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, December 16, 2011

Strategic CSR - Corporate Stakeholder Responsibility



This will be the last CSR Newsletter of the Fall semester.
Have a great holiday season and I will see you in January!


Some food for thought over the break:

In the article in the url below in Wednesday’s Wall Street Journal, Al Gore and David Blood (co-founders of Gore’s sustainability-focused investment fund) present “A Manifesto for Sustainable Capitalism”:

We are once again facing one of those rare turning points in history when dangerous challenges and limitless opportunities cry out for clear, long-term thinking. The disruptive threats now facing the planet are extraordinary: climate change, water scarcity, poverty, disease, growing income inequality, urbanization, massive economic volatility and more. Businesses cannot be asked to do the job of governments, but companies and investors will ultimately mobilize most of the capital needed to overcome the unprecedented challenges we now face.

Gore and Blood define “sustainable capitalism” as:

a framework that seeks to maximize long-term economic value by reforming markets to address real needs while integrating environmental, social and governance (ESG) metrics throughout the decision-making process.

While I agree with much of the sentiment and intentions underlying the authors’ arguments, I believe their effort is misguided because it continues to demand unsolicited, proactive change from corporations:

We recommend five key actions for immediate adoption by companies, investors and others to accelerate the current incremental pace of change to one that matches the urgency of the situation.

Consistently, for-profit firms have demonstrated that they are very good at reacting to market forces and economic incentives, and that they are not very good at predicting consumer trends or shifting markets in ways that counter demonstrated demand.

An alternative focus of the efforts of the CSR community that I believe will more likely lead to the meaningful change Gore and Blood would like to see is to focus on a demand-pull strategy, rather than a supply-push strategy. In particular, we need to shift the focus from firms to their stakeholders. In Strategic CSR, we define CSR  in the following way:

[CSR is] a view of the corporation and its role in society that assumes a responsibility among firms to pursue goals in addition to profit maximization and a responsibility among a firm’s stakeholders to hold the firm accountable for its actions.” (Chapter 1: What is CSR? p5)

In other words, there is a responsibility on stakeholders to hold firms to account that is equal to the responsibility on firms to act in a socially responsible manner. I believe this more balanced approach is essential for generating meaningful change. Until stakeholders begin holding firms to account (i.e., governments start regulating effectively, suppliers start choosing firms that treat them fairly, consumers start discriminating among firms based on their ability to maximize social value, etc.), we will not see a comprehensive shift to a sustainable economic model. Firms’ primary purpose is to make a profit. As such, their risk tolerance for actions that undermine that purpose is limited. If, however, stakeholders are willing to translate their values, needs, and concerns into action that punishes those firms that fail to meet those criteria and rewards those firms that exceed expectations, then CSR becomes essential to survival. Given such incentives, for-profit firms have demonstrated time and again that they are capable of rapidly changing the way they operate.

Firms are good at making a profit. It is up to a firm’s stakeholders to define the parameters of which actions are profitable and which are not.

Wednesday, December 14, 2011

Strategic CSR - Walmart

Just when you think Walmart is making strides in relation to CSR broadly defined, the article in the url below reminds us that, beyond seeing sustainability as a means to decrease costs, the firm has a way to go before it incorporates a CSR perspective throughout all aspects of operations (Chapter 3, p53). In a policy statement released in September:

Wal-Mart said it planned to source a total of $20 billion in products from women-owned businesses in the United States over the next five years, which works out to an average of $4 billion a year, versus the $2.5 billion a year it currently spends, and to double what it buys from women-owned businesses globally by 2016. The company said it would also support training of women in factories and farms that are Wal-Mart suppliers, donate $100 million to causes supporting women’s economic development, and ask its vendors and services firms like ad agencies or public relations firms to increase gender and minority representation on their Wal-Mart accounts.

As Leslie A. Dach, executive vice-president for corporate affairs at Walmart, explains:

‘If you look at retail, the vast majority of our customers are women, and if you look at Wal-Mart, the majority of our associates are women. ... It makes complete sense for us to really have a focus on how we have the best associates we can, how we help women suppliers succeed and how we engage our communities.’

But, if this approach ‘makes so much sense,’ why did Walmart wait until it faced the possibility of crippling class-action litigation (and, now, individual claims stemming from the failed attempt to group all female employees of the firm as a ‘class’) before considering its introduction? In addition, why limit the commitment to such a small percentage of Walmart’s overall procurement budget?

The $4 billion a year, on average, that Wal-Mart will spend sourcing from women in the United States works out to about 5 percent of the company’s annual operating expenses.

In response, Walmart stated that the new policy announcement “was not in reaction to the class-action suit against Wal-Mart, which charged unfair treatment of women in the workplace.” The court ruling was decided on June 20, 2011 and Walmart’s new policy announcement was released on September 14, 2011.

Monday, December 12, 2011

Strategic CSR - Legal Rights

The article by Joel Bakan in the url below contrasts the progress of two relatively recently established, legally-protected entities—corporations and children. First, children, which emerged as a protected class towards the end of the nineteenth century:

By the early 20th century, the “century of the child,” as a prescient book published in 1909 called it, was in full throttle. Most modern states embraced the general idea that government had a duty to protect the health, education and welfare of children.

Second, corporations, which gained their status as a “legal—albeit artificial—person” in the twentieth century:

Lawyers, policy makers and business lobbied successfully for various rights and entitlements traditionally connected, legally, with personhood.

Bakan, who co-authored the book and documentary, The Corporation (http://www.thecorporation.com/), argues that the interests of these two protected classes (children and corporations) are inherently in conflict:

Century-of-the-child reformers sought to resolve conflicts in favor of children. But over the last 30 years there has been a dramatic reversal: corporate interests now prevail. Deregulation, privatization, weak enforcement of existing regulations and legal and political resistance to new regulations have eroded our ability, as a society, to protect children.

In particular, he identifies childhood obesity, electronic media, childhood medication, and toxic chemicals exposure as areas where corporate behavior is fundamentally controlling and damaging child development. He concludes:

“…our current failure to provide stronger protection of children in the face of corporate-caused harm reveals a sickness in our societal soul.

Friday, December 9, 2011

Strategic CSR - FDA

Here are a couple of quotes from the article in the url below, which focuses on the increased challenges faced by the Food and Drug Administration (FDA) in monitoring the inflow of food- and medical-related products into the U.S.:

A decade ago, the F.D.A. was responsible for policing six million shipments annually coming through 300 ports. This year, the number of shipments is expected to grow to 24 million … . Nearly two-thirds of all fruits and vegetables and three-quarters of all seafood consumed in the United States now come from outside the country.

The scale of the problem quickly becomes evident:

Government investigators estimated in 2008 that the F.D.A. would need 13 years to check every foreign drug manufacturing plant, 27 years to check every foreign medical device plant and 1,900 years to check every foreign food plant at its rate of inspections at the time. And with imports growing faster than the agency’s inspection force, those numbers have only mounted.

The oversight of firms bringing food and medical products into the U.S. is minimal. As a result, the incentive to subvert the controls put in place to regulate these products is high.

Have a good weekend.
David

Wednesday, December 7, 2011

Strategic CSR - Coca-cola

The article in the url below questions the value for firms in investing in recycling.

In January 2009, Coke opened a state of the art recycling facility in Spartanburg, North Carolina. We featured it in the second edition of Strategic CSR (Case-studies: Paper vs. Plastic, p314). Coke opened the plant with the ambitious goal “to recycle and reuse 100 percent of its plastic packaging in the United States” (http://www.csrwire.com/press_releases/17692). Two and a half years later, as Coke’s director of sustainability Scott Vitters puts it:

We’re not exactly where we’d want to be. Last year the plant produced only about a third of its targeted 100 million pounds of plastic recycled from PET, or polyethylene terephthalate. For much of this year, the 120,000-square-foot facility has remained mostly unused.

The reason offered in the article to explain the poor performance is a combination of low consumer recycling rates in the U.S. and Coke and Pepsi’s opposition to 5 or 10 cents bottle deposits. Both factors constrict the supply of used plastic bottles delivered to the plant, which increases per unit costs:

So low is the supply of recycled, bottle-grade PET that its price is about 10% above that of virgin PET in the U.S., according to Coke and recycling industry executives.

It gets worse:

The U.S. recycling rate for plastic bottles made from PET, typically derived from petroleum, was 28% in 2009, according to the National Association for PET Container Resources. That compares with a recycling rate for PET plastic bottles of nearly 50% in Europe.

A bottle deposit would help (Issues: Compliance, p310), but the soft drinks firms are reluctant to experiment with anything that would push up their costs and/or price, especially in a difficult economy:

The PET recycling rate in the 10 states with bottle-deposit laws is more than double the national average. In California, which recently strengthened bottle-deposit rules, 68% of PET bottles were recycled last year, according to the state. Europe also uses bottle-deposit rules and other variations of "extended producer responsibility'' laws requiring bottlers to bear recycling costs.

The outcome is disheartening and will discourage other firms from investing in recycling technology:

Due in part to the woes at the Spartanburg plant, Coke only has about 5% recycled content in its plastic PET bottles today, down from 10% roughly five years ago. PepsiCo Inc. says it has 10% recycled PET content. Both rates pale with recycled content in aluminum beverage cans, which stands at 68%, according to the Aluminum Association.

In spite of these figures, Coke says its recycling goals remain in place:

to recycle or reuse 100% of its bottles and cans in the U.S. by 2020, and aims to have 10% recycled content in its PET bottles again by next year.

Monday, December 5, 2011

Strategic CSR - Walmart

There are three aspects of the article in the url below that I find interesting. First, is that Walmart is changing its grocery supply chain to purchase more locally-grown foods. The move carries the advantage of meeting consumers’ growing demand for local food, but is primarily an attempt to reduce transportation costs:

This summer, Wal-Mart has lined up farmers to grow jalapeƱo peppers in 30 states, twice as many as last summer. A decade ago, almost all of the chain's hot peppers came from Florida, California and Mexico. "We can get chili peppers from Florida all day long, but at the end of the day that is not necessarily the best model for us," says Darrin Robbins, Wal-Mart's senior manager for produce. "I'm going to pay a higher price in Ohio for peppers, but if I don't have to ship them halfway across the country to a store, it's a better deal."

Second, is that loose definitions of sustainability-related terms (such as “organic,” “natural,” and “local”) allow firms to maximize the PR value they get by presenting foods in ways to which consumers respond positively. It also, of course, raises the possibility of greenwash (Chapter 4, p108):

At most large retailers, fruits and vegetables harvested hundreds of miles away can be touted as locally grown. Such loose definitions have sparked criticism from small farmers and organic-food advocates that the chains are merely adjusting their marketing to capitalize on the latest food trend, rather than making real changes in their procurement practices. Wal-Mart … encourages its managers to buy produce grown within 450 miles of its distribution centers, even if local peaches, for example, cost more than those produced across the country in California.

And, third, is that, although Walmart changed its logo in the summer of 2008 in a chain-wide re-branding effort, newspapers continue to refer to the firm as Wal-Mart with a hyphen (rather than Walmart). I find the inertia fascinating and can imagine it drives Walmart’s executives nuts. In relation to CSR, it brings to mind firms like Nike, which many people still think of as a non-socially responsible firm, even though (like Walmart) it is now leading best practice in many aspects related to CSR.

Friday, December 2, 2011

Strategic CSR - Patagonia

Patagonia ran an interesting ad last week on Black Friday (the day after Thanksgiving in the U.S. traditionally reserved for excessive amounts of consumption). The full-page ad and accompanying copy are re-produced on ‘The Cleanest Line’—“Weblog for the employees, friends and customers of the outdoor clothing company Patagonia”:


and as a pdf at:


The title of the ad was “Don’t Buy This Jacket.” Some excerpts from the ad copy:

Why run an ad in The New York Times on Black Friday telling people, “Don’t Buy This Jacket”?

It’s time for us as a company to address the issue of consumerism and do it head on.

The most challenging, and important, element of the Common Threads Initiative is this: to lighten our environmental footprint, everyone needs to consume less. Businesses need to make fewer things but of higher quality. Customers need to think twice before they buy.

Why? Everything we make takes something from the planet we can’t give back. Each piece of Patagonia clothing, whether or not it’s organic or uses recycled materials, emits several times its weight in greenhouse gases, generates at least another half garment’s worth of scrap, and draws down copious amounts of freshwater now growing scarce everywhere on the planet.

We’re placing the ad in the Times because it’s the most important national newspaper and considered the “paper of record.” We’re running the ad on Black Friday, which launches the retail holiday season. We should be the only retailer in the country asking people to buy less on Black Friday.

So, why run the ad?

It’s part of our mission [http://www.patagonia.com/us/patagonia.go?assetid=2047&ln=140] to inspire and implement solutions to the environmental crisis. It would be hypocritical for us to work for environmental change without encouraging customers to think before they buy.

The ad is part of Patagonia’s Common Threads Initiative, which contains five main components designed to re-think our approach to consumerism, in general, and the apparel sector, in particular:

·         REDUCE what you buy
·         REPAIR what you can
·         REUSE what you have
·         RECYCLE everything else
·         REIMAGINE a sustainable world