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


Wednesday, October 30, 2013

Strategic CSR - Walmart

The article in the first url below is interesting not because of the antagonism a local community expressed towards a proposed new Walmart store (Chapter 3: The Walmart Paradox, p102), but because of the lengths to which the local legislature went to prevent the store from opening:
 
“Wal-Mart Stores Inc. said it was scrapping plans to build three stores in Washington, D.C., after the city's council passed a bill late Wednesday that would require big retailers to pay starting wages that are 50% higher than the city's minimum wage. … Wal-Mart had warned in an op-ed article in the Washington Post on Tuesday that it would pull out of the city if the District of Columbia's council passed the bill, called the Large Retailer Accountability Act of 2013.”
 
In particular:                                                        
 
“The bill requires retailers with corporate sales of $1 billion or more and with stores of at least 75,000 square feet to pay workers starting salaries of no less than $12.50 an hour. The city's minimum wage is $8.25. The measure includes an exemption for unionized businesses and gives existing big stores, which include Target Corp. and Macy's Inc., four years to comply.”
 
I am trying to decide whether I am happy at a stakeholder taking a stand and forcing its values onto a firm, or suspicious at a highly interventionist piece of government legislation that is designed to target a particular organization. Ultimately, as noted in the article in the second url below, short-term political considerations (local jobs generation and tax revenues) outweighed the community’s longer-term and less easily-quantifiable concerns (the decline of independent stores and community identity) as the Mayor of Washington DC vetoed the legislation in September:
 
“Wal-Mart, which had threatened to abandon its plan should the bill become law, issued a statement after Gray’s veto last week that it would proceed with plans for at least five stores.”
 
Supporters of the legislation among Council members reiterated their concerns against Walmart and pledged to continue the fight elsewhere:
 
“The bill had become part of a national campaign against the proliferation of low-wage jobs, and it has become entwined locally with Wal-Mart’s plans to open several stores in the city. … ‘This is really about what kind of economic development strategy we want in this city,’ said Chairman Phil Mendelson (D), a supporter of the bill. ‘Creating low-quality jobs, in my view, is not a good economic-development strategy.’”
 
Take care
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/
 
 
Wal-Mart Scraps D.C. Store Plans
By Ann Zimmerman
July 11, 2013
The Wall Street Journal
Late Edition – Final
B2
 
D.C. Council fails to override ‘living wage’ veto, paving way for Wal-Marts
By Mike DeBonis
September 17, 2013
The Washington Post
 

Monday, October 28, 2013

Strategic CSR - BlackBerry

What I think is interesting about the article in the url below is not that it notes the demise of a once-proud corporation (BlackBerry, previously Research in Motion), but that it makes a strong statement about past behaviors that most likely contributed to its demise. Even more interesting is that the article makes the case that, rather than a shift in technology and consumer tastes, it was the firm’s focus on short-term shareholder value that undermined its competitive position, while contributing little to the long-term wellbeing of the firm:
 
“BlackBerry’s corporate filings show that over the years it distributed $3.5 billion to shareholders. … That is an impressive amount, especially considering that the entire company is now worth only a little more than $5 billion.”
 
What is more important than the focus on short-term value to shareholders, however, is that these actions failed to reward those shareholders the firm should have valued the most—loyal ones:
 
“… loyal shareholders did not receive any of that money. To get the money, an investor had to sell. The money was spent on share buybacks, and most of those buybacks came in 2008 and 2009, when the company was flying high.”
 
In particular, the article makes the damning case that it was the firm’s policy on awarding senior executives stock options that resulted in the narrow focus on share price, which only benefits shareholders when they sell their shares:
 
“BlackBerry’s financial strategy was not particularly unusual, although it does stand out in the way it abused the rules on executive stock options. Perhaps it would never have paid dividends anyway, but those options gave the company’s executives good reasons to avoid dividends and concentrate on share buybacks. … One reason companies that issue a lot of options prefer stock buybacks to dividends is that while buybacks may raise the market value of the stock and thus increase the value of an outstanding option, dividends are less likely to do so. Option holders, unlike shareholders, do not benefit from dividends.”
 
As with many aspects of business so-called “received wisdom” (much of which gets parroted in business school classrooms), the reality does not hold up to the theory:
 
“The net effect: It took in $365 million from the exercise of options. It paid $3.5 billion to repurchase shares. Under accounting rules, that $3 billion difference had no effect on reported profits, but it had a big effect on the resources available to the company for other purposes, like spending on research and development.”
 
The article also has interesting things to say about the value of options versus restricted stock grants (Chapter 6, Case-study: Stock Options, p274):
 
“In practice, companies tend to prefer options when they think the share price will rise, and restricted stock when they are not so confident. That is the way it worked at BlackBerry. The last large option grants to senior executives were made in October 2007. A year later, the stock price had peaked — at $148 in June 2008 — and was down to about $70. No options were granted. Instead, restricted stock units were issued.”
 
All in all, the company behaved badly in relation to its stock option grants and, more importantly, in terms of its focus on valuing its most loyal shareholders:
 
“In 2006, when the backdating scandal broke in the United States, the company piously denied it had done anything of the sort. A few months later, it had to admit it had lied. In the end, top executives surrendered a large number of options, and other options were re-priced. The Securities and Exchange Commission determined that more than 1,400 individual grants had been backdated. … The executives certainly benefited from the purchases. Shareholders who believed in the company’s future did not.”
 
The reasons a company fails are many and varied, but clearly BlackBerry had issues beyond the quality of their products that extended into the executive suite. Creative destruction, commence!
 
Take care
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/


How Blackberry Handled Past Wealth
By Floyd Norris
August 23, 2013
The New York Times
Late Edition – Final
B1
 

Friday, October 25, 2013

Strategic CSR - Energy

If you ever feel the need to better understand the importance of energy to the global economy and also the difficulty we face converting to non-carbon fuel sources (and, therefore, avoiding calamitous climate change), the long article in the url below is an education:
 
“Together, fracking and a little-known energy source called methane hydrate—flammable ice—may soon usher in an age of widespread energy independence. In many respects, this would be a miracle. It also might unleash an arc of instability stretching from Nigeria to Saudi Arabia to Siberia—and doom any hope of halting climate change.”
 
The title, alone, suggests the extent of the mess we have created:

“What if We Never Run Out of Oil?”
 
Have a good weekend
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/


What If We Never Run Out of Oil?
By Charles C. Mann
May, 2013
The Atlantic
pp. 48-63
 

Wednesday, October 23, 2013

Strategic CSR - Ecolabels

The article in the url below wades into the confusion created by companies’ attempts to greenwash via deceptive labels:
 
“Chemicals, of course, are ubiquitous; everything is made from them. But the question is what products are toxic and what are not. Are there labels available to help us distinguish what is safe and what could pose harm to us?”
 
The worst labels are based on either faulty science or on consumer fears (fed by media campaigns) that fly in the face of science:
 
“There has also been a proliferation of labels targeting specific chemicals in packaging, with ‘BPA free’ and ‘phthalate free’ the two most prominent. … So, should consumers feel safer buying a product labelled “BPA free”? No. Even if BPA was harmful – and the weight of evidence suggests it is not – manufacturers have to substitute the demonised chemical with another. The most common replacement for BPA is BPS – a chemically similar ingredient whose only virtue is that it is less tested. Yet its profile is actually more toxic and, unlike BPA, it is non-biodegradable. In this case a ‘BPA free’ label is utterly deceptive.”
 
The key to an effectively misleading label is either to provide too much information, use ambiguous terms that do not have any standardized meaning (such as “natural”), or replace science with ideology in ways that push specific causes, rather than focus on consumer safety:
 
“In 2012, the Washington DC based anti-chemical NGO Environmental Working Group unveiled its online Guide to Healthy Living. … Seventh Generation, the US-based household and personal care products company founded on a commitment to sustainability, has felt the wrath of EWG’s misplaced idealism. … Seventh Generation’s detergents contain boric acid, a harmless chemical – as used – that stabilises its products. Boric acid is also an antiseptic used in vaginal douches and acne medicine. Like many other chemicals that regulatory agencies have determined to be safe, it’s been labelled an ‘endocrine disruptor’ by anti-chemical campaigners – in this case on the basis of one study of borax mine workers exposed to industrial quantities.”
 
Ultimately:
 
“For chemical ecolabels to work, they must be based on consistent, transparent, meaningful and verifiable standards.”
 
Until they are (supported by universally accepted standards and policed by a broadly-recognized authority), labels will continue to confuse. As such, they will continue to provide an economic opportunity for those firms that are willing to take advantage of that confusion.
 
Take care
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/
 
 
Ecolabels: Chemical reactions
By Jon Entine
June 4, 2013
Ethical Corporate Magazine
 

Monday, October 21, 2013

Strategic CSR - Social Cost of Carbon

The article in the url below is notable for the intention behind the policy change it discusses as much as for any expected outcome:
 
“The Obama administration is making a second attempt to systematically account for the dollar damage from greenhouse gas pollution, … The new effort is an update to an estimate for the awkwardly named ‘Social Cost of Carbon,’ a range of costs, stated in dollars per ton, that carbon dioxide emissions are thought to impose on future generations. When the government totes up costs and benefits for a variety of proposed regulations, the Social Cost of Carbon is plugged into the calculation to decide how to write the regulation.”
 
 
As noted elsewhere (Strategic CSR – Measuring CSR), measuring something like the “social cost of carbon” is easy to say, but incredibly difficult to do:
 
“Supporters of the idea acknowledge the tremendous difficulties of trying to translate slippery estimates into a single mathematical factor, difficulties that perhaps help explain why there is little hope of consensus now on climate policy.”
 
The result of such difficulty, is widely varying outcomes:
 
“The new price, used for the first time [earlier this year] in establishing a standard for energy efficiency in new microwave ovens, is 50 percent to 100 percent higher per ton than the one developed in 2010.”
 
The difficulty arises from the unknowable impact of future events that may or may not occur:
 
“Some of these damages appear likely but hard to calibrate, like the extent of sea level rise. Others are less certain and thus stated as probabilities, like the increase in the number of Katrina-level hurricanes or sustained droughts, or changes that radically cut crop yields. Others are simply hard to put a dollar value on, like the extinction of species.”
 
The ambiguity in calculation is matched by the ambiguity in application:
 
“It is supposed to be used when the government establishes new regulations, like appliance efficiency standards, or fuel economy standards.”
 
In theory, however, these costs affect all aspects of government policy to some degree. Again, this would be OK if we could have some sense of the reliability of the numbers that were being used. Ultimately, however, the only thing we know is what we do not know:
 
“The only real cost of carbon that [we] know is wrong is zero.”
 
But, the government should be applauded for entering the debate. The consequences are potentially great. For example:
 
“… a new standard could not be approved unless it was advantageous to the buyer. In the case of microwaves, that would mean that the buyer would save more during the appliance’s lifetime than the added cost of buying an efficient machine, and that other benefits like saving polar bears would not enter into the calculation.”
 
Take care
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/
 
 
New Effort To Quantify ‘Social Cost’ of Pollution
By Matthew L. Wald
June 19, 2013
The New York Times
Late Edition – Final
A17
 

Friday, October 18, 2013

Strategic CSR - Walmart

We talked about Walmart in my strategy class last week. During the discussion, a student told me about a sign he had seen recently in the entrance to a Walmart store here in Colorado. I asked him to take a photo of the sign the next time he saw it and he sent me this:
 
 
I think it is fascinating that Walmart would post this information. It is even more interesting that they post it without any explanation as to why they did it or any comparison data to reference it against (e.g., industry average pay levels).
 
To provide a bit of a benchmark, the minimum wage in Colorado in 2013 is $7.78 per hour (above the federal minimum wage of $7.25 per hour).
 
Have a good weekend.
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/
 

Wednesday, October 16, 2013

Strategic CSR - Carbon tax

In the absence of meaningful political action to curb carbon emissions, the article in the url below reports that some companies are imposing carbon taxes on themselves. Some of the firms, such as Disney, are surprising in that they normally are the target of CSR activists for their non-CSR-type behavior:
 
“It's not just Disney. Although most of the world's governments have declined to put a price on carbon emissions, a handful of global companies, including Microsoft and Shell, have chosen to act on their own. They have established internal carbon prices in an effort to reduce emissions, promote energy efficiency and encourage the use of cleaner sources of power, just as a government tax or cap-and-trade program would.”
 
The advantage to the firm of doing this is internal pressure toward greater efficiency. At Disney, for example:
 
“Since 2009, when the tax was imposed, the company's engineers have changed thermostat set points, installed light sensors and efficient bulbs, increased the efficiency of chillers, heat exchangers and pumps, and shut down the lights on park icons like Cinderella's Castle and Spaceship Earth when the parks are closed.”
 
And, the revenues generated by the premium that is paid above market prices is collected in what Disney calls the Climate Solutions Fund, which it uses to offset emissions elsewhere in the value chain:
 
“The tax, the price of which depends upon the costs of offsets and the volume needed by Disney to reach its emissions targets, has been set at between $10and $20 a ton and has raised about $35m so far. That has enabled Disney to invest in a variety of certified forest-carbon projects in Inner Mongolia, China, Peru, and the Democratic Republic of the Congo, as well as in Virginia, Mississippi and its home state of California. Taking those carbon offsets into account, Disney's 2012 emissions have been cut in half from a 2006 baseline. The company has set a long-term goal of zero net emissions.”
 
In addition, all three firms are publicly supporting “an international framework that puts a price on CO2,” while also benefitting from the efficiencies created by such an innovative approach to operations. Primarily, however, these firms and others like them will be best placed when the global political class finally gets around to acting (Chapter 1: A Rational Argument for CSR, p16):
 
“Why bother with these voluntary carbon taxes? Partly to prepare for government regulation of emissions, if and when they arrive. Rob Bernard, Microsoft's chief environmental strategist, explains: ‘I think it's likely that over time society is going to move in this direction. It's hard work. We should get to it now.’”
 
Take care
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/
 
 
Disney, Microsoft and Shell opt for self-imposed carbon emissions taxes
By Marc Gunther
March 26, 2013
The Guardian
 

Monday, October 14, 2013

Strategic CSR - Milton Friedman

While I was reading a review of the book by Cass Sunstein (Simpler: The Future of Government) in the article in the url below, this quote caught my eye:
 
“Milton Friedman didn't need behavioral economics to know that each of us typically spends our own money on ourselves more wisely than a stranger spends other people's money on us.”
 
My first instinct was to agree. After all, government has certainly demonstrated an inability to predict market outcomes. And, as the author of the review indicates:
 
“[The author] fails to explain why the irrational and impulsively childlike people who are apparently the nation's citizens will elect a government that is itself not irrational and impulsive—or why government officials won't exploit, for their own corrupt ends, the people's cognitive weaknesses.”
 
On second thought, however, I know that it is also true that we are often incapable of making good decisions ourselves. Because human decisions are driven by our inherent fallibilities—irrationality, biases, cognitive constraints, etc.—we often make short term decisions that do not serve our long term interests. This happens even when we are trying to be rational—there are good reasons, for example, why most people fail to save sufficient money for their retirement.
 
Given that we are living in a system designed and operated by humans and that, as I tell my students in class, any system involving humans is flawed to some degree; where is the balance between government oversight and individual enterprise? Sunstein helps push the debate in a helpful direction. He does so by drawing on behavioral economics—the foundation of many ideas in his previous book, Nudge, written with Richard Thaler (Chapter 8, Case-study: Nudge, p485):
 
“Mr. Sunstein deploys behavioral-economics notions such as ‘framing effects’ (our interpretation of facts is affected by how they are presented to us) and ‘status-quo bias’ (we prefer the status quo, simply because it is the status quo, over potential alternatives) to promote what he calls ‘libertarian paternalism.’”
 
The beauty of many of the ideas discussed in Nudge and Simpler is that they preserve the illusion of choice, while also generating more socially-valuable outcomes:
 
“Government, he thinks, should change behavior using ‘nudges’ instead of commands. Regulations can tap into people's psychological quirks and prompt them to choose ‘better’ behaviors—while still leaving them free in many circumstances to act differently. Cigarette packages with grisly images of cancer-ridden lungs are an effort to nudge—rather than command—people not to smoke.”
 
Needless to say, the author of the review (it is published in The Wall Street Journal) feels that, while Sunstein’s ideas are more palatable than most advocates for “a paternalist state,” his view of the world places considerably more faith in the abilities of individuals and the power of the market:
 
“[Sunstein’s] faith in government combines with a scanty appreciation of the creative and disciplining powers of markets to render his case for active regulation, whether imposed through nudges or commands, less than persuasive. The pages of ‘Simpler’ bubble over with examples of adults' weak capacity to choose wisely, which, in Mr. Sunstein's view, calls for more expansive government.”
 
I find that, as I listen to the two sides in this debate and try and work out which side would generate the most optimal outcomes, it is usually helpful to keep Friedman’s core instincts in mind. His ideas remind me that it is important to work within the constraints of human nature as it is, rather than as we would wish it to be.
 
For those who haven’t seen it, here is a fascinating interview of Friedman on the TV program Donahue, from 1979: http://www.youtube.com/watch?v=E1lWk4TCe4U
 
Take care
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/
 
 
Thank You For Smoking
By Donald J. Boudreaux
April 24, 2013
The Wall Street Journal
Late Edition – Final
A13
 

Friday, October 11, 2013

Strategic CSR - Washington

The article in the url below discusses something that vaguely resembles an effective political process. I had forgotten what that looks like in Washington, so was taken aback as I began to read it:
 
“In July of last year, senators David Vitter and Sherrod Brown noticed each other across a crowded room. Ben Bernanke, chairman of the Federal Reserve Board of Governors, was testifying to the Senate Banking Committee. Vitter, a conservative Louisiana Republican, and Brown, a liberal Ohio Democrat, were asking the same questions about capital ratios. ‘We were surprised by that,’ says Vitter, ‘so we started comparing notes.’ The notes led to a weekly schedule of direct conversations and staff meeting between their offices. By the end of the summer, Brown and Vitter had co-signed an eight-page letter to Bernanke.”
 
Genuine, bipartisan cooperation:
 
“Now the romance has borne a bill, the Terminating Bailouts for Taxpayer Fairness Act. It’s short. It’s simple. Its 24 printed pages, if ever passed into law, would have far greater consequences for the money-center banks than the 848 pages of Dodd-Frank. Banks with assets greater than $500 billion would have to hold equity capital of at least 15 percent. There’s no cheating allowed: Equity-like instruments such as contingent capital won’t count. And the complicated, modeled assessments of different assets known as ‘risk-weighting’ won’t count, either. A dollar at risk will be a dollar at risk. … The bill marks a departure from Basel III, which allows contingent capital and risk weighting, and asks for equity capital of 4.5 percent.”
 
Not only bipartisan cooperation, but global leadership:
 
“Asked whether this means pulling out of the Basel negotiations completely, Vitter says ‘Yes, and trying to lead the world … we think Basel II and Basel III are hopelessly complicated. And risk weighting, it’s too easy to be gamed, certainly the versions I’ve seen.’”
 
Not only bipartisan cooperation and global leadership, but taking a stand against the well-financed lobbyists that often prevent effective legislation from being crafted:
 
“It’s hard to overstate how significant this is. Large banks got much of what they wanted out of both Dodd Frank and the Basel III negotiations. Complexity in bank regulation favors large organizations, which can pay to throw lawyers at problems. And since the crisis, regulators both in the U.S. and internationally have continued to use banks’ internal models to assess risk. The Brown-Vitter approach does away with the models entirely. A large bank can arrange its risks however it pleases, so long as it holds 15 percent equity.”
 
As the article’s author concludes (equally shocked):
 
“This bill is so good and so unambiguous that it’s hard to imagine it becoming law.”
 
Have a good weekend.
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/
 
 
Ditch Basel Bank Rules, Just Raise Capital, Vitter Says
By Brendan Greeley
May 1, 2013
Bloomberg Businessweek
 

Wednesday, October 9, 2013

Strategic CSR - AIDs

The article in the url below highlights recent developments by corporations in South Africa, such as the mining company Anglo American, to deal with AIDs infections among its employees. The goal is twofold—to prevent as many employees as possible from becoming HIV+, while helping provide the support and treatment necessary for those who are infected:
 
“Bosses receive a daily e-mail that shows, statistically speaking, ‘which is the safest mine to have sex’, says John Standish-White, an Anglo executive and a champion of its AIDS policy. Managers are judged by it. There is even a trophy for the mine with the lowest score. Any employee who tests positive for HIV is offered antiretroviral drugs paid for by Anglo. So the 17% of Anglo’s South African staff with HIV can live a normal life. The firm’s big push now is to slow down or stop new infections.”
 
In response to the firm’s proactive efforts, 80% of all employees have now been tested and the issue of AIDs is openly-discussed:
 
“The results of all this were better than anyone dared to hope. Free drugs gave workers an incentive to get tested, so many did. Thanks to lobbying by activists and improvements in technology, the price of drugs meanwhile plummeted from roughly $10,000 per person per year in the late 1990s to as little as $100 today. Drug firms made their medicines simpler to take: a pill or two a day instead of lots. Corporate AIDS programmes are starting to pay for themselves by cutting absenteeism and staff turnover, not to mention improving morale. Anglo’s Dr Brink talks of ‘turning a disaster into something we could manage.’”
 
This approach has affected the overall relationship the firm has with its employees. In short, in relation to its employees, the firm now does not see its responsibility (or self-interest) as confined to the workplace:
 
“The fight against AIDS has subtly changed the relationship between firms and their workers. Before AIDS, a mine boss at Anglo would worry about rockfalls but feel it none of his business if an employee took risks at home. These days he takes a paternalistic interest in the sex lives of his workers. … Since Anglo started monitoring its workers’ health more closely it has discovered other problems, such as rising obesity and hypertension, and started to tackle them.”
 
At Anglo American, at least, the business argument for doing so is easy for the firm to make:
 
“Mining firms have a strong incentive to keep employees healthy, because they are hard to replace. Miners become familiar with the unique geology of the mine where they work. Staff turnover is only 2.4% a year at Anglo. Also, its record in tackling HIV may help it secure the ‘social licence’ to mine in other regions with virulent diseases, such as malaria.”
 
Take care
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/
 
 
Sex, drugs and hope
April 13, 2013
The Economist
68
 

Monday, October 7, 2013

Strategic CSR - Fracking

The article in the url below details the environmental consequences of fracking—in particular, in Colorado:
 
“While Colorado's drilling boom produces record amounts of gas and oil, the multiplying wells also are bringing up far greater quantities of a salty, toxic liquid waste — 15 billion gallons a year.”
 
The knowledge and ability exists to recycle this water—at a minimum into water that is sufficiently pure to be re-used in the fracking process and, ideally, could be converted into water pure enough to drink:
 
“If cleaned properly, all that liquid could become safe water to restore rivers, irrigate food crops and sustain communities in an era of drought and declining water supplies. Or at least it could be reused by oil and gas companies to reduce their draw of fresh water from farmers and cities.”
 
The economic incentive, however, is to discard the water as waste, with only the most progressive firms seeing the potential in recycling:
 
“Technology exists to clean liquid waste right up to drinking water standards, but it's expensive, about three times as costly as buying fresh water for drilling and fracking, which runs about 17 cents a barrel, and burying waste untreated for about 70 cents per barrel. State regulators also don't require oil and gas companies to deploy such technology.”
 
As a result:
 
“… Colorado leaders have no policy for reusing oil and gas industry waste. More than half is injected untreated into super-deep wells – filling rocky voids from which oil and gas was extracted. Other waste is dumped in shallow pits, stored in evaporative ponds or discharged after partial treatment under state permits into waterways.”
 
Companies continue to abuse the situation without any concern of real consequences:
 
“The Colorado Oil and Gas Conservation Commission, charged with both promoting and regulating the oil and gas industry, has issued 3,191 permits letting companies dispose of liquid waste in evaporative ponds, shallow pits and 300 super-deep injection wells. Disposal in pits and ponds can lead to toxic emissions and contamination of groundwater.”
 
Oil and gas companies are an important component of the Colorado economy. They add a great deal of value, but use a great deal of the state’s resources in the process:
 
“The liquid waste comes from drilling boreholes at oil and gas wells. First, drillers inject about 300,000 gallons of fresh water. Then frackers inject 1 million to 5 million more gallons, mixed with sand and fracking fluids, to loosen oil and gas in shale rock. This all blends with briny underground pools that are often saltier than seawater and laced with metals. When drilling and fracking is done, the waste rockets back up the boreholes and, if not trapped and treated, can sterilize soil, sicken animals and hurt human health.”
 
Given that fresh water is a scarce resource in Colorado, an effective regulatory system would at least seek to encourage recycling; if not compel it. Given the negative public perception of the fracking process, however, an industry with sufficient foresight would proactively initiate such a program. There is a lot of gas left to extract in Colorado (and elsewhere in the U.S.) and there is broad societal interest in it being removed with as little ecological damage as possible:
 
“Growing volumes of waste are likely because oil and gas wells in Colorado, currently around 50,000, are increasing by about 3,000 per year.”
 
Take care
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/
 
 
Oil, gas companies urged to clean, reuse muck, but process expensive
By Bruce Finley
April 14, 2013
The Denver Post
Late Edition – Final