Strategic CSR - Plastic

I knew the level of pollution in our oceans was a problem. The article in the url below, however, demonstrates just how much of a problem it has become:

 

"The world is awash in plastic. It's in our cars and our carpets, we wrap it around the food we eat and virtually every other product we consume; it has become a key lubricant of globalization — but it's choking our future in ways that most of us are barely aware."

 

Two facts, in particular, stood out. First:

 

"Plastics are now one of the most common pollutants of ocean waters worldwide. Pushed by winds, tides and currents, plastic particles form with other debris into large swirling glutinous accumulation zones, known to oceanographers as gyres, which comprise as much as 40 percent of the planet's ocean surface — roughly 25 percent of the entire earth."

 

And, second:

 

"In a 2010 study of the Los Angeles and San Gabriel Rivers, my colleagues and I estimated that some 2.3 billion pieces of plastic — from polystyrene foam to tiny fragments and pellets — had flowed from Southern California's urban centers into its coastal waters in just three days of sampling."

 

To repeat, that is 2.3 billion pieces in 3 days! As a result:

 

"We suspect that more animals are killed by vagrant plastic waste than by even climate change."

 

One solution, of course, is to incorporate the true costs associated with the consumption of these plastics into the price paid for the product (see, Chapter 8: Case-study – Lifecycle Pricing, p473). This will reduce consumption and would make recycling a more cost-effective option. Most importantly, it would incentivize businesses to innovate and develop a more environmentally efficient (and, in a lifecycle pricing model, less costly) alternative.

 

I will be travelling for the rest of this week, so there will be no Newsletters on Wednesday and Friday this week.

Happy Thanksgiving to all of you here in the U.S.

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/

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

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

 

 

Choking the Oceans With Plastic

By Charles J. Moore

August 26, 2014

The New York Times

Late Edition – Final

A23

http://www.nytimes.com/2014/08/26/opinion/choking-the-oceans-with-plastic.html

 

Strategic CSR - Monsanto

At the significant risk of provoking the wrath of a fair number of you (yet again J), I wanted to round-off our week's look at GMOs by stating that I continue to be fascinated by Monsanto. I am fascinated by the science and technology behind the company's innovations; I am also fascinated by the activists who push back against Monsanto—many of whom are no doubt persuaded by the science behind climate change, but not by the science behind GM foods (see: Strategic CSR – GM Foods; see also this article from The Economist).

 

As I have said before, there is insufficient land in the world to satisfy our growing food demands solely via organic production methods. While national governments play a huge role in policing food production (making sure it is safe and sustainable, and minimizing waste), it is hard to escape the conclusion that firms like Monsanto need to be included as part of the solution to satisfying the nutritional needs of the world's population.

 

Given this, the article in the url below, which is an interview with Monsanto's president and COO, Brett Begemann, reminded me of my interest in the company (along with an extended profile in Bloomberg Businessweek over the summer). Here are some highlights:

 

"The world's largest-grossing seed seller ranks between one and 15 on any list of the world's most-hated corporations. The annual 'March Against Monsanto,' world-wide protests against genetic modification, drew an estimated two million people in some 400 cities last year."

 

"The use of biotechnology has skyrocketed since GM crops were first commercialized in 1996, and more than 90% of all acres planted with corn and soybeans are now GM crops. These crops, typically fed to livestock and used as ingredients in other foods, are in nearly 80% of the products on grocery-store shelves."

 

"In 2011 farmers earned $19.8 billion added economic benefit from GM crops, according to a 2013 report by the U.K.-based PG Economics."

 

"In 1996 Monsanto commercialized its first GM crop, a herbicide-resistant soybean seed."

 

"'The biotech-derived products that we eat are the most highly tested and regulated components in what we consume,' Mr. Begemann says. A new seed must be reviewed by the Department of Agriculture. Then there's a voluntary check from the Food and Drug Administration. If the GM seed includes insecticides or pesticides, as most do, the Environmental Protection Agency gets a look. It takes about $100 million to get one seed from discovery to market. Crops that are bred conventionally, on the other hand, undergo no government testing. None."

 

"In a recent poll for The Wall Street Journal by the market-research firm Nielsen, about 60% of 1,200 consumers said they had heard of GMOs, and roughly half said they try not to eat them. The most common explanation was it 'doesn't sound like something I should eat.'"

 

"One irony is that GM crops help the environment by reducing pesticide use. Thanks to fewer sprays and less tillage, GM crops in 2012 reduced world-wide carbon emissions by 26.7 billion kilograms—the equivalent of taking 11.8 million cars off the road for a year, according to a 2013 report by the International Service for the Acquisition of Agri-Biotech Applications."

 

"By 2050 there will be nine billion people on earth, and they will want dinner. GM crops are not a panacea, Mr. Begemann reminds me many times, but 'just one of many tools' that farmers should be allowed to choose."

 

Have a great weekend.
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/

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

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

 

 

Meet Mr. Frankenfood

By Kate Bachelder

August 23-24, 2014

The Wall Street Journal

Late Edition – Final

A11

http://online.wsj.com/articles/meet-mr-frankenfood-1408748277

 

Strategic CSR - Ben & Jerry's

What I find interesting in the article in the url below is not Ben & Jerry's commitment to removing GMOs (genetically modified organisms) from its products, but the complexity involved in reaching that goal, which is staggering. Essentially, GMOs are everywhere:

 

"Two decades after the first genetically engineered seeds were sold commercially in the U.S., genetically modified organisms—the crops grown from such seeds—are the norm in the American diet, used to make ingredients in about 80% of packaged food, according to industry estimates."

 

The process is complex, even for a company that really makes only one product—ice-cream. The extent to which B&J's has to reach back into its supply chain to ensure that none of its ingredients are "contaminated" with GM foods is mind-boggling:

 

"Ben & Jerry's said most ice cream ingredients were already non-GMO. Still, the company needed to check with suppliers and rigorously investigate all 110 ingredients it uses to make ice cream. Among the surprises: finding out a product couldn't be considered non-GMO if the supplier dusted the pan with cornstarch before baking. The supplier had to switch to rice starch."

 

Essentially, B&J's has divided the task into two phases—first, removing GM ingredients from the "chunks and swirls" that it adds to its ice-cream and, second, removing GMOs from the milk it uses to make its ice-cream. While the company is approaching the end of phase 1 (almost two years after committing to this goal and one year behind schedule), removing GMOs from the milk it uses is proving to be much more difficult:

 

"The vast majority of the feed given to dairy cows in the U.S. is made with GMO corn, soybeans and alfalfa. That makes it difficult to find non-GMO milk in quantities large enough for Ben & Jerry's, so the company hasn't committed to doing it. Labeling laws like the one passed in Vermont don't apply to meat or dairy derived from animals that consumed GMO animal feed, buying Ben & Jerry's more time. "We are having conversations with multiple stakeholders throughout the entire supply chain," Mr. Michalak said. 'It's a slow process.'"

 

What is making a complex issue even more convoluted is B&J's nuanced public statements about GMOs:

 

"Ben & Jerry's, which ranks fifth among U.S. ice cream brands by sales, says it doesn't consider GMOs unsafe to humans either, but has always positioned itself as an environmentally friendly, socially progressive brand. Executives long wanted to drop GMOs, which they feel are part of industrialized, chemical-intensive agriculture that the company opposes, said Mr. Michalak, the social mission director. But the company didn't start discussing converting its flavors with suppliers until 2012."

 

And, even if a company wants to go "non-GMO," what that means in practice is not agreed upon and is far from standardized:

 

"Unlike with organic foods—which also can't contain GMOs but must follow additional restrictions—the government sets no standard for what qualifies as 'non-GMO.' Companies seeking some authoritative imprimatur must go to third-party certifiers, usually the Non-GMO Project, a nonprofit group founded by natural foods retailers. It vets applicants with an almost religious exactitude."

 

Take just one ingredient, honey, for example:

 

"To gain its certification, Enjoy Life Foods LLC, a small Schiller Park, Ill.-based company that makes gluten- and allergen-free snacks, traced its honey to the hive. 'We had to go to our honey suppliers, who went to the bee keepers, who had to actually determine how far the bees could fly to make sure they weren't cross-pollinating at any GMO fields,' said Joel Warady, its chief sales and marketing officer. … The Non-GMO Project, which has verified more than 17,000 products, says such lengths are necessary to ensure the bees aren't feeding on nectar or pollen from GMO crops. Thus, the organization requires a four-mile radius from the bee hives be clear of GMO fields."

 

In spite of the complexities, companies are increasingly feeling pressured to remove GMOs from their products:

 

"In addition to Ben & Jerry's, a subsidiary of Unilever PLC, General Mills Inc. this year started selling its original flavor Cheerios without GMOs. Post Holdings Inc. took the GMOs out of Grape-Nuts. Boulder Brands Inc.'s Smart Balance has converted to non-GMO for its line of margarine and other spreads. Chipotle Mexican Grill Inc. is switching to non-GMO corn tortillas."

 

There is also potential compeititve advantage in taking this action because, given the widespread use of GMOs, removing them from products constitutes a point of differentiation:

 

"'Non-GMO' is one of the fastest-growing label trends on U.S. food packages, with sales of such items growing 28% last year to about $3 billion, according to market-research firm Nielsen. In a poll of nearly 1,200 U.S. consumers for The Wall Street Journal, Nielsen found that 61% of consumers had heard of GMOs and nearly half of those people said they avoid eating them. The biggest reason was because it 'doesn't sound like something I should eat.'"

 

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/

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

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

 

 

GMO Fight Ripples Down Food Chain

By Annie Gasparro

August 8, 2014

The Wall Street Journal

Late Edition – Final

A1

http://online.wsj.com/articles/the-gmo-fight-ripples-down-the-food-chain-1407465378

 

Strategic CSR - GMOs

This week, I would like to use the Newsletters to discuss a number of articles I have seen recently about genetically modified foods.

 

I wanted to start with the radio story in the url below, which is interesting for two reasons: First, it reports on the increasing number of companies that are dropping genetically-modified organism (GMO) ingredients from their foods:

 

"The Non-GMO Project has certified more than 20,000 products since it launched in 2007, and … says this is one of the fastest growing sectors of the natural food industry, representing $6 billion in annual sales."

 

Second and more interesting, however, the story reports that the firms that are doing this are not necessarily advertising the fact:

 

"General Mills' original plain Cheerios are now GMO-free, but the only announcement was in a company blog post in January. And you won't see any label on the box highlighting the change. Grape Nuts, another cereal aisle staple, made by Post, is also non-GMO. And Target has about 80 of its own brand items certified GMO-free. Megan Westgate runs the Non-GMO Project, which acts as an independent third-party verifier of GMO-free products, including Target's. She says her organization knows about 'a lot of exciting cool things that are happening that for whatever strategic reasons get kept pretty quiet.'"

 

It seems that, while non-GMO foods are increasingly being demanded by consumers (or, at least, the right to know whether GMOs are in the foods they are eating), firms that are responding to this demand feel there is limited marketing value in doing so. In other words, firms perceive that while some consumers will value this change, it is not clear that all or even most consumers will do so. As such, companies are taking a progressive stance on a sensitive social issue (appealing to those consumers who support removing GMOs from foods), but are not communicating the change in case it adversely affects other consumers who prefer the status quo. Ben & Jerry's offers a perfect example of the consequences of altering an established product:

 

"One recently deceased flavor [is] Coffee Heath Bar Crunch, one of the company's best-sellers. Ben & Jerry's CEO Jostein Solheim says the company had to remove the key ingredient, Heath bars made by Hershey, and rework the flavor. Its replacement is called Coffee Toffee Bar Crunch. (Some fans have blasted the company in online forums, claiming it doesn't taste as good.) The reason for the change? Hershey makes Heath bars with genetically engineered ingredients, and Ben & Jerry's has made a pledge to remove all GMO ingredients from its ice cream."

 

And, to make walking this fine line on an evolving social issue even more delicate, some of the same firms that are voluntarily removing GM ingredients from their foods are also fighting local initiatives that require greater transparency in food labelling:

 

"They often fight those battles through the powerful Grocery Manufacturers Association, or GMA, a trade group with hundreds of members. It has just filed suit against Vermont over the state's GMO labeling law. Even Ben & Jerry's, so vocal in its anti-GMO stance, has a conflict, of sorts. It may have eliminated GMOs, but it's still owned by Unilever, which put a lot of money toward fighting labeling legislation in California and belongs to the GMA."

 

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/

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

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

 

 

Some Food Companies Are Quietly Dumping GMO Ingredients

By Jane Lindholm

July 22, 2014

National Public Radio

http://www.npr.org/blogs/thesalt/2014/07/22/333725880/some-food-producers-are-quietly-dumping-gmo-ingredients

 

Strategic CSR - Chinese edition

If any of you ever have the need, the Chinese edition of Strategic CSR (3e) has just been published:

 

 

 

This adds to the Korean translation of the 2e that was published in 2013:

 

 

 

Thank you all very much for your ongoing support.

 

Have a great weekend.

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/

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

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

 

Strategic CSR - Alternative energy

The article in the url below presents a fascinating breakdown of the costs (and relative efficiencies) of different energy sources. In doing so, it makes a compelling argument that government subsidies are hurting as much, if not more, than they are helping us transition away from fossil fuels:

 

"Billions are spent nursing the infant solar- and wind-power industries in the hope that they will one day undercut fossil fuels and drastically reduce the amount of carbon dioxide being put into the atmosphere."

 

On the face of it, government subsidies are working:

 

"Photovoltaic panels have halved in price since 2008 and the capital cost of a solar-power plant—of which panels account for slightly under half—fell by 22% in 2010-13. In a few sunny places, solar power is providing electricity to the grid as cheaply as conventional coal- or gas-fired power plants."

 

In reality, however, they are encouraging the most inefficient alternative energies—wind and solar:

 

"… whereas the cost of a solar panel is easy to calculate, the cost of electricity is harder to assess. It depends not only on the fuel used, but also on the cost of capital (power plants take years to build and last for decades), how much of the time a plant operates, and whether it generates power at times of peak demand. To take account of all this, economists use "levelised costs"—the net present value of all costs (capital and operating) of a generating unit over its life cycle, divided by the number of megawatt-hours of electricity it is expected to supply."

 

What the government should be doing is helping set a penalty for burning carbon (via a carbon tax) and then allowing the market to determine which alternative energy source provides the greatest overall benefit. When you consider all the costs involved in generating the energy (such as transporting it to where it is needed) and all the potential benefits (such as emissions avoided), the graphic that accompanies the article makes it clear that natural gas is the most cost effective alternative currently known to humanity, while nuclear is the most effective zero emissions energy source:

 

http://cdn.static-economist.com/sites/default/files/imagecache/original-size/images/print-edition/20140726_FNC393.png

 

Specifically:

 

"If all the costs and benefits are totted up … solar power is by far the most expensive way of reducing carbon emissions. It costs $189,000 to replace 1MW per year of power from coal. Wind is the next most expensive. Hydropower provides a modest net benefit. But the most cost-effective zero-emission technology is nuclear power. The pattern is similar if 1MW of gas-fired capacity is displaced instead of coal. And all this assumes a carbon price of $50 a tonne. Using actual carbon prices (below $10 in Europe) makes solar and wind look even worse. The carbon price would have to rise to $185 a tonne before solar power shows a net benefit."

 

Emissions of carbon dioxide should not be the only criteria on which an energy source is chosen (as the article notes), but the article does make clear that our current understanding of these issues is limited and is certainly not at a level where the government should be picking winners and losers via misguided subsidies.

 

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/

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

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

 

 

Sun, wind and drain

July 26, 2014

The Economist

63

http://www.economist.com/news/finance-and-economics/21608646-wind-and-solar-power-are-even-more-expensive-commonly-thought-sun-wind-and

 

Strategic CSR - Supply chain

The article in the url below indicates opposite approaches to the same problem (tainted food ingredients in the supply chain) by different companies (McDonald's, KFC, and Yum Brands):

 

"The allegations came in a report from Dragon TV–continuing a pattern of Western companies facing critical scrutiny from Chinese TV stations–which said the Shanghai unit of OSI Group Inc. had been supplying meat that was beyond its sell-by date."

 

While KFC and Yum Brands promptly dropped the supplier (OSI), McDonald's in China has decided to stick with the firm (at least for now) to try and correct the situation. As commentators in the article note, this may be because it is simply more expedient to try and salvage a known supplier, rather than invest the cost and time to find a new partner firm. Whether by luck or design, however, McDonald's approach is also consistent with what I understand best CSR practice to be in situations like this:

 

"Anthony Johndrow of the Reputation Institute views McDonald's stance as a thoughtful approach to protecting its reputation. 'I think they're smart in trying to handle this strategically rather than just throwing the supplier under the bus,' he said. Both McDonald's and OSI have offered fulsome apologies and the next step is to take 'tangible, believeable steps' that will allow McDonald's to demonstrate its attention to its supply chain and to hygiene issues, Mr. Johndrow said. The crisis could turn out to be an object lesson, he said: 'There's a new story being told here.'"

 

For McDonald's, the greater long-term investment might be in re-training OSI to ensure the higher standards now in place are met. Doing so also sends a positive message to McDonald's other suppliers that the firm is more interested in developing meaningful relationships and will not cut-and-run at the first sign of trouble. In this case, continued vigilance will/should also involve regular audits. But, given OSI's apparent contrition, and keeping in mind the value of supporting firms and industries in developing economies by encouraging production capabilities (something that is in everyone's interests, especially  those of McDonald's), it seems to me that giving OSI the opportunity to correct its serious mistakes is the right response at this stage.

 

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/

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

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

 

 

McDonald's Takes New Approach to China Food Scare

By Nicholas Elliott

July 28, 2014

The Wall Street Journal

Late Edition – Final

http://blogs.wsj.com/riskandcompliance/2014/07/28/the-morning-risk-report-mcdonalds-takes-new-approach-to-china-food-scare/

 

Strategic CSR - HSBC

The article in the url below contains a staggering statistic:

 

"HSBC Holdings PLC's third quarter earnings call brought the striking revelation that nearly 25,000 of its 258,000 employees, almost 10%, work in compliance. Compliance was a major driver in the 5% increase in operating expenses reported, and management left no doubt that higher compliance costs would not go away soon, if ever."

 

That statistic (10% of all employees work in compliance) is a function of operating in a highly regulated industry. These regulations, however, are a function of past behavior that ignores the interests of a broad range of stakeholders. The result of such a narrow operational perspective is to invite additional scrutiny from the regulatory authorities. Banks have no one to blame but themselves for the increased costs that come from having to comply with that scrutiny.

 

Have a good weekend.
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/

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

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

 

 

HSBC Costs Illustrate New Cost of Banking

By Gregory J. Millman

November 4, 2014

The Wall Street Journal

http://blogs.wsj.com/riskandcompliance/2014/11/04/the-morning-risk-report-hsbc-costs-illustrate-new-cost-of-banking/

 

Strategic CSR - Corporations

The article in the url below is an interesting survey of the state of CSR today – where we have been and, possibly, where we are going. In the process, it poses the following question:

 

“Is it naïve to expect corporations to assist in addressing the social, economic and environmental challenges of the day?”

 

There are two points the author makes, in particular, that I want to highlight. First, is the idea that the executives who lead the corporations of the past:

 

“… served not just stockholders, but also workers, customers and the community.”

 

The implication reinforced throughout the article is that executives today serve only stockholders. It is frustrating continually to see such complex ideas presented so simplistically. I understand the constraints of space that newspaper journalists face, but that does not seem to be the main driver behind the problem. In general, we like to see the world as a series of dichotomies, rather than the continua that are all around us. Businesses today operate within a series of stakeholder relationships. They do not choose this; it is simply the way that it is. Now, they can certainly prioritize the interests of one group over another, but it is not true to say that executives only care about stockholders. It is impossible to run a business that way. An overly simplistic representation of this when discussing CSR prevents the more important discussion around stakeholder prioritization, which is the true challenge that executives face. In fact, you could argue that the main job of executives today is to manage among competing stakeholder interests to allocate scarce resources in the best interests of the firm.

 

Second, the author concludes that, due to the narrow, distorted perspective of businesses today:

 

“Elected governments are certainly imperfect. But to address our most intractable ills, they are the better tool.”

 

As someone who has been thinking about CSR for many years (so is well aware of the many ways in which for-profit firms both create and destroy value, broadly defined), I think this statement is ludicrous. A strong and active government is clearly a vital component of a functioning democratic system. But, anyone who pins their hope for social progress primarily on government agencies and, heaven forbid, elected politicians, has just not been paying attention over the past few decades. No-one makes this point more effectively than Milton Friedman, in an interview on The Donahue Show in 1979 (http://www.youtube.com/watch?v=GapXLpLoZBs), which I show in my class and should be, I think, compulsory viewing for all business students:

 

“The great achievements of civilization have not come from government bureaus. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way. In the only cases in which the masses have escaped from [grinding poverty], the only cases in recorded history, is where they have had capitalism and largely free trade. If you want to know where the masses are worst off, it is exactly in the kinds the societies that depart from that. So the record of history is absolutely crystal clear, that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.”

 

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/

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

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

 

 

Motivating Corporations to do Good

By Eduardo Porter

July 15, 2014

The New York Times

Late Edition – Final

B1

http://www.nytimes.com/2014/07/16/business/the-do-good-corporation.html

 

Strategic CSR - Green bonds

The article in the url below reports the latest developments in the market for green bonds:

 

"… instruments which tie the proceeds of a bond issue to environmentally friendly investments. Issuers of green bonds raise money, promising to spend it on (for example) building wind farms or less-polluting factories."

 

The market for these environmental/social-impact bonds has increased significantly in only the last two years:

 

"In 2012 $3 billion of such bonds were sold. In the first six months of 2014, the sum was about $20 billion, nearly twice as much as in 2013 as a whole. … Climate Bonds Initiative, a research group, reckons the cumulative value of all green bonds will be around $50 billion by the end of 2014. … two or three times more than German taxpayers will spend subsidising wind and solar energy—the largest green subsidy in Europe."

 

And, as the market for green bonds evolves, more entities (in particular, for-profit firms such as Unilever and Toyota) have started to issue them:

 

"All green bonds are investment grade; many have been two or three times oversubscribed; half were issued by companies, a switch from 2013, when most green bonds were sold by international agencies such as the World Bank."

 

As these types of bonds become more popular, however, the definition of what constitutes a green bond has become more contentious:

 

"The trouble with this sort of discretion is that different people have different views. Is fracking green? Is nuclear power? The definition is likely to be tested further because a big oil firm is working on a green bond to finance a carbon-capture and storage (CCS) scheme. CCS is an important technology—but oil firms are, for the most part, seen as beyond the pale by greens."

 

As a result, green bonds are running into a problem that eventually faces any diffusing practice—the issue of validation:

 

"A market needs standardised products. … Earlier this year 13 banks drew up a shared set of principles governing different categories of bonds; 49 institutions have signed up. Nonetheless, there is far from universal agreement over the question, 'What makes a bond green?' At the moment the answer is, 'If someone says it is.'"

 

Similar challenges threatened (and, ultimately, undermined) the legitimacy of carbon offsets, which we no longer hear much about. Given the size of the market for green bonds relative to the total bond market ($50 billion verses $80 trillion), we should hope that green bonds are given a more stable footing than carbon offsets, and that this happens sooner rather than later.

 

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/

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

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

 

 

Green grow the markets, O

July 5, 2014

The Economist

Late Edition – Final

61

http://www.economist.com/news/finance-and-economics/21606326-market-green-bonds-booming-what-makes-bond-green-green-grow

 

Strategic CSR - Gulf of Mexico

The article in the url below reports that the dead zone, the area of the Gulf of Mexico that cannot sustain aquatic life, is now the size of Connecticut:

 

"The Gulf of Mexico's annual spring-summer 'dead zone' is the size of Connecticut -- slightly smaller now than in recent years but nowhere near the trim scientists had sought, researchers said this week."

 

The dead zone is formed by chemical run-off from agricultural pollutants (fertilizer, etc.) that finds its way into the Mississippi River and flows down into the Gulf of Mexico:

 

"The zone is formed by nutrients that wash into the Gulf's waters -- largely agriculture fertilizer and wastewater coming down the Mississippi River. These boost algae blooms that suck up the oxygen in deep water, according to NOAA and the U.S. Geological Survey. Marine life struggles to find enough oxygen to survive within the zone."

 

The map included in the article illustrates how big this problem has become:

 

http://i2.cdn.turner.com/cnn/dam/assets/140805053436-dead-zone-story-top.png

 

What I find ironic is that this dead zone never generates any public interest (let alone outrage). I put this down to the fact that we cannot see the damage being done (together, of course, with the influence of the agricultural industry's lobby in Washington). In contrast, the oil spill caused by the Deepwater Horizon explosion caused great public anger. This was justified, but the dead zone is a bigger problem that, unlike Deepwater Horizon, is not getting any better.

 

Happy Halloween.
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/

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

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

 

 

Gulf of Mexico 'dead zone' is the size of Connecticut

By Melodi Smith and Jason Hanna

August 7, 2014

CNN Tech

http://www.cnn.com/2014/08/05/tech/gulf-of-mexico-dead-zone/

 

Strategic CSR - Samsung

The article in the url below reports Samsung's discovery of child labor violations in its supply chain and its decision to suspend one of its suppliers as a result:

 

"Samsung Electronics said on Monday that it had temporarily suspended business with a factory in southern China after allegations last week that it had illegally hired under-age workers to produce cellphone components. … In a news release, Samsung said that the authorities in China were investigating the case, and that if the under-age workers had been hired illegally, the factory could be permanently barred from working with Samsung."

 

The Risk & Compliance Journal (a daily Newsletter published by the Wall Street Journal) commented on this story, arguing that this will likely encourage other firms to investigate their supply chains and root out similar transgressions, if they exist:

 

"Samsung Electronics Co.'s admission it has child labor within its supplier network and the U.S. State Department's recent demotions of Thailand, Malaysia and Venezuela to lowest-tier status for child and forced labor problems are serving as a wake-up call to multinational companies about cleaning up their own supply chains. Failing to weed out problems in their systems could lead to their bad behavior becoming front-page news, says the head of one organization fighting to eliminate child labor. 'The hide-your-head-in-the-sand days are over,' said Diane Mull, executive director of the International Initiative on Exploitative Child Labor."

 

Two things interest me about this case: First, is that Samsung apparently knew nothing about these violations, in spite of having widely-lauded audit procedures and auditing this specific factory three times in the past year (the last time less than a month ago):

 

"The allegations were embarrassing because on June 30, Samsung released its annual global sustainability report, which noted for the second year in a row that its audits had not turned up any under-age workers in more than 130 supplier factories audited in China. The company also said that it had strict compliance procedures in place, including facial recognition software at its facilities and instructions that Samsung suppliers refrain from hiring workers younger than 18."

 

Second, I agree that events such as this constitute "a wake-up call to multinational companies about cleaning up their own supply chains," but not in the way that the WSJ sees it. I think it is just as likely that companies will learn the opposite lesson from this – that if they keep quiet the chances are they will slide under the radar, but if they "weed out these problems" they will be pilloried in the press (rather than being lauded for having investigated and identified transgressions). Given the poor record of unearthing problems like this, companies continue to be incentivized to know as little as possible about what is going on in their supply chain. At least then they can claim ignorance, rather than companies that self-report a problem, only to be accused subsequently of covering things up. In short, firms are currently discouraged from seeking complete and voluntary transparency (think BP after the Deep Horizon oil spill). There are as many people waiting to take advantage of corporate willingness to admit wrongdoing as there are people willing to encourage such behavior in the first place.

 

Ultimately, whether or not there is a social sanction will determine whether such behavior is deterred. I wonder how many people chose not to purchase a Samsung phone as a result of this news story? I am guessing, not many.

 

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/

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

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

 

 

Samsung Suspends China Supplier Over Child Labor Case

By David Barboza

July 15, 2014

The New York Times

Late Edition – Final

B7

http://sinosphere.blogs.nytimes.com/2014/07/14/samsung-contractor-suspended-over-child-labor-allegations/

 

Strategic CSR - Australia

The article in the url below contains a bad headline:

 

"Australia Becomes First Developed Nation to Repeal Carbon Tax."

 

This matters because Australia was "one of the first major countries outside Europe to adopt a carbon price." More importantly, however, it matters because Australia is one of the highest carbon polluting countries, per capita, in the world:

 

"Australia, the world's 12th largest economy, is one of the world's largest per capita greenhouse gas emitters due to its reliance on coal-burning power stations to power homes and industry. In 2011, daily emissions per head amounted to 49.3 kilograms (108 pounds), almost four times higher than the global average of 12.8 kilograms, and slightly ahead of the U.S. figure of 48.2 kilograms."

 

The graphic accompanying the article shows Australia's carbon emissions relative to the rest of the G20—Australia is second only to Saudi Arabia:

 

http://si.wsj.net/public/resources/images/AI-CJ753_AUSCAR_G_20140717033604.jpg

 

What is also striking is that this decision by Australia runs counter to the global trend which, although achingly inertial, is at least moving in the right direction:

 

"The World Bank in May produced a State and Trends of Carbon Pricing report counting carbon pricing programs in 40 nations and 20 regions worth a collective US$30 billion, while also singling out repeal plans in Australia as one of the biggest international threats to the rollout of similar programs elsewhere, given its example."

 

Australia is not the only carbon bad news story, unfortunately. Both Japan and Canada, for essentially similar local, short-term political considerations, have also taken significant steps away from recent public commitments to lower their emissions:

 

"Japan last year retreated on pledges to cut greenhouse emissions, blaming the shutdown of its nuclear plants in the wake of the 2011 Fukushima nuclear disaster for a decision to release 3% more greenhouse emissions by 2020 instead of a 25% cut on 1990 levels previously promised. … Canada withdrew from the Kyoto protocol in 2011, with the conservative government saying the agreement would unfairly penalize its fossil fuel-reliant economy for failing to meet a promised 6% cut."

 

In short, what was already a slow, incremental process worldwide has just became slower and further away from where we need to be.

 

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/

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

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


Australia Becomes First Developed Nation to Repeal Carbon Tax

By Rob Taylor & Rhiannon Hoyle

July 17, 2014

The Wall Street Journal

Late Edition – Final

http://online.wsj.com/articles/australia-repeals-carbon-tax-1405560964

 

Strategic CSR - Waste

The article in the url below contains some interesting statistics regarding the extent of waste throughout the global food system:

 

"Our mission, should we choose to accept it, is first to find 175-220m hectares of additional cropland by 2030; second, to increase total food production by about 70% by 2050, mostly through improving crop yields; and third, to achieve all this without damaging the land, poisoning ourselves or impairing the health of our finite and already fragile ecosystems."

 

"This challenge is hard enough, but we also have to tackle the problem of 1.3bn tonnes of food wasted every year – roughly a third of all food produced for human consumption."

 

"According to the FAO, the total value of lost food is $4bn per year in Africa and $4.5bn a year in India, with up to 50% of fruit and vegetables ending up as waste. In developing countries including China and Vietnam, most food is lost through poor handling, storage and spoilage in distribution. It is estimated that 45% of rice in China and 80% in Vietnam never make it to market for these reasons."

 

The article proposes a variety of technological innovations (such as food packaging, refrigeration, transportation, and the treatment of animal by-products) as containing the potential solutions to these and other related problems. Reading the article, however, it sounds like a bit of common sense wouldn't go amiss either.

 

Have a good weekend.

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/

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

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

 

 

Tackling the food waste challenge with technology

By Wayne Visser

July 29, 2014

The Guardian

http://www.theguardian.com/sustainable-business/tackling-food-waste-technology-refrigeration-packaging

 

Strategic CSR - Impact investing

The article in the url below outlines a productive use for the money that U.S. corporations currently have parked offshore. And, there is a lot of it. The money is offshore because the companies want to avoid paying U.S. corporation taxes on it. As such, they are waiting for the U.S. government to grant them a tax holiday to re-patriate the funds. Although this would make some sense (the U.S. government could generate some income and the U.S. economy would benefit greatly), the article suggests these companies should not hold their collective breath:

 

"… bringing home more than $2tn in profit would cost billions in corporate taxes. So companies wait, find ways to park their funds overseas and hope for an unlikely tax holiday as their 'problem' grows. Just last year, these idle overseas amounts grew 11.8%."

 

In the meantime, the article's authors have come up with an interesting use for that money that revolves around solving one of the most pressing poverty-related problems facing a sizeable chunk of the world's population (many of whom are in India and Africa)—easy access to electricity:

 

"Most Americans take turning lights on for granted. But one in five people in the world still can't plug anything in. The World Bank estimates 1.2 billion people lack electricity all together – resulting in millions of premature deaths yearly – and many more have undependable or unaffordable electricity service."

 

The authors estimate that the amount needed to solve this problem is $50bn:

 

"… solar photovoltaic cells, batteries and LED lights have grown so cheap and durable that an 'off-grid' household – spending less than it would dole out on kerosene over two years – can harvest enough electricity to power lights and charge a cellphone for decades. In Africa, for example, companies such as Azuri Technologies and M-KOPA Solar already sell 'pay-as-you-go' electrification systems for as little as $1.50 per month. At $200 each for these systems, a total of $50bn in loans – over several years – would be enough to finance the electricity to light up the world's dark homes."

 

How feasible is this? Well, the $2 trillion in corporate assets parked offshore is more than 200 times the $50bn needed to solve the problem. In fact:

 

"Some companies have enough in overseas billions – take Apple's $138bn, GE's $110bn, Microsoft's $93bn, IBM's $52bn, Cisco's $48bn and Google's $48bn ­– that just one of them could take on the whole job singlehandedly. Another lender could jump in to finance bigger systems for households or villages, or to fund renewable replacements for the sooty biomass that 2.5 billion people now use for heating and cooking (resulting in approximately 1.5 million deaths from fumes and smoke annually)."

 

Importantly, this money would be invested (rather than donated) and the transaction could be structured as:

 

"… a giant working capital fund. … Investments would be loans, and investments in promising commercial ventures, not philanthropy, and a successful program could set margins to yield competitive returns."

 

Moreover:

 

"Unlike microfinance for individuals, working capital funds would go to companies – experienced manufacturers and vendors – that would supply the systems. With this funding, these companies could grow manufacturing, education and marketing efforts, sales and collections."

 

Of course, such an investment would have multiplier economic benefits—grow companies and industries, provide jobs and local taxation, etc., etc. It is a simple idea that would have wide-ranging positive consequences for everyone. Or, as the authors put it:

 

"All this adds up to an enormous opportunity for US multinationals to make history with bold game-changing investments that will bring a billion people into the global economy – and to profit in the process. … Which company will step up to put its cash to good use, take a big bite out of fossil fuels and light up the world?"

 

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/

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

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


How a single multinational corporation could light up the world

By Daniel M. Kammen and Felix Kramer

September 24, 2014

The Guardian Sustainable Business

http://www.theguardian.com/sustainable-business/2014/sep/24/business-company-climate-finance-fund-clean-green-energy-carbon-inequality-lights