Strategic CSR - 2nd Edition!

This will be the last CSR Newsletter for the Fall semester.

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

The purpose of the Newsletter today is to ask for your assistance in shaping the second edition of the textbook that this Newsletter is intended to support: Strategic CSR: Stakeholders in a Global Environment.

Sage has decided to publish a second edition and Bill and I thought it would be a good idea to ask for your thoughts in terms of what you like and do not like about the first edition.

In general, we intend to keep the overall structure of the current edition, but will:

• Add two new chapters to Part I
• Update the Issues in Part II (removing the less effective ones and adding some that are more relevant to the CSR debate today), and
• Add a selection of 50 past Newsletters as a new Part III.

None of the current material will be lost, however, as Sage plans to set-up an interactive website on which we can store:

• Information in the current edition, but not included in the second edition
• The Instructor’s CD, and, perhaps,
• Additional material posted by adopters.

We would appreciate it very much if you could make any suggestions you have with these proposed changes in mind (particularly those of you who are using the book in the classroom). Please, also, if you have any additional ideas that are not included in this brief outline, please let us know as we are open to your suggestions.

In the past I have solicited thoughts from some of you on the book, so, if you have already sent me your ideas and have nothing more to add, thank you and rest assured your comments will be taken into account.

Many thanks again for your input into this process and continuing support for the textbook. We are excited to try and improve the book for its second edition. We will keep you updated on the release date for the second edition when it is finalized and as it gets nearer.

Happy Holidays!
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006

Strategic CSR - Teaching CSR

The article in the url below questions the ambitions of students from prestigious U.S. colleges (Harvard in particular) who automatically pursue high-paying careers in the financial or consulting industries:

“As Adam M. Guren, a new Harvard graduate who will be pursuing his doctorate in economics, put it, ''A lot of students have been asking the question: 'We came to Harvard as freshmen to change the world, and we're leaving to become investment bankers -- why is this?'”

The article outlines the pressures students feel to enter such careers, while talking to those who are trying to stimulate a debate about the true value of these sought-after educations (Issues: Ethics, p227):

“Is this what a Harvard education is for?'' … ''Are Ivy League schools simply becoming selecting mechanisms for Wall Street?”

The universities are also engaging in this debate, sponsoring “reflection seminars” at Harvard and reducing the financial cost of attending these universities as a way of removing the need/incentive to pursue a high salary on graduation:

“This year, Tufts announced that it would pay off college loans for graduates who chose public service jobs. And officials at Harvard, Penn, Amherst and a number of other colleges say one reason they have begun emphasizing grants instead of loans in financial aid is so students do not feel pressured by their debts to pursue lucrative careers.”

Take care
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006

Strategic CSR - Carbon Offsets

The article in the first url below demonstrates the size of the market for carbon credits:

http://sg.wsj.net/public/resources/images/P1-AL151A_carbo_20080411191616.gif
  
It also demonstrates the market’s fragile nature and the potential for abuse:

“The United Nations is the main global policeman in an effort by wealthy nations to reduce the impact of their own pollution by paying for cleanups in the developing world. The program, known as the Clean Development Mechanism, is one of the most important coordinated efforts to attack global warming. In recent months, however, U.N. regulators who administer the program have objected to dozens of these developing-world projects, ranging from hydroelectric plants to wind farms, questioning whether the projects would produce a real environmental payoff.”

The article in the second url below profiles the fate of the largest of the agencies/auditors that identify and certify projects, EcoSecurities. Following certification, the projects are then submitted to the UN for final approval under the scheme. Following UN approval, then the agencies can begin trading the credits:

“EcoSecurities Ltd., helps companies in the industrialized world meet their obligations to pollute less by selling them "credits" that fund clean-air projects in poorer nations. Last year, some $9.4 billion in these credits were traded, up from almost none four years earlier.”

The articles report that during the early years of the scheme, set-up following the Kyoto Protocol, UN oversight was lax and agencies like EcoSecurities were allowed to submit projects that had not been properly vetted. Now, however, the UN is moving to improve its oversight and tighten the overall system of approval:

“EcoSecurities' rise coincided with a permissive U.N. board. In 2004 and 2005, the board automatically approved 95% of the projects proposed to it, according to U.N. statistics. … Last year, the U.N. board gave automatic approval to only 57% of proposed projects, down from 95% in 2004 and 2005. Overall, it rejected 9% of proposed projects last year, more than double its rejection rate in 2006.”

Take care
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
(c) Sage Publications, 2006

U.N. Effort To Curtail Emissions In Turmoil
By Jeffrey Ball
1463 words
12 April 2008
The Wall Street Journal
A1
http://online.wsj.com/article/SB120796372237309757.html

Up In Smoke: Two Carbon-Market Millionaires Take a Hit as U.N. Clamps Down --- EcoSecurities Sees Shares Slide 70%; 'In the Gray Zone'
By Jeffrey Ball
2317 words
14 April 2008
The Wall Street Journal
A1
http://online.wsj.com/article/SB120813542203111705.html

Strategic CSR - Qik

The article in the url below demonstrates further how evolving communications technology in an online world raises the profile for CSR for firms (Issues: Internet, p237; Media, p249):

“Qik's attraction is that it takes a feed from the viewfinder of a camera phone and streams the images live over the internet to a web page. Viewers can type comments and questions on to the screen, which the phone user can then see and answer.”

The Qik software enables anyone with a cell phone to upload live video and distribute it globally in real time. The article discusses the implications of this for media outlets (news, in particular), but I think the real danger lies for the entities who are the potential news stories. While this has broader political and social implications, therefore, Qik also further jeopardizes firms’ reputations, which can be quickly damaged by anyone with a cell phone and internet connection:

“"What if there had been Qik-enabled cell phones during the Burma protests a few months ago? Snap your fingers and it's there on whatever channel," says [Carla Thompson, an analyst with the Guidewire Group].”

Have a good weekend.
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006

Qik broadcasts shine light on workings of the world: A small piece of mobile software is proving useful for capturing live images in every corner of life
By Chris Nuttall in San Francisco
912 words
1 August 2008
Financial Times
London Ed1
12
http://www.ft.com/cms/s/0/58e9f0ae-5f62-11dd-91c0-000077b07658.html
or without registration at:
http://www.ftchinese.com/story.php?lang=en&storyid=001021144

Strategic CSR - Ethical consumers?

The article in the link below questions the assumption of many CSR advocates that consumers care sufficiently about business ethics and CSR to sustain a fundamental shift in economic model (Issues: Ethics, p227). In essence, consumers will say one thing in response to survey questions about CSR, then turnaround and make their purchase decisions based on different principles:

“For most people to choose an “ethical” product over a regular product, that product must not cost any more than an ordinary one, it must come from a reputed brand, require no special effort to buy or use, and it must be at least as good as its alternative.”

In spite of a rise in availability of ethical products and producers willing to sell them:

“For the majority of consumers, cheap products of decent quality remain the popular choice.”

If true, then:

“… what incentives do businesses have in maintaining responsible or ethical standards?”

While the article addresses the issue of reputation risk for firms, it is at its most convincing in arguing that the threat of regulation represents the strongest incentive for firms to reform ahead of consumer demands that they do so (Chapter 1: The Rational Argument for CSR, p17). Because consumers are unlikely to voluntarily sacrifice their current standard of living for a future, uncertain benefit (the article argues), governments will eventually be forced to act on their behalf:

“… because the future will have to be one in which governments and regulators will have to take a much tougher line on the way externalities are priced by business.”

It is not the most forceful (or uplifting) argument for sustainable change, but it might be the best one that we have got!

Happy Thanksgiving!
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006

Ethical consumers – Cop-out at the checkout
Consumers have shown that they will not push companies to be responsible
Chandran Nair
September 8, 2008
http://www.ethicalcorp.com/content.asp?ContentID=6074

Strategic CSR - Finance

The article in the url below by Martin Wolf of the FT offers two important comments on the recent credit crisis and the self-inflicted wounds of the financial industry (Issues: Finance, p180; Investing, p184). First, is the idea that industries that fail to regulate themselves and consistently overstep the bounds of acceptability set by society face regulation (Chapter 1; A Rational Argument for CSR, p17):

“More regulation is on its way. After frightening politicians and policymakers so badly, even the most optimistic banker must realise this. The question is whether the additional regulation will do any good.”

Second, Wolf offers a stinging rebuke to an industry that should expect an even stronger social backlash because of its poor performance relative to standards in other industries:

“Yet why, I ask, should this industry have apparently failed to improve its standards of performance over the past century? After all, almost every other industry has done so. Consider how confident we are that the food we buy will not poison us. Yet adulterated food was once a threat. … [The banking industry’s] purely operational performance is now impressive. But competition does not work well in finance. The "product" of the financial industry is promises for an uncertain future, marketed as dreams that can readily become nightmares. Customers are readily swept away by exaggerated promises, irrational beliefs, misplaced trust and sheer skulduggery. So, too, are practitioners: basing risk management on limited data and inadequate models is a good example. Emotions count wherever uncertainties loom. Boeing would not survive if the aircraft it built fell out of the sky. Yet in the financial industry, huge blunders are also almost always made in common. If everybody is in the dance nobody is to blame and, in any case, governments, horrified by the consequences of a collapsing financial system, will come to the rescue.”

Wolf, however, is pessimistic that anything will change. Regulators, he argues, are likely to focus on correcting past mistakes, rather than preventing future ones, and firms and individuals are unlikely to feel sufficient “pain” to deter future recklessness.

Take care
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006

Why financial regulation is both difficult and essential
By Martin Wolf
1,035 words
April 15 2008
Financial Times
London Ed1
Page 11
http://us.ft.com/ftgateway/superpage.ft?news_id=fto041520081354588929

Strategic CSR - Nike

It is characteristic of the media that good news takes a back seat to scandal, but the article in the url below is worth highlighting as an example of how far Nike has come regarding CSR (Issues: Cultural Conflict, p160). The article, buried deep in the sports pages of my local paper, reports Nike’s voluntary disclosure of the mistreatment of workers at the factory of a Nike sub-contractor in Malaysia:

“… including squalid living conditions, garnished wages and withheld passports of foreign workers.”

Nike’s response, I think, is impressive:

“Nike said all workers are being transferred to Nike-inspected and approved housing … All workers will be reimbursed for any fees and going forward, the fees will be paid by the factory. All workers will have immediate access to their passports and any worker who wishes to return home will be provided return airfare.”

Those executives that remain unconvinced of the value of CSR, however, are likely to remain skeptical as long as such proactive behavior remains unrecognized, while the slightest transgression is plastered all over the front pages.

Have a good weekend.
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006

Nike finds major violations at Malaysian factory
By SARAH SKIDMORE
AP Business Writer
415 words
1 August 2008
02:04 PM
Associated Press Newswires
http://www.newsvine.com/_news/2008/08/01/1713691-nike-finds-major-violations-at-malaysian-factory

Strategic CSR - Dr. Hauschka

The article in the url below profiles the parent (WALA Heilmittel) of the natural cosmetics firm, Dr. Hauschka:

“… the company's roots are in herbal medicine. WALA was founded in 1935 by Rudolf Hauschka, a Viennese chemist who sought to develop remedies using only natural ingredients. In 1967, it added the skin care line, named after the founder, who died two years later.”

Dr. Hauschka is experiencing success today as consumers increasingly seek out socially and environmentally friendly products:

“Sales of WALA Heilmittel, the maker of Dr. Hauschka, have more than doubled in the last five years, to nearly $150 million, about 8 percent of that from the United States, where it also sells herbal remedies. The 73-year-old company, which labored for decades in obscurity, now finds itself in the sweet spot of a booming market for green cosmetics.”

The firm’s level of social responsibility extends far beyond its product line, however, appearing to have successfully integrated a CSR perspective throughout all aspects of operations. The company is run:

“… almost as a collective, with all the profits either plowed back into operations or handed out to the 700 workers.”

Take care
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006

Garden Is a Seedbed For Green Cosmetics
By MARK LANDLER
1307 words
28 June 2008
The New York Times
Late Edition - Final
3

http://www.nytimes.com/2008/06/28/business/worldbusiness/28organic.html

Strategic CSR - Green Noise

The article in the url below introduces the concept of “green noise”:

“green noise” -- static caused by urgent, sometimes vexing or even contradictory information [about the environment] played at too high a volume for too long.”

The idea of “green noise” adds value to the debate. While terms like “greenwashing” describe the conduct of firms, “green noise” presents a consumer perspective on the exponential growth in information on issues related to the environment and climate change that is often contradictory. The overall effect is to obfuscate, rather than clarify, whether deliberately or with good intentions:

“An environmentally conscientious consumer is left to wonder: are low-energy compact fluorescent bulbs better than standard incandescents, even if they contain traces of mercury? Which salad is more earth-friendly, the one made with organic mixed greens trucked from thousands of miles away, or the one with lettuce raised on nearby industrial farms? Should they support nuclear power as a clean alternative to coal?”

In outlining the concept of “green noise” the article also highlights the effect of this information overload on consumer behavior:

“… consumers surveyed in 2007 were between 22 and 55 percent less likely to buy a wide range of green products than in 2006. The slipping economy had an effect, but message overload appeared to be a major factor as well.”

There is an interesting relationship between the amount of information and effective decision making—the idea that more information is better, but too much leads to paralysis and, consequently, bad or non decisions:

“Diane Tompkins, a founder of the Curious Company, a market research firm based in San Francisco … has conducted focus groups to investigate the psychological barriers to taking action for the sake of the environment. The activist groups ''believe that, surely, if I just gave them one more reason why they should do it, then they would,'' she said. ''But the fact is, people are not motivated by more facts. That can just reinforce their feeling of helplessness.''”

Take care
Dave

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

That Buzz In Your Ear May Be Green Noise
By ALEX WILLIAMS
1540 words
15 June 2008
The New York Times
Late Edition - Final
1
http://www.nytimes.com/2008/06/15/fashion/15green.html

Strategic CSR - Google

The two articles in the urls below demonstrate the power of the internet to re-shape the way information is communicated around the globe (Chapter 1: Globalization and the Free Flow of Information, p20; Issues: Internet, p237). This phenomenon will continue to evolve in ways that we have not yet even begun to imagine (at least, those of us who do not work for Google):

“You can Google to get a hotel, find a flight and buy a book. Now you may be able to use Google to avoid the flu.”

The philanthropic arm of the internet search company (http://www.google.org/) has released a new service (http://www.google.org/flutrends/) that will track internet search terms related to the flu nationally (e.g., “cough” or “fever”) and use this information to help identify potential outbreaks of the illness:

“It displays the results on a map of the U.S. and shows a chart of changes in flu activity around the country. The data is meaningful because the Google arm that created Flu Trends found a strong correlation between the number of Internet searches related to the flu and the number of people reporting flu symptoms.”

This information is powerful because of the speed with which it identifies early trends to which government agencies and health providers can then react:

“Tests of the new Web tool from Google.org, the company's philanthropic unit, suggest that it may be able to detect regional outbreaks of the flu a week to 10 days before they are reported by the Centers for Disease Control and Prevention.”

I believe that firms are just beginning to appreciate the ways in which these communication tools will affect their operations and reputations. What seems apparent, however, is that the affect will be dramatic and that firms that are not transparent and accountable to their stakeholders will suffer as a result.

Have a good weekend.
Dave

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

Sniffly Surfing: Google Unveils Flu-Bug Tracker
By Robert A. Guth
1070 words
12 November 2008
The Wall Street Journal
D1
http://sec.online.wsj.com/article/SB122644309498518615.html

Aches, a Sneeze, a Google Search
By MIGUEL HELFT
1267 words
12 November 2008
The New York Times
Late Edition - Final
1
http://www.nytimes.com/2008/11/12/technology/internet/12flu.html

Strategic CSR - Labor Laws in China

The article in the url below charts the improving labor laws in China (Issues: Cultural Conflict, p160; Wages, p204). In spite of a new Labor Contract Law (introduced in January 2008), however, formal protest and workers’ rights are still sensitive issues in China and reform is slow:

“While China's rising number of middle-class malcontents are quick to protest one-off threats to their relatively comfortable existences - such as a nuclear plant or rail project nearby - they are otherwise coddled by government policies. Workers' grievances, by contrast, range from exploitation by employers to administrative discrimination against migrants who have moved to coastal factory towns from poor provinces in the interior. … They also have a lot less to lose than China's professional classes, making any independent labour movement forged outside the official All China Federation of Trade Unions one of the greatest potential threats to the Communist party's grip on power.”

Although union organization is still strongly discouraged by authorities, there is room for organizations (such as Chunfeng, featured in the article) to advise workers on their legal rights:

“Despite the restrictions, Chunfeng has never been busier. "Before this year, we handled about 10 cases a month," says Mr Zhang, who turns 34 this year. "Now it's up to about 30."”

This issue gained increased prominence over the summer with the story that Wal-Mart has finally agreed to collectively-bargained wage rises for all employees at its stores in China.

Take care
Dave

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

China's factory workers gain recognition for grievances
By Tom Mitchell in Shenzhen
1110 words
30 July 2008
Financial Times
Asia Ed1
07
http://www.ft.com/cms/s/0/03fc6bc2-5d9f-11dd-8129-000077b07658.html

Strategic CSR - Home Depot

In the absence of regulated standards in many areas of CSR-related products, the article in the url link below describes the steps firms are taking to ensure their progress on this issue is not lost on their customers (Issues: Advertising, p151; Brands, p153):

“It's all part of a new trend spinning out from the current wave of eco-chic. Perhaps taking a cue from the U.S. Agriculture Dept.'s eye-catching, consumer-friendly, official labels for organic food, increasing numbers of non-food related stores and brands are introducing official-looking symbols and signs to promote their products. Their strategy is clear: To market their eco-friendliness, and to quickly and effectively communicate how socially responsible they are.”

Home Depot’s new “earth-friendly products” icon is below as an example:

http://images.businessweek.com/story/07/popup/0501_green_labeling_1.jpg

“Already, the label is associated with more than 2,500 products, ranging from compact fluorescent light bulbs to organic plants in biodegradable pots. Many, but not all, are verified by Scientific Certification Systems, an independent standards development and certification company.”

The sudden increase in various forms of environmental and social responsibility-type labels is designed to benefit from a growing consumer market:

“Each of these companies are looking to tap the growing numbers of socially responsible consumers. They have realized the power that the nearly five-year-old, USDA organic label wields among customers (products bearing the "organic" label represented a healthy $14.6 billion in total annual U.S. sales in 2005, the latest figures available from industry group Organic Trade Assn., up 17% from the year before).”

The problem, of course, is that the increased variety of symbols, marks, and icons, not to mention the huge variance in standards that underpin what is deemed to be ‘sustainable,’ ‘ethical,’ or ‘responsible,’ leads to further confusion. More important is the potential for abuse of consumer interest in CSR and products that support a responsible and sustainable business model, and also the dilution of meaning of what official labels (where they exist) mean over time:

“… while graphic designers, brand strategists, and consumer advocates alike agree that a proliferation of socially responsible corporations is healthy news for the environment, they're also cautioning that shoppers be wary or at least well-informed of the claims that each new, brand-specific eco-label conveys.”

Take care
Dave

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

Business Week Online
Insider Newsletter
Saturday, May 5, 2007
********************
READING THE NEW ECO LABELS
Retailers and manufacturers of non-food items are creating their own seals of approval for earth-friendly goods
by Reena Jana
Marketing May 2, 2007
http://www.businessweek.com/stories/2007-05-02/reading-the-new-eco-labelsbusinessweek-business-news-stock-market-and-financial-advice

Strategic CSR - Union Carbide

The article in the url below describes how the gas leak that occurred in Bhopal, India almost 25 years ago has still not been cleared up. As a result, the disaster continues to generate negative headlines for Union Carbide (and Dow Chemicals, which bought Union Carbide in 2001) on the front page of the NYT (Issues: Human Rights, p234):

“Hundreds of tons of waste still languish inside a tin-roofed warehouse in a corner of the old grounds of the Union Carbide pesticide factory here, nearly a quarter-century after a poison gas leak killed thousands and turned this ancient city into a notorious symbol of industrial disaster.”

Putting aside any arguments of moral responsibility, it is amazing that a firm like Dow does not just pay what it takes to make this problem go away (Chapter 1: A Rational Argument for CSR, p17):

“The toxic remains have yet to be carted away. No one has examined to what extent, over more than two decades, they have seeped into the soil and water … Nor has anyone bothered to address the concerns of those who have drunk that water and tended kitchen gardens on this soil and who now present a wide range of ailments, including cleft palates and mental retardation, among their children as evidence of a second generation of Bhopal victims.”

Over the summer, the Supreme Court delivered a decision on the 1989 Exxon Valdez case. Both that case and the Bhopal disaster reflect poorly (to say the least) on the strategic decisions taken by the executives of both companies. At least, however, Exxon has accepted some degree of responsibility for its role in the Valdez oil spill.

Take care
Dave

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

Decades Later, Toxic Sludge Torments Bhopal
By SOMINI SENGUPTA
1858 words
7 July 2008
The New York Times
Late Edition - Final
1
http://www.nytimes.com/2008/07/07/world/asia/07bhopal.html

Strategic CSR - Mobile phones

The article in the url below outlines the steps mobile phone companies are taking to develop products that appeal to consumers at the bottom-of-the-pyramid (Issues: Profit, p200):

“A study by Gartner, a technology research group, of related security issues estimated mobile phone payment systems could be available to 15 per cent of the world's 3bn unbanked people by the end of this year.”

The availability of mobile phones and the level of current technology make banking and financial services particularly amenable to the needs of BOP consumers. Often, consumers in this target market do not have bank accounts, but need to take out a loan, pay bills, or send money to friends and relatives, all of which can be done using their mobile phone:

“Mobile technology has the potential to offer cheap no-frills banking, at low risk, because transactions are monitored in real-time, on widely-used, high-quality infrastructure.”

This article came from a supplement in the FT on Sustainable Banking. Other articles in the same supplement can be found at:

http://www.ft.com/reports/sustainablebanking2008

Have a good weekend.
Dave

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

FT REPORT - SUSTAINABLE BANKING 2008
Mobile phone operators revolutionise cash transfers
Tieman, Ross
739 words
3 June 2008
Financial Times
Surveys SBA1
04
http://us.ft.com/ftgateway/superpage.ft?news_id=fto060220081321472830

Strategic CSR - Wal-Mart

The article in the url below deals with the prospect of firms’ CSR activity contracting during the expected economic recession:

“It is easy to imagine corporate social responsibility being the first fad that companies abandon during the downturn.”

This might be true, except for the fact that Wal-Mart’s CEO, Lee Scott, has chosen now to reaffirm his firm’s commitment to raising the profile of sustainability throughout operations:

“Lee Scott, Wal-Mart's chief executive, told a meeting of 1,000 Chinese suppliers in Beijing: "I firmly believe that a company that cheats on overtime and on the age of its labour, that dumps its scraps and its chemicals in our rivers, that does not pay its taxes or honour its contracts, will ultimately cheat on the quality of its products."”

The more I see and hear Scott speak on this issue, the more I am convinced he is genuine and, more importantly, is articulating an effective business case for CSR. In making this case, he is driven less by morals or ethics (a subjective minefield from which no firm emerges unscathed) and more by focusing on maximizing the long term value added by his organization:

“Hearing Wal-Mart say this still produces splutters of disbelief. … But Mr Scott has been talking this way since 2005, when he promised Wal-Mart would "sell products that sustain our resources and the environment".”

Two issues remain. First, it is not clear how comprehensive this ethos is throughout Wal-Mart and, as a result, what happens when a decision consistent with Scott’s message to “sustain our resources and environment” increases costs, rather than decreases them? And, second, Wal-Mart’s business model still relies on fostering economic growth through mass consumption and disposal/waste. The second point, in particular, might be a question for society rather than Wal-Mart (although, given the firm’s size, it is becoming hard to distinguish the two), but it still poses a threat to Scott’s claims to sustainability over the long term.

Take care
Dave

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

An ethics lesson from an unlikely quarter
Skapinker, Michael
829 words
28 October 2008
Financial Times
Asia Ed1
11
http://us.ft.com/ftgateway/superpage.ft?news_id=fto102720081602378640

Strategic CSR - Equator Principles

The purpose of this Newsletter is to direct those of you interested in the Equator Principles (Issues: Finance, p180) to the article in the url link below:

“The Equator Principles are a set of social and environmental standards for project finance. Banks signed up to the principles pledge to consider the impacts a proposed project, such as a mine, might have on the local environment and communities. The banks promise to make action to address these impacts a condition of their lending money to the borrower, or project sponsor, such as a mining company.”

The invited debate between Johan Frijns of BankTrack (http://www.banktrack.org/) and Leo Johnson of Sustainable Finance (http://www.sflnet.com/) was designed to mark the fifth anniversary of the introduction of the Equator Principles in 2003. The debate highlights some of the key successes and remaining problems associated with the program.

Take care
Dave

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

Ethical Corporation: Not an oxymoron
By Invitation: Debate, project finance
The Equator Principles – Is it a happy fifth birthday for the Equator Principles?
No, still need to do better, says Johan Frijns, BankTrack. Yes, many happy returns, says Leo Johnson, director Sustainable Finance
July 7, 2008
http://www.ethicalcorp.com/content.asp?ContentID=5989

Strategic CSR - CSR

The article in the url below is one of the most concise and effective arguments for CSR I have read:

“… in our hyperconnected and transparent world, how you do things matters more than ever, because so many more people can now see how you do things, be affected by how you do things and tell others how you do things on the Internet anytime, for no cost and without restraint.”

The focus of the article is the predatory lending practices that led to the current financial crisis, but the same argument can be made in any area of a firm’s operations:

“We got away from these hows. We became more connected than ever in recent years, but the connections were actually very loose. … nobody was really connected in value terms.”

Friedman argues that:

“We need to get back to collaborating the old-fashioned way. That is, people making decisions based on business judgment, experience, prudence, clarity of communications and thinking about how -- not just how much.”

In short, we need to get back to a CSR perspective.

Have a good weekend.
Dave

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

Why How Matters
By THOMAS L. FRIEDMAN
897 words
15 October 2008
The New York Times
Late Edition - Final
35
http://www.nytimes.com/2008/10/15/opinion/15friedman.html

Strategic CSR - SOX

The article in the url below summarizes a report by the Government Accountability Project (“an advocacy group that provides legal advice to whistleblowers,” http://www.whistleblower.org/) that criticizes the 2002 Sarbanes-Oxley (SOX) legislation for failing to protect corporate whistleblowers (Issues: Corporate Governance—Reporting, p108). In particular, the report highlights the very narrow interpretation of the legislation, which is leading courts to favor companies over individuals:

“Many cases against defendant companies have been dismissed on the grounds that employees who worked for a corporate subsidiary are not necessarily covered by the whistleblower provision, according to Richard Moberly, a University of Nebraska law professor. "The provision is supposed to be interpreted broadly but it is being interpreted very narrowly," he says.”

In spite of the fact that the protection of whistleblowers was one of the central reasons for passing the legislation, the results of 1,273 complaints that have been filed under SOX indicate that the odds are still stacked in favor of large corporations:

“According to data from the Department of Labor, it has ruled in favour of whistleblowers 17 times in the 1,273 complaints filed from 2002 to the start of this month. Meanwhile, 841 cases were dismissed, 162 were withdrawn and 107 are pending.”

Take care
Dave

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

US legislation 'fails' to help corporate whistleblowers achieve justice
By Joanna Chung in New York
409 words
10 September 2008
Financial Times
USA Ed2
04
http://www.ft.com/cms/s/0/f7ba2db6-7ecf-11dd-b1af-000077b07658.html

Strategic CSR - Danone

The article in the url below is confusing. It outlines the Danone Communities Fund, but describes it in parts of the article as a means of “financing social businesses” and, in others, as a “financing model” designed as an investment fund (Issues: Finance, p180; Investing, p184):

“[Danone] has devised a financing model in which 90 per cent of investors' money will be ploughed into low-risk investments, weighted towards socially responsible investments. The other 10 per cent will go directly to the yoghurt project [a nutrient-rich yoghurt for poor consumers in Bangladesh]. The model is a Sicav (société d'investissement à capital variable), an open-ended collective investment fund common in France.”

Several questions come to mind: What were the motivations behind the fund—a social project or investment vehicle? Are investors asked to accept a lower level of return to meet the fund’s social goals? What is Danone, a “French food company,” doing designing investment funds?

“Anyone, from Danone staff to shareholders and institutional investors, can invest in the Danone Communities fund, which launched in December 2007 and is managed and marketed by Crédit Agricole. So far the fund has raised about €60m (£47): €20m from Danone, €24m from Credit Agricole, and the rest from other institutions and Groupe Danone's employees.”

The article is not clear on these questions, but I think it is also missing the broader point by confusing the firm’s and fund’s social and business goals. If this fund is not considered part of Danone’s philanthropic arm, then it is designed to generate a profit. Alternatively, if it is a philanthropic project, then perhaps it should make clear there will be a trade-off between reaching its social goals and ROI:

“In recent years, many groups have warmed to the idea of serving the world's poorest people while turning a profit. But the heavy investment in time and money and the unstable operating conditions concerned mean most of these activities remain far from profitable.”

Danone’s project looks interesting—unfortunately, the article describing it does not do it justice.

Take care
Dave

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

Yoghurt maker's recipe for funding social businesses
Murray, Sarah
664 words
7 July 2008
Financial Times
London Ed1
16
http://www.ft.com/cms/s/0/ff1bd10a-4bc0-11dd-a490-000077b07658.html

Strategic CSR - Food

It will come as no surprise to many that a huge amount of the daily food consumption in the U.S. is wasted. The article in the url below, however, reports research that attempts to quantify just how much food this wastage represents:

“In 1997, in one of the few studies of food waste, the Department of Agriculture estimated that two years before, 96.4 billion pounds of the 356 billion pounds of edible food in the United States was never eaten.”

This amounts to “an estimated 27 percent of the food available for consumption” and is not only a U.S. phenomenon:

“In England, a recent study revealed that Britons toss away a third of the food they purchase, including more than four million whole apples, 1.2 million sausages and 2.8 million tomatoes. In Sweden, families with small children threw out about a quarter of the food they bought, a recent study there found.”

This NYT article reports that a new study is being undertaken to update the figure, this time accounting for the recent growth in pre-prepared food produced by supermarkets. Optimistically, Jonathan Bloom, the creator of the website WasteFood.com (http://wastefood.com/) believes recent events suggest things might be improving:

“The fundamental thing that I'm fighting against is, 'why should I care? I paid for it,' '' Mr. Bloom said. ''The rising prices are really an answer to that.”

Have a good weekend.
Dave

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

One Country's Table Scraps, Another Country's Meal
By ANDREW MARTIN
1548 words
18 May 2008
The New York Times
Late Edition - Final
3
http://www.nytimes.com/2008/05/18/weekinreview/18martin.html

Into the Trash It Goes: A federal study found that 96.4 billion pounds of edible food was wasted by U.S. retailers, food service businesses and consumers in 1995 -- about 1 pound of waste per day for every adult and child in the nation at that time. That doesn't count food lost on farms and by processors and wholesalers. For a family of four people, that amounted to about 122 pounds of food thrown out each month in grocery stores, restaurants, cafeterias and homes.

Strategic CSR - P&G

The article in the url below presents the opportunities and challenges for firms seeking to engage with stakeholders online (Issues: Stakeholder Relations, p138). The article is a review of a new book titled ‘Groundswell’ that profiles different case studies of firms’ attempts to establish an online dialogue with stakeholders (primarily customers):

“As part of P&G's embrace of "social technologies", the site launched a messageboard late last year allowing customers to share their views on stain removal and, more controversially, packaging.”

The postings by customers, as the article illustrates, were not very complimentary. But P&G’s mistake was not setting-up the site, but giving the impression of not listening to or acting upon the issues that were raised:

“… the boards contain no response to the gripes, nor has the company taken down repetitive postings. … P&G has opted to let its customers talk openly on its website, but it has not shown it is taking notice.”

The book presents a number of examples (both good and bad) of firms’ attempts to establish this virtual dialogue with their stakeholders. It argues that, even done with the best of intentions, offering an opportunity for stakeholders to debate the virtues of a product can end up harming a firm’s reputation if it is not done either genuinely or well. As such, firms need to understand their stakeholders, what their concerns are, and who among them are likely to participate in online forums before beginning:

“Lego, for example, finds "Lego Ambassadors" among its AFOLs, or Adult Fans of Lego, and uses them to communicate with a global online community of adult hobbyists who account for 5 to 10 per cent of the toymaker's business.”

Take care
Dave

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

Dangerous e-liaisons with the customer
By Jonathan Birchall
814 words
5 June 2008
Financial Times
USA Ed1
12
http://us.ft.com/ftgateway/superpage.ft?news_id=fto060420081503173239

Strategic CSR - American Apparel

The article in the url below demonstrates the limits for firms that rely too heavily on the market segment of ethical consumers (Chapter 2: CSR: Do Stakeholders Care? p25):

“In the beginning, American Apparel put a "sweatshop free" label on its t-shirts. But sex turned out to be a better sell than good labor practices. Lessons in the limits of altruism.”

The pessimistic (or realistic, depending on your perspective) view of human nature held by Dov Charney, America Apparel’s CEO, is that “to get what you want, you must appeal to people's self-interest, not to their mercy.” The article argues that the success of Charney’s approach, at least in relation to the teenage customer to whom American Apparel seeks to appeal, lies in understanding the gap between people’s stated intentions and actual practice:

“A whopping majority of American shoppers may consider themselves environmentalists, but, according to the Journal of Industrial Ecology, only 10% to 12% "actually go out of their way to purchase environmentally sound products." Similarly, Brandweek reported on a survey that found that even among consumers who called themselves "environmentally conscious," more than half could not name a single green brand.”

The article argues that, instead, successful ethical retailers rely on other research that suggests people are much happier treating themselves to luxury items, while at the same time feeling like they are doing something virtuous:

“Perhaps this is why many big companies and brands are not so much changing their products as adding new alternatives to their existing product mixes, or carving a small donation to charity out of their profit margins. Pepsi-Cola is testing an all-natural version of its flagship drink called Pepsi Raw, and Clorox has launched an eco-friendly line of cleaning products. The Bono-promoted (Product) Red initiative brands existing products that dedicate a portion of the purchase price to the Global Fund to Fight AIDS, Tuberculosis, and Malaria. There's even a (Product) Red version of the iPod.”

Take care
Dave

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

Sex vs ethics
Fast Company Magazine
It's a dilemma for investors who want hefty returns and a clean green conscience: Can you own Big Oil and still feel good in the morning?
From: Issue 124 | April 2008 | Pages 54-56 | By: Rob Walker
http://www.fastcompany.com/magazine/126/sex-vs-ethics.html

Strategic CSR - Wal-Mart

Just in case some of you missed it on the slow media day of July 4, the article in the url below discusses the meaning behind Wal-Mart’s new logo:

“Something's up at Wal-Mart. Visitors to walmart.com will notice that the logo consumers have become accustomed to over the past 17 years is gone. Gone, too, are the sharp, uppercase letters spelling out the name of the Bentonville (Ark.) company and the pointy star that served as a hyphen. In its place: a new logo made up of rounded, lowercase characters. The hyphen has disappeared. And in place of the star is a symbol that resembles a sunburst or flower. It appears after the "Walmart" name, like an asterisk begging for a footnote.”

http://images.businessweek.com/story/08/190/0702_walmart.jpg

The article argues that the logo, which was officially launched on June 30, is an attempt by Wal-Mart’s to capitalize on its increasing reputation for progressive action in relation to environmental sustainability. The introduction of the new logo (changing from “Everyday low prices” to “Save money. Live better.”):

“… coincides with CEO H. Lee Scott's goal of transforming Wal-Mart—most recently under fire for losing a Minnesota court case over breaking labor laws—into a more environmentally friendly corporation.”

The article contains quotes, however, that suggest the design will fall short of its intentions:

“[Marty Neumeier, president of Neutron, a branding firm in San Francisco] adds that the image lacks the distinctive power of the most successful logos, such as Target's (TGT) bull's eye, which is immediately recognizable. Wal-Mart's new sunburst, in contrast, "is designed so simply that there's no ownership to it," Neumeier says. In other words, it could be used by almost any corporation.”

Have a good weekend.
Dave

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

Business Week Online
Insider Newsletter
July 3, 2008
********************
Wal-Mart Gets a Facelift
Gone are the mega-retailer's blocky letters, hyphen, and star. Can Wal-Mart remake itself by remaking its logo?
by Reena Jana
http://newsletters.businessweek.com/c.asp?713736&c55a2ee820194f0f&14

Strategic CSR - GE

You can read the news reported in the article in the url below that GE’s “green sales” rose by 15% from 2006 to 2008 in two different ways. The optimist will see it as evidence of the potential market for sustainability related products and, therefore, further support for the business case for CSR:

“Sales of products labelled by General Electric as "environmentally friendly" rose to $14bn last year … from $12bn in 2006.”

The skeptic, however, is more likely to question the underlying growth and the way in which GE classifies a product as ‘green’:

“GE's Ecomagination products are independently audited to ensure they are environmentally friendly, but the definition the company uses means products not usually thought of as green, such as jet engines, can be included if they are more energy efficient than their predecessor or rival products, and nuclear reactors are included as they produce energy without carbon.”

Such a skeptic might continue to argue that, while sales in GE’s ‘green’ sector have increased by 15% since 2006, the number of products the firm classifies as ‘green’ has increased by 38%:

“In 2006, there were 45 product lines under the brand; last year, this rose to 62 lines, an increase of 38 per cent.”

A skeptic might conclude, therefore, that this casts the “buoyant” sales in a different light and wonder whether the figures demonstrate anything other than creative accounting.

Take care
Dave

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

Buoyant GE sees 'green' sales up by 15%
By Fiona Harvey in London
474 words
28 May 2008
Financial Times
London Ed1
26
http://us.ft.com/ftgateway/superpage.ft?news_id=fto052820080125501937

Strategic CSR - Zappos

The article in the url below summarizes a recent article in Harvard Business Online (‘Why Zappos Pays New Employees to Quit—And You Should Too,’ http://discussionleader.hbsp.com/taylor/2008/05/wy_zappos_pays_new_employees_t.html) about a firm I hadn’t heard of before—Zappos. For the similarly uninitiated:

“Zappos delivers shoes, handbags and other products ordered over the Internet. Delivery is free and fast, and customers can return unwanted products at no charge.”

The article praises Zappos for its exceptional customer service and argues that the reason it is so consistent in this area is due to the employees it hires (Issues: Employee Relations, p118; Wages, p204):

“After a few weeks of intensive training, new call-center employees are offered $1,000 on top of what they have earned to that point if they want to quit.”

Zappos reasons that those employees who take the firm up on its offer do not have the level of commitment it is looking for, while those that refuse it are more likely to be enjoying what they are doing. Quite a refreshing approach to employee retention!

Take care
Dave

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

Shoe Seller's Secret of Success
By DAN MITCHELL
650 words
24 May 2008
The New York Times
Late Edition - Final
5
http://www.nytimes.com/2008/05/24/technology/24online.htm

Strategic CSR - Earthshare.org

Over the summer, I saw a full-page advert in the NYT for the environmental activist group Earthshare.org (http://www.earthshare.org/). I couldn’t find a graphic of the ad to share with you, but have reproduced the copy below:

“Ever decision we make has consequences. We choose what we put into our lakes and rivers. We choose what we release into the air we breathe. We choose what we put into our bodies, and where we let our children run and play. We choose the world we live in, so make the right choices. Learn what you can do to care for our water, our air, our land and yourslefyourself at earthshare.org.”

What attracted me to the ad was the emphasis it places on individual responsibility, rather than merely harranging firms for polluting too much. The headline of the ad (including capital letters and bold) captures the tone exactly:

“WE LIVE IN THE HOUSE WE ALL BUILD.”

As regular readers of this Newsletter will know, I favor a similar emphasis within the CSR debate. I think firms act much more quickly in response to key stakeholder demands (consumers, in particular) than they do when expected to initiate action that has no demonstrated support in the marketplace. In other words, if consumers stop buying a certain product because they disapporave of the way it was produced or some other action by the firm that produced it, that firm will quickly adapt or fail. In other words, we are as responsible for the corporations that survive and thrive in our society as the organizations themsleves. It is not a perfect solution for the problems in our capitalist system, and I do not absolve firms of all responsibility (and I still think that those firms that are able to differentiate themselves in relation to CSR will be more successful in the long term); it is just that I think more would be achieved that much faster in terms of CSR advocacy if an equal empahsis was placed on stakeholder responsibility (e.g., consumer education) as on corporate responsibility.

Have a good weekend.
Dave

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

Strategic CSR - Wal-Mart

The article in the url below emphasizes the value of firms remaining on good terms with all stakeholders (Issues: Stakeholder Relations, p138). This particularly applies to those stakeholders who have embarrassing video archives of past activities that a firm would rather keep quiet:

“About 15,000 videotapes of Wal-Mart executives at work and at play over the past 30 years have suddenly become available to the public thanks to a series of blunders by the retail giant - which paid too little attention to the company it hired to make the tapes before abruptly terminating their relationship two years ago. … Astonishingly, Wal-Mart never drew up a written contract with Flagler to establish who owns the tapes.”

The tapes are already providing valuable evidence for parties that have brought lawsuits against Wal-Mart and the resource (available for anyone to research at a cost of $250 a time) could easily open the firm up to further liability claims:

“A Kansas City lawyer representing a 12-year-old boy who suffered extensive burns when a gasoline can bought at Wal-Mart blew up in her face was astounded - and delighted - to find footage of employees making jokes about their gasoline cans blowing up at a Christmas party.”

Take care
Dave

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

For sale: the video archive Wal-Mart should have erased
By Andrew Gumbel in Los Angeles
591 words
11 April 2008
The Independent
Page 25
http://www.independent.co.uk/news/world/americas/for-sale-the-video-archive-walmart-should-have-erased-807813.html

Strategic CSR - Recycling plastics

The article in the url below contains some depressing statistics about plastics recycling:

“While some 52% of paper, 36% of metals, and 22% of glass get recycled, only 7% of all plastics do, according to the Environmental Protection Agency.”

In general, only No.1 or No.2 plastics are recycled. There is an insufficient market for Nos.3 to 7 to make recycling them sufficiently profitable. Most people, however, continue to throw all kinds of plastics into the recycling container:

“Sadly, all the things not labeled 1 or 2 get pulled out at the recycling facility and are trucked off to a big, smelly hole in the ground, where they will deposit their petroleum-based chemicals into the soil for the next 500 years.”

In addition to depressing statistics, the article also does a good job of explaining that there are no easy answers to this problem. The author describes how the environmentally aware firm Stonyfield Farm considered changing its yoghurt pots from No.5 to No.2 plastic, for example, but ended up rejecting the plan on the basis that it would increase the amount of plastic used in making the pots because No.2 plastic is less sturdy that No.5 plastic. In addition:

“… if Stonyfield switched, most communities wouldn't recycle them anyway -- turns out that No. 2 tubs can't be mixed with No. 2 bottles because they're made from different chemicals.”

And, of those firms that are recycling plastics, a lot of it is done off-shore, often in China, where reports indicate that:

“… employees in Chinese recycling facilities are exposed to toxic fumes from the materials they are recycling. Which means that my recycling options just got a whole lot more complicated. Some choice: noxious chemicals in the soil versus the health of Chinese workers. It really isn't easy being green.”

Have a good weekend.
Dave

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

Green Business: Plastic Potion No. 9
Recycling should be the easy way to get people involved in helping the environment. Too bad the businesses behind it are blowing it.
Fast Company Magazine
From: Issue 128 | September 2008 | Page 103 | By: Melanie Warner
http://www.fastcompany.com/magazine/128/green-business-plastic-potion-no-9.html

Strategic CSR - The Business Case

The article in the url below by Mallen Baker (Foreword, pxiii) debates the search for proof of a business case for CSR (Chapter 1: An Economic Argument for CSR, p18):

“There is a powerful business case for most of the actions that a company might take under the label of “corporate social responsibility”. But much of what is currently offered under the heading of “business case for CSR” is tosh, and we need to wean ourselves off it. For instance, one of the most common questions I still get asked by managers and journalists alike is for figures to show that “doing CSR” has a measurable and inevitable positive impact on a company’s share price, or on its bottom line. It is a mirage, a distraction. Such figures that do exist are based on a fundamentally flawed premise. … Not only is there no agreement about what constitutes a good, or a sustainable, company, but there is also no agreement even on how you would measure the achievement of these criteria.”

The problem with Baker’s arguments early in the article is that, taken to the extreme, they lead to the conclusion that there is no way of measuring a firm’s CSR profile, little chance of finding a correlation with financial success across firms, and, therefore, no general business case. Instead, I prefer to argue that there is a way of quantifying CSR performance; it is just that we do not yet have sufficiently comprehensive tools to do so adequately:

“There is no one thing called “corporate social responsibility”. It is an umbrella label that covers a range of choices, dilemmas, principles and values. As a result, there can be no one business case that covers it – each proposed course of action requires its own rationale, will carry with it a degree of judgment, and will require skill in execution in order to achieve success.”

By rendering CSR so amorphous as to include anything a firm determines relevant, Baker is in danger of rendering CSR meaningless. It is not so much that I disagree with anything Baker says, so much that it is a matter of emphasis. His argument is a dangerous line to walk and, potentially, damages the cause he believes in so strongly. He is on much stronger ground in arguing that the debate around the value of CSR needs to be waged on a case-by-case basis, rather than trying to bend to the demands of the skeptics for an ultimate proof.

As part of this argument, Baker returns to concrete benefits of CSR later in the article. He notes that CSR is essential to building trust with customers and retaining the best employees, both components of a tangible business case. The complexity of quantifying these effects for firms and then aggregating similar measures across all aspects of operations lead Baker to suggest that the CSR field should not continue to tie itself in knots over the need to definitively prove the business case:

“Generally, if somebody chooses to buy from you it is because they like you, your brand, or your company and they want to buy from you. When sceptical chief executives demand a business case, it is because they do not want to buy from you and they are seeking to justify their scepticism by demanding a level of proof that is not realistically achievable.”

Take care
Dave

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

Ethics and financial performance: The big question – Is there really a business case?
There is no catch-all “business case” for ethics, just good and bad business judgments. And always a healthy slice of luck
Mallen Baker
May 2, 2008
http://www.ethicalcorp.com/content.asp?ContentID=5876

Strategic CSR - Shell

The article in the url below reports on a “shareholder revolt” at Shell’s 2008 AGM (Issues: Shareholder Activism, p134) concerning a decision by the Shell board to award “retention payments” of approximately $1.5m in stock to three executives of the firm:

“One third of Shell shareholders who voted on the bonus plan opposed it. Combined with those who withheld their votes, 49.5 per cent of voting shareholders did not support the bonuses.”

The payments were to be paid to the three candidates most likely to succeed Shell’s current CEO when he leaves in June 2009, in order to keep them from leaving the firm:

“The bonuses, each worth about €1m in stock, become payable in 2011, provided the three are still in their posts. Investors objected in part because of the lack of performance hurdles.”

Such shareholder votes of opposition, however, are rarely binding on firms, or even noted by management. And, in this case, in spite of the low level of support for the payments, Shell’s board announced its intention to ignore the vote and continue with its plan.

Another story of shareholder conflict with the management of an oil firm that emerged around the same time as the Shell story concerns the Rockefeller family’s attempts to get Exxon to divide its Chair and CEO positions. Representatives of the Rockefeller family, who are minority shareholders in Exxon, explain their position in the article in the second url below.

Have a good weekend.
Dave

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

Shell rocked by investor revolt
By Tom Burgis, Michael Steen and Kate Burgess
428 words
21 May 2008
Financial Times
London Ed1
Page 21
http://www.ft.com/cms/s/0/6681ab10-2693-11dd-9c95-000077b07658.html
Article re-printed in full at:
http://royaldutchshellplc.com/2008/05/21/shell-rocked-by-investor-revolt/

ExxonMobil needs an independent chairman
By Peter O’Neill and Neva Rockefeller Goodwin
22 May 2008
Financial Times
London Ed1
Page 13
http://us.ft.com/ftgateway/superpage.ft?news_id=fto052120081442070888

Strategic CSR - Comparative Advantage

The article in the url below asks the understandable question “Why Bother?” in relation to tackling the overwhelming issue of climate change. Having watched Al Gore’s documentary, “An Inconvenient Truth,” the author is underwhelmed—not by the danger at hand, but by Gore’s call to action. Having sketched a vision of a global calamity, Gore then implores the audience to go home and “change a light bulb”:

“That's when it got really depressing. The immense disproportion between the magnitude of the problem Gore had described and the puniness of what he was asking us to do about it was enough to sink your heart.”

Hence the question, “Why Bother?” The author identifies his widespread feelings of ambivalence and powerlessness as rooted in the central role in our economic model of comparative advantage. As a cornerstone of economic theory, comparative advantage enables widespread prosperity through task specialization and economic growth. The author argues, however, that it is this “task specialization” that distances us from broader solutions to societal-wide problems, such as climate change:

“Virtually all of our needs and desires we delegate to specialists of one kind or another -- our meals to agribusiness, health to the doctor, education to the teacher, entertainment to the media, care for the environment to the environmentalist, political action to the politician.”

By being removed from the ability to imagine our own meaningful contribution to radical change, any solution in an area outside our expertise becomes someone else’s problem. Because we each know how to do only one thing well, we are unable to contemplate doing anything beyond that skill. As a result, we are increasingly more likely to rely on someone else (with expertise in the necessary area) to solve the problem for us. Yet, fundamentally, the problem of climate change is one of the aggregate effects of our day-to-day lifestyle decisions:

“… the climate-change crisis is at its very bottom a crisis of lifestyle -- of character, even. The Big Problem is nothing more or less than the sum total of countless little everyday choices, most of them made by us (consumer spending represents 70 percent of our economy), and most of the rest of them made in the name of our needs and desires and preferences.”

Given the scale of the task, the author’s solution, for each of us to make a garden, seems a bit flippant. The article is instructive in its critique of our economic model, however, and its underlying purpose, to reinstate a connection within each of us between cause and effect, is important:

“For Berry, the ''why bother'' question came down to a moral imperative: ''Once our personal connection to what is wrong becomes clear, then we have to choose: we can go on as before, recognizing our dishonesty and living with it the best we can, or we can begin the effort to change the way we think and live.''”

Take care
Dave

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

Why Bother?
By MICHAEL POLLAN
3403 words
20 April 2008
The New York Times
Late Edition - Final
19
http://www.nytimes.com/2008/04/20/magazine/20wwln-lede-t.html

Strategic CSR - Martha Stewart

The article in the url below is an interview with Susan Lyne, the (former) CEO of Martha Stewart Living Omnimedia (MSLO), who took over the running of the company immediately following Martha Stewart’s conviction and jail sentence in 2004 (Chapter 2: MSLO, p35).

The interview offers some insight into the loyalty of Martha Stewart’s viewers and readers, who allowed MSLO to survive and thrive, in spite of the negative press coverage that surrounded Martha Stewart’s case:

“… what was fascinating to me was that her readers never left, her viewers didn't leave, it was advertisers who stepped back because there was a fear that the association would somehow damage their brand, but the consumers kept buying sheets, watching television, and certainly kept subscribing to our magazines.”

I’m not entirely sure what this says from a CSR perspective. A negative interpretation suggests that consumers are able to separate their personal values from the actions or values of firms and the individuals running them. In other words, consumers don’t care about CSR as long as they keep getting the products they seek (Chapter 2: Do Stakeholders Care? p25). A more positive interpretation, however, suggests that MSLO does a great job of meeting the needs and demands of its key stakeholder groups that are willing to give the firm the benefit of doubt in return.

Take care
Dave

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

VIEW FROM THE TOP SUSAN LYNE, chief executive of Martha Stewart Living Omnimedia.
By JOSHUA CHAFFIN and CHRYSTIA FREELAND
1022 words
18 April 2008
Financial Times
London Ed1
Page 14
http://www.ft.com/cms/s/816bb29e-0ce0-11dd-86df-0000779fd2ac.html

Strategic CSR - Philanthropy

The article in the url below is interesting, I think, not because of the personal failings of the individuals running the nonprofit, but because of the gap in the market that their organization was intended to fill (Issues: Philanthropy, p196):

“Karnofsky and Hassenfeld, both 26, quit hedge-fund jobs last year and started a foundation [GiveWell] with $325,000 from themselves and their friends. Their mission was to gather and disseminate exhaustive data on the effectiveness of charities. GiveWell had found an important niche. American charitable donations reached nearly $300 billion in 2006, and charity is a classic long tail: 75% of that tally comes from individual donors. Unfortunately, most of it is dumb money. Large foundations have professionals who evaluate potential grantees, but their research is generally proprietary. Online resources such as GuideStar and Charity Navigator provide public ratings of nonprofits based on their IRS Form 990s but are skimpy on strategy or program details.”

The idea of accountability for nonprofits is important and these guys had a good business idea—they just messed it up on implementation.

“The worst thing about the GiveWell debacle is that it put at risk a service that's sorely needed in the nonprofit world. Credibility is hard to gain and easy to lose, and restoring it will be GiveWell's big challenge--tough for an organization aspiring to be an evaluator.”

The print version of the article also has some great statistics (missing from the online article)—It is amazing how much money Americans donate relative to people in other countries, both in absolute terms ($295bn, 75% of which come from individual donations), as well as a percentage of GDP (the US ranks first with donations the equivalent of 1.7% of GDP. The UK is No.2 with 0.73% of GDP).

Take care
Dave

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

When the Giving Gets Tough
A nonprofit startup set itself up as a watchdog -- then showed how easy it is to lose your own credibility.
Fast Company Magazine
From: Issue 125 | May 2008 | Page 65 | By: Anya Kamenetz
http://www.fastcompany.com/magazine/125/when-the-giving-gets-tough.html

Strategic CSR - Nau

The last thing I read about Nau (http://www.fastcompany.com/magazine/116/features-leap-of-faith.html), it was changing the face of apparel retailing. The firm’s mission was to integrate a broad sustainability perspective with a specific social mission into every aspect of its business model (Chapter 4: Implementation: The Integration of CSR Into Strategy and Culture, p63):

“Its stylishly minimal clothes in muted colors, made of sustainable materials such as organic cotton and recycled polyester, went on sale in 2007 and appealed to outdoorsy types and city dwellers, tapping into the growing green fashion trend. … And as part of the company's social enterprise initiative, 5% of all sales—from a $38 tank top to a pair of $138 "lean jeans"—were handed over to nonprofit organizations, chosen by the buyer.”

Then I read the article in the url below from BusinessWeek, which reports a decision taken at the firm’s Board meeting on May 1 to close the firm, “just two weeks after its L.A. store had opened.”

The problem for Nau seems to have been a danger that faces all firms seeking to rely on the CSR market niche—the best of intentions cannot replace a solid business model:

“Nau's business model, with its multiple retail channels and sophisticated product line—as well as a heavy commitment to the ideals of sustainability, including tracing the origins of the wool it used back to the sheep in New Zealand—was not only ambitious but capital intensive.”

Nau ran out of money and, when the business climate turned, was unable to raise additional capital to underpin its planned expansion. Sales were fine, but costs were prohibitively high. The limits of appealing to consumer’s best instincts should not be underestimated:

“… in its first and only year of operation, Nau attracted a cult following; Even today its Web site is jammed as the company sells off remaining stock at half-price. But at a board meeting in Portland on May 1, the directors decided to shut it down. … Perhaps Nau was too fashion-forward, with its higher production costs … and unusual products … . While Nau's prices were comparable to like-minded retailers Patagonia and North Face, they couldn't match megaretailers such as Steve & Barry's, whose $8.99 dresses sold in massive, unadorned stores are wildly popular in tough economic times.”

Take care
Dave

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

Business Week Online
Insider Newsletter
May 22, 2008
********************
Nau Is Then
The hip green clothing label with an unconventional approach to style, materials, and retailing calls it quits. What went wrong?
by Ernest Beck
http://www.businessweek.com/innovate/content/may2008/id20080516_881121.htm

Strategic CSR - Clorox

The article in the url below analyses the recently announced partnership between Clorox and the Sierra Club that places the Sierra Club’s logo on all of the products in Clorox’s new line of cleaning products—Green Works (Issues: NGO and Corporate Cooperation, p192). In exchange, the Sierra Club will receive a percentage of the profits from sales. Although Clorox has benefited handsomely from “one of the most successful launches of a new cleaning brand in recent memory”:

“… within the Sierra Club, the reaction to the deal has been contentious, with emails flying back and forth and charges that Pope's executive committee has sold out … the awkward pairing with Clorox underlines both the huge potential upside for major brands discovering green and the danger for nonprofit environmental groups plunging headlong into the for-profit world.”

On the face of it, the Sierra Club seems to have the most at risk in forming this relationship with a firm whose core product many environmentalists believe to be fundamentally opposed to their conception of ‘sustainability.’ The article notes that Clorox had been working on sustainable ingredients “for nearly a decade.” Even after improvements in cost and availability, however, the firm still faces a difficult challenge:

“… how to get people to believe that Clorox could really be green. … "there were a lot of greenwashing reports starting to surface," … "Consumers were a little bit skeptical."”

While difficult, I believe the Sierra Club’s attitude when approached by Clorox is the attitude that many NGOs need to have if they are truly invested in realizable change. While there will always be a role for antagonists and idealism is fine, reality inevitably means incremental progress:

“When Clorox approached him, Pope had already been pushing for a shift in mind-set at the 116-year-old Sierra Club for some time … "Instead of just saying, Let's boycott somebody who's making a toxic product," Pope explains from his San Francisco office one recent summer day, "let's find a good product and help people who are trying to help consumers."”

That is not to say, however, that the Sierra Club is handling everything as well as it should:

“With no independent scientific assessment of Green Works products, and with an undisclosed amount of money changing hands, what does that Sierra Club seal on the back of the bottle really mean?”

Ultimately:

“For Clorox, it's nothing but upside. For the Sierra Club, it's risking -- if not undermining -- its most valuable asset: its independent reputation.”

This skeptical tone is continued in the article in the second url below:

 “Transparency and accountability are double-edged. Embedded in an organisation’s culture they can burnish credibility and encourage progressive innovation. But if the promise does not match the practice, the greenwashing backlash can cause considerable brand damage.”

Have a good weekend.
Dave

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

Cleaning Solution
Since Clorox enlisted the Sierra Club to hype a new green product line, sales are booming. But the club is dealing with a nasty little stain.
Fast Company Magazine
From: Issue 128 | September 2008 | Pages 120-125 | By: Anya Kamenetz
http://www.fastcompany.com/magazine/128/cleaning-solution.html

The contrarian – Sell-out at the Sierra Club
The Clorox partnership fiasco demonstrates poor levels of transparency and weak corporate governance at the Sierra Club
Jon Entine
September 1, 2008
http://www.ethicalcorp.com/content.asp?ContentID=6055

Strategic CSR - Cap and Trade

The article in the url below reports a recent decision by the US Court of Appeals that seems to be very important for a prospective carbon cap-and-trade scheme in the US, but which I haven’t seen reported elsewhere. The author describes the decision as a:

“… drive-by slaughter of the Clean Air Interstate Rule on July 11. CAIR is - sorry, was - the Environmental Protection Agency's cap-and-trade programme for electric utilities' emission allowances for sulphurous and nitrous oxides.”

The decision’s implications are significant because the court has essentially delivered an:

“… invalidation of what had become a significant market.”

As a direct result, PPL (an electricity utility) has announced a prospective $100m loss on nitrous oxide emissions credits that it had purchased to allow it to come in under a cap that no longer exists:

“Using EPA data, Jeffrey Holmstead … estimates that the total loss of value for SO emission allowances is in the order of $15bn-$20bn. Nitrous oxide allowances issued under the CAIR, which were wiped out by the Washington DC Circuit, had been valued at $21bn.”

These costs are in conjunction with the prospective losses of investments made by firms to minimize factory emissions:

“The last number we had for investment made in plants, [at least partially] as a consequence of that is around $75bn, and counting.”

The annoying thing about the article is that it does not explain the basis for the Court’s decisions. Ultimately, however, the decision has resulted in high uncertainty and threatens confidence that a similar scheme could work for carbon:

“The court's action means there will almost certainly be higher levels of NOX emissions in the air next year.”

An update on this story is provided in a subsequent article by the same author in the second url below. This story appears to have significant implications for a carbon cap-and-trade scheme, but I have not seen it mentioned anywhere else.

Take care
Dave

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

A costly cap on utilities' cap-and-trade programme
By John Dizard
868 words
29 July 2008
Financial Times
USA Ed1
08
http://www.ft.com/cms/s/0/4e32493e-5a7d-11dd-bf96-000077b07658.html

Misguided game of SOx and NOx played for high stakes
By John Dizard
891 words
19 August 2008
Financial Times
USA Ed1
08
http://www.ft.com/cms/s/0/8bf3e074-6c4e-11dd-96dc-0000779fd18c.html

Strategic CSR - Carbon

The article in the url below presents the argument that the current price of carbon on the EU cap-and-trade market is significantly lower than it should be:

“The price of European carbon allowances … has risen only modestly this year, to about €27 ($43, £21) a tonne. … However, the levels of demand and supply are severely out of balance. This may lead to a radical repricing of carbon that will fundamentally change the political, business and financial landscape forever.”

The author makes the assertion, which seems logical, that the price of carbon should rise in conjunction with the price of other energies:

“A recent report … argues that carbon's market clearing price with oil at $85 (€55) a barrel and coal at $90 (€58) a tonne is about €40 a tonne. However, with the actual oil price at about $135 (€87) and coal at $200 (€127), the market clearing price for carbon is €75 to €80 a tonne - nearly three times its current level.”

Another trigger that will lead to an increase in the price of carbon, the author argues, is the “€100-per-tonne fine that comes into force this year with phase two of the European Union's Emissions Trading Scheme.”

Maybe I am missing something, but wouldn’t this fine then automatically become the price per ton of carbon? Below €100 firms will buy allowances on the market because they are cheaper than the fine (eventually, given the lack of supply noted in the article, pushing the price up to €100). Once the market price rises above €100, however, firms will prefer to pay the fine instead. It seems to me that fixing the fine essentially imposes a government-determined price that undermines the purpose of the market and carbon trading scheme.

The overall effects of the re-balancing of supply and demand predicted by the author, and corresponding price rise, should be dramatic:

“Carbon will take its place alongside oil, coal and gas as one of the most closely followed commodities in the world. This will mark the beginning of externalities at last being priced into the cost of production.”

Firms will be forced to account fully for carbon in their strategic planning and those firms best able to innovate will benefit the most. The author argues that the effects will also extend to governments that will be forced to respect a global price for carbon and deal with multi-nationals reluctant to invest in projects involving significant exposure regarding carbon:

“Landmark decisions are already being taken in the US, where coal-fired power projects have been abandoned owing to the future cost of emissions.”

Take care
Dave

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

Carbon emitters' free ride is about to end
Kevin Parker
776 words
17 July 2008
Financial Times
London Ed1
11
http://www.ft.com/cms/s/0/ce67fbe0-5333-11dd-8dd2-000077b07658.html

Strategic CSR - eBay

Today’s Newsletter highlights two websites that I recently heard about and thought would be of interest.

The first of these (http://worldofgood.com/) was launched this week by eBay and described as an “Online Marketplace for Ethically Sourced and Eco-Friendly Products”:

“WorldofGood.com is a one-stop-shop where the products, producers and sellers are verified by various third parties called Trust Providers – like TransFair USA (Fair Trade Certified), Co-op America and Aid to Artisans – to meet a core set of ethical and environmental standards.”

The second website (http://www.ecoogler.com/) is an interesting search engine that a friend introduced me to over the summer:

“Ecoogler is a search engine that uses Yahoo technology and helps reforesting trees and safeguard water resources in the Amazon region … For every search in Ecoogler, you contribute symbolically to reforest one leaf. For every 10.000 searches, Ecoogler and Aquaverde plant a tree in the Amazon and in the Canary Islands.

1 search =            10.000 = 1 Planted tree”

While the goal behind WorldofGood.com is clear (eBay is in the business of making money), the thing I would like to know about Ecoogler (and that the website does not make clear) is the source of the financing for the tree planting.

Have a good weekend.
Dave

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

Press release from: eBay Inc.
eBay Launches New Online Marketplace for Ethically Sourced and Eco-Friendly Products
WorldofGood.com by eBay Helps Socially Responsible Shoppers Make a Difference
CSRwire Press Release
9.02.2008 - 11:59pm ET
http://www.csrwire.com/News/12988.html

Strategic CSR - Carbon Credits

The article in the url below announces the launch of a carbon credit ratings agency that will evaluate carbon credits in a similar way that Moody’s and Standard and Poor’s in the US rate debt (Issues: Finance, p180; Loans, p188):

“The agency, run by the IdeaCarbon group of which Lord Stern is vice-chairman, said it would offer investors a guide to the quality of credits and the likelihood that they would be delivered.”

The agency, launched by Nicholas Stern (who authored the Stern climate change reports), emerged largely in response to concerns about the potential for abuse regarding the quality of the projects that generate carbon credits. In particular, concerns center on the credibility of claims by both buyers and sellers of the credits about the environmental benefits being delivered:

“Recent studies have confirmed findings by the Financial Times last year that suggested as many as half of the carbon credits promised under the Kyoto protocol would fail to materialise.”

One problem with the proposed carbon credit rating agency is that its business model is structured in the same was as the debt rating agencies in the US. As a result, there is an apparent conflict of interest with the agency being paid by those organizations and projects that it is supposed to be evaluating:

“Sellers of carbon credits would have to pay to have their products rated, while buyers would also pay to gain access to the ratings.”

The virtues and problems associated with carbon trading schemes and the carbon credits that underwrite them are covered in a longer article that appeared recently in Fast Company magazine:

http://www.fastcompany.com/magazine/127/carbon-boom.html

Take care
Dave

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

Stern launches carbon credit ratings agency
By Fiona Harvey
920 words
24 June 2008
Financial Times
London Ed1
18
http://www.ft.com/cms/s/0/897fc1b4-4219-11dd-a5e8-0000779fd2ac.html

Strategic CSR - Product (Red)

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

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

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

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

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

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

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

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

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

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

Take care
Dave

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

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