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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Wednesday, May 15, 2013

Strategic CSR - Third edition!

This will be the last CSR Newsletter of the Spring semester.
Have a great summer and I will see you in August!
The third edition of Strategic CSR is due to be published in time for the Fall semester. This edition is a complete re-write of the book, with updated tools and frameworks in Part I, and new or re-written Issues and Cases in Part II:
'Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation' ('Strategic CSR') is a comprehensive CSR and strategy text. As such, it supports courses taught either as standalone electives or as core components of the business school curriculum across all discipline areas. Integral to the book’s unique format is its mix of theory and practical application divided into two parts. After five chapters that provide an overview of the field, core concepts, and practical challenges, the second half of the book illustrates the extensive and dynamic nature of CSR via 21 detailed issues and case-studies. The cases capture contentious debates across the spectrum of CSR topics that culminate with a series of questions designed to stimulate further investigation and debate.
The third edition of 'Strategic CSR' constitutes a comprehensive re-write of the text. While the structure remains the same, the manuscript has been significantly re-written to reflect the rapidly changing nature of the CSR debate. New ideas that have been introduced to Part I of the book (Chapters 1-5) include: ‘An Ethical Argument for CSR,’ a stakeholder prioritization model, a more in-depth discussion of 'Whose Responsibility is CSR?', an expansion of the concept of the CSR Filter, and a new section on Values-based Businesses.  Similarly, all the Issues and Case-studies in Part II of the book (Chapters 6-8) have been updated, with new Cases that include: Citizens United, John Lewis Partnership, and Social Impact Bonds (Chapter 6); Foreign Corrupt Practices Act, Unilever, and Foxconn (Chapter 7); and Lifecycle Pricing, Nudge (behavioral economics), and Benefit Corporations (Chapter 8).
The range of issues and cases presented in 'Strategic CSR' reflect the scale and scope of CSR for firms today—a level of importance that will increase as societal expectations regarding business ethics, environmental sustainability, and social responsibility continue to grow and evolve. CSR is not an option—it is an inevitable and central component of business in the twenty-first century!
Here is a working draft of the cover—What do you think? We tried to do something a little different for this edition. The concentric squares design is intended to echo the concentric circles of the stakeholder model:
Please let me know if you have any questions.
Have a great summer!

Monday, May 13, 2013

Strategic CSR - Distributors

While we have done a better job within the CSR community of holding firms responsible for their supply chain, there is much less discussion about distribution. But, if we are going to say a firm is responsible for actions taken by firms that precede it in the supply chain, why are we not willing to say the same about actions taken by firms that come after it?
This does not diminish the good work done in terms of lifecycle pricing and the post-consumption obligations of the business to consumer relationship. In fact, it is all part of the same discussion—it is all a matter of where to put the emphasis. In particular, I have not heard any discussion of responsibilities further up the distribution chain for businesses.
This issue emerged in a discussion I had with a colleague recently while we were talking about the mining industry. Why are extraction firms not held accountable for subsequent uses of the raw materials they take out of the ground? While there has been some discussion of conflict diamonds/minerals, responsibility for the supply chain appears to rest with the firm that sells the finished product, rather than the firm that sold the component parts. Take e-waste, for example—Why are we willing to hold a firm like Dell responsible for recycling those parts of the computer that are toxic (precious metals and minerals), but not the firm that was responsible for extracting those metals and minerals and selling them to Dell (and others)?
This is an issue that has yet to emerge for extraction companies, but it is not difficult to imagine a day when that happens. If we want to hold GAP, Nike, and Walmart responsible for the actions of other firms far removed from them closer to source, we will one day surely hold extraction firms responsible for the actions of other firms and consumers closer to consumption.

Given this, the progressive extraction company that is sensitive to the relationships it has with its stakeholders, broadly defined, will act now to get ahead of this issue and prevent the future risk to business that it could well become (see: A Rational Argument for CSR, p16).
Take care
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Friday, May 10, 2013

Strategic CSR - Walmart

Some good news from the behemoth of Bentonville:
“Walmart has reported that it has delivered a 20 percent cut in greenhouse gas emissions since 2005, beating its target one year ahead of schedule. The company's 2011 figures show a 20.02 percent decrease in emissions from the Walmart stores, Sam's Clubs and distribution centers that existed in 2005, Bloomberg reported, surpassing the goal that had been set for 2012.”
While on the surface this is good news, the reality underscores the fundamentally unsustainable nature of Walmart’s business model (and, by extension, our economic system):
“However, Walmart's overall emissions have risen since 2005 as a result of the continued global expansion of the retail giant. Emissions totaled 22 million tons in 2010, the most recent year for which data exists. This is exactly the amount of emissions Walmart is looking to cut from its supply chain by 2015.”
Equally concerning is that, although Walmart is the “fifth biggest user of clean energy in the U.S.,” it still only uses “about 4 percent green energy.” This means that the fifth biggest user of renewable energy in the U.S. still gets 96% of its energy from carbon-based sources.
Have a good weekend
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Walmart beats emissions goal a year early
By BusinessGreen Staff
March 11, 2013

Wednesday, May 8, 2013

Strategic CSR - Samoa Air

Here is a contentious issue that has been causing lively debates in my classes. Recently Samoa Air, the national carrier for Samoa, began to price its tickets based on the weight of its passengers:
“Under Samoa Air's plan, customers are now required to estimate their weight when they book their flight online, and then to weigh in when they arrive at the airport. That number determines the price they will pay and also how much space they will get once they board the plane. ‘You travel happy, knowing full well that you are only paying for exactly what you weigh ... nothing more,’ the Samoa Air website says.”
Hmmmm, I am not sure it will be quite that easy! The resulting differences in prices are real:

“Estimates of price per pound vary with the length of the trip. According to The Wall Street Journal, customers flying to American Samoa will pay 92 U.S. cents a kilogram, or 42 cents a pound, for each flight. A kilogram equals 2.2 pounds. … As an example of the new policy, [the company] estimated that a 160-kilogram person on Samoa Air will pay four times as much as a 40-kilogram person, but he or she would also get more space.”

There are various drivers of this decision—primarily the high correlation that exists between the weight of a plane and the cost (primarily in fuel) of moving it and everyone in it from point A to point B. In addition:

“One reason for the new policy may be the fact that Samoa has the fourth highest obesity rate in the world. Estimates of the percentage of obese people in the population range from 55% to 60%.”
I am interested in the concept of discriminant pricing. Although this seems unfair on the surface, companies discriminate in pricing structures all the time—think of the cost of a movie ticket for a student or senior citizen. Think also of the different prices we already pay for our airplane tickets, depending on the time we buy, location in the plane, whether we are a member of the loyalty program, etc. In spite of the overall agreement in the article that this pricing strategy does not amount to discrimination (at least, not in terms of “the legal definition of discrimination based on race, age, sex, nationality, religion or handicap”), there was broad agreement on the advisability of fairness—achieving the same goal via more ‘acceptable’ means:
“Wharton marketing professor Deborah Small agrees there may be ‘more tactful ways’ to accomplish the same goal. For example, Samoa Air could have child discounts (in fact, children under 12 are charged 75% of the adult rate) ‘or they could even have discounts for low-weight people.’”
I found this example particularly interesting:
“[Coca-Cola] plans to use vending machines that would change the price of a can of soda depending on the weather. On warmer days, the price would go up, and on colder days, it would go down. ‘That makes perfect sense from an economic [standpoint],’ Small says, ‘but customers were very upset that the company would take advantage of their thirst on hot days.’ The launch was called off.”
Ultimately, however, the arguments come down to a perception of a firm’s social license to operate based around stakeholder perceptions of behavior that is deemed to be ‘acceptable’—in other words, CSR:
“Consumers have ‘a relationship with firms, and their expectations are much like their expectations in any interpersonal relationships,’ Small says. ‘When a firm acts in a way that violates the social rule of treating people fairly, consumers get offended.’ So it's fine for a restaurant to offer a discount to people on a relatively uncrowded Tuesday, but if the restaurant tried to add a surcharge to people eating there on a busy Saturday, that would be considered unfair.’”
Take care
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When Samoa Air last week announced it was going to start charging people for airline tickets based on their weight, it set off a flurry of comments, some supportive, some not. Is this new policy an example of discrimination or a smart business model? Are there better ways to achieve the same objective? And will other airlines adopt the same approach?

Monday, May 6, 2013

Strategic CSR - Goldman Sachs

The article in the url below was published on April 1, so it is hard to know how serious to take it, but it is certainly eye-catching. It deals with Boards of Directors’ compensation levels:
“Take Goldman Sachs, where the average annual compensation for a director – essentially a part-time job – was $488,709 in 2011, the last year for which data is available, up more than 50 percent from 2008, according to Equilar, a compensation data firm. Some of the firm’s 13 directors make more than $500,000 because they have extra responsibilities. And those numbers are likely to skyrocket for 2012 because the firm’s shares rose more than 35 percent last year and its directors are paid in stock.”
Nice work if you can get it! Of course, Goldman Sachs would like us to know that these hard-put upon Directors work hard for their money:
“‘The board’s pay is set at a level that reflects the firm’s long-term performance as well as directors’ substantial time commitment and the increased demands placed on them in recent years by new laws and regulations,’ said David Wells, a Goldman spokesman.”
The firm also argues that, just like for its CEO and senior executives, it needs to pay these rates in order to secure the services of the ‘best’ who, clearly, would just go elsewhere if Goldman Sachs threatened to pay them any less:
“More broadly, banks and compensation experts say, financial firms must now pay a premium to entice and keep qualified directors.”
In other words, due to their past failures, we have to pay them more to make sure that they do not make the same mistakes again:
“After the financial crisis, some financial firms’ boards were criticized for being asleep at the wheel and not understanding the risks being taken. Recruiters say banks are redoubling efforts to recruit directors with more financial expertise who can exercise better oversight.”
The flip side of arguing that Directors face greater scrutiny today as a result of their past failures is that, due to this increased scrutiny, Directors actually have less flexibility than before:
“‘About the only thing bank directors have more of these days is meetings,’ joked one senior Wall Street executive who has frequent interaction with his board but spoke on the condition he not be named because he was not authorized to speak on the record. ‘Regulators have all but stripped boards of the main powers they had before the crisis.’”
Like I said, nice work if you can get it!
Take care
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Pay for Boards At Banks Soars Amid Cutbacks
By Susanne Craig
April 1, 2013
The New York Times
Late Edition – Final

Friday, May 3, 2013

Strategic CSR - Walmart

The article in the url below about Walmart caught me by surprise:
“Margaret Hancock [a retired CPA in Delaware] has long considered the local Wal-Mart superstore her one- stop shopping destination. No longer. During recent visits, the retired accountant from Newark, Delaware, says she failed to find more than a dozen basic items, including certain types of face cream, cold medicine, bandages, mouthwash, hangers, lamps and fabrics. The cosmetics section ‘looked like someone raided it,’ said Hancock, 63.”
The reason for her failure to find these products?
“It’s not as though the merchandise isn’t there. It’s piling up in aisles and in the back of stores because Wal-Mart doesn’t have enough bodies to restock the shelves, according to interviews with store workers. In the past five years, the world’s largest retailer added 455 U.S. Wal-Mart stores, a 13 percent increase, according to filings and the company’s website. In the same period, its total U.S. workforce, which includes Sam’s Club employees, dropped by about 20,000, or 1.4 percent. Wal-Mart employs about 1.4 million U.S. workers.”
The consequences of this discrepancy for Walmart are significant:
“A thinly spread workforce has other consequences: Longer check-out lines, less help with electronics and jewelry and more disorganized stores, according to Hancock, other shoppers and store workers. Last month, Wal-Mart placed last among department and discount stores in the American Customer Satisfaction Index, the sixth year in a row the company had either tied or taken the last spot. The dwindling level of customer service comes as Wal-Mart has touted its in-store experience to lure shoppers and counter rival Inc.”
In other words, for six years in a row, Walmart has failed to meet the basic expectations of its core organizational stakeholders—its employees and its consumers. And, it appears that its shareholders are also beginning to notice:
“Wal-Mart traded at a 1.4 percent discount to Target last week on a price-to-earnings basis after averaging a 5.9 percent premium to its smaller rival in the past two years. Wal-Mart traded as high as a 22 percent premium to Target in January 2012.”
I had no idea Walmart had cut its workforce by so much, nor that it had affected operations so drastically. The cumulative effect is that Walmart appears to have gone off the rails somewhat in recent years. In terms of strategy, its 2008 logo re-design and move to take some of the market staked out by Target forced it to try and differentiate itself at exactly the time when the economy was calling out for a laser-like focus on low costs (see: Strategic CSR – Wal-Mart). And, from a sustainability perspective, the efforts by Mike Duke to roll back Lee Scott’s commitments is generating similarly bad press (see: Strategic CSR – Walmart vs. Apple). The ultimate conclusion by Mrs. Hancock?
“‘If it’s not on the shelf, I can’t buy it,’ she said. ‘You hate to see a company self-destruct, but there are other places to go.’”
Have a good weekend.
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Customers Flee Wal-Mart Empty Shelves for Target, Costco
By Renee Dudley
March 26, 2013
Walmart Faces the Cost of Cost-Cutting: Empty Shelves
By Renee Dudley
March 28, 2013
Bloomberg Businessweek

Wednesday, May 1, 2013

Strategic CSR - Electric cars

It has always annoyed me when I see claims that electric cars generate zero emissions. The article in the url below provides the numbers to support my frustration. Some extracts:
“A 2012 comprehensive life-cycle analysis in Journal of Industrial Ecology shows that almost half the lifetime carbon-dioxide emissions from an electric car come from the energy used to produce the car, especially the battery. The mining of lithium, for instance, is a less than green activity. … When an electric car rolls off the production line, it has already been responsible for 30,000 pounds of carbon-dioxide emission. The amount for making a conventional car: 14,000 pounds.”
“[Electric cars] recharge using electricity overwhelmingly produced with fossil fuels. Thus, the life-cycle analysis shows that for every mile driven, the average electric car indirectly emits about six ounces of carbon-dioxide. This is still a lot better than a similar-size conventional car, which emits about 12 ounces per mile. But remember, the production of the electric car has already resulted in sizeable emissions—the equivalent of 80,000 miles of travel in the vehicle.”
“If a typical electric car is driven 50,000 miles over its lifetime, the huge initial emissions from its manufacture means the car will actually have put more carbon-dioxide in the atmosphere than a similar-size gasoline-powered car driven the same number of miles. Similarly, if the energy used to recharge the electric car comes mostly from coal-fired power plants, it will be responsible for the emission of almost 15 ounces of carbon-dioxide for every one of the 50,000 miles it is driven—three ounces more than a similar gas-powered car. Even if the electric car is driven for 90,000 miles and the owner stays away from coal-powered electricity, the car will cause just 24% less carbon-dioxide emission than its gas-powered cousin. This is a far cry from ‘zero emissions.’”
You get the idea (see also: Strategic CSR – The Jevons Paradox). There are other good facts and figures quoted in the article.
Take care
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Green Cars Have a Dirty Little Secret
By Bjorn Lomborg
March 11, 2013
The Wall Street Journal
Late Edition – Final