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


Thursday, November 16, 2017

Strategic CSR - Self-interest

The article in the first url below is an excellent analysis by David Brooks of the current administration's view of America's place in the world – in particular in relation to its decision over the summer to withdraw from the Paris Accord. On that particular decision, there is not much I can say that won't get me into trouble, but I think the article in the second url below by Bill McKibben, the founder of 350.org, is particularly eloquent.
 
The purpose of this Newsletter, however, is to comment on Brooks' column. While I agree with almost all of what Brooks writes, I disagree with his equating "self-interest" with "selfishness." I have thought a lot about self-interest and its role in motivating human behavior and, in particular, in generating optimal outcomes. I have two responses that, in my thinking, allow the pursuit of self-interest to lead to optimal outcomes for society, but in a way that also incorporates all of the good points that Brooks raises.
 
First, "self-interest" does not equal "selfishness." My self-interest can be served by making the community around me stronger – by contributing, rather than taking away. I can easily justify paying higher taxes as in my self-interest, for example, if I know the extra funds will be reinvested in education or healthcare or providing a safety net for those most in need (and as long as I value those things, which I do). Conversely, I can see the harm done to me individually if I refuse to contribute to the common good simply because I want to increase my personal income in the short term. It is against my self-interest, for example, to refuse to contribute to funding the police if, as a result, crime increases and my personal property (or safety) is jeopardized as a result.
 
Second, the idea or "rational self-interest" is a misnomer, a core feature of classical economics that has produced highly constrained theoretical models founded on warped assumptions that lead to misinformed public policies. Humans pursue their perceived self-interest, not their actual self-interest. That does not mean these two things cannot be the same thing, on occasions. In my experience, however, more often than not, they are different (even assuming someone's 'actual' self-interest can be identified). The difference between the two is accounted for by the emotions, biases, morals, and values that make us human (and flawed, on many levels).
 
It is the combination of these two points at the intersection of economic theory and human psychology that, in essence, differentiates strategic CSR (or sustainable value creation) from mainstream discussions of CSR and sustainability. Understanding how humans actually make decisions, rather than how we wish they made decisions (what they are, rather than what we wish they were), is essential to understanding how our economic and social systems work. Once we agree on that, we can begin to discuss how to build a more sustainable economic system, but that discussion is pointless if it is based on false or unrealistic assumptions.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
The Axis of Selfishness
By David Brooks
June 2, 2017
The New York Times
Late Edition – Final
A25
 
Trump's Reckless Climate Decision
By Bill McKibben
June 2, 2017
The New York Times
Late Edition – Final
A25
 

Tuesday, November 14, 2017

Strategic CSR - Robots

The article in the url below offers a calming perspective on the current hyperventilation about the threat to employment of artificial intelligence. In doing so, it presents two points that help me better process the flood of opinion about this topic from all sides of the debate. First, is the need to place AI in some context. For example, it is a fact that "the field of artificial intelligence is now more than a half-century old," but we have managed to survive (if not exactly thrive) so far. As a result of this long history, automation has been a constant in the evolving nature of 'work' to an extent that we often forget (emphasis added):
 
"… despite centuries of progress in automation and recurrent warnings of a jobless future, total employment has continued to increase relentlessly, even with bumps along the way. More remarkable is the fact that today's most dire projections of jobs lost to automation fall short of historical norms. A recent analysis … quantified the rate of job destruction (and creation) in each decade since 1850, based on census data. They found that an incredible 57% of the jobs that workers did in 1960 no longer exist today."
 
Beyond this fundamental context, a more subtle distinction is between the potential for robots to replace jobs verses the potential to replace specific tasks. In other words, rather than replace workers, they enable existing workers to do their jobs more effectively. Recent studies in this vein suggest that:
 
"… by 2055, more than 50% of all work-related tasks will be subject to automation. Such studies naturally raise concerns that we may be on the brink of an unprecedented employment crisis. But robots aren't mechanical people. They are a new wave of automation, and like previous waves, they reduce the need for human labor. In doing so, they make the remaining workers more productive and their companies more profitable. These profits then find their way into the pockets of employees, stockholders and consumers (through lower prices). This newfound wealth, in turn, increases demand for products and services, compensating for lost jobs by employing even more people."
 
Ultimately, there is a pattern to the encroaching use of AI in work – one that should help society, rather than necessarily threaten it:
 
"As the logic goes, if artificial intelligence is getting so smart that it can recognize cats, drive cars, beat world-champion Go players, identify cancerous lesions and translate from one language to another, won't it soon be capable of doing just about anything a person can? Not by a long shot. What all of these tasks have in common is that they involve finding subtle patterns in very large collections of data, a process that goes by the name of machine learning. The kinds of data vary, of course. It might be pixels in cat photos, bytes streaming from a dashboard camera, millions of computer-generated games of Go, digital X-rays or volumes of human-translated documents. But it is misleading to characterize all of this as some extraordinary leap toward duplicating human intelligence. The selfie app in your phone that places bunny ears on your head doesn't 'know' anything about you. For its purposes, your meticulously posed image is just a bundle of bits to be strained through an algorithm that determines where to place Snapchat face filters. These programs present no more of a threat to human primacy than did automatic looms, phonographs and calculators, all of which were greeted with astonishment and trepidation by the workers they replaced when first introduced."
 
Robots, AI, machine-learning, etc., will increase productivity, which will result in greater wealth, which will then be spent:
 
"Luxury hotels are not prized because they are more efficient but because their staff is more attentive. People pay more to watch a barista brew their latte than for a comparable product from a vending machine, and I somehow doubt that our grandchildren will want to tell their troubles to a robotic bartender or prefer to stick their hands in a manicure machine. In the future, the masses may make do with simple-minded domestic robots while the upper crust hires ever more butlers and maids. The Jetsons, after all, were a middle-class family."
 
The key, of course, is to make sure the wealth is more evenly distributed, rather than narrowly distributed. This, of course, is the essence of the current debate that is causing so much political upheaval. But, that is a different issue as to whether AI is to be welcomed and encouraged, rather than feared. We know that humans do not handle change very well. We are currently undergoing a period of concentrated change, the turmoil from which is beginning to show up in political elections/structures. The article reinforces my sense that, while progress always represents a dislocation that will effect some sections of society more negatively than others; in general, the majority will benefit. For example, I do not see many people suggesting we should return to an agrarian economy, even though the shift to an industrialized society caused massive upheaval for the 40% of society that used to work on farms.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/


Don't Fear the Robots
By Jerry Kaplan
July 22-23, 2017
The Wall Street Journal
Late Edition – Final
C3
 

Friday, November 10, 2017

Strategic CSR - Oceans

The article in the url below (a lead editorial in The Economist) contains some mind-boggling statistics about the world's oceans:
 
"EARTH is poorly named. The ocean covers almost three-quarters of the planet. It is divided into five basins: the Pacific, the Atlantic, the Indian, the Arctic and the Southern oceans. Were all the planet's water placed over the United States, it would form a column of liquid 132km tall. The ocean provides 3bn people with almost a fifth of their protein (making fish a bigger source of the stuff than beef). Fishing and aquaculture assure the livelihoods of one in ten of the world's people. Climate and weather systems depend on the temperature patterns of the ocean and its interactions with the atmosphere. If anything ought to be too big to fail, it is the ocean."
 
"Humans have long assumed that the ocean's size allowed them to put anything they wanted into it and to take anything they wanted out. Changing temperatures and chemistry, overfishing and pollution have stressed its ecosystems for decades. The ocean stores more than nine-tenths of the heat trapped on Earth by greenhouse-gas emissions. Coral reefs are suffering as a result; scientists expect almost all corals to be gone by 2050."
 
"By the middle of the century the ocean could contain more plastic than fish by weight. Ground down into tiny pieces, it is eaten by fish and then by people, with uncertain effects on human health. Appetite for fish grows nevertheless: almost 90% of stocks are fished either at or beyond their sustainable limits. The ocean nurtures humanity. Humanity treats it with contempt."
 
After framing a particularly dire problem, the editorial details several steps we can take to improve the situation. They deserve the attention of us all; whether they will receive it, however, is another matter altogether.
 
Have a good weekend.
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Deep trouble
Editorial
May 27, 2017
The Economist
18
 

Wednesday, November 8, 2017

Strategic CSR - Employees

The article in the url below sheds an interesting light on the issue of employee background checks. What is interesting is that, although most firms conduct background checks prior to employment, they do not conduct any checks subsequently:
 
"While 98% of the 278 executives surveyed by insider threat-monitoring firm Endera said their organization checks people before offering them a job, fewer than 25% said they make such checks after someone joins the group."

This lack of attention, post-hiring, is even more surprising when it turns out there are good reasons to conduct these checks:

"The lack of post-employment monitoring remains prevalent despite the fact one in every 1,000 employees is arrested every month—and despite the fact 79% of security executives and 81% of operations executives who were asked in the survey said they would screen or consider screening their entire workforce every day if they could. While companies manage cybersecurity risks, they focus on insider threats such as data and device behavior, preventing data loss and managing access—and this leaves unknown all the things an employee does when not working, said Endera Chief Executive Raj Ananthanpillai."

While there is a balance that needs to be struck between employee trust and workplace security, it seems that the disproportionate focus on pre-hiring checks is misplaced. This issue is even more important, given the way that trends towards greater contracting are shaping the relationships individuals have with the firms that hire them:
 
"The challenge is even more acute for companies that contract employees, as they often may not conduct any checks themselves and sometimes don't know if the staffing agency they used to get the workers did background checks, the survey found. This comes despite the fact contract employees generated twice as many criminal alerts versus workers at Fortune 500 firms—11.1 criminal alerts per 1,000 contractors versus 6.3 for employees, said Endera."
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Lack of Post-employment Checks Expose Companies
By Ben DiPietro
April 27, 2017
The Wall Street Journal
 

Monday, November 6, 2017

Strategic CSR - Impact investing

The article in the url below presents a multiple-choice quiz on the socially-responsible (or impact)-investing industry. The article includes 10 questions. Here are a selection, with the answers underlined:
 
3. Last year, investors put how much money into ESG funds in the U.S.?
A. $20 million
B. $100 million
C. $1 billion
D. $3 billion
 
4. At the start of 2016, the sustainable, responsible and impact investing category represented what percentage of all investment under professional management in the U.S.?
A. 22%
B. 10%
C. 5%
D. 0.1%
 
5. From 2014 to 2016, sustainable investing grew by what percentage in the U.S.?
A. 12%
B. 20%
C. 33%
D. 55%
 
6. On a global level, what is the dollar amount of assets professionally managed under ESG strategies?
A. $15.56 trillion
B. $22.89 trillion
C. $34.45 trillion
D. $45.67 trillion
 
7. True or false: There is no official governing body that regulates environmental, social and governance criteria.
 
Explanations for the answers, along with additional information and the other questions, is provided in the article.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Test Your Smarts on … Ethical Investing
By Matthew Kassel
July 10, 2017
The Wall Street Journal
Late Edition – Final
R8
 

Thursday, November 2, 2017

Strategic CSR - Electric cars (II)

In contrast to the Newsletter sent earlier this week, today's Newsletter presents some good news about electric cars. The article in the first url below, for example, reports that, in Denmark:
 
"Electric car owners are earning as much as $1,530 a year just by parking their vehicle and feeding excess power back into the grid."
 
In other words, the excess energy created while the car is running is stored in the battery and fed back into the grid when the car is parked. While the article highlights the challenges for utilities in integrating energy from renewable sources into a country's energy network, it also reveals the creativity that can result from new challenges. This is especially important as electric car sales are predicted to overtake combustion engine sales by 2038:
 
"While the Tokyo-based automaker has trials with more than 100 cars across Europe, only those in Denmark are able to earn money by feeding power back into the grid. There, fleet operators collected about 1,300 euros ($1,530) a year using the two-way charge points."
 
The article in the second url below from The Economist expands on these benefits, running a special report on the death of the internal combustion engine and the rise of electric battery cars, which are rapidly becoming more efficient:
 
"The Chevy Bolt has a range of 383km; Tesla fans recently drove a Model S more than 1,000km on a single charge. UBS, a bank, reckons the 'total cost of ownership' of an electric car will reach parity with a petrol one next year. … It optimistically predicts electric vehicles will make up 14% of global car sales by 2025, up from 1% today. Others have more modest forecasts, but are hurriedly revising them upwards as batteries get cheaper and better – the cost per kilowatt hour has fallen from $1,000 in 2010 to $130-200 today. Regulations are tightening, too. Last month Britain joined a lengthening list of electric-only countries, saying that all new cars must be zero-emission by 2050."
 
While there are concerns about the jobs that will be displaced as a result of the shift to electric cars (which are easier to build and maintain), the article argues that the benefits to society as a whole far outweigh any costs:
 
"Lots of shared, self-driving electric cars would let cities replace car parks (up to 24% of the area in some places) with new housing, and let people commute from far away as they sleep. … [The shift] will offer enormous environmental and health benefits. Charging car batteries from central power stations is more efficient than burning fuel in separate engines. Existing electric cars reduce carbon emissions by 54% compared with petrol-powered ones. … The World Health Organization says that [air pollution] is the single largest environmental health risk, with outdoor air pollution contribution to 3.7m deaths a year. One study found that car emissions kill 53,000 Americans each year, against 34,000 who die in traffic accidents."
 
In short, the future is electric … . Or not, depending on which source you read, how you weight the relative pros and cons (of electric and other options), and what assumptions you make about future prices/growth/innovation. Other than that, it is easy … ! Like many innovations, progress is bumpy and some sort of middling-course is probably more likely than the most optimistic or most pessimistic forecasts.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Parked Electric Cars Earn $1,530 From Europe's Power Grids
By Jess Shankleman
August 10, 2017
Bloomberg Businessweek
 
Roadkill
Editorial
August 12, 2017
The Economist
7
 

Monday, October 30, 2017

Strategic CSR - Electric cars (I)

The article in the first url below sheds some light on the economics of the electric car:
 
"Electric cars have come a long way. They are no longer ugly, impossibly expensive and impractical, thanks to technological advances that have slashed battery storage from $1,000 per kilowatt-hour in 2010 to $273per kwh last year."
 
In particular, it highlights the extent to which Tesla (and other car companies) have so far relied so heavily on government subsidies – a prop that will soon come to an end:
 
"Nonetheless, … a 75 kwh battery (about 250 miles of range) still adds about $20,000 to a car's cost. So how do the cars sell? Public largess helps a lot. The federal government offers a tax credit of up to $7,500 each for the first 200,000 electric or plug-in hybrid cars a manufacturer sells. Throw in state tax credits, subsidies for recharging infrastructure, relief from gasoline taxes, preferential lanes and parking spots and government fleet purchases, and taxpayers help pay for every electric car on the road."
 
Anecdotal evidence suggests that, when this support is taken away, the cars are not so competitive, at least in terms of the mass market:
 
"When Hong Kong slashed a tax break worth roughly $55,000 fora Tesla in April, its sales ground to a halt. In Georgia, electric vehicle sales plummeted 80%the month aftera$5,000 tax credit was repealed."
 
The future for the market for electric cars, as envisioned by Tesla, also relies on certain assumptions that, while not impossible, are also far from guaranteed:
 
"… such scenarios hinge not just on the cost of batteries but on the price of oil and the efficiency of competing vehicles. [Economists] estimate that if batteries cost $270 per kwh, oil would have to cost more than $300 a barrel in 2020 to make electric and gasoline equally attractive. If battery costs fall to $100, as Tesla Founder Elon Musk has targeted, oil would have to average $90. … in an optimistic scenario, where battery costs fall 10% a year starting now and gasoline begins at $5 a gallon, electric vehicles will be competitive in five years. If battery costs fall just 5% a year and gasoline starts at $2.25, it will take more than 20."
 
At a more fundamental level, the author questions the extent to which electric cars have helped reduce climate change. This is principally because they are recharged at night, which is when electricity is more likely to be generated by coal:
 
"Economists … estimate electric vehicles account for more carbon dioxide per mile than existing cars in the upper Midwest, where coal-fired plants are more prevalent, and more than comparable hybrids in most of the U.S."
 
While I recognize that the oil companies and traditional car companies also get their fair share of government subsidies, it is instructive to realize that electric cars (at least using current technologies) might not be the silver bullet that Elon Musk often suggests. Strategic CSR, of course, argues for a level playing field – remove all subsidies, impose a lifecycle pricing that accounts for all costs incurred during production (in this case, a carbon tax for carbon-based fuel consumption), and allow the market to determine where to invest to optimize returns. In the meantime, we are stuck with government subsidies and, as a result, distorted market outcomes. As the author concludes:
 
"These subsidies have clearly accomplished one goal: They've accelerated innovation when the private market had little incentive to invest. Yet they may not be the most efficient way to combat carbon emissions. A carbon tax, for example, would incentivize conservation and alternative fuels regardless of oil prices."
 
In short, as summarized in a recent report by Morgan Stanley on impact investing:
 
"… the carbon emissions generated by the electricity required for electric vehicles are greater than those saved by cutting out direct vehicle emissions."
 
The article in the second url below suggests additional possible additional harm caused by electric cars -- this time in terms of e-waste:
 
"The number of electric cars in the world passed the 2m mark last year and the International Energy Agency estimates there will be 140m electric cars globally by 2030 if countries meet Paris climate agreement targets. This electric vehicle boom could leave 11m tonnes of spent lithium-ion batteries in need of recycling between now and 2030, according to Ajay Kochhar, CEO of Canadian battery recycling startup Li-Cycle."
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Electric Cars Are the Future? Not So Fast
By Greg Ip
July 13, 2017
The Wall Street Journal
Late Edition – Final
A2
 
The rise of electric cars could leave us with a big battery waste problem
By Joey Gardiner
August 10, 2017
The Guardian
 

Friday, October 27, 2017

Strategic CSR - Corporate 'Stakeholder' Responsibility

The article in the url below demonstrates vividly a core tenet of Strategic CSR and the difference between CSR in theory and practice:
 
"On the list of companies I dislike, Amazon ranks near the top, for putting bookstores out of business everywhere and destroying the ability of authors and publishers to earn a living. Having fed itself to monstrous size on such small potatoes, the company has now moved on to gut the rest of Main Street retail and cut the heart out of communities everywhere. And yet I shop at Amazon. My lame excuse is that it's now a 25-minute drive to the nearest independent bookstore, it's convenient to have a book turn up at my door, and the price looks right."
 
This basic hypocrisy is rampant because it is core to who we are as human beings (for recent examples, see: Strategic CSR – Uber and Strategic CSR – United). We are compelled to say we support something that seems like the 'right' or 'popular' thing to do, but then surreptitiously do the opposite if it benefits us. In making his point, the author quotes recent research that captures this phenomenon empirically:
 
"This inconsistency isn't just an issue for left-leaners like me. Starbucks faced a right-wing boycott early this year when it responded to President Trump's immigration ban with a pledge to hire 10,000 refugees. But new research by Brayden King at Northwestern University's Kellogg School of Management shows 'zero correlation' between public commitments to that boycott and subsequent purchasing behavior by pro-Trump consumers. That is, our failure to vote with our wallets crosses political lines. Withholding our cash from companies that cause harm or behave badly is one of the few avenues of protest we have as consumers. So why are we so bad at boycotting?"
 
In Strategic CSR, I discuss this effect of individuals professing to support a social good, but in fact seeking individual benefit, via the concept of 'corporate stakeholder responsibility' (4e, Chapter 5). That is, it is up to us, all of us as stakeholders, to hold firms to account for the behavior we truly want them to demonstrate. We are all (collectively) stakeholders who interact with firms in different guises – as consumers, employees, journalists, regulators, suppliers, distributors, and so on. It is pointless for us to deceive ourselves by saying, as this author does, that we dislike Amazon, but then renew our subscription to Prime. If we truly value what Amazon has to offer (and, clearly, we do as a society), then we either have to embrace that or, if we really want something different, then sacrifice some of the value Amazon offers and, instead, support a different company. One of the many problems with the majority of the CSR debate is that it does not account for the hypocrisy that drives much human behavior. For example, I could stand out on the corner of the street and ask everyone who passes whether they approve of sweatshops. My guess is that I would get a large majority who say they do not, but that most of those people are happy to benefit from the fast fashion industry, which is able to deliver clothes to them at ridiculously cheap prices because of the sweatshops that are an integral part of the global supply chain. But, it is not only consumers. For example, it is no good for the government to pass a law and then fail to enforce it; it is no good for the media to fail to investigate corporate wrongdoing, and so on. If we are going to make a more sustainable economy/society, we first need to acknowledge how the 'system' works in reality. Then, if we want to, we can start doing something about it. The worst situation is to misunderstand the causes of the problems we worry about. If we kid ourselves as to the causes, we have no chance of building something better.
 
Have a good weekend
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Why we don't vote with our wallets
By Richard Conniff
October 22, 2017
The New York Times
Late Edition – Final
SR4
 

Tuesday, October 24, 2017

Strategic CSR - Walmart, Amazon, Apple

One of the arguments I make in class is that "CSR," in essence, can be defined as 'corporations giving society what it wants.' If we think of a 'responsibility' as something for which we are held accountable, then this is the best colloquial definition of CSR that I can think of. The natural extrapolation of this logic, however, is that the most socially responsible company is not a firm like Patagonia, but a firm like Walmart.
 
Clearly, Patagonia is not giving America what it wants. If America did want what Patagonia is selling, then the company would not have the miniscule market share that it currently does. In contrast, I have seen numbers quoted that 90% of U.S. households shop at a Walmart store at least once a year. It is hard to think of any other company that receives that level of societal endorsement. As such, if you have a problem with Walmart then, at some level, you have a problem with American society since, clearly, Walmart is giving America what it wants. I understand that this is a simple statement that reflects a very complex reality, but I also think it captures the essence of how societies and economies work – we get the companies we deserve (they reflect our collective set of values), just like we get the politicians we deserve. You and I might agree that it would be great for Americans (and the World) if they wanted something different, but that is a secondary argument.
 
In classes more recently, when I have asked students 'What is the most socially responsible company?' and talked through the reasoning behind my answer, I have seen Amazon being suggested as a possible alternative. I like this answer, although given the way that most CSR advocates react to Walmart, it doesn't have the quite the same dramatic effect. Nevertheless, as Jeff Bezos continues to encroach upon every aspect of our lives, Amazon can lay greater claim to the title. Until now, though, I hadn't seen a convincing quote to support a challenge to Walmart's crown.
 
The article in the url below changes this. In the most recent All-America Economic survey, it was revealed that 2 out of every 3 Americans own an Apple product:
 
"The latest CNBC All-America Economic Survey reports that 64% of Americans now own at least one Apple product, and that the average U.S. household now owns an average of 2.6 Apple products. CNBC first asked the question back in 2012, when the numbers were 50% and 1.6 products. Even more impressive is the fact that there are very few demographics where Apple product ownership is below 50%."
 
Maybe Apple is now the most socially responsible company …
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/


64% of Americans now own an Apple product, up from 50% in 2012
By Ben Lovejoy
October 10, 2017
9to5Mac
 

Thursday, October 19, 2017

Strategic CSR - Airlines

The article in the url below discusses the extent to which executive compensation tied to shareholder interests distorts decision making in the airline industry. What is interesting, though, is not that this happens (it has been a feature of western capitalism for a while now), but how the degree of influence has shifted so dramatically in this particular industry in a relatively short period of time:
 
"Five years ago, American Airlines factored in on-time arrivals, lost baggage and consumer complaints to help calculate annual incentive payments for top management. Today, these bonuses are based exclusively on the company's pretax income and cost savings. … 'Fifteen years ago, airlines competed with each other over who could buy the most planes or have the most routes,' said Jamie Baker, a top airline industry analyst at JPMorgan Chase. 'Executives are just as competitive today, but it's about who can achieve an investment-grade rating first, who can be a component in the S. & P. 500, and who has better returns for investors.'"
 
The article argues that this heightened pressure results from the relatively low levels of economic growth in recent years. When growth is low, increased returns for shareholders come at the expense of the interests of other stakeholders:
 
"Mature industries — where double-digit annual profit growth is a reach in the best of times — are especially vulnerable to activist investors' demands for board seats, bigger stock repurchases and other short-term financial rewards. The pressure is especially brutal in the airline industry because the key expense, fuel, is for the most part beyond management control. Yet airline executives have largely convinced Wall Street that the bad old days of bankruptcies and fare wars are over, replaced by the kind of predictable annual profits more common among industrial companies. That's among the reasons fees have popped up in recent years for everything from checking bags to securing an assigned seat before boarding. Known on Wall Street as ancillary revenue, this stream of income is especially favored by investors because it doesn't swing sharply the way fares do."
 
What is equally interesting, however, is why the airline firms' other stakeholders allow this disproportionate transfer of capital to shareholders to continue:
 
"And so far, despite occasional bouts of air rage and frequent consumer complaints, Wall Street has been getting what it wants. United's stock has surged to more than $80 per share from $25 per share five years ago, with profit margins rising to 13.6 percent from 3.7 percent over the same period. Overall industry margins hit 16.3 percent, up from 5.2 percent in 2012."
 
The lack of resistance is placing a significant amount of pressure on the legacy carriers to follow suit or be left behind:
 
"The pressure on United, American and other giants is only going to increase with the rise of so-called ultra-low-cost carriers like Spirit, Frontier and Allegiant. In fact, American and United are rolling out a stripped-down new class called Basic Economy. Here, in exchange for the cheapest tickets, fliers can't choose their seats before checking in and are more likely to be stuck in the middle of the row. They board last and are less likely to be able to sit with companions. No carry-on luggage is permitted, forcing anyone without elite frequent-flier status to check anything larger than a backpack — for a fee."
 
Again, we have no-one to blame but ourselves for the standard of customer service we now have to endure every time we fly:
 
"'The response isn't to Wall Street. It's to customer behavior,' said Alex Dichter, a senior partner at McKinsey who works with major airlines. 'About 35 percent of customers are choosing on price, and price alone, and another 35 percent choose mostly on price.' Mr. Dichter noted that when American added two to four inches of legroom in coach in the early 2000s, 'as far as I know, the airline didn't see one bit of improvement in market share or pricing.' 'The great irony is that most C.E.O.s would love to compete on product and experience,' he added. 'It's much more fun. The problem is that customers aren't paying attention to that.'"
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Route to Air Travel Discomfort Starts on Wall Street
By Nelson D. Schwartz
May 28, 2017
The New York Times
Late Edition – Final
A1
 

Monday, October 16, 2017

Strategic CSR - Coal

For all the progress we have made in renewable energy, the article in the url below reminds us that the majority of energy produced in the world today still comes from carbon-based sources. While in some parts of the world, additional production capacity is more likely to be renewable, in other parts, fossil fuel energy is not only prevalent, it is expanding:
 
"Chinese corporations are building or planning to build more than 700 new coal plants at home and around the world, some in countries that today burn little or no coal, according to tallies compiled by Urgewald, an environmental group based in Berlin. Many of the plants are in China, but by capacity, roughly a fifth of these new coal power stations are in other countries."
 
It seems hard to believe, given our scientific awareness of the damage coal does, but coal is still the dominant energy source in many parts of the world:
 
"Overall, 1,600 coal plants are planned or under construction in 62 countries, according to Urgewald's tally, which uses data from the Global Coal Plant Tracker portal. The new plants would expand the world's coal-fired power capacity by 43 percent."
 
It is not only China, however. The article provides examples in Egypt, Pakistan, India, and other countries of how the need to develop energy capacity outweighs any professed concern about climate change:
 
"In Egypt, coal projects by Shanghai Electric and other global developers are set to bring the country's coal-fired capacity to 17,000 megawatts, from near zero, according to the Urgewald database. Pakistan's coal capacity is set to grow to 15,300 megawatts from 190. In Malawi, planned coal projects would bring its coal-fired capacity to 3,500 megawatts from zero. … The world's single largest coal-plant developer is India's National Thermal Power Corporation, which plans to build more than 38,000 megawatts of new coal capacity in India and Bangladesh."
 
And much of this expansion is being driven by western developers and investors:
 
"The AES Corporation, based in Arlington, Va., is building coal plants in India and the Philippines with a combined capacity of 1,700 megawatts. … Japan's Marubeni Corporation is involved in joint ventures for a combined 5,500 megawatts of new coal generation in Myanmar, Vietnam, Philippines and Indonesia, according to the database. Japan is also adding to its coal-fired capacity at home, to make up for an energy shortfall in the wake of the Fukushima nuclear disaster. … Western investors also continue to play a role in financing new coal plants overseas. Bonds and shares of the world's biggest coal developers, like India's National Thermal Power and Marubeni, are frequently found in the portfolios of large institutional investors and banks."
 
The consequence of all this expansion is yet another nail in the coffin of the Paris Accord:
 
"The fleet of new coal plants would make it virtually impossible to meet the goals set in the Paris climate accord, which aims to keep the increase in global temperatures from preindustrial levels below 3.6 degrees Fahrenheit."
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
As Beijing Joins Climate Fight, Chinese Companies Build Coal Plants
By Hiroko Tabuchi
July 2, 2017
The New York Times
Late Edition – Final
10
 

Thursday, October 12, 2017

Strategic CSR - Robots

Following-up on an earlier Newsletter arguing that a dramatically higher minimum wage should be re-labeled "the Robot Employment Act" (Strategic CSR – Minimum wage), the article in the url below suggests that, rather than killing jobs, "robots aren't killing our jobs fast enough":
 
"From Silicon Valley to Davos, pundits have been warning that millions of individuals will be thrown out of work by the rapid advance of automation and artificial intelligence. As economic forecasts go, this idea of a robot apocalypse is certainly chilling. It's also baffling and misguided."
 
The problem, the author argues, is that too many industries are resisting the advance of atomization, which ultimately reduces overall value creation:
 
"Too many sectors, such as health care or personal services, are so resistant to automation that they are holding back the entire country's standard of living."
 
The author also argues that, if robots were increasingly replacing employees, we would expect job creation to be declining (it is increasing) and productivity to be increasing (it is decreasing):
 
"Monthly job creation has averaged 185,000 this year, more than double what the U.S. can sustain given its demographics. This has driven unemployment down to 4.4%, a 10-year low and below most estimates of 'full employment.' Growing labor shortages have boosted the typical worker's annual wage gain to more than 3% now from 2% in 2012, according to the Federal Reserve Back of Atlanta."
 
In short, the author explains these trends arise due to the shift in overall economic activity from manufacturing jobs (which are more easily automated) to services (less easily automated). In addition, whether overall productivity rises depends as much on which jobs in which sectors are being created/destroyed:
 
"Since 2007, low productivity sectors such as education, health care, social assistance, leisure and hospitality have added nearly seven million jobs. Meantime, information and finance, where value added per worker is five to 10 times higher, have cut or barely added jobs."
 
The author concludes that the solution is to push robots into more and more industries, if for no other reason than containing overall inflation levels.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Robots Aren't Killing Our Jobs Fast Enough
By Greg Ip
May 11, 2017
The Wall Street Journal
Late Edition – Final
A2
or
 

Tuesday, October 10, 2017

Strategic CSR - Fake news

I am in the process of thinking through a new case for the next edition of Strategic CSR – something around the role of the media in the 21st century and the growing prevalence of fake news. I have always been interested in the role of the media in society, both reflecting the news and (in their selection of which events to report) also creating the news. More recently, I have been interested in how Facebook and Twitter have emerged as new age media companies. Their role in shaping the outcome of the last presidential election here in the U.S., as well as the massive impact they have had on human relations, social etiquette, student attention spans (!!!), and driving the news in traditional media outlets, is fascinating/frightening to watch.
 
With these evolving thoughts in mind, and in the aftermath of the devastation in Las Vegas, I noticed the article in the url below that explains how fringe groups are able to use social media to take advantage of crises to advance their agendas:
 
"When they woke up and glanced at their phones on Monday morning, Americans may have been shocked to learn that the man behind the mass shooting in Las Vegas late on Sunday was an anti-Trump liberal who liked Rachel Maddow and MoveOn.org, that the F.B.I. had already linked him to the Islamic State, and that mainstream news organizations were suppressing that he had recently converted to Islam. They were shocking, gruesome revelations. They were also entirely false — and widely spread by Google and Facebook."
 
The article reports that searches related to the shooting, in particular the name of the shooter, were generating results with false stories near the top of the list:
 
"In Google's case, trolls from 4Chan, a notoriously toxic online message board with a vocal far-right contingent, had spent the night scheming about how to pin the shooting on liberals. One of their discussion threads, in which they wrongly identified the gunman, was picked up by Google's 'top stories' module, and spent hours at the top of the site's search results for that man's name."
 
Facebook was also tricked into promoting false stories about the shooting:
 
"In Facebook's case, an official 'safety check' page for the Las Vegas shooting prominently displayed a post from a site called 'Alt-Right News.' The post incorrectly identified the shooter and described him as a Trump-hating liberal. In addition, some users saw a story on a 'trending topic' page on Facebook for the shooting that was published by Sputnik, a news agency controlled by the Russian government. The story's headline claimed, incorrectly, that the F.B.I. had linked the shooter with the 'Daesh terror group.'"
 
In both cases, the companies blamed "algorithm errors" for these mistakes. This demonstrates, of course, the extent to which algorithms now intrude into our lives, making them more convenient, but also producing unintended consequences. It also emphasizes the speed at which these groups work to take advantage of specific events, which suggests these companies are not in control of their product as much as they would like us to believe. What is more, the article argues that this is not a recent phenomenon, but something that has plagued these services for many years:
 
"But this was no one-off incident. Over the past few years, extremists, conspiracy theorists and government-backed propagandists have made a habit of swarming major news events, using search-optimized 'keyword bombs' and algorithm-friendly headlines. These organizations are skilled at reverse-engineering the ways that tech platforms parse information, and they benefit from a vast real-time amplification network that includes 4Chan and Reddit as well as Facebook, Twitter and Google. Even when these campaigns are thwarted, they often last hours or days — long enough to spread misleading information to millions of people."
 
All of this (together with the on-going Russia-related Congressional investigations) raises two important questions – one for these companies and one for the broader CSR debate. First, what kind of companies are these? If they are merely tools that others use to communicate with each other (a media platform), then they can claim that the content they convey on their sites are not their business. All they are doing is enabling communication that would take place anyway. If, however, they are media companies that are slowly taking on more of the functions of regular media companies (a media publisher), then that suddenly alters their level of responsibility for the content – something they were happy to edit when it helped produce a better product, but now something they may have to do more systematically:
 
"Facebook, for instance, previously had a team of trained news editors who chose which stories appeared in its trending topics section, a huge driver of traffic to news stories. But it disbanded the group and instituted an automated process last year, after reports surfaced that the editors were suppressing conservative news sites. The change seems to have made the problem worse — earlier this year, Facebook redesigned the trending topics section again, after complaints that hoaxes and fake news stories were showing up in users' feeds."
 
Second, an essential element of CSR is transparency and accountability, which is enabled by our ability to communicate clearly. The more free-flowing information is, the faster stories about sweatshops in SE Asia or oil spills in Nigeria can reach the stakeholders of large companies in ways that influence behavior. And it is the threat of this happening that can encourage companies to build long-lasting, trust-based stakeholder relationships. For all of this to hold true, however, it is essential that the information that is circulated is both accurate and reliable. This is where the attention turns back to Facebook, Twitter, and Google (among others). Clearly, they get this and are responding. Of course, more socially responsible companies would have done more to prevent this situation from running out of control (with such dire consequences) in the first place. The broader implications for the firms of not acting earlier are evident in the article in the second url below, which describes a discussion within the UK government as to whether Facebook and Google should be regulated as media publishers:
 
"Britain is looking at the role of Google and Facebook in the provision of news and what their wider responsibilities and legal status should be, a spokesman for Prime Minister Theresa May said on Tuesday. As more people get their news through Google and Facebook, some in the industry say the internet giants are publishers and not just platforms, meaning they should be held responsible for the content and regulated like traditional news providers."
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Capitalizing on a Mass Killing to Spread Fake News Online
By Kevin Roose
October 3, 2017
The New York Times
Late Edition – Final
A19
 
Britain looking at Google, Facebook role in news: PM May's spokesman
October 10, 2017
Reuters