Strategic CSR - Paper

As the article in the url below notes, it appears that one upside to the COVID-19 lockdown is the revival of the recycling market, at least for paper and cardboard:

"Junk mail and discarded delivery boxes have turned into a hot commodity as the paper industry uses them as a substitute for recycled office paper, which became scarce as people work from home."

This is a marked improvement on most of the articles I have read about recycling over the past couple of years – ever since China stopped being willing to take our waste (see Strategic CSR – Recycling). Now, instead of worrying where to ship our recycling and avoid throwing it in the landfill (e.g., Strategic CSR – Recycling):

"U.S. paper and cardboard mills are figuring out how to turn that trash into new toilet paper, coffee cups, paper towels and cardboard boxes. And they have more material to work with as people order more food and packages to their homes during the coronavirus."

It seems that the underlying reason is there is now an increased supply of waste paper caused by our sudden increase in online shopping. But, it is not simply a case of greater volume, but more that the increased volume has affected the ratio of clean to dirty waste that is ending up in the paper recycling bin:

"Many U.S. mills long avoided paper from curbside recycling programs. The low quality of paper mixed with glass, cans and household trash made it difficult to turn into new paper and cardboard. … But better screening for contaminants and the rising share of e-commerce delivery boxes in recycling bins have made that mixed paper more attractive, operators say."

It seems that the increased percentage of Amazon boxes is more than making-up for the lack of paper we are recycling at the office while "most office workers stay home." And, as we might expect, if there are sufficient market indicators as encouragement, for-profit firms are responding with investment, which should produce greater efficiencies and even more reasons to increase the amount of waste that is recycled:

"Georgia Pacific, whose consumer brands include Dixie cups, Brawny paper towels and Quilted Northern toilet paper, invested about $45 million at mills in Green Bay, Wis., and Muskogee, Okla., in recent years to produce pulp that contains more paper recovered from recycling programs, including coffee cups. Fine screens were added to pulping equipment at the plants to filter out the polyethylene plastic films inside coffee cups that prevent them from leaking but also make them harder to turn into pulp."

In short, the market is working as it should. Firms will do what we ask (i.e., incentivize) them to do:

"The overall collection volume from U.S. residential recycling programs is up at least 7% from last year at this time, thanks in part to the mountain of delivery boxes piling up on doorsteps, according to the Solid Waste Association of North America. 'We're more than happy to see it. We've said this is valuable material,' said Brent Bell, vice president of recycling for Houston-based Waste Management Inc., the nation's largest trash collector."

Happy Thanksgiving everyone!

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Delivery Boxes Bring New Life to Recycling

By Bob Tita

November 18, 2020

The Wall Street Journal

Late Edition – Final

B1, B5

https://www.wsj.com/articles/all-those-used-delivery-boxes-are-a-hot-commodity-11605609001

Strategic CSR - Free speech (II)

One of last week's newsletters focused on the issue of free speech (Strategic CSR – Free speech). The article in the url below expands on this argument, demonstrating some of the challenges (and collateral damage) of entrusting for-profit firms with the task of defining the parameters of acceptable content that is allowed to be disseminated via their platforms:

"What do a small business that sell socks packaged by homeless youth and a start-up that makes bracelets from life vests once worn by refugees have to do with the spread of misinformation during the presidential election season? Nothing, thought the entrepreneurs who started them, until Facebook notified them that their ads had been pulled because they fell into a category of 'social issues, elections or politics' that were being blocked by the site."

The challenges of separating right from wrong are particularly stark when the effort to define them is systematic – in other words when it is algorithmic, which necessarily generalizes about topics that, in reality, are extremely nuanced:

"The social media giant announced last week that it was extending a ban imposed on certain ads during the election to prevent the dissemination of false information. The prohibition has ensnared a number of socially driven businesses with no direct connection to partisan politics. Companies connected to issues like hunger, the environment and immigration, many of which rely heavily on social media to draw customers to their websites, have seen their access abruptly cut off."

The trouble is that, in writing algorithms (as in using data to predict any outcome), the prediction is only as good as the data available. In other words, the resulting algorithm can only account for what has happened before when predicting what might happen in the future. This conservative approach necessarily entails generalizations that lead to unintended consequences:

"In the run-up to the 2016 election, deceptive and distorted information spread by Russian automated accounts and others on social media platforms like Facebook, Instagram and YouTube was designed to influence voters. Some of the accounts generated posts about social issues, such as civil and women's rights, that proved divisive."

While the lost ad revenues are merely a drop in the ocean for Facebook, the ability to advertise in the run-up to the holiday season is life and death for many small businesses:

"Advertising on Facebook is a lifeline for Epimonia, a Minneapolis-based company that makes and sells bracelets and other items made from the discarded life jackets worn by refugees fleeing on flimsy boats to Europe. The company spends several thousand dollars a year to advertise on Facebook, which targets users who have a favorable view of refugees based on the interests listed on their profiles. … 'Not being able to run ads before the holidays could put us out of business,' said [founder and CEO, Mohamed] Malim, who employs a handful of refugees to make bracelets, beanies and T-shirts."

The lasting impression is that this is a fascinating topic that is incredibly difficult to navigate – whether for CEOs trying to run a company or social media platforms trying to determine what content should be allowed on their platforms. This difficulty is magnified when the affected stakeholders really care about a particular issue and are willing to pushback if their concerns are not acknowledged or accommodated. But, I think these cases (where stakeholders care deeply) also fall into the 'exception' category I tried to demarcate in my post last week. The trouble is that everything cannot be an exception or else no work ever gets done. But, whenever a bright line is drawn, unintended consequences mean there are inevitably innocent victims caught up in the blunt solution that has been imposed on such a complicated issue. In short, the key questions are 'Where should we draw the line?' and 'Who gets to draw it?' So far, it is not at all clear that, when considering society as a whole, the best answer to either question is for-profit firms.

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Why Did Facebook Mute Philanthropic Businesses?

By Miriam Jordan

November 18, 2020

The New York Times

Late Edition – Final

A14

https://www.nytimes.com/2020/11/17/us/Facebook-political-ads-mission-businesses.html

Strategic CSR - Food stamps

The article in the url below details yet another example of how Amazon is able to adapt to and take advantage of our growing desire to shop online:

"Ian Babcock used to take the bus from his home in northern Michigan to get groceries, a trip that was inconvenient before the pandemic made it dangerous. For the last several months, he's been using his food-stamp benefits to get groceries delivered by Amazon."

Demonstrating great flexibility, it seems that the government agency in charge of administering food stamps in the U.S. (the Department of Agriculture) was responsible for allowing them to be used for online shopping, an option that is now available "for shoppers in 46 states and the District of Columbia." It has clearly been beneficial for many in navigating the pandemic and associated lockdowns this year:

"Babcock is among one million-plus U.S. households now using government benefits each month to buy groceries online. Their numbers spiked 50-fold this year after the spread of Covid-19 prompted the U.S. Department of Agriculture to make it easier for food-stamp recipients to shop on the web."

Perhaps predictably, the greatest beneficiaries of this move (beyond the customers themselves) is those companies large enough to deal with the bureaucracy of the U.S. government:

"While the USDA declined to provide an industry breakdown of such purchases, the main beneficiaries are Amazon.com Inc. and Walmart Inc. -- the only retailers in most states to take part in the agency's online shopping pilot."

And why would Amazon and Walmart bother with this? Of course because it increases their market share, but also because there is a lot of money to be made in serving the needs of those who have been hit the hardest by the pandemic and subsequent recession:

"For Seattle-based Amazon, the USDA program is an opportunity to get a chunk of the $55 billion that food-stamp recipients spent last year, purchasing that surged 20% in the first four months of 2020. It also lets the company court a cohort that has traditionally patronized Walmart or other discount grocers. Amazon is nearing saturation with higher-income U.S. households and has few other sources of new, potentially loyal customers in its most important market."

The spread of the U.S. government's Supplemental Nutrition Assistance Program (SNAP) program, and the obvious value it is creating for those in need, is apparent in the graph that accompanies the article:

 

As with Walmart, and any other large retailer that dominates its market, Amazon is succeeding because it is delivering what people want and, in cases such as this, cannot get elsewhere:

"When Michigan joined the program in May, Babcock, who suffers chronic health problems and has a suppressed immune system, started using his benefits to buy groceries on Amazon. The 55-year-old former financial planner, computer programmer and self-described veteran of Detroit's hardcore punk scene, also has a discounted Prime membership available to holders of Electronic Benefits Transfer (EBT) cards. Referring to Amazon Chief Executive Officer Jeff Bezos, he said 'the guy is making money hand over fist, but he's providing a service I can't get elsewhere.'"

What started out as a pilot program by the USDA looks set to become even more popular as the virus rages on. It is difficult to imagine people shedding the convenience once life returns to something resembling normal:

"Ruth Ilano, a comic artist in Massachusetts with multiple sclerosis, was making a quick trip to the store in May when she collapsed. She hasn't gone inside a supermarket since and is using SNAP benefits to help pay for groceries online. 'Online delivery was previously a nice touch,' she said. 'But now it's absolutely essential to my life.'"

Have a good weekend

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Amazon Lures Food-stamp Shoppers as Online Buying Surges 50-fold

By Matt Day

November 11, 2020

Bloomberg Businessweek

https://www.bloomberg.com/news/articles/2020-11-11/amazon-lures-food-stamp-shoppers-as-online-buying-surges-50-fold

Strategic CSR - Free speech

The articles in the two urls below, together, cover both sides of an issue that is becoming ever-more pressing for corporate leaders – whether employees should be encouraged to debate topics of concern, irrespective of whether they relate directly to operations. Facebook and Google have been wrestling with this issue publicly (see Strategic CSR – Google); the articles summarized here focus on two smaller firms (Coinbase and Spotify), but illustrate both the empowering benefits of allowing employees to vent, as well as the potential distractions such debates can become.

The article in the first url below is about Coinbase (a digital currency exchange), which I think tracks more closely to the Strategic CSR framework – i.e., that, for the most part, the firm should stick to issues most directly related to operations and, by extension, avoid social or political issues that are unrelated:

"Specifically, [CEO and co-founder, Brian] Armstrong said that the company 'won't debate causes or political candidates internally,' and will not engage when the issues are 'unrelated to our core mission, because we believe impact only comes with focus.' The cryptocurrency company is 'laser focused' on the use of digital currencies, and on profits, Armstrong said."

More controversially, Coinbase's CEO does not hesitate to say that those employees who do not like the focus of his company should leave:

"Coinbase is offering to pay employees who decide to quit the cryptocurrency company after it discouraged employee activism and discussing of political and social issues at work.

CEO Brian Armstrong told Coinbase staff in an email that the company would offer severance packages for anyone 'who doesn't feel comfortable with this new direction.' The pay packages range from four to six months, depending on how long an employee had been with the company."

In many ways, it is difficult to argue with the CEO's perspective:

"'Life is too short to work at a company that you aren't excited about,' Armstrong said in the email. …. 'Hopefully this package helps create a win-win outcome for those who choose to opt out.'"

The reasoning behind his uncompromising stance, at least to Armstrong, is clear:

"'While I think these efforts [to discuss social and political issues] are well intentioned, they have the potential to destroy a lot of value at most companies, both by being a distraction, and by creating internal division,' Armstrong said. 'I believe most employees don't want to work in these divisive environments.' The approach stands apart from many Silicon Valley companies, which have embraced social justice causes in the wake of widespread protests over racial injustice this year."

In contrast, the article in the second url below is about Spotify (the streaming music company), which has benefitted from signing the controversial podcaster, Joe Rogan, to its streaming service:

"The deal to bring Mr. Rogan to Spotify is already showing signs of success. His millions of loyal fans have made 'The Joe Rogan Experience' podcast Spotify's No. 1 show since arriving on the platform in September, 'outperforming our audience expectations,' the company said when reporting its earnings Thursday. The company's stock has run up more than 50% since the deal was announced in May."

As controversial guests have been interviewed on Rogan's show, however, the signing has increasingly distressed employees:

"Recent appearances on the show from two guests—first Abigail Shrier, an author critical of transgender issues; then Alex Jones, a radio host and the publisher of InfoWars, whose content has been removed from Facebook, Apple, YouTube and Spotify—have sparked outrage from listeners inside and outside the company who have posted on social media to express their disagreement."

Spotify encourages debate among employees on all manner of topics on its online forum, which is divided into specific "clubs":

"A recent thread in the company's #ethics-club channel centered on Mr. Rogan's episode with Mr. Jones. Employees circulated information on how to flag content for review by Spotify's trust-and-safety team, according to people familiar with the matter. That team is responsible for determining whether shows or music on the platform violate company policies barring content that incites violence or hatred, and can remove content if it crosses those lines."

Spotify is standing by Rogan for now, saying none of his content has breached the company's rules. Even so, it is clear that many employees feel offended by the platform Spotify is providing for Rogan:

"The deal with Mr. Rogan, a comedian and former mixed-martial-arts commentator who last year said his show had 190 million monthly downloads, brings the Stockholm-based Spotify into more edgy territory. The reaction to his arrival suggests that listeners and employees are increasingly trying to hold the company responsible for the content it hosts, similar to the issues encountered by Silicon Valley tech companies."

In other words, Rogan's signing illustrates the potential exception to the 'related to operations' rule of Strategic CSR – i.e., that, any issue can be justified as 'operationally relevant' if it is valued by a key stakeholder group. This applies particularly in the case of employees, whose morale and productivity can be directly affected if an issue that is important to them is left unaddressed. But, this does not mean it is necessarily easy for the company to determine where to draw the line, particularly on sensitive issues such as free speech:

"Mr. Rogan retains full creative control in his licensing deal with Spotify, he has said, though his show is subject to the company's content policy guidelines. At one point in September amid discontent over the episode with Ms. Shrier, some Spotify employees asked for editorial supervision over Mr. Rogan's podcast, according to people familiar with the matter. The company denied the request and stood with Mr. Rogan, who later retweeted an internet comedian's video mocking the employees as oversensitive."

In looking at the response of these two companies to expansive debate among their employees, what is interesting is that Coinbase's Armstrong does not hesitate to define his company as "mission focused" (see here). The value of a strong mission, of course, is that it identifies what the firm does (and, therefore, is 'ok' for employees to discuss) and what it does not do (and, therefore, is 'off limits'):

"In short, I want Coinbase to be laser focused on achieving its mission, because I believe that this is the way that we can have the biggest impact on the world. … Change happens in the world only when a smart, talented, group of people come together to focus on a hard problem for a decade or more. Many companies never stand the test of time, because they decide to dabble in unrelated efforts, and distract and divide their workforce in the process. Paradoxically, by being laser focused on our mission, we will likely have an even greater impact on the world, through our products and growing customer base."

I guess the difference between the two, ultimately, comes down to whether that mission is defined narrowly and is disciplined, or whether it is defined broadly and is more abstract. My sense is that those firms who apply this framework with greater discipline, as a general rule, are going to create greater stakeholder value over the medium to long term.

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Coinbase CEO discourages politics at work, offers generous severance to employees who want to quit

By Kate Rooney

September 30, 2020

CNBC

https://www.cnbc.com/2020/09/30/coinbase-ceo-offers-severance-to-employees-leaving-over-politics.html

Spotify Sticks by Rogan Amid Worker Discord

By Anne Steele

November 2, 2020

The Wall Street Journal

Late Edition – Final

B1

https://www.wsj.com/articles/joe-rogans-podcast-sparks-tensions-inside-spotify-11604156400

Strategic CSR - Europe (II)

Continuing the theme from Tuesday's newsletter: At the top of any 'World's Best Places to Live' list tends to be one or more of the Scandinavian countries. In spite of having strong safety nets throughout society, there appears to be no compromise in quality of life. In fact, the strong safety net is a feature of the system, rather than a flaw. The criticism of high taxes is a distraction since many of the costs that are accounted for in the revenues these taxes generate are simply shifted to the individual in the U.S. Often, these costs end up being higher in the U.S. (healthcare at 17 percent of GDP is only the most obvious example), without any compensating benefit that the promised 'freedom of choice' is supposed to provide (e.g., better outcomes on health and wellbeing metrics). What matters is the return on any $1 spent (the quality of outcomes created), irrespective of whether that dollar goes to the government or private companies.

Of course, comparing completely different countries with different histories is not easy. In particular, I think there are two challenges with promoting the Scandinavian model out of context. First is the issue of size. It is much easier to run a country the size of Denmark than one the size of the U.S. I am not sure there are any examples of the Scandinavian model run at scale. Second is the issue of innovation, which I discussed on Tuesday. If you look at the largest, most innovative companies in the world, most of them were formed in the U.S. There are exceptions, of course, but a disproportionate amount of innovation comes from the U.S. and, by implication, the economy where the pursuit of profit is most blatant.

As a European living in the U.S. (U.S. citizen since 2019), I struggle with these contrasts in thinking through how best to structure society. What is interesting is that the Scandinavian countries are more capitalist than the U.S. or almost any other country you can think to mention, in spite of the higher taxes. This is supported by evidence suggesting that, today, there is more social mobility in many European countries than in the U.S. In other words, if you are born poor in the U.S., you are more likely to die poor than the same person born into the same situation in Europe. Yet, there are many benefits to living in the U.S. and it is something I decide actively to continue.

The way I have come to think about this is in terms of normal distributions (bell curves). That is, the average (on many metrics) is probably similar in Europe and the U.S., but the standard deviation is much higher in the U.S. That is, in the U.S. there are much higher highs and much lower lows – the distribution is flatter. In Europe, there is much lower upside (e.g., not as much innovation), but also much lower downside (e.g., the strong safety net). One positive externality resulting from this imbalance is that the innovation generated in the U.S. is enjoyed by other countries who do not incur the associated costs.

Having said all that, there is clearly much to be said for the European lifestyle in general, and the Scandinavian model in particular. The challenge, therefore, and something Strategic CSR is dedicated to addressing, is whether an economy can be created with stronger protections at the bottom end of the distribution, while retaining the freedom to innovate at the top. One possible example of this is illustrated in the article in the url below. As the tag line to the headline suggests:

"Forget Scandinavia. Switzerland is richer and yet has a surprisingly equal wealth distribution."

As the article describes in detail, Switzerland is larger, happier, and more egalitarian than its Scandinavian neighbors. I would add The Netherlands to the mix – particularly noteworthy for its democratic engagement (also a feature of the Swiss cantons) and its progressive assignment of rights equally throughout society. Switzerland, of course, is small, but is also a wonderfully prosperous society (in the broadest sense):

"This $700 billion European economy is among the world's 20 largest, significantly bigger than any in Scandinavia. It delivers welfare benefits as comprehensive as Scandinavia's but with lighter taxes, smaller government, and a more open and stable economy. Steady growth recently made it the second richest nation in the world, after Luxembourg, with an average income of $84,000, or $20,000 more than the Scandinavian average. Money is not the final measure of success, but surveys also rank this nation as one of the world's 10 happiest."

The article features a number of positive attributes that suggest Switzerland is doing many things right. Two characteristics stand out to me – both related to building an informed citizenry that have specific expectations of the country's firms (and its politicians). First is immigration:

"Switzerland has been welcoming more immigrants than any Scandinavian country since the 1950s. It is on track to accept more than 250,000 immigrants between 2015 and 2020, expanding its population by 3 percent. That immigration rate is nearly double the Scandinavian average, and one of the highest among large, developed countries."

The second is education:

"The Swiss labor force gets an added boost from a meritocratic public school system that starts steering students as young as 12 toward their academic strengths. The world-class universities charge average annual tuition of only $1,000 and leave graduates thousands of dollars less in debt than many Scandinavian schools."

It seems to me that the issue of education, in particular, is central to many of the problems we face – specifically, decades of under-funding in education. I have often found it frustrating that we invest so much money in the final 5 years of life (which almost every article I've read on the subject suggests are not 'good' years), but do not spend nearly as much on the first five years of life. This is primarily because older people vote reliably, which skews the political distribution of funds. But, in spite of this, why do we not see it in our best interest to give every child the best opportunity to realize their potential? They are the future, after all.

Having just come through yet another overly-long and shallow presidential campaign, it is difficult to see how any politician could be elected in this country on a platform of higher taxes in exchange for sustained investment in education. And, given we have had decades of under-funding, that can only be fixed with decades of over-funding. Yet, in every discussion I have about CSR, business ethics, and/or the problems facing society, education seems to be the solution. It is not the system that is the problem so much as what we ask of the system. The system is neutral, but good inputs lead to good outputs. We need informed and engaged citizens in order for liberal democracy (and, for that matter, market-based capitalism) to work at its best. In the absence of either, we get discord and dysfunction.

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

The Happy, Healthy Capitalists of Switzerland

By Ruchir Sharma

November 3, 2019

The New York Times

Late Edition – Final

SR5

https://www.nytimes.com/2019/11/02/opinion/sunday/switzerland-capitalism-wealth.html

Strategic CSR - Europe (I)

I am often struck by the differences between the economic systems in the U.S. and Europe (see also Strategic CSR – Europe vs. U.S.). While the quality of life generally appears to be higher in Europe, the level of innovation/creativity seems higher here in the U.S. Although this contrast is pretty fixed in my head, the article in the first url below argues that the balance is shifting. Specifically, the author (a Finance Professor at NYU) emphasizes how the U.S. has become much less competitive in the past 20 years, while the EU has become more competitive:

"When I landed in Boston in 1999, the United States was the land of free markets. Many goods and services were cheaper here than in Europe. Twenty years later, American free markets are becoming a myth. Internet service, cellphone plans, and plane tickets are now cheaper in Europe and Asia than in the US. In 2018, the average monthly cost of a broadband internet connection was $31 in France, $39 in the UK and $68 in the US. American households also spend twice as much on cellphone services as households in France or the UK. This is a result of policy choices. In 1999, the US had free and competitive markets while European markets were dominated by oligopolies. The airline industry is a prime example. Over the past two decades a wave of mergers has turned the US airline industry into an oligopoly while Europe has opened its skies to competition, thanks in part to low-cost carriers such as Ryanair and EasyJet. US regulators allowed these mergers to happen without meaningful challenges. EU regulators, on the other hand, encouraged the entry of low-cost competitors by making sure they could get access to takeoff and landing slots."

As this quote suggests, there are many structural reasons that explain the shift that the author explores, and the gridlock around public policy at present can hardly be helping, but one additional reason may be an unwillingness in the U.S. to adapt to what science has to teach us about our changing environment. In particular, developments over the past few months suggest that the fossil fuel companies in Europe are reacting very differently to the evolving societal awareness about climate change compared to their U.S. counterparts (e.g., see Strategic CSR – BP (I) and Strategic CSR – BP (II)). As the article in the second url below notes, what was always a philosophical difference is suddenly having very practical implications:

"As oil prices plunge and concerns about climate change grow, BP, Royal Dutch Shell and other European energy companies are selling off oil fields, planning a sharp reduction in emissions and investing billions in renewable energy. The American oil giants Chevron and Exxon Mobil are going in a far different direction. They are doubling down on oil and natural gas and investing what amounts to pocket change in innovative climate-oriented efforts like small nuclear power plants and devices that suck carbon out of the air."

As the article continues:

"The disparity reflects the vast differences in how Europe and the United States are approaching climate change, a global threat that many scientists say is increasing the frequency and severity of disasters like wildfires and hurricanes. European leaders have made tackling climate change a top priority while [the U.S. president] has called it a 'hoax' and has dismantled environmental regulations to encourage the exploitation of fossil fuels."

While both sets of companies recognize the reality of climate change and that we cannot go on burning carbon forever, that is about where the agreement ends:

"'Despite rising emissions and societal demand for climate action, U.S. oil majors are betting on a long-term future for oil and gas, while the European majors are gambling on a future as electricity providers,' said David Goldwyn, a top State Department energy official in the Obama administration. 'The way the market reacts to their strategies and the 2020 election results will determine whether either strategy works.'"

This is where we have some hope, as the market is beginning to signal that the U.S. oil and gas firms need to move further and faster than they have publicly committed to date:

"In August, for example, Storebrand Asset Management, Norway's largest private money manager, divested from Exxon Mobil and Chevron. And Larry Fink, who leads the world's largest investment manager, BlackRock, has called climate change 'a defining factor in companies' long-term prospects.'"

While the U.S. companies double-down in response to this criticism:

"European oil executives, by contrast, have said that the age of fossil fuels is dimming and that they are planning to leave many of their reserves buried forever."

The problem is that while, from an environmental perspective, the European companies are right, it is not at all clear, from a business perspective, that the U.S. companies are wrong:

"'If this is the sunset time for oil and gas, someone forgot to tell consumers,' said Raoul LeBlanc, a vice president at IHS Markit, a research and consulting firm. He said that while sales of electric cars may have picked up, it would take decades to replace the more than a billion internal-combustion cars on the road now. It will probably take just as long, if not longer, to replace the large fleets of trucks, airplanes and ships that run on fossil fuels. There ought to be enough demand for oil over the next 30 to 40 years for Exxon and Chevron to exploit their reserves and make money, though the profits will decline over time, said Dieter Helm, an Oxford economist who studies energy policy."

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Monopolies cost Americans $300 a month. We're no longer the land of free markets

By Thomas Philippon

November 19, 2019

The Guardian

https://www.theguardian.com/commentisfree/2019/nov/13/america-was-once-the-land-of-free-markets-now-theyre-becoming-a-myth

Oil Giants An Ocean Apart on Adapting to Climate Change

By Clifford Krauss

September 23, 2020

The New York Times

Late Edition – Final

B1, B9

https://www.nytimes.com/2020/09/21/business/energy-environment/oil-climate-change-us-europe.html

Strategic CSR - Water

The article in the url below discusses the growing importance of water as a strategic asset – one that needs to be acquired by companies and protected by local communities. The trouble with this is those two imperatives are often incompatible, as is evident in a recent conflict that arose in Chaffee County, Colorado:

"The world's largest food and beverage company [Nestlé] wants a new 10-year permit to pump 200 gallons of groundwater a minute and truck it to Denver for bottling."

Extracting that much water from the ground adds up to "65 million gallons of groundwater a year," and is an issue for Nestlé everywhere the firm operates:

"The same scene played out in person in 2009, when the world's largest food and beverage company applied for a permit to drill wells along the banks of the Arkansas River and build a pipeline to a station where 25 trucks a day would haul the spring water to a Denver plant for bottling under the Arrowhead brand."

One problem for Nestlé is that, the more often these conflicts arise, the more aware local populations are about the potential consequences of this resource utilization, and the larger the likely backlash. In Colorado, for example:

"The county's population is booming. Drought is ravaging the state. Plastic is polluting the planet. Nestlé Waters has been targeted by conservation groups across the country as it expands its water bottling operations. And Nestlé is about to sell its North American water brands."

Until now, the company has done very well with its sales of bottled water:

"Nestlé Waters reported $8.6 billion in sales in 2019, down slightly from 2018. The company's North American water brands generated $3.6 billion in sales in 2019."

But, increasingly, Nestlé realizes it is going to have to alter its approach if it expects to continue receiving approval for such projects:

"Earlier this year, as Nestlé worked to increase sustainability and profitability, the company said it would, by 2025, replenish all the water it sucks from watersheds and offset the carbon footprint of bottling and transporting water."

 

Interestingly, perhaps Nestlé has concluded that these fights are more trouble than they are worth:

 

"The company also announced in June it was exploring a sale of its water-bottling operations in Canada and the U.S."
 
And, as the article explores in detail, there are multiple challenges to the company's "water-mining operations" throughout the U.S. As a result, and perhaps more encouragingly, the company is increasingly unwilling to produce products that are inconsistent with its commitments to become a more sustainable company:
 
"John McGowan, a Chaffee County homeowner, on Thursday asked the commissioners to examine why Nestlé was selling and warned against a private equity owner. 'Nestlé is saying it has promised to operate in more sustainable ways,' McGowan said, 'but Nestlé found it has a dilemma with its North American waters business, which cannot fulfill these new environmental promises and achieve its profitability goals.'"
 
Nestlé divesting itself of this unsustainable business, of course, does not mean that the firm isn't willing to sell the division to the highest bidder who will then seek a return on its investment. In order to do so, that firm is going to need access to plentiful supplies of fresh water.

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Nestlé's plan to pump 65 million gallons of Arkansas River water to Denver for bottling stirs contentious fight

By Jason Blevins

October 26, 2020

The Colorado Sun

https://coloradosun.com/2020/10/26/nestle-waters-permit-arrowhead-colorado/

Strategic CSR - Green bonds

The article in the url below discusses the pros and cons of green bonds, financial instruments that "channel funds raised towards environmentally friendly projects." Immediately apparent is how popular these investments have become in recent years:

"Green bonds are the stars of climate finance … [having] raised $271bn in 2019. … That is only about 4% of total bond issuance worldwide, but it easily makes green bonds the most popular form of eco-friendly debt. Covid-19 has only slightly slowed the rise. On September 2nd Germany issued green paper for the first time. The European Commission is mulling using them to fund just under a third of its €750bn ($888bn) stimulus package."

Yet, in spite of this success, the article notes there are several reasons to question whether green bonds are advancing the cause of reducing carbon emissions, at least to the extent that the companies issuing the bonds would like us to believe. First of all is the issue of who issues the bonds:

"… a new study by the Bank for International Settlements … looked at 200-odd large firms that issued them in 2015-18. They found that firms that issue the most tend to be cleaner in the first place—ie, they produce the least carbon for a given amount of revenue. … Large polluters rarely issue such bonds for fear of being accused of greenwashing, and because the bonds would be excluded from green funds."

This suggests the bonds are being used for projects that would have gone ahead anyway with traditional fundraising (if green bonds did not exist):

"Another finding was that green-bond issuance did not seem to lead to decarbonisation. In the years after issuance, the average carbon intensity oscillates wildly, but the changes are not statistically significant. Moreover, though some issuers claim that tapping the green-bond market lowers their cost of borrowing, data from the IMF suggest a discount is rare (see chart)."

Even though these bonds do not seem to be used for new projects and do not necessarily reduce costs, the article concludes these fashionable investments have other useful applications:

"Some green bonds fund worthy projects that do not reduce carbon footprints, such as improving water management. This is the case for at least a fifth of the stock of green bonds by value, reckons HSBC, a bank. Moreover, many bonds are used to refinance genuinely green projects."

And, of course, green bonds also send an important signal to investors:

"Issuing a green bond sends virtuous signals to regulators. … the green label may also attract a wider pool of lenders than conventional bonds. Green bonds can also make life easier for institutional investors pressed by clients to become more climate-conscious. They could invest directly in green projects, which often take the form of infrastructure. But a failed project may default on its repayments to direct investors. … Issuers also typically disclose the details of projects, such as their size and location. Such morsels are otherwise hard to come by."

More encouraging, it seems, is the emergence of new types of bonds that genuinely do encourage the reduction of carbon emissions:

"Big polluters can use the proceeds of 'transition' bonds to decarbonise. In March Cadent Gas, a British firm, raised a €500m note to reduce leakages from its pipeline, among other things. 'Sustainability-linked' bonds tie interest payments to the achievement of a target. The first of these was issued by Enel, an Italian electricity firm, last year, and is linked to increasing the share of renewables in its generation capacity."

As with many aspects of sustainability, therefore, some progress and lots of good intentions, but nothing nearly as far or as fast as we need:

"For now, climate-conscious investors may have to stick with green bonds—and doing less good for the planet than they may have claimed to their clients."

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

The meaning of green

September 19, 2020

The Economist

Late Edition – Final

70

https://www.economist.com/finance-and-economics/2020/09/19/what-is-the-point-of-green-bonds