Strategic CSR - Caterpillar

Sometimes, it is hard to understand how risk assessment/risk management decisions are made inside firms. The article in the url below, for example, announces Caterpillar’s decision to halt trading with Iran via its non-U.S. subsidiaries:

“Caterpillar, the construction equipment group, has become the latest US company to bow to a "name and shame" campaign by influential lobbyists by announcing steps to sever trading links with Iran.”

This means that, until this March, Caterpillar was deliberately trading with Iran, in spite of the well-known nature of the regime and its difficult relations with the international community. Did Caterpillar’s executives think no-one would notice? Alternatively, did they think the firm’s stakeholders would not mind or have sympathy for the firm’s need to maximize profits? It is difficult to imagine the thought processes inside Caterpillar’s executives’ minds that recognize the controversy surrounding Iran, acknowledge U.S. law that makes it illegal to trade directly with Iran, but conclude that the firm is going to go ahead and circumvent the spirit of the law anyway:

“As part of the Caterpillar campaign, the pressure group this month erected a roadside billboard near the company's Peoria, Illinois, headquarters that pictured one of the company's diggers alongside Mahmoud Ahmadi-Nejad, Iranian president, and the slogan: "Today's work, tomorrow's nuclear Iran.”

Clearly, Caterpillar is not alone in evaluating this risk in the same way and concluding that the potential profits outweigh any risks to business:

“As western pressure mounts at the United Nations for a new round of global sanctions against Tehran over its nuclear programme, UANI and other lobbyists have targeted 200 US and non-US companies whose business with Iran is legal under US and international law.”

Take care
David

Bill Werther & David Chandler
Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)
© Sage Publications, 2011
http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/


Caterpillar bows to pressure and severs its trading links with Iran
By Harvey Morris in New York
401 words
1 March 2010
Financial Times
USA Ed1
01
http://www.ft.com/cms/s/0/30d15d3c-24d2-11df-8be0-00144feab49a.html
or
http://www.ftchinese.com/story/001031492/en

Strategic CSR - Microfinance

The article in the url below suggests the dangers of success for the microfinance business model (Issues: Microfinance, p245):

“SKS Microfinance, India's largest lender to the poor, aims to raise about $350m this month by selling a 21.6 per cent stake in an initial public offering expected to spark a wave of listings by equity-strapped Indian microfinance companies.”

While the high rates of repayment and community structure present a real opportunity for microfinance institutions to be profitable (or at least self-sustaining), the profit-maximization pressures (higher interest rates and lower loan qualification standards) that accompany a public listing carry the potential to undermine the social-entrepreneurship microfinance goals (Issues: Social Entrepreneurship, p189):

“Muhammad Yunus, the Nobel Peace Prize-winning founder of Bangladesh's Grameen Bank - the world's most famous microlender - has criticised the commercialisation of the industry, saying profit-oriented microlenders are little different to the loan sharks they once set out to replace.”

The possibility for corruption quickly arises as the pursuit of profit spreads across the sub-units of the organization:

“SKS, which says it has 7m borrowers in 19 Indian States, also plans to boost its revenues through alliances with large companies to distribute their products - such as mobile phones and water purifiers - even as it provides rural consumers with the microloans needed to buy the items.”

The article in the second url below shows the success and rapid growth of microfinance organizations, such as SKS, in India:

“For the last three years, outstanding loan portfolios of Indian micro-finance institutions have grown by 65 per cent annually, according to the World Bank, with total loans of about $2.5bn to about 22.6m households.”

As well as reinforcing the threats:

“Typical loans average between $200 and $250, and carry rates of about 28 per cent - lower than money-lenders, albeit still expensive when compared with commercial bank rates.”

Take care
David

Bill Werther & David Chandler
Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)
© Sage Publications, 2011
http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/


SKS Microfinance plans to raise $350m in IPO
By James Fontanella-Khan in Mumbai and Amy Kazmin in New Delhi
418 words
21 July 2010
Financial Times
Asia Ed1
17
http://www.ft.com/cms/s/0/1879f6e4-9422-11df-a3fe-00144feab49a.html

New networks help ease debt dilemma
Kazmin, Amy
603 words
21 July 2010
Financial Times
Asia Ed1
17
http://presscuttings.ft.com/presscuttings/s/3/viewPdf/37730595

Strategic CSR - Recycling

The graphic in the url below is of a yacht constructed solely from recycled plastic:

“The Plastiki, a boat built from recycled plastic, is expected to begin a 100-day crossing of the Pacific Ocean in March to test the seaworthiness of new materials and draw attention to ocean-borne plastic waste.”

As well as raising awareness of the importance of recycling and not polluting the oceans, the yacht also represents the scientific innovation that can be applied to solving some of the most intractable problems we face:

“The Plastiki can travel up to 200 miles a day, depending on wind, and will pass through and take samples of a massive floating garbage patch in the eastern part of the North Pacific Gyre.”

In July, the Plastiki completed her trip across the Pacific Ocean from San Francisco to Sydney (http://www.msnbc.msn.com/id/38412525/).

Have a good weekend
David

Bill Werther & David Chandler
Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)
© Sage Publications, 2011
http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/


A Boat From Bottles
23 February 2010
The New York Times
Late Edition - Final
D3
http://www.nytimes.com/imagepages/2010/02/23/science/23sciillo_graphic.html

Strategic CSR - China

There is growing evidence that the negative impact on climate change of China’s economic and social development is increasing, that China’s government recognizes this threat, and that it is acting to do something about it.

The article in the first url below was written by Gordon Conway, co-Chair of the China Council for International Co-operation on Environment and Development (the other co-Chair is China’s vice-premier, Li Keqiang), and outlines China’s economic response to the ecological changes it is experiencing. The economic plan is to be included in the country’s twelfth five-year plan (2011-2015):

“The Chinese leaders are moved by a sense of urgency. Following the traditional economic model is not an option: resource, social and environmental constraints make it impossible. They are also aware of the danger that rapid growth will lock China into industrial and urban structures that will become a liability in a low-carbon world.”

The plan maps out possible responses to three different scenarios of high, low, and “enhanced low-carbon” emission levels. The reported goals are ambitious and extend beyond anything China is willing to commit to publicly:

“In each scenario China would continue its economic growth. … The Chinese plan is to reduce energy consumption per unit of GDP by 75-85 per cent by 2050. It will be achieved through industrial restructuring and efficiency gains in every economic sector, including new low-carbon cities that avoid suburban sprawl and prioritise public transport. This will be complemented by much higher efficiency in fossil fuel use, a shift to renewable energy and the use of carbon capture and storage (CCS). … During the 12th five-year plan, energy-saving measures and new energy sources could reduce carbon emissions per unit of gross domestic product by 20-23 per cent or possibly more.”

Interestingly:

“Lord Stern, the climate economist, attended the September 2009 meeting of the task force in Beijing. He believed the report was the most careful, thorough analysis by any country.”

The article in the second url below provides examples of how China is fast becoming a world leader in renewable energy technology, such as carbon sequestration, clean-burning coal, and wind and solar energies. This position is supported by Tom Friedman’s long-standing campaign in the NYT to promote action in the U.S. on this issue so that it does not fall further behind China’s developing capabilities (e.g., http://www.nytimes.com/2010/09/19/opinion/19friedman.html):

“There is really no debate about climate change in China,” said Peggy Liu, chairwoman of the Joint U.S.-China Collaboration on Clean Energy, a nonprofit group working to accelerate the greening of China. “China’s leaders are mostly engineers and scientists, so they don’t waste time questioning scientific data.”

Take care
David

Bill Werther & David Chandler
Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)
© Sage Publications, 2011
http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/


Beijing seeks a head start in the race to go green
Gordon Conway
753 words
12 November 2009
Financial Times
Asia Ed1
11
http://www.ft.com/cms/s/0/adb09036-cef9-11de-8a4b-00144feabdc0.html
or
http://www.china-embassy.org/eng/xw/t649414.htm

Copenhagen Summit: China takes lead in green technology --- World's top polluter combines cheap labor, capital in ambitious renewable-energy plan that could reshape business
By Shai Oster
1946 words
18 December 2009
The Wall Street Journal
6
http://online.wsj.com/article/SB126082776435591089.html

Strategic CSR - Conflict Minerals

The article from Newsweek in the url below is interesting because it describes a growing pressure on technology firms to be held accountable for the raw materials they use to produce many of the communication products on which we rely (see also Issues: e-waste, p326):

“It takes a lot to snap people out of apathy about Africa’s problems. But in the wake of Live Aid and Save Darfur, a new cause stands on the cusp of going mainstream. It’s the push to make major electronics companies (manufacturers of cell phones, laptops, portable music players, and cameras) disclose whether they use “conflict minerals”—the rare metals that finance civil wars and militia atrocities, most notably in Congo.”

What I found most interesting about the story, however, was a throwaway line heralding the topical nature of the campaign:

“… new rules requiring American-listed companies to improve their supply-chain transparency are folded into the financial-reform bill that passed Congress this week.”

A little searching on the web led me to this industry association blog entry (http://blog.ipc.org/2010/06/28/1061/ on the IPC website, which carries the tag line: Association Connecting Electronics Industries) complaining about the “heavy-handed legislation.” I thought the blog’s summary of the requirements in the legislation (plus comments) was worth quoting at length:

“Once passed by the Senate and House and signed by the president, the legislation will require companies whose manufactured goods contain tin, tantalum, tungsten, or gold to:

• Report annually to the SEC (Securities and Exchange Commission) if the minerals did originate from the Congo or adjoining countries. It is unclear what the obligation will be for companies who cannot determine from where the minerals originated.

• Submit a due diligence plan with the company’s annual SEC report that includes:

a. A description of the measures taken by the company to prevent sourcing from the Congo;

b. A description of the products manufactured or contracted to be manufactured that are not conflict free, the facilities used to process the conflict minerals, the country of origin of the conflict minerals, and the efforts to determine the mine or location of origin;

c. An independent third party audit of the company’s due diligence plan; and

d. A certification by the company of its due diligence report (there is no definition of “certify” included in the language so that obligation is vague).”

While claiming that:

“For the past several years, industry groups, including Electronics Industry Citizenship Coalition (EICC), the Global eSustainability Initiative (GeSI), the International Tin Research Institute (ITRI) Tin Supply Chain Initiative (iTSCi) and the IPC Solder Product Value Council (SPVC), have been working to provide transparency and accountability concerning the supply of raw materials coming from the conflict zones of the Democratic Republic of Congo (DRC).”

the blog entry predicts the new legislation will likely result in:

“… total industry divestment from the DRC and adjacent countries — removing an important legitimate source of income in the resource-poor region in addition to clamping down on illegitimate mines.”

Although the IPC clearly has an interest in this issue, because it represents firms in the electronics industry, they post more information about conflict minerals in consumer electronics goods at: http://www.ipc.org/minerals

There is also more information available from the NYT (http://www.nytimes.com/2010/06/27/opinion/27kristof.html) and a quick Google search for ["conflict minerals" Dodd-Frank] produces a great deal more information.

Take care
David

Bill Werther & David Chandler
Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)
© Sage Publications, 2011
http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/


The Genocide Behind Your Smart Phone
Our biggest gadget makers—including HP and Apple—may inadvertently get their raw ingredients from murderous Congolese militias. A new movement wants them to trace rare metals from ‘conflict mines.’
By Alan Mascarenhas
NEWSWEEK
Published July 16, 2010
http://www.newsweek.com/2010/07/16/the-genocide-behind-your-smart-phone.html

Strategic CSR - CSR blogs

Below are two blogs that act as central resources for CSR background information and current debates that I thought you might find useful:

Mallen Baker (Introduction, pxvii): http://www.mallenbaker.net/csr/
“This site is the personal website of Mallen Baker, a writer, speaker and strategic advisor on corporate social responsibility and the founding director of Business Respect (http://www.businessrespect.net/).”

Fabian Pattberg: http://www.fabianpattberg.com/
“The aim of this blog is to be a resource for practical information on the topics of Sustainability, Corporate Social Responsibility (CSR) and the use of Social Networking for business and individuals.”

Both sites contain links to many more resources that serve as a valuable library of CSR topics and ideas.

Have a good weekend.
David

Bill Werther & David Chandler
Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)
© Sage Publications, 2011
http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

Strategic CSR - Nike

I thought it was both interesting and promising that in Fast Company Magazine’s 2010 list of ‘The 100 Most Creative People in Business’ earlier this year (in the article in the url below), Hannah Jones, Nike’s VP of Sustainable Business and Innovation, was #8:

She has paired Nike with NASA and venture capitalists to address water shortages; with Creative Commons to launch GreenXchange, a platform for companies to share green intellectual property; and with PopTech to create an Open Collaboration Lab for scientists and engineers. "We need to get to a place," Jones says, "where businesses leverage renewable energy, do not produce waste, and have clean water coming in and clean water coming out.”

It was great that a CSR officer should be recognized and is, no doubt, a reflection of Jones’ abilities. It also, however, reinforced in me how far Nike has evolved since its sweatshop troubles of the 1990s and, today, helps establish best practice in relation to sustainable business.

Take care
David

Bill Werther & David Chandler
Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)
© Sage Publications, 2011
http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

Fast Company Magazine
The 100 Most Creative People in Business 2010
#8 Hannah Jones: VP of Sustainable Business and Innovation (Nike)
By: Danielle Sacks

Issue 146 , June 2010
Page 75
http://www.fastcompany.com/100/2010/08/hannah-jones

Strategic CSR - Government Oversight

Over the summer, I thought a lot about the government’s role in overseeing business. As the oil spill in the Gulf of Mexico raced out of BP's control and the government could only sit on the sidelines, a pattern began to emerge:

Increasingly, where technologically complex industries are concerned, government is less and less able to regulate what it is businesses do.

As the push for profits has intensified, the best minds are attracted to industry positions that pay so much more than government jobs. With incentives in place, these people have pushed innovation in ways that employees at regulatory agencies do not fully understand and with which they cannot keep up.

The Securities and Exchange Commission understood as much about the complex derivatives that laid the foundation for the financial crisis of 2007-2009 as the Minerals Management Service did about the technical challenges of ocean drilling for oil at 5000 feet. Which is to say, not much.

In both cases, trust was placed in business to understand what it was doing and deal with any problems that arose. Firms, it was reasoned, have their reputations to protect, which should ensure self-interest in preventing serious damage. Executives reassured bureaucrats that this was the case, down-playing any risk to their activities.

If the mindset is that risk is absent, then that frees executives to push the boundaries in all aspects of operations.

The absence of risk means that investment is less necessary in back-up plans and fail-safe technology that, by this reasoning, will probably never be needed anyway.

The absence of worst-case-scenario planning and investment, in turn, lowers costs and generates higher short-term margins, which is what executives have to produce or else they will be punished by investors.

We are left to clean up in the aftermath.

What is the solution?

I do not think there is an easy answer:

If government cannot compete with private-sector pay to attract the best minds and spend enough to finance effective oversight, business will always be one step ahead.

If business executives are forced into avoiding worst-case scenario planning and spending in order to maximize short term profits, then there will be no back-up plan in place when the one-in-a-thousand (one-in-a-million?) accident happens on their watch. With substantial golden parachutes built into their compensation packages—what incentive do they have to care, either way?

If trust is outsourced from government to the private sector, yet the private sector is unwilling or unable to uphold its end of the bargain, we are left with a system that promotes maximum short term returns (for which everyone wants to take credit), punctuated by massive events that produce rapid corrections (crashes and accidents for which everyone wants to blame someone else).

It seems that the corrections, of late, are flowing more frequently and with greater severity.

Increasingly, however, due to ideological intensity and political gridlock, government seems unable or unwilling to fix the system. It seems more than content to plug the holes and hope the problem goes away long enough for them to get through the next election cycle and pass the problem forward.

Two questions:

What does all this say about the state of CSR and the role for the private sector in adding more social value than it takes away?

More importantly, perhaps, how long can the current economic/political/ecological system sustain these shocks?

I am not sure I like the answers I come up with in response.

Take care
David

Bill Werther & David Chandler
Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)
© Sage Publications, 2011
http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/


For some further reading and related thoughts, see these three excellent articles:

Cutting costs so often leads to cutting corners
By John Kay
Financial Times
23 June 2010
http://www.johnkay.com/2010/06/23/cutting-costs-so-often-leads-to-cutting-corners/

Gulf oil spill offers a lesson in capitalism vs. socialism
By E.J. Dionne
The Washington Post
May 27, 2010
http://www.washingtonpost.com/wp-dyn/content/article/2010/05/26/AR2010052604013.html

Obama and BP at Risk Over Oil Spill
As the Gulf spill threatens to sink BP and damage a Presidency, it's time for Obama to rally the U.S. around tough, fair regulation—for the good of capitalism
BusinessWeek
By Paul M. Barrett
June 3, 2010
http://www.businessweek.com/magazine/content/10_24/b4182007924028.htm

Strategic CSR - Live Aid

The article in the url below marks the twenty-fifth anniversary of Live Aid and contains some interesting statistics that, in retrospect (and, in spite of raising nearly $300mn), question the success of the event:

“Recently released CIA documents from 1985 (and a subsequent BBC investigation) suggest that so much of the money went to arms instead of food that it may have prolonged and deepened Ethiopia's humanitarian catastrophe.”

More generally, the article argues that aid is destined to fail unless fundamental institutions of state (e.g., transparent and accountable governance, rule of law, property rights, etc.) are in place:

“The quarter-century since Live Aid has borne out irrefutably that famine and poverty cannot be solved with charity alone. We can only stop them by putting an end to corruption and instability.”

The article quotes Bono in 2005:

“This is the number one problem facing Africa, corruption; not natural calamity, not the AIDS virus. This is the number one issue and there's no way around it.”

This is a sensitive issue and a controversial perspective, but one that should be taken seriously.

Have a good weekend.
David

Bill Werther & David Chandler
Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)
© Sage Publications, 2011
http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/


The Failure of the Live Aid Model
By John-Clark Levin
689 words
14 July 2010
The Wall Street Journal
A17
http://online.wsj.com/article/SB10001424052748704288204575363400690371326.html

Strategic CSR - Executive Compensation

The article in the url below reports on an innovative method the Dutch companies DSM (life sciences) and TNT (mail delivery) have introduced to address mounting societal concern about levels of executive compensation:

“DSM, the Dutch life sciences group, will today announce that half the bonuses for its management board will be tied to targets such as the reduction of greenhouse gas emissions and energy use, the introduction of new environmentally-friendly products, and improvements in workforce morale. Earlier this week, TNT, the Dutch mail operator, unveiled similar plans that also included customer satisfaction.”

The idea at DSM (which still leaves half of its executives’ bonuses tied to more traditional financial metrics) was developed in response to the rejection of the firm’s compensation plan by shareholders in 2009 and following extensive consultation:

“Half of DSM's short-term bonuses will be determined by the number of environmentally friendly products it introduces each year, whether it reduces energy consumption and how it performs in an employee satisfaction survey. The other half will be based on financial targets such as sales and cashflow. Long-term bonuses will be given in shares, with half based on performance - total shareholder return - and the other half on how much the company reduces greenhouse gas emissions per unit of production. Total bonuses cannot exceed fixed pay.”

In general, the article reports that similar executive compensation packages in other firms have been well-received by shareholders and converted initial skeptics:

“Akzo Nobel, the Dutch paint company that bought ICI of the UK three years ago, was among the pioneers. It based half of its long-term incentive scheme on its position in the Dow Jones sustainability index for chemicals companies. "There is a risk that if rewarding for performance is your value, you put all your eggs in one basket," said Hans Wijers, chief executive. … Mr Wijers says the idea has been positively received by shareholders - Akzo's proposal was passed by 97 per cent of investors - as well as by workers.”

Take care
David

Bill Werther & David Chandler
Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)
© Sage Publications, 2011
http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

Executive bonuses tied to green targets
By Richard Milne and Michael Steen in Amsterdam
700 words
24 February 2010
Financial Times
Asia Ed1
14
http://www.ft.com/cms/s/0/28db1b9a-20e5-11df-b920-00144feab49a.html

Strategic CSR - Science

If, like me, you sometimes despair that behavioral change sufficient enough to avert ecological disaster is possible, then the only hope is technical innovation. Finding more innovative ways to maximize the utility of our dwindling set of natural resources may compensate for humans’ seeming collective inability to place long term sustainability over short term gratification (or, at least, delay the inevitable). Pessimism aside, scientific discovery is truly amazing and has to be one of the defining characteristics of human civilization. The article in the url below is a good example of how science continues to amaze and offers hope among the daily gloom of corruption and ineptitude:

“All Vibrations are good vibrations in the world of energy harvesting. Whether it's a road under heavy traffic or commuters pounding the sidewalk pavement, micromovements on any surface can be converted into clean energy by power-scavenging devices fitted with piezoelectric (PE) crystals. … So a PE layer slotted beneath a supermarket parking lot could, for example, use the movement of customers' cars to power checkout conveyor belts or pump that free electricity back into the grid.”

Take care
David

Bill Werther & David Chandler
Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)
© Sage Publications, 2011
http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

Fast Company Magazine
How Everyday Behaviors Can Produce Clean Energy
How to generate energy from sidewalks, roads, railways -- and every breath you take.
From: Issue 146
June 2010
Page 38
By: Theunis Bates
http://www.fastcompany.com/magazine/146/supertiny-power-plants.html

Strategic CSR - BP (III)

Following the Gulf of Mexico oil spill, Greenpeace held an online contest to design a new logo for BP. So far, the contest has generated 1,926 entries.

Predictably, the suggestions are far from complimentary. The results are posted to flickr and make for entertaining viewing:

http://www.flickr.com/photos/greenpeaceuk/sets/72157623796911855

One of my favorites:

http://www.flickr.com/photos/greenpeaceuk/4751440551/in/set-72157623796911855/

Have a good weekend.
David

Bill Werther & David Chandler
Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)
© Sage Publications, 2011
http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

Strategic CSR - BP (II)

I wonder what lessons other firms watching BP’s descent into ‘public enemy No.1’ status are likely to learn about how to respond to a crisis. From Day 1, BP publicly accepted full responsibility for the crisis (even while contesting fault) and promised to pay all reasonable compensation claims. The firm genuinely seemed intent on living up to the image it had crafted for itself as a good corporate citizen, as indicated by this quote from the article in the url below:

“The irony of this is that, early on at least, BP appeared to be adopting a textbook approach to corporate crises – dispatching its chief executive to lead from the front, taking responsibility for cleaning the spill and compensating victims. Mr Hayward was, laughable as it now sounds, eager to be a model corporate citizen and show that BP would be more responsive than Exxon Mobil after the Valdez disaster.”

I think many firms would not have been so forthcoming—instead, hiding behind legal statements about needing to wait until all proper investigations are conducted and then fighting tooth and nail in court to minimize compensation payments.

Even accounting for its PR mistakes, what has BP gained from its relative openness?

It is as if politicians and the media perceive the admission of responsibility as a sign of weakness, an excuse to posture (employing a slice of nationalism for extra measure), and an invitation to move in for the kill. What incentive will the CEO of the next firm to cause a disaster have to publicly take responsibility, apologize, and offer to compensate the victims? Looking at BP’s experience, I can imagine what the General Counsel’s advice will be.

Of course, it would have been ideal if BP had thought through the consequences of deep-sea drilling in advance, made sure its back-up equipment worked, developed a half-decent disaster response plan in case anything went wrong, and was transparent with information when it did. But, even if firms take all these steps, accidents will happen and, when they do, it is in society’s best interests to encourage firms to accept responsibility, rather than hide behind lawyers. My sense is that the BP disaster has made hiding behind lawyers more, rather than less, likely in the future.

Take care
David

Bill Werther & David Chandler
Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)
© Sage Publications, 2011
http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/


How not to salvage a reputation, at BP and beyond
By John Gapper
756 words
24 June 2010
Financial Times
Asia Ed1
09
http://www.ft.com/cms/s/0/0d3a10c8-7f0c-11df-84a3-00144feabdc0.html
or
http://xinkaishi.typepad.com/a_new_start/marketing/