Strategic CSR - Sustainability - See you in January!

This will be the last CSR Newsletter until the Spring semester.

Have a great holiday season and I will see you in January!

On reflection, this semester I sent a marked increase in the number of Newsletters focused on environmental sustainability, in general, and climate change, in particular (Issues: Environmental Sustainability, p171). This, no doubt, mirrors the growing public awareness of these issues and, as a result, the greater profile they are given by the media. As such, I will finish this semester's Newsletters with a 20 minute video that focuses on sustainability, although my sense is that it is presented in a 'Michael Moore-type' approach to documentary-making, which is to say it is more polemical than it is objective and scientific. Nevertheless, as with much of Michael Moore's work, it is entertaining and educational, and it makes some very important points:

http://www.storyofstuff.com/index.html

My sense is that the most effective way of achieving the over-arching goal of the video (how to make a linear system more sustainable) lies in maintaining a focus on CSR in its broadest interpretation. In writing Strategic CSR, we originally decided to limit the environmental sustainability content, simply because so much has been written about this subject elsewhere and there were so many other subjects that we wanted to discuss that were not, at the time, central to the CSR debate. One of our main messages, as a result, is that it is the inclusion of all aspects of firm operations that maximizes the strategic advantages of CSR. In the spring, my thought at present is to try and return to this broadest focus. While not ignoring issues of environmental sustainability or recycling or climate change, I will try and rededicate the Newsletters to this issue of system-wide sustainability, as it is only by focusing on the system as a whole that meaningful and lasting change can occur.

As usual, your thoughts and/or feedback are always welcome.

Happy Holidays!
Dave

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

Strategic CSR - Supply Chain

The article in the url link below appeared recently in a special insert in the NYT titled ‘Business of Green.’ The supplement focused mostly on the business benefits of environmental sustainability by cutting costs within the firm, but this article extends the sustainability logic into a firm’s supply chain (Issues: Auditing CSR, p94; Country of Origin, p223):

“Call it Phase 3 of the greening of corporate America. Companies have turned to alternative energy, bought hybrid fleets and otherwise tried to clean up their own acts. Many have helped customers go green by stocking green products, selling carbon offsets along with airline tickets or offering electricity from renewable resources for those willing to pay extra. Now they are looking at their supply chain as the next frontier for combating climate change.”

Proactive efforts on in-house sustainability are one thing; setting a high bar and then expecting the same level of commitment from your suppliers is another level of implementation of a social responsibility perspective:

“In September, Wal-Mart announced a pilot program with suppliers of seven common items -- DVDs, toothpaste, soap, milk, beer, vacuum cleaners and soda -- to measure and reduce the amount of energy used in making and distributing them. In marketing and store displays, Home Depot gives preferences to its EcoOptions line of environmentally friendly products, and the company has said it would favor suppliers that came up with a new category of green product, like a recyclable power tool.”

There are a number of interesting questions that emerge from this debate: How many firms are really thinking about this issue at this stage? What are the benefits for those firms that make these demands of their suppliers and what costs to those that do not? And, How far down the supply chain can firms realistically be held responsible for actions over which they have no direct operational control? Most important, perhaps, is ensuring that the demands firms place on their suppliers regarding costs (i.e., as low as possible) do not conflict with expectations regarding sustainability policies, which often involve an upfront investment (CSR Business Plan of Action—Short Term: Awareness Creation: Measurement and Rewards, p71).

Take care
Dave

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

For Suppliers, the Pressure Is On
By CLAUDIA H. DEUTSCH
1558 words
7 November 2007
The New York Times
Late Edition - Final
1
http://www.nytimes.com/2007/11/07/business/businessspecial3/07Supply.html

Strategic CSR - P&G

The article in the url link below presents a case study concerning a multi-national’s attempts to move into a new market. In particular, it describes P&G’s efforts to work in developing economies to build a business model to appeal to “Bottom of the Pyramid” consumers (Issues: Profit, p200):

“[P&G] has a goal of increasing total sales by 5% to 7% annually over the next three years. As part of that mission, it is looking to tap roughly one billion additional consumers -- most of them very poor women who live in developing countries.”

The article describes in detail the different challenges a firm like P&G faces and the extent to which it needs to adapt to the new cultural and economic environment—from single portion packaging, to small retail outlets, to different shopping habits (daily, rather than weekly, for example):

“Reaching these customers isn't easy. In emerging markets, P&G estimates that 80% of people buy their wares from mom-and-pop stores no bigger than a closet. … Rather than stock up on full-size goods, which cost more per item, they buy small portions of soap, laundry detergent, and single diapers as they need them -- even though the smaller sizes are usually sold at a premium. … P&G calls such locally owned bodegas, stalls and kiosks "high-frequency stores," because of the multiple times shoppers visit them during a single day or week.”

The article is clear that it is the business model that is driving P&G’s expansion in Mexico, although it is through similar efforts that economic and social progress is also made:

“For P&G the stakes are high. Sales of P&G products in developing markets currently total $20 billion, up from $8 billion five years ago. In recent years, emerging markets have contributed about 40% of the company's "organic" sales growth, which excludes gains from acquisitions. The company still lags other consumer-product rivals. Last year P&G derived 26% of sales in these regions -- a far cry from Unilever and Colgate-Palmolive Co., which manage to snag about 40% of their business in developing markets.”

Take care
Dave

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

Emerging Ambitions -- P&G's Global Target: Shelves of Tiny Stores --- It Woos Poor Women Buying Single Portions; Mexico's 'Hot Zones'
By Ellen Byron
2229 words
16 July 2007
The Wall Street Journal
A1
http://online.wsj.com/article/SB118454911342967244.html

A freely accessible version of this article can be found at:
http://marketdrivengrowth.blogspot.com/2007/08/p-global-target-shelves-of-tiny-stores.html

Strategic CSR - Banks

The article in the url below generates contradictory feelings (Issues: Finance, p180; Investing, p184; Loans, p188). At first, when I read it I thought firms were innovatively expanding access to credit to previously excluded segments of the market (a positive). Then I realized that less affluent customers are more likely to use credit heavily and get caught up in cycles of repayment and high interest rates (a negative). It is important, however, to recognize that consumer credit is far more preferable to the “neighborhood loan shops” that can charge “more than 200% annual interest” and having a credit card helps build credit history (positives). But, then I read that such private label cards tend to charge higher interest rates than regular credit cards (negative). In general, however, I like the Citigroup policy:

“Citigroup lets consumers build a credit history with a MasterCard secured with money the consumer puts in a certificate of deposit. After 18 months, consumers deemed creditworthy may be offered a regular Citigroup credit card, and the original deposit, plus interest, is put into the holder's credit-card account. Others can renew the CD or close the account and get the deposit back, with interest.”

And also aspects of the GE plan:

“The issuers say they are treading carefully and tracking payment habits closely, so they aren't saddled with bad loans to nonpaying customers. GE, for example, calls new customers to make sure they understand their bills, interest rates and potential late fees.”

The oversight role played by consumer advocates, discussed in the article, should help keep the banks reasonably honest. Ultimately, I think extending the banking system to serve the huge number of people in the US who do not have either a bank account or access to credit of some sort, providing them with legitimate alternatives to the “neighborhood loan shops,” generates a great deal of social value:

Take care
Dave

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

Private-Label Card Program From GE Offers 'Road to Credit' To Tap Greater Portion of Market
By Kathryn Kranhold and Robin Sidel
1104 words
6 July 2006
The Wall Street Journal
C1
http://online.wsj.com/article/SB115214210537198943.html

A freely accessible version of this article can be found at:
http://www.nabble.com/Article-(07-06-2006):-Private-Label-Card-Program-from-GE-Offers-'Road-to-Credit'-p5210720.html

Strategic CSR - Internet

The article in the url link below highlights the leveling effect that the Internet (Issues: Internet, p237) has had on the free flow of information (Figure 3.4, p56):

“Opponents of a chemical plant being built in the coastal city of Xiamen used cellphone text messaging to distribute widely their warning of dire consequences if the factory opened. … Spreading like a virus, the message was repeated more than 1 million times, environmentalists said, until it had reached practically everyone in Xiamen, a city of 1.5 million people in southeastern China known for its clean air and scenic views.”

This effect still impacts governments more than corporations, but I believe it is a sign of things to come. Firms that overstep societal expectations will face grass-roots campaigns, which are aided significantly by the revolution in communications technology that has occurred over the last 10 to 15 years. There is no reason to suspect that consumers have any less influence on corporate executives than the public has on politicians:

“[In late May], in a move that caught almost everyone by surprise, municipal authorities announced that they were suspending construction of the plant. … Vice Mayor Ding Guoyan was quoted in the official China Daily newspaper as saying, "The city government has listened to the opinions expressed and has decided, after careful consideration, that the project must be re-evaluated."”

Today, NGOs and individuals can communicate their agenda and mobilize like-minded others in ways that were unthinkable only 10 years ago:

“Student protesters who filled Tiananmen Square in 1989 used fax machines to disseminate news about their struggle, leading to a crackdown on the use of faxes. Similarly, the advent of the Internet and e-mail brought a new organizing tool, one still in use despite a massive, and largely successful, government effort to control it. … But cellphones present a new challenge to the government, because all but the poorest people in China own one and text messaging is ubiquitous — used far more often, and by a wider span of ages, than in the U.S., where it tends to be a tool of the young.”

Take care
Dave

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

Chinese activists turn to cellphones
Authorities in Xiamen, China, halt construction of a factory after text messages spread word of the risks it would pose.
By MITCHELL LANDSBERG
1118 words
1 June 2007
The LA Times
Late Edition – Final
http://globaltechforum.eiu.com/index.asp?layout=rich_story&doc_id=10856&title=Chinese+activists+turn+to+cellphones&categoryid=30&channelid=4

Strategic CSR - Climate Change

Another report on climate change by a well-intentioned global body (this time the UN Development Program), another insightful (and depressing) comment by Martin Wolf of the FT. I would be in severe infringement of copyright law if I reproduced everything from the article in the url below that I think is important and interesting, so I will leave it to those of you who are interested to read further. The statistics Wolf cites on the complete failure of the Kyoto Treaty are particularly worrying. Needless to say, the overall outlook is bleak:

"In short, if they are to tolerate radical change in energy use, people must first be frightened and then they must be offered a good way out. The truth, moreover, is that this will happen only if the US also takes the lead. No country will deliver radical cuts if the US does not do so, too. No leaps forward in science and technology will occur if the US is not prepared to commit its resources to those ends. The US can no longer wait for a lead from others. Either it takes the lead now or the cause, in all probability, will be lost. Our children and grandchildren will then find out whether it was a real wolf or not."

Have a good weekend.
Dave

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

Why the climate change wolf is so hard to kill off.
By MARTIN WOLF
1242 words
5 December 2007
Financial Times
Asia Ed1
Page 13
http://us.ft.com/ftgateway/superpage.ft?news_id=fto120420071412536621

Strategic CSR - Recycling

I don’t have much to add to the article in the url link below—it speaks for itself. It is an example of a proactive, progressive policy on re-cycling introduced by the city of Seattle that I find hard to believe is not replicated throughout the US (Issues: Environmental Sustainability, p171):

“Seattle now recycles 44 percent of its trash, compared with the national average of around 30 percent, which makes it a major player in big-city waste recovery. Its goal, city waste management officials said, is to reach 60 percent by 2012 and 72 percent by 2025.”

Importantly, according to the article, there is a strong business case to be made for such policies at present re-cycle prices:

“Waste paper is now commanding about $90 a ton throughout the United States, which makes it possible to turn a profit by loading it onto ships instead of dumping it into landfills. Not to sell it ''would be like burying money,'' said Chaz Miller of the Environmental Industry Associations, which represents the private waste service industry.”

Luckily, those who should know are hopeful:

“Jerry Powell, who publishes Resource Recycling magazine, based in Portland, Ore., and is considered one of the nation's experts on the subject, is bullish on the industry's prospects. ''This decade is the best for recycling markets ever,'' Mr. Powell said. ''If you can't make money recycling, you should go elsewhere.'' By his count, more recycling legislation was passed in 2006 than in any year of the previous 10.”

Take care
Dave

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

Seattle's Recycling Success Is Being Measured in Scraps
By J. MICHAEL KENNEDY
1072 words
10 October 2007
The New York Times
Late Edition - Final
14
http://www.nytimes.com/2007/10/10/us/10recycle.html

Strategic CSR - Social Marketing

The article in the url link below demonstrates clear boundary constraints on the ability of the market to deliver social value (Issues: Profit, p200). The article argues that, at least in terms of the most effective means of distributing malaria nets to those who need them most, handing them out for free is a far superior means of distribution:

“In doing so, Dr. Kochi [the blunt new director of the World Health Organization's malaria program] turned his back on an alternative long favored by the Clinton and Bush administrations -- distribution by so-called social marketing, in which mosquito nets are sold through local shops at low, subsidized prices -- $1 or so for an insecticide-impregnated net that costs $5 to $7 from the maker -- with donors underwriting the losses and paying consultants to come up with brand names and advertise the nets.”

Past experience with social marketing suggests, in areas where there is little or no existing market infrastructure, trying to impose a market solution is ineffective:

“In 2000, a world health conference in Abuja, Nigeria, set a goal: by 2005, 60 percent of African children would be sleeping under nets. By 2005, only 3 percent were.”

The example presented in the article is compelling:

“Maendeleo, a village of about 140 mud-walled shacks with tin roofs, was part of a five-year study of 40 health districts. When it started in 2002, the only nets were those for sale in small shops, Dr. Olumese said, and only about 7 percent of people had them. Social marketing was introduced by Population Services International, a large aid contractor. That increased coverage to about 21 percent by early 2006. Then, late last year, the health ministry got a big grant from the Global Fund to Fight AIDS, Tuberculosis and Malaria that allowed it to hand out 3.4 million free nets in two weeks. Coverage rose to 67 percent, and distribution became more equitable. … Deaths of children dropped 44 percent. It also turned out to be cheaper.”

Take care
Dave

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

Distribution of Nets Splits Malaria Fighters
By REUBEN KYAMA and DONALD G. McNEIL Jr.; Reuben Kyama reported from Maendeleo, Kenya, and Donald G. McNeil Jr. from New York.
1280 words
9 October 2007
The New York Times
Late Edition - Final
1
http://www.nytimes.com/2007/10/09/health/09nets.html

Strategic CSR - Executives

The article in the url link below is taken from the August edition of Strategy+Business, a magazine produced by the consulting company Booz Allen Hamilton, Inc. The article proposes an interesting idea for a non-profit organization, ‘Executives without Borders,’ that would be modeled on the successful medical non-profit, ‘Medecins Sans Frontieres’:

“Like MSF, Executives Sans Frontières (ESF) would be run by an international board of directors, who would be in charge of recruiting a group of volunteer, adventurous business executives and rotating teams of committed members into regions like the Sahel to help establish businesses and develop untapped markets. Based on their background and expertise, these managers from the developed world’s corporate elite and recent startups would be parachuted in for several months to several years to address such critical issues as transportation of goods, sustainable harvesting, and international trade practices. ESF’s success would be predicated on its ability to locate, mentor, and, in some cases, underwrite local entrepreneurs. The overarching goal would be to teach people to run ventures themselves.”

The idea has much to recommend it and is potentially more effective than the uncoordinated similar actions some firms have already initiated:

“Although some businesses have tinkered with sending salaried consultants to developing countries on pro bono projects, such projects tend to be temporary and focused at the higher levels of government. The ESF, however, would be far more adventurous, appealing to executives’ altruistic instincts while giving them an opportunity to apply real business learning in exciting, uncharted settings. ESF would target mid-career managers with experience, drive, and a sense of joie de vivre. There could also be an opportunity for companies to get involved directly; for example, FedEx might donate 15 employees a year, who would each serve four years with ESF while remaining on FedEx’s payroll.”

Take care
Dave

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

Executives without Borders
by Jonathan Ledgard
August 14, 2007
A novel proposition for saving driest Africa from total collapse.
http://www.strategy-business.com/li/leadingideas/li00038?

Strategic CSR - Corporate Charters

The article in the url link below summarizes the history of the corporate charter and the public-interest demands placed on organizations that sought both the privilege and responsibility of incorporation (Issues: Corporate Charters, p106; Corporation, p116):

“While history does not support the claim of a golden age when corporations came into being to serve a “public purpose”, it does not prevent society from imposing one now.”

I understand the principle of advocating for firms to align themselves publicly with a commitment to serve “a stated public purpose”:

“A charter, like today’s articles of incorporation, brought a corporation into existence. Lawyers still commonly refer to articles as charters, their historical antecedent. The charter – then and now – invariably has a “purpose” clause, a statement of why the company is coming into existence.”

I question, however, what purpose this requirement will serve in practice. Greater transparency will help hold firms accountable for their commitments, but, by definition, a statement in a founding document to serve the “public purpose” is likely to be broad in sweep and short on specifics. Imposing the need for such a statement of purpose on corporations, as advocated by the author, seems only to revive the deception and corruption of the principle, which, as the article reveals, occurred historically in centuries past:

 “… to the extent one could conjure up a public benefit for the new corporation, it would justify the granting of special powers, usually a local monopoly on a particular business. Hence, the Hudson Bay Company’s lock on commerce in vast swaths of colonial Canada. The earliest, recognisably modern business corporation was the famous – or infamous – East India Company. Chartered on 31 December, 1600, its public purpose – “the advancement of trade” – was in fact nothing more glorious than the making of money for its proprietors.”

Take care
Dave

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

Public purpose – Corporate history’s lesson for companies now
While there is much about the history of corporate legislation that remains murky, companies should revive the requirement for a stated public purpose, says Peter Kinder
Ethical Corporation Magazine
June 18, 2007
http://www.ethicalcorp.com/content.asp?ContentID=5406