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

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Monday, October 10, 2011

Strategic CSR - Puma

The article in the url below by Mallen Baker (Foreword, pxvii) highlights the futility of relying solely on quantitative metrics to capture a firm’s CSR performance. The comment was initially prompted by a BBC News story (http://www.bbc.co.uk/news/business-13410397), which reported that Puma was the “first major corporation to publish its environmental impact costs”:

The combined cost of the carbon PUMA emitted and water it used in 2010 was 94.4m euros.

Baker quickly deconstructs the figure by questioning the assumptions that were necessary to generate such a number that is supposed to represent the environmental damage done by Puma’s operations:

Let's suppose changes in average world temperature lead to the extinction of, let's say Blue Whales, and an obscure currently undiscovered insect in the Amazon. What valuation would we place on the Blue Whale, and how would we calculate it? On the potential economic value of products that might be extracted from it? On the basis of what someone would be prepared to pay for it's existence to be preserved? And what about the insect we never even heard of? Suppose it might hold the secret of a new pharmaceutical discovery? Or then again, it might not.

His conclusion, which it is difficult to disagree with, is:

So the figures are bogus. Unquantifiable. Why would the BBC cover such a story? Oh, yes, that's right. Because the figures have been produced by PwC amongst others. The magical power of auditors to give credibility to numbers.

Additional comment by Toby Webb (of Ethical Corporation Magazine) welcoming Puma’s report can be found at: http://ethicalcorp.blogspot.com/2011/05/well-done-puma-some-serious-research-on.html

In spite of the futility involved in this exercise to measure perfectly a firm’s CSR/sustainability profile, does that mean we have to throw our hands up in the air and surrender, returning to moral/ethical arguments designed to persuade executives to ‘do the right thing’?

Baker’s point that, as a society, we place great faith in the face-value of numbers (and are less likely to question the underlying methodology) provides the ammunition he needs to deconstruct the figure Puma arrives at; it also, however, provides the logic for continuing the pursuit of effective metrics for measuring CSR activity.

To the extent that we can arrive at a standardized way of measuring what we agree should be measured, then we will be able to compare one firm’s activity with another’s. Whether those figures are 100 percent accurate is less important than whether any biases are applied equally to all firms. So many of our measurements involve subjective interpretations and assumptions, but have become accepted as objective statements of fact (albeit socially constructed). Placing a value on the extinction of the Blue Whale versus the potential damage of an unrealized pharmaceutical discovery will always involve some element of subjectivity (and, therefore, be open to contestation).

There is a great deal of value, however, in identifying a relative measure of which firms are better or worse performers. This speaks to continued investigation in this difficult area and the application of standardized measures across all firms. As Baker concludes:

the point is not the answer – it is that you haven't sufficiently well-defined the question.

The work that Walmart (and other retailers) is doing to create standardized “eco-labels” across all its products is important and carries the potential to change the game in this area (see: http://www.ecoindexbeta.org/ and http://earth911.com/news/2011/03/01/nike-walmart-target-other-brands-launch-eco-clothing-index/).