Strategic CSR - SCOTUS

The two newsletters for this week will focus on issues related to religion that, according to the latest Gallup poll, here in the U.S. is becoming less important in people's everyday lives. The article in the url below, however, suggests that this trend may not apply to the Supreme Court (SCOTUS). The article makes its case by summarizing an academic study showing how the Court is increasingly siding with organized religion (in particular, "mainstream Christian organizations") in the cases it decides:

"The study, to be published in The Supreme Court Review, documented a 35-percentage-point increase in the rate of rulings in favor of religion in orally argued cases, culminating in an 81 percent success rate in the court led by Chief Justice John G. Roberts Jr."

Specifically, placing this claim in its historical context:

"The court led by Chief Justice Earl Warren, from 1953 to 1969, supported religion just 46 percent of the time. That grew to 51 percent under Chief Justice Warren E. Burger, from 1969 to 1986; then to 58 percent under Chief Justice William H. Rehnquist, from 1986 to 2005; and finally jumped to just over 81 percent under Chief Justice Roberts, who joined the court in 2005."

The study also notes that it is not only the frequency with which religious causes are supported that has changed, but also the nature of the groups that benefit from the Court's decisions:

"In the Warren court, all of the rulings in favor of religion benefited minority or dissenting practitioners. In the Roberts court, most of the religious claims were brought by mainstream Christians."

Perhaps not surprisingly, the study also notes the ideological nature of the shift, which it claims has been driven by the five Justices appointed by Republican presidents:

"The five most pro-religion justices all sit on the current court, the study found. 'The justices who are largely responsible for this shift are Clarence Thomas, Samuel Alito, Neil Gorsuch, John Roberts and Brett Kavanaugh,' the study's authors wrote. 'While there are some differences among these justices, and Kavanaugh has been involved in only a handful cases, they are clearly the most pro-religion justices on the Supreme Court going back at least until World War II.'"

And also that a similar shift has taken place in lower-level courts, in particular among the federal judiciary – a finding summarized in a second study that is also summarized in the article:

"In the five years through the end of 2020, [the study's author] wrote, federal judges' partisan affiliations had become powerfully correlated to their votes. 'And when the pandemic struck, resulting in widespread lockdowns of religious houses of worship,' he wrote, 'the unprecedented number of constitutional free exercise cases brought in such a condensed span of time forced that partisanship into sharp relief.' Even putting aside cases concerning the pandemic, a big partisan gap has opened in free exercise cases."

The courts have also used their ideological advantage to expand the application of the religion clauses of the constitution to more contemporary issues:

"More generally, claims of religious freedom, brought mostly by Christian groups, have increasingly been used to try to limit progressive measures like the protection of transgender rights and access to contraception. On top of that, a culture war erupted about how best to address the coronavirus."

The accusation by Justice Elena Kagan in a 2018 decision that "the court's conservative majority [is] 'weaponizing the First Amendment'" (see also Strategic CSR – The Rights of Corporations), seems to suggest we should expect more such polarizing decisions by the Court:

"'Just as the majority has weaponized free speech in service of business and conservative interests,' [Justice Kagen] said, 'it's using the religion clauses to privilege mostly mainstream religious organizations.'"

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/

An Extraordinary Winning Streak for Religion at the Supreme Court

By Adam Liptak

April 6, 2021

The New York Times

Late Edition – Final

A14

https://www.nytimes.com/2021/04/05/us/politics/supreme-court-religion.html

 

Strategic CSR - Sustainability

The article in the url below is excellent – one of the best things I have seen written about CSR/sustainability in a long time. I won't summarize it, as I would like to encourage you all to read it, but here are a few choice quotes:

"Reporting standards like ESG and others raise important and fundamental questions about the nature of sustainability. Do reporting standards help achieve improved sustainability and increased innovation, or do they thwart sustainability and stifle innovation by creating uniformity and ease for those reporting and reviewing? How do we know what 'good' sustainability performance is? Is it possible for a company or a nation to effectively measure progress toward sustainability? Are the best intentions of companies moving us toward a more sustainable world, or could they be a catalyst moving us further away from such a world? How will we know?"

"Let us explore those questions in light of a common example, the disposable paper cup. Single-use products are much maligned by sustainability advocates as wasteful and unsustainable. Yet single-use products, including the disposable paper cup, made a comeback in 2020 due to the global pandemic. The disposable cup has always required valuable inputs (trees, energy, water, and chemicals) and created waste, including manufacturing residuals and used cup waste. Those are often viewed as 'bad' by sustainability standards. But those inputs and the resulting wastes generated go toward creating something society highly values. Historically, the disposable cup came into being as a social 'good'—a way to improve quality of life by slowing the transmission of disease at community drinking buckets found in public schools, public buildings, and railway stations."

"The ongoing value of the disposable cup illustrates many of the challenges associated with sustainability initiatives. For most products and projects, it is nearly impossible to anticipate, properly evaluate, and effectively weigh the value of the various factors leading to sustainability with simplistic measures. Value is always subjective. How can a 'standard' for sustainability capture the subjective nature of value?  As is the case with the disposable paper cup, some may value hygiene over cost, while others may not. Who should decide?  In the case of the disposable cup, the market got to decide and valued the cup's social, environmental, and economic benefits more than the perceived downsides."

"Sustainability is the object of ESG reporting. ESG reporting isn't the goal; sustainable performance is the goal."

"The disposable cup example illustrates how thirsty humans chose preferred social outcomes (avoiding disease and enhancing convenience by use of a disposable cup) despite worse economics (a penny per cup) and some perceived adverse environmental outcomes (resource use and waste). Yet voluntary decisions by those paying the costs and optimizing the tradeoffs created a significant market for disposable cups. And the longevity of this product proves its sustainability."

"Early smartphone users likely weren't concerned about whether their model of phone needed more rare-earth metals, generated more emissions in manufacturing, consumed more energy over its life, or used more packaging than prior model phones. In fact, products that consumers choose every day create some form of waste. Consumers showed that they valued the many benefits and enhanced quality accompanying smartphone technology rather than lament the use of expensive and non-renewable rare earth metals. Think of the time saved and convenience increased due to smartphones. Also consider the material savings resulting from the desktop and laptop computers that were never made or sold as smartphones filled that demand. (On the other side of the equation, we should also consider the addictions, lost productivity, and other adverse consequences of smartphones.) But in 2007, regulators did not try to stifle innovation or influence market choices by defining a reporting standard for a 'sustainable phone.' And we should be thankful for that."

I have not heard of either author, but here is the bio published along with the article:

"Bill Frerking is Chief Administrative Officer and Vice President of Environment, Health & Safety at the USD Group in Houston, and was formerly Chief Sustainability Officer of Georgia-Pacific. Blaine McCormick is a management professor at Baylor University's Hankamer School of Business in Waco."

Hope you have a good weekend.

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/

Sustainability: Who Gets to Decide?

By Bill Frerking and Blaine McCormick

January 28, 2021

Texas CEO Magazine

https://texasceomagazine.com/sustainability-who-gets-to-decide/

 

Strategic CSR - Revlon

The article in the url below dives pretty deep into the weeds of U.S. corporate law, but it is potentially an important step in the direction of tighter corporate governance (increasing the burdens placed on a firm's board of directors) and against one of the few remaining 'rights' that shareholders possess. Specifically, the article covers a recent decision in U.S. federal court:

"In a little-noticed December ruling in a case involving a failed 2014 leveraged buyout, Jed S. Rakoff, a federal judge in the Southern District of New York, threw some sand into the otherwise well-lubricated gears of what has been a 40-year financial bonanza. It's about time we started asking tough questions about the ramifications of loading up companies with huge amounts of debt they will surely have difficulty repaying."

Specifically, because the board's decision to sell the company knowingly placed the firm with a debt load that was likely to force it into bankruptcy, the judge held that the board had been "reckless" in its decision and are therefore liable:

"In other words, Judge Rakoff said in his ruling, officers and directors had better think twice before agreeing to sell a company to a buyout firm. What had for decades been considered a virtue — selling a company for a market-clearing price to the benefit of existing shareholders — might have become a vice. Judge Rakoff's decision 'has the potential of really blowing up,' said Brian Quinn, a law professor at Boston College."

The facts of the case, in the opinion of the judge, mean that the directors are not protected by the business judgment rule:

"Judge Rakoff … said [the board] could not take cover behind the business judgment rule, which usually protects directors from being held accountable for past business decisions so long as they were made in 'good faith.'"

The author of the article, who was a former investment banker (specializing in M&A), argues that this case has implications beyond the specific facts (in spite of idiosyncrasies that suggest it might have limited influence) because it challenges the long-held 1986 decision by the Delaware Supreme Court known as 'Revlon.' Revlon applies as precedent during the sale of a firm and is important because it establishes the burden on directors during the sale to seek the highest price possible for shareholders, irrespective of the wishes of other stakeholders in the firm. This recent decision suggests this may no longer be the case:

"The ruling has the potential to hold accountable those responsible for allowing otherwise solvent companies to be sold into circumstances that would soon enough cause their bankruptcy. … In the wake of Judge Rakoff's ruling, Big Law quickly sought to warn clients that officers and directors of companies needed to be more vigilant about who they agree to sell a company to and what the buyer plans to do with it. The days of just selling a company to the highest bidder regardless of the consequences — the legal standard on Wall Street since the Delaware Supreme Court decided the so-called Revlon case in 1986 — might just be over."

If so, then this case would be another nail in the coffin of the idea that 'shareholder democracy' has any substantive meaning in the U.S.

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/

The End of Private Equity

By William D. Cohan

March 1, 2021

The New York Times

Late Edition – Final

A19

https://www.nytimes.com/2021/02/28/opinion/business-economics/private-equity-reckoning.html

Strategic CSR - Whistleblowing

One upside from the pandemic and associated lockdowns, according to the article in the url below, is an increase in workplace related whistleblowing:"

The proof is in the data, with the U.S. Securities and Exchange Commission receiving 6,900 tips alleging white-collar malfeasance in the fiscal year that ended Sept. 30, a 31% jump from the previous 12-month record. Officials at the agency, which pays whistle-blowers for information that leads to successful investigations, say the surge really started gaining traction in March when Covid-19 forced millions to relocate to their sofas from office cubicles."

It seems that the enforced social distance has lowered employees' inhibitions about voicing their concerns:

"The isolation that comes with being separated from a communal workplace has made many employees question how dedicated they are to their employers, according to lawyers for whistle-blowers and academics. What's more, people feel emboldened to speak out when managers and co-workers aren't peering over their shoulders."

Of course, the lowering of employees' inhibitions may also have been aided by the financial rewards associated with those reports that lead to a successful prosecution:

"Since the pandemic hit the U.S., the agency has paid out some $330 million in awards, including an eye-popping $114 million to a single tipster in October. While the payments are tied to SEC investigations that almost certainly predate coronavirus, the amount of money going out the door is unprecedented in the decade since the regulator started its whistle-blower program."

For firms, of course, this heightened risk merely increases the value of having effective ethical cultures and compliance programs:

"For corporations, the rise in tips risks triggering a consequence from work from home that will last long after employees return to the office. Even if few of the tips lead to SEC enforcement cases, companies could still be dealing with years of compliance distractions as the agency launches investigations, subpoenas documents and grills senior executives."

But, while the pandemic appears to have sharpened our ethical antennae, the pathway that led to the elevated reporting levels currently being recorded appears to be the financial rewards that the SEC was empowered to offer as part of 2010 Dodd-Frank Act:

"Under the program, tipsters can receive financial awards if they voluntarily provide unique information that results in an enforcement action. Payouts can range from 10% to 30% of the money collected in cases where sanctions exceed $1 million. Awards are paid from a fund set up by Congress -- not money owed to harmed investors."

It seems that the prospect of a large payout may be more persuasive than either an ethical conscience or the inability to live with the guilt of knowing you have witnessed wrongdoing:

"Leveraging whistle-blowers has become one of the SEC's most potent tools for rooting out financial crime, despite the fact that most of the tips the SEC receives don't lead to enforcement cases. Information has come from more than 100 countries, with whistle-blowers providing evidence such as texts, emails and recorded calls."

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/

Whistle-blowing Soars to Record with Americans Working from Home

By Matt Robinson and Benjamin Bain

January 12, 2021

Bloomberg

https://www.bloomberg.com/news/articles/2021-01-12/whistle-blowing-soars-to-record-with-americans-working-from-home

Strategic CSR - Merit

The article in the url below is a review/critique of Michael Sandel's recently published book, The Tyranny of Merit: What Became of the Common Good (for more on Sandel, see Strategic CSR – Moral Limits). As the title implies, Sandel here is focusing on the rise of meritocracy as the default explanation (and aspiration) of American society:

"The meritocratic model, he believes, has become the de facto creed of both the center-left and the center-right in America. Hence the commonplace, intoned by politicians of both parties, that those who 'play by the rules' should be able to 'rise as far as their talent and hard work will take them.'"

The trouble is that the theory, more often than not, does not match the reality. In particular, there are two flaws in the argument that Sandel highlights:

"The first is that it's an aspiration, an ideal, that Americans increasingly take to be a reality when it isn't. A young person may be intellectually gifted and possess an excellent work ethic, but if he comes from a low-income home he won't have the advantages enjoyed by a slightly dumber and lazier student from a privileged background."

Moreover, Sandel continues:

"The second problem with the meritocratic model … is that it flatters the elite and makes them arrogant. If the wealthy and powerful achieved their status by talent and hard work, they deserve what they have; and contrariwise the poor and uneducated must deserve their status, too. As the meritocratic ideal seeps into the American psyche, the nation is governed more and more to the detriment of the already disadvantaged."

The result is that, while the ideal remains and is widely believed, the reality is usually different and often unjust. And, as a society, we are not only harmed by the deception, but also by what we are missing (and that this façade replaced):

"The elevation of individual merit 'diminishes our capacity to see ourselves as sharing a common fate,' Mr. Sandel writes, and 'leaves little room for the solidarity that can arise when we reflect on the contingency of our talents and fortunes.'"

The reviewer ("an editorial page writer" for the WSJ) uses this framework to critique what he sees as a key distinction between the left and right in the U.S. Central to this is Sandel's solution to "the tyranny of merit," which is embedded in the second part of the book's title – the importance of "the common good." That is, rather than a focus on the success of the individual, Sandel argues that society would be stronger if it focused on the success of the group (society in its broadest sense), which comes from shared values, goals, and common conceptions of what is 'good.' But, the reviewer notes, this ignores what the reviewer sees as the role of the 'left' in bringing about the problem Sandel identifies:

"[Liberal commentators, such as Sandel] typically don't assign blame for the breakup of American life to themselves and their forerunners on the political left. They aren't prepared to trace the invidious phenomenon known as identity politics back to the cultural revolution of the 1960s, and they express little regret for the left's hostility to religion and contempt for tradition. Instead they pin the blame for American culture's breakup on various forms of market deregulation. The free-enterprise policies of the 1980s and '90s, they argue, legitimated greed, widened inequality and encouraged Americans to forget their collective identity."

As someone who studies institutional theory (the value of institutions as the essential fabric of a strong society), but also believes in rewarding those who are the most productive (even while acknowledging the multiple predictors of successful outcomes, including luck), I feel torn between the two arguments. In other words, I see the value that institutions add by constraining our selfish tendencies (e.g., see my favorite David Brooks column, here). At the same time, I see the structural inequalities these same institutions have produced and continue to perpetuate. Ultimately, my personal resolution is the strategic CSR framework that I detail in my books. That is not to say it is a perfect resolution, and I struggle with the goal of internal consistency every time I sit down to write a new edition, but that is why I see the framework as an evolving project (rather than something that is complete). It is also why I anticipate it being the most important thing I do in my academic career.

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/

The Cream Also Rises

By Barton Swaim

January 6, 2021

The Wall Street Journal

Late Edition – Final

A13

https://www.wsj.com/articles/the-tyranny-of-merit-review-the-cream-also-rises-11609887858

Strategic CSR - Greenwashing (II)

Following on from the newsletter sent earlier this week, the articles in the two urls below also both tackle the issue of greenwashing, but in different ways. The first article looks at the role of carbon offsets in allowing firms with polluting operations to present a much more favorable carbon image, while the second article looks at how firms are increasingly setting aggressive sustainability targets, but failing to begin the hard work of delivering on their promises.

The key to the first article about carbon offsets is twofold – first, firms may be committing to offsets, but then not being transparent in terms of whether they are actually bought (or achieve the reduction in carbon promised) and, second, using the offsets to cloak the fact that nothing has changed in their underlying business model/operations. And, given that the goal is to get to zero emissions, rather than net zero emissions, such businesses are avoiding the harder task of changing their operations to produce less emissions. This emphasis on carbon reduction techniques (rather than carbon offsets) will become even more essential as the price of offsets rises in line with anticipated increases in demand:

"Companies face rising costs of carbon dioxide emissions. European Union credit costs reached a record high of nearly €40 a metric ton, or about $48, this month. Levies of over $100 are expected in many countries by 2030. Given the very limited information available about companies' carbon footprints and cleanup plans, analyzing how they use CO2 reduction techniques can be a helpful shortcut to identify risky businesses."

While all industries, ultimately, will be affected, there are some that are more likely to struggle:

"Oil and coal producers face existential questions. The challenge is also particularly acute in so-called hard-to-abate industries: airlines, cement, long-haul trucking, plastics, shipping and steel. Many investors would like to distinguish the leaders from the laggards."

For now, however, we are where we are due to the challenge of measurement and financial reporting requirements, which still allow companies to select what information they release and when:

"In an ideal world, detailed, comparable carbon exposure data would be published alongside financial information to help investors assess risks. That should be available eventually. Until then, a company's use of carbon offsets provides a helpful shortcut to divine some insight."

The key to the second article is the disconnect between what companies are proclaiming and what they are actually doing:

"Household names like Costco and Netflix have not provided emissions reduction targets despite saying they want to reduce their impact on climate change. Others, like the agricultural giant Cargill and the clothing company Levi Strauss, have made commitments but have struggled to cut emissions. Technology companies like Google and Microsoft, which run power-hungry data centers, have slashed emissions, but even they are finding that the technology often doesn't yet exist to carry out their 'moonshot' objectives."

Again, transparency and reporting requirements are allowing companies to get away with symbolic behavior:

"… determining how hard companies are really trying can be very difficult when there are no regulatory standards that require uniform disclosures of important information like emissions."

In contrast, those companies that stick to measurable targets tend to be a lot more effective in achieving substantive change:

"For example, Walmart discloses its targets for emissions reductions and the progress it has made to the CDP, including a goal for emissions from its suppliers, and its plan has been vetted by Science Based Targets. But Costco doesn't expect to have commitments to reduce emissions until the end of next year. Costco executives declined to comment."

The conclusion is that, ultimately due to the variance in corporate attitudes to real change, regulation is most likely to move the needle:

"'If we are going to achieve a net-zero carbon economy for real, we will need everyone to act,' said Lucas Joppa, Microsoft's chief environmental officer. 'And that means action can't be voluntary. We need requirements and standards that everyone is expected to meet.'"

An example of the challenges that remain, however, is the extent of creative accounting that characterizes carbon offsetting. The most devious form of this is where firms claim for avoiding carbon emissions that would otherwise have happened. For example, they could support the production of renewable energy and claim that, by doing so, they have avoided the emissions that would have occurred if they had used regular fossil fuels, instead. Clearly, however, no carbon was removed from the atmosphere. In other words, such a trick is not even net zero, it is net positive emissions (overall), even though firms are using such claims to 'reduce' their total carbon account.

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/

Investors, Research Green Ambitions

By Rochelle Toplensky

February 23, 2021

The Wall Street Journal

Late Edition – Final

B11

https://www.wsj.com/articles/an-investor-shortcut-for-net-zero-ambitions-11613995380

The Climate Talk vs. the Walk

By Peter Eavis and Clifford Krauss

February 23, 2021

The New York Times

Late Edition – Final

B1, B5

https://www.nytimes.com/2021/02/22/business/energy-environment/corporations-climate-change.html

 

Strategic CSR - Greenwashing (I)

According to the article in the url below, the term 'greenwashing' was introduced in 1986 by the "environmentalist Jay Westerveld." In the intervening years, this term has come to represent much of what is bad about corporate CSR—attempts by companies to convey the idea they are taking sustainability seriously when, in fact, they are continuing business as usual (often at the expense of the environment). The reason this happens is clear, because there is money to be made in pretending to do something without incurring the costs of actually doing it:

"Experts in the financial sector, independent watchdog groups and academics who study such issues say that unsubstantiated and exaggerated claims about sustainability and other 'green' credentials are increasing in advertising and marketing materials, and on product labels. … The U.S. market alone for products considered environmentally friendly is expected to grow to as much as $150 billion next year from $128.5 billion in 2018, according to Nielsen Holdings PLC."

The problem is that such deception is becoming taken-for-granted among those who watch companies closely:

"A [survey by the financial data company, Refinitiv] from February found that 57% of the 250 institutional investors polled, with more than $10 trillion under management, believe companies are presenting misleading environmental credentials, and 84% think the practice is becoming more common."

The article goes on to explore greenwashing, giving examples of companies that have been accused of doing it, and what to look for in identifying possible cases. For example:

"In a U.S.-based case, the Federal Trade Commission in September 2019 filed a complaint against Miami-based Truly Organic, alleging that the company mislabeled beauty products as 100% organic or vegan when they weren't."

 

One of the reasons why these deceptive practices continue is that many of the claims made by such companies cover terms with no official definition:

 

"Regulation of claims about ESG credentials in the U.S. tends to vary and is not centralized. Use of words like 'bio,' 'eco,' and 'natural' in packaging and advertising is not regulated at all."

 

And, where terms are regulated, there can be confusion over which agencies control which practices:

 

"… the Agriculture Department regulates use of the word organic in foods and personal products that use agricultural ingredients, but the Food and Drug Administration oversees the use of the term in other types of products but doesn't have a definition of the word."

Another challenge is the liberties that U.S. courts have read into free speech claims by companies:

"U.S. courts have consistently upheld a company's right to 'marketing speech' as long as it isn't demonstrably false, [Todd Cort, a lecturer in sustainability at Yale University's School of Management] says. 'Aspirational and vague statements have tended to be protected from liability in court,' he says."

And yet another challenge is confusion in the marketplace among consumers who are looking to purchase sustainable products, but are simply overwhelmed by the choice on offer and the lack of transparency that comes with product packaging:

"Product labels that make ecological or social-responsibility claims are especially confusing. When product labels feature such buzzwords as 'eco,' 'bio,' and 'fair,' it can be difficult to know what is merely an attempt to green up a product's image and what is actually meaningful information. There are at least 457 environmental and social product labels in 25 industries and nearly every country in the world, according to Ecolabel Index, a data provider and certifications directory that has been tracking eco labels since 2007."

On the plus side, the article also gives examples of counter-practices—effective and genuine implementation, often by nonprofit monitors:

"Jenny Ahlen, senior director of sustainable food and product at Environmental Defense Fund, a nonprofit that works with companies on their environmental goals, cites the Forest Stewardship Council, a nonprofit based in Bonn, Germany, that fights for responsible forest management, as a good example of sustainability certification. Ms. Ahlen says she trusts the council, whose certifications are found on items ranging from furniture to yoga mats, because of its rigorous criteria, monitoring and verification methods."

Ultimately, the article puts the onus back on consumers to do their homework, with the aid of nonprofits that investigate certification schemes on their behalf. But this feels unsatisfactory. Consumers are important actors (and have an obligation to be better informed), but cannot know everything. My sense is that it is employees who bear the greatest burden. Any deception by a company is decided upon and implemented by someone, often multiple people. If we know and turn our backs, then we are at least somewhat complicit. I am not saying that employees should go around threatening to resign every time they see something untoward. But, at the same time, we each make choices about the kind of organization we are willing to work for, and the extent to which we are willing to compromise our principles in exchange for our pay check. The Strategic CSR framework does not draw red lines in the sand, but asks each of us to think through for ourselves where those red lines lie.

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/

How to Tell if a 'Sustainable' Business is 'Greenwashing'

By Fabian Negrin Ochoa and Dieter Holger

October 10, 2020

The Wall Street Journal

https://www.wsj.com/articles/how-to-tell-if-a-sustainable-business-is-greenwashing-11602342001

 

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 

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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 - Black Rifle Coffee

The article in the url below profiles Black Rifle Coffee – a roasting company in Salt Lake City that, I would argue, is just as good an example of strategic CSR in action as Patagonia:

"Black Rifle Coffee Co. says its AK-47 Espresso Blend 'is here to conquer your taste buds.' Its extra-dark Murdered Out roast 'will fuel your midnight ops or your morning commute.' Another of the six-year-old company's blends promises to 'keep your freedom engine running.'"

While enacting a very different set of values to Patagonia and, as a result, appealing to a completely different part of the population, the point is that Black Rifle stands for something and that thing is highly valued by a specific market segment:

"With firearms-themed branding, unabashed support for police and the military and an irreverent founder who hasn't shied away from political debate, Black Rifle is a prime example of the way some businesses are capitalizing on politically engaged consumers' hyperpartisan shopping habits."

While we get the politicians we deserve, we also get the companies we deserve. As a result, the mix of businesses across the economy will reflect the values of the broader population. And, clearly, there is a market for some firearms with your coffee:

"Salt Lake City-based Black Rifle said its revenue nearly doubled in 2020 to $163 million, 70% of it from e-commerce. In 2015, its revenue was $1 million. The company said it is profitable but didn't provide further details. Of its 450 current employees, 55% are military veterans."

The point is value creation – meeting the needs and demands of your key stakeholders, rather than striving to implement a particular set of objectively-defined values:

"Justin Cheung buys Black Rifle's Silencer Smooth blend because he prefers a light roast—and because the company's message resonates with him, including its promise a few years ago to hire a huge number of veterans. 'I do feel better about my purchase knowing that they stand for things I believe in,' said Mr. Cheung, a Southern California-based wine buyer who describes himself as a constitutional conservative."

I can imagine an environmental activist saying exactly the same thing about shopping at Patagonia – while the values are different, the fact that stakeholders are loyal to a company that meets those values is what is important:

"Big American firms historically sought to stay above the partisan fray, an approach summarized by basketball legend Michael Jordan, who famously proclaimed: 'Republicans buy sneakers too.' Now more consumers want CEOs to take a stand. In 2019, 60% of American consumers would make a decision about whether to buy or boycott a company's product based on its stand on societal issues, according to a survey by public-relations firm Edelman—up from 47% in 2017."

As any effective strategist understands, the key to differentiation is market segmentation:

"Tom Davin, the former CEO of Panda Restaurant Group Inc. who was brought on as Black Rifle's co-CEO in 2019, said the company is targeting a specific segment of the population: military members and their families, first responders, sportsmen and gun enthusiasts. 'We're not going for the entire coffee market,' he said."

Rather than something to shy away from, I would like to see more companies adopt a defined set of values and work to enact them, genuinely. Then, the marketplace will decide which companies succeed and which fail. A company can only be socially responsible if it is meeting the needs of that society – what the people who live there actually want. The flipside of that is those companies that judge the societal mood incorrectly, or embrace values that go out of fashion, will quickly find themselves on the wrong side of history, and out of business. Whether we agree with the outcome is different from being able to understand the process by which value is created.

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/

Coffee with a Shot of Politics

By Zusha Elinson

March 13-14, 2021

The Wall Street Journal

Late Edition – Final

B1

https://www.wsj.com/articles/black-rifle-coffee-seeks-like-minded-aficionados-11615550401

 

Strategic CSR - Peak oil

The article in the url below argues that, in spite of the rapid drop in demand for oil during the COVID-19 pandemic and associated drop in economic activity, and also in spite of oil companies writing-down large proportions of their reserves (e.g., see Strategic CSR – BP (I) and Strategic CSR – BP (II)), the point of peak oil has not yet arrived:

"Ambitious green policies—from politicians and even the newly climate-conscious oil companies—suggest the world is moving at warp speed away from fossil fuels. But the transition might not be easy on consumers' wallets, which is precisely why it could take a while."

Not only has this point not yet arrived, but the author argues that it may not do so for many years yet:

"Under its 'stated policies scenario,' the International Energy Agency estimates that oil demand will peak around 2030 and plateau. That scenario takes into account announced policy measures and its own judgment of how attainable they seem."

This contrasts markedly with BP, that suggested peak oil had already passed in 2019. The difference can be accounted for in the assumptions that underpin the respective projections, as presented in a chart that accompanies the article:

 

The key, of course, is the extent to which legislation is introduced to combat climate change (in particular, a price on carbon), and how aggressively targets are set and enforced:

"Transportation plays a key role in the timing of that peak; it accounts for the largest share of petroleum consumption globally. For electricity to crowd out oil as a transportation fuel, governments must either provide taxpayer subsidies that make electric vehicles more affordable or place a cost on not switching over, such as even higher taxes at the pump."

Another related factor is how quickly technology develops to enable more rapid curbing of the worst pollutants (the higher the carbon price, the greater the incentive), and the speed at which different economies progress toward change (politically and socially). But, as ever, the legislation that politicians are willing to pass is most likely going to be driven by voter demands. If there is a reasonable chance that their chance of re-election will drop as a result of a particular vote, then we can all assume that the corresponding piece of legislation is unlikely to be passed any time soon:

"Nobody likes paying more for energy. Policies that directly raise prices have a track record of sparking a backlash. Such setbacks seem more, not less, likely in the post-pandemic world when economies around the world emerge with weaker balance sheets and a price-sensitive population. As Bob McNally, president of Washington, D.C.-based consultancy Rapidan Energy Group, puts it: 'motorists are voters.'"

What is clear is that the two projections compared in the article are starkly different, and we can only afford for one of them to be right.

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/

Peak Oil? Not this Year. Or this Decade

By Jinjoo Lee

January 9-10, 2021

The Wall Street Journal

Late Edition – Final

B12

https://www.wsj.com/articles/peak-oil-driversand-voterscould-delay-it-for-years-11610101808

 

Strategic CSR - A.I.

The article in the url below reports what it presents as a breakthrough in the measurement of firms' ESG performance. The article sets up its pitch with breathtaking claims about the connection between ESG metrics and firm performance, while at the same time (and apparently without any irony) acknowledging that we do not yet know how to measure the things that are 'known' to be so crucial:

"It is indisputable that company reputation and performance in the long term is linked to environmental, social and corporate governance performance. … However, quantifying ESG performance on a global scale is a deeply complex problem that was unsolved and unstandardized."

The breathlessness continues:

"For the first time, it is possible to create a meaningful global framework for ESG using artificial intelligence and machine learning under the assumption that a company's ESG perception is a proxy for its ESG performance."

Here's how it works:

"Take a scenario where you are able to analyze vast amounts of textual content from the world's media and other external sources, such as legislation, company releases and regulatory sources, and then measure the perception of an organization. Then cross-reference this perception with specific aspects of ESG that an organization is targeting at a point of time such as conservation or labor practices. Let's call these ESG topics pillars. You can then compare pillars between peers, gather actionable insight and improve the organization's ESG performance, and ultimately affect critical decision making. Using AI, analysts can now search vast amounts of information, from millions of documents from around the globe in virtually any language to understand the ESG reputation of organizations and distill it into a 'reputation score' for different ESG pillars."

Although the stated goal is compatibility and standardization, the author immediately undermines themselves by claiming that an advantage is its customization:

"Relevant ESG pillars can fit into wider industry standards such as SASB or UNSDG. Alternatively, individuals and companies can easily train their own AI models, personalizing their results according to their own interpretation and definition of ESG pillars."

The author would have benefitted from a first year Ph.D. methods course. The A.I. is impressive in the amount of data it can process and allows the resulting measurement to be accurate and consistent (both essential elements of an effective measure), but fails miserably in terms of construct validity. In essence, it is simply a more powerful measurement tool. It does nothing to ensure that the 'right' things are being measured. The article recognizes its own problem when it states that their premise holds, only "under the assumption that a company's ESG perception is a proxy for its ESG performance." That is a massive assumption that I do not think holds at all. What they are doing is accurately capturing what people think firms are doing – not what they are actually doing, or even what they necessarily 'should' be doing. As such, this should not be heralded as a step in the right direction. More likely, it will lead to the punishment of firms that are thought to be doing badly, irrespective of what they are actually doing.

Having a more powerful measurement tool is useless if the thing you are measuring is the 'wrong' thing. Much more important is to do the upfront thinking about what we should be measuring, and then work out how to measure those things more effectively.

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/

All hail the AI-fueled ESG framework

By Miguel Martinez

December 11, 2020

PR Week

https://www.prweek.com/article/1702284/hail-ai-fueled-esg-framework

 

Strategic CSR - Net zero

There are a lot of countries and companies that are throwing around carbon neutral dates at the moment. The article in the url below demonstrates how it is much easier to claim these target dates than it is to actually deliver carbon neutrality:

"If the United States wants to get serious about tackling climate change, the country will need to build a staggering amount of new energy infrastructure in just the next 10 years, laying down steel and concrete at a pace barely being contemplated today."

The article summarizes a report by researchers at Princeton "who set out several exhaustively detailed scenarios for how the country could slash its greenhouse gas emissions down to zero by 2050":

"The study's findings are at once optimistic and sobering. Reaching 'net zero' by 2050 appears technically feasible and even affordable. There are ways to get there that rely solely on renewable energy, as many environmentalists prefer, or that lean on other technologies such as nuclear power or carbon capture. Each approach carries different social and economic trade-offs."

Here are some of the reports headline findings:

• "This year, energy companies will install 42 gigawatts of new wind turbines and solar panels, smashing records. But that annual pace would need to nearly double over the next decade, and then keep soaring, transforming the landscapes in states like Florida or Missouri."
• "The capacity of the nation's electric grid would have to expand roughly 60 percent by 2030 to handle vast amounts of wind and solar power, which would mean thousands of miles of new power lines crisscrossing the country."
• "Car dealerships would look radically different. Today, electric-vehicle models are just 2 percent of new sales. By 2030, at least 50 percent of new cars sold would need to be battery-powered, with that share rising thereafter."
• "Virtually all of the 200 remaining coal-burning power plants would have to shut down by 2030."

Needless to say, there are a number of challenges that need to be overcome in order to achieve the goals being proclaimed, yet many are not being seriously considered. For a start, how much would it cost to get all of our electricity from renewable sources?

"To start, the United States could make enormous strides over the next decade by rapidly scaling up solutions already in use today, like wind, solar, electric cars and heat pumps. Doing so would require $2.5 trillion in additional investments by governments and industry by 2030. By midcentury, both studies found, at least 90 percent of the nation's electricity could feasibly come from renewable sources."

But, unfortunately, that is the easy part:

"Large parts of the economy still rely on fossil fuels and don't yet have obvious solutions. How do we fuel airplanes and trucks that can't easily shift to batteries? What about industries like steel or cement? How do we keep the lights on when the wind isn't blowing or the sun isn't shining?"

The article contains some promising ideas in terms of how to answer these questions, but many are only theories at present. No one knows for sure, and the takeaway from this report is that we had better start looking more seriously at these ideas (and quickly) if we are to stand even a passing chance of reaching many of the targets that, in themselves, are insufficient given the scale of the problem.

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/

A Lot of Work Ahead if the U.S. is to Reach 'Net Zero' on Pollution

By Brad Plumer

December 16, 2020

The New York Times

Late Edition – Final

A17

https://www.nytimes.com/2020/12/15/climate/america-next-decade-climate.html

Strategic CSR - COP 26

The United Nations climate report covered in the article in the url below needs little commentary. It states clearly the extent of the challenge we face:

"The global scientific consensus is clear: Emissions of planet-warming gases must be cut by nearly half by 2030 if the world is to have a good shot at averting the worst climate catastrophes."

The reality of where we are at present in terms of government commitments:

"New climate targets submitted by countries to the United Nations would reduce emissions by less than 1 percent, according to the latest tally, made public Friday by the world body."

The Paris Agreement (COP 21), which almost every country signed-up to, requires revised targets by the end of 2020. Most failed to submit:

"The tally was all the more damning because fewer than half of all countries submitted fresh targets to the United Nations."

The most polluting countries are the most concerning in their intransigence:

"Still missing from the ledger is the United States, which has produced more greenhouse gas emissions than any other country in history. … It has yet to submit its 2030 targets and is under pressure from climate advocates to reduce emissions by at least 50 percent compared with 2005 levels. Likewise, China, which currently produces the largest share of emissions, has yet to submit new 2030 targets to the United Nations. Some of the biggest emitter countries — including Australia, Brazil and Russia — submitted new plans for 2030 without increasing their ambitions. Mexico lowered its climate targets."

The only bright spot in the report is, in reality, a distraction, given how far we are from where we need to be:

"In contrast, 36 countries — among them Britain, Chile, Kenya, Nepal and the 27 countries of the European Union — raised their climate targets."

Ironically, the fundamental flaw in the Paris Agreement was the only way it could have been ratified – each country's commitment is voluntary. As a result, we all await the COP 26 meeting in Glasgow later this year. The longer we wait, of course, the less room we have for maneuver and the more expensive any corrective action will be.

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/

New Targets for Emissions Fall Far Short of Paris Goals

By Somini Sengupta

February 27, 2021

The New York Times

Late Edition – Final

A9

https://www.nytimes.com/2021/02/26/climate/paris-agreement-emissions-targets.html