The CSR Newsletters are a freely-available resource generated as a dynamic complement to the textbook, Strategic Corporate Social Responsibility: Sustainable Value Creation.

To sign-up to receive the CSR Newsletters regularly during the fall and spring academic semesters, e-mail author David Chandler at david.chandler@ucdenver.edu


Thursday, March 23, 2017

Strategic CSR - Shareholder value

The article in the url below offers a defense of shareholder value as the orienting purpose of the firm. It is not, the author argues, that shareholder value is wrong, but it is the way it has been implemented that is at fault:
 
"The culprit is not shareholder value but rather corporate executives, investment managers and the business press who incorrectly believe that the governing objective of shareholder value is to boost a company's near-term stock price by meeting the market's quarterly earnings expectations. This misguided thinking has hijacked the good name of 'shareholder value'. Consequently, companies commonly 'talk' shareholder value but 'walk' quarterly earnings in their everyday operations."
 
Instead, the author articulates what shareholder value should look like:
 
"Let us be clear what managing for shareholder value really means. It means focusing on cash flow, not earnings. It means managing for the long-term, not the short-term. And it means that managers must take risk into account in their capital allocation decisions. Properly implemented, there is no better cure for short-termism than managing for shareholder value with its long-term orientation."
 
Further:
 
"Critics also contend that shareholder value encourages the exploitation of other stakeholders. Quite the opposite is true. Shareholder value companies recognise that their long-term success depends on a solid relationship with each of their stakeholders. Customers expect high-quality products and services at competitive prices. … Likewise, employees seek competitive remuneration and a satisfying work environment. … Companies risk their viability if any one stakeholder gets too much or too little for an extended period."
 
All of this is fine, I think, and the broad value creation process he is describing actually sounds a lot like "strategic CSR." Over the medium to long term, I agree that shareholder value can only be achieved through the creation of value for all the firm's stakeholders. The problem is that shareholder value is clearly not being implemented in the way the author advocates, which should tell him something about his underlying ideas. Whether it is simply because executive compensation plans have hijacked the focus of firms and distorted their focus on share price (which is what increases the value of stock options) or whether it is simply human nature that prevents the 'pure' implementation of shareholder value; instead of simply restating the idealistic tenets of your theory, why not just change the theory to better account for the imperfections that are clearly being identified? If shareholder value is really supposed to represent value creation for all stakeholders, then why not call it what it is – stakeholder value?
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
What managers misunderstand about shareholder value
By Alfred Rappaport
August 15, 2016
Financial Times
Late Edition – Final
9
 

Tuesday, March 21, 2017

Strategic CSR - Nuclear

The article in the url below highlights the limits of our knowledge regarding renewable energies:
 
"The United States, and indeed the world, would do well to reconsider the promise and the limitations of its infatuation with renewable energy."
 
In particular, the issue is the reliability of renewables (e.g., solar is less productive in cloudy conditions), combined with our constrained ability to store and transfer that energy (wind energy, in particular, is difficult to transmit, meaning only windy places can generate wind energy). Although our knowledge and capabilities are improving at a rapid rate, our rush to bring renewable energy sources on-line is having repercussions throughout the network as a whole:
 
"Renewable sources are producing temporary power gluts from Australia to California, driving out other energy sources that are still necessary to maintain a stable supply of power."
 
In essence, the rapid expansion of renewable energies is a result of the success of the public policies (and subsidies) that were passed in an effort to reduce our dependence on carbon-based energy. The author suggests that these policies have been too successful. Of particular concern is the effect these constraints are having on the one renewable source that we know well:
 
"But in what may be the most worrisome development in the combat against climate change, renewables are helping to push nuclear power, the main source of zero-carbon electricity in the United States, into bankruptcy."
 
In response, the article calls for approaches that are "more subtle" than simply loading up on more and more renewable energy projects. And it is the public subsidies that are the cause of much of the trouble – a too rapid shift from known technologies to relatively unknown technologies. Although the market for nuclear energy has its own problems, its price per megawatt hour is continually being undercut either by subsidies or the failure to incorporate the full costs of an energy into the price (i.e., a carbon tax). Both forms of support distort the markets for specific energy sources:
 
"Nuclear generators' troubles highlight the unintended consequences of brute force policies to push more and more renewable energy onto the grid. These policies do more than endanger the nuclear industry. They could set back the entire effort against climate change."

California is offered as a case-in-point:
 
"As more and more solar capacity is fed onto the grid, it will displace alternatives. An extra watt from the sun costs nothing. But the sun doesn't shine equally at all times. Around noon, when it is blazing, there will be little need for energy from nuclear reactors, or even from gas or coal. At 7 p.m., when people get home from work and turn on their appliances, the sun will no longer be so hot. Ramping up alternative sources then will be indispensable. The problem is that nuclear reactors, and even gas- and coal-fired generators, can't switch themselves on and off on a dime. So what happens is that around the middle of the day those generators have to pay the grid to take their power. Unsurprisingly, this erodes nukes' profitability. It might even nudge them out of the system altogether."
 
Ultimately, the very real cost of integrating renewable energy sources into our utilities system has yet to be adequately accounted for:
 
"In Germany, where renewables have mostly replaced nuclear power, carbon emissions are rising, even as Germans pay the most expensive electricity rates in Europe. In South Australia, the all-wind strategy is taking its toll. And in California, the costs of renewables are also apparent."
 
At a minimum, it is worth making sure we know what we are getting with renewables before we shut-down the known problems of nuclear energy altogether:
 
"Displacing nuclear energy clearly makes the battle against climate change more difficult. But that is not what is most worrying. What if the world eventually discovers that renewables can't do the job alone?"
 
Once we get rid of the nuclear energy industry, we will not have the time or resources to bring it back.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/


Embrace of Renewables Has a Hidden Cost
By Eduardo Porter
July 20, 2016
The New York Times
Late Edition – Final
B1
 

Wednesday, March 15, 2017

Strategic CSR - Perfume

The article in the url below suggests that synthetic alternatives can sometimes be more sustainable than natural products. In particular, the article focuses on the production of perfume. It makes the point that, while consumers often want 'natural' fragrances that are organic and fair trade, synthetic perfumes are significantly better for the planet:
 
"The trend toward a minimalist aesthetic in fragrance can however be more harmful than it appears, particularly when it comes to flowers. The struggle major companies face is how to sustainably produce what is inherently an unsustainable product, especially as consumers demand more and more raw materials."
 
Flowers, in particular, are a challenging product to grow for harvest:
 
"'Flowers are very resource-intensive with low yield,' explains Torsten Kulke, senior vice president of global innovation & regulatory fragrances at Symrise … . Some 500kg (1,102lbs) of a flower, he noted, usually only yields 50 grams (1.1lbs) of essence. 'Why do you want to waste hectares and hectares of productive land?'"
 
In response, companies like Symrise ("one of the 'big eight' global fragrance companies that provide the bulk of the formulas for the fine fragrance market") are working hard to deliver products to a new generation of customers who seek natural, authentic, and sustainable:
 
"In a coastal jungle in northern Madagascar, biologist Fanny Rakotoarivelo places a plastic bubble over a branch of papaya flowers. Inside, air currents run through the flowers, sucking out essential oils. The scented air that remains is funneled into another bag, which Rakotoarivelo places inside a metal briefcase. It will be flown and delivered to the German headquarters of Symrise, the second largest flavors and fragrances company in the world, where scientists will attempt to recreate the scent."
 
Another of the "big eight," IFF has also pivoted to respond to the shifting demands of consumers:
 
"IFF announced its Natural Ethics program in 2013 for its vanilla grown in the Sava region, which includes development of more biosynthetic vanilla. Firmenich works with a local partner in Madagascar that helped 1,300 farming families to achieve Rainforest Alliance certification."
 
While there is always demand for the 'real thing,' the costs associated with getting it are increasingly becoming available only to a select few. The rest of us will need to get used to synthetic, at least when it comes to perfume:
 
"'Rose costs thousands of dollars,' Kulke elaborates. 'A 98% copy you can get for a fraction of the cost.' A papaya flower could not feasibly be harvested for its oil, even in its native Madagascar – the cost, monetary and environmental, would be astronomical. The real thing is, no doubt, more complex, but in this case the copy smells just as sweet."
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
A sweeter choice: synthetic perfumes, while unpopular, are better for the planet 
By Alexandra Pechman
May 23, 2016
The Guardian
 

Monday, March 13, 2017

Strategic CSR - Trust

The article in the url below discusses the role of trust in the modern economy:
 
"One of the underrated achievements of the modern world has been to develop ways to extend the circle of trust by depersonalising it. Trust used to be a very personal thing: you would trust your friends or friends of friends. But when I withdrew €400 from a cash machine, it was not because the bank trusted me but because it could verify that my bank would repay the money. This is a cold corporate miracle."
 
Trust is essential for strangers to interact in an exchange of things of value. For example, if I buy a food item from my local supermarket, I trust it will not give me food poisoning (or worse); when I buy something on Amazon, I trust the company will send it to me; and so on. Of course, I do not base my trust purely on the goodness of strangers. Things like government regulations and NGOs provide seals of quality and there are penalties for transgressions that incentivize producers to not make me sick (or kill me). Repeat interactions are another incentive – if Amazon does not send my purchase, I am less likely to shop there again. Nevertheless, trust is a big part of our everyday experience. This becomes most obvious when it is abused, and it is surprising how infrequently that happens. Given this, the purpose of the article is to discuss whether the role of trust has changed with the emergence of online platforms that increase interactions at arm's length – specifically, the sharing economy:
 
"One example is Airbnb, which lets people stay in the homes of complete strangers, a considerable exercise of trust on both sides. We successfully used it on another stop in our Bavarian holiday. Airbnb makes personal connections but uses online reviews to keep people honest: after our stay, we reviewed our host and he reviewed us."
 
Rather than celebrate the mechanism developed to preserve trust, however, the author says this surface-level analysis of why Airbnb works misunderstands what is really going on:
 
"We're misunderstanding the reason that eBay and Airbnb work. … It's not because of the brilliance of the online reputation system but 'because most people aren't crooks', an idea any Bavarian hotelier would understand."
 
Recent research suggests, however, that, as with the everyday economy, there is a limit to the kindness of strangers that skirts the evaluation systems currently in place:
 
"When Harvard Business School researchers … conducted field experiments on Airbnb, they found that both hosts and guests were discriminating against racial minorities. Other researchers have found evidence of discrimination in places from Craigslist to carpools. New online tools are giving us the ability to treat faraway strangers as though they were neighbours — and we do, in good ways and in bad."
 
In other words, any system involving human behavior (i.e. all systems) at some level will be subject to the biases, emotions, and prejudices that define human nature. While, in the majority of cases we can limit the negative effects (because "most people aren't crooks"), we cannot rule them out completely. The author's conclusion is that the increased commercial interactions we have with individuals (as opposed to companies) as part of the sharing economy is tweaking our economic system, rather than revolutionizing it. It is not a better system, just different:
 
"Trust is sometimes given to people who do not deserve it. And it is often withheld from people who do."
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Trust in the age of Airbnb
By Tim Harford
August 13/14, 2016
Financial Times
Late Edition – Final
Life & Arts, 15
 

Thursday, March 9, 2017

Strategic CSR - Double standards

An important challenge for CSR advocates is to understand why we might employ different values at home and at work:
 
"'I know I should be bothered but I just can't be,' said a colleague recently as they threw some paper towards the bin, 'it's weird really because at home we're fastidious about recycling and all that … but at work I just don't bother.' In one sentence highlighting how hard it can be to encourage employees to be as environmentally friendly in the workplace as they are in their own homes."
 
Why is one behavior at home and in the family unacceptable (e.g., lying or creating waste), yet 'deception' and 'pollution' have long been a part of business practice? The list of companies where such 'unacceptable' behavior is not only sanctioned, but rewarded or incentivized, is long (e.g., Wells Fargo, VW, BP, etc.). The article in the url below presents an interesting take on this issue – unfortunately, as with many things with humans it seems, our behavior is explained by following the money:
 
"… research confirms that employees act worse at work because they don't have a financial interest (most don't even know the energy spend of their organisation), equipment is often shared so there can be a lack of responsibility and employees can't control many of the elements that could make a difference to energy and resources use, such as heating or lighting."
 
As such, solving the problem appears to rest in explicitly demonstrating a self-interest in choosing one behavior over another:
 
"A London council, for example, tackled printing by showing that if every employee used one less sheet of paper a day it saved paper equivalent to the height of a local landmark."
 
In an organization, however, in order for the individual to feel motivated to act in the best interests of the collective, there has to be a sense that everyone is in it together. Because such a culture is difficult to create and often depends on executives leading by example, there is significant variance – among firms, certainly, but even within firms:
 
"… employee environmental behaviours differ between organisation types (private versus public) and even between sites and buildings of the same organisations. Each may have its own constraints in terms of infrastructure, social norms or managerial expectations. Research has found behaviour may even vary during different times of the day or week because of employee's emotional state, job satisfaction or ability to complete work goals."
 
As with any kind of culture, it is hard to align everyone's interests in a way that persuades us there is value in thinking first of the group, rather than the individual.
 
"There is no one solution to encouraging pro-environmental behaviour, but leadership is a key issue and without managers demonstrating their commitment, staff are unlikely to follow suit. [Firms] must also understand the barriers to sustainable behaviour for employees and what might motivate them to make different choices. This can be as simple as making sure that there are enough recycling bins or setting up computer systems effectively so employees can work remotely."
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
'I just can't be bothered': why people are greener at home than in the office
By Victoria Wells.
May 20, 2016
The Guardian
 

Monday, March 6, 2017

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
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Better Food, at a Bargain
By Stephanie Strom
July 28, 2016
The New York Times
Late Edition – Final
B1
 

Friday, March 3, 2017

Strategic CSR - Michael Novak

The article in the url below is the obituary of Michael Novak. I was unaware of his work before reading about his recent death in both The New York Times (below) and Wall Street Journal. Here are a couple of quotes from the obituary summarizing his work:
 
"In The Spirit of Democratic Capitalism (1982) he mounted a defense of capitalism as a morally superior system based on liberty, individual worth and Judeo-Christian principles. It was, he insisted, the only economic system capable of lifting the poor from misery and of encouraging moral growth. Samuel McCracken, in Commentary magazine, called the book 'a stunning achievement' and 'perhaps the first serious attempt to construct a theology of capitalism.'"
 
"Mr. Novak elaborated and extended this argument in several books, notably The Catholic Ethic and the Spirit of Capitalism (1993). It argued that capitalism's most powerful underlying forces were not self-denial and discipline, as Max Weber had maintained in his classic 1905 work The Protestant Ethic and the Spirit of Capitalism, but the 'social dimensions of the free economy' and the free play of creativity — both rooted, as Mr. Novak saw it, in Catholic ethics."
 
The idea that capitalism is a vehicle by which we channel our individual ethics and values is central to Strategic CSR, as is the idea that all aspects of operations include economic, moral, ethical, and values-based judgments. Economic exchange via markets encourages engaged stakeholders to prioritize certain actions over others—a form of accountability. Market forces are the means by which we convert scarce and valuable resources into the goods and services we want. Our 'desire' is reflected in our willingness to make meaningful choices among alternatives. It is in this sense that we get the companies we deserve when we (stakeholders) interact with them, just like we get the politicians we deserve when we vote. It is also in this sense that business is "a moral endeavor."
 
Have a good weekend
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Michael Novak, Catholic Social Philosopher, Dies at 83
By William Grimes
February 20, 2017
The New York Times
Late Edition – Final
B6
 

Tuesday, February 28, 2017

Strategic CSR - Venmo

The article in the url below signals yet another way in which our social norms are 'changing' (if you are optimistic), 'breaking down' (if you are concerned), at the intersection of virtual reality and social media. It does so by discussing the emergence of Venmo, a digital payment service that facilitates the transfer of small amounts of money among friends:
 
"When a cash register rings in Silicon Valley, one often sees the person who is paying being told: 'I'll Venmo you' by their friends. The peer-to-peer payments app Venmo has fast-tracked its way to being a verb as the cashless crowd adopts it to split their bills. This easy pinging of money means people have started paying each other back for the smallest things: a burrito, a cocktail, a coffee."
 
The shift that is occurring as a result, according to the author, is from a more trusting society (based on multiple repeat interactions) to a more transient society (where relationships are seen as single interactions and, as a result, less valued):
 
"Venmo and its rivals are of course convenient when splitting the cost of large purchases: a ski chalet for the weekend or a utility bill with roommates. But they have rapidly led to the expectation that you will count dollars and cents between friends."
 
As the author notes, trust is the foundation of our economic system of market exchange. Money (cash, in particular) came along later as that trust began to break down:
 
"In his 2011 book Debt: The First 5,000 Years, anthropologist David Graeber describes how credit came before coins. … Debt was a sign of trust: you knew you would see that person again and they would behave fairly. Money was used by the military, the soldiers passing through who could not be trusted."
 
In other words, we are now holding each other accountable for small amounts of money that, in a more trusting society based on long-term ties, would not be tracked:
 
"New technologies often encourage us to do something because we can, leaving us to weigh the social consequences only after these innovations have been taken up on a massive scale. Just because it is easier to pay a friend for a $4 coffee on Venmo rather than by counting out the change, why should we? Would it not be better to wait until we can buy them a coffee or a beer at a later date? Not wiping the slate clean at the end of every date may in fact show, in Graeber's words, a desire to develop ongoing relations."
 
The author also shows how trust is ebbing away from many of the social interactions that used to be the foundation of what constituted friendship. In other words, the sharing economy is a sign of weaker, not stronger, relationships among people:
 
"When I first moved to San Francisco, I told my mother I was considering hiring someone from TaskRabbit, a service that allows people to bid to do your odd jobs, to help me hang curtains and assemble flat-pack furniture. Her reaction was: 'But isn't that what neighbours are for?' … Before Uber, it would be kind to offer to drop someone at the airport. Recently a friend was confused when he was asked to drive a classmate to the departure hall, and wondered if she'd heard the ride-hailing service could take her there."
 
The author concludes that we are in danger of "substituting community for convenience." Rather than concede, however, she is preparing to resist:
 
"Next time someone tells me: 'I'll Venmo you,' I will reply: 'I got this,' knowing I am showing my trust in my friends, as people have done for thousands of years, through the small debts that bind us."
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/ 
 
 
Real friends don't bother to sweat the small change
By Hannah Kuchler
February 9, 2017
Financial Times
Late Edition – Final
8
 

Monday, February 27, 2017

Strategic CSR - Lush

The article in the url below discusses the activism-based business model of the British cosmetics company, Lush:
 
“Lush likes to cause a stink. As well as its smelly shops and package-free produce, a large chunk of the handmade cosmetics company’s time and money is spent on political activism.”
 
Lush, today, is positioned in the market in a way that reminds me of The Body Shop in the 1990s. Similar to The Body Shop, Lush campaigns broadly and passionately:
 
“Far from carefully choosing a few business-friendly good causes, Lush has backed a plethora of controversial causes from Guantanamo prisoners, to hunt saboteurs and the anti-fracking campaign. It does this through financial donations – totalling £5m a year in 2015 - and in-store products such as the May Day bath bombs, which supported activists opposed to the badger cull. It also supports groups in favour of peaceful resistance to the Israeli occupation of Palestine.”
 
The key question, of course, is how many of its stakeholders (customers, employees, etc.) engage with the firm as a result of its activism and how many just like its products, or its working conditions, or whatever? If most stakeholders engage with the firm in spite of its activism, then the firm is probably wasting its money and is less efficient as a result. If most stakeholders engage with the firm because of its activism, however, then the firm is creating value for those stakeholders in a way that other firms are not. The difference speaks to the extent to which, for Lush, activism is the foundation of a successful business model, as opposed to the founder/CEO’s personal interests/values that are selfishly being imposed as a constraint on what would otherwise be a more successful cosmetics company:
 
“Such blatant politicisation is a tactic few other businesses in the UK seem willing to replicate. The renewable energy firm Ecotricity has produced anti-fracking films, but this makes sense for a company that benefits from consumers switching away from fossil fuels. Lush admits a lot of the campaigning it does has nothing to do with its own business.”
 
That is perfectly OK (and something I wish more companies would do) but, in order to be consistent with strategic CSR, it is essential that the firm is acting in accordance with its stakeholders’ collective set of values:
 
“None of this appears to be harming sales, which reached a record £574m in 2015, with profits of £31.3m. … ‘People don’t just want to buy something, they want to belong to something. We’re not a cult but we certainly have strong ethos and personality that’s difficult to describe. It doesn’t come directly from the founders, it comes from the organisation and it is something that you belong to. It is a company in the true sense of the word, as in a group of individuals,’ says [says Simon Constantine, head of buying at Lush and son of co-founder and boss Mark Constantine].”
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
How badger bombs and politics brought Lush sales of £500m
By Tom Levitt
May 10, 2016
The Guardian
 

Wednesday, February 22, 2017

Strategic CSR - Walmart + crime

The article in the url below unearths an amazing problem at Walmart that I had not previously heard about (at least, not to this extent):
 
"Police reports from dozens of stores suggest the number of petty crimes committed on Walmart properties nationwide this year will be in the hundreds of thousands."
 
It is not only the amount of crime being committed, but also the type of crime, much of it very serious:
 
"But people dashing out the door with merchandise is the least troubling part of Walmart's crime problem. More than 200 violent crimes, including attempted kidnappings and multiple stabbings, shootings, and murders, have occurred at the nation's 4,500 Walmarts this year, or about one a day, according to an analysis of media reports."
 
To listen to Walmart, they are the unwilling victims of a social problem the firm is doing everything it can to solve. Anecdotal data from Oklahoma, however, suggests this might be a problem specific to Walmart—one that does not occur to the same degree, for example, at Target:
 
"It's not unusual for the [Tulsa Police] department to send a van to transport all the criminals [their officer] arrests at [one] Walmart. The call log on the store stretches 126 pages, documenting more than 5,000 trips over the past five years. Last year police were called to the store and three other Tulsa Walmarts just under 2,000 times. By comparison, they were called to the city's four Target stores about 300 times."
 
According to the article, the current situation at Walmarts across the U.S. is a direct result of short-term decisions made over the last decade and a half designed to produce immediate results in terms of profit:
 
"There's nothing inevitable about the level of crime at Walmart. It's the direct, if unintended, result of corporate policy. Beginning as far back as 2000, when former CEO Lee Scott took over, an aggressive cost-cutting crusade led many stores to deteriorate. The famed greeters were removed, taking away a deterrent to theft at the porous entrances and exits. Self-checkout scanners replaced many cashiers. Walmart added stores faster than it hired employees. The company has one worker for every 524 square feet of retail space, a 19 percent increase in space per employee from a decade ago. In terms of profit, all this has worked: Sales per employee in the U.S. have grown 23 percent in the past decade, to $236,804. For criminals, however, the cutbacks were like sending out a message that no one at Walmart cared, no one was watching, and no one was likely to catch you."
 
There are other reasons that might explain why the number of crimes being committed at Walmart stores vastly outnumber those being committed at comparable competitors. While there are some differences between the Target and Walmart stores in Tulsa, in reality, the different levels of crime boil down to Walmart's willingness to invest in employees who are present in the store:
 
"Target, Walmart's largest competitor, is a different kind of retail business, with mostly smaller stores that tend to be located in somewhat more affluent neighborhoods. But there are other reasons Targets have less crime. Unlike most Walmarts, they're not open 24 hours a day. Nor do they allow people to camp overnight in their parking lots, as Walmarts do. Like Walmart, Target relies heavily on video surveillance, but it employs sophisticated software that can alert the store security office when shoppers spend too much time in front of merchandise or linger for long periods outside after closing time. The biggest difference, police say, is simply that Targets have more staff visible in stores."
 
As with many things related to sustainability and CSR at Walmart, for all the good things the firm does, it is still difficult to be convinced that the senior executives 'get it' and are willing to expand the horizon on the firm's return on investment to the medium to long term. It is interesting that the article lays much of the blame for this short-sightedness on Walmart's board:
 
"The question is whether Walmart is moving as fast as it can. Its executives 'could clean it up in a matter of a year were they to be given the financial support from the board,' says Burt Flickinger, managing director of retailing consultant Strategic Resource Group. Eight of the nine nonfamily members of the Walmart board come from academia or nonretail companies, including former PepsiCo CEO Steven Reinemund and Yahoo! CEO Marissa Mayer. Three officers are members of the Walton family, including the chairman of the board, Gregory Penner, a venture capitalist who is the son-in-law of fellow board member Rob Walton, a son of Walmart founder Sam Walton. 'The board doesn't want profits to fall,' says Flickinger. 'They simply lack the retail business background to understand how important security is.'"
 
The business case for making this investment seems clear:
 
"Flickinger argues that Walmart can't afford not to invest heavily to expand its workforce if it wants cleaner, more orderly, better-performing, and ultimately safer stores. 'It pays for itself,' he says. 'To get back to that high-performing level of the late 1990s, it's going to take a lot more money.'"
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Walmart's Out-of-Control Crime Problem is Driving Police Crazy
By Shannon Pettypiece and David Voreacos
August 17, 2016
Bloomberg Businessweek
 

Monday, February 20, 2017

Strategic CSR - Nationalism

I have been thinking about the primary cause said to have driven the two major controversial political decisions of 2016 – Brexit and Trump. In almost every account I have seen seeking to explain those decisions, it all seems to boil down to globalization. What this generally means at the local level is the failure of capitalism to spread wealth (the benefits of globalization) more evenly. The resulting inequality then drives the economic protectionism and anti-immigration that allow political movements, such as UKIP and Trump, to take advantage and secure previously unimaginable victories.
 
While I get this explanation, it only works if you care primarily about your country. That is, there is a belief that American workers 'lose' jobs to Chinese workers, for example. But, as an immigrant here in the US, I find that this nationalistic argument fails to resonate. To me, an American does not have any more 'right' to a job than a Chinese, Indian, South African, or anyone else anywhere in the world. The reason why a multi-national firm might close a US factory and open one in China is that the Chinese factory is more efficient. In other words, it produces a product of the same or better quality for less money. As a result, the Chinese employee gets better training, higher income, etc., etc., and the Chinese economy progresses. Similarly, the US gets to export all the jobs that do not add much value (i.e., they do not pay well) and (and this is where the story appears to break down, I guess) they re-train their citizens to do higher-skilled jobs that pay more (because they add more value) and the US economy also progresses.
 
I appreciate that a key element of the nationalistic argument is that politics is largely local and most democratic systems are based on geographic representation (rather than, for example, doing what is 'best' for the country or, heaven forbid, the world). I also appreciate that the rise of the robots seems to be accelerating this trend, although I can't help but think this is overblown. We have faced many technological shifts in our time and, always, the new technology has ended-up producing more work than it replaced.
 
To me, though, it just seems like a level-of-analysis issue. If we all thought of ourselves as citizens of the world (whatever Theresa May thinks), it would enable us to tackle problems that we do not see at present. For example, if a factory closes in California and relocates to Texas, while the workers are annoyed, it is not perceived in the same light as when a factory closes in North Carolina and opens in India. Yet, it is exactly the same economic process. It is just that our perspective is clouded by arbitrary national borders that were determined decades or centuries ago, either as a result of military might (e.g., pick your war), geographic protection (e.g., an island), or bureaucratic incompetence (e.g., the role of the UK and other colonial powers in over-riding centuries of history by drawing straight lines in the Middle East). If we could see through these clouds, we would understand that we are one world (geographic fact) before we are one nation (historical anomaly).
 
What is essential for CSR to move the needle, therefore, is an ability to think in terms of the group, the much larger group, and begin to suppress our extremely unhealthy current preoccupation with the narrower nation/racial/ethnic-based group. CSR is, by definition, of concern to society at large and, at a fundamental level, it prioritizes the interests of the majority over those of the minority. The issues it deals with (including economic inequality) are, at a minimum, societal-wide and, more likely, global. In other words, while it may be true that "all politics is local," CSR is global. And, until we start thinking that way, it will be hard to progress together.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 

Friday, February 17, 2017

Strategic CSR - Uber

The article in the url below raises an interesting question:
 
"What if Uber kills off public transport instead of cars?"
 
While this may not be a very pressing concern in most U.S. cities, where public transport is generally less well-developed; in Europe, public transport is central to most city life:
 
"The perceived wisdom is that Uber has disrupted taxis and that private automobiles are next, but what if we've misread what is happening in our cities? Traditional thinking would suggest that UberPool, which allows users to split the cost of trips with other Uber riders heading in the same direction, will always be inferior to public transport. Sitting in the backseat of a Prius may be more comfortable than standing on a crowded bus or train, continues this reasoning, but carpooling can't substitute for mass transit at rush hours without massively increasing congestion."
 
Rather than simply offering an alternative method of transportation for those who can afford it, the aggressive pricing on Uber Pool appears aimed directly at public transportation – seemingly with the goal of eventually replacing it:
 
"This is wrong. In the last six months, Uber has begun offering shared rides for as little as $1 (81p), introduced optimised pickup points that algorithmically recreate bus stops, and started testing semi-autonomous vehicles it hopes will solve its increasingly contentious labour issues."
 
A standard economic answer to this problem would be that Uber will only succeed in replacing public transportation if it ultimately adds more value than buses and trains. If it is cheaper (shared costs), more comfortable (no standing), and more convenient (picks you up at your house), then it may indeed add more value. The danger, I guess, is if Uber follows the pattern it has demonstrated with its drivers (see Strategic CSR – Gig economy and also here), where it offers financial incentives to sign-up, but then decreases those benefits slowly over time. The equivalent with public transportation is if it is initially much cheaper to use Uber, but becomes more expensive once government has cut the relevant funding.
 
Have a good weekend
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
What if Uber kills off public transport rather than cars?
By Greg Lindsay
January 13, 2017
The Guardian
 

Tuesday, February 14, 2017

Strategic CSR - Nordstrom

The article in the url below describes how nervous companies in the U.S. are at the moment. CEOs and executives in prominent companies (and also some pretty obscure ones) apparently dread drawing the wrath of the Twitter monster. The example given was Nordstrom (a high-end department store), which was boycotted by customers when it stocked Ivanka's line of clothing and jewelry, and then boycotted again (by a different set of customers) when it removed the brand:
 
"These days, a shirt is not always just a shirt, and a store is not always just a store. Handbags, dresses and other ordinary items — and where they are bought — have become politicized, turning shopping decisions into acts of protest for the millions of people in pro- and anti-President Trump camps. Under Armour, L.L. Bean, T.J. Maxx and many other companies have already been pulled into a sort of ideological tug of war. But perhaps no retailer has been in the hot seat like Nordstrom."
 
The article's angle was that companies cannot win in this new reality:
 
"The sharp reaction before and after Nordstrom's decision — made quietly, with no announcement — highlights the tightrope companies must walk in this hyper-politicized environment. 'Companies are nervous,' said Andrew Gilman, chief executive of the crisis communications firm CommCore Consulting Group. 'I know several companies that have war rooms set up.' 'They have playbooks on what to do if there is a product recall or if the C.E.O. has a heart attack,' he added. 'Now they have a different chapter on how to deal with a tweet from the president.' Many retailers and brands would clearly prefer to fly below the political radar and stay away from the outrage on Twitter and Facebook."
 
My take on this, however, is that companies are feeling nervous mostly because they are being forced to take a position on issues. In other words, they are having to inject values into their business decisions in a way that makes them uncomfortable because they might make the 'wrong' decision and be blamed for doing so. CEO accountability – what a wonderful concept! The story unfolding around Under Armour is a great example of the fine line executives are being forced to walk:
 
"The athletic-gear maker Under Armour also encountered the perils this week, when its chief executive, Kevin Plank, called Mr. Trump a 'real asset' for the country. Within hours, the hashtag #boycottunderarmour emerged on social media."
 
I think this is great. Business is a force for economic, social, and moral change, even if executives try and pretend otherwise. Granted, it is just a bit more blatant at the moment because the atmosphere is so charged and the issues so contentious. The more companies take a stand, however, and I am thinking about companies on both sides of any debate (think Patagonia on the environment, but also Chick-fil-A on religion in the workplace), then the more the market can begin to help solve some of our most intractable problems. If stakeholders are aware of companies' positions on these issues, then they can choose which ones to support and the chance for progress is increased. In all likelihood, taking a stand on an issue that is of concern for stakeholders will be good for business. At a minimum, there is evidence (according to the article in the second url below) to suggest that firms are worrying too much about the consequences of being caught on the wrong side of Donald:
 
"The Financial Times has crunched data on 30 cases in which companies have been targeted by that @realDonaldTrump account. The sample size is small and the data only start on January 1. However, this limited analysis shows that Mr Trump's tweets have had surprisingly little effect on share prices so far, irrespective of the media hullabaloo."
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
In the Era of Trump, Shopping is Political
By Julie Creswell and Rachel Abrams
February 11, 2017
The New York Times
Late Edition – Final
B1
 
The corporate benefits of a Trump tweet
By Gillian Tett
February 10, 2017
The Financial Times
Late Edition – Final
9
 

Monday, February 13, 2017

Strategic CSR - Silicon Valley

The article in the url below discusses the recent intervention by the information technology industry in the debate in the U.S. about immigration. In particular, the article demonstrates how important immigration is to IT firms, judging by the large number of well-known founders, CEOs, and senior executives who are foreign-born:
 
"Attracting hyper-brainy people from around the world is at the heart of the tech business model. Mr Brin was born in Moscow, Mr Pichai in Tamil Nadu and Satya Nadella, the head of Microsoft, in Hyderabad. The biological father of the late Steve Jobs was a Syrian who moved to America, a journey that as of this week would be impossible. Half of all the American startups that are worth more than $1bn were founded by migrants. Many of the engineers at tech firms were born abroad, too. In Cupertino, a posh suburb in Silicon Valley, half the population is foreign-born."
 
These executives are intervening on the side of more open immigration, therefore, because it is good for their business (and, by extension, good for the U.S. economy). What is interesting about the article, however, is not that the IT industry is being vocal in its opposition to efforts to limit immigration, but that the industry is so selective about which issues it chooses to protest. By taking such a high-profile stand now, therefore, the article suggests the industry risks exposing its hypocrisy:
 
"For decades tech bosses have pushed a convenient doublespeak to explain their firms' rise. Their dazzling products are the creations of their leaders. The resulting fortunes are these visionaries' just reward. But the economic and social consequences of the industry's output, not all of them good, are no one's responsibility. Instead, the industry argues, they are the result of unavoidable shifts in technology, in turn responding to society's broad demands. This logic has allowed tech firms to avoid responsibility for the stolen or bilious content that they publish and for the jobs that their algorithms help eliminate—to say nothing of their own oligopolistic market shares. Silicon Valley boasts of its own might and shrugs at its own impotence both at once."
 
The article goes on to note the various recent issues, other than immigration, where the industry has been slower to take action – such as, job losses (due to outsourcing and technological progress), fake news (enabled by social media), and income inequality (driven by pay disparities), and so on. In reality, the article concludes, the 'holier-than-thou' approach of the IT industry on the issue of immigration is merely dressed-up self-interest that is used selectively to advance goals that are, ultimately, very narrow:
 
"Often [tech firms] define virtue as what they judge to be in their business interests. Last year, Mr Cook dismissed a demand by the European Union to pay more tax as 'political crap.' In December Apple agreed to a state request to ban the New York Times's app in China, where the firm makes just over a fifth of its sales. Mr Zuckerberg fits the same pattern: he says he wants to give away 99% of his fortune and that he believes in the ideal of free expression, but his firm paid a tax rate of just 6% over the past half-decade, and he has toadied up to China's censors, too. Oligopolistic, hubristic and ruthless to its core, Silicon Valley is no beacon of moral leadership."
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Silicon Valiant
By Schumpeter
February 4, 2017
The Economist
Late Edition – Final
59