Friday, October 8, 2010

CSR Weekly Articles Updates: Justmeans

In defense of CSR - Akhila Vijayaraghavan

Today I read something painfully ignorant in BrandLine, The Hindu Business Line's supplementary. The column by Harish Bijoor that is usually spot on and informative was a sad let down. Mr. Bijoor reckons that CSR is nothing more than branding and even those who "deny it soutly will admit it some day or the other."

Bijoor goes on to say, "CSR helps organizations achieve a soft image for themselves." Many companies will beg to differ from this statement because we are seeing companies who are adopting the principles of CSR and retaining their 'hard' business edge and in many cases doing better for it. He elaborates by saying that a company that produce a traditionally unsustainable product "indulges in CSR to escape the guilt-trip the corporate organization finds itself on."

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CSR and Product Stewardship
- Mary Sue Schmaltz

It has long been a CSR principle  that entities which profit along a product chain retain responsibility for the life-cycle impacts of their products and packaging materials.  The U.S., however, has lagged behind in the institution of a federally mandated Extended Producer Responsibility (EPR) law also known as Product Stewardship.

At their meeting in June 2010 held in Oklahoma City, the Environment Committee of the US Conference of Mayors put forward a resolution supporting both state and federal EPR legislation.  Since the greater cost of waste and recycling end up being paid for by municipalities, the committee asserted that this cost burden is effectively a subsidy for producers.  According to the Electronics Takeback Commission, e-waste recycling legislation has been passed in 23 states and is being introduced in several more. Earlier this year, the electronics industry filed a lawsuit against New York City's e-waste recycling law, but it was dismissed after the New York State Legislature passed a statewide e-waste law.

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CSR and Conflict Minerals - Mary Sue Schmaltz

Supply chains and local working conditions are vitally important issues in CSR.  Conflict minerals are an especially problematic area, as sourcing of raw materials can sometimes be difficult to discern. Soon, however, it will be mandatory for U.S. companies to adhere to new regulations geared towards creating transparency in the use of conflict minerals.  Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act entrusts the SEC with establishing a regulatory framework as of April of 2011, which will require public companies to issue reports and be audited on their use of conflict minerals.  In light of the complexity inherent in ascertaining which mining operations are controlled by rebels, USAID and the State Department have been directed to map out the constantly shifting conflict territories and guide companies in this process.

The viciousness of the civil war provoked by the Revolutionary United Front in Sierra Leone in the 1990's, brought global awareness to the issue of conflict diamonds.  It became glaringly evident that the appetite of western consumers for diamonds was financing these and other violent insurgencies in Angola, Liberia, Ivory Coast, the Democratic Republic of the Congo (DRC), and the Republic of Congo. All of these countries are now part of the Kimberely Process which was instituted after much deliberation in 2003, under the auspices of the United Nations.  In order to filter out conflict diamonds from the legitimate diamond trade, the process entails the acquisition of validated government certificates for both rough and polished diamonds and requires that they be transported in tamper proof containers. As a result of this certification process, almost 99% percent of traded diamonds are now considered to be conflict-free.

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CSR - the devil's in the detail - Sarah Brown

Marks and Spencer - the iconic British retailer and pioneer of so many successful CSR initiatives, has come up with another thoughtful idea. They have announced a way of making their clothing labels more sustainable. From next year they will be made from recycled polyester.

It is this level of attention to detail which is so impressive in this initiative, as in many of M&S's CSR ideas.

Care labels on clothing may seem small and insignificant, but as M&S has pointed out, when you multiply one label by 300 million (the amount which will be produced from the new materials) its impact is obvious.

The labels (which represent around two-thirds of all those produced for M&S) will be produced from around 200 million recycled plastic drinks bottles. These will replace labels made of 'virgin' polyester, which requires oil for its production.

The fact that the new labels will mean less need for fossil fuel based plastics, gives this CSR practice credibility.

Making clothing out of recycled plastic (which has long been the case with fleece jackets and is coming into vogue for football shirts) is not always the most sustainable option. This is because it is always better to opt for 'closed-loop' recycling. That is, turning the used product back into the same thing - a plastic bottle back into a plastic bottle, for example. This uses far less energy and is consequently better for the environment. You can easily, for example, make a football shirt out of cotton. If it is organically grown and fairly traded then cotton is a sustainable material. There is actually no need to make a football shirt out of plastic bottles.

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Wednesday, May 5, 2010

Mining Problems

April of 2010 will always be remembered as a sad time for the mining industry. Only five days into this month, the news media was scoured with articles about the terrible explosion that claimed the lives of 29 people. Follow up reports continue to pour in, each revealing egregious oversights on the part of Massey Energy. It is horrible to think that such a tragedy could --- and should--- have been prevented.

Should investors in Massey Energy have known better than to keep their money tied up in such a problematic investment? In fact, investors are often shielded from the information they need to make responsible decisions. Over the course of one week this month, I published a series of articles that hopefully provided some perspective on standards for this industry. In fact, multi-stakeholder groups have provided significant input to guide and shape the industry. Hopefully this guidance is starting to be heeded.

Unfortunately, not every company feels that it needs to be a leader in corporate responsibility, which is the real problem. You will notice that Massey Energy is not included on any of the lists of mining companies affiliated with initiatives for reforming the mining industry (see “Responsible Mining Industry Initiatives”, published on the Justmeans CSR editorial page on April 21st). No big surprise, but a good reminder that corporate commitments to ethical standards are far from pervasive at this point in time.

Photo credit: infomindeva

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Tuesday, May 4, 2010

CSR Hero: Jeffrey Hollender “Tax Me More!”

Although reluctant to award Jeffrey Hollender any more credit than he already receives in droves, his most recent initiative is charming. Hollender teamed with other millionaires and have been organized by a group called United for a Fair Economy to advocate for higher taxes on the wealthy- taxes that they would be subject to pay. The group is especially persuasive in requests to Congress to repeal the Bush era tax cuts for Americans making more than $250,000, since they are Americans making more than $250,000. The move signals an awareness of corporate social responsibility growing in wealthy Americans, in and outside the office.

Prior to this time, c-level management has been almost certainly anti-tax, and has lobbied accordingly, and aggressively to keep taxes down. This new movement is completely unique. Apparently Hollender isn’t the only one who minds raising taxes… according to the Washington Post quoting United for a Fair Economy executive director Brian Miller, almost 65% of Americans making over $250,000 a year would not oppose higher taxes on themselves.

Whether moved by guilt over inherited wealth or being born into entitlement, or by some other compulsion, the millionaires’ request for more taxes does point to a fundamental inequity in American tax law. Though called “progressive”, the tax code costs those making less a larger proportion of their income. For example, people making $40,000/year will feel the impact of $3000 in taxes more acutely than someone making $2 million year who is taxed $30000 (not to imply these are their tax rates; both are probably paying at least double what I suggested).

Secondly, unearned income such as capital gains enjoys a much lower tax rate than wages do. In this way, working people pay more, and investors pay less, perpetuating the logical trend that the investment-class will grow wealth at a faster rate than the working-class will. This, combined with the fact that every basis point of tax costs the non-millionaire more, literally and figuratively, creates a system that is unfair on its face. The idea behind this tax type of tax treatment was to incentivize investment; whether investment really needs incentives more than workers need to be able to keep more of their paycheck is a question worth revisiting. Would Wall St. break down under a higher capital gains tax? Where can I place bets for absolutely not?

CSR does not end with the workday. While it’s great to see companies increasingly adopting CSR strategies, policies, and changes business processes- strike that- while it’s awesome to see companies adopting more CSR strategy, it is even better to see management internalize the CSR principles in their daily lives. Corporate social responsibility is greatly influenced by CEO leadership and personal fortitude; company ethics and culture are administered from the top. Thus when c-level management can reform personal priorities for the public interest, it becomes much more likely that they will align their professional lives with CSR as well.

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Website review: Eurocommerce’s CSR bridge

EuroCommerce, a trade association for European businesses, has launched a platform for European companies to gather virtually, learn best CSR practices, and advance the state of CSR. The effort is designed to further connect companies to their stakeholders, critics and thought leaders to advance CSR in Europe. And, most importantly, the website is to showcase successful CSR activity in an effort to preempt regulation that makes CSR activity mandatory.

This website does serve more than an innocuous, CSR promoting purpose; it was made to show European regulators how good businesses are at regulating themselves, and to inform them of the scope of initiatives voluntarily in place. Indeed, a EuroCommission press release calls on EU legislators to “safeguard voluntary nature of CSR initiatives”. So, the website is political –to keep legislators from forcing businesses into compliance- but that’s fine. A recent study showed that risk officers most fear the risk posed by the regulatory environment; CSR plays an important role in staving off regulation, to the extent that it can.

The EuroCommission’s website notes that it wants to show “tangible results” of the success of CSR initiatives in Europe. This website seems to be the first effort to do so. Unfortunately, it also cites the EuroCommissions’ most recent achievements as being in 2006, suggesting that European CSR is not as lively as the EuroCommission would like its website’s visitors to believe.

Nonetheless, the website is potentially an excellent repository for CSR data and information. It’s not there yet- but the framework indicates that it could be. The site offers brief case studies in CSR strategy, white papers and research, and pages that appear to be created by companies. These sections need to be bulked up and enhanced to include multinational players. Although the site purports to facilitate communication between firms and their stakeholders, there is not chat or forum functionality yet. So- how are they to communicate?

EuroCommission’s intention with the website is clear, and the strategy is generally admirable, but the execution is incomplete. The website would benefit from more information about CSR, as well as more deeper case briefs- real proof that CSR is working in Europe. A means of creating profiles would also help the EuroCommision site to actually become a hub for CSR information and collaboration, as would adding chat functions. In short- it will take functionality enhancement to get turn the EuroCommission CSR website into the CSR thought-emporium it aspires to be.

Author: Amelia Timbers

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Anti CSR: Oh Goldman; Sweet, Goldman

How can we escape discussing Goldman Sachs’ swift share price collapse this week in the context of CSR? The federal civil claim plus a potential criminal claim indicate the beginning of the pain for Goldman; European governments are reportedly considering similar legal action, China has taken a stance against them, and they will face private actions. GoldmanSachs joins Toyota, Enron, WR Grace, 2005 GlaxoSmithKline, Merrill Lynch to some extent, Worldcom, Pfizer, Monsanto and other companies whose reprehensible actions landed them in the corporate social responsibility hall of infamy. We have something to learn from these firms.

Americans, even in the lat twenty five years, have seen these patterns play out enough times to be familiar with them. Fraud and cover-ups come in recognizable cycles:

  • Big growth of a promising, innovative company. Ivy league management, lots of press.
  • Steady business for a period of time.
  • Bigger growth! Records break, more press, more money.
  • Grumblings from consumer protection groups.
  • An initial scandal, well managed, diffused, tucked away.
  • Followed by a disastarous scandal that affects and harms many.
  • Government rebuke, congressional hearings, apologies, tears, etc.
  • Regulation.
  • Business adapts and evolves; new company, big growth…

The companies that end up involved in national and international fraud scandals typically share similar traits: unchecked focus on short-term gain, a complete disregard for whom they may harm, and leadership that nurtures both qualities. Most importantly, all companies involved in major fraud in the last 100 years failed their customers. In a chicken-egg problem, do fraudulent companies stop serving customers because they are fraudulent, or is it this failure of core business that leads to the fraud? Had any of these companies continued to delivering on their mission statements and provide valuable products that benefited their customers lives, they would never have gotten into the positions they are in.

Consumer harm is always paired with companies that disregarded their own customers. Sometimes, this disregard is precipitated by great success; when companies have vast cash reserves, there is less hunger to please the customer, the entrepreneurial spirit dies. Successful businesses come to see their customers as inputs, receivables, tools. The dehumanizing effect growth has on customers when companies grow rapidly is well understood; this is why people typically expect a drop in quality once a firm goes national, when bands sign with a major label, etc. However, if firms could just focus on the customer, be obsessed with the customer’s happiness despite their size, they would already be well on their way to social responsibility.

Profit is alluring; however, business does not exist for profit. Business, as a societal function, exists for people, to benefit people, to meet needs. As soon as a business starts meeting its own needs ahead of its customers’, the fraud, in a small way, begins.

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BP to fisherman: clean up our mess

Part of the problem with ecosystem collapse is that the markets related to different components of the ecosystem collapse as well. The Gulf Mexico has experienced diminishing fish stocks for decades, and a similarly depressed economy. The economy was further harmed by Katrina, and now will be retarded even further by the decimating effect BP’s oil spill will have on the region’s remaining fish stocks. Fishermen in the region have been rapidly trying to retrain as crisis management workers to assist BP in cleaning up the very spill that will likely put the fisherman out of business in the area for decades. What’sBP’s responsibility when their negligence eliminates the only regional economic activity there is?

According to the Exxon Valdez precedent, the region will take decades to even partially recover. The Prince Edward Sound has never been the same since the Exxon Valdez ran aground. The salmon stocks have never rebounded and fishermen went bankrupt. The tourism industry, which relied greatly on the pristine environment, was dashed. One report put preliminary damage at $580 million dollars in 1992 dollars; Exxon ultimately paid out only $570 million in punitive damages.

When a company takes on high risk activity such as producing and transporting oil, social responsibility has not, thus far, not been be much of a consideration. As far as corporate social responsibility has come, tree planting and donations to charity don’t mitigate the big disasters. Few businesses in high risk businesses have successfully implemented CSR initiatives either. BP is a great example; they offer vast greenwashing, but little has positively changed about their oil production business.

In cases where CSR fails to alter firm behavior, laws must step in. Currently, the U.S. does not have laws strong enough to send the financial signal that would motivate fundamental change in firm business practices. This was made especially true when the Supreme Court reduced the punitive damages in Exxon Valdez from $4.5 billion, which would have sent that message, to a paltry $570 million, which did not. BP is surely relying on this precedent to protect them from the legal fall out of the current spill.

Where firms cannot find a way to motivate themselves to be preemptively socially responsible, they must be forced to take full responsibility for the entire scope of economic disruption their business operation incurs. Firms whose business practices manage to destroy an entire economy should be obligated to make those economies whole to the best of their ability, even if it compromises the financial integrity of the firm. Each of the gulf fisherman affected by this disaster should be able to relatively easily claim lost wages for at least five years from BP, not be forced to beg for a job from them now that BP has destroyed the economy.

Don’t get me wrong; I love CSR. But like other things I love, I also see its limitations. CSR isn’t enough for the big problems; for the GoldmanSachs; for BPs; for the Toyotas. For that, you need laws that unflinchingly harsh consumer protection consequences that force companies to fully cover the harm they cause, and to actually discourage this behavior in the future.

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Monday, April 19, 2010

Questioning Green Certification

Last Friday, I posted a short piece about Energy Star, the U.S. certification assigned to appliances supposedly demonstrating exemplary eco-efficiency. As my post explained, a small scandal erupted at the end of March, when the New York Times published an article revealing that the U.S. Government Accountability Office (GAO) had managed to secure Energy Star certification for fifteen products that don’t actually exist. The EPA seems to have spent the month scrambling to put in place a set of checks and balances to prevent against further embarrassment.

One reader of my Energy Star piece commented that she was not surprised by what happened since she has never fully trusted certifications. But what is a normal run-of-the-mill consumer trying to do the right thing (while saving money) to do WITHOUT certifications to guide him or her? Aren’t labels a necessary tool?

While certifications provide valuable shorthand for people trying to find products that meet certain standards, it is important for consumers to consider what each label ACTUALLY represents. For example, if you are in the market for a refrigerator and desire one that saves energy, take the time to do figure out what attributes you are seeking and determine if there are additional ways to come by this information. As the Energy Star saga illustrates, Consumer Reports is one good source for information, but the internet has many more.

On that note, I would welcome suggestions from readers. What online resources do you trust for sustainability-related product information and why?

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