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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Tuesday, December 9, 2014

Strategic CSR - Business Schools

 
This will be the last CSR Newsletter of the Fall semester.
Have a great holiday break and I will see you in January!
 
 
The article in the url below is a review of a recently published book by William Deresiewicz titled Excellent Sheep: The Miseducation of the American Elite. The book records the effect on students of a higher education system that is defined by merit and intense competition among students who are forced to emphasize resume-building above all else:
 
"For William Deresiewicz the rat race for college admissions—and, later, for entry into the top banks and law firms—has robbed these ultra-high achievers of their passion, intellectual curiosity, purpose and depth. Students today, he suggests, regard their education at elite institutions not as an opportunity to develop their character, but as just another credential, 'an algorithm to be cracked in order to get to the next level,' as one graduate of Deerfield Academy told the author. They chase 'success' with no greater purpose to guide them. And the universities they attend, which regard them increasingly as customers rather than students, do little to provide one."
 
As a result:
 
"Beyond their glowing transcripts and the fact that they have become 'accomplished adult-wranglers,' these students are anxious, depressed and searching for some deeper meaning in their lives. … A Yalie put it more succinctly: 'I might be miserable, but were I not miserable, I wouldn't be at Yale.'"
 
Rather than focus on the students, however, I was drawn to the role played by colleges in creating and maintaining this soul-destroying process:
 
"The author chronicles the gradual process by which the traditional liberal arts education that was once a staple of these schools has given way to the research university agenda, where 'fragmentation and specialization' define the curriculum. Rather than being taught the accumulated wisdom of the past through the great books, students now select from a bland a la carte menu of 'distribution requirements' that leave them without a holistic understanding of the debates and issues that shaped the culture they now live in."
 
The same fragmentation is characteristic of business schools. It seems, in many cases, that the starting point for curriculum development is bottom-up, rather than top-down. By this, I mean that each Department decides how it should teach its particular functional area (marketing, finance, operations, etc.) independently of the other functional areas. A more useful approach would be for the business school as a whole to define its primary purpose as addressing the question: What is the role of the for-profit firm in society? Once the faculty as a whole had sketched out the parameters of how they wanted to answer that question, then individual departments could define how their function should be taught in order to help achieve that broader goal—i.e., how marketing, finance, operations, and so on, can help the firm achieve the role the faculty as a whole think it should be filling. The resulting curriculum/set of courses would be unified and complementary, rather than idiosyncratic and disjointed. Without such a discussion, however, there is little over-arching structure or purpose to the students' business education. In theory, we set ourselves up to train the managers of the future; in reality, we teach them how to perform various tasks (marketing, finance, operations, etc.) with little concern as to whether those tasks add-up to a sum that is greater than the parts. In short, at present:
 
"Nothing adds up … because nothing is designed to add up."
 
Happy Holidays!
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/
 
 
Book Review: 'Excellent Sheep: The Miseducation of the American Elite' by William Deresiewicz
By Emily Esfahani Smith
August 20, 2014
The Wall Street Journal
 

Monday, December 8, 2014

Strategic CSR - JetBlue

The article in the url below records a rare phenomenon – a CEO willing to stand up to Wall Street analysts (see also: Strategic CSR – Unilever). Why does this CEO, in particular, need to defend himself?
 
"Several Wall Street analysts have been agitating for JetBlue Airways to replace Chief Executive Officer David Barger when his contract expires in February. He's too passenger-friendly, they say, and impedes measures that could increase the airline's profitability."
 
His response to the criticism?
 
"'You want to compare my track record to bankruptcies and layoffs?' asked Barger, referring to the Chapter 11 restructurings of Delta, United, and American and the subsequent mergers that radically reshaped all three. 'Go ahead. I'll take that comparison.'"
 
Although Barger has already announced the introduction of some fees (checked bags) and fare increases (business class), he has also makes it clear that "I may be alone among CEOs in the industry, but I don't believe we're a commodity [business]" and the fees, when they arrive, will be introduced "in a JetBlue way." Nevertheless, that is insufficient for some analysts:
 
"The latest nudge for Barger to leave the company came on Aug. 20 when Cowen & Co. analyst Helane Becker upgraded the stock and raised her target price by $5, to $15 per share, partly on the prospect of a CEO change. 'We believe JetBlue could make a management change at the top in order to foster a change in strategy throughout the company,' Becker wrote. 'We believe a management change would lead to a change in philosophy and likely morph the model similar to one of Spirit Airlines, although not as extreme.'"
 
Barger's retort?
 
"Barger says his board fully agrees with having the company continue to build its franchise. And in airline years, 15 is just a baby; JetBlue is still building its franchise and adding planes, the CEO says. To the equity analysts, he says: 'It's a free country. You can write what you want.'"
 
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/
 
 
JetBlue CEO Fires Back at Wall Street Analysts
By Justin Bachman
August 26, 2014
Bloomberg Businessweek
 

Friday, December 5, 2014

Strategic CSR - Carbon trading

The article in the url below reports on a recent announcement by the Chinese government that it is planning:
 
"…what will be the world's biggest emissions trading program."
 
The program, which would be launched nationwide in 2016, would immediately become the world's most important market-based model for reducing carbon emissions:
 
"The Chinese market, when fully functional, would dwarf the European emissions trading system, which is now the world's biggest. It would be the main carbon trading hub in Asia and the Pacific, where Kazakhstan and New Zealand already operate similar markets. South Korea will start a national market on Jan. 1, 2015, while Indonesia, Thailand and Vietnam are drawing up plans for markets of their own."
 
The market is designed to significantly alter the country's carbon footprint, which is large and growing:
 
"China has pledged to reduce the amount of carbon it emits per unit of its gross domestic product to 40 to 45 percent below its 2005 levels by 2020."
 
These targets compare to the U.S. government's 2009 commitment to decrease emissions by 17% below its 2005 level by 2020.
 
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/
 
 
China Plans A Market for Carbon Permits
Reuters
September 1, 2014
The New York Times
Late Edition – Final
B2
 

Wednesday, December 3, 2014

Strategic CSR - Divestment

The article in the url below highlights the growing importance of a movement I had been following at a distance, but haven't previously paid much attention to—the divestment of fossil-fuel companies from university and college endowment portfolios (see: http://gofossilfree.org/):
 
"Such divestment is clearly advocated on moral grounds – to save the planet – but is increasingly premised on financial grounds as well – to avoid the risks associated with the carbon bubble and what these stranded assets or unburnable carbon will do to investment portfolios holding fossil-fuel company stocks."
 
In particular, the article draws on the recent IPCC report (see: http://www.ipcc.ch/) that stresses a limit of keeping global temperature rises to 2 degrees Celsius (a "carbon budget"). The implication of such a budget is that "two-thirds of coal, oil and gas reserves would have to be left in the ground, at least until 2050" (a "carbon bubble"). As the author notes:
 
"If two-thirds of known reserves must stay in the ground, then this 'unburnable carbon' would not be monetized, becoming instead a stranded asset or liability that is not being priced into the current valuations of fossil-fuel companies."
 
In other words, either our carbon-intensive global economy will be allowed to continue extracting and burning traditional energy sources at great profit for energy companies (and great expense for the rest of us), or the valuations of these same companies are greatly inflated because they do not account for the possibility that two-thirds of known reserves cannot be monetized. Following the ideas in the article and extrapolating them to their natural conclusions does not appear to result in a situation where both outcomes can occur simultaneously. Either the planet or the fossil-fuel companies should be shorted today:
 
"Fossil-fuel companies, and an economy that subsidizes these (and other emitters) by letting them dump their carbon pollution into the atmosphere for free, would see significant disruptions if and when these externalities are accounted for."
 
This leads us back to the divestment movement. Given that "One can divest fossil fuels and still own a portfolio that remains very carbon intensive," the author advocates a very creative "Multi-pronged approach" that encompasses both engagement, protest, and incentives for carbon-based energy companies. Principally, he sees these three forces coming together in a "smart carbon tax":
 
"Not only would such a tax put a price on carbon so that clean energy can effectively compete, but it would also generate significant revenues, a portion of which could be assigned or recycled right back to the energy companies in the form of transition subsidies that enable them to convert over to sustainable energy. A Smart Carbon Tax would be designed so that a significant portion of proceeds is earmarked for investments in renewable energy, energy efficiency, resource efficiency more broadly, green infrastructure, and so forth. The fossil-fuel companies, as well as others, would be eligible to participate in this revenue stream from the Smart Carbon Tax. These transition subsidies could include expanded investment tax credits, low-interest loans, price supports, and so forth – and should obviously replace current fossil-fuel subsidies. But for such a plan to work, the amount transferred would have to be meaningful and may have to approach or approximate the profits the energy companies forego by leaving the fossil fuels in the ground."
 
An approach that incentivizes the involvement of the energy companies by not inflicting losses on them is essential. The fact that the divestment advocates are 'right' does not make them a solid bet given humanity's demonstrated capacity for self-destruction.
 
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/
 
 
2014 the Year for a Smart Carbon Tax
By Joe Keefe
July 28, 2014
Green Money Journal
 

Monday, December 1, 2014

Strategic CSR - Social impact investing

The theme for this week's Newsletters is social impact investing (Issue: Investor Activism, p285). Aspects of impact investing, which grew out of the socially responsible investing (SRI) industry, have been a part of Strategic CSR since the first edition. The market for investment instruments that satisfy values-based investing demand continues to grow and, according to the article in the url below, has evolved into a new type of fund:
 
"It is an intriguing concept: investing in stocks of companies with female leadership. Backed by studies that say such companies perform better, fund companies are stepping in with investments that snub male-dominated companies, and bet on women."
 
In particular:
 
"Barclays PLC in July launched a Barclays Women in Leadership Total Return Index and related exchange-traded notes, Barclays Women in Leadership ETN. The index is made up of U.S. companies with a female chief executive or at least a 25% female board."
 
According to research that supports the foundation of such tailored funds:
 
"…from 2004 to 2008, Fortune 500 firms with three or more female directors had an 84% better return on sales and a 46% better return on equity. Matterhorn Group [at Morgan Stanley] cites studies by several universities and consulting companies as well that see a correlation between strong financials and women in leadership roles."
 
These funds come with two caveats (according to the article). First:
 
"Female leaders are often appointed in times of poor company performance, so their posts may be precarious, say Michelle Ryan and Alex Haslam, professors at the University of Exeter in the U.K. That 'glass cliff' could make such companies less attractive to investors, the researchers say. Some observers caution, too, that the presence of more female directors is not necessarily the cause of business success, but could instead be a consequence."
 
Second, and equally controversially, there is still considerable debate about the value of mutual funds with higher than average management fees, in general, and SRI funds, in particular:
 
"Robert Goldsborough, a fund analyst at investment-research firm Morningstar Inc., says, 'Over time, these kinds of screens typically produce performance that's on par with the market; typically not better, but not worse.'"
 
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/
 
 
Men Had Their Chance; New Funds Bet on Women
By Daisy Maxey
August 4, 2014
The Wall Street Journal
Late Edition – Final
R1
 

Monday, November 24, 2014

Strategic CSR - Plastic

I knew the level of pollution in our oceans was a problem. The article in the url below, however, demonstrates just how much of a problem it has become:
 
"The world is awash in plastic. It's in our cars and our carpets, we wrap it around the food we eat and virtually every other product we consume; it has become a key lubricant of globalization — but it's choking our future in ways that most of us are barely aware."
 
Two facts, in particular, stood out. First:
 
"Plastics are now one of the most common pollutants of ocean waters worldwide. Pushed by winds, tides and currents, plastic particles form with other debris into large swirling glutinous accumulation zones, known to oceanographers as gyres, which comprise as much as 40 percent of the planet's ocean surface — roughly 25 percent of the entire earth."
 
And, second:
 
"In a 2010 study of the Los Angeles and San Gabriel Rivers, my colleagues and I estimated that some 2.3 billion pieces of plastic — from polystyrene foam to tiny fragments and pellets — had flowed from Southern California's urban centers into its coastal waters in just three days of sampling."
 
To repeat, that is 2.3 billion pieces in 3 days! As a result:
 
"We suspect that more animals are killed by vagrant plastic waste than by even climate change."
 
One solution, of course, is to incorporate the true costs associated with the consumption of these plastics into the price paid for the product (see, Chapter 8: Case-study – Lifecycle Pricing, p473). This will reduce consumption and would make recycling a more cost-effective option. Most importantly, it would incentivize businesses to innovate and develop a more environmentally efficient (and, in a lifecycle pricing model, less costly) alternative.
 
I will be travelling for the rest of this week, so there will be no Newsletters on Wednesday and Friday this week.
Happy Thanksgiving to all of you here in the U.S.
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/
 
 
Choking the Oceans With Plastic
By Charles J. Moore
August 26, 2014
The New York Times
Late Edition – Final
A23
 

Friday, November 21, 2014

Strategic CSR - Monsanto

At the significant risk of provoking the wrath of a fair number of you (yet again J), I wanted to round-off our week's look at GMOs by stating that I continue to be fascinated by Monsanto. I am fascinated by the science and technology behind the company's innovations; I am also fascinated by the activists who push back against Monsanto—many of whom are no doubt persuaded by the science behind climate change, but not by the science behind GM foods (see: Strategic CSR – GM Foods; see also this article from The Economist).
 
As I have said before, there is insufficient land in the world to satisfy our growing food demands solely via organic production methods. While national governments play a huge role in policing food production (making sure it is safe and sustainable, and minimizing waste), it is hard to escape the conclusion that firms like Monsanto need to be included as part of the solution to satisfying the nutritional needs of the world's population.
 
Given this, the article in the url below, which is an interview with Monsanto's president and COO, Brett Begemann, reminded me of my interest in the company (along with an extended profile in Bloomberg Businessweek over the summer). Here are some highlights:
 
"The world's largest-grossing seed seller ranks between one and 15 on any list of the world's most-hated corporations. The annual 'March Against Monsanto,' world-wide protests against genetic modification, drew an estimated two million people in some 400 cities last year."
 
"The use of biotechnology has skyrocketed since GM crops were first commercialized in 1996, and more than 90% of all acres planted with corn and soybeans are now GM crops. These crops, typically fed to livestock and used as ingredients in other foods, are in nearly 80% of the products on grocery-store shelves."
 
"In 2011 farmers earned $19.8 billion added economic benefit from GM crops, according to a 2013 report by the U.K.-based PG Economics."
 
"In 1996 Monsanto commercialized its first GM crop, a herbicide-resistant soybean seed."
 
"'The biotech-derived products that we eat are the most highly tested and regulated components in what we consume,' Mr. Begemann says. A new seed must be reviewed by the Department of Agriculture. Then there's a voluntary check from the Food and Drug Administration. If the GM seed includes insecticides or pesticides, as most do, the Environmental Protection Agency gets a look. It takes about $100 million to get one seed from discovery to market. Crops that are bred conventionally, on the other hand, undergo no government testing. None."
 
"In a recent poll for The Wall Street Journal by the market-research firm Nielsen, about 60% of 1,200 consumers said they had heard of GMOs, and roughly half said they try not to eat them. The most common explanation was it 'doesn't sound like something I should eat.'"
 
"One irony is that GM crops help the environment by reducing pesticide use. Thanks to fewer sprays and less tillage, GM crops in 2012 reduced world-wide carbon emissions by 26.7 billion kilograms—the equivalent of taking 11.8 million cars off the road for a year, according to a 2013 report by the International Service for the Acquisition of Agri-Biotech Applications."
 
"By 2050 there will be nine billion people on earth, and they will want dinner. GM crops are not a panacea, Mr. Begemann reminds me many times, but 'just one of many tools' that farmers should be allowed to choose."
 
Have a great 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/
 
 
Meet Mr. Frankenfood
By Kate Bachelder
August 23-24, 2014
The Wall Street Journal
Late Edition – Final
A11
 

Wednesday, November 19, 2014

Strategic CSR - Ben & Jerry's

What I find interesting in the article in the url below is not Ben & Jerry's commitment to removing GMOs (genetically modified organisms) from its products, but the complexity involved in reaching that goal, which is staggering. Essentially, GMOs are everywhere:
 
"Two decades after the first genetically engineered seeds were sold commercially in the U.S., genetically modified organisms—the crops grown from such seeds—are the norm in the American diet, used to make ingredients in about 80% of packaged food, according to industry estimates."
 
The process is complex, even for a company that really makes only one product—ice-cream. The extent to which B&J's has to reach back into its supply chain to ensure that none of its ingredients are "contaminated" with GM foods is mind-boggling:
 
"Ben & Jerry's said most ice cream ingredients were already non-GMO. Still, the company needed to check with suppliers and rigorously investigate all 110 ingredients it uses to make ice cream. Among the surprises: finding out a product couldn't be considered non-GMO if the supplier dusted the pan with cornstarch before baking. The supplier had to switch to rice starch."
 
Essentially, B&J's has divided the task into two phases—first, removing GM ingredients from the "chunks and swirls" that it adds to its ice-cream and, second, removing GMOs from the milk it uses to make its ice-cream. While the company is approaching the end of phase 1 (almost two years after committing to this goal and one year behind schedule), removing GMOs from the milk it uses is proving to be much more difficult:
 
"The vast majority of the feed given to dairy cows in the U.S. is made with GMO corn, soybeans and alfalfa. That makes it difficult to find non-GMO milk in quantities large enough for Ben & Jerry's, so the company hasn't committed to doing it. Labeling laws like the one passed in Vermont don't apply to meat or dairy derived from animals that consumed GMO animal feed, buying Ben & Jerry's more time. "We are having conversations with multiple stakeholders throughout the entire supply chain," Mr. Michalak said. 'It's a slow process.'"
 
What is making a complex issue even more convoluted is B&J's nuanced public statements about GMOs:
 
"Ben & Jerry's, which ranks fifth among U.S. ice cream brands by sales, says it doesn't consider GMOs unsafe to humans either, but has always positioned itself as an environmentally friendly, socially progressive brand. Executives long wanted to drop GMOs, which they feel are part of industrialized, chemical-intensive agriculture that the company opposes, said Mr. Michalak, the social mission director. But the company didn't start discussing converting its flavors with suppliers until 2012."
 
And, even if a company wants to go "non-GMO," what that means in practice is not agreed upon and is far from standardized:
 
"Unlike with organic foods—which also can't contain GMOs but must follow additional restrictions—the government sets no standard for what qualifies as 'non-GMO.' Companies seeking some authoritative imprimatur must go to third-party certifiers, usually the Non-GMO Project, a nonprofit group founded by natural foods retailers. It vets applicants with an almost religious exactitude."
 
Take just one ingredient, honey, for example:
 
"To gain its certification, Enjoy Life Foods LLC, a small Schiller Park, Ill.-based company that makes gluten- and allergen-free snacks, traced its honey to the hive. 'We had to go to our honey suppliers, who went to the bee keepers, who had to actually determine how far the bees could fly to make sure they weren't cross-pollinating at any GMO fields,' said Joel Warady, its chief sales and marketing officer. … The Non-GMO Project, which has verified more than 17,000 products, says such lengths are necessary to ensure the bees aren't feeding on nectar or pollen from GMO crops. Thus, the organization requires a four-mile radius from the bee hives be clear of GMO fields."
 
In spite of the complexities, companies are increasingly feeling pressured to remove GMOs from their products:
 
"In addition to Ben & Jerry's, a subsidiary of Unilever PLC, General Mills Inc. this year started selling its original flavor Cheerios without GMOs. Post Holdings Inc. took the GMOs out of Grape-Nuts. Boulder Brands Inc.'s Smart Balance has converted to non-GMO for its line of margarine and other spreads. Chipotle Mexican Grill Inc. is switching to non-GMO corn tortillas."
 
There is also potential compeititve advantage in taking this action because, given the widespread use of GMOs, removing them from products constitutes a point of differentiation:
 
"'Non-GMO' is one of the fastest-growing label trends on U.S. food packages, with sales of such items growing 28% last year to about $3 billion, according to market-research firm Nielsen. In a poll of nearly 1,200 U.S. consumers for The Wall Street Journal, Nielsen found that 61% of consumers had heard of GMOs and nearly half of those people said they avoid eating them. The biggest reason was because it 'doesn't sound like something I should eat.'"
 
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/
 
 
GMO Fight Ripples Down Food Chain
By Annie Gasparro
August 8, 2014
The Wall Street Journal
Late Edition – Final
A1
 

Monday, November 17, 2014

Strategic CSR - GMOs

This week, I would like to use the Newsletters to discuss a number of articles I have seen recently about genetically modified foods.
 
I wanted to start with the radio story in the url below, which is interesting for two reasons: First, it reports on the increasing number of companies that are dropping genetically-modified organism (GMO) ingredients from their foods:
 
"The Non-GMO Project has certified more than 20,000 products since it launched in 2007, and … says this is one of the fastest growing sectors of the natural food industry, representing $6 billion in annual sales."
 
Second and more interesting, however, the story reports that the firms that are doing this are not necessarily advertising the fact:
 
"General Mills' original plain Cheerios are now GMO-free, but the only announcement was in a company blog post in January. And you won't see any label on the box highlighting the change. Grape Nuts, another cereal aisle staple, made by Post, is also non-GMO. And Target has about 80 of its own brand items certified GMO-free. Megan Westgate runs the Non-GMO Project, which acts as an independent third-party verifier of GMO-free products, including Target's. She says her organization knows about 'a lot of exciting cool things that are happening that for whatever strategic reasons get kept pretty quiet.'"
 
It seems that, while non-GMO foods are increasingly being demanded by consumers (or, at least, the right to know whether GMOs are in the foods they are eating), firms that are responding to this demand feel there is limited marketing value in doing so. In other words, firms perceive that while some consumers will value this change, it is not clear that all or even most consumers will do so. As such, companies are taking a progressive stance on a sensitive social issue (appealing to those consumers who support removing GMOs from foods), but are not communicating the change in case it adversely affects other consumers who prefer the status quo. Ben & Jerry's offers a perfect example of the consequences of altering an established product:
 
"One recently deceased flavor [is] Coffee Heath Bar Crunch, one of the company's best-sellers. Ben & Jerry's CEO Jostein Solheim says the company had to remove the key ingredient, Heath bars made by Hershey, and rework the flavor. Its replacement is called Coffee Toffee Bar Crunch. (Some fans have blasted the company in online forums, claiming it doesn't taste as good.) The reason for the change? Hershey makes Heath bars with genetically engineered ingredients, and Ben & Jerry's has made a pledge to remove all GMO ingredients from its ice cream."
 
And, to make walking this fine line on an evolving social issue even more delicate, some of the same firms that are voluntarily removing GM ingredients from their foods are also fighting local initiatives that require greater transparency in food labelling:
 
"They often fight those battles through the powerful Grocery Manufacturers Association, or GMA, a trade group with hundreds of members. It has just filed suit against Vermont over the state's GMO labeling law. Even Ben & Jerry's, so vocal in its anti-GMO stance, has a conflict, of sorts. It may have eliminated GMOs, but it's still owned by Unilever, which put a lot of money toward fighting labeling legislation in California and belongs to the GMA."
 
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/
 
 
Some Food Companies Are Quietly Dumping GMO Ingredients
By Jane Lindholm
July 22, 2014
National Public Radio
 

Friday, November 14, 2014

Strategic CSR - Chinese edition

If any of you ever have the need, the Chinese edition of Strategic CSR (3e) has just been published:
 
 
 
This adds to the Korean translation of the 2e that was published in 2013:
 
 
 
Thank you all very much for your ongoing support.
 
Have a great 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/
 

Tuesday, November 11, 2014

Strategic CSR - Alternative energy

The article in the url below presents a fascinating breakdown of the costs (and relative efficiencies) of different energy sources. In doing so, it makes a compelling argument that government subsidies are hurting as much, if not more, than they are helping us transition away from fossil fuels:
 
"Billions are spent nursing the infant solar- and wind-power industries in the hope that they will one day undercut fossil fuels and drastically reduce the amount of carbon dioxide being put into the atmosphere."
 
On the face of it, government subsidies are working:
 
"Photovoltaic panels have halved in price since 2008 and the capital cost of a solar-power plant—of which panels account for slightly under half—fell by 22% in 2010-13. In a few sunny places, solar power is providing electricity to the grid as cheaply as conventional coal- or gas-fired power plants."
 
In reality, however, they are encouraging the most inefficient alternative energies—wind and solar:
 
"… whereas the cost of a solar panel is easy to calculate, the cost of electricity is harder to assess. It depends not only on the fuel used, but also on the cost of capital (power plants take years to build and last for decades), how much of the time a plant operates, and whether it generates power at times of peak demand. To take account of all this, economists use "levelised costs"—the net present value of all costs (capital and operating) of a generating unit over its life cycle, divided by the number of megawatt-hours of electricity it is expected to supply."
 
What the government should be doing is helping set a penalty for burning carbon (via a carbon tax) and then allowing the market to determine which alternative energy source provides the greatest overall benefit. When you consider all the costs involved in generating the energy (such as transporting it to where it is needed) and all the potential benefits (such as emissions avoided), the graphic that accompanies the article makes it clear that natural gas is the most cost effective alternative currently known to humanity, while nuclear is the most effective zero emissions energy source:
 
 
Specifically:
 
"If all the costs and benefits are totted up … solar power is by far the most expensive way of reducing carbon emissions. It costs $189,000 to replace 1MW per year of power from coal. Wind is the next most expensive. Hydropower provides a modest net benefit. But the most cost-effective zero-emission technology is nuclear power. The pattern is similar if 1MW of gas-fired capacity is displaced instead of coal. And all this assumes a carbon price of $50 a tonne. Using actual carbon prices (below $10 in Europe) makes solar and wind look even worse. The carbon price would have to rise to $185 a tonne before solar power shows a net benefit."
 
Emissions of carbon dioxide should not be the only criteria on which an energy source is chosen (as the article notes), but the article does make clear that our current understanding of these issues is limited and is certainly not at a level where the government should be picking winners and losers via misguided subsidies.
 
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/
 
 
Sun, wind and drain
July 26, 2014
The Economist
63
 

Monday, November 10, 2014

Strategic CSR - Supply chain

The article in the url below indicates opposite approaches to the same problem (tainted food ingredients in the supply chain) by different companies (McDonald's, KFC, and Yum Brands):
 
"The allegations came in a report from Dragon TV–continuing a pattern of Western companies facing critical scrutiny from Chinese TV stations–which said the Shanghai unit of OSI Group Inc. had been supplying meat that was beyond its sell-by date."
 
While KFC and Yum Brands promptly dropped the supplier (OSI), McDonald's in China has decided to stick with the firm (at least for now) to try and correct the situation. As commentators in the article note, this may be because it is simply more expedient to try and salvage a known supplier, rather than invest the cost and time to find a new partner firm. Whether by luck or design, however, McDonald's approach is also consistent with what I understand best CSR practice to be in situations like this:
 
"Anthony Johndrow of the Reputation Institute views McDonald's stance as a thoughtful approach to protecting its reputation. 'I think they're smart in trying to handle this strategically rather than just throwing the supplier under the bus,' he said. Both McDonald's and OSI have offered fulsome apologies and the next step is to take 'tangible, believeable steps' that will allow McDonald's to demonstrate its attention to its supply chain and to hygiene issues, Mr. Johndrow said. The crisis could turn out to be an object lesson, he said: 'There's a new story being told here.'"
 
For McDonald's, the greater long-term investment might be in re-training OSI to ensure the higher standards now in place are met. Doing so also sends a positive message to McDonald's other suppliers that the firm is more interested in developing meaningful relationships and will not cut-and-run at the first sign of trouble. In this case, continued vigilance will/should also involve regular audits. But, given OSI's apparent contrition, and keeping in mind the value of supporting firms and industries in developing economies by encouraging production capabilities (something that is in everyone's interests, especially  those of McDonald's), it seems to me that giving OSI the opportunity to correct its serious mistakes is the right response at this stage.
 
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/
 
 
McDonald's Takes New Approach to China Food Scare
By Nicholas Elliott
July 28, 2014
The Wall Street Journal
Late Edition – Final
 

Friday, November 7, 2014

Strategic CSR - HSBC

The article in the url below contains a staggering statistic:
 
"HSBC Holdings PLC's third quarter earnings call brought the striking revelation that nearly 25,000 of its 258,000 employees, almost 10%, work in compliance. Compliance was a major driver in the 5% increase in operating expenses reported, and management left no doubt that higher compliance costs would not go away soon, if ever."
 
That statistic (10% of all employees work in compliance) is a function of operating in a highly regulated industry. These regulations, however, are a function of past behavior that ignores the interests of a broad range of stakeholders. The result of such a narrow operational perspective is to invite additional scrutiny from the regulatory authorities. Banks have no one to blame but themselves for the increased costs that come from having to comply with that scrutiny.
 
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/
 
 
HSBC Costs Illustrate New Cost of Banking
By Gregory J. Millman
November 4, 2014
The Wall Street Journal
 

Wednesday, November 5, 2014

Strategic CSR - Corporations

The article in the url below is an interesting survey of the state of CSR today – where we have been and, possibly, where we are going. In the process, it poses the following question:
 
“Is it na├»ve to expect corporations to assist in addressing the social, economic and environmental challenges of the day?”
 
There are two points the author makes, in particular, that I want to highlight. First, is the idea that the executives who lead the corporations of the past:
 
“… served not just stockholders, but also workers, customers and the community.”
 
The implication reinforced throughout the article is that executives today serve only stockholders. It is frustrating continually to see such complex ideas presented so simplistically. I understand the constraints of space that newspaper journalists face, but that does not seem to be the main driver behind the problem. In general, we like to see the world as a series of dichotomies, rather than the continua that are all around us. Businesses today operate within a series of stakeholder relationships. They do not choose this; it is simply the way that it is. Now, they can certainly prioritize the interests of one group over another, but it is not true to say that executives only care about stockholders. It is impossible to run a business that way. An overly simplistic representation of this when discussing CSR prevents the more important discussion around stakeholder prioritization, which is the true challenge that executives face. In fact, you could argue that the main job of executives today is to manage among competing stakeholder interests to allocate scarce resources in the best interests of the firm.
 
Second, the author concludes that, due to the narrow, distorted perspective of businesses today:
 
“Elected governments are certainly imperfect. But to address our most intractable ills, they are the better tool.”
 
As someone who has been thinking about CSR for many years (so is well aware of the many ways in which for-profit firms both create and destroy value, broadly defined), I think this statement is ludicrous. A strong and active government is clearly a vital component of a functioning democratic system. But, anyone who pins their hope for social progress primarily on government agencies and, heaven forbid, elected politicians, has just not been paying attention over the past few decades. No-one makes this point more effectively than Milton Friedman, in an interview on The Donahue Show in 1979 (http://www.youtube.com/watch?v=GapXLpLoZBs), which I show in my class and should be, I think, compulsory viewing for all business students:
 
“The great achievements of civilization have not come from government bureaus. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way. In the only cases in which the masses have escaped from [grinding poverty], the only cases in recorded history, is where they have had capitalism and largely free trade. If you want to know where the masses are worst off, it is exactly in the kinds the societies that depart from that. So the record of history is absolutely crystal clear, that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.”
 
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/
 
 
Motivating Corporations to do Good
By Eduardo Porter
July 15, 2014
The New York Times
Late Edition – Final
B1
 

Monday, November 3, 2014

Strategic CSR - Green bonds

The article in the url below reports the latest developments in the market for green bonds:
 
"… instruments which tie the proceeds of a bond issue to environmentally friendly investments. Issuers of green bonds raise money, promising to spend it on (for example) building wind farms or less-polluting factories."
 
The market for these environmental/social-impact bonds has increased significantly in only the last two years:
 
"In 2012 $3 billion of such bonds were sold. In the first six months of 2014, the sum was about $20 billion, nearly twice as much as in 2013 as a whole. … Climate Bonds Initiative, a research group, reckons the cumulative value of all green bonds will be around $50 billion by the end of 2014. … two or three times more than German taxpayers will spend subsidising wind and solar energy—the largest green subsidy in Europe."
 
And, as the market for green bonds evolves, more entities (in particular, for-profit firms such as Unilever and Toyota) have started to issue them:
 
"All green bonds are investment grade; many have been two or three times oversubscribed; half were issued by companies, a switch from 2013, when most green bonds were sold by international agencies such as the World Bank."
 
As these types of bonds become more popular, however, the definition of what constitutes a green bond has become more contentious:
 
"The trouble with this sort of discretion is that different people have different views. Is fracking green? Is nuclear power? The definition is likely to be tested further because a big oil firm is working on a green bond to finance a carbon-capture and storage (CCS) scheme. CCS is an important technology—but oil firms are, for the most part, seen as beyond the pale by greens."
 
As a result, green bonds are running into a problem that eventually faces any diffusing practice—the issue of validation:
 
"A market needs standardised products. … Earlier this year 13 banks drew up a shared set of principles governing different categories of bonds; 49 institutions have signed up. Nonetheless, there is far from universal agreement over the question, 'What makes a bond green?' At the moment the answer is, 'If someone says it is.'"
 
Similar challenges threatened (and, ultimately, undermined) the legitimacy of carbon offsets, which we no longer hear much about. Given the size of the market for green bonds relative to the total bond market ($50 billion verses $80 trillion), we should hope that green bonds are given a more stable footing than carbon offsets, and that this happens sooner rather than later.
 
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/
 
 
Green grow the markets, O
July 5, 2014
The Economist
Late Edition – Final
61