Strategic CSR - True costs + prices

The article in the url below introduces the concept of true cost accounting:

"As pricey as a run to the grocery store has become, our grocery bills would be considerably more expensive if environmental costs were included, researchers say. The loss of species as cropland takes over habitat. Groundwater depletion. Greenhouse gases from manure and farm equipment. For years, economists have been developing a system of 'true cost accounting' based on a growing body of evidence about the environmental damage caused by different types of agriculture."

At first glance, I equated this to the lifecycle pricing that is a component of strategic CSR. But, on reading further, the article makes clear that the people at True Price (the Dutch nonprofit the authors worked with to generate the data in the article) do not want to alter prices (by embedding all costs), but instead want to place the 'true cost/price' next to the actual price (as a signal to impact behavior). In other words, they want to charge the current price and advertise the true cost, rather than charging the true price:

"Now, emerging research aims to translate this damage to the planet into dollar figures. By displaying these so-called true prices, sometimes next to retail prices, researchers hope to nudge consumers, businesses, farmers and regulators to factor in the environmental toll of food. The proponents of true cost accounting don't propose raising food prices across the board, but they say that increased awareness of the hidden environmental cost of food could change behavior."

The data is still imperfect, but is more comprehensive than I have seen elsewhere, demonstrating the extent to which costs we incur today are externalized onto future generations. Take beef, for example, where the retail price for 1lb is listed as $5.34, but the "estimated full price" is listed as $27.36 – an "estimated environmental cost" of $22.02 that is currently not being charged.

While I understand why they are proposing this less conflict-ridden approach, and agree the signal will have some effect, I also think the impact of this approach will likely be considerably weaker than directly changing the price.

Take care 

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (6e)

© Sage Publications, 2023

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler6e  

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The Hidden Environmental Costs of Food

By Lydia DePillis, Manuela Andreoni, and Catrin Einhorn

September 19, 2024

The New York Times

https://www.nytimes.com/interactive/2024/09/19/climate/food-costs-protein-environment.html

 

Strategic CSR - Warning labels

The article in the url below asks an interesting question:

"What if gas station pumps warned drivers about climate change the way cigarette packs warn smokers about lung cancer?"

Apparently, they do in Cambridge, MA:

"Drive up to any gas pump in Cambridge, Massachusetts, and you'll see a yellow label slightly bigger than a greeting card. In red lettering, it tells drivers, 'WARNING: Burning Gasoline, Diesel and Ethanol has major consequences on human health and on the environment including contributing to climate change.'"

These labels are the first of their kind in the U.S. They were originally installed in early 2021, and they are not subtle:

The theory motivating the idea for the labels places the responsibility for action on each of us, as individuals:

"'The fight to reverse climate change requires that everyone take action to change their behavior,' the council noted in its policy order for the labels, 'and the City must underscore the fact that each individual's behavior can make an impact on the environment and on public health.'"

The idea first appeared in Vancouver, Canada, but was more of a muted effort:

"North Vancouver ended up agreeing to the idea first, and in 2016 became the first Canadian city to put climate labels on its pumps. But local officials opted not to go with a graphic warning about climate change proposed by activists and instead chose a label that the energy industry helped design. The word 'warning' doesn't appear. Instead, the labels state 'Reducing Emissions Help Fight Climate Change' and also offer tips on how to do so through things like maintaining tire pressure and not idling your car."

Perhaps not surprisingly, Scandinavia is making faster progress on this issue:

"In Sweden, a campaign to put climate labels on gas pumps launched in 2013 and was passed by parliament in 2018. Now color-coded labels can be found in most fueling stations across the country; they compare the carbon intensity of fossil fuels, biodiesel, and electric vehicle chargers."

The comparison with health warnings on cigarettes is obvious, but the effectiveness of such labels is unknown:

"Perhaps the closest parallel are the warning labels on cigarettes; but even there, the effectiveness remains unclear. 'Do the warnings on cigarette packs actually prevent people from smoking? We don't know,' [Patricia Nolan, the Cambridge City Council member sponsoring the labeling effort] said. For her, the point of the gas labels is 'educating the public. The science is very clear: burning gasoline hurts people's health and the environment.'"

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (6e)

© Sage Publications, 2023

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler6e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Where Are All the Climate Warnings on Labels on Gas Pumps?

By Zahra Hirji

July 19, 2022

Bloomberg Businessweek

https://www.bloomberg.com/news/articles/2022-07-19/where-are-all-the-climate-warning-labels-on-gas-pumps

Strategic CSR - Exercise

The idea, detailed in the article in the url below (and something that I found on LinkedIn), is brilliant:

"The Romanian city of Cluj-Napoca has reintroduced its smart sports bus station, which gives city residents the ability to ride the bus for free if they complete 20 squats in two minutes. … Dubbed the 'health ticket', the ticket is valid for a one-way trip across the city, which usually costs around 2.50 RON (0.80c AUD)."

One of the best ideas I have seen in a long time – simple, yet effective. An excellent nudge that is not so intrusive that it is likely to discourage participation, and technology that is making implementation of such an idea possible:

"Squats are counted by a device at the bus stop that measures the kneeling of a person squatting. Once completed, the ticket is then printed and the person is able to ride the bus. Tickets are able to be accessed between the hours of 8:00am-8:00pm, with the price of the ticket covered by digital marketing company SYKES Romania."

The idea became permanent after a successful trial, the year before:

"The 'health ticket' scheme was a huge success last year, with reports indicating nearly 1 million squats were completed, resulting in 55,000 bus tickets and approximately 1,900 hours of exercise."

The comments on LinkedIn tell me that something similar is happening in Mexico for train tickets, but my German is not what it once was: 

https://www.spiegel.de/gesundheit/ernaehrung/abnehmen-in-mexiko-zehn-kniebeugen-fuer-ein-u-bahn-ticket-a-1015136.html

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

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Exercise equals a free ride in this city

By Jarrod Reedie

May 10, 2021

Architecture & Design

https://www.architectureanddesign.com.au/news/exercise-equals-a-free-ride-in-this-romanian-city

 

Strategic CSR - Urinals

Yesterday, I watched an online lecture by Richard Thaler who is promoting his new book, Nudge: The Final Edition. In introducing the lecture, Thaler defined his area of expertise as "choice architecture." In the process, he listed several examples of good designs and bad designs. The good designs are examples of effective nudges that promote positive choices/behavior, while the bad designs are examples of ineffective nudges that do not have the same options or behavioral results. Among the effective nudges he listed was a fascinating example from The Netherlands:

For those of you who do not see this view often, it is a housefly printed onto the bottom of a urinal. Because it draws the user's attention, they tend to focus more on what they are doing. The results, as explained in the article in the url below, are striking:

"In the early 1990s, the story goes, the cleaning manager at Amsterdam's Schiphol Airport was trying to reduce 'spillage' around urinals. He settled on etching small, photorealistic images of flies on the urinals, right near the drain. The idea was to give people something to aim at."

Why a fly, you ask?

"Flies are small and annoying and a little gross but they're not scary like say, a spider, which might discourage people from using the urinal at all. As Aad Kieboom, the Schiphol Airport manager who oversaw the introduction of urinal flies, [explained that] 'a fly may have unsanitary connotations, but that is exactly why nobody feels guilty aiming at it!'"

And, as I said, the results were pretty amazing:

"And aim they did. Kieboom reported an astonishing 80 percent reduction in urinal spillage after introducing the flies. He estimated this resulted in an 8 percent reduction in total bathroom cleaning costs at the airport. Since then, urinal flies have begun showing up in restrooms all over the world."

Highly effective. What is great about this design, and why Thaler gives it as much prominence as he does in his book, is that there is no compulsion involved and no options are denied, yet the outcome is beneficial. In other words, it is a great example of design and, in Thaler's words, effective choice architecture:

"Take the case of airport urinals. If you're looking to reduce spillage you could, say, institute a policy prohibiting bad aim, and hire attendants to enforce the policy by handing out fines to violators. But this would be expensive and contentious, as well as hugely intrusive into one's bathroom time. The flies do the same work as overbearing restroom attendants without any element of forced coercion. They make it easier for people using the urinals to make the right choice."

For those who are interested, here is an interview with Thaler on NPR about his new book: https://www.npr.org/2021/07/27/1021438772/nudge-vs-shove-a-conversation-with-richard-thaler

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

What's a urinal fly, and what does it have to do with winning a Nobel Prize?

By Christopher Ingraham

October 9, 2017

The Washington Post

https://www.washingtonpost.com/news/wonk/wp/2017/10/09/whats-a-urinal-fly-and-what-does-it-have-to-with-winning-a-nobel-prize/

 

Strategic CSR - Diversity training

David Brooks' column in the NYT on New Year's Day (the article in the url below) covers the way people make decisions, but focuses almost entirely on diversity training in the workplace. I think it is worth sharing because of the way various companies responded to the rise of the BLM social movement last summer; it is interesting, though, because, to me at least, it illustrates how complex such topics are and, most importantly, how good intentions often do not lead to good outcomes. These two paragraphs from the article are pertinent (particularly, the second one):

"One of the most studied examples of this flawed model is racial diversity training. Over the last few decades, most large corporations and other institutions have begun racial diversity programs to combat the bias and racism pervasive in organizational life. The courses teach people about bias, they combat stereotypes and they encourage people to assume the perspectives of others in disadvantaged groups. These programs are obviously well intended, and they often describe systemic racism accurately, but the bulk of the evidence, though not all of it, suggests they don't reduce discrimination. Firms that use such courses see no increase in managerial diversity. Sometimes they see an increase — not a decrease — in minority employee turnover."

"First, 'short-term educational interventions in general do not change people.' This is as true for worker safety courses as it is for efforts to combat racism. Second, some researchers argue that the training activates stereotypes in people's minds rather than eliminates them. Third, training can make people complacent, thinking that because they went through the program they've solved the problem. Fourth, the mandatory training makes many white participants feel left out, angry and resentful, actually decreasing their support for workplace diversity. Fifth, people don't like to be told what to think, and may rebel if they feel that they're being pressured to think a certain way."

As an attempt to minimize or counteract implicit biases (that we all have to some degree), the research suggests that most of the training programs employed in organizations today are, at best, ineffective and, at worst, counterproductive. Executives think they are doing something to correct the injustice, but in fact are not doing anything at all to address the underlying problem (and might well be making it worse):

"… as Tiffany L. Green and Nao Hagiwara wrote in Scientific American this past August, 'But to date, none of these interventions has been shown to result in permanent, long-term reductions of implicit bias scores or, more importantly, sustained and meaningful changes in behavior.'"

Brooks' solution to what seems like an intractable problem is, in essence, forced integration:

"Real change seems to involve putting bodies from different groups in the same room, on the same team and in the same neighborhood. That's national service programs. That's residential integration programs across all lines of difference. That's workplace diversity, equity and inclusion — permanent physical integration, not training."

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

We Just Saw How Minds Aren't Changed

By David Brooks

January 1, 2021

The New York Times

Late Edition – Final

A19

https://www.nytimes.com/2020/12/31/opinion/social-change-bias-training.html

Strategic CSR - Freedom

The article in the url below is a critical review of a new book (titled On Freedom) by Cass Sunstein, most famously of the "nudge" phenomenon. The author of the review begins with an overview of "what is means for people to be free." Presenting a balance between the liberty we require to pursue our self-interest (however we define that), with the (most obviously legal) constraints necessary to ensure one person's pursuit of their self-interest does not unnecessarily harm or limit anyone else's pursuit of their self-interest:

 

"No one thinks that any coherent notion of liberty lets everyone do just what they want, the rest of the world be damned. …. Even in a free society, [the] basic rules of the game have to be defined and imposed collectively. But there are limits. To echo the famous words of John Stuart Mill in 'On Liberty,' it won't do to say baldly that no individual is allowed to do any act that harms another. By that measure, market competition would need to end, because it harms losing competitors."

 

OK, so far so good. The author (of the review) then goes on to critique Sunstein for, first, not covering this basic overview, but also for the content he does focus on. In essence, Sunstein suggests that, if 'freedom' requires free choice, then what happens if there is too much choice? The answer, he argues, is that many "individuals lose their way," which, ultimately, means they are less free. In short, too much freedom leads to too much choice, which leads to decision-making paralysis (i.e., reduced freedom). In response, he offers his framework of "navigability," which relies on "nudges" and "choice architecture" to find their way out of this circular trap of the modern world:

 

"By nudges, Mr. Sunstein means interventions that supposedly leave individuals freedom of choice but subtly steer them in certain desirable directions. … Mr. Sunstein's notion of 'choice architecture' [is defined] loosely as 'the environment in which choices are made.'"

 

This brings us to the reviewer's central criticism – that it is all well and good saying that people can be lightly coerced into making the 'correct' choices, but who is to say what is correct? And, perhaps more importantly from the reviewer's perspective, how can we stop someone using such influence over others for Machiavellian ends?

 

"But which social planners should be allowed to play the role of shaping that environment and how long can they keep that role? What institutional norms and safeguards will protect everyone else against these overseers' own cognitive impairments, ideological blind spots or corrupt motivations? Mr. Sunstein never tells us who is fit to correct the mistakes of others."

 

Ignoring the obvious point that politicians get elected to make such political/social/ethical choices for us all the time, I think this point is important because it applies to much of what I see as wrong with the mainstream CSR debate. Much of that debate is conducted in absolute terms – i.e., firms must pay their employees $15 an hour, or they must stop using sweatshop labor, or they must not pollute, etc. Such absolute statements ignore the fact that many parts of society (if not the majority) like cheap hamburgers, love to shop for $5 t-shirts, and don't mind pollution (as long as it is not in their backyard or they can't see it). We cannot ignore basic economic theory or human psychology in analyzing the problem and before we start suggesting solutions. To do so is to waste everyone's time. In critiquing Sunstein, therefore, the reviewer is also critiquing much of what passes for debate in the CSR world. More importantly, however, he is missing the obvious answer – that we all have individual values and agendas and are pursuing them in a vast marketplace of ideas. The 'winners' of those debates (whether politicians or academics writing textbooks) are exactly the people who get to define the 'solutions' that society attempts to implement. And, as with many aspects of life, the competition is not meritocratic. In other words, the 'best' idea is defined by the person who is the most persuasive, or best connected, or simply the luckiest in terms of timing – not necessarily the one that would benefit the most people or lead to the 'best' society (whatever that means).

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (4e)

© Sage Publications, 2017

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

 

 

Nudged to be free

By Richard A. Epstein

February 28, 2019

The Wall Street Journal

Late Edition – Final

A15

https://www.wsj.com/articles/on-freedom-review-nudged-to-be-free-11551312324

 

Strategic CSR - Blood money

The article in the url below reveals an innovative approach to increasing blood donations (while also reducing the prison population):

 

"Judge Marvin Wiggins's courtroom was packed on a September morning. The docket listed hundreds of offenders who owed fines or fees for a wide variety of crimes — hunting after dark, assault, drug possession and passing bad checks among them. 'Good morning, ladies and gentlemen,' began Judge Wiggins, a circuit judge here in rural Alabama since 1999. 'For your consideration, there's a blood drive outside,' he continued, according to a recording of the hearing. 'If you don't have any money, go out there and give blood and bring in a receipt indicating you gave blood.' For those who had no money or did not want to give blood, the judge concluded: 'The sheriff has enough handcuffs.'"

 

The benefits for people who could not otherwise pay their fines quickly became apparent:

 

"The dozens of offenders who showed up that day, old and young, filed out of the Perry County courthouse and waited their turn at a mobile blood bank parked in the street. They were told to bring a receipt to the clerk showing they had given a pint of blood, and in return they would receive a $100 credit toward their fines — and be allowed to go free."

 

Not surprisingly, forcing poor people to bear the burden of providing essential medical supplies has been widely criticized:

 

"Efforts by courts and local governments to generate revenue by imposing fines for minor offenses, particularly from poor and working-class people, have attracted widespread attention and condemnation in recent months. But legal and health experts said they could not think of another modern example of a court all but ordering offenders to give blood in lieu of payment, or face jail time. They all agreed that it was improper. 'What happened is wrong in about 3,000 ways,' said Arthur L. Caplan, a professor of medical ethics at NYU Langone Medical Center, part of New York University. 'You're basically sentencing someone to an invasive procedure that doesn't benefit them and isn't protecting the public health.'"

 

But, at least someone is innovating to correct for the societal failure to contribute to the broad well-being of the community (in terms of blood donations). Research shows that creative public policy can have a positive effect. For example, a simple opt-out approach to organ donation in Canada (where you participate unless you choose not to do so) has been shown to increase participation greatly over the current opt-in approach employed in the U.S. (where you only participate if you specifically choose to do so). Mind you, if a pint of blood will now keep you out of jail in Alabama, I wonder what you can get for donating a kidney?

 

Take care
David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

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/

 

 

For Offenders Who Can't Pay, It's a Pint of Blood or Jail Time

By Campbell Robertson

October 20, 2015

The New York Times

Late Edition – Final

A1

http://www.nytimes.com/2015/10/20/us/for-offenders-who-cant-pay-its-a-pint-of-blood-or-jail-time.html

 

Strategic CSR - Moral licensing

The article in the url below builds on the concept of conspicuous virtue (see Strategic CSR – Conspicuous virtue) to provide additional evidence of the complexities of the human mind. In particular, it demonstrates how difficult it can be to persuade humans to act in their own actual interests (as opposed to their perceived interests), which is particularly relevant when it comes to solving our environmental problems:

 

"A recent [academic study] … finds that shoppers who bring their own bags when they buy groceries like to reward themselves for it. For two years the authors tracked transactions at a supermarket in America. Perhaps unsurprisingly, shoppers who brought their own bags bought more green products than those who used the store's bags. But the eco-shoppers were also more likely to buy sweets, ice cream and crisps."

 

According to the article, psychologists refer to this effect as "moral licensing," which is defined as "the tendency to indulge yourself for doing something virtuous." Although this might not seem something we should worry too much about, other studies indicate the issue has broader ramifications:

 

"A study from 2011 on water-conservation in Massachusetts shows how. In the experiment, some 150 apartments were divided into two groups. Half received water-saving tips and weekly estimates of their usage; the other half served as a control. The households that were urged to use less water did so: their consumption fell by an average of 6% compared with the control group. The hitch was that their electricity consumption rose by 5.6%. The moral licensing was so strong, in other words, that it more or less outweighed the original act of virtue."

 

After citing additional evidence to suggest that people are more likely to make 'virtuous' choices as a way to punish themselves, the article concludes that:

 

"The best way to get people to do good, it seems, is to make them feel bad about themselves."

 

Take care

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

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/


Eco-waverers

February 28, 2015

The Economist

Late Edition – Final

67

http://www.economist.com/news/finance-and-economics/21645239-when-people-feel-good-about-themselves-they-do-bad-things-eco-waverers

 

Strategic CSR - Milton Friedman

While I was reading a review of the book by Cass Sunstein (Simpler: The Future of Government) in the article in the url below, this quote caught my eye:

 

“Milton Friedman didn't need behavioral economics to know that each of us typically spends our own money on ourselves more wisely than a stranger spends other people's money on us.”

 

My first instinct was to agree. After all, government has certainly demonstrated an inability to predict market outcomes. And, as the author of the review indicates:

 

“[The author] fails to explain why the irrational and impulsively childlike people who are apparently the nation's citizens will elect a government that is itself not irrational and impulsive—or why government officials won't exploit, for their own corrupt ends, the people's cognitive weaknesses.”

 

On second thought, however, I know that it is also true that we are often incapable of making good decisions ourselves. Because human decisions are driven by our inherent fallibilities—irrationality, biases, cognitive constraints, etc.—we often make short term decisions that do not serve our long term interests. This happens even when we are trying to be rational—there are good reasons, for example, why most people fail to save sufficient money for their retirement.

 

Given that we are living in a system designed and operated by humans and that, as I tell my students in class, any system involving humans is flawed to some degree; where is the balance between government oversight and individual enterprise? Sunstein helps push the debate in a helpful direction. He does so by drawing on behavioral economics—the foundation of many ideas in his previous book, Nudge, written with Richard Thaler (Chapter 8, Case-study: Nudge, p485):

 

“Mr. Sunstein deploys behavioral-economics notions such as ‘framing effects’ (our interpretation of facts is affected by how they are presented to us) and ‘status-quo bias’ (we prefer the status quo, simply because it is the status quo, over potential alternatives) to promote what he calls ‘libertarian paternalism.’”

 

The beauty of many of the ideas discussed in Nudge and Simpler is that they preserve the illusion of choice, while also generating more socially-valuable outcomes:

 

“Government, he thinks, should change behavior using ‘nudges’ instead of commands. Regulations can tap into people's psychological quirks and prompt them to choose ‘better’ behaviors—while still leaving them free in many circumstances to act differently. Cigarette packages with grisly images of cancer-ridden lungs are an effort to nudge—rather than command—people not to smoke.”

 

Needless to say, the author of the review (it is published in The Wall Street Journal) feels that, while Sunstein’s ideas are more palatable than most advocates for “a paternalist state,” his view of the world places considerably more faith in the abilities of individuals and the power of the market:

 

“[Sunstein’s] faith in government combines with a scanty appreciation of the creative and disciplining powers of markets to render his case for active regulation, whether imposed through nudges or commands, less than persuasive. The pages of ‘Simpler’ bubble over with examples of adults' weak capacity to choose wisely, which, in Mr. Sunstein's view, calls for more expansive government.”

 

I find that, as I listen to the two sides in this debate and try and work out which side would generate the most optimal outcomes, it is usually helpful to keep Friedman’s core instincts in mind. His ideas remind me that it is important to work within the constraints of human nature as it is, rather than as we would wish it to be.

 

For those who haven’t seen it, here is a fascinating interview of Friedman on the TV program Donahue, from 1979: http://www.youtube.com/watch?v=E1lWk4TCe4U

 

Take care

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

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/

 

 

Thank You For Smoking

By Donald J. Boudreaux

April 24, 2013

The Wall Street Journal

Late Edition – Final

A13

http://online.wsj.com/article/SB10001424127887324105204578384850872793208.html

 

Strategic CSR - Samoa Air

Here is a contentious issue that has been causing lively debates in my classes. Recently Samoa Air, the national carrier for Samoa, began to price its tickets based on the weight of its passengers:

 

“Under Samoa Air's plan, customers are now required to estimate their weight when they book their flight online, and then to weigh in when they arrive at the airport. That number determines the price they will pay and also how much space they will get once they board the plane. ‘You travel happy, knowing full well that you are only paying for exactly what you weigh ... nothing more,’ the Samoa Air website says.”

 

Hmmmm, I am not sure it will be quite that easy! The resulting differences in prices are real:

“Estimates of price per pound vary with the length of the trip. According to The Wall Street Journal, customers flying to American Samoa will pay 92 U.S. cents a kilogram, or 42 cents a pound, for each flight. A kilogram equals 2.2 pounds. … As an example of the new policy, [the company] estimated that a 160-kilogram person on Samoa Air will pay four times as much as a 40-kilogram person, but he or she would also get more space.”

There are various drivers of this decision—primarily the high correlation that exists between the weight of a plane and the cost (primarily in fuel) of moving it and everyone in it from point A to point B. In addition:

“One reason for the new policy may be the fact that Samoa has the fourth highest obesity rate in the world. Estimates of the percentage of obese people in the population range from 55% to 60%.”

 

I am interested in the concept of discriminant pricing. Although this seems unfair on the surface, companies discriminate in pricing structures all the time—think of the cost of a movie ticket for a student or senior citizen. Think also of the different prices we already pay for our airplane tickets, depending on the time we buy, location in the plane, whether we are a member of the loyalty program, etc. In spite of the overall agreement in the article that this pricing strategy does not amount to discrimination (at least, not in terms of “the legal definition of discrimination based on race, age, sex, nationality, religion or handicap”), there was broad agreement on the advisability of fairness—achieving the same goal via more ‘acceptable’ means:

 

“Wharton marketing professor Deborah Small agrees there may be ‘more tactful ways’ to accomplish the same goal. For example, Samoa Air could have child discounts (in fact, children under 12 are charged 75% of the adult rate) ‘or they could even have discounts for low-weight people.’”

 

I found this example particularly interesting:

 

“[Coca-Cola] plans to use vending machines that would change the price of a can of soda depending on the weather. On warmer days, the price would go up, and on colder days, it would go down. ‘That makes perfect sense from an economic [standpoint],’ Small says, ‘but customers were very upset that the company would take advantage of their thirst on hot days.’ The launch was called off.”

 

Ultimately, however, the arguments come down to a perception of a firm’s social license to operate based around stakeholder perceptions of behavior that is deemed to be ‘acceptable’—in other words, CSR:

 

“Consumers have ‘a relationship with firms, and their expectations are much like their expectations in any interpersonal relationships,’ Small says. ‘When a firm acts in a way that violates the social rule of treating people fairly, consumers get offended.’ So it's fine for a restaurant to offer a discount to people on a relatively uncrowded Tuesday, but if the restaurant tried to add a surcharge to people eating there on a busy Saturday, that would be considered unfair.’”

 

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/

 

 

On Samoa Air, Fatter People Pay More to Fly: Good Business or Bad Customer Relations?
April 10, 2013

Knowledge@Wharton

When Samoa Air last week announced it was going to start charging people for airline tickets based on their weight, it set off a flurry of comments, some supportive, some not. Is this new policy an example of discrimination or a smart business model? Are there better ways to achieve the same objective? And will other airlines adopt the same approach? http://knowledge.wharton.upenn.edu/article/3225.cfm

 

Strategic CSR - Ireland

The article in the url below reminded me of the paper vs. plastic debate (Issues: Compliance, p313) and the willingness of Ireland to experiment with nudge-driven taxes (see: Strategic CSR – Recycling):

 

“In 2002, Ireland passed a tax on plastic bags; customers who want them must now pay 33 cents per bag at the register. … Within weeks, plastic bag use dropped 94 percent. Within a year, nearly everyone had bought reusable cloth bags, keeping them in offices and in the backs of cars. Plastic bags were not outlawed, but carrying them became socially unacceptable -- on a par with wearing a fur coat or not cleaning up after one’s dog.”

 

The article below reveals that it is not only plastic bags where Ireland sees the potential for government-driven revenue raising to drive the CSR debate. Over the last three years, the country has also been experimenting with carbon taxes to see how they can also influence individual behavior (as well as raising much-needed revenues):

 

“The government imposed taxes on most of the fossil fuels used by homes, offices, vehicles and farms, based on each fuel’s carbon dioxide emissions, a move that immediately drove up prices for oil, natural gas and kerosene. Household trash is weighed at the curb, and residents are billed for anything that is not being recycled. The Irish now pay purchase taxes on new cars and yearly registration fees that rise steeply in proportion to the vehicle’s emissions.”

 

In terms of results, the program’s supporters claim that a significant part of its success is due to a direct correlation between the tax plan and individual behavior:

 

“Long one of Europe’s highest per-capita producers of greenhouse gases, with levels nearing those of the United States, Ireland has seen its emissions drop more than 15 percent since 2008. Although much of that decline can be attributed to a recession, changes in behavior also played a major role, experts say, noting that the country’s emissions dropped 6.7 percent in 2011 even as the economy grew slightly.”

 

As a result, unlike many developed economies, Ireland is well on track to meet its Kyoto Protocol commitments (see here).

 

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/

 

 

Carbon Taxes Make Ireland Even Greener

By Elisabeth Rosenthal

December 28, 2012

The New York Times

Late Edition – Final

A1

http://www.nytimes.com/2012/12/28/science/earth/in-ireland-carbon-taxes-pay-off.html

 

Strategic CSR - Mandatory vs. Voluntary

The article in the url below raises an important issue in the CSR debate, although it does not do it directly and does it in a context not related to CSR. Applied to a discussion about CSR, however, the article is instructive—Can and/or should firms be compelled to behavior more responsibly? Specifically, the article focuses on the absence of law compelling people to help others in distress. Even when the risk and cost to the person in a position to help is low, the social consequences of not helping are high:

“‘The expert swimmer, with a boat and a rope at hand, who sees another drowning before his eyes, is not required to do anything at all about it, but may sit on the dock, smoke his cigarette, and watch the man drown.’”

What is worse is that:

“If you voluntarily try to rescue someone, you may be liable if you then stop and the victim is harmed.”

The article explains the evolution of this situation in language commonly used to describe the laissez faire approach to capitalism often promulgated in the U.S.:

“The ‘no duty’ rule can be traced to the spirit of rugged capitalist individualism, the Darwinist idea that the common good is advanced through the struggles of selfish individuals.”

As such, the current law is defended in terms of its defining goals:

“One defense of the no-duty rule is that common law exists to prevent people from harming one another, not to compel people to help one another.”

A big part of the core argument behind Strategic CSR is a debate about whether more socially responsible behavior is best encouraged via mandated or voluntary actions. The resolution we settled on is that firms are more likely to implement CSR genuinely and substantively if they are convinced it is in their self-interest to do to (hence the focus on medium- to long-term stakeholder value). Central to this argument is the belief that firms are more likely to avoid or try and circumvent legislation if they are compelled to act. This debate is not fully resolved in my mind, however, as there are many grey areas in between the extremes (e.g., the rise of behavioral economics, see: Strategic CSR – Nudge) and the article below taps into these internal debates:

“A duty to help would not require bystanders to endanger themselves or provide help beyond their abilities; it could simply require warning someone of imminent danger or calling 911. … it would require us to accept our fundamental moral duty to help those in grave peril.”

The concept of moral duty is difficult to quantify because morals and values are subjective. As such, who gets to decide which morals/values apply and in what situations? More importantly, if I disagree with those morals/values, why should I be forced to comply with them? In spite of these very valid questions, however, asking them does not feel very satisfactory. I am currently drafting the third edition to the book and have made a more conscious effort to move beyond a self-interest argument alone, reemphasizing the importance of a CSR Filter as integral to the strategic process (a central argument in the second edition), but strengthening the need to embed that whole process within a framework of guiding values that set the parameters of decisions and guide all employees through the construction of the firm’s strategy, as well as the day-to-day implementation via operations. The work of John Mackey (Whole Foods Market) on conscious capitalism (http://consciouscapitalism.org/) is highly complementary to the argument we present in Strategic CSR and was instructive.

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/

Can the Law Make Us Be Decent?

By Jay Sterling Silver

November 7, 2012

The New York Times

Late Edition – Final

A25

http://www.nytimes.com/2012/11/07/opinion/can-the-law-make-bad-samaritans-be-decent.html

Strategic CSR - Soda tax

I wasn’t going to write about New York City’s ban on soda drinks larger than 16 ounces (I try to avoid subjects that have received a lot of media attention), but the article in the url below brings a different perspective to the debate that I thought might be of interest. The author focuses on the issue of whether the ban would result in the amount of plastic used in soda drink packaging increasing, rather than decreasing:

“If the super-size ban caused people to drink less soda, then perhaps the amount of waste from cups and bottles would decrease. But if people simply choose to buy more than one, then the packaging waste will increase.”

All the NYC ban did was to prohibit the sale of certain sized sodas in certain situations. Consumers can still buy the same amount of soda, they will just need to buy multiple smaller servings, rather than one big serving. If they do that, they will use multiple cups/bottles, rather than one cup/bottle—hence the possible increase in plastic use.

Another reason why I liked this article is that it re-focuses the debate where it should be—what is the most efficient way to produce the desired outcome (less soda consumption)?

“… a “soda tax”–a per ounce tax on beverages with added sugar. A tax like that would give people an incentive to drink less.”

A tax would allow people the option to consume as much soda as they want, but they would be penalized in proportion to that amount. For people less able to afford the tax, this would discourage consumption. Other social ‘nudge’ experiments have demonstrated that small price increases can generate significant changes in behavior (e.g., Case-study: Paper vs. Plastic, p313).

But, if Mayor Bloomberg would rather focus on banning unhealthy calories (rather than making them more expensive), the Huffington Post has some helpful suggestions for which foods he might consider banning next (or, perhaps, should have banned before worrying about soda):

“We certainly don't want to give them any more ideas, but these 11 foods -- most at 30-40 times the calorie count of the typical banned soda -- could very well now be on Bloomberg's radar.”

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/

Will a NYC Ban on Large Sugary Sodas Decrease Obesity or Increase Plastic Waste?

By Beth Terry

June 19, 2012

My Plastic-free Life

http://myplasticfreelife.com/2012/06/will-a-nyc-ban-on-large-sugary-sodas-decrease-obesity-or-increase-plastic-waste/