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


Friday, September 29, 2017

Strategic CSR - Paris

This quote from the article in the url below needs little explanation or accompanying commentary:
 
“There is only a 5% chance that the Earth will avoid warming by at least 2°C come the end of the century, according to new research that paints a sobering picture of the international effort to stem dangerous climate change. … The Paris accord, signed by 195 countries, commits to holding the average global temperature to ‘well below 2°C’ above pre-industrial levels and sets a more aspirational goal to limit warming to 1.5°C. This latter target is barely plausible, the new research finds, with just a 1% chance that temperatures will rise by less than 1.5°C.”
 
So, what is the new prognosis?
 
“According to the [research], there is a 90% likelihood that temperatures will rise between 2°C and 4.9°C by 2100. This would put the world in the mid-range warming scenarios mapped out by the UN’s Intergovernmental Panel on Climate Change. It negates the most optimistic outcome as well as the worst case, which would see temperatures climb nearly 6°C beyond the pre-industrial era.”
 
For a more complex (and alternative and, therefore, controversial) take on the speed at which climate change is occurring, see the article in the second url below:
 
“It may be possible for the world to emit significantly more carbon dioxide in the next few decades than was previously thought, and still keep global warming ‘well below’ a 2°C rise above pre-industrial levels, which is what the [Paris] agreement requires.”
 
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/
 
 
Planet has just 5% chance of reaching Paris climate goal, study says
By Oliver Milman
July 31, 2017
The Guardian
 
Breathing space
September 23, 2017
The Economist
Late Edition – Final
71
 

Tuesday, September 26, 2017

Strategic CSR - Apple

The article in the url below uses the economist, Thorstein Veblen's concept of "conspicuous consumption" to discuss the release of the latest iPhone. Contrary to most goods (which decline in price over time, even while improving in quality), those goods that are seen by consumers as status symbols (so-called "Veblen goods") will tend to rise in price:
 
"Now, Apple and Samsung are testing whether the social commentator's theory on what has come to be known as the 'Veblen good' can work for one of the most common of all consumer products: the phone."
 
The article continues that, according to economic theory, this kind of price competition is more likely to happen in a mature industry. Whether the smartphone industry is mature is up for debate. Either way, the speed of the rise in price is notable when compared to previous models:
 
"The starting price of the new flagship iPhone X is about 50% more than the $650 starting price of last year's iPhone 7. The most expensive version of the iPhone X, with 256 gigabytes of storage, will cost 19% more than last year's most expensive device, the iPhone 7 Plus, with the same memory."
 
What I found interesting about the article, though, was the numbers it uses to convey the suspicion of saturation in this market:
 
"Data from IHS Markit estimates there are just under 100 smartphones per 100 people in the U.S. and about 92 smartphones per 100 people in Europe. (Many people own more than one phone.) By 2020,there will be about 84 smartphones per 100 people globally, IHS projects."
 
I think this trend has many implications for the CSR debate. For one, all the drivers of greater transparency in life today (for good and bad) will continue, if not strengthen as smartphone ownership embeds itself even more firmly around the world. The speed (and volume) at which we communicate will only increase, helping to further flood our mental inboxes with information we (for the most part) do not need. Expect to see a corresponding drop in attention spans. Most important for companies, however, they will continue to be forced to react at lightning speed to complex issues that often require greater reflection. While this matters directly in terms of product-related issues that arise, it will also include national (or global) debates that suddenly become a universal dialogue, and which CEOs have traditionally sought to avoid. The speed at which the narrative around this past weekend's NFL games evolved here in the U.S. was truly amazing to watch. I have no idea where this is taking us, but it means the need for effective stakeholder relations and responsiveness will move ever-closer to the heart of the modern corporation.
 
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/
 
 
New iPhone Tests Economic Theory
By Josh Zumbrun and Tripp Mickle
September 18, 2017
The Wall Street Journal
Late Edition – Final
A2
 
Apologies: The NYT article in Monday's post contained an incorrect url. The correct url is: https://www.nytimes.com/2017/09/21/technology/facebook-frankenstein-sandberg-ads.html
 

Sunday, September 24, 2017

Strategic CSR - Twitter

The article in the url below demonstrates the scale of the challenges facing Twitter (and Facebook and YouTube) in trying to balance their natural inclination toward free speech with the regulatory pressure to promote social justice:
 
"In the first half of [2017], Twitter said it suspended nearly 300,000 accounts globally linked to terrorism. Of those, roughly 95 percent were identified by the company's spam-fighting automation tools."
 
"[Twitter] provided authorities with data on roughly 3,900 accounts from January to June."
 
"Twitter said about 75 percent of the blocked accounts this year were spotted before a single tweet was sent, and that 935,897 accounts had been suspended since August 2015."
 
"American authorities made 2,111 requests from Twitter from January to June, the most of the 83 countries tracked by the company. Twitter supplied information on users in 77 percent of the inquiries."
 
"Japan made 1,384 requests and the U.K. issued 606 requests. Turkish authorities continued a trend of aggressively policing Twitter, making 554 requests for account data and issuing court orders to remove 715 pieces of content."
 
"Other governments made only 38 total content-removal requests."
 
The article in the second url below reveals the true extent of the problem when you scale-up from Twitter to Facebook, and how ill-equipped these tech companies are to deal with it:
 
"Facebook was simply not built to handle problems of this magnitude. It's a technology company, not an intelligence agency or an international diplomatic corps. Its engineers are in the business of building apps and selling advertising, not determining what constitutes hate speech in Myanmar. And with two billion users, including 1.3 billion who use it every day, moving ever greater amounts of their social and political activity onto Facebook, it's possible that the company is simply too big to understand all of the harmful ways people might use its products."
 
To quantify this problem at Facebook's scale:
 
"Alex Stamos, Facebook's security chief, said last month that the company shut down more than a million user accounts every day for violating Facebook's community standards. Even if only 1 percent of Facebook's daily active users misbehaved, it would still mean 13 million rule breakers, about the number of people in Pennsylvania."
 
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/
 
 
Twitter Suspends 300,000 Accounts Tied to Terrorism in 2017
By Adam Satariano
September 19, 2017
Bloomberg Businessweek
 
Facebook's Frankenstein Moment
By Kevin Roose
September 22, 2017
The New York Times
Late Edition – Final

Wednesday, September 20, 2017

Strategic CSR - Kenya

If you think the charge you pay for a plastic bag at your local supermarket is punitive, be grateful that you don't live in Kenya:
 
"Kenya will now punish with up to four years in jail anyone making, selling or importing plastic bags, putting in place one of the world's toughest bans on the ubiquitous item that is blamed for clogging oceans and killing marine life."
 
As the article in the url below reports, the drive to ban plastic bags is spreading worldwide, and some countries are serious about it:
 
"Kenya joins more than 40 other countries including China, the Netherlands and France that have introduced taxes on bags or limited or prohibited their use."
 
The range of ways designed to curtail use is wide, but effective:
 
"In Rwanda, plastic bags are illegal, and visitors are searched at the airport. Britain introduced a 5 pence charge at stores in 2015, leading to a plunge of more than 80 percent in the use of plastic bags."
 
In Kenya, the change in behavior targeted is massive, and prior attempts to curtail use in 2007 and 2011 failed, which is why the punishments are now so extreme:
 
"Kenyan shoppers are thought to use 100 million plastic bags a year, according to the United Nations, and the new rules created some worries in the capital, Nairobi, when they were announced. … The new regulations call for a fine of $19,000 to $38,000 or a four-year jail term for those manufacturing or importing plastic bags in Kenya. Plastics used in primary industrial packaging are exempt, according to the National Environment Management Authority, although it said that the new regulation would prohibit retailers from selling garbage bags."
 
Although ridding the world of plastic bags is going to be difficult (and there is a valid debate as to whether they are better or worse than paper or recycled bags), the problem is very real:
 
"Worldwide, plastic bags contribute to eight million tons of plastic that leak into the ocean every year, according to the United Nations Environment Program. 'At current rates, by 2050, there will be more plastic in the oceans than fish, wreaking havoc on marine fisheries, wildlife and tourism,' the program said in a statement when Kenya's ban was announced in March. Plastic bags can take hundreds of years to degrade, and polyethylene bags can strangle sea turtles and fill the stomachs of whales and dolphins until they die of starvation. In Kenya, livestock often graze on garbage, and bags are found in the stomachs of cows when they are slaughtered, according to the United Nations Environment Program."
 
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/
 
 
Kenya to Enforce its Ban on Selling Plastic Bags with Steep Fines and Jail Time
By Kimiko de Freytas-Tamura
August 29, 2017
The New York Times
Late Edition – Final
A4
 

Monday, September 18, 2017

Strategic CSR - Charity

In the aftermath of the devastation caused by Hurricane Harvey in Texas, local companies have been pledging donations to help with the rebuilding effort:
 
"Chevron, an energy giant with several offices in the Houston area, pledged $1 million to post-Harvey disaster relief efforts. So did Exxon Mobil and Dow Chemical, two companies with facilities hit by the storm. Companies in less regional industries also donated: Amazon offered to match $1 million in donations to the American Red Cross, while Verizon promised $10 million. Walmart, which took a front-line role in the clean-up after Hurricane Katrina, sent truckloads of emergency supplies to the affected area. In all, corporations have pledged more than $65 million to help clean up the wreckage from Harvey, according to a Wednesday morning estimate by the U.S. Chamber of Commerce."
 
This is necessary because early estimates suggest that the cleanup bill will be substantial:
 
"Hurricane Harvey may be one of the costliest natural disasters in American history, according to initial forecasts. Moody's Analytics has estimated that the storm's damage may be as much as $50 billion, though it is hard to know at such an early stage."
 
In explaining these donations (and demanding more), the article in the url below argues that local corporations have a duty to donate funds to the clean-up effort because they, themselves, had received large amounts of funds (e.g., tax relief, startup funds, etc.) previously. In other words, the article suggests these companies have an obligation to "repay" any benefits they received to conduct business in the area:
 
"As Houston recovers, its business community should feel especially compelled to help. That is partly because Houston and the surrounding area, as well as the state of Texas, have been generous to big business in recent years, showering companies with tax breaks, subsidies and other perks in an effort to keep them happy and create new jobs. Houston has benefited from the presence of large corporations, adding thousands of jobs and becoming one of the fastest-growing cities in America. But those companies have benefited, too — sometimes to the tune of hundreds of millions of dollars."
 
This is an unhelpful representation of the idea of "corporate citizenship." Although the money being donated by the companies can be described as charity, it is not correct to use the same term to describe the money those same companies received. They were not altruistic handouts, but incentives that were offered because those companies were in demand. The battle to secure a second Amazon HQ currently underway here in the U.S. will further demonstrate the lengths local governments are willing to go to attract big businesses:
 
"The donations announced for Harvey relief are generous by the standards of corporate philanthropy. Some of the donations are smaller, though, than the amounts many companies have gotten from the region's generous economic development programs."
 
I believe that companies absolutely should donate funds to help with the cleanup, but not for the reason stated in the article. It has nothing to do with 'paying back' the benefits they received in the past. Presumably, the companies have already delivered on whatever the quid-pro-quo was for them to receive those payments in the first place. Instead, corporations should donate because they have a stake in rebuilding the communities directly affected by the hurricane. They want those communities to recover as fast as possible because it will help them return to business as fast as possible. In other words, the reason for them to donate is a forward-looking argument (we have a direct stake in the future of these communities), rather than a backward-looking argument (we owe something from the past to those communities). The difference is the difference between a mainstream argument for CSR and the argument underpinning strategic CSR.
 
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/


Will Big Business Repay Houston's Generosity
By Kevin Roose
August 31, 2017
The New York Times
Late Edition – Final
B1
 

Wednesday, September 13, 2017

Strategic CSR - United (follow-up)

As a follow-up to the Newsletter I sent last semester about United's treatment of its passengers (Strategic CSR – United), the article in the first url below reinforces the idea that all the airline is doing is providing the level of service for which we are willing to pay:
 
"On Tuesday, the carrier released its first financial statement that included the period after security officers forcibly removed a 69-year-old passenger, Dr. David Dao, from a plane. The incident left him bloodied and disheveled and left United facing widespread calls for a boycott. Nearly three months later, it appears that all the public anger has not hurt the company's bottom line."
 
In case you needed reminding, the online version of the article has the video of the forced removal embedded in the story. Not only did the video (and subsequent #boycottUnited campaign) fail to hurt the airline, however, it thrived in its aftermath:
 
"United reported a profit of $818 million in the most recent quarter, ending in June, up 39 percent compared with last year. Sales rose, too, as more customers booked flights with the carrier, amid rising demand for air service over all. In a separate report this month, United said that it had more than 71 million passengers during the first half of the year, up 4.2 percent compared with last year."
 
While I understand that there are complex issues involving the failure of anti-trust law to provide a competitive industry for domestic U.S. flights and that the price of airline fuel drives profits to some degree, the stunning results (39% growth, year-over-year) suggest we are also gluttons for punishment:
 
"The results point to an underlying principle about the airline business: Passengers, by and large, look for the most convenient and cheapest fares, not which airlines claim to offer the best service."
 
Or, as a longer discussion about seat space in the article in the second url below puts it:
 
"Faced with a choice between discomfort and higher fares, most travelers choose discomfort."

Given such results, what is the United CEO to takeaway from the experience? Should he risk his airline by providing a higher quality product and charging accordingly, or should he give passengers what they say they do not want, but what seems to be the only thing for which they are willing to pay?
 
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/
 
 
United Airlines Profit Rises Despite Boycott Threats Over Passenger Treatment
By Micah Maidenberg
July 18, 2017
The New York Times
By Justin Bachman
August 17, 2017
Bloomberg Businessweek
 

Monday, September 11, 2017

Strategic CSR - PayPal

It is difficult to understand how companies get away with presenting fictitious earnings that result from their preferred accounting measures (which, as far as I can see, are basically whatever the firm wants its numbers to be). Needless to say, the resulting earnings differ significantly from those that would be produced using GAAP principles. While firms also have to report those GAAP numbers, they are allowed to bury them and highlight their non-GAAP numbers, instead. As the article in the url below notes, this happened recently with PayPal's second-quarter financial results, which were published at the end of July:
 
"Revenues grew to $3.14 billion in the quarter that ended in June, an increase of 18 percent over the same period last year. Total payment volume of $106 billion was up 23 percent, year over year. Even better, PayPal's favored earnings-per-share measure — which it does not calculate in accordance with generally accepted accounting principles, or GAAP — came in at 46 cents per share, 3 cents more than Wall Street analysts had expected. The company has trained investors to focus on this number, rather than on the less pretty GAAP-compliant numbers most companies are judged by."
 
The main concern of the article is the amount of compensation paid as stock options, which (for some hard-to-explain reason) PayPal excludes as a cost:
 
"How could stock-based compensation — which is a company expense, after all — have helped PayPal's performance in the quarter? Simple. The company does not consider stock awards a cost when calculating its favored earnings measure. So when PayPal doles out more stock compensation than it has done historically, all else being equal, its chosen non-GAAP income growth looks better."
 
How much better, exactly?
 
"Under generally accepted accounting principles, PayPal reported operating income of $430 million in the second quarter of 2017. That was up almost 16 percent from the $371 million it produced in the same period last year. But under PayPal's alternative accounting, its non-GAAP operating income was $659 million in the June quarter, an increase of almost 25 percent from 2016. So what's to account for the added $230 million in operating income under PayPal's preferred calculation? Most of it — $192 million — was stock-based compensation PayPal dispensed to employees in the June quarter and added back to its results as calculated under GAAP."
 
How is it that investors are quite happy to accept this? It clearly presents a distorted view of the firm's performance. Perhaps it is just that people see what they want to see and some firms are favored by investors, for whatever reason:
 
"PayPal's stock has been on a tear this year, up almost 50 percent since January. At a recent $59, its shares are trading at over 40 times next year's earnings estimates. It is clearly an investor darling, providing all the more reason to dig into its numbers."
 
You might not be surprised to know that there are other stakeholders in PayPal who also stand to benefit from the practice:
 
"The company says it has three main metrics for calculating its managers' performance pay each year. One of those measures, its proxy shows, is non-GAAP net income. So, as PayPal awards more and more stock to its executives and employees, non-GAAP net income shows better growth. And the greater that growth, the more incentive pay the company awards to its top executives."
 
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/


Making PayPal's Numbers Shine
By Gretchen Morgenson
August 6, 2017
The New York Times
Late Edition – Final
BU1
 

Wednesday, September 6, 2017

Strategic CSR - Whole Foods

The article in the url below about Whole Foods' recent struggles is half right. It is correct in noting that Whole Foods is struggling, but incorrect in the underlying reasons for its difficulties:
 
"It's hard to think of a better poster child for 'conscious capitalism' than Whole Foods Market, the high-end grocery store that made a name for itself selling organic produce in feel-good, mood-lit stores. These days, the chain is floundering and a potential buyout is on the horizon. What does that say about the conscious capitalism it championed? … Whole Foods was supposed to be different. John Mackey, the company's chief executive, has long argued that Whole Foods is wired differently — that it runs on a 'conscious capitalism' model that outsmarts the competitive pressures of our for-profit system through creativity and innovation. … The Whole Foods founder penned his treatise in response to the growing consensus that capitalism is doing irreparable harm to the planet and the people who live on it. Our for-profit system is increasingly viewed as a zero-sum game in which ecological destruction, climate change and rising inequality are firmly linked to the rapacious behavior of multinational corporations. Mackey agrees that humans are harming the planet, but he doesn't think the problem lies in capitalism. Free-market capitalism, according to Mackey, is actually a 'beautiful,' 'heroic' system that, properly harnessed, can operate 'in harmony with the fundamentals of human nature' and the planet."
 
All of this is true. Fundamentally, however, the article misses the point about the root causes of Whole Foods' struggles. Yes, there are business decisions that the firm could have made that would have better protected it from competition. But, conscious capitalism is not the reason for the firm's decline. In essence, Whole Foods' sales are declining due to a lack of stakeholder support, particularly customers, who have been persuaded that products on offer at Walmart and Kroger (for example) are essentially the same as those offered at Whole Foods. As such, they see no reason to pay the higher prices that Whole Foods generally charges.
 
In reality, however, these customers are failing to distinguish between the low cost model pursued by most supermarkets and the differentiated model pursued by Whole Foods (something that might be threatened under Amazon's control). With food, as with many products, you get what you pay for and there is a price premium associated with quality. To draw an analogy, people are confusing a Toyota Corolla with a BMW 7 series because both cars are capable of getting you from A to B. Just because this is true, however, does not mean the two cars are comparable or even close to being the same product.
 
With all business models, stakeholder engagement represents either an endorsement or a rejection of what is on offer. Irrespective of what might be in our best interests, our perceived best interests take precedent. And, if customers no longer perceive Whole Foods to be a better value proposition, or they perceive a different company to be offering the same value at a lower price point, they will go elsewhere.
 
Whole Foods is essentially a premium product that, by definition, has a ceiling to its potential growth. Not everyone can afford or wants to shop at Whole Foods, just like not everyone can afford or wants to drive a BMW 7-series. The key, however, is to understand the underlying economic drivers – not be confused that products that are fundamentally different are really the same thing:
 
"Attractive as the conscious capitalism model may be, we simply can't rely on companies to deliver dignified workplaces, equitable models of food production or a better relationship between consumers and the planet. All stakeholders are not equal in our global economy, and even the best intentioned businesses run up against the implacable foes of profit and competition. Ultimately, the thorny problem of sustaining both decent livelihoods and a livable planet won't be solved by buying better things. It'll be solved through political struggle and demands that put people before profit."
 
Incorrect. Firms provide stakeholders with what they want and are willing to reward. Once we understand that good quality food is more expensive than poor quality food and are willing to pay for that product, then Whole Foods will have the success it deserves (and also be able to help improve the health of the general public and also the planet). We are not at that point at present.
 
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/
 
 
Whole Foods represents the failure of 'conscious capitalism'
By Nicole Aschoff
May 29, 2017
The Guardian
 

Monday, September 4, 2017

Strategic CSR - Paris

In light of the current U.S. administration's announcement that it intends to reject the Paris Accord, the article in the url below details the timeline over which such a decision could be implemented:
 
  • November, 2017: "Negotiators for 195 nations will meet in Bonn, Germany, to discuss how to carry out the Paris agreement."
  • November, 2018: "Everyone agrees that current pledges under the Paris agreement are nowhere near sufficient to keep total global warming well below 2 degrees Celsius, the threshold widely deemed unacceptably risky. So, starting in 2018, countries have agreed to meet every five years to take stock of their emissions-cutting efforts to date, compare them with what is needed to stay below 2 degrees of warming, and then figure out how to ratchet up their ambitions."
  • November 4, 2019: "This is the earliest date that the United States can submit a written notice to the United Nations that it is withdrawing from the Paris deal — exactly three years after it came into force."
  • November 4, 2020: "This is the earliest that the United States could officially withdraw from the climate accord. By coincidence, it would happen one day after the next presidential election."
  • January, 2021: "If a new president enters the White House on Jan. 20, 2021, he or she could easily submit a written notice to the United Nations that the United States would like to rejoin the Paris accord. Within 30 days, the United States could re-enter the agreement and submit a new pledge for how the country plans to tackle climate change."
  • November, 2023: "Negotiators will meet again in 2023 to see how their second round of pledges and actions stack up against the 2-degree goal."
  • 2025: "The Obama administration vowed to cut greenhouse gas emissions 26 to 28 percent below 2005 levels by 2025 as part of the Paris deal."
 
Clearly, whatever has been announced is not yet official; it is also far from irreversible. While the concern is largely over the symbolic effects of the announcement (in terms of both domestic policy and policy in other countries), the timeline indicates the vast gap between political speeches and the hard work of day-to-day diplomacy and international public policy
 
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/
 
 
U.S. Won't Actually Be Leaving the Paris Climate Deal Anytime Soon
By Brad Plumer
June 8, 2017
The New York Times
Late Edition – Final
A22