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


Friday, September 30, 2011

Strategic CSR - CSR Jobs

The article in the url below contains some good employment news, especially in terms of CSR jobs:

In the past two years, the number of online job postings containing the keyword "sustainability" has more than quadrupled to 8,245 in May, according to Indeed.com, which aggregates online job postings. The number containing "wind" and "solar" more than doubled in the same time period.

This information is portrayed graphically in the article and demonstrates strong growth:


The important question, of course, is: Why is this happening?

One explanation is that it is happening because firms are convinced they are able to better manage risk and achieve lower costs if they implement CSR/sustainability more substantively.

An alternative explanation is that, as general awareness of CSR/sustainability issues spread, firms feel the need to be seen to be acting in this respect. During an economic recession, the most cost efficient way of doing this (without substantially altering operations) is to appoint a figurehead to create the impression of action among the firm’s external stakeholders.

Both motivations produce the same result (more sustainability officers being hired), but with very different consequences for firm operations. The article presents multiple examples that suggests the changes are meaningful in some firms that are beginning to establish strong CSR track-records:

In May, Coca-Cola Co. appointed a new chief sustainability officer and created an office of sustainability, tasked with overseeing the company's efforts around areas such as recycling, water management and climate protection. In the past two years, Coca-Cola accelerated its hiring related to green jobs across functions including sustainable sourcing of ingredients and water efficiency.

As the article notes, however, another explanation is that $100 billion of the federal government’s $800 billion stimulus package was “devoted to green-related projects.

Wednesday, September 28, 2011

Strategic CSR - Adam Smith

The article in the url below is a review of a book titled SuperCooperators: Altruism, Evolution, and Why We Need Each Other to Succeed. The review is by David Willetts, currently Britain’s Minister for Universities and Science, but someone who rose through the political ranks via Margaret Thatcher’s policy unit when she was Prime Minister.

Essentially, Willetts is using the review to advocate on behalf of the current UK Prime Minister’s push for a “Big Society,” an idea which softens the right-wing emphasis on the preeminence of markets by incorporating the importance of the social relations in which we are all embedded and rely on (think George W. Bush’s “compassionate conservatism” or a 21st century version of George H.W. Bush’s “1,000 points of light”).

Rather than summarize the book’s (and review’s) arguments, which are complex (focusing on the “nexus of evolutionary biology, game theory, and neuroscience”), I quote the first paragraph as the framing of the article and encourage all who are interested to read further:

Adam Smith’s Wealth of Nations outlines the logic of modern capitalism; a world of competition in which benevolence is irrelevant. But in The Theory of Moral Sentiments he gave an account of morality resting on empathy and conscience as an impartial spectator observing our actions. The Adam Smith problem – how to reconcile these two great books – is also the challenge of how to order a society in which competition and ethical sensibility are combined.

Monday, September 26, 2011

Strategic CSR - Human Rights

In case you missed it over the summer, in June, the United Nations announced a set of guiding principles designed to avoid human rights abuses involving businesses.



And, the report itself can be found here: http://www.ohchr.org/documents/issues/business/A.HRC.17.31.pdf

In particular, the guiding principles are designed to:

“…  provide--for the first time--a global standard for preventing and addressing the risk of adverse impacts on human rights linked to business activity.

The principles are designed around three pillars that are intended to act in concert in order to protect basic human rights:

The first is the State duty to protect against human rights abuses by third parties, including business enterprises, through appropriate policies, regulation, and adjudication. The second is the corporate responsibility to respect human rights, which means that business enterprises should act with due diligence to avoid infringing on the rights of others and to address adverse impacts with which they are involved. The third is the need for greater access by victims to effective remedy, both judicial and non-judicial. Each pillar is an essential component in an inter-related and dynamic system of preventative and remedial measures: the State duty to protect because it lies at the very core of the international human rights regime; the corporate responsibility to respect because it is the basic expectation society has of business in relation to human rights; and access to remedy because even the most concerted efforts cannot prevent all abuse.

Immediate criticism of the principles, however, centered around the lack of accountability for states and firms that sign up to the framework (for similar criticisms of the UN Global Compact, see: http://www.corpwatch.org/article.php?id=14549). Without a supranational entity with powers to enforce the principles and inspect signatories to ensure compliance, the potential for greenwash is great. In spite of these concerns, Tony Webb from Ethical Corporation Magazine is more optimistic, claiming the presence of a framework provides the groundwork for a standardized approach to this issue across firms and national boundaries:

Despite the shortcomings of the UN Human Rights Council's proposed actions, the completion of John Ruggie's work is surely one of the most important milestones in the history of the field of corporate responsibility.

Take care
David


Instructor Teaching Site: http://www.sagepub.com/strategiccsr/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

Friday, September 23, 2011

Strategic CSR - Voluntary vs. Mandatory

The article in the url below focuses on the value of behavioral explanations of human behavior—i.e., explaining behavior in terms of empirical examination rather than theoretical assumptions. I thought it would be interesting for the Newsletter list because the arguments demonstrate how human action can be shaped dramatically by applying this knowledge to public policy (Chapter 8, Issues: Compliance, p310):

When you renew your driver’s license, you have a chance to enroll in an organ donation program. In countries like Germany and the U.S., you have to check a box if you want to opt in. Roughly 14 percent of people do. But behavioral scientists have discovered that how you set the defaults is really important. So in other countries, like Poland or France, you have to check a box if you want to opt out. In these countries, more than 90 percent of people participate.

Using this approach is often an effective way of achieving socially beneficial outcomes, while retaining the individual choice that is an essential component of an open society.

Wednesday, September 21, 2011

Strategic CSR - M&S

Over the summer, I read about a great idea by Marks & Spencer (M&S) that is called “Clothes Exchange.” The policy, which is a partnership developed in connection with the UK charity, Oxfam, is described on M&S’s website as:

“…the biggest programme in the UK to encourage consumers to recycle their clothes.”

The idea makes good business sense, while also helping the firm meet its aggressive “Plan A” goals (Case-studies: Primark vs. M&S, p198).

First, the socially-responsible benefit comes from encouraging more people to donate their old clothes to charity, rather than throwing them away (which, M&S claims, happens in 80% of cases currently). M&S’s solution, via the three-year old Clothes Exchange, is to “pay people to recycle”:

Anyone who heads down to an Oxfam store with a bag of unwanted clothes gets a £5 shopping voucher. The idea has been a roaring success with us, the consuming public. Oxfam has collected over seven million garments – that's an item from almost one in every eight UK residents.

Second, the business benefit comes from ensuring that the vouchers that people receive from Oxfam are spent at M&S, but in a way that generates additional business that may otherwise have gone to the firm’s competitors:

There are two conditions to the scheme. First, at least one of the recycled items must be an M&S product. Second, the £5 can only be used against purchases in M&S of £35 or over. Both make eminent sense.

The result is that M&S is able to reduce its environmental footprint (reducing waste and used landfill space), while supporting one of the UK’s most popular charities in its goal to reduce poverty, while also generating increased custom in its stores:

Oxfam is in the business of reducing poverty. More clothing donations means more funds to do just that. M&S is in the business of making profits. Persuading people to come into its stores and spend is therefore fundamental. A voucher helps towards that. Consumers feel happy (they’ve collectively pocketed vouchers worth over £7.5 million so far), as does M&S (whose tills are busier).

Ultimately, the plan is altering consumer behavior, which is essential if meaningful, lasting change is to be achieved:

Companies can’t force us to ‘do the right thing’. But they can present us with options that take the hassle out of doing what – in our more principled moments – we know to be right.

For more information about the M&S/Oxfam partnership, see: http://plana.marksandspencer.com/about/partnerships/oxfam%20
For more information about M&S’s Plan A, see: http://plana.marksandspencer.com/

Monday, September 19, 2011

Strategic CSR - FCPA

The article in the url below reports a recent bribery conviction for Tyson Foods. Following a series of mistakes over a number of years (where the firm ignored several opportunities to start correcting its behavior and, instead, continued to dig itself into a bigger and bigger hole), the SEC charged the firm in February this year with:

… conspiracy and violating the Foreign Corrupt Practices Act. Tyson agreed to resolve the charges with a deferred prosecution agreement in which it “admits, accepts and acknowledges” the government’s statement of facts, and paid a $4 million criminal penalty. The company paid an additional $1.2 million and settled related S.E.C. charges that it maintained false books and records and lacked the controls to prevent payments to phantom employees and government officials.

The article is interesting because, beyond the litany of irresponsible behavior exhibited by Tyson Foods (“What were these Tyson officials thinking?”), the author discusses the deeper issue of personal liability for corporate criminal behavior within the FCPA framework:

It would seem self-evident that if Tyson engaged in a conspiracy and violated the Foreign Corrupt Practices Act, then someone at Tyson did so as well. The statute specifically provides for fines of up to $5 million and a prison term of up to 20 years for individuals, as well as fines of up to $25 million for companies.

In spite of this provision, individuals rarely get charged under the FCPA legislation, or, for that matter, in relation to white-collar corporate crime in general:

The Justice Department … points out that in 2009 and 2010 it filed charges against 50 individuals under the Foreign Corrupt Practices Act, up from just two in 2004. This is surely progress, but the Tyson case suggests the problem persists, and not just in bribery cases: witness the widespread public frustration that so few people, as opposed to impersonal financial institutions, have faced criminal charges for actions that contributed to the financial crisis.

This is no doubt due to the complexity of the issues that are often involved in these crimes, as well as the difficulty in proving guilt beyond a reasonable doubt for a jury without expertise in the nuances of corporate and financial law. Equally, however, it is a result of the lack of resources government agencies have to regulate adequately the laws over which they have jurisdiction. Firms, on the other hand, have far greater resources to protect their executives. In redressing the balance somewhat, the article names the three executives at Tyson most closely involved in the crimes, whereas the SEC letter detailing the settlement with Tyson only mentions their titles. Unsurprisingly:

None of the three former Tyson executives responded to messages asking for comment.

Take care
David

Friday, September 16, 2011

Strategic CSR - David Friedman

Earlier this year I came across the work of David D. Friedman (son of Milton Friedman). He is a proponent of “anarcho-capitalism,” which is defined on Friedman’s Wikipedia page (http://en.wikipedia.org/wiki/David_D._Friedman) as:

[A system] where all goods and services including law itself can be produced by the free market. … Friedman advocates an incrementalist approach to achieve anarcho-capitalism by gradual privatization of areas that government is involved in, ultimately privatizing law and order itself. … Friedman's version of individualist anarchism is not based on the assumption of inviolable natural rights but rather rests on a cost-benefit analysis of state versus no state.

Intellectually, I find his ideas interesting, in the same way that a pure version of Communism is an interesting thought-experiment. The practical application of these ideas, however, seems less obvious. In addition, he has adopted his father’s antipathy for CSR (or, at least, what he defines as CSR), which suggests little prospect of reconciliation:

“…my university is big on "sustainability;" it has just been having an extended event designed to boost the idea. I responded to an email urging faculty members to introduce sustainability into one of their classes by asking if it was all right if I argued against it in mine, and suggesting that a program which consisted entirely of presentations on one side of an issue looked more like propaganda than education.

Friedman is correct, of course, that any program that presents only one side of a story is tantamount to propaganda and any university should feel confident enough to allow a professor to teach an anti-CSR course—you could title it ‘Introduction to Economics’ (J).

Friedman’s conceptualization of CSR (also like his father’s), however, appears somewhat simplistic (see his blog posting criticizing the value of pursuing sustainability at: http://econlog.econlib.org/archives/2011/04/david_friedman_7.html). In Strategic CSR, we raise and address the anti-CSR argument in Chapter 3 (p53), drawing heavily on the work of David Friedman’s father!

Wednesday, September 14, 2011

Strategic CSR - Alternative Energy

The article in the url below illustrates vividly the barriers to large scale expansion of alternative energy sources.

In short, scaling-up production of these energy sources (e.g., solar or wind) requires large amounts of resources—a cost that defeats the purpose of introducing them in the first place (a reduction in resource consumption). The article details this point in reference to fulfilling California’s commitment:

“…to obtain one-third of its electricity from renewable energy sources like sunlight and wind by 2020.

In particular, the author highlights the huge amount of land both solar and wind projects require in order to produce a meaningful amount of energy. California’s peak electricity demand is (according to the author) 52,000 megawatts. As such, in order to meet its one-third obligation from alternative energy sources, California will need to generate approximately 17,000 megawatts of alternative electricity:

Most of its large-scale solar electricity production will presumably come from projects like the $2 billion Ivanpah solar plant, which is now under construction in the Mojave Desert in southern California. When completed, Ivanpah, which aims to provide 370 megawatts of solar generation capacity, will cover 3,600 acres — about five and a half square miles. The math is simple: to have 8,500 megawatts of solar capacity, California would need at least 23 projects the size of Ivanpah, covering about 129 square miles, an area more than five times as large as Manhattan. … Wind energy projects require even more land. The Roscoe wind farm in Texas, which has a capacity of 781.5 megawatts, covers about 154 square miles. Again, the math is straightforward: to have 8,500 megawatts of wind generation capacity, California would likely need to set aside an area equivalent to more than 70 Manhattans.

There is plenty of land in the California desert, but then distribution becomes a barrier. The article also outlines the environmental impact of such huge projects—endangering plants and wildlife is one concern, while the amount of steel necessary to produce sufficient numbers of wind turbines is another:

The production and transportation of steel are both expensive and energy-intensive, and installing a single wind turbine requires about 200 tons of it. Many turbines have capacities of 3 or 4 megawatts, so you can assume that each megawatt of wind capacity requires roughly 50 tons of steel. By contrast, a typical natural gas turbine can produce nearly 43 megawatts while weighing only 9 tons.

The author delivers a strong conclusion:

Such profligate use of resources is the antithesis of the environmental ideal.

Monday, September 12, 2011

Strategic CSR - The Jevons Paradox

The article in url below makes you want to throw your hands up in resignation. It focuses on the unforeseen consequences of energy efficiency, particularly in consumer products, such as appliances or cars. While the article does not dispute the more efficient use of energy by these products, it makes a compelling argument that the net energy consumption as a result of their use is often zero (i.e., unchanged) or even positive (i.e., an increase in overall energy use):

The problem is known as the energy rebound effect. While there's no doubt that fuel-efficient cars burn less gasoline per mile, the lower cost at the pump tends to encourage extra driving. There's also an indirect rebound effect as drivers use the money they save on gasoline to buy other things that produce greenhouse emissions, like new electronic gadgets or vacation trips on fuel-burning planes.

There is a term for these unforeseen consequences – the Jevons Paradox:

“… named after a 19th-century British economist who observed that while the steam engine extracted energy more efficiently from coal, it also stimulated so much economic growth that coal consumption increased.

While generally dismissed by environmentalists today, there are important policy implications from this work:

“… if your immediate goal is to reduce greenhouse emissions, then it seems risky to count on reaching it by improving energy efficiency. To economists worried about rebound effects, it makes more sense to look for new carbon-free sources of energy, or to impose a direct penalty for emissions, like a tax on energy generated from fossil fuels. Whereas people respond to more fuel-efficient cars by driving more and buying other products, they respond to a gasoline tax simply by driving less.

I think the issue of unintended consequences is one of the most important issues for the CSR community to face – particularly in relation to sustainability. I see it again and again; whether it is a government subsidy or tax break for a particular kind of alternative energy, or a new technological innovation that interacts with some other factor (or is applied inappropriately) to generate an unexpected result.

In short, good intentions that seek to subvert market forces and established market practices often result in net neutral or other counterproductive outcomes.

Take care
David

Friday, September 9, 2011

Strategic CSR - FCPA

This article caught my eye, if for no other reason than it is surprising.

The article reports a conviction of three employees from Lindsey Manufacturing Co. under the Foreign Corrupt Practices Act (FCPA) for paying bribes in Mexico. The surprising thing is that this is “the first time a company has been convicted at a U.S. trial in a foreign bribery case.

Specifically:

[The] conviction marks the first time a company has been convicted at trial for violations of the Foreign Corrupt Practices Act, which bans the bribery of foreign officials for business purposes. In the law's 34-year history, companies had always pleaded guilty or signed non- or deferred-prosecution agreements with the Justice Department.

This case reinforces a trend in recent years (starting with the Bush administration) of a more aggressive enforcement of the FCPA by the Justice Department (see Newsletters: January 26, 2011, November 23, 2009, and September 16, 2009), which has resulted in a significantly larger number of investigations being initiated and now, apparently, in the first ever successful prosecution.

Have a good weekend.
David

Wednesday, September 7, 2011

Strategic CSR - Alternative Energy

The article in the url below ties together a series of recent accidents/disasters in a way I had not thought of before reading it:

In April 2010, an explosion in one of Massey Energy's coal mines killed 29 workers. Just weeks later, BP's Macondo well started gushing millions of barrels of oil into the gulf. And more than a month after Japan's large earthquake, the Fukushima nuclear plant is still leaking radiation.

Add to that the recent report of the spill of contaminated water by Chesapeake Energy in Pennsylvania and you can add natural gas and fracking to the list of problematic traditional energy sources and extraction methods:

“…the spill will galvanize critics of hydraulic fracturing, a process that releases natural gas from shale rock by blasting it with water, sand and chemicals.

In theory, the market potential for alternative energies is significant due to the problems with existing energy sources. In reality, the current low market share, inadequate distribution infrastructure, and reliance on subsidies mean there is a great deal of inertia to overcome:

In America, for instance, wind and solar power still provide just 1.4 percent of the nation's total energy diet. And although alternative sources are becoming cheaper, in many cases they still need subsidies.

The article presents this as an opportunity, rather than a constraint. It could have also argued that we are running out of time to treat this decision as an option.

Take care
David

Monday, September 5, 2011

Strategic CSR - J&J

The article in the url below presents a pretty damning picture of recent activity at J&J. For example:

On Aug. 26 last year, DePuy [a unit of Johnson & Johnson] announced a voluntary recall for two types of ASR hips, … but only after 93,000 had been implanted in patients worldwide, including 37,000 in the U.S. … Accusations of selling bum hips are bad enough; the lawsuits allege worse: that DePuy continued to push the hips even after it received preliminary numbers as early as 2007 indicating rising failure rates for both ASR models.

The article is based on a separate list of all the products J&J has had to recall over the past 3 years (http://www.businessweek.com/magazine/content/11_15/b4223066662101.htm). The accusation is that the firm is no longer making best practice decisions based on its stakeholder-focused Credo (http://www.jnj.com/connect/about-jnj/jnj-credo/), but is making business decisions based on projected profit and loss and in the absence of moral/ethical factors:

With $28 billion in holdings of cash and short-term securities at the end of 2010, J&J will surely weather the financial blowback from the bad hips. More troubling to customers and stakeholders, however, is that the DePuy recalls may be symptoms of a systemic quality-control problem at the 125-year-old corporation.

It is hard to put the numbers in this article in perspective without fully knowing the scale of J&J’s operations and how many products it produces and expected industry recall rates, but, at first glance, the numbers seem shocking:

The DePuy crisis is one of more than 50 voluntary product recalls that J&J has issued just since the start of 2010, covering brand names that read like an inventory of the family medicine cabinet. … In the year ended Mar. 8, 2011, J&J was involved in at least 11 major recalls, as defined by the FDA, almost twice as many as Pfizer, the world's largest health-care-products company by revenue, or Procter & Gamble, the world's largest consumer-products company. "I'm not familiar with another company that has had this many debacles in a very short period of time," says Ira Loss, an analyst at investment research firm Washington Analysis who has followed the FDA for more than three decades.

It gets worse:

Moreover, J&J's woes aren't confined to the last couple of years. During the last decade, the company has been repeatedly confronted with claims that it sold a product that was defective, or that carried risks J&J downplayed in its marketing. It has been accused of paying kickbacks and using other financial incentives to promote off-label use of drugs and devices. It has been cited by federal authorities for trying to avoid the publicity of a recall by quietly buying up tainted products. And it frustrated FDA regulators who were urging the company to strengthen quality control at the factories that produced many of the recalled over-the-counter products. J&J has steadfastly denied these claims, but its own annual report for 2010 contains eight pages detailing government criminal and civil investigations and thousands of private lawsuits covering a wide range of drugs, devices, and business practices.

The article makes a compelling case that J&J has been skirting, or just plain ignoring, best practice in its approach to researching and testing large numbers of its products. The implicit argument is that it is cost-cutting that has driven the change in business practices at the firm. What is ironic, of course, is that J&J’s 1982 Tylenol recall generated probably the most-cited CSR/ethics/crisis management case-study of how to respond to a defective product (Chapter 2: A Stakeholder Perspective, p43). The Credo and the way it shapes (or was thought to shape) behavior within J&J is presented as best-practice in prioritizing among competing stakeholder needs in a way that maximizes both economic and social value. Tellingly:

At Harvard Business School, however, faculty "became uncomfortable" teaching the popular Tylenol-poisoning case study amid all the J&J recalls, [HBS faculty Sandra] Sucher says. Last month it added another study to the curriculum: "On Weldon's Watch: Recalls at Johnson & Johnson From 2009 to 2010."

Take care
David