One of the most pressing and contentious areas of the CSR debate today revolves around the following question: How do we measure CSR?
How can we develop an accurate and consistent measure of CSR that allows stakeholders to evaluate the social and environmental impact of different products and firms, and compare them to other products and firms (i.e., compare apples with oranges along common metrics)? If we can’t measure CSR, how can we tell whether and when it matters? I have been thinking about this issue for a while now and will focus the next few Newsletters on some interesting and innovative steps firms are taking to address it.
One of the primary goals of measuring CSR should be to move towards some form of product lifecycle pricing.
Lifecycle pricing supports the idea that we need to develop an economic model that is no longer founded on waste by accounting for externalities in pricing (i.e., similar to the idea of Pigovian taxes). In other words, the price of a product should not only include the cost of production, but also include the costs associated with replenishing the raw materials used and disposing/recycling of the waste after consumption. Attempts to put a price on carbon reflect this process (either through a carbon tax or some form of cap-and-trade), while firms’ efforts to develop carbon footprints (e.g., http://www.walkerscarbonfootprint.co.uk/ and http://www.nytimes.com/2009/01/22/business/22pepsi.html) provide a possible means of implementation.
If all firms are forced to incorporate externalities into the price of a finished product or service, many of the cheap items in our disposable economy will become significantly more expensive and businesses will be incentivized to produce sustainable alternatives. The market remains the most effective means we know of allocating scarce and valuable resources in ways that maximize social outcomes. Rather than subsidizing specific industries, adequately pricing the ‘true’ cost of a product allows for a less distorted competition of ideas in the marketplace that should also generate socially responsible outcomes.
The articles in the two urls below contain examples of firms that are leading the way in this area. The article in the first url details attempts by the apparel industry to incorporate lifecycle product information into all the clothing we buy:
“More than 200 clothing manufacturers and retailers have joined together to create an industry-wide sustainability rating, the Eco Index, which will assess the environmental impact of products along their entire life-cycle chain. … The Eco Index, currently at the “beta” stage of development, provides three types of tools – guidelines, indicators and metrics. These can be used together or separately, and enable any company to participate, whether seasoned in sustainability or not. Each tool assesses a product’s impact within six life-cycle stages: materials; packaging; product manufacturing and assembly; transport and distribution; use and service; and end of life. … The stakeholder engagement process should be complete by the end of 2010, with the formal phase 1 index to launch in early 2011.”
The article in the second url looks at Whole Foods’ attempts to assess and support sustainable seafood products:
“[Whole Foods Market Inc.] on Monday launched a new color-coded rating program — with the help of Monterey Bay Aquarium and Blue Ocean Institute — that measures the environmental impact of its wild-caught seafood. … Similar to a stoplight, seafood is given a green, yellow or red rating. A green rating indicates the species is relatively abundant and is caught in environmentally friendly ways. Yellow means some concerns exist with the species' status or the methods by which it was caught. And a red rating means the species is suffering from overfishing, or the methods used to catch it harm other marine life or habitats. … Whole Foods also announced Monday that it will end sales of red-rated species by Earth Day 2013. The company has already phased out a number of such products.”
It is encouraging to see these firms collaborating on industry-wide standards that move us closer to understanding the holistic impact of our current economic system and business practices. What is not clear (and is not necessarily relevant) is the extent to which consumers want this information and whether they are willing to act on it.
Take care
David
Bill Werther & David Chandler
Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)
© Sage Publications, 2011
Instructor Teaching Site: http://www.sagepub.com/strategiccsr/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/
Eco Index: How green are your clothes?
Manufacturers and retailers are developing an ambitious rating system for the ecological impact of their clothes
Jeni Bauser
Ethical Corporate Magazine
October 15, 2010
Whole Foods to label seafood's sustainability
Green, yellow and red stickers to show if food is endangered or overfished
Sarah Skidmore
msnbc.com
September 17, 2010
