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

To sign-up to receive the CSR Newsletters regularly during the fall and spring academic semesters, e-mail author David Chandler at david.chandler@ucdenver.edu


Thursday, May 3, 2018

Strategic CSR - 5e

 
This is the last CSR Newsletter of the Spring semester.
Have a great summer and I will see you in August!
 
 
I am happy to announce that Sage has asked me to write the fifth edition of Strategic CSR. I plan to do that this Fall, with a publication date in the summer of 2019.
 
As such, I would like to ask for your feedback on the 4e, please. Sage is conducting a formal review of the 4e, so has probably contacted some of you for your assistance with that. If you are an adopter and Sage contacts you, please help if you can. You know the book as well as anyone and your feedback is invaluable to making improvements for the 5e.
 
If Sage has not contacted you, however, and you have any thoughts/ideas on how the book can be improved, please let me know. This includes content currently in the 4e that you would like to see retained for the 5e, content that you think can be excluded in the 5e, as well as new content that is currently missing.
 
As ever, your thoughts and comments are welcome, as well as any questions you have about the book, online simulation (http://www.strategiccsrsim.com/), or, of course, the Newsletters.
 
Thank you for your support.
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 

Tuesday, May 1, 2018

Strategic CSR - Inequality

I have been doing some thinking recently as to whether the bifurcation of society in terms of income/wealth disparity is a natural consequence of market forces. Is it an inherent aspect of capitalism that wealth will eventually concentrate among a small subset of the population? Or, alternatively, can capitalism be tweaked to ensure a more consistent, level (read sustainable) playing field that allows wealth to follow ability from generation to generation?
 
I was introduced to this challenge via the fantastic (and extremely prescient) work of the Human Services Coalition (now Catalyst Miami, http://catalystmiami.org/) in Miami in the early 2000s. Daniella Levine (now an elected official on the Board of County Commissioners in Miami), who founded HSC, saw earlier than most that the middle class in Miami was being hollowed-out and that this would be the future for other major US cities.
 
Given the political upheavals we have seen in the past couple of years in the developed economies, and that these have largely been attributed to social inequality (as a result of globalization), my question then is: Is this an inevitable outcome of capitalism? In other words, given human nature (and our tendency towards inertia, biases, and shortcuts), is it possible to design a market (driven largely by self-interest, which rewards specific skills/merit) that, over time, results in more equitable opportunity? My sense is that it might not be possible. If so, and if we accept that altruism is an unrealistic model on which to structure society (and every previous attempt suggests this is true), what alternative structure would produce something more equitable? And, more importantly, how do we get there? To some extent, this is accounted for in Strategic CSR via an empowered stakeholder model. But, in order for it to work at the extreme, requires a significant correction – an outcome that history teaches us is usually violent and, as a result, worth avoiding (if possible).
 
Over the summer, I plan to think more about this. If anyone has any ideas/thoughts, I would love to hear them.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 

Thursday, April 26, 2018

Strategic CSR - Environmentalism

In celebration of Earth Day this past Sunday, the article in the url below summarizes the history of the environmental movement's evolving relationship with business:
 
"Now widely known as Third Wave environmentalism, the idea first became a reality in 1990, when McDonald's teamed up with my organization, the Environmental Defense Fund, to reduce more than 300 million pounds of solid waste by doing away with its foam-clamshell packaging. The Third Wave built on the progress of the first two: Teddy Roosevelt-era land conservation, followed by mid-20th-century antipollution laws like the Clean Air Act."
 
The article then goes beyond that to argue that this relationship has entered a new phase of much closer co-operation/co-ordination:
 
"Market-based approaches and corporate partnerships are standard practice today. Yet too many environmentalists still regard business as the enemy, and vice versa. That may finally be changing, because an emerging wave of environmental innovation is making these partnerships more productive, and their results more precisely measurable. Call it the Fourth Wave of environmental progress: Innovation that gives people new ways to solve environmental problems."
 
For example:
 
"Last year, … Smithfield Foods, the world's largest pork producer, joined with EDF and other groups to reduce fertilizer waste on the vast network of farms from which it purchases roughly two million tons of corn each year. The move is part of Smithfield's goal of cutting supply-chain greenhouse-gas emissions 25% by 2025. The company is the first in its industry to set such a target, and its progress is enabled by corn growers' increasing investment in tools that help determine the most efficient ways to apply fertilizer."
 
This line of argument is perhaps all the more surprising (and welcome) because it is written by the current president of the Environmental Defense Fund. He argues that the fourth wave of environmentalism is substantively different to each of the three preceding waves, principally in terms of the complexity of the co-operation between business and environmental activists:
 
"Where Third Wave partnerships tended to be one-on-one, the Fourth Wave boasts many multilateral partnerships. EDF's work to measure methane emissions from the oil-and-gas supply chain involved scores of academic institutions and energy companies, and now we're working with the Netherlands Institute for Space Research to derive emissions data from the European Space Agency's Sentinel-5P satellite, sent into orbit last year. More than 400 companies have joined Walmart in its effort to reduce greenhouse-gas emissions in its global supply chain by one billion tons—more than the total annual emissions of Germany."
 
The key seems to be to leverage evolving technology:
 
"In any era, those doing the hard work of solving environmental problems take advantage of the best available tools, and in this era those tools include innovations that can help drive transparency, responsibility and low-cost solutions. Technology can obviously be used for good or ill. But when sensors, machine learning and data analytics are used to shape smart policy, rein in free riders, and reward corporate responsibility, they will enable changes that help people and nature prosper."
 
Perhaps, but I would think the more difficult transition is mental. The shift from seeing business as the 'enemy' to seeing it as an essential part of the solution is transformational. It is hard for activists committed to an ideologically pure vision of the environment to shift to accepting that some pollution is an inevitable cost to economic and social progress.

Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Fourth Wave Environmentalism Fully Embraces Business
By Fred Krupp
March 21, 2018
The Wall Street Journal
Late Edition – Final
A17
 

Tuesday, April 24, 2018

Strategic CSR - Human psychology

The article in the url below presents a fascinating, counter-intuitive perspective on the SRI industry:
 
"An analysis of fund inflows into U.S. stock ETFs and mutual funds that invest with a social, governance or environmental purpose (often called sustainable, ESG or impact funds) paints an interesting picture of investor psychology. Namely, while most traditional investors run for the hills when news comes out that conflicts with their expectations or ideas about the world, sustainable investors appear to dedicate more of their money to the cause when news or policy decisions that go against their values are announced."
 
The empirical support for this conclusion is fascinating:
 
"In perhaps the clearest representation of this, during December 2016, one month after the election of Donald Trump, a staggering $2.1 billion flowed into U.S. equity sustainable funds—representing a 3.5% increase in the category's total assets under management as of Nov. 1."
 
How exceptional was this "Trump bump"?
 
"The 'Trump bump' (which was the largest single monthly increase into the sustainable-investing class ever) was 170% larger than the next-largest one-month inflow. And the growth has continued. Since the election, $8.1 billion has flowed into these funds, a 13.1% jump from the assets under management on the eve of the 2016 presidential election—by far the greatest percentage inflow into any class or style of fund (e.g., value, growth, small-cap funds) since the election."
 
The authors extended their investigation, also looking at flows into environmental funds following the passing of COP 21 in Paris and, later, the announcement by the U.S. that it was withdrawing from the pact:
 
"In the month following the Paris Climate Agreement (which was signed in December 2015), $50.1 million flowed out of environmental-focused funds (amounting to a 1.05% drop in assets under management from the previous month). Conversely, when President Trump withdrew the U.S. from the climate agreement in June 2017, $98.5 million flowed into them (a 1.32% increase in assets under management)."
 
Similarly, the #MeToo movement appears to have influenced money flows into and out of social funds that employ gender or diversity filters:
 
"Surrounding the accusations of sexual abuse that came to light around Hollywood's Harvey Weinstein, Kevin Spacey and other celebrities, iShares MSCI KLD 400 Social ETF (DSI)—the largest socially conscious ETF—saw inflows of $48 million during November 2017. This was the fund's single largest monthly inflow, pushing it close to the $1 billion mark in assets. And, it isn't just individual investors who seem to be moving their money. In the four months following the news about Mr. Weinstein, TIAA-CREF Social Choice Equity Fund institutional class (TISCX) jumped $211 million (starting from $1.9 billion)—a striking 11% inflow."
 
People are both fascinating and frustrating, which at least keeps all of us social scientists in a job!
 
"Many factors are driving the increasing popularity of sustainable investing, including demographic demand (high among millennials and women), generational wealth transfer, a strong market and new sustainable financial products. But macro political and cultural trends are clearly the largest drivers—specifically, negative news that conflicts with sustainable investors' views of the world. Asset managers and wealth advisers should take note: Politics is personal, especially when it comes to investing."
 
This study reminds me of patterns around gun sales – when Obama (a proponent of gun reform) was elected, gun sales spiked (due to a fear that he wanted to remove guns from society by making them illegal), while sales dropped after the election of Trump (a Second Amendment supporter), leading to the bankruptcy of the 200-year-old gun-maker Remington in March. It also reminded me of subscriptions to The New York Times or viewership of CNN, which jumped the more that these media institutions have come under attack for their supposedly biased reporting.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Ethical Investing Seems to Thrive on 'Bad' News
By Derek Horstmeyer
April 9, 2018
The Wall Street Journal
Late Edition – Final
R5
 

Thursday, April 19, 2018

Strategic CSR - Carbon emissions

The article in the url below demonstrates how far we have to go before we can even begin to think about achieving sustainability. In spite of all the warning signals, we refuse to even begin taking the steps necessary to preserve the planet:
 
"For now, however, we're still moving in the opposite direction: Carbon dioxide emissions from the use of coal, oil and natural gas increased 1.4 percent globally in 2017 after holding steady for the previous three years, the International Energy Agency reported on Thursday. That's the equivalent of adding 170 million new cars to the road worldwide."
 
In particular, there are five drivers of increased carbon emissions identified by the article, each of which would be difficult to surmount (given human nature and the rapidly expanding middle class worldwide); together, they represent a formidable challenge. First, is the growth in Asia:
 
"Roughly two-thirds of last year's emissions increase came from Asia, where fast-growing countries like China, India and Indonesia continue to rely heavily on fossil fuels as they lift themselves out of poverty."
 
Second, is the insufficient growth of renewable energy:
 
"Last year's 'unprecedented' growth in renewables, the I.E.A. said, satisfied only about one-quarter of the increase in global energy demand as the world's economy boomed. Fossil fuels supplied the rest."
 
Third, is the resilience of coal:
 
"… coal use rebounded slightly in 2017, rising by 1 percent, driven in part by an increase in coal-fired power in Southeast Asia. A particularly hot summer in China also led the country to run its existing coal plants more often to power air conditioning."
 
Fourth, is growing affluence and the purchases we make that reflect it, in particular cars:
 
"Demand for oil rose 1.6 percent last year, much faster than the average annual pace over the previous decade. As oil prices have declined, more people in the United States and Europe are buying larger S.U.V.s, pushing up transportation emissions further."
 
Fifth, is the insufficient gains in energy efficiency:
 
"In 2017, the energy intensity of the global economy — a measure of efficiency — improved by just 1.7 percent, a slower pace than in each of the previous three years. The agency noted that many countries appear to be easing up on government policies to improve energy efficiency."
 
A second article on the same day and the same page of The New York Times reminds us that carbon is only one of the many toxic materials we pump into the environment at an unsustainable rate:
 
"In the Pacific Ocean between California and Hawaii, hundreds of miles from any major city, plastic bottles, children's toys, broken electronics, abandoned fishing nets and millions more fragments of debris are floating in the water — at least 87,000 tons' worth, researchers said. …  [The so-called garbage patch] is four to 16 times bigger than previously thought, occupying an area roughly four times the size of California and comprising an estimated 1.8 trillion pieces of rubbish."
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Behind the Increase in Gas Emissions Last Year
By Brad Plumer
March 23, 2018
The New York Times
Late Edition – Final
A8
 

Tuesday, April 17, 2018

Strategic CSR - Carbon pricing

This week's Newsletters will focus on our consumption of carbon, either directly (via emission levels) or indirectly (via market pricing). To begin, the article in the url below discusses the range of efforts being implemented to tackle climate change in the way recommended by most economists – to price carbon emissions. At some level, this is gaining traction among some governments that are finally beginning to take climate change policy seriously:
 
"A total of 41 OECD and G20 governments have announced either a carbon tax or a cap-and-trade scheme, or both. Add state and local schemes, and they cover 15% of the world's emissions, up from 4% in 2010."
 
While impressive on the surface, such schemes (cap-and-trade, in particular) are not comprehensively exposed to market forces and, as such, are subject to distorting political influences. Seeing the day when carbon taxes are coming, however, companies are not waiting to be told what to do:
 
"Companies are moving faster than many governments on carbon pricing. Nearly 1,400 firms globally with combined revenues of $7trn already use, or soon will, 'internal carbon prices.'"
 
This is happening at a pace that is not widely recognized:
 
"Of the 6,100-odd firms which report climate-related data to CDP, a British watchdog, 607 now claim to use 'internal carbon prices.' The number has quadrupled since CDP first began posing the query in its annual questionnaire three years ago. Another 782 companies say they will introduce similar measures within two years. Total annual revenues of these 1,389 carbon-price champions amount to a hefty $7trn. Most come from rich countries, but more developing-world firms are joining them."
 
In most cases, firms charge departments internally for the amount of carbon they use (whether in production or executives flying to meetings overseas), with the goal of reducing the firm-level total. Microsoft and Disney are both mentioned in the article as early adopters. Shell is also a proponent:
 
"In his day job as chief executive of Royal DSM, Mr Sijbesma has made the Dutch food producer examine all proposed ventures to check whether the sums still add up if a ton of carbon dioxide cost €50 ($60), well above the going rate of €6 or so in the European Union's emissions-trading system, which is kept low by an oversupply of permits. Where they do not, alternative feedstocks or cleaner energy suppliers must be found. If a project still looks unprofitable, it could be discarded altogether."
 
What I found interesting in the article, however, is the extent to which firms are differentiating between the short and long term in their planning:
 
"Besides assessing capital projects at €30 per ton of carbon dioxide, Saint-Gobain, a French maker of building materials, factors in a higher price of €100 per ton when choosing between long-term research-and-development projects. AkzoNobel, a Dutch chemicals giant, uses €50 per ton for most investments, but double that for those with lifetimes of 30 years or more."
 
Needless to say, implementation is inconsistent across firms. Nevertheless, the fact that so many firms are innovating in this area suggests there is support for governments to introduce a carbon tax, which immediately exposes all carbon-pricing schemes to market forces and all firms to the full costs of production. When (not if) this happens, those firms that are being the most creative and experimental today will see the largest and quickest benefit.
 
"Such voluntary steps will not stop the planet sizzling. But they help firms prepare for when governments do bring in pricing schemes. In December China launched a market for trading carbon emissions which is the world's largest. The clearest sign of progress would be for similar policies elsewhere to render internal exercises redundant."
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Low-carb diet
January 13, 2018
The Economist
58
 

Thursday, April 12, 2018

Strategic CSR - Shareholder democracy

If the fiction of shareholder democracy needed any more exposure, the article in the url below highlights the weak powers that shareholders have to influence directly the running of corporations. In particular, the article focuses on what it terms "zombie directors":
 
"They're board members who've failed to get a majority of shareholder votes in elections but continue to serve. From 2012 to 2016 there were a total of 225 instances where directors of public companies got less than half the votes cast, but only 44 directors, or 20 percent, left within the next election cycle, according to a Bloomberg analysis of data from ISS Corporate Solutions Inc. The directors who stayed included 30 who were snubbed by shareholders more than once."
 
In contrast to many shareholder votes, where the results are nonbinding on management, director elections are binding. Rather than a majority needed to be elected, however, most firms allow directors to be elected with a plurality of votes. This means merely that they need more votes than any other candidate and, since most directors run unopposed, 1 vote is all they need to be duly elected:
 
"In response to investor and activist complaints, companies have been agreeing to new standards under which directors who don't receive a majority of votes have to submit a letter of resignation. Currently, 54 percent of companies require a director to do so. The hitch: The board usually isn't required to accept those resignations and can reinstate the unelected director."
 
The article lists a number of such examples, with some directors failing to receive a majority of votes multiple times:
 
"In each case, the directors reviewed the voting results and chose not to accept the resignations, citing their colleagues' value to the company, according to regulatory filings."
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
With 'Zombie' Directors, It's the Board of the Living Dead
By Jeff Green and Alicia Ritcey
August 10, 2017
Bloomberg Businessweek
 

Tuesday, April 10, 2018

Strategic CSR - A 'professional'

The article in the url below was written by Frank Abrams for HBR in 1951. At the time, Abrams was 'chairman' of Standard Oil of New Jersey (which later became Exxon). I learned two things about this article from the late, great Bill Frederick. First, that this article (and not the better-known 1953 book by Howard Bowen, Social Responsibilities of the Businessman) represented the beginning of the CSR movement in the U.S.; and, second, that the article was actually ghost-authored by Courtney Brown when she was Dean of the Business School at Columbia University – Brown had previously worked for Abrams at Standard Oil.
 
I assign this article for my students in the first class of my strategic management course. I do so because Abrams' main point is that, in 1951, the job of being a manager was about to become a profession (and, by implication, the MBA was the vehicle by which this was to occur):
 
"Briefly, it seems to me that business management in the United States is acquiring more and more the characteristics of a profession."
 
As I point out to my students, however, today, we are further from that point than we were in 1951. This is clear when you consider the three main characteristics that define what it means to be a professional:
  1. A sense of duty beyond the self.
  2. A certified body of knowledge (governed by an accreditation organization).
  3. A code of ethics.
By these criteria, clearly, a manager is not a professional, even though most business schools label their MBA programs things like the 'professional program.' Nevertheless, it is worth emphasizing what might have been. What strikes me in particular about the article is Abram's vision of the high sense of duty that a manager has to society:
 
"There is no higher responsibility, there is no higher duty, of professional management than to gain the respect of the general public through objective participation in, and consideration of, national questions, even though these questions in many cases do not relate directly to their immediate business problems."
 
In fact, Abrams refers to the work of a manager as something closer to a patriotic duty:
 
"There is an underlying patriotic motive in all of this which an intelligent management thoroughly understands. In a democratic state, only those institutions which so conduct themselves as to deserve, secure, and hold public confidence can survive and prosper. It is a plain ordinary fact that our country, to be strong and constructive in a troubled world, is dependent upon free, competitive institutions to give its people opportunity of self-expression and advancement. If we are to be helpful in advancing our American way of life, we must be willing to show by example that individual objectives can best be served when they are identified with the common good."
 
The reason that society confers professional status on a particular job is, essentially, for protection. For example, there is a reason why society does not let me open a hospital and start operating on people (like a medical doctor), because they would die if I did. That is the same reason why society does not let me design and build buildings (like an architect), because those structures would fall down. In other words, in order to protect against the potential harm that can be caused by poorly-trained people doing those essential jobs (even if they are confident that they can), society sets very high standards (a form of quality assurance) to minimize the risks. In return for the strict requirements demanded in order to become a professional, society grants a monopoly to that group to practice that particular job (and reap the rewards for doing so).
 
What is important about this is that there is no such requirements to start up a business and call yourself a manager. Society has decided that it is willing to make the trade-off between risk and reward for business. If you have an idea and think it will be successful in the marketplace, you can form a company and try it out with very few barriers in your way. Of course, if you fail, the business can cause harm, but society is willing to take that risk in the hope of fostering the next Google, or Amazon, or Apple, or whatever the next life-changing company will be.
 
That is why managers are not professionals and the MBA is not the certified gateway to becoming a manager that it could have been. I'm not saying we would have been better off if the manager was a true professional, but I like to teach this to students to open their eyes about the risks/rewards of business, as well as the lack of understanding in most business schools about what it means to be a true professional. I also like to emphasize the business school's role in failing to create the conditions necessary to bring this about. Having said that, I make the point that, just because management is not a profession does not mean that they, as MBA graduates, cannot carry themselves as a professional by adopting the characteristics of a professional. To this end, the MBA Oath (http://mbaoath.org/, see also Strategic CSR – MBA Oath) initiated by Harvard MBAs for graduating students, is a good start.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Management's Responsibilities in a Complex World
By Frank W. Abrams
May, 1951
Harvard Business Review
Vol. 29, No. 3
29-34
 

Friday, April 6, 2018

Strategic CSR - Stakeholder expectations

The article in the url below contains some interesting statistics on the extent to which businesses are internalizing and responding to evolving societal concerns:
 
"On politics, business leaders are risk-averse. They prioritize stability and the status quo. What has changed is the definition of the status quo. Gay and transgender rights, and action on climate change, were once liberal causes. They are now largely mainstream, particularly in big cities that are home to corporate head offices and the educated workers they covet. Businesses have adapted their own plans, policies and attitudes to this new mainstream."
 
As society evolves, companies need to evolve with them. Those companies that evolve most effectively (a combination of speed and content) will be more successful:
 
"This changes [CEOs'] cost-benefit calculus: Speak up and embroil yourself in unwelcome controversy, or stay silent and invite the opprobrium of customers, employees, social media and, for some, their own families and consciences. Increasingly, they have concluded that inaction is the riskier path."
 
What does this shift look like in terms of concrete policies and practices?
 
"Half of Fortune 500 companies provide transgender inclusive health benefits—up from none in 2002—and 61% offer domestic-partner benefits to gay couples, according to the Human Rights Campaign. … Similarly, nearly half the Fortune 500 has some sort of internal target for greenhouse-gas emissions, renewable energy or efficiency, according to the Carbon Disclosure Project."
 
Firms reflect the collective set of values held by key stakeholders. As such, they will do what their stakeholders hold them accountable for. To continue down this path, therefore, stakeholders need to be sure to reward those companies that match the values they want to see businesses adopt and punish those firms that transgress those values.
 
Have a good weekend
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
For Business, a New Political Status Quo
By Greg Ip
August 17, 2017
The Wall Street Journal
Late Edition – Final
A2
 

Tuesday, April 3, 2018

Strategic CSR - Business schools

Over the winter break, I started reading the book From Higher Aims to Hired Hands by Rakesh Khurana. The main message is that business schools have not lived up to the intentions behind their creation. That, rather than build a platform to train managers as professionals (in the true meaning of that term), they have instead morphed into money machines for universities, where revenue generation trumps their educational mission. This message was reinforced by the article in the url below, which is a review of the book The Golden Passport published last year by Duff McDonald. The critique offered by the book (and summarized in the review) is damning:
 
"Anthropologists in the distant future will make their careers investigating the extraordinary rituals of American business education. As they sift through the wreckage of a civilization that bestowed its highest rewards on individuals trained to ignore its deepest problems, they will be lucky to have as their guidebook Duff McDonald's deliciously iconoclastic history of the Harvard Business School, 'The Golden Passport.'"
 
The overall message is that business schools have played a large part in producing the managers who have shaped the economy into something that serves the interests of the minority at the expense of the majority. Although HBS is not the only problem, the institution is singled out for particular disdain. Michael Jensen earns particular criticism for his role in propagating the diffusion of agency theory throughout business schools. Michael Porter is also heavily criticized for creating a problem that he then magnanimously offered to help solve (for a price, of course):
 
"The Monitor Group, the consulting company Mr. porter co-founded, raked in over $100 million from AT&T in the early 1990s—just as the old phone company, flailing around in search of new sources of monopolistic advantage, launched a series of strategic acquisitions that landed it in a ditch. Starting in 2006, Monitor put its expertise in the service of a certain terrorist-sponsoring dictator in Libya. … The strategic foray into the tin-pot sector—which included contracts with the Assads in Syria, as well as the Russians and Saudis—did not keep the consulting firm from bankruptcy. Now, according to the author, Mr. Porter seems convinced his management magic will solve the problems of health care and education. Apparently all we need to get our schools and insurance companies back on track is a little 'strategy.'"
 
While the critique is good, there is not much offered by the book in terms of possible alternatives. The absence in the review of plausible ways forward is palpable. This applies to the general direction of business school education. I agree with the criticism, but haven't seen an accurate description of why previous models were 'wrong' (e.g., shareholders do not own the firm), or what should be taught in its place (e.g., sustainable value creation). In other words, the discussion around the book (and I read several reviews of it) is not very enlightening and further entrenches an 'unhelpful' view of the role of the firm in society.
 
I think the principles advocated in Strategic CSR are an important part of that discussion. Complementing these ideas is the work that all of you are doing in your classrooms every day to build a 'better' alternative. How to get HBS (or any other influential actor) to pay attention, though? That is the essential question.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Schools of Mismanagement
By Matthew Stewart
April 22-23, 2017
The Wall Street Journal
Late Edition – Final
C5
 

Friday, March 30, 2018

Strategic CSR - Plastic

It never ceases to amaze me how much we know about the damage we are doing to the planet and, in light of that knowledge, how little we are doing to rectify that damage. The statistics that I include in the CSR Newsletter are usually just the most eye-catching of the articles I read on this topic. There are many more that are equally depressing. Whatever else can be said about the climate change debate, no one can say that we weren't warned. The article in the url below continues that trend, discussing the amount of plastic we produce and how, even though we fully understand the pollution it is causing, we are only ramping-up the amount of plastic in our lives. The amounts are staggering:
 
"The global plastic binge which is already causing widespread damage to oceans, habitats and food chains, is set to increase dramatically over the next 10 years after multibillion dollar investments in a new generation of plastics plants in the US."
 
How much, exactly?
 
"Fossil fuel companies are among those who have ploughed more than $180bn since 2010 into new 'cracking' facilities that will produce the raw material for everyday plastics from packaging to bottles, trays and cartons. The new facilities – being built by corporations like Exxon Mobil Chemical and Shell Chemical – will help fuel a 40% rise in plastic production in the next decade."

According to a graphic in the article, we now produce 300 million tons of plastic a year. To put that in perspective:
 
"The amount of plastic produced in a year is roughly the same as the entire weight of humanity."
 
And we have been doing this for a while now:
 
"… humans have produced 8.3bn tonnes of plastic since the 1950s, with the majority ending up in landfill or polluting the world's oceans and continents. The report warned that plastic, which does not degrade for hundreds of years, risked 'near-permanent contamination' of the earth."
 
This is a topic that The Guardian has been pushing for a while:
 
"In June a Guardian investigation revealed that a million plastic bottles are bought around the world every minute with most ending up in landfill or the sea."
 
The article argues that the current expansion in plastics production is driven by the shale gas boom in the U.S.. With cheaper, more readily available fossil fuels (and without an adequate carbon tax in place), plastic becomes more efficient to produce in larger quantities. In a sign of the permanent nature of the damage being done, the plastic residue being deposited in the sediment that will be discovered by future geologists was one of the two defining criteria (along with nuclear fallout) for the declaration that we have entered a new epoch (see Strategic CSR – Anthropocene).
 
Have a good weekend
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/ 
 
 
$180bn investment in plastic factories feeds global packaging binge
By Matthew Taylor
December 26, 2017
The Guardian
 

Monday, March 26, 2018

Strategic CSR - Unilever

I don't understand the difference between a social enterprise and a for-profit firm. Take this example from the article in the url below about the founding of Unilever:
 
"To most of Unilever's customers, the state of the world is probably the last thing on their minds as they push their shopping carts through the supermarket, tossing in Ben & Jerry's ice cream, Dove soap, Lipton tea, Hellmann's mayonnaise, and other Unilever products. It's hard to imagine that eco-disasters might someday lead to those items disappearing from shelves. But to Unilever, which was born as a solution to a crisis, the potential for calamity seems real enough. The company got its start in the 1880s, right here in this picture-perfect redbrick village near Liverpool called Port ­Sunlight—named after the world's first packaged, branded bar of soap and the company's founding product. It was created in an effort to stop rampant epidemics and child deaths amid the grinding poverty and squalor of Victorian England. Nearly 130 years later, there is still an acute sense at Unilever that the world needs fixing."
 
How is Unilever not a social enterprise? The firm uses market forces to solve societal problems, just like all for-profit firms. In contrast, take this example of TOMS Shoes (see Strategic CSR – TOMS Shoes), which is usually described as a social enterprise. It is essentially the same thing (an organization using market forces to solve a societal problem), but just not as effective as Unilever. At best, the value TOMS is adding seems dubious; in fact, it might be doing more harm than good:
 
"Did you buy TOMS shoes because you want to make the world a better place? If so, you should be a little mad. TOMS, of course, is an accessory company that markets itself like a charity … When someone buys a pair of TOMS shoes in the US, for instance, the company donates a pair of shoes to a child in a poor country like Haiti. … But TOMS and the many other companies like it are the charitable equivalents of yes men. They're telling you what they think you want to hear in order to get what they want (for you to purchase trendy, pricey accessories), not what you need to hear in order to do what you want (to have your purchase to do as much good in the world as it can)."
 
CSR advocates talk about the need for companies to "do good" instead of focusing on profit as if economic problems and social problems are independent of each other. However, a simple thought experiment highlights the overly-simplistic nature of this forced dichotomy. Is feeding people a social problem or an economic problem? Of course, there are hundreds of for-profit food manufacturers (not to mention the hundreds of thousands of restaurants) that produce food and distribute it widely (and efficiently) to whole populations of people. What about clothing people—a social problem or an economic problem? A visit to the shopping mall will quickly reveal how efficiently for-profit firms have essentially eradicated the supply of clothes as a challenge for all but the most deprived societies. Or, what about providing internet access to every household in the country—economic or social? Certainly, you could make an argument that, today, a family is essentially excluded from many aspects of society if it cannot get online; yet, internet provision in most developed economies is the sole responsibility of the private sector (as it is for the food and apparel industries).
 
Strategic CSR argues that for-profit firms are the best hope we have to institute change on the scale and speed necessary to make a difference. I tell my students, if you want to "do good" in the world, join a corporation. So-called social enterprises make us feel good, but are more akin to rearranging the deckchairs on the Titanic.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Unilever CEO Paul Polman's Plan to Save the World
By Vivienne Walt
February 16, 2017
Fortune
 

Wednesday, March 21, 2018

Strategic CSR - Fake news

The article in the url below suggests that placing all the blame for 'fake news' on Facebook, YouTube, and Twitter might have been misplaced. It appears that our willing gullibility also played an important role in the process:
 
"What if the scourge of false news on the internet is not the result of Russian operatives or partisan zealots or computer-controlled bots? What if the main problem is us?"
 
It seems that we might actually prefer clear-cut fake news, rather than the messy complexity of real life:
 
"As a result, false news travels faster, farther and deeper through the social network than true news. [Research] found that those patterns applied to every subject they studied, not only politics and urban legends, but also business, science and technology."
 
And, in the race for people's attention, it is not very close between fact and fiction:
 
"False claims were 70 percent more likely than the truth to be shared on Twitter. True stories were rarely retweeted by more than 1,000 people, but the top 1 percent of false stories were routinely shared by 1,000 to 100,000 people. And it took true stories about six times as long as false ones to reach 1,500 people."
 
This finding is robust to the malign influence of foreign software influences:
 
"Software robots can accelerate the spread of false stories. But the M.I.T. researchers, using software to identify and weed out bots, found that with or without the bots, the results were essentially the same."
 
The article gives many more examples to support its conclusion. While it is good to have empirical support for this, it is also not very surprising and fits into the general claim that we get the companies we deserve (just like we get the politicians we deserve) – by extension, I suppose, we get the social media we deserve. The only encouraging conclusion reached by the researchers is that the influence of fake news might not be as great as we fear. The more worrying implications, however, are that we are not consciously shaping our society, it is more like we are defaulting to our lowest common denominators. If the majority succumb to their worst impulses (whether through laziness or ignorance) and abdicate their role in shaping a better society for everyone, it is hard to see how we can tackle the bigger, more consequential problems we face, such as building a more sustainable economy.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Why We're Easily Seduced by False News
By Steve Lohr
March 9, 2018
The New York Times
Late Edition – Final
B1
 

Monday, March 19, 2018

Strategic CSR - GDP

The article in the url below is a great example of why there needs to be more economists engaged in the CSR debate. On the surface, the article is a review of a recent book by David Pilling of the FT, Growth Delusion, that argues against GDP as a measure of national economic wellbeing:
 
"Like most other offerings in this genre, David Pilling's 'The Growth Delusion' celebrates the predicted demise of our headline measure of how well the economy is doing—and along with it the end of Western capitalism's obsession with 'endless' production and consumption."
 
The reviewer rebuts the charge that such weaknesses have been ignored by economists, instead suggesting they are well known:
 
"From the start, prominent critics underlined the failure of GDP to account for the environmental costs of economic growth, a theme struck most forcefully in the 1972 Club of Rome report 'The Limits to Growth.' Less prominently, although no less accurately, feminist scholars highlighted GDP's failure to account for economic value created in the home—which meant that post-1950s GDP and productivity growth statistics were flattered by the new tendency of women to take paid work and purchase items such as microwaves and ready meals. … The people who work with GDP data know, far better than most, how much uncertainty arises from compiling the statistics, seasonally adjusting them and comparing them over time or across countries."
 
The environmental harm of our current economic model is, of course, well documented. There are other interesting questions raised in the review, such as whether there is any measurable improvement in the economy by "merely shifting the economic value of production in the home into the marketplace." The reviewer's point, however, is that it is easy to criticize. The challenge, of course, is coming up with a better measure that serves our economic needs more effectively. And this, according to the reviewer, depends on how you respond to this central question:
 
"Is economic welfare better served by a high level of output and consumption or is it necessary for it to grow?"
 
The reviewer builds the compelling case that, in order to consider dethroning GDP as our primary measure of economic activity, it is important that critics understand what it actually does and why we focus on change in GDP, rather than overall GDP. To this point, the reviewer raises what she thinks is the crux of the debate:
 
"In other words: Why does momentum matter? Portugal and Greece have similar levels of GDP per capita now, but after 2007 Greece had a massive boom and then a bust. Greeks have had the extra interim output, but it is not obvious they have had the better experience. The point about Japan is similar: At its level of prosperity, does it need more growth? Is it terrible to be a rich, contented, safe country, where people have long life expectancy, a magnificent culture and high quality services, simply because the chosen measure of total economic output is static?"
 
The answer to this question is central to understanding what GDP does and is, therefore, a direct critique of the title of the book under review:
 
"The answer lies in the fact that GDP—or any alternative aggregate measure—aims to encapsulate the constant innovation and betterment of life driven by competition in market economies. No single number will do it perfectly. Indeed, a new critique of GDP recently has joined the old ones—namely that it fails to capture the role of new technology in our increasingly digital economies. The concept of GDP, an aggregate measure of output at market prices, does not account for all the value of innovations. Yet over time an increase in GDP is the result of innovation, and so to argue against growth is to argue for an end to innovation. Those who think growth is 'delusional' need to explain what they think should be taken away from people when a new product or service they want comes along, to prevent GDP from growing."
 
In other words, it is not that GDP implies growth when there really is none (i.e., a "Growth Delusion"), but that it captures innovation and creativity in a society. In other words, it captures progress in its widest sense. If progress equals 'value-added,' then an increase in GDP is an imperfect measure of the growth in overall value created. This review acknowledges that GDP is imperfect, but also that it has so far turned out to be the best measure we have of value creation, society-wide. As such, proposed changes should be incremental, based on this core understanding of what GDP is and what it does, rather than the radical reform that is suggested by the book being reviewed, or other high-profile projects, such as the move to measure Gross National Happiness (http://www.grossnationalhappiness.com/).
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Dismal Statistics
By Diane Coyle
February 5, 2018
The Wall Street Journal
Late Edition – Final
A15