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Wednesday, November 28, 2012

Strategic CSR - Europe vs. U.S.

The article in the url below covers the 2011 Newsweek Green Rankings that were released last October (the 2012 rankings are available at:

"Is the same value assigned to being 'green' in Europe, North America, and Asia-Pacific? What are the key sustainability drivers for companies in each of these regions? Ultimately, which countries are taking the lead?"

In particular, the article focuses on the inclusion, for the first time in 2011, of the Top 500 global companies in the rankings, which increases the number of European firms covered. The article compares the performance of European, U.S., and Asian companies along the rankings' different metrics, with a clear pattern emerging:

"First and foremost is the issue of disclosure, where Europe takes the clear lead. Of the top 100 global disclosure scores featured in the 2011 Green Rankings, Europe accounts for 65% (though it only represents one-third of the companies ranked), compared to 19% for North America and 10% for Asia-Pacific. These figures are broadly consistent with those published by the Global Reporting Initiative (GRI), the leading international standard for sustainability reporting. Europe accounts for 45% of the world's GRI certified sustainability reports, compared to 14% in North America and a noteworthy 24% in Asia-Pacific. … European companies, most notably Northern European companies, have also taken the lead in environmental management, though the regional discrepancy is much narrower in this category."

Where the U.S. has taken the lead, in terms of "environmental impact," the report argues that the driver is the greater propensity to environmental crises, which then force the U.S. firms to take more drastic action in response:

"45 percent of the significant environmental controversy assessments assigned to the global 500 list implicated U.S. companies alone, which represent less than one-third of the global list. The silver lining there is that some of the most innovative environmental initiatives to date have been launched in reaction to controversies, paving the way for long-term strategic approaches to sustainability that would outlive tarnished reputations."

The article suggests explanations for this discrepancy that include a longer history of social activism on this issue combined with tighter government regulation. My thought, however, as a European who has been living in the U.S. for some time now, is that it is simply a matter of resource dependency. The U.S. is self-sufficient in all kinds of resources in a way that Europe is not. Since the U.S. has more resources, it has less need to preserve them (from an economic, not environmental, perspective). Given the ingrained way of life, where resource abundance forms a central part of the national narrative, the U.S. is having a harder time adjusting to the global view that resources are not unlimited and, therefore, need to be preserved.

This discussion reminded me of a very effective graphic that was produced in 2010 by Michael Hopkins—an academic who has been publishing and thinking about CSR for many years (, p2). The graph traces the evolution of CSR across three different geographical regions—the U.S., Europe, and emerging markets. My understanding is that the graph is a stylized representation of a complex set of ideas. I raise it here because the 2011 Newsweek rankings begin to demonstrate this phenomenon empirically. Equally interesting are the arguments Hopkins presents for why the diffusion has taken the course it has in each respective region:

"Essentially the diagram shows that Europe is ahead of most countries, followed by USA while emerging market economies (aka developing countries) are on the first rungs of CSR with few having a complete systematic approach to CSR (as, for instance, outlined in Strategic CSR and Competitive Advantage. In fact, right now, most developing countries – and the USA to a certain extent – focus on CSR as charitable giving. How CSR and philanthropy became intertwined is curious and is another story."

Comparing performance on subjective issues, such as CSR and stakeholder engagement, is hugely problematic due to the large number of contributing factors to different outcomes. That does not mean it should not be investigated, however, and Hopkins' graph, combined with the Newsweek Rankings, provide good starting points.

Take care

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Why is Europe Greener than the U.S.?
By Heather Lang
October 16, 2011
The Daily Beast