Strategic CSR - (Product)Red

I own a t-shirt with the logo "A t-shirt can change the world." It was produced by a partnership between the GAP and (Product)Red (https://red.org/). I was just thinking that I have not heard much from (Product)Red recently but, visiting their website, they claim the initiative (which is a series of products produced in partnership with name-brands, with a portion of the products going to support Red-related projects) has resulted in "$460 million dollars raised" and "90 million lives saved." My t-shirt contributed a very small amount to that total (and the broader project of 'changing the world'), but every time I wear it I question the validity of the claim.

 

While my heart wants to believe such altruism matters, the more I learn about economic theory and human psychology, the more it suggests to me that the market for such products is, at best, extremely limited. This is perhaps supported by the $460 million claim, which is not that much for an organization founded in 2006 (particularly given the high-profile publicity and support it enjoys). Moreover, there is research out there to suggest that self-styled social entrepreneurship companies such as TOMS are particularly inefficient ways to deliver social progress, and may even be harmful (see Strategic CSR – TOMS Shoes).

 

Nevertheless, the optimist in me is always open to be persuaded on this, which brings me to the article in the url below – a report on a new restaurant chain in LA that is using branches in wealthy neighborhoods to subsidize branches serving the same good quality food in poor neighborhoods:

 

"When a new restaurant called Everytable opens on Saturday in the poverty-stricken area of Los Angeles known as South L.A., a grab-and-go Jamaican jerk chicken bowl with coconut rice, beans, plantains and carrots will be the most expensive meal on the menu at $4.50. But this fall, when a second outpost of Everytable opens just two miles away in more affluent downtown Los Angeles, the same Jamaican jerk chicken bowl will cost $8.95. The big price difference represents an unusual experiment to address the persistent issue of limited food choices in poorer neighborhoods around the country. The higher prices at the downtown store are effectively meant to offset smaller profits at the other location, making the lower-priced restaurant more economically viable."

 

The challenge in what the entrepreneurs are attempting is revealed in their recoil at the mention of the word 'subsidy':

 

"Just don't call it a subsidy. 'We don't love the word subsidize because each store is designed to be individually profitable,' said Sam Polk, co-founder and chief executive of Everytable. Rather, he said he hopes customers in affluent neighborhoods will understand they are helping to underwrite sales of the same nutritious meals they are eating in neighborhoods where such food is typically unavailable because no one can afford it."

 

Not sure what the difference is between 'subsidize' and 'underwrite,' but perceptions are important I suppose. And the potential for success seems good here, given that the 'expensive' price is not really that expensive. A good quality lunch for $8.95 is very reasonable. In fact, whenever I see a price much cheaper than that, I suspect to be eating food that is compromised in some way. Since $8.95 doesn't feel expensive, most consumers will either not be aware or not mind that they are 'underwriting' the same meals for half the price elsewhere. Ultimately, however, I cannot escape the feeling that the success of the venture will have nothing to do with the altruistic business model, but whether consumers feel they are getting value for money for their $8.95 (and, for that matter, $4.50). And "value for money" means food that they want as well as food that is 'good' for them. If true, then the only difference between this new restaurant and any other restaurant is that the owner is willing to take lower profits. That is, of course, absolutely fine and completely up to him. Just call it what it is, capitalism, and stop pretending it is something else.

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (4e)

© Sage Publications, 2017

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e

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

 

 

Better Food, at a Bargain

By Stephanie Strom

July 28, 2016

The New York Times

Late Edition – Final

B1

http://www.nytimes.com/2016/07/28/business/the-same-healthy-food-but-its-cheaper-across-town.html

 

Strategic CSR - Pharmaceuticals

The article in the url below is notable primarily because it deals with the supply chain responsibilities of suppliers, rather than distributors. In other words, it looks forward and up the supply chain, rather than behind and down the supply chain:

 

"Drug manufacturers will have to adhere to new rules governing the chain of custody for pharmaceuticals as they move through the supply chain, with others in the distribution system eventually having to come into compliance."

 

Much of the supply chain debate within the CSR community focuses on the responsibilities that companies like Walmart, Nike, or GAP have for their suppliers. There is little discussion about what responsibilities suppliers (such as mining companies or pharmaceutical companies) have for how their products are used further up the supply chain by distributors (see: Strategic CSR – Distributors):

 

"The Drug Quality and Security Act, which takes effect Jan. 1 [2015], will 'make sure the drug you are getting is the drug the manufacturer produced and that every set of hands that touched it in the supply chain didn't compromise it at all.'"

 

The result should be responsibility spread more evenly throughout the supply chain (among companies that are, after all, all independent entities), with greater transparency leading to better outcomes for consumers:

 

"… companies will be required to keep records of the transaction history of the drugs moving through their systems. … Such a system also will help guard against the introduction of counterfeit drugs, which will not only protect a company's revenue stream but also guard against any potential reputational harm. … Eventually, consumers will be able to scan their medicine at a retail counter to authenticate whether it is real or counterfeit."

 

Take care

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

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

 

 

New Drug Supply Chain Rules Set to Take Effect

By Ben DiPietro

December 16, 2014

The Wall Street Journal

http://blogs.wsj.com/riskandcompliance/2014/12/16/the-morning-risk-report-new-drug-supply-chain-rules-set-to-take-effect/

 

Strategic CSR - Distributors

While we have done a better job within the CSR community of holding firms responsible for their supply chain, there is much less discussion about distribution. But, if we are going to say a firm is responsible for actions taken by firms that precede it in the supply chain, why are we not willing to say the same about actions taken by firms that come after it?

 

This does not diminish the good work done in terms of lifecycle pricing and the post-consumption obligations of the business to consumer relationship. In fact, it is all part of the same discussion—it is all a matter of where to put the emphasis. In particular, I have not heard any discussion of responsibilities further up the distribution chain for businesses.

 

This issue emerged in a discussion I had with a colleague recently while we were talking about the mining industry. Why are extraction firms not held accountable for subsequent uses of the raw materials they take out of the ground? While there has been some discussion of conflict diamonds/minerals, responsibility for the supply chain appears to rest with the firm that sells the finished product, rather than the firm that sold the component parts. Take e-waste, for example—Why are we willing to hold a firm like Dell responsible for recycling those parts of the computer that are toxic (precious metals and minerals), but not the firm that was responsible for extracting those metals and minerals and selling them to Dell (and others)?

 

This is an issue that has yet to emerge for extraction companies, but it is not difficult to imagine a day when that happens. If we want to hold GAP, Nike, and Walmart responsible for the actions of other firms far removed from them closer to source, we will one day surely hold extraction firms responsible for the actions of other firms and consumers closer to consumption.

Given this, the progressive extraction company that is sensitive to the relationships it has with its stakeholders, broadly defined, will act now to get ahead of this issue and prevent the future risk to business that it could well become (see: A Rational Argument for CSR, p16).

 

Take care

David

 

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

 

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

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

 

Strategic CSR - BP

The articles in the two urls below present interesting perspectives on the ecological disaster currently unfolding in the Gulf of Mexico. On a negative note (among many negatives in this story), the first article argues that the disaster undermines President Obama’s move to forge a bipartisan coalition in support of the climate change legislation currently working its way through Congress:

“Last month, Mr Obama sacrificed much of his support among environmental groups when he lifted the US ban on new offshore drilling in an attempt to win Republican support for a climate change bill. … Barring the already-declared support of Lindsey Graham, a senator from South Carolina, the move had little effect on a Republican party that sees any attempt to cap carbon as a new tax. The BP spill is likely only to crystallise that divide. But Mr Obama’s decision to lift the moratorium makes it much harder for him to exploit those divisions.”

On a slightly more positive note, the second article suggests the oil spill can help the environmental debate. In short, the pollution in the Gulf is pollution that the public finds harder to ignore because it is “highly visible”:

“Environmentalism began as a response to pollution that everyone could see. … It wasn't that hard, under the circumstances, to mobilize political support for action. The Environmental Protection Agency was founded, the Clean Water Act was enacted, and America began making headway against its most visible environmental problems. Air quality improved: smog alerts in Los Angeles, which used to have more than 100 a year, have become rare. Rivers stopped burning, and some became swimmable again. And Lake Erie has come back to life, in part thanks to a ban on laundry detergents containing phosphates.”

Yet, the author argues that the cost of this success was waning public support for the environmental movement and many of the legislative and regulatory restrictions that were initially introduced:

“For one thing, as visible pollution has diminished, so has public concern over environmental issues. According to a recent Gallup survey, ''Americans are now less worried about a series of environmental problems than at any time in the past 20 years.'' This decline in concern would be fine if visible pollution were all that mattered -- but it isn't, of course. In particular, greenhouse gases pose a greater threat than smog or burning rivers ever did. But it's hard to get the public focused on a form of pollution that's invisible, and whose effects unfold over decades rather than days.”

Nevertheless, at best, this optimistic perspective on a disaster that will likely be America’s worst since the Exxon Valdez in 1989, is only “a small silver lining to a very dark cloud.”

One reaction I have had to the crisis concerns the issue of where ‘blame’ ultimately lies. BP says “It wasn’t our accident” (see BP’s official response at: http://www.bp.com/productlanding.do?categoryId=40&contentId=7061696). The firm states that, although it will take responsibility for the clean-up, the rig that sank was owned and operated by its partner, Transocean. As such, BP claims it was Transocean’s systems and procedures that failed, rather than its own. The more I think about this, however, the more I see a parallel with the debate in the CSR community over the responsibility of a firm for its extended supply chain. When an Indian sub-sub-sub-contractor of GAP was found to be employing children in 2007, GAP was dragged over the coals, even though the guilty supplier was several degrees removed from the firm (http://www.nytimes.com/2007/11/16/business/worldbusiness/16gap.html):

“… the vendor that got the Gap order for the children's clothes had employed a rural community center to do the embroidery work but that this entity had subcontracted the work to a Delhi workshop where children were employed. While auditing in factories is relatively straightforward, checking conditions in the informal workshops where hand embroidery is done is harder because large contracts are often divided up among dozens of small workshops.”

If GAP can be held responsible for a transgression committed at such a distance, and given BP’s recent safety issues in Texas (2005) and oil spills in Alaska (2006), what conclusions can we draw about the quality control systems BP has in place for its partner firms that are extracting the oil that it ‘owns’?

Take care
David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility

© Sage Publications, 2006

http://www.sagepub.com/Werther/

From tragedy can come a new direction for US energy
By Edward Luce
743 words
4 May 2010
Financial Times
London Ed1
08
http://www.ft.com/cms/s/0/19769bf6-56d8-11df-aa89-00144feab49a.html

Drilling, Disaster, Denial
By PAUL KRUGMAN
803 words
3 May 2010
The New York Times
Late Edition - Final
25
http://www.nytimes.com/2010/05/03/opinion/03krugman.html

Strategic CSR - Product (Red)

The press release in the url below contrasts the cynicism it says people feel towards the idea “that we can help poor victims of AIDS in Africa by going shopping” with the notable success of Product (Red) (http://www.joinred.com/):

“Then again, there’s this number: $110 million. That’s the amount of money that (Red) partners have generated for the Global Fund To Fight AIDS, Tuberculosis and Malaria to provide AIDS treatment in Ghana, Rwanda, Swaziland and Lesotho.”

Product (Red) was launched in January 2006 by, among others, Bono and the range of products now available is extensive:

“… now you can buy (Red) phones from Motorola, (Red) iPods from Apple, (Red) greeting cards from Hallmark, (Red) laptops from Dell, (Red) shoes from Converse and (Red) watches from Emporio Armani.”

In spite of this success, however, the author outlines three reasons for concern that expose the limitations of such campaigns. The first reason argues for greater transparency among the participating firms:

“… if all these companies want credit for supporting a good cause, we ought to be able to know how much financial support they are actually delivering.”

The second reason questions whether consumption provides a sustainable solution to any social problem:

“But Americans already consume way too much stuff. The message of Product (Red) is that we can buy that new cell phone or wrist watch and feel good about it because we are helping victims of AIDS.”

And, the final reason raises the potential that Product (Red) might result in an overall decrease in social engagement:

“But what if, after buying that Gap T-shirt, consumers feel they’ve done their part? What if Product (Red) becomes a substitute for either activism or charitable giving?”

Take care
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006
http://www.sagepub.com/Werther

Better (Red) Than Dead
Marc Gunther
CSRwire Weekly News Alert
August 5, 2008
http://vcr.csrwire.com/node/9680

Strategic CSR - Patagonia

The press release in the first url below tracks the evolution of the cutting edge practices some firms are adopting regarding CSR reporting (Chapter 4: CSR Audit and Report, p72; Issues: Auditing CSR, p94):

“With its Footprint Chronicles, Patagonia is taking the next step in a broader trend toward greater transparency on corporate social and environmental impacts. A website that tracks and discloses “the good and the bad” in Patagonia’s supply chain, the Footprint Chronicles build on a history of bold actions by other companies seeking to be “candid and forthright” in their transparency.”

Greater levels of transparency allow a firm’s stakeholders to better understand a firm’s actions and compare it to expectations. Minimizing the information asymmetry that exists between firms that control access to much of the information stakeholders need to evaluate firm performance stands to reduce uncertainty and head off potential unnecessary clashes. Rather than see greater transparency as a burden or intrusion, therefore, the most progressive firms will view it as an uncertainty reduction and risk management tool in its attempts to meet the needs and demands of key stakeholder groups:

“Patagonia, like its predecessors, figures its customers and investors are savvy enough to know that problems exist in its manufacturing processes. So instead of glossing over them, Patagonia exposes the problems--in hopes of partnering with its customers to create solutions.”

Additional detail about Patagonia’s “Footprint Chronicles” initiative—“an effort to document and share with customers information about the environmental effects of every link in the supply chain,” is contained in the article in the second url below.

Take care
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006
http://www.sagepub.com/Werther

The Latest Corporate Social Responsibility News - Patagonia Takes Next Step in Corporate Transparency and Accountability
Borrows Elements from The Gap, Timberland, and Stonyfield
CSRwire Weekly News Alert
http://www.csrwire.com/News/11480.html

Measuring Footprints
A new program at Patagonia tells consumers about the eco-impact of its products -- and helps the company get greener.
Fast Company Magazine
From: Issue 124 | April 2008 | Pages 59-60 | By: Alissa Walker
http://www.fastcompany.com/magazine/124/measuring-footprints.html

Strategic CSR - Fashion

The slide show put together by Businessweek in the url below highlights the extent to which social issues are beginning to surface in the fashion industry (Issues: Auditing CSR, p94; Advertising, p151; Brands, p153; Cultural Conflict, p160; Sex, p268):

“Fashion used to be the epitome of vanity and conspicuous consumption. But now, a number of designers are espousing causes, such as erasing global poverty and AIDS, and producing clothing that drives emerging nation development and combats worker abuses.”

The poster child for such efforts is Bono’s Product Red:

“Partner companies include Gap, which is selling a number of Red-branded products including an African cotton T-shirt made in Lesotho; Converse, which is offering a limited-edition sneaker made of African mud cloth; and Giorgio Armani, which plans to expand its Product Red line to include fragrances and jewelry this spring.”

But, a number of other designers and clothing firms are also featured:

“American Apparel trumpets its “vertically integrated” manufacturing, which consolidates every stage of production into its factory in downtown Los Angeles. “Worker-positive” conditions are bolstered by subsidized lunches, free English classes, low-cost health insurance, and on-site massages. The company recently launched a Sustainable Edition line of T-shirts made with organic cotton and has pledged to convert more than 80% of its cotton consumption to sustainable cotton over the next several years.”

To the extent that these products are demand-driven, the increasing expectations placed on businesses to solve social problems are a positive. To the extent, however, that they are supply-driven, with little consumer support, they are likely to be short-lived. One year after the publication of this article, it would be interesting to see sales figures associated with each of the products and firms featured here.

Take care
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006
http://www.sagepub.com/Werther

Business Week Online
Insider Newsletter
Friday, January 12, 2007
********************
GUILT-FREE FASHION
Humanity Is Now in Fashion
A new breed of designer is looking at clothing as a way to help address social ills
By Kerry Miller
http://newsletters.businessweek.com/c.asp?id=643684&c=c55a2ee820194f0f&l=6

Strategic CSR - GAP

The article in the url link below reports on GAP’s response to a piece of investigative journalism in October by the UK newspaper The Observer that uncovered evidence of under-age children making GAP clothes (Issues: Auditing CSR, p94; Cultural Conflict, p160). The story is interesting on two levels. First, the speed and extent of GAP’s response, which seems to me to be genuine:

“Gap said it would refine its procedures to ensure that items made in textile workshops in India were not being produced by children. It also announced a grant of $200,000 to improve working conditions and said it would hold an international conference next year to come up with solutions for issues related to child labor. … the children who were found to be embroidering decorations on blouses for toddlers for Gap would be paid until they were of working age and then offered employment.”

Second, the extent to which GAP could have (or should have) been expected to avoid this problem:

“… the vendor that got the Gap order for the children's clothes had employed a rural community center to do the embroidery work but that this entity had subcontracted the work to a Delhi workshop where children were employed. While auditing in factories is relatively straightforward, checking conditions in the informal workshops where hand embroidery is done is harder because large contracts are often divided up among dozens of small workshops.”

It is one thing for a firm to be held responsible for the business practices of an immediate supplier. It seems to be another thing altogether to expect GAP to know about a sub-contractor (“a rural community center”) that had again contracted out this order to a Delhi factory—three steps removed from the initial order by GAP. The extent to which a firm is responsible for the actions of its suppliers throughout its supply chain (as well as how that responsibility should be enforced) is an issue on which a consensus within the CSR community is yet to arise.

Take care
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006
http://www.sagepub.com/Werther/

Gap Vows To Combat Child Labor At Suppliers
By AMELIA GENTLEMAN
557 words
16 November 2007
The New York Times
Late Edition - Final
6
http://www.nytimes.com/2007/11/16/business/worldbusiness/16gap.html