abstract Concept      

By Christina C. Herman

An important aspect of the work of the Missionary Oblates JPIC Initiative is our engage­ment with corporations on social and environmental sustainability issues. This corporate engagement ranges across many areas, from the pricing of essential medicines for the poor, to the impacts of corporate water use; from the enforcement of labor standards in factories to eq­uitable access to capital and credit; from pressing for the rights of indig­enous communities in mining oper­ations, to encouraging corporations to fight human trafficking.

Large corporations - whether they are making cell phones or ham­burgers – obtain their inputs from smaller companies scattered across the world. As we know, manufactur­ing is truly global, with much of the actual manufacturing taking place outside the US – in low-wage coun­tries like Bangladesh, Sri Lanka, Guatemala – and of course, China. Because countries vary in terms of how well they enforce worker safety laws, environmental regulations, minimum wage requirements, etc., worker rights and the environment are often inadequately protected.

Corporate Impacts on Water

An issue of growing concern is the impact of water use by corporate op­erations on local communities and ecosystems. Freshwater supplies are increasingly limited in many parts of the world, and water access and allocation are already proving to be areas of conflict. Negative corporate impacts can come from the direct use of water and water pollution, but also from the use of energy, which requires water for its production.

In water-rich areas, heavy water use is not necessarily a problem, al­though we need to think – and plan into the future - to insure mainte­nance of those now-adequate sup­plies. But in water stressed and water scarce areas, water use by corpora­tions and agribusiness poses a risk both to the local population and the company. Population growth and the impacts of climate change (caus­ing both drought and flooding) have combined to increase the pressure on existing water supplies to a point of crisis in some areas. Groundwater, in particular, is being used at unsus­tainable rates in much of the world.

When we engage a company in a di­alog on water, we focus on risk, and encourage them to measure their water use, so they can determine which of their facilities and what parts of their supply chain are locat­ed in water-scarce areas. If the com­pany has taken this step (and many have not), we then ask if they are taking action to decrease and off­set their direct water use - to reduce negative impacts on the watershed. Measuring and reporting - transpar­ency - are important first steps in re­ducing corporate impacts on water.
  

Supply Chain Risk

A major challenge, even for compa­nies well along this path of aware­ness and water risk management, is to get a handle on just what the risks are in the supply chain. A company’s supply chain consists of the companies that supply it with materials, and so is not under a company’s direct con­trol. The lack of a direct relationship makes it harder to both measure and reduce risk. But pressure com­panies do, with significant results. Wal-Mart, for instance, is pushing elements of sus­tainability down their supply chain, and hav­ing a huge im­pact, just by dint of their vast buy­ing power.

Managing water use in the supply chain is particu­larly important for large food and beverage companies, because 70-90% of the world’s freshwater use is for agricultural production, which forms most of their inputs. Yet, it is also a difficult challenge, one that even companies deeply concerned about water-related risks are still trying to manage.

Community Engagement

A very important focus for faith-based investors is the extent to which companies engage local com­munities on the impacts of their operations. Is the company working with other large water users, the lo­cal government, and the community in that particular watershed to fig­ure out better ways to manage the scarce resource? Have all elements of the community, including the disenfranchised, been included in this process?

The Interfaith Center on Corporate Responsibility (ICCR) hosted a Roundtable on the Human Right to Water and commu­nity impacts of corporate operations in New York in February of 2012. The goal was to start a more robust conver­sation about issues affecting both communities and companies, as well as how the needs of affected com­munities can be addressed. Much work has gone into determining how to measure the environmental impacts of corporate operations, but the determination of social im­pacts is far less developed. 

ICCR has started this conversation with the publication of its Social Sustain­ability Resource Guide. Further work is needed to develop processes that will respect the particular needs of poor com­munities. As always, concern for the people affected by corporate opera­tions, and the ecosystems on which they depend for their well-being, is what drives our faith-consistent in­vestment work.