Strategic CSR - Food waste

Following on from Tuesday's newsletter, the article in the url below profiles the CEO of Apeel – James Rogers, who was a Ph.D. student in materials science when he founded his company dedicated to the reduction of food waste in food supply chains around the world:

"Mr. Rogers … company, Apeel, applies an edible, plant-based coating to fruits and vegetables that extends their shelf life without refrigeration. Apeel-treated avocados, limes, apples and cucumbers are already in some of the largest grocery chains in the U.S. and Europe. The startup now plans to expand into markets in Asia, Africa and Latin America, thanks to a $30 million investment from the International Finance Corp., the World Bank's private-sector arm. The company Mr. Rogers launched in 2012 as a Ph.D. student is now valued at more than $1 billion."

It is clear that there will be demand for his services for many years to come, since there is currently no shortage of food waste:

"'Perishability governs every element of the food system,' Mr. Rogers says. Fruits and vegetables start to lose their value once they are picked, and producers, suppliers, retailers and consumers all race to get those berries and leaves into someone's mouth before they spoil. This urgency forces trade-offs. Most retailers arrange produce in unrefrigerated displays, which sells food faster but ensures that everything rots sooner. … Despite this haste, there is plenty of waste. More than a third of the food produced today is never eaten, at a global cost of $2.6 trillion a year, according to the U.N.'s Food and Agriculture Organization."

I found Rogers' description of how he problematized the global food supply chain fascinating. Specifically, he talks in terms of the "time value of food" in an attempt to answer the question, "Why do so many people go hungry when there is so much food in the world?":

"The answer, he discovered, is that food is an intermittent asset ('Either it's in season and you have more than you know what to do with, or it's out of season and there's not enough'), and most farmers lack the time and wherewithal to bring their harvest to market. If produce took longer to spoil, poor farmers could sell their wares to distant customers. But how, he wondered, could he 'create more time for food?'"

More specifically:

"He began to study the differences between foods that 'had time,' such as lemons and oranges, and those that didn't, like strawberries and cucumbers. He discovered that the exteriors of both sorts of fruit are composed of the same molecules, just arranged differently. He hoped to use the lessons of lemon peels to sustain strawberries, but he wasn't sure how. To move forward, he needed money."

This is where it gets a little technical:

"All fruits and vegetables spoil by the same process—water goes out, oxygen comes in—but creating an invisible barrier that locks in moisture requires a different formula for each one. Using the lipids and glycerolipids of existing peels, seeds and pulp (i.e., things we already eat), Apeel has created a safe, flavorless, FDA-approved solution for dozens of products, which it applies while wet to the surface of harvested produce on specially outfitted conveyor belts just before everything is packaged for export. This invisible 'peel' can double or triple the lifespan of a product, the firm says."

The next task was to convince producers and retailers that it is in their interests to increase the shelf lives of their food products:

"But adding shelf life to produce is one thing; convincing suppliers and retailers that this time has value is another. 'What we found was there wasn't a market for longer-lasting produce,' Mr. Rogers says with a chuckle. Most businesses told him that perishability kept their customer coming back for more."

Then, he had to wrap his head around the complexity of the global supply chain for food:

"He has discovered, for example, that every fruit and vegetable has its own idiosyncratic supply chain, and Apeel works to pinpoint where time has the most value. He has also learned that delivering avocados to Europeans throughout the year means working with lots of different countries (Chile, Israel, Morocco, South Africa, etc.), each of which has its own unique supply chain, regulatory hurdles and distinct avocado."

The key to his business model (and Apeel is now valued at more than $1 billion) is to differentiate on quality and efficiency, and purpose:

"Because these deals save retailers money, Apeel products aren't pricier than more perishable alternatives, Mr. Rogers says: 'We're saying when you purchase this item for the same or lower cost, you are voting for a food system that will look after more people and our planet.'"

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/

James Rogers

By Emily Bobrow

January 9-10, 2021

The Wall Street Journal

Late Edition – Final

C6

https://www.wsj.com/articles/apeel-ceo-james-rogers-wants-to-extend-the-shelf-life-of-your-avocados-and-oranges-11610128693

 

Strategic CSR - Food

The article in the url below is a review of a recently published book that seeks to highlight the state of the food that we eat:

"America's eating habits have changed radically over the past 40 years. We consume more and more food of less and less nutritional value. The nation's adult obesity rate is now 42.4%."

One of the reasons this shift toward unhealthy eating has occurred, the author argues, is demographic (many more two-parent working households, leaving less time to cook), while another is technological:

"The microwave oven gave birth to an industry of highly processed foods larded with fats and oils."

Rather than preparing foods that the industry knows we like or might be healthy, however, the author of the book proposes a more cynical explanation of how we got to where we are:

"In Hooked, Michael Moss, a Pulitzer Prize-winning journalist and the author of Salt Sugar Fat (2013), [asks:] What if the foods we're scarfing down have been designed and marketed to become addictive?"

In essence, Moss argues that food is more addictive than other substances we consume, such as tobacco or even hard drugs, because of the way that it enters our bodies:

"Mr. Moss notes that, while it takes 10 seconds for the brain to feel the effects of cigarettes, sugar's effects are felt 20 times faster—and salt and fat don't take much longer than that. The disparity stems from nicotine needing to enter the bloodstream to reach the brain, while sugar and salt take a shortcut through the taste buds. But the tongue is outmatched by the nose when it comes to driving our eating decisions. While there are 10,000 taste buds, there are 10 million olfactory receptors, and they can detect hundreds of scents."

While food itself can be addictive, the processed products that are manufactured by the modern-day food industry are designed specifically to prey on these weaknesses. The industry achieves this by featuring heavily those substances that are the most addictive (i.e., salt, sugar, and fat) in combinations that are most effective and, as a result, have become everyday staples:

"Those foods are the highly processed and sweetened concoctions that dominate the American diet: cereals, sodas, fruit juices, cookies, packaged meats, as well as the many condiments (like salad dressings and pasta sauces) that are packed with sodium and sugar. Consuming these items delivers intense and immediate pleasure and creates a need that fits Mr. Moss's broad definition of addiction."

Crucially, however, the author argues that this is a deliberate approach, rather than something that has simply happened over time:

"Mr. Moss argues that the industry's growth has been enabled by its 'manipulation of our instinctual desires,' not least through marketing and sales strategies. He describes companies super-sizing their products (such as the 'Double Stuf' Oreo) and creating packaging that can remain upright (thus easing consumption while, say, driving). One byproduct of these strategies, observes Mr. Moss, is that snacks—often processed products high in convenience but low in nutritional value—now account for about 25% of daily calorie consumption. Social norms have adjusted themselves accordingly: It has become 'socially acceptable to eat anything, anywhere, anytime,' Mr. Moss writes."

And, in a nice twist of irony, having created the problem of obesity, the same food companies then seek to capitalize on the guilt associated with the overconsumption of their products:

"Mr. Moss notes that as nutrition-less eating expanded our waistlines, food companies acquired low-calorie food lines (like Lean Cuisine) and diet franchises (such as Weight Watchers). It's as if 'Philip Morris had cornered the market on nicotine patches,' he writes. He says that food companies lobby to keep nutrition labels practically meaningless to most Americans."

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/

Lured into Gluttony

By Matthew Rees

March 12, 2021

The Wall Street Journal

Late Edition – Final

A13

https://www.wsj.com/articles/hooked-review-lured-into-gluttony-11615505415

Strategic CSR - Personhood and politics

An issue that has surfaced for me in my classes this semester, particularly when discussing the challenges firms face in deciding their position on controversial issues such as the new Georgia voting laws, is the extent to which firms should be proactive or reactive in the actions they take. As indicated in the article in the url below, firms are increasingly finding themselves caught in a ratcheting of expectations – the more they engage in such issues, the more they are expected to do so:

"Civil-rights activists pressured Delta and Coca-Cola to take public stands against the law, which the groups have called restrictive and racist. Some of the companies' own employees echoed those concerns. After an initially muted public response, CEOs at both companies, which said they had been lobbying lawmakers behind the scenes, ultimately spoke out against the law."

But by waiting, the article argues, the firms end up pleasing no one and annoying everyone:

"In the end, their statements came too late to please many activists on the left and angered many on the right. Georgia House members voted to revoke a tax break for Delta, though the effort didn't go farther before the legislature adjourned last week. Senate Minority Leader Mitch McConnell accused big businesses of 'behaving like a woke parallel government,' and threatened 'serious consequences' for companies, though he later tempered his stance. The companies found themselves in the strange position of facing boycott calls from critics on both sides."

The more I thought about this, however, the more I realized that this might simply be another mistaken attempt to anthropomorphize large organizations (something the mainstream discussion around CSR does as a way to deflect blame from the real source of any problems they see – people). It seems to me that traits we might see as unprincipled in individuals might actually be a strength in corporations. In other words, another way to think about firms that wait to see which way the wind is blowing before issuing strong public statements on a particular issue is that they are waiting to see which issues their key stakeholders clearly care about. The article focuses on how customers react to such issues:

"According to a 2020 survey of 8,000 consumers by public-relations giant Edelman, about 63% said they choose, switch to, avoid, or boycott a brand based on its stand on social issues. And in a more recent Edelman poll of 33,000 consumers, 86% said they expect CEOs to publicly speak out on social issues, while 68% said companies should step in when the government fails to fix social ills."

But, there are two problems with thinking through this challenge only from the perspective of customers. First, it is unwise to rely on a survey to understand how people will really act and, second, there are many other stakeholders than customers to consider. Instead, if firms were to proactively determine their stance before an issue becomes part of the social discourse (an issue of principle that we might admire in an individual), the set of stakeholders who are able to participate in the decision is narrowed to the executives (and possibly the board). Since firms are non-agentic entities and it is only people who can act, in order for the firm to decide what to do ahead of time the firm's executives will need to decide on its behalf. This means potentially that a narrow set of interests/values/morals, etc. are represented in the decision that is announced. By waiting, however, the firm is effectively expanding the set of stakeholders who weigh in on an issue, determine it is important, and signal to the firm how they want it to respond.

This is not to diminish the value of a strong, values-based culture that can unite the firm and its stakeholders in achieving the firm's purpose. But, in particular on issues that can be so far removed from core operations and areas of expertise (like voting laws), it might pay firms to wait and see, instead of issuing premature statements that represent what the firm's executives think they should say/do, rather than what their stakeholders as a whole want them to say/do.

The key in all cases, of course, whether proactive or reactive, is that the firm is genuine in its intentions, and not just issuing a statement designed to appease stakeholders without committing to substantive action.

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 New Business of Business is … Politics

By Chip Cutter, Suzanne Vranica, and Alison Sider

April 10-11, 2021

The Wall Street Journal

Late Edition – Final

B1, B9

https://www.wsj.com/articles/with-georgia-voting-law-the-business-of-business-becomes-politics-11618027250

Strategic CSR - Amazon

I have long noted that we get the companies we deserve, in the same way that we get the politicians we deserve. In other words, as non-agentic entities, companies reflect the collective set of values (or votes) of all stakeholders, who make decisions based around perceived self-interest to advance their interests within the boundaries of what we call 'the firm.' The article in the url below makes the same point, arriving at its destination in a round-about way, perhaps without meaning to and definitely using different rhetoric, but the same point nonetheless. It begins with the usual pedestrian criticism of Amazon and how it operates:

"Here are some of the ways that people who have worked inside Amazon's warehouses describe the experience: 'The job crushed my spirit and crippled my body.' 'The lowest point in my life.' An 'isolating colony of hell.' 'They're killing people mentally and physically.' 'I began to hate my day-to-day life.' 'The way Amazon pushes people is not moral.' 'I had whole days where I didn't talk to anyone.' 'The systematic devaluing of human bodies.' Few of these accounts are new. But persistent horror stories have done nothing to diminish Amazon's geometric growth. In 2017, the company's head count surpassed 500,000 employees. In 2020, Amazon added that many new workers, very likely a record level of hiring for a company in a single year. Today, nearly 1.3 million people work at Amazon, making it the country's second-largest private employer, after Walmart. The majority toil in its sprawling fulfillment operations — they are the people who pick, pack, drive and deliver your stuff."

The author appears to be discovering his story as he writes it. These reports "persist," of course, because the majority of Amazon's stakeholders are completely fine with the current arrangement:

"Are these workers happy? Is this good work? Should we rejoice about a company that can hire so many people in the midst of pandemic-induced mass unemployment? And one that, in 2018, instituted a minimum hourly wage of $15, pushing Walmart, Target and other competing retailers to raise their pay, too? Or should we recoil at the way Amazon has swept the apparent brutality of its operations under a haze of public-relations opportunism — the way it paints itself as a high-minded savior of American labor while its workers are so pressed for time that they must urinate and defecate in bags and bottles?"

The key is to recognize that Amazon reflects the aggregated demands of its key stakeholders in the same way that all firms do. The explicit conclusion is that if the firm's stakeholders change what they see as being in their best interests, then Amazon will change to reflect that shift:

"The larger point is that Amazon is less the cause of American inequality than it is a consequence. Amazon is what you get when a country has systematically devalued workers and labor organizations to the benefit of billionaires. Amazon is what you get when a country has decided to import so many of its physical goods from abroad. And Amazon is what you get when states and cities compete with one another to lavish huge tax breaks upon corporations that pledge to create local jobs, without setting any requirements that they be good, safe, high-paying jobs."

The problem in this particular case, of course, is that Amazon's customers are perfectly happy with the current state of affairs, in which what they need and want is delivered to their door at the lowest possible price. As long as that is more important to Amazon's customers (and its other stakeholders) than the wellbeing of the firm's employees, then Amazon the company will continue to reflect those values. In short, 'Amazon' is not at fault – if there is any 'fault,' then the blame lies with us, all of us.

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 Force That Can Help Amazon's Workers? Amazon's Shoppers

By Farhad Manjoo

April 12, 2021

The New York Times

Late Edition – Final

A19

https://www.nytimes.com/2021/04/10/opinion/amazon-warehouse-workers-rights-unions.html

 

Strategic CSR - Lil Nas X

Following on from Tuesday's newsletter, the articles in the three urls below introduce a more light-hearted take on the influence of religion in the U.S. today. You may have seen the recent story about the rapper, Lil Nas X, repurposing 666 pairs of Nike shoes to promote the release of his new song, 'Montero (Call Me By Your Name).' If not, the article in the first url provides a flavor of what you missed:

"Nike has won its lawsuit against Brooklyn art collective MSCHF over their controversial 'Satan Shoes' that contain a drop of real human blood in the soles. The $1,018 (£740) trainers are modified Nike Air Max 97s that feature an inverted cross, a pentagram and the words 'Luke 10:18.' MSCHF produced the shoes in collaboration with rapper Lil Nas X. It said only 666 pairs were made and all but one have already been shipped."

Apparently, Nike was unimpressed and sued the rapper, along with the company that produced the shoes (MSCHF), for trademark infringement, claiming that consumers might be confused about Nike's involvement in the project:

"'MSCHF and its unauthorised Satan Shoes are likely to cause confusion and dilution and create an erroneous association between MSCHF's products and Nike,' the sports shoe giant said in the lawsuit. Lawyers for MSCHF countered that the 666 pairs it created were 'not typical sneakers, but rather individually-numbered works of art that were sold to collectors for $1,018 each.' Siding with Nike, a federal judge issued a temporary restraining order on Thursday."

The idea was quite clever, I think, and not only because the restraining order has little effect given that the company has no plans to produce any more of the shoes (and has sold all but one of the shoes it did produce). The 'stunt' is a clever play on the content of the song the shoes were tied to and the resulting video (which the article details), enhancing the message, while the subsequent 'recall' agreed to by MSCHF is essentially meaningless, given that it is voluntary (see here). The release of the shoes certainly achieved Lil Nas X's goal as the song entered the charts at No.1 soon afterwards (see here). Beyond the shock value of putting human blood in the sole of the shoes, however, there are two aspects of the story that became apparent as I discussed it with students in my Executive MBA class. First, as noted in the article in the second url below, the same company that Lil Nas X partnered with to produce the shoes, also produced some Jesus shoes in 2019 (no connection to Lil Nas X). In place of blood, the shoes that time contained "holy water" and sold for $1,425 each (but in online re-sale sites for up to $4,000), rather than the lowly sum of $1,018 for Lil Nas X's Satan shoes:

"A pair of 'Jesus Shoes' are on sale for $4,000 — and for that price, the lucky owner can literally walk on water. The shoes were designed by Brooklyn-based creative arts company MSCHF and they come with holy water in the soles. MSCHF bought a normal pair of Nike Air Max 97 sneakers at market value, the company's head of commerce, Daniel Greenberg, confirmed to CBS News. A plain pair of men's Air Max 97s go for about $160, but MSCHF completely revamped the shoe and added a golden Jesus on a crucifix as a shoelace charm. MSCHF also sourced holy water from the River Jordan, which was blessed by a priest in Brooklyn and added it to the soles of the sneaker."

Second, and perhaps most funny about the whole story, though, is that Nike did not sue the company over the Jesus shoes, while it did sue over the Satan shoes. Apparently, Nike didn't even issue a statement at the time, much to the disappointment of MSCHF, as noted in the article in the third url below:

"The sneakers quickly sold out and began appearing on resale sites, going for as much as $4,000. The Christian Post wrote about them. Drake wore them. They were among the most Googled shoes of 2019. The only thing that didn't happen, said Kevin Wiesner, 27, a creative director at MSCHF, was a public disavowal of the shoes by Nike or the Vatican. 'That would've been rad,' he said."

This produced an interesting conversation in class about the relative costs and benefits for Nike of being linked (however unwittingly) with either Jesus or Satan. While we concluded that the relative downsides of being linked to either was an interesting debate, we all agreed there is potentially a strong upside of being linked to Jesus, while no one could think of an upside to being linked to Satan. In other words, the devil-worshipping market segment in society was thought to be much smaller than the God-worshipping market segment, which might have been the clinching argument for Nike in its decision of whether to sue. Of course, as so often happens in such cases, the result of the lawsuit was only to draw greater attention to the shoes (and song) and no doubt exceed Lil Nas X's expectations for the stunt.

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/

Nike wins court bid over 'Satan Shoes' with human blood

April 1, 2021

BBC News

https://www.bbc.com/news/business-56609333

"Jesus shoes" with holy water in the soles are selling for $4,000

By Caitlin O'Kane

October 11, 2019

CBS News

https://www.cbsnews.com/news/nike-air-max-97-jesus-shoes-filled-with-holy-water-selling-for-4000-2019-10-11/

The Story of MSCHF, a Very Modern … Business?

By Sanam Yar

January 30, 2020

The New York Times

https://www.nytimes.com/2020/01/30/style/MSCHF-sneakers-culture.html

Strategic CSR - SCOTUS

The two newsletters for this week will focus on issues related to religion that, according to the latest Gallup poll, here in the U.S. is becoming less important in people's everyday lives. The article in the url below, however, suggests that this trend may not apply to the Supreme Court (SCOTUS). The article makes its case by summarizing an academic study showing how the Court is increasingly siding with organized religion (in particular, "mainstream Christian organizations") in the cases it decides:

"The study, to be published in The Supreme Court Review, documented a 35-percentage-point increase in the rate of rulings in favor of religion in orally argued cases, culminating in an 81 percent success rate in the court led by Chief Justice John G. Roberts Jr."

Specifically, placing this claim in its historical context:

"The court led by Chief Justice Earl Warren, from 1953 to 1969, supported religion just 46 percent of the time. That grew to 51 percent under Chief Justice Warren E. Burger, from 1969 to 1986; then to 58 percent under Chief Justice William H. Rehnquist, from 1986 to 2005; and finally jumped to just over 81 percent under Chief Justice Roberts, who joined the court in 2005."

The study also notes that it is not only the frequency with which religious causes are supported that has changed, but also the nature of the groups that benefit from the Court's decisions:

"In the Warren court, all of the rulings in favor of religion benefited minority or dissenting practitioners. In the Roberts court, most of the religious claims were brought by mainstream Christians."

Perhaps not surprisingly, the study also notes the ideological nature of the shift, which it claims has been driven by the five Justices appointed by Republican presidents:

"The five most pro-religion justices all sit on the current court, the study found. 'The justices who are largely responsible for this shift are Clarence Thomas, Samuel Alito, Neil Gorsuch, John Roberts and Brett Kavanaugh,' the study's authors wrote. 'While there are some differences among these justices, and Kavanaugh has been involved in only a handful cases, they are clearly the most pro-religion justices on the Supreme Court going back at least until World War II.'"

And also that a similar shift has taken place in lower-level courts, in particular among the federal judiciary – a finding summarized in a second study that is also summarized in the article:

"In the five years through the end of 2020, [the study's author] wrote, federal judges' partisan affiliations had become powerfully correlated to their votes. 'And when the pandemic struck, resulting in widespread lockdowns of religious houses of worship,' he wrote, 'the unprecedented number of constitutional free exercise cases brought in such a condensed span of time forced that partisanship into sharp relief.' Even putting aside cases concerning the pandemic, a big partisan gap has opened in free exercise cases."

The courts have also used their ideological advantage to expand the application of the religion clauses of the constitution to more contemporary issues:

"More generally, claims of religious freedom, brought mostly by Christian groups, have increasingly been used to try to limit progressive measures like the protection of transgender rights and access to contraception. On top of that, a culture war erupted about how best to address the coronavirus."

The accusation by Justice Elena Kagan in a 2018 decision that "the court's conservative majority [is] 'weaponizing the First Amendment'" (see also Strategic CSR – The Rights of Corporations), seems to suggest we should expect more such polarizing decisions by the Court:

"'Just as the majority has weaponized free speech in service of business and conservative interests,' [Justice Kagen] said, 'it's using the religion clauses to privilege mostly mainstream religious organizations.'"

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/

An Extraordinary Winning Streak for Religion at the Supreme Court

By Adam Liptak

April 6, 2021

The New York Times

Late Edition – Final

A14

https://www.nytimes.com/2021/04/05/us/politics/supreme-court-religion.html

 

Strategic CSR - Sustainability

The article in the url below is excellent – one of the best things I have seen written about CSR/sustainability in a long time. I won't summarize it, as I would like to encourage you all to read it, but here are a few choice quotes:

"Reporting standards like ESG and others raise important and fundamental questions about the nature of sustainability. Do reporting standards help achieve improved sustainability and increased innovation, or do they thwart sustainability and stifle innovation by creating uniformity and ease for those reporting and reviewing? How do we know what 'good' sustainability performance is? Is it possible for a company or a nation to effectively measure progress toward sustainability? Are the best intentions of companies moving us toward a more sustainable world, or could they be a catalyst moving us further away from such a world? How will we know?"

"Let us explore those questions in light of a common example, the disposable paper cup. Single-use products are much maligned by sustainability advocates as wasteful and unsustainable. Yet single-use products, including the disposable paper cup, made a comeback in 2020 due to the global pandemic. The disposable cup has always required valuable inputs (trees, energy, water, and chemicals) and created waste, including manufacturing residuals and used cup waste. Those are often viewed as 'bad' by sustainability standards. But those inputs and the resulting wastes generated go toward creating something society highly values. Historically, the disposable cup came into being as a social 'good'—a way to improve quality of life by slowing the transmission of disease at community drinking buckets found in public schools, public buildings, and railway stations."

"The ongoing value of the disposable cup illustrates many of the challenges associated with sustainability initiatives. For most products and projects, it is nearly impossible to anticipate, properly evaluate, and effectively weigh the value of the various factors leading to sustainability with simplistic measures. Value is always subjective. How can a 'standard' for sustainability capture the subjective nature of value?  As is the case with the disposable paper cup, some may value hygiene over cost, while others may not. Who should decide?  In the case of the disposable cup, the market got to decide and valued the cup's social, environmental, and economic benefits more than the perceived downsides."

"Sustainability is the object of ESG reporting. ESG reporting isn't the goal; sustainable performance is the goal."

"The disposable cup example illustrates how thirsty humans chose preferred social outcomes (avoiding disease and enhancing convenience by use of a disposable cup) despite worse economics (a penny per cup) and some perceived adverse environmental outcomes (resource use and waste). Yet voluntary decisions by those paying the costs and optimizing the tradeoffs created a significant market for disposable cups. And the longevity of this product proves its sustainability."

"Early smartphone users likely weren't concerned about whether their model of phone needed more rare-earth metals, generated more emissions in manufacturing, consumed more energy over its life, or used more packaging than prior model phones. In fact, products that consumers choose every day create some form of waste. Consumers showed that they valued the many benefits and enhanced quality accompanying smartphone technology rather than lament the use of expensive and non-renewable rare earth metals. Think of the time saved and convenience increased due to smartphones. Also consider the material savings resulting from the desktop and laptop computers that were never made or sold as smartphones filled that demand. (On the other side of the equation, we should also consider the addictions, lost productivity, and other adverse consequences of smartphones.) But in 2007, regulators did not try to stifle innovation or influence market choices by defining a reporting standard for a 'sustainable phone.' And we should be thankful for that."

I have not heard of either author, but here is the bio published along with the article:

"Bill Frerking is Chief Administrative Officer and Vice President of Environment, Health & Safety at the USD Group in Houston, and was formerly Chief Sustainability Officer of Georgia-Pacific. Blaine McCormick is a management professor at Baylor University's Hankamer School of Business in Waco."

Hope you 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/

Sustainability: Who Gets to Decide?

By Bill Frerking and Blaine McCormick

January 28, 2021

Texas CEO Magazine

https://texasceomagazine.com/sustainability-who-gets-to-decide/

 

Strategic CSR - Revlon

The article in the url below dives pretty deep into the weeds of U.S. corporate law, but it is potentially an important step in the direction of tighter corporate governance (increasing the burdens placed on a firm's board of directors) and against one of the few remaining 'rights' that shareholders possess. Specifically, the article covers a recent decision in U.S. federal court:

"In a little-noticed December ruling in a case involving a failed 2014 leveraged buyout, Jed S. Rakoff, a federal judge in the Southern District of New York, threw some sand into the otherwise well-lubricated gears of what has been a 40-year financial bonanza. It's about time we started asking tough questions about the ramifications of loading up companies with huge amounts of debt they will surely have difficulty repaying."

Specifically, because the board's decision to sell the company knowingly placed the firm with a debt load that was likely to force it into bankruptcy, the judge held that the board had been "reckless" in its decision and are therefore liable:

"In other words, Judge Rakoff said in his ruling, officers and directors had better think twice before agreeing to sell a company to a buyout firm. What had for decades been considered a virtue — selling a company for a market-clearing price to the benefit of existing shareholders — might have become a vice. Judge Rakoff's decision 'has the potential of really blowing up,' said Brian Quinn, a law professor at Boston College."

The facts of the case, in the opinion of the judge, mean that the directors are not protected by the business judgment rule:

"Judge Rakoff … said [the board] could not take cover behind the business judgment rule, which usually protects directors from being held accountable for past business decisions so long as they were made in 'good faith.'"

The author of the article, who was a former investment banker (specializing in M&A), argues that this case has implications beyond the specific facts (in spite of idiosyncrasies that suggest it might have limited influence) because it challenges the long-held 1986 decision by the Delaware Supreme Court known as 'Revlon.' Revlon applies as precedent during the sale of a firm and is important because it establishes the burden on directors during the sale to seek the highest price possible for shareholders, irrespective of the wishes of other stakeholders in the firm. This recent decision suggests this may no longer be the case:

"The ruling has the potential to hold accountable those responsible for allowing otherwise solvent companies to be sold into circumstances that would soon enough cause their bankruptcy. … In the wake of Judge Rakoff's ruling, Big Law quickly sought to warn clients that officers and directors of companies needed to be more vigilant about who they agree to sell a company to and what the buyer plans to do with it. The days of just selling a company to the highest bidder regardless of the consequences — the legal standard on Wall Street since the Delaware Supreme Court decided the so-called Revlon case in 1986 — might just be over."

If so, then this case would be another nail in the coffin of the idea that 'shareholder democracy' has any substantive meaning in the U.S.

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 End of Private Equity

By William D. Cohan

March 1, 2021

The New York Times

Late Edition – Final

A19

https://www.nytimes.com/2021/02/28/opinion/business-economics/private-equity-reckoning.html

Strategic CSR - Whistleblowing

One upside from the pandemic and associated lockdowns, according to the article in the url below, is an increase in workplace related whistleblowing:"

The proof is in the data, with the U.S. Securities and Exchange Commission receiving 6,900 tips alleging white-collar malfeasance in the fiscal year that ended Sept. 30, a 31% jump from the previous 12-month record. Officials at the agency, which pays whistle-blowers for information that leads to successful investigations, say the surge really started gaining traction in March when Covid-19 forced millions to relocate to their sofas from office cubicles."

It seems that the enforced social distance has lowered employees' inhibitions about voicing their concerns:

"The isolation that comes with being separated from a communal workplace has made many employees question how dedicated they are to their employers, according to lawyers for whistle-blowers and academics. What's more, people feel emboldened to speak out when managers and co-workers aren't peering over their shoulders."

Of course, the lowering of employees' inhibitions may also have been aided by the financial rewards associated with those reports that lead to a successful prosecution:

"Since the pandemic hit the U.S., the agency has paid out some $330 million in awards, including an eye-popping $114 million to a single tipster in October. While the payments are tied to SEC investigations that almost certainly predate coronavirus, the amount of money going out the door is unprecedented in the decade since the regulator started its whistle-blower program."

For firms, of course, this heightened risk merely increases the value of having effective ethical cultures and compliance programs:

"For corporations, the rise in tips risks triggering a consequence from work from home that will last long after employees return to the office. Even if few of the tips lead to SEC enforcement cases, companies could still be dealing with years of compliance distractions as the agency launches investigations, subpoenas documents and grills senior executives."

But, while the pandemic appears to have sharpened our ethical antennae, the pathway that led to the elevated reporting levels currently being recorded appears to be the financial rewards that the SEC was empowered to offer as part of 2010 Dodd-Frank Act:

"Under the program, tipsters can receive financial awards if they voluntarily provide unique information that results in an enforcement action. Payouts can range from 10% to 30% of the money collected in cases where sanctions exceed $1 million. Awards are paid from a fund set up by Congress -- not money owed to harmed investors."

It seems that the prospect of a large payout may be more persuasive than either an ethical conscience or the inability to live with the guilt of knowing you have witnessed wrongdoing:

"Leveraging whistle-blowers has become one of the SEC's most potent tools for rooting out financial crime, despite the fact that most of the tips the SEC receives don't lead to enforcement cases. Information has come from more than 100 countries, with whistle-blowers providing evidence such as texts, emails and recorded calls."

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/

Whistle-blowing Soars to Record with Americans Working from Home

By Matt Robinson and Benjamin Bain

January 12, 2021

Bloomberg

https://www.bloomberg.com/news/articles/2021-01-12/whistle-blowing-soars-to-record-with-americans-working-from-home