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Wednesday, October 26, 2016

Strategic CSR - Dave's Killer Bread

Here's a good example of the power of business to transform lives – organizations offering opportunities for employment to people who have served time in prison:
"Bonnie Rice was released from prison last year. After a five-year, drug-related prison sentence, she knew she couldn't go back to any of the people who led her into trouble. … She managed to find a place to live in a halfway house. But even though she filled out lots and lots of job applications in the first few months out of prison, she didn't get many calls back. … Then she found Together We Bake. It's a bakery … that makes granola, cookies and kale chips for local eateries and a local Whole Foods store. It's also a job-training and coaching program for women who need a second chance — many of whom have served time in prison, or are on probation following criminal charges."
Together We Bake ( operates in the Washington DC area and, as its website states, is set-up to provide opportunities to women who otherwise face limited employment options:
"Together We Bake's mission is to provide a comprehensive workforce training and personal development program to help women gain self-confidence, transferable workforce skills, and invaluable hands-on experience which will allow them to find sustainable employment and move toward self-sufficiency."
The radio story in the url below explores this issue in depth, profiling Together We Bake as well as other companies that see their role as employer as an opportunity to help a segment of the population that is ignored or excluded by most firms. In particular, it highlights a company and product that I have loved for some time now: Dave's Killer Bread ( As Dave's Killer Bread (DKB) announces proudly on its website:
"DKB is powerfully different. Packed with protein, fiber, and whole grains with no artificial anything. It will rock your world."
Dave's Killer Bread will rock your world, but it will also make you feel good about capitalism. It is a company whose values are founded around the concept of a second chance and, in particular, what it terms "second chance employment":
"One in three of our employee partners has a criminal background. At Dave's Killer Bread, we believe everyone is capable of greatness and that a second chance can lead to positive lasting change. In 2015 we introduced our non-profit, the Dave's Killer Bread Foundation, with the mission to inspire other businesses to become Second Chance Employers and affect positive societal change."
Dave's Killer Bread is both healthy and tasty and, believe me, your doctor recommends it!
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This Bakery Offers A Second Chance For Women After Prison
By Allison Aubrey
April 15, 2016
National Public Radio

Monday, October 24, 2016

Strategic CSR - Passive investing

The article in the url below focuses on the effects of the growing trend of passive investing (e.g., exchange-traded funds) on overall market performance. This is interesting because passive investing is being increasingly sold to armchair investors as a 'safe' way to invest in the market:
"The argument goes like this: the stock market will outperform other investments over the long term, yet no individual is in a position to outsmart the market as a whole. So the best way to reap the rewards of investing in stocks with minimal risk is to put your money in a fund that tracks the performance of some broad, indexed measure of the market, such as the S&P 500."
In reality, however, the greater the proportion of the total market that is invested in funds designed to track the overall market, the greater the extent to which these funds become a self-fulfilling prophecy. In other words, they become the market, rather than reflecting the market:
"It stands to reason that beyond some threshold, a market that has more passive than active investors will behave differently than markets have in the past. One way to think about this is to imagine that investment decisions are increasingly on autopilot: more and more money will pour into a set of firms largely independent of the considerations that have traditionally guided investors, such as supply, demand, management performance, growth potential, or broader economic factors."
The result is an even greater distortion of what the stock market represents (and the overall value that it adds):
"Typically, stocks are indexed by market capitalization—the value of a firm's share price times the number of shares—from highest to lowest. A market with more passive investors than active ones will continue to push money into the largest firms, whether these companies are actually performing strongly or not."
Inertia is a strong force, affecting everything from business school rankings to our weekly shopping list. It is not hard to see the potentially distorting effects it can have on the stock market:
"Timothy O'Neill, the global co-head of Goldman Sachs' investment-management division, [said] that essentially every new indexed dollar goes to the same places as previous dollars did. This 'guarantees that the most valuable company stays the most valuable, and gets more valuable and keeps going up. There's no valuation or other parameters around that decision,' he said. … Such effects already exist today, of course, but the market is able to rely on active investors to counteract them. The fewer active investors there are, however, the harder counteraction will be."
Other potentially damaging effects of the growing influence of passive investors/funds are discussed in the article.
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Is Passive Investing Actively Hurting the Economy?
By James Ledbetter
March 9, 201
The New Yorker

Thursday, October 20, 2016

Strategic CSR - Corporate taxes

The article in the url below covers a topic I have been thinking about for a while – corporate taxes. In particular, the appropriate level of corporate taxation:
"Just about every American chief executive has the same dream: to get out from under the corporate income tax. For many, that means lobbying Congress to change the tax code. But for a growing number, it also involves increasingly creative — and successful — tricks to avoid their liability."
In order to achieve this, most corporations are adopting ingenious schemes (many of which skirt the fuzzy boundary between avoidance and evasion) to pay less than their governments have determined to be their 'fair' share:
"The latest fad is inversion. Over the last few years, some of the country's largest companies have arranged to be taken over by smaller companies, conveniently headquartered in the Bahamas or some other tax haven. A company then has to pay tax only in the tax haven; it escapes American corporate income taxes altogether."
The result of these schemes (of which inversion is only the most dramatic) is widespread avoidance, which obviously defeats the purpose of corporate taxation. The common refrain from companies is that they abide by the relevant laws wherever they operate. While probably true in most cases, this reflects poorly on our elected representatives who have failed to pass laws that accommodate the modern structures of multi-national corporations, along with innovations in accounting practices that allow firms to avoid taxes so effectively ("intra-group loans" appear to be a favored ploy):
"Though the United States has the highest statutory corporate income tax in the developed world, … Corporate income taxes were just 1.9 percent of gross domestic product in 2014. That is down from an average of 2.6 percent in the 1970s, even though profits are near a postwar high as a share of national income."
In response, some have suggested that, due to the ability of firms to stay one step ahead of regulators and the enormous waste of resources avoidance/evasion consumes, we should instead consider getting rid of corporate taxes altogether. A related article in The Economist (the article in the second url below) presents the benefits of pursuing this option:
"Corporate taxes are a poor way to raise revenue. Since the burden is ultimately borne by people, whether investors, workers or consumers, it would, in theory, be more efficient to tax [those people] directly."
One essential element of shifting the tax burden to people, in my opinion, would be to tax capital and income at the same rate. While seemingly attractive, however, the article also indicates the problems that would likely arise if governments pursued this course:
"In poor countries with large informal sectors, big companies are a rare source of reliable tax revenue. In rich countries, wealthy people would doubtless turn themselves into companies to avoid income taxes. For policymakers, therefore, the priority is to make corporate taxes less distorting and less easy to avoid."
In contrast, I wonder if a low tax rate (say 1-2%) levied as a percentage of revenues, rather than profits, would achieve the desired effect (and is essentially how the incomes of individuals are taxed). Although this would penalize firms that are yet to make a profit, it is also true that companies at all stages of development extract a benefit and exert a cost on the societies in which they are based. At a minimum, it would be interesting to see a comparison of the revenues raised by government under the existing system and one based on a corporate tax rate of 1% (or 2% or 3%) of gross revenues. An alternative idea, presented in the article in the first url below, is more creative:
"Suppose that, instead of taxing corporate profits, we required companies to turn over an amount of stock, in the form of nonvoting shares, to the government. … The shares would be nontransferable, except in the case of mergers or buyouts, but they otherwise would be treated just like any other shares. If the company paid a dividend to its other stockholders, then it would pay the same per share dividend to the government. If it bought back 10 percent of its shares, then it would buy back 10 percent of the government's shares at the same price. In the event of a takeover, the buyer would have to pay the same per-share price to the government as it did to the holders of other shares."
The author suggests this would make it much more difficult for companies to avoid paying their 'fair' share of profits:
"This way, there is no way for a corporation to escape its liability. A portion of whatever profit it makes will automatically go to the government. It also eliminates the enormous cost and waste associated with complying with or avoiding the corporate income tax (there would be some start-up and monitoring costs, of course, but nothing like what current enforcement requires). And federal revenues will go up, because companies will have incentive to do what is most profitable, not what minimizes their tax liability."
And, in order to reduce resistance, the suggestion is that the policy should be voluntary – firms could choose whether they wanted to pay the current rate of tax or, instead, pay using shares:
"If we pick the right number, many companies will go with the share option. This both gets us much of the way there, but also makes it easier for the Internal Revenue Service to focus on the companies that didn't take the deal. They have told us with their actions that they think they can escape their tax liability."
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Get Rid of Corporate Taxes
By Dean Baker
January 13, 2016
The New York Times
Late Edition – Final
Going after Google
January 30, 2016
The Economist
Late Edition – Final

Tuesday, October 18, 2016

Strategic CSR - Patagonia

I had missed this, but Patagonia is now making and selling food. As the article in the url below reports, the independent company set-up by Patagonia for this is named Patagonia Provisions and draws on "regenerative agriculture" as its guiding philosophy:
"Conventional farming practices tend to entail reaping one annual crop, tilling the soil for next season's harvest, and making extensive use of inputs—fertilizer, herbicides, pesticides—to boost yield. Regenerative agriculture emphasizes a diverse variety of crops (throughout the farm, in rotation, or even in the same field), not tilling the soil, using fewer inputs, and adding perennials into the mix as buffers and cover crops. It's a lot harder than it sounds, but a growing body of soil science and on-farm research shows that these techniques—especially not tilling the soil—can generate competitive harvests while saving water and restoring topsoil. That restored soil is able to fix more nitrogen in place, so farmers can cut down on expensive nitrogen fertilizers and excess nitrogen doesn't run off into rivers and create dead zones in bays. This soil retains higher concentrations of carbon, too, so it doesn't rise in the atmosphere and trap heat there, frying the planet."
The article is long and detailed for all those wanting to find out more about this new venture. I was drawn to a couple of quotes by Yvon Chouinard towards the end of the article that illustrate this revolutionary founder's exasperation at the snail's pace of progress on what has become his life's work:
"For a while, [Chouinard] was proud of the work his sustainability teams did with companies like Walmart. But, he says, 'they took the low-hanging fruit, recycling plastic, converting their fleet over to natural gas. Things like that. They did everything that ends up making 'em more money. But when it comes down to doing the hard things, anything with a long-term payoff, they backed out.' He stresses that it's not just Walmart. 'All of these companies, whether it's Dannon or Unilever, they're all ­greenwashing. They start out making a big deal out of something and they back down. It's like Nike started out doing a little bit of organic cotton, like 1 percent. Now I don't know if they do any at all. The fashion industry, same thing.'"
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Solving Climate Change with Beer From Patagonia's Food Startup
By Bradford Wieners
October 10-16, 2016
Bloomberg Businessweek
Late Edition – Final

Thursday, October 13, 2016

Strategic CSR - Warren Buffett

If you are an active investor, you are likely aware that Warren Buffett releases an annual letter to Berkshire Hathaway's shareholders. In this year's letter (released in March), he addressed the issue of climate change. In particular, he analyzed the issue in relation to Berkshire Hathaway's sizeable holdings in the insurance industry. Perhaps surprisingly, he was very bullish on the prospect of widespread environmental degradation:
"As a citizen, you may understandably find climate change keeping you up nights. As a homeowner in a low-lying area, you may wish to consider moving. But when you are thinking only as a shareholder of a major insurer, climate change should not be on your list of worries."
His reasoning rests on the somewhat ignorant argument that climate change has yet to produce any change in the number of extreme weather events:
"Up to now, climate change has not produced more frequent nor more costly hurricanes nor other weather-related events covered by insurance. As a consequence, U.S. super-cat rates have fallen steadily in recent years, which is why we have backed away from that business. If super-cats become costlier and more frequent, the likely – though far from certain – effect on Berkshire's insurance business would be to make it larger and more profitable."
As the article in the url below notes, however, this view contradicts the current scientific consensus. I imagine it is also not consistent with those in the north-east of the U.S. who were standing in the way of Hurricane Sandy when it hit in 2012:
"This claim flies in the face of growing scientific evidence. In 2014, the federally funded National Climate Assessment stated that: 'Certain types of extreme weather events with links to climate change have become more frequent and/or intense, including prolonged periods of heat, heavy downpours, and, in some regions, floods and droughts.'"
"Other insurers have already expressed concern about these changes. Carl Hedde, head of risk accumulation for insurer Munich Re America, says: 'The number of loss-relevant, weather-related natural catastrophes worldwide has almost tripled since 1980 […] we do think that the warming climate – depending on region and peril concerned – does play a certain role.'"
What is even more striking is the contrast between what Buffett said in this year's letter and what he has said in previous year's letters (as noted in the article in the second url below):
"Buffett certainly understands the danger of miscalculating risks. In his 2007 shareholder letter, he wrote that 'devastating storms' like Hurricane Katrina could 'rock the insurance industry.' 'We do know it would be a huge mistake to bet that evolving atmospheric changes are benign in their implications for insurers,' Buffett said then."
Buffett has demonstrated similar insensitivity to shifts that are occurring in other industries, too. He has recently reiterated his strong support for the railroad industry (in particular, Burlington Northern Santa Fe), even though between 30 and 40% of revenues in this industry come from the transportation of coal. In banking, I have not seen or heard any demonstrable comments about the recent behavior at Wells Fargo, which has now resulted in the CEO's resignation. And in the food industry, by doubling down on his support for Coca-Cola, not to mention Dairy Queen and last year's merger between Kraft and Heinz, he appears willing to squeeze as much revenue out of these fading brands, irrespective of the healthcare consequences of the salt, sugar, and fat that are stuffed into each of the company's products.
As a European living in the U.S., it seems counter-intuitive to me that Buffett should be praised for doing so much good with the fortune he has amassed (by pledging it to the Gates Foundation), without some comment on the social consequences incurred during the accumulation of that fortune. To me at least, doing good with a fortune once you have it does not justify the methods used to build that fortune.
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The big flaw in Warren Buffett's view of climate change
By Thomas P Lyon
March 7, 2016
The Guardian
By Alison Moodie
March 2, 2016
The Guardian

Tuesday, October 11, 2016

Strategic CSR - The child in the basement

Good social commentators seek to hold up a mirror to society so we can see what we look like to others. The best ones are able to do it while inviting us in, rather than pushing us away. The goal is to enlist our participation in seeking change, rather than highlighting our weaknesses and moving on. David Brooks of The New York Times is one of my favorite commentators because he does this with good writing and by drawing on a wide source of literary and academic sources. I don't always agree with his columns, but there are a critical mass of them that truly hit home, powerfully. I have written a number of Newsletters that were stimulated by his columns (see here) and my favorite of his columns that speaks directly to my research interests is here. The article in the url below is another good one. The foundation for the column is a short story by Ursula Le Guin ('The Ones Who Walk Away from Omelas') and the center of the story is the child in the basement in the town of Omelas. You'll have to read the column to understand why the child is in the basement, but the central moral decision lies in those who choose to live in Omelas and those who choose not to accept the moral tradeoffs that living in Omelas entails:
"That is the social contract in Omelas. One child suffers horribly so that the rest can be happy. If the child were let free or comforted, Omelas would be destroyed. Most people feel horrible for the child, and some parents hold their kids tighter, and then they return to their happiness. But some go to see the child in the room and then keep walking. They don't want to be part of that social contract. 'They leave Omelas; they walk ahead into the darkness and they do not come back.'"
In reality, as Brooks notes, the vast majority of us, facing the same tradeoff, choose to live in Omelas:
"The story compels readers to ask if they are willing to live according to those contracts. Some are not. They walk away from prosperity, and they make some radical commitment. They would rather work toward some inner purity. The rest of us live with the trade-offs. The story reminds us of the inner numbing this creates. The people who stay in Omelas aren't bad; they just find it easier and easier to live with the misery they depend upon. I've found that this story rivets people because it confronts them with all the tragic compromises built into modern life — all the children in the basements — and, at the same time, it elicits some desire to struggle against bland acceptance of it all."
Of course, we can rationalize living in Omelas because we are trying to make the town better. In reality, we all compromise our principles on some level, both collectively and individually, for the benefits that living in Omelas provides:
"In another reading, the whole city of Omelas is just different pieces of one person's psychology, a person living in the busy modern world, and that person's idealism and moral sensitivity is the shriveling child locked in the basement."
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The Child in the Basement
By David Brooks
January 13, 2015
The New York Times
Late Edition – Final

Thursday, October 6, 2016

Strategic CSR - CSR Threshold

You know that an industry has passed through its CSR Threshold (Chapter 10, p222) when the government has to place a health warning on ads promoting its main product:
"San Francisco is set to become the first U.S. city to require health warnings on advertisements for soda and other sugar-added drinks after the beverage industry failed Tuesday to get a court order to stop it."
The law was implemented over the summer and it designed to shape ads on billboards or other public spaces, such as bus stops. The law stipulates the wording of the warning that should accompany these adds in future:
"WARNING: Drinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay. This is a message from the City and County of San Francisco."
All legal attempts by the American Beverage Association to block the law have failed on the radical idea that it is well within the rights of governments to pass laws that are designed to protect their citizens. Increasingly for the soda industry in the U.S., this is a position that is gaining ground:
"Philadelphia is weighing a tax of 3 cents per ounce on drinks with added sugars. The Food and Drug Administration has proposed listing the amount of added sugar on nutrition labels and recommended consumption levels. Lawmakers in states including California and New York also have proposed warning labels on beverage containers but have failed to gain traction."
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Soda Industry Fails to Stop San Francisco Law Targeting Sugar
By Mike Esterl
May 18, 2016
The Wall Street Journal

Tuesday, October 4, 2016

Strategic CSR - Pfizer

The article in the url below reports an important step in the campaign against the death penalty in the U.S.:
"The pharmaceutical giant Pfizer announced on Friday that it had imposed sweeping controls on the distribution of its products to ensure that none are used in lethal injections, a step that closes off the last remaining open-market source of drugs used in executions."
Pfizer is a late-comer to this debate, joining a long list of companies that have objected to the use of their drugs in executions:
"More than 20 American and European drug companies have already adopted such restrictions, citing either moral or business reasons. Nonetheless, the decision from one of the world's leading pharmaceutical manufacturers is seen as a milestone."
This announcement is important because Pfizer was the last legitimate source for these drugs:
"'With Pfizer's announcement, all F.D.A.-approved manufacturers of any potential execution drug have now blocked their sale for this purpose,' said Maya Foa, who tracks drug companies for Reprieve, a London-based human rights advocacy group. 'Executing states must now go underground if they want to get hold of medicines for use in lethal injection.'"
Rather than taking these obstacles as an indication of social disapproval, however, those U.S. states still executing their citizens (and the list is growing short) are improvising:
"Some states have used straw buyers or tried to import drugs from abroad that are not approved by the Food and Drug Administration, only to see them seized by federal agents. Some have covertly bought supplies from loosely regulated compounding pharmacies while others, including Arizona, Oklahoma and Ohio, have delayed executions for months or longer because of drug shortages or legal issues tied to injection procedures. A few states have adopted the electric chair, firing squad or gas chamber as an alternative if lethal drugs are not available."
As sources dry up, states have refused to reveal how they obtained the drugs they use. While possibly unconstitutional (in that it makes it impossible for undue suffering to be avoided), the resulting variable quality of drugs has produced alarming results:
"Many states have experimented with new drug combinations, sometimes with disastrous results, such as the prolonged execution of Joseph R. Wood III in Arizona in 2014, using the sedative midazolam. The state's executions are delayed as court challenges continue. Under a new glaring spotlight, deficiencies in execution procedures and medical management have also been exposed. After winning a Supreme Court case last year for the right to execute Richard E. Glossip and others using midazolam, Oklahoma had to impose a stay only hours before Mr. Glossip's scheduled execution in September. Officials discovered they had obtained the wrong drug, and imposed a moratorium as a grand jury conducts an investigation."
Pfizer, for its part, is presenting this decision as a moral stand, even though the company has taken its time getting to this point:
"'Pfizer makes its products to enhance and save the lives of the patients we serve,' the company said in Friday's statement, and 'strongly objects to the use of its products as lethal injections for capital punishment.' Pfizer said it would restrict the sale to selected wholesalers of seven products that could be used in executions. The distributors must certify that they will not resell the drugs to corrections departments and will be closely monitored."
Pfizer's decision is just the latest in a long line of indicators that the death penalty is becoming increasingly impractical to implement, even while it remains a relatively popular punishment option in the U.S.:
"For a host of legal and political reasons as well as the scarcity of injection drugs, the number of executions has declined, to just 28 in 2015, compared with a recent peak of 98 in 1999, according to the Death Penalty Information Center."
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Pfizer Blocks the Use of Its Drugs in Executions
By Erik Eckholm
May 13, 2016
The New York Times

Friday, September 30, 2016

Strategic CSR - Coca-Cola

Recently, Coca-Cola released a full-page ad making a bold claim:
"To commemorate Coca-Cola achieving our 2020 water replenishment goal five years early — and becoming the first Fortune 500 company to hit such an aggressive target – we published this full-page ad in The New York Times on Aug. 29, 2016."
Specifically, the ad claims that:
"Working with our bottling partners and organizations across government, civil society and the private sector, Coca-Cola exceeded our goal of giving back to communities and nature the equivalent of all the water we use in our beverages and their production."
In other words, Coke is announcing it is now water-neutral. Of course, it still draws water from virgin resources, but it claims that it makes-up an equivalent amount through water conservation programs, run both by itself and other organizations. Coke also claims that the offset has been verified by "third-party assessors." If true, this is an important step forward by a company that is a water-intensive as Coke. The ad can be seen here:
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Wednesday, September 28, 2016

Strategic CSR - Financial Advisers

The research summarized in the article in the url below contains some worrying information about the financial advising industry:
"[Research published by] the University of Chicago and University of Minnesota found that 7 percent of financial advisers have been disciplined for misconduct that ranges from putting clients in unsuitable investments to trading on client accounts without permission. That's a troubling mark for an industry that relies on the trust of clients."
More worrying is that the 7% number is only an average. While the 'cleanest' companies such as Morgan Stanley and Goldman Sachs had less than 1% of their advisers who had been disciplined in this way, in some companies (which interestingly, given recent events, includes Wells Fargo) the number was above 15% and, in other companies, it was higher still:
"Nearly 20 percent of financial advisers at Oppenheimer & Co., with more than 2,000 advisers counted in the study, have misconduct records, according to the new paper."
Also disconcerting was that, although these advisers were initially punished, there did not appear to be any lasting stigma attached to their transgressions. In fact, it looks as though whatever drove them to transgress in the first place is a skillset that is in demand in this industry:
"Misconduct isn't left unchecked by financial firms. About half of advisers found to have committed misconduct are fired—although 44 percent of advisers who leave a job due to misconduct are hired by another firm within a year, according to the paper."
This is in spite of an elevated risk of future transgressions by past offenders:
"Many fired advisers end up moving to firms that have higher rates of misconduct than their previous employer did, and they become repeat offenders. 'Prior offenders are five times as likely to engage in new misconduct as the average financial adviser,' the study found."
For a list of the Top 10 and Bottom 10 companies in the industry in terms of the percentage of advisers who have been disciplined, see:
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It Just Got Even Harder to Trust Financial Advisers
By Suzanne Woolley
March 1, 2016
Bloomberg Businessweek

Monday, September 26, 2016

Strategic CSR - Best Buy

At present, there is a cost to recycling e-waste (Chapter 13, p297). Given the drop in global commodity prices in materials such as copper and plastics, it remains significantly cheaper to buy these components on the open market than it is to strip down used consumer electronics goods and recycle the components that can be salvaged. In spite of this, Best Buy, the consumer electronics retailer, sees value in establishing a reputation for itself as the most progressive recycler of e-waste among retailers:
"To date, the retailer has accepted junky gadgets and appliances from anyone – not just customers – for free."
As discussed in the article in the url below, for Best Buy the commitment is far from symbolic. In particular:
"In its annual report last year, the retailer said it had collected more than 126m pounds of consumer electronics and 110m pounds of appliances during that fiscal year, helping it meet its goal of collecting 1bn pounds of electronic waste. The company has since vowed to double that number by 2020."
As a result of current market conditions, however, the firm is beginning to reconsider its recycling model:
"Earlier this month, the retailer announced it would start charging customers $25 for every television and computer monitor dropped off at a retail outlet as part of its in-store recycling program. Because of this, Best Buy will no longer accept television and computer monitors from customers in Pennsylvania and Illinois, as both states prohibit companies from collecting fees to help defray recycling costs. It will still recycle hundreds of other items for free."
Laura Bishop, vice president of public affairs and sustainability at Best Buy, sees this area as becoming increasingly challenging for Best Buy and, at some point, will cross over from being a competitive advantage to a distinct disadvantage relative to its competitors:
"'E-waste volume is rising, commodity prices are falling and global outlets for recycled glass, a key component of TVs televisions and monitors, have dramatically declined,' she wrote. 'More and more cities and counties have cut their recycling programs for budget reasons, limiting consumer options even further. While providing recycling solutions for our customers is a priority, Best Buy should not be the sole e-cycling provider in any given area, nor should we assume the entire cost.' … Many of Best Buy's biggest competitors, such as Amazon and Walmart, don't offer recycling, or their programs don't cover nearly as many personal gadgets and household items. Staples runs a similar recycling program to Best Buy, but it has a more modest goal of recycling 40m pounds of e-waste by 2020."
It is only reasonable to expect firms to promote recycling if that is behavior that is rewarded by stakeholders. Whether government or customers or employees (or some other stakeholder), it is up to us to make it in Best Buy's interests to become a leader in this field. In other words, it is stakeholder response that determines whether this (or any) action can form the basis for a competitive advantage. If stakeholders provide that incentive, Best Buy will lead and its competitors will soon follow.
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Best Buy's e-cycle program is ambitious, successful and financially unsustainable
By Alison Moodie
February 23, 2016
The Guardian

Thursday, September 22, 2016

Strategic CSR - Anthropocene

The article in the url below announces the dawn of a new geological epoch – the Anthropocene. This new epoch, which is estimated to have begun in 1950, is the result of human impact on the planet's ecosystem and replaces the Holocene epoch:
"The current epoch, the Holocene, is the 12,000 years of stable climate since the last ice age during which all human civilisation developed. But the striking acceleration since the mid-20th century of carbon dioxide emissions and sea level rise, the global mass extinction of species, and the transformation of land by deforestation and development mark the end of that slice of geological time, the experts argue. The Earth is so profoundly changed that the Holocene must give way to the Anthropocene."
The graphic accompanying the article demonstrates the short period of the planet's history within which humans have existed. Of course, this also ably demonstrates how we have been able to screw things up in such a short period of time:
The designation of a new geological epoch is something that is not taken lightly. Currently, the proposal to label the current period 'Anthropocene' is before the International Geographic Congress, which met recently in Cape Town:
"To define a new geological epoch, a signal must be found that occurs globally and will be incorporated into deposits in the future geological record. … For the Anthropocene, the best candidate for such a [signal] are radioactive elements from nuclear bomb tests, which were blown into the stratosphere before settling down to Earth. … Other [signals] being considered as evidence of the onset of the Anthropocene include the tough, unburned carbon spheres emitted by power stations. … Other candidates include plastic pollution, aluminium and concrete particles, and high levels of nitrogen and phosphate in soils, derived from artificial fertilisers."
There are still several steps in the process that need to be taken before the new label can be officially declared:
"The 35 scientists on the WGA [working group seeking to define the new epoch] – who voted 30 to three in favour of formally designating the Anthropocene, with two abstentions – will now spend the next two to three years determining which signals are the strongest and sharpest. Crucially, they must also decide a location which will define the start of the Anthropocene. Geological divisions are not defined by dates but by a specific boundary between layers of rock or, in the case of the Holocene, a boundary between two ice layers in a core taken from Greenland and now stored in Denmark. … Once the data has been assembled, it will be formally submitted to the stratigraphic authorities and the Anthropocene could be officially adopted within a few years. … Despite the WGA's expert recommendation, the declaration of the Anthropocene is not yet a foregone conclusion."
Whether or not the new epoch is approved, the evidence supporting the devastating effect of human existence on the planet's evolution is not in dispute. As the article concludes, human activity has:
- "Pushed extinction rates of animals and plants far above the long-term average."
- "Increased levels of climate-warming CO2 in the atmosphere at the fastest rate for 66m years."
- "Put so much plastic in our waterways and oceans that microplastic particles are now virtually ubiquitous."
- "Doubled the nitrogen and phosphorous in our soils in the past century with fertiliser use."
- "Left a permanent layer of airborne particulates in sediment and glacial ice such as black carbon from fossil fuel burning."
Whatever we call the period in which we dominate life on Earth, the challenge is to see if we can rectify some of the damage before it is too late.
Take care
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The Anthropocene epoch: Scientists declare dawn of human-influenced age
By Damian Carrington
August 29, 2016
The Guardian

Tuesday, September 20, 2016

Strategic CSR - Values

The article in the url below explores the muddy waters of company values. In a somewhat sarcastic manner, it questions the value of values, both for the company that adopts them and the employees who are supposed to embody them:
"Maitland, the financial PR company, has just finished an audit of the values of the FTSE 100, and found that three words — integrity, respect and innovation — crop up over and over again. What a splendid trio they sound. Alas, all are duds. Integrity is particularly feeble. It makes no sense to assert integrity as a value, as no one would ever dream of asserting the reverse. Respect sounds good, but is meaningless unless it is made clear (as it never is) who is meant to be respected. Some people deserve respect; others do not. And innovation makes its way on to the list more as a wish from frumpy companies to be seen as a little groovier."
Apart from the fact that few employees remember what their company's values are, the author suggests that the main problem with espoused values is that they make companies sound desperate. Moreover, they expose companies to charges of hypocrisy as soon as someone in the firm breaks the values:
"First, self-describing is always dodgy. If someone goes out of their way to tell me they are honest or creative, I immediately conclude the reverse. Second, far from being a point of difference, values make every company look the same, as there is only a finite list of desirable corporate traits. And third, public professions are a hostage to fortune. Volkswagen must be ruing the day it made 'sustainability' a core value."
Further critiquing the report, the author concludes that, rather than seeking the ideal set of values, companies should abandon the search altogether:
"The report then questions how many values a company should have and concludes — entirely arbitrarily — that the perfect number is four. For me the ideal number is zero. Values may be important, but they are also slippery. The minute anyone tries to write them down they become trite and unhelpful."
As evidence in support of her argument, the author presents some compelling data:
"Seventeen of Britain's 100 biggest companies are sensible enough to have no values at all — or at least none they care to disclose on their websites. And how do they get along without them? … I asked [the FT's] statistics department to crunch some numbers for me and compare an index made up of the 17 values refuseniks with one made of 83 who are toeing the line. … Over the past 10 years the 17 valueless companies have outperformed the others in the FTSE 100 Index by about 70 per cent."
For the graph revealing this disparity in performance, see:
Take care
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Hands up if you can list what your company's values are
By Lucy Kellaway
October 5, 2015
Financial Times
Late Edition – Final

Friday, September 16, 2016

Strategic CSR - Lobbying

The article in the url below indicates the extent of what we are up against in the fight to establish climate change as the preeminent threat facing humanity today:
"ExxonMobil, Royal Dutch/Shell, and three oil-industry groups together spend $115 million a year on advocacy designed to 'obstruct' climate change policy, according to new estimates released by Influence Map, a British nonprofit research organization."

In particular:
"ExxonMobil's 'direct spending on climate obstruction,' according to [Influence Map's] report, may be $27 million a year. Shell's estimated spending is $22 million. The American Petroleum Institute, the oil industry's U.S. trade group, may spend up to $65 million a year, and two smaller groups—the Western States Petroleum Association (WSPA) and the Australian Petroleum Production & Exploration Association—are estimated to spend about $9 million together."

In contrast:
"Investor groups that push for strong climate policies spend less than $5 million a year on advocacy."
Although there is some indication that energy companies are beginning to shift their position on climate change (in particular, Exxon's support for a carbon tax), we still have not worked out how we are going to prevent these companies from exploiting all of their known reserves. For more detail on how the oil lobby seeks to obstruct progress on climate change policy, see the chart accompanying the article:
Have a good weekend
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Trying to Put a Price on Big Oil's 'Climate Obstruction' Efforts
By Eric Roston
April 6, 2016
Bloomberg Businessweek

Wednesday, September 14, 2016

Strategic CSR - McDonald's

In my strategic management course this spring, a student reminded me of the McDonald's Peace Theory – the idea that no countries that have McDonald's stores within their borders have ever gone to war with each other. The theory came from Thomas Friedman of The New York Times and can be traced to the article in the url below, which he wrote in 1996:
"So I've had this thesis for a long time and came here to Hamburger University at McDonald's headquarters to finally test it out. The thesis is this: No two countries that both have a McDonald's have ever fought a war against each other. The McDonald's folks confirmed it for me. I feared the exception would be the Falklands war, but Argentina didn't get its first McDonald's until 1986, four years after that war with Britain. Civil wars don't count: McDonald's in Moscow delivered burgers to both sides in the fight between pro-and anti-Yeltsin forces in 1993. Since Israel now has a kosher McDonald's, since Saudi Arabia's McDonald's closes five times a day for Muslim prayer, since Egypt has 18 McDonald's and Jordan is getting its first, the chances of a war between them are minimal. But watch out for that Syrian front. There are no Big Macs served in Damascus. India-Pakistan? I'm still worried. India, where 40 percent of the population is vegetarian, just opened the first beefless McDonald's (vegetable nuggets!), but Pakistan is still a Mac-free zone."
The theory held for quite some time and is a testament, not to the unifying power of McDonald's 'food' (with 'food' placed firmly in inverted commas), but to the power of capitalism to promote societal progress. It was broken only recently after Russia invaded Ukraine:
"Obviously, I say all this tongue in cheek. But there was enough of a correlation for me to ask James Cantalupo, president of McDonald's International and its de facto Secretary of State, what might be behind this Golden Arches Theory of Conflict Prevention -- which stipulates that when a country reaches a certain level of economic development, when it has a middle class big enough to support a McDonald's, it becomes a McDonald's country, and people in McDonald's countries don't like to fight wars; they like to wait in line for burgers. Or as Mr. Cantalupo puts it: 'We focus our development on the more well-developed economies -- those that are growing and those that are large -- and the risks involved in being adventuresome [for those growing economies] are probably getting too great.'"
What is also interesting is that, following Russia's invasion, McDonald's closed its three stores in Crimea in 2014 and withdrew from the country (see here). As the company said at the time:
"Like many other multi-national companies, McDonald's is currently evaluating potential business and regulatory implications which may result from the evolving situation in Crimea. … We believe it is prudent and responsible to sort through these details thoroughly. Additionally, due to the suspension of necessary financial and banking services, we have no option but to close our three restaurants in Crimea. It is important to note that this is strictly a business decision which has nothing to do with politics. We are taking numerous steps to support our employees during this time. We hope to reopen our restaurants soon so we can welcome back our loyal customers. "
This discussion in my class arose in response to a quote from Micklethwait and Wooldridge's great book, The Company: A Short History of  Revolutionary Idea (2003, pxv), which I assign as a reading for my students:
"The most important organization in the world is the company: the basis of the prosperity of the West and the best hope for the future of the rest of the world."
The idea of that particular class is to discuss the history of the corporation, how it evolved to where it is today (a result of a series of deliberate political and judicial decisions), in order to better understand why concepts like the LLC, limited liability, corporate personhood, boards of directors, and investor relations with the firm all exist in the way that they do today. The point more relevant to this Newsletter, however, is the status of the corporation as the dominant institution of our time. This lies in contrast to the state, the political party, the Church, and the family as dominant institutions of previous times. While the 'value' of specific corporations to society will vary (and, in my opinion, McDonald's does not rank very highly), the broader point about the power of capitalism to advance societies and the danger of authoritarian governments to impede societies is reinforced powerfully by the McDonald's Peace Theory. As Friedman notes:
"In the 1950's and 60's developing countries thought that having an aluminum factory and a U.N. seat was what made them real countries, but today many countries think they will have arrived only if they have their own McDonald's and Windows 95 in their own language."
I am sure there are more elevated signals of 'progress.' Nevertheless, those metrics (assuming the latest version of Windows) are as good as any others in determining what counts as progress today in many countries that wish they had economies as developed as ours, along with the companies that generate that progress:
"Said Mr. Cantalupo: 'I feel these countries want McDonald's as a symbol of something -- an economic maturity and that they are open to foreign investments. I don't think there is a country out there we haven't gotten inquiries from. I have a parade of ambassadors and trade representatives in here regularly to tell us about their country and why McDonald's would be good for the country.'"
Take care
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Foreign Affairs Big Mac I
By Thomas L Friedman
December 8, 1996
The New York Times
Late Edition – Final