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Wednesday, November 27, 2013

Strategic CSR - Scale

Marc Gunther writes some great articles for the UK newspaper, The Guardian. He also writes a very good blog. He started a recent post with the following provocative question:
“Which trio of companies has done more for the environment…
Patagonia, Starbucks and Chipotle?
Walmart, Coca-Cola and McDonald’s?”
While provocative, the answer to the question is also intuitive – size matters! That is not to say, however, that the question isn’t an important one to ask. And, perhaps for the CSR/sustainability/business ethics community, it is the only one worth asking. Ultimately, the core of the issue is: Are we interested in unrealizable ideals or realistic change? If change is what we want, then Walmart, Coca-Cola, and McDonald’s need to be the source. If we want to hold onto ideals, however, then we will at least sleep well as we head towards oblivion while cheering on the efforts of Patagonia, Starbucks, and Chipotle.
Focusing on firms such as Walmart, Coca-Cola, and McDonald’s does nothing to change the fact that Patagonia, Starbucks, and Chipotle are wonderful firms, doing great things, under inspired leadership. If anything, they are the roadmap for what larger firms also need to accomplish. This argument merely acknowledges the reality that these firms operate at the periphery, rather than the core, of the economy. It is similar to the conundrum I face every time I recycle a plastic bottle – it is the sustainable thing to do, even though I am fully aware that I am not saving the world. All of the plastic bottles that are recycled every day pale in comparison to the huge amount of resources that are wasted elsewhere in our economic system.
For-profit firms are the most important organizational form because it is only these organizations that can combine scarce resources in the most efficient way on the scale necessary to implement meaningful economic reform in the timeframe in which change needs to occur. Within the vast group of organizations labelled for-profit firms, however, there are some that contain vastly more potential for significant impact. As the article from The Economist in the url below indicates, massive firms have a disproportionate impact on our daily lives. The market capitalization of the Top 10 global firms alone is $1.5 trillion; the scale of their operations are almost unfathomable. As a result, what these large firms do in the near future will do more to influence our lifestyles, standard of living, and future security than all of the smaller firms put together. Or, as Jason Clay puts it in his TED talk on how big brands can save biodiversity:
“100 companies control 25% of the trade of all 15 of the most significant commodities on the planet. … Why is 25% important? Because if these companies demand sustainable products they will pull 40-50% of production.”
According to Clay, it is all about scale in the supply chain. Large companies pushing other large companies will achieve change much faster and on a scale that actually matters, rather than waiting for consumers, one-by-one, to wake up to the global consequences of their consumption decisions:
“Convince just 100 key companies to go sustainable, and … global markets will shift to protect the planet our consumption has already outgrown.”
Take care
David Chandler & Bill Werther
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September 21, 2013
The Economist