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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Friday, November 30, 2012

Strategic CSR - Walgreens

The article in the url below reports a new line of ‘green’ products recently launched by Walgreens, named Ology:

The brand features bath and facial tissue, paper towels, copy paper, fluorescent light bulbs, laundry detergent, baby care products, householder cleaners and personal care items, such as adult shampoo and conditioner. All products are value-priced, Walgreens says.

This raises the issue of where the tradeoff is between CSR products and “value-pricing,” but I’ll leave that to another day. What I found particularly interesting was another element of the story:

The liquid products contain no harmful chemicals, according to the company.

It is notable that the fact that the products contain “no harmful chemicals” is a point that needs to be highlighted. Why isn’t that the starting point for all consumer products? Anyway, it turns out that, rather than an act of proactive progressivism from Walgreens in response to a receptive market, this move is merely a reactive decision that was “prompted by increasing legislative pressure to regulate chemicals in consumer products.” Apparently:

The US Senate previously approved The Safe Chemicals Act, which if passed, would overhaul the federal chemicals law and require ingredients be determined safe for human health before they could be used in everyday consumer products, Walgreens said. The pending legislation has compelled several industry leaders, including Walgreens, to pledge to remove potentially harmful and carcinogenic chemicals over the next several years.

It is amazing to stop and think about that for a moment. Congress might just pass a law requiring that the ingredients in consumer products should not be hazardous to human health (see: The position in the U.S. that all chemicals are safe until proven otherwise, contrasts with Europe’s approach that all chemicals need to be proven safe before they are included in consumer products.

Someone wake me up when the twenty-first century gets here!

Have a good weekend

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Walgreens Launches Green Products Brand
November 9, 2012
Environmental Leader

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

Monday, November 26, 2012

Strategic CSR - Cost Benefit Analysis

The article in the url below examines the costs of illegal behavior for firms—assessing whether current fines and other punishments stand a chance of preventing transgressions. The results are not encouraging:

It has been a bumper summer for corporate fines and settlements. In the past three months alone firms in Britain and America have agreed to pay out over $10 billion because of wrongdoing. But the economics of crime suggests that fines imposed by regulators may need to rise still further if they are to offset the rewards from lawbreaking.

The article makes clear that illegal corporate behavior is big business and, as such, well worth the risk of being discovered:

In a 2007 paper, John Connor and Gustav Helmers of Purdue University examined 283 international cartels that operated between 1990 and 2005. The aggregate revenue increase these cartels achieved by acting as they did was over $300 billion.

In terms of punishments, at the theoretical extremes, the article argues that regulators could either impose no fines (allowing market forces to punish wrongdoers) or it could seize all company assets (making the costs of a wrongful conviction prohibitive). Given that both of these options carry unacceptable risks, however, a more cost-effective method of calculating the fines imposed on firms is needed:

A middle way might be for regulators to levy penalties that offset the benefits of crime. Data on cartels supply useful guidance on how to go about calculating these fines. The first step is to measure the expected gain from crime which fines need to offset. In the study by Messrs Connor and Helmers, the median amount that cartel members overcharged was just over 20% of revenue in affected markets. Next, you need an assumption about the chances of being found out: a detection rate of one cartel in three would mean trustbusters were doing well. In this example, that would mean a fine of 60% of revenue is needed to offset an expected benefit of 20% of revenue.

This is a substantive punishment, but current fines pale in comparison. The fines in the above mentioned study, for example, “were between 1.4% and 4.9%.” Elsewhere, the story is equally discouraging:

Assessed against this methodology, even apparently hefty fines look pretty weak. … Britain looks particularly lenient. Its antitrust laws impose fines of up to 10% of revenues; American regulators levy penalties of up to 40%, and the European Commission goes up to 30%.

Consumer-based class action litigation (such as the settlement announced over the summer that imposed a $7.3 billion charge on MasterCard and Visa) is examined as one possible solution:

Yet litigation and criminal charges tend to take years to emerge; many wrongdoers are able to avoid court. To deter bad behaviour fines need to rise. The watchdogs are biting, but some need sharper teeth.

Perhaps crime does pay, after all!

Take care

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Fine and punishment
The Economist
July 21, 2012

Friday, November 23, 2012

Strategic CSR - Facebook

The article in the url below is interesting because it raises the issue of human death and virtual life:

As the dividing line between our online and offline lives continues to fade, more and more of what happens in the ‘real’ world is also seeping into the online world—and that includes death. So how should we deal with it when our friends or loved ones die?

The author raises this issue because he recently attended a friend’s funeral and live-tweeted about it during the ceremony. Some of his friends felt this was inappropriate. Another quandary arose when he continued to receive Facebook updates from his deceased friend (his friend’s family had memorialized his Facebook page and continued to send messages to it) and struggled with the decision of whether to delete his friend from his ‘friends’ list’:

But then I thought about how difficult it had been deleting another friend’s contact information from my cell phone after he died (this was before Facebook became popular) and how it felt as if I were deliberately forgetting about that person, which didn’t feel right. It occurred to me that we often keep photos of loved ones in our wallets or in picture frames on our mantelpieces, as a way of remembering them after they are gone. … So why does it feel so different when we see that person’s avatar pop up in our Facebook feed or a chat window? Perhaps because social media is inherently about communication—and in most cases real-time communication—and that person can no longer be communicated with.

And these emotional issues pale into comparison with the web of legal conflicts that can arise concerning ownership of a digital profile:

And Facebook is just one part of the equation when it comes to handling a person’s social media after they die. What about their Twitter account, or their Tumblr account, or even their e-mail? … There are also issues around who owns a user’s social content after he or she dies: Does Facebook own that person’s page and status updates and photos, and if so, what duty do they have to provide it to family members? What about iTunes?


… perhaps it is too much to ask that our virtual worlds be any more comfortable around death than our offline ones are.

Have a good weekend (and Happy Thanksgiving to those in the U.S.).

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Death and Facebook: Blurring the Line Between Real and Virtual
By Matthew Ingram
November 14, 2012
Bloomberg BusinessWeek

Wednesday, November 21, 2012

Strategic CSR - Walmart

The article in the url below provides an update on the ongoing Walmart bribery investigation in Mexico:

Wal-Mart on [November 15] reported that its investigation into violations of a federal antibribery law had extended beyond Mexico to China, India and Brazil, some of the retailer’s most important international markets.

On the upside, at least Walmart disclosed the expanded investigation voluntarily this time, rather than being ‘encouraged’ by The New York Times (see: Strategic CSR – Walmart in Mexico). On the downside, however, the announcement of the expansion via regulatory filing suggests the extent of the FCPA violation is both serious and widespread throughout Walmart’s international operations:

A person with direct knowledge of the company’s internal investigation cautioned that [the] disclosure did not mean Wal-Mart had concluded it had paid bribes in China, India and Brazil. But it did indicate that the company had found enough evidence to justify concern about its business practices in the three countries — concerns that go beyond initial inquiries and that are serious enough that shareholders needed to be told.

The disclosure is more concerning in that, in recent years, Walmart has relied on international operations to drive growth throughout the firm. Both in terms of lost revenue and mounting costs, the full consequences of this investigation for Walmart are still far from clear:

Wal-Mart has so far spent $35 million on a compliance program that began in spring 2011, and has more than 300 outside lawyers and accountants working on it, the company said. It has spent $99 million in nine months on the current investigation.

Take care

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Wal-Mart Takes  Broader Look at Bribery Cases
By Stephanie Clifford & David Barstow
November 16, 2012
The New York Times
Late Edition – Final

Monday, November 19, 2012

Strategic CSR - Social Risk

I will be travelling for the next three weeks with only intermittent access to e-mails.
I will endeavor to keep the Newsletters in production, but apologies in advance for any disruption to service.

The article in the url below reports on an interesting story from last week’s Party Congress heralding the leadership transition in China:

The cabinet of China has ordered that all major industrial projects must pass a ‘social risk assessment’ before they begin, a move aimed at curtailing the large and increasingly violent environmental protests of the last year, which forced the suspension or cancellation of chemical plants, coal-fired power plants and a giant copper smelter.

The “social risk assessment” policy  is aimed at minimizing public protest in response to government edicts. It is not clear from the announcement (or article), however, whether the “social” part of ‘social risk’ is intended to prevent damage to society (environmental degradation) or damage to the Party (reduced legitimacy):

He did not provide a description of how social risk assessments would be conducted, but he indicated that they would involve looking at the likelihood that a project would set off a public backlash.

It is interesting to think of a similar filter being applied by Western organizations (either governmental, nonprofit, or for-profit).

‘No major projects can be launched without social risk evaluations,’ Zhou Shengxian, the environment minister, said at the news conference. ‘By doing so, I hope we can reduce the number of mass incidents in the future.’

It is interesting and hopeful, however, that the announcement was made by the Environment Minister and framed in terms of environmental damage. The Chinese government has a track record of progressive work in this area:

Mr. Zhou also noted that effective Sept. 1, all government agencies in China had been ordered to make public all environmental impact assessments by posting them on the Internet, with a description of what the government planned to do about the assessments.

Take care

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‘Social Risk’ Test Ordered By China for Big Projects
By Keith Bradsher
November 13, 2012
The New York Times
Late Edition – Final

Friday, November 16, 2012

Strategic CSR - CEOs and ethics

Maybe someone can explain the story covered in the article in the url below to me in simple terms, because, on the face of it, it makes no sense:

Lockheed Martin Corp. ousted its incoming chief executive, Christopher Kubasik, for having a ‘close personal relationship’ with a subordinate at the defense contractor. The company said Mr. Kubasik was asked to resign Friday after an investigation determined the ‘improper conduct’ violated Lockheed Martin's code of ethics. He will receive a $3.5 million separation payment.

I understand that CEO tenure is decreasing and that, having worked their way to the top, CEOs need contractual safeguards in case they lose the position through some factor (more or less) beyond their control. But, how is it that when an individual breaks the firm’s ethics code through personal choice, conducting himself in a way that damages the firm’s reputation, and is forced to resign as a result (i.e., he is fired), he receives a payout of $3.5 million, even before he becomes CEO?

How is it that compensation committees on the Board are so weak and pathetic that they cannot just fire the person, without having to buy-off the threat of a lawsuit with $3.5 million, when they have every reason (and right) to fire the guy?

And we wonder why the Gallup Annual Honesty and Ethics poll, which rates “the honesty and ethics of workers in 21 different professions,” reveals that the public’s perception of business executives is not very high. From 1992 to 2010, the percentage of the U.S. public surveyed who rated business executives’ ethics as “high” or “very high” never rises above 25% and is trending downwards.

More importantly for Lockheed, I wonder what message its decision sends to employees about how seriously senior executives and directors take the firm’s ethics code.

Have a good weekend

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Lockheed Ousts New Chief
By Doug Cameron & Joann S. Lublin
November 10-11, 2012
The Wall Street Journal
Late Edition – Final

Wednesday, November 14, 2012

Strategic CSR - Moral Argument for CSR

Back in July, during a campaign event, President Obama said the following:

If you were successful, somebody along the line gave you some help.  There was a great teacher somewhere in your life.  Somebody helped to create this unbelievable American system that we have that allowed you to thrive.  Somebody invested in roads and bridges.  If you’ve got a business -- you didn’t build that.  Somebody else made that happen.  The Internet didn’t get invented on its own.  Government research created the Internet so that all the companies could make money off the Internet. The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together.  There are some things, just like fighting fires, we don’t do on our own.  I mean, imagine if everybody had their own fire service.  That would be a hard way to organize fighting fires.

The official transcript of Obama’s remarks are available in the url below. The response to what he said was astonishment, disbelief, and what seemed to be widespread criticism (some of the more inventive stuff made it into its own website: and Wikipedia page:'t_build_that), with The Wall Street Journal claiming in an editorial that, as a result of the speech, “the self-made man is an illusion” and that:

This burst of ideological candor is already resonating like nothing else Mr. Obama's said in years. The Internet is awash with images of the President telling the Wright Brothers, Thomas Edison, Henry Ford, Steve Jobs and other innovators they didn't build that. … Beneath the satire is the serious point that Mr. Obama's homily is the soul of his campaign message. The President who says he wants to be transformational may be succeeding—and subordinating to government the individual enterprise and risk-taking that underlies prosperity.

As opposed to a widely-reported “gaffe,” I was struck by how unremarkable Obama’s comments were. I understand the political undertone of the criticism, but what Obama said was just plain common sense. The contrast in perspectives reminded me of Michael Lewis’ commencement speech to last year’s graduating class from Princeton (see: Strategic CSR – Luck and responsibility). The point of Lewis’ speech was to emphasize to the students that luck played a significant part of their success (luck in being born into supportive families, luck in getting good opportunities, luck in being able to go to school in a country that has great universities, etc.) and that, as a result, they have a responsibility to others who have not been as lucky. Essentially, Lewis (eloquently) and Obama (a little more clumsily) were articulating the Moral Argument for CSR (Chapter 1, p14):

CSR broadly represents the relationship between a company and the principles expected by the wider society within which it operates. It assumes businesses recognize that ‘for profit’ entities do not exist in a vacuum, and that a large part of their success comes as much from actions that are congruent with societal values as from factors internal to the company.

The idea that there is some kind of moral argument for CSR seems fundamental, to me. More importantly, it is fundamental to ensuring meaningful change occurs on a society-wide basis. To the extent that we understand that we are a group that is “all in this together,” we stand a much better chance of building a cohesive society; to the extent that we are all individuals who need to only look out for ourselves, then there is no society to be responsible towards.

Take care

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Remarks by the President at a Campaign Event in Roanoke, Virginia
Roanoke Fire Station #1, Roanoke, Virginia
July 13, 2012
The White House

Monday, November 12, 2012

Strategic CSR - Definitions

The article in the url below is both stimulating, but also misguided, in its conceptualization of CSR. It is stimulating because it captures the difficulty in identifying the most responsible position on any number of complex issues:

Is it more socially responsible for U.S. businesses to protect American jobs or provide employment for impoverished people in developing countries? To shun genetically modified foods or endorse their role in ameliorating malnutrition? To power their fleets with petroleum or use electricity generated by coal? Making judgments about which position is “right” is a slippery slope, because, like fair trade and social justice, corporate social responsibility is a fuzzy, malleable, eye-of-the-beholder concept.

The article is misguided, however, in conceptualizing CSR as something that is an option that firms can choose to be “known for”:

Do you want your business to become known for its commitment to corporate social responsibility? If so, you’re going to have to be thoughtful in managing trade-offs, balancing short-term and long-term interests, and assessing possible unintended consequences. Differing audiences (or interest groups) will judge the choices you make based on their differing perspectives. Your task is to sort through the issues and determine the best course of action for your organization.

CSR is not a choice—it is the way business is conducted. For example, the author suggests that, in order to be good at CSR, a firm needs “to be thoughtful in managing trade-offs, balancing short-term and long-term interests, and assessing possible unintended consequences.” If that is not a description of how all firms conduct business, I do not know what is. Certainly, firms are either better or worse at managing these relationships; they draw the lines of key stakeholders narrowly (at shareholders alone) or more broadly (in terms of a wider group of constituents), but, in both cases, CSR is not an option, it is the way that business is conducted in the twenty-first century. Once firms understand that they are embedded in complex stakeholder relations and that they need to manage these relations effectively if they are to survive and thrive over the medium to long term in today’s global business environment, then strategic planning and daily operations represent the means to manage the messy trade-offs and priority-setting that the author refers to in the first quote, above. But, again, this approach to business is not an option, it is the reality that firms operate within—those firms that understand this will be more successful than those that do not.

Where the author returns to safer ground is in terms of the distinction he draws “between core and extraneous corporate social responsibility efforts.” This distinction is one of the key messages of Strategic CSR—the difference between “core and extraneous” actions is the difference between strategic CSR and CSR as understood by many advocates (and journalists). It is operational relevance that is key.

It is somewhat frustrating to still be running into these fundamental misunderstandings of CSR as some kind of philanthropic add-on that are propagated by the media and other commentators (and academics like Porter & Kramer with their concept of “shared value”). Combatting these perceptions and building a sound, strategy and operational basis for CSR is essential in order to begin building lasting change around common understandings of core CSR concepts.

Take care

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Corporate Social Responsibility: Distinction or Distraction?
By Steve McKee
August 9, 2012
Bloomberg Businessweek

Friday, November 9, 2012

Strategic CSR - Climate Change (III)

The article in the url below contains facts/quotes indicating the extent of the delay in compiling a serious response to climate change:

It has been well over 100 years since the phenomenon called the greenhouse effect was identified, 24 years since the steamy summer of ’88, when many of us first took notice, and, incredibly, 15 years since the Kyoto Protocol. … The climate has changed, and the only remaining questions may well be: a) how bad will things get, and b) how long will it be before we wake up to it.

The article also contains an indication of the urgency of acting:

… not only was May the warmest on record for the Northern Hemisphere, not only was it “the 327th consecutive month in which the temperature of the entire globe exceeded the 20th-century average,” but it was also followed by a June in which some 3,200 heat records were broken in the United States.

Have a good weekend

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The Endless Summer
By Mark Bittman
July 19, 2012
The New York Times
Late Edition – Final

Wednesday, November 7, 2012

Strategic CSR - Climate Change (II)

The article in the url below is a review of a book by Dieter Helm of Oxford University titled The Carbon Crunch. The book’s goal is to provide:

“… a cogent account of how self-defeating current global climate-change policies are turning out to be.

The core idea of the book counters the perception that it is a failure of political will that accounts for worldwide inaction on climate change. Rather, Helm argues that it is a failure of misplaced priorities and economic incentives gone awry that are the main problems:

They have caused people to focus on the most expensive ways of mitigating climate change, rather than the cheapest, imposing high costs for little gain.

Two points the review highlights about the book stood out for me. First, is the idea that, while Europe continues to focus on reducing its own carbon emissions (and feeling very proud of itself in the process), it continues to promote an economic model that relies on imports from many countries that rely on carbon intensive production processes:

Since Chinese and Indian manufacturing is usually dirtier than Europe’s, the real upshot of Europe’s choices has been an increase in global emissions.

Second, the review explains in clear terms why alternative energies, such as wind, have failed to establish themselves as a viable economic alternative to more traditional energies:

Wind-power generators are expensive. But this is only part of the problem. They are also intermittent. One day last February, wind power produced almost a third of German electricity; four days later, nothing (it was a calm day).

The result of this is that wind-generated energy is highly unreliable. While this is problematic in itself, it has significant consequences for the rest of the energy sector:

Nations have to build lots of spare capacity for windless days. This was fine when wind farms were marginal, but now they produce a tenth of Germany’s electricity and their output is rising fast. To make matters worse, wind messes with the economics of the spare capacity, too. When the wind blows, the extra energy is free. Other forms cannot compete and the standby generators have to close. But other sorts of power stations are not designed to be switched on and off: they are supposed to run all the time. Since energy cannot yet easily be stored, wind farms are making other forms of energy uneconomic.

The result is a corrupt process that is highly inefficient and unproductive:

The system therefore relies on a panoply of subsidies which, as night follows day, has produced an enormous industry to compete for them—wind and solar firms, lobbyists, NGOs and politicians. The entire renewables sector, Mr Helm argues, has become an orgy of rent-seeking.

Take care

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How to fix it
The Economist
October 20, 2012