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Wednesday, March 30, 2016

Strategic CSR - GMOs

The national debate here in the U.S. about food labelling is heating-up. In particular, it is the issue of genetically-modified organisms (GMOs) that is the battleground of choice:
"The country's first law requiring mandatory GMO labels is slated to go into effect in Vermont on July 1 after an industry-backed federal law that would block states' authority stalled in the U.S. Senate [recently]."
Given the extent of the fines associated with a failure to comply, it looks like the Vermont legislature is serious about enforcement and, as a result, the food companies have to be serious about compliance:
"Facing fines up to $1,000 a day per product, food makers from giants like General Mills Inc. to regional businesses like Vermont Fresh Pasta are making big adjustments, many of which extend beyond the state's borders."
As the article explains, the law in Vermont is ground-breaking not because Vermont is an important market, but because the nature of the supply chains of large, multinational companies is that they prefer uniformity, since it reduces costs. When the issue is legal compliance, in order for a firm to comply and also be consistent throughout its supply chain and all markets, it forces all operations to adhere to the highest standards of the strictest areas:
"Vermont is a tiny market for most companies, but the integrated nature of supply chains gives it an outsize effect. On Friday, General Mills said it is slapping GMO labels on its packaged food nationwide, saying it would be too complex and expensive to create a separate distribution network for the 626,000-person state of Vermont. The maker of Cheerios and Lucky Charms remains firm in its stance against mandatory labeling, but 'having one system for Vermont and one for everywhere else is untenable,' said Jeff Harmening, General Mills' chief operating officer of U.S. retail."
I see this action by Vermont as an excellent example of a stakeholder (the state legislature) holding an industry to account based on its expectations of what constitutes socially responsible behavior. As this chart in the article indicates, GMOs are already out there – the least the regulatory authorities can do is make consumers aware of the ingredients that are in the food they are buying:
Here is an example of what a label that complies with the new law might look like (see the box labelled "Produced with Genetic Engineering"):
What I would like to see now is an informed debate about the pros and cons of GMOs (including the science around these organisms), not only in the developed world, but in many emerging markets, too – something I have yet to see at any kind of broad level.
For more details about this story and its wide-ranging effects, see:
Take care
David Chandler & Bill Werther
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GMO Labeling Law Roils Food Companies
By Annie Gasparro and Jacob Bunge
March 21, 2016
The Wall Street Journal
Late Edition – Final