The CSR Newsletters are a freely-available resource generated as a dynamic complement to the textbook, Strategic Corporate Social Responsibility: Sustainable Value Creation.

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Wednesday, October 22, 2014

Strategic CSR - Impact investing

The article in the url below outlines a productive use for the money that U.S. corporations currently have parked offshore. And, there is a lot of it. The money is offshore because the companies want to avoid paying U.S. corporation taxes on it. As such, they are waiting for the U.S. government to grant them a tax holiday to re-patriate the funds. Although this would make some sense (the U.S. government could generate some income and the U.S. economy would benefit greatly), the article suggests these companies should not hold their collective breath:
 
"… bringing home more than $2tn in profit would cost billions in corporate taxes. So companies wait, find ways to park their funds overseas and hope for an unlikely tax holiday as their 'problem' grows. Just last year, these idle overseas amounts grew 11.8%."
 
In the meantime, the article's authors have come up with an interesting use for that money that revolves around solving one of the most pressing poverty-related problems facing a sizeable chunk of the world's population (many of whom are in India and Africa)—easy access to electricity:
 
"Most Americans take turning lights on for granted. But one in five people in the world still can't plug anything in. The World Bank estimates 1.2 billion people lack electricity all together – resulting in millions of premature deaths yearly – and many more have undependable or unaffordable electricity service."
 
The authors estimate that the amount needed to solve this problem is $50bn:
 
"… solar photovoltaic cells, batteries and LED lights have grown so cheap and durable that an 'off-grid' household – spending less than it would dole out on kerosene over two years – can harvest enough electricity to power lights and charge a cellphone for decades. In Africa, for example, companies such as Azuri Technologies and M-KOPA Solar already sell 'pay-as-you-go' electrification systems for as little as $1.50 per month. At $200 each for these systems, a total of $50bn in loans – over several years – would be enough to finance the electricity to light up the world's dark homes."
 
How feasible is this? Well, the $2 trillion in corporate assets parked offshore is more than 200 times the $50bn needed to solve the problem. In fact:
 
"Some companies have enough in overseas billions – take Apple's $138bn, GE's $110bn, Microsoft's $93bn, IBM's $52bn, Cisco's $48bn and Google's $48bn ­– that just one of them could take on the whole job singlehandedly. Another lender could jump in to finance bigger systems for households or villages, or to fund renewable replacements for the sooty biomass that 2.5 billion people now use for heating and cooking (resulting in approximately 1.5 million deaths from fumes and smoke annually)."
 
Importantly, this money would be invested (rather than donated) and the transaction could be structured as:
 
"… a giant working capital fund. … Investments would be loans, and investments in promising commercial ventures, not philanthropy, and a successful program could set margins to yield competitive returns."
 
Moreover:
 
"Unlike microfinance for individuals, working capital funds would go to companies – experienced manufacturers and vendors – that would supply the systems. With this funding, these companies could grow manufacturing, education and marketing efforts, sales and collections."
 
Of course, such an investment would have multiplier economic benefits—grow companies and industries, provide jobs and local taxation, etc., etc. It is a simple idea that would have wide-ranging positive consequences for everyone. Or, as the authors put it:
 
"All this adds up to an enormous opportunity for US multinationals to make history with bold game-changing investments that will bring a billion people into the global economy – and to profit in the process. … Which company will step up to put its cash to good use, take a big bite out of fossil fuels and light up the world?"
 
Take care
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/


How a single multinational corporation could light up the world
By Daniel M. Kammen and Felix Kramer
September 24, 2014
The Guardian Sustainable Business