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


Wednesday, May 3, 2017

Strategic CSR - Ethical shopping

 
This is the last CSR Newsletter of the Spring semester.
Have a great summer and I will see you in the Fall!
 
 
The link in the url below takes you to Businessweek's "Ethical consumer game":
 
"Ethical shopping is even harder than you thought. You buy cage-free eggs, eat quinoa and drive an electric car to do your part to help the environment. That's all great, right? ... Pump the brakes on that Tesla. We built an ethical consumer game that leads you through the difficulties of living a cage-free, carbon-neutral lifestyle."

My favorite slide covers the topic of reusable shopping bags:
 
"Only 3 percent of shoppers with multi-use bags said they regularly washed them. … In 99 percent of bags tested, half carried coliform bacteria, while 8 percent carried E. coli."
 
A heads-up – you are not going to win this game. It seems as though every consumer choice we have has perceived negative consequences for some stakeholder somewhere.
 
Have a great summer!
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/
 
 
Ethical shopping is even harder than you thought
By Miranda Purves
December 22, 2016
Bloomberg Businessweek
 

Monday, May 1, 2017

Strategic CSR - Cadbury

The article in the url below reports a decision by Cadbury (the UK chocolate company) to drop its commitment to the Fairtrade certification of its cocoa sourcing and, instead, replace it with its own scheme – “Cocoa Life”:
 
“The British confectionery maker, which is owned by US food giant Mondelez, was applauded in 2009 when it announced its Dairy Milk brand would be made from Fairtrade cocoa — guaranteeing farmers in its supply chain decent working conditions and a minimum cocoa price.”
 
The company is being criticized for the decision in some quarters because it weakens support for Fairtrade, in spite of its growth in recent years:
 
“Fairtrade now has more than 4,500 products to its name, including bananas, coffee and sugar.”
 
In contrast, Cadbury says farmers will not lose out from the change and, in fact, the company’s new program indicates a higher commitment to a more sustainable supply chain:

“Instead, the new scheme will involve the entire Cadbury range. Products including Flake, Twirl and Wispa bars will all sport a Cocoa Life logo on the front of their packets, the company said, and the farming supply chain will receive $400m in investment by 2022. ‘This is about making sure we make a greater impact to more farmers in more communities,’ said Glenn Caton, president of Northern Europe at Mondelez, adding that the decision was driven by a desire to take ‘ownership of the challenge of sustainability.’”
 
From the outside, it is good to see Cadbury taking ownership of its supply chain and imposing its own operational-specific standards, similar to Starbuck’s CAFÉ standards. From the consumer’s point of view, however, it is difficult to see how yet another ethical/environmental ‘standard’ is going to aid transparency and enable better consumption decisions (see Strategic CSR – Green Noise). As noted by the head of the Food Foundation, a UK think-tank:
 
“… there is a risk that if every company has their own mark it will be extremely difficult for consumers to determine which mark represents the best, independently verified standard.”
 
Already:
 
“Nestlé and Barry Callebaut each have their own company schemes, Cocoa Plan and Cocoa Horizons.”
 
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/
 
 
Cadbury move fuels concern for Fairtrade’s future
By Hannah Murphy
November 29, 2016
Financial Times
Late Edition – Final
14
 

Thursday, April 27, 2017

Strategic CSR - Jobs

To follow-up on Tuesday's Newsletter, the article in the url below investigates the accusation that excessive government regulation "kills jobs":
 
"It was in the early days of Ronald Reagan's campaign for president that America first started frequently hearing the term 'job-killing regulations' in response to an increasing number of environmental laws. Reagan criticized the Carter administration for doing a terrible job with the economy, and said these failures were related to Carter's 'continuing devotion to job-killing regulation.'"
 
Interestingly, research suggests that, while regulations can diminish economic growth and, therefore, employment in one sector or industry, the same regulation usually creates about the same number of jobs in a different/new industry:
 
"A factory that makes lead additives for gasoline might be shut down because regulations have banned lead additives. But new jobs will then be created at a factory that makes catalytic converters, which are emissions-control devices for cars. Some workers, then, benefit from regulation, while others lose. That doesn't mean that the losses aren't real and painful for the people who held those jobs, but the overall picture is not one that can be accurately characterized by the phrase 'job-killing.'"
 
Of course, with any evaluation of an economy-wife phenomenon, there is also a lot of noise to go along with the theory. While jobs are created and lost continuously, it is ideologically useful to have the crutch of "burdensome governmental regulation" to blame for run-of-the-mill business failure:
 
"Job loss and creation is also a normal part of any economy; some companies go out of business because their goods or services are no longer in demand, while other jobs are created as new companies emerge to fill new demands. … That doesn't mean companies don't try to blame regulations for their failures."
 
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/
 
 
Do Regulations Really Kill Jobs?
By Alana Semuels
January 19, 2017
The Atlantic
 

Wednesday, April 26, 2017

Strategic CSR - Minimum wage

The article in the url below presents a strong argument in favor of minimum wage jobs:
 
"Entry-level jobs matter—and you don't have to take my word for it. In a speech last week on workforce development in low-income communities, Federal Reserve Chair Janet Yellen said that 'it is crucial for younger workers to establish a solid connection to employment early in their work lives.'"
 
Although the author of this article has a dodgy record as an employer (to say the least), I think there is value in his position on this issue. Specifically, he argues that the downside to a significant jump in the minimum wage is heightened in an age of increasing automation:
 
"In a survey released last month, the publication Nation's Restaurant News asked 319 restaurant operators to name their biggest challenged for 2017. Nearly a quarter of them, 24%, said rising minimum wages. … McDonald's said last November that it would install self-order kiosks in all 14,000 of its U.S. restaurants. Wendy's announced in February it would add kiosks at about 1,000 locations to 'appeal to younger customers and reduce labor costs.'"
 
While prior research on the effects of a minimum wage suggest that a significant jump discourages entrepreneurs from creating more jobs, the article suggests that, given the increasing ability of machines to replace humans in the workplace, any legislation designed to raise the minimum wage should really be called "the Robot Employment Act":
 
"The trend toward automation is particularly pronounced in areas where the local minimum wage is high. Eatsa, a 21st-century version of the automat, now lists seven locations in four cities, each of which will be subject to a $15 minimum wage within the next 36 months."
 
And this problem is only going to become more apparent:
 
"Taking automation to the next step, Miso Robotics and the owner of CaliBurger announced in March they have developed a robotic arm, called Flippy, that can turn burgers and place them on buns. CaliBurger plans to install them over the next two years in 50 restaurants worldwide."
 
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/
 
 
The Minimum Wage Should Be Called the Robot Employment Act
By Andy Puzder
April 14, 2017
The Wall Street Journal
Late Edition – Final
A19
 

Wednesday, April 19, 2017

Strategic CSR - Progress

In evaluating the purpose of the for-profit firm in society, it is useful to occasionally remind ourselves of how far we have come. The article in the url below touches on this subject:
 
"For most of the time that our species has been around, a man in his thirties had a fair chance of being dead already; a woman, too, often through childbirth. Evading violence, hunger and the elements was a human's daily lot. Even in modern history, people were bonded to the state through conscription or to the land through serfdom. Within memory, there was one role for women (mother), one for men (provider), one permissible sexual taste (straight), and even that was consecrated within marriage."
 
A large assumption of the framework presented in Strategic CSR is that, although all sectors of society played a part, the invention of the for-profit firm (in particular, the limited liability corporation) is a large reason for these advances – what the article attributes to "material progress." The speed and extent of change is quite remarkable (when you stop to think about it) given the short period of time involved:
 
"Most people for most of history lived in small communities, had few sexual partners and could not take food or other needs for granted. My friend is just two generations removed from a similar life, and that was on English soil. Now, in a city he shares with almost 9 million others, he goes on a hundred dates a year without having to do anything more strenuous than wait for his numerous apps to make matches. Without working very hard, he has surplus income."
 
None of this, of course, excuses behavior by firms that transgresses stakeholder expectations, but it does put things in perspective and, perhaps more importantly, should be accounted for among those who seek alternatives to market capitalism. The bar that needs to be cleared is inventing a system that creates more value than the system we currently have. If that bar cannot be cleared, then a more sensible solution is to improve the system we currently have. This is the approach of Strategic CSR, based within a set of assumptions about economic exchange and human psychology that helps us understand how the current system works and how we might end up with behavior from firms we say/think we do not want.
 
A historical perspective is useful in assessing how best the for-profit firm can benefit us. To be clear, the corporation is a social construction. We can shape it in any way that we please. What is important, however, is that we remember that it is a tool, not an agent with an independent consciousness; as such, it reflects the values of those connected to it (its stakeholders).
 
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/
 
 
History's luckiest generation: We're getting away with it – For now
By Janan Ganesh
January 14/15, 2017
Financial Times – Life & Arts
Late Edition – Final
17
 

Tuesday, April 18, 2017

Strategic CSR - Morality

The article in the url below discusses the extent to which our personal values/morals/ethics are central to who we are as individuals:
 
"What defines who we are? Our habits? Our aesthetic tastes? Our memories? If pressed, I would answer that if there is any part of me that sits at my core, that is an essential part of who I am, then surely it must be my moral center, my deep-seated sense of right and wrong."
 
What is interesting, therefore, is to consider how that morality evolves according to context, such as when speaking a foreign language:
 
"And yet, like many other people who speak more than one language, I often have the sense that I'm a slightly different person in each of my languages—more assertive in English, more relaxed in French, more sentimental in Czech. Is it possible that, along with these differences, my moral compass also points in somewhat different directions depending on the language I'm using at the time?"
 
While we have known that morality is, to some extent, culturally specific (i.e., different behaviors are deemed to be moral/immoral in different cultures) and time-specific (i.e., different behaviors are deemed to be moral/immoral at different points in time), the article discusses how this variance exists within people as well as among them. In other words, different behaviors by the same person are considered moral/immoral depending on the culture in which the person happens to be at the time. The research summarized in the article operationalizes different cultures in terms of when the person is speaking a different language and found some interesting results:
 
"[Researchers] found that using a foreign language shifted their participants' moral verdicts. In their study, volunteers read descriptions of acts that appeared to harm no one, but that many people find morally reprehensible—for example, stories in which siblings enjoyed entirely consensual and safe sex, or someone cooked and ate his dog after it had been killed by a car. Those who read the stories in a foreign language (either English or Italian) judged these actions to be less wrong than those who read them in their native tongue."
 
The explanation offered for this relative morality speaks directly to the level of effort required to speak a foreign language as opposed to a native language:
 
"According to one explanation, such judgments involve two separate and competing modes of thinking—one of these, a quick, gut-level 'feeling,' and the other, careful deliberation about the greatest good for the greatest number. When we use a foreign language, we unconsciously sink into the more deliberate mode simply because the effort of operating in our non-native language cues our cognitive system to prepare for strenuous activity."
 
Another explanation offered relies more on the relationship between language, emotions, and memory:
 
"An alternative explanation is that differences arise between native and foreign tongues because our childhood languages vibrate with greater emotional intensity than do those learned in more academic settings. As a result, moral judgments made in a foreign language are less laden with the emotional reactions that surface when we use a language learned in childhood."
 
The author's conclusion?
 
"What then, is a multilingual person's 'true' moral self? Is it my moral memories, the reverberations of emotionally charged interactions that taught me what it means to be 'good'? Or is it the reasoning I'm able to apply when free of such unconscious constraints? Or perhaps, this line of research simply illuminates what is true for all of us, regardless of how many languages we speak: that our moral compass is a combination of the earliest forces that have shaped us and the ways in which we escape them."
 
This work reminds me of research that looked at the relativity of ethical values by studying the decisions of prison parole boards before and after lunch. It seems that, if you ever find yourself before a prison parole board, they will be less likely to be lenient if they are hungry (see Strategic CSR – Ethics).
 
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 Morality Changes in a Foreign Language
By Julie Sedivy
September 14, 2016
Scientific American
 

Wednesday, April 12, 2017

Strategic CSR - United

A key to understanding the full implications of Strategic CSR is the idea that corporations reflect our values; they do not shape those values. In other words, corporations reflect the aggregated values of their collective set of stakeholders (internal and external). To put this succinctly – it is not Walmart that puts Mom & Pop stores out of business; customers do that by choosing to shop at Walmart, employees do it by choosing to work for Walmart, governments do it by providing tax breaks for Walmart, and so on. If you have a problem with Walmart, then you have a problem with American society because it is clear that American society wants Walmart. 90% of U.S. households shop at Walmart at least once a year – I don't know of any other company that consistently receives that level of societal endorsement.
 
An extension of this idea is that corporations are not the problem; they are the solution. The for-profit firm is simply a tool that we have devised to solve a specific problem – how to allocate scarce and valuable resources. There is a finite set of resources available to us. How to allocate these resources in a way that produces 'optimal' value for the majority is a problem that has challenged humanity throughout our existence. The best solution we have found to date is for-profit firms operating within a market-based, democratic form of capitalism. Once you understand firms are merely a tool, you understand that they will do what we ask of them. If we ask them to pollute the planet (as we are, at present), they will efficiently do that. Equally, if we ask them to preserve the planet, they will find the most efficient means of achieving that goal. They will do what we want them to do – they reflect our collective set of values.
 
I was thinking about this again in light of United's recent challenges. To what extent is United shaping the airline industry and to what extent is it merely giving us what we, collectively, want – cheap tickets and bare-bones service? The most recent crisis to hit United is made all the more apparent in contrast to last week's news about the airline industry's most recent performance ratings. The one headline that caught my attention there – the low budget carrier, Spirit Airlines, is currently the most profitable U.S. airline; it also has the highest rate of customer complaints. I fail to understand how that can be. If people want the absolute cheapest tickets, why would they then complain if they receive poor service, or their bags get lost, or whatever caused them to complain? If we want good service, we have to understand that there is a cost associated with that. And, if we are willing to pay for good service, we should believe that there are many entrepreneurs out there who would be more than willing to provide it to us. Clearly, when it comes to airlines, however, most of us do not want to pay for that service.
 
This brings me back to United. I don't necessarily agree with the overall tone of the article in the url below, but it is the most unique perspective I have seen in the acres of coverage on this issue. More importantly, I think it captures effectively the idea that United is merely a reflection of a broader system that we have shaped through our day-to-day decisions. In other words, while it feels satisfying to shoot the messenger, we should always remember that it is we (the firm's collective set of stakeholders) who are sending the message. In the same way that we get the politicians we deserve, we also get the companies we deserve:
 
"It is commendable and necessary to direct your outrage at this particular corporation, on this particular day, but keep the larger truth in mind: You are not mad at United Airlines; you are mad at America."
 
Of course, on the flip side, the fact that so many passengers felt outraged at the events and spread the word so quickly suggests a willingness to induce change, …. perhaps. We'll have to see if there are any lasting consequences for United. Past performance suggests we will quickly forget and move on. But, it is worth keeping in mind the next time you purchase an airline ticket. Will you demand better service and pay for it, or are we all heading towards a future filled with versions of Spirit Airlines or Ryan Air (or your lowest-cost carrier of choice)?
 
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/
 
 
You're Not Mad at United Airlines; You're Mad at America
By Shane Ryan
April 10, 2017
Paste Magazine
 

Tuesday, April 11, 2017

Strategic CSR - Bribery

The article in the url below about the effects of bribery on firm performance reminded me of other research I have seen before. The research summarized here states that, while bribery helps drive revenue, it does not help drive profits:
 
"[The research] by two Harvard Business School professors analysed anti-corruption data from 480 multi-national firms based on sales growth, the strength of companies' anti-corruption programs and the type of market the businesses were operating in. When companies with lower end anti-corruption programs entered high bribery markets they achieved 14.1% growth over three years, compared with 2.6 % growth for top compliance companies. But the fast growth was typically offset by other costs, the study found."
 
In other words, while bribery appears on the surface to pay dividends, it in fact stimulates other costs that end up offsetting any gains. So, while bribery drives revenue growth, it does not increase a firm's profits. The article in the second url below, however, shows that (like much academic research), this empirical reality does not necessarily change behavior:
 
"Bribery is a way of life for British companies working in emerging markets, with 85pc of managers forced to resort to it to do business, according to a new report. … [The research] claims the vast majority of UK managers operating in these markets resort to the dishonest practice on a monthly basis – often with the tacit permission of their chief executives."
 
Rather than a choice, however, the article suggests bribery is a way of conducting business in some emerging countries that cannot be avoided. As the researcher notes:
 
"'It is the managing directors and general managers in country… who are being forced to give bribes to win business. These are good people being forced to do bad things. Boards are doing worse than paying lip service to anti-corruption laws because they are using them to protect themselves while they know bribery is going on.'"
 
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/
 
 
Study Finds Bribery Increases Sales Not Profits
By Stephen Dockery
March 1, 2016
The Wall Street Journal
 
Bribery a way of life for companies operating in emerging markets 
By Alan Tovey
October 26, 2016
The Daily Telegraph
 

Thursday, April 6, 2017

Strategic CSR - Climate policy

The article in the url below presents some statistics that suggest the Trump administration's efforts to turn back the clock on climate change will have little effect:
 
"'You cannot stop the momentum,' said Sacha Sadan, director of corporate governance for Legal & General Investment Management. … As an example of that trend, Mr. Sadan cited LGIM's launch in November 2016, of an index fund that will rank companies based on their environmental standards. HSBC Holdings invested 1.85 billion pounds in the fund, making it the default equity fund for its employees' defined contribution pension plan. According to the Global Sustainable Investment Alliance, climate change and carbon emissions was 'the most significant overall environmental factor' for socially-minded investors in the U.S., drawing allocation of $2.15 trillion in institutional investor assets in the year ended Dec. 31, 2015. Shareholder proposals focusing on the climate risk are also getting more support, even if none got majority approval over board opposition so far. According to Proxy Monitor, an arm of the Manhattan Institute's Center for Legal Policy that tracks resolutions filed with Fortune 250 companies, 23 of the total 58 environmental-related proposals as of the end of June, 2016, got 26% of the vote, compared with 16% support in 2015 and 14% in the 2006-2015 period. Also, five environmental resolutions received at least 40% support, a record number, said Proxy Monitor."
 
These data points are reinforced by an op-ed piece by Michael Bloomberg in the article in the second url below, which argues that the momentum (and, therefore, the ability to drive change) on this issue lies at the state and city level, rather than the federal level:
 
"In both red and blue states, cities — which account for about two-thirds of the country's emissions — are taking the lead in the fight against climate change. More than 130 American cities have joined the Global Covenant of Mayors for Climate and Energy, and all are determined to see that we meet our Paris goal. Their local policies — expanding mass transit, increasing the energy efficiency of their buildings, installing electric vehicle charging stations, creating bike share programs, planting trees, to name just a few — will help ensure we do."
 
This change, Bloomberg argues, is driven more by bottom-up stakeholder demand, rather than top-down ideology:
 
"Though few people realize it, more than 250 coal plants — almost half of the total number in this country — have announced in recent years that they will close or switch to cleaner fuels. Washington isn't putting these plants out of business; the Obama administration's Clean Power Plan hasn't even gone into effect yet. They are closing because consumers are demanding energy from sources that don't poison their air and water, and because energy companies are providing cleaner and cheaper alternatives."
 
Progressive companies recognize this and are not changing plans simply to reflect the fluctuating moods of politicians in Washington:
 
"This week, many of the 81 major corporations (including Apple and Wal-Mart) that signed a pledge in 2015 to reduce their emissions reaffirmed their commitments, and Anheuser-Busch InBev announced that it aims to get 100 percent of its energy from renewable sources by 2025. (My company is pursuing the same goal.) No mandate from Washington is forcing these companies to act — just their own self-interest."
 
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/
 
 
The Case for Climate Rick Investing in Trump Era
By Mara Lemos Stein
March 31, 2017
By Michael R. Bloomberg
March 31, 2017
The New York Times
Late Edition – Final
A23
 

Tuesday, April 4, 2017

Strategic CSR - Cognitive dissonance

The article in the url below contains some interesting information on Americans' awareness of climate change as a problem, as well as their willingness to pay to solve that problem. It appears that, increasingly, Americans are aware that climate change is real, that it is a human-caused problem, and it is something that needs to be addressed:
 
"Americans of all political stripes are increasingly worried about climate change. This is undoubtedly good news for those advocating for robust policies to reduce carbon emissions, the main contributor to climate change."
 
Unfortunately, while awareness is growing, it appears that Americans are much less willing to pay, even a small amount, to solve the problem:
 
"This is what researchers from the Energy Policy Institute at the University of Chicago (EPIC) and the Associated Press … set out to better understand. Their nationally representative poll found that 43% of Americans were unwilling to pay an additional $1 per month in their electricity bill to combat climate change—and a large majority were unwilling to pay $10 per month. That's despite the fact that a whopping 77% said they think climate change is happening and 65% think it is a problem the government should do something about. Support plummets as the amount of the fee increases."
 
This response is out of all proportion to the threat posed by climate change, both to the group and to each household individually:
 
"This is an upside-down result. The best available science tells us that Americans should be willing to pay considerably more, because the damages from climate change are so great—including to them personally. If we use the federal government's estimate of the combined social cost of carbon pollution and apply it to the typical U.S. household's electricity consumption on today's national grid mix, the average household faces damages of almost $20 per month. Yet just 29% of respondents said they would be willing to pay at least that much."
 
So, the interesting question is how can we keep these contradictory thoughts in our heads at the same time? Humans' well-known capacity for cognitive dissonance allows us to recognize a problem as potentially existential, while at the same time not being willing to sacrifice individually for the benefit of the group. My sense is that the existential threat, even if believed, is perceived as distant, while the costs associated with preventing it are perceived as immediate. We have a collective need for short-term gratification that seems to override our longer term self-interest – there is a reason why so many of us have not saved enough for our retirement. In terms of the climate in the U.S., however, this mechanism seems disproportionately influential. While the article includes examples of different communities around the world that are willing to pay for a clean environment, the data suggests that willingness has yet to emerge in the U.S. As the author concludes:
 
"This is potentially bad news for climate policy. After all, if 43% of Americans are unwilling to pay even $1 to solve  a $20 problem, the policy landscape is likely to be challenging."
 
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/
 
 
Few Will Pay for Climate-Change Fight
By Sam Ori
November 14, 2016
The Wall Street Journal
Late Edition – Final
R8
 

Friday, March 31, 2017

Strategic CSR - Shareholders

Here is an interesting quote from the article in the url below:
 
“‘Shareholders are stupid and impertinent — stupid because they give their money to somebody else without any effective control over what this person is doing with it, and impertinent because they ask for a dividend as a reward for their stupidity.’ So said the banker Carl Fürstenberg, who ran the Berliner Handels-Gesellschaft in the late 19th and early 20th century.”
 
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/
 
 
IPOs and Shareholders
By John Plender
February 23, 2017
Financial Times
Late Edition – Final
9
 

Wednesday, March 29, 2017

Strategic CSR - Net positive

The article in the url below asks a particularly silly question and, in the process, demonstrates why The Guardian Sustainable Business unit (https://www.theguardian.com/us/sustainable-business) misses as often as it hits:
 
"Can a company ever claim to be making a better world?"
 
My starting assumption in addressing what I think is the most important question society faces ('What is the purpose of the for-profit firm?') is that all firms with ongoing operations are making a better world for at least some of their stakeholders (as those stakeholders define 'better'). Now, there is certainly a debate that can be had as to whether the net effect of specific firms is positive or negative, but it is simply ignorant to question whether there are any firms out there improving our collective standard of living. In fact, the opposite question is far more interesting -- Are there any companies that are not making a better world? Once it gets past its provocative (read 'ridiculous') title, then the article in the url below comes round to this position by discussing what "net positive" means:
 
"So, what exactly is net positive? At its core, it involves measuring a company's impacts as a result of its operations and products. The positive impacts – anything from reduced greenhouse gas emissions due to fuel-efficient vehicles to the social benefits resulting from good supply chain practices – are the company's handprint, or what a company adds to the world. A footprint is what it takes away."
 
Putting aside the issue that this only discusses sustainability metrics (rather than all operations); conceptually, I think this is fine, although it is hard to know what it adds to the long-standing CSR debate (other than another label). Clearly, one of the central challenges to the progress of CSR is measurement – how do we measure something so complex that it encompasses everything done by all firms across all industries? And, as the article notes, it does not help when firms start issuing their own indices to suit their own purposes, as is often the case with sustainability:
 
"When you walk the aisles of your favourite shop you are bombarded with labels attempting to explain why this product is so much better than those others. It can be overwhelming, and it's neither a new problem nor one that's getting better; there are currently at least 465 different eco-labels in use around the globe according to the EcoLabel Index."
 
This is an extremely complex issue and deserves our full attention, but we need to be starting the debate from common points based on a fundamental understanding of economic theory and human psychology. It is therefore important that companies, such as Dell, are beginning to tackle this:
 
"In 2013, Dell announced its aim to make its overall positive impacts 10 times greater than its negative impacts by 2020. It has attempted to do this with a net positive assessment of the impacts of its programme that helps employees work from home. … Calculating this [impact], however, required a level of expertise and effort that would be daunting to most companies. And it could be just as hard, if not impossible, to communicate such complexity on product packaging."
 
Unfortunately, these efforts are not well-served by journalists seeking to provoke using shallow headlines because, clearly, although we have made great strides, we still have much further to go:
 
"In the meantime, all that's left to be worked out in calculating net positive, is well just about everything. … Its partners in the new project will need to develop methodologies for specific areas like water and greenhouse gases as well as guidance for companies that want to set net positive goals. And because every company will need to address different social and environmental impacts to reach net positive, members will be casting a wide net in their approaches."
 
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/
 
 
Can a company ever claim to be making a better world?
By Matthew Wheeland
August 24, 2016
The Guardian
 

Sunday, March 26, 2017

Strategic CSR - Oil

Now that Exxon has vocally expressed its support for a carbon tax (see Strategic CSR – Exxon), it seems that the rest of the oil and gas industry is falling over itself to help tackle climate change. The article in the url below, for example, announces an effort by ten companies (including Saudi Aramco, Shell, and BP, but not Exxon and Chevron), who have committed a total of $1bn in a "decade-long plan to fight climate change":
 
"The 10 companies unveiled their plan … as the Paris climate agreement came into force, underlining growing energy industry concerns that the deal will spur governments to force the sector to capture or pay more for the planet-warming carbon emissions it produces. 'Don't worry, we've got it,' BP chief executive, Bob Dudley, said in London, explaining the $1bn investment would add to efforts each company was already making 'on the transition to a lower emissions world.'"
 
In other words, this sudden enlightened perspective is essentially being driven by the desire to avoid government regulation; it is also self-serving in that it involves investment in ways to burn oil more 'sustainably,' rather than discover alternatives to oil for our energy needs:
 
"The 10 companies, which also include France's Total, Norway's Statoil and CNPC of China, said they would initially focus their spending on measures such as carbon capture and storage systems, which trap CO2 emissions and store them deep under the ground or sea. Their $1bn will not be targeted at technologies that pose a direct competitive threat to their businesses, including renewable power or energy storage."
 
Equally, the investment is being criticized as minimal, given the revenues these companies generate, as well as the scale of the problem:
 
"Their $1bn investment over a decade is also small compared with the $348bn spent globally last year on clean energy and it pales beside the sums experts say would need to be spent on carbon capture measures to meet the Paris agreement's goals. The bill could reach $4tn between now and 2050, according to the International Energy Agency, although the global energy advisory body thinks the figure could be higher without carbon capture systems."
 
Nevertheless, the initiative does highlight the fact that, any solution to a transition away from carbon-based energy sources will require the co-operation of the oil and gas companies. There is simply too much money at stake to expect them to role-over the make way for alternative energy sources. The best way I have seen to achieve this is to somehow incentivize these companies to leave their oil reserves in the ground – in essence, to buy the oil from them before it is extracted (see Strategic CSR - Divestment). The details of how this might work, however, and how to you prevent the distorted incentives for these companies to 'discover' more oil that then remains underground, is less clear. What is clear, however, is that neither the industry nor the governments of major oil export/import countries are yet serious about tackling the problem.
 
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/
 
 
Big Oil in $1bn decade-long plan to fight climate change
By Pilita Clark
November 5/6, 2016
The Financial Times
Late Edition – Final
10
 

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