Strategic CSR - Social Cost of Carbon

The article in the url below is notable for the intention behind the policy change it discusses as much as for any expected outcome:

 

“The Obama administration is making a second attempt to systematically account for the dollar damage from greenhouse gas pollution, … The new effort is an update to an estimate for the awkwardly named ‘Social Cost of Carbon,’ a range of costs, stated in dollars per ton, that carbon dioxide emissions are thought to impose on future generations. When the government totes up costs and benefits for a variety of proposed regulations, the Social Cost of Carbon is plugged into the calculation to decide how to write the regulation.”

 

For more detail about the Administration’s initiative, see: http://www.whitehouse.gov/sites/default/files/omb/inforeg/social_cost_of_carbon_for_ria_2013_update.pdf

 

As noted elsewhere (Strategic CSR – Measuring CSR), measuring something like the “social cost of carbon” is easy to say, but incredibly difficult to do:

 

“Supporters of the idea acknowledge the tremendous difficulties of trying to translate slippery estimates into a single mathematical factor, difficulties that perhaps help explain why there is little hope of consensus now on climate policy.”

 

The result of such difficulty, is widely varying outcomes:

 

“The new price, used for the first time [earlier this year] in establishing a standard for energy efficiency in new microwave ovens, is 50 percent to 100 percent higher per ton than the one developed in 2010.”

 

The difficulty arises from the unknowable impact of future events that may or may not occur:

 

“Some of these damages appear likely but hard to calibrate, like the extent of sea level rise. Others are less certain and thus stated as probabilities, like the increase in the number of Katrina-level hurricanes or sustained droughts, or changes that radically cut crop yields. Others are simply hard to put a dollar value on, like the extinction of species.”

 

The ambiguity in calculation is matched by the ambiguity in application:

 

“It is supposed to be used when the government establishes new regulations, like appliance efficiency standards, or fuel economy standards.”

 

In theory, however, these costs affect all aspects of government policy to some degree. Again, this would be OK if we could have some sense of the reliability of the numbers that were being used. Ultimately, however, the only thing we know is what we do not know:

 

“The only real cost of carbon that [we] know is wrong is zero.”

 

But, the government should be applauded for entering the debate. The consequences are potentially great. For example:

 

“… a new standard could not be approved unless it was advantageous to the buyer. In the case of microwaves, that would mean that the buyer would save more during the appliance’s lifetime than the added cost of buying an efficient machine, and that other benefits like saving polar bears would not enter into the calculation.”

 

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/

 

 

New Effort To Quantify ‘Social Cost’ of Pollution

By Matthew L. Wald

June 19, 2013

The New York Times

Late Edition – Final

A17

http://www.nytimes.com/2013/06/19/us/politics/new-effort-to-quantify-social-cost-of-pollution.html

 

Strategic CSR - Walmart

We talked about Walmart in my strategy class last week. During the discussion, a student told me about a sign he had seen recently in the entrance to a Walmart store here in Colorado. I asked him to take a photo of the sign the next time he saw it and he sent me this:

 

 

I think it is fascinating that Walmart would post this information. It is even more interesting that they post it without any explanation as to why they did it or any comparison data to reference it against (e.g., industry average pay levels).

 

To provide a bit of a benchmark, the minimum wage in Colorado in 2013 is $7.78 per hour (above the federal minimum wage of $7.25 per hour).

 

Have a good weekend.

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/

 

Strategic CSR - Carbon tax

In the absence of meaningful political action to curb carbon emissions, the article in the url below reports that some companies are imposing carbon taxes on themselves. Some of the firms, such as Disney, are surprising in that they normally are the target of CSR activists for their non-CSR-type behavior:

 

“It's not just Disney. Although most of the world's governments have declined to put a price on carbon emissions, a handful of global companies, including Microsoft and Shell, have chosen to act on their own. They have established internal carbon prices in an effort to reduce emissions, promote energy efficiency and encourage the use of cleaner sources of power, just as a government tax or cap-and-trade program would.”

 

The advantage to the firm of doing this is internal pressure toward greater efficiency. At Disney, for example:

 

“Since 2009, when the tax was imposed, the company's engineers have changed thermostat set points, installed light sensors and efficient bulbs, increased the efficiency of chillers, heat exchangers and pumps, and shut down the lights on park icons like Cinderella's Castle and Spaceship Earth when the parks are closed.”

 

And, the revenues generated by the premium that is paid above market prices is collected in what Disney calls the Climate Solutions Fund, which it uses to offset emissions elsewhere in the value chain:

 

“The tax, the price of which depends upon the costs of offsets and the volume needed by Disney to reach its emissions targets, has been set at between $10and $20 a ton and has raised about $35m so far. That has enabled Disney to invest in a variety of certified forest-carbon projects in Inner Mongolia, China, Peru, and the Democratic Republic of the Congo, as well as in Virginia, Mississippi and its home state of California. Taking those carbon offsets into account, Disney's 2012 emissions have been cut in half from a 2006 baseline. The company has set a long-term goal of zero net emissions.”

 

In addition, all three firms are publicly supporting “an international framework that puts a price on CO2,” while also benefitting from the efficiencies created by such an innovative approach to operations. Primarily, however, these firms and others like them will be best placed when the global political class finally gets around to acting (Chapter 1: A Rational Argument for CSR, p16):

 

“Why bother with these voluntary carbon taxes? Partly to prepare for government regulation of emissions, if and when they arrive. Rob Bernard, Microsoft's chief environmental strategist, explains: ‘I think it's likely that over time society is going to move in this direction. It's hard work. We should get to it now.’”

 

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/

 

 

Disney, Microsoft and Shell opt for self-imposed carbon emissions taxes

By Marc Gunther

March 26, 2013

The Guardian

http://www.guardian.co.uk/sustainable-business/carbon-emissions-tax-microsoft-disney-shell

 

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 - Washington

The article in the url below discusses something that vaguely resembles an effective political process. I had forgotten what that looks like in Washington, so was taken aback as I began to read it:

 

“In July of last year, senators David Vitter and Sherrod Brown noticed each other across a crowded room. Ben Bernanke, chairman of the Federal Reserve Board of Governors, was testifying to the Senate Banking Committee. Vitter, a conservative Louisiana Republican, and Brown, a liberal Ohio Democrat, were asking the same questions about capital ratios. ‘We were surprised by that,’ says Vitter, ‘so we started comparing notes.’ The notes led to a weekly schedule of direct conversations and staff meeting between their offices. By the end of the summer, Brown and Vitter had co-signed an eight-page letter to Bernanke.”

 

Genuine, bipartisan cooperation:

 

“Now the romance has borne a bill, the Terminating Bailouts for Taxpayer Fairness Act. It’s short. It’s simple. Its 24 printed pages, if ever passed into law, would have far greater consequences for the money-center banks than the 848 pages of Dodd-Frank. Banks with assets greater than $500 billion would have to hold equity capital of at least 15 percent. There’s no cheating allowed: Equity-like instruments such as contingent capital won’t count. And the complicated, modeled assessments of different assets known as ‘risk-weighting’ won’t count, either. A dollar at risk will be a dollar at risk. … The bill marks a departure from Basel III, which allows contingent capital and risk weighting, and asks for equity capital of 4.5 percent.”

 

Not only bipartisan cooperation, but global leadership:

 

“Asked whether this means pulling out of the Basel negotiations completely, Vitter says ‘Yes, and trying to lead the world … we think Basel II and Basel III are hopelessly complicated. And risk weighting, it’s too easy to be gamed, certainly the versions I’ve seen.’”

 

Not only bipartisan cooperation and global leadership, but taking a stand against the well-financed lobbyists that often prevent effective legislation from being crafted:

 

“It’s hard to overstate how significant this is. Large banks got much of what they wanted out of both Dodd Frank and the Basel III negotiations. Complexity in bank regulation favors large organizations, which can pay to throw lawyers at problems. And since the crisis, regulators both in the U.S. and internationally have continued to use banks’ internal models to assess risk. The Brown-Vitter approach does away with the models entirely. A large bank can arrange its risks however it pleases, so long as it holds 15 percent equity.”

 

As the article’s author concludes (equally shocked):

 

“This bill is so good and so unambiguous that it’s hard to imagine it becoming law.”

 

Have a good weekend.

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/

 

 

Ditch Basel Bank Rules, Just Raise Capital, Vitter Says

By Brendan Greeley

May 1, 2013

Bloomberg Businessweek

http://www.businessweek.com/articles/2013-05-01/ditch-basel-bank-rules-just-raise-capital-vitter-says

 

Strategic CSR - AIDs

The article in the url below highlights recent developments by corporations in South Africa, such as the mining company Anglo American, to deal with AIDs infections among its employees. The goal is twofold—to prevent as many employees as possible from becoming HIV+, while helping provide the support and treatment necessary for those who are infected:

 

“Bosses receive a daily e-mail that shows, statistically speaking, ‘which is the safest mine to have sex’, says John Standish-White, an Anglo executive and a champion of its AIDS policy. Managers are judged by it. There is even a trophy for the mine with the lowest score. Any employee who tests positive for HIV is offered antiretroviral drugs paid for by Anglo. So the 17% of Anglo’s South African staff with HIV can live a normal life. The firm’s big push now is to slow down or stop new infections.”

 

In response to the firm’s proactive efforts, 80% of all employees have now been tested and the issue of AIDs is openly-discussed:

 

“The results of all this were better than anyone dared to hope. Free drugs gave workers an incentive to get tested, so many did. Thanks to lobbying by activists and improvements in technology, the price of drugs meanwhile plummeted from roughly $10,000 per person per year in the late 1990s to as little as $100 today. Drug firms made their medicines simpler to take: a pill or two a day instead of lots. Corporate AIDS programmes are starting to pay for themselves by cutting absenteeism and staff turnover, not to mention improving morale. Anglo’s Dr Brink talks of ‘turning a disaster into something we could manage.’”

 

This approach has affected the overall relationship the firm has with its employees. In short, in relation to its employees, the firm now does not see its responsibility (or self-interest) as confined to the workplace:

 

“The fight against AIDS has subtly changed the relationship between firms and their workers. Before AIDS, a mine boss at Anglo would worry about rockfalls but feel it none of his business if an employee took risks at home. These days he takes a paternalistic interest in the sex lives of his workers. … Since Anglo started monitoring its workers’ health more closely it has discovered other problems, such as rising obesity and hypertension, and started to tackle them.”

 

At Anglo American, at least, the business argument for doing so is easy for the firm to make:

 

“Mining firms have a strong incentive to keep employees healthy, because they are hard to replace. Miners become familiar with the unique geology of the mine where they work. Staff turnover is only 2.4% a year at Anglo. Also, its record in tackling HIV may help it secure the ‘social licence’ to mine in other regions with virulent diseases, such as malaria.”

 

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/

 

 

Sex, drugs and hope

April 13, 2013

The Economist

68

http://www.economist.com/news/business/21576083-how-big-business-fought-aids-south-africa-sex-drugs-and-hope

 

Strategic CSR - Fracking

The article in the url below details the environmental consequences of fracking—in particular, in Colorado:

 

“While Colorado's drilling boom produces record amounts of gas and oil, the multiplying wells also are bringing up far greater quantities of a salty, toxic liquid waste — 15 billion gallons a year.”

 

The knowledge and ability exists to recycle this water—at a minimum into water that is sufficiently pure to be re-used in the fracking process and, ideally, could be converted into water pure enough to drink:

 

“If cleaned properly, all that liquid could become safe water to restore rivers, irrigate food crops and sustain communities in an era of drought and declining water supplies. Or at least it could be reused by oil and gas companies to reduce their draw of fresh water from farmers and cities.”

 

The economic incentive, however, is to discard the water as waste, with only the most progressive firms seeing the potential in recycling:

 

“Technology exists to clean liquid waste right up to drinking water standards, but it's expensive, about three times as costly as buying fresh water for drilling and fracking, which runs about 17 cents a barrel, and burying waste untreated for about 70 cents per barrel. State regulators also don't require oil and gas companies to deploy such technology.”

 

As a result:

 

“… Colorado leaders have no policy for reusing oil and gas industry waste. More than half is injected untreated into super-deep wells – filling rocky voids from which oil and gas was extracted. Other waste is dumped in shallow pits, stored in evaporative ponds or discharged after partial treatment under state permits into waterways.”

 

Companies continue to abuse the situation without any concern of real consequences:

 

“The Colorado Oil and Gas Conservation Commission, charged with both promoting and regulating the oil and gas industry, has issued 3,191 permits letting companies dispose of liquid waste in evaporative ponds, shallow pits and 300 super-deep injection wells. Disposal in pits and ponds can lead to toxic emissions and contamination of groundwater.”

 

Oil and gas companies are an important component of the Colorado economy. They add a great deal of value, but use a great deal of the state’s resources in the process:

 

“The liquid waste comes from drilling boreholes at oil and gas wells. First, drillers inject about 300,000 gallons of fresh water. Then frackers inject 1 million to 5 million more gallons, mixed with sand and fracking fluids, to loosen oil and gas in shale rock. This all blends with briny underground pools that are often saltier than seawater and laced with metals. When drilling and fracking is done, the waste rockets back up the boreholes and, if not trapped and treated, can sterilize soil, sicken animals and hurt human health.”

 

Given that fresh water is a scarce resource in Colorado, an effective regulatory system would at least seek to encourage recycling; if not compel it. Given the negative public perception of the fracking process, however, an industry with sufficient foresight would proactively initiate such a program. There is a lot of gas left to extract in Colorado (and elsewhere in the U.S.) and there is broad societal interest in it being removed with as little ecological damage as possible:

 

“Growing volumes of waste are likely because oil and gas wells in Colorado, currently around 50,000, are increasing by about 3,000 per year.”

 

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/

 

 

Oil, gas companies urged to clean, reuse muck, but process expensive

By Bruce Finley

April 14, 2013

The Denver Post

Late Edition – Final

http://www.denverpost.com/environment/ci_23021317/oil-gas-companies-urged-clean-reuse-muck-but

 

Strategic CSR - Hedonometer

The article in the url below introduces the Hedonometer (http://www.hedonometer.org/). It is a graphical representation of people’s emotions expressed via Twitter:

 

“A group of Twitter-junkie data scientists launched a tool this week to measure the ups and downs of public contentment, an index they are calling the hedonometer that takes the pulse of the national mood and, the researchers hope, may even one day play a role in informing economic and public health policies. … The scientists say the measurements provide a deeper insight into public sentiment in real time. In introducing the hedonometer, the duo describe it as a ‘Dow Jones Index of Happiness.’”

 

The authors claim that it measures “happiness.” I am not sure what it measures, and I am certain that this is not a representative sample of the population, but the resulting graphic certainly looks cool:

 

“Here’s how it works: The hedonometer measures Twitter’s Gardenhose feed, a random daily sampling of roughly 50 million English-language tweets, generating usually about 100 million individual words. The entire word cache is then scored each day to determine a sliding mood scale. Drilling down to the word level, the scientists have scored 10,000 terms, weighting them for their positive or negative connotations. Words such as ‘happy,’ for example, score high (8.3 out of 10) for positive sentiment, whereas words like ‘war’ or ‘dead’ score low. The more positive words that turn up in the cache, the higher the score. (You can see where ironic tweets might skew things.)”

 

The results capture shifts in national attention, if nothing else:

 

“The scientists have been tracking public sentiment via Twitter since September 2008, the month Lehman Brothers went bust. The hedonometer assessment of Twitter chatter that day—Sept. 15, 2008—shows the term ‘bankruptcy’ trending, sinking the overall mood of the index. The ‘saddest’ day so far recorded was April 15, 2013, the Boston Marathon bombings. The most positive days consistently are public holidays, with Christmas regularly generating the highest score of the year.”

 

Have a good weekend.

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/

 

 

Forget GDP. Data Crunchers Measure Happy Tweets for Key Economic Indicator

By Bernhard Warner

May 1, 2013

Bloomberg Businessweek

http://www.businessweek.com/articles/2013-05-01/forget-gdp-dot-data-crunchers-measure-happy-tweets-for-key-economic-indicator

 

Strategic CSR - Free markets

The article in the url below highlights the inefficiencies of markets—in particular, the market for energy and the government subsidies that distort it to such a great extent. A more enlightened approach to government support for this market, the article claims, would help correct federal deficits as well as begin to address important social challenges, such as climate change:

 

“The International Monetary Fund, in a comprehensive critique of the subsidies released Wednesday, wants to change that. Energy subsidies, it says, aggravate budget deficits, crowd out public spending on health and education, discourage private investment in energy, encourage excessive energy consumption, artificially promote capital-intensive industries, accelerate the depletion of natural resources and exacerbate climate change. Other than that, there is nothing wrong with them.”

 

Governments use subsidies to placate their citizens and the large businesses that produce energy:

 

“The most obvious way that governments subsidize energy is by charging households and businesses less than it costs to produce and distribute gasoline, cooking fuel and electricity. Taxpayers, now or later, pick up the tab. The IMF says these subsidies added up to $481 billion in 2011. Globally, this amounts to 2% of government revenues, but about 22% of revenues in the Middle East and North Africa. … Globally, holding down energy prices increases consumption of fossil fuels. Eliminating those direct subsidies, the IMF estimates, would reduce energy consumption enough to bring the world one-fourth of the way toward the goals set at the climate-change conference in Copenhagen in 2009.”

 

This graphic that accompanies the article demonstrates how these subsidies, on a global scale, add up to $1.9 trillion a year:

 

http://si.wsj.net/public/resources/images/NA-BV653_CAPITA_G_20130326180304.jpg

 

Ultimately:

 

“‘The question is whether a country should choose to let someone buy something for $1 when the total cost—both of producing it and the costs imposed on society—are $1.25,’ says David Lipton, the IMF's No 2.”

 

This conversation feeds into the idea of lifecycle pricing (Chapter 8, Case-study: Lifecycle Pricing, p473). What should be clear from the example above, and others cited in the third edition, is that markets do not currently do a good enough job of accounting for the true costs of production in the prices that are charged to consumers. The reason for this is that the markets we have created are riddled with inefficiencies (what economists call externalities and politicians call subsidies, tax breaks, loopholes, etc.). These inefficiencies introduce costs into the system that prevent the final price reflecting a product’s true value (i.e., its total costs).

 

As such, we need to reform our market system. The goal should be to work towards a model in which all inefficiencies are eradicated and all costs are included in the price that is charged for each product and service. In other words, the price of a product should not only include the cost of production, but also include the costs associated with replenishing the raw materials used and disposing/recycling of the waste after consumption. Attempts to put a price on carbon reflect this process (either through a carbon tax or cap-and-trade program), while firms’ efforts to develop carbon footprints (Chapter 8, Figure 8.4, p538) provide a possible means of implementation.

 

An economy where externalities are internalized, and embedded within a moral framework (see the CSR Filter, Chapter 4 and Conscious Capitalism, Chapter 5) moves us closer to the economy Adam Smith envisioned and wrote about in his classic treatise The Theory of Moral Sentiments—truly free markets filled with values-based businesses and vigilant stakeholders (see: Strategic CSR: Free ‘free markets’).

 

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/

 

 

Rethinking Energy Subsidies

By David Wessel

March 28, 2013

The Wall Street Journal

Late Edition – Final

A2

http://online.wsj.com/article/SB10001424127887323361804578386033482868260.html

 

Strategic CSR - Bribery

The Wall Street Journal’s Risk & Compliance Journal (http://online.wsj.com/public/page/risk-compliance-journal.html) is interesting and informative, and demonstrates the increasing importance of compliance-related issues today. The risks are multiplied for multi-national firms working across cultures. As the article in the url below indicates, Walmart’s exposure to bribery is increasingly apparent following its Mexico scandal, while the changes it is making in response are beginning to affect performance overseas:

 

“Three years ago Wal-Mart Stores Inc. set out to be India's top retailer by 2015. … Today, Wal-Mart's advance on India is barely moving. The company opened just five wholesale stores in the country last year – well below the 22 planned. This year, Wal-Mart plans to open eight locations, a person familiar with the company's plans said. Part of the reason lies in what people in the industry say is India's labyrinthine process for developing commercial real estate and operating stores. But one of the biggest reasons has been a compliance crackdown at Wal-Mart.”

 

As a result, the consequences for firms (especially for those that are trying to operate with integrity) are growing. A recent newsletter from the WSJ’s Risk & Compliance Journal (summarizing events at a Dow Jones Compliance Symposium) provides some compelling examples of how firms can become enmeshed in convoluted situations that break U.S. law. This has greater consequences for these firms today because this law is increasingly being enforced more stringently by federal agencies:

 

“Susan Angele, the former global deputy general counsel at the The Hershey Co., said that in Japan, it’s customary to give cash gifts at funerals to the bereaved family. Of course, if one of the family members is a government official, such payments could qualify as a bribe under the U.S. Foreign Corrupt Practices Act. Angele said that guidance on the FCPA, recently released by the DOJ and SEC, provided no clues on how to avoid insulting a grieving family. ‘You do the best you can’ in such situations, she said.”

 

“Jonathan Drimmer, assistant general counsel for Barrick Gold Corp. , said he ran into trouble with Saudi Arabia’s ‘value-based billing’ system. The company had inherited a $125,000 service contract in the country, he said, but was surprised when it received a $1 million tab from the contractor. Drimmer said outside lawyers told him that Saudis regularly throw out contracts and charge what they think is the actual value. ‘I said, ‘we’re a multinational, we can’t do that,’’ Drimmer said. ‘The lawyer said, ‘well they can take you to court for not paying, and they’ll probably win.’’”

 

Take care

David

 

David Chandler & Bill Werther

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

© Sage Publications, 2014

 

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Wal-Mart's Path to Power in India Hits Its Limits: The Lawyers

By Megha Bahree

April 2, 2013

The Wall Street Journal

Late Edition – Final

B1

http://online.wsj.com/article/SB10001424127887324373204578373830411211410.html