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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Monday, April 29, 2013

Strategic CSR - Online CSR simulation

An important debate within the CSR community surrounds the teaching of CSR and business ethics in the classroom. The debate consists of two main points—first, whether or not topics like ethics can be taught effectively to adults with fully-formed value sets, and second, how best to do that.
The textbook Bill and I wrote, Strategic CSR, is an attempt to tackle the second of these issues. One problem with a textbook, however, is that once printed, it is a relatively static tool. In order to help combat this, I developed this Newsletter (to provide regular updates on the issues and cases in the book) and also committed to reasonably regular new editions of the book (the third edition manuscript is currently being prepared for publication in August/September by Sage).
In an attempt to broaden the classroom tools available to instructors further, I have long wanted to develop an online simulation and the launch of the third edition presented an ideal incentive to do so. With this in mind, I approached a colleague (Michael Hendron, BYU) who is the only person I know with the development skills and simulation expertise to do this and, together, we have developed the Strategic CSR simulation. The simulation is intended to complement the third edition, but is also being designed as a stand-alone teaching tool that draws on issues related to CSR, business ethics, and stakeholder theory, broadly defined.
In the simulation, students (in groups or individually) act as the Corporate Responsibility and Ethics Officer (CREO) for a fictional cellphone company, K-Tai, Inc. As the firm’s new CREO, the students work within a budget to set-up their office, employ personnel, and respond to various scenarios that are presented to them over multiple years of operations. The scenarios emerge from the firm's wide range of stakeholders and the CREO’s responses have consequences at the individual, firm, and industry level.
We have been developing the simulation over the last year and many of you have been instrumental in that process. We have also been testing the simulation in the classroom and it has been adopted by instructors from Europe, Asia, and North America. The feedback from different cultural perspectives has been valuable in bringing the simulation to the point where we are ready to launch it as a complete product.
If any of you are interested in seeing the simulation in more detail, please let us know and Mike and I would be happy to introduce it to you. Equally, if you would like to register and explore the simulation on your own, please feel free to sign-up here.
Take care
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Friday, April 26, 2013

Strategic CSR - Monster Energy

Longtime subscribers of the Newsletter will know of my distaste (literally and figuratively) for the food industry. This distaste extends to the drinks industry, which is working hard to compete with agribusiness to see which group of firms can do the most damage to long-term public health. The article in the url below helps push the advantage back towards the drinks industry:
“Fans of Monster Energy, the popular high-caffeine energy drink, may not notice the change: its ingredients will be the same and its familiar label bearing a green, clawlike monogram will change only slightly. But the drink’s maker has decided after a decade of selling it as a dietary supplement to market it as a beverage, a switch that will bring significant changes in how it is regulated.”
What changes, exactly, are we talking about?
“Among them: Monster Beverage, the nation’s biggest seller of energy drinks, will no longer be required to tell federal regulators about reports potentially linking its products to deaths and injuries. … The changes by Monster and Rockstar demonstrate the degree to which energy drink manufacturers can decide which rules to follow.”
It must be nice to be able to make up the rules as you go along:
“For a decade, Monster sold its products as dietary supplements, apparently as part of a strategy to convince consumers that they were different from beverages. But the company, like its competitors, has run into a spate of bad news, including the disclosure in October that the F.D.A. had received reports in recent years that mentioned its drinks in connection with deaths and injuries. Since then, the F.D.A. has received three more death reports and 14 injury reports that cite Monster energy drinks, an F.D.A. spokeswoman, Tamara Ward, said in an e-mail. In recent months, the agency has also received added reports about other energy products; since October, for example, it has received 38 reports that cite the popular energy ‘shot’ 5-Hour Energy, including five involving a death.”
The company, of course, insists that the change is merely part of the important public service that they offer:
“A spokesman for Monster, Michael Sitrick, said the company had decided to market its products as beverages for several reasons. One was to stop what he described as ‘misguided criticism’ that the company was selling its energy drinks as dietary supplements because of the belief that such products were more lightly regulated than beverages. Another consideration, he said, was that consumers can use government-subsidized food stamps to buy beverages.”
It is always reassuring to know such socially-oriented companies place our collective wellbeing central to their mission!
Have a good weekend.
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In a New Aisle, Energy Drinks Sidestep Some Rules
By Barry Meier
March 20, 2013
The New York Times
Late Edition – Final

Wednesday, April 24, 2013

Strategic CSR - Prisons

A couple of months ago, there was a lot of media coverage surrounding the announcement by Florida Atlantic University that its new football stadium was to be sponsored by a private prison company. The article in the url below, for example, explained that:
“The GEO Group is a for-profit prison company based in Boca Raton, Fla., that calls itself ‘the world’s leading provider of correctional and detention management and community reentry services to federal, state and local government agencies.’ It can also call itself the world’s leading provider of Florida Atlantic University Owls football, having paid $6 million to put its name on the school’s stadium.”
Most commentators deemed the story sufficiently interesting due to the nature of the sponsor's industry. The combination of university education and private-sector incarceration was thought to be bordering on the offensive. In particular, the fact that the GEO Group’s main customer is the government and that, ultimately, the firm’s revenue was provided by taxpayers, suggested that the company was making too much money and that this was an inappropriate way to spend it. Perhaps more controversial was the firm’s past record of transgressions:
“… in 2010, the Southern Poverty Law Center and the ACLU National Prison Project alleged in a class action lawsuit that a youth detention center GEO Group used to operate in Mississippi was home to ‘rampant contraband brought in by guards, sex between female guards and male inmates, inadequate medical care, prisoners held inhumanely in isolation, guards brutalizing inmates and inmate-on-inmate violence that was so brutal it led to brain damage.’”
I wondered what all the fuss was about (see protests here and here). There is a bigger issue of corporate involvement with university sports, in general, and the corrupt practices of the NCAA; but, if we are going to allow corporate sponsors, I do not see a problem with one of them being a private prison operator. In fact, you could argue that operating a prison delivers a significant amount of social value, since the firm is dealing with those individuals who have been deemed to be a threat to society. In essence, a company is a company, and this company is arguably delivering a product with as much social value as any other. I think it is instructive that we wouldn’t blink if it was Pepsi that was sponsoring the stadium, yet its products do a great deal of social harm. While there are certainly problems with the so-called “prison industrial complex” in the U.S., my sense is that the source of this problem is the criminal justice system and biased application of ineffective legislation, rather than the company that actually implements the judicial sentences that are imposed. I agree there is some discomfort with the idea that incarcerating people is “good business;” so good, in fact, that a firm can afford to spend $6 million sponsoring a college stadium, but I experience equal (if not greater) discomfort in the idea that it is “good business” to produce and distribute fundamentally unhealthy foods, just as it is “good business” to construct a financial system that relies on public subsidy to unjustly reward a few at the expense of the many, and “good business” to exploit the scarce resources of our planet to convince people to buy things they neither need nor want. Yet, sponsorship by firms from these three industries (food, finance, and retail) is broadly accepted and widely practiced. Again, whether to allow any corporate sponsorship of collegiate athletics is one thing; but if we are going to say that that is OK, then I think it is hypocritical to judge the GEO Group by a different standard than the many other companies whose money forces colleges to compromise their principles with a smile every day.
That is not to say, of course, that hypocrisy does not have a prominent place in today’s modern society. As a result of the public backlash, the decision to sponsor the stadium was eventually withdrawn by the firm (see here):
“Members of a student group called the Stop Owlcatraz Coalition, which had protested the deal, declared victory after the announcement. The [GEO Group’s] chief executive pledged $500,000 to the university for academic scholarships in lieu of the stadium deal.”
Take care
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Florida Atlantic University's Stadium Named After a Prison Company
By Ira Boudway
February 20, 2013
Bloomberg Businessweek

Monday, April 22, 2013

Strategic CSR - Earth Day!

The more you study a subject like CSR, the more it is easy to be dragged down into a conversation of increasing despair as the planet hurtles towards social introversion and environmental destruction. As such, it is extremely liberating to be reminded occasionally of the brilliance of human beings. Given the right conditions and incentives, we have the ability to thrive (and, hopefully, survive)! The article in the url below from the UK newspaper, The Guardian, presents a series of amazing innovations that extends our ability to recycle discarded products that were previously considered waste:
“From plastic bottles that have helped create Nike's 2013 Brazil home kit, to roof tiles made of toilet paper.”
Truly inspiring! Now, if we could only work out how to scale this kind of innovation so that we use less resources than we throw away …
Happy Earth Day!
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Turning waste into worth - innovation in pictures
From fishing nets turned into carpet tiles, shampoo sludge that becomes fertiliser and plastic bottles transformed into Brazilian football kits, waste is being re-used in innovative ways to create new products. Our gallery pulls together some of the most interesting examples
April 10, 2013
The Guardian

Friday, April 19, 2013

Strategic CSR - Waste

There are many examples of how we, as a society, waste significant amounts of the natural resources that we extract from the Earth. Food is a particularly salient example—both because it is something that we consume regularly (too regular in many cases! J) and can relate to, but also because the transgressions are so blatant. I have seen a number of reports on the amounts of food that are discarded every day, but I do not remember seeing numbers as high as in the article in the url below:
“As much as half of the food produced worldwide ends up being thrown away every year because shoppers are too choosy about the appearance of fruit and vegetables, a report said Thursday. The world produces about four billion metric tonnes of food a year but up 2 billion tonnes is never eaten. … [The report] says retailers reject millions of tonnes of crops because of the physical appearance of fruit and vegetables, fearing shoppers will not buy them unless they look perfect.”
I am not sure how accurate these numbers are, but what is consistent across studies is that we are wasting a valuable resource that is not being replenished at a sustainable rate. It is also clear that this is a problem that is not going away, at least not in the short-term:
“Food consumption is becoming an important global issue. By the end of the century the world could have an extra 3 billion people to feed, according to the United Nations.”
The full report that was published by the Institution of Mechanical Engineers can be accessed at:
Have a good weekend
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Half of world food goes to waste, global study says
By Duncan Golestani
January 10, 2013
NBC News

Wednesday, April 17, 2013

Strategic CSR - Carrots and sticks

An ever-present challenge for those looking to hold firms to account for their actions is what mix of carrots and sticks to use. While providing incentives for firms (i.e., executives) to make the right decisions can be productive; how can we, as a society, wield sufficient sticks? How can we punish firms which, by definition, cannot go to jail? The article in the url below highlights the extent of this problem by focusing on the fines paid by firms that are found to have committed serious transgressions:
“The numbers seem eye-popping. So many billions here for supposed mortgage abuses, so many billions there for questionable foreclosures. But there’s more than meets the eye to the big legal settlements you’ve been reading about involving some of the nation’s biggest banks. Actually, there’s less than meets the eye. The dollar signs are big, but they aren’t as big as they look, at least for the banks. That’s because some or all of these payments will probably be tax-deductible. The banks can claim them as business expenses. Taxpayers, therefore, will likely lighten the banks’ loads.”
What does this look like in practice? Well, for example:
“After the Gulf of Mexico oil spill, for example, BP received a $10 billion tax windfall by writing off $37.2 billion in cleanup expenses.”
The law in the U.S. appears to be that, in general, settlements or penalties paid by firms to correct either civil or criminal transgressions are not tax deductible. That is, unless the payments are being made into funds that will ultimately aid others. Of course, that is a loophole that any half-decent corporate lawyer can wade through with their eyes closed. As a result, the issue of tax deductibility (of any settlement) is usually part of the negotiation between the firm and the government, with enforcement being left up to the IRS (which may or may not have been informed by the relevant government agency about what parts of the settlement are deductible). The outcome, in most cases, appears to be a fine that is largely tax-deductible. The only exception is the SEC:
“Since 2003, it has barred companies from deducting settlement costs as a business expense.”
In reality, however:
“… a 2005 report from the Government Accountability Office suggests that tax benefits in settlements are prevalent. Examining more than $1 billion in settlements made by 34 companies, the G.A.O. found that 20 had deducted some or all of the money from their tax bills.”
So, one possibility in terms of punishing firms is to fine them. But, as the article demonstrates, who is really being punished in such cases? The default to firms in financial settlements appears to be to treat it as a tax deductible expense. And, even when additional costs are levied, the firm is free to pass those costs onto customers in the form of higher prices. Surely, the only way to hold firms to account is to punish individuals. But, as the government demonstrates every time it tries, white-collar crime is notoriously difficult to prosecute.
So, where does that leave us? The whole discussion around HSBC and its money laundering activities earlier this year was that the firm was “too big to fail”—that, if the government had indicted the firm for a criminal act, it would have essentially put the firm out of business, which would seriously damage the economy, which is not in our collective best interests, etc., etc. As such, I am increasingly left with the sense that, in practice, societies are highly limited in being able to hold firms to account. In the worst cases, the organization dissolves and the individuals (the smartest ones among them, anyway) simply move onto the next job. What recourse do we have?
Everything I ever needed to know about bargaining/leverage was taught to me by my Chinese step mother in the street markets of Hong Kong. Unless you are willing to walk away, you will not come out on top. I can translate that action directly to CSR—what I am terming ‘corporate stakeholder responsibility.’ If self-interest is an insufficient motivation for firms to engage in strategic CSR, corporate stakeholder responsibility seems to me to be the only option that can form the basis for a sustainable economy. In short, stakeholder vigilance has to lead to the withdrawal of business/custom. That is the only message firms seem to understand, and history shows that they are very good at reacting to it. As stakeholders, we have to be willing to walk away, even at the risk of forgoing a product we demand, if we ever hope to change anti-social behavior into pro-social behavior.
Take care
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Paying the Price, but Often Deducting It
By Gretchen Morgenson
January 12, 2013
The New York Times
Late Edition – Final

Monday, April 15, 2013

Strategic CSR - Ireland

The article in the url below reminded me of the paper vs. plastic debate (Issues: Compliance, p313) and the willingness of Ireland to experiment with nudge-driven taxes (see: Strategic CSR – Recycling):
“In 2002, Ireland passed a tax on plastic bags; customers who want them must now pay 33 cents per bag at the register. … Within weeks, plastic bag use dropped 94 percent. Within a year, nearly everyone had bought reusable cloth bags, keeping them in offices and in the backs of cars. Plastic bags were not outlawed, but carrying them became socially unacceptable -- on a par with wearing a fur coat or not cleaning up after one’s dog.”
The article below reveals that it is not only plastic bags where Ireland sees the potential for government-driven revenue raising to drive the CSR debate. Over the last three years, the country has also been experimenting with carbon taxes to see how they can also influence individual behavior (as well as raising much-needed revenues):
“The government imposed taxes on most of the fossil fuels used by homes, offices, vehicles and farms, based on each fuel’s carbon dioxide emissions, a move that immediately drove up prices for oil, natural gas and kerosene. Household trash is weighed at the curb, and residents are billed for anything that is not being recycled. The Irish now pay purchase taxes on new cars and yearly registration fees that rise steeply in proportion to the vehicle’s emissions.”
In terms of results, the program’s supporters claim that a significant part of its success is due to a direct correlation between the tax plan and individual behavior:
“Long one of Europe’s highest per-capita producers of greenhouse gases, with levels nearing those of the United States, Ireland has seen its emissions drop more than 15 percent since 2008. Although much of that decline can be attributed to a recession, changes in behavior also played a major role, experts say, noting that the country’s emissions dropped 6.7 percent in 2011 even as the economy grew slightly.”
As a result, unlike many developed economies, Ireland is well on track to meet its Kyoto Protocol commitments (see here).
Take care
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Carbon Taxes Make Ireland Even Greener
By Elisabeth Rosenthal
December 28, 2012
The New York Times
Late Edition – Final

Friday, April 12, 2013

Strategic CSR - Size

The article in the url below criticizes anti-obesity campaigns. Being The Wall Street Journal, of course, the blame for obesity is placed on individual free will and societal changes, rather than on the companies that seek to take advantage of that freewill (and the human frailties, such as our addictions to salt, sugar, and fat, that play such a large part in determining our food and drink consumption choices) and help alter norms:
“Food prices have fallen in relation to incomes. Jobs have become less strenuous. Instead of being paid to exercise, now people must pay to exercise. … Social feedbacks seem to be at work. As the median person became fatter, it became socially acceptable to be fat.”
What is interesting about the article, however, is that it also discusses why it is that activists who pursue social goals (such as reduced obesity) see value in targeting large, for-profit firms to further their cause. The alternative is to target individual consumers, who, if they did change their consumption habits, would actually bring about the activists’ goals much more quickly:
“When anti-obesity activists rattle on about how terrible obesity is, no one listens. When they rattle on about how terrible fast-food chains and soft-drink companies are for causing the obesity crisis, the media, plaintiffs bar and politicians pay attention.”
In particular:
“A fact of life for companies whose livelihood is powerful, expensively promoted, and universally recognized brands is that others will try to capture and expropriate a tiny sliver of that brand power to advance their own agendas.”
It is the same phenomenon that focuses attention on Walmart, Nike, Shell, and any other large multi-national firm with broad brand awareness and deep-pockets (all the better to sue you with). These firms do a lot wrong, but they also do a lot right. With greater consumer awareness and actions aimed at encouraging the good behavior and discouraging the bad (see: Strategic CSR: Corporate Stakeholder Responsibility), they would do even more.
Have a good weekend.
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Coke and the Calorie Wars
By Holman W. Jenkins, Jr.
January 30, 2013
The Wall Street Journal
Late Edition – Final

Wednesday, April 10, 2013

Strategic CSR - Purpose marketing

One of the biggest dangers to the CSR project is the prospect of greenwashing. The more stakeholders (and consumers, in particular) suspect that CSR is a symbolic exercise, the less likely they are to fully engage. With this in mind, the article in the url below is concerning. It discusses the idea of “Purpose marketing,” which is “also called pro-social marketing, advertising for good and conscious capitalism.” On the surface, the effort seems like it would advance the cause of CSR:
“The goal is to convince potential customers that the companies operate in a socially responsible manner — marketing ‘meaningful brands,’ to borrow a term from the Havas Media division of Havas — that goes beyond tactics like making charitable contributions or selling a product or two in recyclable packaging.”
In reality, however, when the goal is to “woo consumers,” the temptation for abuse is too great. My skepticism is increased when the first and primary driver of purpose marketing is to increase sales, rather than raise awareness and understanding:
“Purpose marketing is becoming popular on Madison Avenue because of the growing number of shoppers who say that what a company stands for makes a difference in what they do and do not buy.”
Call me cynical, but when proponents of purpose marketing say things like “Consumers are seeking ‘authentic emotional connections’ with brands, … and the perception that certain ‘shared values’ can increase loyalty,” I am ready to run in the opposite direction. The danger is that the actions of seemingly genuine companies, such as Panera Bread (see ad here), are lost among a general increase of emotive-laden ads, designed to appeal to the segment of consumers willing to educate themselves about firm behavior and discriminate in their purchase decisions. By virtue of their increased engagement, however, these same consumers will also be quicker to see through the attempts of firms that seek to mislead them in pursuit of inflating sales via vague and, ultimately meaningless, slogans:
“Other brands known for purpose marketing include Kashi, sold by Kellogg, and Whole Foods Market. A newcomer to the trend, Union Bank, is introducing a campaign … in San Francisco that carries the theme ‘Doing right, it’s just good business.’”
Take care
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Selling Products by Selling Shared Values
By Stuart Elliott
February 14, 2013
The New York Times
Late Edition – Final

Monday, April 8, 2013

Strategic CSR - Rights vs. Responsibilities

A big part of building a more cohesive and responsible society is arriving at the correct balance between personal freedoms and social obligations. Do I do something because I want to (without worrying about the consequences for others) or do I sacrifice my personal interests in situations where pursuing them will somehow negatively affect others? This debate will seem quaint to many (that we can or should subsume personal interest for the greater good), but the willingness to do so is the foundation on which a strong and stable society is built. It is inevitable that we experience the tension between our individual rights and our collective responsibilities every day as we interact with others—the difficult decision is where to draw the line.

David Brooks of The New York Times has thought a lot about this tension and the article in the url below is another component of his evolving ideas. The focus of this column from last week is the gay marriage debate and how, by seeking equality on this issue (an apparent right), gay people are in fact sacrificing their individual freedoms and surrendering themselves to an institution that benefits society—marriage constrains personal liberty in the name of long-term commitment to something that is bigger than the lives of the two people separately (an important social responsibility).
Although the focus of the article is gay marriage, Brooks frames the discussion within this larger tension between personal rights and societal responsibilities. I think these ideas are central to the idea of CSR as a way of ordering the relationship between for-profit businesses and their various stakeholders. It is also a feature of our modern, convenient, narcissistic society that we are surrendering—seemingly without putting up much of a fight.
Here are some selected quotes from the article:
“Over the past 40 years, personal freedom has been on a nearly uninterrupted winning streak. In the 1960s, we saw a great expansion of social and lifestyle freedom. In the 1980s, we saw a great expansion of economic freedom … . Since then, we’ve had everything from jeans commercials to rock anthems to political conventions celebrating freedom as the highest ideal.”
“The big thinkers down through the ages warned us this was going to have downsides. Alexis de Tocqueville and Emile Durkheim thought that if people are left perfectly free to pursue their individual desires, they will discover their desires are unlimited and unquenchable. They’ll turn inward and become self-absorbed. Society will become atomized. You’ll end up with more loneliness and less community. … For these writers, the goal in life is not primarily to be free but to be good. Being virtuous often means thwarting your inclinations, obeying a power outside yourself. It means maintaining a balance between liberty and restraint, restricting freedom for the sake of an ordered existence.”
“Recently, the balance between freedom and restraint has been thrown out of whack. People no longer even have a language to explain why freedom should sometimes be limited. The results are as predicted. A decaying social fabric, especially among the less fortunate. Decline in marriage. More children raised in unsteady homes. Higher debt levels as people spend to satisfy their cravings.”
“The proponents of same-sex marriage used the language of equality and rights in promoting their cause, because that is the language we have floating around. But, if it wins, same-sex marriage will be a victory for the good life, which is about living in a society that induces you to narrow your choices and embrace your obligations.”
Take care
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Freedom Loses One
By David Brooks
April 2, 2013
The New York Times
Late Edition – Final

Friday, April 5, 2013

Strategic CSR - Nike

It is worth forwarding good news in the CSR field when it crosses your desk. Truly, Nike has come a long way from its 1990s sweatshop days:
“Ask most corporate responsibility practitioners about the business benefits of sustainability and, chances are, they will refer to reduced energy bills, enhanced corporate reputation or increased sales from a sustainable lifestyle product or service. Few would be able to reference examples of product and process innovations integrated across entire product supply chains. Or companies that have shared eight years’ of proprietary materials research and analysis with peers and competitors in a bid to drive systems change across an entire industry – as Nike did when it donated its materials sustainability index (MSI) to the Sustainable Apparel Coalition in 2010.”
Nike just made a very good process (the drive by Walmart and others to create a unified measurement and labeling scheme across all products, significantly better.
Have a good weekend.
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Sustainability commercialized – Systems change with a swoosh
By Rob Bailes
December 11, 2012
Ethical Corporation Magazine