The CSR Newsletters are a freely-available resource generated as a dynamic complement to the textbook, Strategic Corporate Social Responsibility: Sustainable Value Creation.

To sign-up to receive the CSR Newsletters regularly during the fall and spring academic semesters, e-mail author David Chandler at david.chandler@ucdenver.edu


Tuesday, May 14, 2019

Strategic CSR - Facebook

 
This is the last CSR Newsletter of the Spring semester.
Have a great summer and I will see you in August!
 
 
The 5e of Strategic CSR contains a new case-study on the media, in general, and Facebook and related issues, in particular. The article in the url below builds on an earlier Newsletter (Strategic CSR – Facebook) to add an interesting twist:
 
"Facebook may eventually have more dead users than living ones. If Facebook continues to grow at its current rate, the site could have 4.9 billion deceased members by 2100, according to [new research]. Even if growth had stopped entirely last year, the study finds, Facebook would be looking at about 1.4 billion dead members by 2100. By 2070, in that scenario, the dead would already outnumber the living."
 
This, of course, raises the interesting question of who owns the data of these people's profiles and pages, filled with their histories, captured in words and photos. The scale of Facebook's success raises the stakes in terms of what to do with these data:
 
"'Never before in history has such a vast archive of human behavior and culture been assembled in one place.' … 'Controlling this archive will, in a sense, be to control our history.'"
 
Facebook is aware of this problem and is responding, somewhat:
 
"As it stands, Facebook users who are alive can choose a 'legacy contact' who gets access to much of the account's data after the original user dies – at which point the account can be 'memorialized.' Others, however, cannot log into it, posing a potential problem if a person dies before designating a legacy contact."
 
In other words, the issue of real death and virtual life remains a legal and ethical challenge:
 
"Is it time to appoint social media executors? Should we collect our passwords and include them in our wills? Should our Instagram accounts become part of the historical record?"
 
Have a great summer.
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Facebook could have 4.9bn dead users by 2100, study finds
By Matthew Cantor
April 24, 2019
The Guardian
 

Friday, May 10, 2019

Strategic CSR - Dick's + Guns

The article in the url below puts a price on principle. In particular, it reports the estimated cost to Dick's Sporting Goods of its decision last year to stop selling guns in the aftermath of yet another school mass shooting here in the U.S. (this time, in Parkland, FL):
 
"Last February, when Dick's Sporting Goods boss Ed Stack announced he was restricting gun sales at the country's largest sports retailer, he knew it'd be costly. At the time, Dick's was a major seller of firearms. Guns also drove the sale of soft goods—boots, hats, jackets. What's more, Stack, the retailer's chief executive officer, suspected the position could drive off some of his customers on political principle. He was right. Dick's estimates the policy change cost the company about $150 million in lost sales, an amount equivalent to 1.7 percent of annual revenue. Stack says it was worth it."
 
It is worth noting that this figure is not a total cost, but one for last year only. In other words, if the company continues not to sell guns, there will be a cumulative effect. Nevertheless, rather than regret his decision, Stack has doubled-down:
 
"'The system does not work,' Stack said. 'It's important that when you know there's something that's not working, and it's to the detriment of the public, you have to stand up.'"
 
It turned out that there was a direct connection between Dick's and this particular shooting:
 
"The 2018 school massacre at Parkland, Florida, touched a nerve for the company. Nikolas Cruz, the shooter, had legally purchased a shotgun from Dick's a few months before the attack. A day after Cruz was arrested, police in Vermont apprehended a teenager with plans to shoot up his high school. He, too, had legally purchased a shotgun from Dick's."
 
This is a significant cost that Dick's is enduring. In order to justify it, it would be helpful if the firm's stakeholders demonstrated their support (if they truly support the policy). Here, there is some good news and some bad news. In terms of shareholders, there still appears to be broad support for the company;
 
"The stock price hasn't suffered. Dick's shares, which didn't move much following the announcement last February, have climbed 14 percent in the 13 months since, outpacing the 4 percent rise in the benchmark Russell 3000 Index."
 
Consumers, it seems, are less committed:
 
"Some people applauded the CEO's decision and promised to show their appreciation with their business—a phenomenon called 'buycotting'—but those people didn't stick around."
 
Unfortunately, recent research shows that Dick's (or any other company that stands on principle) may see similar reactions, at least among consumers:
 
"What happened at Dick's confirms new study results out of Stanford University. Respondents said they were more likely to buy a product to support a CEO's political stance than they were to boycott in disagreement, but their actions revealed the opposite. When asked for specific examples, 69 percent could name a product they'd stopped buying, and only 21 percent could recall a product they started buying."
 
Or, as Stack puts it:
 
"Love is fleeting. Hate is forever."
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/


Restricting Gun Sales Cost Dick's $150 Million Last Year
By Eben Novy-Williams
March 29, 2019
Bloomberg Businessweek
 

Tuesday, May 7, 2019

Strategic CSR - Aluminum

In contrast to most of the recycling industry, which is suffering due to the decision by China to stop accepting imports of scrap materials (for example, see Strategic CSR – Recycling and Strategic CSR - Recycling), the article in the url below reports that the trade in recycled aluminum is booming:

"Companies in the U.S. that turn junked cars and beer cans into fresh aluminum are seeing business boom thanks to the trade fight between Washington and Beijing."
 
While the domestic industry is doing well primarily because the tariffs are driving up the price of imports, it is particularly encouraging to see that the use of recycled aluminum is flourishing:
 
"Aluminum made from recycled scrap made up the majority of the aluminum used in the U.S. for the first time last year, according to market forecaster Harbor Aluminum Intelligence Unit LLC, which tracks U.S. government reports on aluminum production and scrap usage back to the 1920s."
 
It appears that this is mostly due to the lack of capacity for virgin aluminum, which is forcing the recycled industry to step up in order to meet growing demand:
 
"… domestic smelters that make new aluminum from bauxite aren't able to supply more than a fraction of the aluminum consumed, even with higher production last year. Instead, much of the increase in domestic production to offset lower imports has come from the processors that make aluminum from scrap."
 
What the article doesn't get into, but is more important for long-term trends, is the relative costs of new versus recycled aluminum. Right now, it seems the industry will take whatever aluminum it can get from whatever sources. If the tariffs are removed, however, what does the future hold? Will the industry revert to favoring sources of new aluminum or can the recycling process be made more cost effective to drive further innovation and encourage more recycling?
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Aluminum Rules the Scrapheap
By Bob Tita
January 17, 2019
The Wall Street Journal
Late Edition – Final
B2
 

Thursday, May 2, 2019

Strategic CSR - Amazon

The article in the first url below discusses Amazon's announcement last year that it would raise the minimum wage of its employees in the US and UK. In particular, the author argues that, while economics and a tightening labor market no doubt played a role, the primary motivation for the decision was political. That is, in the aftermath of Bernie Sander's Stop BEZOS proposed legislation (and the accompanying publicity around the extent to which Amazon employees rely on state welfare to subsist), the company felt it was advisable to appease the politicians:
 
"For months, Sanders has been criticizing the company for paying its workers too little. He went so far as to offer a bill called the 'Stop BEZOS Act,' for Jeff Bezos, Amazon's C.E.O. The bill was deeply flawed, but it still served to call more attention to the issue."
 
As the author notes, "this is how democracy and capitalism are supposed to work." More specifically, it is a great example of stakeholder pressure (government and the media) being brought to bear in a way that forced a change in corporate behavior. While the details of the policies in Sander's bill were problematic (in the sense that they essentially constituted a tax on employment, which might easily have led to a reduction in jobs for the people Sanders was most seeking to help), the problem he raised was real and something that, ultimately, Amazon felt uncomfortable with once it was exposed:
 
"All of this attention wasn't pleasant for Amazon. It cares about its image. … [Subsequently], Amazon announced that it was raising its minimum hourly pay to $15. About 350,000 workers will receive an immediate raise as a result. Amazon also called on other companies to do the same and said it would lobby Washington to increase the federal minimum wage."
 
This reflects the extent to which Amazon's higher profile exposes it to greater stakeholder pressure. The article in the second url below, for example, shows how employees (emboldened by action taken in the IT sector in recent months – e.g., Strategic CSR – Google), are beginning to become more aggressive in their demands of their employer:
 
"This week, more than 4,200 Amazon employees called on the company to rethink how it addresses and contributes to a warming planet. The action is the largest employee-driven movement on climate change to take place in the influential tech industry."
 
Interestingly, the employees are using a tool IT companies use to tie employees more closely to the firm – stock options:
 
"Like other shareholders, they can file a resolution urging a particular corporate change that investors vote on at a company's annual meeting. Historically, this approach has been used by outside activist investors, not employees."
 
As one Amazon employee put it:
 
"'It's exactly what Amazon has taught me to be: bold, audacious, and tackle big problems,' said Maren Costa, a principal user-experience designer who has been with the company for almost 15 years."
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/


Amazon's Surrender is Inspiring
By David Leonhardt
October 3, 2018
The New York Times
 
Also here:
By Karen Weise
April 11, 2019
The New York Times
Late Edition – Final
B1
 

Monday, April 29, 2019

Strategic CSR - Seaweed

The article in the url below presents a good idea – replacing single-use plastics with seaweed. In particular, it outlines a plan for the London Marathon this year, which took place Sunday, to hand out seaweed pods filled with liquid for hydration in place of bottled water:
 
"More than 40,000 people plan to run the marathon on Sunday. And they're in for a bit of a different experience when they reach Mile 23 — Ooho seaweed capsules instead of plastic bottles or cups. The capsules can be filled with a variety of liquids, but the ones provided at the marathon will be filled with Lucozade Sport, an electrolyte drink."
 
Not only will the pods save plastic, but they are also more convenient for the runners:
 
"The small pods … are designed to be both edible and biodegradable — the pods themselves are tasteless, and if not consumed, they biodegrade within six weeks."
 
Apparently, the experience is similar to eating a cherry tomato. Here is what they look like:
 
 
There is also a video about the pods here: https://youtu.be/9-WY9ZTyKvM
 
The London Marathon says it is committed to advancing sustainability and has a list of actions it is taking to further reduce the marathon's carbon footprint in the article.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Thousands of seaweed pods will replace single-use plastics at the London Marathon
By Sophie Lewis
April 27, 2019
CBS News
 

Thursday, April 25, 2019

Strategic CSR - LTSE

The article in the url below reports on the latest developments with the proposed Long Term Stock exchange (LTSE):
 
"The founders of the Long-Term Stock Exchange (LTSE) want to operate a full-fledged US stock exchange, with a twist: The exchange aims to combat short-term thinking by introducing extra rules designed to reward long-term shareholding and long-term business strategies. The LTSE and Investor's Exchange (IEX) disclosed today that IEX, an upstart exchange already operating under US Securities and Exchange Commission approval, last week formally filed with the SEC for the LTSE to handle initial public offerings via special securities listings on IEX."
 
It is interesting that they are working with IEX, which is the stock exchange set-up by Brad Katsuyama to try and compete against the high-frequency trading algorithms (and featured in Michael Lewis' book, Flash Boys). The goal is to open an independent stock exchange with a long-term, sustainable focus:
 
"By piggybacking on IEX, the LTSE hopes to accelerate the ability of companies to go public with the LTSE's rules binding them and their investors. The LTSE plans to submit an application to become a full-fledged stock exchange, a significantly tougher proposition, after the SEC has ruled on its arrangement with IEX."
 
While certainly well-intentioned, I think the LTSE contains flaws that are similar to the Benefit Corporation project. First, if the main purpose is to raise money (as the founder states it is), there are many alternative sources of capital today. It is not clear that we need another stock exchange for IPOs:
 
"The LTSE, founded by San Francisco entrepreneur and The Lean Startup author Eric Ries, is an ambitious project to overhaul how companies raise money, allow employees to sell shares, and practice good corporate governance. It comes amid challenges to Wall Street's traditional approach to financing businesses, with many companies shunning public markets altogether, while others turn to newfangled fundraising methods like cryptocurrency initial coin offerings instead of stock offerings."
 
Second, the rules mentioned in the article seem pretty superficial. The most important, I think is the restriction on short-term incentives.
 
"The rules for companies listing via the LTSE include:
  • Increased voting rights for shareholders who hold company stock for long periods of time
  • Restrictions on offering short-term incentives to executives
  • Additional disclosures, such as clearly showing the impact of any stock buybacks
  • A board-level long-term product and strategy committee, to focus on issues of governance and sustainability"

It will be interesting to see if that gets any traction. A stronger rule would be no stock-based compensation at all, which is what I would like to see firms adopt. If I can do my job without performance incentives, I am not sure why executives cannot. Just pay them a salary! But, this speaks to a more fundamental issue, which is that all firms can already adopt these measures, if they wanted to:
 
"The LTSE acknowledges in the SEC filing that companies could voluntarily adopt the rules it has drawn up without listing through the LTSE. But it contends that the structure it has created allows for regulatory enforcement of the rules, giving them more impact."
 
Finally, I am somewhat sympathetic to the argument in the article that we might lose some of the shareholder oversight. Short-sellers, in particular, perform a valuable buffer against corruption:
 
"Critics say that the LTSE's rules would overly insulate company executives from shareholders, reducing the accountability that can help boost performance over the long term."
 
While I do not trust shareholders much, I am not sure I would rather trust executives to act with any less oversight than at present! :-)
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
The company aiming to create a long term-focused stock exchange has applied to handle IPOs
By Kevin Delaney
March 19, 2018
Quartz
 

Tuesday, April 23, 2019

Strategic CSR - 1,000th

 
 
Today's Strategic CSR Newsletter is the 1,000th I have sent!
The first Newsletter was sent on October 31, 2007.
Thank you all for your support.
As always, your comments and ideas are welcome.
 
 
Following-on from the ToC for the fifth edition of Strategic CSR that I sent out a few weeks ago (Strategic CSR – 5e ToC), I am happy to circulate the cover artwork. The organic pattern is intended to invoke the dynamic nature of this topic, as well as the inter-related complexity of stakeholder relations.
 
The book should be published by mid-August, hopefully with a review copy available at the Sage stand at AOM in Boston.
 
 
 
Please let me know if you have any questions about the 5e or its publication timetable.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 

Thursday, April 18, 2019

Strategic CSR - Moral assumptions

Given that Monday is Earth Day, today's Newsletter highlights the article in the url below, which explores the moral assumptions that underpin economic models of climate change. Specifically, the article argues that, beyond the inherent complexity of climate change (replete, at least in the US, with large segments of deniers of science), there is an essential economic challenge:
 
"Humanity must work out how many resources should be diverted from other valuable uses—from life-enriching consumer goods to funding for pensions—to the task of limiting global warming."
 
In essence, the core question of economics applies—how do we allocate scarce resources to address needs/wants in ways that create optimal outcomes? The additional challenge here is that, in spite of economics' insistence for many years to the contrary, this is not purely a mathematical problem:
 
"These calculations may look bloodless, but they are built on weighty moral assumptions, namely, how to value people's lives."
 
For the author of the article, having a discussion around these moral assumptions may increase the perceived level of importance of climate change:
 
"Though it is hard to know what might finally impel humanity to take the threat of climate change seriously, speaking more plainly about its moral costs might help."
 
Take, for instance, the discount rate, which is an essential component of any attempt to place a value on wealth that is deferred today for future benefit. Up until now, economists have used knowledge about our consumption patterns to determine how much we would be willing to sacrifice today for some future, unspecified benefit:
 
"But it is far from clear that the rates people have in mind when deciding whether to attend university or save for retirement should be applied to questions of social policy that will affect billions of lives. Climate policy does not simply shift a bit of ill-defined utility from one pile to another, after all. It determines how much life-threatening environmental harm the current generation will impose on scores of future ones."
 
This is where it gets interesting because we have the knowledge to make these tradeoffs; it is just not something that economists have spent a lot of time thinking about:
 
"Philosophers are accustomed to discussions about how to value lives distant from our own in time and place; economists are not. But [new research] puts the results of discounting in evocative terms: given a 5% rate of discount, one human life today is worth 132 a century hence. Is it really ethically acceptable to save one life now at the expense of so many in the future? … Economists should treat threats to future lives as just as morally reprehensible as present threats to our own."
 
By valuing the future in proportion to the present (there is a lot more of the future), we should be able to arrive at a conclusion of how much that future is worth, relative to our current wealth, and how much of an obligation we have to deliver it:
 
"… there is a risk that humanity will no longer be around a few centuries from now—for example, if a large comet hits the Earth, or if a supervolcanoes erupt and cloak the Earth in choking debris. It makes sense to discount future lives by a tiny amount to take account of the possibility that they will never come to be. That would nonetheless mean that humanity ought to be willing to bear substantial costs now to reduce eventual climate harms."
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Future lives matter
December 8, 2018
The Economist
Late Edition – Final
75
 

Monday, April 15, 2019

Strategic CSR - Napalm

The article in the url below comments on the recent uprisings among the employees of tech companies who are objecting to their employer's involvement with U.S. military agencies (see also Strategic CSR – Google):
 
"Over the past few months, a fierce debate has erupted in Silicon Valley over whether large technology companies like Amazon, Google and Microsoft should join forces with the United States military, along with agencies like Immigration and Customs Enforcement."
 
As the author notes, so far the "debate has been conducted along ethical lines." He cites a recent example at Microsoft, whose employees drafted an open-letter to management expressing their concerns about the company's adaptation of its virtual reality hardware for application on the battlefield:
 
"'We did not sign up to develop weapons, and we demand a say in how our work is used,' the Microsoft employees wrote."
 
In contrast, the author wants to take the conversation in what he sees as a different direction:
 
"This is a debate worth having. But there is a more pragmatic question swirling around it, one surprisingly few people are asking. Namely: Could Big Tech's decision to pursue controversial defense and law enforcement contracts be a financial mistake?"
 
He then cites the value of some of these contracts, noting that, on the face of it, they make sense. The costs come in the shape of potential reputation damage – among customers, to be sure, but also among potential employees who may think twice before working for such companies. The dramatic comparison used, to maximum journalistic effect, is with Dow Chemical's decision to supply the U.S. military with napalm during the Vietnam War:
 
"Dow Chemical stopped making napalm for the military in 1969, just four years after it had begun. But the reputational damage haunted the company for decades. … All told, the $5 million napalm contract most likely cost Dow Chemical billions of dollars. And it was the kind of unforced error that could have been avoided if company executives had listened to early signs of opposition, done some risk analysis and changed course."
 
The author's point is that, once a technology is developed for the military, the companies lose control over how it is used, forever. And, given that we are unable to predict how society's definitions of acceptable behavior will evolve into the future, even if we suppose that there is general support for these firms to work with the government today, that does not mean that support will always be there. And, as with Dow, if things go badly, they can go very badly for everyone:
 
"Already, there are signs of trouble on the horizon. At Stanford, fliers recently appeared on campus walls urging students not to work for Amazon, Microsoft, Palantir and other companies with reported contracts with ICE and law enforcement agencies. And artificial intelligence experts caution that the stigma of being seen as a war profiteer could repel idealistic recruits for years to come. … In fact, in today's corporate operating environment, turning down controversial military and government contracts could be a selling point."
 
All of this is fine. My point is to push back on the idea that this "financial perspective" is a different question to the "ethical" one the author begins with. I would say, instead, that it is the same question reframed using a financial lens. This is a lot of what Strategic CSR seeks to do. The basic argument is that, since most (if not all) company transactions can be monetized at some level (i.e., all stakeholder interactions have the potential to affect profit, either positively or negatively), then focusing on the finances is a more revealing analysis. But, it is not a different question and to focus on the finances does not remove the ethics from the decision. All decisions that we make, as humans, are based on our values/ethics/morals, the precise mix of which are unique to each of us. I have a different set of values than you do. We probably agree on many of them, but also probably, not 100% of them. As such, at the margins, I make slightly different decisions to you. But, where we are talking about our interactions with companies as stakeholders, the effect of our decisions (our values/ethics/morals in action) increase the firm's profit (when we engage) and decrease its profit (when we boycott). Like many in the mainstream CSR community, this author is drawing a clear distinction between the two (ethics and finances) while, from a Strategic CSR perspective, they are essentially indistinguishable.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Why Napalm is a Cautionary Tale for Tech Giants
By Kevin Roose
March 6, 2019
The New York Times
Late Edition – Final
B1
 

Thursday, April 11, 2019

Strategic CSR - McDonald's (II)

The article in the url below shows how fast food in the U.S. has evolved over the past 30 years. Of course, the term "evolved" sounds inherently progressive – in that fast food evolved in a way that promotes health. In reality, the opposite is closer to reality. While it is true that menu options have expanded and often include salads (which are healthier only as long as you don't drown them in dressing), it is the size of the portions and their makeup of fat and salt that caught my attention in this article:
 
"But as menus swelled over the past three decades with grilled chicken wraps (McDonald's) and 'fresco' burritos (Taco Bell), many options grew in size and the calories and sodium in them surged, according to new study from researchers at Boston University and Tufts."
 
The research was recently published in The Journal of the Academy of Nutrition and Dietetics and consisted of a study of multiple fast-food chains over 30 years:
 
"The researchers studied 1,787 entrees, sides and desserts at 10 chains — Arby's, Burger King, Carl's Jr., Dairy Queen, Hardee's, Jack in the Box, KFC, Long John Silver's, McDonald's and Wendy's — from 1986 to 2016. In that time, the number of items in those three categories rose 226 percent."
 
The results are not encouraging:
 
"Across the 10 chains, the researchers found, the average entree weighed 39 grams more in 2016 than in 1986 and had 90 more calories. It also had 41.6 percent of the recommended daily allotment of sodium, up from 27.8 percent."
 
The same pattern is evident in the desserts on offer:
 
"In 2016, the average fast food dessert weighed an extra 71 grams and had 186 more calories than the average dessert 30 years earlier, the researchers found."
 
And don't forget the sides:
 
"The researchers found that there were 42 more calories on average in items like chips, soups and French fries in 2016 than there were in 1986. Sodium content rose to 23.2 percent of the recommended daily allotment from 11.6 percent, even though portion size did not grow substantially."
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Bigger, Saltier, Heavier: How Fast Food Changed Over 30 Years
By Tiffany Hsu
March 4, 2019
The New York Times
Late Edition – Final
B3
 

Tuesday, April 9, 2019

Strategic CSR - McDonald's (I)

The article in the url below demonstrates the range of issues facing a company as it tries to create value for its diverse set of stakeholders. This is true even for a firm as large and complex as McDonald's ("Every day McDonald's serves 69m customers, more than the population of Britain or France"), which wouldn't normally spring to mind as the epitome of a socially responsible organization. The article profiles the career of Bob Langert, who converted a short-term assignment in the firm in 1988 (dealing with a spat over polystyrene packaging) into a 25 year career as McDonald's CSR officer:
 
"It was a Herculean task. … Apart from litter, he had to deal with animal welfare, environmental destruction, obesity and worker's rights."
 
The opportunities, however, when a company the size of McDonald's decides to make a change in operating practices, are massive:
 
"McDonald's [often] took action even when there was little sign of public concern. Shaving one inch off the napkins saved 3m lbs of paper annually, for example, but few consumers noticed."
 
Another example is the firm's supply chain for eggs:
 
"In the late 1990s, after complaints from campaign groups about the living conditions of hens, Mr Langert visited an egg facility to find the conditions were indeed terrible. In August 2000 the firm said it would buy eggs only from suppliers that gave hens 72 square inches of space, compared with an industry average of 48 square inches. Suppliers resisted so strongly that McDonald's had to find new sources for its eggs. But those who complied found that the mortality rates of hens decreased and egg-laying rates increased, offsetting the extra costs."
 
The list of issues were endless:
 
"Human working conditions also caused the company trouble. … Another issue was the use of 'trans fats' to cook the restaurant fries, which were deemed to increase the risk of heart disease; it took six years for the chain to phase out the practice. But the company has also added more salads and healthy options."
 
Even if critics continue to campaign against McDonald's and hold it up as the anti-CSR company, it is clear from the article that the potential to change the world lies with these large organizations, much more than the Patagonias or NGOs of this world:
 
"Was all the effort worth it? It seems like that many of the people who care a lot about these issues would never eat a fast-food burger in the first place. But Mr Langert did more than most to reduce environmental waste and animal cruelty."
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Do you want ethics with that?
February 9, 2019
The Economist
Late Edition – Final
55
 

Thursday, April 4, 2019

Strategic CSR - Fairphone

The podcast in the url below covers an array of topics related to capitalism, but includes an interview with Bas van Abel. Bas is an entrepreneur who founded a company, Fairphone, with the goal of designing an "ethical phone." He recently gave up on this goal due to the compromised supply chains that are as inescapable part of the hi-tech industry:
 
"Van Abel's experiment of building a 'fair' phone has taken him around the world to witness first-hand the lives made invisible in the digital supply chain. [In the podcast, Bas talks] about how putting people first requires both a redesign of economic systems and a reshaping of our individual perspectives as consumers in an age of hyper-materialism."
 
There is more information about the Fairphone, here, and there is a video documentary about how it is made, here. According to the phone's website, the Fairphone's developers have:
 
"… created the world's first ethical, modular smartphone. You shouldn't have to choose between a great phone and a fair supply chain."
 
Beyond an ethical phone, van Abel had the grander vision of all technology that "should be built without exploiting human laborers and destroying the planet." Rather than this vision being realized, however, van Abel apparently now refers to the phones he makes as "fairer," rather than "fair." As the article in the second url below puts it:
 
"… the more devastating impacts of pedal-to-the-metal digital capitalism fall on the environment and the global poor. The manufacture of some of our computers and smartphones still uses networks of slave labor. … Meanwhile, the mining of rare earth metals and disposal of our highly digital technologies destroys human habitats, replacing them with toxic waste dumps, which are then picked over by peasant children and their families, who sell usable materials back to the manufacturers."
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/ 
 
 
Fingerprints on the Touchscreen
By Douglas Rushkoff
March 29, 2017
Team Human
 
How tech's richest plan to save themselves after the apocalypse
By Douglas Rushkoff
July 24, 2018
The Guardian
 

Monday, April 1, 2019

Strategic CSR - SRI/ESG

I find the debate around SRI/ESG (socially responsible investing/environmental, social, and governance) to be largely artificial and somewhat distracting. It seems to me that, given the difficulties we face measuring CSR (even defining CSR), identifying correlations between some set of compromise variables and firm performance is spurious (to put it generously). In other words, the filters that structure these investments (such as low pollution levels, or director diversity, or employee pay ratios, or whatever measure you like) miss the point. Primarily this is because, in my mind, CSR is everything the firm does (not easily identifiable parts), but also because this research suffers from omitted variable bias. That is, it is the progressive executive team that adopts good environmental practices (or diverse directors or equitable pay practices), so it is the progressive executive team that predicts performance (not the various practices they adopt). With this in mind, the article in the url below adds another important (and rational) explanation for why much of the discourse around SRI/ESG is misleading. In particular, it identifies a flaw in the argument intended to legitimize this industry—that investing in social responsibility need not compromise performance:
 
"The trouble is, even badly run companies, big polluters or terrible employers have some price at which they will be profitable investments. A recent example is the rebound in the sector environmentalists love to hate: Coal miners globally have returned almost 20% in the past 12 months in dollar terms, double the world market, according to Datastream indexes."
 
Beyond the challenges associated with measuring social responsibility, whenever you constrain choice there is a good chance you will affect outcomes. Similarly, if a lack of demand pushes the price of one stock down, that only makes it a more attractive investment (presuming it is an ongoing, profitable business). It is this same logic that undermines much of the oil and gas divestment activism:
 
"Lower stock prices mean a higher cost of capital for the company, which should hurt. But cheaper shares in the same business mean buyers should expect higher returns in future than they did before. If the do-gooders are successful in driving down stocks, the new shareholders in the badly behaved business should outperform, and the do-gooders underperform."
 
The Figure in the article that shows total returns of the coal sector relative to all stocks is enlightening. The article also has another Figure showing how much individual firms have varied in ESG ratings—reinforcing the idea that we really have no idea of how to measure CSR. But, none of this means that SRI/ESG products are not viable. It just means that, if the industry is to be successful, it has to be more honest with potential customers/investors. Just like there is a cost to purchasing a higher quality product (expressed in terms of a price premium), there is a cost to investing using one or more SRI/ESG filters. Given that reality, customers can choose. The added value comes from knowing that certain firms and industries are being avoided—that investments are aligned with values. But the cost, over the medium to long term, almost by definition, is likely to be lower returns.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
If You Want to Do Good, Expect to Do Badly
By James Mackintosh
June 29, 2018
The Wall Street Journal
Late Edition – Final
B1
 

Thursday, March 28, 2019

Strategic CSR - Values + Guns

I suspect that some CSR commentators have a problem with supporting the idea of values-based business. If you promote such a notion, then you have to give equal credibility to all values and not just the ones that you share. In other words, if you have trouble with the idea of calling Chick-fil-A a values-based business, or do not see that it is every bit as much a values-based business as Patagonia, then you do not support the idea in principle, but some biased version of the idea. Just because you may not agree with the values in question, does not make them any less valid or meaningful to those who do share them – they are just not values to which you ascribe. In line with this argument, the article in the url below places a values-based argument in the context of second amendment rights here in the U.S.:

"
Louisiana is using the bond market to stick up for the Second Amendment. The state's bond commission voted 7 to 6 Thursday to ban Bank of America Corp. and Citigroup Inc. from working on its upcoming debt sale because of the banks' 'restrictive gun policies,' the state treasury said in a statement. Bank of America and Citigroup are the two top-ranked underwriters of long-term municipal debt, according to data compiled by Bloomberg."
 
The second amendment to the U.S. Constitution (the 'right' to bear arms) is an important part of this country's history. While I disagree with the modern interpretation of the amendment, and think the NRA's role in politics deliberately distorts the debate in a way that causes harm, I also recognize that there are many people who would disagree with what I just wrote:
 
"'I personally believe the policies of these banks are an infringement on the rights of Louisiana citizens,' Treasurer John Schroder said in a statement. 'As a veteran and former member of law enforcement, I take the Second Amendment very seriously.'"
 
The trouble for large, national companies dealing with guns to any extent (and, in some cases, it can be tangential), is that there are passionate feelings about this issue that vary considerably across the country. This makes implementing a consistent policy very challenging:
 
"The ban is the latest example of how corporate America has been drawn into the nation's polarizing debate over gun control. Earlier this year, Chicago Mayor Rahm Emanuel proposed using the city's business to push for stricter gun controls by limiting work with Wall Street firms that didn't cut ties with companies that sold firearms to people under the age of 21 or dealt in high-capacity magazines. The decision by Louisiana comes after Bank of America in April said it would stop making new loans to companies that make military-style rifles for civilian use. … Citigroup was the first major banking institution to set restrictions on the firearm industry in March, when it announced plans to prohibit retailers that are customers of the bank from offering bump stocks or selling guns to people who haven't passed a background check or are younger than 21."
 
From a Strategic CSR perspective, all this is well and good. In terms of the politicians (as opposed to the companies), what should happen is that, if the citizens of Louisiana do not support the actions their state representatives are taking on their behalf, they should vote them out of office and elect politicians/candidates that better represent their views (and values). Of course, that assumes an engaged electorate, and an honest campaign – in short, a well-functioning democratic system.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/ 
 
 
Louisiana Bans Bank of America, Citi from Bond Sale Over Gun Policies
By Amanda Albright & Jennifer Surane
August 17, 2018
Bloomberg Businessweek