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


Wednesday, November 30, 2011

Strategic CSR - Greenwash

The article in the url below calls for an end to green marketing. The primary reason, the author argues, is because the increased focus on sustainability-related issues has not generated the scale of change necessary (Chapter 4, Greenwashing, p108):

For more than 20 years, consumers haven’t been willing to vote with their dollars. … With the exception of some energy-saving devices, no green product has captured more than a tiny slice of the marketplace, at least in the U.S. Think about it: No environmentally preferable car, carpet, cleaner, cosmetic, clothing, coffee, credit card or cell phone has captured more than 2 percent of its respective market. In most cases, sales of green products represent well under 1 percent of any given category.

Ultimately, the author feels that even where green products are somewhat successful, it is because of individual benefit rather than a broader ecological concern, “It’s not really about the planet”:

Hybrid cars? They reduce costly trips to the pump. Energy Star TVs and appliances? They cut energy costs. … But those choices benefit us personally, today -- not some far-off forest or future.

Now that green marketing is ubiquitous (and tarnished through multiple examples of greenwashing), it has lost much of its impact. As such, partly due to uninspired ad campaigns by firms, poor product quality, and price premiums associated with green products, consumers have not been willing to significantly alter their behavior. In other words, because everyone is now a sustainable company, no-one is a sustainable company—“Green Marketing is Over. Let’s Move On.”

Most of these criticisms, however, refer to business to consumer marketing. Business-to-business marketing, in contrast, provides reason for hope. Here, the push to develop and sell more environmentally-friendly products has been much more successful because it has focused on the business argument:

A wide range of things companies buy -- building products, industrial cleaners, IT equipment, paper and forest products, appliances and some industrial feedstocks -- are being marketed effectively for their environmental attributes. Companies and other buyers (like government agencies, hospitals and universities) are more willing to change their buying habits, and their buying power can make for attractive economies of scale. Witness the continued market growth of green buildings, biobased packaging, alternative-fueled fleet vehicles and more.

Monday, November 28, 2011

Strategic CSR - Toms Shoes

The article in the url below is a book review of an autobiography of Blake Mycoskie, the founder of Toms Shoes (http://www.toms.com/). Mycoskie’s innovation with Toms is the promise to donate one free pair of shoes to needy children for every pair of Toms shoes purchased (see also: http://online.wsj.com/article/SB10001424052702304252704575155903198032336.html). The autobiography is titled ‘Start Something That Matters’:

In 2006, Blake Mycoskie, a Tiggerish Texan bounded off to Argentina on holiday. … While in Argentina he came across a shoe called the alpargata, a kind of espadrille, and thought it would sell well in the United States. On the same trip, he met an American woman who was running a shoe drive, to deliver shoes to poor Argentine children. Twang went his entrepreneurial synapses: "Why not create a for-profit business to help provide shoes for these children? Why not come up with a solution that guaranteed a constant flow of shoes, not just whenever kind people were able to make a donation?"

Being The Wall Street Journal, the reviewer is skeptical of the “social entrepreneur” label Mycoskie uses throughout the book. The author’s skepticism generates a great point:

Though General Electric builds power plants and life-saving medical equipment and Exxon heats homes in winter and keeps the world moving with its fuel, they are decried as the villains of society, while the "social" entrepreneurs are venerated for giving us hemp shirts and organic greens. It has never seemed a fair distinction.

While recognizing the incontrovertible social value those firms have generated, Toms achievements are pretty impressive, too:

[In 2010] the company reported that, with the help of charities and other groups, its giveaways had passed the million-pair mark.

The advantage of a business model such as Toms (which now also includes eye glasses: http://www.toms.com/eyewear/), though, is that value is more likely to be added without the damage that the products of a traditional for-profit firm such as Exxon can also cause. The reviewer, ultimately, is also persuaded:

Having given away a million pairs of shoes—to children who, when barefoot, might be vulnerable to hookworm, tetanus and other soil-borne ailments—buys Mr. Mycoskie the credibility he needs. I finished the book not only wanting to buy a pair of Toms but also wanting to "start something that matters" myself.

The important insight worth building a business around?

People yearn to do meaningful work.

Wednesday, November 23, 2011

Strategic CSR - Nutrition Labels

The article in the url below reports the results of a competition organized by journalism students at the University of California, Berkeley to design more effective and informative food nutrition labels:

We asked food thinkers and design minds to come together and give advice on how they might rethink the food label and bring some insight into how design impacts choice,’’ said Lily Mihalik, co-creator of the project and a fellow in the News21 program, which is a journalism fellowship supported by the Carnegie and Knight Foundations. “There are a lot of things right with the current label, but at the same time people are confused. The question is whether a new nutrition facts label could help people make more educated decisions.

The winning designs are featured in the article and can be seen online at: http://graphics8.nytimes.com/images/2011/07/27/health/27well_labels3/27well_labels3-popup.jpg

More designs can be found at: http://berkeley.news21.com/foodlabel/

The competition was intended to complement a review of nutrition labels currently being conducted by the Food & Drug Administration (FDA) and joins efforts by many other interested parties looking to influence the review’s outcome:

This fall, the Institute of Medicine is expected to release its own report on food packaging and labeling.

I thought the article was interesting because it shows progress on two fronts:
  1. A larger emphasis on emphasizing the nutritional content of foods—increasing awareness and, hopefully, more educated consumer decisions.
  2. Conveying complex product information in ways that are more easily comprehensible for consumers. The ideas generated for nutrition labels can inform the effort by Walmart and others (http://walmartstores.com/sustainability/9292.aspx) to provide similarly complex information to consumers regarding product sustainability.

One last point; it is interesting that, in nutritional terms, the amount of processing involved in food production is as important, if not more so, than the ingredients themselves:

The focus on nutrients is probably inevitable, but it distracts from the issue of whether you’re getting real food or not,” he said. “The degree of processing matters more, very often, than the nutrients as expressed in a label. So how do we capture that?

Happy Thanksgiving (see you on Monday)!
David

Monday, November 21, 2011

Strategic CSR - Penn State

Of all the articles that have been written about the Penn State tragedy, the two best that I read appeared together on the op-ed page of The New York Times last Tuesday.

The article in the first url below by David Brooks is titled ‘Let’s All Feel Superior’ and highlights the hypocrisy of those who claim they would have done so much more to prevent the abuse if they had been in the same position as those who have featured so prominently in the Penn State case:

Unfortunately, none of us can safely make that assumption. Over the course of history — during the Holocaust, the Rwandan genocide or the street beatings that happen in American neighborhoods — the same pattern has emerged. Many people do not intervene. Very often they see but they don’t see.

Brooks concludes:

Commentators ruthlessly vilify all involved from the island of their own innocence. Everyone gets to proudly ask: “How could they have let this happen?” The proper question is: How can we ourselves overcome our natural tendency to evade and self-deceive. … But it’s a question this society has a hard time asking because the most seductive evasion is the one that leads us to deny the underside of our own nature.


As much as we would like to think that, put on the spot, we would do the right — and perhaps even heroic — thing, research has shown that that usually isn’t true.

The article in the second url below by Joe Nocera is titled ‘Penn State’s Long Road Back’ and charts a course for the university to recover “its moral bearings”:

[Last] Saturday’s game was just another example: The message it sent was that football comes first. A university with its priorities straight would have forfeited. But Penn State clearly just couldn’t bring itself to do that.

Nocera outlines five steps the university can take to reprioritize the values that drive Penn State. The surprise lies not in the proposals themselves (which all seem reasonable suggestions), but that Nocera can contemplate any President of a large U.S. university enacting them:

First, it should announce that it will not participate in a postseason bowl game this year. … Second, it must discipline the rioters. A university cannot allow its students to rampage so destructively — and so amorally — without consequences. Third, it must promise not to use its status as a state institution to shield itself from the inevitable civil lawsuits that will be brought by those who were allegedly abused by Jerry Sandusky. … Fourth, Penn State should establish a compensation fund [for the victims]. … Finally, Penn State should announce that it will cancel the 2012 football season.

Cancel football? But, what would a major university in this country do without a football season?

As for the students and the fans, who can scarcely imagine life without Penn State football,  well, that’s the whole point, isn’t it? In words and deeds, they have shown that their priorities are askew. It’s the job of the university to reset those priorities and teach new ones.

Friday, November 18, 2011

Strategic CSR - Goldman Sachs

The article in the first url below is a response to the Occupy Wall Street protests by comedian, Andrew Borowitz. It is a mock ‘Letter to Investors,’ supposedly from Lloyd Blankfein, Goldman Sachs’ CEO:

Up until now, Goldman Sachs has been silent on the subject of the protest movement known as Occupy Wall Street.  That does not mean, however, that it has not been very much on our minds.  As thousands have gathered in Lower Manhattan, passionately expressing their deep discontent with the status quo, we have taken note of these protests.  And we have asked ourselves this question:

How can we make money off them?

The answer is the newly launched Goldman Sachs Global Rage Fund, whose investment objective is to monetize the Occupy Wall Street protests as they spread around the world.  At Goldman, we recognize that the capitalist system as we know it is circling the drain – but there’s plenty of money to be made on the way down.

In particular:

The Rage Fund will seek out opportunities to invest in products that are poised to benefit from the spreading protests, from police batons and barricades to stun guns and forehead bandages.  Furthermore, as clashes between police and protesters turn ever more violent, we are making significant bets on companies that manufacture replacements for broken windows and overturned cars, as well as the raw materials necessary for the construction and incineration of effigies.

What is clever and telling about the spoof letter is that it is not hard to imagine someone at Goldman Sachs thinking something similar to these thoughts (and even perhaps writing them down).

Most good comedy contains at least an element of truth!

The article in the second url below places this letter within the context of a broader plea for the titans of finance to demonstrate a little appreciation for the iterative relationship between for-profit firms and the societies on which they rely for success (Chapter 1: A Moral Argument for CSR, p14).

Have a good weekend.
David


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


A letter from Goldman Sachs—Concerning Occupy Wall Street
Andrew Borowitz
October 17, 2011
The Borowitz Report

What should Wall Street do?
Schumpeter
October 29, 2011
The Economist
80

Wednesday, November 16, 2011

Strategic CSR - FREE 'free markets'

The editorial pages of The Wall Street Journal should be taken with a pinch (read ‘truck full’) of salt. As someone who reads newspapers for informed content, I find them even less helpful than the editorials of The New York Times. Needless to say, Rupert Murdoch’s influence at the WSJ has not improved things! Nevertheless, a recent editorial caught my eye and quickly had me nodding my head:

The Occupy Wall Street protesters aren't good at articulating what they want, but one of their demands is "end corporate welfare." Well, welcome aboard. Some of us have been fighting crony capitalism for decades, and it's good to have new allies if liberals have awakened to the dangers of the corporate welfare state.

The column continues:

Corporate welfare is the offer of special favors—cash grants, loans, guarantees, bailouts and special tax breaks—to specific industries or firms. The government doesn't track the overall cost of these programs, but in 2008 the Cato Institute made an attempt and came up with $92 billion for fiscal 2006, which is more than the U.S. government spends on homeland security. That annual cost may have doubled to $200 billion in this new era of industry bailouts and subsidies. According to the House Budget Committee, the 2009 stimulus bill alone contained more than $80 billion in "clean energy" subsidies, and tens of billions more went for the auto bailout and cash for clunkers, as well as aid for the mortgage industry through programs to refinance or buy up toxic loans.

I couldn’t agree more. People on both the left and the right tend to favor government intervention when it is in support of a cause they believe in (e.g., subsidies for solar power on the left, tax breaks for oil firms on the right), but at least the left recognizes that it favors government intervention. Right-wing ideology, in contrast, preaches the free market, but then implements heavily subsidized intervention in contravention of that ideology.

What the column does not include, therefore, is the recognition that subsidies and quotas are only one component of the inefficient corporate welfare system we have created in the West. As the article about energy policy in the second url below from the NYT correctly notes:

Economics 101 tells us that an industry imposing large costs on third parties should be required to “internalize” those costs — that is, to pay for the damage it inflicts, treating that damage as a cost of production. Fracking might still be worth doing given those costs. But no industry should be held harmless from its impacts on the environment and the nation’s infrastructure. Yet what the industry and its defenders demand is, of course, precisely that it be let off the hook for the damage it causes. Why? Because we need that energy!

It is the combination of reduced government intervention (i.e., the removal of subsidies, quotas, tax breaks, etc.) PLUS the full internalization of all externalities in product pricing that allows a truly free market to emerge. One without the other is not free; at present, we have neither:

So it’s worth pointing out that special treatment for fracking makes a mockery of free-market principles. Pro-fracking politicians claim to be against subsidies, yet letting an industry impose costs without paying compensation is in effect a huge subsidy. They say they oppose having the government “pick winners,” yet they demand special treatment for this industry precisely because they claim it will be a winner.

In this light, a government tax on carbon is simply a means of accounting for the full environmental costs of oil/gas extraction, processing, and consumption. In other words, it is a means of creating the conditions for a FREE ‘free market.’ Once the level-playing field has been created (with more accurate prices for all forms of energy—traditional and alternative), then let the market determine which energy sources should drive our future economies.

Monday, November 14, 2011

Strategic CSR - Solyndra

The Solyndra bankruptcy demonstrates the problems with a political entity applying its agenda to suppress market forces and achieve social goals.

While the goals are valid (driven by scientific analysis of the unsustainable nature of our current economic model), the means used to pursue them are inefficient. Government should be setting macro objectives and then stepping back to allow the market to micro manage resource allocation in the pursuit of those goals. An overview of the current state of the solar panel industry, which is a direct product of these distorted market and social forces, is presented in the article in the url below:

Demand for solar panels doubled last year, driven by soaring growth in Germany and Italy. This was a response to tumbling prices of solar panels, triggered largely by a big increase in polysilicon production capacity. In 2008 and 2009, the average price of a solar panel halved. Yet European subsidies for solar power, which are largely responsible for the industry’s emergence, hardly fell. Hence last year’s surge in demand, especially in Italy, where panel sales increased by 857% . The cost to European electricity users was enormous: they cover the subsidies, which are known as feed-in tariffs, in their bills. So Europe’s regulators have moderated their largesse. France announced a moratorium on its feed-in tariff last December, and Italy and Germany also made their subsidies less generous. Wider economic ills in Europe have given investors further pause, causing European demand for solar panels to plummet. In Germany, annual sales are expected to fall by more than 30%. Despite growth in America and China, global demand for solar sales is expected to grow by less than 10% this year. That leaves the market seriously oversupplied.

In relation to climate change, the government’s role should not be to choose the solution, but to clarify the problem and allow the market the freedom to determine the solution. In particular, it should do this by accounting for the true cost of carbon consumption (resource depletion, environmental degradation, political corruption, etc.) in the price of carbon-based energy sources.

Imposing a tax on carbon is the most effective way to do this. Such a tax ensures a level playing field for the most viable alternative energies (and the most efficient firms) to attract private capital and prosper. Government quotas and subsidies distort market forces in ways that generate inefficient outcomes; a carbon tax ensures a level playing field and comparative market pricing. The former are politically expedient; the latter is a political liability, which is why we will continue to get more government-driven problems, rather than market-based solutions.

Friday, November 11, 2011

Strategic CSR - Stakeholders

On Tuesday, President Bill Clinton was interviewed about his new book, Back to Work, by John Stewart on The Daily Show (http://www.thedailyshow.com/full-episodes/tue-november-8-2011-bill-clinton, 19.38 mins. to 20.55 mins.). During the interview, Clinton said the following:

“When I went to law school … in the 1970s, I was part virtually of the last generation of American law students and business students taught that corporations had a responsibility (because they had special privileges under the law, like limited liability) to their stakeholders (to their shareholders, their employees, their customers, and the communities of which they were a part). Then, starting in the late 1970s, that practice changed and all of a sudden the shareholders were way up here and all the stakeholders were down here. It had the ironic consequence of giving the most influence over corporate decisions to the stakeholders with the least concern about the long term profitability of the corporation and the greatest concern about the short term profitability. ... We need to be competitive, … but we also need to try to create an ethic in America where the employees and the customers and the communities can [be successful] too and we need to make it easy for corporations to act that way again.”

Wednesday, November 9, 2011

Strategic CSR - HSBC

On the surface, the article in the first url below by Mallen Baker (Foreword, pxvii) is a useful comment on the evolving issue of executive compensation. Increasingly, some firms are beginning to include sustainability-related targets in executives’ performance related bonuses. HSBC is leading this group of firms (for more examples, see CSR Newsletter on September 8, 2010, titled ‘Executive Compensation,’ about similar policies at Akzo Nobel and other European firms, such as DSM and TNT):

HSBC says that the adoption of this practice has helped to cut waste, water and electricity use within the company. A raging success story. Other companies, such as Kingfisher, also have a direct link.

Baker is reluctant, however, to support such developments unequivocally. As such, the more interesting point in the article focuses on the issue he highlights regarding the difference between values-led and incentive-led firms:

For me, the need to incentivise the right payments through bonuses is the device you fall back on when you have a company without embedded values. If you need to offer selfish motivations to achieve public good, you're not valuing the public good properly, or you're not hiring people that will respond to the public good.

While recognizing that values-led firms remain the exception (and incentive-led firms the rule), Baker argues that it is important to retain sight of the difference, while also recognizing that altering the basis on which executives are rewarded is at least a step in the right direction:

… the majority of businesses are not values-led, they follow a conventional business logic which is amoral. And in that situation, you have to create a system that will encourage the right outcomes. … Tying large executive remuneration to sustainability outcomes is therefore a good thing. It concedes that the our businesses are run by people who will only respond to large financial incentives. It operates within the short term business logic of the current prevailing culture - one which has helped put us in the mess we're in. But if we accept that we change the world by accepting the way it is, not pretending it is the way we would like it to be, then it is not a bad step to take.

Just because the outcomes may look the same, however, does not mean that the motives driving the behavior are inconsequential and won’t matter in more substantive ways in different contexts.

The article in the second url below gives different examples of other organizations, such as Walmart, that are trying to instill a values-led culture firm-wide:

AS WALMART grew into the world’s largest retailer, its staff were subjected to a long list of dos and don’ts covering every aspect of their work. Now the firm has decided that its rules-based culture is too inflexible to cope with the challenges of globalisation and technological change, and is trying to instill a “values-based” culture, in which employees can be trusted to do the right thing because they know what the firm stands for.

Take care
David


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


HSBC ‘bonuses for sustainability’ is the best of the second best
By Mallen Baker
June 3, 2011

The view from the top, and bottom
Business – Corporate Culture
September 24, 2011
The Economist

Monday, November 7, 2011

Strategic CSR - Carbon footprints

The article in the url below reviews a book written by Mike Berners-Lee about carbon footprinting. The book is titled ‘How Bad Are Bananas? The Carbon Footprint of Everything,’ which tells you all you need to know about the book’s general content. The detail, however, is well worth exploring:

Author Mike Berners-Lee writes about 100 or so items, ordering them by the size of their carbon footprints. Flipping through his book reveals that a store-bought rose has a bigger footprint than driving a mile, and that a banana makes a more carbon-friendly breakfast than a bowl of porridge.

The goal of the book, in broad terms, is to understand more comprehensively how our actions affect the environment. In doing so, however, Berners-Lee also allows us to focus on which actions are causing the most damage and, as a result, prioritize our efforts in order to generate more efficient outcomes:

We might agonize over paper versus plastic in the checkout line, even though grocery bags account for just 1/1000th of the carbon footprint of the average shopping trip. Rather than worrying so much about how many bags we’re using, the carbon-conscious consumer would do better to skip the asparagus airlifted from Peru in favor of produce shipped by boat or truck. Conversely, we might not think twice about picking up a bottle of water, even though bottled water is 1,000 times more carbon-intensive than its tap equivalent.

While the accuracy of some of the numbers in the book have been questioned and Berners-Lee is unclear about some of his sources, his ultimate goal is to educate, rather than preach:

‘How you decide to live is a choice that only you can make,’ he writes. ‘I just want to help you understand carbon so that you can do whatever you decide to do with more knowledge.’