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The HIP Scorecard in Fast Company: Rate and Debate 21 Firms Driving Profit Through Impact

HIP: A new way to maximize both Human Impact + Profit for your company, for your portfolio and for your world. (Updated and groovy HIPinvestor.com site now live)

The April issue of Fast Company showcases The HIP Scorecard, and the HIP philosophy and framework, that we completed in collaboration with Sara Olsen and Brett Galimidi of SVT Group in San Francisco.

Our goal: to look beyond good intentions and focus on concrete results--how human impact drives the bottom line--as a guide for investors seeking to generate compelling returns and benefit society.

The 21 companies profiled here were able to describe their strategic vision, performance metrics, financial returns, accountability, and decision-making systems that supported sustainable performance. They could also articulate how that management approach drove human impact: namely, the health and wealth of customers and employers, environmental quality, and social equality.

Find out more about AMD, AA / Alcoa, CSCO / Cisco, GE, GS / Goldman Sachs, MLHR / Herman Miller, HPQ / Hewlett Packard, INFY / Infosys, IFSIA / Interface, IBM, LRY / Liberty Property, MCD / McDonald's, NKE / Nike, PCG / Pacific Gas and Electric, SBUX / Starbucks, SUNW / Sun Micro, UTX / United Technologies, VZ / Verizon, WAG / Walgreens, and WMT / Wal-Mart.

See the entire analysis at http://www.fastcompany.com/investing/

Interactive HIP Scorecard Click on each of the 21 profiled companies to see where they plot on the "HIP Revenue" and "HIP Practices Rating" chart.

How HIP is Your Company? Take this quiz to test your company's HIPness.

Measured Progress Investors are figuring it out: short-term numbers don't tell the whole story. How to think about valuing the invaluable.

The HIP Scorecard A new way of looking at the human side of investment performance.

Get a HIP Replacement Be HIP in how you buy, how you innovate, where you invest, and how you vote.

Experts in Measuring Impact Fast Company partnered with HIP Investor and SVT Group because of their innovation and expertise in measuring impact--and experience in helping leaders and organizations realize results.

Slideshow: 10 Tips for Making Sensible Investments10 tips for
investing in companies that drive profit through human impact.

Learn More About Impact + ProfitWant to learn more about quantifying human impact and how it drives profit? Here are connections to some leading resources in the field.

See the entire analysis at http://www.fastcompany.com/investing/

Just Say Yes? Free Drugs for Employees from New Wellness Initiatives

Free drugs? Paid for by employers? Is "health care for all" the new business mantra?

Today's front-page New York Times coverage outlines this emerging revolution:

In the most radical of various moves, a number of employers are now giving away drugs to help workers manage chronic conditions like diabetes, high blood pressure, asthma, and depression.

Major employers -- the Times profiles hotelier Marriott (MAR), office products maker Pitney Bowes (PBI), carpet maker Mohawk Industries (MHK), and Maine's state goverment -- are testing free-of-charge pharmaceuticals with employees, with the expectation that the return on that investment will be lower health-care costs and higher employee loyalty (and lower staff turnover costs).

Companies now recognize that “if you get people’s obesity down, cholestrol down, asthma down, you save a lot of money,” said Uwe E. Reinhardt, a health economist at Princeton University.

Nearly 60 million Americans have hypertension, or high blood pressure, leading to heart attacks. Asthma sufferers are estimated at 17 million Americans. Nearly 20 million Americans have diabetes. Combining these three conditions with depression, the Times quotes Hewitt Associates as saying 25% of working-age adults encounter these health issues. And those who cannot afford health care, especially at lower income levels, are skipping even the $10-$50 co-pays for their prescription drugs So, what happens when companies give employees free medicine?

“We can see in the preliminary numbers that employees taking part have improved their [health treatment] compliance,” said Jill Berger, the vice president for health and welfare at Marriott, which covers 160,000 hotel and resort workers and dependents.

Earlier this year, the online edition of the journal Health Affairs published Value-Based Insurance Design by Harvard Professor Michael E. Chernew and University of Michigan Professors Allison B. Rosen and A. Mark Fendrick.

When everyone is required to pay the same out-of-pocket amount for health care services whose benefits depend on patient characteristics, there is enormous potential for both under- and overuse. Unlike most current health plan designs, Value-Based Insurance Design (VBID) explicitly acknowledges and responds to patient heterogeneity. It encourages the use of services when the clinical benefits exceed the cost and likewise discourages the use of services when the benefits do not justify the cost.

How should health care be delivered, and who should pay how much? The CEO of Merck (MRK), Richard T. Clark, writes in "The American Journal of Managed Care":

Currently, we price our products to health plans on a per tablet basis, regardless of who the patient is. Within a given health plan, patients share the same benefit design with the same copayment for a given drug. To control costs, payers raise copayments and set up formularies to restrict use. To create demand and drive volume, we promote our products to the physicians and patients.

But what if we all focused on quality measures, appropriate patients, treatment gaps, and goals instead? What if we priced to the plan on a population basis, the way a health plan manages its business?

Maybe some products are overused among some patients and underused by others. Maybe some patients should be discouraged from using a product (through higher opayments or other restrictions), while other patients should be encouraged. Should a patient who has already had a double bypass and a stent, and who has multiple comorbid conditions, really have the same copayment for his cholesterol drug as an otherwise healthy 40-year-old with mildly elevated cholesterol who is responding to a direct-to-consumer ad?

In addition, wellness programs are starting to emerge in more corporations. However, General Mills (GIS) was early in its wellness program with its sales and marketing employees 20 years ago, and has tracked the longitudinal results. The findings shared with HIP Investor claim that those staff are eating better, living healthier and suffering from fewer conditions now than they were two decades ago.

IS THIS HIP?

• HEALTH: Obviously, with free pharmaceuticals properly prescribed, employee health should improve. In addition, employee satisfaction grown leading to boosted mental health and lesser stress. However, some companies aggressive behavior like Scotts Miracle-Gro(SMG) have led to contention and lawsuits described in the current issue of Business Week "Get Healthy or Else", where a smoker who refused to give up his habit was fired and now is suing the company.
  
• WEALTH: When people are healthier, they can attend work, pay closer attention to detail, and reduce stress at home by not being ill. In addition, healthy employees inspire other employees to be healthier - and may walk, run or play sports at breaks or lunches (see Google's sand volleyball "beach"). All of this is expected to lead to a more productive workforce, but could also increase customer satisfaction, as companies improve individual and collective health. Also, as previously blogged at HIP Investor, healthier-weight people tend to earn more in income and accumulate assets faster.
  
• EARTH: More preventive health approaches, including more exercise, could lead to a better environment - as employees could walk rather than drive during breaks, and possibly during commuting. In addition, healthier food intake supports more sustainable food production. As pharma companies pursue "green chemistry" practices, their products will be healthier for the earth. Companies may even try Eastern medicine solutions to examine a particular treatment's ROI.
  
• EQUALITY: Finally, free-of-charge medicine is a great boost to "health care for all." and could spur a new form of competitive advantage to attract, retain and promote the best talent. One challenge will be how low-margin businesses and high-turnover businesses encourage health-care prevention and wellness and realize benefits from their financial constraints.

WHAT DO YOU THINK?

What practices exist at your company? Have you selected who you work for by health care benefit? What else could companies do to encourage positive health? Tell us about it.

Hey Leadfoots, Your Eco-meter is Watching You (in Toyotas in Japan)

In Japan, Toyota's (TM) models now rate your driving with an eco-sensor. Whether coasting in a Zen-like manner, or properly generating RPMs that are not wasteful, the Toyota sensor helps to re-train us as drivers.

How can drivers value MPG over MPH? The need for speed definitely gets your juices flowing with emotion, but maybe can be tempered with thoughts of global warming and climate change - and just a more restful and stressless driving experience.

WHY IS THIS HIP?

* HEALTH: Smoother starts and less speeding makes driving more predictable, and should reduce accidents and deaths. More sensors are coming to alert drivers on these topics too.

* WEALTH: Less gas wasted means fewer trips to the petrol station. Maybe the sensor should have a monetary display of gas saved at the end of each trip too?

* EARTH: Obviously, this eco-sensor can give imeediate feedback on saving Greenhouse Gases (GHG). How about a counter that tracks that versus more inefficient driving?

* EQUALITY: Smoother driving might make us neighborly and respectful of each other, and drive in a more collaborative way.

WHAT DO YOU THINK?

Do you want an eco-sensor? What should it track? How else can we shift behavior?

Supersize Me? In for a Penny, In for a Pound (of Your Weight & Your Wallet)

A December 2 New York Times Business article reported that being overweight or obese - as classified by your body-mass index - can lead to lower financial net worth, as well as increased long-term health costs.

As shown in the chart, the median net worthy of younger Baby Boomers is correlated (but not proven to be causated) with body-mass-index weight classification. You can calculate yours by taking your weight in pounds and dividing it by the square of your height in inches, and then multiplying by 703. A score of over 40 is morbidly obese, over 30 is obese, over 25 is overweight, and 25 and under is normal.

Most alarmingly in the article is the true cost of "supersizing" a meal, resulting in long-term health costs of 5-x to 10-x the cost of extra fries and a larger drink:

This year, two nutritional scientists at the University of Wisconsin-Madison, Rachel N. Close and Dale A. Schoeller, took a unique twist on the calculations to determine what “supersizing” a fast-food meal costs society. Paying 67 cents to supersize an order — 73 percent more calories for 17 percent more money — adds an average of 36 grams of adipose tissue. The future medical costs for that bargain would be $6.64 for an obese man and $3.46 for an obese woman. “The hidden financial costs associated with weight gain from upsizing a value meal may help convince people it is not a bargain,” Mr. Schoeller said.

Also included are whether and how much hiring biases and weight discrimination play a factor in incomes and asset growth, as there are few social boundaries that restrict the blame and exclusion of overweight people. Only Wisconsin explicitly bans weight discrimination.

In sum, according to the US Bureau of Labor Statistics (BLS), every one point increase in body-mass-index (BMI) relates to a $1000 decrease in net worth.

IS THIS HIP?

Public companies in the food business are at increasing risk of lawsuits and damages of producing and marketing high-fat foods, especially to children and teens. What measures could be used for food companies?

* HEALTH: Each food product package carries a nutrition label; however, most prepared foods do not (especially in restaurant menus). Measuring calories per portion size provided standard comparisons, but many prepared meals are already supersized - especially in most parts of the USA with big appetites (California entrees tend to be smaller portions). IDEA: Nutrition Labels could take the USDA food pyramid and showcase green/yellow/red ratings for each food group's contribution to the overall meal.

* WEALTH: Income distribution of food purchasers by class, ethnicity and gender can highlight particular at-risk groups, providing information for more proactive solutions. Any company that increases the wealth of its customers can generate tremendous loyalty and renewals, not to mention satisfaction. Who will be first?

* EARTH: Potential measures: Proportion of chemicals used in food production, and remainder of food consumption that cannot be composted or recycled. Portion of packaging that is recylable (made from corn starch or potato starch).

* EQUALITY: Do all classes of society have access to nutritious food? Will Frito-Lay's (PEP)test of healthy potato chips (baked instead of fried) succeed? How can food companies partner with exercise regimes to both decrease consumption and increase calorie burning?

WHAT DO YOU THINK?

Does weight discrimination exist? Shoud it impact Wealth (income and assets)? Should Health be rewarded or incented by busineses, or governments? Which companies are delivering nutritional Health and its associated Wealth?

Sustainable AND High-Growth "Green 50" Picked by Inc. Magazine for First Time

November's issue of Inc. magazine launched its inaugural listing of sustainable for-profit businesses, called "The Green 50."

Inc.'s reporters and editors selected 50 companies in eight categories:

* Industrialists, featuring the only public company, Interface (NASDAQ:IFSIA), maker of flooring products. CEO Ray Anderson, age 72, has committed to taking net resource consumption to zero, and participated in the 2006 Clinton Global Initiative.

* Integrators, like organic winery Frog's Leap, wind-powered New Belgium Brewery, "cradle-to-cradle" skateboards by Comet, and organic-based lawn care franchisor NaturaLawn.

* Converts, like detoxifying the worst offenders Pantheon Chemical a 2004 EPA award-winner, environmental consulting firm GreenOrder, sustainable stationery maker New Leaf Paper, and fresh fast food chain Burgerville.

* Pioneers, such as responsible forest-grower Collins Companies, green-product maker Seventh Generation which reviews its own supply chain for environmental and social performance (hurray!), and sustainable food companies Eden Foods (soy milk), Clif Bar, and Stonyfield Farm (whose strategic partnership with Group Danone spurted its growth starting in 2001).

* Builders, like green pre-fab housing supplier Michelle Kaufmann Designs, building systems reengineer IBC Engineering Services, and bamboo floor/panel supplier Teragren.

* Road Crew, including electric-(sports)car maker Tesla Motors, trucking fuel-saver IdleAire, and flex-car renter ZipCar.

* Futurists, with ethanol-producer and Vinod Khosla-backed Cilion, home power storage manufacturer/lessor Gridpoint ("TiVo for electricity" they say), and clean-energy transformer CoalTek.

* Recyclers, featuring corn and potato utensils (SpudWare) by Excellent Packaging and Supply, mobile device recycler ReCellular, and producer of recycled personal-care products Recycline.

While the recognition highlighting these 50 is certainly positive for Human Impact and Profit, it would be even more powerful to see companies ranked more specifically on their OUTCOMES, like Health, Wealth, Earth and Equality. Inc. magazine - and the companies themselves - should consider methodically analyzing each firm's HIP-ness, just as it does with its revenue-growth metrics for its annual Inc. 500 (and now Inc. 5000) ratings.

WHAT HIP MEASURES ARE APPROPRIATE?

Each Green 50 firm could be rated on its Health, Wealth, Earth and Equality outcomes - and then ranked relative to its peer group or overall. For example:

* HEALTH: Employee sick day percentage (possibly lower than average for green companies); average health-care spending per employee (HIP practices and policies encourage better employee health and lower spending and premiums); impact of products on customers health (lowering their health-care costs and increasing their quality of life and life expectancy).

* WEALTH: Growth in employee wealth (high-growth triggers higher incomes and bonuses, and possible stock options boost assets of employee families and households); growth in customer savings (when there's green synergy of both environmental and cash savings, customers benefit economically - and spread word of mouth); growth in supplier business (the value chain is one of the most powerful impacts of a growing green business).

* EARTH: Carbon intensity and usage (lower usage per person or per product, increasingly more systematically measured); track record of recognition or lack of punishment for green practices and outputs; and net resource usage (of water, materials and other inputs, which boost both profits and sustainability).

* EQUALITY: Customer, employee, supplier and society distributions are all categorically similar (gender balance, ethnic balance, income class balance), triggering high participation and involvement, and discovering new markets and products; access to products easy for all types of potential customers (no matter their background or situation).


WHAT DO YOU THINK?
What other types of HIP measures would be relevant across companies and industries? Which companies not yet listed should be on Inc.'s Green 50?

The inc.com website also has recommendations for 23 planet-saving products and 10 ways your company can save the environment.

The Death of Pensions: Winnowing Wealth

E.I. du Pont de Nemours and Company (NYSE: DD) announced this week that new hires in 2007 and beyond will not receive a pension, health care or life insurance as its employees have for decades. In addition, employees retiring in 2008 and beyond will draw on a lesser pension base, by reducing it s contributions by two-thirds (67%).

Going forward, du Pont will contribute 3% of an employee's pay to their retirement savings through a 401(k) plan, and match up to 6% of an employee's contributions.

IS THIS HIP?

* WEALTH: DuPont's decision to shift from defined-benefit pensions to 401(k) funding and matching will impact younger employees differently than older ones. The impact on Wealth could be higher impact if younger employees save aggressively and make good investment decisions, and theoretically beat the old pension system. However, voluntary contributions are typically less than 100% participation, and most individuals are not sophisticated or disciplined enough to yield the investment results that professionals can obtain. While this could stimulate more investment education and participation by individuals, it could leave mid-career professionals in murky waters, as their retirement planning goals may need readjusting. Overall DuPont earnings will rise according to the company in 2007 and beyond, but what will happen to individual pools of wealth? Will it drag the economy?

* HEALTH: Mental health of employees could suffer due to increased stress. Many individuals find finance difficult and confusing, also leaving some susceptible to recommendations from friends rather than investment guidance.

* EARTH: No obvious impact, unless individuals choose to invest in more eco-positive companies, especially since du Pont is making intentional efforts to reduce its carbon and emissions footprints globally.

* EQUALITY: For employees, this may provide more equitable access to investment potential, but can vary based on family situations (lower income families may choose to save less to afford basic essentials).

WHAT DO YOU THINK?
Is this a positive move for more individual participation and accountability? What else should du Pont do to help with the transition?

JDPower: Customers Want to Live - with Safe Cars

Customer-satisfaction expert J.D. Power and Associates has found that customers driving cars want to live.

1. Side Impact air bags: 42% "definitely" intersted; 89% "probably" interested; same rating by customers even when the price of $600 was revealed.

2. Run-flat tires, 21% definitely interested; rated #3 when price revealed.

3. Stability control, 20% definitely interested; rated #2when price revealed.

4. Backup assistance (cameras and sensors behind the car alerting the driver)

And, on the entertainment front, customers want personalized music in their cars. Three in five, or 60%, are willing to pay $150 to connect their iPods with music they load and manage into the car audio system.

WHY IS THIS HIP?

* HEALTH: Obviously, customers want safety for themselves as drivers and their families or friends as passengers. This leads both to saved lives, fewer disabilities, and lower health costs personally and for health insurance. Additionally, lower stress from driving could result, while hopefully not making them more volatile drivers (which sometimes happens with Volvo drivers! :)

* WEALTH: Higher re-sale values could result when exchanging models in the future, or in the short-term, a higher ROI on adapting current cars to run iPods today when reselling.

* EARTH: Unclear impact on the environment; depends on what type of materials are used in the new safety features, especially the run-flat tires which could be more beneficial if they degrade less when on the road.

* EQUALITY: If built in as standard features, then equal access to all customers and eventually all models would benefit all segments of society.

WHAT DO YOU THINK?
What features do you value in vehicles? How much would you be willing to pay for them? Do you have a favorite transportation mode?

One Billion Dollars! China Trades Up on the Environment

Austin Powers has made more than one phrase famous, but today's winner is:

ONE BIL-LION DOL-LARS! (or is it bil-Yuan?)

Why "bil-Yuan"? Because today the largest greenhouse-gas emissions trade in history totaled US$1 billion, to help two Chinese chemical manufacturers reduce its pollutants (a gas called HFC-23, an inert gas rated 11,700 tmes more powerful in global warming than carbon-dixoide (CO2).

WHO WAS INVOLVED and WHY?

* Chemical companies: Two Chinese companies in Jiangsu Province (east coast of China), to reduce pollutants by the equivalent of 19.7 million tons of CO2 (and to make substantial progress by 2008, the Summer Olympics in Beijing)

* International Financing Institutions: The World Bank, to advance the market for emissions trading and enable the Kyoto Protocols to progress with 164 country signatories (despite the lack of participation from the USA, the world's largest polluter, and Australia, a very large per-capita polluter)

* Utilities: RWE (adr: RWE AG) of Germany; Tokyo Electric Power (Japan: 9501); Endesa (adr: ELE) of Spain/Espana; several utilities firms, who have already reduced their emissions and can sell them through this unique financing vehicle.

The Wall Street Journal also reported some of the funds will be invested in a new Clean Development Fund that will promote forms of renewable energy and to remove other gases believed to cause global warming.

WHY IS THIS HIP?

* EARTH: A positive step forward for reduction of greenhouse gases and other pollutants, continuing to accelerate the time towards a more balanced ecology. The chemical companies in particular have pressure to meet international standards by the 2008 Summer Olympics, which should help not only eastern China pollution, but other pollutants that carry over the Pacific Ocean to western USA and Canada.

* HEALTH: Lesser breathing and lung cancers and conditions should result; plus, positive hope for further pollution reduction can trigger beneficial mental (and physical) health of employees, suppliers and stakeholders locally in China.

* WEALTH: Lower future clean-up costs by not polluting in the first place, typically the burden of local and federal government paid for by citizen tax dollars.

* EQUALITY: Low-income families are typically burdened with the most health problems, and can be proximate to the facilities and their pollutants. This move can hopefully reduce an impact on those families.

WHAT DO YOU THINK?

Is emissions-trading helpful to reward low polluters? What other incentives could be initiated?

Will Wal-Mart Save Our Skies, Seas & Security?

Low prices may also mean low emission and carbon soon. That is, if Wal-Mart (NYSE: WMT) and its affiliated Sam's Clubs start selling ethanol at its nearly 400-plus owned locations (and 900+ sites with partners) that offer fuel for cars and trucks.

As Fortune magazine reports:

That's because running cars and trucks on E85, a blend of 85 percent ethanol and 15 percent gasoline, could turn out to be a cost-effective way to reduce the carbon emissions that cause global warming and curb our dependence on imported oil.

There's just one big problem. Only about 800 service stations in the United States, out of a total of 168,000, pump E85. There's not a single E85 pump, for example, in all of New England.

To accelerate the future into today, Wal-Mart assembled a network of stakeholders, according to Fortune magazine:

* Auto companies: GeneralMotors (GM), Ford (F), DaimlerChrysler (DCX)

* Ethanol makers: Cargill, BlueFire Ethanol Fuels (BFRE), Iogen

* Technical experts: Green Strategies, BluSkye, Rocky Mountain Institute

* Environmental organizations: Conservation International, Environmental Defense, Natural Resources Defense Fund, World Wildlife Fund, Worldwatch Institute.

WHY IS THIS HIP?
* WEALTH: Making, selling and using ethanol is great for USA's national income, jobs and economic security. Buying ethanol instead of oil-based gasoline means less money for the sources from the Middle East, Russia, Venezuela and other countries with strained relations with the USA.

* HEALTH: Reduced carbon emissions will lead to declining health issues; and if we are lucky, a smell of popcorn on the highways :)

* EARTH: Lesser environmental damage and less run-off from materials toxic to our planet.

* EQUALITY: Farmers of all sizes could participate in the corn-based economy, and also give new growth potential to nations like Brazil and their crops.

WHY IS THIS HIP?

Do you use E85? Who will be the winners in this market? How can corn-based ethanol and our corn-based food economy co-exist without driving up both food and energy prices?

Where on Earth Can You Be Happy? Ask Denmark

How happy you are may depend on where you live? Or at least be determined by your country's access to health care, ease of jobs and wealth, and ability to attend school.

The Times of India notes that while:

Seven of the top 10 happiest countries are from western democracies, while countries in Asia, known for their strong cultural values, family ties and collective identities surprisingly scored low — China (82), Japan (90) and Thailand (76).

The study showed that large countries with huge populations tend to be unhappy lacking collective identity, which is in abundance in smaller nations with its people believing a lot on inter-dependence for survival. That's why countries like China, India and Russia (167) did so badly.

Using data from 100 global sources across 178 countries (excluding war-torn nations like Iraq and Sudan), Dr. Adrian White, an analytical social psychologist at the University of Leicester in central England, sees that health and wealth are closely correlated to happiness, and that size matters:

"Smaller countries tend to be a little happier because there is a stronger sense of collectivism and then you also have the aesthetic qualities of a country," White said.

But nations with capitalist economies appear to be not only richer, but also happier:

“There is a belief that capitalism leads to unhappy people. However, when people are asked if they are happy with their lives, people in countries with good healthcare, a higher GDP per capita, and access to education were much more likely to report being happy.”

The Full Happiness Index and scores are available at:
http://www.le.ac.uk/pc/aw57/world/sample.html

Diamonds, and Fair Labor, Are Forever

San Francisco-based Brilliant Earth's motto is "Luxury With a Conscience" to sell its conflict-free diamond and gold jewelry.

Brilliant Earth grew out of a marriage proposal. After Beth's fiance could not find a reliable source that could guarantee conflict free diamonds, Beth Gerstein and Eric Grossberg created Brilliant Earth to provide certified conflict free diamonds as an alternative to current diamond industry practices.

BrilliantEarth sources its diamonds mainly from Canada, which monitors the labor conditions and mining approaches. Typically, diamonds are sourced from South Africa, where practices for extraction and labor practices have been contested over the years.

WHY IS BRILLIANT EARTH HIP?

* HEALTH: For workers, better physical and mental health due to more reasonable labor practices.

* WEALTH: Higher quality jobs and incomes for the diamond miners and millers.

* EARTH: More sustainable environmental practices and processes in Canadian extractions.

* EQUALITY: A balanced population of ethnic workers.

BrilliantEarth has also co-founded and donates 5% of its profits to Diamonds For Africa Fund.

HI + IP = HIP too!

An innovative Chicago company named ipIQ ("intellectual property Intelligence Quotient"), chaired by IBM veteran Bob Howe, is quantifying and indexing Intellectual Property (IP) performance -- and rank-ordering companies, industries and geographies.

So, with oil prices near $80 per barrel, how innovative are Energy and Environmental firms? Not very, according to ipIQ:

The slowest industry to innovate remains highly competitive.While overall movement is slow, slight shifts in ranking are a direct correlation to an increase or decrease in patenting activity and the quality of those patents. ... Exxon Mobil (XOM) continues to be among the top patenters every year but has a lower impact on the industry. ... With the need for alternative energy sources growing, companies such as Hydro-Quebec should be watched closely to see if future patents have a greater influence on the industry.

Meanwhile, over in the hyper-active Information Technology industry:

Industry players feel a driving need to patent. The most significant changes in thetop 10 comes from the introduction of Hitachi (HIT) into this industry edging Hewlett-Packard (HPQ) out of the 2nd position. Microsoft (MSFT), which marked 5000 patents in early 2006, breaks into the top 5 in front of Toshiba (otc - TOSBF).

Interestingly, iPiQ has quantified four dimensions of IP Performance to determine these rankings:

PATENT AVERAGE: the number of patents granted to companies within an industry and region, based on the average of all grants for countries in the region.

CURRENT-IMPACT INDEX™: the broader significance of a company’s patents by examining how often its U.S. patents are used as the basis for other innovation in the current year.

SCIENCE LINKAGE™ reflects the core science referenced in a company’s U.S. patents. A high figure indicates a company closer to the cutting edge than its competitors with lower values.

TECHNOLOGY CYCLE TIME™ indicates a firm’s speed in turning proprietary research and innovation into Intellectual Property.

These measures vary by company, industry and region; more examples can be found at the iPiQ web site.

ARE THESE METRICS 'HIP'?

Patents are a leading indicator of possible new products and services, and potential transformational impact. With patent protection of 14 years, companies can realize high margins for multiple years if they can commercialize their inventions.

The HIPinvestor sees that a similar approach can be explored among the correlation of the four Human Impact categories(Wealth, Health, Earth and Equality) and the drivers of Profitability (including Customer and Employee Satisfaction, as well as financial performance). We will report on these correlations in future posts.

Just as ipIQ believes about Intellectual Property (IP) performance, The HIPinvestor sees that Human Impact (HI) is highly relevant to the business, its strategy, and enterprise value.

Hence, both HI and IP make a company HIP!

WHAT DO YOU THINK?

How is IP commercialized in your organization? What new measures have you seen or used in your organization? What novel insights or unique actions did they trigger?

(Post your thoughts and feedback below.)

Silicon Valley IP: Location, Location, Innovation!

THE HEADLINE:

Silicon Valley, the global nexus of talent, capital and innovation based in the the 8-million strong Bay Area of Northern California, is top of the heap for US Patents issued to individual inventors or companies large and small in 2005, reports the WSJ.com July 22-23 edition in combination with primary research and analysis performed by iPiQ of patents issued.

Silicon Valley's cities/towns commanded just over half the top 20 slots for cities with patents issued, nearly three-quarters of the top 10 slots, and the top 2 slots (in rank order: San Jose, Sunnyvale, Palo Alto, Fremont, Cupertino, Mountain View, Santa Clara, San Francisco, Los Altos, Saratoga, Menlo Park). Including San Diego's Silicon Coast, California had 12 of the top 20; Texas (Austin's Silicon Hills & Plano's Silicon Prarie, and Houston) held 3; New York's Silicon Alley and Rochester totalled 2; and one town each from Idaho (Boise HQ of Micron semiconductors), Oregon (Portland's Silicon Forest) and Washington (Seattle's Silicon Salmon :).

WHY SILICON VALLEY?

Silicon Valley was seeded by government aerospace research and contracts dating back to the original space-launch decades of 1960s and 1970s building on computing research from the 1950s and 1960s and military weapons research from the 1940s and 1950s. Universities like Stanford and University of California's multiple campuses were augmented by commercial entities like Xerox PARC and government labs in Livermore and Berkeley. As talent and ideas massed, professional venture capital initially funded garage and dorm-room start-ups. As companies like Hewlett Packard and Intel IPO'd their equity and accelerated into multinationals, the virtuous circle of talent with ideas developed in academia, capital to commercialize and accelerate into businesses with revenue, profit and market capitalization ramped up to today's Silicon Valley. The sunny weather, balance of life, and welcoming attitude to immigrants (globally and nationally) provides competitive advantage for retaining talent and long-term commitment to the area.

WHY IS I.P. "HIP"?

The four main HIP categories relating to Human Impact are:

* WEALTH: Great ideas and IP enable job creation, income generation and profit streams that can either be paid to shareholders, employees or taxes to governments for societal infrastructure. The most innovative companies are typically the strongest hirers and developers of talent (e.g., Hewlett Packard). Solid education performance can aggregate both extraordinary students and professors, and hence institutions as a magnet for ideas and talent. (e.g., UTexas-Austin)

* HEALTH: Innovations require creative minds, healthy bodies, and time outside of work to spark the "aha!" moment. Silicon Valley has the weather, landscape (ocean, mountains) and access to outdoors, exercise, and attractive environments that spur ongoing ideas, innovations and IP. Directly, the industries of Biotech and HealthCare can tremendously benefit our human health physically, mentally and emotionally.

* EARTH: Sustainability is core to innovation, as ideas can only grow when they add more than they consume. The challenge going forward is how to up this productivity metric even further - to innovate on the least possible resources, especially environmental impact. The next wave of IP will likely include eco-efficient technologies, enviro-friendly transportation, and net-negative processing (e.g., treated water flows that are cleaner going out than coming in).

* EQUALITY: Great ideas and innovations cut across boundaries, whether gender, ethnicity or class. The challenge is how to create the human conditions and relationships to enable them to flourish. New York City is probably closest to the melting pot culture, but up and down the West Coast (Seattle, Portland, SF, SV, San Diego) the embracing of immigrant-professionals has built the economies of innovation, both commercially and societally.

and the three drivers of Profit (the P in HIP):

* CUSTOMER SATISFACTION: Customers have unmet needs, and innovation closes the gap on what clients want. Close listening to these desires can trigger new ideas and hence new revenue. Also called Customer Delight!

* EMPLOYEE SATISFACTION: Employees desire companies that are innovating and are "cool"; but employee attention and feedback on customer needs or appropriate inventions are leverageable by HIP companies.

* PROFITABILITY: Up to 70% of profitability is driven by launches of new products and services (vs. existing products or line extensions), according to Bain & Co. analysis. Market leaders command first-mover status, market share, and a positively disproportionate share of a new segment's profitability. Copycats are always catching up - and returns and market caps reflect that reality.


WHAT DO YOU THINK?

What other areas globally are the new Silicon Valleys?

When will we see both the Human Impact and Profits (HIP) of their innovations, intellectual property and patents?

(Click below to post!)

Petition to SEC: Climate Change Affects Profits?

Hurricane Katrina proved that weather impacts the economy - energy supply constraints pushed up prices; agriculture and manufacturing exports were restricted by the flooding of the Mississippi; and massive displacement of workers into Houston and out of New Orleans caused mutliple ripple effects.

Whether Katrina and climate change are connected, most major weather events can affect profits of retailers, manufacturers and of course the markets. Will individual and corporate behavior cause changes in climate that ultimately generate ripple effects into Human Impact (earth; health) and Profitability?

THE NEWS:

Yesterday, a new petition sent by a coalition of 27 investors to the U.S. Securities and Exchange Commission (SEC) encourages companies to disclose potential vulnerability and financial risk of overall changes in climate.

The investors represented a wide range of constituents and interests, as well as $1 Trillion in investable assets:

- Four major UNIONS covering 3+ million workers: the Teamsters, the Sheet Metal Workers Union, and AFL-CIO representing Communications and Telecom workers; and the Service Employees union

- State TREASURERS, controllers and their pension funds, representing all political stripes: New York, New Jersey, California, Oregon, Vermont, Connecticut, Kentucky; as well as British Columbia in Canada

- FOUNDATIONS and NGOs: eco-positive Bullitt and Cummings; UNITEnow

- RELIGIOUS, progressive investors with traditional values: Christian Brothers Investment Services and the Evanagelical Lutheran Church

- Innovative FUNDS like Trillium in the USA and F&C Asset Management in London, UK

THE IMPACT TO DATE:

CERES.org, the anchor of the investor coalition, reports results to date of the results of initiatives like this:

As a result of such resolutions and other engagement with companies, more than a dozen electric power companies, as well as a handful of auto and oil firms, have published or agreed to publish reports on their potential financial exposure from new regulations and other climate-related risks.

The letter to Cox is part of a 10-Point Investor Network on Climate Risk action plan that was endorsed by 28 European and U.S. investors at the Institutional Investor Summit on Climate Risk at the United Nations last year. The action plan calls on U.S. companies, Wall Street firms and the SEC to intensify efforts to provide investors with comprehensive analysis and disclosure about the financial risks and opportunities presented by climate change.

WHY IS THIS "HIP"?

CERES and its coalition of investors is HIP because:

+ Active ENGAGEMENT by investors with large pools of capital for increased disclosure and ratings of risk factors.

+ If implemented, more TRANSPARENCY about risk, especially those not typically discussed officially by many public companies (though Bill Ford of Ford Motor Company is one positive example)

+ A move towards tangible MEASURES of Human Impact linked to climate changes and environmental impacts; and ultimately a correlation to Profits. This initiative would help trigger more HIP performance scorecards, that would include metrics on resources used on Earth, and net effects of their behavior on Health (Other categories of HIP measures include Wealth and Equality)

THE COVERAGE:

The news was first reported by the New York Times (Business Page C8) , then CSRwire.com, and as of this posting the Financial Times.

Welcome to The HIP Investor

Great investing is HIP, as in:

"Human Impact" + "Profit" = HIP investing

The HIP Investor blog outlines the spectrum of ways that you as an investor can make a net positive human impact on the world while also earning financial returns from profitable ventures.

We will review companies, funds, and investment vehicles of all types of equity and debt - and highlight the range of Human Impact as well as Profits that they deliver.

We encourage you to participate by letting us know of investments we should share with our community - and encourage your collaborative input into the conversation.

Let's improve our world together by investing all our currencies -- whether rupees, rand, reals, euros or dollars -- for Human Impact + Profit; now, that's HIP!