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


Thursday, January 31, 2008

Strategic CSR - Intel

The article in the url link below provides an update on the One Laptop Per Child (OLPC) computer that is being developed by Nicholas Negroponte (http://laptop.org/) and details Intel’s recent decision to abandon the project (Issues: Profit, p200). The acrimonious split comes after a troubled relationship that saw Intel publicly supporting OLPC, while also commercially producing its own competing low cost computer:

“After several years of publicly attacking the XO, Intel reversed itself over the summer and joined the organization's board, agreeing to make an $18 million contribution and begin developing an Intel-based version of the computer. Although Intel made an initial $6 million payment to One Laptop, the partnership was troubled from the outset as Intel sales representatives in the field competed actively against the $200 One Laptop machine by trying to sell a rival computer, a more costly Classmate PC. The Classmate sells for about $350 with an installed version of Microsoft Office, and Intel is selling the machine through an array of sales organizations outside the United States.”

It is hard to know what Intel hopes to achieve by competing with Negroponte, whose actions are purely philanthropic. Even if there is a compelling business case to be made for selling low cost computers in developing countries, Negroponte’s goals largely involve sales to governments in order to provide laptops to the neediest children—not an obvious market foundation on which Intel can build a strong market presence. In such a fight, Intel is always going to lose out in the media arena. This would apply even against someone who is not nearly as media-savy as Negroponte, who, for example, frames Intel’s actions as:

''… a little bit like McDonald's competing with the World Food Program.''

Any time the headline of an article that features a firm is along the lines of “Intel Quits Effort to Get Computers to Children,” that firm is losing the PR battle.

Take care
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006
http://www.sagepub.com/Werther

Intel Quits Effort to Get Computers to Children
By JOHN MARKOFF
1414 words
5 January 2008
The New York Times
Late Edition - Final
3
http://www.nytimes.com/2008/01/05/technology/05laptop.html

Wednesday, January 30, 2008

Strategic CSR - BP

The article in the url link below presents the conundrum facing oil firms that seek to extract oil from the tar sands in Canada, but have presented themselves as socially responsible (Issues: Brands, p153). With oil prices rising, extracting the oil from these tar sands becomes profitable. Canada’s oil reserves are second only to Saudi Arabia and the country’s friendly and stable business environment is rare in the oil industry:

“Lord Browne of Madingley, who was BP's chief executive until May, sold its remaining Canadian tar sands interests in 1999 and declared as recently as 2004 that there were "tons of opportunities" beyond the sector. But as oil prices hover around the $100-per-barrel mark, Lord Browne's successor, Tony Hayward, announced that BP has entered a joint venture with Husky Energy, … making BP one of the biggest players in tar sands extraction.”

It is clear, however, that the processes used to extract the oil are causing significant environmental damage:

“Producing crude oil from the tar sands -- a heavy mixture of bitumen, water, sand and clay -- … generates up to four times more carbon dioxide, the principal global warming gas, than conventional drilling. The booming oil sands industry will produce 100 million tonnes of CO2 … a year by 2012, ensuring that Canada will miss its emission targets under the Kyoto treaty, according to environmentalist activists. The oil rush is also scarring a wilderness landscape: millions of tonnes of plant life and top soil is scooped away in vast open-pit mines and millions of litres of water are diverted from rivers -- up to five barrels of water are needed to produce a single barrel of crude and the process requires huge amounts of natural gas. … it takes two tonnes of the raw sands to produce a single barrel of oil.”

There are also tales of water pollution and increased medical consequences for nearby populations. Where does responsibility lie here? Greenpeace’s claim that “in the era of climate change it should not be being developed at all” is too flippant. BP’s reply that “These are resources that would have been developed anyway” seems equally unsatisfactory. What is clear is that the economic opportunity is generating:

“… a £50bn "oil rush" as American, Chinese and European investors rush to profit from high oil prices. Despite production costs per barrel of up to £15, compared to £1 per barrel in Saudi Arabia, the Canadian province expects to be pumping five million barrels of crude a day by 2030.”

Surely, the Canadian government is responsible for generating and enforcing environmental legislation in Canada, although the politicians also seek the tax revenues and other benefits that come with a booming industry. Surely, the oil firms have a primary duty to remain in business and obey the law, but many of them also present a public image that implies a concern for the environment over and above merely ‘obeying the law.’

Take care
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006
http://www.sagepub.com/Werther

The Biggest Global Warming Crime in History
by Cahal Milmo,
The Independent
December 13th, 2007
http://www.corpwatch.org/article.php?id=14858

Tuesday, January 29, 2008

Strategic CSR - Fair Trade

What is interesting about the article in the url link below is not that the Fair Trade coffee company (AMT) lost its license to operate coffee kiosks at London railway stations to a competitor that doesn’t stock any Fair Trade coffee (Issues: Fair Trade, p175). What is interesting about this story is that the reason the firm lost relates back to a strategic decision not to pass on its higher supply chain costs to its customers, which has a direct impact on the firm’s profits. It is not clear whether this is due to a managerial misstep, or whether the firm has no confidence that UK consumers are willing to pay the price premium associated with Fair trade coffee (the article suggests it is the latter, but it would be nice to know now much per cup is involved). Either way, it is not good news for AMT and potentially has implications for the fundamental CSR business model.

For example, it is fine for AMT to say:

“We can sleep at night knowing that the people picking our beans that go in our cups are being looked after – unlike the high street guys who are trying to take over the world.”

But, the reality is that:

“The closures slashed a hefty £6 million off AMT’s £15 million revenue in one fell swoop.”

Firms that differentiate their products on some aspect other than price (i.e., quality, technology, design, etc.) charge a corresponding price premium because, in general, the consumers who buy such products are less price sensitive than consumers who make their purchase decisions based primarily on price. The same laws of economics apply to firms wanting to differentiate their products based primarily on socially responsible products, which often incur a higher cost structure. Due to the awareness surrounding the Fair Trade brand in the UK (“Four-fifths of UK consumers now recognise the Fairtrade brand, according to the Department for Environment, Food and Rural Affairs”) and the likely small increase in price per cup involved, my sense is that UK consumers place a higher importance on CSR issues than most and would be willing to pay the difference. But, that won’t help AMT if the firm goes out of business without testing to see whether or not this is true.

Take care
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006
http://www.sagepub.com/Werther

UK Fairtrade – Shunted into a siding
The closure of Fairtrade-only coffee kiosks at prime locations in London raises the age-old question of whether the movement can ever beat big business
David Vetter
December 14, 2007
http://www.ethicalcorp.com/content.asp?ContentID=5583

Monday, January 28, 2008

Strategic CSR - Dr. Hauschka

The article in the url link below provides a brief case-study of a “luxury organic skin-care company” that I hadn’t heard of before (Dr. Hauschka Skin Care) and that places sustainability at the heart of its business model (Issues: Environmental Sustainability, p171):

“"We aim to heal the earth and humanity," Susan, 58, says, pausing as if she's anticipating the skeptical retort, Through $14.50 tubs of lip balm? "Every action that is taken in this business, every intersection between the earth and end user, has a proactive healing impulse behind it." Hauschka's products back up the boast. Its raw ingredients are grown or sourced primarily from biodynamic farms and at fair-trade pricing.”

What is interesting about this article, however, are the steps the founding couple took to protect the sustainability focus of their business model beyond their time in charge:

“In a transaction believed to be unprecedented among U.S. companies, Kurz and her husband legally eliminated their ownership in Hauschka, and then placed the operating company, which is profitable, inside a Massachusetts nonprofit corporation. The result is a novel corporate structure that acts a lot like an irrevocable trust, with one significant exception: It has no trustees or beneficiaries, which means that the Estée Lauders and L'Oréals of the world will find it very difficult to buy Hauschka, ever.”

There is a reasonable amount of debate within the CSR Community regarding the issue of how to protect a firm’s founding values and business model beyond both a certain level of success and the day-to-day presence of the founders. [Note: Marjorie Kelly wrote an excellent article on this point in the summer 2003 issue of Business Ethics Magazine—‘The Legacy Problem,’ pp11-16, http://www.meadowbrooklane.com/business.ethics.legacay.pdf]. Any significant growth in operations presents logistical challenges that often require the skills of professional management expertise (i.e., The Body Shop—Issues: Hypocrisy, p122), while the associated success catches the attention of large suitors wanting to capture specific segments of the market (i.e., Ben & Jerry’s—Issues: Stakeholder Relations, p138). The article in today’s Newsletter (below) presents a unique solution that should appeal both to CSR purists, as well as to those interested in developing an effective business case for CSR:

“Hauschka looks like a nonprofit but isn't one. It makes money, and it pays taxes. It is governed by a four-member board that includes the Kurzes and two WALA representatives. Their charge is to see that the company complies with Hauschka's long-standing mission "to heal." The articles of incorporation prohibit board members from receiving any financial gain for their role, in salary or dividends. They also prohibit the sale of Hauschka's distribution rights. Without owners to collect dividends, all net profits are reinvested in operations, sustaining development.”

Take care
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006
http://www.sagepub.com/Werther/

Can't Buy Me Love
How luxury organic skin-care company Dr. Hauschka has infused sustainability into its financial structure.
Fast Company Magazine
From: Issue 121 | December 2007 | Page 60 | By: Carleen Hawn | Photographs By: Ben Stechschulte
http://www.fastcompany.com/magazine/121/cant-buy-me-love.html

Friday, January 25, 2008

Strategic CSR - Time

This link takes you to a very interesting website called the “World Clock”:

http://www.chippynews.com/worldclock.htm

The description below came from the circular e-mail that was forwarded to me and describes the purpose of the site very well:

“Most clocks are happy just to tell us what time it is. But there are different ways of showing elapsed time, and they are not all chronological. This Web site, which keeps track of nearly every measurement of human progression, is a prime example. If you're a student of statistics, you will have your fill, from the number of traffic accidents since the beginning of 2007, to the number of marriages or divorces for the same period. What makes this site so interesting is that you can see it change before your eyes. Some figures, such as the world population, are in a state of constant change, while others show a much slower increase. Other categories include the number of barrels of oil pumped, cars and computers produced, and the variable temperature of the earth shown in billionths of a degree. If you wish to break down the information into shorter periods, you can view the figures broken down monthly, weekly, daily, and even now (where the counts will start from the moment you click on it).”

Have a good weekend.
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006
http://www.sagepub.com/Werther

Thursday, January 24, 2008

Strategic CSR - McDonald's

I had to think for a while about the article in the url below before deciding what I wanted to say about it (Issues: Wages, p204; Special Cases of CSR: Fast-Food Industry, p283; McDonald’s, p295):

“FAST-FOOD chains often post nutritional report cards about their product ingredients on restaurant walls. Now one is using children's report cards to help stimulate sales. The McDonald's restaurants in Seminole County, Fla., and the Seminole County School Board have agreed to reward students for good grades and attendance during the 2007-8 school year with Happy Meals.”

While this effort by McDonald’s seems crass and insensitive to growing concerns about the role fast-food plays in record high obesity among children, there is clearly social value in incentivizing students to work hard at school (presuming they consider a McDonald’s Happy Meal to be an incentive). And, since the ‘reward’ is only one Happy Meal a semester, why should a less-than-healthy, occasional ‘treat’ be such a bad thing (I remember being bribed with ice-cream when I was a child)?

“Students in kindergarten through fifth grade can now receive a Happy Meal from a local McDonald's restaurant as a ''food prize,'' as it is described, for achievements like all A's and B's in academic subjects or two or fewer absences from school.”

This story reminds me of the criticism Cadbury’s received in the UK for encouraging sales of chocolate bars by promising donations of sports equipment to schools (Special Cases of CSR: Cadbury, p297). Having said that, however, McDonald’s took over the sponsorship of the report cards from Pizza Hut that had run the same scheme without complaint for ten years (although their involvement was more subtle and sensitive). Still, something just doesn’t seem right about this, which is why, perhaps, McDonald’s CSR efforts ended up as a case study in the “Companies Persevering Against All The Odds” section of Strategic CSR (Special Cases of CSR: McDonald’s, p305).

Take care
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006
http://www.sagepub.com/Werther

Straight A's, With a Burger as a Prize
By STUART ELLIOTT
1273 words
6 December 2007
The New York Times
Late Edition - Final
4
http://www.nytimes.com/2007/12/06/business/media/06adco.html

Wednesday, January 23, 2008

Strategic CSR - Monsanto

The article in the url link below from BusinessWeek charts Monsanto’s journey from pariah status and potential economic oblivion to a corporate success story today (Issues: Research and Development, p130; Science and Technology, p264; Special Cases of CSR: GM Labeling, p293; Monsanto, p300):

“During the 12 months preceding [the current CEO] Grant's elevation, Monsanto's stock price fell nearly 50% to $8 a share. In 2002, the prior fiscal year, the company lost $1.7 billion. … Fewer than five years later, Monsanto is thriving. The St. Louis company's net income leaped 44% last year, to $993 million, on $8.5 billion in revenue. Monsanto shares, which closed at $104.81 on Dec. 5, have risen more than 1,000% during Grant's tenure.”

The main reason for the firm’s recovery, the article argues, is its decision to switch away from straight-to-market consumer GM foods to seeds that are used to grow key food ingredients for agribusiness, such as “animal feed, ethanol, and corn syrup.” Monsanto’s retreat from foods more likely to stoke consumer fears about the science behind genetic modification has enabled the firm to steer clear of the focus of activist groups and build a commanding market share:

“Today, more than 90% of the genetically modified seeds in the world are sold either by Monsanto or by competitors that license Monsanto genes in their own seeds.”

Take care
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006
http://www.sagepub.com/Werther

Business Week Online
Insider Newsletter
December 07, 2007
********************
Monsanto: Winning the Ground War
How the company turned the tide in the battle over genetically modified crops
by Brian Hindo
http://newsletters.businessweek.com/c.asp?685460&c55a2ee820194f0f&3

Tuesday, January 22, 2008

Strategic CSR - Greenwash

“Green-wash (green'wash', -wôsh') – verb: the act of misleading consumers regarding the environmental practices of a company or the environmental benefits of a product or service.”

http://www.terrachoice.com/

The article from the NYT in the url link below summarizes a recent report that makes for interesting reading for anyone interested in the extent to which firms are willing to jump on the CSR bandwagon and mislead consumers in the hope of financial gain (Issues: Advertising, p151; Brands, p153):

“Not everything called ''green'' is going to do much for the environment, according to a report issued this week by a marketing firm, TerraChoice Environmental Marketing (terrachoice.com). Titled ''The Six Sins of Greenwashing,'' the report is based on a study of 1,018 consumer products that make environmental claims. Of those, according to the report, ''all but one made claims that are demonstrably false or that risk misleading intended audiences.''”

The report’s “six sins” include the Sin of the Hidden Trade-off, the Sin of No Proof, the Sin of Vagueness, the Sin of Irrelevance, the Sin of Fibbing, and Sin of the Lesser of Two Evils that, taken together, indicate:

“… both that the individual consumer has been misled and that the potential environmental benefit of his or her purchase has been squandered.”

The full report and definitions of each of the six sins can be accessed at:

http://www.terrachoice.com/Home/Six%20Sins%20of%20Greenwashing

Take care
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006
http://www.sagepub.com/Werther

Being Skeptical of Green
By DAN MITCHELL
663 words
24 November 2007
The New York Times
Late Edition - Final
5
http://www.nytimes.com/2007/11/24/technology/24online.html

Monday, January 21, 2008

Strategic CSR - Fashion

The slide show put together by Businessweek in the url below highlights the extent to which social issues are beginning to surface in the fashion industry (Issues: Auditing CSR, p94; Advertising, p151; Brands, p153; Cultural Conflict, p160; Sex, p268):

“Fashion used to be the epitome of vanity and conspicuous consumption. But now, a number of designers are espousing causes, such as erasing global poverty and AIDS, and producing clothing that drives emerging nation development and combats worker abuses.”

The poster child for such efforts is Bono’s Product Red:

“Partner companies include Gap, which is selling a number of Red-branded products including an African cotton T-shirt made in Lesotho; Converse, which is offering a limited-edition sneaker made of African mud cloth; and Giorgio Armani, which plans to expand its Product Red line to include fragrances and jewelry this spring.”

But, a number of other designers and clothing firms are also featured:

“American Apparel trumpets its “vertically integrated” manufacturing, which consolidates every stage of production into its factory in downtown Los Angeles. “Worker-positive” conditions are bolstered by subsidized lunches, free English classes, low-cost health insurance, and on-site massages. The company recently launched a Sustainable Edition line of T-shirts made with organic cotton and has pledged to convert more than 80% of its cotton consumption to sustainable cotton over the next several years.”

To the extent that these products are demand-driven, the increasing expectations placed on businesses to solve social problems are a positive. To the extent, however, that they are supply-driven, with little consumer support, they are likely to be short-lived. One year after the publication of this article, it would be interesting to see sales figures associated with each of the products and firms featured here.

Take care
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006
http://www.sagepub.com/Werther

Business Week Online
Insider Newsletter
Friday, January 12, 2007
********************
GUILT-FREE FASHION
Humanity Is Now in Fashion
A new breed of designer is looking at clothing as a way to help address social ills
By Kerry Miller
http://newsletters.businessweek.com/c.asp?id=643684&c=c55a2ee820194f0f&l=6

Friday, January 18, 2008

Strategic CSR - Social Value

The article in the url link below discusses the issue of the discount rate used in economic forecasting. On the surface, this might not appear to be directly related to CSR, but I think it is highly relevant when we think of what obligation today’s society has to future generations, and how much we should be willing (compelled?) to pay today to minimize the future costs of our current actions. This issue is particularly relevant in terms of dealing with issues such as climate change, but relates also to the broader issue of social value:

“Groucho Marx describes one end of a spectrum of opinion. The only obligation we owe to future generations is to sell them assets to pay our pensions. Sir Nicholas Stern's climate change report takes an opposite view. Governments must value the welfare of all present and future citizens equally and give no special preference to current voters.”

The newspaper coverage in general at the time of the Stern report on climate change identified a number of assumptions the committee had made in the economic analysis that seemed to exaggerate the immediate cost implications of climate change and diminish variables such as the possibility for technical innovation and the greater wealth of future generations. Getting this balance between current and future responsibility/burden ‘right’ is crucial if we are to ensure effective and realizable public policy in response to this hugely important issue:

“If Groucho's position is morally indefensible, Sir Nicholas's is operationally impossible. The problem of weighting the present and the future equally is that there is a lot of future. The number of future generations is potentially so large that small but permanent benefit to them would justify great sacrifice now. If we were to use this criterion to appraise all long-term investment, the volume of such investment would impoverish the current population. No government advocating it would ever be elected. The burden of caring for all humanity, present and future, is greater than even the best-intentioned of us can bear.”

With the huge implications in changes in behavior that will be required by people in both developed and developing countries, it is essential that buy-in is secured as quickly as possible. In order for politicians to act, however, it is essential that there be no obvious personal consequences of their actions (i.e., the danger of them losing their jobs). This is a sad, but realistic position that aims to achieve change, rather than adopting an idealistic position that will never be realized. Walking the tightrope between being sufficiently alarmist to ensure the attention of the world is directed toward the issue of climate change, while not requiring too radical sacrifices in the near future (that are likely to be rejected) is essential for making meaningful progress. This balanced perspective in making public policy decisions is the message I took away from Kay’s article (below):

“Governments cannot be expected to do more, and should not be permitted to do less, than express the concerns their citizens really feel. History illustrates the harm done when the fundamentalism of faith or abstract reasoning overtakes pragmatism as political principle.”

I also think the analogy carries over to the burden placed on firms in relation to their social responsibility. Firms will respond to their consumer needs (in search of profit) more quickly than they will to regulatory coercion (considered an additional cost). Importantly, from both an economic and social value perspective, I am not sure we should expect much else of them. Until firms’ stakeholders (and consumers in particular) re-shape their priorities and demand specific levels of social responsibility, I think it is unrealistic to expect firms to do all the heavy lifting. As a society, we get the politicians for whom we vote and the firms at which we shop.

Have a good weekend.
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006
http://www.sagepub.com/Werther

Climate change: the (Groucho) Marxist approach.
By JOHN KAY
692 words
28 November 2007
Financial Times
Asia Ed1
Page 11
http://www.ft.com/cms/s/0/e8978fba-9cfb-11dc-af03-0000779fd2ac.html

Thursday, January 17, 2008

Strategic CSR - Carbon Emissions

The article in the url link below makes a succinct and convincing case for voluntary carbon emissions reporting by firms (Chapter 1: A Rational Argument for CSR, p17):

“So why are so many companies doing it? In short, because it's always better to know than not to know. If a nationwide carbon market is created in the next few years, as seems likely, businesses that have been tracking and reducing emissions will be favorably positioned. If it comes to regulatory compliance, they'll have a head start. And if green continues to be "the new black," they'll have good PR fodder.”

The article also shows how far this practice has already diffused among large firms in the US:

“Around 60% of the S&P 500 now participates in the CDP's voluntary emissions-disclosure program, and momentum is building.”

More important than all of the reasons to be collecting and analyzing these data presented in the article, however, is the author’s focused cost benefit analysis of the practice (Chapter 1: An Economic Argument for CSR, p18):

“… every business that takes a hard look at carbon emission comes to see it for what it is: gaseous evidence of inefficiency. It costs money to create carbon dioxide, so cutting emissions slashes costs.”

Take care
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006
http://www.sagepub.com/Werther/

Carbon Copy
Disclose your greenhouse-gas emissions? Sounds crazy. Why Wal-Mart and P&G are doing it--and you should too.
Fast Company Magazine
From: Issue 121 | December 2007 | Page 78 | By: David Roberts | Illustrations by: Aaron McConomy
http://www.fastcompany.com/magazine/121/carbon-copy.html